新聚思 (SNX) 2018 Q4 法說會逐字稿

Good afternoon, and welcome to SYNNEX Fourth Quarter Fiscal 2018 Earnings Conference Call.

Today's call is being recorded (Operator Instructions)

At this time for opening remarks, I would like to pass the call over to Marshall Witt, CFO at SYNNEX Corporation.

Mr. Witt, you may begin.

Thank you, Kelly, and welcome to the SYNNEX Corporation's Earnings Call for the Fourth Quarter Fiscal 2018 ended November 30, 2018.

But before I begin my remarks, you typically hear Mary Lai, Head of Investor Relations, provide the introductions and safe harbor.

Mary is on maternity leaves, celebrating the birth of her second son.

So first congratulations to Mary and William.

And second, Mary your shoes are difficult to fill, so we are looking forward to your return in the near future.

Now on to the call.

Joining me today on the call is: our President and CEO, Dennis Polk; our President of Concentrix, Chris Caldwell.

We will review fourth quarter fiscal 2018 financial results.

After the prepared remarks, we'll open the call to a Q&A session.

As a reminder, today's call is being webcast live and will be recorded.

Please note that some of the information you will hear today consists of forward-looking statements.

Such statements may relate, to without limitation, revenue, non-GAAP net income and diluted EPS, amortization of intangibles, acquisition-related and integration expenses, margin, costs, tax rates, interest expense and finance charges, sales, strategy and integration.

Actual results or trends could differ materially from our expectations.

For more information, please refer to the risk factors discussed in our fiscal 2017 Form 10-K and the discussion of forward-looking statements in our earnings release and Form 8-K filed with the SEC today.

SYNNEX assumes no obligation to update any forward-looking statements, which speak as of their respective dates.

Also during the call, we'll reference certain non-GAAP financial information.

Reconciliation of non-GAAP and GAAP reporting is included in today's earnings release and the related Form 8-K available on our website at www.synnex.com.

This conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcasted without our specific written permission.

With that, let's go ahead and review fourth quarter results and Q1 guidance.

Our fourth quarter revenue, both GAAP and non-GAAP net income, and diluted EPS significantly exceeded the high-end of our original guidance and hit record highs.

On a consolidated basis, total revenue was a record $5.6 billion, up 6% compared to $5.3 billion in the same quarter last year.

Adjusting for FX, revenue increased 7%.

Technology Solutions revenue was $4.7 billion, a 3% reduction over the prior year period.

The expected decrease was primarily due to a tough prior year compare due to our focus on profitably operating the Hyve business and the impact of sales growth driven by revenue that is subject to gross versus net treatment.

If you adjust for the growth in sales attributable to gross versus net treatment, revenue grew slightly year-over-year.

Concentrix revenue was $972 million, up 82% from $534 million in the prior year quarter, as a result of the Convergys acquisition on October 5.

Now turning to gross profit.

Our fourth quarter gross profit dollars totaled $651 million, up 41% or $190 million versus a year ago.

Our gross margin was 11.6%, an improvement of 289 basis points from the prior year quarter.

Technology Solutions and Concentrix both reflected expansions in gross margin.

Technology Solutions gross margin was 5.8%, an improvement of 49 basis points from the prior year quarter.

Due to the positive impact of gross versus net adjustments and across the board strength in our Technology Solutions business, Concentrix gross margin was 39.3%, up 36 basis points from the prior year quarter.

Total adjusted SG&A expense was $387 million or 6.9% of revenue, up $117 million over the prior year quarter in absolute dollars, and up 1.8% as a percentage of revenue compared to a year ago.

The increase in SG&A was primarily due to the acquisition of Convergys.

Fourth quarter consolidated non-GAAP operating income was $265 million and it is the 10th consecutive quarter of year-over-year growth, an increase of $72 million or a 37% increase.

Non-GAAP operating margin of 4.7% was 108 basis point improvement from the prior year period.

We are proud to have completed 126 consecutive quarters of profitable quarterly results.

At the segment level, fourth quarter Technology Solutions non-GAAP operating income was $136 million, up 6.4% or $8 million from the prior year period, driven by stable pricing and complemented by extremely efficient systems and platforms, allowing us to grow with minimal incremental cost.

Adjusted operating margin was 2.9%, up 22 basis points sequentially and up 25 basis points from the prior year period.

For Concentrix, non-GAAP operating income in the quarter was $129 million or 13.2% of revenue, up $64 million or 99% in operating profit dollars and up 112 basis points in margin from the prior year period, primarily due to the Convergys acquisition.

Fourth quarter net total interest expense and finance charges were approximately $31 million, up from $18 million in the prior year quarter and slightly below our expectations.

The year-over-year increase was due to borrowings to fund the Convergys acquisition and to support Technology Solutions' working capital requirements.

On December 4, we issued a press release regarding the strong support we received in regards to our Convergys financing, which matures in 2023, the successful -- Japan's refinancing and our ability to extend our term debt to 2022.

We are well positioned from a liquidity perspective, while fixing approximately 55% of our variable debt.

For the first quarter of fiscal 2019, we believe a range of $38 million to $39 million is the appropriate level for our quarterly net total interest expense and finance charges.

For the fourth quarter, other income expense was approximately $5 million, up from $200,000 from the prior year quarter, primarily due to higher FX losses.

We had more activity this quarter than normal.

Higher FX losses associated with Latin America were offset by gains connected to the fair value of Convergys' convertible debt at acquisition and the subsequent tendering process.

By the end of December, over 99% of all convertible debt was settled in cash.

The effective tax rate for fourth quarter fiscal 2018, excluding the discrete impact related to tax reform, was 24.9% compared to 35.5% in the prior year period.

The current quarter tax rate was lower primarily due to the impact of lower tax rate due to tax reform, the mix of income earned in lower tax jurisdictions, the impact of the Convergys acquisition and certain tax true-ups, which were approximately $0.15.

We also recorded a one-time tax charge of $8.4 million or $0.18 per diluted share related to the adjustment associated with the one-time tax transition on accumulated overseas profits and the reevaluation of deferred tax assets and liabilities.

These adjustments represent true-ups of provisional adjustments initially recorded in the first and second quarter of fiscal 2018.

For fiscal 2019, we anticipate the effective tax rate to be in a range of 27% to 28%.

Non-GAAP net income was $172 million, up $59 million or 53% from the prior year period.

Our fourth quarter non-GAAP diluted EPS was $3.65, up $0.86 or 31% over the same period a year ago.

Turning to the balance sheet, our accounts receivable totaled $3.9 billion and inventories totaled $2.5 billion on November 30, 2018.

Our cash conversion cycle for the fourth quarter was 52 days, up 1 day compared the prior quarter and up 12 days compared the prior year period.

The increase over last year is due to Convergys AR and higher inventory due to Technology Solutions growth.

The increase in gross versus net also impacted our cash conversion cycle.

Given recent transactions, our cash conversion cycle metrics [are as] comparable and our portfolio remains very healthy and continues to be a top priority as we effectively manage working capital.

Preliminary cash generated from operations was approximately $141 million for the fourth quarter or approximately $100 million for the full fiscal quarter.

At the end of Q4, between our cash and credit facilities, SYNNEX has over $2.4 billion in liquidity available to fund growth.

Other financial data and metrics of note for the fourth quarter are as follows: depreciation expense was $34 million, amortization expense was $45 million, capital expenditure for the quarter was approximately $50 million, trailing quarters' ROIC was 7.9% and 10.8% for adjusted ROIC.

We repurchased approximately $10 million or approximately 127,000 shares of our stock in the fourth quarter.

At the end of the fourth quarter, the remaining authorization under our 3 year share repurchase program was approximately $234 million out of the total $300 million authorized by our Board back in July of 2017.

Fiscal 2018 year-to-date, we repurchased 680,000 shares of our stock or approximately $66 million in total, representing a record year of buybacks.

The Board of Directors approved a regularly quarterly cash dividend of $0.375 per common share to be paid on January 31, 2019 for stockholders of record as of the close of business on January 22, 2019.

Now moving to our first quarter fiscal 2019 outlook.

We expect revenue to be in the range of $5.225 billion to $5.425 billion, non-GAAP net income is expected to be in the range of $139 million to $144 million.

Non-GAAP diluted EPS is expected to be in the range of $2.70 to $2.80 per diluted share, based on weighted average shares outstanding of approximately $51 million.

Our Q1 forecast reflects an approximate $150 million to $200 million year-over-year Technology Solutions gross to net revenue accounting -- revenue headwind associated with the increased sales in software, cloud and security products.

This also includes the impact of the adoption of ASC 606.

Non-GAAP net income and non-GAAP diluted EPS guidance excludes after-tax cost of approximately $50.8 million or $0.98 per diluted share related to the amortization of intangibles and acquisition-related and integration expenses.

Please note that these statements of first quarter fiscal 2019 expectations are forward looking and actual results may differ.

I will now turn the call over to Dennis.

Thank you, Marshall.

Good afternoon to everyone on the call.

As you saw in our press release and heard from Marshall, we just completed an incredibly successful year, concluding with record fourth quarter results.

Our expectations for the fourth quarter were exceeded both individually at the segment level and for the consolidated business.

Revenue at $5.6 billion reflected the solid performance in both of our businesses, stable market places and excellent execution.

These factors, along with significant leverage from our scale and recent investments, drove our record non-GAAP EPS.

Regarding our Technology Solutions business, it was another strong quarterly performance with non-GAAP operating margin at nearly 3%.

Leverage and focus on profitable growth were the key drivers to the success in our fourth quarter.

From a product standpoint, divisional aspect, customer segment and geographic perspective, we saw growth in virtually every area.

The U.S. distribution business led the way again in overall performance.

Our Concentrix business also performed exceptionally well on the quarter.

The team did an outstanding job executing in our seasonally higher fourth quarter, while balancing the close and initial integration of Convergys.

There are many aspects of our Concentrix quarter and business to highlight and I would like to turn over the call to Chris at this point to do so.

Chris?

Thanks, Dennis.

The team at Concentrix is very happy with how we executed in the fourth quarter and wrapped up a transformational year.

Throughout the year, we have been keeping you updated on our goal of hitting our double-digit, non-GAAP operating income target for the Concentrix business, and I'm happy to report that we were able to achieve this milestone on schedule.

The fourth quarter was a record for the legacy Concentrix business, hitting 13.8% non-GAAP operating margin.

This is a result of solid focus on providing higher value offerings, replacing lower margin business and continuing to refine our operations.

We believe this discipline will serve us very well as we integrate the Convergys acquisition.

With the closing of the Convergys acquisition in the fourth quarter, we immediately began the integration work.

We have been extremely happy with that talented staff, strength of execution and potential with the clients.

While we will not be breaking out the business going forward as we run it as one, I think it is important to note that Convergys added $439 million to revenue for the 57 days above the $425 million we expected in the quarter.

Importantly, Convergys revenue was flat year-over-year, which is a large improvement over the prior quarter decreases driven by the telecom portfolio.

On a run-rate basis, we have achieved approximately $50 million on our $75 million goal for year 1, and I am confident we will meet or exceed the year 1 target.

I'm also happy to report that we have one new business within the quarter based on the footprint and breadth of capabilities of the new combined organization.

This supports our thesis for the acquisition.

All our integration work streams are on track and we are very pleased with the momentum in the marketplace.

As the 2 companies come together, a few notes of interest.

We are now the #2 global player within the CRM BPO space and recognized by third party analysts as being a leader in vision and our execution.

We have a strong diverse name-brand portfolio with our top 5 clients projected to be 28% of our FY '19 revenue.

Our strategic verticals make up 65% of our business now and growing.

We will be rolling out additional metrics on the Concentrix business as we complete the integration in the following quarters.

We now operate in over 40 countries and have one of the most robust footprints and capability sets to service global brands worldwide.

We expect our cumulative restructuring cash charges to now be approximately $100 million, down from $150 million we first indicated when we announced the transaction.

We've incurred approximately $40 million in 2018.

Turning to Q1.

We expect to make further progress in achieving our synergy target and executing on ramping our new wins from Q4.

We expect that the typical seasonal pattern of Concentrix revenue and profitability will not be materially altered by the acquisition, other than through the recognition of additional synergies as our integration activities move forward.

While we don't guide further out in the quarter, we feel confident in our ability to grow Concentrix to achieve industry growth rates by the end of 2019, while increasing our non-GAAP operating margin.

As I conclude, I would like to thank the over 200,000 team members of Concentrix who have made 2018 the successful year it was.

I look forward to another successful year ahead.

Back to you, Dennis.

Thank you, Chris.

Our fourth quarter was excellent, but 2018 was a great year as well.

Some highlights include: We completed the first full year of our Westcon-Comstor Americas investment and grew the business overall.

We achieved these results while also integrating the North America business on to our core operating platform during the year.

We acquired and completed the initial integration of Convergys.

Rarely do 2 companies with more than 100,000 associates each merge and we did so in 2018, while delivering excellent customer service.

We closed the year with over $20 billion in revenue for the first time.

This represents significant organic and acquisition growth in recent years and we accomplished this while improving our adjusted operating margin, most importantly, including our legacy Concentrix business, hitting our 10% margin goal in 2018.

And lastly, we also returned cash to our shareholders through a record dividend amount and increased share repurchases.

We have an established strategy and have made investments in growth and new businesses models.

I believe these investments have and will continue to differentiate SYNNEX in our performance and in the markets in which we compete.

I take significant amount of pride in the incredible SYNNEX team and their proven ability to adapt to changing environments.

We realize that 2019 currently presents more economic uncertainty compared to recent periods.

Despite these headwinds, I am optimistic about our ability to execute and to continue to drive value as we successfully demonstrated the ability to do so over the years.

A big part of this optimism is a result of our market position in TS and Concentrix.

Both are now solidly in the top 3 in each of their respective marketplaces.

Both have large markets to grow in and both are making investments to ensure continued growth occurs.

Now, turning to our guidance for the first quarter of 2019.

We expect to maintain our sales momentum in both our business segments, while maintaining our strong profitability focus.

The midpoint of our revenue guidance reflects the first full quarter of the Convergys acquisition, but also factors expected organic or non-Convergys acquisition growth as well.

We set high goals for 2018 and exceeded that once again.

It was 1 year ago when I became the CEO of SYNNEX.

As I stated then and still believe now, SYNNEX remains solidly positioned due to the team in place today that's the best in the industry and a culture, drive and entrepreneurial spirit that distinguishes SYNNEX from the rest of the field.

In our third quarter call, we showed our confidence in our overall business by indicating a projected range of non-GAAP EPS for 2019 of $11.40 to $11.90.

This assumes no major change in the business environments we operate in or challenges in the IT market that are out of our control.

This range reflected our confidence in our teams, our markets, our capabilities and our expectations to profitably grow market share.

At this point, we are pleased to say that we believe we can deliver EPS at the upper end of this range, if not slightly higher in 2019.

This considers all aspects previously noted about our environments and marketplaces.

I want to thank all our associates around the world for their individual and collective accomplishments.

And I also want to thank our business partners and shareholders for their continued support.

Lastly, I want to welcome Michael Urban to the SYNNEX team.

Michael will join in February, and we look forward to his contributions.

We are in an enviable position to be adding to our team at a time of strength in our business.

And with that, let's turn the call over to the operator for questions.

(Operator Instructions) Your first question comes from the line of Frank Atkins from SunTrust.

I wanted to ask a little bit about the Concentrix business.

One, can you talk a little bit about the seasonality going into 1Q as well as the trajectory to get to kind of industry growth?

And two, a little bit about the drivers of this improving margin over the year and where could that go to?

Frank, it's Chris.

So first to kind of tackle your seasonality questions.

We talked about it in the prepared remarks.

Our expectation is that you're going to see the same rough seasonality that you saw last year and prior years in the Concentrix business, where there was a dip down.

And historically, if you've looked at our business, you've seen sort of a dip down in Q1, sort of flattish for the middle 2 quarters and then obviously Q4 is a very, very strong quarter.

And we don't seem -- a difference with adding the Convergys business to it outside of, obviously, margin improvement.

From a growth perspective, as we've kind of indicated last call, our thesis is still the same that we expect to see, very frankly, anemic growth for Q1 and then start to see that ramp-up to where the new business wins that we've had as well as the organic growth that we are germinating in the business will drive us to industry growth rates exiting Q4 this year.

So you'll see that progression through the course of the year.

And then in terms of margin expansion, our focus right now is driving the synergies through the business.

We've obviously done a lot in the existing Concentrix business to raise our margin to the 10% operating income level.

And so the synergies will continue to drive through that.

And then clearly within the industry, we're focused on more RPA, more AI, more of the digital business which tends to have a richer margin profile, but takes a little longer to get instilled to see the benefits of that.

But that -- those are the sort of the levers that we continue to drive to increase our operating margin.

Okay, great, that's helpful.

And for my follow-up, I wanted to ask a little bit about exposure to the public sector, given what's next going on.

Is there any concern around impact in the 1Q for the Tech Solutions business?

Frank, this is Dennis.

Yes, we do have a reasonable amount of exposure to the fed spending space, if you will.

Right now, we haven't seen any material change in buying patterns.

And we factored that in our guidance that we provided today.

Obviously, if the shutdown extends out or broadens, we would have more concern about spending activity.

But at this point in time, we're going to stay with the guidance that we've given.

Your next question comes from the line of Adam Tindle from Raymond James.

I just wanted to start with a clarification for Chris.

I think the reported results for Concentrix reflect Convergys.

Excluding Convergys, I think you said that Concentrix would have achieved a double-digit operating margin for fiscal '18.

I just want to confirm that first?

Yes, Adam, that is correct.

We did hit the 10% double-digit operating income for the entire year.

And clearly within the fourth quarter, we had a very, very strong fourth quarter coming in at 13.8% for the legacy existing Concentrix business.

Okay.

And then, just maybe talk about what drove the performance for Concentrix in fiscal '18.

And how quickly, you can carry those learnings to Convergys?

So if you looked at our performance over the last 4 quarters, Adam, you've seen that progression of significant basis point improvement year-over-year.

And primarily, that's been driven by, one, replacing sort of some low margin business, which was a task that we did this year and called out at the beginning of the year.

We also put a lot more automation into our business and more digital practices within our business that tends to have a higher margin profile.

And then subsequently, just continuing to refine our operations, as we put in new tools and new work processes that have just generally improved our operational efficiencies.

Our goal is to put those into the new business as quickly as possible.

We've already started that.

And that will -- you'll see that being layered into the business over the course of next year, as you've seen us make those improvements over the Concentrix business over the last year.

Okay.

And just maybe just one more clarification, on the $75 million synergy target for fiscal '19.

I think we were all thinking it would be a little bit more back-half weighted, would take some time in fiscal '19.

But has the amount or the timing changed?

I think you might have said that you've already achieved $50 million on a run rate in Q4.

Is that correct?

Yes, Adam, we have pulled some of those synergy savings forward, where we were able to see opportunities to take advantage of putting the business together faster, where we saw some quick wins.

And so we are a little ahead of our schedule and that's where sort of the comment came that, clearly, we're very, very confident hitting the $75 million, if not overachieving that within the first year.

Okay.

And then how much can we think about being reflected in Q1 guidance?

Can you give us any color on -- how much of it -- is it just the remaining gets achieved in Q1?

There will be a longer tailwind, Adam, but I hate to give you exact guidance.

I would look at the run rate that we have within the quarter we just finished.

And then look at that, with then slowly, marginally improving over the next quarter.

The next question comes from the line of Matt Sheerin from Stifel.

On the Tech Solutions business, could you give us a little bit more color on the strengths you're seeing in the non-Hyve business?

And what the growth rate there is and what the drivers of growth are?

And then within Hyve, I know that's been a top line headwind, sounds like you've been more selective which is helping the margins.

And I know you've also been trying to diversify in that business with that 1 large customer.

Could you just give us an update on how that's going?

Matt, this is Dennis.

As far as the overall growth rate of Tech Solutions, as I indicated in my prepared remarks, it really was an across-the-board positive growth rate in all the markets that we participate in.

So we had strength in the U.S. We had strength in Canada.

We have strength in Latin America and in Japan.

And we subscribe that to a couple of things.

One, we've -- obviously add the Westcon-Comstor business and that's been integrated to one system.

So we're getting the benefits and synergies of that business.

We also have just grown our legacy business through investments as well as just an overall positive and better economy, especially in the U.S. And we've also worked on our Japan business over the past couple of years.

And that's starting to contribute as well.

So really across every segment it was positive.

Specifically to Hyve, Hyve came in just about to expectations for the quarter, top and bottom line.

As you indicated, we've been working on this business quite a bit, especially from a concentration standpoint and that goal has not changed.

We're working to diversify the business, but we're also really working on improving the profitability of this business, especially from an asset return perspective.

I think we made incremental progress in both of those areas in Q4 2018 and the goal is to continue that in 2019.

Okay, great.

And then as a follow-up, that you're moving your guidance up to the upper end of that range.

You're closer to $12.

Was that primarily driven by expectations of the profitability in Concentrix getting there faster with this integration working well?

Or are you also seeing contribution from the Tech Solutions business?

Yes, Matt, this is Dennis again.

So the increase in our guidance and having more confidence in the top end of the range, or even a little bit higher, is really a kind of a 50-50 more balanced from each segment perspective.

So both are contributing to our improved guidance.

(Operator Instructions) Your next question comes from the line of Shannon Cross from Cross Research.

The first is, I just got back from CES and everybody seems pretty positive.

There are still some hesitancy, nobody kind of knows what's going on, obviously, in terms of the wall and -- or the shutdown and tariffs and all of that.

But I'm just curious, as you're thinking about where you're seeing demand or where you think there might be areas of weakness.

Because investors are really sort of across the board trying to figure out what's going to happen, given some of the tough comps that we face in this coming year.

And then, I just -- if you can dig a little bit more deeply into what you're hearing from customers?

What they're saying about data center spend?

Where they're really focusing and what's making them make the decisions to pull the trigger and buy?

That would be really helpful and then I have a follow up.

Sharon, this is Dennis.

I understand your perspective and your question but really from our perspective, other than the concerns about the federal shutdown and day-to-day challenges may be from a -- like, processor shortage and things like that.

We don't see a lot of headwinds or don't hear a lot of concerns from our customers at this point in time.

So it's really the macro uncertainties that are out there, but overall, we're not seeing a lot of issues that are causing us to be concerned about our growth in 2019.

Okay, that's helpful.

Because again, it's -- believe me, the conversations were very different between when I would talk to investors who are very concerned about what's going on, and then you talk to the companies and they're, like, things seem okay.

So it's good that you agree.

And then Marshall, can you talk a little bit -- I think the conversation we had that was made on Convergys is basically -- or in Concentrix in terms of seasonality, I think we can understand what's going to happen there.

But can you remind us if there's anything to keep in mind on the TS side that might make tougher comps as we try to figure out the seasonality, especially given the puts and takes between, obviously, adding in Convergys and then the synergies?

And then what we saw last year in terms of demand on the TS side.

Yes, so Shannon, obviously, we had a really strong Q4.

But with that said, our guide for Q1 is within seasonal norms.

In my prepared remarks, I referenced some headwind on the gross to net.

When you adjust that, we're right at, call it, mid-single digit growth rate, which is consistent on a year-over-year basis.

As Dennis said in his comments and follow-up, we still feel really good about our ability to outperform the market and within kind of seasonal trends as we typically have seen them in the past.

Okay, and then just one final question on the synergies.

There was a comment about feel good at hitting at least $75 million, maybe more.

I guess can you dig a little bit more into what would drive upside to synergies?

And where you're specifically seeing the faster integration and benefit?

Sharon, it's Chris.

So we're seeing faster integration in some of the toolsets that we use and -- overlapping toolsets that we use and being able to get across quicker some of the technology platforms.

So that's certainly one of the big drivers.

Also in terms of, we both use similar systems and so we're able to put departments together faster.

And so that's definitely driving some of the synergies that we're seeing within the business.

And as we kind of have more maturity, clearly we need to get on to one accounting system, one HR system and some of those systems that will be happening through the course of the year.

The faster we can get that done will allow us to drive better synergies through the back half of the year.

Your next question comes from the line of Jim Suva from Citi.

For the Hyve business, and just to clarify from the prior answers and prepared remarks, are you really focused on like deemphasizing a couple of product lines or some of your main customer, or is it more broadening that?

I was a little bit more confused or maybe answers both, or how should we think about it?

Because it seems like from a lot of the suppliers to hyperscalers and cloud providers and big social media companies, there was some pre-purchasing going on with the CPU shortages.

So I'm just trying to figure out your strategy for that business going forward?

Sure, Jim, this is Dennis.

To be very clear, no, we're not deemphasizing the business or customers at all.

What I want to just be very clear on is, as in all of our businesses that we operate, we want to make sure we're operating a business that's profitable.

So for the last several quarters, we've been very focused on the high profitability, especially from an asset return perspective.

As well, as we talked about quite a bit, Hyve is fairly concentrated from a top 2 customer perspective.

And so we're working on diversifying that as well.

So really the goals and objectives for our Hyve component of TS have not changed at all over the past year.

And my last question is on the prepared comments, it may have been Marshall, he made some comment about, I think, Latin America and I didn't quite grasp it.

Was that a positive, negative?

Was it an integration thing or was it a demand of profitability?

I kind of missed that line about Latin America and a few other things I think.

Yes, Jim, that was some FX losses below the line, but they were balanced or offset by some gains associated with our convert payments that we made post-close.

So it was FX stuff.

It wasn't like operational?

Am I correct?

Correct.

Okay, great.

Last question, on the tax rate going forward with the integration, you mentioned integration is going faster than expected from your acquisition.

Anything with tax rate or is that kind of in line with what we were expecting for your tax rate outlook?

Yes, the same.

In my prepared, it was 27% to 28%, Jim, for 2019.

And there are no further questions at this time.

I will now turn the call back over to Dennis for closing remarks.

Thank you, everyone, for joining our call today.

We look forward to talking to you over the next coming quarter.

Have a good day.

This concludes today's conference call.

You may now disconnect.