We’re now looking more of what’s a normal technology year going to be like in next year. When I say next year, I really mean not calendar year. So when we look out to the typical ScanSource model, we have seasonality in our Q3, which is the March quarter. And we have no idea, are we going to have that seasonality or not, because Q2 is going to be a crapshoot. So we’re trying to triangulate on what customers are telling us, what some of our suppliers have already said publicly about this quarter, meaning our Q1 and Q2. We heard that, and you’ve probably seen from some of our barcoding and point of sale suppliers, they’re talking about how they’re down 30% or so, and so we certainly are feeling that through our customer base. But we have no reason to think that there won’t be come back in the second half of our year.
We said this back in August. The challenge now is we think it’s got to be softer to some extent. There’s no way it’s going to be as strong as we thought back in August based on these customer conversations, based on supply chain issues gone. And some of our suppliers are already saying, “Hey, their bookings are not like they were before.” So we want to be very clear that we are planning for the second half to be reasonable, but we’re also thinking beyond that. That we want to be careful and make sure we’ve still got investments positioned for the rest of calendar — calendar ’24, which would be our FY ’25. We don’t want to sacrifice future growth opportunities because the next 2 quarters might be soft.
Operator: [Operator Instructions]. And your next question comes from the line of Michael Latimore with Northland Capital Markets.
Michael Latimore: Your comments on Intelisys seem fairly positive. Should we assume that the kind of the growth rates you’re seeing in CCaaS and UCaaS are sustainable for the foreseeable future?
Michael Baur: Mike, it’s Mike. Yes, we do. That business for us has continued to grow. The dollars have gotten much larger. So even as in some cases, the UCaaS growth rate is maybe less than it was a year ago, the dollars are still substantial and CCaaS has gone up dramatically. So yes, we’re still seeing that happen. We still see the quarter-over-quarter growth happening and the year-over-year happening. Certain suppliers are doing better than others, and that was expected as well. There would be some leveling out last year with the winners, and we think we’re in the right place. We have the right suppliers to win in this market.
Michael Latimore: Do you think — is Intelisys taking share in those categories?
Michael Baur: We believe we are. We believe we’re having more success than the industry growth rates would suggest. And yes, we are. Now that, again, that’s part of the challenge we have because we have been, by far, the largest technology services distributor. And so there are always — our competitors coming after us. And so we’re having a battle for some share, too, Mike, just to be fair. And that affects our growth rate as well because as we compete for market share, we have to take a lower margin in some cases, which is very typical of distribution. That’s the way it works. So in some respects, our end user billings is actually doing quite well, and we look at that as an indicator of overall success.
Michael Latimore: Have the — over the last year, have the sort of lead vendors in each category changed much?
Michael Baur: I would say they’ve taken more share, yes. I think there’s been a shift to the lead vendors, yes. And again, what we’re seeing is some of the suppliers and vendors are more willing to embrace the channel, embrace the agent community than others. And those that really go all out to make sure that the agents are profitable and have a long-term return on investment are the ones that are winning.
Michael Latimore: Yes. Can you highlight which vendors are kind of in the top group business point?
Michael Baur: Not today but — well, at different times, we’ve shared that. I would say for example, previous quarters in CCaaS, we’ve mentioned Five9, Genesys and NICE, but we decided not to really mention any this quarter. So that is a previous quarter comment.
Michael Latimore: Right, right. In the CCaaS world, generative AI has gotten a lot of attention. Does that flow through? Is that visible to your channel and your business? Or is that not really a driver yet?
Michael Baur: Probably still early days, yes. More to come on that, but we certainly think it’s going to be a factor and our channel will benefit. I mean, the thing about the channel is we generally — partners don’t want to sell things that are not ready for prime time, but they certainly want to be at the very early, early stages at the same time. So we’ll see.
Michael Latimore: Very last one here. On your — it sounds like physical security is doing well. Can you highlight which kind of use cases are doing well and what verticals are doing well there?
Michael Baur: Yes. Over the years, we’ve talked about our physical securities led by our video surveillance technologies. And if you think about it, gosh, you just look around the world. Every time there’s some events, there’s more interest in do we have video to capture that. And so the video technologies continue to improve. You’ve got 4K cameras, you got even better cameras now, color, thermal. And then, well, for example, here in Greenville this week, we had one of our key suppliers, Axis Communications. Axis was here with their mobile experience centers. Basically, a big RV with $1 million worth of equipment demonstrating all of the capabilities of video surveillance, and Axis continues to be one of our leading suppliers.
