SCSC - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the ScanSource quarterly earnings conference call. All lines have been placed in a listen only mode until the question and answer session. 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. begin. may you Ma'am,

Mary Gentry

welcome December earnings XXst, and the call quarter ended XXXX. to you conference ScanSource's for Thank

Our call CFO, will us. our Chief Chairman include Officer prepared remarks CEO Revenue Gerry from and Lyons, also our is John our and Eldh, joining Mike Baur,

expectations will comments operating divestitures for rates, and quarter and of sales, fair the Relations take for operating webcasts XXXX of and CFO commentary our our looking earnings, results posted section including tax statements this call questions. in We a our made website. are third that cashflow, review contingent for statements. year interest value performance, fourth then We of the consideration, the and your fiscal operating forward quarters accompanies on planned expense, Certain our Investor results

by results should filed changes representing to the release be subject any SEC. with looking ended These such and from forward and represent Form not limited June factors relied risks differ or except views update in the and any could date. to include are law. XXth, XX- to uncertainties put statements. to results required ScanSource's as K duty cause to only of year today actual but of earnings are for in those upon statements that in These statements Any our as any we as actual reflect our as disclaims out materially views statements subsequent the today not risks ScanSource as looking forward XXXX uncertainties and that identified expectations

our these in can our X-K. over be press I'll turn and CFO to call non-GAAP and release. These have Mike. with have discuss on now form will we amounts During our our call, and GAAP found and filed commentary results provided the between the been in website reconciliations also reconciliations both

Mike Baur

and joining thank us for Mary Thanks you today.

North American sales from VAR quarter our we sales sales forecast as missed reorganized our For primarily team. we lost the

one is discussed strategy. prior increase revenue. strategy and value ScanSource customer executing we one recurring of calls, on selling we are our to growing ScanSource cross As our The goal by

VAR We sell connectivity, including Intelisys acquisitions. teams sales and up are cloud setting intY and our from our solutions, offerings SAS, to

strategy one and CRM value become compensation sales enable provide We The our for introduced business of one. and combined centric, team we customers. plan. We customer segments. North Beginning reorganized by we we ScanSource's teams behind American new April, more our units implemented changed our growth five into Salesforce a customer assignments, customer selling, we adopted VAR

in disruption we results, following adjustments. changes teams, our With made our we created will changes. encountered as we more And make realignment the these we impacted issues, customer this quarter service now sales since of and levels negatively April sales

This over sales quarter we During partners. this record Intelisys year the even had quarter cloud grew the with XX% year at suppliers XX%. growing with another business faster

key Intelisys and has with the recruit through agent growing our of more VARs One objectives still sell while channel. been to

growth financial of partners of VARs. the Intelisys Intelisys year ago join our to the date to order VAR Ignite account VARs channel focused ScanSource and the program the To in sales approximately recurring sales a require and the a successfully. to started ScanSource Over to The with recruit sales XX% revenue. participate approximately financial working introduce on we out X,XXX identify of sales X,XXX VARs accelerate are is investment community. We strategic education benefit ScanSource VARs that to and team Ignite partners to the executives learned

VAR connectivity worth in each recurring the long will form strategic a base. recurring time us and far, commissions over creating so with in year These success efforts barcode strategy minimally with contract and mobility is recently services devices a the the confidence of won services. VAR ScanSource ScanSource accelerate supply team to one be thousands example integrate a multiyear of Ignite to XXX approach. to closely aligning an accounts As The This the more to working by gives currently of $XXX,XXX teaming VAR. in revenue the our key

take outlook for our through will you quarter. financial the results Gerry Now and next

Gerry Lyons

to to for the divest diluted outside the and million and Thanks agreement upon Canada, forecasted December XXX America EPS anticipate the received, principally volumes, Brazil. fiscal our and based working million. Mike. higher year lower XXXX product of fell million also process organic had our of at on businesses an for announced second of we sell GAAP August, X% EPS for below and the premise underway quarter In sales based Net of net decline communications A total these United certain is declined have net the over businesses business. the and second we $XXX basis. by we our XX non-GAAP States, interest quarter diluted XXXX. of businesses having expected range. Consolidated Because capital than sales sales $XXX physical end These sales third year, down our X% had volumes plans sales year quarter of in down lower X% our from our year an North the of year, and over quarter in second

$X approximately translation impacted currency Foreign negatively sales million. by

in worldwide year an and on segment in over our partially lower X.X% America. X% sales and from North an or year sales over communications basis. Net This declined for declined networking in North by business on for and in worldwide year significant Net reflected sales XX% headwinds a year premise or services our security and basis, a mobile primarily communications offset computing America, volumes growth XX% barcoding organic payments segment business. based barcode, organic

a record over year where quarter Intelisys increased XX% year. had for also sales We

sales from intY added the of also SaaS $XX We million acquisition.

for the divestitures, Excluding planned gross X% year. year decreased dollars profit non-GAAP the quarter over

million expenses the down year year gross quarter prior the XX.X% XX.X%. to XX.X%, ago $X.X the non-GAAP from quarter the second XXXX quarter increased of fiscal margin from profit fiscal year of XXXX. year up second period million prior Our was from and for $XX period slightly SG&A

our investments made have services based We businesses. revenue and for recurring

Our digital the RPM with and include capabilities the Canpango. investments we've acquisitions also intY, added of

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

$XX of We present contingent have this reflects future consideration the earn-out payments December expected value and XXXX on Intelisys liability sheet XX, our million balance a for acquisition.

For second for fiscal recorded the we an contingent in of XXXX value for expense quarter million year consideration $X.X fair Intelisys. of increase

value XXXX fiscal of quarter third the in an year consideration For approximately contingent change $X.X fair expensive estimate be to we forecast million.

divestitures XXXX excluding XX% XX from estimate year the tax to we discreet fiscal rate range the to planned excluding For effective items.

cash flow, our for strong trailing flow sheet $XX operating operating and quarter million we cash generated of flow cash of Now turning to balance the second and million. month to XXX XX

during XXX XXXX. working XX, fiscal at over Working to generate capital million had XX.X quarter X% June X% capital over year divestitures balance. quarter expect cash declined December positive XXXX investments in the We planned flow approximately year. and from XXXX million year operating down The XX,

of debt completion use million. divestitures, pay XXXX the to of December expect would proceeds down million XX, of and At planned those $XXX to we $XX and debt. we cash cash With equivalents had

XXXX. approximately X.X months for Our X.X was leverage of year second ROIC EBITDA. totaled fiscal quarter the XX adjusted trailing times net

our 'XX, intY recurring that XXXX Canpango, have growth. August RPM capabilities acquisitions for strategic $XX built contributed EBITDA in and but we not Since million have to revenue our invested yet

quarter divestitures. are Now we our providing forecast third turning excluding the planned our to forecast,

expect XXXX million. sales and quarter to from net fiscal excluding $XXX For XXX year the divestitures the XXX range to third to million net we non-GAAP $XXX from sales GAAP range planned million million

sales quarter June over to next see quarter the two planning our we quarter down are with over line March in quarter the trends. quarter XX% are Historically, quarters quarter and the seasonal up quarter. for XX% quarter For growth sales net over for historical

year X%. For growth annual expect of we XXXX year than fiscal sales full the less

and third forecast we non-GAAP our $X.XX range range For per cents $X.XX diluted per to share share per expect from GAAP share. diluted $X.XX earnings $X.XX earnings from to quarter to per to share

does GAAP reasonably losses The any at with EPS charges divestitures from as the associated planned non-cash cannot include time. those downs write this be estimated not or

income and profit below a March non-GAAP to operating quarter, For gross we the X%. expected XX% margin close

lower are sales leverage getting expected the forecast in we our not the With SG&A for originally year. volume we that the

our XXXX volumes. in line expect sales our For non-GAAP little the expected be over to with margin X% year a operating fiscal we

third in the be approximately discrete for for assuming expense million are estimate to items. interest XX% of excluding fiscal to $X.X we and the divestitures the XX quarter in We range excluding planned rate XXXX year tax

Mike Now I'd closing like to back the comments. over call turn to for

Mike Baur

Gerry. Thanks

double delivering revenue to results transformation non-GAAP complete strategy, market completing We recurring for drive strategy that per is we growth. ROIC to XX% After able above are including year to our we our confident deliver the moving be earnings growth expect fiscal to business. this right share ScanSource and transformation, one XXXX reflect go that digit

it up now will We open questions. for

Operator

Instructions] Our question first [Operator Tindle with comes Adam Raymond you. from Thank James.

Your line is open. now

Madison Shaw

Adam is North sales the for about wanted I around the to you Are case any those are attrition in to just fiscal you missed year? is this, for Madison of the commentary some reorganization then to it the be taking of with this? the seeing And to continued Good lost just related on throughout headwind talk timing, expecting and in for impact my Can customer afternoon. rest America This thanks you customers? sales. the timing the a start of or the questions. sales it

Mike Baur

Mike. is Hey Madison, this

and team CRM that from as moving such prepared that system, remarks this different didn't from was this a of learned since you started a we Salesforce on we the that doing So the were April, negative different customers as gave we one things our heard pieces moving in was another. as what said plans, new perspective. see compensation more past quarter in we a little And process we and in to all the impact color call, lot that until we of April,

what a are, may away. different in, and sales we know from not our are team. customers, certain a and somewhere implied for they believe some that in and sales I'm are now. when happened we our from especially not go aims I December. QX believe somebody happy as Hey, want normal we cases seasonal I'm four it's change we And regularly, what customers customers experience going some We that QX with go for or indicated that in we should had to What in that adjustments buying the is about we person said, forecast for planning is or Now have cases we're about us decided make we and seasonality said. be to think else new to that we that in

we December that we today are XX%. grow planning And to We're from we March what what would and decline March suggesting we're would go we're quarter, that then XX% forecasting forecasting. the normally historically that that's for. say quarter We from June means quarter would to that be or

to So make get quickly. yes, can and, planning we're have changes customers. them many lost but but We we believe we know back, some get we've to through this of we some

Madison Shaw

really That's color. helpful Okay.

expectations to flow, be you to positive just obviously comments set in half. flow? level you're up here at the I from bright cash Just But for us that a year. the second can you spot half on perspective expect the it sticking Do full follow first as cash you by half well. looking for positive going a the know know, help standalone the second on is here

Just standpoint there. from of modeling don't ahead want get a to ourselves

Gerry Lyons

Madison, this expect well. that be the We positive think to that's for as second should half right. is Jerry, I it

isn't The have volume working down, we drives good. good was know, thing, for a some but us. flow obviously You which capital we coming it down, come cash which

expect So, the question, second your but and expect short answer positive. we half do do to be to we

Operator

Keith Research. Northcoast comes next Our question with from Housum

open. now is line Your

Keith Housum

North we that started Hey of American to to really VARs, Mike, took was, but What long saw, referring the made why it what in you impact three these the see ramifications so is the changes you're for April. quarters that? you

Mike Baur

what of decided gaps sure some some part make or quite either Well, saw do we deficiencies to that adjustments was things we we Sure. working or well. made as weren't

the along. then the was benefit is looking our gave for a December at, their they and going in what somewhere at we of They sales back September whatever guys we then may cases were changes results us point in call looking in in changes at quarter, gave we're at that in when knew number And have confidence else. the to don't we and we some this doubt gave weren't what June you November go quarter. December learned November particular enough the case, in us did. as were the October's time, we some quarter customer we said, we get this still to And those okay, So all in then the forecast made fixed and

a middle it became we of obvious. of in then. the, is that not sales when had It the obvious would disconnect, from December to November was So until end disconnect volume that big say the we, really we a

Keith Housum

first disconnect for And into that expectations. your below guidance quarter. continued Okay. And why five the next is that's quarter

Mike Baur

probably what took the this always we any Keith. it's happened It's in March Well more in quarter. quarter said, you in it's be down and December to other we December probably like know, going

we will December we ratably really expect we're bring it Obviously So what had less have as cause to historic. going we If like December do. do ago. forecast. that be our it's a It's will, we at do if than looking we the and back better we just and customers better to if don't, do guide, year business we to and December, the the we'd is what do on not it let's forecast this in in what that's

Keith Housum

mentioned Okay. changes you that going win changes you that make. back customers? What you And to you more make to have confidence the these that gives is

Mike Baur

because because another maybe and were provide good that team is they rep company you their obviously rep not an mad and example sales and replace. teams Well, we with we lot their believe a we just took And customers talked something to more know, they we and that to have sales are their these is talked value of easily self-inflicted. made disconnect rep to promoted you our can thought could the them that some cause we we really

help it's to team executive. a why put to probably but going can't say this bring go that sit here's better. going If We down team value place. Johnny customer and and visit got we're in can them, So a Sally an by back we'd talk take they Hey in we to you new

Account And now have large group all have the we teams. didn't before an design, of be as what going reasons, are in details example, our have a is did tried didn't for for these blocking competitive essentially this we executives April. to that tackling. customers. more we've to we So and and the executives account that field to disclose sales We not prior but

structures will go those So we win business. believe the new enable and to us the conversations back have

Keith Housum

know rumblings to what but obviously very they're hearing, perhaps change to need gears early I'm one any from and about the more in you're and I are what on Okay. hearing you. disruption. guess squeeze this I right if chains vendors impact in worse? potential in supply I thinking here supply coronavirus, going hearing about you we're now customers and terms gets how chain of we're the

Mike Baur

minimal to we've an a heard and sent us far, teams we so disruptions. give message are what update to Well, out based some potential on there our

hearing. what was they we in be If the weeks, kind don't of disruption returning or Some no might saying are It factory vendors have following there the one the that was we're a is chain problem. two supply or that of scenario. like, workers week Keith, anything two Year a their to yet, one New heard

Keith Housum

Okay. Appreciate guys. All Thanks it. right.

Operator

is Sidoti your [Operator from question next Instructions] open. Chris Our with now comes Company, McGinnis line

Chris McGinnis

Thanks for questions. to little the cloud Afternoon. wanted offering. you're just my bit ask I taking a services around

is one getting and VARs. investment little investment bit you that by being You the how maybe hump? Can just talked about an what of that them, them about the talk over a headwinds by you're

Mike Baur

question. the for thanks Chris, sure. Yeah,

revenue a going with is recurring that sit works. created sales to you're you three investment to VAR once we that This to a money. take here's the and higher sit years, You investment principles, it the on three gives exit everybody longer way business one owners down what and to for add them that a you But valuation, that's to When CFO, traditional the your owner, business we the you we playbook it by you an typical this say, out. revenue man, And CFO, hardware realizes, people here's, that financial day. in and a have but return go get selling hardware revenue. business that fantastic know, in value minimize together takes that so processes move walk in has help return it's some and our hardware to from know, to path going, financial we a much a team means Why a we you invest it easy. is get he's it's would put why To designed the a and which pitch. best. has a making recurring Once better how printing get years, president, But through recurring by and this that's risk investment. that strategy and try our not won't start VARs that than and blueprint and a a the Ignite team that's down mean them,

any valuable do you. want you we If must have business, this and help can to you more

Chris McGinnis

you lastly in for terms for lot that said, versus, came Okay, you of you like know, guidance the the was in, market then bit where maybe trends from change you QX Thanks. a to that. and thanks the just know, of, obviously a was And Can QX? about you you're in end QX seeing Salesforce. there provided little an the you demand talk from just where escalation communications just the

Mike Baur

quarter the from and Yeah, thirds miss third two Sure. the forecasted. last our had and cloud to we continued Salesforce was accelerate premise about we was to so own for climb more than quarter, we, did would this reorganization say that

I still So curve back we a than definitely is in yes happening forecast say steeper there would November. had

quarter we some moving are this rest the making of sense from as we starting premise model the out, in to, believe strategy. a planned sure we're towards investments cloud year also that of makes we we're clearly those know from a So based it where investment a strategy are away and we you based do forecasting

reallocation resources be from from the premise we cloud business. that So of doing the will the cloud to

Operator

you. over would to Mike turn Thank at I am I to Baur any any now not like closing further time. back this questions the call for showing remarks.

Mike Baur

us Thank you for today. joining

We conference XXXX. quarterly our to call to results Monday, March hold May discuss expect XXth, on next XXst

Operator

Ladies call. you conference and Thank today's gentlemen, this participating. for concludes

may now disconnect. You

ScanSource (SCSC) 4 Feb 202020 Q2 Earnings call transcript