Business Wire | May 10, 2021 04:06PM EDT

ScanSource Delivers Strong Third Quarter Profits

May 10, 2021

GREENVILLE, S.C.--(BUSINESS WIRE)--May 10, 2021--ScanSource, Inc. (NASDAQ: SCSC), a leading provider of technology products and solutions, today announced financial results for the third quarter ended March 31, 2021. All results in this release reflect continuing operations only unless otherwise noted.

Third Quarter Summary:

* Net sales: $729.9 million, down 2% year-over-year, or flat year-over-year for organic growth * Gross profit: $88.1 million, up 4% year-over-year * GAAP operating income of $19.4 million, up 87% year-over-year, for a 2.66% operating income margin * Non-GAAP operating income of $25.1 million, up 70% year-over-year, for a 3.45% non-GAAP operating income margin * Net income from continuing operations of $13.8 million * GAAP diluted EPS of $0.54 per share; non-GAAP diluted EPS of $0.71 per share * Return on invested capital increased to 13.6% for the quarter

"We are very pleased with the excellent execution from ScanSource employees worldwide," said Mike Baur, Chairman and CEO, ScanSource, Inc. "We are focused on driving gross profit growth, gaining operating leverage on our SG&A, and shifting to more recurring revenue. We are committed to helping our channel partners accelerate their digital transformation."

Quarterly Results

Net sales for the third quarter of fiscal year 2021 totaled $729.9 million, down 2% year-over-year, or flat year-over-year for organic growth. During the quarter, the Company saw continued progress in recovering from the sales impact of the COVID-19 pandemic in North America and Brazil. For the Intelisys master agency business, net sales increased 12% year-over-year for the third quarter of fiscal year 2021.

For the third quarter of fiscal year 2021, operating income increased to $19.4 million from $10.4 million for the prior-year quarter, and non-GAAP operating income increased to $25.1 million from $14.8 million for the prior-year quarter. At the end of 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. Selling, general and administrative expenses for the quarter decreased $4.9 million year-over-year, and the Company continued to realize the planned quarterly impact of the expense reduction plan.

On a GAAP basis, net income for the third quarter of fiscal year 2021 totaled $13.8 million, or $0.54 per diluted share, compared to net income of $5.7 million, or $0.23 per diluted share, for the prior-year quarter. Non-GAAP net income totaled $18.2 million, or $0.71 per diluted share, compared to $9.2 million, or $0.36 per diluted share, for the prior-year quarter.

At March 31, 2021, ScanSource had cash and cash equivalents of $49.3 million and total debt of $198.9 million. The Company used $60.3 million of operating cash flow in the third quarter of fiscal year 2021 and generated $129.4 million for the trailing 12-month period.

COVID-19 Update

The Company's 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. Most of our office-based employees around the world continue to work 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 continue to experience 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.

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, May 10, 2021, 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 regarding 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 the Company's operations and financial condition and the potential prolonged economic weakness brought on by COVID-19, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, risk to the Company's business from a cyber-security attack, a failure of the Company's IT systems, failure to hire and retain quality employees, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, 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 acquisitions (organic growth) 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 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. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. 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"): ROIC assists management in comparing the Company's performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of ROIC provides useful information to investors and is an additional relevant comparison of our 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)

March 31, June 30, 2021 2020*

Assets

Current assets:

Cash and cash equivalents $ 49,321 $ 29,485

Accounts receivable, less allowance of $21,180 atMarch 31, 2021 509,404 443,185

and $21,906 at March 31, 2020

Inventories 459,652 454,885

Prepaid expenses and other current assets 99,424 94,681

Current assets held for sale - 181,231

Total current assets 1,117,801 1,203,467

Property and equipment, net 45,316 55,641

Goodwill 217,093 214,288

Identifiable intangible assets, net 109,172 121,547

Deferred income taxes 24,405 24,630

Other non-current assets 68,835 72,521

Total assets $ 1,582,622 $ 1,692,094

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $ 521,552 $ 454,240

Accrued expenses and other current liabilities 87,969 76,686

Current portion of contingent consideration - 46,334

Income taxes payable 5,333 5,886

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

Current liabilities held for sale - 128,022

Total current liabilities 622,697 719,007

Deferred income taxes 4,309 3,884

Long-term debt, net of current portion 137,206 143,175

Borrowings under revolving credit facility 53,802 67,714

Other long-term liabilities 74,033 80,068

Total liabilities 892,047 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 sharesauthorized, 25,466,365 and 25,361,298 shares 68,895 63,765 issued and outstanding at March 31, 2021 and June30, 2020, respectively

Retained earnings 734,361 747,276

Accumulated other comprehensive loss (112,681 ) (132,795 )

Total shareholders' equity 690,575 678,246

Total liabilities and shareholders' equity $ 1,582,622 $ 1,692,094

*Derived from audited financial statements.

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Income Statements (Unaudited)

(in thousands, except per share data)

Quarter endedMarch 31,

Nine months ended March 31,

2021

2020

2021

2020

Net sales

$

729,873

$

744,584

$

2,298,111

$

2,411,285

Cost of goods sold

641,757

660,006

2,043,172

2,129,862

Gross profit

88,116

84,578

254,939

281,423

Selling, general and administrative expenses

60,099

64,971

182,681

201,344

Depreciation expense

3,141

3,268

9,634

9,729

Intangible amortization expense

4,880

5,159

14,595

15,007

Restructuring and other charges

560

169

9,312

604

Change in fair value of contingent consideration

-

618

516

6,266

Operating income

19,436

10,393

38,201

48,473

Interest expense

1,576

3,098

5,285

9,727

Interest income

(745

)

(1,080

)

(1,756

)

(2,627

)

Other expense (income), net

(302

)

(137

)

183

198

Income before income taxes

18,907

8,512

34,489

41,175

Provision for income taxes

5,121

2,797

9,757

11,542

Net income from continuing operations

13,786

5,715

24,732

29,633

Net loss from discontinued operations

(688

)

(4,002

)

(37,647

)

(5,025

)

Net (loss) income

$

13,098

$

1,713

$

(12,915

)

$

24,608

Per share data:

Net income from continuing operations per common share, basic

$

0.54

$

0.23

$

0.97

$

1.17

Net loss from discontinued operations per common share, basic

(0.03

)

(0.16

)

(1.48

)

(0.20

)

Net (loss) income per common share, basic

$

0.51

$

0.07

$

(0.51

)

$

0.97

Weighted-average shares outstanding, basic

25,455

25,346

25,404

25,386

Net income from continuing operations per common share, diluted

$

0.54

$

0.23

$

0.97

$

1.16

Net loss from discontinued operations per common share, diluted

(0.03

)

(0.16

)

(1.48

)

(0.20

)

Net (loss) income per common share, diluted

$

0.51

$

0.07

$

(0.51

)

$

0.97

Weighted-average shares outstanding, diluted

25,572

25,363

25,484

25,444

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Income Statements (Unaudited)

(in thousands, except per share data)



Quarter ended Nine months ended March 31, March 31,

2021 2020 2021 2020

Net sales $ 729,873 $ 744,584 $ 2,298,111 $ 2,411,285

Cost of goods sold 641,757 660,006 2,043,172 2,129,862

Gross profit 88,116 84,578 254,939 281,423

Selling, general andadministrative 60,099 64,971 182,681 201,344 expenses

Depreciation expense 3,141 3,268 9,634 9,729

Intangible 4,880 5,159 14,595 15,007 amortization expense

Restructuring and 560 169 9,312 604 other charges

Change in fair valueof contingent - 618 516 6,266 consideration

Operating income 19,436 10,393 38,201 48,473

Interest expense 1,576 3,098 5,285 9,727

Interest income (745 ) (1,080 ) (1,756 ) (2,627 )

Other expense (302 ) (137 ) 183 198 (income), net

Income before income 18,907 8,512 34,489 41,175 taxes

Provision for income 5,121 2,797 9,757 11,542 taxes

Net income from 13,786 5,715 24,732 29,633 continuing operations

Net loss fromdiscontinued (688 ) (4,002 ) (37,647 ) (5,025 )operations

Net (loss) income $ 13,098 $ 1,713 $ (12,915 ) $ 24,608

Per share data:



Net income fromcontinuing operations $ 0.54 $ 0.23 $ 0.97 $ 1.17 per common share,basic

Net loss fromdiscontinued (0.03 ) (0.16 ) (1.48 ) (0.20 )operations per commonshare, basic

Net (loss) income per $ 0.51 $ 0.07 $ (0.51 ) $ 0.97 common share, basic

Weighted-averageshares outstanding, 25,455 25,346 25,404 25,386 basic



Net income fromcontinuing operations $ 0.54 $ 0.23 $ 0.97 $ 1.16 per common share,diluted

Net loss fromdiscontinued (0.03 ) (0.16 ) (1.48 ) (0.20 )operations per commonshare, diluted

Net (loss) income per $ 0.51 $ 0.07 $ (0.51 ) $ 0.97 common share, diluted

Weighted-averageshares outstanding, 25,572 25,363 25,484 25,444 diluted

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Nine months ended March 31,

2021

2020

Cash flows from operating activities:

Net (loss) income

$

(12,915

)

$

24,608

Net loss from discontinued operations

(37,647

)

(5,025

)

Net income from continuing operations

24,732

29,633

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

Depreciation and amortization

25,417

26,585

Amortization of debt issue costs

313

313

Provision for doubtful accounts

226

1,399

Share-based compensation

5,711

4,053

Deferred income taxes

(26

)

(1,479

)

Change in fair value of contingent consideration

516

6,266

Contingent consideration payments excess

(5,457

)

(3,050

)

Finance lease interest

96

64

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(68,654

)

(85

)

Inventories

(5,907

)

(7,446

)

Prepaid expenses and other assets

(1,641

)

(10,977

)

Other non-current assets

2,846

(1,029

)

Accounts payable

69,609

55,378

Accrued expenses and other liabilities

8,434

13,233

Income taxes payable

(793

)

(4,775

)

Net cash provided by operating activities of continuing operations

55,422

108,083

Cash flows from investing activities of continuing operations:

Capital expenditures

(2,283

)

(6,575

)

Cash paid for business acquisitions, net of cash acquired

-

(48,915

)

Proceeds from the sale of net assets of discontinued operations

34,356

-

Net cash provided by (used in) investing activities of continuing operations

32,073

(55,490

)

Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses

1,486,464

1,608,472

Repayments on revolving credit, net of expenses

(1,500,375

)

(1,650,862

)

Borrowings on long-term debt, net

(5,964

)

(3,147

)

Repayments of finance lease obligations

(974

)

(660

)

Contingent consideration payments

(41,393

)

(35,481

)

Exercise of stock options

439

754

Taxes paid on settlement of equity awards

(1,036

)

(1,354

)

Repurchase of common stock

-

(6,077

)

Net cash used in financing activities of continuing operations

(62,839

)

(88,355

)

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited), continued

(in thousands)

Cash flows from discontinued operations:

Net cash flows provided by operating activities of discontinued operations

21,704

42,000

Net cash flows used in investing activities of discontinued operations

(58

)

(48

)

Net cash flows (used in) provided by financing activities of discontinued operations

(29,494

)

6,739

Net cash flows provided by discontinued operations

(7,848

)

48,691

Effect of exchange rate changes on cash and cash equivalents

(1,942

)

(2,151

)

Increase in cash and cash equivalents

14,866

10,778

Consolidated cash and cash equivalents at beginning of period

34,455

23,818

Consolidated cash and cash equivalents at end of period

49,321

34,596

Cash and cash equivalents of discontinued operations

-

4,838

Cash and cash equivalents of continuing operations

$

49,321

$

29,758

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)



Nine months ended March 31,

2021 2020

Cash flows from operating activities:

Net (loss) income $ (12,915 ) $ 24,608

Net loss from discontinued operations (37,647 ) (5,025 )

Net income from continuing operations 24,732 29,633

Adjustments to reconcile net income to net cashprovided by operating activities of continuing operations:

Depreciation and amortization 25,417 26,585

Amortization of debt issue costs 313 313

Provision for doubtful accounts 226 1,399

Share-based compensation 5,711 4,053

Deferred income taxes (26 ) (1,479 )

Change in fair value of contingent consideration 516 6,266

Contingent consideration payments excess (5,457 ) (3,050 )

Finance lease interest 96 64

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable (68,654 ) (85 )

Inventories (5,907 ) (7,446 )

Prepaid expenses and other assets (1,641 ) (10,977 )

Other non-current assets 2,846 (1,029 )

Accounts payable 69,609 55,378

Accrued expenses and other liabilities 8,434 13,233

Income taxes payable (793 ) (4,775 )

Net cash provided by operating activities of 55,422 108,083 continuing operations

Cash flows from investing activities of continuing operations:

Capital expenditures (2,283 ) (6,575 )

Cash paid for business acquisitions, net of cash - (48,915 )acquired

Proceeds from the sale of net assets of 34,356 - discontinued operations

Net cash provided by (used in) investing 32,073 (55,490 )activities of continuing operations

Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses 1,486,464 1,608,472

Repayments on revolving credit, net of expenses (1,500,375 ) (1,650,862 )

Borrowings on long-term debt, net (5,964 ) (3,147 )

Repayments of finance lease obligations (974 ) (660 )

Contingent consideration payments (41,393 ) (35,481 )

Exercise of stock options 439 754

Taxes paid on settlement of equity awards (1,036 ) (1,354 )

Repurchase of common stock - (6,077 )

Net cash used in financing activities of (62,839 ) (88,355 )continuing operations



ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited), continued

(in thousands)



Cash flows from discontinued operations:

Net cash flows provided by operating activities 21,704 42,000 of discontinued operations

Net cash flows used in investing activities of (58 ) (48 )discontinued operations

Net cash flows (used in) provided by financing (29,494 ) 6,739 activities of discontinued operations

Net cash flows provided by discontinued (7,848 ) 48,691 operations

Effect of exchange rate changes on cash and cash (1,942 ) (2,151 )equivalents

Increase in cash and cash equivalents 14,866 10,778

Consolidated cash and cash equivalents at 34,455 23,818 beginning of period

Consolidated cash and cash equivalents at end of 49,321 34,596 period

Cash and cash equivalents of discontinued - 4,838 operations

Cash and cash equivalents of continuing $ 49,321 $ 29,758 operations

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

(in thousands, except percentages)

Non-GAAP Financial Information:

Quarter ended March 31,

2021

2020

Return on invested capital ratio (ROIC), annualized (a)

13.6

%

6.0

%

Reconciliation of net income to EBITDA:

Net income from continuing operations (GAAP)

$

13,786

$

5,715

Plus: Interest expense

1,576

3,098

Plus: Income taxes

5,121

2,797

Plus: Depreciation and amortization

8,358

8,987

EBITDA (non-GAAP)

28,841

20,597

Plus: Change in fair value of contingent consideration

-

618

Plus: Acquisition and divestiture costs(b)

272

780

Plus: Restructuring costs

349

169

Plus: Tax recovery

-

(2,320

)

Adjusted EBITDA (numerator for ROIC) (non-GAAP)

$

29,462

$

19,844

Invested Capital Calculations:

Equity - beginning of the quarter (c)

$

682,139

$

927,580

Equity - end of the quarter (c)

690,575

897,678

Plus: Change in fair value of contingent consideration, net of tax

-

467

Plus: Acquisition and divestiture costs(b)

272

780

Plus: Restructuring, net of tax

264

125

Plus: Tax recovery, net of tax

-

(1,754

)

Plus: Net loss from discontinued operations

688

4,002

Average equity

686,969

914,439

Average funded debt (d)

191,996

405,533

Invested capital (denominator for ROIC) (non-GAAP)

$

878,965

$

1,319,972

(a) The annualized EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 90 days in the current quarter and 91 days in the prior-year quarter.

(b) Acquisition and divestiture costs are generally nondeductible for tax purposes.

(c) In the quarter ending June 30, 2020, the Company recorded impairment charges of $120.5 million. Impairment charges, net of tax reduced equity by $114.4 million.

(d) Average funded debt, which includes both continuing and discontinued operations, is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

(in thousands, except percentages)



Non-GAAP Financial Information:

Quarter ended March 31,

2021 2020

Return on invested capital ratio (ROIC), annualized ^ 13.6 % 6.0 %(a)



Reconciliation of net income to EBITDA:

Net income from continuing operations (GAAP) $ 13,786 $ 5,715

Plus: Interest expense 1,576 3,098

Plus: Income taxes 5,121 2,797

Plus: Depreciation and amortization 8,358 8,987

EBITDA (non-GAAP) 28,841 20,597

Plus: Change in fair value of contingent - 618 consideration

Plus: Acquisition and divestiture costs^(b) 272 780

Plus: Restructuring costs 349 169

Plus: Tax recovery - (2,320 )

Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 29,462 $ 19,844



Invested Capital Calculations:

Equity - beginning of the quarter ^(c) $ 682,139 $ 927,580

Equity - end of the quarter ^(c) 690,575 897,678

Plus: Change in fair value of contingent - 467 consideration, net of tax

Plus: Acquisition and divestiture costs^(b) 272 780

Plus: Restructuring, net of tax 264 125

Plus: Tax recovery, net of tax - (1,754 )

Plus: Net loss from discontinued operations 688 4,002

Average equity 686,969 914,439

Average funded debt ^(d) 191,996 405,533

Invested capital (denominator for ROIC) (non-GAAP) $ 878,965 $ 1,319,972



(a) The annualized EBITDA amount is divided by days in the quarter times 365days per year, or 366 days for leap year. There were 90 days in the currentquarter and 91 days in the prior-year quarter.

(b) Acquisition and divestiture costs are generally nondeductible for taxpurposes.

(c) In the quarter ending June 30, 2020, the Company recorded impairmentcharges of $120.5 million. Impairment charges, net of tax reduced equity by$114.4 million.

(d) 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 March 31,

2021

2020

% Change

Worldwide Barcode, Networking & Security:

(in thousands)

Net sales, reported

$

502,227

$

489,218

2.7

%

Foreign exchange impact (a)

4,132

-

Non-GAAP net sales, constant currency

$

506,359

$

489,218

3.5

%

Worldwide Communications & Services:

Net sales, reported

$

227,646

$

255,366

(10.9)

%

Foreign exchange impact (a)

10,476

-

Non-GAAP net sales, constant currency

$

238,122

$

255,366

(6.8)

%

Consolidated:

Net sales, reported

$

729,873

$

744,584

(2.0)

%

Foreign exchange impact (a)

14,608

-

Non-GAAP net sales, constant currency

$

744,481

$

744,584

-

%

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2020.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Segment:

Quarter ended March 31,

2021 2020 % Change

Worldwide Barcode, Networking & (in thousands) Security:

Net sales, reported $ 502,227 $ 489,218 2.7 %

Foreign exchange impact ^(a) 4,132 -

Non-GAAP net sales, constant currency $ 506,359 $ 489,218 3.5 %



Worldwide Communications & Services:

Net sales, reported $ 227,646 $ 255,366 (10.9) %

Foreign exchange impact ^(a) 10,476 -

Non-GAAP net sales, constant currency $ 238,122 $ 255,366 (6.8) %



Consolidated:

Net sales, reported $ 729,873 $ 744,584 (2.0) %

Foreign exchange impact ^(a) 14,608 -

Non-GAAP net sales, constant currency $ 744,481 $ 744,584 - %



^(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 March 31, 2021 into U.S. dollars using the averageforeign exchange rates for the quarter ended March 31, 2020.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Segment:

Nine months ended March 31,

2021

2020

% Change

Worldwide Barcode, Networking & Security:

(in thousands)

Net sales, reported

$

1,577,197

$

1,645,406

(4.1

)%

Foreign exchange impact (a)

19,758

-

Non-GAAP net sales, constant currency

$

1,596,955

$

1,645,406

(2.9

)%

Worldwide Communications & Services:

Net sales, reported

$

720,914

$

765,879

(5.9

)%

Foreign exchange impact (a)

47,694

-

Non-GAAP net sales, constant currency

$

768,608

$

765,879

0.4

%

Consolidated:

Net sales, reported

$

2,298,111

$

2,411,285

(4.7

)%

Foreign exchange impact (a)

67,452

-

Non-GAAP net sales, constant currency

$

2,365,563

$

2,411,285

(1.9

)%

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the nine months ended March 31, 2021 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2020.



ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Segment:

Nine months ended March 31,

2021 2020 % Change

Worldwide Barcode, Networking & (in thousands) Security:

Net sales, reported $ 1,577,197 $ 1,645,406 (4.1 )%

Foreign exchange impact ^(a) 19,758 -

Non-GAAP net sales, constant currency $ 1,596,955 $ 1,645,406 (2.9 )%



Worldwide Communications & Services:

Net sales, reported $ 720,914 $ 765,879 (5.9 )%

Foreign exchange impact ^(a) 47,694 -

Non-GAAP net sales, constant currency $ 768,608 $ 765,879 0.4 %



Consolidated:

Net sales, reported $ 2,298,111 $ 2,411,285 (4.7 )%

Foreign exchange impact ^(a) 67,452 -

Non-GAAP net sales, constant currency $ 2,365,563 $ 2,411,285 (1.9 )%



^(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 nine months ended March 31, 2021 into U.S. dollars using theaverage foreign exchange rates for the nine months ended March 31, 2020.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Geography:

Quarter ended March 31,

2021

2020

% Change

United States and Canada:

(in thousands)

Net sales, as reported

$

665,720

$

670,175

(0.7)

%

International:

Net sales, reported

$

64,153

$

74,409

(13.8)

%

Foreign exchange impact(a)

14,608

-

Non-GAAP net sales, constant currency

$

78,761

$

74,409

5.8

%

Consolidated:

Net sales, reported

$

729,873

$

744,584

(2.0)

%

Foreign exchange impact(a)

14,608

-

Non-GAAP net sales, constant currency

$

744,481

$

744,584

-

%

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended March 31, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2020.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Geography:

Quarter ended March 31,

2021 2020 % Change

United States and Canada: (in thousands)

Net sales, as reported $ 665,720 $ 670,175 (0.7) %



International:

Net sales, reported $ 64,153 $ 74,409 (13.8) %

Foreign exchange impact^(a) 14,608 -

Non-GAAP net sales, constant currency $ 78,761 $ 74,409 5.8 %



Consolidated:

Net sales, reported $ 729,873 $ 744,584 (2.0) %

Foreign exchange impact^(a) 14,608 -

Non-GAAP net sales, constant currency $ 744,481 $ 744,584 - %



^(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 March 31, 2021 into U.S. dollars using the averageforeign exchange rates for the quarter ended March 31, 2020.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Geography:

Nine months ended March 31,

2021

2020

% Change

United States and Canada:

(in thousands)

Net sales, as reported

$

2,069,327

$

2,173,515

(4.8

)%

International:

Net sales, reported

$

228,784

$

237,770

(3.8

)%

Foreign exchange impact(a)

67,452

-

Non-GAAP net sales, constant currency

$

296,236

$

237,770

24.6

%

Consolidated:

Net sales, reported

$

2,298,111

$

2,411,285

(4.7

)%

Foreign exchange impact(a)

67,452

-

Non-GAAP net sales, constant currency

$

2,365,563

$

2,411,285

(1.9

)%

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the nine months ended March 31, 2021 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2020.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Net Sales by Geography:

Nine months ended March 31,

2021 2020 % Change

United States and Canada: (in thousands)

Net sales, as reported $ 2,069,327 $ 2,173,515 (4.8 )%



International:

Net sales, reported $ 228,784 $ 237,770 (3.8 )%

Foreign exchange impact^(a) 67,452 -

Non-GAAP net sales, constant $ 296,236 $ 237,770 24.6 %currency



Consolidated:

Net sales, reported $ 2,298,111 $ 2,411,285 (4.7 )%

Foreign exchange impact^(a) 67,452 -

Non-GAAP net sales, constant $ 2,365,563 $ 2,411,285 (1.9 )%currency



(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 nine months ended March 31, 2021 into U.S. dollars using theaverage foreign exchange rates for the nine months ended March 31, 2020.

Quarter ended March 31, 2021

GAAP Measure

Intangible amortization expense

Change in fair value of contingent consideration

Acquisition and divestiture costs

Restructuring costs

Tax recovery, net

Non-GAAP measure

(in thousands, except per share data)

Net sales

$

729,873

$

-

$

-

$

-

$

-

$

-

$

729,873

Gross profit

88,116

-

-

-

-

-

88,116

Operating income

19,436

4,880

-

272

560

-

25,148

Other expense, net

529

-

-

-

-

-

529

Pre-tax income

18,907

4,880

-

272

560

-

24,619

Net income from continuing operations

13,786

3,697

-

272

423

-

18,178

Diluted EPS from continuing operations

$

0.54

$

0.14

$

-

$

0.01

$

0.02

$

-

$

0.71

Quarter ended March 31, 2020

GAAP Measure

Intangible amortization expense

Change in fair value of contingent consideration

Acquisition and divestiture costs

Restructuring costs

Tax recovery, net

Non-GAAP measure

(in thousands, except per share data)

Net sales

$

744,584

$

-

$

-

$

-

$

-

$

-

$

744,584

Gross profit

84,578

-

-

-

-

-

84,578

Operating income

10,393

5,159

618

780

169

(2,320

)

14,799

Other expense, net

1,881

-

-

-

-

-

1,881

Pre-tax income

8,512

5,159

618

780

169

(2,320

)

12,918

Net income from continuing operations

5,715

3,909

467

780

125

(1,754

)

9,242

Diluted EPS from continuing operations

$

0.23

$

0.15

$

0.02

$

0.03

$

-

$

(0.07

)

$

0.36

Quarter ended March 31, 2021

Change in Acquisition GAAP Intangible fair and Restructuring Tax Non-GAAP Measure amortization value of divestiture costs recovery, measure expense contingent costs net consideration

(in thousands, except per share data)

Net sales $ 729,873 $ - $ - $ - $ - $ - $ 729,873

Gross profit 88,116 - - - - - 88,116

Operating income 19,436 4,880 - 272 560 - 25,148

Other expense, net 529 - - - - - 529

Pre-tax income 18,907 4,880 - 272 560 - 24,619

Net income from 13,786 3,697 - 272 423 - 18,178 continuing operations

Diluted EPS from $ 0.54 $ 0.14 $ - $ 0.01 $ 0.02 $ - $ 0.71 continuing operations



Quarter ended March 31, 2020

Change in Acquisition GAAP Intangible fair and Restructuring Tax Non-GAAP Measure amortization value of divestiture costs recovery, measure expense contingent costs net consideration

(in thousands, except per share data)

Net sales $ 744,584 $ - $ - $ - $ - $ - $ 744,584

Gross profit 84,578 - - - - - 84,578

Operating income 10,393 5,159 618 780 169 (2,320 ) 14,799

Other expense, net 1,881 - - - - - 1,881

Pre-tax income 8,512 5,159 618 780 169 (2,320 ) 12,918

Net income from 5,715 3,909 467 780 125 (1,754 ) 9,242 continuing operations

Diluted EPS from $ 0.23 $ 0.15 $ 0.02 $ 0.03 $ - $ (0.07 ) $ 0.36 continuing operations



Nine months ended March 31, 2021

Reported GAAP Measure

Intangible amortization expense

Change in fair value of contingent consideration

Acquisition and divestiture costs

Restructuring costs

Tax recovery, net

Non-GAAP measure

(in thousands, except per share data)

Net sales

$

2,298,111

$

-

$

-

$

-

$

-

$

-

$

2,298,111

Gross profit

254,939

-

-

-

-

-

254,939

Operating income

38,201

14,595

516

2,130

9,312

-

64,754

Other expense, net

3,712

-

-

-

-

-

3,712

Pre-tax income

34,489

14,595

516

2,130

9,312

-

61,042

Net income from continuing operations

24,732

11,055

390

2,130

7,040

-

45,347

Diluted EPS from continuing operations

$

0.97

$

0.43

$

0.02

$

0.08

$

0.28

$

-

$

1.78

Nine months ended March 31, 2020

Reported GAAP Measure

Intangible amortization expense

Change in fair value of contingent consideration

Acquisition and divestiture costs

Restructuring costs

Tax recovery, net

Non-GAAP measure

(in thousands, except per share data)

Net sales

$

2,411,285

$

-

$

-

$

-

$

-

$

-

$

2,411,285

Gross profit

281,423

-

-

-

-

-

281,423

Operating income

48,473

15,007

6,266

2,689

604

(2,320

)

70,719

Other expense, net

7,298

-

-

-

-

-

7,298

Pre-tax income

41,175

15,007

6,266

2,689

604

(2,320

)

63,421

Net income from continuing operations

29,633

11,347

4,737

2,689

449

(1,754

)

47,101

Diluted EPS from continuing operations

$

1.16

$

0.45

$

0.19

$

0.11

$

0.02

$

(0.07

)

$

1.85

Nine months ended March 31, 2021

Intangible Change in Acquisition Tax Reported GAAP amortization fair value of and Restructuring recovery, Non-GAAP Measure expense contingent divestiture costs net measure consideration costs

(in thousands, except per share data)

Net sales $ 2,298,111 $ - $ - $ - $ - $ - $ 2,298,111

Gross 254,939 - - - - - 254,939 profit

Operating 38,201 14,595 516 2,130 9,312 - 64,754 income

Otherexpense, 3,712 - - - - - 3,712 net

Pre-tax 34,489 14,595 516 2,130 9,312 - 61,042 income

Net incomefrom 24,732 11,055 390 2,130 7,040 - 45,347 continuingoperations

DilutedEPS from $ 0.97 $ 0.43 $ 0.02 $ 0.08 $ 0.28 $ - $ 1.78 continuingoperations



Nine months ended March 31, 2020

Intangible Change in Acquisition Tax Reported GAAP amortization fair value of and Restructuring recovery, Non-GAAP Measure expense contingent divestiture costs net measure consideration costs

(in thousands, except per share data)

Net sales $ 2,411,285 $ - $ - $ - $ - $ - $ 2,411,285

Gross 281,423 - - - - - 281,423 profit

Operating 48,473 15,007 6,266 2,689 604 (2,320 ) 70,719 income

Otherexpense, 7,298 - - - - - 7,298 net

Pre-tax 41,175 15,007 6,266 2,689 604 (2,320 ) 63,421 income

Net incomefrom 29,633 11,347 4,737 2,689 449 (1,754 ) 47,101 continuingoperations

DilutedEPS from $ 1.16 $ 0.45 $ 0.19 $ 0.11 $ 0.02 $ (0.07 ) $ 1.85 continuingoperations

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Discontinued Operations - Financial Results:

Quarter endedMarch 31,

Nine months ended March 31,

2021

2020

2021

2020

(in thousands)

Net sales

$

-

$

127,899

$

213,373

$

439,527

Cost of goods sold

-

117,669

198,512

400,158

Gross profit

-

10,230

14,861

39,369

Selling, general and administrative expenses

-

13,782

17,291

42,607

Depreciation expense

-

225

-

771

Intangible amortization expense

-

327

-

1,073

Operating loss

-

(4,104

)

(2,430

)

(5,082

)

Interest expense, net

-

323

394

1,236

Loss on disposal group

688

-

34,496

-

Other expense, net

-

433

310

(96

)

Loss from discontinued operations before taxes

(688

)

(4,860

)

(37,630

)

(6,222

)

Income tax expense

-

(858

)

17

(1,197

)

Net loss from discontinued operations

$

(688

)

$

(4,002

)

$

(37,647

)

$

(5,025

)

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)



Discontinued Operations - Financial Results:



Quarter ended Nine months ended March 31, March 31,

2021 2020 2021 2020

(in thousands)

Net sales $ - $ 127,899 $ 213,373 $ 439,527

Cost of goods sold - 117,669 198,512 400,158

Gross profit - 10,230 14,861 39,369

Selling, general and - 13,782 17,291 42,607 administrative expenses

Depreciation expense - 225 - 771

Intangible amortization expense - 327 - 1,073

Operating loss - (4,104 ) (2,430 ) (5,082 )

Interest expense, net - 323 394 1,236

Loss on disposal group 688 - 34,496 -

Other expense, net - 433 310 (96 )

Loss from discontinued operations (688 ) (4,860 ) (37,630 ) (6,222 )before taxes

Income tax expense - (858 ) 17 (1,197 )

Net loss from discontinued $ (688 ) $ (4,002 ) $ (37,647 ) $ (5,025 )operations

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Discontinued Operations - Assets and Liabilities:

March 31, 2021

June 30, 2020

(in thousands)

Assets

Current assets:

Cash and cash equivalents

$

-

$

4,970

Accounts receivable, net

-

117,200

Inventories, net

-

106,779

Prepaid expenses and other current assets

-

23,808

Total current assets

-

252,757

Property and equipment, net

-

1,833

Deferred income taxes

-

9,349

Other non-current assets

-

6,215

Total assets, before valuation allowance

-

270,154

Less: valuation allowance

-

(88,923

)

Total assets, net of valuation allowance (a)

$

-

$

181,231

Liabilities

Current liabilities:

Accounts payable

$

-

$

56,098

Accrued expenses and other current liabilities

-

14,815

Other taxes payable

-

20,378

Short-term borrowings

-

3,524

Income tax payable

-

1,085

Total current liabilities

-

95,900

Borrowings under revolving credit facility

-

24,704

Other long-term liabilities

-

7,418

Total liabilities(1)

$

-

$

128,022

(a) Total assets and liabilities of discontinued operations are classified in current assets and liabilities, respectively, in the Company's consolidated balance sheet as of March 31, 2021 and June 30, 2020. The discontinued operations were disposed of during the quarter ended December 31, 2020.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210510005893/en/

CONTACT: Steve Jones Senior Executive Vice President, Chief Financial Officer ScanSource, Inc. (864) 286-4302 - or - Mary M. Gentry Vice President, Treasurer and Investor Relations ScanSource, Inc. (864) 286-4892