ScanSource(US:SCSC)2022-11-12 17:57Financial Data and Key Metrics Changes - The company reported net sales of $944 million for Q1, representing a 10% year-over-year increase and record profitability [21] - Non-GAAP diluted EPS reached $1.07, an 8% increase year-over-year, with adjusted EBITDA of $45.3 million, marking a 9% growth [21][25] - Gross profits grew 12% year-over-year to $113 million, with a gross profit margin of 12% [23] Business Line Data and Key Metrics Changes - Specialty Technology Solutions segment saw a 15% year-over-year sales growth, driven by strong demand for hardware technologies [15] - Modern Communications & Cloud segment achieved 3% net sales growth, with Cisco net sales growing nearly 50% year-over-year [16] - Intelisys net revenue increased 7% year-over-year, with double-digit net commission growth expected for the full year [22] Market Data and Key Metrics Changes - The company experienced strong demand from VARs servicing large enterprise customers, particularly in technologies enabling remote work [13] - In Brazil, the company achieved operational excellence and self-funded growth, receiving recognition from the government for compliance [18][19] Company Strategy and Development Direction - The company is focused on hybrid distribution, leveraging relationships with partners to drive growth in both device and digital solutions [12] - The hybrid strategy has enabled the company to build a recurring revenue stream, now accounting for approximately 24% of gross profits [7][23] - The company aims to maintain double-digit year-over-year net sales growth for Intelisys, driven by strong partner relationships [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory of sustainable, profitable growth, despite ongoing supply chain challenges [19] - The company reaffirmed its full-year 2023 outlook of at least 5.5% year-over-year net sales growth and at least $174 million for adjusted EBITDA [33][34] Other Important Information - The company amended its credit facility for $500 million, providing financial flexibility to support growth opportunities [32] - The company utilized operating cash of $48 million for the quarter, with a significant increase in accounts receivable and inventory levels [27][30] Q&A Session Summary Question: Insights on net sales growth in Modern Communications - Management noted a 26% year-over-year decrease in on-prem communications, primarily due to three suppliers [38] Question: Gross profit decline explanation - The decline was attributed to a mix issue, with Cisco's lower margin impacting overall gross profit growth [41] Question: Demand trends in Technology segment - Demand is driven by automation, worker productivity, mobility, and physical security, continuing from pandemic-related needs [42] Question: Visibility for the next quarter in barcode and mobility - Management expressed excitement about strong demand and inventory flows, supported by enthusiasm from partners at a recent conference [45] Question: Sustainability of Cisco growth - Management believes the growth in the Modern Communications segment is sustainable, supported by strong relationships and new partner acquisitions [48][49]