Financial Data and Key Metrics Changes - For Q1 2026, the company reported a 6% increase in gross profits and a 26% year-over-year growth in non-GAAP EPS [9] - Adjusted EBITDA margins were at 5.2%, with cash conversion of non-GAAP net income at 88% [9] - The company ended Q1 with approximately $125 million in cash and a net debt leverage ratio close to zero [10] Business Line Data and Key Metrics Changes - In the specialty technology solutions segment, net sales declined by 5% year-over-year and 9% quarter-over-quarter, influenced by approximately $40 million of large deal pull-ins in Q4 [9] - The Intellisys and advisory segment saw a 4% increase in net sales year-over-year, with annualized net billings reaching approximately $2.78 billion [10] Market Data and Key Metrics Changes - The percentage of gross profits from recurring revenues in the specialty technology solutions segment was approximately 13% [10] - The company maintained its market share despite the decline in net sales, indicating stability in its competitive position [10] Company Strategy and Development Direction - The company is focusing on helping channel partners transition from traditional VAR to solution providers and technology architects, emphasizing the importance of integrated converged solutions [4][5] - Recent acquisitions, including DataZoom, are expected to enhance the company's capabilities in mobile data connectivity and support its strategic goals [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future growth of technology distribution, driven by the convergence of hardware, software, and services [4] - The company reaffirmed its full-year outlook, expecting net sales growth between $3.1 billion and $3.3 billion, with adjusted EBITDA ranging from $150 million to $160 million [12] Other Important Information - The company is actively pursuing acquisitions to expand its capabilities and drive additional value across its partner ecosystem [11] - The management highlighted the importance of gross profit growth as a key performance indicator moving forward [16] Q&A Session Summary Question: Concerns about top-line revenue decline - Management clarified that they prioritize profitable growth and do not believe they are losing market share, attributing revenue challenges to timing and deal structuring rather than demand weakness [14][17] Question: Sustainability of supplier rebates - Management indicated that supplier programs have evolved and are tied more to activities rather than inventory, suggesting sustainability in the rebates received [18] Question: Insights on DataZoom acquisition - The acquisition is expected to be margin accretive and enhance the company's ability to sell more mobile devices by integrating connectivity solutions [20][21] Question: Guidance on net sales growth - Management reaffirmed confidence in their guidance, citing that Q1 results were in line with expectations and that large deals are merely delayed rather than canceled [36][40] Question: Business development investments in Intellisys - Management reported double-digit new order growth year-over-year, indicating that investments are translating into pipeline activity [49]

Financial Data and Key Metrics Changes - For Q1 2026, the company reported a 6% increase in gross profits and a 26% year-over-year growth in non-GAAP EPS [10] - Adjusted EBITDA margins were at 5.2%, with a cash conversion of non-GAAP net income at 88% [10] - The company ended Q1 with approximately $125 million in cash and a net debt leverage ratio of approximately zero [13] Business Line Data and Key Metrics Changes - In the Specialty Technology Solutions segment, net sales declined by 5% year-over-year and 9% quarter-over-quarter, with gross profits increasing by 7% year-over-year [11] - The Intellisys and Advisory segment saw a 4% increase in net sales year-over-year, with annualized net billings reaching approximately $2.78 billion [12] Market Data and Key Metrics Changes - The company believes it maintained market share despite the decline in revenue, attributing the challenges to timing issues with larger deals rather than loss of market share [21][22] - The company is focusing on the indirect channel to deliver recurring, complex, and high-value solutions as technology markets converge [5] Company Strategy and Development Direction - The company is investing in its Intelisys and Advisory segment to accelerate new order growth, including expanding its solutions engineering team [6] - The recent acquisition of DataZoom is expected to enhance the company's capabilities in mobile data connectivity and support its strategic plan [13][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in reaffirming the full-year net sales growth outlook, expecting revenue growth to accelerate in the second half of the fiscal year [14][45] - The company emphasized that the decline in revenue is not indicative of overall demand weakness but rather a timing issue with large deals [45] Other Important Information - The company is actively pursuing acquisition targets to expand capabilities and drive additional value across its partner ecosystem [13] - The company plans to maintain a target net debt leverage ratio of one to two times adjusted EBITDA while balancing acquisitions and share repurchases [14] Q&A Session Summary Question: Concerns about revenue decline and market share - Management clarified that they prioritize profitable growth and do not believe they are losing market share, attributing revenue challenges to timing and deal structuring [20][21] Question: Sustainability of supplier rebates - Management indicated that supplier programs have evolved and are tied to activities rather than inventory, suggesting sustainability in the rebates [23][24] Question: Details on the DataZoom acquisition - Management described DataZoom as a tuck-in acquisition that will be margin accretive and enhance mobile device sales through improved connectivity solutions [27][28] Question: Guidance on net sales growth - Management reaffirmed guidance based on internal plans and noted that Q1 results were in line with expectations, indicating confidence in future performance [44][45] Question: Business development investments in Intelisys - Management reported double-digit new order growth year-over-year, indicating that investments are translating into pipeline activity [57]

Financial Performance - Net sales for Q1 FY26 totaled $739.7 million, a decrease of 4.6% year-over-year[4] - Gross profit increased by 5.8% year-over-year to $107.5 million, with a gross profit margin of 14.5% compared to 13.1% in the prior-year quarter[5] - Operating income for Q1 FY26 was $25.9 million, up 46.9% from $17.6 million in the prior-year quarter[6] - GAAP net income rose to $19.9 million, or $0.89 per diluted share, reflecting a 17.1% increase from $17.0 million, or $0.69 per diluted share, in the prior-year quarter[7] - Non-GAAP net income increased to $23.7 million, or $1.06 per diluted share, up 13.7% from $20.8 million, or $0.84 per diluted share, in the prior-year quarter[7] - Adjusted EBITDA for Q1 FY26 was $38.6 million, an 8.2% increase from $35.7 million in the prior-year quarter, with an adjusted EBITDA margin of 5.22%[7] - Free cash flow for Q1 FY26 was $20.8 million, with operating cash flow of $23.2 million[8] - Net income for the quarter was $19,878,000, representing an increase of 16.5% from $16,974,000 in the prior year[28] - Adjusted EBITDA for the quarter was $38,590,000, compared to $35,666,000 in the same quarter of 2024, indicating a year-over-year growth of 5.4%[32] - Free cash flow for Q3 2025 was $20,816, significantly lower than $42,455 in Q3 2024, indicating a decrease of 51.0%[40] - Operating income for Q3 2025 was reported at $25,903, compared to $27,509 in Q3 2024, showing a decline of 5.8%[42] - Net income for Q3 2025 was $19,878, down from $20,823 in Q3 2024, representing a decrease of 4.5%[42] - Diluted EPS for Q3 2025 was $0.89, compared to $0.84 in Q3 2024, indicating an increase of 6.0%[42] Revenue and Sales - The annual financial outlook for FY26 projects net sales between $3.1 billion and $3.3 billion, with adjusted EBITDA expected to be between $150 million and $160 million[11] - ScanSource reported a recurring revenue increase of 8.0% year-over-year, including contributions from acquisitions[4] - Net sales for the quarter ended September 30, 2025, were $739,650,000, a decrease of 4.6% compared to $775,580,000 in the same quarter of 2024[28] - Recurring revenue increased by 8.0% to $36,666,000 from $33,962,000 year-over-year[37] - Net sales in the United States for Q3 2025 were reported at $682,217, a decrease of 4.2% compared to $712,019 in Q3 2024[39] - Non-GAAP net sales in Brazil for Q3 2025 were $56,345, reflecting an 11.4% decline from $63,561 in Q3 2024[39] - Consolidated net sales for Q3 2025 were $739,650, down 4.6% from $775,580 in Q3 2024[39] Assets and Liabilities - Total current assets decreased to $1,307,335,000 from $1,370,452,000, a decline of 4.6%[25] - Total liabilities decreased to $802,944,000 from $879,197,000, a reduction of 8.7%[25] - Cash and cash equivalents at the end of the period were $124,924,000, down from $145,044,000 in the prior year[30] - The company reported a decrease in accounts receivable to $557,071,000 from $635,521,000, a decline of 12.3%[25] Acquisitions and Investments - ScanSource completed the acquisition of DataXoom on October 20, 2025, adding 17 employees and enhancing its connectivity offerings[9] - Capital expenditures for Q3 2025 were $2,395, slightly higher than $2,375 in Q3 2024[40] Return on Investment - The adjusted return on invested capital (Adjusted ROIC) ratio was 14.6%, up from 13.3% in the previous year[33] Foreign Exchange Impact - The company experienced a foreign exchange impact of $(1,088) on consolidated net sales for Q3 2025[39] Cash Flow - The company reported a decrease in GAAP operating cash flow from $44,830 in Q3 2024 to $23,211 in Q3 2025, a decline of 48.2%[40]

Financial Performance - Net sales for the quarter ended September 30, 2025, were $739.65 million, a decrease of 4.6% compared to $775.58 million for the same quarter in 2024[17] - Gross profit increased to $107.47 million, up 5.7% from $101.62 million year-over-year[17] - Operating income rose to $25.90 million, representing a 47.0% increase from $17.63 million in the prior year[17] - Net income for the quarter was $19.88 million, an increase of 16.5% compared to $16.97 million in the same quarter last year[19] - Basic net income per share increased to $0.90, up from $0.70 in the prior year, reflecting a 28.6% growth[17] - Comprehensive income for the quarter was $23.61 million, compared to $20.03 million in the prior year, reflecting a 17.0% increase[19] - For the quarter ended September 30, 2025, total revenue was $739.65 million, a decrease of 4.6% compared to $775.58 million for the same quarter in 2024[46] - The net income for the quarter ended September 30, 2025, was $19.88 million, representing an increase of 17.7% from $16.97 million in the same quarter of 2024[48] - Basic earnings per share increased to $0.90 for the quarter ended September 30, 2025, compared to $0.70 for the same quarter in 2024, reflecting a growth of 28.6%[48] Assets and Liabilities - Total assets decreased to $1.72 billion as of September 30, 2025, down from $1.79 billion at June 30, 2025[14] - Total liabilities decreased to $802.94 million, down from $879.20 million at the end of the previous quarter[14] - Cash and cash equivalents at the end of the period were $124.92 million, a slight decrease from $126.16 million at the beginning of the quarter[25] - Total current assets decreased to $1.31 billion as of September 30, 2025, down from $1.37 billion at June 30, 2025[14] - The company’s total shareholders' equity increased to $914.03 million as of September 30, 2025, compared to $906.41 million at June 30, 2025[14] Cash Flow and Operating Activities - The company reported a net cash provided by operating activities of $23.21 million, down from $44.83 million in the same quarter last year[25] - Net cash provided by operating activities decreased to $23,211,000 in Q1 2025 from $44,830,000 in Q1 2024, a decline of 48.2%[25] - The company had borrowings on revolving credit amounting to $49,210,000 in Q1 2025, compared to $8,381,000 in Q1 2024, an increase of 485.5%[25] Acquisitions and Strategic Growth - The Company completed acquisitions of Resourcive and Advantix in August 2024, with a combined initial purchase price of approximately $56.7 million[108] - On October 20, 2025, the company completed the acquisition of DataXoom, adding 17 employees and enhancing its Specialty Technology Solutions segment[111] - The company continues to evaluate acquisitions on an ongoing basis, indicating a strategic focus on growth through potential mergers and acquisitions[110] - The impact of the recent acquisitions was not material to the consolidated financial statements[109] Segment Performance - The Specialty Technology Solutions segment operates primarily in the United States and Brazil, focusing on hardware, SaaS, and subscription services[87] - The Intelisys & Advisory segment provides sales and services to channel partners and end users, distributing connectivity and cloud technologies[87] - Gross profit for the Specialty Technology Solutions segment was $83.90 million, representing a gross margin of approximately 11.7%[90] - Operating income for the Specialty Technology Solutions segment increased to $20.38 million, up from $16.74 million in the prior year, reflecting a growth of 21.5%[90] Debt and Interest Rates - As of September 30, 2025, the total debt of the company was $133.913 million, a decrease of 1.7% from $136.149 million on June 30, 2025[54] - The effective interest rate for the term loan was 5.26% as of September 30, 2025, down from 5.43% on June 30, 2025[57] - The average daily outstanding balance on the revolving credit facility was $1.1 million for the quarter ended September 30, 2025, compared to $0.1 million for the same period in 2024[58] Other Financial Metrics - The effective tax rate for the quarter ended September 30, 2025, was 26.4%, slightly higher than 26.1% for the same quarter in 2024[102] - The Company reported capital expenditures of $(2.40) million for the quarter ended September 30, 2025, compared to $(2.38) million in the same quarter of 2024[90] - The company recognized $0.3 million in acquisition-related costs for the quarter ended September 30, 2025, compared to $0.4 million for the same quarter in 2024[110] - The company incurred debt issuance costs of $1.4 million in connection with the amendment and restatement of the Amended Credit Agreement[55] Currency and Derivatives - The company had net foreign exchange derivative contract losses of $655,000 for the quarter ended September 30, 2025, compared to losses of $941,000 for the same period in 2024[63] - The company had contracts outstanding for managing cash flows with notional amounts of $22.6 million for foreign currency exchange at September 30, 2025[63] - The fair value of derivative assets designated as hedges was $373,000 as of September 30, 2025, down from $680,000 as of June 30, 2025[70][72] Restructuring and Cost Management - The Company executed cost reduction and restructuring programs, resulting in accrued restructuring costs of $0.15 million as of September 30, 2025[107] - The remaining balance of accrued restructuring costs as of September 30, 2025, was $151,000[14] - In January and September 2024, the company executed cost reduction and restructuring programs, resulting in accrued restructuring costs of $0.2 million expected to be paid through Q3 FY 2026[14]

Core Viewpoint - ScanSource, Inc. is set to report its first-quarter fiscal 2026 results on November 6, with revenue estimates indicating a slight growth of 1.2% year-over-year and earnings per share expected to improve by 8% from the previous year [1]. Financial Estimates - The Zacks Consensus Estimate for revenues in the upcoming quarter is $784.85 million, reflecting a 1.2% increase from the same quarter last year [1]. - The consensus estimate for quarterly earnings is 91 cents per share, suggesting an 8% improvement compared to the year-ago quarter [1]. - The estimates for earnings and revenues have remained unchanged over the past 60 days [1]. Earnings Surprise History - ScanSource has beaten the Zacks Consensus Estimates in three of the last four quarters, with an average earnings surprise of 7.10% [2][3]. - The earnings surprise percentages for the last four quarters were 12.09%, 11.69%, -4.49%, and 9.09% respectively [3]. Segment Performance - The Specialty Technology Solutions segment is expected to report sales of $752 million, indicating stable performance compared to the previous year [7]. - The Intelisys & Advisory segment's sales are estimated at $24.4 million, representing a 5% increase from $23.3 million in the same quarter last year [9]. - The company anticipates modest revenue growth in the first half of fiscal 2026, with expectations for a stronger performance in the second half [9]. Cost Management - ScanSource has implemented cost reduction and restructuring programs, projected to yield approximately $10.5 million in annualized savings in selling, general, and administrative expenses [10]. - These ongoing cost-saving measures are expected to contribute positively to earnings for the quarter [11]. Stock Performance - Year-to-date, ScanSource's shares have declined by 10.9%, contrasting with a 0.2% growth in the industry [12].

Core Insights - ScanSource, Inc. plans to announce its first quarter fiscal year 2026 results on November 6, 2025, for the period ending September 30, 2025 [1] - An earnings conference call will be held on the same day at 10:30 a.m. ET to discuss the results [1] Company Overview - ScanSource, Inc. is a leading technology distributor focused on complex, converging technologies, and aims to accelerate growth for channel partners across various sectors including hardware, software as a service (SaaS), connectivity, and cloud [3] - The company was founded in 1992 and is headquartered in Greenville, South Carolina, employing approximately 2,600 people [3][4] - ScanSource has been recognized as one of the 2025 Best Places to Work in South Carolina and is listed on FORTUNE magazine's 2025 List of World's Most Admired Companies [3]

Core Viewpoint - SCSC has garnered investor interest due to its recent recognition as a top value stock and a positive price target set by Barclays, indicating potential for growth in its stock price [1][2][4]. Group 1: Price Target and Stock Performance - Barclays has set a price target of $43 for SCSC, suggesting a potential increase of about 3.61% from its current price of $41.50 [1][5]. - The stock's current price reflects a decrease of 2.83%, with a drop of $1.21 today [2]. - SCSC's trading activity has shown volatility, with a year range between a high of $53.90 and a low of $28.75, indicating potential for growth [3][5]. Group 2: Market Recognition - Zacks Investment Research has recognized SCSC as a top value stock, placing it on the Zacks Rank 1 (Strong Buy) list, aligning it with other notable stocks [2][4]. - The company's market capitalization is approximately $908.2 million, with a trading volume of 137,525 shares, reflecting investor interest and activity [3].

Core Insights - The near-term outlook for the Zacks Industrial Services industry is positive, driven by increased e-commerce activity and a rise in the production index [1][4][5] - Companies are focusing on strategic pricing, cost-reduction initiatives, and enhancing productivity to improve margins [1][6] Industry Overview - The Zacks Industrial Services industry includes companies providing industrial equipment and MRO services, serving diverse sectors such as commercial, government, healthcare, and manufacturing [3] - The industry helps reduce MRO supply-chain costs and enhances productivity through inventory management and procurement solutions [3] Trends Impacting the Industry - E-commerce is a significant growth driver, with rising demand for tailored solutions and efficient online business operations [4] - The production index has shown signs of recovery, entering expansion territory at 51% after a contraction in August [5] Financial Performance - The Zacks Industrial Services industry has outperformed its sector with a growth of 6.5% over the past year, compared to the sector's 5.1% increase [10] - The industry is currently trading at a forward 12-month EV/EBITDA ratio of 36.39X, significantly higher than the S&P 500's 18.64X and the Industrial Products sector's 19.85X [13] Company Highlights - **ScanSource (SCSC)**: Recently announced a partnership with Zoom Communications, focusing on operational execution and cost-saving efforts, with shares appreciating 44.8% in the past six months [19][20] - **Fastenal (FAST)**: Benefiting from daily sales growth and digital sales strategies, with a 13.5% increase in eBusiness sales in Q2 2025, shares up 29.5% in six months [24] - **MSC Industrial (MSM)**: Expects fiscal Q4 results to be in the upper half of its guidance range, with shares gaining 29.2% in the past six months [27]

Core Viewpoint - Investors in the Industrial Services sector should consider ScanSource (SCSC) and SiteOne Landscape (SITE) as potential value opportunities, with SCSC appearing to offer superior value based on various financial metrics [1][7]. Valuation Metrics - Both SCSC and SITE have a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and improving earnings outlooks [3]. - SCSC has a forward P/E ratio of 11.17, significantly lower than SITE's forward P/E of 39.26, suggesting SCSC is more attractively priced [5]. - The PEG ratio for SCSC is 0.74, while SITE's PEG ratio is 2.34, indicating that SCSC is expected to grow earnings at a more favorable rate relative to its price [5]. - SCSC's P/B ratio is 1.11, compared to SITE's P/B of 3.73, further supporting the argument that SCSC is undervalued relative to its book value [6]. - Based on these valuation metrics, SCSC earns a Value grade of A, while SITE receives a Value grade of C, highlighting SCSC as the better value option [6].

Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Strategy - Momentum investors often face challenges in determining the right entry point for fast-moving stocks, which can lead to limited upside or potential downside if growth fails to justify high valuations [2] - A safer approach involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify promising candidates [3] Group 2: Company Spotlight - ScanSource (SCSC) - ScanSource (SCSC) has shown a four-week price change of 3.4%, indicating growing investor interest and positioning it well within the momentum investing framework [4] - Over the past 12 weeks, SCSC's stock has gained 11.5%, with a beta of 1.43, suggesting it moves 43% more than the market in either direction [5] - SCSC has a Momentum Score of B, indicating a favorable time to invest based on momentum [6] Group 3: Earnings and Valuation - SCSC has received a Zacks Rank 2 (Buy) due to upward trends in earnings estimate revisions, which attract more investor interest and support price increases [7] - The stock is currently trading at a Price-to-Sales ratio of 0.33, suggesting it is undervalued at 33 cents for each dollar of sales, providing significant room for growth [7] Group 4: Additional Opportunities - Besides SCSC, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, presenting further investment opportunities [8] - The Zacks Premium Screens offer over 45 different strategies tailored to various investing styles, aiding in the identification of potential winning stocks [9]