ScanSource Reports Third Quarter Results

Announces New $200M Share Repurchase Authorization

ScanSource, Inc. (NASDAQ:SCSC), a leading hybrid distributor connecting devices to the cloud, today announced financial results for the third quarter ended March 31, 2025.

"Our business performed well this quarter with both segments achieving year-over-year gross profit growth and higher EBITDA margins," said Mike Baur, Chair and CEO of ScanSource, Inc. "For our third quarter, we delivered strong free cash flow and EPS growth including the benefit from our acquisitions. Hardware demand improved late in the quarter, along with a return of large deals."

Quarterly Results

Net sales for the third quarter of fiscal year 2025 totaled $704.8 million, down 6.3% year-over-year, or down 6.4% for non-GAAP net sales. Net sales for products and services decreased 8.2% year-over-year, while recurring revenue increased 41.0% year-over-year including acquisitions. For Specialty Technology Solutions, third quarter net sales of $678.4 million decreased 7.0% year-over-year primarily due to lower net sales in Brazil. In North America, most of the technologies in this segment had year-over-year net sales growth. Intelisys & Advisory net sales for the third quarter increased 16.0% year-over-year to $26.4 million reflecting the addition of an acquisition and Intelisys net sales growth.

Gross profit for the third quarter of fiscal year 2025 increased 6.1% year-over-year to $100.2 million with a gross profit margin of 14.2% versus 12.6% in the prior-year quarter. The higher gross profit margin reflects a higher contribution of recurring revenue in our overall revenue mix, which is recorded on a net basis and therefore contributes to a higher gross profit margin, and higher vendor program recognition. For the third quarter of fiscal year 2025, the percentage of gross profit from recurring revenue increased to 36.0% from 29.3% for the prior-year period.

For the third quarter of fiscal year 2025, operating income was $22.3 million compared to $17.5 million in the prior-year quarter. Third quarter fiscal year 2025 non-GAAP operating income increased to $26.6 million from $25.3 million in the prior-year quarter.

On a GAAP basis, net income for the third quarter of fiscal year 2025 totaled $17.4 million, or $0.74 per diluted share, compared to net income of $12.8 million, or $0.50 per diluted share, for the prior-year quarter. Third quarter fiscal year 2025 non-GAAP net income totaled $20.3 million, or $0.86 per diluted share, compared to $17.5 million, or $0.69 per diluted share, for the prior-year quarter. On a non-GAAP basis, adjusted EBITDA for the third quarter of fiscal year 2025 increased 5.9% to $35.1 million, or 4.97% of net sales, compared to $33.1 million, or 4.40% of net sales, for the prior-year quarter.

Balance Sheet and Cash Flow

As of March 31, 2025, ScanSource had cash and cash equivalents of $146.3 million and total debt of $138.0 million.

For the first nine months of fiscal year 2025, ScanSource generated $104.7 million of operating cash flow and $98.9 million of free cash flow (non-GAAP). ScanSource also had share repurchases of $81.3 million for the first nine months of fiscal year 2025.

Annual Financial Outlook for Fiscal Year 2025

ScanSource updates its expectations for net sales and adjusted EBITDA for the full fiscal year ended June 30, 2025 and replaces previously provided guidance.

Adjusted EBITDA is a non-GAAP measure, which excludes estimates for amortization of intangible assets, depreciation expense, and non-cash shared-based compensation expense. Free cash flow is a non-GAAP measure, which excludes the effect of estimated capital expenditures from estimated operating cash flow. These measures are forward-looking, and actual results may differ materially.

ScanSource believes that a quantitative reconciliation of such forward-looking information to the most directly comparable GAAP financial measures cannot be made without unreasonable efforts, because a reconciliation of these non-GAAP financial measures would require an estimate of future non-operating items such as acquisitions and divestitures, restructuring costs, impairment charges and other unusual or non-recurring items. Neither the timing nor likelihood of these events, nor their probable significance, can be quantified with a reasonable degree of accuracy. Accordingly, a reconciliation of such forward-looking information to the most directly comparable GAAP financial measures is not provided.

Share Repurchase Authorization

ScanSource announces a new $200 million authorization by its Board of Directors to purchase shares of its common stock. This supplements the existing authorization of which approximately $42 million remained outstanding as of March 31, 2025. Repurchases may be made at management's discretion through open market or privately negotiated transactions, including pursuant to one or more Rule 10b5-1 trading plans. This share repurchase authorization does not obligate ScanSource to purchase any particular amount of common stock, does not include a time limit on purchases, and may be suspended at any time.

Webcast Details and Earnings Infographic

At approximately 8:45 a.m. ET today, an Earnings Infographic, as a supplement to this press release and the earnings conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results and business in a conference call today, May 8, 2025, at 10:30 a.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 ScanSource's FY25 annual outlook, which involve risks and uncertainties, many of which are beyond ScanSource's control. No undue reliance should be placed on such statements, as any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, the following factors, which are neither presented in order of importance nor weighted: macroeconomic conditions, including potential prolonged economic weakness, inflation, tariffs and changes in trade policy, the failure to manage and implement ScanSource's growth strategy, the ability for ScanSource to realize the synergies or other benefits from acquisitions, credit risks involving ScanSource's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting ScanSource's international operations, risk to the business from a cyberattack, a failure of IT systems, failure to hire and retain quality employees, loss of ScanSource's major customers, relationships with key suppliers and customers or a termination or a modification of the terms under which it operates with these key suppliers and customers, changes in ScanSource's operating strategy, and other factors set forth in the "Risk Factors" contained in ScanSource's annual report on Form 10-K for the year ended June 30, 2024. Except as may be required by law, ScanSource expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or otherwise.

Non-GAAP Financial Information

In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), ScanSource 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 items such as amortization of intangible assets related to acquisitions, acquisition and divestiture costs, gain/loss on sale of business, and restructuring costs and include other non-GAAP adjustments.

Net sales on a constant currency basis excluding acquisitions and divestitures to calculate organic growth ("non-GAAP net sales"): ScanSource 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 and divestitures prior to the first full year from the transaction date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis.

Adjusted earnings before interest expense, income taxes, depreciation, and amortization ("Adjusted EBITDA"): Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments, including acquisition and divestiture costs, restructuring costs, cyberattack restoration costs, tax recovery, and non-cash share-based compensation expense. Since Adjusted EBITDA excludes some non-cash costs of investing in ScanSource's business and people, management believes that Adjusted EBITDA shows the profitability from the business operations more clearly. The Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net sales.

Adjusted return on invested capital ("Adjusted ROIC"): Adjusted ROIC assists management in comparing ScanSource'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. Management believes the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of its performance. Adjusted ROIC is calculated as Adjusted EBITDA over invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. Management believes the calculation of Adjusted ROIC provides useful information to investors and is an additional relevant comparison of ScanSource's performance during the year.

Free cash flow: ScanSource presents free cash flow as it is a measure used by management to measure our business. ScanSource believes this measure provides more information regarding liquidity and capital resources. Free cash flow is defined as cash flows from operating activities less capital expenditures.

Net debt: Net debt includes total balance sheet debt less cash and cash equivalents. ScanSource believes this measure is useful in assessing its borrowing capacity.

Additional Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, ScanSource discloses non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income, and non-GAAP diluted earnings per share (non-GAAP diluted EPS). These non-GAAP results exclude amortization of intangible assets related to acquisitions, acquisition and divestiture costs, restructuring costs, and other non-GAAP adjustments. These metrics include the translation impact of changes in foreign currency exchange rates. Non-GAAP metrics are useful in assessing and understanding ScanSource's performance especially when comparing results with previous periods or forecasting performance for future periods.

These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that ScanSource 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 ScanSource's non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ:SCSC) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for channel partners across hardware, software as a service (SaaS), connectivity and cloud. ScanSource enables channel partners to deliver solutions for their end customers to address changing buying and consumption patterns. ScanSource uses multiple sales models to offer hybrid distribution solutions from leading suppliers of specialty technologies, connectivity and cloud. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the 2024 Best Places to Work in South Carolina and on FORTUNE magazine's 2025 List of World's Most Admired Companies. ScanSource ranks #776 on the Fortune 1000. For more information, visit www.scansource.com.

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Steve Jones

Senior EVP, Chief Financial Officer

ScanSource, Inc.

(864) 286-4302

Mary M. Gentry

SVP, Finance and Treasurer

ScanSource, Inc.

(864) 286-4892