ScanSource, Inc. (NASDAQ:SCSC) Q2 2024 Earnings Call Transcript February 6, 2024 10:30 AM ET

Company Participants

Mary Gentry - SVP, Treasurer & IR

Mike Baur - Chair and CEO

Steve Jones - CFO

Conference Call Participants

Greg Burns - Sidoti

Mike Latimore - Northland Capital

Adam Tindle - Raymond James

Operator

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.

Mary Gentry

Good morning, and thank you for joining us. Joining me on the call today are Mike Baur, 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 webcast 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 30, 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 8-K.

I'll now turn the call over to Mike.

Mike Baur

Thanks, Mary, and thanks, everyone, for joining us today. As we entered fiscal year 2024, we identified strong free cash flow and focus on Intelisys as keys for our success. For our second quarter, we achieved this aim with free cash flow of $61 million and Intelisys 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 Intelisys Technology Services business grew 7.5% and drove our recurring revenue growth. Q2 end user billings increased 10% year-over-year and exceed $2.6 billion annualized. This includes billings growth in Contact Center as a Service CCaaS of 24% and UCaaS 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'd for Growth educational events, we held the first one last week featuring AI and Communication Platform as a Service CPaaS opportunities.