Scansource, Inc 10-Q for FY2020 Q3

Scansource, Inc. (SCSC)

10-Q 2020-05-11 For: 2020-03-31

Added on April 08, 2026

About this 10-Q

Scansource, Inc filed this 10-Q on May 11, 2020, covering the quarter ended March 31, 2020 (FY2020 Q3).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $872.48M; down 2.3% from $893.36M a year earlier
Net income: $1.71M; down 85.4% from net income of $11.72M a year earlier
Diluted EPS: $0.07; down 84.4% from $0.45 a year earlier

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Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Trading Symbol:	Name of exchange on which registered:
Common stock, no par value	SCSC	NASDAQ Global Select Market



Large accelerated filer	☒	Smaller reporting company	☐
Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐



Class		Outstanding at May 8, 2020
Common Stock, no par value per share		25,345,789 shares



		Page #
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (unaudited) at March 31, 2020 and June 30, 2019	5
	Condensed Consolidated Income Statements (unaudited) for the Quarters and Nine Months Ended March 31, 2020 and 2019	6
	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the Quarters and Nine Months Ended March 31, 2020 and 2019	7
	Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the Quarters and Nine Months Ended March 31, 2020 and 2019	8
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended March 31, 2020 and 2019	10
	Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48

PART II. OTHER INFORMATION

Item 1	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 6.	Exhibits	50

SIGNATURES		51



	March 31, 2020			June 30, 2019
Assets
Current assets:
Cash and cash equivalents	$	34,596		$	23,818
Accounts receivable, less allowance of $34,119 at March 31, 2020 and $38,849 at June 30, 2019	618,758			654,983
Inventories	666,458			697,343
Prepaid expenses and other current assets	116,221			101,171
Total current assets	1,436,033			1,477,315
Property and equipment, net	60,891			63,363
Goodwill	338,358			319,538
Identifiable intangible assets, net	133,228			127,939
Deferred income taxes	23,635			24,724
Other non-current assets	81,656			54,382
Total assets	$	2,073,801		$	2,067,261
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	608,417		$	558,101
Accrued expenses and other current liabilities	108,086			91,407
Current portion of contingent consideration	45,660			38,393
Income taxes payable	989			4,310
Short-term borrowings	143			4,590
Current portion of long-term debt	6,901			4,085
Total current liabilities	770,196			700,886
Deferred income taxes	1,077			1,395
Long-term debt, net of current portion	145,050			151,014
Borrowings under revolving credit facility	168,502			200,817
Long-term portion of contingent consideration	—			39,532
Other long-term liabilities	91,298			59,488
Total liabilities	1,176,123			1,153,132
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, 25,345,798 and 25,408,397 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively	62,314			64,287
Retained earnings	964,538			939,930
Accumulated other comprehensive loss	(129,174		)	(90,088		)
Total shareholders’ equity	897,678			914,129
Total liabilities and shareholders’ equity	$	2,073,801		$	2,067,261

June 30, 2019 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Quarter ended						Nine months ended
	March 31,						March 31,
	2020			2019			2020			2019
Net sales	$	872,483		$	893,357		$	2,850,812		$	2,912,278
Cost of goods sold	777,674			783,342			2,530,020			2,569,570
Gross profit	94,809			110,015			320,792			342,708
Selling, general and administrative expenses	78,923			77,688			244,557			236,569
Depreciation expense	3,493			3,417			10,500			9,954
Intangible amortization expense	5,486			5,005			16,079			14,708
Change in fair value of contingent consideration	618			5,101			6,266			11,535
Operating income	6,289			18,804			43,390			69,942
Interest expense	3,421			3,670			10,964			9,415
Interest income	(1,080		)	(682		)	(2,629		)	(1,397		)
Other (income) expense, net	296			21			102			254
Income before income taxes	3,652			15,795			34,953			61,670
Provision for income taxes	1,939			4,080			10,345			15,651
Net income	$	1,713		$	11,715		$	24,608		$	46,019
Per share data:
Net income per common share, basic	$	0.07		$	0.46		$	0.97		$	1.79
Weighted-average shares outstanding, basic	25,346			25,704			25,386			25,647

Net income per common share, diluted	$	0.07		$	0.45		$	0.97		$	1.79
Weighted-average shares outstanding, diluted	25,363			25,762			25,444			25,755



	Common Stock (Shares)		Common Stock (Amount)			Retained Earnings		Accumulated Other Comprehensive Loss			Total
Balance at June 30, 2019	25,408,397		$	64,287		$	939,930	$	(90,088	)	$	914,129
Net income	—		—			11,530		—			11,530
Unrealized loss on hedged transaction, net of tax	—		—			—		(1,071		)	(1,071		)
Foreign currency translation adjustment	—		—			—		(14,639		)	(14,639		)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	786		(12		)	—		—			(12		)
Common stock repurchased	(168,068	)	(5,432		)	—		—			(5,432		)
Share-based compensation	—		1,246			—		—			1,246
Balance at September 30, 2019	25,241,115		$	60,089		$	951,460	$	(105,798	)	$	905,751
Net income	—		—			11,366		—			11,366
Unrealized loss on hedged transaction, net of tax	—		—			—		900			900
Foreign currency translation adjustment	—		—			—		8,558			8,558
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	104,683		(621		)	—		—			(621		)
Common stock repurchased	—		—			—		—			—
Share-based compensation	—		1,627			—		—			1,627
Balance at December 31, 2019	25,345,798		$	61,095		$	962,825	$	(96,340	)	$	927,580
Net income	—		—			1,713		—			1,713
Unrealized loss on hedged transaction, net of tax	—		—			—		(4,046		)	(4,046		)
Foreign currency translation adjustment	—		—			—		(28,788		)	(28,788		)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	—		34			—		—			34
Common stock repurchased	—		—			—		—			—
Share-based compensation	—		1,185			—		—			1,185
Balance at March 31, 2020	25,345,798		$	62,314		$	964,538	$	(129,174	)	$	897,678

See accompanying notes to these condensed consolidated financial statements.



	Quarter ended March 31, 2020
			(in thousands)
	Worldwide Barcode, Networking & Security Segment		Worldwide Communications & Services Segment		Total
Revenue by product/service:
Technology solutions	$	583,642	$	273,120	$	856,762
Master agency and professional services^(a)	—		15,721		15,721
	$	583,642	$	288,841	$	872,483



	Nine months ended March 31, 2020
			(in thousands)
	Worldwide Barcode, Networking & Security Segment		Worldwide Communications & Services Segment		Total
Revenue by product/service:
Technology solutions	$	1,967,670	$	836,883	$	2,804,553
Master agency and professional services^(a)	—		46,259		46,259
	$	1,967,670	$	883,142	$	2,850,812

^(a)Includes Intelisys Communications, Inc., Canpango and Intelisys Global Ltd.



	Quarter ended March 31, 2019
			(in thousands)
	Worldwide Barcode, Networking & Security Segment		Worldwide Communications & Services Segment		Total
Revenue by product/service:
Technology solutions	$	596,913	$	282,124	$	879,037
Master agency and professional services^(a)	—		14,320		14,320
	$	596,913	$	296,444	$	893,357



	Nine months ended March 31, 2019
			(in thousands)
	Worldwide Barcode, Networking & Security Segment		Worldwide Communications & Services Segment		Total
Revenue by product/service:
Technology solutions	$	1,953,664	$	917,727	$	2,871,391
Master agency and professional services^(a)	—		40,887		40,887
	$	1,953,664	$	958,614	$	2,912,278

^(a)Includes Intelisys Communications, Inc., Canpango and Intelisys Global Ltd.



	Quarter ended March 31,						Nine months ended March 31,
	2020			2019			2020			2019
	(in thousands)
Tax (expense) benefit	$	(740	)	$	(193	)	$	(1,174	)	$	(187	)



	Net Identifiable Intangible Assets
	(in thousands)
Balance at June 30, 2019	$	127,939
Additions	23,725
Amortization expense	(16,079		)
Foreign currency translation adjustment	(2,357		)
Balance at March 31, 2020	$	133,228



		March 31, 2020				June 30, 2019
	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:
Foreign exchange contracts	Prepaid expenses and other current assets	$	—	$	209	$	—	$	165
Derivative liabilities:
Foreign exchange contracts	Accrued expenses and other current liabilities	$	—	$	130	$	—	$	168
Interest rate swap agreement	Other long-term liabilities	$	8,922	$	—	$	3,504	$	—


•	Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;



	Nine months ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	24,608		$	46,019
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,428			27,566
Amortization of debt issuance costs	313			252
Provision for doubtful accounts	3,077			3,199
Share-based compensation	4,097			4,906
Deferred income taxes	(1,748		)	1,132
Change in fair value of contingent consideration	6,266			11,535
Contingent consideration payments excess	(3,050		)	(10,190		)
Finance lease interest	64			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	11,842			40,530
Inventories	15,656			(169,031		)
Prepaid expenses and other assets	(15,957		)	10,116
Other non-current assets	428			413
Accounts payable	62,553			25,138
Accrued expenses and other liabilities	17,153			(4,082		)
Income taxes payable	(3,647		)	(12,050		)
Net cash provided by (used in) operating activities	150,083			(24,547		)
Cash flows from investing activities:
Capital expenditures	(6,617		)	(10,977		)
Cash paid for business acquisitions, net of cash acquired	(48,921		)	(32,161		)
Net cash used in investing activities	(55,538		)	(43,138		)
Cash flows from financing activities:
Borrowings on revolving credit	1,670,227			1,602,568
Repayments on revolving credit	(1,701,494		)	(1,503,654		)
Repayments on short-term borrowings, net	(4,384		)	—
Repayments on long-term debt	(3,147		)	(330		)
Repayments of finance lease obligations	(660		)	(495		)
Contingent consideration payments	(35,481		)	(35,606		)
Exercise and issuance of equity awards	754			1,509
Taxes paid on settlement of equity awards	(1,354		)	(1,406		)
Repurchase of common stock	(6,077		)	(308		)
Net cash (used in) provided by financing activities	(81,616		)	62,278



	Quarter ended						Nine months ended
	March 31,						March 31,
	2020			2019			2020			2019
	(in thousands)
Net foreign exchange derivative contract losses (gains)	$	(6,178	)	$	1,125		$	(5,978	)	$	178
Net foreign currency transactional and re-measurement (gains) losses	6,546			(654		)	6,155			810
Net foreign currency exchange (gains) losses	$	368		$	471		$	177		$	988


•	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).



	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 portion	$	23,553	$	23,553	$	—	$	—
Forward foreign currency exchange contracts	209		—		209		—
Total assets at fair value	$	23,762	$	23,553	$	209	$	—
Liabilities:
Deferred compensation plan investments, current and non-current portion	$	23,553	$	23,553	$	—	$	—
Forward foreign currency exchange contracts	130		—		130		—
Interest rate swap agreement	8,922		—		8,922		—
Liability for contingent consideration	45,660		—		—		45,660
Total liabilities at fair value	$	78,265	$	23,553	$	9,052	$	45,660


•	estimated future results, net of pro forma adjustments set forth in the purchase agreements;


•	a discount rate reflective of the Company’s creditworthiness and market risk premium associated with the United States markets.



Reporting Period	Valuation Technique	Significant Unobservable Inputs	Weighted Average Rates^(a)
March 31, 2020	Discounted cash flow	Weighted average cost of capital	12.3	%
		Adjusted EBITDA growth rate	24.9	%

June 30, 2019	Discounted cash flow	Weighted average cost of capital	14.2	%
		Adjusted EBITDA growth rate	21.5	%



Operating leases	Balance Sheet location	March 31, 2020
		(in thousands)
Operating lease right-of-use assets	Other non-current assets	$	30,196
Current operating lease liabilities	Accrued expenses and other current liabilities	$	5,805
Long-term operating lease liabilities	Other long-term liabilities	$	26,490



	March 31, 2020
Weighted-average remaining lease term	6.27 years
Weighted-average discount rate	3.9	%



	Operating leases
	(in thousands)
Remainder of 2020	$	2,362
2021	7,828
2022	7,090
2023	5,574
2024	4,757
Thereafter	11,282
Total future payments	38,893
Less: amounts representing interest	6,598
Present value of lease payments	$	32,295



	March 31, 2020		June 30, 2019
	Network1
	(in thousands)
Assets
Prepaid expenses and other current assets	$	15	$	761
Other non-current assets	$	3,847	$	5,219
Liabilities
Accrued expenses and other current liabilities	$	15	$	761
Other long-term liabilities	$	3,847	$	5,219



	Quarter ended March 31,									% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions^(a)
Net Sales by Segment:	2020		2019		$ Change			% Change
	(in thousands)
Worldwide Barcode, Networking & Security	$	583,642	$	596,913	$	(13,271	)	(2.2	)%	(0.8	)%
Worldwide Communications & Services	288,841		296,444		(7,603		)	(2.6	)%	2.9	%
Total net sales	$	872,483	$	893,357	$	(20,874	)	(2.3	)%	0.5	%

	Nine months ended March 31,									% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions ^(a)
	2020		2019		$ Change			% Change
	(in thousands)
Worldwide Barcode, Networking & Security	$	1,967,670	$	1,953,664	$	14,006		0.7	%	2.4	%
Worldwide Communications & Services	883,142		958,614		(75,472		)	(7.9	)%	(6.2	)%
Total net sales	$	2,850,812	$	2,912,278	$	(61,466	)	(2.1	)%	(0.5	)%



	Quarter ended March 31,									% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions^(a)
Net Sales by Geography:	2020		2019		$ Change			% Change
	(in thousands)
United States and Canada	$	670,175	$	672,155	$	(1,980	)	(0.3	)%	(0.3	)%
International	$	202,308	$	221,202	(18,894		)	(8.5	)%	6.9	%
Total net sales	$	872,483	$	893,357	$	(20,874	)	(2.3	)%	0.5	%

	Nine months ended March 31,									% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions ^(a)
	2020		2019		$ Change			% Change
	(in thousands)
United States and Canada	$	2,173,516	$	2,189,567	$	(16,051	)	(0.7	)%	(0.9	)%
International	677,296		722,711		(45,415		)	(6.3	)%	2.3	%
Total net sales	$	2,850,812	$	2,912,278	$	(61,466	)	(2.1	)%	(0.5	)%



	Quarter ended March 31,									% of Net Sales March 31,
	2020		2019		$ Change			% Change		2020		2019
	(in thousands)
Worldwide Barcode, Networking & Security	$	48,583	$	61,563	$	(12,980	)	(21.1	)%	8.3	%	10.3	%
Worldwide Communications & Services	46,226		48,452		(2,226		)	(4.6	)%	16.0	%	16.3	%
Gross profit	$	94,809	$	110,015	$	(15,206	)	(13.8	)%	10.9	%	12.3	%

	Nine months ended March 31,									% of Net Sales March 31,
	2020		2019		$ Change			% Change		2020		2019
	(in thousands)
Worldwide Barcode, Networking & Security	$	166,990	$	188,339	$	(21,349	)	(11.3	)%	8.5	%	9.6	%
Worldwide Communications & Services	153,802		154,369		(567		)	(0.4	)%	17.4	%	16.1	%
Gross profit	$	320,792	$	342,708	$	(21,916	)	(6.4	)%	11.3	%	11.8	%




Consolidated:
Net sales, as reported	$	872,483		$	893,357		$	(20,874	)	(2.3	)%
Planned Divestitures	(127,875		)	(140,511		)
Non-GAAP net sales, excluding Planned Divestitures	744,608			752,846			(8,238		)	(1.1	)%
Foreign exchange impact^(a)	13,328			—
Less: Acquisitions^(b)	(1,677		)	—
Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions	$	756,259		$	752,846		$	3,413		0.5	%

^(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 March 31, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2019.
^(b)Reflects a revenue recognition change to a net basis for the intY acquisition.

	Nine months ended March 31,
	2020			2019			$ Change			% Change
United States and Canada:	(in thousands)
Net sales, as reported	$	2,173,516		$	2,189,567		$	(16,051	)	(0.7	)%
Less: Acquisitions^(b)	(3,623		)	(1,062		)
Net sales, constant currency excluding acquisitions	$	2,169,893		$	2,188,505		$	(18,612	)	(0.9	)%

International:
Net sales, as reported	$	677,296		$	722,711		$	(45,415	)	(6.3	)%
Planned Divestitures	(439,157		)	(473,767		)
Non-GAAP net sales, excluding Planned Divestitures	238,139			248,944			(10,805		)	(4.3	)%
Foreign exchange impact^(a)	20,653			—
Less: Acquisitions^(b)	(4,144		)	—
Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions	$	254,648		$	248,944		$	5,704		2.3	%

Consolidated:
Net sales, as reported	$	2,850,812		$	2,912,278		$	(61,466	)	(2.1	)%
Planned Divestitures	(439,157		)	(473,767		)
Non-GAAP net sales, excluding Planned Divestitures	2,411,655			2,438,511			(26,856		)	(1.1	)%
Foreign exchange impact^(a)	20,653			—
Less: Acquisitions^(b)	(7,767		)	(1,062		)
Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions	$	2,424,541		$	2,437,449		$	(12,908	)	(0.5	)%

^(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 nine months ended March 31, 2020 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2019.
^(b)Reflects a revenue recognition change to a net basis for the intY acquisition.



	Quarter ended March 31, 2020
	Reported GAAP measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition, divestiture and restructuring costs^(a)		Tax recovery, net			Impact of Planned Divestitures			Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	872,483	$	—	$	—	$	—	$	—		$	(127,875	)	$	744,608
Gross profit	94,809		—		—		—		—			(10,206		)	84,603
Operating income	6,289		5,486		618		935		(1,529		)	3,020			14,819
Other expense, net	2,637		—		—		—		—			(759		)	1,878
Pre-tax income	3,652		5,486		618		935		—			4,571			15,262
Net income	1,713		4,171		467		894		(1,224		)	3,248			9,269
Diluted EPS	$	0.07	$	0.16	$	0.02	$	0.04	$	(0.05	)	$	0.13		$	0.37

^(a) Acquisition and divestiture costs totaled $0.8 million for the quarter ended March 31, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.1 million for the quarter ended March 31, 2020.

	Quarter ended March 31, 2019
	Reported GAAP measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition, divestiture and restructuring costs^(a)		Tax recovery, net			Impact of Planned Divestitures			Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	893,357	$	—	$	—	$	—	$	—		$	(140,511	)	$	752,846
Gross profit	110,015		—		—		—		—			(14,208		)	95,807
Operating income	18,804		5,005		5,101		814		—			898			30,622
Other expense, net	3,009		—		—		—		—			(257		)	2,752
Pre-tax income	15,795		5,005		5,101		814		—			1,155			27,870
Net income	11,715		3,789		3,619		665		—			846			20,634
Diluted EPS	$	0.45	$	0.15	$	0.14	$	0.03	$	—		$	0.03		$	0.80

^(a) Acquisition and divestiture costs totaled $0.2 million for the quarter ended March 31, 2019 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.6 million for the quarter ended March 31, 2019.




Operating Income by Segment:
	Quarter ended March 31,											% of Net Sales March 31,
	2020			2019			$ Change			% Change		2020		2019
Worldwide Barcode, Networking & Security:	(in thousands)
GAAP operating income	$	3,870		$	16,865		$	(12,995	)	(77.1	)%	0.7	%	2.8	%
Adjustments:
Amortization of intangible assets	1,968			1,968			—
Tax recovery, net	(1,452		)	—			(1,452		)
Planned Divestitures	925			(618		)	1,543
Non-GAAP operating income	$	5,311		$	18,215		$	(12,904	)	(70.8	)%	1.1	%	3.7	%

Worldwide Communications & Services:
GAAP operating income	$	3,199		$	2,161		$	1,038		48.0	%	1.1	%	0.7	%
Adjustments:
Amortization of intangible assets	3,518			3,037			481
Change in fair value of contingent consideration	618			5,101			(4,483		)
Restructuring costs	155			592			(437		)
Tax recovery, net	(77		)	—			(77		)
Planned Divestitures	2,095			1,516			579
Non-GAAP operating income	$	9,508		$	12,407		$	(2,899	)	(23.4	)%	3.7	%	4.8	%

Corporate:
GAAP operating income	$	(780	)	$	(222	)	$	(558	)	nm*		nm*		nm*
Adjustments:
Acquisition and divestiture costs	780			222			558
Non-GAAP operating income	$	—		$	—		$	—		nm*		nm*		nm*

Consolidated:
GAAP operating income	$	6,289		$	18,804		$	(12,515	)	(66.6	)%	0.7	%	2.1	%
Adjustments:
Amortization of intangible assets	5,486			5,005			481
Change in fair value of contingent consideration	618			5,101			(4,483		)
Tax recovery, net	(1,529		)	—			(1,529		)
Acquisition and divestiture costs	780			222			558
Restructuring costs	155			592			(437		)
Planned Divestitures	3,020			898			2,122
Non-GAAP operating income	$	14,819		$	30,622		$	(15,803	)	(51.6	)%	2.0	%	4.1	%


(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 91 days in the current and prior-year quarter.


(a)	Acquisition and divestiture costs are generally nondeductible for tax purposes.


(b)	Accelerated depreciation expense on certain European facilities in connection with restructuring for the quarter ended March 31, 2019 are classified as depreciation expense above rather than restructuring costs.


(c)	Average funded debt is calculated as the average daily amounts outstanding on our current and long-term interest-bearing debt.



Exhibit Number	Description

10.1	Form of Restricted Stock Unit Award Certificate (Performance- and Service-Based for grants on or after November 15, 2019 (incorporated by reference to Exhibit 10.1 of the registrant's Current Report filed with the SEC on Form 8-K on January 30, 2020)

31.1	Certification of the Chief Executive Officer, Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer, Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of the Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of the Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following materials from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at March 31, 2020 and June 30, 2019; (ii) the Condensed Consolidated Income Statements for the quarter and nine months ended March 31, 2020 and 2019; (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income for the quarter and nine months ended March 31, 2020 and 2019; (iv) the Condensed Consolidated Statements of Shareholder's Equity at March 31, 2020 and 2019; (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and 2019; 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
	document.



		ScanSource, Inc.

		/s/ MICHAEL L. BAUR
		Michael L. Baur
Date:	May 11, 2020	Chairman and Chief Executive Officer (Principal Executive Officer)