Tech Data Stock Skyrockets On News Of Record Q2 Profits
Surging demand for data-center products, notebooks and higher-margin services fueled record quarterly earnings and stratospheric stock price growth for Tech Data.
The Clearwater, Fla.-based distributor delivered 22.4 percent growth in net income for the quarter ended July 31 from $42.9 million to $52.5 million, or $1.43 per share on a non-GAAP basis. This all-time quarterly earnings high shattered Seeking Alpha projections of 96 cents per share.
Sales rose 8 percent, after factoring out changes in foreign currency exchange rates, to $6.58 billion, destroying Seeking Alpha expectations of $6.07 billion.
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"We had the right assets, right relationships and right strategy in place to achieve profitable growth and deliver results for our partners," CEO Bob Dutkowsky said during the earnings call. "We're competing in the right places, and we're winning in the right places."
Wall Street was overjoyed with the news, sending Tech Data's stock price up 18.1 percent Thursday morning to $66.46 per share. Earnings were released before the market opened Thursday.
Tech Data saw double-digit growth in its higher-margin data-center business, led by surging demand for storage and security products from vendors such as Hewlett-Packard and EMC, Dutkowsky said.
The distributor, though, also was able to take advantage of its reduced overhead, which Dutkowsky said is now the lowest of anyone in the industry, to pursue lower-margin opportunities around smartphones, notebooks and Chromebooks as the back-to-school shopping season ramps up for school districts and consumers.
"Just because you see top-line growth doesn't mean you got that because you gave away price," Dutkowsky said.
Although Dutkowsky said sales associated with Phoenix-based Signature Technology Group (STG), which was acquired by Tech Data on June 1, weren't material to the distributor's overall business, the deal has created more complex service options for partners around data-center implementations, cloud assessments and cloud deployments.
"STG is allowing Tech Data, through our partners, to compete for different kinds of opportunities," Dutkowsky said.
Several partners had expressed concerns at the time the acquisition was announced that STG, No. 480 on the CRN Solution Provider 500, could provide Tech Data with the ability to sell data-center services directly to end users without engaging a solution provider partner. Dutkowsky has said repeatedly since then that STG, under Tech Data, will be utilizing a "partner-led business model."
From a vertical standpoint, Dutkowsky said Tech Data saw strong demand from the state and local government, education and health-care segments in its most recent quarter. HP and Apple continue to be Tech Data's largest vendors, accounting for 18 percent and 17 percent of new sales, respectively.
Revenue for the Americas ticked up 1 percent to $2.7 billion based on successful storage, security, software and notebook sales, according to Chuck Dannewitz, Tech Data's chief financial officer. That was negatively impacted by Tech Data selling its Chile and Peru businesses to Ingram Micro in March, along with exiting its business in Uruguay at the same time.
European sales, meanwhile, climbed 11 percent on a constant currency basis to $3.8 billion with mobility, software, storage, security and notebooks all performing well. The success was broad-based, with Germany, Italy, Spain, Portugal, Belgium, Netherlands and Luxembourg all posting double-digit growth in local currency.
"Europe, to us, feels much more balanced," Dutkowsky said.
For the coming quarter, Tech Data expects year-over-year sales growth in the mid-single digits for the Americas (excluding $77 million of sales last year in the departed countries on Chile, Peru and Uruguay) and mid- to high-single digit revenue growth in Europe.
"We had a good quarter, but we're not done," Dutkowsky said. "There's more for us to do on all fronts."
PUBLISHED AUG. 20, 2015