ScanSource(US:SCSC)2020-05-14 01:56Financial Data and Key Metrics Changes - Consolidated net sales for Q3 totaled $872 million, down 2% year-over-year and up 0.5% on an organic basis [21] - EPS was below forecasted range due to a $4.5 million expense for inventory charges, negatively impacting EPS by approximately $0.11 [18] - Non-GAAP gross profit margin for Q3 was 11.4%, below the expected 12% gross margin [23] Business Line Data and Key Metrics Changes - Net sales for the Worldwide Barcode, Networking and Security segment declined 2% year-over-year [21] - Worldwide Communications & Services segment net sales declined 3% year-over-year but were up 3% on an organic basis, driven by growth in Brazil [22] - Intelisys had a record quarter with sales increasing 12% year-over-year [23] Market Data and Key Metrics Changes - April net sales declined 22% year-over-year for GAAP net sales, with non-GAAP net sales down 17% year-over-year excluding foreign currency translation [28] - Brazil showed relatively better performance compared to other regions during the pandemic [49] Company Strategy and Development Direction - The company is focusing on digital capabilities and has formed a single software development group to enhance partner revenue growth and automation [10] - Plans to divest certain physical product businesses outside the U.S., Canada, and Brazil, which had net sales of $128 million for Q3 [19] - The company is adapting to the pandemic by providing partners with resources and support programs to navigate government aid [15] Management's Comments on Operating Environment and Future Outlook - Management expressed concern over the 22% decline in April sales, indicating uncertainty about future performance [33] - The company is monitoring credit quality closely and has not seen significant impacts from COVID-19 in the March quarter [37] - Management expects sales and earnings per share to be down sequentially for Q4 compared to Q3 [28] Other Important Information - The company generated strong operating cash flow of $32 million for Q3, with trailing 12-month operating cash flow at $148 million [26] - Cash and cash equivalents stood at $35 million with debt of $321 million, resulting in a net leverage ratio of approximately 2.4 times trailing 12-month adjusted EBITDA [27] Q&A Session Summary Question: Did declines in sales moderate as April progressed? - Management indicated it is still early in the quarter and remains concerned about the 22% decline [33] Question: What is the magnitude of increased costs related to safety measures? - Management noted increased costs in the March quarter but did not provide specific figures [34] Question: What steps are being taken to maintain credit quality? - Management is reaching out to customers to ensure their safety and business health, designing programs to support them [37] Question: How did the POS Portal business perform? - Management acknowledged a decline in the POS Portal business, particularly among small to medium-sized businesses [38] Question: Can you provide more color on the inventory adjustment? - Management explained that the adjustment was due to bin-level accuracy issues with the new inventory management system [39][40]