Achieves Strong Q2 Cash Flow and Intelisys
Growth
ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor
connecting devices to the cloud, today announced financial results
for the second quarter ended December 31, 2023.
Second Quarter Summary
Q2 FY24
Q2 FY23
Change
(in thousands, except per
share data)
Select reported measures:
Net sales
$
884,792
$
1,011,241
-12.5%
Gross profit
$
100,748
$
115,334
-12.6%
Gross profit margin %
11.39
%
11.41
%
-2bp
Operating income
$
26,826
$
39,432
-32.0%
GAAP net income
$
32,726
$
25,734
27.2%
GAAP diluted EPS
$
1.29
$
1.01
27.7%
Operating cash flow
$
63,224
$
(26,885
)
n/m
Select Non-GAAP measures:
Adjusted EBITDA
$
38,459
$
48,815
-21.2%
Adjusted EBITDA margin %
4.35
%
4.83
%
-48bp
Non-GAAP net income
$
21,587
$
26,941
-19.9%
Non-GAAP diluted EPS
$
0.85
$
1.06
-19.8%
Free cash flow
$
60,675
$
(29,389
)
n/m
n/m - not meaningful
“Strong cash flow and Intelisys recurring revenue growth are the
highlights for our second quarter results,” said Mike Baur, Chair
and CEO, ScanSource, Inc. “Our teams are navigating well through
the challenging industry demand cycles.”
Quarterly Results
Net sales for the second quarter of fiscal year 2024 totaled
$884.8 million, down 12.5% year-over-year. Specialty Technology
Solutions net sales for the second quarter decreased 17.0%
year-over-year to $520.7 million. Soft demand in barcode, mobility
and point of sale was partially offset by growth in networking.
Modern Communications & Cloud net sales for the second quarter
decreased 5.1% year-over-year to $364.1 million due to lower sales
volumes in communications hardware, partially offset by growth in
Cisco products. Intelisys net billings increased to approximately
$2.64 billion annualized, and Intelisys net sales for the second
quarter increased 7.5%.
Gross profit for the second quarter of fiscal year 2024
decreased 12.6% year-over-year to $100.7 million. Gross profit
margin for the second quarter was 11.39%, compared to 11.41% for
the prior-year quarter.
For the second quarter of fiscal year 2024, operating income was
$26.8 million compared to $39.4 million in the prior-year quarter.
Second quarter fiscal year 2024 non-GAAP operating income decreased
to $30.6 million down from $40.7 million for the prior-year
quarter.
On a GAAP basis, net income for the second quarter of fiscal
year 2024 totaled $32.7 million, or $1.29 per diluted share,
compared to net income of $25.7 million, or $1.01 per diluted
share, for the prior-year quarter. Second quarter fiscal year 2024
non-GAAP net income totaled $21.6 million, or $0.85 per diluted
share, down from $26.9 million, or $1.06 per diluted share, for the
prior-year quarter. Interest expense for the quarter decreased to
$3.4 million, down from $5.1 million for the prior-year quarter,
reflecting lower borrowings.
Adjusted EBITDA for the second quarter of fiscal year 2024
decreased 21.2% to $38.5 million, or 4.35% of net sales, compared
to $48.8 million, or 4.83% of net sales, for the prior-year
quarter.
ScanSource generated $156.8 million of operating cash flow and
$151.9 million of free cash flow in the first six months of fiscal
year 2024.
Updated Annual Financial Outlook for Fiscal Year 2024
ScanSource updates its expectations for net sales and adjusted
EBITDA for the full fiscal year ending June 30, 2024 and replaces
previously provided guidance:
FY24 Annual Outlook
Prior FY24 Annual
Outlook
Net sales
At least $3.5 billion
At least $3.8 billion
Adjusted EBITDA (Non-GAAP)
At least $155 million
At least $170 million
Free cash flow
At least $200 million
At least $200 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.
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 earnings 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, February 6, 2024, 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 ScanSource'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
ScanSource's organic growth strategy, credit risks involving
ScanSource's larger customers and suppliers, changes in interest
and exchange rates and regulatory regimes impacting ScanSource's
international operations, economic weakness and inflation, risk to
the business from a cyberattack, a failure of IT systems, failure
to hire and retain quality employees, loss of ScanSource's major
customers, relationships with key suppliers and customers or a
termination or a modification of the terms under which it operates
with these key suppliers, changes in ScanSource's operating
strategy, and other factors set forth in the "Risk Factors"
contained in ScanSource's annual report on Form 10-K for the year
ended June 30, 2023. Except as may be required by law, ScanSource
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"), ScanSource 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,
acquisition and divestiture costs, gain on sale of business,
restructuring costs and other non-GAAP adjustments.
Net sales on a constant currency basis excluding acquisitions
and divestitures (organic growth): ScanSource 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 and
divestitures prior to the first full year from the transaction
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,
ScanSource 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,
acquisition and divestiture costs, gain on sale of business,
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 ScanSource'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,
gain on sale of business, 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 ScanSource’s business and people, management
believes that Adjusted EBITDA shows the profitability from the
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 ScanSource's performance over
various reporting periods on a consistent basis because it removes
from operating results the impact of items that do not reflect core
operating performance. Management believes the calculation of
Adjusted ROIC provides useful information to investors and is an
additional relevant comparison of its 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 ScanSource's
performance during the year.
Free cash flow: ScanSource presents free cash flow as it
believes this measure provides more information regarding 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 ScanSource 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 ScanSource'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, software as a service ("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
mobility and barcode, point-of-sale (POS), payments, networking,
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
2024 List of World’s Most Admired Companies. ScanSource ranks #817
on the Fortune 1000. For more information, visit
www.scansource.com.
ScanSource, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands)
December 31, 2023
June 30, 2023*
Assets
Current assets:
Cash and cash equivalents
$
44,987
$
36,178
Accounts receivable, less allowance of
$19,243 at December 31, 2023 and $15,480 at June 30, 2023
662,799
753,236
Inventories
575,137
757,574
Prepaid expenses and other current
assets
122,272
110,087
Total current assets
1,405,195
1,657,075
Property and equipment, net
36,546
37,379
Goodwill
208,214
216,706
Identifiable intangible assets, net
45,313
68,495
Deferred income taxes
19,478
17,764
Other non-current assets
66,059
70,750
Total assets
$
1,780,805
$
2,068,169
Liabilities and
Shareholders’ Equity
Current liabilities:
Accounts payable
$
540,642
$
691,119
Accrued expenses and other current
liabilities
58,460
78,892
Income taxes payable
3,653
9,875
Current portion of long-term debt
7,857
6,915
Total current liabilities
610,612
786,801
Deferred income taxes
—
3,816
Long-term debt, net of current portion
139,899
144,006
Borrowings under revolving credit
facility
20,878
178,980
Other long-term liabilities
55,815
49,268
Total liabilities
827,204
1,162,871
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000
shares authorized, none issued
—
—
Common stock, no par value; 45,000,000
shares authorized, 25,154,469 and 24,844,203 shares issued and
outstanding at December 31, 2023 and June 30, 2023,
respectively
63,983
58,241
Retained earnings
984,836
936,678
Accumulated other comprehensive loss
(95,218
)
(89,621
)
Total shareholders’ equity
953,601
905,298
Total liabilities and shareholders’
equity
$
1,780,805
$
2,068,169
*Derived from audited financial
statements.
ScanSource, Inc. and
Subsidiaries
Condensed Consolidated Income
Statements (Unaudited)
(in thousands, except per
share data)
Quarter ended December
31,
Six months ended December
31,
2023
2022
2023
2022
Net sales
$
884,792
$
1,011,241
$
1,761,098
$
1,955,054
Cost of goods sold
784,044
895,907
1,553,842
1,726,236
Gross profit
100,748
115,334
207,256
228,818
Selling, general and administrative
expenses
66,921
69,074
142,356
140,667
Depreciation expense
2,964
2,678
5,759
5,441
Intangible amortization expense
4,037
4,150
8,230
8,391
Operating income
26,826
39,432
50,911
74,319
Interest expense
3,359
5,060
8,945
8,507
Interest income
(2,119
)
(2,027
)
(3,444
)
(3,618
)
Gain on sale of business
(14,533
)
—
(14,533
)
—
Other expense, net
73
207
750
955
Income before income taxes
40,046
36,192
59,193
68,475
Provision for income taxes
7,320
10,458
11,035
18,699
Net income
$
32,726
$
25,734
$
48,158
$
49,776
Per share data:
Net income per common share, basic
$
1.31
$
1.02
$
1.93
$
1.97
Weighted-average shares outstanding,
basic
25,035
25,287
24,961
25,244
Net income per common share, diluted
$
1.29
$
1.01
$
1.91
$
1.96
Weighted-average shares outstanding,
diluted
25,334
25,502
25,235
25,454
ScanSource, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(in thousands)
Six months ended December
31,
2023
2022
Cash flows from operating activities:
Net income
$
48,158
$
49,776
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Gain on sale of business
(14,533
)
—
Depreciation and amortization
14,475
14,285
Amortization of debt issue costs
193
385
Provision for doubtful accounts
4,472
33
Share-based compensation
5,340
5,679
Deferred income taxes
(1,703
)
932
Finance lease interest
46
24
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
75,579
(49,541
)
Inventories
182,168
(146,826
)
Prepaid expenses and other assets
(11,576
)
30,487
Other non-current assets
3,208
(7,168
)
Accounts payable
(135,138
)
33,820
Accrued expenses and other liabilities
(7,678
)
(13,268
)
Income taxes payable
(6,254
)
6,036
Net cash provided by (used in) operating
activities
156,757
(75,346
)
Cash flows from investing activities:
Capital expenditures
(4,865
)
(4,262
)
Proceeds from sale of business, net of
cash transferred
17,978
—
Net cash provided by (used in) investing
activities
13,113
(4,262
)
Cash flows from financing activities:
Borrowings on revolving credit, net of
expenses
1,134,629
1,232,058
Repayments on revolving credit, net of
expenses
(1,292,729
)
(1,137,897
)
Repayments on long-term debt, net
(3,165
)
(1,407
)
Borrowings (repayments) on finance lease
obligation
(442
)
17,465
Debt issuance costs
—
(492
)
Exercise of stock options
4,309
634
Taxes paid on settlement of equity
awards
(2,657
)
(2,332
)
Common stock repurchased
(1,251
)
—
Net cash (used in) provided by financing
activities
(161,306
)
108,029
Effect of exchange rate changes on cash
and cash equivalents
245
37
Increase in cash and cash equivalents
8,809
28,458
Cash and cash equivalents at beginning of
period
36,178
37,987
Cash and cash equivalents at period
end
44,987
$
66,445
ScanSource, Inc. and
Subsidiaries
Supplementary Information
(Unaudited)
(in thousands, except
percentages)
Non-GAAP Financial Information:
Quarter ended December
31,
2023
2022
Adjusted return on invested capital ratio
(Adjusted ROIC), annualized(a)
13.2
%
15.6
%
Reconciliation of Net Income to
Adjusted EBITDA:
Net income (GAAP)
$
32,726
$
25,734
Plus: Interest expense
3,359
5,060
Plus: Income taxes
7,320
10,458
Plus: Depreciation and amortization
7,258
7,057
EBITDA (non-GAAP)
50,663
48,309
Plus: Tax recovery
(1,386
)
(2,858
)
Plus: Share-based compensation
2,571
3,364
Plus: Acquisition and divestiture
costs
703
—
Plus: Cyberattack restoration costs
441
—
Plus: Gain on sale of business
(14,533
)
—
Adjusted EBITDA (numerator for Adjusted
ROIC) (non-GAAP)
$
38,459
$
48,815
Invested Capital Calculations:
Equity – beginning of the quarter
$
915,253
$
827,004
Equity – end of the quarter
953,601
862,386
Plus: Share-based compensation, net
1,919
2,496
Plus: Cyberattack restoration costs,
net
329
—
Plus: Divestiture costs
703
—
Plus: Tax recovery, net
(640
)
(1,886
)
Plus: Gain on sale of business
(14,533
)
—
Average equity
928,316
845,000
Average funded debt (b)
227,688
392,853
Invested capital (denominator for Adjusted
ROIC) (non-GAAP)
$
1,156,004
$
1,237,853
(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 92 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.
Quarter ended December
31,
Six months ended December
31,
2023
2022
2023
2022
GAAP operating cash flow
$
63,224
$
(26,885
)
$
156,757
$
(75,346
)
Less: Capital Expenditures
(2,549
)
(2,504
)
(4,865
)
(4,262
)
Free cash flow (non-GAAP)
$
60,675
$
(29,389
)
$
151,892
$
(79,608
)
ScanSource, Inc. and
Subsidiaries
Supplementary Information
(Unaudited)
Net Sales by Segment:
Quarter ended December
31,
2023
2022
% Change
Specialty Technology Solutions:
(in thousands)
Net sales, reported
$
520,651
627,548
(17.0
)%
Foreign exchange impact (a)
(886
)
—
Non-GAAP net sales
$
519,765
$
627,548
(17.2
)%
Modern Communications &
Cloud:
Net sales, reported
$
364,141
$
383,693
(5.1
)%
Foreign exchange impact (a)
(4,323
)
—
Less: Divestitures
$
(1,628
)
$
(2,170
)
Non-GAAP net sales
$
358,190
$
381,523
(6.1
)%
Consolidated:
Net sales, reported
$
884,792
$
1,011,241
(12.5
)%
Foreign exchange impact (a)
(5,209
)
—
Less: Divestitures
$
(1,628
)
$
(2,170
)
Non-GAAP net sales
$
877,955
$
1,009,071
(13.0
)%
(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 December 31, 2023 into U.S. dollars using the average
foreign exchange rates for the quarter ended December 31, 2022.
ScanSource, Inc. and
Subsidiaries
Supplementary Information
(Unaudited)
Net Sales by Geography:
Quarter ended December
31,
2023
2022
% Change
United States and Canada:
(in thousands)
Net sales, as reported
$
795,382
$
909,221
(12.5
)%
International:
Net sales, reported
$
89,410
$
102,020
(12.4
)%
Foreign exchange impact(a)
(5,209
)
—
Less: Divestitures
(1,628
)
(2,170
)
Non-GAAP net sales
$
82,573
$
99,850
(17.3
)%
Consolidated:
Net sales, reported
$
884,792
$
1,011,241
(12.5
)%
Foreign exchange impact(a)
(5,209
)
—
Less: Divestitures
(1,628
)
(2,170
)
Non-GAAP net sales
$
877,955
$
1,009,071
(13.0
)%
(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 December 31, 2023 into U.S. dollars using the average
foreign exchange rates for the quarter ended December 31, 2022.
ScanSource, Inc. and
Subsidiaries
Supplementary Information
(Unaudited)
(in thousands, except per
share data)
Non-GAAP Financial Information:
Quarter ended December 31,
2023
GAAP Measure
Intangible amortization
expense
Divestiture costs
Tax recovery
Cyberattack restoration
costs
Gain on sale of
business(a)
Non-GAAP measure
(in thousands, except per
share data)
SG&A expenses
$66,921
—
$(703)
$1,386
$(441)
—
$67,163
Operating income
26,826
4,037
703
(1,386)
441
—
30,621
Pre-tax income
40,046
4,037
703
(1,386)
441
(14,533)
29,308
Net income
32,726
3,002
703
(640)
329
(14,533)
21,587
Diluted EPS
$1.29
$0.12
$0.03
$(0.03)
$0.01
$(0.57)
$0.85
Quarter ended December 31,
2022
GAAP Measure
Intangible amortization
expense
Divestiture costs
Tax recovery
Cyberattack restoration
costs
Gain on sale of
business(a)
Non-GAAP measure
(in thousands, except per
share data)
SG&A expense
$69,074
—
—
$2,858
—
—
$71,932
Operating income
39,432
4,150
—
(2,858)
—
—
40,724
Pre-tax income
36,192
4,150
—
(2,858)
—
—
37,484
Net income
25,734
3,093
—
(1,886)
—
—
26,941
Diluted EPS
$1.01
$0.12
—
$(0.07)
—
—
$1.06
(a) Reflects gain on the sale of the
UK-based intY business. This transaction resulted in a capital loss
for tax purposes. ScanSource did not record a tax provision on the
capital loss since there were no offsetting capital gains.
Annual Financial Outlook for Fiscal Year 2024:
FY 24 Outlook
GAAP operating income
At least $111 million
Intangible amortization
$17 million
Depreciation expense
$12 million
Share-based compensation
expense
$11 million
Interest income and income (expense),
net
$4 million
Adjusted EBITDA (non-GAAP)
At least $155 million
GAAP operating cash flow
At least $210 million
Less: Capital expenditures
$10 million
Free cash flow (non-GAAP)
At least $200 million
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206017497/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
ScanSource (NASDAQ:SCSC)
과거 데이터 주식 차트
부터 4월(4) 2024 으로 5월(5) 2024
ScanSource (NASDAQ:SCSC)
과거 데이터 주식 차트
부터 5월(5) 2023 으로 5월(5) 2024