Q1 2021 Scansource Inc Earnings Call
[music].
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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, Vice President Treasurer, and Investor Relations Ma'am you may begin.
Good afternoon, and thank you for joining us joining me on the call today are Mike Baur, our chairman and CEO, John Ellis, Our Chief revenue Officer, and Jerry Lyons, Our Chief Financial Officer, We will review our operating results for the quarter and then take your questions. We posted a CFO commentary that accompanies.
Our comments and webcast in the Investor Relations section of our website, let me remind you that certain statements in our press release and the CFO commentary and on this call are forward looking statements. These statements are subject to risks and uncertainties that could cause <unk> actual results to differ materially from such statements.
These risks and uncertainties include but are not limited to those factors identified in the earnings release, we put out today and in Scansource. This form 10-K for the year ended June Thirtyth 2020, as filed with the SEC any forward looking statements represent our views only as of today and should not be relied upon as representing.
Our views as of any subsequent date scansource disclaims any duty to update any forward looking statements reflect actual results or changes in expectations, except as required by law. During our call. We will discuss both GAAP and non-GAAP results provided reconciliations between these amounts in the CFO commentary and in our press.
Release. These reconciliations also can be found on our website and have been filed with our form 8-K, I will now turn the call over to Mike.
Thanks, Mary and thanks for joining us today I am incredibly proud of our Scansource team and our strong execution in an unprecedented operating environment.
We achieved better than expected results and net sales grew 19% quarter over quarter.
This is much stronger than our typical June to September sequential quarter growth of around 4% in.
In addition, we had strong operating cash flow driven by working capital efficiency gains. These results demonstrate the strength of our people our offerings and our market growth opportunities scans.
Scansource is uniquely positioned to help channel partners drive growth by providing customers with industry, leading endpoints and cloud solutions.
Yes.
Successful.
Cloud companies in the channel with our acquisition four years ago of Intelisys.
We are leader in sales of Ucas see caf infrastructure as a service and SD Lan solutions and Scansource remains after 28 years, the largest and most successful endpoint distributor in our industry.
We remain the leader in video and voice endpoints mobile computing barcode printers, IP enabled hi, Def cameras payment terminals receipt printers network access points a much much more.
I will now turn the call over to John to discuss our sales performance for the quarter.
Mike.
Im very excited about this quarter sales performance and our focus strategy for growth. We saw a continued adoption of our SaaS and subscription business growing at 46% year over year.
Barcode networking and security segment net sales increased 17% quarter over quarter led by significant growth in large deals across our mobility self checkout solutions in video surveillance technologies and we also saw continued strength in networking and access points.
Enabling the remote working trend accelerated by the COVID-19 virus.
For communications and services, we saw a 24% quarter over quarter increase in net sales driven largely by cloud enabled video endpoints headsets and phone provisioning to support Ucas service providers and our Intelisys business had another record quarter drew.
Given by the continued market shift to cloud based solutions.
Our team in Brazil achieved the highest quarterly sales results in Brazil history in local currency, while also driving impressive working capital efficiency gains. In addition to their success across hardware solutions, Brazil continues to build momentum in its recurring revenue business.
His including says and our Master agency.
We're also excited about our newly formed cloud partnerships with both Oracle and IPO.
This quarter, our supplier services team made significant progress in our working capital management, we're delighted with the work we did to increase inventory turns to 6.2 times. The best level Weve had in close to three years, while also delivering on time for our customers and maintain.
Gaining excellent service levels.
Im pleased with this quarter's positive results and it and really inspired by our workforce, who continue to primarily work remotely do that to the pandemic.
We were also very proud of the success, we had with our two virtual partner conferences with over 3000 combined attendees. The first our Intelisys channel connect event helped our partners to Reimagine.
The new nicked together exploring opportunities across cloud and connectivity and our virtual var partner conference focused on the power of connections and enabling our partners on opportunities across our portfolio, including recurring revenue SaaS.
And verticals we.
We received huge accolades from our partners and suppliers on our ability to deliver world class digital events.
Now Gerry will take you through our financial results.
Thank you John we made excellent progress this quarter.
19% sequential quarter net sales growth.
Disciplined cost management strong cash flow generation and lower working capital.
And unless otherwise indicated this discussion reflects our results for continuing operations only.
For the first quarter, our net sales were $757 million down 10% year over year or down 7% year over year organically.
Foreign currency translation negatively impacted non-GAAP sales by approximately $25 million.
As expected the year over year reduction in net sales was primarily due to the impact of the COVID-19 pandemic.
Our gross profits were $81 million down 18% year over year.
Gross profit margin of 10.7% is down from 11.7% for the prior year quarter.
And as John said earlier this quarter sales reflected a higher mix of large deals compared to last quarter.
As well as lower supplier program recognition.
Our non-GAAP EPS Gina expenses for the quarter of 61.6 million declined 9% year over year and declined 2% quarter over quarter.
At the end of July we implemented a $30 million annualized expense reduction program.
Our lower non-GAAP SGN, a expenses reflect a partial quarter impact and we are on track to achieve the $30 million in cost reduction cost savings.
In the first quarter of fiscal year 2021, we recorded a restructuring charge of $8.3 million for severance and related benefits.
We have experienced higher costs from coated related expenses.
Which totaled approximately $310000 in the September quarter.
For fiscal year 2021, we estimate the effective tax rate to range from 28.5% to 29.5%.
Now turning to the balance sheet and cash flow.
We generated strong operating cash flow of $71 million for our first quarter and $226 million for the trailing 12 month period.
Working capital investment declined 34% year over year, and 13% quarter over quarter.
We continue to strengthen our balance sheet and our liquidity position.
Our dsos came in at 61 days remaining relatively stable with recent trend.
We decreased our inventory levels down, 29% year over year and down 7% quarter over quarter.
We increased our turns to 6.2 times as John reference.
On September Thirtyth, 2020, we had cash and cash equivalents of $56 million.
Debt of $169 million, including discontinued operations.
Our net leverage totaled approximately 1.3 times trailing 12 month adjusted EBITDA.
On October Thirtyth, we completed the sale of our products business in Latin America outside of Brazil to income tax.
We are actively working on sales opportunities to divest our products business in Europe and UK.
Both of these divestitures were classified as held for sale and discontinued operations in our first quarter fiscal year 2021 financial statements and now I would like to turn the call back over to Mike for closing comments. Thanks.
Thanks, Sherry before we close I want to take this opportunity to welcome our new director Frank AMRI to our Scansource Board of Directors. Frank currently serves as executive Vice President and Chief administrative officer for INNOVALT Health.
Frank's perspectives as a legal expert and executive as well as his many years of public service and deep community involvement bring valuable insight to the board and Scansource.
The progress we made this quarter gives me confidence in the strategic direction, we are taking we.
We are very excited about the growth opportunities for our channel partners.
And with that we'll now open it up for questions.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one on your Touchtone telephone.
If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Your first question comes from Adam Tindle Raymond James.
Good afternoon. This is Madison on for Adam and Thanks for taking my questions I wanted to drill down a bit on the barcode networking security operating margin. So revenue is up pretty significantly quarter over quarter, but margins were flat. So can you just touch on what drove the quarter over quarter margin headwind in Q.
One and then historically this segment has operated above 2% operating margin. So do you still think this is the right way to think about margins in this segment longer term.
Yeah, Matt.
Madison High this is Jerry let me just start and I'll start with kind of the top of the income statement. If you will so if you.
If you look at in that segment, we had.
And John references on the call we had some fairly large deals.
That that drove our gross profit down our gross profit margin down if you look year over year was 8.7 the year prior and 7.8.
In the current quarter and again, we referenced these larger deals.
And some supplier.
Supplier program recognition as well driving those gross profits down on it and so thats really the vast majority of whats driving the operating profit down.
Okay, and kind of longer term outlook for for that segment. In particular do you still think that 2% range is achievable over the intermediate longer term.
Yes.
Okay, Great and then I wanted to ask quickly on on Q2, obviously normally out of budget flush quarter. Im just wondering if you can give some initial color on what you're seeing into Q2, and maybe how you're expecting this year to be different or similar relative to.
Prior years.
Hey, Matt This is Mike I'll take that one.
We're not going to give any guidance for this quarter and but if you just think about history.
With this quarter for us there's a lot of moving pieces in December quarter, and we've never been really a budget flush.
Quarter kind of company for one thing Thats happened to us over the last.
I'll say four or five years, though is its been a federal quarter.
Where we would see federal business than we used to reference it as.
Either happening on time kind of in the December quarter, sometimes they got delayed.
Sales did and they moved into the March quarter. So it generally was characterized with some big deals that were federal in nature, and we characterized them.
We're federal Slash Cisco in nature I don't know if you if you recall that so that's the that's the question frankly for this quarter coming up is we don't know and I would just say that in general we would love to have another quarter like we just had.
Got it yes that would definitely look nice thanks for thanks for taking my questions guys.
Sure.
Your next question comes from Keith Wilson with Northcoast research.
Good morning, guys I give you care about our card maybe being or anything about how the on Prem businesses doing obviously was a tough quarter last quarter I can't imagine, we'd see more some more pressure here, but looking at the results have seen that the pressure wasn't nearly as bad as what you saw last quarter and then as a follow up to that.
Is the work from home strength that you're seeing.
Are we expecting that to continue into the second quarter, perhaps for now.
Imminent do fiscal 22.
Oh, I'm sorry 21.
Yes, I'll take that this is John elder and thanks for your question.
Look we saw.
We saw a real strength in Q2 and it was quite frankly, it was widespread meaning it was North America us in Canada.
We also saw strength in Brazil.
And we saw strength in Brazil across all segments.
And so you know it was a positive quarter and we're hoping to see kind of the same trends as we move into Q3 as it relates to the work from home.
Question.
You know they are too we saw a lot of strength in Q2, and we believe we're going to see similar strength as we move to Q3 or sorry from Q1 to Q2.
Gotcha Gotcha, so do I assume here that the pressure for the on Prem hardware was not nearly as bad as you saw last quarter.
So I mystic Mystic question.
The on Prem communication hardware.
In our pressure not nearly as bad.
It was not and I think it's important to remember that this business is going to continue to shift to the cloud and we were in great position.
To deliver on both fronts this quarter, we foresee that happening as we move forward.
Great.
Jerry with in terms of the workforce reduction.
For their big color in terms of how much of that was completed and you saw the benefit in this quarter versus yet to be seen here in the second quarter.
Sure Keith So I mean, we announced that late in July.
And so really we probably had about a month and a half of <unk>.
Of benefit in the quarter.
So as we move forward as we move forward, you'll obviously get full quarters.
But but we're on track as I said.
Okay, and then the sales over Latin America business that closed already cracked.
Yes that closed.
On the Thirtyth.
Great can you provide any color in terms of the sales proceeds and how is your working capital reduction you guys will see.
I am we didn't announce any of that Keith.
Okay.
Got it.
Okay Thats all I got thank you.
Thank you.
Your next question comes from Chris Mcginnis with Sidoti and company.
Good afternoon, Thanks for taking my questions and nice quarter.
I was just wondering if you could maybe just comment around.
Maybe some pent up demand and are you seeing continued strength in the sense of.
Maybe on a monthly basis.
No the larger orders play into that somewhat but.
Maybe more volatility in the quarter base, but.
Just when you're looking at the business sounds like you feel.
Pretty good at this point.
Yes, Hi, this is John again.
We definitely coming out of Q4.
I saw some pent up demand.
Clearly as a result of Covidien and I think that that helped us and will also help us as we move into Q2.
Especially in light of.
Projects that were on hold and actual physical locations of our customers customers that were closed that are beginning to open up which are now enabling.
More installations of things like physical surveillance technology and other things.
And so as we see.
More of the economy open up we should see continued benefit from this.
Great and little surprised by the strength in Brazil.
News talk about given.
The reaction to the pandemic.
How are you it's exceeding down there and now that performed.
I think a little bit better than expected.
Our great question. We we just were really proud of our Brazil team and their performance. We saw widespread I mean, it wasn't one area was widespread.
Performance.
Across SMB and enterprise across our both sides of the business whether its comes over the phone.
Yes, barcode business and we also saw success in hardware as well as our recurring revenue business, so very very impressive.
Large deals.
Were strong this quarter and we're expecting another strong quarter coming up.
And Chris This is Mike if I could just add one thing to that that our team John referenced our team.
And one of the things we heard when we review the quarter was the employees who work for us in Brazil are extremely happy that we've taken the actions we took to allow us to work from home the employee satisfaction that we measure in Brazil regularly is that one of the highest its ever been and.
Our team our executive team they're treated the.
Morale and loyalty of our employees as a difference.
Thanks, a lot of sense. Thanks.
And then just that long term target I think it's 3% operating margin do.
You see a pathway to get there in this year or what would have to change in the environment.
Would you need a little bit more demand or this is cost saving help you get there by year end.
Good.
A normal pace of recovery I guess, yes.
Yeah, Chris as Mike again, I'll take it we.
We talked about it last quarter too that we have a plan for the year. We believe based on our cost savings plan that we've already announced a $30 million and based on growth returning that we can get leverage on that asset in a certain volumes and certain mix of volume and get back to three and a half per se.
At a point in time, we're not going to say we're done once we get there either we but we do believe that there is a path to get back to 3.5%.
Yes.
That's all I have for now thank you very much taking my questions and good luck in Q2.
Thanks, Thanks, Chris.
Again, ladies and gentlemen, if you have a question at this time. Please press the Star then the number one on your Touchtone telephone.
I'm showing no further questions at this time I would now like to turn the conference back to Mike.
Thank you for joining us today, we expect to hold our next conference call to discuss December 31st quarterly result on Tuesday February 2nd 2021.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful day you may all disconnect.
Yeah.
[music].
The entire sales.
Ill.
[music].
[music].
[music].
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, Vice President Treasurer, and Investor Relations Ma'am you may begin.
Good afternoon, and thank you for joining us joining me on the call today are Mike Baur, our chairman and CEO, John Ellis, Our Chief revenue Officer, and Jerry Lyons, Our Chief Financial Officer, We will do our operating results for the quarter and then take your questions.
We posted a CFO commentary that accompanies our comments and webcast in the Investor Relations section of our website, let me remind you that certain statements in our press release and the CFO commentary and on this call are forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ.
Early from such statements. These risks and uncertainties include but are not limited to those factors identified in the earnings release, we put out today and its scansource. Its form 10-K for the year ended June Thirtyth 2020, as filed with the FTC any forward looking statements represent our views only as of today. It's.
Should not be relied upon as representing our views as of any subsequent date scansource disclaims any duty to update any forward looking statement to reflect actual results or changes in expectations, except as required by law. During the call. We will discuss both GAAP and non-GAAP results provided reconciliations between these amounts in the.
CFO commentary and in our press release. These reconciliations also can be found on our website and have been filed with our form 8-K, I'll now turn the call over to Mike.
Thanks, Mary and thanks for joining us today.
Hi, I'm incredibly proud of our Scansource team and our strong execution and unprecedented operating environment.
We achieved better than expected results and net sales grew 19% quarter over quarter.
This is much stronger than our typical June to September sequential quarter growth of around 4% and.
In addition, we had strong operating cash flow driven by working capital efficiency gains. These results demonstrate the strength of our people our offerings and our market growth opportunities scans.
Scansource is uniquely positioned to help channel partners drive growth by providing customers with industry, leading endpoints and cloud solutions.
Yeah.
Successful.
Cloud companies in the channel with our acquisition four years ago Ive been telling us.
We are a leader in sales up you can see caf infrastructure as a service and SD Wan solutions and Scansource remains after 28 years, the largest and most successful endpoint distributor in our industry.
We remain the leader in video and voice endpoints mobile computing barcode printers, IP enabled hi, Def cameras payment terminals receipt printers network access points a much much more.
I will now turn the call over to John to discuss our sales performance for the quarter.
Mike.
I'm very excited about this quarter sales performance and our focused strategy for growth. We saw continued adoption of our SAS and subscription business growing at 46% year over year.
Barcode networking and security segment net sales increased 17% quarter over quarter led by significant growth in large deals across our mobility self checkout solutions in video surveillance technologies and we also saw continued strength in networking and access points.
Enabling the remote working trend accelerated by the COVID-19 virus.
For communications and services, we saw a 24% quarter over quarter increase in net sales driven largely by cloud enable video endpoints headsets and phone provisioning to support Ucas service providers and our Intelisys business had another record quarter.
Given by the continued market shift to cloud based solutions.
Our team in Brazil achieved the highest quarterly sales results in Brazil history in local currency, while also driving impressive working capital efficiency gains. In addition to their success across hardware solutions, Brazil continues to build momentum in its recurring revenue business.
Including SaaS and our Master agents say we're.
We're also excited about our newly formed cloud partnerships with both Oracle and IPO.
This quarter, our supplier services team made significant progress in our working capital management, we're delighted with the work we did to increase inventory turns to 6.2 times. The best level Weve had in close to three years, while also delivering on time for our customers and maintain.
Turning excellent service levels.
Pleased with this quarter's positive results and really inspired by our workforce, who continue to primarily work remotely do that to the pandemic.
We were also very proud of the success, we had with our two virtual partner conferences with over 3000 combined attendees. The first our Intelisys channel connect event helped our partners to Reimagine.
The new niche together exploring opportunities across cloud and connectivity and our virtual var partner conference focused on the power of connections and enabling our partners on opportunities across our portfolio, including recurring revenue sales.
Yes.
And verticals.
We received huge accolades from our partners and suppliers on our ability to deliver world class digital events.
Yeah, Jerry will take you through our financial results.
Thank you John we made excellent progress this quarter.
19% sequential quarter net sales growth.
Disciplined cost management style.
Strong cash flow generation lower working capital.
And unless otherwise indicated this discussion reflects our results for continuing operations only.
For the first quarter, our net sales were $757 million down 10% year over year or down 7% year over year organically.
Foreign currency translation negatively impacted non-GAAP sales by approximately $25 million.
As expected the year over year reduction in net sales was primarily due to the impact of the COVID-19 pandemic.
Our gross profits were $81 million down 18% year over year.
Gross profit margin of 10.7% is down from 11.7% for the prior year quarter.
And as John said earlier this quarter sales reflected a higher mix of large deals compared to last quarter.
As well as lower supplier program recognition.
Our non-GAAP EPS Gina expenses for the quarter of 61.6 million declined 9% year over year and declined 2% quarter over quarter.
At the end of July we implemented a 30 million annualized expense reduction program.
Our lower non-GAAP SGN, a expenses reflect a partial quarter impact and we are on track to achieve the $30 million in cost reduction cost savings.
In the first quarter of fiscal year 2021, we recorded a restructuring charge of $8.3 million for severance and related benefits.
We have experienced higher costs from cobot related expenses.
Which totaled approximately $310000 in the September quarter.
For fiscal year 2021, we estimate the effective tax rate to range from 28.5% to 29.5%.
Now turning to the balance sheet and cash flow.
We generated strong operating cash flow of $71 million for our first quarter and $226 million for the trailing 12 month period.
Working capital investment declined 34% year over year, and 13% quarter over quarter.
We continue to strengthen our balance sheet and our liquidity position.
Our dsos came in at 61 days remaining relatively stable with recent trends.
We decreased our inventory levels down, 29% year over year and down 7% quarter over quarter.
We increased our turns to 6.2 times as John reference.
On September Thirtyth, 2020, we had cash and cash equivalents of $56 million.
Net debt of $169 million, including discontinued operations.
Our net leverage totaled approximately 1.3 times trailing 12 month adjusted EBITDA.
On October Thirtyth, we completed the sale of our products business in Latin America outside of Brazil, The intermec.
We are actively working on sales opportunities to divest our products business in Europe and the UK.
Both of these divestitures were classified as held for sale and discontinued operations.
Our first quarter fiscal year 2021 financial statements and now I would like to turn the call back over to Mike for closing comments. Thanks.
Thanks, Gerry before we close I want to take this opportunity to welcome our new director Frank AMRI to our Scansource Board of Directors. Frank currently serves as executive Vice President and Chief administrative officer for an avant health.
Frank's perspectives as a legal expert and executive as well as his many years of public service and deep community involvement bring valuable insight to the board and Scansource.
The progress we made this quarter gives me confidence in the strategic direction, we are taking we.
We are very excited about the growth opportunities for our channel partners.
And with that we'll now open it up for questions.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one on your Touchtone telephone.
If your question has been answered or you wish to remove yourself from the queue. Please press the pound.
Your first question comes from Adam Tindle with Raymond James.
Good afternoon. This is Madison on for Adam and Thanks for taking my questions.
To drill down a bit on the barcode networking security operating margin. So revenue is up pretty significantly quarter over quarter, but margins were flat. So can you just touch on what drove the quarter over quarter margin headwind in Q1, and then historically this segment has operated above 2% operating margin. So do you still think this.
Is the right way to think about margins in this segment longer term.
Yeah Madison High this is Jerry let me just start and I'll start with kind of the top of the income statement. If you will so if you.
If you look at the in that segment, we had and.
And John references on the call we had some fairly large deals.
That that drove our gross profit down our gross profit margin down if you look year over year was 8.7 the year prior and that 7.8.
In the current quarter and again, we referenced these large.
Larger deals.
Some supplier.
Supplier program recognition as well driving those gross profits down so.
So thats really the vast majority of whats driving the operating profit down.
Okay, and kind of longer term outlook for for that segment. In particular do you still think that 2% range is achievable over the intermediate longer term.
Yes.
Okay, Great and then I wanted to ask quickly on Q2, obviously normally on a budget flush quarter. I was just wondering if you can give some initial color on what you're seeing into Q2, and maybe how you're expecting this year to be different or similar relative to.
Prior years.
Hey, Matt This is Mike I'll take that one.
We're not going to give any guidance for this quarter and but if you just think about history.
With this quarter for US there is a lot of moving pieces in the December quarter, and we've never been really a budget flush.
Quarter kind of company for one thing Thats happened to us over the last.
I will say four or five years, though is its been a federal quarter.
Where we would see federal business than we used to reference it as.
Either happening on time kind of in the December quarter sometime they got delayed.
Sales did and they moved into the March quarter. So it generally was characterized with some big deals that were federal in nature, and we characterized them.
We're federal Slash Cisco in nature I don't know if you if you recall that so that's the that's the question frankly for this quarter coming up is we don't know and I would just say that in general we would love to have another quarter like we just had.
Got it yes that would definitely look nice thanks for thanks for taking my questions guys.
Sure.
Your next question comes from Keith Wilson with Northcoast research.
Good morning, guys I Didnt hear the hot car, maybe being or anything about how the businesses doing obviously it was a tough quarter last quarter I kind of imagine we'd see more some more pressure here, but looking at the results. We've seen that the pressure wasn't nearly as bad as what you saw last quarter and then as a follow up to that.
Is the work from home strength that you're seeing.
Are we expecting that to continue into the second quarter, perhaps for now.
Imminent do fiscal 22.
I'm sorry 21.
Yes, I'll take that this is John elder and thanks for your question look.
Look we saw.
We saw a real strength in Q2 and it was quite frankly, it was widespread meaning it was north America or us and Canada.
We also saw strength in Brazil.
And we saw strength in Brazil across all segments.
And so you know it was a positive quarter and we're hoping to see kind of the same trends as we move into Q3 as it relates to the work from home.
Question.
Yeah.
They are two we saw.
A lot of strength in Q2, and we believe we're going to see similar strength as we move to Q3 or sorry from Q1 to Q2.
Gotcha Gotcha, so do I assume here or there.
Pressure for the on Prem hardware was not nearly as bad as you saw last quarter.
So I missed the missed the question.
The on Prem communication hardware I'm, assuming that pressure not nearly as bad.
It was not and I think it's important to remember that this business is going to continue to shift to the cloud and we were in great position.
To deliver on both fronts this quarter, we foresee that happening as we move forward.
Great.
Jerry in terms of the workforce reduction.
For the big color in terms of how much of that was completed and you saw the benefit in this quarter versus yet to be seen here in the second quarter.
Sure Keith So I mean, we announced that late in July.
And so really we probably had about a month and a half of.
Benefit in the quarter.
So as we move forward as we move forward, you'll obviously get full quarters.
But we're on track as I said.
Okay, and then the sales or Latin America business not closed already cracked.
Yes that close okay.
On the Thirtyth.
Can you provide any color in terms of the sales proceeds and how is your working capital reduction you guys will see.
I am we didn't announce any of that Keith okay.
Okay.
Got it.
Okay Thats all I got thank you. Thank.
Thank you.
Your next question comes from Chris Mcginnis with Sidoti and company.
Good afternoon, Thanks for taking my questions in that quarter.
I was just wondering if you could maybe just comment around.
Maybe some pent up demand and are you seeing continued strength in the sense of.
Maybe on a monthly basis.
No the larger orders play into that somewhat but.
Maybe more volatility in the quarter base, but.
When you're looking at the business sounds like it.
Pretty good at this point.
Yes, Hi, there this is John again.
We definitely coming out of Q4.
I saw some pent up demand.
Clearly as a result of Covisint and I think that that helped us and will also help us as we move into Q2.
Especially in light of.
Projects that were on hold and actual physical locations of our customers customers that were closed that are beginning to open up which are now enabling.
More installations of things like physical surveillance technology and other things.
And so as we see.
More of the economy open up we should see continued benefit from us.
Great.
And little surprised by the strength in Brazil.
News talk about given.
The reaction to the pandemic.
How are you feeling down there now that performed well.
I think a little bit better than expected.
Our great question. We we just were really proud of our Brazil team and their performance. We saw widespread I mean, it wasn't one area was widespread.
Performance.
Across SMB and enterprise across or both.
Both sides of the business, whether its comes or the Pos barcode business and we also saw six.
Success in hardware as well as our recurring revenue business, so very very impressive.
Large deals.
Were strong this quarter, we're expecting another strong quarter coming up.
And Chris This is Mike if I could just add one thing to that that our team John referenced our team.
And one of the things we heard when we review the quarter was the employees who worked for US in Brazil are extremely happy that we've taken the actions we took to allow us to work from home the employee satisfaction that we measure in Brazil regularly is that one of the highest its ever been and.
Our team our executive team their tribute to the.
Morale and loyalty of our employees as a difference.
No.
Got it thanks.
And then just that long term target I think 3% operating margin do.
Do you see a pathway to get there in this year or what would have to change in the environment.
We need a little bit more demand or cost saving help you get there by year end with a.
And the.
That's a normal pace of recovery I guess.
Yeah, Chris as Mike again, I'll take it we.
We talked about it last quarter too that we have a plan for the year that we believe based on our cost savings plan that we've already announced the $30 million and based on growth returning that we can get leverage on that asked today as certain volumes and certain mix of volume and getting back to three and a half per se.
At a point in time, we're not going to say we're done once we get there either but we do believe that there is a path to get back to 3.5% yes.
That's all I have for now thank you very much for taking my questions and good luck in Q.
Thanks, Thanks, Chris.
Again, ladies and gentlemen, if you have a question at this time. Please press the Star then the number one on your Touchtone telephone.
I'm showing no further questions at this time I would now like to turn the conference back to Mike.
Thank you for joining us today, we expect to hold our next conference call to discuss December 31st quarterly result on Tuesday February 2nd 2021.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful day you may all disconnect.