- Reports preliminary fourth quarter fiscal year 2020 net
sales
- Hosts investor conference call today, 7/23/20, at 5:00 pm
ET
ScanSource, Inc. (Nasdaq: SCSC), a leading provider of
technology products and solutions, today announced actions to
address the business impacts of the COVID-19 pandemic and prepare
for the next phase of growth.
These actions include a $30 million expense reduction plan
designed to better align the cost structure for its wholesale
distribution business with lower sales volumes as a result of the
COVID-19 pandemic. As part of the plan, ScanSource will continue to
invest in its higher growth agency business, Intelisys. Strong
growth for the Intelisys business has continued, even with the
COVID-19 pandemic.
The expense reduction plan includes (i) 10% to 25% salary
reductions for the Executive team through December 31, 2020, (ii)
elimination of cash retainers for the Board of Directors through
December 31, 2020, (iii) cost savings measures related to
discretionary SG&A expenses, (iv) a reduction in workforce in
North America, excluding the Intelisys business and (v) the
wind-down of the Canpango professional services business.
“Taking these measures, most of all letting go valued and
dedicated members of our team, is very difficult,” said Mike Baur,
Chairman and CEO, ScanSource, Inc. “We are incredibly grateful to
these employees for their service to ScanSource, and deeply
appreciate their loyalty and hard work to move ScanSource
forward.”
These actions are expected to reduce the Company’s annualized
SG&A cost base by approximately $30 million. In the first
quarter of fiscal year 2021, the Company anticipates recording an
estimated pre-tax cash charge of approximately $8 to $9 million,
consisting of severance and related employee benefits. The Company
expects to complete substantially all of the workforce reduction of
approximately 200 positions by the end of the September 2020
quarter.
Wind-Down of the Canpango Professional Services Business
ScanSource has initiated actions to close Canpango, its Salesforce
implementation and consulting business. In August 2018, ScanSource
acquired Canpango to help partners build out their customer
relationship management capabilities as part of a CCaaS solution.
There has been limited adoption by ScanSource’s partner community.
With input from valued partners, ScanSource has shifted its focus
to delivering a more targeted set of services to support CCaaS and
UCaaS business growth through partnerships with third parties.
As a result of winding down the Canpango business, which
includes completing existing contracts over the next few months,
ScanSource expects to record a pre-tax non-cash charge of
approximately $2 million as of June 30, 2020.
Update on Preliminary Fourth Quarter Fiscal Year 2020 Net
Sales Subject to completion of financial reporting and review
procedures, ScanSource announced that it expects fourth quarter
fiscal year 2020 GAAP net sales to be approximately $758 million
and non-GAAP net sales excluding the Planned Divestitures to be
approximately $636 million. This represents a 21% decline
year-over-year for quarterly GAAP net sales and a 19% decline
year-over-year for quarterly non-GAAP net sales, excluding the
negative impact of foreign currency translation. For the Intelisys
business, fourth quarter fiscal year 2020 net sales increased
approximately 15% year-over-year. ScanSource expects to provide
full fourth quarter and fiscal year 2020 results on August 25,
2020.
Conference Call ScanSource will be hosting a conference
call to discuss the expense reduction plan today, July 23, 2020, at
5:00 PM ET. The live conference call is accessible by telephone at
1-866-861-6865 or 1-765-507-2651 (passcode: ScanSource). 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 planned
expense reductions and related charges, net sales for the fourth
quarter fiscal year 2020, and the impact of the COVID-19 pandemic,
which involve risks and uncertainties. Any number of factors could
cause actual results to differ materially from anticipated results,
including, but not limited to, the impact of the COVID-19 pandemic
on our operations and financial condition, the failure to
satisfactorily manage and implement the Company's expense reduction
plan, the Company’s ability to complete the divestiture of its
physical product businesses outside of the United States, Canada
and Brazil (“Planned Divestitures”) on acceptable terms or to
otherwise dispose of the operations, 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, 2019 and quarterly report on Form 10-Q for
the quarter ended March 31, 2020, 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 Planned
Divestitures and acquisitions: 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 Planned Divestitures, as well as
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.
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 reconciliation
below.
NON-GAAP NET SALES RECONCILIATION
(in thousands)
Quarter ended June 30,
2020
2019
% Change
Preliminary net sales, reported
$
758,418
$
960,833
(21.1
)%
Planned Divestitures
(121,930
)
(149,336
)
Non-GAAP net sales, excluding Planned
Divestitures
636,488
811,497
(21.6
)%
Foreign exchanges impact(a)
19,587
---
Less: Acquisitions
(1,567
)
---
Non-GAAP net sales, constant currency
excluding Planned Divestitures and acquisitions
$
654,508
$
811,497
(19.3
)%
(a) Year-over-year net sales growth
excluding the translation impact of changes in foreign currency
exchange rates. Calculated by translating
net sales for the quarter ended June 30,
2020 into U.S. dollars using the average foreign exchange rates for
the quarter ended June 30, 2019.
About ScanSource, Inc. ScanSource, Inc. (NASDAQ: SCSC) is
at the center of the technology solution delivery channel,
connecting businesses and providing solutions for their complex
needs. ScanSource sells through multiple, specialized
routes-to-market with digital, physical and 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. ScanSource enables its
sales partners to create, deliver and manage solutions for
end-customers across almost every vertical market. Founded in 1992
and headquartered in Greenville, South Carolina, ScanSource was
named one of the 2019 Best Places to Work in South Carolina and on
FORTUNE magazine’s 2020 List of World’s Most Admired Companies.
ScanSource ranks #654 on the Fortune 1000. For more information,
visit www.scansource.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200723005718/en/
Gerald Lyons Sr. EVP, Chief Financial Officer 864.286.4845
gerry.lyons@scansource.com
Mary M. Gentry VP, Treasurer and Investor Relations 864.286.4892
mary.gentry@scansource.com
ScanSource (NASDAQ:SCSC)
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