SCSC - Earnings call transcript Q2 2021

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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 objection 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

thank joining and you afternoon, us. for Good

Financial today Baur, our December. our me new Revenue on and Mike call the Chief our Jones, Eldh, Joining Chairman ScanScource are CEO; and Steve who Officer, joined Officer; in Chief John

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

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

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

Mike Baur

new discussed COVID-XX by What one introduced thanks and us pandemic North joining leadership to unfold. we few weeks challenges sales been? has Mary, presented at the Thanks, the A later, America, A ScanSource team year and ago, executive in Intelisys. a year reorganization our today. it began for

ScanSource growth. focus, year is execution XXXX a and For for

business, Over the and sales last that few to partners years, respond our industry technologies. end solutions new customers acquire we deliver been the ways to to enable transforming prefer to have leading

As you drove substantially expenses. by results operating net SG&A can sales quarter the our improved performance over release, Excellent leverage our our on second first quarter. from higher see press employees and our

As we outstanding a ever in the Jones, our Steve’s foundation to we to will now ScanSource the new fit have of for company believe of new fiscal, ScanSource and are the start like larger performance discuss are there quarter. sales second his background half digital is before. built an turn CFO experiences over Steve for that software welcome, we a growth market than transformation family. through opportunities going to to I’d our and to licensing for subscription. with from the our ScanSource, for call moving because John, I the supplier working XXXX

John Eldh

Thanks, sales very Mike. We quarter. execution our excited sequential momentum. about the had X% and September quarter sales growth this growth from I'm

large in sales budget Our are and deals due flush. increase than to expected net quarter an higher this year-end

growing In America, business. I'm and year our networking than mentioned his ScanSource our Our business, opening higher Mike growth A is SaaS reorganization. one recurring including North in at and rates later also rates, and Intelisys, sales revenue working margins challenges, on and higher proud that fighting chain mobility, to increased for deals customer product segment, digit some of representing satisfaction comments, led thank self-checkout subscription video that number we increased sales solutions. and suppliers. program average levels. we led to Despite net sizes points, funds our our volumes, and and report greater larger Networking and change the trust, with I really the customers continued Security In confidence surveillance this our increased truly accounts, across excellent access our supply higher drove restoring and strength order by focus employees enabling sales shortages education And want to on the through and loyalty including of remote quarter-over-quarter, business, customer time orders. our to trend, in an for X% maintained double market. customers Barcode, federal large managed strong our E-rate teams deliver which service and a is during which learning the saw quarter,

year-over-year. has which XX% Our higher margins, POS portal payments business, declined

services, the phone and digital For and provisioning data driven America, in an net by saw the and XX% sales, communications North growth quarter-over-quarter in technologies increase Brazil. in enabled in we headsets center and growth endpoints, in cloud workplace

us. based Intelisys even at record at market with continued solutions. communications had Intelisys growth XX%, year-over-year contact as shift service driven another XX%. business Intelisys cloud to XX% grew faster opportunity the center a growth for for quarter Our as a to unified service key by be a and continues

the we investing services. as automates opportunity. cable process We’ve launched of Intelisys for such which continue in tools of partners market digital sales result, plan a finder, buying our to ahead As the new cable recently

We some to new prior support new agent year. go-to engagement sales year recruiting in made newly recruitment inside the increasing investments in partner great by we XX% team for a partners, also And over our for market a had XXXX, recruited with partners. Intelisys

local cloud and stability Brazil, portfolio broadest our financial a the top across supplier offers and number We most growth in also the share. management reliable strong strongest provide to contracts continue platinum tool grow the in and with by the of We community services. of led commission achieved ScanSource, trusted with digit business, them team relationships, our partner enabling see sales through continue the take currency, record enabling deals with the value quarter connectivity, supplier we and growth industry. differentiated In to business. partners, deepest the credibility while offering us across the and confidence their and large in to strength Intelisys by partners double

amazing. portfolio, its to In In held also to cloud team Oracle. Brazil and a drive our virtual very Forum, our success engagement. including successful COVID-XX, conference solution, innovative Brazil participants, IBM, continues are customer providers X,XXX Microsoft, hardware and to our addition Despite December, momentum just across we top build digital across called over events leveraging digital spend virtual partner Innovation marketing with

sales And with performance and dedication understand anatomy government we're resources example, opportunity like ScanSource's areas is available We're building. such sales the opportunities for education, our also a productivity win an CCaaS solutions of our continued how of discover and partners manufacturing. this to businesses understand partners opportunity helping as I'd campaign, help the our solutions increase can for to and their very grocery forward suppliers in second summary, As In ScanSource. vertical and future take growing contact momentum also promoting expertise, partners. commitment our quarter mobile providing our tools mobility adding to as service we're with a customers. their pleased and center thank for partners with

you Steve will the Now, results. financial take through

Steve Jones

Thanks, excellent discuss John. you. great results to with ScanSource to also have It's great to family join quarterly the and

quarter. business indicated our to XX.X% Difficulty] this momentum, the operating leverage SG&A results a otherwise discussion sales cash Our for ROIC drove operations for build gained reflects outstanding strong on only. continued and execution continuing Unless generation this and [Technical

up organic our quarter, and net X% second for $XXX year-over-year year-over-year growth. down the sales million X% For were

impacted currency translation approximately $XX negatively Foreign by million. sales non-GAAP

lower Our profit primarily and year down program from gross XX% the due margin was gross prior XX.X%, profits recognition. were The sales $XX million, year-over-year. mix vendor the down

As our declined portal John mentioned, POS higher business year-over-year. payments margin

announced $X.X Our July. expense impact quarter our $XX.X non-GAAP XX% realized declined of of the in the SG&A quarterly year-over-year. plan reduction expense for million million We or planned

higher XXXX, impact fiscal tax and For to we XX.XX% our geographical non-deductible reflecting of tax items from estimate mix. range XX.XX%, effective a rate to

the for for quarter Working the Now turning flow capital trailing balance $XXX million declined sequentially cash year-over-year. sheet strong flow, cash we XX to month operating $XX of investment and both and million and the generated period.

and We strengthen position. to liquidity sheet our continue balance

lower and stable turns had $XX with Our XX, levels, inventory net our times. of X.X inventory and On equivalent DSO and debt cash remained $XXX and sales XXXX, million of December increase days to we increased at cash million. XX

stronger a lower have sheet We balance leverage. with

EBITDA. trailing total months leverage net times approximately Our X.X adjusted XX

were of products statements. America, we in our the second distribution quarter in the financial divestitures quarter in business sale year as operations and Europe completed These classified fiscal During and the XXXX UK. our Latin discontinued

not business. of the the uncertainty for our forecast range because around COVID-XX providing on third We quarter are

Following turn the we to now seasonal expect back call trend, quarter-over-quarter. I historical net like for to our would sales closing Mike to over decline comments.

Mike Baur

has Thanks, confidence are we're ahead. positioned by gives in Steve. strong This execution our sales with taking. strategic best of partners we direction strong the employees was them quarter suppliers. the year and And this a ScanSource in And growth worldwide. the best for me

up open We for will questions. now

Operator

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

Adam Tindle

foundation about talked wanted thanks. afternoon. start year, just I for Okay, fiscal second comment have you you in this half growth. to your Good with a where the Mike, of starting

last that you but some you in into you half, directional can Just would you foundation secondly, given year? in the on helpful. comment. that momentum give about Any I comments think for year-over-year your did, be then the or talked QX, do strong of possible, know sequential growth X.XX maybe half decline if going off the year? you've in color that back And grow of seasonal for basis the you the back QX Thanks. about talked it's Steve Did finish quarter

Mike Baur

Yes. for Hey, Thanks Adam. the questions.

we you you for was over growth, look all, talked if year, I last if ago, the First in recall, a foundation quarter, it disaster. year the December expected of We to. And really we and we when a what about and frankly, upset as that a back saying, sales had half us, were had of customers at not reorganization. year was had we executing were executed, a just

about. average all even at the a to standpoint, I talked feel with I these metrics that. and from John and I confident management things in us spend orders, are ago, some believe When year last distribution execute proven accomplished a results. our key what the from you of we chain couldn't that COVID very more with more ability And customers, those supply look a to on quarters, has the say size about orders more standpoint, four what So

year, our a has there will two top if terms the from Intelisys December but fiscal increase in strong the resulted growth believe in that that to second good in half some be couple as year March the areas of business, And always which throw we on in of growing you in we've is products of the so And stabilized challenges Brazil, and we of sales, quarter experienced, quarter. dramatically, areas continued a and you after take the highlighted. that

to So just what the that's it sequentially. seasonal quarter decline quarter was trend. we by really a And meant that's

that I can today, with go But we it quarter. our years many, and are to If works. many may you tell now. back not struggling Again, look forecast the you, way ability be the still

expectations our And very I I X.XX feeling exceeded think we call, we and say to our the on with the our to what market said a position good trying about we the As that's today mean, feel and in it's the revenue. is company execute. good ability is

Adam Tindle

certainly hold that work returning to you this around run say level in have about think of Can done and that environment. as the drop through there, lot we you intermediate so rate quarterly difficulty or Or structure $XX growth. the a how think the How occurs? on and think about as program. a over appreciate growth forward of about let's And this cost million basis? restructuring Understood, most $XX million algorithm? should we the we that I you've term, forecasting guess, should OpEx

Mike Baur

discussing excellent since an been summer. point have that's that Yes, the we

If you our intentionally all announced in did and reduction million not summer, our the we expense opportunities. of recall plan, $XX in reduce we growth the investments when out back

accomplish. intact about we So somewhat talked trying we as to we what those left were

to high board's that very still a need earlier, about while how talked manage and deliver, heard some we the those believe expenses John focused, in times it leaving make be spending room the so we're very, it were can the invest more to from to and operating a examples term we about tell growth very as going and clear it We're operating there longer do last margin extremely lot for perspective, They Steve, margin And careful yet. are many the future. new need And a of than We've is will that long-term he's but talk opportunities we take advantage those of income. got for sure in eye to the we and I we increase revenue investments businesses, discussion strong said, selectively not us that to of that are important very we when recurring high And that in you very guy, week. just make our continue think make many, high specific people meetings. quarter. we with sure X.X% specific this the to still already we being us it's the for to tightly, added, these we do of number and an we we've that how we we tools had

Adam Tindle

Understood. last Steve. eyes. know got If one one I I get pair early, it's you've of a fresh in just could for but

Just differently, And do that Thanks. if be things capital opportunity pockets of early perhaps any in to curious, your view on emphasize. to biggest on you or helpful. allocation, want tie thoughts would be the

Steve Jones

Yes, thanks.

the that's of biggest I there mean, we've model, I in Intelisys. set that and front us. we think big in think opportunity growth I is believe seen our opportunity

Mike Baur

I of sheet, where fund But to performance balance is forward. strategic standpoint, the at we think make and sure Adam, that we'll growth just capital organic you of and would I the have for talked and continue an be growth the that to on also I going look the from opportunities with believe the strong that allocation, ability we seeing. a appear team, balance definitely suggest we sheet, improvement And we do as want the that to to taking this we're the with acquisition it morning, today, Steve believe about with the

Adam Tindle

Thank very that's much. Okay, you helpful.

Mike Baur

Adam. Thanks, Great.

Operator

comes from research. question next Housum Our with Keith Northcoast

Keith Housum

sheet Steve, -- join I Steve, inventories payable payable question aboard. review accounts the are guys. afternoon, first receivable accounts to Good guess the welcome low it are you. have the looks Glad at you balance call. mean, towards high. I the

As where you levels terms what the are of capital your your be exited thoughts to quarter, at working you going forward? look need in as they

Steve Jones

I'm happy to answer.

supply exit So QX, we I had think issues. we where some we as are

sales And we back so build look some those we're catch up. as and to we're to catch inventory to have probably QX, to to looking going

Keith Housum

that issues. you bigger staying the a pipeline more And a going little than usual third quarter? more on provide give And supply chain Expected. quarter? on bit color does how through Can progressed the they the into you

Steve Jones

bit than I'll pass closer to little I that over to a John, he's am. it

John Eldh

we're Sure. we strong we'll we sales as saw conjunction Look, of internal my shortages, comments, importantly, our we we I deliver our customers QX. for And most our for working some despite QX. said the maybe shortages. But into I said, great in those and see Steve and to definitely outcome in even as beat volumes. mean, it took closely a expectations thing with And care suppliers hopeful same move sales

Keith Housum

think Great. third elsewhere? Do or you given the go a quarter sales do pipeline going into those

John Eldh

that say you time? more can Sorry, one

Keith Housum

the Yes. challenges the a sales to I third the of those elsewhere supply go with? chain, your gave quarter the did start of pipeline you said, at end in that terms quarter

John Eldh

our somewhere didn't way No, quarter. will be else. go us still the they throughout with and come They

Keith Housum

the to quarter? the business And for what's surprising, the have them one quarter? prospect on, wouldn't question POS you. during you COVID-XX-related. Mike, drop significant I've ask But you. be any Got the for then this portal. And It I missed third I got is more for guess thoughts about in

Mike Baur

Yes, it. I'll take

that disappointed some any in There's We are kind excited we're of make we of wanted business. have And still no market opportunities. that we other their business. of that more in they the share businesses. about COVID impact has so to our And lack sure changes structural than highlight there don't had

year-over-year, higher didn't this it our happens very but we a margin when that our when. having was others. is that the sure so revenue more skills business. at because right the still see it's of it's to coming, POS not margin that portal just we traditional not business have a we now, it's some that the And business unique reason And as exactly when And business because do it much know make about lower. of challenged to that We you excited it but delivering. some are sure going quarter, high just back, we of So business look but part at gross were than than knew want don’t in everyone our margins will, confidence come we have

Keith Housum

build your then how your revenue me. is as And to revenue? total for idea revenue us Can last stream. factors much you recurring give of you. of recurring Several up an question percentage Got

Mike Baur

to to might willing give some get of point sure to to about recurring. to I’m of you we’re sure, how Q am Mary, I look are see going much revenue not is kind of that our you if his am not that, exactly what our helping. in I pointing

Mary Gentry

Sure.

is as be of revenue percentage very small. going a revenue to recurring the So

number. Intelisys, the profit the noticeable recurring the as can’t to the to it. And recurring all much of contribution what going the However be revenue is coming not we substantial from with the the of revenue revenue. from gross is the profit quarter more recurring point And for percentage piece second a you gross associated that but is which a XX% revenue our revenue Intelisys recurring was recurring of

Keith Housum

Great, you. thank

Operator

Our from next with Sidoti. Chris question comes McGinnis

Chris McGinnis

the similar Thanks [Indiscernible]. my just services, over big just service you growth questions. I of just prior maybe year. guess the and just increase patients in as for [Indiscernible]. Is highlight revenue? that line driver Can the that you in greater Is the that question, income sales the big just Can Nice of bit? from quarter percent operating a little the a the that? base of on Afternoon. taking touch

Mike Baur

I Chris, Mike. it's I'm to can Hey, try. going see if

strong a and growth. strong just of also talking from contribution that and And profitability to clean so there about I on high a comp is services know contribution margin, reminder. is there. had kind you're we used things in they as that So high which as these that's in aren't Intelisys, segment, remember, as the And the the segment, that drives Intelisys be. that's also segment what within in Brazil,

growth are pieces the well, comps the two the and those is of pieces. key so those two doing so And

Chris McGinnis

bottom Great. on Can there? you a time? position maybe just Thanks in Can happening higher really And little expand on driving this having of down in Brazil that in you for expand that. such that Is strong the what's maybe Brazil? you're a margin to just at that the that just part you're line. just in bit success

John Eldh

great question. Look, one We've Thanks to quarters. up have we're for the couple we Brazil, positive momentum. real it’s question a it last built John. now Chris, excited answer. It's Yes, of for the and

a of time, lot team, a having stable. a I think to down a it's very comes been it together long team. they've senior great It's

lot the And comes the one we a would down taking seeing we're from regional so were it other there taking team. of offer share But distributors. of also to the I from in just strength the distributor, share but also of leadership also -- departure strength local

Chris McGinnis

Great.

don't I been that [Indiscernible] continued question, well just as time John share for bit [Indiscernible] last Intelisys. comments partner then think you you. year, in the great on on more just up I can gain. well though partner time a I long And growth market you of that's little that maybe sense Thank that growth. today? a that sets that you was for for a long highlighted, growing your a been know, a about and talked it's you last context expand maybe Can in where in XX% add think congrats so always growth,

John Eldh

and Yes, think, Intelisys play the growing Where play Chris, opportunities there, in are large we I substantial. again, for markets. we

number are of as fingers it's we're moving based VARs recruitment. recruitment seeing their the to increased the And there one solutions from and that moving greater advent But to places. recognizing our with we're see partner for result, helping forward. recurring is fuel increasing cloud to customers. the of so offering continue importance, COVID-XX crossed, ever especially hopeful a And revenue of key areas are a we And of

Steve Jones

of Ketchum I the that add And there, Chris, more over joining can. business. ago, our A as ScanScource who [ph] Mike if a team I a Paul these from Casting moved Paul year we leading lot really would the couple business Morgan executives partners traditional of comment is and that one senior know

our in best recruiting a a fantastic faster. have job done partners, partners So and growing those even getting guys new year, of

yes, So execution. just great

Chris McGinnis

the taking Great. I luck good time QX. appreciate answer my questions, and in to you

Mike Baur

Thank you.

Operator

like That I'd today's Mr. to the question-and-answer turn concludes session. remarks. call to for back Baur closing

Mike Baur

for Great. us Thank joining today. you

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

Operator

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

You may now disconnect.

ScanSource (SCSC) 3 Feb 212021 Q2 Earnings call transcript