SCSC - Earnings call transcript Q1 2019

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Operator

Welcome to the ScanSource Quarterly Earnings Conference Call. [Operator Instructions] Today's call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Mary Gentry, Vice President, Treasurer and Investor Relations. Ma'am, you may begin.

Mary Gentry

to XX, conference XXXX. welcome quarter for and September ended you, ScanSource's call earnings the Thank With CEO; our and today Gerry me are Lyons, CFO. Mike Baur, our

fiscal views the those June your We this but and in and for Any operating the as today and call, SEC. include, are identified release we for made to, XX-K XX, of be required changes XXXX, our relied webcast actual any performance, statements rates the expectations that our These or results and reflect our cause our in represent will to comments for forward-looking ended including subsequent Form except statements limited not any posted could expectations, the update put earnings, upon should factors ScanSource duty Relations statements. review differ that second uncertainties statements. statements are year year date. expense from accompanies our XXXX, to in materially These our risks then to not only as of of sales, representing any out forward-looking our for A views questions. and to results on earnings Investor the take with as by forward-looking today and law. and is in filed ScanSource's quarter as CFO as of disclaims website. commentary actual tax operating statements quarter subject section Certain results risks such interest that are uncertainties

release. reconciliations with now have website in begin will in provided on an found and our and the overview can with reconciliations results. amounts discussion Baur X-K. also non-GAAP these our and We of results These will be press Mike during have GAAP and filed be CFO our our commentary been Form call discussing between both our our

Mike Baur

our start and and joining first thank fiscal us. for results we strong reported operating Mary, a year. quarter to excellent Thanks, you Today,

For growth sales we XXXX, a profit growth. on basis, first year X% year-over-year X% operating and delivered income quarter gross net X% non-GAAP fiscal growth,

Our non-GAAP business of for We for our and our year-over-year regions. operating sales across segments both our EPS organic geographic the results range. tracked our worldwide delivered growth all of was forecast strong upper growth at with expectations net end forecast diluted our and

the quarter, For to profit increased to non-GAAP X.XX%. margin increased our gross and XX.X% margin operating our

We expansion. for driving margin our on and growing solutions higher margin customers executing both sales net are and

our performance Our this executing reflects in progress strategic plan. quarter

operating pent-up support for for applications. computers. demand vendors had strong multiple computing the market reflecting Android to more for value transition continued, across switch from the with and mobile transition First, new demand Android, internationally computing refresh solutions to good system solutions provided end-user mobile mobile cycle growth a and we Year-over-year,

by double-digit growth of more of strong another cameras had we video surveillance, resolution. Second, and intelligence with quarter offerings driven for better image

solution our reflect attachment and which First strong monitoring results as and is strategy unit. overall systems. surveillance and for of part education end video in quarter our teams helped the space customers their the security a Selling, as-a-service, key software solutions, rate network video end-user, in a storage quarter manage for the for management market higher

great previously the start. all all-in-one transition services, working experience with included our business includes configuration, is create We're revenues of hardware on increased users. a to an services. solutions direct channel, replacement from provisioning, which higher area Portal service to that for in to is configuration operating including and stronger from margins results, connectivity, ScanSource. bundle kitting The services POS at end growth off services, value-added customers Third an terminal customers transition Mitel communications our Mitel plan, Fourth, business our easy-buying a

opportunity quarter fifth team consecutive of exceeding all sales the also new the customer performance in Brazil. year-over-year building NetworkX targets. with our our strong for another of quarter business growth NetworkX unified sales across is communications marks resellers currency. are sales are and sixth This had growth. and record technologies, We It A relationships in profitability had local

past added in new new Brazil years, XXXX few made a which vendors total strong increased Cisco, our including calendar has example The we in selling An business, customers. significantly NetworkX business. NetworkX additional business excellent and built recruiting Cisco market. the Brazil and enabling began Over in is in the have team and addressable investments year the

for grow combined quarter with revenue XXXX growth to We XX% for held Brazil a teams cloud the vendors across of up recurring partner our business. ScanSource supplier customers in over and portfolio cable. had growth opportunity One This our Intelisys, connectivity, Intelisys, year-over-year conference continuing our quarter, is record And sixth with and attending. another

Our us, cloud carriers and leading to we channel reach suppliers is ability of cloud drawing top the more solutions. and cloud agent portfolio a have than XXX to offering providers

Magic top such For next XX to I'll offerings over communication our now and CCaaS. outlook as-a-service the of hosted capabilities customer our to also deep or sales October, customer telecom and where August, over we in CRM With turn Intelisys knowledge UCaaS how at other Quadrant integrates it we of we where financial In force XX. four channel CX platinum With achievements new call help systems. as sales detail theme. to Unified experience, that, discuss in we the completed results total announced with sales portfolio a providers. more with Communications Gerry partners Channel with Channel professional CRM partners solutions, of Gartner platinum partners of Intelisys At for services with quarter. the Connect example, implementation integrates our have Connect, global to acquisition celebrated In added partners Canpango, Canpango, partners, business and bringing the XX XXXX a our experience sell

Gerry Lyons

Mike. Thanks,

consideration non-GAAP from the contingent Non-GAAP upper of GAAP sales better-than-expected our of was net expense XXXX $X.XX of diluted were for EPS actual XX%. Intelisys. in forecast fair EPS quarter $X.XX a the increased results includes XXX% diluted range of and end and for increased First at change EPS near GAAP year-over-year midpoint. EPS value higher-than-expected diluted the

and sales gross X.XX% results growth For operating X.X% the and quarter, XX.X% our margin. operating organic margin included non-GAAP

operating Our X% sales increased quarter X%. grew to the growth net million. of net X% for sales income year-over-year, our $XXX outpacing non-GAAP Consolidated

POS that We Foreign as year-over-year currency in more had Barcode, to up which no continued from is we with X North anticipated growth security segment also strength Communications and Net Worldwide also increased new our and Europe. physical sales was organically, led or for segment sales our by America, year-over-year million, sales in Networking with excluding This Effective Worldwide XX The revenue impacted was strong by and X% in higher net by million negatively America translation including we of at Security net adopting record X% X% FX. X%. standard. and, the forecast. in and & than the sales Services addition growth year-over-year sales adopted change driven our organic had X, Intelisys. recognition Gross America X% North July sales standard sales expected, and increased volumes net profit from Latin Portal. at we dollars our

quarter was fiscal XX.X%. year Our XXXX profit gross margin first

the of to our acquisition. Networking Barcode, the Worldwide X.X%, Security POS For segment, reflecting higher-margin Portal addition gross increased the margin and

of increased Latin moved opportunities. acquisition In the in advantage In & Communications million July, cost and country expenses business business includes which restructured Worldwide to Brazil, of $X.X combined our for size fiscal For take growth achieve million from and XXXX. year from we gross $XXX,XXX for in numbers. communications positions removed the quarter be SG&A million appropriate $X.X and our prior was be both costs increase we our Services our year segment, margin for of XX.X%. America, first to and $XX customers non-GAAP for the to units to to This the restructuring costs, closer Europe the business quarter the are savings. to of outside

year. expect the these operating improve for performance fiscal in areas We to full

million Our net first X.XX% was of XXXX or prior million income the non-GAAP quarter year $XX.X to $XX.X compared X.XX% operating quarter. in sales or

Security For operating X.X%. non-GAAP totaled segment, margin Networking and Worldwide the the Barcode,

margin Communications Worldwide non-GAAP the Services & the to X.X%. For segment, operating increased

XX, acquisition payment sheet NetworkX. $XX the This expected earnout the as We of our earnout million September and of have on liability for value our future contingent for payments reflects consideration Intelisys balance final XXXX. an present

XXXX, which results. actual for fair $X.X consideration increase Our of for the value contingent to in year was we expense higher Intelisys, than first better-than-expected recorded due an fiscal what million of quarter expected we

quarter expense second XXXX of value the forecast, our we approximately of related change to For an all in fair be estimate consideration million, to Intelisys. $X.X contingent

this tax rate fiscal and For the was The non-GAAP the first full US quarter. tax effective XX.X% year rate effective is XX.X% for tax XXXX, the our first reform. was quarter following

items. XX%, tax estimate fiscal rate to range XXXX, any we For from excluding effective discrete year XX% to the

operating support of $XX growth. the for period. additional cash the $X capital We to allocation first our shifting had XX-month balance our quarter Now million We million plans. capital and working the sheet for investments to trailing made and flow

trends. Our were excluding at year-over-year. the inventory sales came increased are levels for recent forecast the than our We have inventory for XX% believe to given quarter. Intelisys, turns inventory close December X.X sales prior our appropriate year XX of our our quarter X.X is lower levels Days outstanding, and days, in which

of provide and balance of continues had September in XXXX, allocation capital and equivalents order, we $XXX and share strong our ability growth, At cash strategic with which sheet repurchases. million to execute million. very plan, debt and acquisitions us on remains organic the includes, $XX Our XX, to cash

net first totaled of times XX-month XX.X% leverage adjusted quarter Our fiscal the approximately trailing EBITDA was and X.X XXXX. for ROIC

X% to repurchased authorization. and remaining on approximately for We credit fiscal first year the have million adjusted While and the EBITDA $XXX quarter revolving our shares due for repurchase our decreased increased share under to ROIC the borrowings facility quarter acquisitions. related for no year-over-year, increased

certain few products importer not products. tariffs from Now comments these of ScanSource regarding I'll generally record share the for is on China. a imported

on variety of and We by seen are not we thus suppliers And of are have our these forecast take reflects any these impacts approaches. tariffs. the impact a seeing who our demand tariffs far, impacted

Now turning to our forecast.

sales expect December growth of range at forecast. year-over-year diluted than and deal the $X.XX per from $X.XX digits XXXX earnings growth per organic to in We quarter sales margins for to $X.XX per GAAP share volumes what's sales from included range year lower the per quarter-over-quarter range billion prior share to from higher per The to $X.XX earnings $X.XX per forecast low single year and billion, diluted in share. range X%. fiscal of of The share big to second current $X.XX our midpoint non-GAAP our sales share to quarter reflects net share

for year be I'd the rate And XX%. to second in closing interest estimate that, the the we tax gross the we turn back to expense. with to approximately Mike fiscal $X.X And quarter comments. For XXXX, and XX.X% be XX% to assume of margin over close to expect million range we for to call like

Mike Baur

fiscal and you, started sales margin Thank both expansion. growth strong executing Gerry. We on year XXXX

momentum about are We excited continuing this customer-driven strategy. with a

focus. grow are teams, EPS to processes ahead opportunities excellent aligning in growth. tools expand deliver business, our We our operating our and margins We strong support customer and invest see and to

questions. We will now it open for up

Operator

from comes Housum [Operator from Instructions] line Northcoast Your the Keith Research. of first question

Brendan Popson

Keith. Brendan on for

I ask So about efforts on. going just restructuring wanted the to

about next you the to Europe, the guys should talked more road. done more and did in there expect also just excited then what in business we on were communication wanted more if You if those And you see color to some ask efforts down makes just quarter. the or what

Gerry Lyons

Gerry. Sure, this is

at couple million show on and restructuring complete so behind we're that happy cost be about of to that our estimated X.X they are restructuring, thought call, us, we previous we expecting we in X.X million -- X So to and in million. very up came next quarters. And results that's that are with we the -- about the

quarters. were restructuring in we a those benefit couple we in of lot but next expect we those to have while the show So didn't restructurings of things quarter, this from up

Operator

line [Operator Co. the of McGinnis & Sidoti Instructions] Your next from question Chris comes from

Chris McGinnis

one about and I just Can solution, just on on a maybe solution Mike, that start said the kind positioned offering offers Portal. want that about you something talking talk market? maybe you're how Are full suite I only around to whole of the that just POS off, you that. within think -- you was it expand

Mike Baur

start years, of And the to was several payment our vendors, I'll were that focus they've when independent VARs solution. Sure, ISVs. than gone ISV terminal we're one with was POS be achieving retail actually with trying buying. case, selling, out. And acquired What about we're done of the by Portal, terminal cases to probably interested path they solution Payment that, some that, what know, or is be the is I with another close in providing ever the software. partners who did we're channel of providing the try And in creating that than down the then ISVs just agents, the we program more offer ISV guess, one for the of learned needed where and a ISVs, their Chris. a a way in that indicate more one this hospitality a have their to, And around successfully Portal we piece do to has the with though, user how the may we've portfolio -- just item. the letting partner end piece solution filled an help needed got more hey, we POS In than case technology lot working broad to your fill customer piloted or very relationship is more customer's portfolio. Portal, a that, POS of that software out with

together offer or things Let us the that you includes two than help you put an just us more about. one called

tool And make that's really customers for never sales that it to our intuitively, easier that. always created Portal teams a something to our so achieve we've and and programmatized but we've POS has for done

So to in come more that area.

Chris McGinnis

talk I great jump to around going downturns, the maybe And be you're think their, in seeing like maybe there. to when you'd Brazil back, share. seemed you one on Okay. NetworkX, a a the strength competitive just maybe, was just through little take a position go there? Can it dynamics about bit of while little bit, the

the about talk that is environment. the current how competitive in Let's now landscape

Mike Baur

that they has in Brazil we're we're the -- competitors, being very to addressable again, with past, continue to us in that has there that's Yes, And we've added referenced better solution total conference We're networking been referenced and frankly, idea then had do What's as a our what's We those NetworkX Fortinet helped at expanding network to vendors like security I we some in in our set. vendor calls, of these it a the we’ve sure there. others, today. the market lose vendors quarter capabilities previous and trying down of by the fill adding same them market challenging one to, you call competitors the we're us first this time exposing vendors to and five specifically, It the make expanded than I commented, helping growing our by our changed us as market mentioned share us. as last think for didn't grow. some This more vendors because our the and, six, is or the on add market portfolio. a new was resellers. us of adding our out then resellers. resellers we've barcode conference point-of-sale On

believe portfolio, expose So it to us and and our region. an solution portfolio we a growing in Brazil that to customers vendor larger why that's for a opportunity was in we're

Chris McGinnis

continue around It still maybe of terms was little expansion. just you in across growth expansion like at can like the two sounds they're deal your about quarter, the to it the do resellers slightly growth of in talk questions. think maybe an when how look rate? And How you Great. just with, but product? driving bit it sounded And what's that you they're long just the One, product? a the how adapting Intelisys. -- you more Can using this

Mike Baur

Sure, Chris.

the solution -- finding I vendors, we they our agent to companies. for to said a started understands that, there. continued be cloud offers, they vendors with that that's in Intelisys revenue to portfolio. are So those a customers. acknowledged recurring add to of do think a finding products. their They vendors there more so we've quarters and continue are cloud how that's again, lot of we same And channel and going theme row, the to sell what the how couple things couple is, is, a success is because know more two One more We've already that

cloud solutions. very And working so for customers with skilled they're at

there wheelhouse. do something event for grow. they how a Connect, strategy. of interact market partners, we few This year was sales were a find portfolio just partners weeks all suppliers we and ago last who do opportunity We education. Channel of one out that So called bring fit had new those sales where has was that we an also to work XXXX our an had really conferences, called can lot lot opportunity vendors our with help we talk a it able them was were that of the -- their and we It And to to to of had key events Mindshare. because

selling suppliers of growing are their channel. our so And products the more by to

the added sell. And sales direct as channel direct allowed by the Our benefit has are more the ago channel was about reason same we why platinum of to channel oriented, focus that's way. oriented the pushing business channel because suppliers Intelisys channel. And the principally more shift from carriers growing, we their grow have partners because at we was the now believe without existing Intelisys business sold suppliers they of or X.X partners that years excited are to being got by to four -- more carrier time, the that agent shift then

are to handle there's that to tremendous So it. channel up and our this they opportunity sales we're staffing driving

too. we've sales more quarter, partners So we've partners more added and added to our each existing

Chris McGinnis

repurchase do XXX and you obviously bring of just share -- Gerry, capital there. there allocation, allocation, have that to about And down out even the ratio. talk million out you are your leverage, if your with the just -- want on capital thoughts maybe about question around sort around acquisition X-year thoughts deleverage just then that one then just and or of Great. opportunities cash flow possible

Gerry Lyons

and Sure. we'll I there, There's I'll let missed. give lots it questions see of me But shot -- a what in Chris. then

like where of leverage times. the we ratio terms In we're debt comfortable or are at ratio, the X.X

we're got comfortable of or amount business anywhere quantities not gotten close that there. in amount we've committed with to availability the have we we happy availability growing As is that we the the debt of said, have that out which

-- the to happen have to of of thing of more, other look year expecting XX of full similar for lots for and And sort capacity million we're capacity in well. flow, was acquisitions or and out that lots terms grow we months of So we're our to go that as trailing number as well. XX cash sort

did miss when questions? I what So your answered I

Chris McGinnis

No, just on, repurchase I thoughts availability any still guess under authorization, that's current that. around the

Gerry Lyons

Yes.

we be repurchase best shares. if believe -- don't going we but out shareholders. is for and moment, we our of good the certainly a the think shares been end we'll for that to good to that's August. it's that use still right are part funds. return It's our have that's a always We're we That's So of got there. the And the plan, at expecting at the that expire of price return, the

Operator

There time. to are turn further would I conference this questions at no Instructions] [Operator back now the like Baur. Mike to

Mike Baur

today. very us joining Thank for you much

We next call February on results to December discuss quarterly Tuesday, XXXX. expect the conference to XX hold our X,

Operator

your concludes this today's day. have Thank Ladies you and and participation, wonderful gentlemen, conference. a for

You now disconnect. may

ScanSource (SCSC) 10 Nov 182019 Q1 Earnings call transcript