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ScanSource delivers strong fourth quarter sales and profitability growth


Outstanding execution of growth opportunities; quarterly net sales up 34% year-over-year

ScanSource, Inc. (NASDAQ: SCSC), a leading provider of technology products and solutions, announced financial results for the fourth quarter and fiscal year ended June 30, 2021. All results in this release reflect continuing operations only unless otherwise noted.

Fourth Quarter Summary:

  • Net sales: $852.7 million, up 34% year-over-year

  • Gross profit: $95.8 million, up 29% year-over-year

  • GAAP operating income of $23.3 million for a 2.73% operating income margin

  • Non-GAAP operating income of $28.4 million, up 245% year-over-year, for a 3.33% non-GAAP operating income margin

  • Net income from continuing operations of $20.7 million

  • GAAP diluted EPS of $0.80 per share; non-GAAP diluted EPS of $0.96 per share

  • Generated strong operating cash flow of $61.3 million for the quarter and $116.8 million for the fiscal year

  • Return on invested capital increased to 14.9% for the quarter

“Our employees delivered strong fourth quarter net sales and profitability growth with operational excellence across our business,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “Our momentum and execution strengthen our confidence in our hybrid distribution strategy accelerating our growth across hardware, software, connectivity, and cloud. ScanSource is uniquely positioned to enable the growth opportunities ahead for our channel partners and suppliers.”

Quarterly Results

Net sales for the fourth quarter of fiscal year 2021 totaled $852.7 million, up 34.0% year-over-year, or 33.7% year-over-year for organic growth. This reflects broad-based growth across our technologies in both operating segments in all geographies. For the fourth quarter of fiscal year 2021, operating income increased to $23.3 million from $(113.4) million for the prior-year quarter, which included goodwill and asset impairment charges of $120.5 million. Fourth quarter fiscal year 2021 non-GAAP operating income increased to $28.4 million for a 3.33% non-GAAP operating income margin, up from $8.2 million for the prior-year quarter. On a GAAP basis, net income for the fourth quarter of fiscal year 2021 totaled $20.7 million, or $0.80 per diluted share, compared to net loss of $(108.9) million, or $(4.29) per diluted share, for the prior-year quarter. Fourth quarter non-GAAP net income totaled $24.5 million, or $0.96 per diluted share, which includes a $0.19 benefit from discrete tax items. These results compare to fourth quarter fiscal year 2020 non-GAAP net income of $4.9 million, or $0.19 per diluted share.

Full-Year Results For fiscal year 2021, net sales increased 3.4% to $3.2 billion, or a 5.5% year-over-year increase on an organic basis. During the year, the Company saw continued progress in recovering from the sales impact of the COVID-19 pandemic. For the Intelisys business, fiscal year 2021 net sales increased 13.1% year-over-year. Fiscal year 2021 GAAP operating income increased to $61.5 million, and non-GAAP operating income increased to $93.1 million, up 18.0% year-over-year. In July 2020, the Company implemented a $30 million annualized expense reduction program to address the business impacts of the COVID-19 pandemic and prepare for the next phase of growth.

On a GAAP basis, net income for fiscal year 2021 totaled $45.4 million, or $1.78 per diluted share. Non-GAAP net income increased to $69.9 million, or $2.74 per diluted share, compared to $52.0 million, or $2.05 per diluted share, for the fiscal year 2020.

Share Repurchase Authorization ScanSource also announced a new $100 million authorization by its Board of Directors to repurchase shares of the Company’s common stock.

“In setting our capital allocation priorities, our top priority is reinvestment in the growth of our business and driving value creation for our shareholders,” said Steve Jones, Chief Financial Officer, ScanSource, Inc. “Our repurchase authorization reflects our confidence in ScanSource’s business and the strength of our long-term operating cash flow generation.” Repurchases may be made in the open market or through privately negotiated transactions, and ScanSource may enter into Rule 10b5-1 plans to facilitate repurchases. This share repurchase authorization does not obligate ScanSource to purchase any particular amount of common stock, and it may be suspended at any time at the Company’s discretion. The authorization does not have any time limit.

Annual Financial Outlook for Fiscal Year 2022 The following statements are based on ScanSource’s current expectation for the full fiscal year ended June 30, 2022.


FY22 Annual Outlook

Net sales growth, year-over-yearAt least 5.5%Adjusted EBITDA (non-GAAP)At least $135 millionAdjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash share-based compensation expense (effective with the first quarter of fiscal year 2022). For comparison, fiscal year 2021 Adjusted EBITDA, excluding share-based compensation totaled $118 million. ScanSource’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. These statements are forward-looking, and actual results may differ materially.

– BUSINESS WIRE About ScanSource, Inc. ScanSource, Inc. (NASDAQ: SCSC) is at the center of the technology solution delivery channel, connecting businesses and providing solutions for their complex needs. ScanSource sells through multiple, specialized routes-to-market with digital, physical and services offerings from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration, telecom and cloud services. ScanSource enables its sales partners to create, deliver and manage solutions for end-customers across almost every vertical market. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2021 Best Places to Work in South Carolina and on FORTUNE magazine’s 2021 List of World’s Most Admired Companies. ScanSource ranks #655 on the Fortune 1000. For more information, visit www.scansource.com.

ScanSource, Inc. and SubsidiariesCondensed Consolidated Balance Sheets (Unaudited)

(in thousands)

June 30, 2021 June 30, 2020*


Assets

Current assets:


Cash and cash equivalents $62,718 $29,485


Accounts receivable, less allowance of $19,341 at June 30, 2021 and $21,906 at June 30, 2020 568,984 443,185


Inventories 470,081 454,885


Prepaid expenses and other current assets 117,860 94,681


Current assets held for sale 181,231


Total current assets 1,219,643 1,203,467


Property and equipment, net 42,836 55,641


Goodwill 218,877 214,288


Identifiable intangible assets, net 104,860 121,547

Deferred income taxes21,853 24,630

Other non-current assets63,615 72,521

Total assets$1,671,684 $1,692,094


Liabilities and Shareholders’ Equity

Current liabilities:


Accounts payable $634,805 $454,240


Accrued expenses and other current liabilities 87,790 76,686


Current portion of contingent consideration 46,334


Income taxes payable 2,501 5,886


Current portion of long-term debt 7,843 7,839


Current liabilities held for sale 128,022


Total current liabilities 732,939 719,007


Deferred income taxes 3,954 3,884


Long-term debt, net of current portion 135,331 143,175


Borrowings under revolving credit facility 67,714


Other long-term liabilities 68,269 80,068


Total liabilities 940,493 1,013,848


Commitments and contingencies

Shareholders’ equity:


Preferred stock, no par value; 3,000,000 shares authorized, none issued


Common stock, no par value; 45,000,000 shares authorized, 25,499,465 and 25,361,298 shares issued and outstanding at June 30, 2021 and June 30, 2020, respectively

71,253 63,765


Retained earnings 758,071 747,276


Accumulated other comprehensive loss (98,133) (132,795)


Total shareholders’ equity 731,191 678,246


Total liabilities and shareholders’ equity $1,671,684 $1,692,094

*Derived from audited financial statements.


ScanSource, Inc. and Subsidiaries Condensed Consolidated Income Statements (Unaudited)(in thousands, except per share data)


Quarter ended June 30, Fiscal year ended June 30,

2021 2020 2021 2020


Net sales $852,694 $636,450 $3,150,806 $3,047,734


Cost of goods sold 756,916 562,3032 800,090 2,692,165


Gross profit 95,778 74,147 350,716 355,569


Selling, general and administrative expenses

64,758 58,192 247,438 259,535


Depreciation expense 2,898 3,304 12,533 13,033


Intangible amortization expense

4,893 4,946 19,488 19,953


Restructuring and other charges

(54)9,258 604


Impairment charges 120,470 120,470


Change in fair value of contingent consideration

674 516 6,941


Operating income (loss) 23,283 (113,439) 61,483 (64,967)


Interest expense 1,643 2,497 6,929 12,224


Interest income (1,341)(3,199) (3,097)(5,826)


Other expense (income), net (65)213 116 411


Income before income taxes 23,046 (112,950) 57,535 (71,776)


Provision for income taxes 2,389 (4,091) 12,146 7,451


Net income (loss) from continuing operations

20,657 (108,859) 45,389 (79,227)


Net income (loss) from discontinued operations

3,053 (108,403) (34,594)(113,427)


Net income (loss) $23,710 $(217,262) $10,795 $(192,654)


Per share data:

Net income (loss) from continuing operations per common share, basic

$0.81 $(4.29) $1.79 $(3.12)


Net income (loss) from discontinued operations per common share, basic

0.12 (4.28) (1.36)(4.47)


Net income (loss) per common share, basic

$0.93 $(8.57) $0.42 $(7.59)


Weighted-average shares outstanding, basic

25,482 25,353 25,423 25,378


Net income (loss) from continuing operations per common share, diluted

$0.80 $(4.29) $1.78 $(3.12)


Net income (loss) from discontinued operations per common share, diluted

0.12 (4.28) (1.36)(4.47)


Net income (loss) per common share, diluted

$0.92 $(8.57) $0.42 $(7.59)


Weighted-average shares outstanding, diluted

25,664 25,353 25,518 25,378




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