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Ingram Micro Reports Third Quarter Financial Results

The following excerpt is from the company's SEC filing.

Robust Contribution from Higher Margin Businesses, Strong Operating Leverage

Drives 21% Increase in Non-GAAP EPS on a Currency Neutral Basis

$965 Million in Operating Cash Flow Generated Through the End of Q3

Company Repurchased 6.4 Million Shares for $160 Million During 2015 Third Quarter,

Declares $0.10 Quarterly Dividend to Stockholders of Record at Market Close on November 10, 2015

IRVINE, Calif., Oct. 29, 2015

- Ingram Micro Inc. (NYSE: IM) today announced financial results for the third quarter ended Oct. 3, 2015.

(US$ in millions, except per share data)

Third Quarter Ended

USD Change

FX Neutral Change

Net Sales

10,516

11,238

Non-GAAP operating income

Non-GAAP operating margin

17 bps

Operating income

Operating margin

Non-GAAP net income

Net income

Non-GAAP earnings per diluted share

Earnings per diluted share

A reconciliation of GAAP financial measures to non-GAAP financial measures is presented in the Supplementary Information

section in this press release.

“We had a great quarter, reflecting continued execution on our strategy,” said Alain Monié, Ingram Micro CEO. “We drove strong operating leverage while continuing to build our capabilities in key strategic areas such as advanced solutions, lifecycle services, commerce and fulfillment solutions and cloud. Our teams remained focused on generating strong returns on capital, which resulted in expanded margins, with non-GAAP operating margin reaching the highest level for a third quarter in more than a decade, a 21% increase in non-GAAP earnings per share

on a currency neutral basis versus last year and $340 million in operating cash flow for the quarter. Our focus on structurally improving our cash conversion cycle is yielding results and we now expect to generate more than $1 billion in operating cash flow for the full year, even as we deploy capital to support revenue growth in our seasonally strongest fourth quarter.

“Consistent with our strategy to expand in higher value and services areas,” Monié said, “we recently announced our intent to acquire the commerce solutions business of DOCDATA N.V. and value-add IT solutions provider Grupo AÇÃO. We expect to leverage our global infrastructure and world-class partnerships to accelerate growth and profitability in these businesses and, upon close, each is expected to immediately contribute to further margin expansion and non-GAAP earnings.

“In addition to strong execution across the business,” Monié continued, “this quarter we continued to deliver on our commitment to return capital to shareholders, paying our first ever quarterly dividend and repurchasing more than $160 million in stock during the third quarter, bringing total repurchases to $206 million since we resumed our program this May.”

Third Quarter Results of Operations

Worldwide third quarter sales were $10.5 billion, down 6 percent in U.S. dollars and up 2 percent on a currency neutral basis. Excluding the negative impact related to the company exiting portions of its North American mobility distribution business, as previously disclosed, worldwide third quarter sales were up approximately 5 percent on a currency neutral basis.

Non-GAAP operating income of $169 million was up 5 percent in U.S. dollars, or up 15 percent on a currency neutral basis, over last year. Non-GAAP operating margin of 1.60 percent grew 17 basis points over last year, the highest level for a third quarter in more than a decade.

North America delivered strong profitability with a 42 basis point increase in non-GAAP operating margin, as the region benefited from robust sales of advanced and specialty solutions and higher volumes in mobility lifecycle services. North America revenue was down 13 percent, or down 11 percent on a currency neutral basis, primarily due to exiting portions of the region’s mobility distribution business that did not meet the company’s profitability requirements, as well as lower sales of PCs and tablets, especially when compared to robust PC growth last year.

Asia Pacific delivered strong operating leverage, as non-GAAP operating income growth of 23 percent was more than triple the region’s 6 percent revenue growth rate. On a currency neutral basis, the region’s revenue grew 16 percent, largely due to continued solid growth in India, Australia and China, as well as contribution from recent value-focused acquisitions in Turkey and Saudi Arabia.

Europe revenue declined 8 percent in U.S. dollars, but was up 8 percent on a currency neutral basis, in part due to the recent acquisition of Anovo and strong smart phone sales, as well as modest growth in technology solutions. Non-GAAP operating margin declined 2 basis points, as strong year-over-year improvement with expanding gross and operating margins in the company’s European technology solutions business was more than

offset by efforts to build out higher margin strategic businesses, including in mobility and to expand the company’s cloud marketplace throughout the region.

Latin America had robust revenue growth in excess of 30 percent on a currency neutral basis (11 percent in U.S. dollars), resulting from strong growth in Mexico and Brazil, as well as the contribution from recent acquisitions. Profitability in the region remains solid.

2015 third quarter non-GAAP net income was $103 million, with non-GAAP earnings of 67 cents per diluted share, up 8 percent when compared to the 2014 third quarter, and up 21 percent on a currency neutral basis. Compared to the same period in 2014, the translation of foreign currencies negatively impacted 2015 third quarter non-GAAP earnings by 8 cents per diluted share. This amount was 2 cents greater than the foreign exchange impact the company anticipated when it provided its earnings outlook for the 2015 third quarter.

Key 2015 third quarter business highlights:

Ingram Micro’s commerce and fulfillment sales grew by double digits in the 2015 third quarter on a currency neutral basis. Following the close of the 2015 third quarter, the company announced its intention to significantly broaden its commerce and fulfillment solutions footprint in Europe with the acquisition of Docdata, one of the leading European providers of order fulfillment, returns logistics and online payment services. Docdata provides critical commerce solutions to major retailers, brands and promising start-ups and currently handles between 125,000 and 250,000 orders on a daily basis, with major operations in Germany, Netherlands and the United Kingdom. Docdata is expected to contribute in excess of $150 million in annual services revenue to Ingram Micro and to contribute 5 to 7 cents to 2016 non-GAAP earnings per share. Closing is expected toward the end of 2015 and is subject to customary closing conditions including regulatory approval and DOCDATA N.V. shareholder approval.

Last week, the company announced its intention to acquire Sao Paulo, Brazil-based Grupo AÇÃO (AÇÃO), one of Latin America’s leading providers of critical value-add IT solutions. In addition to a portfolio of higher value products, including those from strategic vendors such as IBM, Oracle, Red Hat, EMC and VMware, AÇÃO also provides integration services, sales support and financial services, with major operations in Brazil, Colombia and Argentina. AÇÃO is expected to contribute in excess of $300 million in annual value-add solutions revenue to Ingram Micro and contribute approximately 4 cents to 2016 full year non-GAAP earnings per share. The transaction, which is subject to customary regulatory and other closing conditions, is expected to close late in the 2015 fourth quarter.

Ingram Micro grew its Cloud business by more than 100 percent year-over-year on a constant currency basis in the 2015 third quarter, benefiting from the continued global expansion of its cloud marketplace. The company has recently expanded into India, Singapore and Malaysia and Ingram Micro’s automated Cloud Marketplace is now available for vendor partners...


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