8-K
Scansource, Inc. (SCSC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2021
ScanSource, Inc.
(Exact name of registrant as specified in its charter)
| SC | 00-26926 | 57-0965380 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
6 Logue Court, Greenville, SC 29615
(Address of principal executive offices, including zip code)
864-288-2432
(Registrant’s telephone number, including area code)
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
|---|---|---|
| Common Stock, no par value | SCSC | NASDAQ Global Select Market |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On November 9, 2021, ScanSource, Inc. (the "Company") issued a press release announcing its financial results for its first quarter ended September 30, 2021. A copy of the press release and accompanying Earnings Infographic are attached as Exhibits 99.1 and 99.2 hereto and incorporated herein by reference and also made available through the Company’s website at www.scansource.com. An updated investor presentation will be made available on the Company's website within approximately two weeks.
The information in Item 2.02 of this Report, including the exhibits, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any other filing under the Securities Act of 1933 or the Exchange Act.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 – Press release issued by ScanSource, Inc. on November 9, 2021. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Company’s annual and quarterly reports filed with the Securities and Exchange Commission.
99.2 – Earnings Infographic for the financial results conference call held on November 9, 2021. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Company’s annual and quarterly reports filed with the Securities and Exchange Commission.
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press release |
| 99.2 | Earnings Infographic |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ScanSource, Inc. | ||
|---|---|---|
| Date: | November 9, 2021 | /s/ STEVE JONES |
| Steve Jones | ||
| Senior Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Contact: | |
|---|---|
| Steve Jones | Mary M. Gentry |
| Senior EVP, Chief Financial Officer | SVP, Treasurer and Investor Relations |
| ScanSource, Inc. | ScanSource, Inc. |
| (864) 286-4302 | (864) 286-4892 |
SCANSOURCE DELIVERS STRONG FIRST QUARTER PERFORMANCE
Strong demand drives excellent top-line growth; net sales increased 13% year-over-year
GREENVILLE, SC -- November 9, 2021 -- ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the first quarter ended September 30, 2021. All results in this release reflect continuing operations only unless otherwise noted.
| First Quarter Summary: | Quarter ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||||
| (in thousands, except per share data) | ||||||||
| Select reported measures: | ||||||||
| Net sales | $ | 857,311 | $ | 757,342 | 13.2 | % | ||
| Gross profit | $ | 101,300 | $ | 80,779 | 25.4 | % | ||
| Gross profit margin % | 11.82 | % | 10.67 | % | 115 | bp | ||
| Operating income | $ | 30,328 | $ | 1,634 | n/m | |||
| GAAP net income | $ | 22,073 | $ | (115) | n/m | |||
| GAAP diluted EPS | $ | 0.86 | $ | (0.01) | n/m | |||
| Select Non-GAAP measures: | ||||||||
| Adjusted EBITDA | $ | 41,394 | $ | 20,911 | 98.0 | % | ||
| Adjusted EBITDA margin % | 4.83 | % | 2.76 | % | 207 | bp | ||
| Non-GAAP net income | $ | 25,550 | $ | 10,698 | 138.8 | % | ||
| Non-GAAP diluted EPS | $ | 0.99 | $ | 0.42 | 135.7 | % | ||
| n/m - percentages are not meaningful |
"Excellent top-line growth driven by strong demand proves our hybrid distribution strategy is winning," said Mike Baur, Chairman and CEO, ScanSource, Inc. "Our business is built for top-line growth, and we realized operational leverage from this growth in our outstanding bottom-line results."
Quarterly Results
Net sales for the first quarter of fiscal year 2022 totaled $857.3 million, up 13.2% year-over-year, or 12.9% year-over-year for organic growth. First quarter fiscal year 2022 net sales in the Specialty Technology Solutions segment increased 22.7% to $501.7 million, driven by broad-based growth across technologies. First quarter fiscal year 2022 net sales in Modern Communications & Cloud increased 2.0% to $355.6 million, reflecting the shift to cloud and subscriptions. For the Intelisys agency business, first quarter fiscal year 2022 net sales increased 13.7% year-over-year.
Gross profit for the first quarter of fiscal year 2022 totaled $101.3 million, up 25.4% year-over-year. Gross profit margin increased to 11.8% for the first quarter of fiscal year 2022, up from 10.7% for the prior year period. The increase is primarily due to a higher margin sales mix and higher vendor program recognition from higher sales.
For the first quarter of fiscal year 2022, operating income increased to $30.3 million from $1.6 million for the prior-year quarter. First quarter fiscal year 2022 non-GAAP operating income increased to $34.9 million for a 4.07% non-GAAP operating income margin, up from $15.8 million for the prior-year quarter.
Exhibit 99.1
On a GAAP basis, net income for the first quarter of fiscal year 2022 totaled $22.1 million, or $0.86 per diluted share, compared to net loss of $(0.1) million, or $(0.01) per diluted share, for the prior-year quarter. First quarter non-GAAP net income totaled $25.6 million, or $0.99 per diluted share, up from $10.7 million, or $0.42 per diluted share, for the prior-year quarter.
Adjusted EBITDA for the first quarter of fiscal year 2022 increased to $41.4 million, or 4.8% of net sales, compared to $20.9 million, or 2.8% of net sales in the prior-year quarter, primarily due to higher gross profits and operating leverage. Return on invested capital increased to 17.5% for first quarter fiscal year 2022.
Segment Changes
Effective with the first quarter of fiscal year 2022, the Company renamed its operating segments and aligned technologies with its hybrid distribution strategy across hardware, software, connectivity and cloud. The Company's segments follow:
•Specialty Technology Solutions (formerly Worldwide Barcode, Networking & Security)
•Modern Communications & Cloud (formerly Worldwide Communications & Services)
This change better aligns the Company's segment reporting with its go-to-market strategy. The reason the Company is making the change now is to reflect a supplier's business transition between the Company's technology segments. Both of the new segments include hardware, services, and recurring revenue opportunities. The Company reclassified certain prior year amounts in the segment results to conform with the current year presentation.
Annual Financial Outlook for Fiscal Year 2022
ScanSource reaffirms its previously provided guidance set forth below for the full fiscal year ended June 30, 2022.
| FY22 Annual Outlook | |
|---|---|
| Net sales growth, year-over-year | At least 5.5% |
| Adjusted EBITDA (non-GAAP) | At least $135 million |
Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash share-based compensation expense (effective with the first quarter of fiscal year 2022). For comparison, fiscal year 2021 Adjusted EBITDA, excluding share-based compensation totaled $118 million. 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 4:15 p.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 in a conference call today, November 9, 2021, at 5:00 p.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 FY22 outlook, operating strategy, supply chain challenges, capital allocation plans, growth opportunities 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, failure to hire and retain quality employees, risk to the Company's business from a cyber-security attack, the failure to manage and implement the Company's organic growth strategy, the impact of the COVID-19 pandemic on the Company's operations and financial condition and the potential prolonged economic weakness brought on by COVID-19, a failure of the Company's IT systems, a failure to acquire new businesses, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, credit risks involving the Company's larger customers and suppliers, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2021,
filed with the Securities and Exchange Commission. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
Non-GAAP Financial Information
In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company also discloses certain non-GAAP financial measures, which are summarized below. Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments.
Net sales on a constant currency basis, excluding acquisitions (organic growth): The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis.
Income Statement Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP net sales, non-GAAP gross profit, non-GAAP operating income, non-GAAP other expense, net, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges, restructuring costs, and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. Non-GAAP metrics are useful in assessing and understanding the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods.
Adjusted earnings before interest expense, income taxes, depreciation, and amortization (“Adjusted EBITDA”): Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments, including acquisition and divestiture costs, impairment charges, and restructuring costs. Effective with the first quarter of fiscal year 2022, non-cash share-based compensation expense will also be added back in calculating Adjusted EBITDA. 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.
Return on invested capital ("ROIC"): 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 ROIC provides useful information to investors and is an additional relevant comparison of our performance. 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 ROIC provides useful information to investors and is an additional relevant comparison of the Company's performance during the year.
These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below.
About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, software, connectivity and cloud. ScanSource enables partners to deliver solutions for their customers to address changing end-user buying and consumption patterns. ScanSource sells through multiple, specialized routes-to-market with hardware, software, 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 2021 Best Places to Work in South Carolina and on FORTUNE magazine’s 2021 List of World’s Most Admired Companies. ScanSource ranks #655 on the Fortune 1000. For more information, visit www.scansource.com.
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | ||||
|---|---|---|---|---|
| Condensed Consolidated Balance Sheets (Unaudited) | ||||
| (in thousands) | ||||
| September 30, 2021 | June 30, 2021* | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 55,491 | $ | 62,718 |
| Accounts receivable, less allowance of $17,620 at September 30, 2021<br><br>and $19,341 at June 30, 2021 | 589,532 | 568,984 | ||
| Inventories | 493,541 | 470,081 | ||
| Prepaid expenses and other current assets | 117,849 | 117,860 | ||
| Total current assets | 1,256,413 | 1,219,643 | ||
| Property and equipment, net | 40,763 | 42,836 | ||
| Goodwill | 216,948 | 218,877 | ||
| Identifiable intangible assets, net | 99,496 | 104,860 | ||
| Deferred income taxes | 21,806 | 21,853 | ||
| Other non-current assets | 61,925 | 63,615 | ||
| Non-current assets held for sale | — | — | ||
| Total assets | $ | 1,697,351 | $ | 1,671,684 |
| Liabilities and Shareholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 602,229 | $ | 634,805 |
| Accrued expenses and other current liabilities | 72,362 | 87,790 | ||
| Income taxes payable | 9,039 | 2,501 | ||
| Current portion of long-term debt | 8,785 | 7,843 | ||
| Total current liabilities | 692,415 | 732,939 | ||
| Deferred income taxes | 3,846 | 3,954 | ||
| Long-term debt, net of current portion | 132,171 | 135,331 | ||
| Borrowings under revolving credit facility | 56,400 | — | ||
| Other long-term liabilities | 66,425 | 68,269 | ||
| Total liabilities | 951,257 | 940,493 | ||
| 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, 25,528,551 and 25,499,465 shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively | 74,817 | 71,253 | ||
| Retained earnings | 780,144 | 758,071 | ||
| Accumulated other comprehensive loss | (108,867) | (98,133) | ||
| Total shareholders’ equity | 746,094 | 731,191 | ||
| Total liabilities and shareholders’ equity | $ | 1,697,351 | $ | 1,671,684 |
*Derived from audited financial statements.
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | ||||
|---|---|---|---|---|
| Condensed Consolidated Income Statements (Unaudited) | ||||
| (in thousands, except per share data) | ||||
| Quarter ended September 30, | ||||
| 2021 | 2020 | |||
| Net sales | $ | 857,311 | $ | 757,342 |
| Cost of goods sold | 756,011 | 676,563 | ||
| Gross profit | 101,300 | 80,779 | ||
| Selling, general and administrative expenses | 63,582 | 62,112 | ||
| Depreciation expense | 2,880 | 3,396 | ||
| Intangible amortization expense | 4,510 | 4,853 | ||
| Restructuring and other charges | — | 8,268 | ||
| Change in fair value of contingent consideration | — | 516 | ||
| Operating income | 30,328 | 1,634 | ||
| Interest expense | 1,660 | 1,913 | ||
| Interest income | (1,026) | (481) | ||
| Other expense (income), net | 263 | 364 | ||
| Income before income taxes | 29,431 | (162) | ||
| Provision for income taxes | 7,358 | (47) | ||
| Net income (loss) from continuing operations | 22,073 | (115) | ||
| Net loss from discontinued operations | — | (11,704) | ||
| Net income (loss) | $ | 22,073 | $ | (11,819) |
| Per share data: | ||||
| Net income (loss) from continuing operations per common share, basic | $ | 0.87 | $ | (0.01) |
| Net loss from discontinued operations per common share, basic | — | (0.46) | ||
| Net income (loss) per common share, basic | $ | 0.87 | $ | (0.47) |
| Weighted-average shares outstanding, basic | 25,512 | 25,361 | ||
| Net income (loss) from continuing operations per common share, diluted | $ | 0.86 | $ | (0.01) |
| Net loss from discontinued operations per common share, diluted | — | (0.46) | ||
| Net income (loss) per common share, diluted | $ | 0.86 | $ | (0.47) |
| Weighted-average shares outstanding, diluted | 25,696 | 25,361 |
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | ||||
|---|---|---|---|---|
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||
| (in thousands) | ||||
| Quarter ended September 30, | ||||
| 2021 | 2020 | |||
| Cash flows from operating activities: | ||||
| Net income (loss) | $ | 22,073 | $ | (11,819) |
| Net loss from discontinued operations | — | (11,704) | ||
| Net income (loss) from continuing operations | 22,073 | (115) | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations: | ||||
| Depreciation and amortization | 7,650 | 8,710 | ||
| Amortization of debt issue costs | 104 | 104 | ||
| Provision for doubtful accounts | (1,027) | (8) | ||
| Share-based compensation | 2,570 | 1,168 | ||
| Deferred income taxes | (183) | 139 | ||
| Change in fair value of contingent consideration | — | 516 | ||
| Finance lease interest | 17 | 37 | ||
| Changes in operating assets and liabilities, net of acquisitions: | ||||
| Accounts receivable | (26,714) | (68,726) | ||
| Inventories | (25,879) | 31,155 | ||
| Prepaid expenses and other assets | (1,174) | 2,369 | ||
| Other non-current assets | 691 | (274) | ||
| Accounts payable | (26,962) | 92,419 | ||
| Accrued expenses and other liabilities | (14,683) | 7,827 | ||
| Income taxes payable | 6,558 | (4,096) | ||
| Net cash (used in) provided by operating activities of continuing operations | (56,959) | 71,225 | ||
| Cash flows from investing activities of continuing operations: | ||||
| Capital expenditures | (1,090) | (748) | ||
| Net cash used in investing activities of continuing operations | (1,090) | (748) | ||
| Cash flows from financing activities of continuing operations: | ||||
| Borrowings on revolving credit, net of expenses | 526,637 | 477,381 | ||
| Repayments on revolving credit, net of expenses | (470,237) | (545,095) | ||
| Borrowings on long-term debt, net | (2,218) | (2,214) | ||
| Repayments of finance lease obligations | (316) | (327) | ||
| Exercise of stock options | 994 | — | ||
| Net cash provided by (used in) financing activities of continuing operations | 54,860 | (70,255) |
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | ||||
|---|---|---|---|---|
| Condensed Consolidated Statements of Cash Flows (Unaudited), continued | ||||
| (in thousands) | ||||
| Cash flows from discontinued operations: | ||||
| Net cash flows provided by operating activities of discontinued operations | — | 31,853 | ||
| Net cash flows used in investing activities of discontinued operations | — | (36) | ||
| Net cash flows used in financing activities of discontinued operations | — | (9,488) | ||
| Net cash flows provided by discontinued operations | — | 22,329 | ||
| Effect of exchange rate changes on cash and cash equivalents | (4,038) | (1,439) | ||
| (Decrease) Increase in cash and cash equivalents | (7,227) | 21,112 | ||
| Consolidated cash and cash equivalents at beginning of period | 62,718 | 34,455 | ||
| Consolidated cash and cash equivalents at end of period | 55,491 | 55,567 | ||
| Cash and cash equivalents of discontinued operations | — | 5,678 | ||
| Cash and cash equivalents of continuing operations | $ | 55,491 | $ | 49,889 |
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | ||||||
|---|---|---|---|---|---|---|
| Supplementary Information (Unaudited) | ||||||
| (in thousands, except percentages) | ||||||
| Non-GAAP Financial Information: | ||||||
| Quarter ended September 30, | ||||||
| 2021 | 2020 | |||||
| Return on invested capital ratio (ROIC), annualized (a) | 17.5 | % | 8.9 | % | ||
| Reconciliation of net income to adjusted EBITDA: | ||||||
| Net income (loss) from continuing operations (GAAP) | $ | 22,073 | $ | (115) | ||
| Plus: Interest expense | 1,660 | 1,913 | ||||
| Plus: Income taxes | 7,358 | (47) | ||||
| Plus: Depreciation and amortization | 7,650 | 8,710 | ||||
| EBITDA (non-GAAP) | 38,741 | 10,461 | ||||
| Plus: Change in fair value of contingent consideration | — | 516 | ||||
| Plus: Share-based compensation | 2,570 | 1,168 | ||||
| Plus: Acquisition and divestiture costs(b) | 83 | 498 | ||||
| Plus: Restructuring costs | — | 8,268 | ||||
| Adjusted EBITDA (numerator for ROIC) (non-GAAP) | $ | 41,394 | $ | 20,911 | ||
| Invested Capital Calculations: | ||||||
| Equity – beginning of the quarter | $ | 731,191 | $ | 678,246 | ||
| Equity – end of the quarter | 746,094 | 671,227 | ||||
| Plus: Change in fair value of contingent consideration, net of tax | — | 390 | ||||
| Plus: Share-based compensation, net | 1,922 | 878 | ||||
| Plus: Acquisition and divestiture costs(b) | 83 | 498 | ||||
| Plus: Restructuring, net | — | 6,250 | ||||
| Plus: Discontinued operations net loss | — | 11,704 | ||||
| Average equity | 739,645 | 684,597 | ||||
| Average funded debt (c) | 197,406 | 243,268 | ||||
| Invested capital (denominator for ROIC) (non-GAAP) | $ | 937,051 | $ | 927,865 | ||
| (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) Acquisition and divestiture costs are generally nondeductible for tax purposes. | ||||||
| (c) Average funded debt, which includes both continuing and discontinued operations, is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. |
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Supplementary Information (Unaudited) | ||||||||||||||
| Net Sales by Segment: | ||||||||||||||
| Quarter ended September 30, | ||||||||||||||
| 2021 | 2020 | % Change | ||||||||||||
| Specialty Technology Solutions: | (in thousands) | |||||||||||||
| Net sales, reported | $ | 501,711 | $ | 408,777 | 22.7 | % | ||||||||
| Foreign exchange impact (a) | (467) | — | ||||||||||||
| Non-GAAP net sales, constant currency | $ | 501,244 | $ | 408,777 | 22.6 | % | ||||||||
| Modern Communications & Cloud: | ||||||||||||||
| Net sales, reported | $ | 355,600 | $ | 348,565 | 2.0 | % | ||||||||
| Foreign exchange impact (a) | (1,970) | — | ||||||||||||
| Non-GAAP net sales, constant currency | $ | 353,630 | $ | 348,565 | 1.5 | % | ||||||||
| Consolidated: | ||||||||||||||
| Net sales, reported | $ | 857,311 | $ | 757,342 | 13.2 | % | ||||||||
| Foreign exchange impact (a) | (2,437) | — | ||||||||||||
| Non-GAAP net sales, constant currency | $ | 854,874 | $ | 757,342 | 12.9 | % | ||||||||
| (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 September 30, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2020. | ScanSource, Inc. and Subsidiaries | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| Supplementary Information (Unaudited) | ||||||||||||||
| Net Sales by Geography: | ||||||||||||||
| Quarter ended September 30, | ||||||||||||||
| 2021 | 2020 | % Change | ||||||||||||
| United States and Canada: | (in thousands) | |||||||||||||
| Net sales, as reported | $ | 769,499 | $ | 683,603 | 12.6 | % | ||||||||
| International: | ||||||||||||||
| Net sales, reported | $ | 87,812 | $ | 73,739 | 19.1 | % | ||||||||
| Foreign exchange impact(a) | (2,437) | — | ||||||||||||
| Non-GAAP net sales, constant currency | $ | 85,375 | $ | 73,739 | 15.8 | % | ||||||||
| Consolidated: | ||||||||||||||
| Net sales, reported | $ | 857,311 | $ | 757,342 | 13.2 | % | ||||||||
| Foreign exchange impact(a) | (2,437) | — | ||||||||||||
| Non-GAAP net sales, constant currency | $ | 854,874 | $ | 757,342 | 12.9 | % | ||||||||
| (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 September 30, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2020. |
ScanSource Delivers Strong First Quarter Performance
| Quarter ended September 30, 2021 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | |||||||
| (in thousands, except per share data) | ||||||||||||
| Net sales | $ | 857,311 | $ | — | $ | — | $ | — | $ | — | $ | 857,311 |
| Gross profit | 101,300 | — | — | — | — | 101,300 | ||||||
| Operating income | 30,328 | 4,510 | — | 83 | — | 34,921 | ||||||
| Other expense, net | 897 | — | — | — | — | 897 | ||||||
| Pre-tax income | 29,431 | 4,510 | — | 83 | — | 34,024 | ||||||
| Net income | 22,073 | 3,394 | — | 83 | — | 25,550 | ||||||
| Diluted EPS | $ | 0.86 | $ | 0.13 | $ | — | $ | — | $ | — | $ | 0.99 |
| Quarter ended September 30, 2020 | ||||||||||||
| GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | |||||||
| (in thousands, except per share data) | ||||||||||||
| Net sales | $ | 757,342 | $ | — | $ | — | $ | — | $ | — | $ | 757,342 |
| Gross profit | 80,779 | — | — | — | — | 80,779 | ||||||
| Operating (loss) income | 1,634 | 4,853 | 516 | 498 | 8,268 | 15,769 | ||||||
| Other expense, net | 1,796 | — | — | — | — | 1,796 | ||||||
| Pre-tax (loss) income | (162) | 4,853 | 516 | 498 | 8,268 | 13,973 | ||||||
| Net (loss) income | (115) | 3,675 | 390 | 498 | 6,250 | 10,698 | ||||||
| Diluted EPS | $ | (0.01) | $ | 0.14 | $ | 0.02 | $ | 0.02 | $ | 0.25 | $ | 0.42 |
ScanSource Delivers Strong First Quarter Performance
| ScanSource, Inc. and Subsidiaries | |
|---|---|
| Supplementary Forward-Looking Information (Unaudited) | |
| Annual Financial Outlook for Fiscal Year 2022: | |
| GAAP, Operating Income | At least 92 million |
| Intangible amortization | 18 million |
| Depreciation expense | 14 million |
| Share-based compensation expense | 11 million |
| Adjusted EBITDA (non-GAAP) | At least 135 million |
All values are in US Dollars.
ScanSource Delivers Strong First Quarter Performance
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except per share data)
Segment Information:
| Quarter Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | ||||||
| Sales: | ||||||||||
| Specialty Technology Solutions | $ | 501,711 | $ | 515,445 | $ | 436,462 | $ | 455,248 | $ | 408,777 |
| Modern Communications & Cloud | 355,600 | 337,249 | 293,411 | 355,649 | 348,565 | |||||
| $ | 857,311 | $ | 852,694 | $ | 729,873 | $ | 810,897 | $ | 757,342 | |
| Depreciation and amortization: | ||||||||||
| Specialty Technology Solutions | $ | 2,969 | $ | 3,139 | $ | 3,200 | $ | 3,308 | $ | 3,545 |
| Modern Communications & Cloud | 3,962 | 4,233 | 4,439 | 4,246 | 4,370 | |||||
| Corporate | 719 | 719 | 719 | 794 | 795 | |||||
| $ | 7,650 | $ | 8,091 | $ | 8,358 | $ | 8,348 | $ | 8,710 | |
| Operating income (loss): | ||||||||||
| Specialty Technology Solutions | $ | 14,104 | $ | 12,011 | $ | 8,713 | $ | 7,160 | $ | 1,684 |
| Modern Communications & Cloud | 16,307 | 11,466 | 11,555 | 11,814 | 8,716 | |||||
| Corporate | (83) | (191) | (832) | (1,844) | (8,766) | |||||
| $ | 30,328 | $ | 23,286 | $ | 19,436 | $ | 17,130 | $ | 1,634 |
12
scscearningsinfographic_
Fiscal First Quarter 2022 Earnings Excellent top-line growth driven by strong demand proves our hybrid distribution strategy is winning. Our business is built for top-line growth, and we realized operational leverage from this growth in outstanding bottom-line results.” Mike Baur Chairman and CEO, ScanSource, Inc. Key Highlights 13% Net Sales Growth and 25% Gross Profit Growth Reaffirmed Full Fiscal Year 2022 Financial Outlook Operational Excellence Amid Ongoing Supply Chain Challenges Net Sales $857.3 M Specialty Technology Solutions +23% Y/Y $501.7M Net Sales Growth +13% Y/Y Modern Communications & Cloud +2% Y/Y $355.6M Delivered Outstanding Q1 Net Sales and Profitability Growth © ScanSource 2021 Consolidated Net Sales Net Sales By Segment Gross Profit by Segment Specialty Technology Solutions +32% Y/Y $45.7M Modern Communications & Cloud +21% Y/Y $55.6M Exhibit 99.2
* Non-GAAP measure TTM represents trailing-12 months; ROIC represents return on invested capital For further financial data, non-GAAP financial disclosures and cautionary language regarding forward-looking statements, please refer to the following pages and ScanSource’s fiscal year 2022 first quarter news release issued on November 9, 2021, which accompanies this presentation and is available at www.scansource.com in the Investor Relations section. First Quarter Metrics Reflect Operational Excellence Focused Execution of Value Creation Strategy Solid Financial Foundation for Growth Fiscal Year 2022 Outlook as of November 9, 2021 $0.86 Per Share GAAP Diluted EPS $0.99 Per Share Non-GAAP EPS* +136% Y/Y $41.4M Adjusted EBITDA* +98% Y/Y $(11.4)M TTM Operating Cash Flow 17.5% ROIC* Highest quarter in over 5 years 4.83% Adjusted EBITDA Margin* 1.0x net debt to TTM adjusted EBITDA Target range: 1x to 2x 6.3x inventory turns 5-qtr range: 5.8x to 6.9x Paid for inventory days of (3.2) 5-qtr range: (11.8) to 2.2 62 days sales outstanding 5-qtr range: 60 to 63 Leader in Hybrid Distribution Deep Partnerships Margin Expansion Attractive Return Potential Digital Growth Opportunities © ScanSource 2021 At Least 5.5% Net Sales Growth At Least $135M +14% Y/Y Adjusted EBITDA* 2
Forward-Looking Statements This Earnings Infographic and supporting materials contain certain comments that are “forward- looking” statements, including statements about our FY22 outlook, growth opportunities and our operating strategies that involve plans, strategies, economic performance and trends, projections, expectations, costs or beliefs about future events and other statements that are not descriptions of historical facts. Forward-looking information is inherently subject to 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 failure to hire and retain quality employees, risk to our business from a cyber-security attack, the failure to manage and implement our organic growth strategy, impact of the COVID-19 pandemic on our operations and financial condition and the potential prolonged economic weakness brought on by COVID-19, a failure of our IT systems, credit risks involving our larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting our international operations, loss of our major customers, termination of our relationship with key suppliers or a significant modification of the terms under which we operate with a key supplier, changes in our operating strategy, and other factors set forth in the “Risk Factors” contained in our annual report on Form 10-K for the year ended June 30, 2021, and subsequent reports on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”). Although ScanSource believes the expectations in its forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement. ScanSource disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. 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 measures, including non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted EPS, non-GAAP net sales, non-GAAP gross profit, non-GAAP gross margin, non- GAAP SG&A expenses, adjusted EBITDA, ROIC and net sales less impacts from foreign currency translation and acquisitions (organic growth). A reconciliation of the Company's non-GAAP financial information to GAAP financial information is provided in the following supporting materials and in the Company’s Form 8-K, filed with the SEC, with the quarterly earnings press release for the period indicated. 3
Consolidated, 5-Quarter Financial Summary - for continuing operations ($ in thousands, except per share data) Q1 FY22 Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q/Q Y/Y Select reported GAAP measures: Net sales $ 857,311 $ 852,694 $ 729,873 $ 810,897 $ 757,342 1% 13% Gross profit $ 101,300 $ 95,778 $ 88,116 $ 86,043 $ 80,779 6% 25% Gross profit margin % 11.8 % 11.2 % 12.1 % 10.6 % 10.7 % 58 bp 115 bp SG&A expenses $ 63,582 $ 64,758 $ 60,099 $ 60,470 $ 62,112 (2)% 2% Operating income (loss) $ 30,328 $ 23,283 $ 19,436 $ 17,130 $ 1,634 30% *nm Operating income (loss) % 3.54 % 2.73 % 2.66 % 2.11 % 0.22 % 81 bp *nm Net income (loss) $ 22,073 $ 20,657 $ 13,786 $ 11,061 $ (115) 7% *nm Diluted EPS $ 0.86 $ 0.80 $ 0.54 $ 0.43 $ (0.01) 8% *nm Select reported Non-GAAP measures: (a) Net sales $ 857,311 $ 852,694 $ 729,873 $ 810,897 $ 757,342 1% 13% Gross profit $ 101,300 $ 95,778 $ 88,116 $ 86,043 $ 80,779 6% 25% Gross profit margin % 11.8 % 11.2 % 12.1 % 10.6 % 10.7 % 58 bp 115 bp Non-GAAP SG&A expenses $ 63,499 $ 64,512 $ 59,827 $ 59,110 $ 61,614 (2)% 3% Non-GAAP operating income $ 34,921 $ 28,368 $ 25,148 $ 23,836 $ 15,769 23% 121% Non-GAAP operating income % 4.07 % 3.33 % 3.45 % 2.94 % 2.08 % 75 bp 199 bp Non-GAAP net income $ 25,550 $ 24,522 $ 18,178 $ 16,469 $ 10,698 4% 139% Non-GAAP diluted EPS $ 0.99 $ 0.96 $ 0.71 $ 0.65 $ 0.42 3% 136% Adjusted EBITDA $ 41,394 $ 35,299 $ 31,998 $ 29,739 $ 20,911 17% 98% Adjusted EBITDA % 4.83 % 4.14 % 4.38 % 3.67 % 2.76 % 69 bp 207 bp Adjusted ROIC 17.5 % 16.0 % 14.7 % 13.3 % 8.9 % 150 bp 860 bp Operating cash flow (QTR) $ (56,959) $ 61,345 $ (60,252) $ 44,449 $ 71,225 193% (180)% Operating cash flow (TTM) $ (11,417) $ 116,767 $ 129,375 $ 214,975 $ 225,630 (110)% (105)% (a) See pages 11 through 13 for the calculation of non-GAAP measures and reconciliations to GAAP measures. *nm - percentages are not meaningful ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 4 November 9, 2021
Specialty Technology Solutions, 5-Quarter Financial Summary ($ in thousands) Q1 FY22 Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q/Q Y/Y Net sales $ 501,711 $ 515,445 $ 436,462 $ 455,248 $ 408,777 (3)% 23% Gross profit $ 45,694 $ 46,554 $ 39,002 $ 38,612 $ 34,665 (2)% 32% Gross profit margin % 9.1 % 9.0 % 8.9 % 8.5 % 8.5 % 8 bp 63 bp GAAP operating income $ 14,104 $ 12,011 $ 8,713 $ 7,161 $ 1,684 17% 738% GAAP operating income % 2.81 % 2.33 % 2.00 % 1.57 % 0.41 % 48 bp 240 bp Add: Intangible amortization expense $ 1,531 $ 1,610 $ 1,610 $ 1,610 $ 1,610 (5)% (5)% Non-GAAP operating income $ 15,635 $ 13,621 $ 10,323 $ 8,771 $ 3,294 15% 375% Non-GAAP operating income % 3.12 % 2.64 % 2.37 % 1.93 % 0.81 % 47 bp 231 bp Reconciliation of Operating Income to Adjusted EBITDA GAAP operating income $ 14,104 $ 12,011 $ 8,713 $ 7,161 $ 1,684 17% 738% Plus: Depreciation expense $ 1,868 $ 1,967 $ 2,000 $ 2,165 $ 2,350 (5)% (21)% Intangible amortization expense $ 1,531 $ 1,610 $ 1,610 $ 1,610 $ 1,610 (5)% (5)% Interest income $ (305) $ (965) $ (517) $ (209) $ (284) *nm *nm Foreign exchange (gain)/loss $ 77 $ 33 $ 12 $ 303 $ 147 133% (48)% Other income/expense, net $ (90) $ (23) $ (123) $ (174) $ (17) 291% 429% EBITDA $ 17,821 $ 16,543 $ 12,951 $ 11,016 $ 5,798 8% 207% Adjustments: Share-based compensation expense $ 1,398 $ 1,325 $ 1,376 $ 1,114 $ 638 6% 119% Adjusted EBITDA (non-GAAP) $ 19,219 $ 17,868 $ 14,327 $ 12,130 $ 6,436 8% 199% Adjusted EBITDA (non-GAAP) % 3.83 % 3.47 % 3.28 % 2.66 % 1.57 % 36 bp 226 bp *nm - percentages are not meaningful ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 5 November 9, 2021
Modern Communications & Cloud, 5-Quarter Financial Summary ($ in thousands) Q1 FY22 Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q/Q Y/Y Net sales $ 355,600 $ 337,249 $ 293,411 $ 355,649 $ 348,565 5% 2% Gross profit $ 55,606 $ 49,224 $ 49,114 $ 47,431 $ 46,114 13% 21% Gross profit margin % 15.6 % 14.6 % 16.7 % 13.3 % 13.2 % 104 bp 241 bp GAAP operating income $ 16,307 $ 11,466 $ 11,555 $ 11,814 $ 8,716 42% 87% GAAP operating income % 4.59 % 3.40 % 3.94 % 3.32 % 2.50 % 119 bp 209 bp Add: Intangible amortization expense $ 2,978 $ 3,283 $ 3,270 $ 3,252 $ 3,242 (9)% (8)% Add: Change in fair value of contingent consideration $ — $ — $ — $ — $ 516 *nm *nm Non-GAAP operating income $ 19,285 $ 14,749 $ 14,825 $ 15,066 $ 12,474 31% 55% Non-GAAP operating income % 5.42 % 4.37 % 5.05 % 4.24 % 3.58 % 105 bp 184 bp Reconciliation of Operating Income to Adjusted EBITDA GAAP operating income $ 16,307 $ 11,466 $ 11,555 $ 11,814 $ 8,716 42% 87% Plus: Depreciation expense $ 1,273 $ 1,231 $ 1,478 $ 1,322 $ 1,508 3 bp (16) bp Intangible amortization expense $ 2,978 $ 3,283 $ 3,270 $ 3,252 $ 3,242 (9)% (8)% Interest income $ (721) $ (376) $ (228) $ (322) $ (197) *nm *nm Foreign exchange (gain)/loss $ 408 $ 33 $ (54) $ 78 $ 291 1136 bp 40 bp Other income/expense, net $ (132) $ (110) $ (138) $ (86) $ (58) 20 bp 128 bp EBITDA $ 21,003 $ 16,433 $ 16,723 $ 16,718 $ 13,430 28% 56% Adjustments: Share-based compensation expense $ 1,173 $ 1,003 $ 1,160 $ 892 $ 530 17% 121% Fair value of contingent consideration $ — $ — $ — $ — $ 516 *nm *nm Adjusted EBITDA (non-GAAP) $ 22,176 $ 17,436 $ 17,883 $ 17,610 $ 14,476 27% 53% Adjusted EBITDA (non-GAAP) % 6.24 % 5.17 % 6.09 % 4.95 % 4.15 % 107 bp 208 bp *nm - percentages are not meaningful ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 6 November 9, 2021
Net Sales, Constant Currency (Organic Growth) - QTR Net Sales by Segment: ($ In thousands) Q1 FY22 Q1 FY21 % Change Specialty Technology Solutions: Net sales, as reported $ 501,711 $ 408,777 22.7 % Foreign exchange impact (a) (467) — Net Sales, constant currency (non-GAAP) $ 501,244 $ 408,777 22.6 % Modern Communications & Cloud: Net sales, as reported $ 355,600 $ 348,565 2.0 % Foreign exchange impact (a) (1,970) — Net Sales, constant currency (non-GAAP) $ 353,630 $ 348,565 1.5 % Consolidated: Net sales, as reported $ 857,311 $ 757,342 13.2 % Foreign exchange impact (a) (2,437) — Net Sales, constant currency (non-GAAP) $ 854,874 $ 757,342 12.9 % Net Sales by Geography: ($ in thousands) Q1 FY22 Q1 FY21 % Change United States and Canada: Net sales, as reported $ 769,499 $ 683,603 12.6 % International: Net sales, as reported $ 87,812 $ 73,739 19.1 % Foreign exchange impact (a) (2,437) — Net Sales, constant currency (non-GAAP) $ 85,375 $ 73,739 15.8 % Consolidated: Net sales, as reported $ 857,311 $ 757,342 13.2 % Foreign exchange impact (a) (2,437) — Net Sales, constant currency (non-GAAP) $ 854,874 $ 757,342 12.9 % (a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the quarter ended September 30, 2021 into U.S. dollars using the weighted-average foreign exchange rates for the quarter ended September 30, 2020. ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 7 November 9, 2021
Average Return on Invested Capital - QTR ($ in thousands) Q1 FY22 Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Adjusted return on invested capital (ROIC), annualized (a) 17.5 % 16.0 % 14.7 % 13.3 % 8.9 % Reconciliation of Net Income to Adjusted EBITDA Net income (loss) from continuing operations - GAAP $ 22,073 $ 20,657 $ 13,786 $ 11,061 $ (115) Plus: Interest expense 1,660 1,643 1,576 1,796 1,913 Income taxes 7,358 2,389 5,121 4,683 (47) Depreciation and amortization 7,650 8,090 8,358 8,349 8,710 EBITDA 38,741 32,779 28,841 25,889 10,461 Adjustments: Change in fair value of contingent consideration — — — — 516 Acquisition and divestiture costs 83 246 272 1,360 498 Restructuring costs — (54) 349 484 8,268 Share-based compensation 2,570 2,328 2,537 2,006 1,168 Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 41,394 $ 35,299 $ 31,999 $ 29,739 $ 20,911 Invested Capital Calculation $ 731,191 $ 690,575 $ 682,139 $ 671,227 $ 678,246 746,094 731,191 690,575 682,139 671,227 Equity - beginning of the quarter Equity - end of quarter Adjustments: Change in fair value of contingent consideration, net of tax — — — — 390 Share-based compensation, net 1,922 1,752 1,912 1,510 878 Acquisition and divestiture costs 83 207 272 1,360 498 Restructuring, net of tax — (40) 264 366 6,250 Discontinued operations net (income) loss — (3,053) 688 25,255 11,704 739,645 710,316 687,925 690,929 684,597 197,406 177,074 191,996 198,620 243,268 Average equity Average funded debt (b) Invested capital (denominator for ROIC) (non-GAAP) $ 937,051 $ 887,390 $ 879,921 $ 889,549 $ 927,865 (a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures. (b) Average funded debt, which includes both continuing and discontinued operations, is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt. ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 8 November 9, 2021
Net Debt and EBITDA Metrics ($ in thousands) Q1 FY22 Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Debt of continuing operations (Q/E) $ 197,356 $ 143,174 $ 198,851 $ 151,924 $ 148,799 Debt of discontinued operations (Q/E) — — — — 19,932 Consolidated debt (Q/E) 197,356 143,174 198,851 151,924 168,731 Less: Cash and cash equivalents of continuing operations (Q/E) (55,491) (62,718) (49,321) (67,187) (49,889) Cash and cash equivalents of discontinued operations (Q/E) — — — — (5,678) Consolidated cash and cash equivalents (Q/E) (55,491) (62,718) (49,321) (67,187) (55,567) Net debt (Q/E) $ 141,865 $ 80,456 $ 149,530 $ 84,737 $ 113,164 Reconciliation of Net Income to Adjusted EBITDA Net income (loss) from continuing operations - GAAP $ 22,073 $ 20,657 $ 13,786 $ 11,061 $ (115) Plus: Interest expense 1,660 1,643 1,576 1,796 1,913 Income taxes 7,358 2,389 5,121 4,683 (47) Depreciation and amortization 7,650 8,090 8,358 8,349 8,710 EBITDA 38,741 32,779 28,841 25,889 10,461 Adjustments: Change in fair value of contingent consideration — — — — 516 Acquisition and divestiture costs 83 246 272 1,360 498 Restructuring costs — (54) 349 484 8,268 Share-based compensation 2,570 2,328 2,537 2,006 1,168 Adjusted EBITDA (non-GAAP) $ 41,394 $ 35,299 $ 31,999 $ 29,739 $ 20,911 Adjusted EBITDA, TTM (a) $ 138,431 $ 117,948 $ 96,605 $ 85,475 $ 90,332 Net Debt / Adjusted EBITDA, TTM (a) 1.0x 0.7x 1.5x 1.0x 1.3x (a) Adjusted EBITDA for the trailing 12-month period ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 9 November 9, 2021
Working Capital, 5-Quarter Summary ($ in thousands) Q1 FY22 Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Accounts Receivable (Q/E) $ 589,532 $ 568,984 $ 509,404 $ 534,583 $ 509,779 Days sales outstanding in receivables 62 60 63 60 61 Inventory (Q/E) $ 493,541 $ 470,081 $ 459,652 $ 421,003 $ 423,088 Inventory turns 6.3 6.5 5.8 6.9 6.2 Accounts payable (Q/E) $ 602,229 $ 634,805 $ 521,552 $ 589,292 $ 544,856 Paid for inventory days* (3.2) (9.4) 2.2 (11.8) (7.2) Working Capital (Q/E) (AR+INV-AP) $ 480,844 $ 404,260 $ 447,504 $ 366,294 $ 388,011 Cash conversion cycle 59 51 65 48 54 *Paid for inventory days represent Q/E inventory days less Q/E accounts payable days ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 10 November 9, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - QTR ($ in thousands) Quarter ended September 30, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Non-GAAP measure Net sales $ 857,311 $ — $ — $ — $ 857,311 Gross profit 101,300 — — — 101,300 SG&A expenses 63,582 — — (83) 63,499 Operating income 30,328 4,510 — 83 34,921 Other expense, net 897 — — — 897 Pre-tax income 29,431 4,510 — 83 34,024 Net income 22,073 3,394 — 83 25,550 Diluted EPS $ 0.86 $ 0.13 $ — $ — $ 0.99 (a) Acquisition and divestiture costs totaled less than $0.1 million for the quarter ended September 30, 2021 and are generally nondeductible for tax purposes. ($ in thousands) Quarter ended June 30, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Non-GAAP measure Net sales $ 852,694 $ — $ — $ — $ 852,694 Gross profit 95,778 — — — 95,778 SG&A expenses 64,758 — — (246) 64,512 Operating income 23,283 4,893 — 192 28,368 Other expense, net 237 — — — 237 Pre-tax income 23,046 4,893 — 192 28,131 Net income 20,657 3,698 — 167 24,522 Diluted EPS $ 0.80 $ 0.14 $ — $ 0.01 $ 0.96 (a) Acquisition and divestiture costs totaled $0.2 million for the quarter ended June 30, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $(0.1) million for the quarter ended June 30, 2021. ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 11 November 9, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - QTR, continued ($ in thousands) Quarter ended March 31, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Non-GAAP measure Net sales $ 729,873 $ — $ — $ — $ 729,873 Gross profit 88,116 — — — 88,116 SG&A expenses 60,099 — — (272) 59,827 Operating income 19,436 4,880 — 832 25,148 Other expense, net 529 — — — 529 Pre-tax income 18,907 4,880 — 832 24,619 Net income 13,786 3,697 — 695 18,178 Diluted EPS $ 0.54 $ 0.14 $ — $ 0.03 $ 0.71 (a) Acquisition and divestiture costs totaled $0.3 million for the quarter ended March 31, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.6 million for the quarter ended March 31, 2021. ($ in thousands) Quarter ended December 31, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Non-GAAP measure Net sales $ 810,897 $ — $ — $ — $ 810,897 Gross profit 86,043 — — — 86,043 SG&A expenses 60,470 — — (1,360) 59,110 Operating income 17,130 4,862 — 1,844 23,836 Other expense, net 1,386 — — — 1,386 Pre-tax (loss) income 15,744 4,862 — 1,844 22,450 Net (loss) income 11,061 3,682 — 1,726 16,469 Diluted EPS $ 0.43 $ 0.14 $ — $ 0.07 $ 0.65 (a) Acquisition and divestiture costs totaled $1.4 million for the quarter ended December 30, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.5 million for the quarter ended December 31, 2020. ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 12 November 9, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - QTR, continued ($ in thousands) Quarter ended September 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Non-GAAP measure Net sales $ 757,342 $ — $ — $ — $ 757,342 Gross profit 80,779 — — — 80,779 SG&A expenses 62,112 — — (498) 61,614 Operating (loss) income 1,634 4,853 516 8,766 15,769 Other expense, net 1,796 — — — 1,796 Pre-tax (loss) income (162) 4,853 516 8,766 13,973 Net (loss) income (115) 3,675 390 6,748 10,698 Diluted EPS $ (0.01) $ 0.14 $ 0.02 $ 0.27 $ 0.42 (a) Acquisition and divestiture costs totaled $0.5 million for the quarter ended September 30, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $8.3 million for the quarter ended September 30, 2020. ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 13 November 9, 2021
FY22 Annual Financial Outlook Reconciliation FY22 Outlook GAAP, operating income At least $92 million Intangible amortization $18 million Depreciation expense $14 million Share-based compensation expense $11 million Adjusted EBITDA (non-GAAP) At least $135 million ScanSource, Inc. Earnings Infographic Q1 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 14 November 9, 2021