Core Insights - Investors in the Industrial Services sector may consider ScanSource (SCSC) and SiteOne Landscape (SITE) as potential stocks for investment [1] Valuation Metrics - SCSC has a Zacks Rank of 1 (Strong Buy) while SITE has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook for SCSC [3] - The forward P/E ratio for SCSC is 10.99, significantly lower than SITE's forward P/E of 40.85, suggesting SCSC is undervalued [5] - SCSC's PEG ratio is 0.73, compared to SITE's PEG ratio of 2.43, indicating SCSC has a better valuation relative to its expected earnings growth [5] - SCSC has a P/B ratio of 1.09, while SITE's P/B ratio is 3.88, further supporting SCSC's position as a more attractive value option [6] - Based on these valuation metrics, SCSC has a Value grade of A, whereas SITE has a Value grade of C, highlighting SCSC's superior value proposition [6]

Group 1 - ScanSource, Inc. (SCSC) has reached an important support level and recently experienced a "golden cross" event, indicating a potential bullish breakout [1][2] - A golden cross occurs when a stock's short-term moving average, typically the 50-day, crosses above its long-term moving average, usually the 200-day, suggesting stronger breakouts [2][3] - SCSC has rallied 7.8% over the past four weeks and currently holds a 1 (Strong Buy) rating on the Zacks Rank, indicating a strong bullish sentiment [4] Group 2 - The positive earnings outlook for SCSC further supports the bullish case, with no earnings estimates decreasing in the past two months and two revisions higher [4][6] - The Zacks Consensus Estimate for SCSC has increased, reinforcing the potential for further gains in the near future [6]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than the traditional "buying low and selling high" approach, aiming for quicker profits [1] Group 1: Momentum Investing Strategy - Fast-moving trending stocks can be challenging to enter at the right time, as they may lose momentum if future growth does not justify their high valuations [2] - A safer strategy involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [3] Group 2: Company Analysis - ScanSource (SCSC) - ScanSource (SCSC) has shown a price increase of 7.8% over the past four weeks, indicating growing investor interest [4] - Over the past 12 weeks, SCSC's stock gained 10.8%, demonstrating its ability to deliver positive returns over a longer timeframe [5] - SCSC has a Momentum Score of A, suggesting it is an opportune time to invest in the stock for maximum momentum advantage [6] - The stock has received a Zacks Rank 1 (Strong Buy) due to upward revisions in earnings estimates, which typically attract more investors [7] - SCSC is trading at a Price-to-Sales ratio of 0.32, indicating it is relatively undervalued, as investors pay only 32 cents for each dollar of sales [7] Group 3: 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] - Investors can explore over 45 Zacks Premium Screens tailored to different investing styles to identify potential winning stocks [9]

Core Insights - ScanSource, Inc. (SCSC) reported adjusted earnings of $1.02 per share for Q4 fiscal 2025, exceeding the Zacks Consensus Estimate of 91 cents, marking a 28% increase from the previous year's earnings of 80 cents [1][8] - The company achieved net revenues of $813 million in the quarter, an 8.9% increase year-over-year, surpassing the Zacks Consensus Estimate of $773 million [2][8] - For fiscal 2026, ScanSource projects net revenues between $3.1 billion and $3.3 billion, with adjusted EBITDA expected to be between $150 million and $160 million [9] Revenue Performance - Net revenues in the United States and Canada rose by 12.2% to $745 million, while international sales decreased by 17.4% to $68.2 million [2] - Specialty Technology Solutions' revenues increased by 9.2% to $789 million in Q4 fiscal 2025, driven by growth in North America [2] Profitability Metrics - The cost of sales for Q4 was $708 million, up 9.1% year-over-year, with gross profit totaling $105 million, an 8% increase from $97 million in the prior year [4] - Adjusted EBITDA rose by 13% year-over-year to $38.6 million, with an adjusted EBITDA margin of 4.7%, slightly up from 4.6% in the previous year [5] Cash Flow and Balance Sheet - As of June 30, 2025, the company reported cash and cash equivalents of $126 million, down from $185 million a year earlier [6] - Operating activities generated $112 million in cash for fiscal 2025, a decrease from $372 million in the prior year [6] Fiscal Year Performance - For fiscal 2025, adjusted earnings per share were $3.57, compared to $3.08 in the prior year, beating the Zacks Consensus Estimate of $3.47 [7] - Total revenues for fiscal 2025 were $3.04 billion, down 6.7% year-over-year, but still exceeding the Zacks Consensus Estimate of $3.01 billion [7] Share Price Performance - The company's shares have declined by 8.7% over the past year, contrasting with an 18% growth in the industry [10]

Core Viewpoint - ScanSource, Inc. is conducting its Q4 2025 earnings conference call to discuss operating results and future outlook [1][2][3]. Group 1: Company Overview - The conference call features key participants including the Chair and CEO, Mike Baur, and the Chief Financial Officer, Steve Jones [1][3]. - The company has provided an earnings infographic that accompanies the call, available in the Investor Relations section of its website [4]. Group 2: Financial Reporting - The call will cover both GAAP and non-GAAP results, with reconciliations provided on the company's website and in its Form 8-K [5].

Financial Data and Key Metrics Changes - Net sales for Q4 grew almost 9% year over year, while adjusted EBITDA grew 13% and non-GAAP net income grew 17% over last year [9] - Q4 non-GAAP earnings per share of $1.02 grew 27.5% year over year [10] - Full year net sales totaled just over $3 billion, a year-over-year decline of 6.7%, while gross profits grew by 2.4% to $408.6 million [12] - Non-GAAP net income of $85.1 million increased by 9.6% over last year, with full year free cash flow of $104 million representing 122% conversion of non-GAAP net income [13] Business Segment Data and Key Metrics Changes - Specialty Technology Solutions segment net sales increased 9% year over year and 16% quarter over quarter, driven by hardware growth in North America [10] - Intellisys and Advisory segment net sales and gross profits increased 1% year over year, but adjusted EBITDA declined 4% due to increased investments in SG&A [11] - Annual end user billing for Intelisys increased 4.5% year over year, totaling approximately $2.8 billion [12] Market Data and Key Metrics Changes - Brazil's business model is transitioning to focus more on cloud and recurring products, with growth in local currency despite economic challenges [51][54] - The company is experiencing competitive pressures in the Intelisys segment due to private equity-backed competitors [39] Company Strategy and Development Direction - The company is focusing on building capabilities in converged solutions, integrating hardware, software, and services [7] - A new business development team, LaunchPoint, has been created to assist emerging technology companies [6] - The company aims to increase the percentage of gross profits from recurring revenues to 50% over the next three years [44][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in growth opportunities despite navigating a dynamic macro environment [15][16] - The company anticipates low single-digit growth in the first half of fiscal year 2026, with expectations for acceleration in the second half [15][16] Other Important Information - The company ended Q4 with $126 million in cash and a net debt leverage ratio of approximately zero [13] - Share repurchases totaled $25 million for the quarter, with ongoing acquisition targets to expand capabilities [14] Q&A Session Summary Question: Discussion on midterm targets and free cash flow - Management emphasized the importance of free cash flow conversion as a metric for long-term outlook and capital allocation priorities [21][22] Question: Strategic investments in the Intelisys segment - Management discussed a new partner segmentation strategy and investments to support growth in the Intelisys business [27][29] Question: Expectations for the Intelisys business in 2026 - Management indicated a focus on adding new suppliers and sales resources to drive growth in the Intelisys segment [41] Question: Guidance for next year and factors affecting EBITDA - Management highlighted the importance of investments and mix in determining the range for adjusted EBITDA growth [42][43] Question: Recurring revenue as a driver of gross profits - Management noted that acquisitions and emerging technologies will contribute to increasing recurring revenue [44][46] Question: Growth in technology segment and market outlook for Brazil - Management acknowledged strong growth in the technology segment but noted challenges in Brazil due to economic conditions [49][51]

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]