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 Reports Fourth Quarter and Full-year Results By: ScanSource, Inc. via Business Wire August 22, 2023 at 08:30 AM EDT ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the fourth quarter ended June 30, 2023. Fourth Quarter Summary Fiscal Year Summary Q4 FY23 Q4 FY22 Change FY23 FY22 Change (in thousands, except per share data) Select reported measures: Net sales $ 947,149 $ 962,283 -1.6 % $ 3,787,721 $ 3,529,935 7.3 % Gross profit $ 108,659 $ 110,792 -1.9 % $ 449,239 $ 426,524 5.3 % Gross profit margin % 11.47 % 11.51 % -4bp 11.86 % 12.08 % -22bp Operating income $ 27,289 $ 27,424 -0.5 % $ 135,886 $ 122,167 11.2 % GAAP net income $ 17,095 $ 19,947 -14.3 % $ 88,092 $ 88,698 -0.7 % GAAP diluted EPS $ 0.68 $ 0.78 -12.8 % $ 3.47 $ 3.44 0.9 % Select Non-GAAP measures: Adjusted EBITDA $ 40,199 $ 38,672 3.9 % $ 179,943 $ 166,723 7.9 % Adjusted EBITDA margin % 4.24 % 4.02 % 22bp 4.75 % 4.72 % 3bp Non-GAAP net income $ 19,213 $ 23,266 -17.4 % $ 97,688 $ 102,140 -4.4 % Non-GAAP diluted EPS $ 0.76 $ 0.91 -16.5 % $ 3.85 $ 3.97 -3.0 % “As we enter our new fiscal year, strong free cash flow and focus on Intelisys are keys to our success,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Now that the supply chain challenges are behind us, we are normalizing our working capital to meet our margin expectations and market demand.” Quarterly Results Net sales for the fourth quarter of fiscal year 2023 totaled $947.1 million, down 1.6% year-over-year. Fourth quarter fiscal year 2023 sales and execution reinforce the resilience of ScanSource’s business amid a cyberattack that impacted the Company’s core systems for its hardware business. Specialty Technology Solutions net sales for the fourth quarter decreased 3.3% year-over-year to $561.5 million. Strength in networking and security partially offset the lost sales from the cyberattack and a slowdown in mobility and barcoding. Modern Communications & Cloud net sales for the fourth quarter increased 1.0% year-over-year to $385.6 million, led by growth in Cisco products. Intelisys net billings increased to approximately $2.47 billion annualized, and Intelisys net sales for fourth quarter increased 8% year-over-year. Gross profit for the fourth quarter of fiscal year 2023 decreased 1.9% year-over-year to $108.7 million. Gross profit margin for the fourth quarter was 11.47% versus 11.51% in the prior-year quarter. For the fourth quarter of fiscal year 2023, operating income was $27.3 million compared to $27.4 million in the prior-year quarter. Fourth quarter fiscal year 2023 non-GAAP operating income increased to $32.8 million for a 3.46% non-GAAP operating income margin, up from $31.9 million for the prior-year quarter. On a GAAP basis, net income for the fourth quarter of fiscal year 2023 totaled $17.1 million, or $0.68 per diluted share, compared to net income of $19.9 million, or $0.78 per diluted share, for the prior-year quarter. Fourth quarter fiscal year 2023 non-GAAP net income totaled $19.2 million, or $0.76 per diluted share, down from $23.3 million, or $0.91 per diluted share, for the prior-year quarter. Interest expense increased to $5.6 million, up significantly from $1.9 million for the prior-year quarter, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the fourth quarter of fiscal year 2023 increased 3.9% to $40.2 million, or 4.24% of net sales, compared to $38.7 million, or 4.02% of net sales, for the prior-year quarter. Full-Year Results For fiscal year 2023, net sales increased 7.3% to $3.8 billion, or a 7.2% year-over-year increase on an organic basis. Fiscal year 2023 net sales in the Specialty Technology Solutions segment increased 11.9% to $2.3 billion, led by growth in networking, security, and barcoding. Fiscal year 2023 net sales in the Modern Communications & Cloud segment increased 0.6% year-over-year to $1.5 billion led by growth in Cisco products. Gross profit for the fiscal year 2023 totaled $449.2 million, up 5.3% year-over-year. The increase is primarily due to higher sales volume compared to the prior year. Gross profit margin decreased to 11.9%, down from 12.1% in the prior year. For the fiscal year ended June 30, 2023, operating income increased to $135.9 million from $122.2 million in the prior year. Fiscal year 2023 non-GAAP operating income increased to $151.1 million for a 3.99% non-GAAP operating income margin, up from $140.1 million for the prior year. On a GAAP basis, net income for the fiscal year ended June 30, 2023 totaled $88.1 million, or $3.47 per diluted share, compared to net income of $88.7 million, or $3.44 per diluted share for the prior year. Fiscal year 2023 non-GAAP net income totaled $97.7 million, or $3.85 per diluted share, compared to $102.1 million, or $3.97 per diluted share for the prior year. Interest expense increased to $19.8 million, up significantly from $6.5 million for the prior year, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the fiscal year ended June 30, 2023 increased to $179.9 million, or 4.75% of net sales, compared to $166.7 million, or 4.72%, of net sales for the prior-year. Annual Financial Outlook for Fiscal Year 2024 The following guidance is based on ScanSource's current expectations for the full fiscal year ended June 30, 2024. FY24 Annual Outlook Net sales growth, year-over-year At least 3% Adjusted EBITDA (Non-GAAP) At least $180 million Free cash flow At least $150 million Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash shared-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. Fourth Quarter Cyberattack On May 14, 2023, ScanSource discovered it was subject to a cyberattack that impacted some of its systems. Upon detection, the Company immediately launched its incident response plan. Thanks to the exceptional work of ScanSource’s employees, in conjunction with external cybersecurity experts, the Company’s core systems were restored, and operations resumed on May 26, 2023. 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, August 22, 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 FY24 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, the following factors, which are neither presented in order of importance nor weighted: macroeconomic conditions, including potential prolonged economic weakness, inflation, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, economic weakness and inflation, risk to our business from a cyberattack, a failure of our IT systems, failure to hire and retain quality employees, loss of the Company's major customers, relationships with our key suppliers and customers or a termination or a modification of the terms under which it operates with these key suppliers, 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, 2023. 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 operating income margin, 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, cyberattack restoration costs, tax recovery, 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. 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. Free cash flow: We present free cash flow as we believe this measure provides more information regarding our liquidity and capital resources. Free cash flow is defined as cash flows from operating activities less capital expenditures. 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 2023 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) June 30, 2023 June 30, 2022* Assets Current assets: Cash and cash equivalents $ 36,178 $ 37,987 Accounts receivable, less allowance of $15,480 at June 30, 2023 and $16,806 at June 30, 2022 753,236 729,442 Inventories 757,574 614,814 Prepaid expenses and other current assets 110,087 141,562 Total current assets 1,657,075 1,523,805 Property and equipment, net 37,379 37,477 Goodwill 216,706 214,435 Identifiable intangible assets, net 68,495 84,427 Deferred income taxes 17,764 15,668 Other non-current assets 70,750 61,616 Total assets $ 2,068,169 $ 1,937,428 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 691,119 $ 714,177 Accrued expenses and other current liabilities 78,892 88,455 Income taxes payable 9,875 34 Current portion of long-term debt 6,915 11,598 Total current liabilities 786,801 814,264 Deferred income taxes 3,816 3,144 Long-term debt, net of current portion 144,006 123,733 Borrowings under revolving credit facility 178,980 135,839 Other long-term liabilities 49,268 53,920 Total liabilities 1,162,871 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, 24,844,203 and 25,187,351 shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively 58,241 64,297 Retained earnings 936,678 846,869 Accumulated other comprehensive loss (89,621 ) (104,638 ) Total shareholders’ equity 905,298 806,528 Total liabilities and shareholders’ equity $ 2,068,169 $ 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 June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Net sales $ 947,149 $ 962,283 $ 3,787,721 $ 3,529,935 Cost of goods sold 838,490 851,491 3,338,482 3,103,411 Gross profit 108,659 110,792 449,239 426,524 Selling, general and administrative expenses 74,358 75,905 285,695 275,442 Depreciation expense 2,827 3,023 10,912 11,062 Intangible amortization expense 4,185 4,440 16,746 17,853 Operating income 27,289 27,424 135,886 122,167 Interest expense 5,564 1,886 19,786 6,523 Interest income (2,085 ) (1,360 ) (7,414 ) (4,333 ) Other expense, net 348 684 1,664 1,354 Income before income taxes 23,462 26,214 121,850 118,623 Provision for income taxes 6,367 6,267 33,758 29,925 Net income from continuing operations 17,095 19,947 88,092 88,698 Net income from discontinued operations 1,717 — 1,717 100 Net income $ 18,812 $ 19,947 $ 89,809 $ 88,798 Per share data: Net income from continuing operations per common share, basic $ 0.69 $ 0.79 $ 3.50 $ 3.48 Net income from discontinued operations per common share, basic 0.07 — 0.07 — Net income per common share, basic $ 0.76 $ 0.79 $ 3.57 $ 3.48 Weighted-average shares outstanding, basic 24,883 25,286 25,142 25,504 Net income from continuing operations per common share, diluted $ 0.68 $ 0.78 $ 3.47 $ 3.44 Net income from discontinued operations per common share, diluted 0.07 — 0.07 — Net income per common share, diluted $ 0.75 $ 0.78 $ 3.54 $ 3.45 Weighted-average shares outstanding, diluted 25,139 25,584 25,362 25,758 ScanSource, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Quarter ended June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Cash flows from operating activities: Net income $ 18,812 $ 19,947 $ 89,809 $ 88,798 Net income (loss) from discontinued operations 1,717 — 1,717 100 Net income from continuing operations 17,095 19,947 88,092 88,698 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 7,256 7,701 28,614 29,884 Amortization of debt issue costs 96 104 577 417 Provision for doubtful accounts 933 1,357 2,785 1,514 Share-based compensation 2,586 2,872 11,219 11,663 Deferred income taxes (2,905 ) 3,742 (1,496 ) 5,737 Finance lease interest 12 1 44 34 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (64,020 ) (98,535 ) (17,368 ) (165,939 ) Inventories (2,057 ) (27,613 ) (138,313 ) (145,962 ) Prepaid expenses and other assets (6,526 ) (12,369 ) 32,653 (27,371 ) Other non-current assets (5,810 ) 3,914 (7,582 ) 1,123 Accounts payable 30,061 15,434 (30,656 ) 82,969 Accrued expenses and other liabilities 2,587 7,876 (14,195 ) (4,869 ) Income taxes payable 5,431 (3,115 ) 9,857 (2,252 ) Net cash used in operating activities (15,261 ) (78,684 ) (35,769 ) (124,354 ) Cash flows from investing activities: Capital expenditures (3,431 ) (3,523 ) (9,979 ) (6,849 ) Cash received for business disposal 1,717 — 1,717 3,125 Net cash used in investing activities (1,714 ) (3,523 ) (8,262 ) (3,724 ) Cash flows from financing activities: Borrowings on revolving credit, net of expenses 627,257 569,139 2,499,166 2,166,409 Repayments on revolving credit, net of expenses (607,470 ) (477,593 ) (2,456,025 ) (2,030,569 ) Borrowings (repayments) on long-term debt, net (938 ) (1,875 ) 15,590 (7,843 ) Repayments on finance lease obligation 23 (306 ) (589 ) (1,238 ) Debt issuance costs — — (1,407 ) — Exercise of stock options 57 712 910 2,304 Taxes paid on settlement of equity awards (30 ) (26 ) (2,463 ) (2,754 ) Common stock repurchased (4,933 ) (9,676 ) (15,651 ) (18,203 ) Net cash provided by financing activities 13,966 80,375 39,531 108,106 Effect of exchange rate changes on cash and cash equivalents 1,813 (3,721 ) 2,691 (4,759 ) Decrease in cash and cash equivalents (1,196 ) (5,553 ) (1,809 ) (24,731 ) Cash and cash equivalents at beginning of period 37,374 43,539 37,987 62,718 Cash and cash equivalents at period end $ 36,178 $ 37,986 $ 36,178 $ 37,987 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except percentages) Non-GAAP Financial Information: Quarter ended June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) 12.9 % 14.9 % 14.6 % 17.0 % Reconciliation of Net Income to Adjusted EBITDA: Net income (GAAP) $ 17,095 $ 19,947 $ 88,092 $ 88,698 Plus: Interest expense 5,564 1,886 19,786 6,523 Plus: Income taxes 6,367 6,267 33,758 29,925 Plus: Depreciation and amortization 7,255 7,700 28,614 29,884 EBITDA (non-GAAP) 36,281 35,800 170,250 155,030 Plus: Share-based compensation 2,586 2,872 11,219 11,663 Plus: Tax recovery (128 ) — (2,986 ) — Plus: Cyberattack restoration costs 1,460 — 1,460 — Plus: Acquisition and divestiture costs — — — 30 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 40,199 $ 38,672 $ 179,943 $ 166,723 Invested Capital Calculations: Equity – beginning of the quarter $ 878,895 $ 806,654 $ 806,528 $ 731,191 Equity – end of the quarter 905,298 806,528 905,298 806,528 Plus: Share-based compensation, net 1,921 2,134 8,326 8,709 Plus: Cyberattack restoration costs 1,092 — 1,092 — Plus: Divestiture costs — — — 30 Plus: Discontinued operations net income (1,717 ) — (1,717 ) (100 ) Plus: Tax recovery, net (2,100 ) — (3,985 ) — Average equity 891,695 807,658 857,771 773,179 Average funded debt (b) 361,792 233,445 372,235 209,114 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,253,487 $ 1,041,103 $ 1,230,006 $ 982,293 (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 91 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 June 30, 2023 2022 % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 561,501 $ 580,619 (3.3 )% Foreign exchange impact (a) 76 — Non-GAAP net sales, constant currency $ 561,577 $ 580,619 (3.3 )% Modern Communications & Cloud: Net sales, reported $ 385,648 $ 381,664 1.0 % Foreign exchange impact (a) 139 — Non-GAAP net sales, constant currency $ 385,787 $ 381,664 1.1 % Consolidated: Net sales, reported $ 947,149 $ 962,283 (1.6 )% Foreign exchange impact (a) 215 — Non-GAAP net sales, constant currency $ 947,364 $ 962,283 (1.6 )% (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 June 30, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Segment: Fiscal year ended June 30, 2023 2022 % Change Specialty Technology Solutions (in thousands) Net sales, reported $ 2,331,030 $ 2,082,321 11.9 % Foreign exchange impact (a) (923 ) — Non-GAAP net sales, constant currency $ 2,330,107 $ 2,082,321 11.9 % Modern Communications & Cloud Net sales, reported $ 1,456,691 $ 1,447,614 0.6 % Foreign exchange impact (a) (3,492 ) — Non-GAAP net sales, constant currency $ 1,453,199 $ 1,447,614 0.4 % Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 7.3 % Foreign exchange impact (a) (4,415 ) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 7.2 % (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 fiscal year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Quarter ended June 30, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 854,521 $ 865,736 (1.3 )% International: Net sales, reported $ 92,628 $ 96,547 (4.1 )% Foreign exchange impact(a) 215 — Non-GAAP net sales, constant currency $ 92,843 $ 96,547 (3.8 )% Consolidated: Net sales, reported $ 947,149 $ 962,283 (1.6 )% Foreign exchange impact(a) 215 — Non-GAAP net sales, constant currency $ 947,364 $ 962,283 (1.6 )% (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 June 30, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Fiscal year ended June 30, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 3,432,074 $ 3,173,694 8.1 % International: Net sales, reported $ 355,647 $ 356,241 (0.2 )% Foreign exchange impact(a) (4,415 ) — Non-GAAP net sales, constant currency $ 351,232 $ 356,241 (1.4 )% Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 7.3 % Foreign exchange impact(a) (4,415 ) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 7.2 % (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 fiscal year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Quarter ended June 30, 2023 GAAP Measure Intangible amortization expense Tax recovery Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $74,358 — $128 $(1,460) $73,026 Operating income 27,289 4,185 (128) 1,460 32,806 Operating income margin 2.88% 0.44% (0.01)% 0.15% 3.46% Net income 17,095 3,126 (2,100) 1,092 19,213 Diluted EPS $0.68 $0.12 $(0.08) $0.04 $0.76 Quarter ended June 30, 2022 GAAP Measure Intangible amortization expense Tax recovery Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expense $75,905 — — — $75,905 Operating income 27,424 4,440 — — 31,864 Operating income margin 2.85% 0.46% —% —% 3.31% Net income 19,947 3,319 — — 23,266 Diluted EPS $0.78 $0.13 — — $0.91 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Year ended June 30, 2023 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs Tax recovery, net Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $285,695 — — $2,986 $(1,460) $287,221 Operating income 135,886 16,746 — (2,986) 1,460 151,106 Operating income margin 3.59% 0.44% —% (0.08)% 0.04% 3.99% Net income 88,092 12,489 — (3,985) 1,092 97,688 Diluted EPS $3.47 $0.49 — $(0.16) $0.04 $3.85 Year ended June 30, 2022 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Tax recovery, net Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $275,442 — $(30) — — $275,412 Operating income 122,167 17,853 30 — — 140,050 Operating income margin 3.46% 0.51% —% —% —% 3.97% Net income 88,698 13,412 30 — — 102,140 Diluted EPS $3.44 $0.52 — — — $3.97 (a) Divestiture costs totaled less than $0.1 million for the fiscal year ended June 30, 2022 and are generally nondeductible for tax purposes. Annual Financial Outlook for Fiscal Year 2024: FY 24 Outlook GAAP operating income At least $134 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and income (expense), net $5 million Adjusted EBITDA (non-GAAP) At least $180 million GAAP operating cash flow At least $160 million Less: Capital expenditures $10 million Free cash flow At least $150 million View source version on businesswire.com: https://www.businesswire.com/news/home/20230822790181/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 Reports Fourth Quarter and Full-year Results By: ScanSource, Inc. via Business Wire August 22, 2023 at 08:30 AM EDT ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the fourth quarter ended June 30, 2023. Fourth Quarter Summary Fiscal Year Summary Q4 FY23 Q4 FY22 Change FY23 FY22 Change (in thousands, except per share data) Select reported measures: Net sales $ 947,149 $ 962,283 -1.6 % $ 3,787,721 $ 3,529,935 7.3 % Gross profit $ 108,659 $ 110,792 -1.9 % $ 449,239 $ 426,524 5.3 % Gross profit margin % 11.47 % 11.51 % -4bp 11.86 % 12.08 % -22bp Operating income $ 27,289 $ 27,424 -0.5 % $ 135,886 $ 122,167 11.2 % GAAP net income $ 17,095 $ 19,947 -14.3 % $ 88,092 $ 88,698 -0.7 % GAAP diluted EPS $ 0.68 $ 0.78 -12.8 % $ 3.47 $ 3.44 0.9 % Select Non-GAAP measures: Adjusted EBITDA $ 40,199 $ 38,672 3.9 % $ 179,943 $ 166,723 7.9 % Adjusted EBITDA margin % 4.24 % 4.02 % 22bp 4.75 % 4.72 % 3bp Non-GAAP net income $ 19,213 $ 23,266 -17.4 % $ 97,688 $ 102,140 -4.4 % Non-GAAP diluted EPS $ 0.76 $ 0.91 -16.5 % $ 3.85 $ 3.97 -3.0 % “As we enter our new fiscal year, strong free cash flow and focus on Intelisys are keys to our success,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Now that the supply chain challenges are behind us, we are normalizing our working capital to meet our margin expectations and market demand.” Quarterly Results Net sales for the fourth quarter of fiscal year 2023 totaled $947.1 million, down 1.6% year-over-year. Fourth quarter fiscal year 2023 sales and execution reinforce the resilience of ScanSource’s business amid a cyberattack that impacted the Company’s core systems for its hardware business. Specialty Technology Solutions net sales for the fourth quarter decreased 3.3% year-over-year to $561.5 million. Strength in networking and security partially offset the lost sales from the cyberattack and a slowdown in mobility and barcoding. Modern Communications & Cloud net sales for the fourth quarter increased 1.0% year-over-year to $385.6 million, led by growth in Cisco products. Intelisys net billings increased to approximately $2.47 billion annualized, and Intelisys net sales for fourth quarter increased 8% year-over-year. Gross profit for the fourth quarter of fiscal year 2023 decreased 1.9% year-over-year to $108.7 million. Gross profit margin for the fourth quarter was 11.47% versus 11.51% in the prior-year quarter. For the fourth quarter of fiscal year 2023, operating income was $27.3 million compared to $27.4 million in the prior-year quarter. Fourth quarter fiscal year 2023 non-GAAP operating income increased to $32.8 million for a 3.46% non-GAAP operating income margin, up from $31.9 million for the prior-year quarter. On a GAAP basis, net income for the fourth quarter of fiscal year 2023 totaled $17.1 million, or $0.68 per diluted share, compared to net income of $19.9 million, or $0.78 per diluted share, for the prior-year quarter. Fourth quarter fiscal year 2023 non-GAAP net income totaled $19.2 million, or $0.76 per diluted share, down from $23.3 million, or $0.91 per diluted share, for the prior-year quarter. Interest expense increased to $5.6 million, up significantly from $1.9 million for the prior-year quarter, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the fourth quarter of fiscal year 2023 increased 3.9% to $40.2 million, or 4.24% of net sales, compared to $38.7 million, or 4.02% of net sales, for the prior-year quarter. Full-Year Results For fiscal year 2023, net sales increased 7.3% to $3.8 billion, or a 7.2% year-over-year increase on an organic basis. Fiscal year 2023 net sales in the Specialty Technology Solutions segment increased 11.9% to $2.3 billion, led by growth in networking, security, and barcoding. Fiscal year 2023 net sales in the Modern Communications & Cloud segment increased 0.6% year-over-year to $1.5 billion led by growth in Cisco products. Gross profit for the fiscal year 2023 totaled $449.2 million, up 5.3% year-over-year. The increase is primarily due to higher sales volume compared to the prior year. Gross profit margin decreased to 11.9%, down from 12.1% in the prior year. For the fiscal year ended June 30, 2023, operating income increased to $135.9 million from $122.2 million in the prior year. Fiscal year 2023 non-GAAP operating income increased to $151.1 million for a 3.99% non-GAAP operating income margin, up from $140.1 million for the prior year. On a GAAP basis, net income for the fiscal year ended June 30, 2023 totaled $88.1 million, or $3.47 per diluted share, compared to net income of $88.7 million, or $3.44 per diluted share for the prior year. Fiscal year 2023 non-GAAP net income totaled $97.7 million, or $3.85 per diluted share, compared to $102.1 million, or $3.97 per diluted share for the prior year. Interest expense increased to $19.8 million, up significantly from $6.5 million for the prior year, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the fiscal year ended June 30, 2023 increased to $179.9 million, or 4.75% of net sales, compared to $166.7 million, or 4.72%, of net sales for the prior-year. Annual Financial Outlook for Fiscal Year 2024 The following guidance is based on ScanSource's current expectations for the full fiscal year ended June 30, 2024. FY24 Annual Outlook Net sales growth, year-over-year At least 3% Adjusted EBITDA (Non-GAAP) At least $180 million Free cash flow At least $150 million Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash shared-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. Fourth Quarter Cyberattack On May 14, 2023, ScanSource discovered it was subject to a cyberattack that impacted some of its systems. Upon detection, the Company immediately launched its incident response plan. Thanks to the exceptional work of ScanSource’s employees, in conjunction with external cybersecurity experts, the Company’s core systems were restored, and operations resumed on May 26, 2023. 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, August 22, 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 FY24 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, the following factors, which are neither presented in order of importance nor weighted: macroeconomic conditions, including potential prolonged economic weakness, inflation, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, economic weakness and inflation, risk to our business from a cyberattack, a failure of our IT systems, failure to hire and retain quality employees, loss of the Company's major customers, relationships with our key suppliers and customers or a termination or a modification of the terms under which it operates with these key suppliers, 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, 2023. 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 operating income margin, 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, cyberattack restoration costs, tax recovery, 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. 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. Free cash flow: We present free cash flow as we believe this measure provides more information regarding our liquidity and capital resources. Free cash flow is defined as cash flows from operating activities less capital expenditures. 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 2023 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) June 30, 2023 June 30, 2022* Assets Current assets: Cash and cash equivalents $ 36,178 $ 37,987 Accounts receivable, less allowance of $15,480 at June 30, 2023 and $16,806 at June 30, 2022 753,236 729,442 Inventories 757,574 614,814 Prepaid expenses and other current assets 110,087 141,562 Total current assets 1,657,075 1,523,805 Property and equipment, net 37,379 37,477 Goodwill 216,706 214,435 Identifiable intangible assets, net 68,495 84,427 Deferred income taxes 17,764 15,668 Other non-current assets 70,750 61,616 Total assets $ 2,068,169 $ 1,937,428 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 691,119 $ 714,177 Accrued expenses and other current liabilities 78,892 88,455 Income taxes payable 9,875 34 Current portion of long-term debt 6,915 11,598 Total current liabilities 786,801 814,264 Deferred income taxes 3,816 3,144 Long-term debt, net of current portion 144,006 123,733 Borrowings under revolving credit facility 178,980 135,839 Other long-term liabilities 49,268 53,920 Total liabilities 1,162,871 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, 24,844,203 and 25,187,351 shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively 58,241 64,297 Retained earnings 936,678 846,869 Accumulated other comprehensive loss (89,621 ) (104,638 ) Total shareholders’ equity 905,298 806,528 Total liabilities and shareholders’ equity $ 2,068,169 $ 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 June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Net sales $ 947,149 $ 962,283 $ 3,787,721 $ 3,529,935 Cost of goods sold 838,490 851,491 3,338,482 3,103,411 Gross profit 108,659 110,792 449,239 426,524 Selling, general and administrative expenses 74,358 75,905 285,695 275,442 Depreciation expense 2,827 3,023 10,912 11,062 Intangible amortization expense 4,185 4,440 16,746 17,853 Operating income 27,289 27,424 135,886 122,167 Interest expense 5,564 1,886 19,786 6,523 Interest income (2,085 ) (1,360 ) (7,414 ) (4,333 ) Other expense, net 348 684 1,664 1,354 Income before income taxes 23,462 26,214 121,850 118,623 Provision for income taxes 6,367 6,267 33,758 29,925 Net income from continuing operations 17,095 19,947 88,092 88,698 Net income from discontinued operations 1,717 — 1,717 100 Net income $ 18,812 $ 19,947 $ 89,809 $ 88,798 Per share data: Net income from continuing operations per common share, basic $ 0.69 $ 0.79 $ 3.50 $ 3.48 Net income from discontinued operations per common share, basic 0.07 — 0.07 — Net income per common share, basic $ 0.76 $ 0.79 $ 3.57 $ 3.48 Weighted-average shares outstanding, basic 24,883 25,286 25,142 25,504 Net income from continuing operations per common share, diluted $ 0.68 $ 0.78 $ 3.47 $ 3.44 Net income from discontinued operations per common share, diluted 0.07 — 0.07 — Net income per common share, diluted $ 0.75 $ 0.78 $ 3.54 $ 3.45 Weighted-average shares outstanding, diluted 25,139 25,584 25,362 25,758 ScanSource, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Quarter ended June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Cash flows from operating activities: Net income $ 18,812 $ 19,947 $ 89,809 $ 88,798 Net income (loss) from discontinued operations 1,717 — 1,717 100 Net income from continuing operations 17,095 19,947 88,092 88,698 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 7,256 7,701 28,614 29,884 Amortization of debt issue costs 96 104 577 417 Provision for doubtful accounts 933 1,357 2,785 1,514 Share-based compensation 2,586 2,872 11,219 11,663 Deferred income taxes (2,905 ) 3,742 (1,496 ) 5,737 Finance lease interest 12 1 44 34 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (64,020 ) (98,535 ) (17,368 ) (165,939 ) Inventories (2,057 ) (27,613 ) (138,313 ) (145,962 ) Prepaid expenses and other assets (6,526 ) (12,369 ) 32,653 (27,371 ) Other non-current assets (5,810 ) 3,914 (7,582 ) 1,123 Accounts payable 30,061 15,434 (30,656 ) 82,969 Accrued expenses and other liabilities 2,587 7,876 (14,195 ) (4,869 ) Income taxes payable 5,431 (3,115 ) 9,857 (2,252 ) Net cash used in operating activities (15,261 ) (78,684 ) (35,769 ) (124,354 ) Cash flows from investing activities: Capital expenditures (3,431 ) (3,523 ) (9,979 ) (6,849 ) Cash received for business disposal 1,717 — 1,717 3,125 Net cash used in investing activities (1,714 ) (3,523 ) (8,262 ) (3,724 ) Cash flows from financing activities: Borrowings on revolving credit, net of expenses 627,257 569,139 2,499,166 2,166,409 Repayments on revolving credit, net of expenses (607,470 ) (477,593 ) (2,456,025 ) (2,030,569 ) Borrowings (repayments) on long-term debt, net (938 ) (1,875 ) 15,590 (7,843 ) Repayments on finance lease obligation 23 (306 ) (589 ) (1,238 ) Debt issuance costs — — (1,407 ) — Exercise of stock options 57 712 910 2,304 Taxes paid on settlement of equity awards (30 ) (26 ) (2,463 ) (2,754 ) Common stock repurchased (4,933 ) (9,676 ) (15,651 ) (18,203 ) Net cash provided by financing activities 13,966 80,375 39,531 108,106 Effect of exchange rate changes on cash and cash equivalents 1,813 (3,721 ) 2,691 (4,759 ) Decrease in cash and cash equivalents (1,196 ) (5,553 ) (1,809 ) (24,731 ) Cash and cash equivalents at beginning of period 37,374 43,539 37,987 62,718 Cash and cash equivalents at period end $ 36,178 $ 37,986 $ 36,178 $ 37,987 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except percentages) Non-GAAP Financial Information: Quarter ended June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) 12.9 % 14.9 % 14.6 % 17.0 % Reconciliation of Net Income to Adjusted EBITDA: Net income (GAAP) $ 17,095 $ 19,947 $ 88,092 $ 88,698 Plus: Interest expense 5,564 1,886 19,786 6,523 Plus: Income taxes 6,367 6,267 33,758 29,925 Plus: Depreciation and amortization 7,255 7,700 28,614 29,884 EBITDA (non-GAAP) 36,281 35,800 170,250 155,030 Plus: Share-based compensation 2,586 2,872 11,219 11,663 Plus: Tax recovery (128 ) — (2,986 ) — Plus: Cyberattack restoration costs 1,460 — 1,460 — Plus: Acquisition and divestiture costs — — — 30 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 40,199 $ 38,672 $ 179,943 $ 166,723 Invested Capital Calculations: Equity – beginning of the quarter $ 878,895 $ 806,654 $ 806,528 $ 731,191 Equity – end of the quarter 905,298 806,528 905,298 806,528 Plus: Share-based compensation, net 1,921 2,134 8,326 8,709 Plus: Cyberattack restoration costs 1,092 — 1,092 — Plus: Divestiture costs — — — 30 Plus: Discontinued operations net income (1,717 ) — (1,717 ) (100 ) Plus: Tax recovery, net (2,100 ) — (3,985 ) — Average equity 891,695 807,658 857,771 773,179 Average funded debt (b) 361,792 233,445 372,235 209,114 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,253,487 $ 1,041,103 $ 1,230,006 $ 982,293 (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 91 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 June 30, 2023 2022 % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 561,501 $ 580,619 (3.3 )% Foreign exchange impact (a) 76 — Non-GAAP net sales, constant currency $ 561,577 $ 580,619 (3.3 )% Modern Communications & Cloud: Net sales, reported $ 385,648 $ 381,664 1.0 % Foreign exchange impact (a) 139 — Non-GAAP net sales, constant currency $ 385,787 $ 381,664 1.1 % Consolidated: Net sales, reported $ 947,149 $ 962,283 (1.6 )% Foreign exchange impact (a) 215 — Non-GAAP net sales, constant currency $ 947,364 $ 962,283 (1.6 )% (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 June 30, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Segment: Fiscal year ended June 30, 2023 2022 % Change Specialty Technology Solutions (in thousands) Net sales, reported $ 2,331,030 $ 2,082,321 11.9 % Foreign exchange impact (a) (923 ) — Non-GAAP net sales, constant currency $ 2,330,107 $ 2,082,321 11.9 % Modern Communications & Cloud Net sales, reported $ 1,456,691 $ 1,447,614 0.6 % Foreign exchange impact (a) (3,492 ) — Non-GAAP net sales, constant currency $ 1,453,199 $ 1,447,614 0.4 % Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 7.3 % Foreign exchange impact (a) (4,415 ) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 7.2 % (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 fiscal year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Quarter ended June 30, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 854,521 $ 865,736 (1.3 )% International: Net sales, reported $ 92,628 $ 96,547 (4.1 )% Foreign exchange impact(a) 215 — Non-GAAP net sales, constant currency $ 92,843 $ 96,547 (3.8 )% Consolidated: Net sales, reported $ 947,149 $ 962,283 (1.6 )% Foreign exchange impact(a) 215 — Non-GAAP net sales, constant currency $ 947,364 $ 962,283 (1.6 )% (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 June 30, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Fiscal year ended June 30, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 3,432,074 $ 3,173,694 8.1 % International: Net sales, reported $ 355,647 $ 356,241 (0.2 )% Foreign exchange impact(a) (4,415 ) — Non-GAAP net sales, constant currency $ 351,232 $ 356,241 (1.4 )% Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 7.3 % Foreign exchange impact(a) (4,415 ) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 7.2 % (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 fiscal year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Quarter ended June 30, 2023 GAAP Measure Intangible amortization expense Tax recovery Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $74,358 — $128 $(1,460) $73,026 Operating income 27,289 4,185 (128) 1,460 32,806 Operating income margin 2.88% 0.44% (0.01)% 0.15% 3.46% Net income 17,095 3,126 (2,100) 1,092 19,213 Diluted EPS $0.68 $0.12 $(0.08) $0.04 $0.76 Quarter ended June 30, 2022 GAAP Measure Intangible amortization expense Tax recovery Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expense $75,905 — — — $75,905 Operating income 27,424 4,440 — — 31,864 Operating income margin 2.85% 0.46% —% —% 3.31% Net income 19,947 3,319 — — 23,266 Diluted EPS $0.78 $0.13 — — $0.91 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Year ended June 30, 2023 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs Tax recovery, net Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $285,695 — — $2,986 $(1,460) $287,221 Operating income 135,886 16,746 — (2,986) 1,460 151,106 Operating income margin 3.59% 0.44% —% (0.08)% 0.04% 3.99% Net income 88,092 12,489 — (3,985) 1,092 97,688 Diluted EPS $3.47 $0.49 — $(0.16) $0.04 $3.85 Year ended June 30, 2022 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Tax recovery, net Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $275,442 — $(30) — — $275,412 Operating income 122,167 17,853 30 — — 140,050 Operating income margin 3.46% 0.51% —% —% —% 3.97% Net income 88,698 13,412 30 — — 102,140 Diluted EPS $3.44 $0.52 — — — $3.97 (a) Divestiture costs totaled less than $0.1 million for the fiscal year ended June 30, 2022 and are generally nondeductible for tax purposes. Annual Financial Outlook for Fiscal Year 2024: FY 24 Outlook GAAP operating income At least $134 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and income (expense), net $5 million Adjusted EBITDA (non-GAAP) At least $180 million GAAP operating cash flow At least $160 million Less: Capital expenditures $10 million Free cash flow At least $150 million View source version on businesswire.com: https://www.businesswire.com/news/home/20230822790181/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 fourth quarter ended June 30, 2023. Fourth Quarter Summary Fiscal Year Summary Q4 FY23 Q4 FY22 Change FY23 FY22 Change (in thousands, except per share data) Select reported measures: Net sales $ 947,149 $ 962,283 -1.6 % $ 3,787,721 $ 3,529,935 7.3 % Gross profit $ 108,659 $ 110,792 -1.9 % $ 449,239 $ 426,524 5.3 % Gross profit margin % 11.47 % 11.51 % -4bp 11.86 % 12.08 % -22bp Operating income $ 27,289 $ 27,424 -0.5 % $ 135,886 $ 122,167 11.2 % GAAP net income $ 17,095 $ 19,947 -14.3 % $ 88,092 $ 88,698 -0.7 % GAAP diluted EPS $ 0.68 $ 0.78 -12.8 % $ 3.47 $ 3.44 0.9 % Select Non-GAAP measures: Adjusted EBITDA $ 40,199 $ 38,672 3.9 % $ 179,943 $ 166,723 7.9 % Adjusted EBITDA margin % 4.24 % 4.02 % 22bp 4.75 % 4.72 % 3bp Non-GAAP net income $ 19,213 $ 23,266 -17.4 % $ 97,688 $ 102,140 -4.4 % Non-GAAP diluted EPS $ 0.76 $ 0.91 -16.5 % $ 3.85 $ 3.97 -3.0 % “As we enter our new fiscal year, strong free cash flow and focus on Intelisys are keys to our success,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Now that the supply chain challenges are behind us, we are normalizing our working capital to meet our margin expectations and market demand.” Quarterly Results Net sales for the fourth quarter of fiscal year 2023 totaled $947.1 million, down 1.6% year-over-year. Fourth quarter fiscal year 2023 sales and execution reinforce the resilience of ScanSource’s business amid a cyberattack that impacted the Company’s core systems for its hardware business. Specialty Technology Solutions net sales for the fourth quarter decreased 3.3% year-over-year to $561.5 million. Strength in networking and security partially offset the lost sales from the cyberattack and a slowdown in mobility and barcoding. Modern Communications & Cloud net sales for the fourth quarter increased 1.0% year-over-year to $385.6 million, led by growth in Cisco products. Intelisys net billings increased to approximately $2.47 billion annualized, and Intelisys net sales for fourth quarter increased 8% year-over-year. Gross profit for the fourth quarter of fiscal year 2023 decreased 1.9% year-over-year to $108.7 million. Gross profit margin for the fourth quarter was 11.47% versus 11.51% in the prior-year quarter. For the fourth quarter of fiscal year 2023, operating income was $27.3 million compared to $27.4 million in the prior-year quarter. Fourth quarter fiscal year 2023 non-GAAP operating income increased to $32.8 million for a 3.46% non-GAAP operating income margin, up from $31.9 million for the prior-year quarter. On a GAAP basis, net income for the fourth quarter of fiscal year 2023 totaled $17.1 million, or $0.68 per diluted share, compared to net income of $19.9 million, or $0.78 per diluted share, for the prior-year quarter. Fourth quarter fiscal year 2023 non-GAAP net income totaled $19.2 million, or $0.76 per diluted share, down from $23.3 million, or $0.91 per diluted share, for the prior-year quarter. Interest expense increased to $5.6 million, up significantly from $1.9 million for the prior-year quarter, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the fourth quarter of fiscal year 2023 increased 3.9% to $40.2 million, or 4.24% of net sales, compared to $38.7 million, or 4.02% of net sales, for the prior-year quarter. Full-Year Results For fiscal year 2023, net sales increased 7.3% to $3.8 billion, or a 7.2% year-over-year increase on an organic basis. Fiscal year 2023 net sales in the Specialty Technology Solutions segment increased 11.9% to $2.3 billion, led by growth in networking, security, and barcoding. Fiscal year 2023 net sales in the Modern Communications & Cloud segment increased 0.6% year-over-year to $1.5 billion led by growth in Cisco products. Gross profit for the fiscal year 2023 totaled $449.2 million, up 5.3% year-over-year. The increase is primarily due to higher sales volume compared to the prior year. Gross profit margin decreased to 11.9%, down from 12.1% in the prior year. For the fiscal year ended June 30, 2023, operating income increased to $135.9 million from $122.2 million in the prior year. Fiscal year 2023 non-GAAP operating income increased to $151.1 million for a 3.99% non-GAAP operating income margin, up from $140.1 million for the prior year. On a GAAP basis, net income for the fiscal year ended June 30, 2023 totaled $88.1 million, or $3.47 per diluted share, compared to net income of $88.7 million, or $3.44 per diluted share for the prior year. Fiscal year 2023 non-GAAP net income totaled $97.7 million, or $3.85 per diluted share, compared to $102.1 million, or $3.97 per diluted share for the prior year. Interest expense increased to $19.8 million, up significantly from $6.5 million for the prior year, reflecting higher interest rates and higher borrowings. Adjusted EBITDA for the fiscal year ended June 30, 2023 increased to $179.9 million, or 4.75% of net sales, compared to $166.7 million, or 4.72%, of net sales for the prior-year. Annual Financial Outlook for Fiscal Year 2024 The following guidance is based on ScanSource's current expectations for the full fiscal year ended June 30, 2024. FY24 Annual Outlook Net sales growth, year-over-year At least 3% Adjusted EBITDA (Non-GAAP) At least $180 million Free cash flow At least $150 million Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash shared-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. Fourth Quarter Cyberattack On May 14, 2023, ScanSource discovered it was subject to a cyberattack that impacted some of its systems. Upon detection, the Company immediately launched its incident response plan. Thanks to the exceptional work of ScanSource’s employees, in conjunction with external cybersecurity experts, the Company’s core systems were restored, and operations resumed on May 26, 2023. 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, August 22, 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 FY24 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, the following factors, which are neither presented in order of importance nor weighted: macroeconomic conditions, including potential prolonged economic weakness, inflation, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, economic weakness and inflation, risk to our business from a cyberattack, a failure of our IT systems, failure to hire and retain quality employees, loss of the Company's major customers, relationships with our key suppliers and customers or a termination or a modification of the terms under which it operates with these key suppliers, 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, 2023. 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 operating income margin, 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, cyberattack restoration costs, tax recovery, 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. 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. Free cash flow: We present free cash flow as we believe this measure provides more information regarding our liquidity and capital resources. Free cash flow is defined as cash flows from operating activities less capital expenditures. 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 2023 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) June 30, 2023 June 30, 2022* Assets Current assets: Cash and cash equivalents $ 36,178 $ 37,987 Accounts receivable, less allowance of $15,480 at June 30, 2023 and $16,806 at June 30, 2022 753,236 729,442 Inventories 757,574 614,814 Prepaid expenses and other current assets 110,087 141,562 Total current assets 1,657,075 1,523,805 Property and equipment, net 37,379 37,477 Goodwill 216,706 214,435 Identifiable intangible assets, net 68,495 84,427 Deferred income taxes 17,764 15,668 Other non-current assets 70,750 61,616 Total assets $ 2,068,169 $ 1,937,428 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 691,119 $ 714,177 Accrued expenses and other current liabilities 78,892 88,455 Income taxes payable 9,875 34 Current portion of long-term debt 6,915 11,598 Total current liabilities 786,801 814,264 Deferred income taxes 3,816 3,144 Long-term debt, net of current portion 144,006 123,733 Borrowings under revolving credit facility 178,980 135,839 Other long-term liabilities 49,268 53,920 Total liabilities 1,162,871 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, 24,844,203 and 25,187,351 shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively 58,241 64,297 Retained earnings 936,678 846,869 Accumulated other comprehensive loss (89,621 ) (104,638 ) Total shareholders’ equity 905,298 806,528 Total liabilities and shareholders’ equity $ 2,068,169 $ 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 June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Net sales $ 947,149 $ 962,283 $ 3,787,721 $ 3,529,935 Cost of goods sold 838,490 851,491 3,338,482 3,103,411 Gross profit 108,659 110,792 449,239 426,524 Selling, general and administrative expenses 74,358 75,905 285,695 275,442 Depreciation expense 2,827 3,023 10,912 11,062 Intangible amortization expense 4,185 4,440 16,746 17,853 Operating income 27,289 27,424 135,886 122,167 Interest expense 5,564 1,886 19,786 6,523 Interest income (2,085 ) (1,360 ) (7,414 ) (4,333 ) Other expense, net 348 684 1,664 1,354 Income before income taxes 23,462 26,214 121,850 118,623 Provision for income taxes 6,367 6,267 33,758 29,925 Net income from continuing operations 17,095 19,947 88,092 88,698 Net income from discontinued operations 1,717 — 1,717 100 Net income $ 18,812 $ 19,947 $ 89,809 $ 88,798 Per share data: Net income from continuing operations per common share, basic $ 0.69 $ 0.79 $ 3.50 $ 3.48 Net income from discontinued operations per common share, basic 0.07 — 0.07 — Net income per common share, basic $ 0.76 $ 0.79 $ 3.57 $ 3.48 Weighted-average shares outstanding, basic 24,883 25,286 25,142 25,504 Net income from continuing operations per common share, diluted $ 0.68 $ 0.78 $ 3.47 $ 3.44 Net income from discontinued operations per common share, diluted 0.07 — 0.07 — Net income per common share, diluted $ 0.75 $ 0.78 $ 3.54 $ 3.45 Weighted-average shares outstanding, diluted 25,139 25,584 25,362 25,758 ScanSource, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Quarter ended June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Cash flows from operating activities: Net income $ 18,812 $ 19,947 $ 89,809 $ 88,798 Net income (loss) from discontinued operations 1,717 — 1,717 100 Net income from continuing operations 17,095 19,947 88,092 88,698 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 7,256 7,701 28,614 29,884 Amortization of debt issue costs 96 104 577 417 Provision for doubtful accounts 933 1,357 2,785 1,514 Share-based compensation 2,586 2,872 11,219 11,663 Deferred income taxes (2,905 ) 3,742 (1,496 ) 5,737 Finance lease interest 12 1 44 34 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (64,020 ) (98,535 ) (17,368 ) (165,939 ) Inventories (2,057 ) (27,613 ) (138,313 ) (145,962 ) Prepaid expenses and other assets (6,526 ) (12,369 ) 32,653 (27,371 ) Other non-current assets (5,810 ) 3,914 (7,582 ) 1,123 Accounts payable 30,061 15,434 (30,656 ) 82,969 Accrued expenses and other liabilities 2,587 7,876 (14,195 ) (4,869 ) Income taxes payable 5,431 (3,115 ) 9,857 (2,252 ) Net cash used in operating activities (15,261 ) (78,684 ) (35,769 ) (124,354 ) Cash flows from investing activities: Capital expenditures (3,431 ) (3,523 ) (9,979 ) (6,849 ) Cash received for business disposal 1,717 — 1,717 3,125 Net cash used in investing activities (1,714 ) (3,523 ) (8,262 ) (3,724 ) Cash flows from financing activities: Borrowings on revolving credit, net of expenses 627,257 569,139 2,499,166 2,166,409 Repayments on revolving credit, net of expenses (607,470 ) (477,593 ) (2,456,025 ) (2,030,569 ) Borrowings (repayments) on long-term debt, net (938 ) (1,875 ) 15,590 (7,843 ) Repayments on finance lease obligation 23 (306 ) (589 ) (1,238 ) Debt issuance costs — — (1,407 ) — Exercise of stock options 57 712 910 2,304 Taxes paid on settlement of equity awards (30 ) (26 ) (2,463 ) (2,754 ) Common stock repurchased (4,933 ) (9,676 ) (15,651 ) (18,203 ) Net cash provided by financing activities 13,966 80,375 39,531 108,106 Effect of exchange rate changes on cash and cash equivalents 1,813 (3,721 ) 2,691 (4,759 ) Decrease in cash and cash equivalents (1,196 ) (5,553 ) (1,809 ) (24,731 ) Cash and cash equivalents at beginning of period 37,374 43,539 37,987 62,718 Cash and cash equivalents at period end $ 36,178 $ 37,986 $ 36,178 $ 37,987 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except percentages) Non-GAAP Financial Information: Quarter ended June 30, Fiscal year ended June 30, 2023 2022 2023 2022 Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) 12.9 % 14.9 % 14.6 % 17.0 % Reconciliation of Net Income to Adjusted EBITDA: Net income (GAAP) $ 17,095 $ 19,947 $ 88,092 $ 88,698 Plus: Interest expense 5,564 1,886 19,786 6,523 Plus: Income taxes 6,367 6,267 33,758 29,925 Plus: Depreciation and amortization 7,255 7,700 28,614 29,884 EBITDA (non-GAAP) 36,281 35,800 170,250 155,030 Plus: Share-based compensation 2,586 2,872 11,219 11,663 Plus: Tax recovery (128 ) — (2,986 ) — Plus: Cyberattack restoration costs 1,460 — 1,460 — Plus: Acquisition and divestiture costs — — — 30 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 40,199 $ 38,672 $ 179,943 $ 166,723 Invested Capital Calculations: Equity – beginning of the quarter $ 878,895 $ 806,654 $ 806,528 $ 731,191 Equity – end of the quarter 905,298 806,528 905,298 806,528 Plus: Share-based compensation, net 1,921 2,134 8,326 8,709 Plus: Cyberattack restoration costs 1,092 — 1,092 — Plus: Divestiture costs — — — 30 Plus: Discontinued operations net income (1,717 ) — (1,717 ) (100 ) Plus: Tax recovery, net (2,100 ) — (3,985 ) — Average equity 891,695 807,658 857,771 773,179 Average funded debt (b) 361,792 233,445 372,235 209,114 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,253,487 $ 1,041,103 $ 1,230,006 $ 982,293 (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 91 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 June 30, 2023 2022 % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 561,501 $ 580,619 (3.3 )% Foreign exchange impact (a) 76 — Non-GAAP net sales, constant currency $ 561,577 $ 580,619 (3.3 )% Modern Communications & Cloud: Net sales, reported $ 385,648 $ 381,664 1.0 % Foreign exchange impact (a) 139 — Non-GAAP net sales, constant currency $ 385,787 $ 381,664 1.1 % Consolidated: Net sales, reported $ 947,149 $ 962,283 (1.6 )% Foreign exchange impact (a) 215 — Non-GAAP net sales, constant currency $ 947,364 $ 962,283 (1.6 )% (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 June 30, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Segment: Fiscal year ended June 30, 2023 2022 % Change Specialty Technology Solutions (in thousands) Net sales, reported $ 2,331,030 $ 2,082,321 11.9 % Foreign exchange impact (a) (923 ) — Non-GAAP net sales, constant currency $ 2,330,107 $ 2,082,321 11.9 % Modern Communications & Cloud Net sales, reported $ 1,456,691 $ 1,447,614 0.6 % Foreign exchange impact (a) (3,492 ) — Non-GAAP net sales, constant currency $ 1,453,199 $ 1,447,614 0.4 % Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 7.3 % Foreign exchange impact (a) (4,415 ) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 7.2 % (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 fiscal year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Quarter ended June 30, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 854,521 $ 865,736 (1.3 )% International: Net sales, reported $ 92,628 $ 96,547 (4.1 )% Foreign exchange impact(a) 215 — Non-GAAP net sales, constant currency $ 92,843 $ 96,547 (3.8 )% Consolidated: Net sales, reported $ 947,149 $ 962,283 (1.6 )% Foreign exchange impact(a) 215 — Non-GAAP net sales, constant currency $ 947,364 $ 962,283 (1.6 )% (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 June 30, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) Net Sales by Geography: Fiscal year ended June 30, 2023 2022 % Change United States and Canada: (in thousands) Net sales, as reported $ 3,432,074 $ 3,173,694 8.1 % International: Net sales, reported $ 355,647 $ 356,241 (0.2 )% Foreign exchange impact(a) (4,415 ) — Non-GAAP net sales, constant currency $ 351,232 $ 356,241 (1.4 )% Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 7.3 % Foreign exchange impact(a) (4,415 ) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 7.2 % (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 fiscal year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2022. ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Quarter ended June 30, 2023 GAAP Measure Intangible amortization expense Tax recovery Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $74,358 — $128 $(1,460) $73,026 Operating income 27,289 4,185 (128) 1,460 32,806 Operating income margin 2.88% 0.44% (0.01)% 0.15% 3.46% Net income 17,095 3,126 (2,100) 1,092 19,213 Diluted EPS $0.68 $0.12 $(0.08) $0.04 $0.76 Quarter ended June 30, 2022 GAAP Measure Intangible amortization expense Tax recovery Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expense $75,905 — — — $75,905 Operating income 27,424 4,440 — — 31,864 Operating income margin 2.85% 0.46% —% —% 3.31% Net income 19,947 3,319 — — 23,266 Diluted EPS $0.78 $0.13 — — $0.91 ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands, except per share data) Non-GAAP Financial Information: Year ended June 30, 2023 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs Tax recovery, net Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $285,695 — — $2,986 $(1,460) $287,221 Operating income 135,886 16,746 — (2,986) 1,460 151,106 Operating income margin 3.59% 0.44% —% (0.08)% 0.04% 3.99% Net income 88,092 12,489 — (3,985) 1,092 97,688 Diluted EPS $3.47 $0.49 — $(0.16) $0.04 $3.85 Year ended June 30, 2022 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Tax recovery, net Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $275,442 — $(30) — — $275,412 Operating income 122,167 17,853 30 — — 140,050 Operating income margin 3.46% 0.51% —% —% —% 3.97% Net income 88,698 13,412 30 — — 102,140 Diluted EPS $3.44 $0.52 — — — $3.97 (a) Divestiture costs totaled less than $0.1 million for the fiscal year ended June 30, 2022 and are generally nondeductible for tax purposes. Annual Financial Outlook for Fiscal Year 2024: FY 24 Outlook GAAP operating income At least $134 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and income (expense), net $5 million Adjusted EBITDA (non-GAAP) At least $180 million GAAP operating cash flow At least $160 million Less: Capital expenditures $10 million Free cash flow At least $150 million View source version on businesswire.com: https://www.businesswire.com/news/home/20230822790181/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