8-K
Scansource, Inc. (SCSC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 23, 2022
ScanSource, Inc.
(Exact name of registrant as specified in its charter)
| SC | 00-26926 | 57-0965380 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
6 Logue Court, Greenville, SC 29615
(Address of principal executive offices, including zip code)
864-288-2432
(Registrant’s telephone number, including area code)
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
|---|---|---|
| Common Stock, no par value | SCSC | NASDAQ Global Select Market |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On August 23, 2022, ScanSource, Inc. (the "Company") issued a press release announcing its financial results for its fourth quarter ended June 30, 2022. A copy of the press release and accompanying Earnings Infographic are attached as Exhibits 99.1 and 99.2 hereto and incorporated herein by reference and also made available through the Company’s website at www.scansource.com. An updated investor presentation will be made available on the Company's website within approximately two weeks.
The information in Item 2.02 of this Report, including the exhibits, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any other filing under the Securities Act of 1933 or the Exchange Act.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 – Press release issued by ScanSource, Inc. on August 23, 2022. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Company’s annual and quarterly reports filed with the Securities and Exchange Commission.
99.2 – Earnings Infographic for the financial results conference call held on August 23, 2022. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Company’s annual and quarterly reports filed with the Securities and Exchange Commission.
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press release |
| 99.2 | Earnings Infographic |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ScanSource, Inc. | ||
|---|---|---|
| Date: | August 23, 2022 | /s/ STEVE JONES |
| Steve Jones | ||
| Senior Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Contact: | |
|---|---|
| Steve Jones | Mary M. Gentry |
| Senior EVP, Chief Financial Officer | SVP, Treasurer and Investor Relations |
| ScanSource, Inc. | ScanSource, Inc. |
| (864) 286-4302 | (864) 286-4892 |
SCANSOURCE REPORTS FOURTH QUARTER AND FISCAL YEAR 2022 RESULTS
Strong Demand and Outstanding Execution by our Team
GREENVILLE, SC -- August 23, 2022 -- ScanSource, Inc. (NASDAQ: SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the fourth quarter and fiscal year ended June 30, 2022. All results in this release reflect continuing operations only unless otherwise noted.
| Fourth Quarter Summary | Fiscal Year Summary | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q4 FY22 | Q4 FY21 | Change | FY22 | FY21 | Change | |||||||||
| (in thousands, except per share data) | ||||||||||||||
| Select reported measures: | ||||||||||||||
| Net sales | $ | 962,283 | $ | 852,694 | 12.9% | $ | 3,529,935 | $ | 3,150,806 | 12.0% | ||||
| Gross profit | $ | 110,792 | $ | 95,778 | 15.7% | $ | 426,524 | $ | 350,716 | 21.6% | ||||
| Gross profit margin % | 11.51 | % | 11.23 | % | 28bp | 12.08 | % | 11.13 | % | 95bp | ||||
| Operating income | $ | 27,424 | $ | 23,283 | 17.8% | $ | 122,167 | $ | 61,483 | 98.7% | ||||
| GAAP net income | $ | 19,947 | $ | 20,657 | -3.4% | $ | 88,698 | $ | 45,389 | 95.4% | ||||
| GAAP diluted EPS | $ | 0.78 | $ | 0.80 | -2.5% | $ | 3.44 | $ | 1.78 | 93.3% | ||||
| Select Non-GAAP measures: | ||||||||||||||
| Adjusted EBITDA | $ | 38,672 | $ | 35,299 | 9.6% | $ | 166,723 | $ | 117,949 | 41.4% | ||||
| Adjusted EBITDA margin % | 4.02 | % | 4.14 | % | -12bp | 4.72 | % | 3.74 | % | 98bp | ||||
| Non-GAAP net income | $ | 23,266 | $ | 24,522 | -5.1% | $ | 102,140 | $ | 69,868 | 46.2% | ||||
| Non-GAAP diluted EPS | $ | 0.91 | $ | 0.96 | -5.2% | $ | 3.97 | $ | 2.74 | 44.9% |
"Our exceptional fiscal year 2022 results demonstrate the success of the new ScanSource and faster growth of our recurring revenue," said Mike Baur, Chairman and CEO, ScanSource, Inc. "Our hybrid distribution strategy of devices and digital is winning, as evidenced by our 12% net sales growth. We exceeded our full-year 2022 outlook for net sales growth and achieved record adjusted EBITDA."
Quarterly Results
Net sales for the fourth quarter of fiscal year 2022 totaled $962.3 million, up 12.9% year-over-year, or 12.2% year-over-year for organic growth, with strong demand in both segments. Fourth quarter fiscal year 2022 net sales in the Specialty Technology Solutions segment increased 12.6% year-over-year, or 12.4% year-over-year for organic growth, to $580.6 million, driven by broad-based demand across technologies and execution by our people. Fourth quarter fiscal year 2022 net sales in Modern Communications & Cloud increased 13.2% year-over-year, or 11.9% year-over-year for organic growth, to $381.7 million, primarily due to increased demand across our communications solutions.
Gross profit for the fourth quarter of fiscal year 2022 totaled $110.8 million, up 15.7% year-over-year. The increase is primarily due to higher sales volume and higher vendor program recognition compared to the prior-year quarter. Gross profit margin increased to 11.51% for the fourth quarter of fiscal year 2022, up from 11.23% in the prior-year quarter.
Exhibit 99.1
For the fourth quarter of fiscal year 2022, operating income increased to $27.4 million from $23.3 million in the prior-year quarter. Fourth quarter fiscal year 2022 non-GAAP operating income increased to $31.9 million for a 3.31% non-GAAP operating income margin, compared to $28.4 million and a 3.33% non-GAAP operating margin for the prior-year quarter.
On a GAAP basis, net income for the fourth quarter of fiscal year 2022 totaled $19.9 million, or $0.78 per diluted share, compared to net income of $20.7 million, or $0.80 per diluted share, for the prior-year quarter. Fourth quarter fiscal year 2022 non-GAAP net income totaled $23.3 million, or $0.91 per diluted share. These results compare to fourth quarter fiscal year 2021 non-GAAP net income of $24.5 million, or $0.96 per diluted share, which includes a $0.19 benefit from discrete tax items.
Adjusted EBITDA for the fourth quarter of fiscal year 2022 increased 9.6% to $38.7 million, or 4.02% of net sales, compared to $35.3 million, or 4.14%, of net sales in the prior-year quarter. Adjusted return on invested capital totaled 14.9% for fourth quarter fiscal year 2022, compared to 16.0% in the prior-year quarter, primarily from increased average invested capital for the current year quarter.
Full-Year Results
For fiscal year 2022, net sales increased 12.0% to $3.5 billion, or a 11.8% year-over-year increase on an organic basis. Fiscal year 2022 net sales in the Specialty Technology Solutions segment increased 14.7% year-over-year, or 14.6% year-over-year for organic growth, to $2.1 billion, driven by broad-based demand across technologies and execution by our people. Fiscal year 2022 net sales in the Modern Communications & Cloud segment increased 8.4% year-over-year, or 7.9% year-over-year for organic growth, to $1.4 billion, primarily due to increased demand across our communications solutions.
Gross profit for the fiscal year 2022 totaled $426.5 million, up 21.6% year-over-year. The increase is primarily due to higher sales volume and higher vendor program recognition compared to the prior year. Gross profit margin increased to 12.1%, up from 11.1% in the prior-year.
For the fiscal year ended June 30, 2022, operating income increased to $122.2 million from $61.5 million in the prior-year. Fiscal year 2022 non-GAAP operating income increased to $140.1 million for a 4.0% non-GAAP operating margin, up from $93.1 million and a 3.0% non-GAAP operating margin for the prior-year.
On a GAAP basis, net income for the fiscal year ended June 30, 2022 totaled $88.7 million, or $3.44 per diluted share, compared to net income of $45.4 million, or $1.78 per diluted share for the prior-year. Fiscal year 2022 non-GAAP net income totaled $102.1 million, or $3.97 per diluted share, compared to $69.9 million, or $2.74 per diluted share for the prior-year.
Adjusted EBITDA for the fiscal year ended June 30, 2022 increased to $166.7 million, or 4.7% of net sales, compared to $117.9 million, or 3.7% of net sales for the prior-year, primarily due to higher gross profits. Adjusted return on invested capital increased to 17.0% for the fiscal year, compared to 12.6% the prior year, driven by higher profitability.
Annual Financial Outlook for Fiscal Year 2023
The following guidance is based on ScanSource's current expectations for the full fiscal year ended June 30, 2023.
| FY23 Annual Outlook | |
|---|---|
| Net sales growth, year-over-year | At least 5.5% |
| Adjusted EBITDA (non-GAAP) | At least $174 million |
Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash share-based compensation expense. ScanSource’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. These statements are forward-looking, and actual results may differ materially.
Webcast Details and Earnings Infographic
At approximately 4:15 p.m. ET today, an Earnings Infographic, as a supplement to this press release and the Company's conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results and business in a conference call today, August 23, 2022, at 5:00 p.m.
Exhibit 99.1
ET. A webcast of the call will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days.
Safe Harbor Statement
This press release contains “forward-looking” statements, including the Company's FY23 outlook, which involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated results, including, but not limited to, failure to hire and retain quality employees, risk to the Company's business from a cyber-security attack, supply chain challenges, the failure to manage and implement the Company's organic growth strategy, economic weakness and inflation, a failure of the Company's IT systems, a failure to acquire new businesses, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, credit risks involving the Company's larger customers and suppliers, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2022, filed with the Securities and Exchange Commission. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
Non-GAAP Financial Information
In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company also discloses certain non-GAAP financial measures, which are summarized below. Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments.
Net sales on a constant currency basis, excluding acquisitions (organic growth): The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis.
Additional Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges, restructuring costs, and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. Non-GAAP metrics are useful in assessing and understanding the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods.
Adjusted earnings before interest expense, income taxes, depreciation, and amortization (“Adjusted EBITDA”): Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments, including acquisition and divestiture costs, impairment charges, and restructuring costs. Effective with the first quarter of fiscal year 2022, non-cash share-based compensation expense is also added back in calculating Adjusted EBITDA. Since Adjusted EBITDA excludes some non-cash costs of investing in our business and people, management believes that Adjusted EBITDA shows the profitability from our business operations more clearly. The presentation for Adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods.
Adjusted return on invested capital ("Adjusted ROIC"): Adjusted ROIC assists management in comparing the Company's performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance. Adjusted ROIC is calculated as Adjusted EBITDA over invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. Management believes the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of the Company's performance during the year.
These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of
financial performance prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below.
About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, SaaS, connectivity and cloud. ScanSource enables partners to deliver solutions for their customers to address changing end-user buying and consumption patterns. ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud services offerings from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration, telecom and cloud services. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2022 Best Places to Work in South Carolina and on FORTUNE magazine’s 2022 List of World’s Most Admired Companies. ScanSource ranks #773 on the Fortune 1000. For more information, visit www.scansource.com.
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||
|---|---|---|---|---|
| Condensed Consolidated Balance Sheets (Unaudited) | ||||
| (in thousands) | ||||
| June 30, 2022 | June 30, 2021* | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 37,987 | $ | 62,718 |
| Accounts receivable, less allowance of $16,806 at June 30, 2022<br><br>and $19,341 at June 30, 2021 | 729,442 | 568,984 | ||
| Inventories | 614,814 | 470,081 | ||
| Prepaid expenses and other current assets | 141,562 | 117,860 | ||
| Total current assets | 1,523,805 | 1,219,643 | ||
| Property and equipment, net | 37,477 | 42,836 | ||
| Goodwill | 214,435 | 218,877 | ||
| Identifiable intangible assets, net | 84,427 | 104,860 | ||
| Deferred income taxes | 15,668 | 21,853 | ||
| Other non-current assets | 61,616 | 63,615 | ||
| Total assets | $ | 1,937,428 | $ | 1,671,684 |
| Liabilities and Shareholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 714,177 | $ | 634,805 |
| Accrued expenses and other current liabilities | 88,455 | 87,790 | ||
| Income taxes payable | 34 | 2,501 | ||
| Current portion of long-term debt | 11,598 | 7,843 | ||
| Total current liabilities | 814,264 | 732,939 | ||
| Deferred income taxes | 3,144 | 3,954 | ||
| Long-term debt, net of current portion | 123,733 | 135,331 | ||
| Borrowings under revolving credit facility | 135,839 | — | ||
| Other long-term liabilities | 53,920 | 68,269 | ||
| Total liabilities | 1,130,900 | 940,493 | ||
| Commitments and contingencies | ||||
| Shareholders’ equity: | ||||
| Preferred stock, no par value; 3,000,000 shares authorized, none issued | — | — | ||
| Common stock, no par value; 45,000,000 shares authorized, 25,187,351 and 25,499,465 shares issued and outstanding at June 30, 2022 and June 30, 2021, respectively | 64,297 | 71,253 | ||
| Retained earnings | 846,869 | 758,071 | ||
| Accumulated other comprehensive loss | (104,638) | (98,133) | ||
| Total shareholders’ equity | 806,528 | 731,191 | ||
| Total liabilities and shareholders’ equity | $ | 1,937,428 | $ | 1,671,684 |
*Derived from audited financial statements.
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Income Statements (Unaudited) | ||||||||
| (in thousands, except per share data) | ||||||||
| Quarter ended June 30, | Fiscal year ended June 30, | |||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Net sales | $ | 962,283 | $ | 852,694 | $ | 3,529,935 | $ | 3,150,806 |
| Cost of goods sold | 851,491 | 756,916 | 3,103,411 | 2,800,090 | ||||
| Gross profit | 110,792 | 95,778 | 426,524 | 350,716 | ||||
| Selling, general and administrative expenses | 75,905 | 64,758 | 275,442 | 247,438 | ||||
| Depreciation expense | 3,023 | 2,898 | 11,062 | 12,533 | ||||
| Intangible amortization expense | 4,440 | 4,893 | 17,853 | 19,488 | ||||
| Restructuring and other charges | — | (54) | — | 9,258 | ||||
| Change in fair value of contingent consideration | — | — | — | 516 | ||||
| Operating income | 27,424 | 23,283 | 122,167 | 61,483 | ||||
| Interest expense | 1,886 | 1,643 | 6,523 | 6,929 | ||||
| Interest income | (1,360) | (1,341) | (4,333) | (3,097) | ||||
| Other (income) expense, net | 684 | (65) | 1,354 | 116 | ||||
| Income before income taxes | 26,214 | 23,046 | 118,623 | 57,535 | ||||
| Provision for income taxes | 6,267 | 2,389 | 29,925 | 12,146 | ||||
| Net income from continuing operations | 19,947 | 20,657 | 88,698 | 45,389 | ||||
| Net income (loss) from discontinued operations | — | 3,053 | 100 | (34,594) | ||||
| Net income | $ | 19,947 | $ | 23,710 | $ | 88,798 | $ | 10,795 |
| Per share data: | ||||||||
| Net income from continuing operations per common share, basic | $ | 0.79 | $ | 0.81 | $ | 3.48 | $ | 1.79 |
| Net income (loss) from discontinued operations per common share, basic | — | 0.12 | — | (1.36) | ||||
| Net income per common share, basic | $ | 0.79 | $ | 0.93 | $ | 3.48 | $ | 0.42 |
| Weighted-average shares outstanding, basic | 25,286 | 25,482 | 25,504 | 25,423 | ||||
| Net income from continuing operations per common share, diluted | $ | 0.78 | $ | 0.80 | $ | 3.44 | $ | 1.78 |
| Net income (loss) from discontinued operations per common share, diluted | — | 0.12 | — | (1.36) | ||||
| Net income per common share, diluted | $ | 0.78 | $ | 0.92 | $ | 3.45 | $ | 0.42 |
| Weighted-average shares outstanding, diluted | 25,584 | 25,664 | 25,758 | 25,518 |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| (in thousands) | ||||||||
| Quarter ended June 30, | Fiscal year ended June 30, | |||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 19,947 | $ | 23,710 | $ | 88,798 | $ | 10,795 |
| Net income (loss) from discontinued operations | — | 3,053 | 100 | (34,594) | ||||
| Net income from continuing operations | 19,947 | 20,657 | 88,698 | 45,389 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: | ||||||||
| Depreciation and amortization | 7,701 | 8,090 | 29,884 | 33,507 | ||||
| Amortization of debt issue costs | 104 | 104 | 417 | 417 | ||||
| Provision for doubtful accounts | 1,357 | 112 | 1,514 | 338 | ||||
| Share-based compensation | 2,872 | 2,328 | 11,663 | 8,039 | ||||
| Deferred income taxes | 3,742 | 2,941 | 5,737 | 2,916 | ||||
| Change in fair value of contingent consideration | — | — | — | 516 | ||||
| Contingent consideration payments excess | — | — | — | (5,457) | ||||
| Finance lease interest | 1 | 23 | 34 | 119 | ||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | (98,535) | (50,204) | (165,939) | (118,859) | ||||
| Inventories | (27,613) | (6,394) | (145,962) | (12,301) | ||||
| Prepaid expenses and other assets | (12,369) | (17,111) | (27,371) | (18,753) | ||||
| Other non-current assets | 3,914 | 7,102 | 1,123 | 9,948 | ||||
| Accounts payable | 15,434 | 105,511 | 82,969 | 175,120 | ||||
| Accrued expenses and other liabilities | 7,876 | (8,928) | (4,869) | (493) | ||||
| Income taxes payable | (3,115) | (2,886) | (2,252) | (3,679) | ||||
| Net cash (used in) provided by operating activities of continuing operations | (78,684) | 61,345 | (124,354) | 116,767 | ||||
| Cash flows from investing activities of continuing operations: | ||||||||
| Capital expenditures | (3,523) | (80) | (6,849) | (2,363) | ||||
| Cash received for business disposal | — | — | 3,125 | 34,356 | ||||
| Net cash (used in) provided by investing activities of continuing operations | (3,523) | (80) | (3,724) | 31,993 | ||||
| Cash flows from financing activities of continuing operations: | ||||||||
| Borrowings on revolving credit, net of expenses | 572,139 | 395,215 | 2,166,409 | 1,881,679 | ||||
| Repayments on revolving credit, net of expenses | (480,593) | (449,017) | (2,030,569) | (1,949,392) | ||||
| Repayments on long-term debt, net | (1,875) | (1,875) | (7,843) | (7,839) | ||||
| Repayments of finance lease obligations | (306) | (320) | (1,238) | (1,294) | ||||
| Contingent consideration payments | — | — | — | (41,393) | ||||
| Exercise of stock options | 712 | 12 | 2,304 | 451 | ||||
| Taxes paid on settlement of equity awards | (26) | — | (2,754) | (1,036) | ||||
| Common stock repurchased | (9,676) | — | (18,203) | — | ||||
| Net cash provided by (used in) financing activities of continuing operations | 80,375 | (55,985) | 108,106 | (118,824) |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Cash Flows (Unaudited), continued | ||||||||
| (in thousands) | ||||||||
| Cash flows from discontinued operations: | ||||||||
| Net cash flows provided by operating activities of discontinued operations | — | 2,469 | — | 24,173 | ||||
| Net cash flows used in investing activities of discontinued operations | — | — | — | (58) | ||||
| Net cash flows used in financing activities of discontinued operations | — | — | — | (29,494) | ||||
| Net cash flows used in discontinued operations | — | 2,469 | — | (5,379) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (3,720) | 5,648 | (4,759) | 3,706 | ||||
| (Decrease) Increase in cash and cash equivalents | (5,552) | 13,397 | (24,731) | 28,263 | ||||
| Consolidated cash and cash equivalents at beginning of period | 43,539 | 49,321 | 62,718 | 34,455 | ||||
| Consolidated cash and cash equivalents at end of period | 37,987 | 62,718 | 37,987 | 62,718 | ||||
| Cash and cash equivalents of discontinued operations | — | — | — | — | ||||
| Cash and cash equivalents of continuing operations | $ | 37,987 | $ | 62,718 | $ | 37,987 | $ | 62,718 |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Supplementary Information (Unaudited) | ||||||||||||
| (in thousands, except percentages) | ||||||||||||
| Non-GAAP Financial Information: | ||||||||||||
| Quarter ended June 30, | Fiscal year ended June 30, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) | 14.9 | % | 16.0 | % | 17.0 | % | 12.6 | % | ||||
| Reconciliation of Net Income to Adjusted EBITDA: | ||||||||||||
| Net income from continuing operations (GAAP) | $ | 19,947 | $ | 20,657 | $ | 88,698 | $ | 45,389 | ||||
| Plus: Interest expense | 1,886 | 1,643 | 6,523 | 6,929 | ||||||||
| Plus: Income taxes | 6,267 | 2,389 | 29,925 | 12,146 | ||||||||
| Plus: Depreciation and amortization | 7,700 | 8,090 | 29,884 | 33,507 | ||||||||
| EBITDA (non-GAAP) | 35,800 | 32,779 | 155,030 | 97,971 | ||||||||
| Plus: Share-based compensation | 2,872 | 2,328 | 11,663 | 8,039 | ||||||||
| Plus: Acquisition and divestiture costs(b) | — | 246 | 30 | 2,376 | ||||||||
| Plus: Restructuring costs | — | (54) | — | 9,047 | ||||||||
| Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) | $ | 38,672 | $ | 35,299 | $ | 166,723 | $ | 117,949 | ||||
| Invested Capital Calculations: | ||||||||||||
| Equity – beginning of the quarter | $ | 806,654 | $ | 690,575 | $ | 731,191 | $ | 678,246 | ||||
| Equity – end of the quarter | 806,528 | 731,191 | 806,528 | 731,191 | ||||||||
| Plus: Share-based compensation, net | 2,134 | 1,912 | ||||||||||
| Plus: Acquisition and divestiture costs(b) | — | 207 | 30 | 2,337 | ||||||||
| Plus: Restructuring, net | — | (40) | — | 6,840 | ||||||||
| Plus: Discontinued operations net (income) loss | — | (3,053) | (100) | 34,594 | ||||||||
| Average equity | 807,658 | 710,396 | 773,179 | 729,825 | ||||||||
| Average funded debt (c) | 233,445 | 177,074 | 209,114 | 202,869 | ||||||||
| Invested capital (denominator for Adjusted ROIC) (non-GAAP) | $ | 1,041,103 | $ | 887,470 | $ | 982,293 | $ | 932,694 | ||||
| (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 90 days in the current and prior-year quarter. | ||||||||||||
| (b) Acquisition and divestiture costs are generally nondeductible for tax purposes. | ||||||||||||
| (c) Average funded debt, which includes both continuing and discontinued operations, is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||||
|---|---|---|---|---|---|---|
| Supplementary Information (Unaudited) | ||||||
| Net Sales by Segment: | ||||||
| Quarter ended June 30, | ||||||
| 2022 | 2021 | % Change | ||||
| Specialty Technology Solutions: | (in thousands) | |||||
| Net sales, reported | $ | 580,619 | $ | 515,445 | 12.6 | % |
| Foreign exchange impact (a) | (1,338) | — | ||||
| Non-GAAP net sales, constant currency | $ | 579,281 | $ | 515,445 | 12.4 | % |
| Modern Communications & Cloud: | ||||||
| Net sales, reported | $ | 381,664 | $ | 337,249 | 13.2 | % |
| Foreign exchange impact (a) | (4,447) | — | ||||
| Non-GAAP net sales, constant currency | $ | 377,217 | $ | 337,249 | 11.9 | % |
| Consolidated: | ||||||
| Net sales, reported | $ | 962,283 | $ | 852,694 | 12.9 | % |
| Foreign exchange impact (a) | (5,785) | — | ||||
| Non-GAAP net sales, constant currency | $ | 956,498 | $ | 852,694 | 12.2 | % |
| (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 June 30, 2022 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2021. | ||||||
| ScanSource, Inc. and Subsidiaries | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Supplementary Information (Unaudited) | ||||||
| Net Sales by Segment: | ||||||
| Fiscal year ended June 30, | ||||||
| 2022 | 2021 | % Change | ||||
| Specialty Technology Solutions | (in thousands) | |||||
| Net sales, reported | $ | 2,082,321 | $ | 1,815,933 | 14.7 | % |
| Foreign exchange impact (a) | (1,710) | — | ||||
| Non-GAAP net sales, constant currency | $ | 2,080,611 | $ | 1,815,933 | 14.6 | % |
| Modern Communications & Cloud | ||||||
| Net sales, reported | $ | 1,447,614 | $ | 1,334,873 | 8.4 | % |
| Foreign exchange impact (a) | (7,115) | — | ||||
| Non-GAAP net sales, constant currency | $ | 1,440,499 | $ | 1,334,873 | 7.9 | % |
| Consolidated: | ||||||
| Net sales, reported | $ | 3,529,935 | $ | 3,150,806 | 12.0 | % |
| Foreign exchange impact (a) | (8,825) | — | ||||
| Non-GAAP net sales, constant currency | $ | 3,521,110 | $ | 3,150,806 | 11.8 | % |
| (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 fiscal year ended June 30, 2022 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2021. |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | ||||||
|---|---|---|---|---|---|---|
| Supplementary Information (Unaudited) | ||||||
| Net Sales by Geography: | ||||||
| Quarter ended June 30, | ||||||
| 2022 | 2021 | % Change | ||||
| United States and Canada: | (in thousands) | |||||
| Net sales, as reported | $ | 865,737 | $ | 771,403 | 12.2 | % |
| International: | ||||||
| Net sales, reported | $ | 96,546 | $ | 81,291 | 18.8 | % |
| Foreign exchange impact(a) | (5,785) | — | ||||
| Non-GAAP net sales, constant currency | $ | 90,761 | $ | 81,291 | 11.6 | % |
| Consolidated: | ||||||
| Net sales, reported | $ | 962,283 | $ | 852,694 | 12.9 | % |
| Foreign exchange impact(a) | (5,785) | — | ||||
| Non-GAAP net sales, constant currency | $ | 956,498 | $ | 852,694 | 12.2 | % |
| (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 June 30, 2022 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2021. | ||||||
| ScanSource, Inc. and Subsidiaries | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Supplementary Information (Unaudited) | ||||||
| Net Sales by Geography: | ||||||
| Fiscal year ended June 30, | ||||||
| 2022 | 2021 | % Change | ||||
| United States and Canada: | (in thousands) | |||||
| Net sales, as reported | $ | 3,173,694 | $ | 2,840,731 | 11.7 | % |
| International: | ||||||
| Net sales, reported | $ | 356,241 | $ | 310,075 | 14.9 | % |
| Foreign exchange impact(a) | (8,825) | — | ||||
| Non-GAAP net sales, constant currency | $ | 347,416 | $ | 310,075 | 12.0 | % |
| Consolidated: | ||||||
| Net sales, reported | $ | 3,529,935 | $ | 3,150,806 | 12.0 | % |
| Foreign exchange impact(a) | (8,825) | — | ||||
| Non-GAAP net sales, constant currency | $ | 3,521,110 | $ | 3,150,806 | 11.8 | % |
| (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 fiscal year ended June 30, 2022 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2021. |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| Quarter ended June 30, 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| GAAP Measure | Intangible amortization expense | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | ||||||
| (in thousands, except per share data) | ||||||||||
| SG&A expenses | $ | 75,905 | $ | — | $ | — | $ | — | $ | 75,905 |
| Operating income | 27,424 | 4,440 | — | — | 31,864 | |||||
| Net income | 19,947 | 3,319 | — | — | 23,266 | |||||
| Diluted EPS | $ | 0.78 | $ | 0.13 | $ | — | $ | — | $ | 0.91 |
| Quarter ended June 30, 2021 | ||||||||||
| GAAP Measure | Intangible amortization expense | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | ||||||
| (in thousands, except per share data) | ||||||||||
| SG&A expense | $ | 64,758 | $ | — | $ | (246) | $ | — | $ | 64,512 |
| Operating income | 23,283 | 4,893 | 246 | (54) | 28,368 | |||||
| Net income | 20,657 | 3,698 | 207 | (40) | 24,522 | |||||
| Diluted EPS | $ | 0.80 | $ | 0.14 | $ | 0.01 | $ | — | $ | 0.96 |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| Year ended June 30, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reported GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | |||||||
| (in thousands, except per share data) | ||||||||||||
| SG&A expense | $ | 275,442 | $ | — | $ | — | $ | (30) | $ | — | $ | 275,412 |
| Operating income | 122,167 | 17,853 | — | 30 | — | 140,050 | ||||||
| Net income | 88,698 | 13,412 | — | 30 | — | 102,140 | ||||||
| Diluted EPS | $ | 3.44 | $ | 0.52 | $ | — | $ | — | $ | — | $ | 3.97 |
| Year ended June 30, 2021 | ||||||||||||
| Reported GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | |||||||
| (in thousands, except per share data) | ||||||||||||
| SG&A expense | $ | 247,438 | $ | — | $ | — | $ | (2,376) | $ | — | $ | 245,062 |
| Operating income | 61,483 | 19,488 | 516 | 2,376 | 9,258 | 93,121 | ||||||
| Net income | 45,389 | 14,753 | 390 | 2,337 | 6,999 | 69,868 | ||||||
| Diluted EPS | $ | 1.78 | $ | 0.58 | $ | 0.02 | $ | 0.09 | $ | 0.27 | $ | 2.74 |
ScanSource Reports Fourth Quarter and Fiscal Year 2022 Results
| ScanSource, Inc. and Subsidiaries | |
|---|---|
| Supplementary Forward-Looking Information (Unaudited) | |
| Annual Financial Outlook for Fiscal Year 2023: | |
| GAAP, Operating income | At least 132 million |
| Intangible amortization | 17 million |
| Depreciation expense | 12 million |
| Share-based compensation expense | 12 million |
| Interest income and other income (expense), net | |
| Adjusted EBITDA (non-GAAP) | At least 174 million |
All values are in US Dollars.
14
scscinfographic_q4fy22
Fiscal Fourth Quarter 2022 Earnings Our exceptional fiscal year 2022 performance demonstrates the success of the new ScanSource and faster growth of our recurring revenue. Our hybrid distribution strategy of devices and digital is winning, as evidenced by our 12% net sales growth.” Mike Baur Chairman and CEO, ScanSource, Inc. Key Highlights 13% Net Sales Growth and 16% Gross Profit Growth Hybrid Distribution Strategy of Devices and Digital is Winning Exceeds Full-Year 2022 Outlook for Net Sales Growth and Adj. EBITDA Net Sales +13% Y/Y $962.3M Strong Demand and Outstanding Execution Drives Top Line Growth © ScanSource 2022 Consolidated Specialty Technology Solutions Segment Gross Profit +16% Y/Y $110.8M, 11.5% margin Modern Communications & Cloud Segment STS, Net Sales +13% Y/Y $580.6M MC&C, Net Sales +13% Y/Y $381.7M STS, Gross Profit +16% Y/Y $54.0M, 9.3% margin MC&C, Gross Profit +15% Y/Y $56.8M, 14.9% margin Exhibit 99.2
* Non-GAAP measure; adjusted ROIC represents return on invested capital For further financial data, non-GAAP financial disclosures and cautionary language regarding forward-looking statements, please refer to the following pages and ScanSource’s fourth quarter and fiscal year 2022 news release issued on August 23, 2022, which accompanies this presentation and is available at www.scansource.com in the Investor Relations section. Metrics Reflect Operational Excellence Focused Execution of Value Creation Strategy Solid Financial Foundation for Growth Fiscal Year 2023 Outlook as of August 23, 2022 $0.78 per share Q4 $3.44 per share FY22 GAAP Diluted EPS $0.91 per share Q4 $3.97 per share FY22 Non-GAAP Diluted EPS* $38.7 Q4 +10% Y/Y $166.7M FY22 +41% Y/Y Adjusted EBITDA* FY22 all-time Company record ($124M) FY22 Operating Cash Flow Working capital for growth 14.9% Q4 17.0% FY22 Adjusted ROIC* FY22 Share Repurchases: $18.2M 4.02% Q4 4.72% FY22 Adjusted EBITDA Margin* 1.4x net debt to TTM adjusted EBITDA Target range: 1x to 2x 5.6x inventory turns 5-qtr range: 5.1x to 6.5x Paid for inventory days of (0.8) 5-qtr range: (9.4) to (0.5) 68 days sales outstanding 5-qtr range: 60 to 69 A repositioned company – Innovative hybrid distributor Attractive financial profile Delivering long-term sustainable growth Differentiated market position © ScanSource 2022 At Least 5.5% Net Sales Growth At Least $174M +4% Y/Y Adjusted EBITDA* 2 Building on specialized technologies
Forward-Looking Statements This Earnings Infographic and supporting materials contain certain comments that are “forward- looking” statements, including statements about our FY23 outlook, growth opportunities and our operating strategies that involve plans, strategies, economic performance and trends, projections, expectations, costs or beliefs about future events and other statements that are not descriptions of historical facts. Forward-looking information is inherently subject to risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including but not limited to, the failure to hire and retain quality employees, risk to our business from a cyber-security attack, the failure to manage and implement our organic growth strategy, economic weakness and inflation, a failure of our IT systems, a failure to acquire new businesses, changes in interest and exchange rates and regulatory regimes impacting our international operations, loss of our major customers, termination of our relationship with key suppliers or a significant modification of the terms under which we operate with a key supplier, changes in our operating strategy, and other factors set forth in the “Risk Factors” contained in our annual report on Form 10-K for the year ended June 30, 2022, and subsequent reports on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”). Although ScanSource believes the expectations in its forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement. ScanSource disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”), the Company also discloses certain non-GAAP measures, including non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non-GAAP diluted EPS, non-GAAP net sales, non-GAAP SG&A expenses, adjusted EBITDA, adjusted ROIC and net sales less impacts from foreign currency translation and acquisitions (organic growth). A reconciliation of the Company's non-GAAP financial information to GAAP financial information is provided in the following supporting materials and in the Company’s Form 8-K, filed with the SEC, with the quarterly earnings press release for the period indicated. 3
Consolidated, 5-Quarter Financial Summary - for continuing operations ($ in thousands, except per share data) Q4 FY22 Q3 FY22 Q2 FY22 Q1 FY22 Q4 FY21 Q/Q Y/Y Select reported GAAP measures: Net sales $ 962,283 $ 845,990 $ 864,351 $ 857,311 $ 852,694 14% 13% Gross profit $ 110,792 $ 106,508 $ 107,925 $ 101,300 $ 95,778 4% 16% Gross profit margin % 11.5 % 12.6 % 12.5 % 11.8 % 11.2 % (108) bp 28 bp SG&A expenses $ 75,905 $ 66,522 $ 69,433 $ 63,582 $ 64,758 14% 17% Operating income $ 27,424 $ 32,917 $ 31,498 $ 30,328 $ 23,283 (17)% 18% Operating income % 2.85 % 3.89 % 3.64 % 3.54 % 2.73 % (104) bp 12 bp Net income $ 19,947 $ 23,526 $ 23,152 $ 22,073 $ 20,657 (15)% (3)% Diluted EPS $ 0.78 $ 0.91 $ 0.89 $ 0.86 $ 0.80 (14)% (3)% Select reported Non-GAAP measures: (a) Non-GAAP operating income $ 31,864 $ 37,374 $ 35,892 $ 34,921 $ 28,368 (15)% 12% Non-GAAP operating income % 3.31 % 4.42 % 4.15 % 4.07 % 3.33 % (111) bp (2) bp Non-GAAP net income $ 23,266 $ 26,879 $ 26,446 $ 25,550 $ 24,522 (13)% (5)% Non-GAAP diluted EPS $ 0.91 $ 1.04 $ 1.02 $ 0.99 $ 0.96 (13)% (5)% Adjusted EBITDA $ 38,672 $ 44,115 $ 42,542 $ 41,394 $ 35,299 (12)% 10% Adjusted EBITDA % 4.02 % 5.21 % 4.92 % 4.83 % 4.14 % (120) bp (12) bp Adjusted ROIC 14.9 % 18.0 % 17.6 % 17.5 % 16.0 % (310) bp (110) bp Operating cash flow (QTR) $ (78,684) $ 29,707 $ (18,419) $ (56,959) $ 61,345 365% (228)% Operating cash flow (TTM) $ (124,355) $ 15,674 $ (74,285) $ (11,417) $ 116,767 (893)% (206)% (a) See pages 13 through 15 for the calculation of non-GAAP measures and reconciliations to GAAP measures. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 4 August 23, 2022
Specialty Technology Solutions, 5-Quarter Financial Summary ($ in thousands) Q4 FY22 Q3 FY22 Q2 FY22 Q1 FY22 Q4 FY21 Q/Q Y/Y Net sales $ 580,619 $ 503,072 $ 496,920 $ 501,711 $ 515,445 15% 13% Gross profit $ 53,994 $ 54,021 $ 52,048 $ 45,694 $ 46,554 —% 16% Gross profit margin % 9.3 % 10.7 % 10.5 % 9.1 % 9.0 % (144) bp 27 bp GAAP operating income $ 15,408 $ 20,623 $ 16,551 $ 14,104 $ 12,011 (25)% 28% GAAP operating income % 2.65 % 4.10 % 3.33 % 2.81 % 2.33 % (145) bp 32 bp Add: Intangible amortization expense $ 1,491 $ 1,491 $ 1,491 $ 1,531 $ 1,610 —% (7)% Non-GAAP operating income $ 16,899 $ 22,114 $ 18,042 $ 15,635 $ 13,621 (24)% 24% Non-GAAP operating income % 2.91 % 4.40 % 3.63 % 3.12 % 2.64 % (149) bp 27 bp Reconciliation of Operating Income to Adjusted EBITDA GAAP operating income $ 15,408 $ 20,623 $ 16,551 $ 14,104 $ 12,011 (25)% 28% Plus: Depreciation expense 2,089 1,833 1,867 1,868 1,967 14% 6% Intangible amortization expense 1,491 1,491 1,491 1,531 1,610 —% (7)% Interest income 325 265 299 305 965 23% (66)% Other income/(expense), net (141) 165 (169) 13 (10) *nm *nm EBITDA 19,172 24,377 20,039 17,821 16,543 (21)% 16% Adjustments: Share-based compensation expense 1,710 1,659 2,038 1,398 1,325 3% 29% Adjusted EBITDA (non-GAAP) $ 20,882 $ 26,036 $ 22,077 $ 19,219 $ 17,868 (20)% 17% Adjusted EBITDA (non-GAAP) % 3.60 % 5.18 % 4.44 % 3.83 % 3.47 % (158) bp 13 bp *nm - percentages are not meaningful ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 5 August 23, 2022
Modern Communications & Cloud, 5-Quarter Financial Summary ($ in thousands) Q4 FY22 Q3 FY22 Q2 FY22 Q1 FY22 Q4 FY21 Q/Q Y/Y Net sales $ 381,664 $ 342,918 $ 367,431 $ 355,600 $ 337,249 11% 13% Gross profit $ 56,798 $ 52,487 $ 55,877 $ 55,606 $ 49,224 8% 15% Gross profit margin % 14.9 % 15.3 % 15.2 % 15.6 % 14.6 % (42) bp 29 bp GAAP operating income $ 12,016 $ 12,294 $ 14,894 $ 16,307 $ 11,466 (2)% 5% GAAP operating income % 3.15 % 3.59 % 4.05 % 4.59 % 3.40 % (44) bp (25) bp Add: Intangible amortization expense $ 2,949 $ 2,966 $ 2,956 $ 2,978 $ 3,283 (1)% (10)% Non-GAAP operating income $ 14,965 $ 15,260 $ 17,850 $ 19,285 $ 14,749 (2)% 1% Non-GAAP operating income % 3.92 % 4.45 % 4.86 % 5.42 % 4.37 % (53) bp (45) bp Reconciliation of Operating Income to Adjusted EBITDA GAAP operating income $ 12,016 $ 12,294 $ 14,894 $ 16,307 $ 11,466 (2)% 5% Plus: Depreciation expense 1,172 1,015 916 1,273 1,231 15% (5)% Intangible amortization expense 2,948 2,966 2,955 2,978 3,283 (1)% (10)% Interest income 1,035 735 648 721 376 41% 175% Other income/(expense), net (542) (28) (374) (276) 77 *nm *nm EBITDA 16,629 16,982 19,039 21,003 16,433 (2)% 1% Adjustments: Share-based compensation expense 1,162 1,098 1,426 1,173 1,003 6% 16% Adjusted EBITDA (non-GAAP) $ 17,791 $ 18,080 $ 20,465 $ 22,176 $ 17,436 (2)% 2% Adjusted EBITDA (non-GAAP) % 4.66 % 5.27 % 5.57 % 6.24 % 5.17 % (61) bp (51) bp *nm - percentages are not meaningful ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 6 August 23, 2022
Net Sales, Constant Currency (Organic Growth) - QTR Net Sales by Segment: ($ In thousands) Q4 FY22 Q4 FY21 % Change Specialty Technology Solutions: Net sales, as reported $ 580,619 $ 515,445 12.6 % Foreign exchange impact (a) (1,338) — Net sales, constant currency (non-GAAP) $ 579,281 $ 515,445 12.4 % Modern Communications & Cloud: Net sales, as reported $ 381,664 $ 337,249 13.2 % Foreign exchange impact (a) (4,447) — Net sales, constant currency (non-GAAP) $ 377,217 $ 337,249 11.9 % Consolidated: Net sales, as reported $ 962,283 $ 852,694 12.9 % Foreign exchange impact (a) (5,785) — Net sales, constant currency (non-GAAP) $ 956,498 $ 852,694 12.2 % Net Sales by Geography: ($ in thousands) Q4 FY22 Q4 FY21 % Change United States and Canada: Net sales, as reported $ 865,737 $ 771,403 12.2 % International: Net sales, as reported $ 96,546 $ 81,291 18.8 % Foreign exchange impact (a) (5,785) — Net sales, constant currency (non-GAAP) $ 90,761 $ 81,291 11.6 % Consolidated: Net sales, as reported $ 962,283 $ 852,694 12.9 % Foreign exchange impact (a) (5,785) — Net sales, constant currency (non-GAAP) $ 956,498 $ 852,694 12.2 % (a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the quarter ended June 30, 2022 into U.S. dollars using the weighted-average foreign exchange rates for the quarter ended June 30, 2021. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 7 August 23, 2022
Net Sales, Constant Currency (Organic Growth) - FY Net Sales by Segment: Fiscal year ended June 30, ($ In thousands) 2022 2021 % Change Specialty Technology Solutions: Net sales, as reported $ 2,082,321 $ 1,815,933 14.7 % Foreign exchange impact (a) (1,710) — Net sales, constant currency (non-GAAP) $ 2,080,611 $ 1,815,933 14.6 % Modern Communications & Cloud: Net sales, as reported $ 1,447,614 $ 1,334,873 8.4 % Foreign exchange impact (a) (7,115) — Net sales, constant currency (non-GAAP) $ 1,440,499 $ 1,334,873 7.9 % Consolidated: Net sales, as reported $ 3,529,935 $ 3,150,806 12.0 % Foreign exchange impact (a) (8,825) — Net sales, constant currency (non-GAAP) $ 3,521,110 $ 3,150,806 11.8 % Net Sales by Geography: Fiscal year ended June 30, ($ in thousands) 2022 2021 % Change United States and Canada: Net sales, as reported $ 3,173,694 $ 2,840,731 11.7 % International: Net sales, as reported $ 356,241 $ 310,075 14.9 % Foreign exchange impact (a) (8,825) — Net sales, constant currency (non-GAAP) $ 347,416 $ 310,075 12.0 % Consolidated: Net sales, as reported $ 3,529,935 $ 3,150,806 12.0 % Foreign exchange impact (a) (8,825) — Net sales, constant currency (non-GAAP) $ 3,521,110 $ 3,150,806 11.8 % (a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the quarter ended June 30, 2022 into U.S. dollars using the weighted-average foreign exchange rates for the quarter ended June 30, 2021. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 8 August 23, 2022
Average Adjusted Return on Invested Capital - QTR ($ in thousands) Q4 FY22 Q3 FY22 Q2 FY22 Q1 FY22 Q4 FY21 Adjusted return on invested capital (ROIC), annualized (a) 14.9 % 18.0 % 17.6 % 17.5 % 16.0 % Reconciliation of Net Income to Adjusted EBITDA Net income from continuing operations - GAAP $ 19,947 $ 23,526 $ 23,152 $ 22,073 $ 20,657 Plus: Interest expense 1,886 1,483 1,493 1,660 1,643 Income taxes 6,267 9,044 7,257 7,358 2,389 Depreciation and amortization 7,700 7,305 7,229 7,650 8,090 EBITDA 35,800 41,358 39,131 38,741 32,779 Adjustments: Acquisition and divestiture costs — — (53) 83 246 Restructuring costs — — — — (54) Share-based compensation 2,872 2,757 3,464 2,570 2,328 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 38,672 $ 44,115 $ 42,542 $ 41,394 $ 35,299 Invested Capital Calculation Equity - beginning of the quarter $ 806,654 $ 768,525 $ 746,094 $ 731,191 $ 690,575 Equity - end of quarter 806,528 806,654 768,525 746,094 731,191 Adjustments: Share-based compensation, net 2,134 2,063 2,590 1,922 1,752 Acquisition and divestiture costs — — (53) 83 207 Restructuring, net of tax — — — — (40) Discontinued operations net (income) loss — — (100) — (3,053) Average equity 807,658 788,621 758,528 739,645 710,316 Average funded debt (b) 233,445 205,073 200,708 197,406 177,074 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 1,041,103 $ 993,694 $ 959,236 $ 937,051 $ 887,390 (a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures. (b) Average funded debt, which includes both continuing and discontinued operations, is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 9 August 23, 2022
Average Adjusted Return on Invested Capital - FY ($ in thousands) FY22 FY21 Adjusted return on invested capital (ROIC), annualized (a) 17.0 % 12.6 % Reconciliation of Net Income to Adjusted EBITDA Net income from continuing operations - GAAP $ 88,698 $ 45,389 Plus: Interest expense 6,523 6,929 Income taxes 29,925 12,146 Depreciation and amortization 29,884 33,507 EBITDA 155,030 97,971 Adjustments: Share-based compensation 11,663 8,039 Change in fair value of contingent consideration — 516 Acquisition and divestiture costs 30 2,376 Restructuring costs — 9,047 Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) $ 166,723 $ 117,949 Invested Capital Calculation Equity - beginning of the year $ 731,191 $ 678,246 Equity - end of the year 806,528 731,191 Adjustments: Share-based compensation, net 8,709 6,052 Change in fair value of contingent consideration, net of tax — 390 Acquisition and divestiture costs 30 2,337 Restructuring costs, net of tax — 6,840 Impact of discontinued operations, net of tax (100) 34,594 Average equity 773,179 729,825 Average funded debt (b) 209,114 202,869 Invested capital (denominator for Adjusted ROIC) (non-GAAP) $ 982,293 $ 932,694 (a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures. (b) Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 10 August 23, 2022
Net Debt and Adjusted EBITDA Metrics ($ in thousands) Q4 FY22 Q3 FY22 Q2 FY22 Q1 FY22 Q4 FY21 Consolidated debt (Q/E) $ 271,170 $ 181,500 $ 196,866 $ 197,356 $ 143,174 Less: Consolidated cash and cash equivalents (Q/E) (37,987) (43,539) (34,123) (55,491) (62,718) Net debt (Q/E) $ 233,183 $ 137,961 $ 162,743 $ 141,865 $ 80,456 Reconciliation of Net Income to Adjusted EBITDA Net income from continuing operations - GAAP $ 19,947 $ 23,526 $ 23,152 $ 22,073 $ 20,657 Plus: Interest expense 1,886 1,483 1,493 1,660 1,643 Income taxes 6,267 9,044 7,257 7,358 2,389 Depreciation and amortization 7,700 7,305 7,229 7,650 8,090 EBITDA 35,800 41,358 39,131 38,741 32,779 Adjustments: Acquisition and divestiture costs — — (53) 83 246 Restructuring costs — — — — (54) Share-based compensation 2,872 2,757 3,464 2,570 2,328 Adjusted EBITDA (non-GAAP) $ 38,672 $ 44,115 $ 42,542 $ 41,394 $ 35,299 Adjusted EBITDA, TTM (a) $ 166,723 $ 163,350 $ 151,234 $ 138,431 $ 117,948 Net Debt / Adjusted EBITDA, TTM (a) 1.4x 0.8x 1.1x 1.0x 0.7x (a) Adjusted EBITDA for the trailing 12-month period ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 11 August 23, 2022
Working Capital, 5-Quarter Summary ($ in thousands) Q4 FY22 Q3 FY22 Q2 FY22 Q1 FY22 Q4 FY21 Accounts Receivable (Q/E) $ 729,442 $ 642,384 $ 613,186 $ 589,532 $ 568,984 Days sales outstanding in receivables 68 69 64 62 60 Inventory (Q/E) $ 614,814 $ 591,396 $ 562,397 $ 493,541 $ 470,081 Inventory turns 5.6 5.1 5.7 6.3 6.5 Accounts payable (Q/E) $ 714,177 $ 706,359 $ 653,190 $ 602,229 $ 634,805 Paid for inventory days* (0.8) (2.9) (0.5) (3.2) (9.4) Working Capital (Q/E) (AR+INV-AP) $ 630,079 $ 527,421 $ 522,393 $ 480,844 $ 404,260 Cash conversion cycle 68 66 64 59 51 *Paid for inventory days represent Q/E inventory days less Q/E accounts payable days ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 12 August 23, 2022
Operating Income, Net Income & EPS - QTR ($ in thousands) Quarter ended June 30, 2022 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs Non-GAAP measure SG&A expenses $ 75,905 $ — $ — $ 75,905 Operating income 27,424 4,440 — 31,864 Net income 19,947 3,319 — 23,266 Diluted EPS $ 0.78 $ 0.13 $ — $ 0.91 Quarter ended March 31, 2022 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring cost Non-GAAP measure SG&A expenses $ 66,522 $ — $ — $ 66,522 Operating income 32,917 4,457 — 37,374 Net income 23,526 3,353 — 26,879 Diluted EPS $ 0.91 $ 0.13 $ — $ 1.04 ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 13 August 23, 2022
Operating Income, Net Income & EPS - QTR, continued ($ in thousands) Quarter ended December 31, 2021 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Non-GAAP measure SG&A expenses $ 69,433 $ — $ 53 $ 69,486 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) Acquisition and divestiture costs totaled less than ($0.1 million) for the quarter ended December 30, 2021 and are generally nondeductible for tax purposes. Quarter ended September 30, 2021 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Non-GAAP measure SG&A expenses $ 63,582 $ — $ (83) $ 63,499 Operating income 30,328 4,510 83 34,921 Net income 22,073 3,394 83 25,550 Diluted EPS $ 0.86 $ 0.13 $ — $ 0.99 (a) Acquisition and divestiture costs totaled $0.1 million for the quarter ended September 30, 2021 and are generally nondeductible for tax purposes. Quarter ended June 30, 2021 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Non-GAAP measure SG&A expenses $ 64,758 $ — $ (246) $ 64,512 Operating income 23,283 4,893 192 28,368 Net income 20,657 3,698 167 24,522 Diluted EPS $ 0.80 $ 0.14 $ 0.01 $ 0.96 (a) Acquisition and divestiture costs totaled $0.2 million for the quarter ended June 30, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.1 million for the quarter ended June 30, 2021. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 14 August 23, 2022
Operating Income, Net Income & EPS - FY ($ in thousands) Fiscal year ended June 30, 2022 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Non-GAAP measure SG&A expenses $ 275,442 $ — $ (30) $ 275,412 Operating income 122,167 17,853 30 140,050 Net income 88,698 13,412 30 102,140 Diluted EPS $ 3.44 $ 0.52 $ — $ 3.97 (a) Acquisition and divestiture costs totaled less than $1.0 million for the fiscal year ended June 30, 2022 and are generally nondeductible for tax purposes. Fiscal year ended June 30, 2021 Reported GAAP measure Intangible amortization expense Acquisition, divestiture and restructuring costs(a) Non-GAAP measure SG&A expenses $ 247,438 $ — $ (2,376) $ 245,062 Operating (loss) income 61,483 19,488 11,634 93,121 Net (loss) income 45,389 14,753 9,336 69,868 Diluted EPS $ 1.78 $ 0.58 $ 0.36 $ 2.74 (a) Acquisition and divestiture costs totaled $2.4 million for the fiscal year ended June 30, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $9.3 million for the fiscal year ended June 30, 2021. ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 15 August 23, 2022
FY23 Annual Financial Outlook Reconciliation FY23 Outlook GAAP, operating income At least $132 million Intangible amortization $17 million Depreciation expense $12 million Share-based compensation expense $12 million Interest income and other income (expense), net $1 million Adjusted EBITDA (non-GAAP) At least $174 million ScanSource, Inc. Earnings Infographic Q4 FY2022 SUPPORTING MATERIALS AND RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 16 August 23, 2022