Tech Data's buyout of Avnet Technology Solutions (TS) has caused its Q1 operating income to rocket on a year-on-year comparison, but hefty interest payments have dragged down net earnings.
For the three months ending 30 April, net sales hit $7.66bn (€6.83bn) - a 29 per cent year-on-year boost, helped along by around $1.6bn in sales generated in two months by the acquired Avnet TS business. Revenues grew five per cent organically year on year on a constant-currency basis.
The addition of Avnet also had a positive impact on both GAAP and non-GAAP operating income. GAAP operating income grew by 43 per cent year on year to $75.1m for the quarter, but surged by 114 per cent annually on a non-GAAP basis at $123.2m, which excludes acquisition and integration-based eExpenses.
GAAP net income fell by eight per cent year on year as a consequence of large interest payments. Tech Data forked out $31m in interest expenses during the quarter compared to only $5.6m in the corresponding quarter last year.
On a geographical basis, European net sales - which represent 52 per cent of total revenues - hit $4bn, a 12 per cent year-on-year increase. According to Tech Data, the acquired Avnet business added around $500m in revenues for the quarter. Organically, the distributor saw a five per cent annual sales increase.
European non-GAAP operating income was $44.1m for the quarter, a year-on-year increase of 48 per cent. On a GAAP basis, profits dipped slightly annually, falling by $100,000 to $24.8m.
Tech Data's Americas region - responsible for 45 per cent of worldwide sales - posted $3.5bn in sales, a 45 per cent increase on the prior-year quarter. The Avnet business contributed around $1bn to sales in the Americas, without which sales would have grown by only five per cent annually.
Non-GAAP operating income in the Americas leaped by 150 per cent year on year to $78.5m, while GAAP figures hit $50.9m, a more modest 62 per cent annual boost.
APAC - a new region for Tech Data - posted $200m in sales - or three per cent of total revenues - entirely attributable to the acquired Avnet TS business. GAAP and non-GAAP operating income was $4.3m and $5.2m respectively.
"We are pleased to report an excellent start to fiscal year 2018. During Q1, we leveraged the breadth of our vendor and customer portfolios and the flexibility of our business model to deliver solid top-line growth and excellent profitability," said Bob Dutkowsky, CEO of Tech Data
"Our regional teams executed well throughout the quarter, capitalised on market opportunities and surpassed their profitability goals. This enabled Tech Data to exceed our expectations on our key financial metrics, including sales, non-GAAP operating and net income, and non-GAAP earnings per share. In addition, we generated strong operating cash flow and paid down a portion of long-term debt, an important first step in our commitment to deleverage the company. Tech Data delivered these strong results, while at the same time making excellent progress on integrating Technology Solutions - the largest and most transformative acquisition in our company's history."
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