SCSC 8-K

Scansource, Inc. (SCSC)

8-K 2023-02-07 For: 2023-02-07

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Added on April 08, 2026

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Exhibit Number			Description

99.1			Press release
99.2			Earnings Infographic
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)


Contact:
Steve Jones						Mary M. Gentry
Senior EVP, Chief Financial Officer						SVP, Treasurer and Investor Relations
ScanSource, Inc.						ScanSource, Inc.
(864) 286-4302						(864) 286-4892


	Second Quarter Summary
	Q2 FY23			Q2 FY22			Change
	(in thousands, except per share data)
Select reported measures:
Net sales	$	1,011,241		$	864,079		17.0%
Gross profit	$	115,334		$	107,653		7.1%
Gross profit margin %	11.41		%	12.46		%	-105bp
Operating income	$	39,432		$	31,498		25.2%
GAAP net income	$	25,734		$	23,152		11.2%
GAAP diluted EPS	$	1.01		$	0.89		13.5%
Select Non-GAAP measures:
Adjusted EBITDA	$	48,815		$	42,542		14.7%
Adjusted EBITDA margin %	4.83		%	4.92		%	-9bp
Non-GAAP net income	$	26,941		$	26,446		1.9%
Non-GAAP diluted EPS	$	1.06		$	1.02		3.9%


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
	December 31, 2022		June 30, 2022*
Assets
Current assets:
Cash and cash equivalents	$	66,445	$	37,987
Accounts receivable, less allowance of $13,353 at December 31, 2022 and $16,806 at June 30, 2022	779,562		729,442
Inventories	761,936		614,814
Prepaid expenses and other current assets	111,119		141,562
Total current assets	1,719,062		1,523,805
Property and equipment, net	36,593		37,477
Goodwill	214,367		214,435
Identifiable intangible assets, net	75,950		84,427
Deferred income taxes	14,751		15,668
Other non-current assets	69,806		61,616

Total assets	$	2,130,529	$	1,937,428
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	748,662	$	714,177
Accrued expenses and other current liabilities	76,985		88,455

Income taxes payable	6,049		34

Current portion of long-term debt	5,040		11,598

Total current liabilities	836,736		814,264
Deferred income taxes	3,132		3,144
Long-term debt, net of current portion	147,756		123,733
Borrowings under revolving credit facility	230,000		135,839

Other long-term liabilities	50,519		53,920
Total liabilities	1,268,143		1,130,900
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued	—		—
Common stock, no par value; 45,000,000 shares authorized, 25,343,014 and 25,187,351 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively	68,313		64,297
Retained earnings	896,645		846,869
Accumulated other comprehensive loss	(102,572)		(104,638)
Total shareholders’ equity	862,386		806,528
Total liabilities and shareholders’ equity	$	2,130,529	$	1,937,428


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands, except per share data)

	Quarter ended December 31,				Six months ended December 31,
	2022		2021		2022		2021
Net sales	$	1,011,241	$	864,079	$	1,955,054	$	1,721,662
Cost of goods sold	895,907		756,426		1,726,236		1,512,437
Gross profit	115,334		107,653		228,818		209,225
Selling, general and administrative expenses	69,074		69,161		140,667		133,016
Depreciation expense	2,678		2,547		5,441		5,427
Intangible amortization expense	4,150		4,447		8,391		8,956



Operating income	39,432		31,498		74,319		61,826
Interest expense	5,060		1,493		8,507		3,153
Interest income	(2,027)		(947)		(3,618)		(1,973)
Other expense, net	207		543		955		807
Income before income taxes	36,192		30,409		68,475		59,839
Provision for income taxes	10,458		7,257		18,699		14,614
Net income from continuing operations	25,734		23,152		49,776		45,225
Net income from discontinued operations	—		100		—		100
Net income	$	25,734	$	23,252	$	49,776	$	45,325

Per share data:
Net income from continuing operations per common share, basic	$	1.02	$	0.91	$	1.97	$	1.77
Net income from discontinued operations per common share, basic	—		—		—		—
Net income per common share, basic	$	1.02	$	0.91	$	1.97	$	1.77
Weighted-average shares outstanding, basic	25,287		25,585		25,244		25,549

Net income from continuing operations per common share, diluted	$	1.01	$	0.89	$	1.96	$	1.75
Net income from discontinued operations per common share, diluted	—		—		—		—
Net income per common share, diluted	$	1.01	$	0.90	$	1.96	$	1.76
Weighted-average shares outstanding, diluted	25,502		25,895		25,454		25,806


☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
	Six months ended December 31,
		2022		2021
Cash flows from operating activities:
Net income		$	49,776	$	45,325


Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		14,285		14,879
Amortization of debt issue costs		385		209
Provision for doubtful accounts		33		921
Share-based compensation		5,679		6,032

Deferred income taxes		932		(109)


Finance lease interest		24		26
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(49,541)		(54,370)
Inventories		(146,826)		(95,531)
Prepaid expenses and other assets		30,487		(11,236)
Other non-current assets		(7,168)		(1,561)
Accounts payable		33,820		25,444
Accrued expenses and other liabilities		(13,268)		(5,130)
Income taxes payable		6,036		(177)
Net cash used in operating activities		(75,346)		(75,378)
Cash flows from investing activities:
Capital expenditures		(4,262)		(2,645)

Cash received for business disposal		—		3,125

Net cash (used in) provided by investing activities		(4,262)		480
Cash flows from financing activities:

Borrowings on revolving credit, net of expenses		1,232,058		1,115,161
Repayments on revolving credit, net of expenses		(1,137,897)		(1,057,376)
Borrowings (repayments) on long-term debt, net		17,465		(4,093)
Repayments on finance lease obligation		(492)		(624)
Debt issuance costs		(1,407)		—

Exercise of stock options		634		1,114
Taxes paid on settlement of equity awards		(2,332)		(2,634)
Common stock repurchased		—		(183)

Net cash provided by financing activities		108,029		51,365













Effect of exchange rate changes on cash and cash equivalents		37		(5,062)
Increase (decrease) in cash and cash equivalents		28,458		(28,595)
Cash and cash equivalents at beginning of period		37,987		62,718
Cash and cash equivalents at period end		$	66,445	$	34,123


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except percentages)

Non-GAAP Financial Information:
	Quarter ended December 31,
	2022			2021
Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a)	15.6		%	17.6		%

Reconciliation of Net Income to Adjusted EBITDA:
Net income (GAAP)	$	25,734		$	23,152
Plus: Interest expense	5,060			1,493
Plus: Income taxes	10,458			7,257
Plus: Depreciation and amortization	7,057			7,229
EBITDA (non-GAAP)	48,309			39,131

Plus: Share-based compensation	3,364			3,464
Plus: Acquisition and divestiture costs(b)	—			(53)


Plus: Tax recovery(c)	(2,858)			—
Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP)	$	48,815		$	42,542

Invested Capital Calculations:
Equity – beginning of the quarter	$	827,004		$	746,094
Equity – end of the quarter	862,386			768,525

Plus: Share-based compensation, net	2,496			2,590
Plus: Acquisition and divestiture costs(b)	—			(53)

Plus: Discontinued operations net (income) loss	—			(100)

Plus: Tax recovery, net	(1,886)			—

Average equity	845,000			758,528
Average funded debt (d)	392,853			200,708
Invested capital (denominator for Adjusted ROIC) (non-GAAP)	$	1,237,853		$	959,236

(a) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 92 days in the current and prior-year quarter.
(b) Acquisition and divestiture costs are generally nondeductible for tax purposes.
(c) Recovery of prior period withholding taxes in Brazil.
(d) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Net Sales by Segment:
	Quarter ended December 31,
	2022		2021		% Change
Specialty Technology Solutions:	(in thousands)


Net sales, reported	$	627,548	$	496,920	26.3	%
Foreign exchange impact (a)	(1,120)		—

Non-GAAP net sales, constant currency	$	626,428	$	496,920	26.1	%

Modern Communications & Cloud:


Net sales, reported	$	383,693	$	367,159	4.5	%
Foreign exchange impact (a)	(4,497)		—

Non-GAAP net sales, constant currency	$	379,196	$	367,159	3.3	%

Consolidated:


Net sales, reported	$	1,011,241	$	864,079	17.0	%
Foreign exchange impact (a)	(5,617)		—

Non-GAAP net sales, constant currency	$	1,005,624	$	864,079	16.4	%

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2022 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2021.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Net Sales by Geography:
	Quarter ended December 31,
	2022		2021		% Change
United States and Canada:	(in thousands)
Net sales, as reported	$	909,221	$	773,660	17.5	%



International:


Net sales, reported	$	102,020	$	90,419	12.8	%
Foreign exchange impact(a)	(5,617)		—

Non-GAAP net sales, constant currency	$	96,403	$	90,419	6.6	%

Consolidated:


Net sales, reported	$	1,011,241	$	864,079	17.0	%
Foreign exchange impact(a)	(5,617)		—

Non-GAAP net sales, constant currency	$	1,005,624	$	864,079	16.4	%

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2022 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2021.


	Quarter ended December 31, 2022
		GAAP Measure	Intangible amortization expense	Acquisition and divestiture costs	Tax recovery (a)	Non-GAAP measure
	(in thousands, except per share data)


SG&A expenses		$69,074	—	—	$2,858	$71,932
Operating income		39,432	4,150	—	(2,858)	40,724


Net income		25,734	3,093	—	(1,886)	26,941
Diluted EPS		$1.01	$0.12	—	$(0.07)	$1.06

	Quarter ended December 31, 2021
		GAAP Measure	Intangible amortization expense	Acquisition and divestiture costs (b)	Tax recovery	Non-GAAP measure
	(in thousands, except per share data)


SG&A expense		$69,161	—	$53	—	$69,214
Operating income		31,498	4,447	(53)	—	35,892


Net income		23,152	3,347	(53)	—	26,446
Diluted EPS		$0.89	$0.13	—	—	$1.02
(a) Recovery of prior period withholding taxes in Brazil.
(b) Acquisition and divestiture costs totaled less than $(0.1) million for the quarter ended December 31, 2021 and are generally nondeductible for tax purposes.


Emerging growth company			☐