SCSC - Earnings call transcript Q4 2022

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Operator

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

Mary Gentry

thank joining And you afternoon. us. for Good

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

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

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

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

Mike Baur

our thanks, sales today. EBITDA of delivering We of million. XXXX net for outlook XX% $XXX people. everyone, the by exceeded growth and demand Fiscal Thanks, adjusted and year year outstanding full our XXXX us execution And year Mary. both strong was joining record

per non-GAAP share. to our increased EPS And our increased XXXX ROIC $X.XX to XX%. XX% adjusted year fiscal For

revenue growth results our recurring on the The the demand ScanSource FY’XX strong meet overall XX% solutions. new channel This of recurring than our success enable and of In the revenue the easy focused to devices FY’XX, business partners exceptional of growth faster customer the revenue. our to grew up in in our to is Our for demonstrate excellent hybrid, made hybrid year-over team business our new build and recurring ScanSource provides distribution year. strong strategy profitability the future. needs digital our

annual we last without We outlook reminder, financial previously explaining limited time. our guidance, a investors to business quarterly that As works year, with hardware for decided provide an bookings or distribution visibility the to provided first and we were always our backlog.

our in growing to year, revenue and midterm next our an the outlook business three well along change as years. FY’XX for annual the our the outlook, sales, with hardware more model, software we and to where time. goals have four each are recurring as introducing a annual decided Today, with we covering However, an hybrid we services provide first to

growth at sales X.X% expect to at million. EBITDA net adjusted least to and expect For be FY’XX be year-over-year we least $XXX we

now in the Our new at the our John over midterm of goals I to least margin turn business X.X%. to growth of net X.X% and call and our adjusted reflect ahead for an X% discuss opportunity the goals are to sales confidence These business performance. EBITDA ScanSource. our will model

John Eldh

strategy. winning work share momentum collaboration of our about very highlighted team Thanks, the our partners and and demand, strong with in and to great our Mike. distribution hybrid by see suppliers. It’s gains I’m by QX our results excited rewarding market execution

navigating a specialization sales growth to technology our and took visibility, chain We market supply amazing share growth. XX% we QX, challenging and XX% while profit environment. team, For delivered due net partner gross pipeline

VARs, strategy in of win a devices the trend hybrid marketplace. customers, There while revenues. growing Our of building our is distribution is largest to growing recurring plus digital partners our some solutions their end including their selling enabling hybrid actively for of VARs,

As of XXX over FY’XX, hybrid have end now partners. of the we

one Let hybrid same would past, me share partners. sell when a be an salespeople computing example of and the sell hardware VAR’s sale. it Today would from they this our In mobile one-time their device that this as people network by digital and and mobile discussing proactively computing partners sales like incremental security ScanSource. and our Innovative hybrid recurring value ScanSource. opportunities revenue are cellular connectivity orchestrated device, driving are for solutions a

net In QX sales our Solutions increased Specialty turning XX%. Technology gross our results. and increased Now XX% segment, profits segment to

deals. growth our for Our share availability technologies, increases market better demand excellent was big and in fueled hardware by gains, product robust

surprisingly, However, in margin to did a mix quarter. gross deals growth the for lower lead not the big

Our key year solutions. point-of-sale in networking, growth the throughout and physical areas mobile computing, of QX and payments were security,

continued these expect in growth We FYXXXX. areas in

profit increased a our over XX%. with we achieved our XX% segment, quarter. mix results XX% strong performance, increased for sales & For led sales Modern into different Cisco growing Communications These gross for QX Cloud strong than expected and going were quarter. the net hardware Net the

hardware the business than negative declined communications a our expected we hand, and other XX%. faster services at On premise-based

including UCaaS areas technologies CCaaS. work growth key the that Our and enable are for remote enterprise,

and by NICE XX%, Talkdesk and business led RingCentral, CCaaS led UCaaS CXone. grew and Zoom, our Our Genesis, by grew FiveX, XX% business XxX

over our agency FYXXXX, billion. to user billings end grew $X.XX For

XXXX. with the During Agency adopting teams full recurring solutions margin sales adjusted and Brazil, fiscal digital spite quickly. market we EBITDA gross very our increased the of in year were revenue is of XXXX, for agency XX-plus QX XX% business experienced, the pressures for margin year percent enterprise In very for the XX% pleased

their line help to an customers. partners with digital expanded for is digital model solutions end deliver well hybrid positioned guard Our

new in Our team sales achieved double-digit share by gains market increases technologies. driven growth in big and growth deals,

Cisco, including to and in in outstanding digital fiscal believe best-in-class addition our strength summary, across business were about Fortinet, trajectory in In throughout XXXX. profitable success We Microsoft, growth sustainable of to for our by up our business us the will excited set across we for In hybrid our FYXXXX. solutions. our continues success growth driven momentum build year Brazil hardware, VMWare. This was suppliers and momentum continued

productivity our addition, trust people in dedication their a want proving model our and to ScanSource. overall out thank commitment and a and suppliers to anywhere all loyalty and experience. be to is better In send you effective driving people throughout their massive I to retention of customer to our and partners year very the for for our work

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

Steve Jones

on review year full Thanks, first our John. our QX and I’ll incredible then results. highlights provide some results

strong by our teams FYXXXX technologies our and execution mentioned John and year demand partners. Mike outstanding our As earlier, was for and of a

For with year-over-year. than QX, We our revenue lower achieved sales we higher double-digit gross XX% adjusted EBITDA net we up with segments delivered and in up both EBITDA in and net sales adjusted XX% of profit million growth margins $XX.X expected.

profits gross $XXX in an lower and XX.X% with to margin contributed margin. lower to a gross XX% year-over-year hardware the overall million Higher Our profit sales quarter. margins grew sales mix

for expense of million quarter to the SG&A $XX.X $XX.X increased million, or non-GAAP Our XX% year-over-year.

include for SG&A EPS based and results approximately performance million marketing totaled period. recognized primarily the non-GAAP to the expense related to $X.XX higher diluted expense, QX Our $X.XX compensation compared of year QX in prior unusual period. $X

period year from $X.XX reminder, tax prior the items. benefit discrete a included a As

X.X%. net and both to with segments grew which growth FYXXXX Modern Solutions up Turning We had outlook. Cloud billion XX% to up & full results. Specialty full exceeded strong up Technology Communications Consolidated $X.X our XX% year our top in year-over-year, sales and line year

from temporary prior gross benefit and in XX.X% increased supplier price basis to XX approximately the XX.X% profit include year points. Our margins a up increases of from

market. Our hybrid distribution the in strategy win continues to

see our our at revenues business. part looking can and from financial by revenues. our we a XX% fast is the our recurring of recurring gross profit in composition results As growing Year-over-year, grew

approximately our recurring our gross from FYXXXX, of For XX% businesses. revenue is profit

represents our FYXXXX an Our margin. outlook $XXX a EBITDA growth a company year and EBITDA exceeding rate record, of X.XX% million XX% adjusted time year-over-year adjusted full all and is

Our FYXXXX year-over-year. of XX% $X.XX non-GAAP EPS increased

Now turning the to cash and sheet balance flows.

$XXX our capital, $XX and accounts which inventory the investments used the of accounts We million of and includes for full cash million working receivable year. increased sales operating Our to capital support working Year-over-year, payable for growth. quarter $XXX net increased the end and with QX XX primarily concentration million, This is timing increase QX year-over-year our days is quarter. a from sales of period. DSO of the the at year increase. DSO by XX% up prior driven in line

fiscal Our increased for to adjusted prior year from return up XX.X% year. XX% for the XXXX, invested on capital

sheet our investments to recurring our Our programs – accelerate than improved inventory adjusted leverage of balance In help have ever financial and our ROIC deals our flexibility. In strength in our revenues management. our availability reflects which both investment to programs. sales grow higher strong created partner the balance growth. profitability help win we been These sales ScanSource our larger and of faster. like Flex, able our helps increased business, device grow We’ve digital and more stronger partners maintaining advantage turn taking partners faster partners our business, we while sheet

As $X.X of a $XX partner June working equivalents of a their cash use to to cash we’ve million. force future of loan and an made $XXX their the capital. and million this expand hybrid million use XX, increase and debt of program, example commissions had to against On XXXX, sales we

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

our under million approximately quarter, we repurchase $XXX June authorization. in purchases share share $X.X the During had million

As share we opening I XXXX the remarks, more Mike to in are assumptions announcing around outlook, for full a year and few want noted the his a details year.

half year. half faster second growth the of in than expect first the in of FY We the XXXX

cash generate expect our earlier. cash first flows, we temporary in price the our in environment, interest year we normalizing flow higher from I are rate gross exclude to benefit use expectations we FY to about noted than free of to expect as the XXXX cash With think to our in supplier increases, XXXX. half. We profit and the higher second pattern half margin And the in be FY this interest expense cash and the

We’ll estimate items tax up to for rate, fiscal excluding our Finally, range questions. we open year the it for to effective XX% from discrete XXXX, XX%. now

Operator

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

is open. line Your

Unidentified Analyst

on much is our Adam. for so Catherine This Thank for questions. you taking

Steve Jones

Catherine. Hi,

Unidentified Analyst

on there supply did secure that margin maybe Was gross work potential inventory that in any margin? line? affected embedded Like from chain you was impact there gross faster? Like, anything to

Steve Jones

Well, our taking as as we at inventory much working we when we Catherine. can capital certainly usage, are look

really wouldn’t say terms that’s our chain, margin impact of supply In I impacting margins from not directly. that

Unidentified Analyst

could update and then a Okay, And perfect. going? also slight where provide that’s you maybe on Intelisys

Steve Jones

Yes.

up saw as the call, XX% user end year-to-year. for year billings, line we slowed that’s growth exited Intelisys, a growth the in large full Still billings, we a we as we’re QX. down in $X.XX XX% top the seeing little the For bit billion, in it’s now noted

of forward. So, we lot as business still a we see go in tailwinds that

Unidentified Analyst

good Thank so news. much. That’s you

Operator

Thank next you. [Operator Research. line Instructions] of with Our from the Keith question Northcoast Housum comes

open. Your line is

Keith Housum

strong guys, your strength more taking you performance largest in product line more bit growth little and a light Was you I Examining further. probably it there. vendors share a line XX% was the morning Good that lineup? a on top on, it, see of Can the little Because, it bit outperform expanded of congratulations quarter. top from in share? perhaps as many

to just So from? of came where the trying some understand strength

John Eldh

and we and we our Hey our it down were drove areas. us excited line to top We strong is three deals about We afternoon, for Good you share, came were, thanks Keith, this and heard, teams. larger question. for execution as growth across really absolutely John. the really took very

Keith Housum

the I Is a see the do that in that that quarter? you unique that some taking we performance for Or how business future? repeatable can this changes in fundamental guess, share? repeating is make

John Eldh

from look results XXXX. with we as Well, we’ll as see of the we we growth year, like most share able the be strong we to can took and you felt of believe XXXX, continue into

Keith Housum

it. appreciate Great,

of are thoughts I perhaps your the overall the guidance on as there? some XXXX guidance for avoids guidance, recession? the your about the guess FY puts you’re you of assuming just and terms In economy takes, a year, thinking the

John Eldh

everybody, of the Yes, that’s that’s Keith, out thing big the unknown. sitting front the recessions, in

today, our half. first sitting good we As to we’re pretty visibility we in look out have August,

our And how a demand looking we’re outstrip we’re at impact so now, at the Yes, we’re recession recession thinking now the kind pressure. timing benefit right it. will as of Could we right that it and could business? – model,

Keith Housum

up it. Got is for Cisco XX%. that know the And I quarter,

for I business? a business without for on-prem has us Can on-prem you it and the for how now been is your XX%, think context us? you’re years. you Give about of the scope on-prem challenged said business business few big overall kind

Steve Jones

modern our tail that space continues long it it’s there of to have than it’s where still probably users, less still com remain end and decline business of about kind for and as is. replacements on-prem on we’re fairly going you’ll the total Keith, XX% Yes, space. and to it’s at It’s going just where small, out. that go you’ll on-prem a set tail In remain have to

so high us, it’s definitely not is is headwind margin for for we like a But business So – it. us. growth it it

Keith Housum

X.X% your that there’s Intelisys color. adjusted that your guidance a being going about And out going four puts think we near-term guidance and your then of to going of more range? EBITDA appreciate the do be on are Should and appreciate years. businesses EBITDA I that climb the margin you contributor kind X.X%, to guess, offsets takes I of I that keep at I as look we forward. going think the of think expect And agency to I margins to to that X.X%, adjusted or three

Steve Jones

Yes.

margins more competition The as now we X.X%. big everybody’s not think say in we’d enough, it like a in way frame trying we more did will secret the to now compress least and at I space that bit to compete. is that it’s space see

want number. So beat to we do that

Keith Housum

question then Got me. final And for Okay. it.

unusual For only, related that expect saw items, was to million do the one-time or that this guess forward? we marketing the the that $X you for quarter going continue a I

Steve Jones

great compensation. we think quarter one-time We of behind certainly for had are and we performance both No, marketing our unique those it. on just of when a are such that were to some a The year. we really saw the – accruing we then event is about

Keith Housum

All I appreciate right, Thank Steve. it. you.

Operator

our Please Thank next for by stand you. question.

Our Mike comes the line Latimore Capital next from question of with Northland Markets.

is line open. Your

Mike Latimore

the there on Congrats Yes. outlook. quarter you. and Thank

year gave growth quarterly CCaaS rates, are UCaaS those growth to you growth or So were rates clarify rates? – just wanted those was and that

John Eldh

were is Thanks quarterly. Those for Mike. John Eldh. Hey, This your question.

Mike Latimore

then And just a also good. Very clarification. Okay.

for user end that year the for right? Intelisys was though, So that billings that and was

Steve Jones

$X.XX Yes. billing end user Intelisys That’s the correct, business. Mike. for billion are annual

Mike Latimore

did Got And it it. XX% you Intelisys was margin? – had say EBITDA

Steve Jones

Yes.

EBITDA XX% Just margin. of north

Mike Latimore

Very good. Okay.

On CCaaS in like any business you seen for sales July, sales the anything cycles, say that? kind feeling August UCaaS and of changes cycles? June, there Have any general

Mike Baur

in we’re looking and – to – growth we the timing see cycle been not quarter. last in about not did same. you the we said Mike, continuing as pretty difference sales we as It’s over did much see much them said, excited the to, the XXXX. rates And forward

Mike Latimore

you supply last just Great. one supply whether And any as the to months? XX I is loosen feel your guess, the kind particularly during chain, next relates on then going it communications have chain this up to business, for do of

Mike Baur

to better just supply comes but chain chain, seeing slightly it are slight. When environment, we supply the

to lead over too probably not we been we’ve from going year-and-a-half mid-XXXX. We’re the last far that think off year; and times are be where longer through

Mike Latimore

Okay, great. Thank you.

Mike Baur

Mike. Thanks

Steve Jones

Thanks Mike.

Operator

for by stand Please you. question. Thank our next

Matt Sheerin line Our next Stifel. question from of the with comes

Your line is open.

Matt Sheerin

Good thanks. Yes, afternoon.

imagine backlog your at what’s VAR that constraints. the of the of are half your very seeing next wanted I months? strong growth least outlook. still Just because supply follow-up those year partners that Is the of in your confidence partners question regarding strong giving six for on you at and through last chain first to least terms the or

Mike Baur

Matt. its your part the Yes, and of Thanks – equation. its the for part absolutely question, of

by our our good and deals key most helps taking number like inventory for us share; team. or execution enterprise because strong with prioritize that all in have had projects, – we As fortune been we part we’ve instances we’ve they most our larger being been the requirements. with about, two number we’ve doing talked suppliers, of one the And of it

Matt Sheerin

incremental a $XX have, had million happen pull-ins. thing in you that Okay. mentioned businesses? And you this some quarter. I quarter due that upside of in to any And some, think strong you last revenue saw you Did same your

Mike Baur

$XX. probably quarter last some had $XX but from forward did quite memory strong pull have again, closer good yes as business as pull-in some to we Yes, million, and we wasn’t

Matt Sheerin

Okay, margin than outlook revenue lower great. year, relatively implies slower, modestly next And slower or in your terms EBITDA EBITDA growth which implies for of margin.

to higher that reasons? reasons and or business mix the the or another OpEx in of the terms due other hardware One else that anything issue of the, is for volume

Steve Jones

the of it this XX XXXX, really benefit we Yes. supplier had Steve throughout is price increases. Yes, points we that for reflects Hi, for question. the, for the had that multiple Matt. FY this Jones. basis year fact Thanks some saw. We the

So FY that’s really adjustment forecast. that the for we’re making XXXX

Matt Sheerin

it. Got

Okay. Thank you.

Operator

to will further I turn like call [Operator in you. questions I’m Instructions] over no the back now closing Jones queue. showing to Thank for Steve remarks. the

Steve Jones

for on us. conference Xth. to like September joining next results XX, we’d call to Well, discuss November our you to we hold And the expect all thank Tuesday, quarterly

Operator

this for Ladies Thank your gentlemen, participation. you concludes today’s conference and call.

You wonderful day. a may now disconnect. Everyone have

ScanSource (SCSC) 24 Aug 222022 Q4 Earnings call transcript