SCSC - Earnings call 2 2024 | ScanSource, Inc.

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Operator

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 morning, us. for Good

today Baur, Jones, our me Chief on and Michael call the Steve Joining Chair are CEO; Officer. Financial our and

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

forward-looking cause and statements infographic materially These and earnings results call identified Form June are the our As uncertainties differ release, on risks XX-K in in to could press you year ended statements in know, XXXX. from subject our XX, risks actual include certain to and our that and the for and this expectations. release uncertainties factors

and Forward-looking as statements ScanSource statements, update by duty required represent except these to our any views today, of disclaims law. only as

we During discuss in turn and to and have website non-GAAP Form Mike. reconciliations GAAP the X-K. results both and on I'll now our over our our provided call, call will

Mike Baur

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

we success. cash on for flow keys identified Intelisys as fiscal and our strong free year As focus XXXX, we entered

For million our of Intelisys we second with X.X%. and growth flow of this free aim cash quarter, $XX achieved

strong. fundamentals business Our remain

our were our net we hardware lower-than-expected However, business. sales at for disappointed

too As changing optimistic it we turns demand out, were a in environment.

XX%, Second our portfolio quarter demand lower declined net of sales from reflecting technologies.

This of $X.X annualized. growth. XX% and recurring Net of user sales billion for as XX%. our billings billings and Intelisys a grew Contact X.X% QX Center end revenue exceed CCaaS XX% Technology drove our growth Services UCaaS and Service business increased in year-over-year includes

Communication business. of AMP first as educational we a and CPaaS they meet we is ] for and our week our help Service Platform the series thought where [ long-standing As and example channel held last them AI their grow recent advocates featuring opportunities. are Growth X events, A leaders, partners

our sales as previous Cisco we strong growth communications than have point-of-sale, from barcode, declined and networking continued quarters, and and products. products hardware QX, services During in discussed mobility, our more portfolio security of we expected

cycles. Our hardware technologies are at demand different of their stages

over we normal ahead used During couple strong than minimize and time demand deploy ScanSource, at work these needs, shortages meet chain they forecasting inventory to years, no stronger And bookings. End last technologies. customers reminder, of We environment, purchased to balance across inventory a In sheet our the with is demand. users crisis this their taking very no while to of our supply enabling broad-based backlogs the experienced are products. demand and our as challenging. we

and I'll for another working For free through strong the cash results take generated you fiscal and XXXX. quarter financial to [ call year our of outlook Steve our improved ] the capital EBITDA to efficiency our adjusted the quarter flow. quarter, now for turn over

Stephen Jones

we Mike. softer demand expected. Thanks, was than QX

and EBITDA delivered free business our lower, cash our with were revenues expectations flow. While strong consistent margins

to margins were declined the recurring QX by grew gross continue in while year. X.X% working profit our million year-over-year, year-over-year Intelisys. XX.X% $XXX led We improve revenues prior in sales of of key capital net with metrics line XX.X% growth and

the expected, Solutions decline, XX% XX% are technologies security. of and is than in recovery saw a profit. in slower for occurring year-over-year and Specialty reported revenue mobility decline While year-over-year gross corresponding Technology our we physical decline which . These and our sooner we slowdown expected a in expected a & year-over-year revenue saw barcode than we technology segment, a

our segment, segment Growth and Gross Modern declined profits partially Communication revenues X% X% year-over-year, product mix. in communication Cloud In in lower our and Modern reflecting Cisco of Communication sales offset Cloud declined an devices. year-over-year. unfavorable

times to working progress days capital improving for as levels with and continue Accounts improve return expect. receivable both free of moving flow our cash our we on are supply revenue solid the expectation inventory reflecting delivered we to lead would chain balances and a quarter, in For Inventory $XX demand. efficiency. million with paid normal

to positive the flow deliver setting business are up We free continue business returns to growth. to cash when our

Now and flow. sheet the cash going a balance into bit deeper

are pleased are working the progress making we capital with with We investment.

inventory lowest increase to is quarters. inventory quarters. goal improvements also in turns to improved as while to capital efficiency working days, We Our maintaining gained the declined demand. meet X inventory demonstrated turns to levels and outstanding increased sales Days in appropriate X.Xx by X our XX working in the capital fastest QX customer metrics.

our to EBITDA, remains within a sheet net QX strategic debt balance at ample credit months perspective, strong. approximately ended with our From facility support we XX leverage adjusted Our existing liquidity trailing X.Xx plans.

of We have opportunities. an M&A pipeline active

we there through shareholders trailing authorization leverage our million 'XX, remainder room the to to of return while our on ample share cash EBITDA. X is maintaining believe target Xx FY However, adjusted existing XX for ratio of to months repurchases $XX

second our guidance the to and near-term headwinds of view our half of company are we updating ahead demand. reflect Looking to the expects continue, to FY current 'XX, revenue

We match Intelisys in are and to our expectations business. FY our growth redirecting and SG&A for 'XX our revenue resources by revenue managing spending recurring investing beyond

FY we $X.X which and least an of margin $XXX now EBITDA billion be believe will EBITDA For adjusted sales to reflects be least X.X%. million, 'XX, that our net at at

better X% seasonality. to is net to expect we down QX, sales quarter-over-quarter, our be than QX which For typical X%

least our $XXX maintaining improve of to at flow efficiency. we capital million are working continue as our We outlook free cash

expect fiscal expense $XX to and To $X expenses help to from for expense, million income 'XX. other the net with for range analyst interest million year interest models, we

Our discrete fiscal tax excluding from effective rate, is for the expected items, XX% to range estimated XX% year. to

turn our in the be of confident well reflects return near-term our remain now and our back guidance call for ability Mike closing Our expectation to growth. the positioned I'll to business resilience to comments. the demand of environment. over We updated for

Mike Baur

Thanks, Steve.

ScanSource. free annual first We the part included flow are culture we cash In fiscal outlook. as 'XX, of at year building time, a cash for our

of working count capital-light flow on. forecast excellent high of An Our aspiration can cash free and growth free and is revenue. to cash sustainable we flow margin fund recurring and predictable use that is

open will questions. it for We now up

Operator

[Operator Greg Instructions] with Burns comes Our question first from Sidoti.

Gregory Burns

they obviously, You mobility be a taking business. they're the and commentary points networking that we've of in seen about Cisco down been different from technologies. or but on of talked and it like point of But holding now. terms the different order dynamic where there's well, up and weakness And seem the product of similar kind talking for of side some sale other have about implementing to pace the preordered the in slowing delivery of areas, and cycle customers

due of So are you area that to dynamic? in a business seeing the that slowdown

Mike Baur

that that's grow. in business is Mike. Greg, did it's Yes, our experienced networking exactly What right. we QX

grow it been. the maybe that at didn't it rate However, had

slow quarter. So And physical good prepared still of the we our but we business, us that mentioned in anticipate surprised growth and would security definitely also we had we I our security say in signs down starting the part that QX, growth, in to saw It it remarks, pretty of that. slowed down. year-over-year, didn't

Gregory Burns

possibly seen you But you've headlines in away demand I've large I change business? seen businesses that's impactful you. kiosks. the in And Could self-checkout just some meaningful if that kind market? a don't moving there. of impacting from any dynamic if way that part something that's that know around about Okay. your that Or talk on is of

Mike Baur

talk and Yes. have actually of self-checkout during NCR retailers least we've during at self-checkout. about business Greg, partners still We years that say, did a would key We the seen -- We And -- relationship noted, in X press done very that years, frequently last COVID for growth are saw the with some installation post-COVID. stories down that the I strong last coming, and their slow X deployed as definitely that the plans. you of but with did the quarter. most some of same we

purchases. they've smaller. and an we area self-checkout they're to continue in for the smaller down new they any The the larger but is customers and that to price year. acted still have what . We seeing believe that retailers us, going than the slowed points be opportunities, are And prior were expect we're now point-of-sale, to first, so it's

Operator

from comes question next Latimore Capital. The Northland with Mike

Mike Latimore

Great. Okay.

said XX%. it believe was On the growth September it I I was think quarter. reason rate, in XX% acceleration? UCaaS billings the that Any for you

Mike Baur

in particular. it's Nothing Mike, Mike.

recently think award. We to I the an continue in did we do space. well receive

seen for XXXX services said calendar distributor have year. that press year, the were technology of RingCentral the may we You release, the

believe do part our of we within so that business, And the competitors. versus well we're very doing

have know. business see X But happens it us, could a strong be for we very Mike, key that to as be going with has in what been, just we'll candid, forward. players, Ring market so particular that UCaaS took And you of the our to and share opportunity continued space being

Mike Latimore

for to is these and about Great. as business either UCaaS or slow? accelerate And any you CCaaS think there then rates growth reason for calendar 'XX, the

Mike Baur

this partners the that empty partners. would is how CCaaS/UCaaS week of about this, I CCaaS and are are UCaaS a still They going what I a had be is to lot we event have say with last part CCaaS think talking of mean Well, about the I now, And everybody tends discussion, and part AI. the still and going discussions AI big we of with our be to is story. where talking is just questions.

at that's leverage use now maybe UCaaS in interested that think about doesn't to either make have too talking existing going so And new. a your something to or because I customers way end continue user look it, you implementation the AI

and UCaaS in a I will so us AI for And CCaaS driver be 'XX. added to demand think of

Mike Latimore

makes That sense. .

Operator

[Operator James. with Adam Instructions] comes Raymond next question The Tindle from

Adam Tindle

things maybe it wanted comments expectations. demand how January just curious seeing how on But in real-time the more quarter cadence you're obviously here progressed I'd February? versus began? ask quarter, the and on as the And be I any below went, Mike, that exited to of

Mike Baur

just budget back of this Adam, of good historically, quarter would to common. is the slowdown typically, tend far. didn't say especially the we my a that QX, at you will, it's typically, suppliers, some But reflects the is or about if guidance end that saw we've most of to we February for our I than a to a and so our will I year. long-standing happen. this, larger seen have January partners, what they It very be flush, talk definitely, want December, gave That's because comment

lots in flush. So we reasons there was but slowdown the was And in And December some we this a that, of reflective all results for budget the did that we was and end not buying the we month. see think I see had. hear could additional year didn't of the of

as than as for if better January make because And again, us careful the an a we're we company time. with technologies. of things increasing X.X guide spent about such $X,XXX last is to demand even comes backlogs much no result around in quarter difficult quarter long We we now this just years to a so our of and next in changing forecast. scenario, demand historical, And size a and we for this how want a has seen are order that that, that bookings haven't no this average more across sure and

Adam Tindle

Understandable. little give us sense, some but if resources. maybe And wondered just that. on his Steve in prepared kind goes makes that. the Mike, think have may you mentioned more the if I logistics remarks just wonder into It of about for could could strategy redirecting you share what I a bit color behind of

Mike Baur

for is people of been. the areas key X always investment us, Well, has

to And we continue that I head so area. add say in count will would

add about talked us probably like more that is our week. tells and what did hear. partners to We're For we the this calendar year, event need do going events that example, demand as we across to we'll last this AMP

of the a educating on lot Intelisys this talk and technologies, new there's year. history community a about got We've to

to independent got people, our why smart also we've our Intelisys very, trust for up because are So advice what beef to we on experts invest And this And to but very in-house for team some can add think they technologies come should that's these more. frankly, in is on key we need they also we the need partners technologies. us year.

to count thesis. the as an So in you're investment Intelisys see us head primarily add going

Adam Tindle

maybe more for X And Okay. me. just

flow investors know I it's looked you mentioned guidance cash talking year that sense. like I If is least here, I a what the at you're of million building hear think cash like $XXX at of culture, makes to probably your a it lot looks free important about. for that and

a the capital that is of I the market double If less depending maybe would But at than the that a you've a evaluate market got capital how $XXX click because yield. free . and repurchase flow, just would billion, of priorities. -- to to in the sort of million consider especially opportunity second on cash allocation could given on seem mentioned day share cap here company that really curious be valued allocation you just you repurchase? share good priorities, $X

Stephen Jones

is for Steve. question. thanks This the Adam, Yes,

authorization. As that for that our recurring in looking past, act allocation priorities that's but ample FY X we've drive the to our leverage priorities allocation. got And repurchases and we've We share through and have would our $XX remarks, capital X at talked we those be about on is 'XX about our then us would the think as help well as talked as capital allocation, we go about repurchases, terms capital of in always our of really revenue. for in current ratio and M&A balancing kind million of remaining our still our

Operator

for Steve at questions remarks. this I no to would time. Jones show to the I now like turn back call closing further

Stephen Jones

us today. for Thank joining you, thank and you

hold discuss approximately X, results a.m. XX next expect call to March Tuesday, on We XX:XX May quarterly our to conference at

Operator

conference Thank for today's you your participation. call. concludes This

now may day. great You and have a disconnect,

ScanSource (SCSC) 6 Feb 242024 Q2 Earnings call transcript