Q3 2019 Earnings Call
I would like to welcome everyone to the Synnex third quarter fiscal 2019 earnings call. Today's call is being recorded an all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question answer session.
At this time for opening remarks, I would like to pass the call over to Ms. Mary like head of Investor Relations Miss you may begin.
Thank you good afternoon welcome to the Synnex Corporation earnings call for the third quarter fiscal 2018.
Joining me today to review, our financial results or death pool, President CEO , Marshall Witt, CFO and Chris Caldwell President after centric.
After the prepared remarks, we will open the call to a question answer session.
Before we begin we remind everyone that today's discussion contains forward looking statements within the meaning of the federal Securities Law, which statements include any predictions estimates projections or other statements about future events, including the company's projected financial results actual results may differ materially from those mentioned.
These forward looking statements as a result at risk and uncertainties discussed in todays earnings release in the form 8-K, we filed and in the risk factor section of our Form 10-K , and other reports and filings with the FCC, we do not intend to uptick any forward looking statements also during the call we were reference certain non-GAAP financial.
Information.
Reconciliation of non-GAAP , and GAAP reporting like who didn't <unk> earnings press release in form 8-K available under the IR section of our website.
This conference is a property of Synnex Corporation, and May not be recorded or rebroadcast without our permission and now I will turn the call, but your CFO for the financial update Marshall.
Thank you Merian. Thank you all for joining us today.
Q3 revenue GAAP and non-GAAP net income and diluted EPS, all exceeded our expectations.
On a consolidated basis total revenue was an all time record of 6.2 billion up 29% compared to 4.8 going in the same quarter last year.
FX did not have a significant impact on our top line or bottom line.
At the segment level technology solutions delivered its highest ever revenue of just over 5 billion, an increase of 60% compared to 4.3 billion in the per your corridor.
Concentrix revenue was 1.2 billion essentially flat versus last quarter and up 136% from 492 million in the prior year quarter, primarily due to the could Burgess acquisition completed in October of 2018.
On a pro forma constant currency basis revenue grew almost 3%.
Our consolidated gross profit dollars totaled 726 million, 69%, EUR 296 million versus a year ago and gross margin was just shy of 12% and a prudent up 270 basis points from the prior year quarter. Several factors contributed to the gross profit dollars in margin increase most.
Notably the positive contribution from our convergence acquisition and overall strong revenue growth in technology solutions technology solutions gross margin of 6% increased 19 basis points from the prior year quarter.
Centrix gross margin was 36.7% down 10 basis points from the prior year quarter.
Total adjusted <unk> expense was 456 million or 7% of revenue up 185 million in absolute dollars and up 173 basis points as a percentage of revenue compared to the year go quarter. The increase in SGN name was mainly attributed to the convergence acquisition.
Third quarter consolidated non-GAAP operating income came in at the company's highest level ever of 270 million up 111 million or 69% year over year.
non-GAAP operating margin of 4.4% was 805 basis point expansion from the prior year period.
The segment level technology solutions non-GAAP operating income was a record of 150 million up 28% or 33 million over the prior year quarter.
Adjusted operating margin was 3%.
28 basis points compared to a year ago, we achieve significant operating leverage in the quarter. As we grew the business for Concentrix non-GAAP operating income in the quarter was 121 million up 78 million in absolute dollars or 182% year over year.
Adjusted operating margin was 10.4% Apone hundred 69 basis points from the prior year period the increase both.
Gross profit dollars in margin was primarily due to the convergence acquisition.
Third quarter net total interest expense and finance charges came in line with our guidance and was approximately 43 million up from 29 in the prior year quarter. The year over year increase was due to borrowings to fund the convergence acquisition and growth in our technology solutions business, we improved our adjusted debt to EBITDA leverage ratio from three point.
Four times in the per quarter to 2.8 times this quarter and expect further improvements next quarter due to a lower leverage ratio. Our interest rate is expected to decline approximately 20 basis points in Q4 for the fourth quarter fiscal 2019, we expect our quarterly net total interest expense and finance charges to be approximately $40 million.
We remain well positioned from a liquidity standpoint, well fixing approximately 6% of our variable debt.
The effective tax rate for the third quarter was 25% compared to 20% a year ago. The decrease in the tax rate is primarily related to the U.S. tax Reform Act for the fourth quarter fiscal 2019, we anticipate the effective tax rate to be approximately 26%.
non-GAAP net income was 169 million 69 million or 69% from the prior year period, reflecting solid contributions from both segments. Our third quarter non-GAAP diluted EPS was $3.30 up 79 cents or 31% over the same period a year ago.
Now turning to the balance sheet, our accounts receivable totaled 3.5 billion and inventories totaled 2.8 billion on August 30, Onest 2019, our cash conversion cycle for the third quarter was 49 days down four days compared to the prior quarter and up four days compared to the prior period.
The increase in D. Io over last year was primarily due to expected seasonal increase in Q4 and timing.
Preliminary cash generated from operations was approximately 259 for the third quarter and our free cash flow came in strong at 217 million.
As we have consistently stated throughout this year. However, our goal to pay down debt, we paid down 196 million in total borrowings in Q3.
Moving forward in Q4, we expect to generate positive cash flow and we're committed to our target reducing total debt by approximately 400 million in fiscal 2019.
At the end of Q3 between our cash and credit facilities Synnex had approximately 2.1 billing and liquidity available to fund growth.
Other financial data and metrics that no for the third quarter are as follows depreciation expense was 39 million amortization expense was 52 million.
Capital expenditure for the quarter was approximately 33 million trailing four quarters, ROI see was 8.6% and 11.1% for adjusted ROI C.
As described in our press release, the board of Directors approved a regular quarterly cash dividend of 37, and a half cents per common share to be paid on October 25th 2019 to stock was a record as of the close of business on October 11th 2019.
Now moving to our fourth quarter fiscal 2019 outlook.
We expect revenue to be in the range of 5.85 billion to 6.15 billing.
non-GAAP net income is expected to be in the range of 180.5 million to 191 million non-GAAP diluted EPS is expected to be in the range of $3.50 to $3 in 70 cents per diluted share based on weighted average shares outstanding of approximately 51.1 million.
non-GAAP net income and non-GAAP diluted EPS guidance exclude after tax cost of approximately 44 million or 86 cents per share related to the amortization of intangibles and acquisition related integration expenses. Please note that these statements of fourth quarter fiscal 2019 expectations are forward looking and our actual results may differ materially.
Now I'll turn the call over to Dennis.
Thank you Marshall and thanks to everyone for joining our call today.
Our team delivered another record quarter in both revenue and profits in Q3.
Our revenue of 6.2 billion generated 29% topline growth year over year, and we delivered our highest ever gross profit dollars operating profit dollars and net income.
Our revenue increase came from both strong organic growth.
And the converges acquisition from last October .
Our financial performance in Q3 further validates our differentiated business model and is a testament to our core values and operating philosophies.
We often use the term entrepreneurial when describing our company culture and resultant success.
Entrepreneurial is not a term often used that companies are side.
But in all its burial spirit is that our core and is key to delivering results like we did for Q3.
We have taken very deliberate steps to drive our growth investing in our associates system.
And relationships with partners and customers.
As we sit today, we have a deeper and richer engagement model and each of our business segments. A direct result from best in class execution by our teams as well as our organic investments and the strategic acquisitions, we made.
Regarding our specific segments are concentrix business performed right on target.
And we continued to make great strides in our integration efforts converges.
I would like to now turn over the call to Chris discussed our Concentrix Q3 results and Q4 outlook Chris.
Thanks, Dennis Concentrix delivered solid results in the third quarter, continuing a trend of like for like constant currency revenue growth over year over year margin expansion, we made important progress in the quarter in our integration efforts and the related synergies contributed to 170 basis point expansion in our adjusted operating margin.
Even as we begin to invest in the seasonal ramp into the fourth quarter third quarter revenue for Concentrix totaled 1.16 billion, an increase of approximately 136% on a reported basis on a like for like constant currency basis revenues were up approximately 2.6% with currency fluctuations, causing just over a.
1% headwind on this measure.
We had a strong quarter of new business signings and are encouraged by the strength of our pipeline and the breadth of verticals geographies and capabilities included in our new business wins, we have also executed very well on our strategy to rebalance our portfolio with telecom revenues now slightly below 25% year over year. This represented an impact.
3% to our growth rate, but gives us a healthcare balance to our business going forward.
Adjusted operating income for the quarter was 121 million up from 43 million in the year ago period.
Adjusted operating margin was 10.4% up from 8.7% last year.
Improved profit margins are the result of progress on integration synergies strong cost containment efforts and continuing efforts to improve the profit profile of our portfolio of offerings footprints and clients.
On the transaction synergy front, we exited the quarter at an annual run rate for synergies of approximately 100 million well ahead of our year, one target of 75 million and believe we will achieve more than 150 million run rate at the end of fiscal 2020, a full year ahead of our schedule.
Our GAAP results for the quarter reflect approximately 9 million of integrated related expenses as we made meaningful progress in the integration as we finished migrating our finance and HR systems to one common set of tools this quarter.
The majority of what remains of the consolidation of facilities in data centers, which will continue to happen through 2020.
We continue to expect the total spend on transaction integration will be approximately a 100 million, including approximately 40 million. We already spent last year, our margin expansion and disciplined investment strategy resulted in another quarter of strong cash flow generation cash flows from operations in the quarter totaled approximately 130.
$2 million. Additionally, we spent 20 million 27 million on capital expenditures. This quarter, we expect a moderate increase in capital spending during the fourth quarter. We continue to bleep that on a long term basis capital spending in this business unit should approximate 3% of revenue.
Turning to Q4, we expect a meaningful sequential ramp in revenue and profitability consistent with the seasonal pattern in our business. We will continue to rebalance our portfolio on higher margin services across our verticals for the coming quarters. As we have successfully done all last year, while still focusing on driving profitable growth.
As I conclude I would like to thank all the Concentrix team members, who are working to exceed our clients' needs and has helped us achieve our milestones for the integration ahead of our schedule our broad capabilities in conjunction of the team's hard work and dedication give me confidence in our continued success back to dose.
Thanks, Chris moving onto our technology solutions business.
RTL segment achieved an all time record revenue of 5 billion in Q3.
Contribution to this achievement was well represented across our sub business unit and Geos within Ts.
Assisting our year over year growth was the shipment of several sizable rollout.
And integration projects, we won in prior quarters.
Our expectation where that these larger projects would ship over Q3 and Q4, but a significant portion was transacted in Q3.
Well they benefit to our quarter by no means whether the only reason for our exceptional performance as our core distribution business grew faster than the market as well.
[noise] major project areas contributed to our growth where Pcs networking.
And cloud and software related solutions.
From a customer standpoint, we saw strength in SMB, and we had a solid sled seasonal period.
With our rapid growth in the quarter came significant leverage as Ts non-GAAP operating margin achieved a Q3 record of 2.97%.
A very high bar to continue to meet but does show the capability of our platform when we layer on more business.
Turning to our fourth quarter outlook.
Historically Q4 is our strongest quarter of the year and we are in solid shape entering the final three months of 2019.
Looking forward as Chris noted, we expect our concentrix business to have it seasonally strong Q4, and as a result drives significant leverage and returns.
For technology solutions, we expect normal seasonality for Q4.
Our sequential top line revenue growth, maybe a bit more muted than prior years.
But primarily due to the success noted in Q3 versus any other factors.
Similar to last quarter, while we acknowledge that there are a macro and other challenges in the current environment. We believe we are well positioned to a definitely adjusts to any change in our large marketplaces.
Our commitment to foster deep and strategic relationships with our partners and customers has been and we'll continue to be paramount to our strategy.
From these relationships, we will continue to generate new and innovative opportunities to grow our business.
To wrap up my comments I.
I wanted to thank all of our dedicated associates around the world.
The result today are from a tremendous amount of hard work by the entire team.
I also want to thank our business partners and shareholders for their continued trust and support.
With that I'd like to open up the call for questions.
As a reminder to ask a question you will need to press star one on your telephone.
Your question press, the pound or how should keep please standby only compiled acuity Ross.
Your first question comes from Adam Tindle with Raymond James Your line is open.
Okay. Thanks, and good afternoon I just wanted to start on Concentrix I think revenue grew in the quarter and Relining back to the convergence acquisition before you acquired at that business was declining for a little while and was flat in Q4 of 2018, when you acquired it and now the combined MS business I think has grown revenue each quarter in fiscal 19. So just wanted to touch on the sustaining.
Ability of that trend for the combined business you talked about exiting Q4 of 19 at market growth rates does that still stand and as we think beyond Q4. Other reasons why you would not sustain that market growth rate call outs of contracts exiting or anything like that moving forward.
Hi, Adam it's Chris So a couple of things you are correct. The conversion as business was declining for about three years prior to US doing the acquisition, we have been able to sort of stabilize and start to grow the combined business.
We do see it as a sustainable I mean, that's what we're in the business off and we've had a very solid track record of turnaround declining businesses and growing up.
We have been more aggressive in this acquisition in terms of rebalancing the portfolio to make sure it's more.
Equally balanced RASM geographies equally bounced around capability set equally balanced round verticals and not as as we indicated has produced some headwinds, but we expect to kind of overcome that going through 2020 and continue to grow our business.
And in terms of exiting on the on the growth rates. You know, we're so focused on driving to that if you look at the underlying business. We're doing that already if we weren't sort of rationalizing some of the portfolio and our belief is that we continue to to do that and drive sustainable growth.
Okay. That's helpful and just another one on Concentrix on non-GAAP operating income I think it was about 120 million in the quarter as you kind of build this up a year ago. In Q3, 2018, Standalone Concentrix was about 40 million converges generated 60 million as a public company you talked about synergies, which are over a 20 million.
Run rate. So you just kind of keep both businesses flattened out in cost synergies. It would kind of gets you to that 120 million that group reported in Q3, So just a long way of saying that skeptic could maybe point out that it doesn't look like operating profit dollars are growing outside of the acquisition and cost synergies because.
If you could just maybe touch on what might be missing in that analysis, and maybe more broadly touch on the path to growing operating profit dollars in the business moving forward.
Yes, Adam it's not really apples to apples, because what you're not seeing us the underlying ramp up of new programs that we've won a new capabilities that we're investing in outside of sort of that a duplications synergies that we've driven in the business. That's the underlying margin expansion opportunities that we have in front of us as we go forward into 2020. These as the sort of new programs new investments start to.
To harvest, you'll start to see that margin expansion, we have the same sort of thought.
I guess skepticism you're on a bit of go when we're getting to 10 double digit op income.
Is that we invest very heavily but the reality is that drives a better business overtime and so we continue to seek good margin expansion possibilities in our business.
Very fair point, maybe just one last quick clarification for Marshall on cash flow. It was positive in the quarter and this is typically a seasonally weak quarter over the past few years Ts growth was very strong which is typically a drag on cash flow can you just talk about cash generation in the quarter and is it possible there it looks like there's some room and inventory days that continue to come down could you get the.
Cycle back to the mid Fortys like years past.
Yeah Adam.
Short answer is yes, the the takeaway for US is that we're pleased seeing equal contribution cash flow for both both segments converges for Concentrix, then and TS and then Q4, we still expect is in my prepared remarks to see another solid.
Quarter performance and yeah gross versus net does cloud a little bit of the absolute.
Cash conversion cycle, and I think if you would appeal that away.
Low Fortys is what you see and Thats, what we'd expect going forward.
Thank you very much.
Thank you.
Your next question comes from and then Doug.
With loop capital your line is open.
Hey, appreciate you guys. Thank you question I apologize in the background noise on traveling I put it on needs since license here, Yes, just a couple from me if I tried.
You mentioned that some of the large.
Large deals in Q1 will ship this quarter.
Revenue.
Ben I guess, a little bit higher for the day anticipated.
But the guidance for next quarter.
As healthy as well.
Tied together there Mark do you have more need big deal win now ramping next quarter as well.
Yes. Thank you can you talk about anybody out there and then add the follow up thanks.
Sure and add other status.
So as far as talking about the project wins in Q3, we were just trying to give some some background behind how we.
Beat our expected our guidance, we gave to the market back in June .
As far as the Q4 guidance how would you still have a few projects that should roll out in Q4, but overall Q4 is just about our performance in the marketplace and our expectation that we'll continue to be the overall growth in the market.
That's really helpful. And then next question is actually for both of the businesses I believe year to date.
You've made your mark in the past about share gain basin TV ads.
Net income waffle larger deal win.
Now that you've had welcome Tom for.
Yes, yes in the portfolio and I believe me Wafi thoughts about.
Seeing share gains as well, maybe even above original expectations.
Hey, concentric what's the addition of whereas its product line can you talk to what you're seeing in terms that share gains.
And you think does continue to be material going forward and they have one last one after that.
Hi, then as Chris So, let's talk about the Concentrix business for us in terms of share gains, we are making share gains across our portfolio that some of what is driving the growth and also improving sort of the profit margins as we get more capabilities and get more scale across those clients. Some of that is being offset by automation, but what we're finding that are.
Partners are sort of driving more business to us as we automated.
And then taking out smaller partners out of their ecosystem and that tends to be what your what you're experiencing within the BPL business.
Dennis.
On the Ts side Lunda it comes down to a lot of blocking and tackling our day to day basis that allows us to increase our share.
But given kind of a couple of highlights that we focus on the most.
We've talked about.
Going after and trying to win larger deals over the past year and we've been successful in doing that how many larger platform a larger.
A collection of vendor partners has allowed us to do that and that's allowed us to take share, but I'm really go back to the basics of the day to day blocking and tackling building relationships with vendor partners and customers, that's really allowed us to grow our business overall.
Okay, Great and then that's helpful and then let left configured and Marshall.
Do you hit the ball hit your your debt pay Downs are again spending November quarter do you need to do anything unusual or is it basically set up as long as you guys execute.
We achieved that and then looking out the next fiscal year. Once you get as the 2.5 times you might you achieved that what's your expectation defunding sympathy you likely saw yet as we go forward. Thanks, Yeah, not I'd say the playbook, we had for Q3, we expect to repeat that in Q4 with balanced.
Improvement or progression from both segments.
Too early to look at next year, but our intent to continue to pay down doesnt see fees or stop at the end of this year as I mentioned, the fact that our leverage got to a point, where our interest rate is now going to be down in Q4, we expect that to benefit us even further into 2020. So expect solid cash contribution next year, but beyond that won't give any specific.
Not yet.
That's helpful. Okay. That's very helpful. Thanks, guys. Thank you.
Your next question comes from Matt Sheerin with Stifel. Your line is open.
Yes, thanks, and Hello, everyone.
Another question or clarification regarding the guidance and Tech solutions, Chris talked about any meaningful sequential growth in concentrix. So lets say that's mid to high single digits that would imply that tech solutions would be down sequentially.
No you talked about seasonality, but also talked about all those.
Those big deals that you filled last quarter. So could you just clarify that Chris if you look back historically in the last five or 10 years, you've been anywhere from up 3% to up double digits. So.
If you can clarify that'd be great.
Yeah, Matt you kind of answered your own question there bigger deals in Q3, we conservative in terms of how we guide I think thats as Dennis said in his remarks, probably the biggest.
Contributor to our look for Q4, but we still expect a strong Q4 gross revenue on a year over year basis, we still believe we'll be in that mid single digits, which is what we look at in terms of our sense for for where we compare relative to the market.
So mid singles that you're a year, so there'll still be down a little bit sequentially and on the if you could just drill down in terms of the area of strength because and those deals those rollouts is that primarily PC kind of fulfillment deals.
Also talked about strength in networking and we saw from your competitor had double digit growth with big networking suppliers. So is there there's momentum in that business or you also just benefiting from the west on cross selling relationships.
Yes, Matt this is Dennis to the last part of your question.
Yeah were two years into the Westcon comp store acquisition, our one full year end to the North American system integration, so really starting to see a lot of benefits from that transaction, obviously networking was a big part of the Westcon comp store business.
And the cross selling of of networking product is really starting to be a significant tailwind for us at this point in time.
Okay, and then on the PC rollout, which is that primarily PC fulfillment.
That you know.
Our PC business as I mentioned in my prepared remarks was strong in the past quarter, but when it came it comes the rollout project that was really more around.
Storage and networking products and server as well.
Okay, and Okay, and then just lastly.
There's been reports about another round of Intel CPQ shortages and concerns about supply.
Are you seeing that at all and then you've been pretty much on top of all these shortages of various components in the last couple of years, but any concerns there any any actions there.
We're always concerned when they're shortages in the market, but as we've shown we can execute well through any type of challenges when it comes to shortages of products that we sell.
Processor.
Shortage challenge has really existed for most of the year.
And it really continue to three and were up based on our projections and assumptions on Q4 as it will continue.
Okay. Okay. Thanks, a lot.
Thanks.
Your next question comes from.
Korea with Bank of America. Your line is open.
Hi, Thank you were taking my questions.
One of the benefits of the converges acquisition was that you could cross sell services across geographies. So can you talk about like how far along are you in that process, and maybe talk about which verticals, you're seeing stronger growth faster growth versus which verticals are growing slower.
Hi, It's Chris Yes, So first off I think we talked about two quarters ago three quarters ago that.
The majority of our deals that we're writing right now take from one part of the acquisition or the other that came together. So we are getting that benefit us at cross selling right now that's happening not only in.
Market share gains with SEC client bases that we're focused on as well as net new clients because we have a very robust footprint. So that's already kicking in and we're seeing some very very good benefits were also seeing some good traction some of our high value services like analytics and voice of customer on some of our T. practices I came across from out of the converged sacrifice.
Mission across our overall client base. So we're seeing some good traction from that perspective.
And then in terms of just overall stronger verticals, we don't really break them I will say that our strategic verticals are growing faster than our average which tend to be healthcare financial services banking consumer electronics technology. We've also seen travel do relatively well, although that also encapsulate some ecommerce players in that space as well.
Okay. Thanks for that Chris.
Thanks for the detailed on that.
And then another one for you given where you are with the converges integration.
What is your appetite for more M&A in this space and maybe if you can maybe martially can give us your thoughts on uses of cash M&A versus buybacks versus paid on a debt.
Yeah briefly so yeah, our approach generally in regards to capital markets and our allocation has been pretty consistent we look at all.
Sides of our business with the same type of wedding an opportunistic.
View on land as you know and in the last few years, we've done deals on both side and we continue to look at that again as I stated in my prepared remarks about our liquidity.
Turn it over to Dennis a Chris anything else color on that I would say the same thing as Marshall. We're opportunistic we are always in the market looking and if it's the right investment we will we'll be able to act on it.
Okay, Okay, and that makes sense and one last question for me with respect to inventory turns and your overall outlook for inventory I think inventory was up 7% sequentially.
Even though the revenue is kind of guide being guided.
Maybe down a little bit on on at the midpoint. So how should we think about the inventory turns going forward over the next couple of quarters and how should we think about free cash flow over the next couple of quarters. Thanks sure. So I had free cash flow. We obviously expect to have a continued free cash flow into Q4 to accomplish our goal of paying down total.
Is that for the year of 409 by the end at 29 team a couple of more specific comments around inventory, we did see inventory move up slightly and the biggest reason for that was we had a lot of in transit towards the end of August .
That if you pull that out.
And essence makes our inventory fairly flat whether you look at November you look at May require revenues were up 11, and 10% respectively. So we feel good about that again in my comments made earlier about the cash conversion cycle. If you look at our D. I owe.
It came in around 47 days the impact that gross versus net had audit for the quarter.
Six days, so you pull that back or right around 40, which is again.
Good efficiency for us and as I always say were never satisfied with our overall conversion cycle on we always look to press that.
To be more efficient going forward.
Okay, great. Thanks for all the detail I appreciate it.
Your next question comes from shutting Cross with Cross Research Your line is open.
Thank you very much my first is just geographic thank you talked about it and on the T. aside being pretty broad based strength, but I'm wondering if that you saw any pre buying in Japan, a prior to the consumption tax increase or anything you know specific any of that yes. Thank you.
I should add this data.
As far as our goes I think it's best to kind of put them in two categories.
Japan, Lat am and Canada outperform.
Right to expectations from a top and bottom line perspective.
And then regarding Japan did we get some tailwind.
From consumption tax and other aspects in the market, probably some yet but overall I think we're performing at or better in the market regardless of of that action thats going on.
So non U.S.G. outperform rights expectations are U.S. geography performed better than expectations.
Part of that is what we talked about earlier, which is I think we're executing quite well on the basics of our business and building solid relationships with all our constituents and part of that I think is the U.S.
Market is growing faster than the others, especially in the.
Supply chain.
And just to clarify in Japan are you anticipating any I hate to use the term, but air pocket any upcoming quarter, you know as maybe the chance everything sort of been fulfilled prior to its consumption tax or does that not appear to be you know a pressure you may find.
I would expect there'll be some.
Reduction in consumption.
The tax passes but not material enough to really change our overall metrics in Japan.
Okay. Thank you and then on in terms of Oh, you talked about cloud and software being areas of growth I get into yes, what's specifically our customers looking for.
I I'm just trying to figure out how much of this is just sort of a continuation of on have current trends or if theres been any change. Thank you.
Yes, Shannon Dennis again.
I'm not hearing anything different than we have over the past year really I've talked a lot about our customers tell us.
Repeatedly that investing in technology makes their businesses more efficient more cost effective and investing in technology used that usually is a very good ROI. That's been a consistent message I've heard and visiting with customers over the past quarter and frankly past year. Once again add going forward I would expect the same so.
Nothing significant to call out regarding software or or I called out cloud also but the and those two were just performing very well as to where the market is going and I expect does continue to do so.
Okay, and then I guess Marcia what do you think about your revenue guidance.
Current quarter.
You've exceeded revenue for the last couple of quarters, I guess I'm, just trying to figure out how much of what you put out there which is solid but I. Just you know again given the outperformance this quarter.
It is more sort of a conservative look or if there. There's enough you know from the pull forward that you had on some of the contracts and then.
Maybe some pre buying in Japan that that lead you a little bit more conservative outlook next quarter or you just a given uncertainty in the environment.
Turning cautiously.
Hi, Shannon just that I'm going to take that one I don't mind.
As far as Q3.
Really the guidance there is on me.
I, let the macro headlines.
Yeah effect.
My thinking on what are our revenue and expectations for the quarter would be turns out the macro headlines didn't really affect our our core businesses and as always our teams executed well through all the challenges in the market as far as our thoughts on Q4 still some challenges in the market still some macro headlines.
A worry about but.
In planning our Q4 guidance.
A lot about what occurred in Q.
Q3, again, despite headlines that with.
Suggests or might be some headwind and we believe now at this point our guidance for Q4 is reflective of where the market really is going to be for the quarter again acknowledging that we did have a set of business.
The larger project rollout business I talked about that we expected to occur over Q3 in Q4 that was largely in Q3. So despite that Marshall indicated earlier I expect us to grow.
At or above market rate in Q4.
Great. Thank you so much.
Yeah.
Your next question comes from Vincent.
Colicchio with Barrington Research your line is open.
Yes, Matt nice quarter guys.
Got a couple of first for Chris.
Chris.
The non CRM business grow significantly faster than the CRM business. If you can break it down and that way.
Yes.
[noise] grow slightly slightly faster, but not significantly faster we have continued to push our portfolio more to that balance that non voice voice.
But those deals tend to take a little longer so we've seen some good traction and some seatings and proof of concepts, but expect that will be more more into 2020 before we see big changes not.
And what was the contribution of the top five and the quarter.
Oh, we didn't break that out this quarter, Vincent where actually the process of figuring out what staffs to break on a regular basis.
But it was not meaningfully different than where it has been the when we last reported debt.
Okay.
So if you're able to the improved growth rates.
Next year.
You know given I guess the need to ramp up new projects.
Well margins be negatively impacted from that due to the ramp coast.
So Vince we've actually done a very good job of kind of changing as the business through the course of the year and not have those ramp costs impacted certainly is a drag on the business, but we're sort of overcompensating at by.
Sort of the synergy numbers that were driving and also.
Frankly, being able to re purpose facilities and moved people around a little faster because you've got some of that capacity that we're going through.
You won't see sort of that pure play until we kind of get through some of that reask.
Reorganization of the portfolio and we haven't put sort of a fine deadline, then that yet.
To to kind of indicate but you'll see that impacted less and less to the preceding quarters.
Okay.
Thanks for answering my questions.
Thanks, Thank you.
Your next question comes from Tim Yang with Citi. Your line is open.
Hi, Thanks for taking the question I have two questions I'll ask the same time on number one on Concentrix I do hope to expend the more verticals onto achieved this industry average gross or do you think you're covered and exposure is good enough for you.
Generally this industry average gross operating integration and number two ounce, yes, I think you mentioned the PC contributor to the P.S. stress can you give some color on how much of it from those to upgrade and how should we think about your PC business in 2020 as most of the users finished the windows 10 upgrade thank you.
So Tim it's Chris why don't I did a concentrix business first no. We don't believe we have to expand outside of our current verticals that we focus on to achieve market growth rates in fact as kind of indicated earlier, we're achieving those growth rates underneath the covers as we rebalanced our portfolio and so we're quite comfortable on the verticals that we're focused on.
And Tim Dennis there regarding PC business.
Definitely was a positive to our quarter, but when I think about our performance in the quarter.
The growth of our PC business wasn't the number one reason why we delivered the exceptional revenue growth that we showed.
In Q3 definitely a.
Help or to the.
The performance and results, but not the main driver.
As far as 2020.
When the support and we do expect will be a roll off throughout 2020.
As you know our business is more SMB focus and we believe that roll off will be a longer tail.
Thus will benefit throughout the rest of 2020 when that occurs.
Got it thank you.
Thank you.
There are no further questions at this time I don't know tend to call back over to marry lie.
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