SYNNEX Corporation (SNX) Q3 2021 Earnings Call Transcript

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SYNNEX Corporation (SNX 0.05%)
Q3 2021 Earnings Call
Sep 28, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Misty and I will be your conference operator today. I would like to welcome everyone to the TD SYNNEX Third Quarter Fiscal 2021 Earnings Call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

At this time for opening remarks, I would like to pass the call over to Liz Morali, Head of Investor Relations. Liz, you may begin.

Liz Morali -- Head of Investor Relations

Thank you and good morning to everyone. Thank you for joining us for today's call. With me today are Rich Hume, CEO and Marshall Witt, CFO. Before we continue, let me remind everyone that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events including the benefits of the merger to our various stakeholders, IT spending, demand, supply, expenses and growth.

Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8-K we filed today and in the Risk Factors section of our Form 10-K and our other reports and filings with the SEC. We do not intend to update any forward-looking statements.

Also during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our Investor Relations website ir.synnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission.

I will now turn the call over to Marshall. Marshall?

Marshall Witt -- Chief Financial Officer

Thanks, Liz, and thanks to everyone who has joined us today for the call. I will begin today by reviewing the legacy SYNNEX results and drivers for the fiscal third quarter ended August 31st. Given our merger close date of September 1st, all discussion and outlook for fiscal Q4 reflects a full quarter combined TD SYNNEX and we will continue to use the SYNNEX fiscal year-end on November 30th going forward.

Moving to the legacy SYNNEX fiscal Q3 results. I'd like to point out that year-over-year comparisons I will reference today are impacted by both the unusually strong performance we experienced a year ago given the rapid adoption of work and learn from home trends during the pandemic and the supply constraints currently impacting our industry. Revenue came in at $5.2 billion reflecting a slight decline from the prior year due to ongoing industry supply chain constraints.

As we indicated during our June earnings call, we expected the impact from these constraints to fiscal Q3 revenue would be $150 million to $200 million. While demand in the quarter continued to be very strong, the impact from the industry supply chain shortages were higher than anticipated. While it's difficult to quantify with precision, we believe the impact to our Q3 revenue most likely came in between $200 million and $300 million.

Demand in the quarter continued to be robust and fairly broad-based and we saw particular strength in commercial software, networking, security and notebooks. Our manufacturing business results were consistent with expectations. Gross profit of $313 million increased $15 million or 5% compared to the prior year and gross margin was 6% up from 5.6% in the prior year. Total adjusted SG&A expense was $144 million down 3% year-over-year and represented 2.8% of revenue.

Non-GAAP operating income was $168 million and improved by $20 million or 13% versus the prior year and non-GAAP operating margin was 3.23%, up 43 basis points year-over-year. Q3 interest expense and finance charges were $26 million and effective tax rate was 25%. Interest expense was higher due to the pre-funding of $2.5 billion of bonds on August 9th. Total non-GAAP income from continuing operations was $112 million, up $15 million and improved by 15% over the prior year and non-GAAP diluted EPS from continuing operations was $2.14, up from $1.88 in the prior year.

Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $4.05 billion and debt of $4.03 billion, which also reflects $2.5 billion of bonds related to merger, which I spoke to previously. Accounts receivable totaled approximately $2.2 billion, down 20% year-over-year and inventories totaled approximately $2.9 billion, up 7% from the prior year. Our cash conversion cycle for the third quarter was 32 days, an improvement by one day from the prior year. Cash used in operations was approximately $56 million in the quarter. We are pleased to report that our Board of Directors has approved a quarterly cash dividend of $0.20 per common share for the current quarter. The dividend is expected to be paid on October 29, 2021 to stockholders of record as of the close of business on October 15, 2021.

Now moving to our outlook for fiscal Q4, which is reflective of the combined TD SYNNEX company. Total revenue is expected to be in the range of $15 billion to $16 billion. Distribution revenue is expected to grow low-to-mid single digits year-over-year and in line with historical seasonal trends quarter-over-quarter despite the supply chain headwinds of approximately 4%. Our manufacturing business is expected to decline year-over-year due to a strong performance in Q4 and fiscal 2020. This business is lumpy and is also experiencing supply chain constraints. Our [Indecipherable] is consistent with prior guidance, which is that we guide toward the lower end of expected outcomes for the manufacturing business.

Non-GAAP net income is expected to be in the range of $242 million to $272 million and non-GAAP diluted EPS is expected to be in the range of $2.50 to $2.80 per diluted share on a weighted average shares outstanding basis of approximately $96.2 million. Non-GAAP interest expense is expected to be approximately $40 million and we expect non-GAAP tax rate to be approximately 25%. Please note that these statements regarding our expectations for our fiscal fourth quarter 2021 are forward-looking and that our results may differ materially.

I will now turn the call over to Rich.

Rich Hume -- Chief Executive Officer

Thank you, Marshall, and good morning everyone and thank you for joining us today. We certainly accomplished a lot in the last six months. I am privileged to join you today on behalf of the new TD SYNNEX and our more than 22,000 coworkers around the world. Since our official day one earlier this month, we've been hard at work, rolling out our new organizational structure and laying the groundwork for our future combined company. We've announced our executive leadership team comprised of seasoned leaders from both legacy companies and thanks to our robust planning and integration efforts, we have hit the ground running on post-day one goals and objectives.

However, we have much to do and I look forward to sharing updates with you as we progress. We are energized by the positive feedback from our customers and vendors and are well positioned to raise the bar on the value we provide to our partners. Those opportunities are reflected in our new name and logo. Our new name TD SYNNEX reflects and preserves the long-standing legacies of our two great companies. Our logo [Indecipherable] is a symbol of growth, expansion and renewal. For us, we expect growth and expansion will occur in many dimensions, including the growth of our business and our partner relationship.

We also announced our new shared purpose, mission, vision and values to our coworkers, many of whom I have gotten the opportunity to get to know better in this past month. With each meeting, I come away even more impressed with their collective talent, motivation and commitment to excellence. Although still largely working remotely, we are united behind our vision of connecting the global IT ecosystem and unlocking this potential for all. Ws we enter our fiscal Q4, we have much to be optimistic about. Our role in the IT industry continues to increase in importance. Our product and services portfolio is tied to some of the highest growth technology markets such as cloud, security, big data and analytics, Internet of Things, mobility and everything as a service.

As TD SYNNEX. We have an incremental opportunity to offer our expanded portfolio to our more than 150,000 customers and expand globally as we bring our enhanced portfolio to the markets that we serve. From a macro economic perspective, we are maintaining a sense of cautious optimism as a recovery from our global pandemic continues to be uneven by geography and industry. For our industry in particular, we believe in the long-term drivers for IT spending, but continue to see a supply constrained environment for at least the next few quarters.

For Q4, as Marshall noted, the distribution business is robust and on track for a normal seasonality from a sequential perspective and low-to-mid single digit growth year-over-year. We see strong demand across PC ecosystem products, advanced solutions and next generation technologies. We continue to see a significant backlog level on a combined basis. We estimate this impact to represent an approximate 4% headwind to revenue. So, we still believe in a robust demand picture based on discussions with our vendor partners and customers. From a merger perspective, we are on track and committed to achieving $100 million of cost synergies and a 25% non-GAAP EPS accretion over the next 12 months. We are optimistic that we can exceed our year one accretion targets.

As I mentioned at the beginning of my remarks today, now the real work begins. We are primed and ready for the task of integrating our two great companies and we'll leverage our wealth of experience in this area. As we contemplate changes and come to decisions on our integration journey, our focus is on establishing and maintaining a superior experience for our customers and vendor partners. Among our top objective is the harmonization of various IT systems, applications and tools in the Americas.

In closing, I'd like to thank all my TD SYNNEX coworkers for their dedication and focus during the lead up to our merger close and further spirit of collaboration and participation as we move forward together. The opportunities ahead of us are boundless. I look forward to meeting with our investors and analysts in the coming months, sharing our vision of the future of the IT ecosystem and keeping you updated on our integration progress.

We will now take questions. Operator.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Adam Tindle with Raymond James.

Adam Tindle -- Raymond James -- Analyst

Okay, thanks. Good morning and congrats on closing the deal. I just wanted to start with some of the guidance that we're getting here first on revenue in Q4, but I looked at the 8-K and thanks for giving historical Tech Data information. I think Tech Data was about $11 billion of revenue in Q4 of last year. We know SYNNEX Corp was $6 billion. So combined $17 billion, but if we look at the guidance, it's $15.5 billion at the midpoint. Just wondering what I'm missing here. I know you talked about some of the changes in Hyve and tough comps, but it's hard to explain the full delta based on that. Maybe you can touch on any dissynergies that you're learning about at the vendor or customer level if any?

Marshall Witt -- Chief Financial Officer

Hey, Adam, this is Marshall. I'll start and then Rich can chime in. Yes. We're happy to provide it. Keep in mind that those quarters, legacy Tech Data are not our quarters and in regards to November year-end measurement. So, depending on which quarter you take, you will get a different outcome. I had focused on Rich's comments around Q4 and the seasonal discussion and year-over-year discussions on growth rates. I think that's where you should focus on. In my prepared remarks, I did discuss Hyve and its impact on Q3 and Q4, it's down year-over-year. That's probably one of the elements that could be -- that's skewing the overall relationship, but fundamentally from a distribution standpoint, the relationships are sound and pretty typical what we've seen in the past.

Rich Hume -- Chief Executive Officer

Yes. It's, Rich, Adam. Good morning. I hope you're doing well. Couple of thing in the single digit for the distribution business. So you should take that is back. The second piece is that we are facing a 4% headwind due to the supply challenges. Year-on-year or sequentially, the backlog is getting bigger for sure. Then a third piece that I would comment on the tail end of your question, we are not anticipating nor have we seen negative revenue synergies associated with our merger. In fact, we have seen as we had commented at the time of the announcement, even from day one and beyond actually use of the complementary line cards for both sales teams. So, we see those opportunities beginning to emerge.

Adam Tindle -- Raymond James -- Analyst

Got it. That's helpful clarification. Thanks Rich. And Marshall maybe just as a follow-up, you went over cash and debt levels. I just want to make sure I'm getting true current leverage levels on a pro forma basis and if you could also touch on how you think about normalized free cash flow for the combined entity and capital allocation priorities that would be helpful. Thank you.

Marshall Witt -- Chief Financial Officer

Sure, that's a mouthful. I'll try to get all three in. Leverage standpoint, we still think we're going to be in that 2.5 to 3 times leverage. We're still going through the opening balance sheet review. We'll have better visibility to that once we get through the quarter itself, but no different than what we had said when we were looking at the deal and came out and announced what that look like back in March when we announced the merger. From a cash perspective, we also did say that after the -- your expectation is, we'll have a pro forma free cash flow approaching $1 billion. Clearly, a lot of that has to do with the momentum that both organizations bring together and the synergies that we believe we're going to achieve, which is $100 million in the first year and $200 million in the second year.

And Adam your last point on capital allocation. We are building from ground up what this organization will look like. We're 28 days into the merger, but trust us as we get through the rest of this quarter, we're going to make good sense of what that looks like for FY '22 and we'll be able to speak to that in our call post close for Q4.

Adam Tindle -- Raymond James -- Analyst

Yes. It sounds like you have a lot of options. Thank you.

Operator

Your next question is from Shannon Cross with Cross Research.

Shannon Cross -- Cross Research -- Analyst

Thank you very much. Rich, hoping if you can talk a bit more about the growth that Tech Data and what you're seeing sustainability and that during the last quarter and maybe if you can give us some background even going back a bit further just in terms of what the trends you're focused on, again, on the Tech Data side as opposed to the SYNNEX side?

Rich Hume -- Chief Executive Officer

Yes. So my reflection would be fairly consistent with what we had seen on the legacy SYNNEX side. So our industry and distribution and the business partner ecosystem have all benefited from the work from home scenario over the past year to year and a half in total. So, there's been some very positive trends there. While at the same time in the early phases of COVID, the datacenter category was slower for obvious reasons. There's a lot of project based work that takes place there. And then the next generation technologies as a service category, which was very robust over the last year and a half time frame.

As we look forward, I believe that, although demand is still exceedingly strong in the PC ecosystem, through time that will begin to moderate a bit based on that whole cycle, but we would anticipate seeing the data center category being more robust. In fact, we see it already, moving forward as some of that pent-up demand begins to emerge and has to be disposition by the market. And of course, we'll continue to see accelerated growth in next generation cloud as a service technology moving forward. So that's how I would summarize it Shannon.

Shannon Cross -- Cross Research -- Analyst

Okay. And then on the financing business you recently added. Can you talk a bit about the magnitude of what you see that growing to or was this something that some customers were asking for and so you decided it's good use of capital. Thank you.

Marshall Witt -- Chief Financial Officer

Shannon, this is Marshall. You broke up at the very beginning. Did you say financing business?

Shannon Cross -- Cross Research -- Analyst

Yes, I did.

Marshall Witt -- Chief Financial Officer

For TD Capital?

Shannon Cross -- Cross Research -- Analyst

Yes.

Marshall Witt -- Chief Financial Officer

Okay. Yes, I'll start and then Rich can chime in. Certainly that's a growing aspect of both organizations coming together. We believe we have to be prepared to address the way the demand in the market is going to go. I mean, we clearly know that we can take a portion of that risk on our balance sheet. We also know that we need to partner with others, as we see that the economic solution continue to be a meaningful part of what we need to do to satisfy our customers' needs.

Rich Hume -- Chief Executive Officer

So...

Shannon Cross -- Cross Research -- Analyst

But this is -- Okay, go ahead, sorry.

Rich Hume -- Chief Executive Officer

Right, Shannon. No matter, please.

Shannon Cross -- Cross Research -- Analyst

I was just saying, is this a response to the shift more and more to cloud and as a service and subscription and all of that or was this something, I mean, the number of the hardware companies and your partners and matter of fact financing businesses for years. So I'm just wondering thought process. Thank you.

Rich Hume -- Chief Executive Officer

Yes, so, Shannon, I would comment both. Obviously, this is something that provides advantage to the core, but as we look forward to cloud and as a service, it becomes a meaningful part of the entire value proposition that our customers are looking for. So they're looking for sort of an end-to-end solution, trying to think of it as almost the lifecycle type of thing. So, we do believe that the financing is a critical element to our go forward strategy.

Marshall Witt -- Chief Financial Officer

Shannon. I just add one more thing to that. Talking about early days in the merger legacy, Tech Data has a very robust solution that we're planning to deploy globally. So, there's a lot of momentum potential behind this offering.

Shannon Cross -- Cross Research -- Analyst

Great, thank you very much.

Operator

Your next question is from Jim Suva with Citigroup.

Jim Suva -- Citigroup -- Analyst

Thank you. In your prepared comments, you mentioned a 4% headwind. I just want to make sure that's solely due to constraints and shortages and that's a year-over-year number as opposed to quarter-over-quarter. Just help me clarify and understand if I'm off on that.

Rich Hume -- Chief Executive Officer

Yes, Jim, this is Rich. Good morning to you. A couple of things. So, first, it is a year-over-year number. Second, when we take a look at the backlog of the business, it continues to grow. Third, it's fairly pervasive. It's not limited to one technology or another. We have backlog in what I would call the PC ecosystem segment, the Advanced Solutions segment as well, as well as our components business. So I think it's our best portrayal right now of how we are [Technical Issues].

Operator

Your next question is from the line of Matt Sheerin with Stifel.

Matt Sheerin -- Stifel -- Analyst

Yes, thank you and good morning. Just, again, regarding the constraints that you're seeing Rich, it sounds like it is across the board, but have you seen that gotten worse. And as you look into as you get into fiscal '22, are you anticipating that to remain the same or you are seeing any signs of easing there?

Rich Hume -- Chief Executive Officer

Yes. So, Matt, obviously our intelligence is as good as it is if we work with our vendor partners to get that insight and I would say that anecdotally that the statements run from, yes, there will be an impact to the first half of the year and could continue to provide some level of impact in the back half of the year. So, I believe that they're improving upon the situation and my crystal ball would be that they will continue to sort of improve on the situation as we move through time, but this will not be a light switch flip, but rather sort of a gradual hopefully reduction in the backlog as we move forward.

Again, we're working very closely with each of the vendors to make sure that we are providing clarity in terms of our demands and where we're short in working with them to help alleviate that as we move through time.

Matt Sheerin -- Stifel -- Analyst

Okay. Thank you. And a couple of modeling questions, Marshall. Looking forward, one is just on gross margin. It looks like just from the Tech Data financials that you provided, it looks like gross margin is similar, but I know there's a lot of mix shifts seasonally for both companies. So how should we be thinking about gross margin and SG&A? And as you proceed into fiscal '22, can we get an idea of the cadence of that $100 million in synergies cuts? When we expect to see that?

Marshall Witt -- Chief Financial Officer

Sure, Matt. As you know, we don't guide to GM, but I will say that the results from legacy SYNNEX for Q3 was positive. So we were happy to see the results. We think that there is some confidence that that could continue going forward. And as you can see from the 8-K we filed with the historical TD quarterly data that the margin profile between the two companies from a gross margin perspective historically is pretty consistent.

In regards to SG&A, it's a good question. A lot of our investments that both companies have done historically have increased SG&A, but for the purpose of having good outcomes and returns going forward in the subsequent quarters. I would use a 3.5% to 4% range if you're just thinking about what that might look like for the rest of '21 and then '22.

And then in regards to the cadence and how the $100 million plays out, we'll work to build that out. We do expect some lumpiness throughout the year. There could be some back-end synergy momentum and some wider synergies earlier on in the year, but we'll figure that out and when we talk to you at the end of our Q4 and part of our discussion on earnings, we'll give a little more sense of what that looks like for fiscal '22 by quarter.

Matt Sheerin -- Stifel -- Analyst

Okay, great. And just lastly, Rich, if I could just talk -- if you could talk about what you're seeing by region. You did say earlier that there's some uneven demand trends by region and obviously you're much global -- a bigger global company and now that you're combined and going forward, will we be able to see the results by region and perhaps operating results by region as well.

Rich Hume -- Chief Executive Officer

Yes. So we will be publishing the results by region as we move forward, Matt. What I would tell you is this global picture of our work from home and it drilling a pretty good opportunity that continues. Is it a global beam and this idea of the data center having a bit of a pent-up view is also a global piece. I mean obviously COVID took the world home and now there are a lot of that data center capability either is requiring more capacity or is requiring a refresh and arguably there is a big, big pause in that for the first year of COVID, albeit that it is now recovering as I had said earlier.

What I would tell you where you see a little bit of unevenness is when you run into pockets of pandemic concentrated issues. I guess, a great example of that might be like in India, where not now, but in previous months, you see up a big, big pause or in some of the other Asian countries. So, I would say that the overall global picture is fairly consistent, but the short or long might be dictated by where a specific country is within the evolution of the pandemic.

Matt Sheerin -- Stifel -- Analyst

Okay, great, thanks a lot.

Rich Hume -- Chief Executive Officer

It's clear, Matt, that we have growth in backlog everywhere.

Matt Sheerin -- Stifel -- Analyst

Got it.

Operator

Your next question is from the line of Ananda Baruah with Loop Capital.

Ananda Baruah -- Loop Capital -- Analyst

Hey, guys. Yes, congrats on everything. Thanks for taking the questions. I got two quick ones if I could. The first, Rich, you mentioned, I think it was during prepared remarks, actually may have been to an answer in Q&A. With regards to the sales team already starting to get value out of the combined -- using the combined line cards. Do you also think -- is there an expectation or belief that you guys could also gain supplier share from key suppliers and what might that dynamic look like? And then I have a quick follow-up for Marshall.

Rich Hume -- Chief Executive Officer

So I hope I understand your question correctly. But I think what we've seen is that -- very early on is that customers of legacy SYNNEX and customers of legacy Tech Data are interested in us supporting line cards that we historically haven't had. It literally showed on day one, where we had requests for things that legacy SYNNEX carried that we did not and vice versa. So, I think that early indicator that we'll be able to -- with the extension of the line card, be able to bring better service to our customers, which in turn should lead to a good sales opportunity and revenue opportunity for us as we move through time.

And just realize that right now these requests are coming while we aren't fully system capable with each other's line card. Certainly, we'll get there in a short period of time, but customer awareness is pretty good relative to things that the others -- one or the other side has. So, I would suggest that that should lead to a good opportunity for us moving forward.

Ananda Baruah -- Loop Capital -- Analyst

That sounds exciting. And I guess just to clarify, well, my question was. As I remember at one point in time in 2-tier, there to some extent with the dynamic where suppliers may have portions -- certain amounts to supplies kind of across the board in various proportions. And then if sort of 2-tier distributors could overperform and show that they consistently overperform at the start till we a get a portion more supply and so that was really the question, in that regard. Is that the dynamic that still exist in our -- was I misinterpreting it, sort of from the time that I was aware of it? Thanks.

Rich Hume -- Chief Executive Officer

So my vendor had on back when I was working with the vendor and the only time that perhaps supply would be a portion is to the extent you are in a constrained environment and usually what you try to do is to be fair to your -- to all of your customers. I would anticipate that if we have real demand in a steady state environment that will get strong support from our vendors to fulfill that requirement. I'm pretty confident in that.

Ananda Baruah -- Loop Capital -- Analyst

That's really helpful, thanks for clearing that up. And Marshall, just real quick, anything with regards to debt pay down cadence that we should calibrate our expectations to?

Marshall Witt -- Chief Financial Officer

Yes, coming back on the question that Adam had, payments are here, we are IG rated. So with that, we're going to be mindful of the balance and the need to make sure that our leverage stays, I'll call it properly balanced and as we had committed to that 2 to 2.5 times leverage in the next 12 to 18 months is our goal. Clearly with that, depending on growth and free cash flow and working capital needs and other investments in part of our business that will all get balanced. But ultimately that's our thought is that the free cash flow we spin out, we're going to certainly allocate a portion to debt portion and reinvesting back in the business, M&A opportunities and then the dividend that we announced today clearly is a part of that and then our open repurchase program.

Ananda Baruah -- Loop Capital -- Analyst

Awesome. Thanks a lot. Appreciate it.

Marshall Witt -- Chief Financial Officer

You're welcome.

Operator

Your next question is from the line of Ruplu Bhattacharya with Bank of America.

Ruplu Bhattacharya -- Bank of America -- Analyst

Hi, thanks for taking my questions. Congrats on the quarter. I have two questions and I apologize if they have been asked. I just joined the call late. But Rich, you've talked about cross-selling opportunities between SYNNEX and Tech Data. But I don't think or at least I don't know if you've quantified any revenue synergy target between the two companies. I think you've talked about $100 million in cost synergies, but I would think, two big organizations, you must have some revenue synergies that are possible. So, any thoughts on that?

Rich Hume -- Chief Executive Officer

Yes. So first I agree with you that I believe we're going to have the opportunity to have positive revenue synergies as we move forward. Second, as a matter of from when you create a business case, as we have for our combined TD SYNNEX going forward, we didn't rely upon positive revenue synergies in our business case. I think that's a typical market paradigm because they're always hard to quantify. So, we see them as a sort of incremental opportunity as we move forward and most important to us right now is to make sure that we're serving those needs and as Marshall had indicated, maybe we'll get closer to quantifying those as we look at our full-year '22 and moving forward. But as I said earlier, it's a great opportunity that we haven't relied upon in the business case.

Ruplu Bhattacharya -- Bank of America -- Analyst

Got it. Thanks for that. For my second question, can I ask you about the Hyve business, I mean, it's a great business, it's more on the EMS side, manufacturing side. I mean under SYNNEX, it was a very significant business. But given the size of the revenues for the combined TD SYNNEX. I mean, it's probably less significant now, but still it's a significant business. What is your long-term thought on that business? Is this something that you think is an integral part of TD SYNNEX or do you think that this is a business that potentially you could have some kind of -- that's been off or it could be divested at some point or spun-off? But -- so just your thoughts on how integrated this businesses is into the combined company and your long-term thoughts for that?

Marshall Witt -- Chief Financial Officer

Ruplu. This is Marshall. Yes, it continues to be a meaningful part of our strategy today and going forward. As you know, we're still building out and diversifying the customer base and building out and creating new solutions to help diversify our portfolio of what we provide to our customers. And then going forward, it's still going to be an important aspect of our go-to-market strategy and a very critical part of our success as an overall TD SYNNEX organization.

Ruplu Bhattacharya -- Bank of America -- Analyst

Okay thanks for that. And if I can just sorry sneak one more in. Rich, before the merger when you -- before you went private actually, you had laid out a certain digital transformation plan for Tech Data. Now that the two companies have merged, I mean, is that plan still in place in terms of the expenditure on that or --and in terms of the different steps you had in that process or has that changed somewhat?

Rich Hume -- Chief Executive Officer

So first, we are fully committed to providing an outstanding customer and co-worker experience -- a customer vendor and co-worker experience with transforming our business digitally through time, so that's a given. The second piece is we have now -- relative to our TD legacy, we have a whole new pool of assets to consider. So the answer is that the initiative will be maintained. The solutioning of the tools and process and IT and capabilities that we put forward will likely get mixed a bit differently as we leverage all of the assets from our two legacy companies. So, we're very excited about our customer experience going forward and know that we can unlock a lot of value by making sure that we're providing an industry-leading experience through digital means.

Ruplu Bhattacharya -- Bank of America -- Analyst

Okay. Thanks for all the details and congrats again on the quarter.

Marshall Witt -- Chief Financial Officer

Thank you.

Operator

There are no further questions at this time, I will turn the call back over to Rich for closing remarks.

Rich Hume -- Chief Executive Officer

Well first, thanks to all of you for joining this morning, very encouraged with our engagement. I would tell you that, we're arguably now 28 days in and as I look at our business moving forward, I could not be more excited about the opportunities that we have in front of us. The promise of being able to serve the business partner ecosystem with more value, the promise of being able to drive meaningful returns for our investors and shareholders, our insight and becoming clear to me. As we had stated in the prepared remarks, we had committed in the business case to 25% accretion. And as we kind of look at our crystal ball right now, we believe that we will over achieve that goal moving forward. So our future from an overall customer, vendor, co-worker and investor perspective is quite bright and I'm very excited about the opportunities. So thanks for your time and we'll be talking to you soon.

Operator

[Operator Instructions]

Duration: 40 minutes

Call participants:

Liz Morali -- Head of Investor Relations

Marshall Witt -- Chief Financial Officer

Rich Hume -- Chief Executive Officer

Adam Tindle -- Raymond James -- Analyst

Shannon Cross -- Cross Research -- Analyst

Jim Suva -- Citigroup -- Analyst

Matt Sheerin -- Stifel -- Analyst

Ananda Baruah -- Loop Capital -- Analyst

Ruplu Bhattacharya -- Bank of America -- Analyst

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