ScanSource Announces Third Quarter Results

GREENVILLE, S.C.--()--ScanSource, Inc. (NASDAQ: SCSC), a leading provider of technology products and solutions, today announced financial results for the third quarter ended March 31, 2020.

 

Quarter ended March 31,

 

2020

 

2019

 

Change

 

(in millions, except per share data)

Net sales

$

872.5

 

 

$

893.4

 

 

(2

)%

Non-GAAP net sales, excluding Planned Divestitures(1)

744.6

 

 

752.8

 

 

(1

)%

Operating income

6.3

 

 

18.8

 

 

(66

)%

Non-GAAP operating income(1) (2)

14.8

 

 

30.6

 

 

(52

)%

Net income

1.7

 

 

11.7

 

 

(85

)%

Non-GAAP net income(1) (2)

9.3

 

 

20.6

 

 

(55

)%

Diluted EPS

$

0.07

 

 

$

0.45

 

 

(84

)%

Non-GAAP diluted EPS(1) (2)

$

0.37

 

 

$

0.80

 

 

(54

)%

 

 

 

 

 

 

(1) A reconciliation of non-GAAP financial information to GAAP financial information is presented in the Supplementary Information (Unaudited) below.

(2) Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, the impact of Planned Divestitures and other non-GAAP items. A reconciliation of non-GAAP to GAAP financial information is presented below.

“In March, companies around the world, including ours, immediately shifted to work-from-home,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “I am proud of how our ScanSource employees made the transition to work-from-home and delivered the same level of customer service. During the quarter, we saw an accelerated decline in our sales of premise-based communications products. However, we had a significant increase in sales of headsets, cameras, speakers, keyboards, displays, back-up power supplies, IP desk phones, and connectivity to support remote workers. Overall, we are pleased with our results delivering on our sales expectations.”

Quarterly Results

Net sales were $872.5 million for the third quarter of fiscal year 2020, down 2% year-over-year, principally from the negative impact of foreign currency translation. Excluding the foreign currency translation and net sales from the Planned Divestitures and acquisitions, organic net sales growth for third quarter of fiscal year 2020 totaled 0.5%. Net sales grew across most of ScanSource’s diversified technologies in North America and Brazil. In addition, the sales growth reflected accelerated growth for work-from-home solutions from the immediate move to remote workforces in March.

Operating income for the third quarter decreased to $6.3 million year-over-year, and non-GAAP operating income decreased to $14.8 million from the prior-year quarter. This decrease includes a $4.5 million expense for inventory charges following the conversion to a new inventory management system. This charge increased cost of goods sold, which lowered gross profit for the third quarter of fiscal year 2020.

On a GAAP basis, net income for the third quarter of fiscal year 2020 totaled $1.7 million, or $0.07 per diluted share, compared to net income of $11.7 million, or $0.45 per diluted share, for the prior-year quarter. Non-GAAP net income totaled $9.3 million, or $0.37 per diluted share, compared to $20.6 million, or $0.80 per diluted share, for the prior-year quarter.

As of March 31, 2020, ScanSource had cash and cash equivalents of $35 million and total debt of $321 million. In the third quarter of fiscal year 2020, the Company generated $32 million of operating cash flow.

Plan to Divest Certain Businesses Outside of US, Canada and Brazil

On August 20, 2019, ScanSource announced plans to divest its physical products distribution businesses outside of the United States, Canada and Brazil. ScanSource continues to operate and invest 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. The Company has identified potential buyers for these businesses and is in due diligence and purchase agreement negotiations. There can be no assurance that this sale process will result in a transaction or regarding the timing of any transaction. The Planned Divestitures, comprised of physical product businesses in Europe, UK, Mexico, Colombia, Chile, Peru and the Miami-based export operations, had net sales of $127.9 million for the third quarter of fiscal year 2020 and at March 31, 2020 had working capital of $155.5 million.

COVID-19 Update

Our top priority during the COVID-19 Pandemic is protecting the health and safety of our employees. We have implemented travel restrictions and moved quickly to transition our employees, where possible, to a fully 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 feel secure in their jobs and have the flexibility and resources they need to stay safe and healthy. We expect 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.

Update on Forecasts

Given the uncertainties related to the COVID-19 pandemic and the changing economic environment, we are not providing our expectations for net sales or earnings per share for the fourth quarter of fiscal year 2020.

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 11, 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 Planned 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 Planned 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, 2019 and quarterly report on Form 10-Q for the quarter ended March 31, 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 Planned 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 Planned 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, impact of Planned Divestitures 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 #643 on the Fortune 1000. For more information, visit www.scansource.com.

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

March 31, 2020

 

June 30, 2019*

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

34,596

 

 

$

23,818

 

Accounts receivable, less allowance of $34,119 at March 31, 2020 and $38,849 at June 30, 2019

 

618,758

 

 

654,983

 

Inventories

 

666,458

 

 

697,343

 

Prepaid expenses and other current assets

 

116,221

 

 

101,171

 

Total current assets

 

1,436,033

 

 

1,477,315

 

Property and equipment, net

 

60,891

 

 

63,363

 

Goodwill

 

338,358

 

 

319,538

 

Identifiable intangible assets, net

 

133,228

 

 

127,939

 

Deferred income taxes

 

23,635

 

 

24,724

 

Other non-current assets

 

81,656

 

 

54,382

 

Total assets

 

$

2,073,801

 

 

$

2,067,261

 

Liabilities and Shareholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

608,417

 

 

$

558,101

 

Accrued expenses and other current liabilities

 

108,086

 

 

91,407

 

Current portion of contingent consideration

 

45,660

 

 

38,393

 

Income taxes payable

 

989

 

 

4,310

 

Short-term borrowings

 

143

 

 

4,590

 

Current portion of long-term debt

 

6,901

 

 

4,085

 

Total current liabilities

 

770,196

 

 

700,886

 

Deferred income taxes

 

1,077

 

 

1,395

 

Long-term debt, net of current portion

 

145,050

 

 

151,014

 

Borrowings under revolving credit facility

 

168,502

 

 

200,817

 

Long-term portion of contingent consideration

 

 

 

39,532

 

Other long-term liabilities

 

91,298

 

 

59,488

 

Total liabilities

 

1,176,123

 

 

1,153,132

 

Shareholders' equity:

 

 

 

 

Common stock

 

62,314

 

 

64,287

 

Retained earnings

 

964,538

 

 

939,930

 

Accumulated other comprehensive income (loss)

 

(129,174

)

 

(90,088

)

Total shareholders' equity

 

897,678

 

 

914,129

 

Total liabilities and shareholders' equity

 

$

2,073,801

 

 

$

2,067,261

 

 

 

*

Derived from audited financial statements.

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Income Statements (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Quarter ended March 31,

 

Nine months ended March 31,

 

 

2020

 

2019

 

2020

 

2019

Net sales

 

$

872,483

 

 

$

893,357

 

 

$

2,850,812

 

 

$

2,912,278

 

Cost of goods sold

 

777,674

 

 

783,342

 

 

2,530,020

 

 

2,569,570

 

Gross profit

 

94,809

 

 

110,015

 

 

320,792

 

 

342,708

 

Selling, general and administrative expenses

 

78,923

 

 

77,688

 

 

244,557

 

 

236,569

 

Depreciation expense

 

3,493

 

 

3,417

 

 

10,500

 

 

9,954

 

Intangible amortization expense

 

5,486

 

 

5,005

 

 

16,079

 

 

14,708

 

Change in fair value of contingent consideration

 

618

 

 

5,101

 

 

6,266

 

 

11,535

 

Operating income

 

6,289

 

 

18,804

 

 

43,390

 

 

69,942

 

Interest expense

 

3,421

 

 

3,670

 

 

10,964

 

 

9,415

 

Interest income

 

(1,080

)

 

(682

)

 

(2,629

)

 

(1,397

)

Other expense, net

 

296

 

 

21

 

 

102

 

 

254

 

Income before income taxes

 

3,652

 

 

15,795

 

 

34,953

 

 

61,670

 

Provision for income taxes

 

1,939

 

 

4,080

 

 

10,345

 

 

15,651

 

Net income

 

$

1,713

 

 

$

11,715

 

 

$

24,608

 

 

$

46,019

 

Per share data:

 

 

 

 

 

 

 

 

Net income per common share, basic

 

$

0.07

 

 

$

0.46

 

 

$

0.97

 

 

$

1.79

 

Weighted-average shares outstanding, basic

 

25,346

 

 

25,704

 

 

25,386

 

 

25,647

 

 

 

 

 

 

 

 

 

 

Net income per common share, diluted

 

$

0.07

 

 

$

0.45

 

 

$

0.97

 

 

$

1.79

 

Weighted-average shares outstanding, diluted

 

25,363

 

 

25,762

 

 

25,444

 

 

25,755

 

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

 

 

 

 

Net Sales by Segment:

 

 

 

 

Quarter ended March 31,

 

 

 

2020

 

2019

 

% Change

Worldwide Barcode, Networking & Security:

(in thousands)

 

 

Net sales, reported

$

583,642

 

 

$

596,913

 

 

(2.2

)%

Planned Divestitures

(94,424

)

 

(100,170

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

489,218

 

 

496,743

 

 

(1.5

)%

Foreign exchange impact (a)

3,590

 

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

492,808

 

 

$

496,743

 

 

(0.8

)%

 

 

 

 

 

 

Worldwide Communications & Services:

 

 

 

 

 

Net sales, reported

$

288,841

 

 

$

296,444

 

 

(2.6

)%

Planned Divestitures

(33,451

)

 

(40,341

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

255,390

 

 

256,103

 

 

(0.3

)%

Foreign exchange impact (a)

 

9,738

 

 

 

 

 

Less: Acquisitions(b)

(1,677

)

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

263,451

 

 

$

256,103

 

 

2.9

%

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

Net sales, reported

$

872,483

 

 

$

893,357

 

 

(2.3

)%

Planned Divestitures

(127,875

)

 

(140,511

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

744,608

 

 

752,846

 

 

(1.1

)%

Foreign exchange impact (a)

 

13,328

 

 

 

 

 

Less: Acquisitions(b)

(1,677

)

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

756,259

 

 

$

752,846

 

 

0.5

%

 

 

 

 

 

 

(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, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2019.

(b) Reflects a revenue recognition change to a net basis for the intY acquisition.

 

 

 

 

 

 

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

 

 

 

 

Net Sales by Segment:

 

 

 

 

Nine months ended March 31,

 

 

 

2020

 

2019

 

% Change

Worldwide Barcode, Networking & Security:

(in thousands)

 

 

Net sales, as reported

$

1,967,670

 

 

$

1,953,664

 

 

0.7

%

Planned Divestitures

(322,264

)

 

(340,862

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

1,645,406

 

 

1,612,802

 

 

2.0

%

Foreign exchange impact (a)

5,484

 

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

1,650,890

 

 

$

1,612,802

 

 

2.4

%

 

 

 

 

 

 

Worldwide Communications & Services:

 

 

 

 

 

Net sales, as reported

$

883,142

 

 

$

958,614

 

 

(7.9

)%

Planned Divestitures

(116,893

)

 

(132,905

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

766,249

 

 

825,709

 

 

(7.2

)%

Foreign exchange impact (a)

15,169

 

 

 

 

 

Less: Acquisitions(b)

(7,767

)

 

(1,062

)

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

773,651

 

 

$

824,647

 

 

(6.2

)%

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

Net sales, as reported

$

2,850,812

 

 

$

2,912,278

 

 

(2.1

)%

Planned Divestitures

(439,157

)

 

(473,767

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

2,411,655

 

 

2,438,511

 

 

(1.1

)%

Foreign exchange impact (a)

20,653

 

 

 

 

 

Less: Acquisitions(b)

(7,767

)

 

(1,062

)

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

2,424,541

 

 

$

2,437,449

 

 

(0.5

)%

 

 

 

 

 

 

(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, 2020 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2019.

(b) Reflects a revenue recognition change to a net basis for the intY acquisition.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

 

 

 

 

 

 

Net Sales by Geography:

 

 

 

 

Quarter ended March 31,

 

 

 

2020

 

2019

 

% Change

United States and Canada:

(in thousands)

 

 

Net sales, as reported

$

670,175

 

 

$

672,155

 

 

(0.3

)%

Less: Acquisitions(b)

(141

)

 

 

 

 

Non-GAAP net sales, excluding acquisitions

$

670,034

 

 

$

672,155

 

 

(0.3

)%

 

 

 

 

 

 

International:

 

 

 

 

 

Net sales, as reported

$

202,308

 

 

$

221,202

 

 

(8.5

)%

Planned Divestitures

(127,875

)

 

(140,511

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

74,433

 

 

80,691

 

 

(7.8

)%

Foreign exchange impact(a)

13,328

 

 

 

 

 

Less: Acquisitions(b)

(1,536

)

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

86,225

 

 

$

80,691

 

 

6.9

%

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

Net sales, as reported

$

872,483

 

 

$

893,357

 

 

(2.3

)%

Planned Divestitures

(127,875

)

 

(140,511

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

744,608

 

 

752,846

 

 

(1.1

)%

Foreign exchange impact(a)

13,328

 

 

 

 

 

Less: Acquisitions (b)

(1,677

)

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

756,259

 

 

$

752,846

 

 

0.5

%

 

 

 

 

 

 

(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, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2019.

(b) Reflects a revenue recognition change to a net basis for the intY acquisition.

 

 

 

 

 

 

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

 

 

 

 

 

 

Net Sales by Geography:

 

 

 

 

Nine months ended March 31,

 

 

 

2020

 

2019

 

% Change

United States and Canada:

(in thousands)

 

 

Net sales, as reported

$

2,173,516

 

 

$

2,189,567

 

 

(0.7

)%

Less: Acquisitions(b)

(3,623

)

 

(1,062

)

 

 

Net sales, excluding acquisitions

$

2,169,893

 

 

$

2,188,505

 

 

(0.9

)%

 

 

 

 

 

 

International:

 

 

 

 

 

Net sales, as reported

$

677,296

 

 

$

722,711

 

 

(6.3

)%

Planned Divestitures

(439,157

)

 

(473,767

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

238,139

 

 

248,944

 

 

(4.3

)%

Foreign exchange impact(a)

20,653

 

 

 

 

 

Less: Acquisitions(b)

(4,144

)

 

 

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

254,648

 

 

$

248,944

 

 

2.3

%

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

Net sales, as reported

$

2,850,812

 

 

$

2,912,278

 

 

(2.1

)%

Planned Divestitures

(439,157

)

 

(473,767

)

 

 

Non-GAAP net sales, excluding Planned Divestitures

2,411,655

 

 

2,438,511

 

 

(1.1

)%

Foreign exchange impact(a)

20,653

 

 

 

 

 

Less: Acquisitions(b)

(7,767

)

 

(1,062

)

 

 

Non-GAAP net sales, constant currency excluding Planned Divestitures and acquisitions

$

2,424,541

 

 

$

2,437,449

 

 

(0.5

)%

 

 

 

 

 

 

(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, 2020 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2019.

(b) Reflects a revenue recognition change to a net basis for the intY acquisition.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Financial Information:

 

 

 

Quarter ended March 31, 2020

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Change in
fair value of
contingent
consideration

 

Acquisition,
divestiture
and
restructuring
costs(a)

 

Tax
recovery,
net

 

Impact of
Planned
Divestitures

 

Non-GAAP
measure

 

in thousands, except per share data

Net sales

$

872,483

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(127,875

)

 

$

744,608

 

Gross profit

94,809

 

 

 

 

 

 

 

 

 

 

(10,206

)

 

84,603

 

Operating income

6,289

 

 

5,486

 

 

618

 

 

935

 

 

(1,529

)

 

3,020

 

 

14,819

 

Other expense, net

2,637

 

 

 

 

 

 

 

 

 

 

(759

)

 

1,878

 

Pre-tax income

3,652

 

 

5,486

 

 

618

 

 

935

 

 

 

 

4,571

 

 

15,262

 

Net income

1,713

 

 

4,171

 

 

467

 

 

894

 

 

(1,224

)

 

3,248

 

 

9,269

 

Diluted EPS

$

0.07

 

 

$

0.16

 

 

$

0.02

 

 

$

0.04

 

 

$

(0.05

)

 

$

0.13

 

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended March 31, 2019

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Change in
fair value of
contingent
consideration

 

Acquisition,
divestiture
and
restructuring
costs(b)

 

Tax
recovery,
net

 

Impact of
Planned
Divestitures

 

Non-GAAP
measure

 

in thousands, except per share data

Net sales

$

893,357

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(140,511

)

 

$

752,846

 

Gross profit

110,015

 

 

 

 

 

 

 

 

 

 

(14,208

)

 

95,807

 

Operating income

18,804

 

 

5,005

 

 

5,101

 

 

814

 

 

 

 

898

 

 

30,622

 

Other expense, net

3,009

 

 

 

 

 

 

 

 

 

 

(257

)

 

2,752

 

Pre-tax income

15,795

 

 

5,005

 

 

5,101

 

 

814

 

 

 

 

1,155

 

 

27,870

 

Net income

11,715

 

 

3,789

 

 

3,619

 

 

665

 

 

 

 

846

 

 

20,634

 

Diluted EPS

$

0.45

 

 

$

0.15

 

 

$

0.14

 

 

$

0.03

 

 

$

 

 

$

0.03

 

 

$

0.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Acquisition and divestiture costs totaled $0.8 million for the quarter ended March 31, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.1 million for the quarter ended March 31, 2020.

(b) Acquisition and divestiture costs totaled $0.2 million for the quarter ended March 31, 2019 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.6 million for the quarter ended March 31, 2019.

 

Nine months ended March 31, 2020

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Change in
fair value of
contingent
consideration

 

Acquisition,
divestiture
and
restructuring
costs(a)

 

Tax
recovery,
net

 

Impact of
Planned
Divestitures

 

Non-GAAP
measure

 

(in thousands, except per share data)

Net sales

$

2,850,812

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(439,157

)

 

$

2,411,655

 

Gross profit

320,792

 

 

 

 

 

 

 

 

 

 

(39,073

)

 

281,719

 

Operating income

43,390

 

 

16,079

 

 

6,266

 

 

3,503

 

 

(1,529

)

 

3,156

 

 

70,865

 

Other expense, net

8,437

 

 

 

 

 

 

 

 

 

 

(1,137

)

 

7,300

 

Pre-tax income

34,953

 

 

16,079

 

 

6,266

 

 

3,503

 

 

$

 

 

5,085

 

 

65,886

 

Net income

24,608

 

 

12,206

 

 

4,737

 

 

3,308

 

 

(1,224

)

 

3,571

 

 

47,206

 

Diluted EPS

$

0.97

 

 

$

0.48

 

 

$

0.19

 

 

$

0.13

 

 

$

(0.05

)

 

$

0.14

 

 

$

1.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended March 31, 2019

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Change in
fair value of
contingent
consideration

 

Acquisition,
divestiture
and
restructuring
costs(b)

 

Tax
recovery,
net

 

Impact of
Planned
Divestitures

 

Non-GAAP
Measure

 

(in thousands, except per share data)

Net sales

$

2,912,278

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(473,767

)

 

$

2,438,511

 

Gross profit

342,708

 

 

 

 

 

 

 

 

 

 

(46,404

)

 

296,304

 

Operating income

69,942

 

 

14,708

 

 

11,535

 

 

2,907

 

 

 

 

(1,253

)

 

97,839

 

Other expense, net

8,272

 

 

 

 

 

 

 

 

 

 

(603

)

 

7,669

 

Pre-tax income

61,670

 

 

14,708

 

 

11,535

 

 

2,907

 

 

 

 

(650

)

 

90,170

 

Net income

46,019

 

 

11,154

 

 

8,514

 

 

2,386

 

 

 

 

150

 

 

68,223

 

Diluted EPS

$

1.79

 

 

$

0.43

 

 

$

0.33

 

 

$

0.09

 

 

$

 

 

$

0.01

 

 

$

2.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Acquisition and divestiture costs totaled $2.7 million for the nine months ended March 31, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.8 million for the nine months ended March 31, 2020.

(b) Acquisition and divestiture costs totaled $1.0 million for the nine months ended March 31, 2019 and are generally nondeductible for tax purposes. Restructuring costs totaled $1.9 million for the nine months ended March 31, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

(in thousands, except percentages)

 

 

 

 

Non-GAAP Financial Information:

 

Quarter ended March 31,

 

2020

 

2019

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

6.1

%

 

11.4

%

 

 

 

 

Reconciliation of net income to EBITDA:

 

 

 

Net income (GAAP)

$

1,713

 

 

$

11,715

 

Plus: Interest expense

3,421

 

 

3,670

 

Plus: Income taxes

1,939

 

 

4,080

 

Plus: Depreciation and amortization

9,539

 

 

9,363

 

EBITDA (non-GAAP)

16,612

 

 

28,828

 

Plus: Change in fair value of contingent consideration

618

 

 

5,101

 

Plus: Tax recovery, net

(1,529

)

 

 

Plus: Acquisition and divestiture costs

780

 

 

222

 

Plus: Restructuring costs

155

 

 

456

 

Plus: Impact of Planned Divestitures

3,231

 

 

854

 

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

$

19,867

 

 

$

35,461

 

 

 

 

 

Invested Capital Calculation

 

 

 

Equity – beginning of the quarter

$

927,580

 

 

$

899,503

 

Equity – end of the quarter

897,678

 

 

911,063

 

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

467

 

 

3,619

 

Plus: Acquisition and divestiture costs

780

 

 

222

 

Plus: Restructuring, net of tax

114

 

 

334

 

Plus: Tax recovery, net

(1,224

)

 

 

Plus: Impact of Planned Divestitures, net of tax

3,248

 

 

1,181

 

Average equity

914,322

 

 

907,961

 

Average funded debt(b)

405,533

 

 

357,443

 

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

$

1,319,855

 

 

$

1,265,404

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(b) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt.

 

Contacts

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

- or -

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

Contacts

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

- or -

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