Okay, we'll go ahead and get started. Good morning, everybody. Thanks for joining us today. My name is Adam Tindle, and this is part of my supply chain coverage here at Raymond James. Very happy to have Steve Jones, CFO from ScanSource. There's been a lot of evolution at the company over the years. Steve's gonna take us through that in slide format, but of course, would love to keep it as interactive as possible. If you do have questions, please raise your hand as we go. Yeah. With that, Steve? Yeah, thank you. Good morning. Thanks, Adam, for that nice introduction. Really today, I want to cover two things. I want to really talk about what we do at ScanSource. I think it's important to maybe step back and understand what we do, how we create value, how we differentiate. And then the other thing I want to talk about this morning is where are we going? Because I think that's the trajectory of where we're going is as important as where we've been. So let's just jump in. Again, please be interactive. If you've got questions, if I'm going too fast or too slow, I'll know if I'm going too slow because people will start nodding off, but if I'm going too fast, just let me know. Let's talk a little bit about our history. So those of you may not know that ScanSource is over 30 years old. We've been a public company for 28 years, which is crazy to think about in this world that we live in today, but we see ourselves as a transformed company. Now, what does that mean? That's a lot of good words, but what does it really mean? What we're talking about is our history has been in hardware distribution, and it's been nichey, so we've, we've concentrated in certain technologies, but it's all been around hardware. But starting in about 2016, we started to see the shift in end user preferences, wanting to buy software first, wanting to buy solutions first, and then wrapping the hardware around it. So we built capabilities around a distribution, a channel, structure, that can go activate those, those solutions, if you will, or those tech stacks, in the, in the ecosystem. So by doing that, we've been able to expand our technology offering into the digital world. We've also, in 2016, acquired Intelisys, and that was an entirely new route to market for the company, and it's been a great acquisition for us, as a lot of our recurring revenue, or a lot of our recurring revenue gross profit, is coming from that acquisition. It was the largest TSD, technology service distributor, in the industry at the time, and still is, and we're very proud of it. It allowed us to start rapidly growing our recurring revenues and our partners' recurring revenues, which we think is important for a healthy channel and a healthy ecosystem. We're still specialized. You know, when we talk about what we do and how we differentiate, we're not broadline, and we don't want to be broadline because we think with any type of complexity, there comes margin opportunity, and so that's where we want to keep focusing, and it comes really with our history. We've been able to historically generate higher margins than typical distribution. It's also allowing us to expand our margins. So all this sounds great, but where's the proof? So when we look at—let me get my slide going here. When we look at a couple of our key metrics, our key financial metrics, it's really a transformed business model is what we get out of it. We'll look at three things. First, our recurring revenues. So while not a big portion of our top-line revenue, we're a $3.5 billion company on the top line, our recurring revenues have been able to grow 18% on a CAGR and now are a little over $100 million. That translates almost 100% into gross profit, and that's really where we're looking, is how are we transforming the business from a gross profit perspective? We're able to expand our gross profit margins by over 200 basis points in that period of time, and that's translating because it's a lighter working capital business, it's translating into a higher return on invested capital. So we think those three things are good demonstrations of how our business model has changed and how it's become more valuable, as a point as we exit this period. So what do we do? This is. I get this question a lot. "What the heck does distribution do? How do you guys create value?" Because at the simplest thing, you think, well, it's in and out, right? You take products in, you break them down, you ship them out. How do you guys create any margin, and particularly, how do you create 12 points of margin by doing that? We look at it in two ways. We're looking at it from an ecosystem of suppliers and our customers, and our customers aren't necessarily the end users. They're actually selling to end users. They're value-added resellers, or they're sitting in the middle of the channel as well. From a technology supplier perspective, we've got over 500 on our line card, and we're usually the number one or number two channel partner with them. We want to go deep with our partners, and get a lot of their wallet share as they come through. What do we do for them? Well, I was on that supplier side for a while, and the first thing that we do for them is we allow them to expand their reach at a variable cost model. They don't have to generate and provide SG&A, a lot of SG&A, to attract these more than 30,000 sales partners. We also give them multiple routes to market, which would be expensive for them to develop in-house. We lower their customer acquisition costs, and if you follow software companies, that's always a big thing: how do they get to the Rule of 40? How do they get their customer acquisition cost in line? And this is really focused, again, on that new emerging digital space when we talk to our suppliers. How do we attract more suppliers into our channel who may not be very mature in using the channel? We want to recruit and train new customers. We think this is really important. The more customers that we can bring to the suppliers, the more valuable we think we are. And then we, of course, manage the channel credit. We're still in that hardware business where we utilize working capital and break down and give terms and break down the manufacturer's efficient manufacturing process, you know, into more of a delivery. From the customer side, this is where we really lean in. So the first thing we're doing is we're enabling our customers to sell the way their end customers want to purchase. A lot of them would have to set up because they're smaller; they would have to set up a lot of in-house structure to be able to sell recurring revenue, for example, and we're helping them do that. We think they're going to be healthier if they're also building a recurring revenue business along with us. We do a lot of pre-sales engineering support for them. So we, we like to say we meet our customers where they are. So they may be very large of ours and have their own engineering staff. That's great, then you don't need what we're doing, you can use this in a, in a more light way. But if you don't have that, then we're here to help. We're here to help configure and help you sort through all the choices, because what you'll see in the next couple of slides is there's a lot of choices, even with the, the small set of technologies that we focus on. But ultimately, what we're thinking about is: how do we orchestrate getting the technology stack from the various suppliers into the end users very efficiently? So that's, that's kind of how we, how we think of the business. Now, going a little bit deeper, the way we organize our business is in two segments. We've got our specialty technology solution segment, and segment's really three technologies or three sets of technologies. Think of it more as the hardware side of the house. So here we've got mobility and bar coding, and the two biggest suppliers there would be Zebra and Honeywell. And that's the, you know, they're probably well out as number one and number two in that space. So let me tell you what that is, because I talk about this to my family, and they're like, "I don't know what that is." So barcode, so anytime you see somebody capturing data with a scanner, that's a barcode technology. When the Amazon guy comes to your house, and it looks like he's on his cell phone, and he's taking a picture of your product, that's actually a mobile computer. That's a rugged mobile computer, it's not their cell phone. Who knows if maybe it is their cell phone, they're taking a picture of your house or something. But that's a mobile computing device, and all of those are connected wirelessly, if you think about it, or through their networks, if it's in a warehouse or if it's in a manufacturing facility. When we look at networking and security, that's what this place is all about. There's. I was walking around last night, you look at all the network routers, all the hardware that's in here to be able to connect all of our devices. It's got to have bandwidth. Think about the number of people that we were seeing last night at some of these events, and they're all connected, right? Maybe connected to two or three devices. And so they've got to have that capability. And then security, you can't go anywhere today that there's not a camera. And a lot of times, if you go back a few years, the cameras were wired, and they were wired to a main, kind of a main switch box, and they were monitoring it. Now, most of them are wireless, and they're monitored, maybe a third party is monitoring it for certain activities. And so that's a refresh that's happening in that space. Some of the suppliers there, of course, are going to be Axis for the cameras, Hanwha for the cameras. When we think about the networking, you've got HPE, Aruba, you've got... Let's see, who else do we have? Cisco, we've got Extreme Networks. So, so Cisco's interesting because Cisco is a big networking, but for us, they actually are over in our modern comms segment because it's a little bit of history. Because we were originally with Cisco in communications, if you think about how Cisco started. So we didn't move them back over and try to split their business, because it-- doing business with Cisco is complex, and they're big. And so, so we left it over in the modern comms space. But the point is, we've got a lot of top suppliers in that networking and security space that we support, and we think all of these are business-critical IT solutions and IT stacks that everybody has to have. So there's almost a built-in refresh cycle, there's almost a built-in demand for this. You can defer it a bit, but you can't avoid it. Then the last one is point of sale and payments, and here you've got folks like NCR, you've got Ingenico, Verifone, Elo is another example there. Think of your self-checkouts. That's probably the technology that we all touch, or when you're at the. When you were sitting here, there was a FreedomPay device as you came in, that you put your card in. Those would be the capture payment devices that we would be distributing, and we distribute them for all types of industries. We actually work with the banks to distribute those, because if you think about it, there's also a security risk in those. You don't want anybody or everybody having access to be able to distribute those. So about 50% of our gross profit comes from the hardware side of the house, the specialty technology. When we switch over to the modern communication and cloud, this is where Intelisys is, and this is where Cisco is for us. Intelisys, we'll talk about it in a bit, is a big... Almost 40% of our GP in this segment is coming from that Intelisys business. So as it's grown, it's become more and more important to our, to our profitability. Here you've got the communication and collaboration supplier. So think of the 8x8, the Five9, these kind of solutions that have really displaced some of the hard phones that and the hard phone systems that businesses used to have. Connectivity, again, when you think about the tech stack of the network, it's all great if you're gonna stay on your in-house network, but if you're going to get outside and use the internet, you got to have connectivity. That becomes a critical piece of that technology. And then cloud services, think of things like Microsoft. I mean, we all use Microsoft. Fortinet, some of the security players in the space. Because all of this, once you start disconnecting the wires and you start getting outside of your protected environment, security becomes even a bigger and bigger component of what you have to think about. And again, 50% of our gross profits now are coming through this segment, even though the revenue's not split the same way. The revenue would be more split towards the hardware side. So hopefully that helps kind of set up what we do. Going just a little bit deeper into the specialty technology solution segment, what we're trying to do is really drive sustainable, profitable growth. This is a segment of our business that's mature. It has a mid-single-digit growth rate when we look out externally at different studies, and so this becomes kind of the bread and butter of the way we build our business. So this is going to be the steady Eddies of the world, giving us a good profit margin, but and a steady growth pace. Again, here's some of the technology trends. Mobile computing devices getting into the hands of almost every worker. So if you think about how far technology is getting into the hands of even entry-level employees, because of productivity needs, because of labor shortages, those types of things are driving more and more technology into the hands of folks. When you think about the point-of-sale and payment space, security is always a big problem, so there's always an update around the security. But also, if you've gone, you know, anywhere, it's hard to find somebody to check you out, right? They want, they want you to do it yourself and bag it yourself. So they're replacing their lines, and they can get a lot more people through the lines with a smaller self-checkout unit. So there's that. And then we talked a little bit about the video IP surveillance and the technology shift that's happened there in terms of wired versus mobile. You can now have a SIM card in an IP device and put it anywhere, as long as you have solar power. So it's just amazing what you can do with those things. When we switch over and we look at the modern communication and cloud segment, this is where software sits. This is where cloud, the cloud, technology sits. So you'll see a much higher growth rate expectation in this space. We're still early days in the channel participating in this space, but this is where Intelisys sits, and 38% of our, our gross profits come from Intelisys in this space. Again, you know, one of... two of the things that we're really excited about this year and, and in our Intelisys education sessions this year, they're all about AI. And if you think about the early adopters of AI, our UCaaS and CCaaS solutions were early adopters of AI. When you call in and they start running you through kind of the, the script, if you will, and now that's getting more and more complex, and there's more players coming in to that space. So there's additional wallet share that, that our sellers can get by adopting AI solutions, maybe not from the providers themselves, but adjacent suppliers that could do that. And then I talked a little bit about the emphasis around security. The more wires you cut, the more open you are, and so you have to have more security around your, around your network. We think that's a great opportunity for our sellers, and we spend a lot of time educating them on those two things. So just diving deeper into Intelisys, it's a different business model. So if you think about why did we get into this space? It was a space we didn't know at the time. It came to us as a channel or operating set of sellers that we weren't familiar with back in 2016. And today, almost $2.6 billion worth of billings are going through our Intelisys business. Now, that's not our revenue. Our revenues come as a commission stream. So I'm going to walk through the transaction. So a seller or reseller, we call them agents, they like to be called TSDs. I mean, they like to be called a lot of stuff, nothing that I can repeat here. But they will go out and find an end user and help them. They're a trusted advisor, so they'll help them identify what solution they need. They'll book the business through Intelisys. We're kind of the channel for them. And the supplier, so if it's Five9, if it's 8x8, whoever it may be, is actually billing the end user. So they own that end user billing process. But for the life of the contract, these are multi-year contracts, those commission streams continue to come to Intelisys, and we continue to pass those on to the reseller. So these have long, long lives to them. They're very sticky because, again, all of these technologies are kind of core business technologies that, that, you know, it's not like you're flipping your internet provider every week, at home when they give you the, you know, give you 2 years for $29.99. So this is, this has been a great business for us, and one of the things that we love about it is this very last bullet point, or really it's two. First, it's the very little working capital. It's actually negative for us, which we love, and it's gives us a sustainable, forecastable free cash flow. It really starts looking like a software company in the way the economics work on it, and so we love that. So how do we differentiate in the market? Well, it really boils down to a couple of things that I've talked about. One is, we provide a lot of different routes to market. So we're looking for sellers that aren't kind of in the mainstream, if you will, of buy and sell. So this would be our agents, our VARs that are very specific to what they do, and we build on those complex niche markets. We don't want to be a broadliner. We feel like that would diminish our value and turn us more into a commodity. We'd rather be narrow with the technologies that we think are critical and deep. Ultimately, this gives us the capabilities to be this hybrid distributor for our partners, that they would have to go and pick up a lot of small players to be able to do. We're kind of their one-stop shop. We believe that this whole channel is now at a pivotal point, where the end user's preference has been shifted so much that they're looking for a total solution and not a partial solution in some of these complex, these complex technologies. When you looked at the whole list, our 500 suppliers, they all have something to offer in these, in these, in these IT environments. So choosing and finding your path to the best one can be complex. From a financial perspective, being the CFO, what does this really mean for us? Well, it means this drives a very attractive financial profile in our opinion. We see sustainable, profitable growth of... We'll talk about our longer term view of what this looks like, but we've got faster-growing recurring revenues. That will help us expand our margins. Just by the mix of that recurring revenue at a 100% gross profit margin, it will naturally mix our gross profit margins up. We believe that this will also be able to help us generate free cash flow as we focus on our working capital efficiency. Over the last couple of years, with COVID and then the supply chain disruption, things really got crazy for us, and we'll talk a little bit more about where we are. All along, we were thinking that we would be able to generate more free cash flow and more sustainable free cash flow, and then COVID hit, and our plans kind of got delayed, and we had to figure out where to get supply. And at one point, we were having to place orders out 12 months in advance. Used to be eight-week lead time, then it was 12-month lead time, and you can imagine how that really wrecks your ability to manage working capital for a while. But we wanted to make sure we didn't lose customers in the chase for product. So we probably oversteered to having more inventory and not losing a customer, not having them look someplace else and keeping that customer. Now, as we got into this year, we were able to cycle a lot of that working capital out, and we're getting to a more sustainable level. Last but not least, we think it's important to maintain a strong balance sheet with discipline capital allocation. Let's go a little bit deeper into what we talked about on our last call, which is building a cash culture at ScanSource. This is kind of the last part of our transformed business model that hasn't been able to show up because of the supply chain disruptions. We talked about this; Mike actually coined this up, that we're a cash culture at ScanSource because he wanted it ingrained in our employees that this is the way we think about the business. It's, it's not just getting revenue, it's not just getting gross profit margin, but it's how do we turn that into, into cash for to be able to grow the business and to be able to reward our shareholders? So we talked about our cash conversion cycle and, and where we are now as we exited Q2. And if you look back 12, 12 months or 4 quarters for us, we've been able to generate $186 million worth of free cash flow. And this year, we've talked about in our guidance that that's going to be at least $200 million worth of free cash flow. Now, that's unusual for us because we had to work out some working capital and, and accelerate out some working capital, but it's not unusual for the way our business model should work. We should be able to generate positive free cash flow even when we're growing at a paced level. So when we talk about a strong balance sheet with disciplined capital allocation, we're thinking of this in a couple of ways. One is, first, the baseline is make sure that we don't get overlevered. We don't want to be that company that's got the wrong inventory, that's got the wrong thing on their balance sheet, and you wind up in trouble. We're conservative that way. We're a conservative South Carolina, you know, bred company, and so that's the way we think about the base of our balance sheet management. Then it becomes two priorities. So we're generating all this cash flow. We've got plenty of dry powder. What are we gonna do with it? Well, first, it's to look at opportunities to accelerate our mid-range goals with strategic acquisitions. These would be things that help us build recurring revenue and build recurring revenue capabilities for the channel. Second is gonna be repurchasing shares. We've got $65 million remaining on our existing facility that we put in place before COVID, just so everybody kind of puts the points together, before COVID, and the whole issue that came up with supply chain. And then when we look at where we're standing today, I mean, we're sitting at a nice leverage ratio. We've got plenty of borrowing capability, we have very little debt, and we're generating free cash flow to put us in position to do both of those two priorities. So how do we grow the company? What are we, what are we looking at in terms of growth? We see five pillars of growth. First, it's growing our hybrid offering across all of our routes to market. We still have areas in our business that have not adopted the hybrid idea that we have of both digital and hardware, and so we think that's an opportunity just to educate and bring them along. Second, it's to broaden our technology portfolio. As we see opportunities for sticky business-to-business core technologies, we're always looking at that as an opportunity to expand our technology portfolio. Entering into new markets, targeting new customer needs. This goes back to not just our customer needs, but that end customer. What are they doing, and how can we address that as a channel partner? Digital expansion, this is just natural. This is where the things are going, so we've got to make sure that we're bringing the suppliers along in our channel, those digital suppliers that may have not used the channel very much before, into that arena. Then building our technology capabilities. How can we differentiate by building capabilities that are hard to match in the markets? Where's all this leading us? Our mid-range goals are really a set of 4 pillars working together. One in itself isn't very exciting, but when we think about it, we think of putting all 4 together makes a better business model long term. First, it starts with net sales, and we've talked even when we were growing at double digits, that we think the business should grow at between 5% and 7.5%. Slower for the hardware, faster for the recurring. If we're doing that, we'll generate higher EBITDA margins, it'll just naturally go up. And then always looking at, are we, are we getting the right return on our invested capital? And now we're even thinking about, how do we start communicating how that turns into free cash flow? And lastly, but not least, is how much of our recurring revenue is come as a, as a percent of our, of our total company gross profit? How can we grow that? We've put a target out there of 30%+. We think with smart acquisitions, that can be blown away, and we can set that as a, as a new target level, and really again, transform the way the business model of our company's working. So working all four of those together, we think... You know, let me, let me just have a couple of closing things here, and then we'll, we'll take questions if there's any questions. You know, what are we focused on? We're focused on expanding the value for our partners, and we see our partners as two things. Suppliers are our partners, and, and our resellers are our partners. We do this, we think. You know, when we think about the hybrid distribution and accelerating that recurring revenue, it's not just for us. We think we can offer a very high value add for the digital suppliers out there today that aren't utilizing the channel, as well as building a recurring revenue business for our customers, that we think helps them long term. A diverse ecosystem and partners of technologies. I think having going deep and having choice, but having the right choice and being able to be an advisor is important for us to be able to provide value. Our differentiated market position, we talked about the attractiveness of what we think is now a new business model that will generate and drive consistent free cash flow. And then ultimately, how do we deliver long-term, profitable growth at a paced level with the markets that we're looking at? Don't get ahead of them, stay in step with them, and that will help us drive both profitable growth and free cash flow. So with that, I'll open it up for any questions and see if Adam's got any questions. He usually does. Maybe time for one, if somebody has... That was comprehensive. Go ahead. Yeah. What is the sweet spot for generation? So we haven't come out. I would say stay tuned. As we get into next year, and we talk about our guidance for next year, it's one of our focus items, is to be able to guide to that. But you know, when I look at it, I think the first thing is, if you look at your adjusted EBITDA, and you start with that, and you tax adjust that, and then it's managing our working capital around that. Those are the two variables, and so if you were to model it, I would say take that first, and then look historically at how we've had to invest in working capital. Not COVID, go back to like, 2018, 2017. That'll give you an idea of what a healthier view looks like. Now, what we're doing internally is we're focused a lot now on increasing the sophistication of our inventory management tools and the way we're thinking about inventory management, which we think will help us unlock even more cash flow through a better working capital. You know, better working capital discipline. The thing that we are always balancing is we really don't want to lose a sale. We want to make sure that the seller knows that we've availability, we want the customer to know that there's availability there, but you don't want to have excess, and so I think we can deploy some tools to be able to do that better. I can do one more. I know it's early in the morning to throw AI out, but you mentioned your guess, and it's already, you know, you're seeing a lot of people moving to bringing in AI and Microsoft. What are you hearing from vendors in terms of what they're doing with AI and your clients? Do you see maybe an uptick in that? Well, I think our clients are still confused about how to deploy it, and what does it mean, and who's going to provide it, and who maintains it. So this is where we're going back to a lot of education. So all of our education series this year, and we've done several. We did one in Dallas, and it was webcast. The whole two days was about AI and how to deploy AI, who are the players? And what we're seeing is, it may be the providers themselves investing in AI, but it may be third parties that are coming on top of and adding value to the suppliers', you know, their solution with AI-enhanced capabilities. So it's still early days. We're still trying to educate, but we think that that's an upsell opportunity for a lot of the technologies that we're in. Because, again, they're business technologies, a lot of them are repetitive in the nature that happens, and so if you get repetitive, you know, high volume stuff, automation's the way to go. We'll have to leave it there, but we'll continue the discussion downstairs in Cordova 4. Thanks, everybody. Yeah. Thank you.