SCSC - Earnings call transcript Q1 2022

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Operator

Welcome to the ScanSource Quarterly Earnings Conference Call. All lines are 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, Senior Vice President, Treasurer and Investor Relations. begin. may you Ma'am,

Mary Gentry

thank joining and you afternoon, us. for Good

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

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

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

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

Michael Baur

us joining Thanks, Mary, everyone and thanks, today. for

XX% year, growth. terrific our fiscal net performance start was driven a Our sales QX to by

navigating extremely by strong while Our excellent hybrid our ongoing am strategy operational proves demand is supply of growth employees challenges. the excellence worldwide I by the chain winning. was delivered proud our topline driven

accelerate communications modern solutions, for services recurring to align our our segments, technologies. and of digital our channel and suppliers the strategy the our our foundation and discuss over go-to-market now revenue distribution technologies end with or partners specialty of business services, of performance. enables the we patterns call hybrid innovative strategy. meet hardware, partners recurring in sales and quarter, reported connect to This and hardware world. growth offers. made by now changes will include to to consumption across are helping to the software turn I providing Both all us cloud user We our enabling cloud opportunities. user This and John is technology to other devices segments fast-growing The exciting demand end follow to new plus

John Eldh

delivered and differentiated expanded This segments. channel, offerings. while connectivity to combination is our gross growth the very business, of service capabilities margins us We Thanks, Mike. cloud resulting suppliers, and value software, our QX to accelerating results growth. growth with our given and XX% sales profit performance. impressive net proud across year-on-year XX% of our year-on-year across to momentum saw in both partners across power I'm opportunities We enabling hardware, combine deliver

cases, our trust for differentiator services technologies. makes second A marketplace. focus specialization on or our Our largest to business knowledge, largest in our advantage teams, their and specialized supplier sales suppliers us and in competitive the us customer. expertise brings and a technology us big closer much deep is provide specialty This many

us work their requirements. to their take trust accommodate and business to suppliers Our our of inventory and care customers

demand, acceleration and driven by strong refresh rate We double-digit first digital results and quarter saw technology run initiatives. deals growth across reflected Our large business.

securing controllers included the cloud for by of recent a sites sell distribution hybrid partners win retailer and strategy. X,XXX-plus a business consumption which in MRR and net and leveraging example deal, a end ScanSource in capabilities. sales across by buying resulted our demand, highlighting change, year-on-year, user maintaining As our deals to A Solutions Specialty $XXX,XXX fueled strong SD-WAN consolidate enables patterns increased share while this and suppliers In XX% to end big multi-brand and solution solution, ScanSource hybrid increases orchestrated segment, technology our market stack continuity. voice, looking Technology connecting, differentiated distribution user connectivity gains.

services purchases. demonstrate and more include to shortages, hardware are pickup connectivity profit devices, cases increase growth use margin hybrid for gross experience, automation distribution XX% is mobile Key mobile curbside profit to segment increased storefront profile. our and key higher-value margins. cases computing hardware. cases ScanSource's implementing computers drove and price attaching solutions payment use for are higher wireless including integrated fulfillment our use self-checkout, across injection productivity. enhance deployments. With our reduce friction grew online supplier labor solutions sales Example to mix, increased and value with buying Our the strategy A and adopting performance proposition end year-on-year. These customers expanding for favorable and incentives unique demand to worker Retailers sales continued

is Cloud pre-XXXX, reflecting our work. to and are connectivity. billion in Included conference video meeting to subscription sales only the place or & adoption. hybrid double-digit marks huddle to Sullivan work environments refresh in Intelisys. end in enabling opportunity across The and and for partners achieved is of meetings and technologies of a growth growth exceeded Modern collaboration row Intelisys, gross rooms, cloud as hybrid According take approximately segment our rooms. ARR, recurring CCaaS, year-on-year, in This is transforming profits our sales Research, partners quarter model, suppliers considered accelerated with UCaaS, is providing net expected way significant we XX% of our year-on-year opportunities and $X Hybrid XX By while XX% qualified we XXXX, space XX% by revenue the work. end increased increased huddle users. huddle many normal and cloud-enabled work growth user annual will endpoints For billings net all Frost X% rooms. this in update for This and new by segment, Communications as XX% year-on-year, tremendous creating sales

accelerate additional of adding our opportunity. revenue to ahead are headcount We growth

the We XX% are in time XX% These by growth by supplier represent Intelisys acquisition year-on-year community, partners, continued through up of encouraged VAR VARs the new now model sales of adoption XX% five the of VARs. agency the billings as ago. by years at from witnessed

Brazil strong continues team with consistent revenue in topline and along Our to discipline. performance on deliver financial profitability,

deals During and the growth big with data across solutions. workplace center, strength experienced cybersecurity quarter, double-digit digital we in

momentum way accelerating build technology the and our solutions. leading outstanding strength the the that and services. I hardware, digital about our excited all connectivity software, efforts partners for the for SaaS lay and very across future quarter, commitment hybrid suppliers like across to In to hardware, business I'd suppliers for outstanding their success In to in opportunities of our QX and in distribution, business momentum our and continued of continues we in employees and our customers are to am the Brazil addition our their cloud thank ahead. performance, and across our summary, ScanSource.

it take turn over Steve, through financial our results. you I'll Now who will to

Stephen Jones

John. Thanks,

for It of our team's and quarter was returns. Our growth outstanding our plan. strategic execution delivering demonstrates results strong an higher quarter successful first

consecutive our topline Non-GAAP on and built $X.XX business of bottom for realized QX line the leverage Our quarter the EPS and was improvement. growth and operational results. in fifth is quarter we represents

made go-to-market to technologies his to As changes our reporting our with in opening we segments align Mike statements, strategy. noted

Our our we segments In and reflect the margins. and better quarter, up manage new how future. today in strong topline the business expanded growth, we the first year-over-year achieved XX%

segments, margins million QX customers. of income reflects Adjusted increased XX.X%. Our and EBITDA margins increased demand profit, margin gross from operating demonstrating income operating operating sales leverage. to increasing In increased faster strong our gross both $XXX to X.XX%. grew profit EBITDA and non-GAAP than non-GAAP net our sales, adjusted X.XX% to

profit Our gross year-over-year margin XX% contributed higher XX.X% profits an to sales million. quarter. from mix increase our to in $XXX of the Favorable year's XX.X%, supplier incentives grew prior sales and gross

Our capabilities. IT the headcount and which investment $X.X increased of Intelisys, in including SG&A includes growth million expense for or areas, non-GAAP investments strategic year-over-year, to for other quarter Brazil expand our X% million $XX.X

as key to profitability shifting adjusted EBITDA are We metrics. our

quarter now share-based $XX.X adjusted year-over-year. compensation, up excludes First totaled XX% EBITDA, which million,

tax primarily rate income, first of reflects XX% tax-exempt increase Brazil. forecasted income in Our from quarter an

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

Negative for million, growth. came the million to turning and flow cash our capital XX balance reflects our trailing the at line in with year-over-year $XX QX Year-over-year, the sheet $XX range. DSO flow. of increase. sales investment cash operating XX working days, capital support $XX Now increased XX% a and expected months million quarter in for to working

we million. debt of up XX, of turns inventory typical $XX cash September QX On Our and X.Xx had modestly range. $XXX from of XXXX, and cash equivalents our million were

to our we perspective, leverage adjusted balance remains approximately support sheet and net trailing demonstrating long-term at debt create strong. flexibility Xx growth EBITDA, value. XX-month a From opportunities QX Our ended financial

had our increased XX.X%, under During $XXX invested no authorization. share XXXX the the repurchases capital we million fiscal finally, quarterly five quarter years. on highest And in first to return year over ROIC quarter, repurchase

time. includes August, compensation. announcement annual adjusted our first in QX to change the outlook ROIC With QX the our in calculation Our share-based EBITDA for exclude we earnings an provided

reaffirming outlook. our year are full We

our to We'll expect open XXXX, at up year and expect questions. at million. EBITDA we net least to least X.X%, now fiscal year-over-year For $XXX growth sales it we for be be adjusted

Operator

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

Catherine Huntley

questions for modern today. Adam. this quarter for so looks and you in on Catherine is Was year-over-year. and our It to spend and This channel? activity sequentially like your beat Thank or in the reshuffling communication segments segment taking increased this much cloud for massively this new Hi. attributable

Michael Baur

a at perspective, year-over-year restated Well, year-over-year from I compare, if look our don't performance. we've think you the

demand would this driving strong be growth. our So

Catherine Huntley

times? you go backlog, bit composition And of you Are backlog, please? can dig little like lead backlog? you this seeing then And into elevated the could a into Okay.

John Eldh

John out material QX, Eldh. wasn't anticipating question. backlogs, the aren't it Thanks it be material frankly, to we QX. about coming we This Yes. and quite in is think When for of

Catherine Huntley

looks turns metric normalize? And expect Okay. like are up bit last It of for a as flow. we mentioned, year-over-year. inventory cash you operating And little on When me. could be pressure one putting this to can

Stephen Jones

at we kind when we the X.Xx, inventory should at turns, where in look be, we're we X.Xx. of middle Well, think of our

of than but right So in it's the a we've middle. little historically bit faster what kind seen,

comfortable seeing So inventory where right levels we're with our now. are – we're

Catherine Huntley

Okay. Thank and much congrats. you so

Michael Baur

you. Thank

Operator

question next Northcoast Keith from with Housum Research. Our comes

open. is line Your

Keith Housum

to the on quarter. Great congratulations Hey, see. guys,

As rebates we gross gross your vendor obviously, that. of margins, were margins very impressive part were a look big at and

and is look of an that And level this achievement? As sustainable analyze you kind there, quarter, the kind just of we dose this really take of the into measured was it activity year? if how of at it outperformance

Stephen Jones

Yes.

that me one, Keith. is Let take Steve. This

our in margins, me the reason detail, believe us. business, a And that to these. higher at see we look higher growth let we when rates that little our why, sustain into for So recurring gross able margin be we'll go and a has we

so thing we for that mix will our is the The gross one sure. on deals. that And we side of think large at sustainable be us, for margin look

we so can in And see the margins. as deals, larger fluctuation see we some

Keith Housum

sense. love worse for look to Makes you a then supply industries guys? you And chain Getting the better? guys challenges get you. of guys would I because your terms guys I'd you Got now? how guess supply right cross-section of you kind chain of see that seeing, see there. just them in at getting are Do you the perspective challenges

John Eldh

Thanks Eldh. its for John the Keith, question.

Lead clearly, we're forward. it them times chain quarter, comments, you team working chain and very relates would prepared supply extended, supply see and my But heard challenges through like as to continuing doing you a in the overall, is we well. job constraints, seeing it have our everybody we as else, this move as imagine. fantastic As

Keith Housum

you. Got

guidance, Or thought adjusted raise an with, of quarter that Okay. Appreciate will then first one the guys to quarters begin any exceptional down? your of at quarter, here on generally rest not you the the your process this bit? guidance a it. EBITDA And for line. little go had least terms especially at Why is strongest the of least year in not there is but

Stephen Jones

again. Jones Steve is this Keith, Well,

We history from Let saying we by time and in the annual first perspective. the ever guidance. stopped quarterly we guidance a an perspective, start giving company's gave guidance from me annual just the started off

least So historically and we're challenges QX. that our guidance But at we're there the are our we wanting in still very supply to confidence make there QX for with definitely comfortable. out gives see seasonality sure. sure chain, impacted us in

the things guidance. those really have QX don't So with update performance than any new other news there, to out we

Keith Housum

All right, queue. Thanks guys. I'll jump back guys. in

Operator

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

Your open. line is

Christopher McGinnis

QX larger you Good with guess afternoon. talk the performance when a my that fluctuate, the at without thought, much bit played on walk Thanks landed and that a just think a through and guess typically, I quarter. the deals those, where I I I margin question. margin to I taking Can for little questions performance? the have how could about know you margin the were into guidance you little nice maybe the just you times. big about in those lower piggyback bit follow-up how just can deals, impacted up guess?

Stephen Jones

talked John and our business. big deals double-digit rate in Chris, our Yes, about growth run

really QX. business we So mix with in of pleased the we were that saw

as far we supply As way had and historically deals. in margins, those the that is the constraints, we see some chain, it don't with supply the big the pricing actually performance

quarter. So that the was for to us a help

Christopher McGinnis

That sense. makes

can a ahead. – I had? Thanks. you seeing John, point strong has don't Okay. some And it just greater this at you specifically But or talk growth given just the around was growth know investment I performance Intelisys. mentioned if then opportunity are think you Intelisys some

John Eldh

Yes, yes, And absolutely. for thanks the question. Chris,

I As And quarter. remarks, opportunities further had in again, we across XX% my Once growth we absolutely, said prepared see strong Intelisys. a growth.

And board. technical and sales of so we're the technical across investing capabilities, our and across revenue, customer-facing expanding roles doing and inside so capabilities sales we're also so ahead

Michael Baur

I Chris, just And to add that. can John, Mike. is if this

about other in about be really channel we've and the few story think our expanded our opportunities I of Intelisys rush Intelisys by the a story. talked the customer with big been is John that part quarters we've VAR dramatically for to talking

early to development. do selling, of those cover and a we've of lot at and So lot are go VARs got lot and John's education now to more so a of have stages a lot of a visit, companies team and

So this plan. is of a multiyear return kind

doing day what a to attract that this about wanted nobody They're contributing else ago have fantastic years we'd great much we're agency really happen is just that So really these. master talked a adding help VARs is to I the this are at investments so one job. our doing. growth. And to VARs Intelisys we five is And would level

that's think I that So investment the story where going. to as real is

Christopher McGinnis

the in pandemic. Thank appreciate – a the maybe seems little of that And And what's that with just Okay. marketplace? color. what's could like maybe touch Can I you about market. happening and just in just share there? can you Brazil, are Great. out in bit describe It then if flux on happening gaining you considerable they're you. just you

Michael Baur

to We team, overall as excited deliver performance. leadership got about really talked a about we're Chris, Yes, Real great Brazil. They in before. we've continue consistent strength the team.

going I think there's a couple of things there. on also

is greater to the there positive are And which the volumes to seeing our and on growth, contributing us Our at but we're profit positively, revenue real really only strong margin. top is recurring get which leverage level, not on real a the SG&A. helping gross also line

Christopher McGinnis

it number. you you discuss was recurring wondering know you way, don't that that I've a give ever if I if this heard don't think you give us don't I growth of if And color. Great. the out. rate know you'd I itself? bucked can Do I have it revenue but

Stephen Jones

This on and out, is We that of recurring On but as aggregate Chris. you'll Hi, recurring revenues we're sure our that see well, now revenue. is something it report don't for Steve both segments base. growing Jones. revenue them recurring focused Yes. sides our is

Christopher McGinnis

you the repurchase this of thanks is where you helpful. in but the to Yes, team at quarter, that's point? that there the just very the question, data add the then M&A, like to have last for balance strength when just given on put know Okay. would you at I And all last possible the realignment, look share sheet, you

Stephen Jones

quarter, we're our our look looking in the of active an and spot, our to end Yes. our capabilities. would pipeline, expand Well, leverage I working first, $XX to low our And we about are especially we M&A added range. you sweet capital. million tell acquire to you capital at if that we have

we're that come So stay focused one, to is on. more something but that is that that on tuned,

Christopher McGinnis

on QX. congrats And questions. my luck quarter taking good and for Thanks Great. the in

Stephen Jones

Thank you.

Operator

no turn the like back this closing [Operator Baur questions are the over further for time. at I'd to Instructions] to remarks. There Mr. call

Stephen Jones

like Jones everyone joining thank again. just to Steve I'd for us. This is

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

Operator

the conclude conference. does This

may great day. You have now a disconnect. Everyone,

ScanSource (SCSC) 12 Nov 212022 Q1 Earnings call transcript