Achieves Strong Q2 Cash Flow and Intelisys Growth
|
Second Quarter Summary |
||||||||
|
Q2 FY24 |
|
Q2 FY23 |
|
Change |
||||
|
(in thousands, except per share data) |
||||||||
Select reported measures: |
|
|
|
|
|
||||
Net sales |
$ |
884,792 |
|
|
$ |
1,011,241 |
|
|
-12.5% |
Gross profit |
$ |
100,748 |
|
|
$ |
115,334 |
|
|
-12.6% |
Gross profit margin % |
|
11.39 |
% |
|
|
11.41 |
% |
|
-2bp |
Operating income |
$ |
26,826 |
|
|
$ |
39,432 |
|
|
-32.0% |
GAAP net income |
$ |
32,726 |
|
|
$ |
25,734 |
|
|
27.2% |
GAAP diluted EPS |
$ |
1.29 |
|
|
$ |
1.01 |
|
|
27.7% |
Operating cash flow |
$ |
63,224 |
|
|
$ |
(26,885 |
) |
|
n/m |
Select Non-GAAP measures: |
|
|
|
|
|
||||
Adjusted EBITDA |
$ |
38,459 |
|
|
$ |
48,815 |
|
|
-21.2% |
Adjusted EBITDA margin % |
|
4.35 |
% |
|
|
4.83 |
% |
|
-48bp |
Non-GAAP net income |
$ |
21,587 |
|
|
$ |
26,941 |
|
|
-19.9% |
Non-GAAP diluted EPS |
$ |
0.85 |
|
|
$ |
1.06 |
|
|
-19.8% |
Free cash flow |
$ |
60,675 |
|
|
$ |
(29,389 |
) |
|
n/m |
n/m - not meaningful |
|
|
|
|
|
“Strong cash flow and
Quarterly Results
Net sales for the second quarter of fiscal year 2024 totaled
Gross profit for the second quarter of fiscal year 2024 decreased 12.6% year-over-year to
For the second quarter of fiscal year 2024, operating income was
On a GAAP basis, net income for the second quarter of fiscal year 2024 totaled
Adjusted EBITDA for the second quarter of fiscal year 2024 decreased 21.2% to
Updated Annual Financial Outlook for Fiscal Year 2024
|
|
FY24 Annual Outlook |
|
Prior FY24 Annual Outlook |
Net sales |
|
At least |
|
At least |
Adjusted EBITDA (Non-GAAP) |
|
At least |
|
At least |
Free cash flow |
|
At least |
|
At least |
Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash shared-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
Safe Harbor Statement
This press release contains “forward-looking” statements, including
Non-GAAP Financial Information
In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"),
Net sales on a constant currency basis excluding acquisitions and divestitures (organic growth):
Additional Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior 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, gain on sale of business, restructuring costs, cyberattack restoration costs, tax recovery, and non-cash share-based compensation expense. Since Adjusted EBITDA excludes some non-cash costs of investing in ScanSource’s business and people, management believes that Adjusted EBITDA shows the profitability from the 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. The Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales.
Adjusted return on invested capital ("Adjusted ROIC"): Adjusted ROIC assists management in comparing
Free cash flow:
These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that
About
|
|||||||
Condensed Consolidated Balance Sheets (Unaudited) |
|||||||
(in thousands) |
|||||||
|
|
|
|
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
44,987 |
|
|
$ |
36,178 |
|
Accounts receivable, less allowance of |
|
662,799 |
|
|
|
753,236 |
|
Inventories |
|
575,137 |
|
|
|
757,574 |
|
Prepaid expenses and other current assets |
|
122,272 |
|
|
|
110,087 |
|
Total current assets |
|
1,405,195 |
|
|
|
1,657,075 |
|
Property and equipment, net |
|
36,546 |
|
|
|
37,379 |
|
|
|
208,214 |
|
|
|
216,706 |
|
Identifiable intangible assets, net |
|
45,313 |
|
|
|
68,495 |
|
Deferred income taxes |
|
19,478 |
|
|
|
17,764 |
|
Other non-current assets |
|
66,059 |
|
|
|
70,750 |
|
Total assets |
$ |
1,780,805 |
$ |
2,068,169 |
|||
Liabilities and Shareholders’ Equity |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
540,642 |
|
|
$ |
691,119 |
|
Accrued expenses and other current liabilities |
|
58,460 |
|
|
|
78,892 |
|
Income taxes payable |
|
3,653 |
|
|
|
9,875 |
|
Current portion of long-term debt |
|
7,857 |
|
|
|
6,915 |
|
Total current liabilities |
|
610,612 |
|
|
|
786,801 |
|
Deferred income taxes |
|
— |
|
|
|
3,816 |
|
Long-term debt, net of current portion |
|
139,899 |
|
|
|
144,006 |
|
Borrowings under revolving credit facility |
|
20,878 |
|
|
|
178,980 |
|
Other long-term liabilities |
|
55,815 |
|
|
|
49,268 |
|
Total liabilities |
|
827,204 |
|
|
|
1,162,871 |
|
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, 25,154,469 and 24,844,203 shares issued and outstanding at |
|
63,983 |
|
|
|
58,241 |
|
Retained earnings |
|
984,836 |
|
|
|
936,678 |
|
Accumulated other comprehensive loss |
|
(95,218 |
) |
|
|
(89,621 |
) |
Total shareholders’ equity |
|
953,601 |
|
|
|
905,298 |
|
Total liabilities and shareholders’ equity |
$ |
1,780,805 |
|
|
$ |
2,068,169 |
|
*Derived from audited financial statements. |
|
|||||||||||||||
Condensed Consolidated Income Statements (Unaudited) |
|||||||||||||||
(in thousands, except per share data) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Quarter ended |
|
Six months ended |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
$ |
884,792 |
|
|
$ |
1,011,241 |
|
|
$ |
1,761,098 |
|
|
$ |
1,955,054 |
|
Cost of goods sold |
|
784,044 |
|
|
|
895,907 |
|
|
|
1,553,842 |
|
|
|
1,726,236 |
|
Gross profit |
|
100,748 |
|
|
|
115,334 |
|
|
|
207,256 |
|
|
|
228,818 |
|
Selling, general and administrative expenses |
|
66,921 |
|
|
|
69,074 |
|
|
|
142,356 |
|
|
|
140,667 |
|
Depreciation expense |
|
2,964 |
|
|
|
2,678 |
|
|
|
5,759 |
|
|
|
5,441 |
|
Intangible amortization expense |
|
4,037 |
|
|
|
4,150 |
|
|
|
8,230 |
|
|
|
8,391 |
|
Operating income |
|
26,826 |
|
|
|
39,432 |
|
|
|
50,911 |
|
|
|
74,319 |
|
Interest expense |
|
3,359 |
|
|
|
5,060 |
|
|
|
8,945 |
|
|
|
8,507 |
|
Interest income |
|
(2,119 |
) |
|
|
(2,027 |
) |
|
|
(3,444 |
) |
|
|
(3,618 |
) |
Gain on sale of business |
|
(14,533 |
) |
|
|
— |
|
|
|
(14,533 |
) |
|
|
— |
|
Other expense, net |
|
73 |
|
|
|
207 |
|
|
|
750 |
|
|
|
955 |
|
Income before income taxes |
|
40,046 |
|
|
|
36,192 |
|
|
|
59,193 |
|
|
|
68,475 |
|
Provision for income taxes |
|
7,320 |
|
|
|
10,458 |
|
|
|
11,035 |
|
|
|
18,699 |
|
Net income |
$ |
32,726 |
|
|
$ |
25,734 |
|
|
$ |
48,158 |
|
|
$ |
49,776 |
|
|
|
|
|
|
|
|
|
||||||||
Per share data: |
|
|
|
|
|
|
|
||||||||
Net income per common share, basic |
$ |
1.31 |
|
|
$ |
1.02 |
|
|
$ |
1.93 |
|
|
$ |
1.97 |
|
Weighted-average shares outstanding, basic |
|
25,035 |
|
|
|
25,287 |
|
|
|
24,961 |
|
|
|
25,244 |
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share, diluted |
$ |
1.29 |
|
|
$ |
1.01 |
|
|
$ |
1.91 |
|
|
$ |
1.96 |
|
Weighted-average shares outstanding, diluted |
|
25,334 |
|
|
|
25,502 |
|
|
|
25,235 |
|
|
|
25,454 |
|
|
|||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||
(in thousands) |
|||||||
|
Six months ended |
||||||
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
48,158 |
|
|
$ |
49,776 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
||||
Gain on sale of business |
|
(14,533 |
) |
|
|
— |
|
Depreciation and amortization |
|
14,475 |
|
|
|
14,285 |
|
Amortization of debt issue costs |
|
193 |
|
|
|
385 |
|
Provision for doubtful accounts |
|
4,472 |
|
|
|
33 |
|
Share-based compensation |
|
5,340 |
|
|
|
5,679 |
|
Deferred income taxes |
|
(1,703 |
) |
|
|
932 |
|
Finance lease interest |
|
46 |
|
|
|
24 |
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
||||
Accounts receivable |
|
75,579 |
|
|
|
(49,541 |
) |
Inventories |
|
182,168 |
|
|
|
(146,826 |
) |
Prepaid expenses and other assets |
|
(11,576 |
) |
|
|
30,487 |
|
Other non-current assets |
|
3,208 |
|
|
|
(7,168 |
) |
Accounts payable |
|
(135,138 |
) |
|
|
33,820 |
|
Accrued expenses and other liabilities |
|
(7,678 |
) |
|
|
(13,268 |
) |
Income taxes payable |
|
(6,254 |
) |
|
|
6,036 |
|
Net cash provided by (used in) operating activities |
|
156,757 |
|
|
|
(75,346 |
) |
Cash flows from investing activities: |
|
|
|
||||
Capital expenditures |
|
(4,865 |
) |
|
|
(4,262 |
) |
Proceeds from sale of business, net of cash transferred |
|
17,978 |
|
|
|
— |
|
Net cash provided by (used in) investing activities |
|
13,113 |
|
|
|
(4,262 |
) |
Cash flows from financing activities: |
|
|
|
||||
Borrowings on revolving credit, net of expenses |
|
1,134,629 |
|
|
|
1,232,058 |
|
Repayments on revolving credit, net of expenses |
|
(1,292,729 |
) |
|
|
(1,137,897 |
) |
Repayments on long-term debt, net |
|
(3,165 |
) |
|
|
(1,407 |
) |
Borrowings (repayments) on finance lease obligation |
|
(442 |
) |
|
|
17,465 |
|
Debt issuance costs |
|
— |
|
|
|
(492 |
) |
Exercise of stock options |
|
4,309 |
|
|
|
634 |
|
Taxes paid on settlement of equity awards |
|
(2,657 |
) |
|
|
(2,332 |
) |
Common stock repurchased |
|
(1,251 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
(161,306 |
) |
|
|
108,029 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
245 |
|
|
|
37 |
|
Increase in cash and cash equivalents |
|
8,809 |
|
|
|
28,458 |
|
Cash and cash equivalents at beginning of period |
|
36,178 |
|
|
|
37,987 |
|
Cash and cash equivalents at period end |
|
44,987 |
|
|
$ |
66,445 |
|
|
|||||||
Supplementary Information (Unaudited) |
|||||||
(in thousands, except percentages) |
|||||||
|
|
|
|
||||
Non-GAAP Financial Information: |
|||||||
|
Quarter ended |
||||||
|
|
2023 |
|
|
|
2022 |
|
Adjusted return on invested capital ratio (Adjusted ROIC), annualized(a) |
|
13.2 |
% |
|
|
15.6 |
% |
|
|
|
|
||||
Reconciliation of Net Income to Adjusted EBITDA: |
|
|
|
||||
Net income (GAAP) |
$ |
32,726 |
|
|
$ |
25,734 |
|
Plus: Interest expense |
|
3,359 |
|
|
|
5,060 |
|
Plus: Income taxes |
|
7,320 |
|
|
|
10,458 |
|
Plus: Depreciation and amortization |
|
7,258 |
|
|
|
7,057 |
|
EBITDA (non-GAAP) |
|
50,663 |
|
|
|
48,309 |
|
Plus: Tax recovery |
|
(1,386 |
) |
|
|
(2,858 |
) |
Plus: Share-based compensation |
|
2,571 |
|
|
|
3,364 |
|
Plus: Acquisition and divestiture costs |
|
703 |
|
|
|
— |
|
Plus: Cyberattack restoration costs |
|
441 |
|
|
|
— |
|
Plus: Gain on sale of business |
|
(14,533 |
) |
|
|
— |
|
Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP) |
$ |
38,459 |
|
|
$ |
48,815 |
|
|
|
|
|
||||
Invested Capital Calculations: |
|
|
|
||||
Equity – beginning of the quarter |
$ |
915,253 |
|
|
$ |
827,004 |
|
Equity – end of the quarter |
|
953,601 |
|
|
|
862,386 |
|
Plus: Share-based compensation, net |
|
1,919 |
|
|
|
2,496 |
|
Plus: Cyberattack restoration costs, net |
|
329 |
|
|
|
— |
|
Plus: Divestiture costs |
|
703 |
|
|
|
— |
|
Plus: Tax recovery, net |
|
(640 |
) |
|
|
(1,886 |
) |
Plus: Gain on sale of business |
|
(14,533 |
) |
|
|
— |
|
Average equity |
|
928,316 |
|
|
|
845,000 |
|
Average funded debt (b) |
|
227,688 |
|
|
|
392,853 |
|
Invested capital (denominator for Adjusted ROIC) (non-GAAP) |
$ |
1,156,004 |
|
|
$ |
1,237,853 |
|
|
|
|
|
||||
(a) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for |
|||||||
(b) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. |
|
Quarter ended |
|
Six months ended |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP operating cash flow |
$ |
63,224 |
|
|
$ |
(26,885 |
) |
|
$ |
156,757 |
|
|
$ |
(75,346 |
) |
Less: Capital Expenditures |
|
(2,549 |
) |
|
|
(2,504 |
) |
|
|
(4,865 |
) |
|
|
(4,262 |
) |
Free cash flow (non-GAAP) |
$ |
60,675 |
|
|
$ |
(29,389 |
) |
|
$ |
151,892 |
|
|
$ |
(79,608 |
) |
|
|
|
|
|
|
|
|
|
||||||||||
Supplementary Information (Unaudited) |
||||||||||
|
|
|
|
|||||||
|
|
|
|
|||||||
|
Quarter ended |
|
|
|||||||
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
|
Specialty Technology Solutions: |
(in thousands) |
|
|
|||||||
Net sales, reported |
$ |
520,651 |
|
|
|
627,548 |
|
|
(17.0 |
)% |
Foreign exchange impact (a) |
|
(886 |
) |
|
|
— |
|
|
|
|
Non-GAAP net sales |
$ |
519,765 |
|
|
$ |
627,548 |
|
|
(17.2 |
)% |
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
Net sales, reported |
$ |
364,141 |
|
|
$ |
383,693 |
|
|
(5.1 |
)% |
Foreign exchange impact (a) |
|
(4,323 |
) |
|
|
— |
|
|
|
|
Less: Divestitures |
$ |
(1,628 |
) |
|
$ |
(2,170 |
) |
|
|
|
Non-GAAP net sales |
$ |
358,190 |
|
|
$ |
381,523 |
|
|
(6.1 |
)% |
|
|
|
|
|
|
|||||
Consolidated: |
|
|
|
|
|
|||||
Net sales, reported |
$ |
884,792 |
|
|
$ |
1,011,241 |
|
|
(12.5 |
)% |
Foreign exchange impact (a) |
|
(5,209 |
) |
|
|
— |
|
|
|
|
Less: Divestitures |
$ |
(1,628 |
) |
|
$ |
(2,170 |
) |
|
|
|
Non-GAAP net sales |
$ |
877,955 |
|
|
$ |
1,009,071 |
|
|
(13.0 |
)% |
|
|
|
|
|
|
|||||
(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 |
|
||||||||||
Supplementary Information (Unaudited) |
||||||||||
|
|
|
|
|
|
|||||
|
|
|
|
|||||||
|
Quarter ended |
|
|
|||||||
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
|
|
(in thousands) |
|
|
|||||||
Net sales, as reported |
$ |
795,382 |
|
|
$ |
909,221 |
|
|
(12.5 |
)% |
|
|
|
|
|
|
|||||
International: |
|
|
|
|
|
|||||
Net sales, reported |
$ |
89,410 |
|
|
$ |
102,020 |
|
|
(12.4 |
)% |
Foreign exchange impact(a) |
|
(5,209 |
) |
|
|
— |
|
|
|
|
Less: Divestitures |
|
(1,628 |
) |
|
|
(2,170 |
) |
|
|
|
Non-GAAP net sales |
$ |
82,573 |
|
|
$ |
99,850 |
|
|
(17.3 |
)% |
|
|
|
|
|
|
|||||
Consolidated: |
|
|
|
|
|
|||||
Net sales, reported |
$ |
884,792 |
|
|
$ |
1,011,241 |
|
|
(12.5 |
)% |
Foreign exchange impact(a) |
|
(5,209 |
) |
|
|
— |
|
|
|
|
Less: Divestitures |
|
(1,628 |
) |
|
|
(2,170 |
) |
|
|
|
Non-GAAP net sales |
$ |
877,955 |
|
|
$ |
1,009,071 |
|
|
(13.0 |
)% |
|
|
|
|
|
|
|||||
(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 |
|
||||||||||||||
Supplementary Information (Unaudited) |
||||||||||||||
(in thousands, except per share data) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Information: |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|||||||||||||
|
|
GAAP
|
|
Intangible
|
|
Divestiture
|
|
Tax recovery |
|
Cyberattack
|
|
Gain on sale
|
|
Non-GAAP
|
|
(in thousands, except per share data) |
|||||||||||||
SG&A expenses |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Operating income |
|
26,826 |
|
4,037 |
|
703 |
|
(1,386) |
|
441 |
|
— |
|
30,621 |
Pre-tax income |
|
40,046 |
|
4,037 |
|
703 |
|
(1,386) |
|
441 |
|
(14,533) |
|
29,308 |
Net income |
|
32,726 |
|
3,002 |
|
703 |
|
(640) |
|
329 |
|
(14,533) |
|
21,587 |
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|||||||||||||
|
|
GAAP
|
|
Intangible
|
|
Divestiture
|
|
Tax recovery |
|
Cyberattack
|
|
Gain on sale
|
|
Non-GAAP
|
|
(in thousands, except per share data) |
|||||||||||||
SG&A expense |
|
|
|
— |
|
— |
|
|
|
— |
|
— |
|
|
Operating income |
|
39,432 |
|
4,150 |
|
— |
|
(2,858) |
|
— |
|
— |
|
40,724 |
Pre-tax income |
|
36,192 |
|
4,150 |
|
— |
|
(2,858) |
|
— |
|
— |
|
37,484 |
Net income |
|
25,734 |
|
3,093 |
|
— |
|
(1,886) |
|
— |
|
— |
|
26,941 |
Diluted EPS |
|
|
|
|
|
— |
|
|
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Reflects gain on the sale of the |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Financial Outlook for Fiscal Year 2024:
|
FY 24 Outlook |
GAAP operating income |
At least |
Intangible amortization |
|
Depreciation expense |
|
Share-based compensation expense |
|
Interest income and income (expense), net |
|
Adjusted EBITDA (non-GAAP) |
At least |
|
|
GAAP operating cash flow |
At least |
Less: Capital expenditures |
|
Free cash flow (non-GAAP) |
At least |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240206017497/en/
Senior EVP, Chief Financial Officer
(864) 286-4302
SVP, Treasurer and Investor Relations
(864) 286-4892
Source: