TD SYNNEX Corporation

Good afternoon, my name is Chantal, and I'll be your conference operator today. I would like to welcome everyone to the Cinex third quarter fiscal 2020 earnings call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. At this time, for opening remarks, I would like to pass the call over to Marshall Witt, Cinex Corp CFO. Marshall, you may begin.

Thank you, Chantal, and good afternoon, everyone, and welcome to the Cenex third quarter fiscal 2020 earnings call. Joining me today to review our financial results are Dennis Polk, President and CEO, and Chris Caldwell, President of Concentrix. Before we continue, let me remind everyone that today's discussions contain 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 as to the expected spinoff, demand, economic recovery, growth, expenses, debt, cash, margin, and liquidity. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8K we filed today and in the risk factors section of our Form 10K and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also during this call, we will reference certain non-GAAP financial information. Reconciliation of non-GAAP and GAAP reporting is included in our earnings press release and the related form 8K available under the investor relations section of our website. This conference call is the property of Spinnix Corporation and may not be recorded or rebroadcast without our permission. And so now I'll cover some of the key highlights from Q3 and discuss Q4 guidance. In the face of continuing economic uncertainty in these unprecedented times, our revenue, net income, and diluted EPS all exceeded our expectations, reflecting our resiliency and ability to do what we do best. Our gap results announced today, while continuing to be impacted by COVID, have not been adjusted for COVID-19 costs. Where appropriate, I will reference the financial impact COVID-19 had on Q3 results. On a consolidated basis, total revenue was a third quarter record of $6.5 billion, up 4% compared to $6.2 billion in the same quarter last year. On a constant currency basis, revenue was up 5% compared to the prior year quarter. Our consolidated gross profit dollars totaled $708 million, down 2% or $18 million versus a year ago, And gross margin was 11% compared to 11.7% a year ago. Total adjusted SG&A expense was $448 million, or 7% of revenue, down $8 million compared to the year-ago quarter. Consolidated non-GAAP operating income was $260 million, down $10 million, or 4% compared to a year ago. Non-GAAP operating margin of 4% was lower by 34 basis points compared to the prior year period. Now shifting gears to Q3 operating performance by business segment. First on technology solutions, revenue was $5.3 billion, up 5% for $258 million over the prior year quarter. Technology solutions gross margin was 5.6%, and that was 37 basis points lower than the prior year quarter, primarily due to product mix. Operating income of $132 million was down $6 million compared to a year ago. Non-GAAP operating income was $142 million, down 5% or $7 million compared to the prior year quarter. Non-GAAP operating margin was 2.7%, 29 basis points lower than a year ago. Technology Solutions COVID-19 related net incremental expense was approximately $8 million for the quarter, primarily made up of an increase in allowance for dappable accounts, staffing, and work-from-home costs. Now to Concentrix. Concentrix revenue was $1.2 billion, up 24 basis points over the prior year quarter. Concentrous gross margin was 35.5%, up 308 basis points sequentially, and down 126 basis points compared to the year-ago quarter, primarily due to the impact of COVID-19. Non-GAAP operating income in the quarter was $118 million, down $3 million in absolute dollars, or 2% compared to a year ago. Non-GAAP operating margin was 10.1% compared to 5.9% in fiscal Q2 and 10.4% a year ago. Net concentric COVID-19 related incremental expenses were approximately $13 million for the quarter. Now, moving back to our consolidated results. Third quarter net total interest expense and finance charges were $29 million, a reduction of $14 million compared to a year ago quarter. The decrease was driven by a reduction in our average outstanding borrowings compared to the prior year quarter, as well as a lower interest rate environment. For the fourth quarter, we expect interest expense to be approximately $29 million. Total non-GAAP net income was $173 million, up $3 million, or 2% over the prior year period. And non-GAAP diluted EPS was $3.33, up 3 cents, or 1% over the same period a year ago. The effective tax rate for the third quarter was 25.2%, compared to 25.3% a year ago. For the fourth quarter of fiscal 2020, we expect the effective tax rate to be approximately 25%. Turning to the balance sheet, our accounts receivable totaled $3.6 billion and inventories totaled $2.8 billion on August 31st, 2020. Our cash conversion cycle for the third quarter was 38 days, 11 days lower from a year ago and improved eight days from last quarter and led to a preliminary cash flow from operations of $321 million. The improvement was supported by continued collaboration with our partners and faster turn on our inventory. At the end of Q3, including our cash and credit facilities, Cinex had approximately $2.8 billion in total liquidity available to fund operations. I also wanted to provide an update regarding the concentric spin. We remain on track for a calendar Q4 spin and believe the most natural date for the spin to be December 1st. as it's consistent with our year-end and is a good clean start for 2020 for both Concentrix and Cenex. As we see it today, the estimated Cenex court gross debt will be approximately $2.6 billion, with Concentrix receiving approximately $1.1 billion and Cenex receiving approximately $1.5 billion. The majority of cash on hand, which we estimate will be approximately $700 million at spin, will be held by Cenex. The use of cash in Q4 will be for normal seasonal uses and debt paydown. As we have previously discussed, we want both companies to be well positioned amongst its peers from a leverage and liquidity standpoint. These debt balances are estimates and could change based on Q4 performance. We are well down the path with our bankers in securing third-party financing for concentrics and are confident in the capital structure of both businesses. Cinex and Concentrix will have the appropriate dry powder to support growth and M&A opportunities. Now, moving to our fourth quarter outlook. We expect revenue to be in the range of $6.45 billion to $6.65 billion. Non-GAAP net income is expected to be in the range of $191 million to $204 million. Non-GAAP diluted EPS is expected to be in the range of $3.68 to $3.93 per diluted share on our weighted average shares of approximately $51.5 million. Non-GAAP net income and non-GAAP diluted EPS guidance excludes after-tax costs of approximately $37.5 million or $0.72 per share related to the amortization of intangibles and acquisition-related and integration expenses. One final note before I turn the call over to Dennis. In previous discussions with you, we've let you know about one of our high customers that will be moving to a consignment model. The transition date remains fluid and will not begin in early 2021. As we learn more and have proper visibility to a start date, we will certainly let you know. Please note that these statements of fourth quarter fiscal 2020 expectations are forward-looking, and our actual results may differ materially. With that, I will now turn the call to Dennis.

Thank you, Marshall, and thank you to everyone for joining our call. I want to start off by expressing my appreciation to all our stakeholders across the globe for their continued commitment and dedication in partnering with us as we have jointly faced a multitude of challenges and economic issues in 2020. Our associates delivered a phenomenal result in Q3, for which I am truly grateful. We're all a bit worn down by the ongoing pandemic, but the cynic spirit and determination continues to inspire me. I see the positive impact we are having on our communities and the strong support our teams are providing to each other, our partners, and customers. Along with executing a great quarter, the team also made significant progress on our proposed spin of Concentrix to a standalone public company. The Concentrix F10 document is available for your review. Third-party financing is in final stages, and most of the remaining spin-related activities are nearing completion. Thus, we believe we are in a solid position to close this transaction in calendar Q4. Now, moving to our third quarter results. In our TS distribution business, better than expected revenue was driven by strong demand in education, state and local, and e-commerce channels. This was driven by ongoing work, learn, and shop-from-home needs. We also experienced a slight improvement from our second quarter in office environment and SMB sales. Consistent with Q2, we saw higher demand in notebooks, Chromebooks, cloud, collaboration, and security products. From a year-over-year perspective, we experienced some softness in products supporting the office environment, such as desktop PCs, printers, supplies, and on-premise data center equipment. From a geographic perspective, North America was the strongest performer, but all geos met or performed better than expectations during the quarter. Overall, TS distribution grew year over year. In our TS Hive business, we delivered a sequential improvement and a year-over-year increase in revenue as we continued to support our largest customers in Q3. The mix of programs delivered was more skewed toward higher volume, lower margin products, but overall, we are pleased with the high results in Q3. Our concentrics business also exceeded our expectations in Q3 despite the known challenges. I'm very pleased with how we have performed, and I will now turn over the call to Chris to discuss Concentrix in more detail.

Thanks, Dennis. We're very pleased with our continued momentum, both on our business execution and on being ready to spin, as Marshall indicated, early December. We delivered very solid results, returning to a pre-COVID revenue growth trajectory and double-digit adjusted operating margins. The third quarter revenue for concentrics totaled $1.16 billion, slightly higher than the same quarter last year. On a sequential basis, third quarter revenue increased across all our delivery regions. This would not have been possible without addressing COVID-19 challenges across three separate areas aggressively. First, providing a flexible, safe workplace that incorporates both at-home and at-office elements to nimbly meet our clients' demands. Second, our strong technology solutions that support clients regardless of the channels they choose. And third, driving a culture of security and integrity backed up by innovations like our recently announced SecureCX offering. SecureCX is our proprietary platform that incorporates advanced technology to ensure close to the same level of security at home as available in an office. This is just the latest innovation from our staff of well over a thousand skilled engineers and developers. Concentrix has been enabling technology-infused solutions like this for well over a decade, and we will continue to lead by investing in this space. We continue to be happy with our execution also around vertical mix. The communication vertical is now approximately 21% of revenue, representing an impact of 4% to our year-over-year growth rate, but giving us a much more balanced portfolio. As expected, our travel, transportation, and tourism clients during the quarter are have been impacted by COVID-19, resulting in an additional 2% impact on growth. More than offsetting these headwinds was strong growth with clients in our technology, healthcare, financial services, and e-commerce verticals, which represent about two-thirds of our business on a combined basis. New business signings were very encouraging in the quarter, coming in at a record level of expected annualized contract revenue. This heightened demand is based on the value that our clients place in the strengths of our best-in-class, CX platform and our ability to meet their evolving needs. We continue to take share with strong signings across our strategic verticals and win new business that has historically not been outsourced. Even with our record signings, our pipeline remains strong and growing. We continue to watch the COVID developments daily and are ready to recalibrate with our clients as their needs change. Now, moving to profitability. Adjusted operating income for the quarter was $118 million or 10.1%. nearly reaching the year-ago level. The return to double-digit operating margin reflects revenue over performance with lower variable spend, despite 13 million of additional net COVID-19 cost impacts. Cash flow from operations in the third quarter totaled approximately 91 million. Capital expenditures totaled approximately 37 million. We generated positive free cash flow despite the impact of prior quarter revenue reductions that reduced our collections in the third quarter. Capital expenditures we see trending slightly higher than historical norms to support growth and reconfiguring some of our facilities due to COVID-19. Turning to our outlook for the fourth quarter, we remain focused on keeping our staff safe, over-delivering for our clients so that we remain their partner of choice, and emerging from the pandemic stronger so that we can drive sequential improvement in both revenue and profitability. In the fourth quarter, we expect more sequential revenue growth than last year, resulting from strong new business signings in the third quarter, in addition to seasonal increases. As a result, we expect fourth quarter revenue to increase by at least 2% year over year on a constant currency basis, and we expect our adjusted operating margin to be above 12.5%. We continue to feel confident in our ability to achieve and exceed industry growth rates while increasing our adjusted operating margin over time. Now, turning to our spin from Cinex, estimated to be on December 1st, we believe that we are ready to go. We intend to announce our Board of Directors in an updated Form 10 registration statement in early October. We are very proud that the Board will reflect the diversity we have in our business. As Marshall indicated, we will have less than approximately two times debt to EBITDA when we separate, giving us strong liquidity and meaningful flexibility to invest in organic and inorganic growth. As always, we have a disciplined approach to both. We believe the spinoff will result in benefits for the CINIC shareholders, our team members, and our clients. A pre-spin event will be held for analysts early November with one-on-one meetings with investors shortly thereafter. I look forward to updating you in the coming weeks on the incredible opportunity and our superior ability to lead in the customer experience industry. As I conclude, I would like to thank the Concentrix team members and our clients. The effort, resourcefulness, and dedication are a tribute to our people, our culture, and our diversity that we'll be able to take advantage of as we enter this new chapter of Concentrix.

Thank you very much, and now I'll hand the call back to Dennis. Thank you, Chris.

Turning to our fourth quarter outlook, our priority continues to be on the safety and health of our associates. For our business, in general, we see positive signs of continued recovery as economies open further. However, we are still cautious as there are many differences from geo to geo and within geos. For technology solutions, we expect an overall seasonal improvement for Q4. We anticipate TS distribution will be up sequentially, partially offset by a decline in TS Hive. TS distribution will be driven by continued strength and remote enablement, the federal buying season, improvement in delayed on-premise projects, and overall continued investment in digital transformation. We expect a solid quarter for TS Hive, but we'll be comparing to an exceptional Q4 last year. As well, given the unpredictability of this business, we tend to use the low end of internal expectations in our guidance calculations. As Marshall indicated, COVID-related expenses declined in Q3 and are expected to decline in Q4. As we stated in our last call, a portion of these costs will be part of our normal TS run rate going forward. Over time, we expect to find ways to offset these amounts while running the most effective and efficient business possible. For Concentrix, as Chris indicated, we expect to have a seasonally strong Q4. A return to growth, positive cash flow, and a solid pipeline are among many aspects that I am pleased about as Concentrix moves toward becoming an independent business. I'm also pleased and excited for the independent TS as well. Our ongoing opportunities to improve our core operation, the many investments we have in place to organically grow our business, And the opportunities that exist for intergrantic investments give me confidence in our business and the services we provide our partners. As well, our goal of growing faster than the market and increasing our profit at a higher rate will continue. As I conclude my prepared remarks, on behalf of the entire management team, I want to again thank our associates and business partners. We appreciate everything you have done for Cenex during this challenging period. Our thoughts continue to be with those who have been affected by COVID-19. Please stay safe and healthy. As well, we are with all those who are working for positive change on social issues. I appreciate the CINIX team members who have been of service in these and other important areas. With that, I would like to open the call up for questions.

As a reminder, Operator, we're having trouble hearing you. Are you able to hear me? Yes, we can hear you, Chantal.

Ruplu Bhattacharya, your line is open.

Hi, it's Ruplu. Congrats on the quarter and on the strong guide as well. For my first question, Chris, I wanted to ask you, what is the mix of voice versus non-voice in your revenues, and in the long term, what mix would you like to get to? And when you look at the current environment, do you see voice demand growing or demand for non-voice services growing faster?

Hi, Rupalu. So prior to the Convergys acquisition, we were, you know, goal was to get to 50-50, and we're getting relatively close to about a 60-voice, 40-non-voice split. With the convergence acquisition, we sort of certainly increased our voice business. But overall, our goal is to get back to that 50-50 split between voice and non-voice. And right now, we're seeing good growth in both, frankly, areas. So it's taking a little longer to get that split to where we'd like it, but we're seeing good margin performance and good growth rates on both sides of the business.

Okay, thanks for that, Chris. And for my follow-up, Dennis, on the TS side, Last quarter you had record backlog. I was just wondering, has the backlog normalized any, and are you still having any issues with the supply chain in terms of getting product that is impacting revenues?

Hi, this is Dennis. Yes, overall I'd say incrementally the supply chain is better or was better in Q3 versus Q2, but by no means are we back to normal SLAs. With regards to our backlog, it actually has remained at a fairly high elevated level. We certainly shipped a lot of what was existing at the end of Q2, but we actually filled it up throughout the quarter. And at the end of Q3, we're about at the same level we were at the end of Q2. Okay.

Thank you for all the details, and congrats again.

Thanks, Rupal.

Again, if you would like to ask a question, press star 1 on your telephone. Please limit yourself to one question and one follow-up question. Your next question comes from Adam Tindall with Raymond James. Your line is open.

Okay, thanks. Good afternoon. I just wanted to start and congrats on the results. On the post-spin capital structure, I think you mentioned that most of the cash will go to T.S., And just as an aside, I would think that TS on a forward basis would have some cash tailwind from the consignment shift into 2021, so very healthy liquidity. So the question maybe for Dennis, just touch on how you thought about options and rationale for this being the most prudent capital structure for the two entities.

Sure, I'll start, and Marshall can add some comments as well. First of all, we wanted to make sure that both companies were capitalized well. and we think we got to a very good conclusion with regards to that goal. When it came to dividing up the cash and the debt, if you do the math, Adam, it's about 50-50 on a net basis. When it comes to how much cash on one segment versus another, part of that is just where the cash is currently and some other tax considerations as well. That's ultimately why the cash fell more on the concentric, or excuse me, on the TS side than the concentric side.

And then, Adam, this is Marshall. As we've said before, We clearly want to position both businesses in a good setting in regards to the peer set. And we think that that does that.

Understood. Thanks. And maybe just as a follow-up for Chris and Concentrix, I think coming into this quarter, you were expecting operating margin to be down year over year. You had stranded labor. You talked about kind of that 90% productivity, but the last 10% can be the toughest. You were expecting meaningful COVID expenses. And ultimately, we were only down 20 basis points, I think, year over year. So maybe you could touch on the biggest buckets of upside in the quarter and how you're thinking about the normalized margins for the business moving forward. Thank you.

So, Adam, a few things that happened. Clearly, we had net COVID impact of around $13 million from an expense perspective, but we're very aggressive at making sure we control other variable costs within our businesses. And then we saw overachievement, and we called out a couple of verticals, you know, e-commerce and technology and financial services and healthcare, that we were able to ramp it a little faster within the quarter of new business that we won in both end of Q2 and early Q3. So that certainly helped. I think from a margin perspective, clearly we want to get back to where we were last year on a quarterly basis and even exceed that a bit. And our belief is that as we finish this year, finish all the last integration of Convergys that's effectively done at this point, start to see a more normalized revenue, return to revenue ramping perspective, we'll be able to continue to grow our adjusted up income basis over what our historical highs were last year.

Our next question comes from Vincent Collegio with Barrington Research. Your line is open.

Yes, Chris. Is Concentrix continuing to gain share from players that are struggling with virtual delivery, or is that sort of played out?

Hi, Vince. It's a good question. We actually saw where we gained share from competitors who were unable to execute both on virtual platforms at-home work models as well as in-office work models where they just weren't able to make that happen. And then we also saw where we gained share from clients who were looking for a higher level of security that they needed from work that was going to be performed in an at-home model. And so we were able to show them what we have done and where we've invested over many, many years that now is proving a very large benefit for them. just in terms of integrity of operations. And so those are really the two areas. We think that will continue, and we see sort of a lot of business that seems to be moving around right at the moment as people look for reliable execution within their own business sets. So certainly I hope to take advantage of that as we go forward.

And are clients in some of the more sensitive areas regarding data getting more comfortable with virtual delivery? Where I'm getting at is, you know, is the mindset giving you confidence that maybe, you know, the virtual mix is going to be, you know, a shift is going to be more sustainable than previously thought?

We expect that there will be a much higher level of work-at-home delivery, you know, post-COVID for sure. I think that's a given. But we do think that a significant amount of work will return back to bricks and mortar at some point. What we are seeing is that from more sensitive work being done, there's a higher push to get it into more digital transformation, which we're executing with our Tiger Spike business, which we're executing with some of our other technology assets within our business to kind of completely get rid of the work, which might have taken a little longer without the COVID experience. And then what we're also finding is that clients are looking for solutions like our Secure CX solution, which gives sort of app-like security at home for bricks and mortar. And that's sort of very differentiated within the marketplace with what we're offering. So both of those will continue to help us give clients a level of security. But again, after COVID, we do expect some of this to come back into bricks and mortar.

Okay. Nice quarter, guys. Thank you. Thanks, Matt.

Our next question comes from Matt Sheeran with Staple. Your line is open.

Yes, thanks. Good afternoon. Just a question regarding the upside that you saw in the quarter, particularly in technology solutions. By my math, you beat our revenue estimate by roughly $700 million. You talked about strength in some of the TS verticals. in terms of products and then customers and then also Hive. Could you tell us sort of what the split was between Hive and the core business?

Hi, Matt. This is Dennis. Just to take your question up a notch to start, I would say part of our beat during the quarter was due to the fact that we were fairly conservative in our guide back in Q2. We were concerned a bit about the marketplace, what was going on with COVID, and everything associated with that. So we did give a fairly conservative guide in hindsight. Overall, the markets that we participated in on the TF side were generally better than we thought three months ago. So that's one of the reasons why we did better. The second was due to I think we took some market share as well during the quarter. And it wasn't just tactical share taken during a quarter. I think we're also benefiting from wins of new customers and new business from quarters in the past that are now playing through in the current quarter, and we expect to go forward. So that was a benefit that we didn't factor as much into our guide going into Q3, but it did benefit us, we believe. And then last, to your specific comment with regards to Hive versus TS distribution split, In general, we had contribution fairly equally from both in the quarter to our initial expectations.

Okay, that's very helpful. And then turning to the concentric business, Chris, your one commentary talked about new program wins with customers that are outsourcing for the first time. So what do you attribute that, and do you see that trend changing? accelerating or continuing?

Hi, Matt. So two things that we're seeing. First of all, we're seeing that where our clients are looking for a more variable cost model just as they kind of go through their challenges of their own business model. And then the second thing that we're seeing is where they're not able to perform because of COVID in their own delivery systems. and therefore looking at outsourcing. And where we're seeing that growth is not only to your point of new clients who have never outsourced, but also clients that we've been working with that are now outsourcing work that historically that they have never outsourced, primarily for the two initial reasons. And I think a couple of things that we're winning for is really we have a lot of technology around what we offer for our clients. And we're driving a lot of transformation for them. So not only are we saying, look, we can support your business that historically have an outsource, but we can support it more efficiently, more securely with our technology and our transformation techniques. And that's, frankly, allowing them to have a much more variable cost model and better scalability up and down within their business. It's resonating very, very well, primarily because people need to make those decisions faster now with their businesses being impacted by COVID.

Okay. Thanks very much.

Thank you.

Our next question comes from Amanda Baruch with Loop Capital. Your line is open.

Good afternoon, guys. Congratulations on the performance and the outlook and the upcoming completion of the split. Two for me, if I could, as well. Dennis, just going back to your comments a moment ago about taking share in past cycles or wins in past quarters that are now paying off, do you see that being – any chance you can give us some context around what led to those wins, and do you feel like those wins could be structural and that you could continue to get lift from those going forward? And then I just have a quick follow-up.

Sure, Ananda. I'd say a couple of things to that question. One, we have been and continued through the last six months investing in our business, investing in sales, business development, and product management resources. And by doing so, we can deliver the full suite of Cinex services to the fullest extent. And we think our customer set is seeing that and benefiting from that, and that's allowed us to to win more business as well. We're about three years past the Wescon ComStore acquisition, but we've really hit our stride in that business as well, and we've started to see some new wins by combining our prior business with those vendor relationships and bringing in some new business for our company.

Okay, that's great. And actually, I'll just stick here for the follow-up, because Dennis, I recall, maybe it was the beginning of this year, maybe it was February. You had called out, and if it was not February, it was the prior quarter. You guys had called out something similar, a Western comp store, and maybe some early, you know, call it cross-sell results. It also had led nicely to some upside. So, you know, is this sort of, that dynamic now really hitting stride or are you sort of even outperforming your original expectations with sort of in that regard?

Yeah, what I'd say is while we do still track cross-sell internally, it's a little harder as you get farther away from a transaction date. But I don't really think about really cross-sell anymore when it comes to the WestConn ComStore business. I just think about sell. We're selling more as a company as we brought all these products and services together. And I think as we've matured and, again, invested in people and resources to support the business, we've enjoyed the benefits from it.

That's great to hear.

Thanks a lot. Thanks, Renata.

Our next question comes from Shannon Cross with Cross Research. Your line is open. Thank you.

Thank you very much. I wanted to talk a little bit about some of the drivers from a revenue perspective for TS. You know, when you think about the quarter, how important were PCs and that? We're just trying to think about sustainability. And, you know, also some in the supply chain, you know, including a call I was just on, we're talking about weakness and enterprise demand. So I'm just curious if you can talk a bit about, you know, what you're seeing. Do you think people are coming back and maybe pursuing some larger projects deals, or is this more sort of like a PC-led recovery or work-from-home recovery? And I have a follow-up. Thank you.

Hi, Shannon. This is Dennis. So the highest of the high runners, if you will, were notebooks and Chromebooks during the quarter. We also had benefit from cloud and collaboration and other products. So those were what drove the quarter. When it comes to PCs and It was incrementally better in Q3 versus Q2, but on a year-over-year basis, still a bit challenged. That being said, we're seeing continual improvement all the way through our current quarter today. So that's one thing I'd emphasize is that's coming back. The second thing, I also called out in my script that as far as data center and office purchases, if you will, we're seeing a comeback in that as well. Again, incrementally better. Q3 versus Q2, still a bit challenged year over year, but also seeing implementations and projects and data center completions occurring all the way through the current date, which gives us a little bit of confidence as we move into Q4 regarding that part of our business.

Okay, great. And then I have a couple more. One, just a clarification on HIVE within guidance. I assume that I think the consignment starts not this quarter but next, so Is this just referring to sort of lumpiness in typical Hive sales? And then my second question, since you talked about the fact that you went into last quarter and, frankly, the quarter before that being quite conservative in terms of your outlook, how do you think you're positioning this quarter? Thank you.

Hey, Shannon. This is Marshall. I'll answer the first. The consignment model for the large customer we referenced in Hive did get pushed out. At the very end of my comments, I just mentioned that When we have more definitive structure or when that's going to happen timing wise, we'll come back and let everyone know. But right now we initially thought it would start early 2021 and now that's been pushed back a little bit.

And then Shannon, this is Dennis on your visibility question. I would say that each passing month and quarter this year, obviously since the pandemic, we've had better visibility into our business. So with each passing quarter that we give guidance, you can infer that we have a better understanding of what we think is going to happen in the following quarter.

Great. Thank you very much.

Thank you.

Our next question comes from . Your line is open.

Hi. Thanks for taking my question. Question for Chris. Concentric's top line was roughly flat year-over-year this quarter and is expected to be up roughly 2% year-over-year next quarter. Given there are still uncertainties with the virus and also if they come next year, is 3% to 5% growth still your sales growth target for concentric? And if so, when do you think that you can achieve that target?

Hey, Tim. So, yes, I mean, our expectation is that we can grow a little faster than market once we finish our rebalancing. And I think now we're tuned to do that with or without sort of COVID impact that's going through. While we have been impacted by the travel and transportation industries we talked about, the reality is that we're winning more business in other segments that is giving us that confidence to continue to reiterate that. We haven't called that out from a guidance perspective and won't because we're only looking at sort of one quarter forward. But I think you can take from our comments that we feel quite confident we can get there in a reasonable period of time.

That's very helpful. My next question is for Marshall. Any timeline or threshold for you to reinstate the dividend?

Yeah, good question. We certainly, as we suspended it, wanted to make sure we had, we'll call it predictable and strong performance in return to where we thought we would be, which is, of course, what we recorded and where we think we're going to be for Q4. And then the other part, too, is because we're going to be spinning here and we're going to have two separate boards, We want that to be the decision now that will be made by those separate boards going forward after the spin.

Thank you. Thanks, Tim. At this time, there are no more questions.

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

In closing, I want to thank the Cinex and Concentrix teams for their ongoing efforts. I have confidence in our business and look forward to each of our segments executing well in Q4 and continuing to do so post-spin as independent entities. I hope you all stay well. Thank you and good evening.

This concludes today's conference call. You may now disconnect.