ScanSource Q2 Earnings Call Highlights

Core Insights - ScanSource reported net sales growth of 3% year-over-year and gross profit growth of 1% year-over-year across both operating segments, but profitability was negatively impacted by unexpected expenses [6][2][3] Financial Performance - In the Specialty Technology Solutions segment, net sales increased 3% year-over-year and 4% sequentially, while gross profits rose 1% year-over-year, with gross profit margins reduced by about 30 basis points due to higher period expenses [1][6] - The company generated strong free cash flow and organic net sales growth in both segments, but profitability declined compared to a strong first quarter due to unexpected expenses [2][3] - For the fiscal year 2026, the updated guidance includes revenue projections of $3.0 billion to $3.1 billion, adjusted EBITDA of $140 million to $150 million, and free cash flow of at least $80 million [6][18] Segment Performance - In the Intelisys and Advisory segment, net sales also increased 3% year-over-year, with annual net billings rising to approximately $2.85 billion and a segment adjusted EBITDA margin of 41% [8][9] - The Specialty Technology Solutions segment's adjusted EBITDA margin was reported at 2.8%, with higher period expenses estimated to have reduced this margin by roughly 60 basis points [7][6] Strategic Initiatives - A new converged communication sales team was launched to unify hardware and cloud offerings, aimed at enhancing sales capabilities and reducing handoffs between teams [11][12] - The company is focusing on increasing gross profit from recurring streams and expanding profitability while evaluating acquisition opportunities to enhance its technology stack [15][14] Balance Sheet and Capital Allocation - ScanSource ended the quarter with approximately $83 million in cash and a net debt leverage ratio of roughly zero, alongside $18 million in share repurchases during the quarter [4][14] - The company has a remaining authorization of $179 million for share repurchases and has closed on a new five-year credit facility to support strategic objectives [14][15]