ScanSource (SCSC) 47th Annual Raymond James Institutional Investor Conference summary

Business model and specialization

• Operates a two-tier distribution model, working with technology manufacturers and resellers to deliver core business technologies across all business sizes and verticals.

• Specializes in technologies such as mobility, barcode, physical security, point-of-sale, networking, and cloud services, creating value for both suppliers and channel partners.

• Supports 25,000 sellers and 500 suppliers, with 92% of revenue from North America and a small presence in Brazil.

• Adds technical knowledge and simplifies complex, multi-supplier transactions for partners, focusing on delivering outcomes to end users.

• Offers suppliers flexible routes to market and a deeper, specialized approach compared to broad-line distributors.

Financial transformation and performance

• Shifted focus from hardware-driven revenue to recurring revenue streams, increasing gross profit margins from 12% to over 13.5%.

• About one-third of gross profits now come from recurring revenues, with a goal to reach 50% in the next three years.

• Specialty Technology Solutions segment has 12.5% of gross profits from recurring streams; Intelisys & Advisory segment is nearly 100% recurring.

• EBITDA margins are just under 5%, with a target to reach close to 6% over three years.

• Introduced a free cash flow conversion metric, aiming for at least 80% conversion from net income.

Strategic goals and capital allocation

• Updated three-year goals to focus on gross profit growth rather than top-line revenue, reflecting the impact of recurring revenues.

• Targets 5%-7% gross profit growth, recurring revenues at 50% of gross profits, and mid-teens adjusted ROIC.

• Capital allocation balances acquisitions and share repurchases, with recent buybacks reflecting stock value relative to book value.

• Pursues capital-light acquisitions to enhance MSP-like capabilities and expand market reach.

• Maintains flexibility to pursue opportunities that align with strategic goals.