Q2 2022 Scansource Inc Earnings Call
Okay.
Please standby your conference is scheduled to begin momentarily once again, thank you for your patience and please standby.
[music].
Welcome to the <unk> quarterly earnings conference call all lines have been placed in 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, Senior Vice President Treasurer, and Investor Relations Ma'am you may be.
Ken.
Good afternoon, and thank you for joining us joining me on the call today are Mike Baur, our chairman and CEO , John <unk>, Our Chief revenue Officer, and Steve Jones, Our Chief Financial Officer, We will review our operating results for the quarter and then take your questions. We posted an earnings infographic that accompanies our comments.
A webcast in the Investor Relations section of our website, let me remind you that certain statements in our press release and the earnings and for graphic and on this call are forward looking statements. These statements are subject to risks and uncertainties that could cause 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 scan sources Form 10-K for the year ended June 32021 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 subs.
Sequencers scans.
<unk> disclaims any duty to update forward looking statements to reflect actual results or changes in expectations as required by law. During our call. We will discuss both GAAP and non-GAAP result, and have provided reconciliations between these amounts in the earnings of the graphics and in our press release. These reconciliations also can.
Be found on our website and have been filed with our form 8-K filed today I'll now turn the call over to Mike.
Thanks, Mary and thanks to everyone for joining us today.
Our outstanding second quarter performance underscores the strength of our hybrid distribution strategy for the quarter, we delivered six 6% net sales growth and adjusted EBITDA margin of four 9% and record non-GAAP EPS for the quarter and for the trailing 12 month period.
Strong demand from channel partners across our technologies drove our top line growth and profitability ahead of expectations. We are proud of the operational excellence delivered by our employees worldwide, while navigating the ongoing supply chain challenges.
We are confident in our business model and ability to execute as a result, we are raising our full year fiscal year 2022 outlook and now expect net sales growth of at least 7% and adjusted EBITDA of at least $148 million.
The foundation of our hybrid distribution strategy is helping suppliers and sales partners accelerate growth across innovative technologies to meet end user requirements by providing hardware plus services SaaS and other value added offers our hybrid distribution strategy.
Guides, how we operate our business for sustainable growth and profitability.
In addition to our outstanding financial results.
I'm pleased today to announce the promotion of John <unk> to President of scan source, Inc.
John successful two years, leading the growth of our device digital and cloud businesses and his SaaS background have positioned John to drive the next phase of profitable growth for us as cancels John has built a world class leadership team that we believe will lead us on a sustainable growth.
<unk> as.
As President John will drive and champion our hybrid distribution growth strategy and communicate this message to our key stakeholders, including employees sales partners suppliers and investors Congratulations John I'll now turn the call over to you to discuss our business performance.
Thanks, Mike the past few years, working with you and the entire <unk> team had been amazing I'm truly excited and also humbled by this opportunity and want to thank you for your trust and belief in our future is bright and I look forward to working together as we architect the next chapter of growth for <unk>.
As for the quarter, our employees delivered impressive results with six 6% year over year net sales growth and 25% year over year increase in gross profits.
<unk> demand across technologies drove top line growth and margin expansion in both of our segments.
Delighted with how our team is executing and successfully navigating supply chain challenges.
Our second quarter results reflect strong growth from enterprise projects and large deals while we experienced heightened supply chain challenges in the quarter, our differentiators specialization.
Deep supplier and customer relationships and operational excellence enabled us to manage these challenges and successfully navigate today's supply constrained environment.
Another differentiator is our ability to use our balance sheet for strategic inventory investments.
Our customers Trust us to take care of their business and our dedicated suppliers and sales teams worked to take friction out of the buying experience.
I'd like to share a recent example of outstand sources, enabling partners to win with our hybrid distribution strategy across hardware Seth connectivity and cloud services. In this example in the healthcare market. We enabled a large communication bore with the design and delivery of our collaboration solution.
That included cloud enabled hardware for voice and video along with the UK as software subscription.
Our team assisted with the technical design product specifications pricing supplier program requirements and delivery of the total solution. This is a great example of how we enable our sales partners to sell hardware plus says.
In our specialty technology solutions segment, net sales increased 9% year over year fueled by strong market demand increases in big deals and market share gains.
Digital acceleration in technology refresh initiatives with end users are driving demand for our channel partners are more favorable sales mix and increased supplier sales incentives drove higher segment gross profit, which increased 35% year over year with 10 five.
<unk> gross profit margin.
With increased demand and continued labor shortages and customers are implementing mobile computing solutions to increase automation and worker productivity.
To address the massive increase in E. Commerce caused by COVID-19 retailers are working with our sales partners to implement mobile solutions to expand distribution centers maximize inventory awareness and improve the customer experience.
Our sales partners are also helping retailers adopt point of sale solutions to navigate omnichannel customer buying preferences, including self checkout curbside pickup and storefront fulfillment for online purchases.
The pause portal team had strong double digit year over year growth for its business, which has a higher margin profile from selling hardware plus services.
For our modern communications and cloud segment net sales increased 3% year over year and segment gross profit increased 18% year over year with a 15, 2% gross profit margin were also encouraged by our momentum in SaaS subscription sales growing double digits globally.
<unk>.
In the communications market, we are well positioned to serve partners with both on Prem and cloud solutions.
Work more model considered by many as the new norm is providing significant opportunities for our partners in Ucas Sika is cloud enabled end points and connectivity.
The <unk> team achieved 14% year on year net sales growth and exceeded $2 billion in end user <unk> annual recurring revenue or billings by supplier to end users.
We're encouraged by the continued adoption of recurring revenue being sold by Vars.
During the quarter a great highlight in the Intel USCIS event lineup was our in person gross summit held here in Greenville, South Carolina, we shared our strategic plans for growth with a select group of over 100 sales and supplier partners.
I'm also excited about our regional face to face Road show series, which we are calling amped.
These high energy educational networking events advanced sales partners understanding of technology.
Topics engage them in interactive breakout role plays and demonstrate our industry thought leadership through panel discussions we've already held two of these power packed event with 10 more planned across the country for our partners' continued enablement and success.
Our team in Brazil continues to deliver consistent performance across top line revenue and profitability metrics during the quarter, we experienced strength in big deals market share gains and traction with new suppliers in.
In addition to our success in hardware our business in Brazil continues to build outstanding momentum across SaaS and digital solutions.
I'm encouraged by our first half execution as we head into the second half of our fiscal year 2022, we are leading the way in hybrid distribution accelerating the future of technology for our partners and suppliers across hardware SaaS connectivity and cloud services.
I'd like to thank all of our employees for their outstanding efforts in the quarter and our heartfelt shout out to our employees at our distribution centers worldwide, who show up every day and exceed our customer expectations. I'd also like to thank our suppliers and customers for their continued loyalty and trust.
With <unk> now.
Now Steve will take you through the financial results.
Thanks, John our strong second quarter results demonstrates our team's successful execution of our strategic plan it.
It was an outstanding quarter for delivering top line growth and our margins continue to see the benefit of the expanding mix of recurring revenues and value added services.
We achieved 17, 6% ROIC for the quarter. The highest result in five years as we balance our working capital investment to support our sales growth and meet future demand.
As Mike noted in his opening remarks, our strong performance and momentum gives us the confidence to raise our FY 'twenty to sales growth and EBIT expectations.
In the second quarter, we achieved strong top line growth up six 6% year over year or 7% on an organic basis and expanded our margins in both segments.
Our gross profit margins increased to 12, 5% adjusted EBITDA margins increased to $4, 92% and our non-GAAP operating income margin increased to $4 one 5%.
Our Q2 net sales of $864 million restrict reflects strong customer demand across our technologies during the quarter, we saw a modest benefit from supplier price increases.
Our gross profit grew 25% year over year to $108 million.
Favorable sales mix and higher supplier sales incentives contributed to our higher gross profit dollars.
Our Q2 margins increased to 12, 5% up from 10, 6% in the prior year's quarter.
Our non-GAAP SG&A expense for the quarter of $69 $5 million increased $10 4 million or 18% year over year. This includes investment in strategic head count for <unk>, Telesis, Brazil, and other growth areas as well as investments to expand our capabilities.
Our investment focus is to enhance our ability to scale our business as part of our growth strategy.
Second quarter, adjusted EBITDA, which excludes share based compensation totaled $42 5 million up 43% year over year, reflecting a $4, 92% adjusted EBITDA margin.
Higher gross profit margins drove the Q2 margin expansion.
Our second quarter income tax rate of 24% reflects an increase in forecasted tax exempt income primarily from Brazil for.
For fiscal year 2022, we estimate the effective tax rate, excluding discrete items to range between 24, 5% to 25, 5%.
Now turning to the balance sheet and cash flow.
Our working capital investment increased as expected to support our sales growth, we used operating cash of $18 million for the quarter and $74 million for the 12 trailing 12 months period.
Year over year, working capital increased to $156 million.
A 43% year over year increase.
Q2, DSO came in at 64 days modestly up from our typical range due to longer terms on selected large deals.
Our Q2 inventory turns of five seven times were in line with our typical range and reflect higher inventory levels to meet future demand and manage the ongoing supply chain challenges.
On December 31, 2021, we had cash and cash equivalents of $34 million and debt of $197 million.
Our balance sheet remains strong from.
From a net debt leverage perspective, we ended Q2 at approximately one one times trailing 12 month adjusted EBITDA.
Demonstrating financial flexibility to support our growth opportunities and create long term value.
During the December quarter, we had approximately $200000 in share repurchases under our $100 million share repurchase authorization.
Second quarter non-GAAP EPS of $1 two per share increased 57% year over year and is an all time record high.
With our Q2 results are trailing 12 months non-GAAP EPS of $3 38.
He is also a record high.
We will now open it up for questions.
Thank you if you have a question at this time. Please press Star then one on your telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Adam Tindle with Raymond James Your line is open. Please go ahead.
Hello, Stephen Mike This is Cathy.
And John Please let me add let me add my congratulations.
Mike can you. Please start by commenting on the state of the supply constraints and today versus the end of the December quarter last night, we heard from a large domestic reseller that theyre starting to see some signs of light and we're wondering if youre starting to see the same and is this baked into your forecast for the year.
I'll, let John answer that if that's okay.
No problem.
Hey, Thanks for the question and thanks for your congratulations and.
Yes, we are.
Expect to see supply chain challenges continue.
And overall, our lead times have extended.
Two to four times longer than a year ago.
Have not seen much change from last quarter.
We think the team is doing a fantastic job of managing and navigating through the environment.
Yes.
The lead times in the supply chain is factored into our second half.
Okay perfect. Thank you and then one for Steve a number of vendor partners has been implementing price increases over the past few quarters, which you mentioned actually benefited skin source in the quarter, but.
What's been the customer response to this so far.
Well from a customer perspective.
Don't have a lot of visibility to the end customer and we haven't seen a lot of impact from our channel partners. It was expected it's well communicated so we really haven't seen much of an impact from a customer perspective.
Great. Thank you so much.
Thank you and our next question comes from the line of Keith.
Keith.
Northcoast Research. Your line is open. Please go ahead.
Good afternoon, guys and John I'll once again add my congratulations as well well deserved.
I'll throw us out and I guess I'll, let you go.
So decided who wants to answer it but obviously the supply constraints issue has been out there now for several quarters any thought in terms of how much did that impact your sales for the quarter.
Yeah, Keith Thanks for the question and Thanks also for the congratulations.
And.
I think the best way to characterize how we're seeing that supply chain is that.
We did see some impact we saw some deals push out and we factored that into our second half guidance.
Gotcha is youre thinking.
No.
Once before but if you think it's going to continue through at least the rest of the calendar year.
Is your visibility in terms of lead times that are people able to deliver on time or is it constantly fluctuating right now.
First of all I would characterize it as kind of fluid and ongoing and we would definitely say that we see supply chain challenges through the end of the year and I think I would point back to what I said earlier in my prepared comments and even last quarter that.
We are navigating the environment, well and we're extremely proud of our team and Thats one of the key Differentiators that has helped us to deliver such strong results this quarter.
Gotcha and then what are the things we're starting to hear is the vendors concern.
This supply chain and is that there might be the risk of a lot of inventory somewhere stuck in the channel that might have an impact on sales I guess can you address I guess efforts the industry and you guys have taken to make sure that doesn't happen at the end of the day.
Well, let me take that one.
Keith as we were looking at our inventory levels, we've been able to remarkably keep our inventory levels fairly steady as we've gone through this which I'm really really speaks back to the way we are leveraging our balance sheet and you see that in our ROIC.
We're constantly watching the health of our inventory, we don't get too far out and so we're managing that.
Alright, thanks, guys.
Thank you and I'm showing no further questions and I would like to turn the conference back over to Mr. Steve Jones for any further remarks.
Well, thank you and we'd like to thank everyone for joining us we expect to hold our next conference call to discuss March 31st quarter results on Tuesday May 10 2022.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Thank you.
Okay.
Yes.
Hello.
Okay.
Okay.
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Yes.
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Sure.
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Hi.
Yes.
[music].
[music].
[music].
Welcome to the scam source quarterly earnings conference call all lines have been placed in 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, Senior Vice President Treasurer, and Investor Relations Ma'am you may begin.
Yeah.
Good afternoon, and thank you for joining us joining me on the call today are Mike Baur, our chairman and CEO , John <unk>, Our Chief revenue Officer, and Steve Jones, Our Chief Financial Officer, We will review our operating results for the quarter and then take your questions. We posted an earnings info graphic that accompanies our comments.
A webcast in the Investor Relations section of our website.
We remind you that certain statements in our press release and the earnings of the graphic on this call are forward looking statements. These statements are subject to risks and uncertainties that could cause 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 then scan sources Form 10-K for the year ended June 32021, 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 scam source disclaims any duty to update forward looking statements to reflect actual results or change.
And expectations as required by law during the call we will discuss both GAAP and non-GAAP result, and have provided reconciliations between these amounts in the earnings at the graphics and in our press release. These reconciliations also can be found on our website and have been filed with our form 8-K filed today all now.
Turn the call over to Mike.
Thanks, Mary and thanks to everyone for joining us today.
Our outstanding second quarter performance underscores the strength of our hybrid distribution strategy for the quarter, we delivered six 6% net sales growth and adjusted EBITDA margin of four 9% and record non-GAAP EPS for the quarter and for the trailing 12 month period.
Strong demand from channel partners across our technologies drove our top line growth and profitability ahead of expectations.
We are proud of the operational excellence delivered by our employees worldwide, while navigating the ongoing supply chain challenges.
We are confident in our business model and ability to execute as a result, we are raising our full year fiscal year 2022 outlook and now expect net sales growth of at least 7% and adjusted EBITDA of at least $148 million.
The foundation of our hybrid distribution strategy is helping suppliers and sales partners accelerate growth across innovative technologies to meet end user requirements by providing hardware plus services SaaS and other value added offers our hybrid <unk>.
Tribunal strategy guides, how we operate our business for sustainable growth and profitability.
In addition to our outstanding financial results I am pleased today to announce the promotion of John <unk> to president of scan source ink.
John successful two years, leading the growth of our device digital and cloud businesses and his SaaS background have position John to drive the next phase of profitable growth for us as cancers.
John has built a world class leadership team that we believe will lead us on a sustainable growth trajectory as.
As President John will drive and champion our hybrid distribution growth strategy and communicate this message to our key stakeholders, including employees sales partners suppliers and investors Congratulations John I'll now turn the call over to you to discuss our business performance.
Thanks, Mike.
The past two years working with you and the entire <unk> team had been amazing I'm truly excited and also humbled by this opportunity and want to thank you for your trust and belief in our future is bright and I look forward to working together as we architect the next chapter of growth for <unk>.
As for the quarter, our employees delivered impressive results with six 6% year over year net sales growth and 25% year over year increase in gross profits.
<unk> demand across technologies drove top line growth and margin expansion in both of our segments.
Delighted with how our team is executing and successfully navigating supply chain challenges.
Our second quarter results reflect strong growth from enterprise projects and large deals while we experienced heightened supply chain challenges in the quarter, our differentiators specialization deep supplier and customer relationships and operational excellence enabled us.
To manage these challenges and successfully navigate today's supply constrained environment.
Another differentiator is our ability to use our balance sheet for strategic inventory investments.
Our customers Trust us to take care of their business and our dedicated suppliers and sales teams worked to take friction out of the buying experience.
I'd like to share a recent example of how <unk> is enabling partners to win with our hybrid distribution strategy across hardware SAS connectivity and cloud services. In this example in the healthcare market. We enabled a large communication bore with the design and delivery of our collaboration solution.
That included cloud enabled hardware for voice and video along with the UK as software subscription.
Our team assisted with the technical design product specifications pricing supplier program requirements and delivery of the total solution. This is a great example of how we enable our sales partners to sell hardware plus says.
In our specialty technology solutions segment, net sales increased 9% year over year fueled by strong market demand increases in big deals and market share gains.
Digital acceleration in technology refresh initiatives with end users are driving demand for our channel partners are more favorable sales mix and increased supplier sales incentives drove higher segment gross profit, which increased 35% year over year with 10 five.
<unk> gross profit margin.
With increased demand and continued labor shortages and customers are implementing mobile computing solutions to increase automation and worker productivity.
To address the massive increase in E. Commerce caused by COVID-19 retailers are working with our sales partners to implement mobile solutions to expand distribution centers maximize inventory awareness and improve the customer experience.
Our sales partners are also helping retailers adopt point of sale solutions to navigate omnichannel customer buying preferences, including self checkout curbside pickup and storefront fulfillment for online purchases.
The pause portal team had strong double digit year over year growth for its business, which has a higher margin profile from selling hardware plus services.
For our modern communications and cloud segment net sales increased 3% year over year and segment gross profit increased 18% year over year with a 15, 2% gross profit margin were also encouraged by our momentum in SaaS subscription sales growing double digits globally.
<unk>.
In the communications market, we are well positioned to serve partners with both on Prem and cloud solutions.
Work more model considered by many as the new norm is providing significant opportunities for our partners in ucas seek as cloud enabled end points and connectivity.
The <unk> team achieved 14% year on year net sales growth and exceeded $2 billion in end user <unk> annual recurring revenue or billings by supplier to end users.
We're encouraged by the continued adoption of recurring revenue being sold by Vars.
During the quarter a great highlight in the <unk> event lineup was our in person gross summit held here in Greenville, South Carolina, we shared our strategic plans for growth with a select group of over 100 sales and supplier partners.
I'm also excited about our regional face to face Road show series, which we are calling amped.
These high energy educational networking events advanced sales partners understanding of technology.
Topics engage them in interactive breakout role plays and demonstrate our industry thought leadership through panel discussions we've already held two of these power packed event with 10 more planned across the country for our partners' continued enablement and success.
Our team in Brazil continues to deliver consistent performance across top line revenue and profitability metrics during the quarter, we experienced strength in big deals market share gains and traction with new suppliers in.
In addition to our success in hardware our business in Brazil continues to build outstanding momentum across SaaS and digital solutions.
I'm encouraged by our first half execution as we head into the second half of our fiscal year 2022, we are leading the way in hybrid distribution accelerating the future of technology for our partners and suppliers across hardware SaaS connectivity and cloud services I'd like to thank all of our employees for their.
Outstanding efforts in the quarter and our heartfelt shout out to our employees at our distribution centers worldwide, who show up every day and exceed our customer expectations. I'd also like to thank our suppliers and customers for their continued loyalty and trust with <unk>.
Now Steve will take you through the financial results.
Thanks, John our strong second quarter results demonstrate our team's successful execution of our strategic plan. It was an outstanding quarter for delivering top line growth and our margins continue to see the benefit of the expanding mix of recurring revenues and value added services.
We achieved 17, 6% ROIC for the quarter. The highest result in five years as we balance our working capital investment to support our sales growth and meet future demand.
As Mike noted in his opening remarks, our strong performance and momentum gives us the confidence to raise our FY 'twenty to sales growth and EBIT expectations.
In the second quarter, we achieved strong top line growth up six 6% year over year or 7% on an organic basis and expanded our margins in both segments.
Our gross profit margins increased to 12, 5% adjusted EBITDA margins increased to 492% and our non-GAAP operating income margin increased to $4 one 5%.
Our Q2 net sales of $864 million restricted reflects strong customer demand across our technologies during the quarter, we saw a modest benefit from supplier price increases.
Our gross profit grew 25% year over year to $108 million favorable sales mix and higher supplier sales incentives contributed to our higher gross profit dollars.
Our Q2 margins increased to 12, 5% up from 10, 6% in the prior year's quarter.
Our non-GAAP SG&A expense for the quarter of $69 5 million increased $10 4 million or 18% year over year. This includes investment in strategic head count for <unk>, Telesis, Brazil, and other growth areas as well as investments to expand our capabilities.
Our investment focus is to enhance our ability to scale our business as part of our growth strategy.
Second quarter, adjusted EBITDA, which excludes share based compensation totaled $42 5 million up 43% year over year, reflecting a 492% adjusted EBITDA margin.
Higher gross profit margins drove the Q2 margin expansion.
Our second quarter income tax rate of 24% reflects an increase in forecasted tax exempt income primarily from Brazil for.
For fiscal year 2022, we estimate the effective tax rate, excluding discrete items to range between 24, 5% to 25, 5%.
Now turning to the balance sheet and cash flow, our working capital investment increased as expected to support our sales growth.
We used operating cash of $18 million for the quarter and $74 million for the 12 trailing 12 month period.
Year over year, working capital increased to $156 million or.
A 43% year over year increase.
Q2, DSO came in at 64 days modestly up from our typical range due to longer terms on selected large deals.
Our Q2 inventory turns of five seven times were in line with our typical range and reflect higher inventory levels to meet future demand and manage the ongoing supply chain challenges.
On December 31, 2021, we had cash and cash equivalents of $34 million and debt of $197 million.
Our balance sheet remains strong from.
From a net debt leverage perspective, we ended Q2 at approximately one one times trailing 12 month adjusted EBITDA.
Demonstrating financial flexibility to support our growth opportunities and create long term value.
During the December quarter, we had approximately $200000 in share repurchases under our $100 million share repurchase authorization.
Second quarter non-GAAP EPS of $1 two per share increased 57% year over year and is an all time record high.
With our Q2 results are trailing 12 months non-GAAP EPS of $3 38.
It is also a record high.
We will now open it up for questions.
Thank you if you have a question at this time. Please press Star then one on your telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Adam Tindle with Raymond James Your line is open. Please go ahead.
Hello, Stephen Mike This is Kevin on for Adam and John Please let me add let me add my congratulations.
Mike can you. Please start by commenting on the state of the supply constraints and today versus the end of the December quarter last night, we heard from a large domestic reseller that theyre starting to see some signs of light and we're wondering if youre starting to see the same and is this baked into your forecast for the year.
I'll, let John answer that if that's okay.
No problem.
Hey, Thanks for the question and thanks for your congratulations and.
Yes, we are.
Expect to see supply chain challenges continue.
And overall, our lead times have extended.
Two to four times longer than a year ago.
Have not seen much change from last quarter.
We think the team is doing a fantastic job of managing and navigating through the environment.
Yes.
The lead times in the supply chain is factored into our second half.
Okay perfect. Thank you and then one for Steve a number of vendor partners has been implementing price increases over the past few quarters, which you mentioned actually benefited skin sourced in the quarter, but.
Has been the customer response to this so far.
Well from a customer perspective, we don't have a lot of visibility to the end customer and we haven't seen a lot of impact from our channel partners. It was expected it's well communicated so we really haven't seen much of an impact from a customer perspective.
Great. Thank you so much.
Thank you and our next question comes from the line of Keith.
Keith <unk> with Northcoast Research. Your line is open. Please go ahead.
Good afternoon, guys, John I will once again add my congratulations as well well deserved.
Hey, guys I'll throw us out and I guess I'll, let you guys, who decided who wants to answer it but obviously the supply constraint issue has been out there now for several quarters and any thought in terms of how much does that impact your sales for the quarter.
Yeah, Keith Thanks for the question and Thanks also for the congratulations.
And.
I think the best way to characterize how we're seeing that supply chain is that we.
We did see some impact.
We saw some deals push out and we've factored that into our second half guidance.
Gotcha is youre thinking.
I know you partially answered this before but is your thinking that it's going to continue through at least the rest of the calendar year. How is your visibility in terms of lead times that are people able to deliver on time or is it constantly fluctuating right now.
Yeah.
First of all I would characterize it as kind of fluid and ongoing and we would definitely say that we see supply chain challenges through the end of the year and I think I would point back to what I said earlier in my prepared comments and even last quarter.
We are navigating the environment, well and we're extremely proud of our team and Thats one of the key Differentiators that has helped us to deliver such strong results this quarter.
Gotcha and then what are the things we're starting to hear is the vendors concern that whenever this supply chain and is that there might be the risk of a lot of inventory somewhere stuck in the channel that might have an impact on sales I guess can you address I guess effort the industry and you guys are taking to make sure that doesn't happen at the end of the day.
Well, let me take that one.
So Keith as we as we're looking at our inventory levels, we've been able to remarkably keep our inventory levels fairly steady as we've gone through this which I'm really really speaks back to the way we are leveraging our balance sheet and you see that in our ROIC.
We're constantly watching the health of our inventory, we don't get too far out and so we're managing that.
Alright, thanks, guys.
Thank you and I'm showing no further questions and I would like to turn the conference back over to Mr. Steve Jones for any further remarks.
Well, thank you and we'd like to thank everyone for joining us we expect to hold our next conference call to discuss March 31st quarter results on Tuesday May 10 2022.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Yes.