SCSC - Earnings call transcript Q4 2020

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Operator

Hello and welcome to ScanSource's 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. [Operator instructions] 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

you us. thank and afternoon for joining Good

Joining our our Chairman the call Financial Chief Mike Baur, today are Officer. Chief and our Officer; Gerry me and on Revenue Lyons, CEO; John Eldh,

results operating take of accompanies our relations then We our our review and questions. will for quarter in year your commentary and CFO a section webcast website. the posted comments and fiscal that investor We the

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

provided reconciliations filed also our press amounts on we discuss our gap] can have non-GAAP these will and both between call, and been found our have the and website be During reconciliations and CFO GAAP in These release. in [audio commentary results

Mike Baur

the on you COVID-XX July taking pandemic, our continuation negative domain. announced the today's discuss actions XXrd thank call next the of and for we in COVID-XX $XXX in which the the fourth user are us On business joining Thanks we reflect million, for see a phase on today. impacts sales of address our impact call, we prepare call net VAR the to the business held to as pandemic channel growth. Mary, our of We quarter of and and

on to worked see continue sales declines we SG&A the need COVID-XX the We the match XXXX of plan, as we As a annual with on our pandemic. fiscal our impact recognize volume COVID-XX costs result to our business. of year

We reach appropriate have level. the sized cost savings an to profitability

throughout growth, As profitability we high XXXX. At increase expect areas. decided same investments our to was sales time, continue the fiscal our strategically higher important begin volumes it to we year in

how value financial executed pandemic While proud the to of quarterly teams and our impact customers. I'm our COVID-XX our and have had on results, a the significant we deliver suppliers

will have call I improve working our strengthen well our in necessary turn and and business. in actions platform our business. continue higher and to to cloud VAR what over drive our our sheet, agent balance agency the our John to to investments taken VAR structure, business cost margin, the highlight We now is

John Eldh

Mike. Thanks

we dealing transitioned from was For me, We delivered massive remote. as customer specialized COVID-XX quarter the of exceptional pandemic. how to with teams the our executed also while disruption service well working highlight

sentiment see As a Throughout $X,XXX. thousands of process quarter, business transaction a transactions customer was reminder, of the and we better volume I with get size approximately each average this active high pleased where is order number an hundreds quarterly, to of customers of the month.

help to owners. COVID-XX's realized in small program together even the and support more. businesses, meetings. our CARES and business them closely these in government our customers suppliers our resuming look challenging navigate solutions person challenges compiled person thrive for seeing are and miss Act do we we forward many survive customers are Early to help extensive We small put especially resources. critical and to more quarter Working an in we them, and the of guide to and aid course, distributed times. Of needed COVID-XX better that including PPC our during customers partners customized programs financial

designed In we addition, our as webinars customers, work promote home remote, go a part and from of driving to satisfaction solutions. with loyalty educational and offered our

offered We series channel webinar the of including practice. recurring health value revenue a a also on financial developing

VAR Next, I'd positive trends in some highlight like to our business.

During communications delivery, applications quarter, software the more pickup driving mobile use categories and networking, curbside cases our The warehouse fourth hardware, services. and video and normal cameras, product is new computing, such in as printing, selling e-commerce, top included mobile mobile expansion. surveillance unified

specialized solutions demand these hospitality continued growing business, continues required technologies stores, be from and enablement, provide temperature self we measuring In retail increased we've of of growth in home thermal we're And access to in work contactless emerging selling headsets heritage expertise in devices. technologies that and points imaging mobile everything Our for solutions. for mobile checkout and unit, from see for our And cameras now our WiFi. to seeing enabled we're to a deployment differentiator. payments significant information

These are many cloud XXXX. ready intY customers. ago, to end deliver shipping. over that with years devices are we such drive payments key help configuration payments with to use in our year this Also and like over added of providers to distribution digital our user expanding little voice for capabilities the return need handsets in directly added partners profitability. to essentially July office our value services requirements. injection acquisition service our platform we customers a added business to business, we CASCADE Solutions based value want cloud calling we services. margin of provisioning, deployment their part XX% as we A our and are to Leveraging services In that success our get to I provisioning who services, of another highlight on higher support attach gross perform ready the prior hardware of

of Brazil. the During in in for platform and the fiscal year use Microsoft our XXXX, expanded US we business

recurring by partners revenue. With build strategic the are and powered sell sales intY, solutions partner CASCADE platform easily our we helping more cloud

agent a business US. For to to the our in in practice expanding business reps our Intelisys been we've our and Brazil, similar market master launched

Our software in Microsoft Brazil, increased XX% suppliers of to cloud. and representing sales approximately sales cybersecurity

multiple recognized and that our team with During voted Brazil the awards fourth by excellence quarter, community. on reseller our was distribution in were

be we in master we United the the for Four to growth the agency high about today, agency Lastly, largest business. in master revenue Intelisys, ago, to add acquired years model continue States excited the recurring our still growth a channel.

churn the strong seen have in community for We to growth the rates. opportunities agents suppliers recognize relationships as channel that indirect slower customer lead accelerate

these CCaaS seen partners. as market leading service have sale cloud for our agent also Intelisys market. suppliers agent strategic to with choose We a route the other a and a suppliers model captured as X UCaaS, offerings position

quarter have year-over-year fourth Intelisys XXXX, fiscal both sales and year For growth. XX%

year XXXX, fiscal exceeded For billings $X.X Intelisys annual billion. supplier

net with net sales associated $XX Our the commissions fiscal report year. as totaled we which what is our million for those billings

and UCaaS suppliers, fiscal our For year our XXXX CCaaS commissions XX%. net over grew

and orders year of For our our UCaaS orders from XXXX, XX% CCaaS of approximately XX% VARs. came the fiscal

increases and continue to for record a VARs a We also Intelisys record recruiting quarter for the recruiting joining Intelisys see quarter in overall, agent quarter Fourth community. was VARs.

higher were towards fourth our the I'm about and to year revenue. business VAR our deliver our future evidence For way signs of XXXX services is a recurring quarter, the the communities. plan. The to and add recruits of of VARs half for fiscal our delivering is both new This agent further value solutions goal excited add and margin that and VARs. more strategy agent early of Intelisys see to than successfully progress momentum Intelisys

take Gerry results. our Now, financial will you through

Gerry Lyons

Thanks, call John. I'll open in has May. all with our last that of earnings overview an occurred since

indicate terms On for quarter and any July fourth provide remember that be the in sequentially, we COVID-XX that announced in down fourth sales back the results revenue we around uncertainty guidance our XXrd, we we did didn't EPS. What expected both You quarter million. given was of the $XXX of fourth non-GAAP May quarter to pandemic.

SG&A. Additionally to on cost Latin announced of agreement August we Brazil. we plan business an our XXrd, announced our to million $XX sell On XXth, reduction America outside a July reduce

are business With agreement that now the made the we America and progress businesses sell our European of business, discontinued for the accounting operations. sell the efforts Brazil, have to we of in as outside our these announcement Latin to

valuation impairment Our fourth operations for noncash establish for in results and non quarter a allowance, to loss million cash charges. discontinued dollar $XX

U.S. for discussion reflects only. results operations. otherwise our for this continuing operations forward, continuing indicated So our Unless be going will numbers GAAP

quarter, sales XX% the were For our or year-over-year net $XXX organically. fourth down million down XX%

sales decline based quarter segments. in our impacted negatively non-GAAP COVID-XX a And where sales translation volumes increased as approximately the sales We of had master business communications year-over-year. in for by $XX sales expected agency acceleration in has currency Intelisys business wholesale our XX% premise negatively Foreign the This includes our million. record impacted our business. VAR both

March the gross the XX.X% $XX XX.X% down of Our for quarter. from gross year-over-year, were is million profits profit up margin XX%

warehouse gross Our implemented back charges March operations a fourth typical following management quarter. inventory to We throughout conversion we're warehouse the quarter and address an plan to action the to included system. more warehouse the profit discrepancies new

During any the our The pandemic, we the $XXX our the In of tested $XXX our goodwills cash-impairment annual sheet had a test And in for we balance that for million. fourth goodwill remaining fourth concluded COVID-XX impairment. goodwill had impairment. charges on million. performed quarter, result non of approximately as quarter, a is we pre-tax

million $X.X recovery for a Our million $XX $XX SG&A tax expenses the year-over-year. versus Brazil was excluding quarter million

the down, not our our in while was margins So gross fourth were sales and quarter. adjusted SG&A down

$XX as we the our record annualized which related structure pre-tax addressed to to COVID-XX approximately expense align $X have XXXX, million We volumes a with cost fiscal an cash implementing sales expect the reduction our quarter result severance In for we pandemic. issue better million the plan. July, began, of of charge benefits. lower year of plan, SG&A the in business is with designed This first estimated cost for

quarter, change value the in we consideration. fair for charge contingent For fourth a the of $XXX,XXX recorded

rate non-deductible And XX, higher tax this decreased about estimate was Our the and for as Board, liability fiscal XXXX. the amount to The comments calendar final XX.X%, fiscal contingent effective payment range Intelisys million. tax A from occur items. The a of XX.X% the we year to charges reflecting year. effective impairment June later earn-out XXXX, the $XX.X year few from XXXX, will of for tax rates results. full the year impact owners

Our down for X% $X.XX year-over-year were net X% organically. down year were sales billion the

the previous grew business XX.X%, margins and the agency for year. fiscal XX.X% from our in Intelisys Our XXXX year were year-over-year down gross XX%

a recognition. supplier of program As result lower

income for X.X% previous in of income operating reduction in year. operating non-GAAP of or or million lower the majority of the was result The $XX volumes. $XXX year sales Our versus a X% sales as the million

close turning cash operating sheet, We relationships year-over-year. we XX% generated year were flow. and and quarter million cash and strong flow XXXX. suppliers. balance our for fourth our to investment to million the with able $XXX We of decline of our have customers sheet fiscal $XX Now for capital balance and the Working because strong strengthen

Our like stays customers close very advisor to develop our financial team and solutions. services customized to works more a financial financial

to the So we during continue successfully pandemic. together can operate

the solutions. Our We our in of days. XX% inventory of is came year this at XX, XX customized sales days XX% providing and financial versus previous And quarter-over-quarter due the year-over-year. of much DSO to timing XXXX, and by the increase reduced June XX

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

Mike Baur

Thanks, Gerry.

to value in results. on our We foundation improving updating we in our our close forward you and the the bring place for our to and look advance our the have to customers believe financial with channel. relationships I forward suppliers a are business steps plan

now questions. We up it for open will

Operator

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

Adam Tindle

XXX analyzed spoke I lot better, Mike I the was billion it's at printed, in wanted demand current of uncertain. kind of a way a about quarters. asking if whole got picture revenue just about or kind I was just million range we last model of to think but rate you think start, was to future X.X that the don't quarter the the so right and

month Just clarity a later, your you've or a more any think revenue, normalized company. top about wondering, the as we got sit if here kind on of way we today, for line

Mike Baur

again think June from would growing quarter. Yeah, to the like thanks. will it start certainly We

the the we exercise to working some on million when as side plan our $XX that we for business. at you business FYXX, challenge obviously of led is to FYXX. exercise, know, And see had As knowing come in the looked cost especially our of which back, about on we starting and us that will reduction assumptions to VAR course our make not

month readably that continued business. has business very see do ago FYXX. Intelisys Our believe business to a have will today in that to we do we to grow We continue we communicate we how to in said, just VAR our any growth well, more as than that. did as But visibility don't that

some So that top appropriate and ready can we're, achieve be of we get everything line we're on the especially we we can sure as sidelines, levels profitability, growth, the to doing making growth. for decent

Adam Tindle

clarify And I to of wanted million just savings. XX

you've little not because making, I I'm a that I'm benefit kind it's working net talked think incremental is? businesses net number, about line? bit like also, if thinking of a of are investment, that sense, makes to Is you're Intelisys. EPS number about a about wondering what share you're investments the buck a that XX And which million

Gerry Lyons

Adam.

So this is to that number We've some number. is Gerry. million. got net taken That a $XX investments

Adam Tindle

to the you expected Maybe helpful. those or start the the margin that's investments, talked just double could for Okay, you're and on we our businesses seeing if and cloud about in platform, enhance, what Mike financials? the for Where's outcome payoff? And maybe click return should just where investing? those agency look he higher

Mike Baur

see I I'll to Well, try can if help.

managers side, we for and with doing our been two make more are One more and people the when now are that is to in our two in we've traditionally Intelisys sell investments, a headcount different teams call along channel the know, you sales are One that find calling them areas. suppliers things. as and these customers joint one agents opportunities on VARs help us, On is of headcount, selling. we

and pick owned historically recruits even new existing we've is managers, As more the this or we channel we four channel. add business Intelisys. in for years new business When up we

where generally managers some relationships come next channel for they by and channel recruit couple to on the existing for we but we do. off payoff while, year, three the in to but year, like unless just with develop, pay of is will this over them to years. a again, is new out years the last continue many We generally investment believe which a However, to way did manager us the that return which two we the see them don't of a invest need

The tools, their investment and sell two part the And help in IT business I'll that of RPM acquisition customers other years Intelisys represent from in tools, ago. is to tools better through suppliers. manage

more of why SaaS those our then bars agents So long-term CASCADE, tools And generally a And we really bar over bars think any are differentiator. competitors. that's that believe type if it's way our to just and again, other about Intelisys you as choose investments, their or business better And for business. the mentioned, develop platform a it for is we cloud business. also subscription

quarters see And few of the that the so you impact up don't significantly in new you ramp as customers. first

So long-term term investments, the again, these will more which we are up that right belief long they're have investments, value. bring but

Adam Tindle

a Gerry, been cash you last just me, one bright mentioned That's spot. Maybe for certainly flow.

something about be items that this future quarter? like You expectations think 'XX? fiscal repeat to to or about cash we like just maybe want proper benefited capital invested flow. there don't and Are we Anything set that that should thinking working about perhaps related as thinking that

Gerry Lyons

that repeat. doesn't Anything

normal sheet. is I being a cash don't we there Adam abnormal think what's flow have the mostly obviously, item. that's there our anything in recall in cyclical counter to balance I

as we So a more but can It's in generated it's there. that slowdown, cash, of. there's things I nothing unusual think business

Adam Tindle

And capital make maybe allocation? did Mike from updated

Mike Baur

From in I what we actually May. can't remember our back said perspective,

Gerry? So at looking I'm

Gerry Lyons

would out hasn't do and a that organic growth that. there's we it's changed acquisition Absolutely, there, Adam, really

Mike Baur

to acquisitions But our With none using operations. our no planned right fund planned capital now. we're current

Operator

Research. line comes with Keith question Housum next Our the from of Northcoast

Keith Housum

quite July happening last the to on Mike hoping is a perhaps of sense quarter? of, downturn a and type and any of August was Gerry, give little we bit that from provide saw I recovery that there us color

Gerry Lyons

Mike you would chime would is, I what and but I say can quarter I at Keith, what when how or the in, look John progressed. say think

So different April was points. little April better was there. a a it better way got low a steeper June and the had, decline. Well, got May said probably from

the look stronger something quarter So When down would on, year-over-year, I we're you XX little as say for obviously we percent. I think that's from perspective. a revenue went got a what

not, statement. it's it's So, a relative

Mike Baur

on key Mike. channel. suppliers of to to got Keith, in mean perspective, stimulate growth one find every focused we've I this our trying is the my from ways

programs, And we've a coming scan And crisis, signed interesting, we believe think we a are we referenced do that there middle growth thermal going initiatives have to in call, got pandemic. more more new of more the but the to underway. actually to as vendor in so the is get vendor the programs we that on we're suppliers with

of kind not in change trajectory that this the seen of have nothing any We volume dramatic significant. at point,

Keith Housum

you have back back come to guys getting margins. X% then to past And X.X% years a that over several had the go to operating

it today, impact in dramatic unlikely a or throughout business pick stand you fiscal that as get 'XX? to here As you're see we the year, interesting in is up the

Mike Baur

certainly that be quarter the see don't as us for Well, achieve the I to year, able year to happening for some during that possible. at

to And so quarter from the for but Number will happens grow million to here, flavor. X.X% the the some from of from with CASCADE, of of growth a for get see another year, a growing side end we we will back we of And a expense the Intelisys in modeled the reductions we and out in XX XX and what traditional before if is million? really, we or if the got just again? What coming growth business, does get think the some our what the the end that XX from platform the over And here be the that profitability? number the we of did the start taking end one of year. we certainly XXX built we get million cloud do happens that business. VAR, reasonable year, we VAR we've and And that, the But business. what if amount that, so believe have if what the not the before million to growth or for by is we fiscal, the combination

Keith Housum

it. progress And terms software, software the areas that see few in is that then, color over past got one to the investment more months, on pressing or calls your is there others? we're and the in talked likely guys have the I past of investments few in the about you before providers the two

Mike Baur

the John a Microsoft Yeah, to get for there. frankly, platform, Brazil. had in big our about talks success running task sure and We

And so it in task those number in longer to And the getting for Microsoft easy that than cloud again But job Brazil, in last the us was was July, the anticipate no work after quarter. Brazil. thought. one platform guys for we bought by that that's way, in we we significant had And growth took continuing.

existing and number that was selling are and who we've haven't needed significant sells some SAP move Scan platform. got sell getting through number to name we suppliers. was specific I them So on won't Objective But them two, supplier that's, that up services platform buy objective a a very to one. because of software CASCADE they the working we our yet. announced it migrate a the that Source system as normal lot it just and from with

platform. revenue in that supplier with that, so quarter, testing a have the significant And September now. for And going the we'll on through we're right

We're we So in talk November. you excited that about. will to about

Keith Housum

credit quality speak And finance seeing can any the in credit deteriorate I that a the perhaps concern that's out department. about me. seeing quarter? appreciate share Are for that question term? you you're you is account But the regarding your media of Gerry, bit the

Gerry Lyons

and closely we of think seen, and works obviously, our customers. our and very with we lots in We're in to our get team customers very, provide deal constantly really provides had into conversations, haven't to with deteriorate, out we with we've lots So credit company to company. to value way working how great value a trying figure done a our them, that deals customers. that their of those And

how And have surprised been. so resilient I've at customers been pleasantly the

Mike Baur

add Gerry, can to And that. I Keith, just

don't best things of recurring are. And was partners. how quarter making that the it And a and talked seminar by back John relationship best We a I of about believe with we think on those we've had got what as services. from devote help don't quarter sure insurance they significant that company. better this series, the way, And webinar our I these company, that's the described and team of VARs outsource a insurance. last financial practices, strong to to we revenue headcount our the we to in and health amount a series of customers. we to an outsource collection a financial Keith, business much efforts credit this one have relationships We

pleased. surprised but as of pay so will I have buy They us they their our not from And to us. trust partners, our Gerry pleased and been customers, pay said, Not us I, and that want some know get for XX other one is not with had customers over our business, because years. distributor we've of overall or on two. we over partners. quarter you And This relationships them that many these that's something

Operator

Our & the from Company. next Chris with line McGinnis Sidoti question comes of

Chris McGinnis

opportunity I could [indiscernible]? if is go environment and shares a out given for different were just take wondering, you about an maybe was to some maybe maybe competitors just landscape the you Thanks. this competitive talk just and

Mike Baur

as We've structured dominant listening Chris, something competitors some want in year. part for our I'll teams, our by market if wants this you agents a wallet see market I to we've and share 'XX. from of in to And many, and big the a In John, different take in of say, a strategy jump way add And really far still lot too. the quarters to the there teams but to years. we FY last share still if the maybe would over maybe, that, it's the are Intelisys few that the business, shares business player said, our In got we had VAR take U.S. Brazil, in we're master it competitors. largest many John first

John Eldh

we've together and base offer To real several to share able ability key drives the value to Mike are priorities coming on-prem, last years And us. that is them John part this us greater question. would be absolutely to agree think Eldh, for differentiators. what that what over to your thank all you with take these hybrid, base from competitors. greater agency we wallet consideration to be, partner and of market from cloud of share loyalty, competitive Chris, for or share thanks And built add capabilities. greater as our is are helps I and customer

Operator

Thank you. to in any further now I'm Baur Mr. remarks. like not to the for showing queue. the questions I call over turn would closing Mike

Mike Baur

next discuss November expect Thank you today for us XXXX. XXth to X joining September to conference call hold we our quarterly Monday, results on

Operator

that Ladies you your and gentlemen, concludes call. today's for participation. Thank conference

disconnect. You may now have day. a Everyone wonderful

ScanSource (SCSC) 31 Aug 202020 Q4 Earnings call transcript