Group 1 - ScanSource reported quarterly earnings of $1.02 per share, exceeding the Zacks Consensus Estimate of $0.91 per share, and up from $0.80 per share a year ago, representing an earnings surprise of +12.09% [1] - The company posted revenues of $812.89 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.18%, compared to year-ago revenues of $746.11 million [2] - Over the last four quarters, ScanSource has surpassed consensus EPS estimates three times, but has only topped consensus revenue estimates once [2] Group 2 - The stock has underperformed the market, losing about 10.4% since the beginning of the year, while the S&P 500 has gained 8.7% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for investors [4] - The current consensus EPS estimate for the coming quarter is $0.90 on revenues of $778.35 million, and for the current fiscal year, it is $3.68 on revenues of $3.15 billion [7] Group 3 - The Zacks Industry Rank indicates that the Industrial Services sector is currently in the top 19% of over 250 Zacks industries, suggesting a favorable outlook for stocks in this sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The estimate revisions trend for ScanSource was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6]

PART I [Business Overview](index=5&type=section&id=Item%201.%20Business) ScanSource is a leading technology distributor connecting devices to the cloud for channel sales partners - ScanSource is a leading technology distributor focused on connecting devices to the cloud and accelerating growth for channel sales partners across hardware, SaaS, connectivity, and cloud services[14](index=14&type=chunk) - The company serves approximately **25,000 channel sales partners** in the United States, Canada, and Brazil[15](index=15&type=chunk) Fiscal Year 2025 Net Sales | Metric | Amount | | :---------------- | :------------- | | Total Net Sales | $3.04 billion | - The company's strategy is to drive sustainable, profitable growth by orchestrating complex, converging technology solutions through a growing ecosystem of channel sales partners, leveraging its people, processes, and tools[16](index=16&type=chunk) - ScanSource operates two realigned segments as of July 1, 2024: Specialty Technology Solutions and Intelisys & Advisory, both including recurring revenue[20](index=20&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces various operational, industry-specific, and general risks that could materially affect its business and financial results - Operational risks include challenges in hiring and retaining high-quality employees, difficulties in managing and integrating acquisitions, and potential failures in IT systems, as evidenced by a ransomware incident in May 2023[68](index=68&type=chunk)[70](index=70&type=chunk)[76](index=76&type=chunk)[78](index=78&type=chunk) - Supply chain issues, including product shortages and international operational risks (e.g., manufacturing delays in Asia, trade disruptions), may increase costs or delay order fulfillment[79](index=79&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - Credit exposure to channel sales partners is a significant risk, especially with longer payment terms and international operations, which can lead to credit losses[84](index=84&type=chunk)[86](index=86&type=chunk) - The company operates in a highly competitive market, facing broad-line and specialized distributors, which could lead to reduced margins and loss of market share[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - Rapid technological changes, including AI developments, and evolving industry standards pose a risk if the company or its suppliers fail to adapt quickly, potentially impacting market share and profitability[114](index=114&type=chunk)[115](index=115&type=chunk) - Economic weakness, inflation, tariffs, and geopolitical uncertainty can adversely affect financial results, demand for products, and the financial condition of channel sales partners and suppliers[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Unresolved Staff Comments](index=22&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section states that there are no unresolved staff comments applicable to the company [Cybersecurity](index=22&type=section&id=Item%201C.%20Cybersecurity) ScanSource maintains a comprehensive cybersecurity risk management program with Board oversight, despite a past ransomware attack - The cybersecurity risk management program is led by the VP of Information Security and integrates with the broader enterprise risk management program, following industry frameworks like NIST[130](index=130&type=chunk)[131](index=131&type=chunk) - Key components include risk assessments, monthly mandatory cybersecurity awareness training for employees, and periodic engagement of independent security firms[131](index=131&type=chunk) - The Board of Directors has primary oversight of cybersecurity risks, receiving regular reports from the CIO, and the Audit Committee reviews security policies and internal controls[135](index=135&type=chunk)[136](index=136&type=chunk) - Despite a ransomware attack in May 2023 that disrupted systems for nine business days and led to data disclosure, the company does not believe current cybersecurity risks materially affect its business strategy or financial condition[120](index=120&type=chunk)[134](index=134&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) ScanSource's principal properties include an owned headquarters in Greenville, SC, and leased warehouses and offices across North America and Brazil Principal Properties as of June 30, 2025 | Location | Approximate Square Footage | Type of Interest | Description of Use | | :------------------------- | :------------------------- | :--------------- | :----------------------------------- | | Greenville, SC (US) | 174,000 | Owned | Headquarters - Principal Executive and Sales Offices | | Southaven, MS (US) | 741,000 | Leased | Warehouse | | Sacramento, CA (US) | 53,000 | Leased | Sales and Administration Offices and Warehouse | | Louisville, KY (US) | 22,000 | Leased | Warehouse | | Serra, Espírito Santo, Brazil | 40,000 | Leased | Sales Office and Warehouse | | Itajai, Santa Catarina, Brazil | 30,100 | Leased | Sales Office and Warehouse | - Management believes current office and warehouse facilities are adequate to support operations at their current levels and for the foreseeable future[141](index=141&type=chunk) [Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company is routinely involved in lawsuits but believes any adverse outcome would not materially affect its financial condition or results of operations - The Company is involved in lawsuits arising out of operations, but believes any adverse determination would not materially affect its financial condition or results[142](index=142&type=chunk) [Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ScanSource common stock trades on NASDAQ, with significant share repurchases in FY2025, and no history of cash dividends - ScanSource common stock trades on the NASDAQ Global Select Market under the symbol "SCSC"[145](index=145&type=chunk) Stock Performance (June 30, 2020 - June 30, 2025) | Year | ScanSource, Inc. | NASDAQ Composite | SIC Code 5045 | | :--- | :--------------- | :--------------- | :-------------- | | 2020 | $100 | $100 | $100 | | 2021 | $117 | $145 | $198 | | 2022 | $129 | $111 | $170 | | 2023 | $123 | $140 | $178 | | 2024 | $184 | $182 | $227 | | 2025 | $174 | $210 | $261 | Share Repurchase Activity (Quarter Ended June 30, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :-------------------------------- | :--------------------- | :--------------------------- | | April 1, 2025 - April 30, 2025 | 261,305 | $31.80 | | May 1, 2025 - May 31, 2025 | 220,897 | $38.66 | | June 1, 2025 - June 30, 2025 | 200,693 | $41.35 | | **Total** | **682,895** | | - In fiscal year 2025, the company repurchased **2,483,299 shares** totaling **$106.5 million** under its share repurchase program[150](index=150&type=chunk)[228](index=228&type=chunk) - As of June 30, 2025, approximately **$217.1 million** remained available for repurchases[150](index=150&type=chunk)[228](index=228&type=chunk) - ScanSource has never declared or paid a cash dividend, and payment of cash dividends is restricted under its credit facility[151](index=151&type=chunk) [Reserved](index=26&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reviews ScanSource's business, strategy, and financial performance, noting decreased net sales, increased gross profit, and strategic actions - The macroeconomic environment, including forecasted growth, inflation, tariffs, and shifting international relations, continues to create significant uncertainty and may adversely affect financial condition and results[156](index=156&type=chunk) - ScanSource completed two acquisitions in August 2024: Secure Path Networks (Resourcive), a technology advisor, and Advantix Solutions Group, a managed connectivity experience provider[158](index=158&type=chunk)[159](index=159&type=chunk) - The company executed cost reduction and restructuring programs in September 2024 and January 2025, expected to result in approximately **$20.5 million** in annualized savings in selling, general and administrative expenses[161](index=161&type=chunk) - The company's strategy focuses on driving sustainable, profitable growth by orchestrating complex, converging technology solutions through a growing ecosystem of channel sales partners[162](index=162&type=chunk) [Results of Operations from Continuing Operations](index=28&type=section&id=Results%20of%20Operations%20from%20Continuing%20Operations) Net sales decreased by 6.7% to $3.04 billion in FY2025 due to a cautious spending environment, while gross profit increased by 2.4% Statement of Income Data as Percentage of Net Sales | Statement of income data: | 2025 | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | :----- | | Net sales | 100.0 % | 100.0 % | 100.0 % | | Cost of goods sold | 86.6 | 87.8 | 88.1 | | Gross profit | 13.4 | 12.2 | 11.9 | | Selling, general and administrative expenses | 9.4 | 8.5 | 7.5 | | Depreciation expense | 0.3 | 0.3 | 0.3 | | Intangible amortization expense | 0.6 | 0.5 | 0.4 | | Restructuring and other charges | 0.2 | 0.1 | 0.0 | | Change in fair value of contingent consideration | 0.1 | 0.0 | 0.0 | | Operating income | 2.8 | 2.8 | 3.6 | | Interest expense | 0.3 | 0.4 | 0.5 | | Interest income | (0.4) | (0.3) | (0.2) | | Gain on sale of business | 0.0 | (0.4) | 0.0 | | Other (income) expense, net | (0.2) | 0.0 | 0.0 | | Income from continuing operations before income taxes | 3.1 | 3.1 | 3.2 | | Provision for income taxes | 0.8 | 0.7 | 0.9 | | Net income from continuing operations | 2.4 | 2.4 | 2.3 | | Net income from discontinued operations | 0.0 | 0.0 | 0.0 | | Net income | 2.4 % | 2.4 % | 2.4 % | Net Sales by Segment and Geography (FY2025 vs FY2024) | Category | 2025 (in thousands) | 2024 (in thousands) | $ Change | % Change | % Change Constant Currency | | :------------------------- | :------------------ | :------------------ | :------- | :------- | :------------------------- | | **Sales by Segment:** | | | | | | | Specialty Technology Solutions | $2,942,717 | $3,167,549 | $(224,832) | (7.1)% | (6.7)% | | Intelisys & Advisory | $98,093 | $92,260 | $5,833 | 6.3% | (0.2)% | | **Total net sales** | **$3,040,810** | **$3,259,809** | **$(218,999)** | **(6.7)%** | **(6.5)%** | | **Sales by Geography Category:** | | | | | | | United States | $2,800,739 | $2,921,172 | $(120,433) | (4.1)% | (5.2)% | | International | $240,071 | $338,637 | $(98,566) | (29.1)% | (18.5)% | | **Total net sales** | **$3,040,810** | **$3,259,809** | **$(218,999)** | **(6.7)%** | **(6.5)%** | - Specialty Technology Solutions net sales decreased by **7.1%** (**6.7% in constant currency**) due to a cautious technology spending environment[168](index=168&type=chunk) - Intelisys & Advisory net sales increased by **6.3%** due to an acquisition, but adjusted net sales decreased by **0.2%** in constant currency due to cautious spending[169](index=169&type=chunk) Gross Profit (FY2025 vs FY2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | $ Change | % Change | 2025 % of Sales | 2024 % of Sales | | :------------------------- | :------------------ | :------------------ | :------- | :------- | :-------------- | :-------------- | | Specialty Technology Solutions | $311,402 | $307,257 | $4,145 | 1.3% | 10.6% | 9.7% | | Intelisys & Advisory | $97,244 | $91,795 | $5,449 | 5.9% | 99.1% | 99.5% | | **Total gross profit** | **$408,646** | **$399,052** | **$9,594** | **2.4%** | **13.4%** | **12.2%** | - Selling, general and administrative expenses increased by **$9.5 million**, primarily due to increased costs related to acquisitions[174](index=174&type=chunk) - Intangible amortization expense increased by **$3.5 million** due to intangible assets acquired from Advantix and Resourcive acquisitions[175](index=175&type=chunk) - Operating income for Specialty Technology Solutions decreased by **$0.6 million**, while Intelisys & Advisory operating income decreased by **$3.4 million**, largely due to higher costs including fair value expense from a recent acquisition[179](index=179&type=chunk)[180](index=180&type=chunk) - Interest expense decreased in fiscal year 2025 due to lower average borrowings, while interest income increased from higher cash balances[183](index=183&type=chunk)[184](index=184&type=chunk) - A **$6.7 million** gain was recognized in fiscal year 2025 from an insurance recovery related to the cybersecurity attack in fiscal 2023[186](index=186&type=chunk) Income Tax Expense and Effective Tax Rates (FY2025 vs FY2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Effective Tax Rate 2025 | Effective Tax Rate 2024 | | :----------------------- | :------------------ | :------------------ | :---------------------- | :---------------------- | | Income tax expense | $22,848 | $22,781 | 24.2% | 22.8% | [Non-GAAP Financial Information](index=33&type=section&id=Non-GAAP%20Financial%20Information) ScanSource utilizes non-GAAP measures like adjusted ROIC and EBITDA to provide a clearer view of performance, with adjusted ROIC increasing to 13.6% in FY2025 - Non-GAAP financial measures are used to better understand and evaluate performance, excluding impacts like foreign exchange, acquisitions, and divestitures[190](index=190&type=chunk) Adjusted Return on Invested Capital (ROIC) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Adjusted ROIC ratio | 13.6 % | 12.4 % | Adjusted EBITDA Reconciliation (FY2025 vs FY2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net income from continuing operations (GAAP) | $71,548 | $77,060 | | Plus: Interest expense | $8,013 | $13,031 | | Plus: Income taxes | $22,848 | $22,781 | | Plus: Depreciation and amortization | $30,195 | $28,009 | | **EBITDA (non-GAAP)** | **$132,604** | **$140,881** | | Plus: Change in fair value of contingent consideration | $1,900 | — | | Plus: Share-based compensation | $11,062 | $9,537 | | Plus: Acquisition and divestiture costs | $926 | $1,717 | | Plus: Cyberattack restoration costs | $177 | $874 | | Plus: Restructuring costs | $5,381 | $4,358 | | Plus: Tax recovery | $(3,041) | $(2,558) | | Plus: Legal settlement | $1,579 | — | | Plus: Insurance recovery, net of payments | $(5,928) | — | | Plus: Gain on sale of business | — | $(14,155) | | **Adjusted EBITDA (non-GAAP)** | **$144,660** | **$140,654** | Net Sales in Constant Currency, Excluding Acquisitions and Divestitures (FY2025 vs FY2024) | Category | 2025 (in thousands) | 2024 (in thousands) | $ Change | % Change | | :------------------------------------------ | :------------------ | :------------------ | :------- | :------- | | **Specialty Technology Solutions:** | | | | | | Net sales, reported | $2,942,717 | $3,167,549 | $(224,832) | (7.1)% | | Non-GAAP net sales, constant currency | $2,951,272 | $3,163,530 | $(212,258) | (6.7)% | | **Intelisys & Advisory:** | | | | | | Net sales, reported | $98,093 | $92,260 | $5,833 | 6.3% | | Non-GAAP net sales, constant currency | $92,096 | $92,260 | $(164) | (0.2)% | | **Consolidated:** | | | | | | Net sales, reported | $3,040,810 | $3,259,809 | $(218,999) | (6.7)% | | Non-GAAP net sales, constant currency | $3,043,368 | $3,255,790 | $(212,422) | (6.5)% | [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management highlights key accounting policies and estimates for receivables, inventory, supplier programs, and goodwill, requiring significant judgment - Key estimates include allowances for uncollectible accounts receivable, inventory reserves, supplier incentives, goodwill, and purchase price allocations[204](index=204&type=chunk)[286](index=286&type=chunk) - Allowance for doubtful accounts is estimated considering historical experience, aging of receivables, customer creditworthiness, economic environment, and forecasts[206](index=206&type=chunk)[288](index=288&type=chunk) - Inventory reserves are determined based on technological changes, quantities on hand, and time on hand to reduce inventory to the lower of cost or net realizable value[207](index=207&type=chunk)[289](index=289&type=chunk) - Goodwill and other intangible assets are reviewed annually for impairment using discounted cash flow and market approaches, requiring significant judgment in estimating future cash flows and discount rates[211](index=211&type=chunk)[212](index=212&type=chunk)[293](index=293&type=chunk) - Supplier incentives (market development funds, volume rebates) are recorded as reductions to inventory or SG&A, based on estimates of achievement and historical experience[208](index=208&type=chunk)[209](index=209&type=chunk)[294](index=294&type=chunk) [Accounting Standards Recently Issued](index=41&type=section&id=Accounting%20Standards%20Recently%20Issued) ScanSource adopted ASU No. 2023-07 in FY2025, expanding segment disclosures, and is evaluating other ASUs for future impact - Adopted ASU No. 2023-07 "Segment Reporting" in fiscal year 2025, resulting in expanded segment disclosures with no material financial impact[335](index=335&type=chunk) - Currently evaluating ASU No. 2023-09 "Income Taxes" (effective FY2026) and ASU 2024-03 "Expense Disaggregation Disclosures" (effective FY2027) for potential impacts on consolidated financial statements and disclosures[336](index=336&type=chunk)[337](index=337&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity relies on operating cash flows and a $350 million credit facility, with cash decreasing in FY2025 due to working capital and share repurchases - Primary liquidity sources are cash flows from operations and borrowings under the **$350 million** revolving credit facility[218](index=218&type=chunk) Cash and Cash Equivalents (in thousands) | Date | Amount | | :----------- | :------- | | June 30, 2025 | $126,157 | | June 30, 2024 | $185,460 | - Net investment in working capital increased by **$14.6 million** to **$520.7 million** at June 30, 2025, primarily due to an increase in accounts receivable[221](index=221&type=chunk) Cash Flows from Activities (in thousands) | Activity | FY2025 | FY2024 | | :------------------------------------ | :------- | :------- | | Operating activities of continuing operations | $112,349 | $371,647 | | Investing activities of continuing operations | $(62,390) | $9,045 | | Financing activities of continuing operations | $(110,905) | $(227,767) | - The decrease in operating cash flow in FY2025 was primarily due to changes in working capital, contrasting with a significant increase in the prior year from a working capital improvement plan[222](index=222&type=chunk) - Cash used in investing activities in FY2025 was largely due to cash paid for acquisitions and capital expenditures[225](index=225&type=chunk) - Cash used in financing activities in FY2025 was primarily due to the repurchase of common stock (**$106.5 million**)[227](index=227&type=chunk)[228](index=228&type=chunk) - The company has a **$350 million** multi-currency senior secured revolving credit facility maturing September 28, 2027, and was in compliance with all covenants as of June 30, 2025[229](index=229&type=chunk)[231](index=231&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) ScanSource manages interest rate and foreign currency risks through swaps and forward contracts, with hypothetical changes impacting pre-tax income - The company is exposed to interest rate risk from variable rate debt and uses interest rate swaps to mitigate this risk[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) Impact of Hypothetical Interest Rate Change on Pre-Tax Income | Fiscal Year | Hypothetical 100 bps Increase/Decrease | | :---------- | :------------------------------------- | | June 30, 2025 | ~$0.7 million increase or decrease | | June 30, 2024 | ~$1.0 million increase or decrease | - Foreign currency exchange rate risk arises from international operations in Canada and Brazil, with transactions in non-functional currencies and intercompany loans[243](index=243&type=chunk) - The company uses currency options and forward contracts to hedge foreign currency exposures, primarily in Brazilian reais and Canadian dollars, and does not designate them as hedging instruments for accounting purposes[244](index=244&type=chunk)[245](index=245&type=chunk) Impact of Hypothetical Foreign Exchange Rate Change on Pre-Tax Income | Fiscal Year | Hypothetical 10% Increase/Decrease | | :---------- | :--------------------------------- | | June 30, 2025 | ~$1.2 million increase or decrease | | June 30, 2024 | ~$0.1 million increase or decrease | [Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents ScanSource's audited consolidated financial statements for FY2025, 2024, and 2023, with an unqualified opinion from Grant Thornton LLP - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements for the period ended June 30, 2025, and on the effectiveness of internal control over financial reporting as of June 30, 2025[249](index=249&type=chunk)[250](index=250&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) Consolidated Balance Sheets (in thousands) | Asset/Liability Category | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | **Assets:** | | | | Cash and cash equivalents | $126,157 | $185,460 | | Accounts receivable, net | $635,521 | $581,523 | | Inventories | $483,815 | $512,634 | | Total current assets | $1,370,452 | $1,404,699 | | Property and equipment, net | $31,169 | $33,501 | | Goodwill | $230,820 | $206,301 | | Identifiable intangible assets, net | $62,909 | $37,634 | | Total assets | **$1,785,606** | **$1,779,032** | | **Liabilities & Shareholders' Equity:** | | | | Accounts payable | $598,595 | $587,984 | | Accrued expenses and other current liabilities | $71,263 | $65,616 | | Total current liabilities | $682,964 | $669,352 | | Long-term debt, net of current portion | $128,288 | $136,149 | | Total liabilities | $879,197 | $854,777 | | Total shareholders' equity | $906,409 | $924,255 | | Total liabilities and shareholders' equity | **$1,785,606** | **$1,779,032** | Consolidated Income Statements (in thousands, except per share) | Metric | FY2025 | FY2024 | FY2023 | | :------------------------------------------ | :------- | :------- | :------- | | Net sales | $3,040,810 | $3,259,809 | $3,787,721 | | Cost of goods sold | $2,632,164 | $2,860,757 | $3,338,482 | | Gross profit | $408,646 | $399,052 | $449,239 | | Operating income | $85,200 | $90,324 | $135,886 | | Income before income taxes | $94,396 | $99,841 | $121,850 | | Provision for income taxes | $22,848 | $22,781 | $33,758 | | Net income from continuing operations | $71,548 | $77,060 | $88,092 | | Net income | $71,548 | $77,060 | $89,809 | | Diluted EPS | $3.00 | $3.06 | $3.54 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | FY2025 | FY2024 | FY2023 | | :------------------------------------------ | :------- | :------- | :------- | | Net cash provided by operating activities of continuing operations | $112,349 | $371,647 | $(35,769) | | Net cash (used in) provided by investing activities of continuing operations | $(62,390) | $9,045 | $(8,262) | | Net cash (used in) provided by financing activities of continuing operations | $(110,905) | $(227,767) | $39,531 | | (Decrease) increase in cash and cash equivalents | $(59,303) | $149,282 | $(1,809) | | Cash and cash equivalents at end of period | $126,157 | $185,460 | $36,178 | - Goodwill balances as of June 30, 2025, were **$159.8 million** for Specialty Technology Solutions and **$71.0 million** for Intelisys & Advisory[212](index=212&type=chunk)[367](index=367&type=chunk) - No goodwill impairment charges were recorded for fiscal years 2025, 2024, or 2023[212](index=212&type=chunk)[367](index=367&type=chunk) Identifiable Intangible Assets, Net (in thousands) | Category | June 30, 2025 Net Book Value | June 30, 2024 Net Book Value | | :------------------------- | :----------------------------- | :----------------------------- | | Customer relationships | $52,585 | $28,640 | | Trade names | $2,594 | $3,015 | | Supplier partner program | $744 | $1,174 | | Encryption key library | $206 | $2,695 | | Developed technology | $6,780 | $2,111 | | **Total intangibles** | **$62,909** | **$37,635** | - Amortization expense for continuing operations was **$19.2 million** in FY2025, **$15.7 million** in FY2024, and **$16.7 million** in FY2023[372](index=372&type=chunk) Scheduled Maturities of Debt (in thousands) | Fiscal year: | Revolving Credit Facility | Term Loan Facility | Mississippi Bond | | :----------- | :------------------------ | :----------------- | :--------------- | | 2026 | $— | $7,500 | $361 | | 2027 | $— | $10,313 | $366 | | 2028 | $— | $115,312 | $371 | | 2029 | $— | $— | $375 | | 2030 | $— | $— | $380 | | Thereafter | $— | $— | $1,171 | | **Total principal payments** | **$—** | **$133,125** | **$3,024** | - The company had **$133.1 million** outstanding under its term loan facility and **$3.0 million** under its Mississippi revenue bond as of June 30, 2025[235](index=235&type=chunk) - The company recorded a contingent consideration liability of **$19.1 million** at June 30, 2025, related to the Advantix and Resourcive acquisitions, with changes in fair value reflected in operating income[177](index=177&type=chunk)[405](index=405&type=chunk) Earnings Per Share (in thousands, except per share data) | Metric | FY2025 | FY2024 | FY2023 | | :------------------------------------------ | :------- | :------- | :------- | | Net income from continuing operations per common share, basic | $3.05 | $3.10 | $3.50 | | Net income per common share, basic | $3.05 | $3.10 | $3.57 | | Net income from continuing operations per common share, diluted | $3.00 | $3.06 | $3.47 | | Net income per common share, diluted | $3.00 | $3.06 | $3.54 | | Weighted-average shares outstanding, diluted | 23,839 | 25,222 | 25,362 | - Total share-based compensation expense was **$11.1 million** in FY2025, **$9.5 million** in FY2024, and **$11.2 million** in FY2023[413](index=413&type=chunk) - The company recognized a tax benefit of **$2.1 million** in FY2025 due to a U.S. Tax Court opinion related to deemed foreign dividends[435](index=435&type=chunk) - Capital expenditures for fiscal year 2026 are expected to range from **$10.0 million** to **$15.0 million**, primarily for IT and warehouse investments[226](index=226&type=chunk)[450](index=450&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=88&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This section states that there are no changes in or disagreements with accountants on accounting and financial disclosure [Controls and Procedures](index=88&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded ScanSource's disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[474](index=474&type=chunk)[475](index=475&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of June 30, 2025, based on the 2013 COSO Internal Control—Integrated Framework[477](index=477&type=chunk) - There were no changes in internal control over financial reporting during fiscal year 2025 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[479](index=479&type=chunk) [Other Information](index=88&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[480](index=480&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=88&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section states that disclosures regarding foreign jurisdictions that prevent inspections are not applicable to the company PART III [Directors, Executive Officers and Corporate Governance](index=89&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item will be included in the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders [Executive Compensation](index=89&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item will be included in the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item will be included in the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders [Certain Relationships and Related Transactions, and Director Independence](index=89&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item will be included in the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders [Principal Accountant Fees and Services](index=89&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item will be included in the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders PART IV [Exhibits and Financial Statement Schedules](index=90&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed as part of the Annual Report on Form 10-K - The section includes a list of financial statements and exhibits filed as part of the Annual Report on Form 10-K[490](index=490&type=chunk) [Form 10-K Summary](index=91&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section indicates that there is no Form 10-K Summary provided [Exhibit Index](index=92&type=section&id=Exhibit%20Index) The Exhibit Index provides a comprehensive list of documents filed as exhibits to the Form 10-K, including corporate documents, agreements, and certifications - The Exhibit Index lists various corporate documents, compensation plans, employment agreements, bank agreements, and supplier distribution agreements[494](index=494&type=chunk)[495](index=495&type=chunk)[496](index=496&type=chunk) - It also includes certifications from the CEO and CFO, and financial statements formatted in Inline XBRL[496](index=496&type=chunk) [SIGNATURES](index=95&type=section&id=SIGNATURES) This section contains the signatures of the registrant's authorized officers and directors, certifying the report's submission on August 21, 2025 - The report is signed by the Chairman and Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and other directors, certifying its submission on August 21, 2025[502](index=502&type=chunk)[503](index=503&type=chunk)

[Company Overview & Performance Highlights](index=1&type=section&id=Item%201.%20Company%20Overview%20%26%20Performance%20Highlights) ScanSource, Inc. reported strong Q4 FY25 results, achieving its full-year outlook with significant profitability growth, and outlined strategic investments for FY26 [Company Introduction](index=1&type=section&id=Item%201.1.%20Company%20Introduction) ScanSource, Inc. (NASDAQ: SCSC) announced its financial results for the fourth quarter and fiscal year ended June 30, 2025, highlighting strong Q4 performance that helped achieve its full-year outlook - ScanSource, Inc. (NASDAQ: SCSC) is a leading technology distributor focused on complex, converging technologies[1](index=1&type=chunk) - The company announced financial results for the fourth quarter and fiscal year ended June 30, 2025, achieving its full-year outlook with strong Q4 performance[1](index=1&type=chunk) [CEO Commentary](index=1&type=section&id=Item%201.2.%20CEO%20Commentary) CEO Mike Baur highlighted strong free cash flow and excellent profitability growth for fiscal year 2025, with plans for strategic investments in FY26 to accelerate growth and expand margins - CEO Mike Baur noted **strong free cash flow** and **excellent profitability growth** across the board for fiscal year 2025[4](index=4&type=chunk) - For fiscal year 2026, ScanSource plans **strategic investments** to accelerate growth and expand margins[4](index=4&type=chunk) [Consolidated Financial Highlights (Q4 & FY25 Summary)](index=1&type=section&id=Item%201.3.%20Consolidated%20Financial%20Highlights%20(Q4%20%26%20FY25%20Summary)) ScanSource reported an 8.9% increase in Q4 FY25 net sales to $812.9 million, with GAAP diluted EPS up 37.5% to $0.88. For the full fiscal year 2025, net sales decreased by 6.7% to $3.04 billion, while non-GAAP diluted EPS increased by 15.9% to $3.57 Select Reported and Non-GAAP Measures (Q4 FY25 vs Q4 FY24) | Measure | Q4 FY25 (in thousands) | Q4 FY24 (in thousands) | Change | | :---------------------- | :--------------------- | :--------------------- | :----- | | Net sales | $812,886 | $746,113 | 8.9% | | Gross profit | $105,102 | $97,315 | 8.0% | | Gross profit margin % | 12.9% | 13.0% | -11bp | | Operating income | $26,787 | $21,871 | 22.5% | | GAAP net income | $20,089 | $16,097 | 24.8% | | GAAP diluted EPS | $0.88 | $0.64 | 37.5% | | Adjusted EBITDA | $38,639 | $34,181 | 13.0% | | Adjusted EBITDA margin % | 4.75% | 4.58% | 17bp | | Non-GAAP net income | $23,322 | $19,921 | 17.1% | | Non-GAAP diluted EPS | $1.02 | $0.80 | 27.5% | Select Reported and Non-GAAP Measures (FY25 vs FY24) | Measure | FY25 (in thousands) | FY24 (in thousands) | Change | | :---------------------- | :------------------ | :------------------ | :----- | | Net sales | $3,040,810 | $3,259,809 | -6.7% | | Gross profit | $408,646 | $399,052 | 2.4% | | Gross profit margin % | 13.4% | 12.2% | 120bp | | Operating income | $85,200 | $90,324 | -5.7% | | GAAP net income | $71,548 | $77,060 | -7.2% | | GAAP diluted EPS | $3.00 | $3.06 | -2.0% | | Adjusted EBITDA | $144,660 | $140,654 | 2.8% | | Adjusted EBITDA margin % | 4.76% | 4.31% | 45bp | | Non-GAAP net income | $85,144 | $77,670 | 9.6% | | Non-GAAP diluted EPS | $3.57 | $3.08 | 15.9% | [Fourth Quarter Fiscal Year 2025 Results](index=1&type=section&id=Item%202.%20Fourth%20Quarter%20Fiscal%20Year%202025%20Results) ScanSource's Q4 FY25 saw significant increases in net sales, gross profit, operating income, and diluted EPS, driven by broad-based growth and acquisitions [Net Sales](index=1&type=section&id=Item%202.1.%20Net%20Sales) Fourth quarter net sales increased 8.9% year-over-year to $812.9 million, driven by broad-based growth in North America for Specialty Technology Solutions and an acquisition for Intelisys & Advisory. Recurring revenue saw significant growth of 30.0% Q4 FY25 Net Sales Performance | Category | Q4 FY25 Net Sales (in millions) | YoY Change | | :-------------------------- | :------------------------------ | :--------- | | Total Net Sales | $812.9 | 8.9% | | Products and Services | $776.3 | 8.1% | | Recurring Revenue | $36.5 | 30.0% | | Specialty Technology Solutions | $788.7 | 9.2% | | Intelisys & Advisory | $24.2 | 1.3% | - Specialty Technology Solutions' growth was driven by broad-based growth in North America[4](index=4&type=chunk) - Intelisys & Advisory net sales growth reflected the addition of an acquisition[4](index=4&type=chunk) [Gross Profit](index=1&type=section&id=Item%202.2.%20Gross%20Profit) Gross profit for Q4 FY25 increased 8.0% year-over-year to $105.1 million, with the gross profit margin slightly decreasing to 12.9%. The contribution of gross profit from recurring revenue increased to 31.6% Q4 FY25 Gross Profit Performance | Metric | Q4 FY25 (in millions) | Q4 FY24 (in millions) | YoY Change | | :---------------------------------- | :-------------------- | :-------------------- | :--------- | | Gross Profit | $105.1 | $97.3 | 8.0% | | Gross Profit Margin | 12.9% | 13.0% | -11bp | | % Gross Profit from Recurring Revenue | 31.6% | 28.5% | +3.1pp | [Operating Income](index=1&type=section&id=Item%202.3.%20Operating%20Income) GAAP operating income for Q4 FY25 rose to $26.8 million from $21.9 million in the prior-year quarter, while non-GAAP operating income increased to $31.3 million from $26.0 million Q4 FY25 Operating Income Performance | Metric | Q4 FY25 (in millions) | Q4 FY24 (in millions) | | :-------------------- | :-------------------- | :-------------------- | | GAAP Operating Income | $26.8 | $21.9 | | Non-GAAP Operating Income | $31.3 | $26.0 | - GAAP operating income increased by **22.5%** year-over-year[2](index=2&type=chunk) [Net Income and Diluted EPS](index=2&type=section&id=Item%202.4.%20Net%20Income%20and%20Diluted%20EPS) GAAP net income for Q4 FY25 was $20.1 million, or $0.88 per diluted share, a significant increase from the prior year. Non-GAAP net income also grew to $23.3 million, or $1.02 per diluted share Q4 FY25 Net Income and Diluted EPS Performance | Metric | Q4 FY25 (in millions/per share) | Q4 FY24 (in millions/per share) | YoY Change | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | | GAAP Net Income | $20.1 | $16.1 | 24.8% | | GAAP Diluted EPS | $0.88 | $0.64 | 37.5% | | Non-GAAP Net Income | $23.3 | $19.9 | 17.1% | | Non-GAAP Diluted EPS | $1.02 | $0.80 | 27.5% | [Adjusted EBITDA](index=2&type=section&id=Item%202.5.%20Adjusted%20EBITDA) Adjusted EBITDA for Q4 FY25 increased 13.0% to $38.6 million, representing 4.75% of net sales, up from 4.58% in the prior-year quarter Q4 FY25 Adjusted EBITDA Performance | Metric | Q4 FY25 (in millions) | Q4 FY24 (in millions) | YoY Change | | :-------------- | :-------------------- | :-------------------- | :--------- | | Adjusted EBITDA | $38.6 | $34.2 | 13.0% | | Adjusted EBITDA Margin % | 4.75% | 4.58% | +17bp | [Full Fiscal Year 2025 Results](index=2&type=section&id=Item%203.%20Full%20Fiscal%20Year%202025%20Results) For FY25, net sales decreased due to a cautious spending environment, but gross profit and non-GAAP diluted EPS increased, reflecting improved margins and recurring revenue [Net Sales](index=2&type=section&id=Item%203.1.%20Net%20Sales) Full fiscal year 2025 net sales decreased 6.7% to $3.04 billion, primarily due to a cautious technology spending environment in the first half. Recurring revenue, however, grew significantly by 31.8% including acquisitions FY25 Net Sales Performance | Category | FY25 Net Sales (in billions) | YoY Change | | :-------------------------- | :--------------------------- | :--------- | | Total Net Sales | $3.04 | -6.7% | | Products and Services | $2.895 | -8.1% | | Recurring Revenue | $0.146 | 31.8% | | Specialty Technology Solutions | $2.94 | -7.1% | | Intelisys & Advisory | $0.098 | 6.3% | - The decrease in Specialty Technology Solutions' net sales was primarily due to a more cautious technology spending environment in the first half of the fiscal year[8](index=8&type=chunk) - Intelisys & Advisory net sales growth reflected the addition of an acquisition[8](index=8&type=chunk) [Gross Profit](index=2&type=section&id=Item%203.2.%20Gross%20Profit) Gross profit for FY25 increased 2.4% year-over-year to $408.6 million, with the gross profit margin improving to 13.4% from 12.2% in the prior year. This improvement was attributed to a higher contribution from recurring revenue and increased vendor program recognition FY25 Gross Profit Performance | Metric | FY25 (in millions) | FY24 (in millions) | YoY Change | | :---------------------------------- | :----------------- | :----------------- | :--------- | | Gross Profit | $408.6 | $399.1 | 2.4% | | Gross Profit Margin | 13.4% | 12.2% | +120bp | | % Gross Profit from Recurring Revenue | 32.8% | 27.5% | +5.3pp | - The higher gross profit margin reflects a higher contribution of recurring revenue and higher vendor program recognition[9](index=9&type=chunk) [Operating Income](index=2&type=section&id=Item%203.3.%20Operating%20Income) GAAP operating income for FY25 was $85.2 million, a decrease from $90.3 million in the prior year. Conversely, non-GAAP operating income increased to $111.3 million from $110.4 million FY25 Operating Income Performance | Metric | FY25 (in millions) | FY24 (in millions) | | :-------------------- | :----------------- | :----------------- | | GAAP Operating Income | $85.2 | $90.3 | | Non-GAAP Operating Income | $111.3 | $110.4 | - GAAP operating income decreased by **5.7%** year-over-year[2](index=2&type=chunk) [Net Income and Diluted EPS](index=2&type=section&id=Item%203.4.%20Net%20Income%20and%20Diluted%20EPS) GAAP net income for FY25 totaled $71.5 million, or $3.00 per diluted share, down from the prior year. Non-GAAP net income, however, increased to $85.1 million, or $3.57 per diluted share FY25 Net Income and Diluted EPS Performance | Metric | FY25 (in millions/per share) | FY24 (in millions/per share) | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | | GAAP Net Income | $71.5 | $77.1 | -7.2% | | GAAP Diluted EPS | $3.00 | $3.06 | -2.0% | | Non-GAAP Net Income | $85.1 | $77.7 | 9.6% | | Non-GAAP Diluted EPS | $3.57 | $3.08 | 15.9% | [Adjusted EBITDA](index=2&type=section&id=Item%203.5.%20Adjusted%20EBITDA) Adjusted EBITDA for FY25 increased 2.8% to $144.7 million, representing 4.76% of net sales, an improvement from 4.31% in the prior year FY25 Adjusted EBITDA Performance | Metric | FY25 (in millions) | FY24 (in millions) | YoY Change | | :-------------- | :----------------- | :----------------- | :--------- | | Adjusted EBITDA | $144.7 | $140.7 | 2.8% | | Adjusted EBITDA Margin % | 4.76% | 4.31% | +45bp | [Balance Sheet and Cash Flow](index=2&type=section&id=Item%204.%20Balance%20Sheet%20and%20Cash%20Flow) ScanSource maintained a healthy balance sheet with $126.2 million in cash and generated strong operating and free cash flow for fiscal year 2025 [Balance Sheet Summary](index=2&type=section&id=Item%204.1.%20Balance%20Sheet%20Summary) As of June 30, 2025, ScanSource reported $126.2 million in cash and cash equivalents and $136.1 million in total debt Balance Sheet Snapshot (June 30, 2025) | Metric | Amount (in millions) | | :---------------------- | :------------------- | | Cash and Cash Equivalents | $126.2 | | Total Debt | $136.1 | - The company had cash and cash equivalents of **$126.2 million** and total debt of **$136.1 million** as of June 30, 2025[12](index=12&type=chunk) [Cash Flow Summary](index=2&type=section&id=Item%204.2.%20Cash%20Flow%20Summary) For fiscal year 2025, ScanSource generated $112.3 million in operating cash flow and $104.1 million in free cash flow, alongside $106.5 million in share repurchases FY25 Cash Flow Summary | Metric | Amount (in millions) | | :---------------------- | :------------------- | | Operating Cash Flow | $112.3 | | Free Cash Flow (non-GAAP) | $104.1 | | Share Repurchases | $106.5 | - ScanSource generated **$112.3 million** of operating cash flow and **$104.1 million** of free cash flow (non-GAAP) for fiscal year 2025[12](index=12&type=chunk) - The company also had share repurchases of **$106.5 million** for fiscal year 2025[12](index=12&type=chunk) [Fiscal Year 2026 Financial Outlook](index=2&type=section&id=Item%205.%20Fiscal%20Year%202026%20Financial%20Outlook) ScanSource provided its annual financial outlook for fiscal year 2026, projecting net sales between $3.1 billion and $3.3 billion, Adjusted EBITDA of $150 million to $160 million, and at least $80 million in free cash flow FY26 Annual Outlook | Metric | FY26 Annual Outlook | | :-------------------- | :-------------------------- | | Net sales | $3.1 billion to $3.3 billion | | Adjusted EBITDA (non-GAAP) | $150 million to $160 million | | Free cash flow (non-GAAP) | At least $80 million | - The guidance is based on ScanSource's current expectations for the full fiscal year ended June 30, 2026[13](index=13&type=chunk) - A quantitative reconciliation of forward-looking non-GAAP measures to GAAP cannot be made without unreasonable efforts due to the unpredictability of future non-operating items[15](index=15&type=chunk) [Non-GAAP Financial Information](index=3&type=section&id=Item%206.%20Non-GAAP%20Financial%20Information) ScanSource utilizes non-GAAP financial measures to provide clearer insights into performance, excluding specific non-operating items for enhanced comparability [Purpose and Exclusions](index=3&type=section&id=Item%206.1.%20Purpose%20and%20Exclusions) ScanSource uses non-GAAP financial measures to evaluate performance and enhance comparability between periods, excluding items such as amortization of intangible assets, acquisition/divestiture costs, and restructuring costs. These measures have limitations and should be considered supplementary to GAAP results - Non-GAAP financial measures are used to understand and evaluate performance, including period-to-period comparisons[18](index=18&type=chunk) - Non-GAAP results exclude items such as amortization of intangible assets related to acquisitions, acquisition and divestiture costs, gain/loss on sale of business, and restructuring costs[18](index=18&type=chunk) - Non-GAAP financial measures have limitations as analytical tools and may not be comparable to similarly titled amounts reported by other companies[25](index=25&type=chunk) [Key Non-GAAP Metric Definitions](index=3&type=section&id=Item%206.2.%20Key%20Non-GAAP%20Metric%20Definitions) This section defines key non-GAAP metrics used by ScanSource, including non-GAAP net sales (organic growth), Adjusted EBITDA (profitability from operations), Adjusted ROIC (performance consistency), Free Cash Flow (liquidity), Net Debt (borrowing capacity), and other adjusted metrics like SG&A and EPS - **Non-GAAP net sales:** Percentage change in net sales excluding foreign currency exchange rate impacts and net sales from acquisitions and divestitures to analyze underlying organic trends[19](index=19&type=chunk) - **Adjusted EBITDA:** Starts with net income and adds back interest expense, income tax expense, depreciation, amortization, change in fair value of contingent consideration, and other non-GAAP adjustments to show profitability from business operations more clearly[20](index=20&type=chunk) - **Adjusted return on invested capital (Adjusted ROIC):** Calculated as Adjusted EBITDA over invested capital, used to compare performance consistently by removing non-core operating impacts[21](index=21&type=chunk) - **Free cash flow:** Defined as net cash provided by operating activities less capital expenditures, used to measure liquidity and capital resources[22](index=22&type=chunk) - **Net debt:** Total balance sheet debt less cash and cash equivalents, useful for assessing borrowing capacity[23](index=23&type=chunk) - **Additional Non-GAAP Metrics:** Includes non-GAAP SG&A expenses, operating income, pre-tax income, net income, and diluted EPS, which exclude specific acquisition-related and restructuring costs for consistent performance assessment[24](index=24&type=chunk) [Supplementary Financial Information (Unaudited)](index=5&type=section&id=Item%207.%20Supplementary%20Financial%20Information%20(Unaudited)) Unaudited supplementary financial statements provide detailed balance sheets, income statements, cash flows, and reconciliations for Q4 and full fiscal year 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Item%207.1.%20Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of ScanSource's financial position as of June 30, 2025, compared to June 30, 2024, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets (Unaudited) - Key Figures | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Total current assets | $1,370,452 | $1,404,699 | | Total assets | $1,785,606 | $1,779,032 | | Total current liabilities | $682,964 | $669,352 | | Total liabilities | $879,197 | $854,777 | | Total shareholders' equity | $906,409 | $924,255 | [Condensed Consolidated Income Statements](index=6&type=section&id=Item%207.2.%20Condensed%20Consolidated%20Income%20Statements) The condensed consolidated income statements present the financial performance for the fourth quarter and full fiscal year ended June 30, 2025, compared to the prior year, showing revenues, expenses, and net income Condensed Consolidated Income Statements (Unaudited) - Q4 Key Figures | Metric | Q4 FY25 (in thousands) | Q4 FY24 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | | Net sales | $812,886 | $746,113 | | Gross profit | $105,102 | $97,315 | | Operating income | $26,787 | $21,871 | | Net income | $20,089 | $16,097 | | Diluted EPS | $0.88 | $0.64 | Condensed Consolidated Income Statements (Unaudited) - FY Key Figures | Metric | FY25 (in thousands) | FY24 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Net sales | $3,040,810 | $3,259,809 | | Gross profit | $408,646 | $399,052 | | Operating income | $85,200 | $90,324 | | Net income | $71,548 | $77,060 | | Diluted EPS | $3.00 | $3.06 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Item%207.3.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows detail the cash generated and used across operating, investing, and financing activities for fiscal year 2025 compared to 2024 Condensed Consolidated Statements of Cash Flows (Unaudited) - FY Key Figures | Metric | FY25 (in thousands) | FY24 (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | $112,349 | $371,647 | | Net cash (used in) provided by investing activities | $(62,390) | $9,045 | | Net cash used in financing activities | $(110,905) | $(227,767) | | Cash and cash equivalents at period end | $126,157 | $185,460 | [Reconciliation of Net Income to Adjusted EBITDA](index=8&type=section&id=Item%207.4.%20Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) This section provides a reconciliation of GAAP net income to non-GAAP Adjusted EBITDA for both the fourth quarter and full fiscal year 2025, detailing the adjustments made Reconciliation of Net Income to Adjusted EBITDA (Q4) | Metric | Q4 FY25 (in thousands) | Q4 FY24 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Net income (GAAP) | $20,089 | $16,097 | | Plus: Interest expense | $2,099 | $2,084 | | Plus: Income taxes | $7,408 | $6,600 | | Plus: Depreciation and amortization | $7,101 | $6,792 | | EBITDA (non-GAAP) | $36,697 | $31,573 | | Adjusted EBITDA (non-GAAP) | $38,639 | $34,181 | Reconciliation of Net Income to Adjusted EBITDA (FY) | Metric | FY25 (in thousands) | FY24 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net income (GAAP) | $71,548 | $77,060 | | Plus: Interest expense | $8,013 | $13,031 | | Plus: Income taxes | $22,848 | $22,781 | | Plus: Depreciation and amortization | $30,195 | $28,009 | | EBITDA (non-GAAP) | $132,604 | $140,881 | | Adjusted EBITDA (non-GAAP) | $144,660 | $140,654 | Adjusted Return on Invested Capital (Adjusted ROIC) | Metric | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :-------------------------------- | :------ | :------ | :--- | :--- | | Adjusted ROIC, annualized | 14.9% | 12.7% | 13.6% | 12.4% | [Net Sales by Segment](index=9&type=section&id=Item%207.5.%20Net%20Sales%20by%20Segment) Detailed net sales by segment for both the fourth quarter and full fiscal year 2025, showing performance for Specialty Technology Solutions and Intelisys & Advisory, including non-GAAP adjustments for foreign exchange and acquisitions/divestitures Net Sales by Segment (Q4 FY25 vs Q4 FY24) | Segment | Q4 FY25 Reported (in thousands) | Q4 FY24 Reported (in thousands) | % Change | Q4 FY25 Non-GAAP (in thousands) | Q4 FY24 Non-GAAP (in thousands) | % Change (Non-GAAP) | | :-------------------------- | :------------------------------ | :------------------------------ | :--------- | :------------------------------ | :------------------------------ | :------------------ | | Specialty Technology Solutions | $788,708 | $722,251 | 9.2% | $786,251 | $722,251 | 8.9% | | Intelisys & Advisory | $24,178 | $23,862 | 1.3% | $23,110 | $23,862 | (3.2)% | | Consolidated | $812,886 | $746,113 | 8.9% | $809,361 | $746,113 | 8.5% | Net Sales by Segment (FY25 vs FY24) | Segment | FY25 Reported (in thousands) | FY24 Reported (in thousands) | % Change | FY25 Non-GAAP (in thousands) | FY24 Non-GAAP (in thousands) | % Change (Non-GAAP) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :------------------ | | Specialty Technology Solutions | $2,942,717 | $3,167,549 | (7.1)% | $2,951,272 | $3,163,530 | (6.7)% | | Intelisys & Advisory | $98,093 | $92,260 | 6.3% | $92,096 | $92,260 | (0.2)% | | Consolidated | $3,040,810 | $3,259,809 | (6.7)% | $3,043,368 | $3,255,790 | (6.5)% | [Net Sales by Revenue Type](index=10&type=section&id=Item%207.6.%20Net%20Sales%20by%20Revenue%20Type) This section breaks down net sales into products and services versus recurring revenue for both the fourth quarter and full fiscal year 2025, highlighting the significant growth in recurring revenue Net Sales by Revenue Type (Q4 FY25 vs Q4 FY24) | Revenue Type | Q4 FY25 (in thousands) | Q4 FY24 (in thousands) | % Change | | :------------------ | :--------------------- | :--------------------- | :--------- | | Products and services | $776,349 | $718,003 | 8.1% | | Recurring revenue | $36,537 | $28,110 | 30.0% | | Total Net Sales | $812,886 | $746,113 | 8.9% | Net Sales by Revenue Type (FY25 vs FY24) | Revenue Type | FY25 (in thousands) | FY24 (in thousands) | % Change | | :------------------ | :------------------ | :------------------ | :--------- | | Products and services | $2,895,110 | $3,149,234 | (8.1)% | | Recurring revenue | $145,700 | $110,575 | 31.8% | | Total Net Sales | $3,040,810 | $3,259,809 | (6.7)% | - Recurring revenue primarily represents agency commissions, managed connectivity, SaaS, subscriptions, and hardware rentals[44](index=44&type=chunk)[45](index=45&type=chunk) [Net Sales by Geography](index=11&type=section&id=Item%207.7.%20Net%20Sales%20by%20Geography) This section provides a geographical breakdown of net sales for the fourth quarter and full fiscal year 2025, distinguishing between the United States & Canada, Brazil, and International regions, with non-GAAP adjustments for foreign exchange and acquisitions/divestitures Net Sales by Geography (Q4 FY25 vs Q4 FY24) | Region | Q4 FY25 Reported (in thousands) | Q4 FY24 Reported (in thousands) | % Change | Q4 FY25 Non-GAAP (in thousands) | Q4 FY24 Non-GAAP (in thousands) | % Change (Non-GAAP) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :------------------------------ | :------------------------------ | :------------------ | | United States and Canada | $744,644 | $663,542 | 12.2% | $736,450 | $663,542 | 11.0% | | Brazil | $68,242 | $82,571 | (17.4)% | $72,911 | $82,571 | (11.7)% | | Consolidated | $812,886 | $746,113 | 8.9% | $809,361 | $746,113 | 8.5% | Net Sales by Geography (FY25 vs FY24) | Region | FY25 Reported (in thousands) | FY24 Reported (in thousands) | % Change | FY25 Non-GAAP (in thousands) | FY24 Non-GAAP (in thousands) | % Change (Non-GAAP) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :------------------ | | United States and Canada | $2,800,739 | $2,921,172 | (4.1)% | $2,770,562 | $2,921,172 | (5.2)% | | International | $240,071 | $338,637 | (29.1)% | $272,806 | $334,618 | (18.5)% | | Consolidated | $3,040,810 | $3,259,809 | (6.7)% | $3,043,368 | $3,255,790 | (6.5)% | [Free Cash Flow Reconciliation](index=12&type=section&id=Item%207.8.%20Free%20Cash%20Flow%20Reconciliation) This section reconciles GAAP operating cash flow to non-GAAP free cash flow for both the fourth quarter and full fiscal year 2025 Free Cash Flow Reconciliation (Q4 & FY) | Metric | Q4 FY25 (in thousands) | Q4 FY24 (in thousands) | FY25 (in thousands) | FY24 (in thousands) | | :------------------------ | :--------------------- | :--------------------- | :------------------ | :------------------ | | GAAP operating cash flow | $7,644 | $54,738 | $112,349 | $371,647 | | Less: Capital expenditures | $(2,518) | $(1,270) | $(8,286) | $(8,555) | | Free cash flow (non-GAAP) | $5,126 | $53,468 | $104,063 | $363,092 | [Reconciliation of Other Non-GAAP Financial Information](index=13&type=section&id=Item%207.9.%20Reconciliation%20of%20Other%20Non-GAAP%20Financial%20Information) This section provides detailed reconciliations of GAAP to non-GAAP measures for SG&A expenses, operating income, pre-tax income, net income, and diluted EPS for both the fourth quarter and full fiscal year 2025, outlining specific adjustments - Detailed reconciliations are provided for SG&A expenses, operating income, pre-tax income, net income, and diluted EPS for Q4 FY25 and FY25, showing adjustments for intangible amortization, contingent consideration, acquisition/divestiture costs, restructuring costs, tax recovery, insurance recovery, cyberattack restoration costs, and legal settlement[54](index=54&type=chunk)[56](index=56&type=chunk) [Additional Company Information](index=3&type=section&id=Item%208.%20Additional%20Company%20Information) ScanSource provides webcast details for earnings calls, includes a safe harbor statement for forward-looking information, and highlights its role as a leading technology distributor [Webcast Details](index=3&type=section&id=Item%208.1.%20Webcast%20Details) ScanSource provided details for accessing its Earnings Infographic and a webcast of the earnings conference call on its investor relations website - An Earnings Infographic and a webcast of the earnings conference call are available on ScanSource's website (www.scansource.com, Investor Relations section)[16](index=16&type=chunk) - The webcast will be available for replay for 60 days[16](index=16&type=chunk) [Safe Harbor Statement](index=3&type=section&id=Item%208.2.%20Safe%20Harbor%20Statement) The press release includes a safe harbor statement regarding forward-looking statements, cautioning that actual results may differ materially due to various risks and uncertainties, including macroeconomic conditions, growth strategy implementation, credit risks, and cyberattacks - The press release contains forward-looking statements, including the FY26 annual outlook, which involve risks and uncertainties beyond ScanSource's control[17](index=17&type=chunk) - Factors that could cause actual results to differ include macroeconomic conditions, failure to manage growth strategy, acquisition synergies, credit risks, changes in interest/exchange rates, cyberattacks, and loss of key partners/suppliers[17](index=17&type=chunk) - ScanSource disclaims any obligation to update these forward-looking statements[17](index=17&type=chunk) [About ScanSource, Inc.](index=4&type=section&id=Item%208.3.%20About%20ScanSource,%20Inc.) ScanSource, Inc. is a leading technology distributor founded in 1992, headquartered in Greenville, South Carolina. It enables channel sales partners to deliver converging solutions across hardware, SaaS, connectivity, and cloud services, and has been recognized as a 'Best Place to Work' and 'World's Most Admired Company' - ScanSource, Inc. (NASDAQ: SCSC) is a leading technology distributor that addresses complex, converging technologies and accelerates growth for channel sales partners[26](index=26&type=chunk) - The company enables partners to deliver solutions across hardware, software as a service (SaaS), connectivity, and cloud services[26](index=26&type=chunk) - Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2025 Best Places to Work in South Carolina and on FORTUNE magazine's 2025 List of World's Most Admired Companies, ranking 875 on the Fortune 1000[26](index=26&type=chunk)

Business Transformation & Strategy - ScanSource has transformed from a traditional hardware distributor to an innovative hybrid distributor with a focus on specialty device distribution and fast-growing recurring revenue[6] - The company aims to drive sustainable profitable growth by orchestrating hybrid technology solutions through a rapidly growing ecosystem of suppliers and channel partners[16] - A key mid-term goal is to increase recurring revenue as a percentage of gross profits to over 30%[22, 72] Financial Performance & Metrics - Recurring revenue has seen rapid growth, increasing from $0 million in FY16 to $111 million in FY24[13] - Gross profit margin has expanded from 9.7% in FY16 to 12.2% in FY24, representing a +259 bps increase[13] - In Q3 FY25, total recurring revenue reached $39.6 million, a 41% year-over-year increase[24] - The company maintains a strong balance sheet with a net leverage ratio of (0.1)x in Q3 FY25, $146 million in cash and cash equivalents, and $350 million in credit facility availability[56] Market Position & Opportunities - ScanSource is positioned as a leading hybrid distributor, offering a diverse ecosystem of partners and technologies[10, 11] - The company differentiates itself through unmatched hybrid distribution capabilities, focusing on complex, niche markets[41, 42] - Intelisys, a technology services distributor, contributes approximately 90% of the Intelisys & Advisory segment's gross profit, with annualized net billings of approximately $2.86 billion[11, 32]

Financial Data and Key Metrics Changes - For Q3, the company reported a 6% year-over-year decline in net sales, while gross profit and adjusted EBITDA both increased by 6% [15][21] - Gross profit margin improved to 14.2%, and adjusted EBITDA margin rose to 4.97% [15] - Non-GAAP net income increased by 16%, and non-GAAP diluted EPS rose by 25% [16] Business Line Data and Key Metrics Changes - Specialty Technology Solutions segment saw a 7% year-over-year decline in net sales, but gross profits increased by 3% due to a higher mix of recurring revenue [17] - The Intelisys and Advisory segment experienced a 16% year-over-year increase in net sales and gross profits, with adjusted EBITDA growing by 20% [18] Market Data and Key Metrics Changes - Most technologies in North America, including mobility, barcode, networking, physical security, payment terminals, and wireless connectivity, grew year-over-year [7][17] - The business in Brazil faced challenges due to macroeconomic issues and foreign exchange impacts, but it represents less than 10% of total revenues [45][46] Company Strategy and Development Direction - The company is focused on driving profitable growth both organically and through strategic acquisitions, with a higher capital allocation priority for acquisitions [14][20] - The Integrated Solutions Group was created to provide high-margin products and services, and a new business development team will be launched to support emerging technology companies [10][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model's resilience and highlighted the importance of free cash flow generation [15][19] - The company updated its FY 2025 outlook to approximately $3 billion in net sales and adjusted EBITDA between $140 million and $145 million [21] Other Important Information - The company announced a new share repurchase authorization of $200 million, in addition to the remaining $42 million from the previous authorization [20] - The company is actively pursuing acquisition targets that align with its strategy for growth and margin improvement [20][76] Q&A Session Summary Question: Guidance for Q4 and trends in April - Management discussed expectations for sequential growth in Q4, citing improvements in netted down revenue and historical averages [27][28] Question: Share repurchase authorization and capital allocation - Management clarified that both acquisitions and share repurchases are priorities, with a focus on maintaining a target net debt leverage of one to two times adjusted EBITDA [33][36] Question: Demand trends in Brazil - Management noted macroeconomic challenges and foreign exchange impacts affecting performance in Brazil, which is less than 10% of total revenues [45][46] Question: Channel exchange and new suppliers - Management highlighted the success of the channel exchange in recruiting new suppliers, particularly in the AI space [49][58] Question: Competitive environment for acquisitions - Management indicated a favorable environment for acquisitions, with a wide range of targets available and a disciplined approach to valuations [75] Question: Impact of large orders on gross margins - Management acknowledged that large deals typically have a lower margin profile but emphasized the benefits of acquired businesses and recurring revenues [77] Question: Free cash flow guidance - Management explained that timing of sales in Q4 could impact free cash flow, but they remain confident in achieving at least $70 million [78]

Financial Data and Key Metrics Changes - For Q3, the company reported a net sales decline of 6% year over year, while gross profit and adjusted EBITDA both increased by 6% [13][14] - Gross profit margin improved to 14.2%, and adjusted EBITDA margin rose to 4.97% [13] - Non-GAAP net income increased by 16%, and non-GAAP diluted EPS rose by 25% [14] Business Line Data and Key Metrics Changes - Specialty Technology Solutions segment saw net sales decline by 7% year over year, but gross profits increased by 3% due to a higher mix of recurring revenue [14][15] - The Intelisys and Advisory segment experienced a 16% increase in net sales and gross profits, with adjusted EBITDA growing by 20% year over year [15][16] Market Data and Key Metrics Changes - Most technologies in North America, including mobility, barcode, networking, physical security, payment terminals, and wireless connectivity, grew year over year [6][14] - The business in Brazil faced challenges due to macroeconomic issues and foreign exchange impacts, but it remains less than 10% of total revenues [11][42] Company Strategy and Development Direction - The company is focused on driving profitable growth both organically and through strategic acquisitions, with a higher capital allocation priority for acquisitions [12][18] - The Integrated Solutions Group was created to provide high-margin products and services, and a new business development team will be launched to support emerging technology companies [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model's resilience and highlighted the importance of free cash flow generation [13][17] - The company updated its FY 2025 outlook to approximately $3 billion in net sales and adjusted EBITDA between $140 million and $145 million [19] Other Important Information - The company announced a new share repurchase authorization of $200 million, in addition to the remaining $42 million from the previous authorization [18] - The company is actively pursuing acquisitions that align with its strategy and maintain a target net debt leverage of one to two times adjusted EBITDA [18][32] Q&A Session Summary Question: Guidance for Q4 and trends in April - Management discussed expectations for sequential growth in Q4, citing improvements in large deals and netted down revenue comparisons from the previous year [21][24] Question: Share repurchase authorization and capital allocation - Management clarified that the larger share repurchase authorization reflects confidence in acquisitions while maintaining a balanced approach to capital allocation [27][30] Question: Demand trends in Brazil - Management noted that Brazil is facing macroeconomic challenges and foreign exchange impacts, but profitability remains insulated due to cost management [42][43] Question: Channel exchange and SaaS revenue streams - Management highlighted the success of the channel exchange in recruiting new suppliers, particularly in the AI space, which is contributing to revenue growth [45][47] Question: Top line performance and competitive environment - Management acknowledged weaknesses in certain areas while emphasizing growth in specific technologies, attributing some performance discrepancies to netted down revenue [50][52] Question: Large orders and gross margins - Management indicated that large deals typically have a lower margin profile, but the acquired businesses and recurring revenues help offset this impact [72][74] Question: Free cash flow guidance - Management explained that free cash flow guidance remains at least $70 million, with potential fluctuations based on the timing of sales within the quarter [75]

Core Insights - ScanSource (SCSC) reported quarterly earnings of $0.86 per share, exceeding the Zacks Consensus Estimate of $0.77 per share, and up from $0.69 per share a year ago, representing an earnings surprise of 11.69% [1] - The company posted revenues of $704.85 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 11.21%, and down from $752.6 million year-over-year [2] - ScanSource shares have declined approximately 23.9% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.87 on revenues of $826.7 million, and for the current fiscal year, it is $3.33 on revenues of $3.14 billion [7] - The estimate revisions trend for ScanSource is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Industrial Services industry, to which ScanSource belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting that companies in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8]

Financial Performance - Net sales for the quarter ended March 31, 2025, were $704.8 million, a decrease of 6.3% compared to $752.6 million for the same quarter in 2024[19] - Gross profit for the quarter was $100.2 million, representing a gross margin of 14.2%, compared to $94.5 million and a gross margin of 12.6% in the prior year[19] - Net income for the quarter was $17.4 million, an increase of 36.5% from $12.8 million in the same quarter last year[19] - The company reported a basic net income per share of $0.75 for the quarter, up from $0.51 in the prior year[19] - Total revenue for the quarter ended March 31, 2025, was $665,229,000, with recurring revenue contributing $39,618,000[50] - Operating income for the quarter was $22.3 million, an increase of 27.5% from $17.5 million in the same quarter of 2024[95] - Comprehensive income for the quarter was $27.1 million, compared to $8.0 million in the same quarter of 2024[20] Assets and Liabilities - Total assets decreased to $1.725 billion as of March 31, 2025, down from $1.779 billion as of June 30, 2024[16] - Total liabilities decreased to $823.5 million from $854.8 million over the same period[16] - Total current assets decreased to $1.31 billion from $1.40 billion, a decline of 6.7%[16] - Shareholders' equity as of March 31, 2025, was $901.7 million, down from $924.3 million at June 30, 2024[16] - The total debt as of March 31, 2025, was $138,024,000, a decrease from $144,056,000 at June 30, 2024[60] Cash Flow and Expenditures - Cash provided by operating activities for the nine months ended March 31, 2025, was $104,704,000, down from $316,908,000 in 2024, indicating a significant decline of about 66.9%[25] - The company reported capital expenditures of $5,769,000 for the nine months ended March 31, 2025, compared to $7,285,000 in 2024, reflecting a decrease of approximately 20.8%[25] - Total cash and cash equivalents at the end of the period on March 31, 2025, were $146,287,000, down from $159,050,000 at the end of March 2024, a decrease of about 8.5%[25] - The company incurred a net cash used in financing activities of $83,424,000 for the nine months ended March 31, 2025, compared to $203,941,000 in 2024, showing a reduction of approximately 59.0%[25] Segment Performance - Specialty Technology Solutions segment sales were $678.4 million, down 7.0% from $729.8 million year-over-year[95] - Intelisys & Advisory segment sales increased by 16.0% to $26.4 million compared to $22.8 million in the prior year[95] - The company has realigned its operating segments effective July 1, 2024, into Specialty Technology Solutions and Intelisys & Advisory to enhance its hybrid distribution growth strategy[30] Restructuring and Future Plans - The company plans to continue focusing on market expansion and new product development as part of its growth strategy[1] - The Company expects annualized savings of approximately $10.0 million and $10.5 million from restructuring programs initiated in January 2024 and September 2024, respectively[110] Tax and Compliance - The effective tax rate for the quarter ended March 31, 2025, was 28.0%, compared to 28.7% for the same quarter in 2024, reflecting a decrease of 2.4%[105] - The Company had approximately $1.2 million of total gross unrecognized tax benefits as of March 31, 2025, slightly up from $1.1 million at June 30, 2024[107] Foreign Currency and Derivatives - The company experienced a foreign currency translation adjustment gain of $10.1 million for the quarter[20] - The foreign currency translation adjustment resulted in an accumulated other comprehensive loss of $121,653,000 as of March 31, 2025[55] - The Company recorded net foreign exchange derivative contract losses of $1,446 thousand for the quarter ended March 31, 2025, compared to gains of $526 thousand in the same quarter of 2024[70] Goodwill and Intangible Assets - Goodwill increased to $228,835,000 as of March 31, 2025, from $206,301,000 at June 30, 2024, due to additions of $22,776,000[57] - The net identifiable intangible assets rose to $67,815,000 as of March 31, 2025, from $37,634,000 at June 30, 2024[58] Lease Obligations - Operating lease right-of-use assets increased to $11,155,000 as of March 31, 2025, from $9,057,000 as of June 30, 2024, representing a 23.2% increase[99] - Total operating lease costs for the quarter ended March 31, 2025, were $1,511,000, slightly up from $1,507,000 in the same quarter of 2024[100] - Cash paid for lease liabilities during the nine months ended March 31, 2025, was $3,039,000, down from $4,019,000 in the same period of 2024, indicating a 24.4% reduction[100]

Financial Performance - Net sales for Q3 FY25 totaled $704.8 million, a decrease of 6.3% year-over-year[2] - Gross profit increased by 6.1% year-over-year to $100.2 million, with a gross profit margin of 14.2% compared to 12.6% in the prior-year quarter[5] - GAAP net income for Q3 FY25 was $17.4 million, or $0.74 per diluted share, representing a 36.1% increase from the prior-year quarter[7] - Operating income for Q3 FY25 was $22.3 million, an increase of 27.3% year-over-year[6] - Net sales for the quarter ended March 31, 2025, were $704,847 thousand, a decrease of 6.3% compared to $752,599 thousand in the same quarter of 2024[27] - Gross profit for the quarter was $100,202 thousand, up from $94,481 thousand year-over-year, reflecting a gross margin improvement[27] - Net income for the quarter was $17,431 thousand, representing an increase of 36.5% from $12,806 thousand in the prior year[27] - Adjusted EBITDA for Q3 FY25 rose by 5.9% to $35.1 million, with an adjusted EBITDA margin of 4.97%[7] - Adjusted EBITDA for the quarter was $35,053 thousand, compared to $33,095 thousand in the same quarter of 2024, indicating a year-over-year growth of 5.9%[32] - Operating income for Q1 2025 was $22,339 thousand, while net income was $17,431 thousand, resulting in a diluted EPS of $0.74[42] Revenue Composition - Recurring revenue increased by 41.0% year-over-year, contributing to the overall revenue mix[4] - Specialty Technology Solutions segment net sales were $678,433 thousand, a decline of 7.0% compared to $729,834 thousand in the same quarter of 2024[35] - Non-GAAP net sales in the United States and Canada were $647,642 thousand, reflecting a 3.5% decline from $671,246 thousand in the prior year[39] - Net sales in Brazil reported a significant decline of 41.1%, dropping to $47,883 thousand from $81,353 thousand year-over-year[39] - Acquisitions impacted net sales by $9,322 thousand in Q1 2025, with no such impact reported in Q1 2024[39] Cash Flow and Assets - Cash and cash equivalents as of March 31, 2025, were $146.3 million, with total debt of $138.0 million[8] - Free cash flow for the first nine months of FY25 was $98.9 million (non-GAAP)[8] - Free cash flow for the quarter ended March 31, 2025, was $64,638 thousand, compared to $157,732 thousand in the same quarter of 2024[40] - Total current assets decreased to $1,310,268 thousand as of March 31, 2025, down from $1,404,699 thousand at June 30, 2024[25] - Total liabilities decreased to $823,462 thousand from $854,777 thousand, indicating a reduction in financial obligations[25] - Cash and cash equivalents at the end of the period were $146,287 thousand, down from $185,460 thousand at the beginning of the period[30] - The company reported a net cash provided by operating activities of $104,704 thousand, significantly lower than $316,908 thousand in the prior year[30] Shareholder Actions - A new $200 million share repurchase authorization was announced, supplementing the existing authorization[12] Other Financial Metrics - The Adjusted return on invested capital (Adjusted ROIC) for the period was 13.6%, up from 12.1% in the previous year[32] - SG&A expenses for Q1 2025 were $69,698 thousand, compared to $66,574 thousand in Q1 2024[42] - The company experienced a capital loss from the sale of its UK-based intY business, which did not result in a tax provision due to the absence of offsetting capital gains[42] - The company reported a foreign exchange impact of $8,705 thousand on consolidated net sales for Q1 2025[39]

Core Viewpoint - ScanSource reported quarterly earnings of $0.85 per share, missing the Zacks Consensus Estimate of $0.89 per share, representing an earnings surprise of -4.49% [1][2] Financial Performance - The company posted revenues of $747.5 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 10.78%, and a decline from year-ago revenues of $879.58 million [2] - Over the last four quarters, ScanSource has surpassed consensus EPS estimates only once [2] Stock Performance - ScanSource shares have increased by approximately 5.4% since the beginning of the year, outperforming the S&P 500's gain of 2.7% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.79 on revenues of $778.8 million, and for the current fiscal year, it is $3.51 on revenues of $3.24 billion [7] - The estimate revisions trend for ScanSource is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Industrial Services industry, to which ScanSource belongs, is currently in the bottom 15% of over 250 Zacks industries, which may negatively impact stock performance [8]