Scansource, Inc 10-Q, filed Nov 5, 2026
Scansource, Inc. (SCSC)
10-Q
2026-11-05
For: 2026-09-30
View Original
Added on
November 05, 2026
About this 10-Q
Scansource, Inc filed this 10-Q on November 5, 2026, covering the quarter ended September 30, 2026.
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $962.29M
- up 30.1% from $739.65M a year earlier
- Net income
- $8.69M
- down 56.3% from net income of $19.88M a year earlier
- Diluted EPS
- $0.42
- down 52.8% from $0.89 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2026
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ____ to ____
Commission File Number: 000-26926
| (Exact name of registrant as specified in its charter) | ||||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Zip Code) | ||||||||||||||
| (Address of principal executive offices) | ||||||||||||||
(864 ) 288-2432
(Registrant's telephone number, including area code)
_______________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act:
None.
_______________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Smaller reporting company | ||||||||||||||||
| Accelerated filer | ☐ | Emerging growth company | |||||||||||||||
| Non-accelerated filer | ☐ | ||||||||||||||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at October 30, 2026 | |||||||
| Common Stock, no par value per share | ||||||||
SCANSOURCE, INC.
INDEX TO FORM 10-Q
September 30, 2026
| Page # | ||||||||
| Item 1. | Financial Statements | |||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
3
FORWARD-LOOKING STATEMENTS
Forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) included in the "Risk Factors," "Legal Proceedings," "Management’s Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk" sections and elsewhere herein. Words such as "expects," "anticipates," "believes," "intends," "plans," "hopes," "forecasts," "seeks," "estimates," "goals," "projects," "strategy," "future," "likely," "may," "should," "will," and variations of such words and similar expressions generally identify such forward-looking statements. Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. You should not place undue reliance on forward-looking statements as actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors 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 and supply chain challenges, tariffs and changes in trade policy, the failure to manage and implement the Company's growth strategy, the Company's ability to realize the synergies or other benefits from acquisitions, credit risks involving the Company's larger channel sales partners and suppliers, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, including new or increased tariffs, risk to the Company's business from a cyber attack, a failure of the Company's IT systems, failure to hire and retain quality employees, loss of the Company's major channel sales partners, relationships with the Company's key suppliers and channel sales partners or a termination or a significant modification of the terms under which it operates with such suppliers and channel sales partners, changes in the Company's operating strategy and other factors set forth in "Risk Factors" contained in our Annual Report on Form 10-K for the year ended June 30, 2026.
4
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements | ||||
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share information)
| September 30, 2026 | June 30, 2026 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, less allowance of $ and $ | |||||||||||
| Inventories | |||||||||||
| Prepaid income tax expense | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Identifiable intangible assets, net | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Current portion of contingent consideration | |||||||||||
| Income taxes payable | |||||||||||
| Current portion of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Borrowings under revolving credit facility | |||||||||||
| Long-term portion of contingent consideration | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Shareholders’ equity: | |||||||||||
Preferred stock, no par value; | |||||||||||
Common stock, no par value; | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
June 30, 2026 amounts are derived from audited consolidated financial statements. | |||||||||||
| See accompanying notes to these condensed consolidated financial statements. | |||||||||||
5
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(In thousands, except per share data)
| Quarter ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net sales | $ | $ | |||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Depreciation expense | |||||||||||||||||||||||
| Intangible amortization expense | |||||||||||||||||||||||
| Restructuring expense | |||||||||||||||||||||||
| Change in fair value of contingent consideration | ( | ||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest income | ( | ( | |||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Per share data: | |||||||||||||||||||||||
| Net income per common share, basic | $ | $ | |||||||||||||||||||||
| Weighted-average shares outstanding, basic | |||||||||||||||||||||||
| Net income per common share, diluted | $ | $ | |||||||||||||||||||||
| Weighted-average shares outstanding, diluted | |||||||||||||||||||||||
| See accompanying notes to these condensed consolidated financial statements. | ||
6
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
| Quarter ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Unrealized gain (loss) on hedged transaction, net of tax | ( | ||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ||||||||||||||||||||||
| Comprehensive income | $ | $ | |||||||||||||||||||||
| See accompanying notes to these condensed consolidated financial statements. | ||
7
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share information)
| Common Stock (Shares) | Common Stock (Amount) | Retained Earnings | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| Unrealized gain on hedged transaction, net of tax | — | — | — | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ( | ||||||||||||||||||||||||
| Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | ( | — | — | ( | |||||||||||||||||||||||||
| Common stock repurchased, including excise tax | ( | ( | ( | — | ( | ||||||||||||||||||||||||
| Share-based compensation | — | — | — | ||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| See accompanying notes to these condensed consolidated financial statements. | |||||||||||||||||||||||||||||
8
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share information)
| Common Stock (Shares) | Common Stock (Amount) | Retained Earnings | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| Unrealized loss on hedged transaction, net of tax | — | — | — | ( | ( | ||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ||||||||||||||||||||||||||
| Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | — | — | |||||||||||||||||||||||||||
| Common stock repurchased, including excise tax | ( | ( | ( | — | ( | ||||||||||||||||||||||||
| Share-based compensation | — | — | — | ||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| See accompanying notes to these condensed consolidated financial statements. | |||||||||||||||||||||||||||||
9
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| Three months ended | |||||||||||||||||
| September 30, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income | $ | $ | |||||||||||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Amortization of debt issue costs | |||||||||||||||||
| Provision for doubtful accounts | |||||||||||||||||
| Share-based compensation | |||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||
| Change in fair value of contingent consideration | ( | ||||||||||||||||
| Finance lease interest | |||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ||||||||||||||||
| Inventories | ( | ( | |||||||||||||||
| Prepaid expenses and other assets | ( | ||||||||||||||||
| Other non-current assets | |||||||||||||||||
| Accounts payable | ( | ( | |||||||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||||||||
| Income taxes payable | ( | ||||||||||||||||
| Net cash (used in) provided by operating activities | ( | ||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Capital expenditures | ( | ( | |||||||||||||||
| Cash paid for business acquisitions, net of cash acquired | ( | ||||||||||||||||
| Net cash used in investing activities | ( | ( | |||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Borrowings on revolving credit | |||||||||||||||||
| Repayments on revolving credit | ( | ( | |||||||||||||||
| Repayments on long-term debt | ( | ( | |||||||||||||||
| Repayments on finance lease obligation | ( | ( | |||||||||||||||
| Contingent consideration payments | ( | ( | |||||||||||||||
| Exercise of stock options | |||||||||||||||||
| Taxes paid on settlement of equity awards | ( | ( | |||||||||||||||
| Common stock repurchased, including excise tax | ( | ( | |||||||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||||||||
| Decrease in cash and cash equivalents | ( | ( | |||||||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||||||||
| See accompanying notes to these condensed consolidated financial statements. | |||||||||||||||||
10
SCANSOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Business and Summary of Significant Accounting Policies
Business Description
ScanSource, Inc. (together with its subsidiaries referred to as “the Company” or “ScanSource”) is a leading technology distributor uniquely positioned to address complex technologies and to accelerate growth for channel sales partners across hardware, software as a service ("SaaS"), connectivity, cloud and services. ScanSource uses multiple sales models to offer technology solutions from leading suppliers of specialty technologies, connectivity, cloud and services. The Company operates primarily in the United States and Brazil. The Company has updated the name of its Intelisys & Advisory segment to Intelisys & Solution Services. The Company's two operating segments, Specialty Technology Solutions and Intelisys & Solution Services, represent the different sales models the Company uses in executing its technology distribution growth strategy.
Basis of Presentation
Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies for the quarter ended September 30, 2026 from the policies described in the notes to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2026. For a discussion of the Company’s significant accounting policies, please see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
Cash and Cash Equivalents
11
Long-lived Assets
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03 “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public entities to disclose specified information about certain costs and expenses. The ASU is effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. This ASU is applicable to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2028, and subsequent interim periods, with early application permitted. The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” This standard is intended to improve the operability and application of guidance related to capitalized software development costs. The ASU is effective for annual reporting periods beginning after December 15, 2027, and subsequent interim periods, with early application permitted. The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements and disclosures.
The Company has reviewed other newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption.
(2) Trade Accounts and Notes Receivable, Net
The Company maintains an allowance for doubtful accounts receivable for estimated future expected credit losses resulting from channel sales partners’ failure to make payments on accounts receivable due to the Company. The Company has notes receivable with certain channel sales partners, which are included in “Accounts receivable, less allowance” in the Condensed Consolidated Balance Sheets.
Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by the Company on the financial condition and the current creditworthiness of its channel sales partners, (iv) the current economic and country-specific environment and (v) reasonable and supportable forecasts about collectability. Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. Estimates of expected credit losses on trade receivables over the contractual life are recorded at inception and adjusted over the contractual life.
The changes in the allowance for doubtful accounts for the three months ended September 30, 2026 are set forth in the table below.
| June 30, 2026 | Amounts Charged to Expense | Write-offs | Other (1) | September 30, 2026 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Trade accounts and current notes receivable allowance | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
12
(3) Revenue Recognition
The Company provides technology solutions and services from the world's leading suppliers of mobility and barcode, POS, payment terminals, physical security, networking, communications, connectivity, cloud, data center and cybersecurity. This includes hardware, related accessories and device configuration as well as software licenses, professional services and hardware support programs. Substantially all of the Company's revenues are derived from products sold at a point-in-time.
In determining the appropriate amount of revenue to recognize, the Company applies the following five-step model in accordance with ASC 606: (i) identify contracts with customers; (ii) identify performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations per the contracts; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company recognizes revenue as control of products and services are transferred to customers, which is generally at the point of shipment. The Company delivers products to customers in several ways, including: (i) shipment from a Company warehouse, (ii) drop-shipment directly from the supplier, or (iii) electronic delivery for non-physical products.
Principal versus Agent Considerations
The Company is the principal for sales of all hardware and certain software and services. The Company considers itself the principal in those transactions where it has control of the product or service before it is transferred to the customer. The Company recognizes the principal-associated revenue and cost of goods sold on a gross basis.
The Company is the agent for third-party service contracts, including product warranties and supplier-hosted software. These service contracts are sold separately from the products, and the Company often serves as the agent for the contract on behalf of the original equipment manufacturer. The Company's responsibility is to arrange for the provision of the specified service by the original equipment manufacturer, and the Company does not control the specified service before it is transferred to the customer. Because the Company acts as an agent, revenue is recognized net of cost at the time of sale. The Intelisys business operates under an agency model.
Variable Considerations
For certain transactions, products are sold with a right of return and may also provide other rebates or incentives, which are accounted for as variable consideration. The Company estimates a returns allowance based on historical experience and reduces revenue accordingly. The Company estimates the amount of variable consideration for rebates and incentives by using the expected value to be given to the customer and reduces the revenue by those estimated amounts. These estimates are reviewed and updated as necessary at the end of each reporting period.
Contract Balances
The Company records contract assets for services performed in advance of payments being received from channel sales partners. The Company records contract liabilities for payments received from channel sales partners in advance of services performed. These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions where control has not yet passed to the customer. These amounts are immaterial to the consolidated financial statements for the periods presented.
13
Disaggregation of Revenue
The following tables represent the Company's disaggregation of revenue:
| Quarter ended September 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | Intelisys & Solution Services | Total | ||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Revenue by category: | ||||||||||||||||||||||||||||||||||||||
| Products and services | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Recurring revenue(a) | ||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| (a) Recurring revenue represents revenue primarily from agency commissions, managed connectivity, SaaS, subscriptions, managed services, and hardware rentals. | ||||||||||||||||||||||||||||||||||||||
| Quarter ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | Intelisys & Solution Services | Total | ||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Revenue by category: | ||||||||||||||||||||||||||||||||||||||
| Products and services | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Recurring revenue(a) | ||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||||||||||||||
(a) Recurring revenue represents revenue primarily from agency commissions, managed connectivity, SaaS, subscriptions, managed services, and hardware rentals. | ||||||||||||||||||||||||||||||||||||||
(4) Earnings Per Share
Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted-average number of common and potential common shares outstanding.
| Quarter ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares, basic | |||||||||||||||||||||||
| Dilutive effect of share-based payments | |||||||||||||||||||||||
| Weighted-average shares, diluted | |||||||||||||||||||||||
| Net income per common share, basic | $ | $ | |||||||||||||||||||||
| Net income per common share, diluted | $ | $ | |||||||||||||||||||||
For the quarters ended September 30, 2026 and September 30, 2025, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 91,346 and 295,562 , respectively.
14
(5) Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax are as follows:
| September 30, 2026 | June 30, 2026 | ||||||||||
| (in thousands) | |||||||||||
| Foreign currency translation adjustment | $ | ( | $ | ( | |||||||
| Unrealized gain on hedged transaction, net of tax | |||||||||||
| Accumulated other comprehensive loss | $ | ( | $ | ( | |||||||
The tax effect of amounts in comprehensive loss reflect a tax expense (benefit) as follows:
| Quarter ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Tax expense (benefit) | $ | $ | ( | ||||||||||||||||||||
(6) Goodwill and Other Identifiable Intangible Assets
The changes in the carrying amount of goodwill for the three months ended September 30, 2026, by reporting segment, are set forth in the table below.
| Specialty Technology Solutions | Intelisys & Solution Services | Total | |||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ||||||||||||||||||||
Additions(a) | ( | ||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | ||||||||||||||||||||
(a) Decrease within Specialty Technology Solutions segment reflects DataXoom Corp. ("DataXoom") acquisition valuation adjustments upon finalization of purchase accounting in the current period. Increase within Intelisys & Solutions Services segment reflects initial valuation of the MicroAge Acquisition Corp. ("MicroAge") acquisition. | |||||||||||||||||||||||
The following table shows the Company's identifiable intangible assets as of September 30, 2026 and June 30, 2026, respectively.
| September 30, 2026 | June 30, 2026 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Amortized intangible assets: | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Trade names | |||||||||||||||||||||||||||||||||||
| Non-compete agreements | |||||||||||||||||||||||||||||||||||
| Supplier partner program | |||||||||||||||||||||||||||||||||||
| Developed technology | |||||||||||||||||||||||||||||||||||
| Total intangibles | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
15
The weighted-average amortization period for all intangible assets was approximately 12 years as of September 30, 2026 and 11 years as of June 30, 2026. Amortization expense for the three months ended September 30, 2026 and 2025 was $4.7 million and $4.4 million, respectively, all of which relates to selling, general and administrative costs, not the cost of selling goods, and has been presented as such in the accompanying Consolidated Income Statements.
Estimated future amortization expense is as follows:
| Amortization Expense | |||||
| (in thousands) | |||||
| Year Ended June 30, | |||||
| 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total | $ | ||||
(7) Short-Term Borrowings and Long-Term Debt
The following table presents the Company’s debt at September 30, 2026 and June 30, 2026.
| September 30, 2026 | June 30, 2026 | ||||||||||
| (in thousands) | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Mississippi revenue bond, net of current portion | |||||||||||
| Senior secured term loan facility, net of current portion | |||||||||||
| Borrowings under revolving credit facility | |||||||||||
| Total debt | $ | $ | |||||||||
Credit Facility
On December 18, 2025, the Company entered into a credit agreement (the “New Credit Agreement”) with PNC Bank, National Association, as administrative agent (“PNC”), and the other lenders party thereto (the “Lenders”), providing for (i) a five-year , $400 million multicurrency senior secured revolving credit facility and (ii) a five-year $100 million senior secured term loan facility (the “New Credit Facilities”). In addition, pursuant to an “accordion feature,” the Company may increase its borrowings by up to the greater of $250 million or 150 % of the Company’s EBITDA calculated on a Pro Forma Basis (each as defined in the New Credit Agreement), subject to obtaining additional credit commitments from the Lenders participating in the increase. The New Credit Agreement allows for issuance of up to $50 million for letters of credit. Borrowings under the New Credit Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries. Under the terms of the revolving credit facility, the payment of cash dividends is restricted. The Company incurred debt issuance costs of $1.4 million in connection with the New Credit Agreement, which were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility.
Loans denominated in U.S. dollars, other than swingline loans, bear interest at a rate per annum equal to, at the Company’s option, (i) the Term Secured Overnight Financing Rate ("SOFR") or daily simple SOFR plus an additional margin ranging from 1.00 % to 1.75 % depending upon the Company’s ratio of (A) total consolidated debt less its unrestricted domestic cash to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable, for which financial statements have been delivered to the Lenders (the “leverage ratio”); or (ii) the base rate plus an additional margin ranging from 0 % to 0.75 %, depending upon the Company’s leverage ratio.
All swingline loans denominated in U.S. dollars bear interest based upon the daily simple SOFR, floating daily, plus an additional margin ranging from 1.00 % to 1.75 % depending upon the Company's leverage ratio, or such other rate as the
16
Company and the applicable swingline lender may agree. Loans denominated in foreign currencies bear interest at a rate per annum equal to the applicable benchmark rate set forth in the New Credit Agreement plus an additional margin ranging from 1.00 % to 1.75 %, depending upon the Company’s leverage ratio. A commitment fee is payable on the unused amount of commitments under the revolving credit facility. The commitment fee ranges from 0.15 % to 0.30 %, depending on the Company’s leverage ratio.
In connection with entering into the New Credit Agreement, on December 18, 2025, the Company terminated and repaid all indebtedness and other obligations outstanding under its Third Amended and Restated Credit Agreement (the “Prior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto, which provided for (i) a five-year , $350 million multicurrency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility.
During the quarter ended September 30, 2026, all of the Company's borrowings under the New Credit Agreement were U.S. dollar loans. The spread in effect as of September 30, 2026 was 1.00 % for SOFR-based loans and 0.00 % for alternate base rate loans. The commitment fee rate in effect at September 30, 2026 was 0.15 %. The effective interest rates for the term loan were 4.91 % and 4.65 % as of September 30, 2026 and June 30, 2026, respectively. The New Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants. Specifically, the Company’s leverage ratio must be less than or equal to 3.50 to 1.00. In addition, the Company’s Interest Coverage Ratio (as such term is defined in the New Credit Agreement) must be at least 3.00 to 1.00 at the end of each fiscal quarter. In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates. The Company was in compliance with all covenants under the New Credit Agreement at September 30, 2026.
The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, was $139.9 million and $1.1 million during the three month periods ended September 30, 2026 and 2025, respectively. There was $168.1 million and $400.0 million available for additional borrowings as of September 30, 2026 and June 30, 2026, respectively. The effective interest rates for the revolving line of credit were 4.90 % and 4.62 % as of September 30, 2026 and June 30, 2026, respectively. There were no
Mississippi Revenue Bond
On August 1, 2007, the Company entered into an agreement with the State of Mississippi to provide financing for the acquisition and installation of certain equipment to be utilized at the Company’s Southaven, Mississippi warehouse, through the issuance of an industrial development revenue bond. The bond matures on September 1, 2032. The bond accrues interest at the one-month term SOFR plus an adjustment of 0.10 % plus a spread of 0.85 %. The agreement also provides the bondholder with a put option, exercisable only within 180 days of each fifth anniversary of the agreement, requiring the Company to pay back the bonds at 100 % of the principal amount outstanding. At September 30, 2026, the Company was in compliance with all covenants under this bond. The interest rates at September 30, 2026 and June 30, 2026 were 4.63 % and 4.57 %, respectively.
Debt Issuance Costs
At September 30, 2026, net debt issuance costs associated with the credit facilities, term loan and bond totaled $1.5 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.
(8) Derivatives and Hedging Activities
The Company's results of operations could be materially impacted by significant changes in foreign currency exchange rates and interest rates. In an effort to manage the exposure to these risks, the Company periodically enters into various derivative instruments. The Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with U.S. GAAP. The Company records all derivatives on the Condensed Consolidated Balance Sheet at fair value. Derivatives that are not designated as hedging instruments or the ineffective portions of cash flow hedges are adjusted to fair value through earnings in other income and expense.
Foreign Currency Derivatives – The Company conducts a portion of its business internationally in a variety of foreign currencies and is exposed to market risk for changes in foreign currency exchange rates. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted the Company uses currency options and forward contracts or other hedging instruments with third parties. These contracts will periodically hedge the exchange of various currencies, including the U.S. dollar, Brazilian real, euro, British pound and Canadian dollar.
17
The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $14.3 million and $15.2 million for the exchange of foreign currencies at September 30, 2026 and June 30, 2026, respectively. To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense. Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters ended September 30, 2026 and 2025 are as follows:
| Quarter ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net foreign exchange derivative contract losses | $ | $ | |||||||||||||||||||||
| Net foreign currency transactional and re-measurement gains | ( | ( | |||||||||||||||||||||
| Net foreign currency exchange losses | $ | $ | |||||||||||||||||||||
Net foreign currency exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses and are included in other income and expense. Foreign exchange gains and losses are primarily generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real and the Canadian dollar versus the U.S. dollar.
Interest Rates - The Company’s earnings are affected by changes in interest rates due to the impact such changes have on interest expense associated with its floating-rate debt. To manage this exposure, the Company entered into separate interest rate swap agreements with a swap counterparty. These swaps include a notional amount of $50.0 million that matured on April 30, 2026, and a notional amount of $25.0 million maturing on March 31, 2028. The agreements are intended to mitigate interest risk by effectively converting a portion of the Company's borrowings from floating-rate to fixed-rate.
These interest rate swap agreements are designated as cash flow hedges to hedge the variable rate interest payments on the revolving credit facility. Interest rate differentials paid or received under the swap agreements are recognized as adjustments to interest expense. To the extent the swaps are effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in current earnings, but are reported as other comprehensive income (loss). There was no ineffective portion to be recorded as an adjustment to earnings for the quarters ended September 30, 2026 and 2025.
The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters ended September 30, 2026 and 2025, are as follows:
| Quarter ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net interest income recognized as a result of interest rate swap | $ | ( | $ | ( | |||||||||||||||||||
| Unrealized gain in fair value of interest rate swap | |||||||||||||||||||||||
| Net increase (decrease) in accumulated other comprehensive income | ( | ||||||||||||||||||||||
| Income tax effect | ( | ||||||||||||||||||||||
| Net increase (decrease) in accumulated other comprehensive income, net of tax | $ | $ | ( | ||||||||||||||||||||
18
The Company used the following derivative instruments at September 30, 2026 and June 30, 2026, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:
| September 30, 2026 | June 30, 2026 | ||||||||||||||||||||||||||||
| Balance Sheet Location | Fair Value of Derivatives Designated as Hedge Instruments | Fair Value of Derivatives Not Designated as Hedge Instruments | Fair Value of Derivatives Designated as Hedge Instruments | Fair Value of Derivatives Not Designated as Hedge Instruments | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Derivative assets: | |||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts | Prepaid expenses and other current assets | $ | $ | $ | $ | ||||||||||||||||||||||||
| Foreign currency hedge | Prepaid expenses and other current assets | $ | $ | $ | $ | ||||||||||||||||||||||||
| Interest rate swap agreement | Other non-current assets | $ | $ | $ | $ | ||||||||||||||||||||||||
| Derivative liabilities: | |||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts | Accrued expenses and other current liabilities | $ | $ | $ | $ | ||||||||||||||||||||||||
19
(9) Fair Value of Financial Instruments
Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company classifies certain assets and liabilities based on the fair value hierarchy, which aggregates fair value measured assets and liabilities based upon the following levels of inputs:
•Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
•Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
•Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The assets and liabilities maintained by the Company that are required to be measured at fair value on a recurring basis include deferred compensation plan investments, forward foreign currency exchange contracts, foreign currency hedge agreements, interest rate swap agreements and contingent consideration owed to the sellers of Advantix Solutions Group, Inc ("Advantix"), Secure Path Networks, LLC dba Resourcive ("Resourcive") and DataXoom. The carrying value of debt is considered to approximate fair value, as the Company’s debt instruments are indexed to a variable rate using the market approach (Level 2).
The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at September 30, 2026:
| Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Deferred compensation plan investments, current and non-current | $ | $ | $ | $ | |||||||||||||||||||
| Forward foreign currency exchange contracts | |||||||||||||||||||||||
| Interest rate swap agreement | |||||||||||||||||||||||
| Foreign currency hedge | |||||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Deferred compensation plan investments, current and non-current | $ | $ | $ | $ | |||||||||||||||||||
| Liability for contingent consideration, current and non-current | |||||||||||||||||||||||
| Total liabilities at fair value | $ | $ | $ | $ | |||||||||||||||||||
20
The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at June 30, 2026:
| Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Deferred compensation plan investments, current and non-current | $ | $ | $ | $ | |||||||||||||||||||
| Interest rate swap agreement | |||||||||||||||||||||||
| Foreign currency hedge | |||||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Deferred compensation plan investments, current and non-current | $ | $ | $ | $ | |||||||||||||||||||
| Forward foreign currency exchange contracts | |||||||||||||||||||||||
| Liability for contingent consideration, current and non-current | |||||||||||||||||||||||
| Total liabilities at fair value | $ | $ | $ | $ | |||||||||||||||||||
The investments in the deferred compensation plan are held in a "rabbi trust" and include securities and cash equivalents for payment of non-qualified benefits for certain retired, terminated and active employees. These investments are recorded to prepaid expenses and other current assets or other non-current assets depending on their corresponding, anticipated distribution dates to recipients, which are reported in accrued expenses and other current liabilities or other long-term liabilities, respectively.
Derivative instruments, such as foreign currency forward contracts, are measured using the market approach on a recurring basis considering foreign currency spot rates and forward rates quoted by banks or foreign currency dealers and interest rates quoted by banks (Level 2). Fair values of interest rate swaps are measured using standard valuation models with inputs that can be derived from observable market transactions, including SOFR spot and forward rates (Level 2). Foreign currency contracts and interest rate swap agreements are classified in the Condensed Consolidated Balance Sheets as prepaid expenses and other non-current assets or accrued expenses and other long-term liabilities, depending on the respective instruments' favorable or unfavorable positions. See Note 8 - Derivatives and Hedging Activities.
The Company recorded contingent consideration liabilities for Advantix, Resourcive, and DataXoom. These liabilities represent the amounts payable to sellers, as outlined under the terms of the individual purchase agreements, based upon the achievement of projected earnings before interest expense, taxes, depreciation and amortization, net of specific pro forma adjustments.
21
The following tables summarize the fair value of the Company's contingent consideration liabilities at September 30, 2026 and September 30, 2025:
| Contingent consideration for the quarter ended | |||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | Intelisys & Solution Services | Total | |||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Payments | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Fair value at end of period | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration for the quarter ended | |||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | Intelisys & Solution Services | Total | |||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Payments | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Fair value at end of period | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
The fair values of amounts owed are recorded in current portion of contingent consideration and long-term portion of contingent consideration in the Company’s Condensed Consolidated Balance Sheets. In accordance with ASC 805, the Company will revalue the contingent consideration liability at each reporting date through the last payment, with changes in the fair value of the contingent consideration reflected in the change in fair value of contingent consideration line item on the Company’s Condensed Consolidated Income Statements that is included in the calculation of operating income. The fair value of the contingent consideration liability associated with future earnout payments is based on several factors, including but not limited to:
•estimated future results, net of pro forma adjustments set forth in the purchase agreements;
•the probability of achieving these results; and
•a risk premium reflective of the Company’s creditworthiness and market risk premium associated with the United States markets.
Specialty Technology Solutions
The fair value of the contingent consideration related to Advantix is determined using a static discounted cash flow model. The liability recognized at September 30, 2026 was $4.6 million, of which $2.1 million is classified as current. The change in fair value for the quarter ended September 30, 2026 is primarily due to the recurring amortization of the unrecognized fair value discount. Earnout payments totaling $1.8 million and $1.4 million were paid to the sellers of Advantix during the quarters ended September 30, 2026 and 2025, respectively. Future earnout payments to the sellers of Advantix are payable based on results through fiscal year 2028.
The fair value of the contingent consideration related to DataXoom is determined using the Monte Carlo method. The liability recognized at September 30, 2026 was $7.9 million, none of which is classified as current. The change in fair value for the quarter ended September 30, 2026 is primarily due to the recurring amortization of the unrecognized fair value discount, partially offset by a change in forecasted results. The first earnout payment totaling $2.0 million was paid to the sellers of DataXoom during the quarter ended September 30, 2026. Future earnout payments to the sellers of DataXoom are payable based on results from fiscal year 2028.
22
Intelisys & Solution Services
The fair value of the contingent consideration related to Resourcive is determined using the Monte Carlo method. The liability recognized at September 30, 2026 was $11.7 million, all of which is classified as current and is due to the sellers of Resourcive during fiscal year 2027. The change in fair value for the quarter ended September 30, 2026 is primarily due a change in forecasted results, partially offset by the recurring amortization of the unrecognized fair value discount.
Significant observable inputs used in recurring Level 3 fair value measurements for the Company's contingent consideration liabilities by segment related to acquisitions at September 30, 2026 and September 30, 2025 were as follows.
| Significant observable inputs | Significant observable inputs | |||||||||||||||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Acquisition | Specialty Technology Solutions | Intelisys & Solution Services | Specialty Technology Solutions | Intelisys & Solution Services | ||||||||||||||||||||||||||||||||||
| Weighted-average payor credit spread | % | % | % | % | ||||||||||||||||||||||||||||||||||
| Weighted-average adjusted EBITDA risk premium | % | % | % | % | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA volatility | % | % | * | % | ||||||||||||||||||||||||||||||||||
*Not applicable to the Specialty Technology Solutions segment for the quarter ended September 30, 2026. | ||||||||||||||||||||||||||||||||||||||
(10) Segment Information
The Company is a leading provider of technology solutions and services to channel sales partners in specialty technology markets. The Company's Chief Executive Officer is the Chief Operating Decision Maker ("CODM") who evaluates how the Company allocates resources, assess performance and make strategic and operational decisions. The CODM reviews key financial measures for each reportable segment based on various financial results including net sales, gross profit and operating income. These measures are assessed in the annual budget process as well as on an actual-to-budget comparison and an actual-to-forecast comparison when making decisions about the allocation of resources to each segment. In addition to financial results such as net sales, gross profit, and operating income, the CODM also considers a range of operational and financial metrics, including EBITDA, return on invested capital, customer metrics and other strategic indicators. These tools support a comprehensive view of performance and inform strategic decisions across the Company's reportable segments.
Corporate primarily includes corporate service costs that are not included in the CODM's assessment of the performance of each of the identified reportable segments. In connection with that assessment, the CODM may exclude matters, such as charges for impairments, significant, higher-cost restructuring programs, costs associated with separation activities, acquisition costs and other related charges, certain gains and losses from acquisitions or dispositions and certain litigation settlements. The CODM also reviews certain other measures including total assets and property and equipment by segment and geography.
Based on such evaluations, the Company has two reportable segments based on sales model.
Specialty Technology Solutions Segment
The Specialty Technology Solutions segment operates primarily in the United States and Brazil and includes specialty technology solutions distributed through a wholesale/resale sales model. This segment includes hardware, SaaS and subscription services. The specialty technology solutions include the following:
•Communications - voice, video, communication platform integration and contact center solutions;
• Connectivity - managed connectivity and wireless enablement solutions;
•Mobility and barcode - mobile computing, barcode scanners and imagers, RFID (radio frequency identification devices), barcode printing and related services;
•Networking - switching, routing and wireless products and software;
•Payment terminals - self-service kiosks including self-checkout, payment terminals and mobile payment devices;
•Physical security - video surveillance and analytics, video management software and access control; and
•POS - Point of Sale systems, integrated POS software platforms.
23
Intelisys & Solution Services Segment
The Intelisys & Solution Services segment operates in the United States and consists of sales and services to both channel sales partners and end users. As a technology services distributor, or TSD, Intelisys distributes connectivity, cloud and next-generation technologies through an agency sales model. Channel sales partners also have access to SaaS and subscription-based services through the company’s proprietary tools, platforms and flexible routes to market. Adding MicroAge allows the Company to serve as IT solutions integrator, managed service provider and digital transformation partner for end-users. Segment technology offerings include:
•AI Solutions
•Cloud
•Connectivity & SDN (Software-Defined Networking)
•CX (Unified Communications as a Service and Contact Center as a Service)
•Data Center
•Managed services
•Security
•Wireless & IoT
By offering flexible routes to market and a robust solutions portfolio, this segment helps advisors service a wide range of end users including businesses of all sizes.
24
Selected financial information about the Company's segments for the quarters ended September 30, 2026 and 2025 are presented below:
| Specialty Technology Solutions | Intelisys & Solution Services | Corporate(a) | Total | |||||||||||||||||||||||||||||
Quarter ended September 30, 2026: | ||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||
Other operating expenses(b) | ||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Other Segment Items | ||||||||||||||||||||||||||||||||
Depreciation and amortization(c) | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Change in fair value of contingent consideration(d) | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
| Capital expenditures | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||
Quarter ended September 30, 2025: | ||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||
Other operating expenses(b) | ||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Other Segment Items | ||||||||||||||||||||||||||||||||
Depreciation and amortization(c) | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Change in fair value of contingent consideration(d) | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Capital expenditures | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||
(a) For the quarter ended September 30, 2026, the amount in Other operating expenses unallocated to the segments include acquisition and restructuring costs. For the quarter ended September 30, 2025, the amount in Other operating expenses unallocated to the segments includes acquisition and cyberattack restoration costs. | ||||||||||||||||||||||||||||||||
(b) Primarily includes payroll and other employee expenses and other selling and general administrative expenses | ||||||||||||||||||||||||||||||||
(c) Depreciation and amortization expense is primarily included within Other operating expenses | ||||||||||||||||||||||||||||||||
(d) Change in fair value of contingent consideration is included within Other operating expenses | ||||||||||||||||||||||||||||||||
| Quarter ended | |||||||||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Sales by Geography Category: | |||||||||||||||||||||||||||||
United States & Canada (a) | $ | $ | |||||||||||||||||||||||||||
| Brazil | |||||||||||||||||||||||||||||
| Less intercompany sales | ( | ( | |||||||||||||||||||||||||||
| Net sales | $ | $ | |||||||||||||||||||||||||||
(a) Net sales in Canada are supported by U.S. operations and represent less than | |||||||||||||||||||||||||||||
25
| September 30, 2026 | June 30, 2026 | ||||||||||
| (in thousands) | |||||||||||
| Assets: | |||||||||||
| Specialty Technology Solutions | $ | $ | |||||||||
| Intelisys & Solution Services | |||||||||||
| $ | $ | ||||||||||
| Property and equipment, net by Geography Category: | |||||||||||
| United States | $ | $ | |||||||||
| Brazil | |||||||||||
| $ | $ | ||||||||||
(11) Leases
In accordance with Accounting Standards Codification ("ASC") 842, at contract inception the Company determines if a contract contains a lease by assessing whether the contract contains an identified asset and whether the Company has the ability to control the asset. The Company also determines if the lease meets the classification criteria for an operating lease versus a finance lease under ASC 842. Substantially all of the Company's leases are operating leases for real estate, warehouse and office equipment ranging in duration from 1 year to 10 years. The Company has elected not to record short-term operating leases with an initial term of 12 months or less on the Condensed Consolidated Balance Sheets. Operating leases are recorded as other non-current assets, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The Company has finance leases for information technology equipment expiring through fiscal year 2028. Finance leases are recorded as property and equipment, net, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The gross amount of the balances recorded related to finance leases is immaterial to the condensed consolidated financial statements at September 30, 2026 and the consolidated financial statements at June 30, 2026.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the net present value of future minimum lease payments over the lease term. The Company generally is not able to determine the rate implicit in its leases and has elected to apply an incremental borrowing rate as the discount rate for the present value determination, which is based on the Company's cost of borrowings for the relevant terms of each lease and geographical economic factors. Certain operating lease agreements contain options to extend or terminate the lease. The lease term used is adjusted for these options when the Company is reasonably certain it will exercise the option. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments not based on a rate or index, such as costs for common area maintenance, are expensed as incurred. Further, the Company has elected the practical expedient under ASC 842 to recognize all lease and non-lease components as a single lease component, where applicable.
The following table presents amounts recorded on the Condensed Consolidated Balance Sheets related to operating leases at September 30, 2026 and June 30, 2026:
| September 30, 2026 | June 30, 2026 | |||||||||||||||||||
| Operating leases | Balance Sheet location | (in thousands) | ||||||||||||||||||
| Operating lease right-of-use assets | $ | $ | ||||||||||||||||||
| Current operating lease liabilities | $ | $ | ||||||||||||||||||
| Long-term operating lease liabilities | $ | $ | ||||||||||||||||||
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The following table presents amounts recorded in operating lease expense as part of selling general and administrative expenses on the Condensed Consolidated Income Statements during the quarters ended September 30, 2026 and 2025. Operating lease costs contain immaterial amounts of short-term lease costs for leases with an initial term of 12 months or less.
| Quarter ended September 30, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Operating lease cost | $ | $ | ||||||||||||||||||||||||
| Variable lease cost | ||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
Supplemental cash flow information related to the Company's operating leases for the three months ended September 30, 2026 and 2025 are presented in the table below:
| Quarter ended September 30, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Cash paid for amounts in the measurement of lease liabilities | $ | $ | ||||||||||||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations | ||||||||||||||||||||||||||
The weighted-average remaining lease term and discount rate at September 30, 2026 are presented in the table below:
| September 30, 2026 | ||||||||
| Weighted-average remaining lease term | ||||||||
| Weighted-average discount rate | % | |||||||
The following table presents the maturities of the Company's operating lease liabilities at September 30, 2026:
| Operating leases | ||||||||
| (in thousands) | ||||||||
| 2027 | $ | |||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
| Total future payments | ||||||||
| Less: amounts representing interest | ||||||||
| Present value of lease payments | $ | |||||||
(12) Commitments and Contingencies
The Company or its subsidiaries are, from time to time, party to lawsuits arising out of operations. Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition and results of operations.
(13) Income Taxes
Income taxes for the quarters ended September 30, 2026 and 2025 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate. In addition to applying the estimated annual effective tax rate to pre-tax income, the Company includes certain items treated as discrete events to arrive at an estimated overall tax provision.
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During the quarter ended September 30, 2026, a discrete net tax benefit of $0.2 million was recorded, which is attributable to stock compensation, partially offset by certain tax expenses. There were no material discrete items recorded during the quarter ended September 30, 2025. The Company’s effective tax rate of 27.1 % and 26.4 % for the quarters ended September 30, 2026 and 2025 differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, nondeductible expenses, and state income tax rates.
As of September 30, 2026, the Company maintains the ability to access the earnings of foreign subsidiaries. The Company has determined that there is no material deferred tax liability for federal, state and withholding tax related to undistributed earnings. There is no certainty to the timing of any future distributions of such earnings to the U.S. in whole or in part.
The Company had approximately $3.9 million and $1.3 million of total gross unrecognized tax benefits at September 30, 2026 and June 30, 2026, respectively. At September 30, 2026, approximately $3.6 million of this total represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company had approximated $3.5 million and $0.6 million accrued for interest and penalties at September 30, 2026 and June 30, 2026, respectively.
The Company has recorded an unrecognized tax benefit, interest, and penalties related to pre-acquisition tax positions of MicroAge. Pursuant to the purchase agreement, the Company is entitled to indemnification from the seller for these matters and has recorded a corresponding indemnification asset.
The Company conducts business internationally and one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries and states in which it operates. With certain exceptions, the Company is no longer subject to federal, state and local or non-U.S. income tax examinations by tax authorities for the years before June 30, 2021.
(14) Restructurings
During the fiscal year ended June 30, 2026, as part of a strategic review of organizational structure and operations, the Company implemented a cost reduction and restructuring program to align its cost structure with demand expectations in its business. Employee separation and benefit costs included in selling, general, and administrative expenses for the quarter ended September 30, 2026 were $1.7 million.
Accrued restructuring costs are included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The following table represents activity for the quarter ended September 30, 2026:
| Accrued Expenses | ||||||||
| (in thousands) | ||||||||
Balance at June 30, 2026 | $ | |||||||
| Charged to expense | ||||||||
| Cash payments | ( | |||||||
Balance at September 30, 2026 | $ | |||||||
The remaining balance as of September 30, 2026 of $2.9 million is expected to be paid through the fourth quarter of fiscal year 2028.
(15) Business Acquisitions
On October 20, 2025, ScanSource completed the acquisition of DataXoom, a connectivity provider dedicated to supporting purpose-built mobile deployments across the Company's current supplier line card and beyond. The initial cash purchase price totaled $18.4 million, in addition, the initial contingent consideration is valued at $9.4 million. DataXoom complements the Company's Advantix investment and is included in the Specialty Technology Solutions segment. The allocation of the purchase prices to the assets and liabilities acquired, including the final valuation of the identifiable intangible assets and associated tax adjustments, have been concluded as of the reporting date. The impact of the DataXoom acquisition was not material to the consolidated financial statements.
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On September 1, 2026, ScanSource completed the acquisition of MicroAge, a leading IT solutions integrator, managed services provider (MSP), and digital transformation partner, helping businesses design, implement, secure, manage, and optimize their IT environments. MicroAge complements the Company's advisory business and is included in the Intelisys & Solution Services segment. The initial cash purchase price totaled $248.2 million. The Company acquired $30.5 million of cash during the acquisition, resulting in $217.8 million net cash paid for MicroAge initially. Per the purchase agreement, a portion of the purchase price was placed into escrow to indemnify the Company of any pre-acquisition contingencies. As of September 30, 2026, the balance available in escrow was $9.8 million, $3.0 million of which is reserved for post-closing adjustments.
The purchase price of this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. Due to the proximity of the acquisition date to the end of the quarter, the valuation of tangible assets, identifiable intangible assets, and goodwill is still in process at the date of this filing, therefore, the estimates provided are subject to change.
| MicroAge | |||||
| (in thousands) | |||||
| Fair value of assets acquired: | |||||
| Cash and cash equivalents | $ | ||||
| Accounts receivable | |||||
| Prepaid expenses and other current assets | |||||
| Property and equipment, net | |||||
| Identifiable intangible assets | |||||
| Other non-current assets | |||||
| Total identifiable assets | $ | ||||
| Fair value of liabilities assumed: | |||||
| Accounts payable | $ | ||||
| Accrued expenses and other current liabilities | |||||
| Deferred income taxes | |||||
| Other long-term liabilities | |||||
| Total liabilities assumed | $ | ||||
| Net assets acquired | $ | ||||
| Goodwill | |||||
| Total consideration transferred | $ | ||||
The following table summarizes the valuation of the fair value of intangibles acquired:
| Fair Value | Estimated Useful Life | |||||||||||||
| (in thousands) | (in years) | |||||||||||||
| Customer relationships | $ | |||||||||||||
| Trade names | ||||||||||||||
| Non-compete agreements | ||||||||||||||
| $ | ||||||||||||||
During the quarter ended September 30, 2026 and following acquisition on September 1, 2026, MicroAge contributed net sales of $20.0 million and net income of $0.6 million. MicroAge net income for the period described includes $1.2 million of amortization expense related to identified intangible assets.
The following unaudited pro forma financial information presents the combined results of operations of the Company and MicroAge as if the acquisition had occurred on July 1, 2025. For the quarter ended September 30, 2026, unaudited pro forma net sales and net income were approximately $1.0 billion and $9.7 million, respectively. For the quarter ended September 30, 2025, unaudited pro forma net sales and net income were approximately $786.3 million and $13.4 million, respectively.
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The unaudited pro forma results were calculated by combining the historical results of the Company and MicroAge and giving effect to the acquisition and related adjustments as if the acquisition had occurred on July 1, 2025. The pro forma results include adjustments to conform MicroAge’s accounting policies to those of the Company, including the presentation of certain revenue arrangements on a gross or net basis, as applicable; incremental amortization expense associated with the fair value of acquired intangible assets; incremental interest expense associated with borrowings used to finance the acquisition; and the related income tax effects. The unaudited pro forma results do not reflect expected cost savings, operating synergies or other anticipated benefits of the acquisition.
The unaudited pro forma net income for the three months ended September 30, 2026 was adjusted to exclude $3.8 million of nonrecurring acquisition-related costs directly attributable to the acquisition. The unaudited pro forma net income for the three months ended September 30, 2025 was adjusted to include $3.9 million of nonrecurring acquisition-related costs as if such costs had been incurred during the period in which the acquisition is assumed to have occurred.
The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition occurred on July 1, 2025, nor is it necessarily indicative of the Company’s future operating results.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||
Overview
ScanSource is a leading technology distributor uniquely positioned to address complex technologies and to accelerate growth for channel sales partners across hardware, SaaS, connectivity, cloud and services. Our recent acquisition of MicroAge expands our offerings to include hardware and managed services to end-users across cloud, AI, data center, and cybersecurity. We provide technology solutions and services from approximately 700 leading suppliers of mobility and barcode, POS, payment terminals, physical security, networking, communications, connectivity, cloud, data center and cyber security to our approximately 27,000 channel sales partners and end-users located primarily in the United States, Canada and Brazil.
We operate our business under a management structure that enhances our technology distribution growth strategy. Our segments operate primarily in the United States and Brazil:
•Specialty Technology Solutions
•Intelisys & Solution Services
We operate product distribution facilities in Mississippi, California, and Kentucky that support the United States and Canada. Brazil product distribution facilities are located in the Brazilian states of Paraná, Espirito Santo and Santa Catarina.
Recent Developments
Impact of the Macroeconomic Environment, Including Growth Outlook, Inflation and Tariffs
The macroeconomic environment, including the economic impacts of growth outlook, inflationary pressures, tariffs and evolving geopolitical conflicts and trade relationships, continues to create significant uncertainty and may adversely affect our financial condition, results of operations and liquidity. We remain mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand. We expect to pass through to our channel sales partners any supplier price increases resulting from tariffs or other factors. While we are monitoring these conditions and maintaining financial flexibility to mitigate potential impacts; the extent and duration of any effects remain uncertain.
Our Strategy
Our strategy is to drive sustainable, profitable growth by providing complex technology solutions through a growing ecosystem of channel sales partners leveraging our people, processes and tools. Our goal is to provide exceptional experiences for our channel sales partners, suppliers and employees, and we strive for operational excellence. Our differentiated technology distribution strategy utilizes multiple sales models to offer hardware, SaaS, connectivity, cloud and services from leading technology suppliers to channel sales partners that solve end users’ challenges. ScanSource enables channel sales partners to deliver solutions for their end users to address changing buying and consumption patterns. Our solutions may include a combination of offerings from multiple suppliers or give our channel sales partners access to additional services. As a trusted adviser to our channel sales partners, we provide innovative solutions through our strong understanding of end-user needs.
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Results of Operations
Net Sales
We have two reportable segments, which are based on sales channels. The following tables summarize our net sales results by operating segment and by geographic location for the quarters ended September 30, 2026 and 2025:
| Quarter ended September 30, | % Change, Constant Currency, Excluding Acquisitions (a) | ||||||||||||||||||||||||||||
| Net Sales by Segment: | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Specialty Technology Solutions | $ | 917,299 | $ | 715,447 | $ | 201,852 | 28.2 | % | 27.5 | % | |||||||||||||||||||
| Intelisys & Solution Services | 44,995 | 24,203 | 20,792 | 85.9 | % | 3.2 | % | ||||||||||||||||||||||
| Total net sales | $ | 962,294 | $ | 739,650 | $ | 222,644 | 30.1 | % | 26.8 | % | |||||||||||||||||||
(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions, is presented at the end of Results of Operations, under Non-GAAP Financial Information.
Specialty Technology Solutions
The Specialty Technology Solutions segment consists of sales to channel partners in the United States, Canada and Brazil. For the quarter ended September 30, 2026, net sales increased $201.9 million, or 28.2%, compared to the prior-year quarter. Excluding the impact of acquisitions and the impact of foreign exchange rate fluctuations, non-GAAP net sales increased $197.1 million, or 27.5%, for the quarter ended September 30, 2026 compared to the prior-year quarter. The increase in net sales and non-GAAP net sales for the quarter is primarily due to broad-based growth in North America.
Intelisys & Solution Services
The Intelisys & Solution Services segment consists of sales and services to channel partners and end-users in the United States and Canada. For the quarter ended September 30, 2026, net sales increased $20.8 million, or 85.9%, compared to the prior-year quarter. The increase in net sales includes the acquisition of MicroAge. Excluding the impact of acquisitions, non-GAAP net sales increased $0.8 million, or 3.2%, for the quarter ended September 30, 2026 compared to the prior-year quarter, primarily from Intelisys business growth. Quarterly net billings for Intelisys increased 3.8% over the prior-year quarter to bring annualized net billings to approximately $2.89 billion.
| Quarter ended September 30, | % Change, Constant Currency, Excluding Acquisitions (a) | ||||||||||||||||||||||||||||
| Net Sales by Geography: | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
United States & Canada (b) | $ | 913,975 | $ | 682,217 | $ | 231,758 | 34.0 | % | 30.7 | % | |||||||||||||||||||
| Brazil | 48,319 | 57,433 | (9,114) | (15.9) | % | (20.5) | % | ||||||||||||||||||||||
| Total net sales | $ | 962,294 | $ | 739,650 | $ | 222,644 | 30.1 | % | 26.8 | % | |||||||||||||||||||
(a) A reconciliation of non-GAAP net sales in constant currency is presented at the end of Results of Operations in the non-GAAP section.
(b) Net sales in Canada are supported by U.S. operations and represent less than 5.0% of net sales for the quarters ended September 30, 2026 and 2025.
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Gross Profit
The following table summarizes our gross profit for the quarters ended September 30, 2026 and 2025:
| Quarter ended September 30, | % of Net Sales September 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | $ | 86,600 | $ | 83,903 | $ | 2,697 | 3.2 | % | 9.4 | % | 11.7 | % | |||||||||||||||||||||||
| Intelisys & Solution Services | 30,344 | 23,570 | 6,774 | 28.7 | % | 67.4 | % | 97.4 | % | ||||||||||||||||||||||||||
| Gross profit | $ | 116,944 | $ | 107,473 | $ | 9,471 | 8.8 | % | 12.2 | % | 14.5 | % | |||||||||||||||||||||||
Our gross profit is primarily affected by sales volume and gross margin mix. Gross margin mix is impacted by multiple factors, which include sales mix (proportion of sales of higher margin products or services relative to total sales), supplier program recognition (consisting of volume rebates, inventory price changes and purchase discounts) and freight costs. Increases in supplier program recognition decrease cost of goods sold, thereby increasing gross profit. Gross profit margin in our Intelisys & Solution Services segment has historically been significantly higher than our Specialty Technology Solutions segment due to a larger contribution of recurring revenue which is recorded on a net basis. With the acquisition of MicroAge into the Intelisys & Solution Services segment, we are introducing a different sales mix that includes hardware, software and services recorded on a gross basis.
Specialty Technology Solutions
For the quarter ended September 30, 2026, gross profit dollars for the Specialty Technology Solutions segment increased $2.7 million, or 3.2%, compared to the prior-year quarter. Higher sales volumes, after considering cost of goods sold, increased gross profit by $23.7 million. Sales mix reduced gross profit by $21.0 million for the quarter. Gross profit margin decreased 229 basis points over the prior-year quarter to 9.4%.
Intelisys & Solution Services
For the quarter ended September 30, 2026, gross profit dollars for the Intelisys & Solution Services segment increased $6.8 million, or 28.7%, compared to the prior-year quarter. The MicroAge acquisition increased gross profit by $5.6 million for the quarter. Excluding the impact of the acquisition, gross profit increased $1.2 million. Higher sales volumes, after considering cost of goods sold, increased gross profit by $0.8 million. Sales mix increased gross profit by $0.4 million. Gross profit margin, excluding acquisitions, increased 161 basis points compared to the prior-year quarter. Gross profit margin was 67.4% for the quarter ended September 30, 2026, compared to 97.4% in the prior year due to the inclusion of MicroAge.
Operating Expenses
The following table summarizes our operating expenses for the quarters ended September 30, 2026 and 2025:
| Quarter ended September 30, | % of Net Sales September 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 96,509 | $ | 75,275 | $ | 21,234 | 28.2 | % | 10.0 | % | 10.2 | % | |||||||||||||||||||||||
| Depreciation expense | 1,874 | 1,577 | 297 | 18.8 | % | 0.2 | % | 0.2 | % | ||||||||||||||||||||||||||
| Intangible amortization expense | 4,662 | 4,404 | 258 | 5.9 | % | 0.5 | % | 0.6 | % | ||||||||||||||||||||||||||
| Restructuring expense | 1,653 | — | 1,653 | (100.0) | % | 0.2 | % | 0.0 | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (147) | 314 | (461) | *nm | 0.0 | % | 0.0 | % | |||||||||||||||||||||||||||
| Operating expenses | $ | 104,551 | $ | 81,570 | $ | 22,981 | 28.2 | % | 10.9 | % | 11.0 | % | |||||||||||||||||||||||
33
Selling, general and administrative expenses (“SG&A”) increased by $21.2 million, or 28.2%, for the quarter ended September 30, 2026, compared to the prior-year quarter. The increase for the quarter ended September 30, 2026 is primarily attributable to increased employee-related expenses and costs related to acquisitions. In addition, SG&A includes approximately $4.5 million of higher bad debt expenses, primarily related to specific customer credit exposures in Brazil.
The increase in depreciation expense during the quarter ended September 30, 2026 is largely due to IT assets put into service in the first quarter of fiscal 2027.
Restructuring expense incurred in the quarter ended September 30, 2026 relate to employee separation and benefit costs in connection with our expense reduction and restructuring plan.
We present changes in fair value of the contingent consideration owed to the former shareholders of businesses that we acquire as a separate line item in operating expenses. We recorded a fair value adjustment of $0.1 million in the quarter ended September 30, 2026 largely due to changes in forecasted results, partially offset by the recurring amortization of the unrecognized fair value discount. Comparatively, we recorded expense of $0.3 million in the prior-year quarter largely due to the recurring amortization of the unrecognized fair value discount.
Operating Income
The following table summarizes our operating income for the quarters ended September 30, 2026 and 2025:
| Quarter ended September 30, | % of Net Sales September 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | $ | 10,170 | $ | 20,375 | $ | (10,205) | (50.1) | % | 1.1 | % | 2.8 | % | |||||||||||||||||||||||
| Intelisys & Solution Services | 8,265 | 5,818 | 2,447 | 42.1 | % | 18.4 | % | 24.0 | % | ||||||||||||||||||||||||||
| Corporate | (6,042) | (290) | (5,752) | *nm | *nm | *nm | |||||||||||||||||||||||||||||
| Operating income | $ | 12,393 | $ | 25,903 | $ | (13,510) | (52.2) | % | 1.3 | % | 3.5 | % | |||||||||||||||||||||||
Specialty Technology Solutions
For the Specialty Technology Solutions segment, operating income decreased $10.2 million, or 50.1% for the quarter ended September 30, 2026, compared to the prior-year quarter. Operating margin was 1.1% and 2.8% for the quarters ended September 30, 2026 and 2025, respectively. The decrease in operating income for the quarter is primarily due to increased costs related to bad debt expense, as well as increased employee-related expenses.
Intelisys & Solution Services
For the Intelisys & Solution Services segment, operating income increased $2.4 million, or 42.1%, for the quarter ended September 30, 2026, compared to the prior-year quarter. Operating margin was 18.4% and 24.0% for the quarters ended September 30, 2026 and 2025, respectively. The increase in operating income for the quarter is primarily due to the MicroAge acquisition. The decrease in operating margin reflects a higher mix of hardware, software, and services as a result of the acquisition.
Corporate
For the quarter ended September 30, 2026, Corporate operating losses of $6.0 million represents $4.4 million of acquisition-related costs and $1.6 million of restructuring costs. For the quarter ended September 30, 2025, Corporate operating losses of $0.3 million largely represent acquisition-related costs.
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Total Other (Income) Expense
The following table summarizes our total other (income) expense for the quarters ended September 30, 2026 and 2025:
| Quarter ended September 30, | % of Net Sales September 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Interest expense | $ | 3,091 | $ | 1,914 | $ | 1,177 | 61.5 | % | 0.3 | % | 0.3 | % | |||||||||||||||||||||||
| Interest income | (2,664) | (3,180) | 516 | (16.2) | % | (0.3) | % | (0.4) | % | ||||||||||||||||||||||||||
| Net foreign exchange losses (gains) | 94 | 348 | (254) | (73.0) | % | 0.0 | % | 0.0 | % | ||||||||||||||||||||||||||
| Other, net | (47) | (175) | 128 | (73.1) | % | (0.0) | % | (0.0) | % | ||||||||||||||||||||||||||
| Total other (income) expense, net | $ | 474 | $ | (1,093) | $ | 1,567 | (143.4) | % | 0.0 | % | (0.1) | % | |||||||||||||||||||||||
*nm - percentages are not meaningful
Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs. Interest expense increased for the quarter ended September 30, 2026 compared to the prior-year quarter, primarily from higher average borrowings on our multi-currency revolving credit facility.
Interest income decreased for the quarter ended September 30, 2026 primarily from lower cash balances.
Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign exchange forward contracts gains and losses. Foreign exchange gains and losses are generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real, the Canadian dollar versus the U.S. dollar, the euro versus the U.S. dollar, and the British pound versus the U.S. dollar. We partially offset foreign currency exposure with the use of foreign exchange contracts to hedge against these exposures. The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses.
Provision for Income Taxes
For the quarter ended September 30, 2026, income tax expense was $3.2 million reflecting an effective tax rate of 27.1%. In comparison, for the quarter ended September 30, 2025, income tax expense was $7.1 million reflecting an effective tax rate of 26.4%. See Note 13 - Income Taxes to the Notes to Consolidated Financial Statements for further discussion.
Non-GAAP Financial Information
Evaluating Financial Condition and Operating Performance
In addition to disclosing results that are determined in accordance with United States generally accepted accounting principles (“US GAAP” or “GAAP”), we also disclose certain non-GAAP financial measures. These measures include non-GAAP operating income; non-GAAP pre-tax income; non-GAAP net income; non-GAAP EPS; adjusted earnings before interest expense, income taxes, depreciation, and amortization (“adjusted EBITDA”); adjusted return on invested capital (“adjusted ROIC”); and constant currency. Constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates between reporting periods. We use non-GAAP financial measures to better understand and evaluate performance, including comparisons from period to period.
These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that we report 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 US GAAP.
Adjusted Return on Invested Capital
Adjusted ROIC assists us in comparing our 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 during the year.
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Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, share-based compensation expense, and other non-GAAP adjustments. Since adjusted EBITDA excludes some non-cash costs of investing in our business and people, we believe that adjusted EBITDA shows the profitability from our business operations more clearly.
We calculate adjusted ROIC as adjusted EBITDA, divided by invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. The following table summarizes annualized adjusted ROIC for the quarters ended September 30, 2026 and 2025, respectively:
| Quarter ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Adjusted return on invested capital ratio, annualized (a) | 10.7 | % | 14.6 | % | |||||||||||||||||||
(a)The annualized 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 in the prior-year quarter.
The components of this calculation and reconciliation to our financial statements are shown on the following schedule:
| Quarter ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Reconciliation of net income to adjusted EBITDA: | |||||||||||||||||||||||
| Net income (GAAP) | $ | 8,691 | $ | 19,878 | |||||||||||||||||||
| Plus: Interest expense | 3,091 | 1,914 | |||||||||||||||||||||
| Plus: Income taxes | 3,228 | 7,118 | |||||||||||||||||||||
| Plus: Depreciation and amortization | 6,734 | 6,200 | |||||||||||||||||||||
| EBITDA (non-GAAP) | 21,744 | 35,110 | |||||||||||||||||||||
| Plus: Change in fair value of contingent consideration | (147) | 314 | |||||||||||||||||||||
| Plus: Share-based compensation | 3,659 | 2,876 | |||||||||||||||||||||
Plus: Acquisition costs (a) | 4,389 | 261 | |||||||||||||||||||||
| Plus: Cyberattack restoration costs | — | 29 | |||||||||||||||||||||
| Plus: Restructuring costs | 1,653 | — | |||||||||||||||||||||
| Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) | $ | 31,298 | $ | 38,590 | |||||||||||||||||||
(a) Acquisition costs are generally non-deductible for tax purposes.
| Quarter ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Invested capital calculations: | |||||||||||||||||||||||
| Equity – beginning of the quarter | $ | 910,792 | $ | 906,409 | |||||||||||||||||||
| Equity – end of the quarter | 915,655 | 914,032 | |||||||||||||||||||||
| Plus: Change in fair value of contingent consideration, net of tax | (110) | 236 | |||||||||||||||||||||
| Plus: Share-based compensation, net | 2,739 | 2,152 | |||||||||||||||||||||
Plus: Acquisition costs (a) | 4,389 | 261 | |||||||||||||||||||||
| Plus: Cyberattack restoration costs, net | — | 21 | |||||||||||||||||||||
| Plus: Restructuring, net | 1,241 | — | |||||||||||||||||||||
| Average equity | 917,353 | 911,556 | |||||||||||||||||||||
Average funded debt (b) | 242,334 | 137,113 | |||||||||||||||||||||
Invested capital (denominator for adjusted ROIC) (non-GAAP) (c) | $ | 1,159,687 | $ | 1,048,669 | |||||||||||||||||||
36
(a) Acquisition costs are generally non-deductible for tax purposes.
(b)Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.
(c)The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for a leap year. There were 92 days in the current quarter and the prior-year quarter.
Net Sales in Constant Currency Excluding Acquisitions
We make references to “constant currency,” a non-GAAP performance measure that excludes the foreign exchange rate impact from fluctuations in the average foreign exchange rates between reporting periods. Constant currency is calculated by translating current period results from currencies other than the U.S. dollar into U.S. dollars using the comparable average foreign exchange rates from the prior-year period. We also exclude the impact of acquisitions prior to the first full year of operations from the acquisition date in order to show net sales results on an organic basis. This information is provided to analyze underlying trends without the translation impact of fluctuations in foreign currency rates and the impact of acquisitions. Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency excluding acquisitions:
| Net Sales by Segment: | |||||||||||||||||||||||
| Quarter ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Specialty Technology Solutions: | (in thousands) | ||||||||||||||||||||||
| Net sales, reported | $ | 917,299 | $ | 715,447 | $ | 201,852 | 28.2 | % | |||||||||||||||
Foreign exchange impact (a) | (2,650) | — | |||||||||||||||||||||
| Less: Acquisitions | (2,119) | — | |||||||||||||||||||||
| Non-GAAP net sales | $ | 912,530 | $ | 715,447 | $ | 197,083 | 27.5 | % | |||||||||||||||
| Intelisys & Solution Services: | |||||||||||||||||||||||
| Net sales, reported | $ | 44,995 | $ | 24,203 | $ | 20,792 | 85.9 | % | |||||||||||||||
| Less: Acquisitions | (20,006) | — | |||||||||||||||||||||
| Non-GAAP net sales | $ | 24,989 | $ | 24,203 | $ | 786 | 3.2 | % | |||||||||||||||
| Consolidated: | |||||||||||||||||||||||
| Net sales, reported | $ | 962,294 | $ | 739,650 | $ | 222,644 | 30.1 | % | |||||||||||||||
Foreign exchange impact (a) | (2,650) | — | |||||||||||||||||||||
| Less: Acquisitions | (22,125) | — | |||||||||||||||||||||
| Non-GAAP net sales | $ | 937,519 | $ | 739,650 | $ | 197,869 | 26.8 | % | |||||||||||||||
(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, 2026 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2025. | |||||||||||||||||||||||
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| Net Sales by Geography: | |||||||||||||||||||||||
| Quarter ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| United States & Canada: | (in thousands) | ||||||||||||||||||||||
Net sales, reported (a) | $ | 913,975 | $ | 682,217 | $ | 231,758 | 34.0 | % | |||||||||||||||
| Less: Acquisitions | (22,125) | — | |||||||||||||||||||||
| Non-GAAP net sales | $ | 891,850 | $ | 682,217 | $ | 209,633 | 30.7 | % | |||||||||||||||
| Brazil: | |||||||||||||||||||||||
Net sales, reported (b) | $ | 48,319 | $ | 57,433 | $ | (9,114) | (15.9) | % | |||||||||||||||
Foreign exchange impact (c) | (2,650) | — | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 45,669 | $ | 57,433 | $ | (11,764) | (20.5) | % | |||||||||||||||
| Consolidated: | |||||||||||||||||||||||
Net sales, reported | $ | 962,294 | $ | 739,650 | $ | 222,644 | 30.1 | % | |||||||||||||||
Foreign exchange impact (c) | (2,650) | — | |||||||||||||||||||||
| Less: Acquisitions | (22,125) | — | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 937,519 | $ | 739,650 | $ | 197,869 | 26.8 | % | |||||||||||||||
(a) Net sales in Canada are supported by U.S. operations and represent less than 5.0% of United States net sales for the quarters ended September 30, 2026 and 2025. | |||||||||||||||||||||||
(b) Includes net sales from outside of the United States, Canada and Brazil, which represent less than 0.1% of Brazil net sales for the quarters ended September 30, 2026 and 2025. | |||||||||||||||||||||||
(c) 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, 2026 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2025. | |||||||||||||||||||||||
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| Operating Income by Segment: | |||||||||||||||||||||||||||||||||||
| Quarter ended September 30, | % of Net Sales September 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | ||||||||||||||||||||||||||||||
| Specialty Technology Solutions: | (in thousands) | ||||||||||||||||||||||||||||||||||
| GAAP operating income | $ | 10,170 | $ | 20,375 | $ | (10,205) | (50.1) | % | 1.1 | % | 2.8 | % | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 1,843 | 2,216 | (373) | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | 473 | 145 | 328 | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 12,486 | $ | 22,736 | $ | (10,250) | (45.1) | % | 1.4 | % | 3.2 | % | |||||||||||||||||||||||
| Intelisys & Solution Services: | |||||||||||||||||||||||||||||||||||
| GAAP operating income | $ | 8,265 | $ | 5,818 | $ | 2,447 | 42.1 | % | 18.4 | % | 24.0 | % | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 2,819 | 2,188 | 631 | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (620) | 169 | (789) | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 10,464 | $ | 8,175 | $ | 2,289 | 28.0 | % | 23.3 | % | 33.8 | % | |||||||||||||||||||||||
| Corporate: | |||||||||||||||||||||||||||||||||||
| GAAP operating loss | $ | (6,042) | $ | (290) | $ | (5,752) | *nm | *nm | *nm | ||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition costs | 4,389 | 261 | 4,128 | ||||||||||||||||||||||||||||||||
| Restructuring costs | 1,653 | — | 1,653 | ||||||||||||||||||||||||||||||||
| Cyberattack restoration costs | — | 29 | (29) | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | — | $ | — | $ | — | *nm | *nm | *nm | ||||||||||||||||||||||||||
| Consolidated: | |||||||||||||||||||||||||||||||||||
| GAAP operating income | $ | 12,393 | $ | 25,903 | $ | (13,510) | (52.2) | % | 1.3 | % | 3.5 | % | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 4,662 | 4,404 | 258 | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (147) | 314 | (461) | ||||||||||||||||||||||||||||||||
| Acquisition costs | 4,389 | 261 | 4,128 | ||||||||||||||||||||||||||||||||
| Restructuring costs | 1,653 | — | 1,653 | ||||||||||||||||||||||||||||||||
| Cyberattack restoration costs | — | 29 | (29) | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 22,950 | $ | 30,911 | $ | (7,961) | (25.8) | % | 2.4 | % | 4.2 | % | |||||||||||||||||||||||
*nm - percentages are not meaningful | |||||||||||||||||||||||||||||||||||
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Additional Non-GAAP Metrics
To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to divestitures, cyberattack restoration costs and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Below we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above:
| Quarter ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition costs (a) | Restructuring costs | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SG&A expenses | $ | 96,509 | $ | — | $ | — | $ | (4,389) | $ | — | $ | 92,120 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | 12,393 | 4,662 | (147) | 4,389 | 1,653 | 22,950 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax income | 11,919 | 4,662 | (147) | 4,389 | 1,653 | 22,476 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 8,691 | 3,499 | (110) | 4,389 | 1,241 | 17,710 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 0.42 | $ | 0.17 | $ | (0.01) | $ | 0.21 | $ | 0.06 | $ | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quarter ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition costs (a) | Cyberattack restoration costs | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SG&A expenses | $ | 75,275 | $ | — | $ | — | $ | (261) | $ | (29) | $ | 74,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | 25,903 | 4,404 | 314 | 261 | 29 | 30,911 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax income | 26,996 | 4,404 | 314 | 261 | 29 | 32,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 19,878 | 3,289 | 236 | 261 | 21 | 23,685 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 0.89 | $ | 0.15 | $ | 0.01 | $ | 0.01 | $ | — | $ | 1.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(a) Acquisition costs for the quarters ended September 30, 2026 and 2025 are generally nondeductible for tax purposes. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
40
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations and borrowings under our $400 million revolving credit facility. Our business requires significant investment in working capital, particularly accounts receivable and inventory, partially financed through our accounts payable to vendors, cash generated from operations and revolving lines of credit. In general, as our sales volume increases, our net investment in working capital increases, which typically results in decreased cash flow from operating activities. Conversely, when sales volume decreases, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.
Cash and cash equivalents balance totaled $45.9 million at September 30, 2026, compared to $88.4 million at June 30, 2026, including $32.6 million and $35.4 million held outside of the United States at September 30, 2026 and June 30, 2026, respectively. Checks released but not yet cleared in the amount of $0.2 million and $0.1 million are included in accounts payable at September 30, 2026 and June 30, 2026, respectively.
We conduct business primarily in the United States and Brazil where we generate and use cash. We provide for United States income taxes from the earnings of our Canadian and Brazilian subsidiaries. See Note 13 - Income Taxes in the Notes to the Consolidated Financial Statements for further discussion.
Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, increased $49.6 million to $588.5 million at September 30, 2026 from $538.8 million at June 30, 2026, primarily from an increase in accounts receivable and inventories partially offset by an increase in accounts payable. Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from channel sales partners, increases and decreases to inventory levels, and payments to vendors.
| Three months ended | |||||||||||
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Cash (used in) provided by: | |||||||||||
| Operating activities | $ | (42,304) | $ | 23,211 | |||||||
| Investing activities | (219,614) | (2,395) | |||||||||
| Financing activities | 219,456 | (22,950) | |||||||||
Operating cash flows are subject to variability period over period as a result of the timing of payments related to accounts receivable, accounts payable, and other working capital items. Net cash used in operating activities was $42.3 million for the three months ended September 30, 2026 compared to net cash provided by operating activities of $23.2 million for the three months ended September 30, 2025. Cash used in operating activities for the three months ended September 30, 2026 is primarily attributable to changes in working capital balances. Compared to September 30, 2025, accounts payable and accounts receivable increased 46.3% and 46.4%, respectively.
The number of days sales outstanding ("DSO") was 76 days at September 30, 2026, compared to 73 days at June 30, 2026 and 68 days at September 30, 2025. Inventory turned 6.3 times during the quarter ended September 30, 2026, compared to 6.6 times during the quarter ended June 30, 2026 and 5.1 times in the prior-year quarter ended September 30, 2025.
Cash used in investing activities for the three months ended September 30, 2026 and 2025 was $219.6 million and $2.4 million, respectively. Cash used in investing activities for the three months ended September 30, 2026 represents cash paid for acquisitions and capital expenditures. Cash used in investing activities for the three months ended September 30, 2025 represents cash paid for capital expenditures.
Management expects capital expenditures for fiscal year 2027 to range from $8.0 million to $12.0 million, primarily for IT and warehouse investments.
For the three months ended September 30, 2026 cash provided by financing activities totaled $219.5 million compared to cash used in financing activities of $23.0 million for the three months ended September 30, 2025. Cash provided by financing activities for the three months ended September 30, 2026 represents borrowings on our revolving line of credit. Cash used in financing activities for the three months ended September 30, 2025 is primarily attributable to common stock repurchases.
41
Credit Facility
On December 18, 2025, we entered into a credit agreement (the “New Credit Agreement”) with PNC Bank, National Association, as administrative agent (“PNC”), and the other lenders party thereto (the “Lenders”), providing for (i) a five-year, $400 million multicurrency senior secured revolving credit facility and (ii) a five-year $100 million senior secured term loan facility (the “New Credit Facilities”). In addition, pursuant to an “accordion feature,” we may increase our borrowings by up to the greater of $250 million or 150% of our EBITDA calculated on a Pro Forma Basis (each as defined in the New Credit Agreement), subject to obtaining additional credit commitments from the Lenders participating in the increase. The New Credit Agreement allows for issuance of up to $50 million for letters of credit. Borrowings under the New Credit Agreement are secured by substantially all of our assets and those of our domestic subsidiaries. Under the terms of the revolving credit facility, the payment of cash dividends is restricted. We incurred debt issuance costs of $1.4 million in connection with the New Credit Agreement, which were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility.
Loans denominated in U.S. dollars, other than swingline loans, bear interest at a rate per annum equal to, at our option, (i) the Term Secured Overnight Financing Rate ("SOFR") or daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our ratio of (A) total consolidated debt less its unrestricted domestic cash to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable, for which financial statements have been delivered to the Lenders (the “leverage ratio”); or (ii) the base rate plus an additional margin ranging from 0% to 0.75%, depending upon our leverage ratio. All swingline loans denominated in U.S. dollars bear interest based upon the daily simple SOFR, floating daily, plus an additional margin ranging from 1.00% to 1.75% depending upon our leverage ratio, or such other rate as we and the applicable swingline lender may agree. Loans denominated in foreign currencies bear interest at a rate per annum equal to the applicable benchmark rate set forth in the New Credit Agreement plus an additional margin ranging from 1.00% to 1.75%, depending upon our leverage ratio. A commitment fee is payable on the unused amount of commitments under the revolving credit facility. The commitment fee ranges from 0.15% to 0.30%, depending on our leverage ratio.
In connection with entering into the New Credit Agreement, on December 18, 2025, we terminated and repaid all indebtedness and other obligations outstanding under our Third Amended and Restated Credit Agreement (the “Prior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto, which provided for (i) a five-year, $350 million multicurrency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility.
During the quarter ended September 30, 2026, all of our borrowings under New Credit Agreement and Prior Credit Agreement were U.S. dollar loans. The spread in effect as of September 30, 2026 was 1.00% for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect at September 30, 2026 was 0.15%. The effective interest rates for the term loan were 4.91% and 4.65% as of September 30, 2026 and June 30, 2026, respectively. The New Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants. Specifically, our leverage ratio must be less than or equal to 3.50 to 1.00. In addition, our Interest Coverage Ratio (as such term is defined in the New Credit Agreement) must be at least 3.00 to 1.00 at the end of each fiscal quarter. In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates. We were in compliance with all covenants under the New Credit Agreement at September 30, 2026.
The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, was $139.9 million and $1.1 million during the three month periods ended September 30, 2026 and 2025, respectively. There was $168.1 million and $400.0 million available for additional borrowings as of September 30, 2026 and June 30, 2026, respectively. The effective interest rates for the revolving line of credit were 4.90% and 4.62% as of September 30, 2026 and June 30, 2026, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of September 30, 2026 and June 30, 2026.
Summary
We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet our present and future working capital and cash requirements for at least the next twelve months. We also believe that our longer-term working capital, planned expenditures and other general funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities.
42
Accounting Standards Recently Issued
See Note 1 of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on our consolidated financial position and results of operations.
Critical Accounting Policies and Estimates
Critical accounting policies are those that are important to our financial condition and require management's most difficult, subjective or complex judgments. Different amounts would be reported under different operating conditions or under alternative assumptions. See Management's Discussion and Analysis of Financial Condition and Results from Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026 for a complete discussion.
43
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||||
For a description of our market risks, see Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026. No material changes have occurred to our market risks since June 30, 2026.
44
| Item 4. | Controls and Procedures | ||||
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of the effectiveness of our disclosure controls and procedures at September 30, 2026. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures are effective at September 30, 2026. During the quarter ended September 30, 2026, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
45
PART II. OTHER INFORMATION
| Item 1. | Legal Proceedings | ||||
The Company is, from time to time, party to lawsuits arising out of operations. Although there can be no assurance, based upon information known to us, we believe that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on our financial condition or results of operations. For a description of our material legal proceedings, see Note 12 - Commitments and Contingencies in the notes to the condensed consolidated financial statements, which is incorporated herein by reference.
| Item 1A. | Risk Factors | ||||
In addition to the risk factors discussed in our other reports and statements that we file with the SEC, you should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2026, which could materially affect our business, financial condition and/or future operating results.
There have been no material changes to the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||||
Share Repurchases
In April 2025, our Board of Directors approved a $200.0 million share repurchase authorization. The authorization does not have any time limit.
The following table presents the share-repurchase activity for the quarter ended September 30, 2026:
| Period | Total number of shares purchased (1) | Average price paid per share | Total number of shares purchased as part of the publicly announced plan or program | Approximate dollar value of shares that may yet be purchased under the plan or program | ||||||||||||||||||||||
| July 1 - 31, 2026 | 33,417 | $ 54.15 | 32,994 | $ 119,006,414 | ||||||||||||||||||||||
| August 1 - 31, 2026 | 106,310 | $ 55.94 | 29,929 | $ 117,356,547 | ||||||||||||||||||||||
| September 1 - 30, 2026 | 49,727 | $ 56.94 | 23,954 | $ 115,974,491 | ||||||||||||||||||||||
| Total | 189,454 | 86,877 | ||||||||||||||||||||||||
(1) Shares withheld from employees' stock-based awards to satisfy required tax withholding obligations totaled 423, 76,381, and 25,773 for the months of July, August and September 2026, respectively.
Dividends
We have never declared or paid a cash dividend. Under the terms of our credit facility, the payment of cash dividends is restricted.
46
| Item 5. | Other Information | ||||
During the three months ended September 30, 2026, none of our directors or our officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted terminated
47
| Item 6. | Exhibits | ||||
| Exhibit Number | Description | |||||||
| 2.1 | ||||||||
| 10.1 (a) + | ||||||||
| 31.1 (a) | ||||||||
| 31.2 (a) | ||||||||
| 32.1 (b) | ||||||||
| 32.2 (b) | ||||||||
| 101 (a) | The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at September 30, 2026 and June 30, 2026; (ii) the Condensed Consolidated Income Statements for the quarters ended September 30, 2026 and 2025; (iii) the Condensed Consolidated Statements of Comprehensive Income for the quarters ended September 30, 2026 and 2025; (iv) the Condensed Consolidated Statements of Shareholder's Equity for the quarters ended September 30, 2026 and 2025; (v) the Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2026 and 2025; and (vi) the Notes to the Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL | |||||||
| 104 (a) | Cover page Inline XBRL File (Included in Exhibit 101) | |||||||
| (a) | Filed herewith | |||||||
| (b) | Furnished herewith | |||||||
| + | Portions of this exhibit have been omitted pursuant to Item 601(b) of Regulation S-K. | |||||||
48
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 thereunto duly authorized.
| ScanSource, Inc. | ||||||||
| Date: | November 5, 2026 | /s/ MICHAEL L. BAUR | ||||||
| Michael L. Baur | ||||||||
| Chair, President and Chief Executive Officer (Principal Executive Officer) | ||||||||
| Date: | November 5, 2026 | /s/ STEVE JONES | ||||||
| Steve Jones | ||||||||
| Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
| Date: | November 5, 2026 | /s/ BRANDY FORD | ||||||
| Brandy Ford | ||||||||
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | ||||||||
49
Exhibit 10.1
IN ACCORDANCE WITH ITEM 601(b) OF REGULATION S-K, CERTAIN IDENTIFIED INFORMATION (THE “CONFIDENTIAL INFORMATION”) HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM IF PUBLICLY DISCLOSED. THE CONFIDENTIAL INFORMATION IS DENOTED HEREIN BY [*****].
September 17, 2026
ScanSource, Inc. Attn: Chris Stokes 6 Logue Court
Greenville, South Carolina 29615
Delivered via email to chris.stokes@scansource.com
RE: Update to Distributor Value-Created Services Program Guide Dear Mr. Stokes:
The purpose of this letter agreement (“Letter Agreement”) is to set forth the understanding of ScanSource, Inc. (“Distributor”) and Cisco Systems, Inc. (“Cisco”) regarding updated terms and termination of Cisco’s Distributor Value-Created Services Program (“DVCSP”).
This Letter Agreement is governed by and is subject to the terms and conditions in Cisco’s DVCSP guide as described in Exhibit A (the “Program”) and the Nonexclusive Value Added Distributor Agreement dated January 22, 2007, as amended (“Agreement”). In the event of a conflict between this Letter Agreement and the Policy or Agreement, this Letter Agreement shall control.
For purposes of this Letter Agreement only, the parties agree as follows:
1.Distributor shall perform all services and maintain all records in accordance with the modified Program guide attached hereto as Exhibit A.
2.This Letter Agreement is effective as of the date of last signature and shall remain in effect through the conclusion of Cisco’s fiscal year 2027, ending on July 31, 2027, at which time the Program will be terminated.
3.This Letter Agreement constitutes the entire agreement among the parties concerning the subject matter and replaces any prior oral or written communications between the parties, all of which are excluded. There are no conditions, understandings, agreements, representations or warranties, expressed or implied, that are not specified herein. This Letter Agreement may be modified only by a written document executed by the parties hereto.
4.This Letter Agreement may be executed in one or more counterparts, each of which when so executed and delivered will be an original and all of which together will constitute one and the same instrument. Facsimile signatures and electronic signatures will be deemed to be equivalent to original signatures for purposes of this Letter Agreement.
(Signature page to follow)
Cisco Confidential
The parties have caused this Letter Agreement to be duly executed. Each party represents that its respective signatories whose signatures appear below have been, and are on the date of signature, duly authorized to execute this Letter Agreement.
ScanSource, Inc. | Cisco Systems, Inc. | |||||||
(“Distributor”) /s/ Katherine White | (“CSI”) /s/ Jenn Baenziger | |||||||
Authorized Signature Katherine White | Authorized Signature Jenn Baenziger | |||||||
Print Name SVP Converged Communications | Print Name Authorized Signatory | |||||||
Title September 29, 2026 | Title September 17, 2026 | |||||||
Date | Date | |||||||
Cisco Confidential
Cisco Distributor Value-Created Services Program (DVCSP) | Program Guide & Term
EXHIBIT A
CISCO DISTRIBUTOR VALUE–CREATED SERVICES PROGRAM (DVCSP)
Program Terms & Conditions
Business Rules, Performance Management & Compensation Guidelines (FY27)
What Is the Program Guide?
The Cisco Distributor Value–Created Services Program: Program Guide establishes business rules governing distributors’ services relationship with Cisco. This program guide defines primary program elements, including eligibility, performance management, and compensation, associated with the offers governed by the Distributor Value–Created Services Program (DVCSP) framework.
What Is the Cisco Distributor Value–Created Services Program?
The DVCSP provides the framework for a services delivery relationship with distributors. This framework consists of three main elements, including offer eligibility, compensation, and performance management specific to each offer within the DVCSP, because distributors access, sell, and deliver value–based services together with Cisco to customers on behalf of partners.
Offers governed by the DVCSP framework use a collaborative approach in services delivery. Distributors have access to Cisco technology experts, award–winning web–based support tools, software support and updates, Cisco industry leadership, and more.
What Services Are Available Through the Cisco Distributor Value–Created Services Program?
Cisco services incorporate Cisco’s extensive knowledge base, smart services capabilities, and global support infrastructure for distributors to use in developing differentiated, value–added service solutions. These services enable distributors to capitalize on Cisco’s intellectual assets and combine them with their own service capabilities and expertise to deliver best-in-class service solutions to customers, together with Cisco.
What Is the Role of Distributors in the Cisco Distributor Value–Created Services Program?
Distributors are responsible for delivering services to the customer on behalf of the partner. They are also responsible for meeting the performance metrics associated with each offer.
Eligibility
Ongoing eligibility requirements for the DVCSP are designed to help ensure continued distributor performance
and are based upon the distributor’s ability to meet minimum performance requirements.
Performance Management
Sales and delivery metrics will be used as entry and ongoing eligibility criteria for each offer governed under the framework of the DVCSP. Distributors will need to perform above a minimum metric threshold in order to stay in good standing in the program.
© 2026 Cisco and/or its affiliates. All rights reserved. Cisco Confidential.
Cisco Confidential
Compensation
The DVCSP compensation framework is based on the principle that distributors are rewarded for providing greater value to the customer. It consists of one primary component:
•Performance incentives: Cisco will pay quarterly performance incentives against eligible services bookings, in the form of a credit memo, to distributors if they achieve minimum performance targets associated with each offer.
Performance incentive details for each offer are published below.
Eligible bookings are determined using a number of business rules, as follows: Eligible services bookings must be:
–Placed to deliver in a customer location within the distributor’s sales territory
–Tied to TP video units under the product family PRTNR TP VID Services bookings exclusions include:
–Services on products intended for the distributor’s internal use
–Services intended for resale and not intended for the distributor’s “consumption”
–Services not available through the DVCSP
–Services sold to PSS partners delivering their own services offering
Performance Management
In addition to the offer eligibility requirements, distributors must meet and maintain the applicable Quarterly Performance Eligibility Requirements defined in Table 1.
Table 1. Quarterly Performance Eligibility Requirements, Metrics Thresholds, and Performance Incentive Payouts
| Compensation Levers | ||||||||||||||||||||
| Performance Criteria | Entry Eligibility Requirement | Ongoing Eligibility Requirement | Performance Metric Min* | Performance Metric Max* | Performance Incentive Minimum Payout | Performance Incentive Maximum Payout | ||||||||||||||
| Attach Rate | [*****] | [*****] | [*****] | [*****] | [*****] | [*****] | ||||||||||||||
| Service Request | [*****] | [*****] | [*****] | [*****] | [*****] | [*****] | ||||||||||||||
| Return Materials Authorization (RMA) | [*****] | [*****] | [*****] | [*****] | [*****] | [*****] | ||||||||||||||
Sales Metrics
This section describes the sales Attach Rate that will be tracked for the DVCSP:
•Definition: The sales Attach Rate is a distributor-level metric that measures a distributor’s ability to attach
and sell services.
•Eligibility Thresholds: Distributors must meet minimum sales Attach Rate requirements to qualify for program entry and to maintain ongoing eligibility (defined in Table 1).
•Measurement Period: Performance is calculated using a rolling 12-month period based on data from a 15-month window ending three months prior to the evaluation date. This “back-15/forward-12” methodology ensures a consistent and stable measurement of year-to-date (YTD).
© 2026 Cisco and/or its affiliates. All rights reserved. Cisco Confidential.
Cisco Confidential
Delivery Metrics
This section provides the delivery metrics tracked for the DVCSP and how they are calculated.
Service Request Ratio
The Service Request Ratio measures a distributor’s ability to manage and resolve Level 0 through Level 2 technical support cases independently. This metric reflects the complexity level that Cisco expects eligible distributors to resolve without escalating to Cisco resources.
The formula is:
| Service request ratio = | Total number of TAC service delivery cases closed | x 1,000,000 | ||||||||||||||||||
| Total supported installed base value | ||||||||||||||||||||
•Numerator: The total number of DCVSP technical support cases raised by the partner to Cisco TAC, excluding Cisco product-specific issues such as dead on arrival (DOA) units and Field Alerts.
•Denominator: The Total supported installed base value, the denominator, is the total list price service value of items covered under the DVCSP. This value is normalized to a 12-months period based on Cisco SMARTnet® Service with next-business-day replacement or equivalent service level.
Return Materials Authorization (RMA) Ratio
The RMA Ration measures a distributor’s effectiveness in diagnosing technical support problems prior to requesting hardware replacements.
The formula is:
| RMA ratio = | Total number of replacement units | x 1,000,000 | ||||||||||||||||||
| Total supported installed base value | ||||||||||||||||||||
•Numerator: The total number of DVCSP replacement units requested by the partner, excluding replacements resulting from Cisco product-specific issues such as DOAs and Field Alerts.
•Denominator: The total list price service value of items covered under the DVCSP. This value is normalized to a 12-month period based on the eligible service with next-business-day replacement or an equivalent service level.
Compensation
Cisco will pay quarterly performance incentives against eligible distributor services bookings if the distributor achieves the performance targets defined in Table 1.
The total performance incentive is comprised of two distinct components:
•Sales Performance Incentives: Based on the sales Attach Rates metrics defined in Section 1.
•Delivery Performance Incentives: Calculated based on the Service Request Ratio and RMA Ratio metrics. The distributor must meet the performance targets for both delivery metrics.
Delivery Performance Incentives are applied only to eligible bookings when purchased, consumed, rebranded, and delivered by the distributor.
Sales Performance Incentives payments are based on net eligible bookings for the applicable quarter. Any bookings that were made in a prior quarter that are subsequently canceled or credited in a later quarter will decrease the total eligible bookings for that quarter, and may result in a lower Sales Performance Incentive payment for that quarter.
Provision on Indirect & Direct Tax
The term “indirect tax” includes all forms of indirect taxes under applicable tax laws, such as VAT, GST,
consumption tax and sales and use tax.
Distributors acknowledge that the payments are granted exclusively to the Distributor and not to an individual.
© 2026 Cisco and/or its affiliates. All rights reserved. Cisco Confidential.
Cisco Confidential
Payments made to the Distributor under this Program or Incentive Agreement constitute payments for marketing activities performed by the Distributor in the countries within the selling territory of the Cisco entities listed in rule 5, except for Canada and the United States.
Invoices issued by Distributor to Cisco must conform with indirect tax requirements applicable in the country of Distributor’s establishment. These indirect tax requirements include but are not limited to invoice currency requirements. Invoices not issued in conformity with these requirements will be rejected and returned to the Distributor. Contact your local tax adviser for additional information.
If an external expert such as an external 3rd party tax advisory firm, determines that indirect taxes are due for marketing services supplied to Cisco, all payment amounts are deemed inclusive of such indirect taxes, with the exception of:
–Dutch Distributors / Partners claiming payment from CSIBV
–UK Distributors / Partners claiming payment from CIL
–Italian Distributors / Partners claiming payment from Cisco Italy
–German Distributors / Partners claiming payment from Cisco Germany
–Australian Distributors / Partners claiming payment from Cisco Australia
–Japanese Distributors / Partners claiming payment from Cisco Japan
–Indian Distributors / partners claiming payment from Cisco Commerce India
–Korean Distributors / partners claiming payment from Cisco Korea
–Mexican Distributors / partners claiming payment from Cisco Mexico
–Saudi Distributors / partners claiming payment from Cisco Saudi Arabia Limited
As a local indirect taxpayer, Distributor is responsible for assuring that any payment claim to Cisco is treated correctly for indirect tax purposes. If indirect tax is due Cisco requires a formal tax invoice listing the local indirect tax.
All the incentive amounts paid to Distributor are exclusive of any other taxes (including any recoverable indirect taxes incurred by Distributor), fees, duties or other amounts however designated and including without limitation withholding tax, duties or other amounts which are levied or based upon such charges or upon this Incentive Program or Incentive Agreement.
Distributor is solely responsible for any federal, state, provincial taxes, social security, national insurance contributions, social charge or other taxes including income taxes that may be imposed as a result of the execution of the Program or Incentive Agreement terms. Such taxes are not subject to reimbursement by Cisco as part of the incentive claim.
Distributor acknowledges that in case any of the incentives are considered taxable benefits and are subject to all applicable laws of the respective country, Distributor is responsible for and must ensure that all applicable income taxes are paid for such incentives. This includes that Distributor must pay all applicable income taxes and/or handle the distribution of the tax responsibility to its employees in case of any incentive issued to its employees. The liability for income taxation or social charges is the sole responsibility of the distributor company, and Cisco gives no warranty and accepts no responsibility as to the taxation treatment of the program.
If a tax deduction is required by law to be made by Cisco when making payment to Distributor, Distributor hereby agrees to accept such deductions or withholdings from the incentive amount that is due to Distributor for the incentive provided under the current Program or the Incentive Agreement.
Distributor must indemnify Cisco for any tax payments or liabilities arising out of non-compliances Distributor, including but not limited to denial of input tax credit. The Distributor is solely responsible for determining the correct tax rate.
Cisco is not liable for any costs, including but not limited to penalties or interest assessed by tax authorities following an incorrect indirect tax treatment on invoices issued by the Distributor. Cisco reserves it’s right to request a credit memo in cases where indirect tax was incorrectly charged.
© 2026 Cisco and/or its affiliates. All rights reserved. Cisco Confidential.
Cisco Confidential
Exhibit 31.1
Certification Pursuant to Rule 13a-14(a) or 15d-14(a)
of the Exchange Act, as adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Michael L. Baur, certify that:
1.I have reviewed this quarterly report on Form 10-Q of ScanSource, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ MICHAEL L. BAUR | |||||
Michael L. Baur Chair, President and Chief Executive Officer (Principal Executive Officer) | |||||
Date: November 5, 2026
Exhibit 31.2
Certification Pursuant to Rule 13a-14(a) or 15d-14(a)
of the Exchange Act, as adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Steve Jones, certify that:
1.I have reviewed this quarterly report on Form 10-Q of ScanSource, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ STEVE JONES | |||||
Steve Jones Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||||
Date: November 5, 2026
Exhibit 32.1
Certification of the Chief Executive Officer of ScanSource, Inc.
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to § 906
of the Sarbanes-Oxley Act of 2002
In connection with the annual report of ScanSource, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1)The Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | November 5, 2026 | /s/ MICHAEL L. BAUR | ||||||
Michael L. Baur Chair, President and Chief Executive Officer (Principal Executive Officer) | ||||||||
This certification is being furnished solely to comply with the provisions of § 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the accompanying Report, including for purposes of Section 18 of the Exchange Act, or as a separate disclosure document. A signed original of this written certification required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written certification required by Section 906, has been provided to the Company and will be rendered by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of the Chief Financial Officer of ScanSource, Inc.
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to § 906
of the Sarbanes-Oxley Act of 2002
In connection with the annual report of ScanSource, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1)The Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | November 5, 2026 | /s/ STEVE JONES | ||||||
Steve Jones Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
This certification is being furnished solely to comply with the provisions of § 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the accompanying Report, including for purposes of Section 18 of the Exchange Act, or as a separate disclosure document. A signed original of this written certification required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written certification required by Section 906, has been provided to the Company and will be rendered by the Company and furnished to the Securities and Exchange Commission or its staff upon request.