Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries ScanSource Third Quarter Results Exceed Expectations By: ScanSource, Inc. via Business Wire May 09, 2023 at 08:30 AM EDT Diversified Portfolio of Technologies Drove 5% Net Sales Growth ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the third quarter ended March 31, 2023. Third Quarter Summary Q3 FY23 Q3 FY22 Change (in thousands, except per share data) Select reported measures: Net sales $ 885,519 $ 845,990 4.7% Gross profit $ 111,762 $ 106,508 4.9% Gross profit margin % 12.62 % 12.59 % 3bp Operating income $ 34,279 $ 32,917 4.1% GAAP net income $ 21,221 $ 23,526 -9.8% GAAP diluted EPS $ 0.83 $ 0.91 -8.8% Select Non-GAAP measures: Adjusted EBITDA $ 45,656 $ 44,115 3.5% Adjusted EBITDA margin % 5.16 % 5.21 % -5bp Non-GAAP net income $ 24,330 $ 26,879 -9.5% Non-GAAP diluted EPS $ 0.96 $ 1.04 -7.7% “Throughout fiscal year 2023, our team has delivered results ahead of expectations,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Our strong results for the quarter demonstrate how our diversified portfolio of technologies is driving our hybrid distribution success.” Quarterly Results Net sales for the third quarter of fiscal year 2023 totaled $885.5 million, up 4.7% year-over-year. Specialty Technology Solutions net sales for the third quarter increased 12.4% year-over-year to $565.7 million, led by growth in networking, security, and barcoding. Modern Communications & Cloud net sales for the third quarter decreased 6.7% year-over-year to $319.9 million. Strength in networking was offset by lower sales volumes in communications hardware as business shifts to the cloud. Gross profit for the third quarter of fiscal year 2023 increased 4.9% year-over-year to $111.8 million, in line with higher sales volume. Gross profit margin for the third quarter was 12.62% versus 12.59% in the prior-year quarter. For the third quarter of fiscal year 2023, operating income increased to $34.3 million from $32.9 million in the prior-year quarter. Third quarter fiscal year 2023 non-GAAP operating income increased to $38.4 million for a 4.34% non-GAAP operating income margin, up from $37.4 million for the prior-year quarter. On a GAAP basis, net income for the third quarter of fiscal year 2023 totaled $21.2 million, or $0.83 per diluted share, compared to net income of $23.5 million, or $0.91 per diluted share, for the prior-year quarter. Third quarter fiscal year 2023 non-GAAP net income totaled $24.3 million, or $0.96 per diluted share, down from $26.9 million, or $1.04 per diluted share, for the prior-year quarter. Interest expense increased to $5.7 million, up significantly from $1.5 million for the prior-year quarter, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the third quarter of fiscal year 2023 increased 3.5% to $45.7 million, or 5.16% of net sales, compared to $44.1 million, or 5.21% of net sales, for the prior-year quarter. Adjusted return on invested capital totaled 14.6% for third quarter fiscal year 2023, compared to 18.0% in the prior-year quarter, primarily from increased average invested capital for the current-year quarter. Third quarter operating cash flow was $54.8 million driven by strong net income and reduced working capital quarter over quarter. Annual Financial Outlook for Fiscal Year 2023 ScanSource raises its expectation for adjusted EBITDA for the full fiscal year ended June 30, 2023 and replaces previously provided guidance. FY23 Annual Outlook Prior FY23 Outlook Net sales growth, year-over-year At least 6.5% At least 6.5% Adjusted EBITDA (non-GAAP) At least $182 million At least $176 million Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash share-based compensation expense. ScanSource’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. These statements are forward-looking, and actual results may differ materially. Webcast Details and Earnings Infographic At approximately 8:45 a.m. ET today, an Earnings Infographic, as a supplement to this press release and the Company's conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results and business in a conference call today, May 9, 2023, at 10:30 a.m. ET. A webcast of the call will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days. Safe Harbor Statement This press release contains “forward-looking” statements, including the Company's FY23 outlook, which involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, failure to hire and retain quality employees, risk to the Company's business from a cyber-security attack, supply chain challenges, the failure to manage and implement the Company's organic growth strategy, economic weakness and inflation, a failure of the Company's IT systems, a failure to acquire new businesses, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, credit risks involving the Company's larger customers and suppliers, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2022, and subsequent reports on Form 10-Q, filed with the Securities and Exchange Commission. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company also discloses certain non-GAAP financial measures, which are summarized below. Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments. Net sales on a constant currency basis, excluding acquisitions (organic growth): The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis. Additional Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges, restructuring costs, and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. Non-GAAP metrics are useful in assessing and understanding the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Adjusted earnings before interest expense, income taxes, depreciation, and amortization (“Adjusted EBITDA”): Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments, including acquisition and divestiture costs, impairment charges, restructuring costs and non-cash share-based compensation expense. Since Adjusted EBITDA excludes some non-cash costs of investing in our business and people, management believes that Adjusted EBITDA shows the profitability from our business operations more clearly. The presentation for Adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods. The Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales. Net debt: Net debt is defined as total consolidated debt minus consolidated cash and cash equivalents. Adjusted return on invested capital ("Adjusted ROIC"): Adjusted ROIC assists management in comparing the Company's performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance. Adjusted ROIC is calculated as Adjusted EBITDA over invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. Management believes the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of the Company's performance during the year. These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below. About ScanSource, Inc. ScanSource, Inc. (NASDAQ: SCSC) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, SaaS, connectivity and cloud. ScanSource enables customers to deliver solutions for their end users to address changing buying and consumption patterns. ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud services offerings from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration, telecom and cloud services. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2022 Best Places to Work in South Carolina and on FORTUNE magazine’s 2023 List of World’s Most Admired Companies. ScanSource ranks #773 on the Fortune 1000. For more information, visit www.scansource.com. ScanSource, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands) March 31, 2023 June 30, 2022* Assets Current assets: Cash and cash equivalents $ 37,374 $ 37,987 Accounts receivable, less allowance of $14,236 at March 31, 2023 and $16,806 at June 30, 2022 684,458 729,442 Inventories 752,763 614,814 Prepaid expenses and other current assets 102,946 141,562 Total current assets 1,577,541 1,523,805 Property and equipment, net 36,486 37,477 Goodwill 215,326 214,435 Identifiable intangible assets, net 72,192 84,427 Deferred income taxes 14,300 15,668 Other non-current assets 64,537 61,616 Total assets $ 1,980,382 $ 1,937,428 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 656,688 $ 714,177 Accrued expenses and other current liabilities 77,045 88,455 Income taxes payable 4,441 34 Current portion of long-term debt 5,977 11,598 Total current liabilities 744,151 814,264 Deferred income taxes 3,202 3,144 Long-term debt, net of current portion 145,881 123,733 Borrowings under revolving credit facility 159,194 135,839 Other long-term liabilities 49,059 53,920 Total liabilities 1,101,487 1,130,900 Commitments and contingencies Shareholders’ equity: Preferred stock, no par value; 3,000,000 shares authorized, none issued — — Common stock, no par value; 45,000,000 shares authorized, 25,007,396 and 25,187,351 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively 60,475 64,297 Retained earnings 917,866 846,869 Accumulated other comprehensive loss (99,446 ) (104,638 ) Total shareholders’ equity 878,895 806,528 Total liabilities and shareholders’ equity $ 1,980,382 $ 1,937,428 *Derived from audited financial statements. ScanSource, Inc. and Subsidiaries Condensed Consolidated Income Statements (Unaudited) (in thousands, except per share data) Quarter ended March 31, Nine months ended March 31, 2023 2022 2023 2022 Net sales $ 885,519 $ 845,990 $ 2,840,573 $ 2,567,652 Cost of goods sold 773,757 739,482 2,499,992 2,251,920 Gross profit 111,762 106,508 340,581 315,732 Selling, general and administrative expenses 70,669 66,522 211,337 199,538 Depreciation expense 2,644 2,612 8,085 8,039 Intangible amortization expense 4,170 4,457 12,561 13,413 Operating income 34,279 32,917 108,598 94,742 Interest expense 5,715 1,483 14,223 4,637 Interest income (1,710 ) (1,000 ) (5,327 ) (2,973 ) Other expense, net 361 (136 ) 1,314 668 Income before income taxes 29,913 32,570 98,388 92,410 Provision for income taxes 8,692 9,044 27,391 23,659 Net income from continuing operations 21,221 23,526 70,997 68,751 Net income from discontinued operations — — — 100 Net income $ 21,221 $ 23,526 $ 70,997 $ 68,851 Per share data: Net income from continuing operations per common share, basic $ 0.84 $ 0.92 $ 2.81 $ 2.69 Net income from discontinued operations per common share, basic — — — — Net income per common share, basic $ 0.84 $ 0.92 $ 2.81 $ 2.69 Weighted-average shares outstanding, basic 25,196 25,635 25,228 25,577 Net income from continuing operations per common share, diluted $ 0.83 $ 0.91 $ 2.79 $ 2.66 Net income from discontinued operations per common share, diluted — — — — Net income per common share, diluted $ 0.83 $ 0.91 $ 2.79 $ 2.67 Weighted-average shares outstanding, diluted 25,439 25,853 25,436 25,812 ScanSource, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine months ended March 31, 2023 2022 Cash flows from operating activities: Net income $ 70,997 $ 68,851 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 21,359 22,184 Amortization of debt issue costs 481 313 Provision for doubtful accounts 1,852 156 Share-based compensation 8,633 8,792 Deferred income taxes 1,409 1,995 Finance lease interest 31 32 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 46,652 (67,404 ) Inventories (136,257 ) (118,349 ) Prepaid expenses and other assets 39,178 (15,002 ) Other non-current assets (1,772 ) (2,791 ) Accounts payable (60,717 ) 67,535 Accrued expenses and other liabilities (16,780 ) (12,745 ) Income taxes payable 4,426 862 Net cash used in operating activities (20,508 ) (45,671 ) Cash flows from investing activities: Capital expenditures (6,549 ) (3,326 ) Cash received for business disposal — 3,125 Net cash used in investing activities (6,549 ) (201 ) Cash flows from financing activities: Borrowings on revolving credit, net of expenses 1,871,909 1,597,270 Repayments on revolving credit, net of expenses (1,848,554 ) (1,552,976 ) Borrowings (repayments) on long-term debt, net 16,527 (5,968 ) Repayments on finance lease obligation (612 ) (932 ) Debt issuance costs (1,407 ) — Exercise of stock options 853 1,592 Taxes paid on settlement of equity awards (2,433 ) (2,729 ) Common stock repurchased (10,718 ) (8,527 ) Net cash provided by financing activities 25,565 27,730 Effect of exchange rate changes on cash and cash equivalents 879 (1,037 ) Decrease in cash and cash equivalents (613 ) (19,179 ) Cash and cash equivalents at beginning of period 37,987 62,718 Cash and cash equivalents at period end $ 37,374 $ 43,539 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except percentages) Non-GAAP Financial Information: Quarter ended March 31, 2023 2022 Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) 14.6 % 18.0 % Reconciliation of Net Income to Adjusted EBITDA: Net income (GAAP) $ 21,221 $ 23,526 Plus: Interest expense 5,715 1,483 Plus: Income taxes 8,692 9,044 Plus: Depreciation and amortization 7,074 7,305 EBITDA (non-GAAP) 42,702 41,358 Plus: Share-based compensation 2,954 2,757 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 45,656 $ 44,115 Invested Capital Calculations: Equity – beginning of the quarter $ 862,386 $ 768,525 Equity – end of the quarter 878,895 806,654 Plus: Share-based compensation, net 2,191 2,063 Average equity 871,736 788,621 Average funded debt (b) 398,318 205,073 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,270,054 $ 993,694 (a) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 90 days in the current and prior-year quarter. (b) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Segment: Quarter ended March 31, 2023 2022 % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 565,652 $ 503,072 12.4 % Foreign exchange impact (a) 61 — Non-GAAP net sales, constant currency $ 565,713 $ 503,072 12.5 % Modern Communications & Cloud: Net sales, reported $ 319,867 $ 342,918 (6.7 )% Foreign exchange impact (a) 363 — Non-GAAP net sales, constant currency $ 320,230 $ 342,918 (6.6 )% Consolidated: Net sales, reported $ 885,519 $ 845,990 4.7 % Foreign exchange impact (a) 424 — Non-GAAP net sales, constant currency $ 885,943 $ 845,990 4.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Quarter ended March 31, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 808,797 $ 764,529 5.8 % International: Net sales, reported $ 76,722 $ 81,461 (5.8 ) % Foreign exchange impact(a) 424 — Non-GAAP net sales, constant currency $ 77,146 $ 81,461 (5.3 ) % Consolidated: Net sales, reported $ 885,519 $ 845,990 4.7 % Foreign exchange impact(a) 424 — Non-GAAP net sales, constant currency $ 885,943 $ 845,990 4.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Quarter ended March 31, 2023 GAAP Measure Intangible amortization expense Non-GAAP measure (in thousands, except per share data) SG&A expenses $70,669 — $70,669 Operating income 34,279 4,170 38,449 Net income 21,221 3,109 24,330 Diluted EPS $0.83 $0.12 $0.96 Quarter ended March 31, 2022 GAAP Measure Intangible amortization expense Non-GAAP measure (in thousands, except per share data) SG&A expense $66,522 — $66,522 Operating income 32,917 4,457 37,374 Net income 23,526 3,353 26,879 Diluted EPS $0.91 $0.13 $1.04 ScanSource, Inc. and Subsidiaries Supplementary Forward-Looking Information (Unaudited) Annual Financial Outlook for Fiscal Year 2023: FY23 Outlook GAAP, Operating income At least $140 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and other income (expense), net $4 million Tax recovery $(3) million Adjusted EBITDA (non-GAAP) At least $182 million View source version on businesswire.com: https://www.businesswire.com/news/home/20230509005312/en/Contacts Steve Jones Senior EVP, Chief Financial Officer ScanSource, Inc. (864) 286-4302 Mary M. Gentry SVP, Treasurer and Investor Relations ScanSource, Inc. (864) 286-4892 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
ScanSource Third Quarter Results Exceed Expectations By: ScanSource, Inc. via Business Wire May 09, 2023 at 08:30 AM EDT Diversified Portfolio of Technologies Drove 5% Net Sales Growth ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the third quarter ended March 31, 2023. Third Quarter Summary Q3 FY23 Q3 FY22 Change (in thousands, except per share data) Select reported measures: Net sales $ 885,519 $ 845,990 4.7% Gross profit $ 111,762 $ 106,508 4.9% Gross profit margin % 12.62 % 12.59 % 3bp Operating income $ 34,279 $ 32,917 4.1% GAAP net income $ 21,221 $ 23,526 -9.8% GAAP diluted EPS $ 0.83 $ 0.91 -8.8% Select Non-GAAP measures: Adjusted EBITDA $ 45,656 $ 44,115 3.5% Adjusted EBITDA margin % 5.16 % 5.21 % -5bp Non-GAAP net income $ 24,330 $ 26,879 -9.5% Non-GAAP diluted EPS $ 0.96 $ 1.04 -7.7% “Throughout fiscal year 2023, our team has delivered results ahead of expectations,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Our strong results for the quarter demonstrate how our diversified portfolio of technologies is driving our hybrid distribution success.” Quarterly Results Net sales for the third quarter of fiscal year 2023 totaled $885.5 million, up 4.7% year-over-year. Specialty Technology Solutions net sales for the third quarter increased 12.4% year-over-year to $565.7 million, led by growth in networking, security, and barcoding. Modern Communications & Cloud net sales for the third quarter decreased 6.7% year-over-year to $319.9 million. Strength in networking was offset by lower sales volumes in communications hardware as business shifts to the cloud. Gross profit for the third quarter of fiscal year 2023 increased 4.9% year-over-year to $111.8 million, in line with higher sales volume. Gross profit margin for the third quarter was 12.62% versus 12.59% in the prior-year quarter. For the third quarter of fiscal year 2023, operating income increased to $34.3 million from $32.9 million in the prior-year quarter. Third quarter fiscal year 2023 non-GAAP operating income increased to $38.4 million for a 4.34% non-GAAP operating income margin, up from $37.4 million for the prior-year quarter. On a GAAP basis, net income for the third quarter of fiscal year 2023 totaled $21.2 million, or $0.83 per diluted share, compared to net income of $23.5 million, or $0.91 per diluted share, for the prior-year quarter. Third quarter fiscal year 2023 non-GAAP net income totaled $24.3 million, or $0.96 per diluted share, down from $26.9 million, or $1.04 per diluted share, for the prior-year quarter. Interest expense increased to $5.7 million, up significantly from $1.5 million for the prior-year quarter, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the third quarter of fiscal year 2023 increased 3.5% to $45.7 million, or 5.16% of net sales, compared to $44.1 million, or 5.21% of net sales, for the prior-year quarter. Adjusted return on invested capital totaled 14.6% for third quarter fiscal year 2023, compared to 18.0% in the prior-year quarter, primarily from increased average invested capital for the current-year quarter. Third quarter operating cash flow was $54.8 million driven by strong net income and reduced working capital quarter over quarter. Annual Financial Outlook for Fiscal Year 2023 ScanSource raises its expectation for adjusted EBITDA for the full fiscal year ended June 30, 2023 and replaces previously provided guidance. FY23 Annual Outlook Prior FY23 Outlook Net sales growth, year-over-year At least 6.5% At least 6.5% Adjusted EBITDA (non-GAAP) At least $182 million At least $176 million Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash share-based compensation expense. ScanSource’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. These statements are forward-looking, and actual results may differ materially. Webcast Details and Earnings Infographic At approximately 8:45 a.m. ET today, an Earnings Infographic, as a supplement to this press release and the Company's conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results and business in a conference call today, May 9, 2023, at 10:30 a.m. ET. A webcast of the call will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days. Safe Harbor Statement This press release contains “forward-looking” statements, including the Company's FY23 outlook, which involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, failure to hire and retain quality employees, risk to the Company's business from a cyber-security attack, supply chain challenges, the failure to manage and implement the Company's organic growth strategy, economic weakness and inflation, a failure of the Company's IT systems, a failure to acquire new businesses, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, credit risks involving the Company's larger customers and suppliers, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2022, and subsequent reports on Form 10-Q, filed with the Securities and Exchange Commission. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company also discloses certain non-GAAP financial measures, which are summarized below. Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments. Net sales on a constant currency basis, excluding acquisitions (organic growth): The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis. Additional Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges, restructuring costs, and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. Non-GAAP metrics are useful in assessing and understanding the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Adjusted earnings before interest expense, income taxes, depreciation, and amortization (“Adjusted EBITDA”): Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments, including acquisition and divestiture costs, impairment charges, restructuring costs and non-cash share-based compensation expense. Since Adjusted EBITDA excludes some non-cash costs of investing in our business and people, management believes that Adjusted EBITDA shows the profitability from our business operations more clearly. The presentation for Adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods. The Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales. Net debt: Net debt is defined as total consolidated debt minus consolidated cash and cash equivalents. Adjusted return on invested capital ("Adjusted ROIC"): Adjusted ROIC assists management in comparing the Company's performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance. Adjusted ROIC is calculated as Adjusted EBITDA over invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. Management believes the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of the Company's performance during the year. These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below. About ScanSource, Inc. ScanSource, Inc. (NASDAQ: SCSC) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, SaaS, connectivity and cloud. ScanSource enables customers to deliver solutions for their end users to address changing buying and consumption patterns. ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud services offerings from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration, telecom and cloud services. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2022 Best Places to Work in South Carolina and on FORTUNE magazine’s 2023 List of World’s Most Admired Companies. ScanSource ranks #773 on the Fortune 1000. For more information, visit www.scansource.com. ScanSource, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands) March 31, 2023 June 30, 2022* Assets Current assets: Cash and cash equivalents $ 37,374 $ 37,987 Accounts receivable, less allowance of $14,236 at March 31, 2023 and $16,806 at June 30, 2022 684,458 729,442 Inventories 752,763 614,814 Prepaid expenses and other current assets 102,946 141,562 Total current assets 1,577,541 1,523,805 Property and equipment, net 36,486 37,477 Goodwill 215,326 214,435 Identifiable intangible assets, net 72,192 84,427 Deferred income taxes 14,300 15,668 Other non-current assets 64,537 61,616 Total assets $ 1,980,382 $ 1,937,428 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 656,688 $ 714,177 Accrued expenses and other current liabilities 77,045 88,455 Income taxes payable 4,441 34 Current portion of long-term debt 5,977 11,598 Total current liabilities 744,151 814,264 Deferred income taxes 3,202 3,144 Long-term debt, net of current portion 145,881 123,733 Borrowings under revolving credit facility 159,194 135,839 Other long-term liabilities 49,059 53,920 Total liabilities 1,101,487 1,130,900 Commitments and contingencies Shareholders’ equity: Preferred stock, no par value; 3,000,000 shares authorized, none issued — — Common stock, no par value; 45,000,000 shares authorized, 25,007,396 and 25,187,351 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively 60,475 64,297 Retained earnings 917,866 846,869 Accumulated other comprehensive loss (99,446 ) (104,638 ) Total shareholders’ equity 878,895 806,528 Total liabilities and shareholders’ equity $ 1,980,382 $ 1,937,428 *Derived from audited financial statements. ScanSource, Inc. and Subsidiaries Condensed Consolidated Income Statements (Unaudited) (in thousands, except per share data) Quarter ended March 31, Nine months ended March 31, 2023 2022 2023 2022 Net sales $ 885,519 $ 845,990 $ 2,840,573 $ 2,567,652 Cost of goods sold 773,757 739,482 2,499,992 2,251,920 Gross profit 111,762 106,508 340,581 315,732 Selling, general and administrative expenses 70,669 66,522 211,337 199,538 Depreciation expense 2,644 2,612 8,085 8,039 Intangible amortization expense 4,170 4,457 12,561 13,413 Operating income 34,279 32,917 108,598 94,742 Interest expense 5,715 1,483 14,223 4,637 Interest income (1,710 ) (1,000 ) (5,327 ) (2,973 ) Other expense, net 361 (136 ) 1,314 668 Income before income taxes 29,913 32,570 98,388 92,410 Provision for income taxes 8,692 9,044 27,391 23,659 Net income from continuing operations 21,221 23,526 70,997 68,751 Net income from discontinued operations — — — 100 Net income $ 21,221 $ 23,526 $ 70,997 $ 68,851 Per share data: Net income from continuing operations per common share, basic $ 0.84 $ 0.92 $ 2.81 $ 2.69 Net income from discontinued operations per common share, basic — — — — Net income per common share, basic $ 0.84 $ 0.92 $ 2.81 $ 2.69 Weighted-average shares outstanding, basic 25,196 25,635 25,228 25,577 Net income from continuing operations per common share, diluted $ 0.83 $ 0.91 $ 2.79 $ 2.66 Net income from discontinued operations per common share, diluted — — — — Net income per common share, diluted $ 0.83 $ 0.91 $ 2.79 $ 2.67 Weighted-average shares outstanding, diluted 25,439 25,853 25,436 25,812 ScanSource, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine months ended March 31, 2023 2022 Cash flows from operating activities: Net income $ 70,997 $ 68,851 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 21,359 22,184 Amortization of debt issue costs 481 313 Provision for doubtful accounts 1,852 156 Share-based compensation 8,633 8,792 Deferred income taxes 1,409 1,995 Finance lease interest 31 32 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 46,652 (67,404 ) Inventories (136,257 ) (118,349 ) Prepaid expenses and other assets 39,178 (15,002 ) Other non-current assets (1,772 ) (2,791 ) Accounts payable (60,717 ) 67,535 Accrued expenses and other liabilities (16,780 ) (12,745 ) Income taxes payable 4,426 862 Net cash used in operating activities (20,508 ) (45,671 ) Cash flows from investing activities: Capital expenditures (6,549 ) (3,326 ) Cash received for business disposal — 3,125 Net cash used in investing activities (6,549 ) (201 ) Cash flows from financing activities: Borrowings on revolving credit, net of expenses 1,871,909 1,597,270 Repayments on revolving credit, net of expenses (1,848,554 ) (1,552,976 ) Borrowings (repayments) on long-term debt, net 16,527 (5,968 ) Repayments on finance lease obligation (612 ) (932 ) Debt issuance costs (1,407 ) — Exercise of stock options 853 1,592 Taxes paid on settlement of equity awards (2,433 ) (2,729 ) Common stock repurchased (10,718 ) (8,527 ) Net cash provided by financing activities 25,565 27,730 Effect of exchange rate changes on cash and cash equivalents 879 (1,037 ) Decrease in cash and cash equivalents (613 ) (19,179 ) Cash and cash equivalents at beginning of period 37,987 62,718 Cash and cash equivalents at period end $ 37,374 $ 43,539 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except percentages) Non-GAAP Financial Information: Quarter ended March 31, 2023 2022 Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) 14.6 % 18.0 % Reconciliation of Net Income to Adjusted EBITDA: Net income (GAAP) $ 21,221 $ 23,526 Plus: Interest expense 5,715 1,483 Plus: Income taxes 8,692 9,044 Plus: Depreciation and amortization 7,074 7,305 EBITDA (non-GAAP) 42,702 41,358 Plus: Share-based compensation 2,954 2,757 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 45,656 $ 44,115 Invested Capital Calculations: Equity – beginning of the quarter $ 862,386 $ 768,525 Equity – end of the quarter 878,895 806,654 Plus: Share-based compensation, net 2,191 2,063 Average equity 871,736 788,621 Average funded debt (b) 398,318 205,073 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,270,054 $ 993,694 (a) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 90 days in the current and prior-year quarter. (b) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Segment: Quarter ended March 31, 2023 2022 % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 565,652 $ 503,072 12.4 % Foreign exchange impact (a) 61 — Non-GAAP net sales, constant currency $ 565,713 $ 503,072 12.5 % Modern Communications & Cloud: Net sales, reported $ 319,867 $ 342,918 (6.7 )% Foreign exchange impact (a) 363 — Non-GAAP net sales, constant currency $ 320,230 $ 342,918 (6.6 )% Consolidated: Net sales, reported $ 885,519 $ 845,990 4.7 % Foreign exchange impact (a) 424 — Non-GAAP net sales, constant currency $ 885,943 $ 845,990 4.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Quarter ended March 31, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 808,797 $ 764,529 5.8 % International: Net sales, reported $ 76,722 $ 81,461 (5.8 ) % Foreign exchange impact(a) 424 — Non-GAAP net sales, constant currency $ 77,146 $ 81,461 (5.3 ) % Consolidated: Net sales, reported $ 885,519 $ 845,990 4.7 % Foreign exchange impact(a) 424 — Non-GAAP net sales, constant currency $ 885,943 $ 845,990 4.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Quarter ended March 31, 2023 GAAP Measure Intangible amortization expense Non-GAAP measure (in thousands, except per share data) SG&A expenses $70,669 — $70,669 Operating income 34,279 4,170 38,449 Net income 21,221 3,109 24,330 Diluted EPS $0.83 $0.12 $0.96 Quarter ended March 31, 2022 GAAP Measure Intangible amortization expense Non-GAAP measure (in thousands, except per share data) SG&A expense $66,522 — $66,522 Operating income 32,917 4,457 37,374 Net income 23,526 3,353 26,879 Diluted EPS $0.91 $0.13 $1.04 ScanSource, Inc. and Subsidiaries Supplementary Forward-Looking Information (Unaudited) Annual Financial Outlook for Fiscal Year 2023: FY23 Outlook GAAP, Operating income At least $140 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and other income (expense), net $4 million Tax recovery $(3) million Adjusted EBITDA (non-GAAP) At least $182 million View source version on businesswire.com: https://www.businesswire.com/news/home/20230509005312/en/Contacts Steve Jones Senior EVP, Chief Financial Officer ScanSource, Inc. (864) 286-4302 Mary M. Gentry SVP, Treasurer and Investor Relations ScanSource, Inc. (864) 286-4892
ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the third quarter ended March 31, 2023. Third Quarter Summary Q3 FY23 Q3 FY22 Change (in thousands, except per share data) Select reported measures: Net sales $ 885,519 $ 845,990 4.7% Gross profit $ 111,762 $ 106,508 4.9% Gross profit margin % 12.62 % 12.59 % 3bp Operating income $ 34,279 $ 32,917 4.1% GAAP net income $ 21,221 $ 23,526 -9.8% GAAP diluted EPS $ 0.83 $ 0.91 -8.8% Select Non-GAAP measures: Adjusted EBITDA $ 45,656 $ 44,115 3.5% Adjusted EBITDA margin % 5.16 % 5.21 % -5bp Non-GAAP net income $ 24,330 $ 26,879 -9.5% Non-GAAP diluted EPS $ 0.96 $ 1.04 -7.7% “Throughout fiscal year 2023, our team has delivered results ahead of expectations,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Our strong results for the quarter demonstrate how our diversified portfolio of technologies is driving our hybrid distribution success.” Quarterly Results Net sales for the third quarter of fiscal year 2023 totaled $885.5 million, up 4.7% year-over-year. Specialty Technology Solutions net sales for the third quarter increased 12.4% year-over-year to $565.7 million, led by growth in networking, security, and barcoding. Modern Communications & Cloud net sales for the third quarter decreased 6.7% year-over-year to $319.9 million. Strength in networking was offset by lower sales volumes in communications hardware as business shifts to the cloud. Gross profit for the third quarter of fiscal year 2023 increased 4.9% year-over-year to $111.8 million, in line with higher sales volume. Gross profit margin for the third quarter was 12.62% versus 12.59% in the prior-year quarter. For the third quarter of fiscal year 2023, operating income increased to $34.3 million from $32.9 million in the prior-year quarter. Third quarter fiscal year 2023 non-GAAP operating income increased to $38.4 million for a 4.34% non-GAAP operating income margin, up from $37.4 million for the prior-year quarter. On a GAAP basis, net income for the third quarter of fiscal year 2023 totaled $21.2 million, or $0.83 per diluted share, compared to net income of $23.5 million, or $0.91 per diluted share, for the prior-year quarter. Third quarter fiscal year 2023 non-GAAP net income totaled $24.3 million, or $0.96 per diluted share, down from $26.9 million, or $1.04 per diluted share, for the prior-year quarter. Interest expense increased to $5.7 million, up significantly from $1.5 million for the prior-year quarter, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the third quarter of fiscal year 2023 increased 3.5% to $45.7 million, or 5.16% of net sales, compared to $44.1 million, or 5.21% of net sales, for the prior-year quarter. Adjusted return on invested capital totaled 14.6% for third quarter fiscal year 2023, compared to 18.0% in the prior-year quarter, primarily from increased average invested capital for the current-year quarter. Third quarter operating cash flow was $54.8 million driven by strong net income and reduced working capital quarter over quarter. Annual Financial Outlook for Fiscal Year 2023 ScanSource raises its expectation for adjusted EBITDA for the full fiscal year ended June 30, 2023 and replaces previously provided guidance. FY23 Annual Outlook Prior FY23 Outlook Net sales growth, year-over-year At least 6.5% At least 6.5% Adjusted EBITDA (non-GAAP) At least $182 million At least $176 million Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash share-based compensation expense. ScanSource’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. These statements are forward-looking, and actual results may differ materially. Webcast Details and Earnings Infographic At approximately 8:45 a.m. ET today, an Earnings Infographic, as a supplement to this press release and the Company's conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results and business in a conference call today, May 9, 2023, at 10:30 a.m. ET. A webcast of the call will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days. Safe Harbor Statement This press release contains “forward-looking” statements, including the Company's FY23 outlook, which involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, failure to hire and retain quality employees, risk to the Company's business from a cyber-security attack, supply chain challenges, the failure to manage and implement the Company's organic growth strategy, economic weakness and inflation, a failure of the Company's IT systems, a failure to acquire new businesses, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, credit risks involving the Company's larger customers and suppliers, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2022, and subsequent reports on Form 10-Q, filed with the Securities and Exchange Commission. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company also discloses certain non-GAAP financial measures, which are summarized below. Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments. Net sales on a constant currency basis, excluding acquisitions (organic growth): The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis. Additional Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges, restructuring costs, and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. Non-GAAP metrics are useful in assessing and understanding the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Adjusted earnings before interest expense, income taxes, depreciation, and amortization (“Adjusted EBITDA”): Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments, including acquisition and divestiture costs, impairment charges, restructuring costs and non-cash share-based compensation expense. Since Adjusted EBITDA excludes some non-cash costs of investing in our business and people, management believes that Adjusted EBITDA shows the profitability from our business operations more clearly. The presentation for Adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods. The Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales. Net debt: Net debt is defined as total consolidated debt minus consolidated cash and cash equivalents. Adjusted return on invested capital ("Adjusted ROIC"): Adjusted ROIC assists management in comparing the Company's performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance. Adjusted ROIC is calculated as Adjusted EBITDA over invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. Management believes the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of the Company's performance during the year. These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below. About ScanSource, Inc. ScanSource, Inc. (NASDAQ: SCSC) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, SaaS, connectivity and cloud. ScanSource enables customers to deliver solutions for their end users to address changing buying and consumption patterns. ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud services offerings from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration, telecom and cloud services. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2022 Best Places to Work in South Carolina and on FORTUNE magazine’s 2023 List of World’s Most Admired Companies. ScanSource ranks #773 on the Fortune 1000. For more information, visit www.scansource.com. ScanSource, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands) March 31, 2023 June 30, 2022* Assets Current assets: Cash and cash equivalents $ 37,374 $ 37,987 Accounts receivable, less allowance of $14,236 at March 31, 2023 and $16,806 at June 30, 2022 684,458 729,442 Inventories 752,763 614,814 Prepaid expenses and other current assets 102,946 141,562 Total current assets 1,577,541 1,523,805 Property and equipment, net 36,486 37,477 Goodwill 215,326 214,435 Identifiable intangible assets, net 72,192 84,427 Deferred income taxes 14,300 15,668 Other non-current assets 64,537 61,616 Total assets $ 1,980,382 $ 1,937,428 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 656,688 $ 714,177 Accrued expenses and other current liabilities 77,045 88,455 Income taxes payable 4,441 34 Current portion of long-term debt 5,977 11,598 Total current liabilities 744,151 814,264 Deferred income taxes 3,202 3,144 Long-term debt, net of current portion 145,881 123,733 Borrowings under revolving credit facility 159,194 135,839 Other long-term liabilities 49,059 53,920 Total liabilities 1,101,487 1,130,900 Commitments and contingencies Shareholders’ equity: Preferred stock, no par value; 3,000,000 shares authorized, none issued — — Common stock, no par value; 45,000,000 shares authorized, 25,007,396 and 25,187,351 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively 60,475 64,297 Retained earnings 917,866 846,869 Accumulated other comprehensive loss (99,446 ) (104,638 ) Total shareholders’ equity 878,895 806,528 Total liabilities and shareholders’ equity $ 1,980,382 $ 1,937,428 *Derived from audited financial statements. ScanSource, Inc. and Subsidiaries Condensed Consolidated Income Statements (Unaudited) (in thousands, except per share data) Quarter ended March 31, Nine months ended March 31, 2023 2022 2023 2022 Net sales $ 885,519 $ 845,990 $ 2,840,573 $ 2,567,652 Cost of goods sold 773,757 739,482 2,499,992 2,251,920 Gross profit 111,762 106,508 340,581 315,732 Selling, general and administrative expenses 70,669 66,522 211,337 199,538 Depreciation expense 2,644 2,612 8,085 8,039 Intangible amortization expense 4,170 4,457 12,561 13,413 Operating income 34,279 32,917 108,598 94,742 Interest expense 5,715 1,483 14,223 4,637 Interest income (1,710 ) (1,000 ) (5,327 ) (2,973 ) Other expense, net 361 (136 ) 1,314 668 Income before income taxes 29,913 32,570 98,388 92,410 Provision for income taxes 8,692 9,044 27,391 23,659 Net income from continuing operations 21,221 23,526 70,997 68,751 Net income from discontinued operations — — — 100 Net income $ 21,221 $ 23,526 $ 70,997 $ 68,851 Per share data: Net income from continuing operations per common share, basic $ 0.84 $ 0.92 $ 2.81 $ 2.69 Net income from discontinued operations per common share, basic — — — — Net income per common share, basic $ 0.84 $ 0.92 $ 2.81 $ 2.69 Weighted-average shares outstanding, basic 25,196 25,635 25,228 25,577 Net income from continuing operations per common share, diluted $ 0.83 $ 0.91 $ 2.79 $ 2.66 Net income from discontinued operations per common share, diluted — — — — Net income per common share, diluted $ 0.83 $ 0.91 $ 2.79 $ 2.67 Weighted-average shares outstanding, diluted 25,439 25,853 25,436 25,812 ScanSource, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine months ended March 31, 2023 2022 Cash flows from operating activities: Net income $ 70,997 $ 68,851 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 21,359 22,184 Amortization of debt issue costs 481 313 Provision for doubtful accounts 1,852 156 Share-based compensation 8,633 8,792 Deferred income taxes 1,409 1,995 Finance lease interest 31 32 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 46,652 (67,404 ) Inventories (136,257 ) (118,349 ) Prepaid expenses and other assets 39,178 (15,002 ) Other non-current assets (1,772 ) (2,791 ) Accounts payable (60,717 ) 67,535 Accrued expenses and other liabilities (16,780 ) (12,745 ) Income taxes payable 4,426 862 Net cash used in operating activities (20,508 ) (45,671 ) Cash flows from investing activities: Capital expenditures (6,549 ) (3,326 ) Cash received for business disposal — 3,125 Net cash used in investing activities (6,549 ) (201 ) Cash flows from financing activities: Borrowings on revolving credit, net of expenses 1,871,909 1,597,270 Repayments on revolving credit, net of expenses (1,848,554 ) (1,552,976 ) Borrowings (repayments) on long-term debt, net 16,527 (5,968 ) Repayments on finance lease obligation (612 ) (932 ) Debt issuance costs (1,407 ) — Exercise of stock options 853 1,592 Taxes paid on settlement of equity awards (2,433 ) (2,729 ) Common stock repurchased (10,718 ) (8,527 ) Net cash provided by financing activities 25,565 27,730 Effect of exchange rate changes on cash and cash equivalents 879 (1,037 ) Decrease in cash and cash equivalents (613 ) (19,179 ) Cash and cash equivalents at beginning of period 37,987 62,718 Cash and cash equivalents at period end $ 37,374 $ 43,539 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except percentages) Non-GAAP Financial Information: Quarter ended March 31, 2023 2022 Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) 14.6 % 18.0 % Reconciliation of Net Income to Adjusted EBITDA: Net income (GAAP) $ 21,221 $ 23,526 Plus: Interest expense 5,715 1,483 Plus: Income taxes 8,692 9,044 Plus: Depreciation and amortization 7,074 7,305 EBITDA (non-GAAP) 42,702 41,358 Plus: Share-based compensation 2,954 2,757 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 45,656 $ 44,115 Invested Capital Calculations: Equity – beginning of the quarter $ 862,386 $ 768,525 Equity – end of the quarter 878,895 806,654 Plus: Share-based compensation, net 2,191 2,063 Average equity 871,736 788,621 Average funded debt (b) 398,318 205,073 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,270,054 $ 993,694 (a) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 90 days in the current and prior-year quarter. (b) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Segment: Quarter ended March 31, 2023 2022 % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 565,652 $ 503,072 12.4 % Foreign exchange impact (a) 61 — Non-GAAP net sales, constant currency $ 565,713 $ 503,072 12.5 % Modern Communications & Cloud: Net sales, reported $ 319,867 $ 342,918 (6.7 )% Foreign exchange impact (a) 363 — Non-GAAP net sales, constant currency $ 320,230 $ 342,918 (6.6 )% Consolidated: Net sales, reported $ 885,519 $ 845,990 4.7 % Foreign exchange impact (a) 424 — Non-GAAP net sales, constant currency $ 885,943 $ 845,990 4.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Quarter ended March 31, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 808,797 $ 764,529 5.8 % International: Net sales, reported $ 76,722 $ 81,461 (5.8 ) % Foreign exchange impact(a) 424 — Non-GAAP net sales, constant currency $ 77,146 $ 81,461 (5.3 ) % Consolidated: Net sales, reported $ 885,519 $ 845,990 4.7 % Foreign exchange impact(a) 424 — Non-GAAP net sales, constant currency $ 885,943 $ 845,990 4.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Quarter ended March 31, 2023 GAAP Measure Intangible amortization expense Non-GAAP measure (in thousands, except per share data) SG&A expenses $70,669 — $70,669 Operating income 34,279 4,170 38,449 Net income 21,221 3,109 24,330 Diluted EPS $0.83 $0.12 $0.96 Quarter ended March 31, 2022 GAAP Measure Intangible amortization expense Non-GAAP measure (in thousands, except per share data) SG&A expense $66,522 — $66,522 Operating income 32,917 4,457 37,374 Net income 23,526 3,353 26,879 Diluted EPS $0.91 $0.13 $1.04 ScanSource, Inc. and Subsidiaries Supplementary Forward-Looking Information (Unaudited) Annual Financial Outlook for Fiscal Year 2023: FY23 Outlook GAAP, Operating income At least $140 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and other income (expense), net $4 million Tax recovery $(3) million Adjusted EBITDA (non-GAAP) At least $182 million View source version on businesswire.com: https://www.businesswire.com/news/home/20230509005312/en/
Steve Jones Senior EVP, Chief Financial Officer ScanSource, Inc. (864) 286-4302 Mary M. Gentry SVP, Treasurer and Investor Relations ScanSource, Inc. (864) 286-4892