ScanSource, Inc.

Welcome to the ScanSource quarterly earnings conference call. All lines have been placed in a listen-only mode until the question and answer session. 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. Ma'am, you may begin.

Good morning and thank you for joining us. Joining me on the call today are Mike Bauer, our chair and CEO, and Steve Jones, our chief financial officer. We will review our operating results for the quarter and then take your questions. We posted an earnings infographic that accompanies our comments and webcasts in the investor relations section of our website. As you know, certain statements in our press release infographic and on this call are forward-looking statements. and subject to risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties include the factors identified in our earnings release and in our Form 10-K for the year ended June 30th, 2023. Forward-looking statements represent our views only as of today, and ScanSource disclaims any duty to update these statements except as required by law. During our call, we will discuss both GAAP and non-GAAP results and have provided reconciliations on our website and in our form 8K. I'll now turn the call over to Mike.

Thanks, Mary, and thanks, everyone, for joining us today. As we entered fiscal year 2024, we identified strong free cash flow and focus on Intellisys as keys for our success. For our second quarter, we achieved this aim with free cash flow of $61 million and Intellisys growth of 7.5%. Our business fundamentals remain strong. However, we were disappointed at our lower than expected net sales for our hardware business. As it turns out, we were too optimistic in a changing demand environment. Second quarter net sales declined 13%, reflecting lower demand from our portfolio of technologies. Net sales for our Intellisys technology services business grew 7.5% and drove our recurring revenue growth. end-user billings increase 10% year-over-year and exceed $2.6 billion annualized. This includes Billings Growth and Contact Center as a Service, CCAS, of 24%, and UCAS of 18%. As long-standing channel advocates and thought leaders, we meet our partners where they are and help them grow their business. A recent example is our series of AMP for Growth educational events We held the first one last week featuring AI and communication platform as a service, CPaaS, opportunities. During Q2, barcode, mobility, point of sale, security, and communications hardware sales declined more than we expected. As we have discussed in previous quarters, strong growth continued from our Cisco portfolio of products and services and our networking products. Our hardware technologies are at different stages of their demand cycles. During the supply chain crisis over the last couple of years, we experienced broad-based demand across our technologies. We used our strong balance sheet to minimize inventory shortages while enabling our customers to meet stronger than normal demand. End users purchased inventory ahead of their needs, and they are taking time to deploy these products. In this environment, forecasting demand is very challenging. And as a reminder at ScanSource, we work with no backlogs and no bookings. For the quarter, our adjusted EBITDA and improved working capital efficiency generated another strong quarter of free cash flow. I'll now turn the call over to Steve to take you through our financial results for the quarter and our outlook for fiscal year 2024.