Business Wire | Aug 31, 2020 04:08PM EDT

ScanSource Reports Fourth Quarter and Fiscal Year 2020 Results

Aug. 31, 2020

GREENVILLE, S.C.--(BUSINESS WIRE)--Aug. 31, 2020--ScanSource, Inc. (NASDAQ: SCSC), a leading provider of technology products and solutions, today announced financial results for the fourth quarter and fiscal year ended June 30, 2020. All results in this release reflect continuing operations only unless otherwise noted.

Fourth Quarter Summary:

* Net sales: $636.5 million, down 22% year-over-year * Gross profit: $74.1 million, down 23% year-over-year * GAAP operating loss of $(113.4) million; non-GAAP operating income of $8.2 million * Net loss from continuing operations of $(108.9) million, which includes non-cash goodwill and asset impairment charges of $120.5 million * GAAP and non-GAAP diluted EPS of $(4.29) and $0.19 per share, respectively * Classified divestitures of products distribution business outside of the United States, Canada and Brazil ("Divestitures") as assets held for sale at June 30, 2020 and reported as discontinued operations in the financial results * Generated strong operating cash flow of $74.0 million during the quarter

"While the COVID-19 pandemic had a significant impact on our quarterly financial results, I am proud of how our teams have executed and the value we deliver to our suppliers and customers," said Mike Baur, Chairman and CEO, ScanSource, Inc. "We've taken the necessary actions to strengthen our balance sheet, improve our cost structure, and continue to drive investments in our higher-margin, VAR cloud platform and agency business."

Quarterly Results

Net sales totaled $636.5 million for the fourth quarter of fiscal year 2020, down 22% year-over-year, or down 19% for organic growth. The reduction in net sales is primarily due to the impact of the COVID-19 pandemic, which resulted in lower demand from customers. For the Intelisys master agency business, net sales increased 15% year-over-year for the fourth quarter of fiscal year 2020.

For the fourth quarter of fiscal year 2020, operating income decreased to $(113.4) million, and non-GAAP operating income decreased to $8.2 million. As of the annual goodwill impairment test date of April 30th, the Company's revenue projections were lowered, primarily as a result of the COVID-19 pandemic. As a result, the Company recognized pre-tax, non-cash goodwill and asset impairment charges of $120.5 million. This accounting adjustment does not involve any cash outflow.

On a GAAP basis, net income for the fourth quarter of fiscal year 2020 totaled $(108.9) million, or $(4.29) per diluted share, compared to net income of $16.0 million, or $0.62 per diluted share, for the prior-year quarter. Non-GAAP net income totaled $4.9 million, or $0.19 per diluted share, compared to $19.3 million, or $0.75 per diluted share, for the prior-year quarter.

At June 30, 2020, ScanSource had cash and cash equivalents of $29.5 million and total debt of $218.7 million for continuing operations. Borrowings for discontinued operations totaled $28.2 million. In the fourth quarter of fiscal year 2020, the Company generated $74.0 million of operating cash flow.

Full Year Results

For fiscal year 2020, net sales decreased 6% to $3.0 billion, or a 5% year-over-year decrease on an organic basis. Fiscal year 2020 GAAP operating income decreased to $(65.0) million, largely from the non-cash goodwill and asset impairment charges, and non-GAAP operating income decreased to $78.9 million.

On a GAAP basis, net income for fiscal year 2020 totaled $(79.2) million, or $(3.12) per diluted share, compared to net income of $64.9 million, or $2.52 per diluted share for the prior year. Non-GAAP net income totaled $52.0 million, or $2.05 per diluted share, compared to $87.7 million, or $3.41 per diluted share for the prior year.

Discontinued Operations

On August 20, 2019, ScanSource announced plans to divest its products distribution businesses outside of the United States, Canada and Brazil. ScanSource continues to operate in its digital distribution business in these geographies. These plans are part of a strategic portfolio repositioning to align investments with higher-growth, higher-margin businesses. On July 23, 2020, ScanSource signed an agreement to sell its products distribution business located in Mexico, Colombia, Chile, Peru and its Miami-based export operations to Intcomex. The Company is actively working on sales opportunities for its divestitures in Europe and the UK.

At June 30, 2020, the Divestitures were classified as assets held for sale and recorded as discontinued operations. Net loss from discontinued operations for the fourth quarter of fiscal year 2020 includes a $88.9 million non-cash loss on held for sale classification to establish a valuation allowance and $13.7 million for non-cash impairment charges.

COVID-19 Update

Our top priority during the COVID-19 pandemic is protecting the health and safety of our employees. We implemented travel restrictions and transitioned our employees, where possible, to a remote working environment. Nearly all office-based employees around the world are working remotely. We have taken a number of measures to ensure our teams have the flexibility and resources they need to stay safe and healthy. We are experiencing higher costs from these safety measures to protect our employees. We are continuing to provide the high level of customer service our partners expect from us.

Initiated Expense Reduction Plan

In July 2020, ScanSource initiated a $30 million annualized expense reduction plan to address the business impacts of the COVID-19 pandemic and prepare for the next phase of growth.

Webcast Details and CFO Commentary

At approximately 4:15 p.m. ET today, a CFO commentary, as a supplement to this press release and the Company's conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results in a conference call today, August 31, 2020, at 5:00 p.m. ET. A webcast of the call will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days.

Safe Harbor Statement

This press release contains "forward-looking" statements, including the Company's Divestitures and the impact of the COVID-19 pandemic, which involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated results, including, but not limited to, the impact of the COVID-19 pandemic on our operations and financial condition, the Company's ability to complete the Divestitures on acceptable terms or to otherwise dispose of the operations, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, the impact of tax reform laws, the failure of acquisitions to meet the Company's expectations, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, the decline in demand for the products and services that the Company provides, reduced prices for the products and services that the Company provides due both to competitor and customer action, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2020, filed with the Securities and Exchange Commission. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information

In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company also discloses certain non-GAAP financial measures, which are summarized below. Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments.

Net sales on a constant currency basis, excluding Divestitures and acquisitions The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from Divestitures, as well as acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis.

Income Statement Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP net sales, non-GAAP gross profit, non-GAAP operating income, non-GAAP other expense, net, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges and other non-GAAP adjustments. Non-GAAP metrics are useful in assessing and understanding the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods.

Return on invested capital ("ROIC"): Management uses ROIC as a performance measurement to assess efficiency in allocating capital under the Company's control to generate returns. Management believes this metric balances the Company's operating results with asset and liability management, is not impacted by capitalization decisions and correlates with shareholder value creation. In addition, it is easily computed, communicated and understood. ROIC also provides management a measure of the Company's profitability on a basis more comparable to historical or future periods.

ROIC assists management in comparing the Company's performance over various reporting periods on a consistent basis because it removes from operating results the impact of items that do not reflect core operating performance. ROIC is calculated as adjusted EBITDA over invested capital. Adjusted earnings before interest expense, income taxes, depreciation and amortization ("Adjusted EBITDA") excludes the change in fair value of contingent consideration, in addition to other non-GAAP adjustments. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. Management believes the calculation of ROIC provides useful information to investors and is an additional relevant comparison of the Company's performance during the year.

These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below.

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 Best Places to Work in South Carolina and on FORTUNE magazine's 2020 List of World's Most Admired Companies. ScanSource ranks #654 on the Fortune 1000. For more information, visit www.scansource.com.

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands)

June 30, 2020 June 30, 2019

Assets

Current assets:

Cash and cash equivalents $ 29,485 $ 19,305

Accounts receivable, less allowance of $21,906 at 443,185 523,424 June 30, 2020 and $27,521 at June 30, 2019

Inventories 454,885 554,080

Prepaid expenses and other current assets 94,681 83,753

Current assets held for sale 181,231 296,753

Total current assets 1,203,467 1,477,315

Property and equipment, net 55,641 60,570

Goodwill 214,288 310,715

Identifiable intangible assets, net 121,547 121,214

Deferred income taxes 24,630 15,447

Other non-current assets 72,521 52,921

Non-current assets held for sale - 29,079

Total assets $ 1,692,094 $ 2,067,261

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $ 454,240 $ 488,291

Accrued expenses and other current liabilities 76,686 64,629

Current portion of contingent consideration 46,334 38,393

Income taxes payable 5,886 3,956

Short-term borrowings - -

Current portion of long-term debt 7,839 4,085

Current liabilities held for sale 128,022 101,532

Total current liabilities 719,007 700,886

Deferred income taxes 3,884 -

Long-term debt, net of current portion 143,175 151,014

Borrowings under revolving credit facility 67,714 172,390

Long-term portion of contingent consideration - 39,532

Other long-term liabilities 80,068 57,153

Long-term liabilities held for sale - 32,157

Total liabilities 1,013,848 1,153,132

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 sharesauthorized, 25,361,298 and 25,408,397 shares 63,765 64,287 issued and outstanding at June 30, 2020 and June30, 2019, respectively

Retained earnings 747,276 939,930

Accumulated other comprehensive loss (132,795 ) (90,088 )

Total shareholders' equity 678,246 914,129

Total liabilities and shareholders' equity $ 1,692,094 $ 2,067,261

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Income Statements (Unaudited)

(in thousands, except per share data)



Quarter ended June 30, Fiscal year ended June 30,

2020 2019 2020 2019

Net sales $ 636,450 $ 811,432 $ 3,047,734 $ 3,249,799

Cost of goods sold 562,303 714,789 2,692,165 2,856,996

Gross profit 74,147 96,643 355,569 392,803

Selling, general andadministrative 58,192 62,923 260,139 252,948 expenses

Depreciation expense 3,304 2,952 13,033 12,028

Intangible 4,946 4,542 19,953 17,893 amortization expense

Impairment charges 120,470 - 120,470 -

Change in fair valueof contingent 674 3,666 6,941 15,200 consideration

Operating (loss) (113,439 ) 22,560 (64,967 ) 94,734 income

Interest expense 2,497 3,851 12,224 13,162

Interest income (3,199 ) (446 ) (5,826 ) (1,818 )

Other expense 213 22 411 (247 )(income), net

(Loss) Income before (112,950 ) 19,133 (71,776 ) 83,637 income taxes

Provision for income (4,091 ) 3,137 7,451 18,778 taxes

Net (loss) incomefrom continuing (108,859 ) 15,996 (79,227 ) 64,859 operations

Net loss fromdiscontinued (108,403 ) (4,418 ) (113,427 ) (7,262 )operations

Net (loss) income $ (217,262 ) $ 11,578 $ (192,654 ) $ 57,597

Per share data:



Net (loss) incomefrom continuing $ (4.29 ) $ 0.62 $ (3.12 ) $ 2.53 operations percommon share, basic

Net loss fromdiscontinued (4.28 ) (0.17 ) (4.47 ) (0.28 )operations percommon share, basic

Net (loss) incomeper common share, $ (8.57 ) $ 0.45 $ (7.59 ) $ 2.25 basic

Weighted-averageshares outstanding, 25,353 25,627 25,378 25,642 basic



Net (loss) incomefrom continuingoperations per $ (4.29 ) $ 0.62 $ (3.12 ) $ 2.52 common share,diluted

Net loss fromdiscontinuedoperations per (4.28 ) (0.17 ) (4.47 ) (0.28 )common share,diluted

Net (loss) incomeper common share, $ (8.57 ) $ 0.45 $ (7.59 ) $ 2.24 diluted

Weighted-averageshares outstanding, 25,353 25,691 25,378 25,734 diluted

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)



Quarter ended June 30, Fiscal year ended June 30,

2020 2019 2020 2019

Cash flows fromoperating activities:

Net (loss) income $ (217,262 ) $ 11,578 $ (192,654 ) $ 57,597

Net loss fromdiscontinued (108,403 ) (4,418 ) (113,427 ) (7,262 )operations

Net (loss) incomefrom continuing (108,859 ) 15,996 (79,227 ) 64,859 operations

Adjustments toreconcile netincome to netcash (used in)provided by operatingactivities ofcontinuingoperations:

Depreciation and 8,743 8,321 35,328 33,652 amortization

Provision for 222 (1,197 ) 1,621 1,712 doubtful accounts

Share-based 1,425 1,210 5,478 6,045 compensation

Impairment 120,470 - 120,470 - charges

Deferred income (10,714 ) (3,698 ) (12,193 ) (2,757 )taxes

Change in fairvalue of 674 3,666 6,941 15,200 contingentconsideration

Contingentconsideration - - (3,050 ) (10,190 )payments excess

Other 125 98 502 350

Changes inoperating assetsand liabilities, net ofacquisitions:

Accounts 57,562 (38,060 ) 57,477 (5,490 )receivable

Inventories 93,623 61,948 86,177 (85,862 )

Prepaid expenses (2,903 ) (14,657 ) (13,880 ) (10,091 )and other assets

Other non-current (12,534 ) (2,545 ) (13,563 ) (2,438 )assets

Accounts payable (76,224 ) (5,622 ) (20,846 ) 16,134

Accrued expensesand other (1,992 ) 6,118 11,239 2,377 liabilities

Income taxes 4,334 2,873 (441 ) (7,469 )payable

Net cash providedby operatingactivities of 73,952 34,451 182,033 16,032 continuingoperations

Cash flows frominvestingactivities of continuingoperations:

Capital 188 4,093 (6,387 ) (5,797 )expenditures

Cash paid forbusiness - - (48,921 ) (32,161 )acquisitions, netof cash acquired

Net cash used ininvestingactivities of 188 4,093 (55,308 ) (37,958 )continuingoperations

Cash flows fromfinancingactivities of continuingoperations:

Borrowings onrevolving credit, 477,446 458,522 2,085,918 2,061,090 net of expenses

Repayments onrevolving credit, (539,732 ) (611,877 ) (2,190,595 ) (2,132,702 )net of expenses

Borrowings onlong-term debt, (938 ) 150,000 (4,085 ) 149,670 net

Repayments offinance lease (1,105 ) (166 ) (1,765 ) (662 )obligations

Debt issuance - (1,096 ) - (1,096 )costs

Contingentconsideration - - (35,482 ) (35,606 )payments

Exercise of stock - - 754 1,509 options

Taxes paid onsettlement of - - (1,353 ) (1,406 )equity awards

Repurchase of - (9,176 ) (6,078 ) (9,483 )common stock

Net cash (usedin) provided byfinancing (64,329 ) (13,793 ) (152,686 ) 31,314 activities ofcontinuingoperations



ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited), continued

(in thousands)



Cash flows fromdiscontinued operations:

Net cash flowsprovided by (usedin) operating 2,235 (37,031 ) 44,238 (43,159 )activities ofdiscontinuedoperations

Net cash flows(used in)provided byinvesting (35 ) (330 ) (77 ) (1,416 )activities ofdiscontinuedoperations

Net cash flows(used in)provided byfinancing (10,663 ) 15,748 (3,921 ) 32,917 activities ofdiscontinuedoperations

Net cash flowsprovided by (used (8,463 ) (21,613 ) 40,240 (11,658 )in) discontinuedoperations

Effect ofexchange ratechanges on cash (1,489 ) 280 (3,642 ) 558 and cashequivalents

Increase(decrease) in (141 ) 3,418 10,637 (1,712 )cash and cashequivalents

Consolidated cashand cashequivalents at 34,596 20,400 23,818 25,530 beginning ofperiod

Consolidated cashand cash 34,455 23,818 34,455 23,818 equivalents atend of period

Cash and cashequivalents of 4,970 4,513 4,970 4,513 discontinuedoperations

Cash and cashequivalents of $ 29,485 $ 19,305 $ 29,485 $ 19,305 continuingoperations

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

(in thousands, except percentages)



Non-GAAP Financial Information:

Quarter ended June 30, Fiscal year ended June 30,

2020 2019 2020 2019

Return oninvested capital 4.0 % 11.2 % 7.5 % 12.1 %ratio (ROIC),annualized ^(a)



Reconciliation ofnet income to EBITDA:

Net (loss) incomefrom continuing $ (108,859 ) $ 15,996 $ (79,227 ) $ 64,859 operations (GAAP)

Plus: Interest 2,497 3,851 12,224 13,162 expense

Plus: Income (4,091 ) 3,137 7,451 18,778 taxes

Plus:Depreciation and 8,743 8,321 35,328 33,652 amortization

EBITDA (non-GAAP) (101,710 ) 31,305 (24,224 ) 130,451

Plus: Change infair value of 674 3,666 6,941 15,200 contingentconsideration

Plus: Acquisitionand divestiture 1,311 230 4,000 1,218 costs

Plus:Restructuring - - 604 - costs

Plus: Impairment 120,470 - 120,470 - charges

Plus: Tax reformand settlement, (8,424 ) - (10,744 ) - includes interestincome

Adjusted EBITDA(numerator for $ 12,321 $ 35,201 $ 97,047 $ 146,869 ROIC) (non-GAAP)



Invested Capital Calculation

Equity -beginning of the $ 897,678 $ 911,063 $ 914,129 $ 866,376 period

Equity - end of 678,246 914,129 678,246 914,129 the period

Plus: Change infair value ofcontingent 510 2,780 5,247 11,294 consideration,net of tax

Plus: Acquisitionand divestiture 1,311 230 4,000 1,218 costs

Plus:Restructuring, - - 449 - net of tax

Plus: Impairment 114,398 - 114,398 - charges, net

Plus: Tax (6,247 ) (3,110 ) (8,001 ) (3,110 )recovery, net

Plus: Impact ofdiscontinued 98,794 (16,557 ) 98,794 (16,557 )operations, netof tax

Average equity 892,345 904,268 903,631 886,675

Average funded 337,973 355,932 390,709 329,473 debt^(b)

Invested capital(denominator for $ 1,230,318 $ 1,260,200 $ 1,294,340 $ 1,216,148 ROIC) (non-GAAP)



^(a) Calculated as earnings before interest expense, income taxes, depreciationand amortization (EBITDA), plus change in fair value of contingentconsideration and other adjustments, annualized and divided by invested capitalfor the period. Invested capital is defined as average equity plus averagedaily funded interest-bearing debt for the period.

^(b) Average funded debt, which includes both continuing and discontinuedoperations, is calculated as the average daily amounts outstanding onshort-term and long-term interest-bearing debt.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Segment:

Quarter ended June 30,

2020 2019 % Change

Worldwide Barcode, Networking & Security: (in thousands)

Non-GAAP net sales, including $ 543,996 $ 636,172 (14.5 )Divestitures %

Planned Divestitures (96,184 ) (107,079 )

Net sales, reported 447,812 529,093 (15.4 ) %

Foreign exchange impact ^(a) 4,911 -

Non-GAAP net sales, constant currency $ 452,723 $ 529,093 (14.4 )excluding Divestitures %



Worldwide Communications & Services:

Non-GAAP net sales, including $ 214,422 $ 324,661 (34.0 )Divestitures %

Planned Divestitures (25,784 ) (42,322 )

Net sales, reported 188,638 282,339 (33.2 ) %

Foreign exchange impact ^(a) 14,674 -

Less: Acquisitions (1,567 ) -

Non-GAAP net sales, constant currency $ 201,745 $ 282,339 (28.5 )excluding Divestitures and acquisitions %



Consolidated:

Non-GAAP net sales, including $ 758,418 $ 960,833 (21.1 )Divestitures %

Planned Divestitures (121,968 ) (149,401 )

Net sales, reported 636,450 811,432 (21.6 ) %

Foreign exchange impact ^(a) 19,585 -

Less: Acquisitions (1,567 ) -

Non-GAAP net sales, constant currency $ 654,468 $ 811,432 (19.3 )excluding Divestitures and acquisitions %



^(a) Year-over-year net sales growth rate excluding the translation impact ofchanges in foreign currency exchange rates. Calculated by translating the netsales for the quarter ended June 30, 2020 into U.S. dollars using the averageforeign exchange rates for the quarter ended June 30, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Segment:

Fiscal year ended June 30,

2020 2019 % Change

Worldwide Barcode, Networking & (in thousands) Security:

Non-GAAP net sales, including $ 2,511,666 $ 2,589,837 (3.0 )Divestitures %

Planned Divestitures (418,449 ) (447,941 )

Net sales, reported 2,093,217 2,141,896 (2.3 ) %

Foreign exchange impact ^(a) 10,395 -

Non-GAAP net sales, constant currency $ 2,103,612 $ 2,141,896 (1.8 )excluding Divestitures %



Worldwide Communications & Services:

Non-GAAP net sales, including $ 1,097,564 $ 1,283,274 (14.5 )Divestitures %

Planned Divestitures (143,047 ) (175,371 )

Net sales, reported 954,517 1,107,903 (13.8 ) %

Foreign exchange impact ^(a) 29,829 -

Less: Acquisitions (9,122 ) (1,026 )

Non-GAAP net sales, constant currency $ 975,224 $ 1,106,877 (11.9 )excluding Divestitures and acquisitions %



Consolidated:

Non-GAAP net sales, including $ 3,609,230 $ 3,873,111 (6.8 )Divestitures %

Planned Divestitures (561,496 ) (623,312 )

Net sales, reported 3,047,734 3,249,799 (6.2 ) %

Foreign exchange impact ^(a) 40,224 -

Less: Acquisitions (9,122 ) (1,026 )

Non-GAAP net sales, constant currency $ 3,078,836 $ 3,248,773 (5.2 )excluding Divestitures and acquisitions %



^(a) Year-over-year net sales growth rate excluding the translation impact ofchanges in foreign currency exchange rates. Calculated by translating the netsales for the fiscal year ended June 30, 2020 into U.S. dollars using theaverage foreign exchange rates for the fiscal year ended June 30, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Geography:

Quarter ended June 30,

2020 2019 % Change

United States and Canada: (in thousands)

Net sales, as reported $ 581,619 $ 728,212 (20.1 ) %

Less: Acquisitions (131 ) -

Non-GAAP net sales, excluding $ 581,488 $ 728,212 (20.1 )acquisitions %



International:

Non-GAAP net sales, including $ 176,799 $ 232,621 (24.0 )Divestitures %

Divestitures (121,968 ) (149,401 )

Net sales, reported 54,831 83,220 (34.1 ) %

Foreign exchange impact^(a) 19,585 -

Less: Acquisitions (1,436 ) -

Non-GAAP net sales, constant currency $ 72,980 $ 83,220 (12.3 )excluding Divestitures and acquisitions %



Consolidated:

Non-GAAP net sales, including $ 758,418 $ 960,833 (21.1 )Divestitures %

Divestitures (121,968 ) (149,401 )

Net sales, reported 636,450 811,432 (21.6 ) %

Foreign exchange impact^(a) 19,585 -

Less: Acquisitions (1,567 ) -

Non-GAAP net sales, constant currency $ 654,468 $ 811,432 (19.3 )excluding Divestitures and acquisitions %



^(a) Year-over-year net sales growth rate excluding the translation impact ofchanges in foreign currency exchange rates. Calculated by translating the netsales for the quarter ended June 30, 2020 into U.S. dollars using the averageforeign exchange rates for the quarter ended June 30, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Geography:

Fiscal year ended June 30,

2020 2019 % Change

United States and Canada: (in thousands)

Net sales, as reported $ 2,755,134 $ 2,917,780 (5.6 ) %

Less: Acquisitions (3,542 ) (1,062 )

Net sales, excluding acquisitions $ 2,751,592 $ 2,916,718 (5.7 ) %



International:

Non-GAAP net sales, including $ 854,096 $ 955,331 (10.6 )Divestitures %

Divestitures (561,496 ) (623,312 )

Net sales, reported 292,600 332,019 (11.9 ) %

Foreign exchange impact^(a) 40,224 -

Less: Acquisitions (5,580 ) 36

Non-GAAP net sales, constant currency $ 327,244 $ 332,055 (1.4 )excluding Divestitures and acquisitions %



Consolidated:

Non-GAAP net sales, including $ 3,609,230 $ 3,873,111 (6.8 )Divestitures %

Divestitures (561,496 ) (623,312 )

Net sales, reported 3,047,734 3,249,799 (6.2 ) %

Foreign exchange impact^(a) 40,224 -

Less: Acquisitions (9,122 ) (1,026 )

Non-GAAP net sales, constant currency $ 3,078,836 $ 3,248,773 (5.2 )excluding Divestitures and acquisitions %



^(a) Year-over-year net sales growth rate excluding the translation impact ofchanges in foreign currency exchange rates. Calculated by translating the netsales for the fiscal year ended June 30, 2020 into U.S. dollars using theaverage foreign exchange rates for the fiscal year ended June 30, 2019.





Quarter ended June 30, 2020

Change in Acquisition, Reported Intangible fair divestiture and Tax Impairment Non-GAAP GAAP amortization value of restructuring recovery, charges measure Measure expense contingent costs(a) net consideration



Net sales $ 636,450 $ - $ - $ - $ - $ - $ 636,450

Gross profit 74,147 - - - - - 74,147

Operating (loss) income (113,439) 4,946 674 1,311 (5,743) 120,470 8,219

Other expense, net (489) - - - 2,681 - 2,192

Pre-tax income (112,950) 4,946 674 1,311 (8,424) 120,470 6,027

Net (loss) income from (108,859) 3,744 510 1,311 (6,247) 114,398 4,857 continuing operations

Diluted EPS from continuing $ (4.29) $ 0.15 $ 0.02 $ 0.05 $ (0.25) $ 4.51 $ 0.19 operations



(a) Acquisition and divestiture costs totaled $1.3 million for the quarterended June 30, 2020 and are generally nondeductible for tax purposes.



Quarter ended June 30, 2019

Change in Acquisition, Reported Intangible fair divestiture and Tax Impairment Non-GAAP GAAP amortization value of restructuring recovery, charges measure Measure expense contingent costs(a) net consideration



Net sales $ 811,432 $ - $ - $ - $ - $ - $ 811,432

Gross profit 96,643 - - - - - 96,643

Operating income 22,560 4,542 3,666 230 - - 30,998

Other expense, net 3,427 - - - - - 3,427

Pre-tax income 19,133 4,542 3,666 230 - - 27,571

Net income from continuing 15,996 3,418 2,780 230 (3,110) - 19,314 operations

Diluted EPS from continuing $ 0.62 $ 0.13 $ 0.11 $ 0.01 $ (0.12) $ - $ 0.75 operations



(a) Acquisition and divestiture costs totaled $0.2 million for the quarterended June 30, 2019 and are generally nondeductible for tax purposes.

Year ended June 30, 2020

Intangible Change in Acquisition, Reported amortization fair divestiture Tax Impairment Non-GAAP GAAP value of and recovery, charges measure Measure expense contingent restructuring net consideration costs(a)



Net sales $ 3,047,734 $ - $ - $ - $ - $ - $ 3,047,734

Gross profit 355,569 - - - - - 355,569

Operating (loss) income (64,967) 19,953 6,941 4,604 (8,063) 120,470 78,938

Other expense, net 6,809 - - - 2,681 - 9,490

Pre-tax income (71,776) 19,953 6,941 4,604 (10,744) 120,470 69,448

Net (loss) income from (79,227) 15,091 5,247 4,449 (8,001) 114,398 51,957 continuing operations

Diluted EPS from $ (3.12) $ 0.59 $ 0.21 $ 0.18 $ (0.32) $ 4.51 $ 2.05 continuing operations



(a) Acquisition and divestiture costs totaled $4.0 million for the fiscal yearended June 30, 2020 and are generally nondeductible for tax purposes.Restructuring costs totaled $0.6 million for the fiscal year ended June 30,2020



Year ended June 30, 2019

Intangible Change in Acquisition, Reported amortization fair divestiture Tax Impairment Non-GAAP GAAP value of and recovery, charges measure Measure expense contingent restructuring net consideration costs(a)



Net sales $ 3,249,799 $ - $ - $ - $ - $ - $ 3,249,799

Gross profit 392,803 - - - - - 392,803

Operating income 94,734 17,893 15,200 1,218 - - 129,045

Other expense, net 11,097 - - - - - 11,097

Pre-tax income 83,637 17,893 15,200 1,218 - - 117,948

Net income from continuing 64,859 13,484 11,294 1,218 (3,110) - 87,745 operations

Diluted EPS from $ 2.52 $ 0.52 $ 0.44 $ 0.05 $ (0.12) $ - $ 3.41 continuing operations



(a) Acquisition and divestiture costs totaled $1.2 million for the fiscal yearended June 30, 2019 and are generally nondeductible for tax purposes.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



DiscontinuedOperations - Financial Results:



Quarter ended June 30, Fiscal year ended June 30,

2020 2019 2020 2019

(in thousands)

Net sales $ 121,969 $ 149,401 $ 561,496 $ 623,312

Cost of goods sold 112,846 136,180 513,003 563,543

Gross profit 9,123 13,221 48,493 59,769

Selling, general andadministrative 11,337 15,028 53,946 61,574 expenses

Depreciation expense 205 249 975 1,127

Intangible 330 483 1,403 1,839 amortization expense

Impairment charges 13,747 - 13,747 -

Operating loss (16,496) (2,539) (21,578) (4,771)

Interest expense, net 163 114 1,399 195

Loss on held for sale 88,923 - 88,923 - classification

Other expense, net 1,221 241 1,124 763

Loss fromdiscontinued (106,803) (2,894) (113,024) (5,729) operations beforetaxes

Income tax expense 1,600 1,524 403 1,533

Net loss fromdiscontinued $ (108,403) $ (4,418) $ (113,427) $ (7,262) operations

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Discontinued Operations - Assets and Liabilities:



June 30, 2020 June 30, 2019

(in thousands)

Assets

Current assets:

Cash and cash equivalents $ 4,970 $ 4,513

Accounts receivable, net 117,200 131,560

Inventories, net 106,779 143,263

Prepaid expenses and other current assets 23,808 17,417

Total current assets 252,757 296,753

Property and equipment, net 1,833 2,793

Goodwill - 8,823

Identifiable intangible assets, net - 6,726

Deferred income taxes 9,349 9,277

Other non-current assets 6,215 1,460

Total assets, before valuation allowance 270,154 325,832

Less: valuation allowance (88,923 ) -

Total assets, net of valuation allowance ^(a) $ 181,231 $ 325,832

Liabilities

Current liabilities:

Accounts payable $ 56,098 $ 69,810

Accrued expenses and other current liabilities 14,815 14,763

Other taxes payable 20,378 12,018

Short-term borrowings 3,524 4,590

Income tax payable 1,085 351

Total current liabilities 95,900 101,532

Borrowings under revolving credit facility 24,704 28,427

Other long-term liabilities 7,418 3,730

Total liabilities^(1) $ 128,022 $ 133,689



^(a) Total assets and liabilities of discontinued operations are classified incurrent assets and liabilities, respectively, in the Company's consolidatedbalance sheet as of June 30, 2020, as the discontinued operations are expectedto be disposed within twelve months of that date. The assets and liabilities ofdiscontinued operations are classified in their respective current andlong-term classifications, respectively, in the Company's consolidated balancesheet as of June 30, 2019 in accordance with the nature and underlyingclassification of such assets and liabilities.

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CONTACT: Gerald Lyons Executive Vice President, Chief Financial Officer ScanSource, Inc. (864) 286-4854

CONTACT: - or -

CONTACT: Mary M. Gentry Vice President, Treasurer and Investor Relations ScanSource, Inc. (864) 286-4892