ScanSource SCSC Q4 2025 Earnings Call Transcript

Image source: The Motley Fool. DATEThursday, August 21, 2025 at 10:30 a.m. ETCALL PARTICIPANTSChief Executive Officer — Mike BaurChief Financial Officer — Steve JonesNeed a quote from a Motley Fool analyst? Email [email protected]TAKEAWAYSNet Sales-- Nearly 9% year-over-year growth in net sales for Q4 FY2025, with full-year net sales (GAAP) just over $3 billion for FY2025, a year-over-year decline of 6.7%.Adjusted EBITDA-- Adjusted EBITDA grew 13% year over year in Q4 FY2025, and a 2.8% increase for the full year, reaching $144.7 million in adjusted EBITDA for FY2025.Non-GAAP Net Income-- Non-GAAP net income grew 17% year over year in Q4 FY2025, Non-GAAP net income of $85.1 million represents an increase of 9.6% for the full year fiscal 2025.Non-GAAP EPS-- Q4 FY2025 non-GAAP EPS rose 27.5% year over year to $1.02; Full-year fiscal 2025 non-GAAP EPS increased 15.9% to $3.57, benefiting from $107 million in share repurchases during FY2025.Specialty Technology Solutions Segment-- and 16% quarter over quarter for Q4 FY2025, driven by double-digit gains in mobility, barcode, physical security, and managed connectivity; $30 million–$40 million of revenue in Q4 FY2025 attributed to large deal pull-ins.Specialty Tech Gross Profit-- with a gross margin nearly flat at 10.3% for Q4 FY2025 and adjusted EBITDA margin rose 35 basis points to 3.6% for the segment in Q4 FY2025.Recurring Revenue as % of Gross Profit-- Increased to approximately 11% for Specialty Technology Solutions segment in Q4 FY2025 and 32.8% of consolidated gross profit for FY2025, compared to 27.5% in FY2024.Intellisys and Advisory Segment-- while adjusted EBITDA declined 4% due to higher SG&A investment; Annual end-user billing for Intellisys increased 4.5% year over year to $2.8 billion with double-digit year-over-year growth in CX products during FY2025.Balance Sheet-- Ended Q4 FY2025 with $126 million in cash; net debt leverage ratio at approximately zero on a trailing twelve-month adjusted EBITDA basis at the end of Q4 FY2025.Free Cash Flow-- Full-year free cash flow of $104 million, representing 122% conversion of non-GAAP net income in FY2025.Adjusted ROIC-- Adjusted ROIC for the quarter was 14.9%, Full-year adjusted ROIC was 13.6%.Share Repurchases-- Share repurchases totaled $25 million for the quarter.Acquisitions-- Resource and Advantech deals were cited as accretive to EPS and ROIC for both Q4 FY2025 and FY2025, and positively impacting recurring revenue composition; active M&A pipeline for both segments outlined.FY 2026 Guidance-- Full-year net sales are targeted at $3.1 billion–$3.13 billion for FY2026; adjusted EBITDA is projected at $150 million–$160 million for FY2026; at least $80 million in free cash flow is expected for FY2026, with management projecting revenue acceleration in the second half and low single-digit growth in the first half.Three-Year Strategic Goals-- Updated targets introduced for adjusted EBITDA margin, recurring revenue contribution, ROIC, gross profit growth, and a new free cash flow metric, explicitly replacing older midterm targets.Capital Allocation Framework-- Management reiterated commitment to balancing M&A and share repurchases, targeting net debt leverage in the 1–2x adjusted EBITDA range.SUMMARYScanSource(SCSC -5.46%) reported net sales growth nearing 9% year over year in Q4 FY2025, with profitability metrics outpacing revenue gains. The Specialty Technology Solutions segment delivered standout quarter-over-quarter (16%) and year-over-year (9%) net sales growth in Q4 FY2025, aided by substantial late-quarter large deal activity. Recurring revenue became a greater part of the gross profit mix, as recent acquisitions bolstered income quality and improved overall margins. Strategic investments increased SG&A expenses in the Intellisys segment, aiming to restore growth by prioritizing strategic partners and introducing new supplier models. Fiscal 2026 (FY2026) guidance anticipates a return to sales growth, improved adjusted EBITDA, and continued robust free cash flow as revenue accelerates in the second half of the year, underpinned by a refreshed three-year strategic plan focused on margin expansion and recurring revenue.CFO Steve Jones said, "Q4 was a strong close to our fiscal year. We delivered on our guidance for revenue, adjusted EBITDA, and free cash flow. Net sales returned to growth, and we delivered strong profitability."Company set new three-year strategic goals targeting higher adjusted EBITDA margin, growing the proportion of recurring revenue in gross profit, and monitoring gross profit growth as a primary business-growth metric.CEO Mike Baur noted, "We see hardware, plus software, plus services convergence as the future of technology distribution. This is the vision for our strategic plan and the new three-year strategic goals"Management indicated an active M&A pipeline, and expects further acquisitions to accelerate the shift toward recurring revenue, aided by small but impactful deals.Brazil operations remain profitable and demonstrate a successful recurring revenue business model that U.S. operations are targeting, though FX headwinds and macroeconomic issues persist.There is ongoing macroeconomic uncertainty impacting deal timing and volume.INDUSTRY GLOSSARYSG&A: Selling, General, and Administrative expenses; includes all non-production operating costs such as salaries, commissions, marketing, and overhead.Recurring Revenue: Revenue from sources expected to be consistent and repeat over time, such as subscriptions, maintenance contracts, or managed services.Converged Solution: An offering that integrates hardware, software, and services into a unified solution for end customers.UCaaS: Unified Communications as a Service—cloud-based delivery of communications services such as voice, messaging, and video.CCaaS: Contact Center as a Service—cloud-based customer interaction solutions generally focused on call centers and customer service operations.CX: Customer Experience—solutions focused on optimizing interactions with end users, including UCaaS, CCaaS, and AI-enabled offerings.ROIC: Return on Invested Capital; a key measure of capital efficiency and value creation.Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for items such as stock-based compensation, restructuring, or acquisition costs.Gross Profit Margin: Gross profit as a percentage of revenue, measuring the profitability of core business operations before accounting for SG&A and other indirect costs.Free Cash Flow Conversion: Ratio of free cash flow to net income, reflecting how effectively accounting earnings convert into available cash.Full Conference Call TranscriptMike Baur: Thank you, Mary, and thanks to everyone for joining us today. We are excited about the growth opportunities ahead for our channel partners and the expanding role of technology distribution. The convergence of IT, connectivity, and cloud computing is propelling a shift toward converged solutions that are redefining success in technology distribution. We are the leading technology distributor uniquely positioned to build cutting-edge skills, capabilities, and expertise to excel in a connected cloud-driven world. We believe end users face increasing complexity when making technology investment decisions. Because of this complexity, end users are looking to the indirect channel for their technology solutions.Given the need for integration and the number of solutions, especially as advanced technologies like AI become part of the solution, our multiple sales channels are a key competitive advantage for ScanSource, Inc. With our suppliers as they seek new routes to market, our channel partners have different skills and capabilities, and for certain opportunities, they will take advantage of additional services that ScanSource, Inc. can deliver to end users on behalf of our partners. We are building capabilities that end users require and our partners demand in our converging technology ecosystem. This includes an innovative supplier portfolio, financial enablement, expert pre and post-sales engineering support, powerful tools, marketing support, and an exceptional customer experience.Last quarter, we announced the creation of LaunchPoint, a new business development team that will identify and assist emerging innovative technology growth companies as they are getting ready for channel success. The LaunchPoint team has an active pipeline of innovative suppliers and has recently signed contracts with companies offering products to enhance our smart warehouse initiative, which includes private cellular networks, robotics, drones, and additional IoT solutions. We have channel partners in both segments that have end-user demand for converging solutions that include hardware, software, and services. To illustrate with an example, we have a channel sales partner who developed a converged solution for a leading auto parts retailer that bundled wireless connectivity plans with 30,000 mobile computing devices.Our ability to support the converged solution was a differentiator, allowing the partner to win the deal and providing the end user with an improved business outcome. We see hardware, plus software, plus services convergence as the future of technology distribution. This is the vision for our strategic plan and the new three-year strategic goals that Steve will introduce in his remarks. Our goals reflect our confidence in our growth strategy to deliver complex converging solutions for our partner ecosystem that will increase our addressable market. I'll now turn the call over to Steve to take you through our financial results and outlook for fiscal year 2026.Steve Jones: Thanks, Mike. Q4 was a strong close to our fiscal year. We delivered on our guidance for revenue, adjusted EBITDA, and free cash flow. Net sales returned to growth, and we delivered strong profitability. Net sales for the quarter grew almost 9% year over year, while adjusted EBITDA grew 13% and non-GAAP net income grew 17% over last year. Our Q4 non-GAAP earnings per share of $1.02 grew 27.5% year over year. Now turning to our segments, I want to call your attention to additional information that we included in our earnings infographic on our key technologies and growth drivers. I'll start with our specialty technology solutions segment.Net sales increased 9% year over year and 16% quarter over quarter with broad-based hardware growth in North America led by double-digit growth in mobility and barcode, physical security, and managed connectivity. We also benefited from some large deals that were pulled in late in the quarter. We estimate the pull-ins contributed $30 million to $40 million of revenue in Q4. Gross profit followed revenues growing 8% year over year, reflecting a higher mix of hardware for the quarter. For the segment, the percent of gross profits from recurring revenues totaled approximately 11%. Segment gross profit margin was similar to last year at 10.3%, while the segment adjusted EBITDA margin was up 35 basis points to 3.6%.In our Intellisys and Advisory segment, net sales and gross profits increased 1% year over year, including the positive contribution from our Resource of acquisition. While adjusted EBITDA for the segment declined 4% due to increasing investments in SG&A to drive future billings growth and expand our technical capabilities in emerging technologies like AI. Annual end-user billing for Intellisys increased 4.5% year over year to bring annualized net billings to approximately $2.8 billion, including double-digit growth year over year in CX, which includes UCaaS, CCaaS, and AI-enabled CX solutions. This segment operates in a very competitive landscape as sales models and partner needs evolve.We believe that we have a unique competitive position with the combined capabilities from our businesses in both segments, as we enable the channel model of the future. As we look back on our full-year results, we delivered strong profit growth while facing tough market conditions. Full-year net sales totaled just over $3 billion, a year-over-year decline of 6.7%. While gross profits of $408.6 million and adjusted EBITDA of $144.7 million grew by 2.4% and 2.8%, respectively. Gross profit margins increased 120 basis points year over year to 13.4%, and adjusted EBITDA margins increased 45 basis points to 4.76%. For the year, recurring revenues represented 32.8% of our consolidated gross profits compared to 27.5% last year.The higher contributions and concentration in the is the primary driver of our improved margins. Non-GAAP net income of $85.1 million is an increase of 9.6% over last year, and full-year free cash flow of $104 million represents a 122% conversion of our non-GAAP net income. Non-GAAP EPS of $3.57 increased by 15.9% year over year, including the benefit of share repurchases, which totaled $107 million. Going a bit deeper on our balance sheet and cash flow, we ended Q4 with $126 million in cash, and a net debt leverage ratio at approximately zero on a trailing twelve-month adjusted EBITDA basis. Adjusted ROIC for the quarter is 14.9%, and full-year adjusted ROIC is 13.6%.Our Resource of an advantage acquisitions completed last August were accretive to both EPS and ROIC for both the quarter and the full-year results. Share repurchases for the quarter totaled $25 million, and we're pleased with the contributions from our two acquisitions, what they bring to our channel capabilities and our strategic plans. We have an active pipeline of acquisition targets for both segments. These targets could expand our capabilities and help us drive additional value across our partner ecosystem while supporting our strategic goals. As we start our new fiscal year, we think about delivering on our strategic plans, we want to clarify our capital allocation framework.We'll continue to maintain our discipline in evaluating M&A opportunities and believe there's room for both acquisitions and share repurchases while maintaining a targeted net debt leverage of one to two times adjusted EBITDA. We want to provide FY '26 full-year outlook. And we believe that the full-year net sales will range between $3.1 billion and $3.13 billion. Full-year adjusted EBITDA will range between $150 million and $160 million, and we will deliver at least $80 million in free cash flow. We also believe that revenue will accelerate in the second half of our fiscal year and expect low single-digit growth for the first half as we continue to navigate the dynamic macro environment.Our adjusted EBITDA is expected to grow year over year and includes investments we believe will help us drive expanding margins. Our free cash flow expectations reflect the confidence we have in our team's ability to manage working capital while taking advantage of growth opportunities. Today, we're also introducing new three-year strategic goals. Our new goals are included in the infographic that accompanies our earnings release and our updated investor presentation posted on our website. Our new goals replace our midterm goals we initiated several years ago and successfully delivered. We updated our targets for adjusted EBITDA margin, the percent of gross profits from recurring revenue, and ROIC.We've included GP growth as a better metric to represent business growth, and we're introducing a new free cash flow metric. Our goals reflect our confidence in our strategy and the drivers we have to create long-term value for our shareholders. We'll now open it up for questions.Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, And our first question comes from the line of Adam Tindle of RJ. Your line is now open.Adam Tindle: Okay. Thanks. Good morning, and congrats on a strong finish to the year-end. I just wanted to start on the midterm targets. I noticed that free cash flow as a percent of net income was included. Steve, I wonder if you could maybe just expand a little bit on why include that metric. Obviously, I was happy to see it, but just a little bit more on the conversation on including that metric. And if we start doing some math here, you know, based on your current leverage, which is fairly minimal and in the future cash generation, we're gonna have quite a bit of cash coming in.I think you mentioned it on there, but if you could just talk a little bit more about the capital allocation priorities with that incremental cash. And then I have a follow-up. Thanks.Steve Jones: Sure, Adam. Thanks, and good morning. When we thought about the free cash flow conversion metric for our long-term outlook that we provided, we wanted to do two things. One, we wanted to build on the back of what we said before that we were building this cash culture. This, I think, really puts a stake in the ground for us in how we're thinking about the business. We also think this is a key reason why our financial position is very attractive, is to have this kind of metric and this kind of discipline in generating free cash. When we think about our capital allocation framework, we want to do two things.If you look at the combined set of targets that we have for our three-year goals, you'll see several things. One is we need to expand our GP. We also are expanding that percent of recurring revenue. That will come through acquisition and faster growth than some of these emerging technologies that we have. But we also think it's important to balance that with returning cash to shareholders when we don't have opportunities to deploy that to help us hit those goals.Adam Tindle: Okay. Got it. Yeah. I wonder if it might make sense at some point to kinda, you know, split up and do a percentage of cash flow for shareholder return or a pie chart or something like that. Is that something you guys would consider?Steve Jones: Still early in our ability to generate cash. You know, we think we've gone out here and put some pretty aggressive three-year goals out there.Adam Tindle: Okay. That's fair. And maybe, Mike, as a follow-up, obviously, as we kind of look at the segment results, the Intellisys and advisory segment has very healthy margin in total. But the adjusted EBITDA, I think you said, was down for the year. I just wonder if you might expand a little bit more on how you're thinking about that segment strategically. And on a forward basis, I think in the press release, it talked a little bit about investments expected in fiscal 2026. I wonder if maybe it's related to that segment or if you could expand on the nature of the investments that you're thinking about. Thanks.Mike Baur: Yes, sure, Adam. Good morning. We believe that the opportunity to grow the Intellisys business is substantial. And one of the things that we learned over the last couple of years as we saw the competitive pressures from some of the PE-backed companies, there was a land grab for partners and their business. And along the way, we did everything we could in our old model to retain that. And what we are learning is that we need to do some new things.And a couple of those that we've already invested in last year that really will see the payoff over time is a different partner segmentation strategy to make sure that we're providing the right mix of services for partners. We tended to treat our partners mostly based just on volume historically, and we've changed that. And under Ken's leadership, our team has added more headcount to focus on strategic partners. And a strategic partner for us going forward is a partner that can grow. In the past, we were frankly having partners that were earning a lot of resources and taking resources from our teams, but they weren't growing.And so we really are driving a new sales demand strategy around finding the places that growth is happening and putting our resources there. So we've done a significant amount of reorganization within the Intellisys team. And what we've learned is that our partners trust us. That we have this level of trust about the simple stuff for us, which is making sure that partners get paid on time and accurately. And we believe that we're still the most attractive distributor for these trusted advisers. But we're also cognizant that we have these private equity-based competitors who are still trying to do a land grab.So we're gonna use our balance sheet to better support the growth partners that we believe can drive future opportunities for us. So we're gonna invest, in some cases, our balance sheet with these partners. And we've talked about this in the past. Some of our programs, we've got some new names for them, but there's one we call a revenue accelerator program, where we'll invest alongside the partner if they are committed to making sure all of that future revenue comes to us exclusively. So those are the things that we've started in FY '25. That we'll see happen and pay off throughout the year.But we certainly saw in '25, kind of a disappointing growth year because we didn't make these investments in FY '24. So I really believe we've got the right team. We've got the right programs, and we're making the right investments because we still believe this business can grow substantially.Operator: Thank you. One moment for our next question. And our next question comes from the line of Keith Housum of North Coast Research. Your line is now open.Keith Housum: Great. Good morning, guys, and congratulations on a good quarter. And thanks for the added information and the infographic on the businesses and what makes up the different segments. Much appreciated. Just kind of piggybacking on Adam's question in terms of the Intellisys business, it looks like sequentially, you know, the revenue is down in that segment, which is a first. I understand there's some competitive challenges there. But perhaps can you talk about the expectations here as you look into '26? And how quickly you can turn that around. And is it possible to quantify how much in strategic investments you need to put forward during the year?Mike Baur: Yeah, Keith. Mike again. You know, we've been looking at this, frankly, for more than a year. We saw this, and we identified it, I think, three years ago that there was the, as we all know, there was revenue pressure because we had margin pressure from the land grab by some of the PE-backed competitors. Who are willing to make little to no margin to get partners to move their business from Intellisys to them based purely on a commission split change. So we had to decide how to react to that. In some cases, we lost some partners that went away. And what we decided to do was let's start. Let's build for the longer term.And one of the things we did last year that I know you remember is we created this new strategy around channel exchange. And the reason for that was we needed to start adding new suppliers to help drive growth too. We had not really added a lot of significant suppliers along the way. And we needed the suppliers that some of the strategic partners that we're trying to recruit that I talked about a few minutes ago, the ones that can drive growth, these strategic partners were asking us for suppliers that transacted differently than the old Intellisys model. So the channel exchange transaction model, without getting too much in the weeds, is allowing us to add new suppliers.We just added Sophos and Trustify. And we think those are examples of the kind of new opportunities that are gonna be incremental to our revenue. And so these aren't suppliers that'll replace existing revenue. So we've got a pipeline of new suppliers coming online. And, again, as we all know, we've been following this Intellisys model. We won't see all of that show up in our revenue as quickly as we'd like, but there are new orders and deals being done now. And we've modeled for FY '26 a reasonable approach to growth.What that means is we're doing everything we can to add sales resources, financial enablement, and new suppliers so that as we exit '26, we expect to be back on a significant growth trajectory.Keith Housum: Great. And as we think about the guidance for next year, perhaps maybe some puts and takes on that. Again, come back to adjusted EBITDA guidance you guys gave at the low end of the range, it's only 3% growth, but yet at the top end of the range, it's obviously in the double digits. How are you thinking about, I guess, what has to go right, what has to go wrong in order to meet the top and bottom end of your ranges there?Steve Jones: Well, Keith, you know, as we were talking about last year, similar as we're setting here this year looking at FY '26, we see the growth coming in the second half. We see a faster growth trajectory coming in the second half as we're still in this kind of choppy tariff and interest rate environment. So, you know, the low end of the range, both ends of the range include our investments we need to make. What Mike was talking about in Intellisys, what we're talking about in our other businesses, we've got investments in that guidance. What we'll do as we go along is we'll throttle those investments to make sure that we manage to that EBITDA margin.And so that's how we're thinking about it. The other thing that can swing through there a little bit is mix. And as we think about the mix, the mix can move around a bit on our EBITDA. And so those are the key things that we're thinking about as we think about that range.Keith Housum: Great. Appreciate it. And maybe just one more for me if I don't mind. You know, talk on a three-year strategic goals, getting your recurring revenue as a driver of gross profit up to, you know, building towards 50%. Obviously, a pretty massive move considering the 31% you have here in this quarter or so. How much of M&A is in part of that is involved in versus what you guys believe you can do organically? And then if it's '26 coming to be, like, a rebuilding year for that, is this really a '27, '28, you know, fiscal year performance?Steve Jones: Well, Keith, I'll go back to what we called out in our prepared remarks. You know, we went from 27.5%, I think, to almost 33% for the year. Recurring revenue as a percent of our gross profits. A lot of that is because of our acquisitions, and they weren't big. But they're very impactful. We also see that those advanced emerging technologies, they're gonna transact more in that netted down revenue space. And so that will help us grow as well. And I think Mike has some comments.Mike Baur: Yeah. And one other thing we added in our materials we provided, I don't know if you had a chance to look at them yet, Keith, but on page 12 of our supporting materials, we added a new schedule which shows the recurring revenue gross profit and how it's changed over time. And if you look at that, we're going in the specialty technology area. We were 6.6% back in '24. And now we're at eleven. And so we're seeing what Steve just said. We're making some acquisitions that seem to be fairly small on the scale of the Advantech and ResourceV. But look at how quickly they can change and add to our recurring revenue contribution.So we believe, and if you remember from our last, I think it was our last call, I talked about the fact that we have four presidents that each have a strategy around acquisitions. And each of them have a real focus on how do they increase the recurring revenue in their particular business. So we feel very good about the ability to get on this path towards 50% even as we exit '26.Keith Housum: Great. Thank you. Good luck.Operator: Thank you. One moment for our next question. And our next question comes from the line of Gregory Burns with Sidoti. Your line is now open.Greg Burns: Good morning. You mentioned some strong, I guess, broad-based growth in the technology segment. Were there any detractors though in the quarter?Steve Jones: Well, Greg, good morning. We continue to have a very profitable business in our communications business, and that's probably the one that we've talked about for a very long time. It does not have a real growth path to it, but it is very profitable for us. And it helps us also sell other solutions. So I would say that's the one that probably is setting out there that's the slower growth. I'd also just kind of send you to our infographic. And if you look at that specialty technology segment, you can kind of see how that breaks out.Greg Burns: Great. Thanks. And then can you maybe update us on the outlook for Brazil? Any changes there and what your expectations are for that market?Mike Baur: Well, you know, Brazil is an interesting dynamic for us. They're growing in local currency. And they're now getting ready to lap a pretty significant supplier shift out of some channels. And so we like where Brazil is going. We're just gonna have to settle through these FX headwinds that we're seeing. And, Greg, this is Mike. One other comment to that. We talked about Brazil a lot recently. And what I want to remind our investors is Brazil's business model is what we're trying to move to, frankly, in the US. They've been selling many more products that are in the cloud, recurring. They've been selling converged solutions before we started calling them converged solutions.And so, really, because in Brazil, we're one of the dominant players. We are not a small distributor. There's not the scenario where we can't get suppliers like we have in some cases in the US. So we really love the fact that we've got a business that is profitable. That we have a very engaged team, and they're able to recruit suppliers in Brazil and sell the suppliers on the value proposition of ScanSource, Inc. and our channel. A way that we're still getting suppliers to understand in the US. So we love that business. We hate the economic environment they go to as a country and a political environment.But it's a profitable business, and we have a very strong management team that understands exactly what we're trying to accomplish now in the US with our recurring revenue business.Greg Burns: Great. Thank you.Operator: You bet. Thank you. One moment for our next question. And our next question comes from the line of Damian Karas of UBS. Your line is now open.Damian Karas: Hey. Good morning, everyone. Congrats on the progress.Steve Jones: Thank you. Yeah. Thank you.Damian Karas: So I just have a couple more specific questions. First, I wanted to ask you about barcoding and mobility solutions and what your expectation is there for that part of the business that you have factored into your fiscal 2026 guidance. And I think, typically, like, the fourth calendar quarter of the year, so your guys' second quarter is when a lot of the larger project activity often consummates for that part of the business.Just curious if you think there might be still larger projects that are fewer in number, comparable level maybe to what you saw last year or if there's the possibility that there might be a larger project ramp as we kind of get through the end of this calendar year.Steve Jones: Yeah. Thanks for the question. So, you know, when we think about the mobility and barcode technologies, what we talked about in our remarks is that was a great growth area for the fourth quarter. What we also want to caveat is we're still facing in our large deals, particularly, some uncertainty in the macro environment that we're not sure if that's a first half or second half growth trajectory for us. So I think it's a bit of a wait and see on when those big deals start rolling out. We saw some of that happen in the fourth quarter. We were happy to see it. But it's not widespread yet.Damian Karas: Really helpful. Thank you. And then I guess kind of a new news item in the last month is Zebra acquiring Elo. I was just wondering if you could maybe discuss ScanSource, Inc.'s relationship with Elo and do you think that transaction potentially changes anything on your side for either of those product categories or coding and point of sale?Mike Baur: This is Mike. I'll take that one. We try not to comment on our partners' acquisitions or their strategy per se, but our relationship with both of them, I can't comment on. We've been a long-time partner with Elo. Obviously, Zebra as well. And I talked to both of their CEOs about it and what they're trying to accomplish. And for ScanSource, Inc., what is interesting is in general, to be very transparent, consolidation of suppliers rarely helps us. Okay? It only helps us if there is a creation of a new market opportunity.And so what we're hoping to see from something like this is they're gonna create new solutions that will go to the market in a way that ScanSource, Inc. and our channel partners can benefit from. And there is this idea that could happen. And we talked about throughout our prepared remarks the idea of Converge Solutions, which is a multi-vendor thought. And what that typically means is no one vendor can provide all of the pieces to that. Now that you have Zebra and Elo together, there's still gonna need to be other parts of that solution that we can provide. And anything they're gonna do to invest in retail is good for us.We've always had a strong retail channel presence. We think that this is gonna drive new technology at the front end of retail, which is what they communicated. We think that's nothing but positive for ScanSource, Inc. and our channel partners.Damian Karas: Very interesting. Thank you very much for your thoughts. Good luck.Steve Jones: You bet. Thank you.Operator: Thank you. Again, as a reminder to ask a question, you'll need to press 11 on your telephone. I'm showing no further questions at this time. I'll now turn it back to Steve Jones for closing remarks.Steve Jones: Yes. Thank you for joining us today. We expect to hold our next conference call to discuss September 30 quarterly results on Thursday, November 6, at approximately 10:30 AM.Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.