We'll go ahead and get started here. I think we're good to go. Yep, okay. Thanks everybody for joining our last and final saved the best for last slot here at the conference. Yes. Some fist pumps in the audience here. I'm Adam Tindle, and this is part of my supply chain coverage here at Raymond James. I'm very happy to have the team from ScanSource here. They've been a long time participant in the conference, and we appreciate that. Steve Jones, CFO, is gonna take us through about 15 minutes overview from a slide deck standpoint. The story has changed over the years, you know, and evolved, I should say, for the better. Looking forward to some of that evolution. Some investors may be kinda newer to the story revisiting that. Looking forward to that. Then, of course, we'll have time for questions. If you do have questions, let's keep it interactive. Just raise your hand, and we'll answer them. With that, Steve. Yeah, please. Thank you. Thanks again for the invite to the conference. We always enjoy being here in Orlando and talking to you, Adam. I'm gonna do a couple things today over my 15 minutes. I'm gonna just step back and talk a few minutes about what are we, what do we do, and then talk about our unique position and what makes us different, and then really dive into some of the transformation that we've made in terms of the financial performance of the company. When we look at ScanSource, we believe we're uniquely positioned to support our partners, both suppliers and our channel sales partners, in delivering complex core business technologies to end users. What does that mean? That's a whole lot of words, but what does it really mean? It means that we operate in a two-tier model, we work directly with technology manufacturers to then sell to resellers who then install and support end users. We do that with resellers that support all sizes of business. They support small and medium businesses all the way up to enterprise businesses. What makes us unique? A couple of things. One is we operate at a very competitive scale, but we're very specialized in the technologies that we focus on. When we look at some of the numbers, our revenues are about $3 billion a year, and we think of that as throughput. We support 25,000 different sellers, so these would be our channel partners. We represent about 500 suppliers. We have about 2,100 employees. Most of our revenue is in the United States. 92% in North America. We have a little bit that's in Brazil. We report in two operating segments based on our sales models. Just going a little bit deeper into our specialization, you know, when we think about what makes us unique and the specialization, we create a unique value for both the supplier and our channel partner for a couple of reasons. One is when you look at this deck and you look at the technologies that we focus on, these are technologies that go across verticals. It's not specific to one vertical, and I'll give a couple of examples. If you're looking at mobility and barcode technology, if you've got to track assets, you need this technology. If you're in manufacturing, if you're in warehousing, if you're in hospitals, assets are your equipment and your patients. If you look at physical security, everywhere you go today, there are cameras needing to take input for security. We all interact with point-of-sale and payment terminals. If you take cash or if you take any kind of payment, you need that technology. Any business that's in a business that's gonna need to take payment, they're operating through those technologies. If you go across networking and connectivity, this is the easiest example of technologies that we interact with every day. When you checked into this hotel, you probably presented a credit card to a payment terminal, and then when you got to your room, the first thing you did is you signed on to the internet and got into the network. Every company has network needs. Every company has connectivity needs. When you think about around cloud services, a lot of what we used to do on-prem is delivered through cloud services, and so we participate in that. From a value creation, suppliers like us because we're a variable cost to distribute, and we extend their reach beyond what they could do with a direct sales channel. Our sales customers like us, and the suppliers like us too, because we add a layer of technical knowledge that creates a real differentiator for our business model. What does that mean for shareholders? Over the years, we've been able to translate our higher margins and our focus on recurring revenue to drive a better financial performance. What you see from this chart is the progress that we've made over the years. We started in 2016 developing the capabilities to participate in more recurring revenue streams. Before that, we made great margins for distributors. We were making ten points of gross profit margin. As we started introducing those recurring revenue streams, you see what that's done to our margin profile. We went from 12%- 12.5%. Now we're over 13.5%, and that's at about a third of our gross profits coming from recurring streams. We believe we have the opportunity to drive that to 50%, and we'll be able to capture more of that margin accretion as we go. This happens in both of our segments. I talked a little bit about segments, but this happens in both of our segments, and I just wanna take a minute to discuss how that falls out. In our Specialty Technology Solutions, which has typically been our hardware segment over the years, we actually have about 12.5% now of our gross profits coming from recurring streams. You'll see that's coming from managed connectivity, from subscriptions in SaaS, and from hardware rentals. If you look at our Intelisys & Advisory, almost 100% of that revenue generated in that segment is from recurring streams, and that's comes from our agency commissions as well as, some of the SaaS subscription business that we have. Overall, we're at about a third of our GP coming from recurring revenues. We think that's a great base to launch the company's next strategic goals. With more of our profits coming from recurring revenue. This is my favorite slide, by the way. Is this it? Yeah, it's mine too. It's one of mine too. The fact that our teams have been really focused on creating this cash culture, we've been able to transform the way our business operates to be more predictable in generating free cash flow. We think it's a very important financial metric. We think it changed the valuation of our company when we were able to do this. We're really proud of it. We're really proud of the teams, and we've been able to demonstrate it now for several years that we've got this discipline. I know it was one of the questions is it a one time. Hey, it's a fair question, right? Is it a one time thing or can we continue to do it? Just to kinda cap off what makes us different, a couple of things. When you look at where ScanSource plays in the space of distribution, we have a high level of knowledge focused on a very small set of technologies that are core to every business. We also dive into a level of complexity in these transactions because a lot of the transactions are multi-supplier transactions that the end user needs. That adds complexity to a distribution or a reseller to be able to do that because they all operate in different sales models. They all operate in different order-to-cash models. We try to take the complexity and simplify it, take some of the back office aggravation that comes with dealing with that out and make it easy for our partners to really focus on what the end customer is asking, which is an outcome. They don't really care about the technology. They're looking at an outcome. From a supplier perspective, what do we deliver for a supplier? It's a couple of things. You know, we give them a flexible route to market. We have a lot of routes or different types of sales partners that other public companies don't participate in. We go from a technology advisor all the way up to a DRR in what we can support. We also give them a specialized approach to their technology, so we're going deeper with them than what they would probably get with a more broad line distributor. We're gonna be in there not only understanding their product, but also the technology in general and how the end users are consuming it. What does that mean from a growth driver perspective? We believe we're well-positioned to drive long-term growth, and I'll go through a couple of these. One of the big things that we are focused on, of course, is this recurring revenue and the expansion of what it can do for our financial profile. We also have some tailwinds across both of our segments. Because our focus is core business technologies, we automatically participate in GDP. We kinda jump in that stream as GDP grows, as businesses grow, GDP drives GDP growth. We also are boosted by some technology opportunities. In Intelisys, the adoption of cloud, AI, and security definitely gives us some technology tailwinds. In the specialty, we've been investing in our ISV group and our mobility, connectivity, services to be able to drive additional growth in that segment as well. Faster partner activation. We believe our go-to-market paths allow a supplier to participate in a broader group of players. Strategic M&A to boost our margins. You know, we're looking at capital-light acquisitions that help us channelize some MSP-like capabilities so that we can play those across the channel and allow more participation across our channel, and then tapping the broader market reach that we have with our 25,000 sellers. I thought this might be your favorite one, Adam. I'm not sure. This one may be number two for you. Yeah. May be two. With all of the free cash flow and the focus that we have, what are we doing with it? What are our plans for our free cash flow and our expanding profit margins? Well, it really comes down to the three words: disciplined capital allocation. We've demonstrated it. We believe in it. Our framework backs it up. When we look at investment back into the business, we're looking at identifying opportunities where acquisition gets us in a game faster than building it organically and/or getting into markets that we don't serve today. This may be with sellers that we're not servicing today. This may be with technologies that we're not servicing today. We think there's opportunity to do both. This isn't an or. We think there's opportunity to do both acquisitions that help us on our 3-year goals as well as doing share repurchases. That balance, in our framework, we think serves our investors well. Talking about those 3-year goals, I'll end my conversation with that. Let's take a little closer look. When we talk about growth, our business has transformed from a top-line growth business as a good metric for our progress to more of our gross profits, and that's because of the netted down effect of these recurring revenues that are growing faster. We believe that over a 3-year period, we can grow 5%-7%, slightly above GDP, but a little bit below where IT would say that the market's going. If we're doing that, we're also looking at growing our recurring revenues to build this to 50% of our gross profits. We do that, our EBITDA margins will naturally increase because our margins will increase, and we're built to scale so that a lot of that extra GP will flow down to our adjusted EBITDA. Today, we're at just under 5%. We believe over the next 3 years we can get another turn and get that closer to 6%. We introduced this year is our free cash flow conversion metric. We believe we are now able to consistently deliver at least 80% of our free cash flow from our net income. That conversion would be $100 worth of net gross non-GAAP net income would generate $80 worth of free cash flow that we then deploy in our capital allocation framework. All this under the understanding that we still have to be disciplined in our capital allocation, we're looking at mid-teens Adjusted ROIC as kind of the balancing principle in delivering these three-year goals. Adam, with that, I'll turn it over to questions. Well, I think maybe that slide is a good place to start. I know those goals were altered, right? Or edited from your prior three-year goals, and I don't know if you wanted to pull the slide back up, but- Let's see. Perfect. Maybe just, you know, obviously, you know my bias on liking some of these categories on here, but if you could talk to investors, you know, here in the room and on the webcast on what changed from your prior three-year goals. You know, what are some of the new things and the discussions that went in to changing some of those metrics? Sure. Yeah, I think the first thing is on the growth. Our prior 3-year goals, we talked about revenue growth, that is probably not the best proxy of are we growing our business because most of our revenue is hardware in terms of the revenue dollars that get generated. That doesn't drive near as much gross profit growth. Changing that to a gross profit focus and thinking more of revenue as a billings almost, and thinking it on a net basis is probably a better proxy for where we're taking the company. We changed our recurring revenue target to 50% from 30% because we hit the goal, which is great. I mean, that's what you wanna do. Our EBITDA margins are really tracking up, and this is more of a function of the first two. We needed to be transparent about what we expect our EBITDA margins to drive to. The newest one would be our free cash flow conversion and that commitment of at least 80%. We're better than that today as we stand for the, for our fiscal year. That institutionalizes for our internal, for our teams, what we're focused on. We talk about these on every company meeting that we have. You know, as a fiduciary responsible party, I wanna make sure that we're doing the right things with our capital, and I think having this Adjusted ROIC as kind of the overarching equalizer helps us stay true to that. You, you mentioned obviously the two slides that I like most, the free cash flow one and then capital allocation. For those investors that might be revisiting the story, just talk about that change to cash culture. What drove that? You know, what are kinda the logistics underneath that are driving that? Was there, you know, systems or KPIs changed internally that are, you know, what are the logistics that are going into pushing that as well? Great question. Sometimes you're the beneficiary of external forces. Back during COVID and during the supply chain disruption, there wasn't inventory to go buy. You were kinda limited by the suppliers on what you could get. Well, before, we would be buying inventory to get extra margin, or we would deploy our working capital to gain extra margin and try to do it that way. When there's no inventory, you kinda get a religion of, "Well, that's not gonna work for us." During that period of time, what we really worked with our suppliers is, "What really matters to you?" It's not how much inventory I have on the shelf, it's how many times I can first time fill the order to the end user. That's what we changed our metrics to. We're still earning, you know, earning our programs, but we're doing it in a more healthy way, both for us and for the supplier. That just helped us really evaluate our business model. On top of that, we were seeing a lot of free cash flow come in and then go right back out with the recurring revenues, and we felt like that wasn't being fair to our shareholders of what we were doing with it. Getting that discipline on the hardware side and then looking at how we deploy the cash that's natural on the other on our other segment was really kind of the catalyst that changed it for us. We got a lot of support from our board, by the way. I would imagine so. On capital allocation, obviously this slide appears to be kind of a pie chart that's about 50/50. I'm not sure how intentional that was or if you're contemplating maybe putting a stake in the ground in terms of, you know, kind of a locked-in guaranteed shareholder return. Is that, would that make sense to you guys? Well, I think from a capital allocation perspective, you know, we've not done a lot of large acquisitions. They've been more bite-sized acquisitions, and we've really been trying to target those that can enhance our capabilities. When we think about the capital allocation, I would tell you, instead of us making a bold statement, it's like, look what we're doing. If you look at the first half of the year, I think we generated $50 million worth of free cash flow, and we bought back $40 million worth of shares. We're not shy to buy back shares. We think it's a good use of our capital, but we also wanna maintain that flexibility. If somethi ng comes at the right time and is the right opportunity for us to hit those 3-year goals, we'd wanna be able to do it. Any questions in the audience? Just so I understand where you said, Are your suppliers manufacturers? Is it a two-step distribution model where you're buying from distributors? They're mostly manufacturers and/or digital manufacturers. Think of it as Microsoft, they're not actually producing a widget, but they're producing a service. Thank you. In terms of the go-to-market motion, you know, in distribution, you've got kinda this two-tier motion. Right you know, where it goes, from a vendor to a distributor and then to a reseller then to the end customer, right? I think that's the distinction that you were looking for. Yeah. There's an exception to that in your business with Intelisys. I don't know if you. We acquired Resourcive, which was one of our customers, which we typically wouldn't do just because of the channel conflict. We really wanted to understand better what's going on with end user decision-making, and that was the best way for us to get live data, is to go do that. We did it in a non-threatening way. We were very transparent with our customers of what we were doing and why we were doing it. As we develop what we know, and we develop that those tools around that, we're sharing that with our partners. We think that's important because us growing a small acquisition versus the entire channel growing, the return's much better on the second one. Just curious if we could get in your head a little bit just to know what you're thinking on memory cost 'cause some of the products that you distribute, you know, whether it's sort of some of the image on the walls or for scanners, you have memory content. Are you seeing any despeccing from customers yet? No. the question was. around impacts to memory cost and what that does to our business. As a distributor, we pass on whatever cost happens. We're a little bit insulated from that. Where it impacts our business is on demand. If there's any uncertainty, I would say it's on the demand side that that generates of, Sometimes it can go both ways, right? Do I pull it in early because I know it's coming, or do I delay it because I'm not sure that this is the right ROI at the time? As far as direct impacts from orders, we haven't seen anything like that yet. There's kind of an investor fear as well, you know, on ScanSource, CWD, a lot of these channel companies that because memory costs are rising so much, maybe the vendors will come to the channel and try to claw back margin. I think the one that was most vocal about this was Cisco on their earnings call, talked about contractual changes to channel partner programs in their script. I've gotten a lot of questions on that. Just would love your perspective, obviously not getting into specific vendors, but... Yeah ... you know, perspective on, the potential for vendors to come and take margin from the channel to offset cost. I think we're in a great position for that because we don't carry a lot of inventory, and that's really where they would claw it back, is you bought it low, you've got an arbitrage opportunity, and so they want some of that back. The fact that we have lower inventory levels insulates it from that. We haven't seen that from our suppliers yet happen. What we have seen happen is, with the uncertainty, they're expiring special bids earlier. It's putting pressure on either take the special bid pricing now, it's not gonna carry over for 90 days, and so they're not renewing those special bids. That puts a little bit of pressure on our sales partners because that's different than what's happened in the past. Right. The idea of, you know, front-end or back-end rebates compressing or going away or, you know, something like that. Haven't really seen that. Haven't really experienced that. Because our inventories turn and our inventory level's low, we would be, even if that did happen, it probably wouldn't be material for us. Yeah. I didn't wanna lead you with that question, but we just had Insight here yesterday and, you know, big reseller, they're saying the same thing. Yeah. Seems like investors are very convinced that this is happening, and you guys are boots on the ground, not. Yeah. seeing any of this. What that would do is it would make you not want to take inventory, which is counterintuitive to what they need 'cause they really need you to be able to fulfill first time. If we were to rewind the clock back to the last supply chain disruption, I guess, 20, 2022 timeframe or whatever, it was actually generally a tailwind. That's right. ... for a lot of distributors at the time. Yeah. We were benefiting from that. Part of that was because when we were in supply chain, the supply chain disruption, we made the conscientious effort to go out and get a lot of product on order. At one point, we had more than $1 billion on order. We had almost $900 million worth of inventory because we wanted to be the place that you could get it versus the place that said no. As we unwound that and the price actions were taking place, we did get some tailwind benefit for that. You know, as you do this more and more times, suppliers, they get wiser about how to manage through these things. Won't surprise me that they're better at it than they were back during the 2022, 2023 disruptions, but we're not seeing pressure from them at this point. Other questions? added to this premise, I just thought it was for a long, long time. When it comes to distributors and when you're buying back stock relative to your book value, it's pretty creative. I'm just curious how you guys think about how aggressive you are for your share price in relative to your book value? Yeah, I mean, that's something that the board's always looking at is what's the right allocation of it. I'm gonna say this. If you look at what we did in the first half of the year, I think that's a reaction to where our book value, where our stock was trading versus our book value. If you're gonna earn a mid-teens ROIC and you're trading your book value, it's a complete no-brainer. It's an easy decision. you have to do that. That's right. That's right. Can you talk to opportunities in terms of deploying AI that are on customer service side or inventory management? What are you doing on that front? Yeah. Internally for us, we're looking at opportunities to deploy AI as a cost opportunity. That's kind of the low-hanging fruit. We're really trying to figure out how can we deploy AI to drive revenue, to close deals faster. That's where our focus is. From a supplier perspective, the ones that are commercially viable today are where suppliers are embedding AI capabilities in their products. Take UCaaS, CCaaS, any of the CX products today. They already had it. People had been exposed to it in their products. They're enhancing it, now they're creating more value out of it. That's a real tangible one that we see. We're looking around the technology, the technologies and the verticals that we support to see if there are new AI vendors out there that would be interesting and would be right for the channel, and there are some. I would say as many that we look at, we probably disqualify at that many. It's there's a lot of startups and a lot of activity around, but it's really hard to, at this point, see where they're commercially viable and where the channel would make sense for them. We're just about out of time. I guess, in the last couple minutes, what's the key message that you'd like to leave with investors here in the room and on the webcast as they think about ScanSource? Well, I think it's two things. I think one is we're in a very unique position with our business model, that we're very specialized. We rely on core business technologies as kind of the base engine for our growth. Our financials are very different than they were five years ago. Our business is operating at a very efficient level when you look at what GP we delivered and what EBITDA we can extract from that GP growth, as well as the cash flows. Very different than what we did five years ago. I think sometimes we suffer from the same name being 32 years old, and we had a great reputation as a hardware distributor. It's a very different business model than it was even five years ago. We'll leave it there. Steve, thanks so much. Yeah. Thank you.