scsc-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 000-26926

ScanSource, Inc.

South Carolina

(State of Incorporation)

57-0965380

(I.R.S. Employer Identification No.)

6 Logue Court

Greenville, South Carolina 29615

(864) 288-2432


Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Trading Symbol:	Name of exchange on which registered:
Common stock, no par value	SCSC	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Smaller reporting company

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at November 1, 2023
Common Stock, no par value per share						24,966,931 shares

SCANSOURCE, INC.

INDEX TO FORM 10-Q

September 30, 2023


		Page #
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (unaudited) at September 30, 2023 and June 30, 2023	5
	Condensed Consolidated Income Statements (unaudited) for the Quarters Ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Quarters Ended September 30, 2023 and 2022	7
	Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the Quarters Ended September 30, 2023 and 2022	8
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Quarters Ended September 30, 2023 and 2022	10
	Notes to Condensed Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 5.	Other Information	38
Item 6.	Exhibits	39

SIGNATURES		40

Table of Contents

FORWARD-LOOKING STATEMENTS

Forward-looking statements are included in the "Risk Factors," "Legal Proceedings," "Management’s Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk" sections and elsewhere herein. Words such as "expects," "anticipates," "believes," "intends," "plans," "hopes," "forecasts," "seeks," "estimates," "goals," "projects," "strategy," "future," "likely," "may," "should," and variations of such words and similar expressions generally identify such forward-looking statements. Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors 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 and supply chain challenges, 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 attack, a failure of the Company's IT systems, failure to hire and retain quality employees, loss of the Company's major customers, relationships with the Company's key suppliers and sales partners or a termination or a significant modification of the terms under which it operates with such suppliers and sales partners, changes in the Company's operating strategy and other factors set forth in "Risk Factors" contained in our Annual Report on Form 10-K for the year ended June 30, 2023.

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.			Financial Statements

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share information)


	September 30, 2023		June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	42,647	$	36,178
Accounts receivable, less allowance of $19,570 at September 30, 2023 and $15,480 at June 30, 2023	691,669		753,236
Inventories	656,170		757,574
Prepaid expenses and other current assets	116,949		110,087

Total current assets	1,507,435		1,657,075
Property and equipment, net	36,745		37,379
Goodwill	215,152		216,706
Identifiable intangible assets, net	63,675		68,495
Deferred income taxes	16,421		17,764
Other non-current assets	59,107		70,750

Total assets	$	1,898,535	$	2,068,169
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	617,594	$	691,119
Accrued expenses and other current liabilities	67,138		78,892

Income taxes payable	8,108		9,875

Current portion of long-term debt	8,209		6,915

Total current liabilities	701,049		786,801
Deferred income taxes	3,679		3,816
Long-term debt, net of current portion	141,774		144,006
Borrowings under revolving credit facility	98,125		178,980

Other long-term liabilities	38,655		49,268

Total liabilities	983,282		1,162,871
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued	—		—
Common stock, no par value; 45,000,000 shares authorized, 24,960,231 and 24,844,203 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively	59,501		58,241
Retained earnings	952,110		936,678
Accumulated other comprehensive loss	(96,358)		(89,621)
Total shareholders’ equity	915,253		905,298
Total liabilities and shareholders’ equity	$	1,898,535	$	2,068,169

June 30, 2023 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)


	Quarter ended
	September 30,
	2023		2022
Net sales	$	876,305	$	943,813
Cost of goods sold	769,797		830,328
Gross profit	106,508		113,485
Selling, general and administrative expenses	75,436		71,593
Depreciation expense	2,795		2,763
Intangible amortization expense	4,193		4,241


Operating income	24,084		34,888
Interest expense	5,585		3,448
Interest income	(1,325)		(1,589)
Other expense, net	677		746
Income before income taxes	19,147		32,283
Provision for income taxes	3,715		8,241


Net income	$	15,432	$	24,042

SEC Form 10-Q filed by ScanSource Inc.