Core Viewpoint - ScanSource, Inc. has appointed Mark Morgan as President of Specialty Technologies to enhance its strategic focus on delivering customized, converging solutions to channel partners [1] Group 1: Leadership Changes - Mark Morgan has been with ScanSource since 2003, holding various leadership roles, including Vice President of Sales and President of Global Strategy [1] - Morgan's leadership will be crucial in advancing the growth of the Converged Sales Team and the Specialty business [1] Group 2: Company Evolution - Under Morgan's guidance, ScanSource has transitioned from a traditional hardware distributor to a leader in hardware, software, cloud, and connectivity solutions [1] - Morgan has played a key role in strategic acquisitions that expanded ScanSource's capabilities, including Intelisys and RPM [1] Group 3: Company Recognition - ScanSource has been named one of the Fortune World's Most Admired Companies for 10 consecutive years, reflecting its strong reputation in the industry [1]

Summary of ScanSource Conference Call Company Overview - **Company**: ScanSource - **Industry**: Technology Distribution - **Annual Revenue**: Approximately $3 billion [3] - **Employee Count**: About 2,100 [3] - **Geographic Focus**: 92% of revenue generated in North America, with some presence in Brazil [4] Core Business Model - **Two-Tier Distribution Model**: Works directly with technology manufacturers to sell to resellers, who then support end users [3] - **Specialization**: Focuses on complex core business technologies across various verticals, including mobility, barcode technology, physical security, point-of-sale systems, and networking [4][5][6] Financial Performance - **Gross Profit Margin**: Increased from 10% to over 13.5% due to the introduction of recurring revenue streams [8] - **Recurring Revenue**: Currently, about one-third of gross profits come from recurring revenue, with a target to increase this to 50% [9][10] - **EBITDA Margins**: Expected to grow from just under 5% to closer to 6% over the next three years [21] Strategic Goals - **Growth Projections**: Anticipates a growth rate of 5%-7% over the next three years, slightly above GDP growth [20] - **Free Cash Flow**: Aims for at least 80% conversion of net income to free cash flow [21] - **Capital Allocation**: Focus on disciplined capital allocation, including potential acquisitions and share repurchases [19][30] Market Dynamics - **Technology Tailwinds**: Benefiting from trends in cloud adoption, AI, and security technologies [15] - **Supply Chain Management**: Adjusted strategies during COVID-19 to focus on fulfilling orders rather than holding inventory [27] - **Vendor Relationships**: Currently not experiencing margin clawbacks from suppliers, maintaining a favorable position due to low inventory levels [41][43] Challenges and Considerations - **Demand Uncertainty**: Some concerns about demand fluctuations due to economic conditions, but no significant impacts observed yet [39] - **AI Integration**: Exploring opportunities to deploy AI for cost savings and revenue generation, while assessing commercially viable AI vendors [63][65] Key Takeaways - **Business Transformation**: ScanSource has evolved from a traditional hardware distributor to a specialized technology distributor with a focus on recurring revenue and improved financial metrics [66] - **Investor Communication**: Emphasizes the importance of transparency and disciplined capital allocation to enhance shareholder value [26][19]

Core Insights - ScanSource reported net sales growth of 3% year-over-year and gross profit growth of 1% year-over-year across both operating segments, but profitability was negatively impacted by unexpected expenses [6][2][3] Financial Performance - In the Specialty Technology Solutions segment, net sales increased 3% year-over-year and 4% sequentially, while gross profits rose 1% year-over-year, with gross profit margins reduced by about 30 basis points due to higher period expenses [1][6] - The company generated strong free cash flow and organic net sales growth in both segments, but profitability declined compared to a strong first quarter due to unexpected expenses [2][3] - For the fiscal year 2026, the updated guidance includes revenue projections of $3.0 billion to $3.1 billion, adjusted EBITDA of $140 million to $150 million, and free cash flow of at least $80 million [6][18] Segment Performance - In the Intelisys and Advisory segment, net sales also increased 3% year-over-year, with annual net billings rising to approximately $2.85 billion and a segment adjusted EBITDA margin of 41% [8][9] - The Specialty Technology Solutions segment's adjusted EBITDA margin was reported at 2.8%, with higher period expenses estimated to have reduced this margin by roughly 60 basis points [7][6] Strategic Initiatives - A new converged communication sales team was launched to unify hardware and cloud offerings, aimed at enhancing sales capabilities and reducing handoffs between teams [11][12] - The company is focusing on increasing gross profit from recurring streams and expanding profitability while evaluating acquisition opportunities to enhance its technology stack [15][14] Balance Sheet and Capital Allocation - ScanSource ended the quarter with approximately $83 million in cash and a net debt leverage ratio of roughly zero, alongside $18 million in share repurchases during the quarter [4][14] - The company has a remaining authorization of $179 million for share repurchases and has closed on a new five-year credit facility to support strategic objectives [14][15]

Financial Data and Key Metrics Changes - In Q2, net sales grew 3% year-over-year in both segments, while gross profits increased by 1% year-over-year [7] - Profitability was negatively impacted by unexpected expenses, leading to declines in both gross profit and EBITDA margins compared to Q1 [4] - The company ended Q2 with approximately $83 million in cash and a net debt leverage ratio of approximately 0 on a trailing 12-month Adjusted EBITDA basis [8] - Adjusted ROIC was 11.9% for the quarter and 13.3% for the first half of FY 2026 [9] Business Line Data and Key Metrics Changes - Specialty Technology Solutions segment saw net sales increase by 3% year-over-year and 4% quarter-over-quarter, with gross profits also increasing by 1% year-over-year [7] - The Intelisys and Advisory segment reported a 3% year-over-year increase in net sales, with annual net billings rising to approximately $2.85 billion [8] Market Data and Key Metrics Changes - The percentage of gross profits from recurring revenues in the Specialty Technology Solutions segment grew to approximately 18%, aided by acquisitions [8] - Brazil's organic sales were down 9% year-over-year, attributed to challenging market conditions [28][30] Company Strategy and Development Direction - The company is launching a new converged communication sales team to unify communications products and services, aiming to capitalize on the convergence of hardware, cloud, and customer experience technologies [4][5] - The strategy focuses on helping channel partners deliver innovative, converged solutions, driving organic net sales and free cash flow [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth in the second half of the fiscal year, despite a reduction in guidance due to slower-than-expected large deal closures [10][51] - The company is confident in its business model and expects to maintain at least $80 million in free cash flow for the year [11][58] Other Important Information - The company is exploring acquisition opportunities to expand its technology stack and capabilities [9] - Share repurchases for the quarter totaled $18 million, with $179 million remaining under the share repurchase authorization [9] Q&A Session Summary Question: Could you provide more details on the period costs mentioned? - Management indicated that higher costs were related to mix and freight expenses, which are expected to be more period-related [14] Question: What caused the slower growth in the technology segment? - Management noted that large deals were being broken into smaller pieces, affecting invoicing and revenue recognition [15] Question: Are there concerns about pricing increases due to supply shortages? - Management acknowledged potential challenges from memory supply issues but indicated that current guidance does not reflect significant impacts from shortages [24] Question: What is the outlook for Intelisys sales in the second half of 2026? - Management believes that new order growth will accelerate, driven by additional sales capabilities and a focus on acquiring new customers [25][26] Question: How does the company view the competitive environment in the TSD market? - Management noted that the TSD space remains competitive, with a shift towards organic growth among competitors [44][45] Question: What are the priorities around capital allocation following the guidance reduction? - Management emphasized maintaining focus on three-year strategic goals, including share repurchases and growth in gross profit contributions [60][62]

Financial Data and Key Metrics Changes - In Q2, net sales grew 3% year-over-year in both segments, while gross profits increased by 1% year-over-year [7] - Profitability was negatively impacted by unexpected expenses, leading to declines in both gross profit and EBITDA margins compared to Q1 [4] - Adjusted ROIC was 11.9% for the quarter and 13.3% for the first half of FY 2026 [9] - Full year revenue is now projected to be in the range of $3 billion to $3.1 billion, with Adjusted EBITDA expected between $140 million and $150 million [10] Business Line Data and Key Metrics Changes - Specialty Technology Solutions segment saw net sales increase by 3% year-over-year and 4% quarter-over-quarter, with gross profits up by 1% year-over-year [7] - The Intelisys and Advisory segment also reported a 3% year-over-year increase in net sales, with annual net billings reaching approximately $2.85 billion [8] Market Data and Key Metrics Changes - The percentage of gross profits from recurring revenues in the Specialty Technology Solutions segment grew to approximately 18% [8] - Brazil's market experienced a 9% organic decline this quarter, attributed to challenging market conditions [28][30] Company Strategy and Development Direction - The company is launching a new converged communication sales team to unify communications products and services, aiming to capitalize on the convergence of hardware, cloud, and customer experience technologies [4][5] - The strategy focuses on helping channel partners deliver innovative, converged solutions, driving organic net sales and free cash flow [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth in the second half of the fiscal year, despite the challenges faced in the first half [10] - The company is confident in its business model and expects large deals to resume, which is crucial for future revenue growth [15][16] Other Important Information - The company closed on a new 5-year credit facility to support strategic objectives and capital priorities [7] - Share repurchases for the quarter totaled $18 million, with $179 million remaining under the share repurchase authorization [9] Q&A Session Summary Question: Clarification on period costs and their impact on future quarters - Management indicated that higher period expenses were primarily related to mix and freight costs, and they expect these to be localized to the current quarter [14] Question: Slower growth in the technology segment - Management noted that large deals have been broken into smaller pieces, affecting invoicing and revenue recognition [15] Question: Impact of memory supply issues on pricing - Management acknowledged potential challenges due to memory supply issues but stated that current guidance does not reflect significant impacts from shortages [24] Question: Future sales acceleration in Intelisys - Management believes that new order growth will accelerate, driven by additional sales capabilities and a focus on acquiring new customers [25][26] Question: Competitive environment in the TSD market - Management noted that the TSD space remains competitive, with a shift towards organic growth among competitors [44][45] Question: Magnitude of guidance reduction - Management clarified that the guidance reduction is primarily due to the absence of large deals rather than product shortages [43] Question: Dynamics of new orders lagging behind billings - Management explained that new orders are expected to convert into billings over time, indicating a positive future revenue outlook [66]

Financial Data and Key Metrics Changes - In Q2, net sales grew 3% year-over-year in both segments, while gross profits increased by 1% year-over-year [7] - Profitability was negatively impacted by unexpected expenses, leading to declines in gross profit and EBITDA margins compared to Q1 [4] - Adjusted ROIC was 11.9% for the quarter and 13.3% for the first half of FY 2026 [10] - Full year revenue is now projected to be in the range of $3 billion to $3.1 billion, with Adjusted EBITDA expected between $140 million and $150 million [11] Business Line Data and Key Metrics Changes - Specialty Technology Solutions segment saw net sales increase by 3% year-over-year and 4% quarter-over-quarter, with gross profits also up by 1% year-over-year [8] - The Intelisys and Advisory segment reported a 3% year-over-year increase in net sales, with annual net billings rising to approximately $2.85 billion [9] Market Data and Key Metrics Changes - The percentage of gross profits from recurring revenues in the Specialty Technology Solutions segment grew to approximately 18% [9] - Brazil's organic sales were down 9% year-over-year, attributed to challenging market conditions [28] Company Strategy and Development Direction - The company is launching a new converged communication sales team to unify communications products and services, aiming to capitalize on the convergence of hardware, cloud, and customer experience technologies [4][5] - The strategy focuses on helping channel partners deliver innovative solutions, driving organic net sales and free cash flow [6] - The company continues to explore acquisition opportunities to expand its technology stack and capabilities [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth in the second half of the fiscal year, despite the challenges faced in the first half [11] - The company believes that large deals will resume, which is crucial for future revenue growth [16][17] - Management acknowledged the competitive environment in the TSD market and emphasized the importance of organic growth [44][45] Other Important Information - The company closed on a new 5-year credit facility to support strategic objectives and capital priorities [7] - Share repurchases for the quarter totaled $18 million, with $179 million remaining under the share repurchase authorization [10] Q&A Session Summary Question: Clarification on period costs and their impact on future quarters - Management indicated that higher period costs were primarily related to mix and freight expenses, and they expect these to be localized to the current quarter [14] Question: Slower growth in the technology segment - Management noted that large deals have been broken into smaller pieces, affecting invoicing and revenue recognition [16] Question: Impact of memory supply issues on pricing - Management acknowledged that memory supply issues could affect suppliers, but they do not anticipate significant impacts on guidance at this time [24] Question: Update on Intelisys business restructuring - Management clarified that they have added sales capabilities rather than restructuring, focusing on acquiring new customers and orders [25][26] Question: Competitive environment in the TSD market - Management noted that the TSD space remains competitive, with a shift towards organic growth among competitors [44][45] Question: Magnitude of guidance reduction - Management explained that the guidance reduction is primarily related to large deals, not product shortages [43] Question: Dynamics of new orders lagging behind billings - Management highlighted that new orders are growing faster than revenues, indicating future revenue potential, but there is a lag in billing [64][66]

分组1 - ScanSource reported quarterly earnings of $0.8 per share, missing the Zacks Consensus Estimate of $1 per share, and down from $0.85 per share a year ago, representing an earnings surprise of -20.00% [1] - The company posted revenues of $766.51 million for the quarter, missing the Zacks Consensus Estimate by 3.66%, compared to $747.5 million in the same quarter last year [2] - Over the last four quarters, ScanSource has surpassed consensus EPS estimates three times, but has only topped revenue estimates once [2] 分组2 - The stock has gained approximately 13.5% since the beginning of the year, outperforming the S&P 500, which gained 0.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.91 on revenues of $766.3 million, and for the current fiscal year, it is $4.13 on revenues of $3.16 billion [7] - The Zacks Industry Rank indicates that the Technology Services sector is currently in the bottom 39% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]

Financial Performance - Net sales for the quarter ended December 31, 2025, were $766.5 million, an increase from $747.5 million in the same quarter of 2024, representing a growth of 1.4%[18] - Gross profit for the quarter was $102.9 million, slightly up from $101.7 million year-over-year, indicating a gross margin of approximately 13.4%[18] - Net income for the quarter was $16.5 million, compared to $17.1 million in the prior year, reflecting a decrease of 3.3%[18] - Total revenue for the quarter ended December 31, 2025, was $766,512 thousand, an increase from $747,497 thousand in the same quarter of 2024, representing a year-over-year growth of approximately 2.0%[48][49] - Recurring revenue for the quarter ended December 31, 2025, was $42,023 thousand, compared to $36,262 thousand for the same quarter in 2024, indicating a growth of about 15.0%[48][49] - Net income for the quarter ended December 31, 2025, was $16,493 thousand, compared to $17,053 thousand for the same quarter in 2024, reflecting a decrease of approximately 3.3%[52] - Basic earnings per share for the quarter ended December 31, 2025, was $0.75, compared to $0.72 for the same quarter in 2024, showing an increase of about 4.2%[52] Assets and Liabilities - The company reported total current assets of $1.3 billion as of December 31, 2025, down from $1.37 billion at June 30, 2025[15] - Total liabilities decreased to $830.8 million from $879.2 million, showing a reduction of approximately 5.5%[15] - The Company recorded total debt of $102,663 thousand as of December 31, 2025, down from $136,149 thousand as of June 30, 2025, representing a reduction of approximately 24.5%[58] - The Company reported accumulated other comprehensive loss of $(116,414) thousand as of December 31, 2025, compared to $(114,424) thousand at June 30, 2025[53] - As of December 31, 2025, total assets were $1,741,671, a decrease from $1,785,606 as of June 30, 2025[98] Cash Flow and Investments - Cash provided by operating activities increased to $54,052,000 for the six months ended December 31, 2025, up from $38,642,000 in 2024, marking a 39.8% increase[27] - The company reported a decrease in cash and cash equivalents, ending the period at $83,466,000, down from $126,157,000 at the beginning of the period, a decline of 33.8%[27] - Total capital expenditures for the six months ended December 31, 2025, were $4,370,000, slightly higher than $4,348,000 in the same period of 2024[27] - The company repurchased common stock totaling $38,687,000 during the six months ended December 31, 2025, compared to $52,342,000 in the same period of 2024, a reduction of 26.2%[27] - The company’s depreciation and amortization expenses for the six months ended December 31, 2025, were $12,138,000, down from $15,603,000 in 2024, a decrease of 22.5%[27] Foreign Currency and Derivatives - The company experienced a foreign currency translation adjustment loss of $5.6 million for the quarter, compared to a loss of $18.7 million in the same quarter of 2024[20] - The company recorded net foreign currency exchange losses of $658,000 for the quarter ended December 31, 2025, compared to gains of $252,000 for the same quarter in 2024[70] - The notional amounts of outstanding foreign currency derivatives were $32.2 million as of December 31, 2025, up from $26.2 million as of June 30, 2025[70] Segment Performance - The Specialty Technology Solutions segment generated net sales of $741.5 million for the quarter ended December 31, 2025, up from $723.3 million in the same quarter of 2024, marking an increase of approximately 2.9%[95] - The Intelisys & Advisory segment reported net sales of $25.0 million for the quarter ended December 31, 2025, compared to $24.2 million in the same quarter of 2024, reflecting a growth of about 3.2%[95] Acquisitions and Goodwill - ScanSource acquired Resourcive for approximately $56.7 million on August 8, 2024, and Advantix for $18.4 million on October 20, 2025, with contingent consideration valued at $13.4 million[14][15][16] - Goodwill increased to $244,178 thousand as of December 31, 2025, from $230,820 thousand at June 30, 2025, due to recent acquisitions[56] Tax and Lease Obligations - The effective tax rate for the quarter ended December 31, 2025, was 15.1%, down from 21.6% for the six months ended December 31, 2024[108] - The weighted-average remaining lease term at December 31, 2025, was 2.87 years, with a weighted-average discount rate of 6.39%[103] - Operating lease costs for the six months ended December 31, 2025, were $3,255, an increase from $2,889 in 2024[103] Future Commitments - The company plans to continue earnout payments to sellers based on performance results through fiscal year 2028 for Advantix and through fiscal years 2026 to 2028 for DataXoom[83][84]

Financial Performance - Net sales for Q2 FY26 totaled $766.5 million, a 2.5% increase year-over-year, with product and service sales up 1.9%[4] - Gross profit increased by 1.2% year-over-year to $102.9 million, with a gross profit margin of 13.4%, down from 13.6% in the prior year[5] - Operating income for Q2 FY26 was $17.9 million, a decrease of 3.1% compared to $18.4 million in Q2 FY25[6] - GAAP net income for Q2 FY26 was $16.5 million, or $0.75 per diluted share, compared to $17.1 million, or $0.70 per diluted share, in the prior year[7] - Non-GAAP net income decreased to $17.6 million, or $0.80 per diluted share, from $20.7 million, or $0.85 per diluted share, year-over-year[8] - Total net sales for the quarter ended December 31, 2025, were $766,512 thousand, representing a 2.5% increase from $747,497 thousand in the same quarter of 2024[29] - Gross profit for the same quarter was $102,910 thousand, slightly up from $101,723 thousand year-over-year[29] - Net income for the six months ended December 31, 2025, was $36,372 thousand, compared to $34,028 thousand for the same period in 2024, reflecting a growth of 6.9%[32] - Net income for Q4 2025 was $16,493,000, compared to $17,053,000 in Q4 2024, reflecting a decrease of 3.3%[43] Revenue and Guidance - Recurring revenue increased by 15.9% year-over-year, including contributions from acquisitions[4] - For FY26, ScanSource updated its net sales guidance to $3.0 billion to $3.1 billion, down from the previous range of $3.1 billion to $3.3 billion[11] - Adjusted EBITDA for FY26 is now expected to be between $140 million and $150 million, reduced from the prior guidance of $150 million to $160 million[11] - Non-GAAP net sales for the quarter, excluding foreign exchange impact and acquisitions, were $760,066 thousand, a 1.7% increase from $747,497 thousand in the prior year[37] - Non-GAAP net sales in the United States for Q4 2025 were $705,332,000, a 2.7% increase from $687,111,000 in Q4 2024[40] Cash Flow and Assets - As of December 31, 2025, ScanSource had cash and cash equivalents of $83.5 million and total debt of $102.7 million[9] - Free cash flow for FY26 is projected to be at least $80 million, consistent with previous guidance[11] - Cash and cash equivalents decreased to $83,466 thousand at the end of December 2025 from $126,157 thousand at the end of June 2025[31] - Total assets as of December 31, 2025, were $1,741,671 thousand, down from $1,785,606 thousand as of June 30, 2025[27] - Total liabilities decreased to $830,785 thousand from $879,197 thousand over the same period[27] - GAAP operating cash flow for the six months ended December 31, 2025, was $54,052,000, compared to $38,642,000 in the same period of 2024[41] Expenses - Adjusted EBITDA for the quarter ended December 31, 2025, was $31,193 thousand, down from $35,299 thousand in the prior year[34] - SG&A expenses for Q4 2025 were $78,114,000, an increase from $73,920,000 in Q4 2024[43] Earnings Per Share - The company reported a basic net income per share of $0.75 for the quarter, compared to $0.72 in the same quarter of 2024[29] - Diluted EPS for Q4 2025 was $0.75, down from $0.70 in Q4 2024, indicating a 7.1% increase[43] Regional Performance - Net sales in Brazil for Q4 2025 were $59,146,000, a decrease of 2.1% from $60,386,000 in Q4 2024[40] - Non-GAAP net sales in Brazil, after accounting for foreign exchange impact, decreased by 9.4% to $54,734,000 in Q4 2025[40]

Core Viewpoint - ScanSource, Inc. plans to release its second quarter fiscal year 2026 results on February 5, 2026, at approximately 8:30 a.m. ET, followed by an earnings conference call at 10:30 a.m. ET on the same day [1] Company Information - ScanSource, Inc. is a leading technology distributor that focuses on addressing complex, converging technologies [1]