Tech Data Reports First Quarter Fiscal Year 2021 Results

Tech Data (NASDAQ: TECD) (the "Company”) today announced its financial results for the first quarter ended April 30, 2020.

A reconciliation of GAAP to non-GAAP financial measures is presented in the financial tables of this press release.

This information is also available on the Investor Relations section of Tech Data’s website at https://investor.techdata.com/.

Regional Financial Highlights for the First Quarter Ended April 30, 2020:

Note: NM = not meaningful, WW = worldwide

Stock-based compensation expense was $6.3 million, a decrease of $2.0 million, compared to the prior-year quarter. These expenses are excluded from the regional operating results and presented as a separate line item in the company’s segment reporting (see the GAAP to non-GAAP reconciliation in the financial tables of this press release).

• Net sales were $8.2 billion, a decrease of 3 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 3 percent. On a constant currency basis, net sales decreased 1 percent.
  • Americas: Net sales were $3.9 billion, an increase of 4 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 2 percent. On a constant currency basis, net sales increased 5 percent.
  • Europe: Net sales were $4.0 billion, a decrease of 8 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 3 percent. On a constant currency basis, net sales decreased 5 percent.
  • Asia Pacific: Net sales were $0.3 billion, a decrease of 16 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 12 percent. On a constant currency basis, net sales decreased 12 percent.
• Gross profit was $531.7 million, an increase of 4 percent compared to the prior-year quarter. As a percentage of net sales, gross profit was 6.50 percent, an improvement of 44 basis points compared to the prior-year quarter. On a constant currency basis, gross profit increased 7 percent.
• Net cash used by operations during the quarter was $8 million.
• Return on invested capital for the trailing twelve months was 12 percent, compared to 13 percent in the prior year. Adjusted return on invested capital for the trailing twelve months was 15 percent, compared to 14 percent in the prior year.

"With the onset of the global COVID-19 crisis, the first quarter brought challenges to businesses across geographies and sectors, including the IT ecosystem. With this backdrop, Tech Data once again is proving its role as the vital link in the IT supply chain, delivering the critical technologies and solutions needed to address rapidly evolving business needs, including enabling remote work. Throughout Q1, we experienced strong demand for Endpoint Solutions driven by remote work and business continuity needs. I’d like to acknowledge the dedication and commitment of our worldwide colleagues who continue to support our channel partners and each other with excellence in these unprecedented times,” said Rich Hume, chief executive officer, Tech Data. "The quarter also brought with it another milestone toward completing our acquisition by Apollo when we received shareholder approval of the transaction, which we look forward to closing upon completion of customary closing conditions.”

Acquisition Update

On November 12, 2019, the Company entered into an Agreement and Plan of Merger, as subsequently amended on November 27, 2019 (the ''Merger Agreement''), with the affiliates of certain funds (the "Apollo Funds”), managed by affiliates of Apollo Global Management, LLC ("Apollo”), a leading global alternative investment manager. Pursuant to the Merger Agreement, the affiliates of the Apollo Funds will acquire all the outstanding shares of the Company’s common stock for $145 per share in cash (the "Merger”). On February 12, 2020, the Company’s shareholders held a special meeting and approved the Merger Agreement.

The Company has received all regulatory approvals necessary to complete the Merger, except for the approval of the Australian Foreign Investment Review Board ("AFIRB”), which has the matter under consideration. The Company and Apollo are still targeting a closing in the first half of calendar year 2020, although this timing may shift based on the timeline for receipt of Australian regulatory approval. We expect to proceed with closing the transaction promptly after the final approval from the AFIRB is received, taking into account the timing requirements of the Merger Agreement, including the Marketing Period (as defined in the Merger Agreement).

In light of the pending acquisition by Apollo, the Company does not plan to host an earnings conference call nor provide forward-looking guidance. A copy of this press release, along with a supplemental slide deck can be accessed at https://investor.techdata.com/overview/default.aspx.

COVID-19 Response

The Company’s focus remains on protecting the health and well-being of our colleagues, while continuing to provide the best possible service levels to our channel partners and supporting our communities. Additional information about Tech Data’s COVID-19 response can be found at https://www.techdata.com/communications/default.aspx.

Non-GAAP Financial Information

The non-GAAP financial information contained in this release is included with the intention of providing investors a more complete understanding of the Company’s operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles ("GAAP”). Certain non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the Company include sales, income or expense items as adjusted for the impact of changes in foreign currencies (referred to as "constant currency”), non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share and Adjusted Return on Invested Capital. Certain non-GAAP measures also exclude acquisition-related intangible assets amortization expense, benefits associated with legal settlements, acquisition, integration and restructuring expenses, goodwill impairment, gain on disposal of subsidiary, tax indemnifications, changes in deferred tax valuation allowances and the impact of U.S. tax reform. A detailed reconciliation of the adjustments between results calculated using GAAP and non-GAAP in this release is contained in the attached financial schedules.

Forward-Looking Statements

This communication includes "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Such forward-looking statements are inherently uncertain, and shareholders and other potential investors must recognize that actual results may differ materially from Tech Data’s expectations as a result of a variety of factors. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which Tech Data is unable to predict or control, that may cause Tech Data’s actual results, performance, or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. Risks and uncertainties related to the proposed merger include, but are not limited to, the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the failure of the parties to satisfy conditions to completion of the proposed merger, including the failure of the parties to obtain required regulatory approvals; the risk that regulatory or other approvals are delayed or are subject to terms and conditions that are not anticipated; and the risks, uncertainties, and other factors detailed from time to time in Tech Data’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed or furnished with the Securities and Exchange Commission (the "SEC”).

Many of these factors are beyond Tech Data’s control. Tech Data cautions investors that any forward-looking statements made by Tech Data are not guarantees of future performance. Tech Data disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

About Tech Data

Tech Data connects the world with the power of technology. Our end-to-end portfolio of products, services and solutions, highly specialized skills, and expertise in next-generation technologies enable channel partners to bring to market the products and solutions the world needs to connect, grow and advance. Tech Data is ranked No. 90 on the Fortune 500^® and has been named one of Fortune’s World’s Most Admired Companies for 11 straight years. To find out more, visit www.techdata.com or follow us on Twitter, LinkedIn, Facebook and Instagram.

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