Document


	Second Quarter Summary
	Q2 FY25			Q2 FY24			Change
	(in thousands, except percentages and per share data)
Select reported measures:
Net sales	$	747,497		$	884,792		-15.5%
Gross profit	$	101,723		$	100,748		1.0%
Gross profit margin %	13.6		%	11.4		%	222bp
Operating income	$	18,444		$	26,826		-31.2%
GAAP net income	$	17,053		$	32,726		-47.9%
GAAP diluted EPS	$	0.70		$	1.29		-45.7%

Select Non-GAAP measures*:
Adjusted EBITDA	$	35,299		$	38,459		-8.2%
Adjusted EBITDA margin %	4.72		%	4.35		%	37bp
Non-GAAP net income	$	20,698		$	21,587		-4.1%
Non-GAAP diluted EPS	$	0.85		$	0.85		—%

Note: Margin % reflects measure as a percentage of sales.

* Represents non-GAAP financial measures. For more information and a reconciliation to the most directly comparable GAAP financial measure, see "Non-GAAP Financial Information" below as well as the accompanying Supplementary Information.

Net sales for the second quarter of fiscal year 2025 totaled $747.5 million, down 15.5% year-over-year, or down 15.1% for non-GAAP net sales. Net sales for products and services decreased 17.0% year-over-year, while recurring revenue increased 31.2% year-over-year. Specialty Technology Solutions net sales for the second quarter decreased 16.0% year-over-year to $723.3 million primarily due to lower large deals and continued soft demand in a more cautious technology spending environment. Intelisys & Advisory net sales for the second quarter increased 4.0% year-over-year to $24.2 million reflecting the addition of an acquisition.

Gross profit for the second quarter of fiscal year 2025 increased 1.0% year-over-year to $101.7 million with a gross profit margin of 13.6% versus 11.4% in the prior-year quarter. Increased 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. For the second quarter of fiscal year 2025, the percentage of gross profit from recurring revenue increased to 32.4% from 27.1% for the prior-year period.

On a GAAP basis, net income for the second quarter of fiscal year 2025 totaled $17.1 million, or $0.70 per diluted share, compared to net income of $32.7 million, or $1.29 per diluted share, for the prior-year quarter. Second quarter fiscal year 2025 non-GAAP net income totaled $20.7 million, or $0.85 per diluted share, compared to $21.6 million, or $0.85 per diluted share, for the prior-year quarter. On a non-GAAP basis, adjusted EBITDA for the second quarter of fiscal year 2025 decreased 8.2% to $35.3 million, or 4.72% of net sales, compared to $38.5 million, or 4.35% of net sales, for the prior-year quarter.

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.

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, January 30, 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.

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, 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.

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 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, gain/loss on sale of business, restructuring costs, cyberattack restoration costs, tax recovery, legal settlement, 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.

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, gain on sale of business, 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.

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.


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
	December 31, 2024		June 30, 2024*
Assets
Current assets:
Cash and cash equivalents	$	110,520	$	185,460
Accounts receivable, less allowance of $25,670 at December 31, 2024 and $20,684 at June 30, 2024	549,112		581,523
Inventories	491,978		512,634
Prepaid expenses and other current assets	132,155		125,082
Total current assets	1,283,765		1,404,699
Property and equipment, net	30,152		33,501
Goodwill	227,932		206,301
Identifiable intangible assets, net	72,691		37,634
Deferred income taxes	17,541		19,902
Other non-current assets	70,448		76,995

Total assets	$	1,702,529	$	1,779,032
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	520,408	$	587,984
Accrued expenses and other current liabilities	70,985		65,616
Current portion of contingent consideration	2,039		—
Income taxes payable	8,330		7,895

Current portion of long-term debt	7,861		7,857

Total current liabilities	609,623		669,352

Long-term debt, net of current portion	132,038		136,149
Borrowings under revolving credit facility	—		50
Long-term portion of contingent consideration	16,304		—
Other long-term liabilities	43,902		49,226
Total liabilities	801,867		854,777
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, 23,612,543 and 24,243,848 shares issued and outstanding at December 31, 2024 and June 30, 2024, respectively	—		26,370
Retained earnings	1,031,934		1,013,738
Accumulated other comprehensive loss	(131,272)		(115,853)
Total shareholders’ equity	900,662		924,255
Total liabilities and shareholders’ equity	$	1,702,529	$	1,779,032

*Derived from audited financial statements.


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands, except per share data)

	Quarter ended December 31, 2024				Six months ended December 31,
	2024		2023		2024		2023
Net sales	$	747,497	$	884,792	$	1,523,077	$	1,761,098
Cost of goods sold	645,774		784,044		1,319,735		1,553,842
Gross profit	101,723		100,748		203,342		207,256
Selling, general and administrative expenses	73,920		66,921		145,626		142,356
Depreciation expense	2,902		2,964		5,759		5,759
Intangible amortization expense	5,001		4,037		9,359		8,230
Restructuring and other charges	313		—		5,381		—

Change in fair value of contingent consideration	1,143		—		1,143		—
Operating income	18,444		26,826		36,074		50,911
Interest expense	1,970		3,359		4,078		8,945
Interest income	(2,693)		(2,119)		(5,352)		(3,444)
Loss (gain) on sale of business	—		(14,533)		—		(14,533)
Other (income) expense, net	(543)		73		(5,325)		750
Income before income taxes	19,710		40,046		42,673		59,193
Provision for income taxes	2,657		7,320		8,645		11,035


Net income	$	17,053	$	32,726	$	34,028	$	48,158

Per share data:


Net income per common share, basic	$	0.72	$	1.31	$	1.42	$	1.93
Weighted-average shares outstanding, basic	23,806		25,035		23,976		24,961



Net income per common share, diluted	$	0.70	$	1.29	$	1.39	$	1.91
Weighted-average shares outstanding, diluted	24,217		25,334		24,450		25,235


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
	Six months ended December 31,
	2024		2023
Cash flows from operating activities:
Net income	$	34,028	$	48,158


Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gain on sale of business	—		(14,533)
Depreciation and amortization	15,603		14,475
Amortization of debt issue costs	193		193
Provision for doubtful accounts	5,925		4,472
Share-based compensation	5,492		5,340

Deferred income taxes	2,306		(1,703)
Change in fair value of contingent consideration	1,143		—

Finance lease interest	48		46
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	21,110		75,579
Inventories	16,316		182,168
Prepaid expenses and other assets	(380)		(11,576)
Other non-current assets	3,145		3,208
Accounts payable	(64,915)		(135,138)
Accrued expenses and other liabilities	(1,834)		(7,678)
Income taxes payable	462		(6,254)
Net cash provided by (used in) operating activities	38,642		156,757
Cash flows from investing activities:
Capital expenditures	(4,348)		(4,865)
Cash paid for business acquisitions, net of cash acquired	(56,673)		—
Proceeds from sale of business, net of cash transferred	2,569		17,978

Net cash provided by (used in) investing activities	(58,452)		13,113
Cash flows from financing activities:

Borrowings on revolving credit	26,587		1,134,629
Repayments on revolving credit	(26,636)		(1,292,729)
Repayments on long-term debt, net	(4,107)		(3,165)
Borrowings (repayments) on finance lease obligation	(547)		(442)


Exercise of stock options	9,489		4,309
Taxes paid on settlement of equity awards	(4,805)		(2,657)
Common stock repurchased	(52,342)		(1,251)

Net cash (used in) provided by financing activities	(52,361)		(161,306)













Effect of exchange rate changes on cash and cash equivalents	(2,769)		245
Increase in cash and cash equivalents	(74,940)		8,809
Cash and cash equivalents at beginning of period	185,460		36,178
Cash and cash equivalents at period end	$	110,520	$	44,987


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except percentages)

Non-GAAP Financial Information:
	Quarter ended December 31,
	2024		2023
Reconciliation of Net Income to Adjusted EBITDA:
Net income (GAAP)	$	17,053	$	32,726
Plus: Interest expense	1,970		3,359
Plus: Income taxes	2,657		7,320
Plus: Depreciation and amortization	8,132		7,258
EBITDA (non-GAAP)	29,812		50,663
Plus: Change in fair value of contingent consideration	1,143		—
Plus: Share-based compensation	3,021		2,571
Plus: Acquisition and divestiture costs	151		703
Plus: Cyberattack restoration costs	30		441
Plus: Restructuring costs	313		—
Plus: Legal settlement	1,579		—

Plus: Tax recovery	(750)		(1,386)
Plus: Gain on sale of business	—		(14,533)
Adjusted EBITDA (numerator for Adjusted ROIC) (non-GAAP)	$	35,299	$	38,459

Invested Capital Calculations:
Equity – beginning of the period	$	920,893	$	915,253
Equity – end of the period	900,662		953,601
Plus: Change in fair value of contingent consideration, net	861		—
Plus: Share-based compensation, net	2,271		1,919
Plus: Acquisition and divestiture costs	151		703
Plus: Cyberattack restoration costs, net	23		329
Plus: Restructuring costs, net	236		—


Plus: Legal settlement, net	1,189		—
Plus: Tax recovery, net	(2,560)		(640)
Plus: Gain on sale of business	—		(14,533)
Average equity	911,863		928,316
Average funded debt (a)	142,143		227,688
Invested capital (denominator for Adjusted ROIC) (non-GAAP)	$	1,054,006	$	1,156,004

Adjusted return on invested capital ratio (Adjusted ROIC), annualized(b)	13.3%		13.2%


(a) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt.
(b) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 92 days in the current and prior-year quarter.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Net Sales by Segment:
	Quarter ended December 31,
	2024		2023		% Change
Specialty Technology Solutions:	(in thousands)


Net sales, reported	$	723,277	$	861,514	(16.0)	%
Foreign exchange impact (a)	10,723		—
Less: Divestitures	—		(1,737)
Less: Acquisitions	(6,888)		—
Non-GAAP net sales	$	727,112	$	859,777	(15.4)	%

Intelisys & Advisory:


Net sales, reported	$	24,220	$	23,278	4.0	%
Foreign exchange impact (a)	(5)		—

Less: Acquisitions	(1,685)		—
Non-GAAP net sales	$	22,530	$	23,278	(3.2)	%

Consolidated:


Net sales, reported	$	747,497	$	884,792	(15.5)	%
Foreign exchange impact (a)	10,718		—
Less: Divestitures	—		(1,737)
Less: Acquisitions	(8,573)		—
Non-GAAP net sales	$	749,642	$	883,055	(15.1)	%

(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 December 31, 2024 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2023.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
Net Sales by Revenue Type:

	Quarter ended December 31,
	2024		2023		% Change
	(in thousands)
Revenue by product/service:
Products and services	$	711,235	$	857,154	(17.0)	%
Recurring revenue(a)	36,262		27,638		31.2	%
	$	747,497	$	884,792	(15.5)	%
(a) Recurring revenue represents primarily agency commissions, SaaS, subscriptions, and hardware rentals.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Net Sales by Geography:
	Quarter ended December 31,
	2024		2023		% Change
United States and Canada:	(in thousands)
Net sales, as reported	$	687,111	$	795,382	(13.6)	%
Less: Acquisitions	(8,573)		—
Non-GAAP net sales	$	678,538	$	795,382	(14.7)	%

Brazil:


Net sales, reported(a)	$	60,386	$	89,410	(32.5)	%
Foreign exchange impact(b)	10,718		—
Less: Divestitures	—		(1,737)
Non-GAAP net sales	$	71,104	$	87,673	(18.9)	%

Consolidated:


Net sales, reported	$	747,497	$	884,792	(15.5)	%
Foreign exchange impact(b)	10,718		—
Less: Divestitures	—		(1,737)
Less: Acquisitions	(8,573)		—
Non-GAAP net sales	$	749,642	$	883,055	(15.1)	%

(a) Countries outside of the United States, Canada and Brazil represent $0.1 million, or 0.2% of sales, for the quarter ended December 31, 2024 and $1.8 million, or 2.0% of sales, for the quarter ended December 31, 2023.
(b) 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 December 31, 2024 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2023.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except per share data)

Reconciliation of Other Non-GAAP Financial Information:

	Quarter ended December 31, 2024
		GAAP Measure	Intangible amortization expense	Change in fair value of contingent consideration	Acquisition & divestiture costs (a)	Restructuring costs	Tax recovery	Cyberattack restoration costs	Legal Settlement	Non-GAAP measure
	(in thousands, except per share data)


SG&A expenses		$73,920	$—	$—	$(151)	$—	$750	$(30)	$(1,579)	$72,910
Operating income		18,444	5,001	1,143	151	313	(750)	30	1,579	25,911


Pre-tax income		19,710	5,001	1,143	151	313	(750)	30	1,579	27,177
Net income		17,053	3,745	861	151	236	(2,560)	23	1,189	20,698
Diluted EPS		$0.70	$0.15	$0.04	$0.01	$0.01	$(0.11)	$—	$0.05	$0.85

	Quarter ended December 31, 2023
		GAAP Measure	Intangible amortization expense	Change in fair value of contingent consideration	Acquisition & divestiture costs (a)	Restructuring costs	Tax recovery	Cyberattack restoration costs	Gain on sale of business (b)	Non-GAAP measure
	(in thousands, except per share data)


SG&A expense		$66,921	$—	$—	$(703)	$—	$1,386	$(441)	$—	$67,163
Operating income		26,826	4,037	—	703	—	(1,386)	441	—	30,621


Pre-tax income		40,046	4,037	—	703	—	(1,386)	441	(14,533)	29,308
Net income		32,726	3,002	—	703	—	(640)	329	(14,533)	21,587
Diluted EPS		$1.29	$0.12	$—	$0.03	$—	$(0.03)	$0.01	$(0.57)	$0.85


Contact:
Steve Jones						Mary M. Gentry
Senior EVP, Chief Financial Officer						SVP, Finance and Treasurer
ScanSource, Inc.						ScanSource, Inc.
(864) 286-4302						(864) 286-4892





Free Cash Flow:

	Quarter ended December 31,				Six months ended December 31,
	2024		2023		2024		2023
GAAP operating cash flow	$	(6,190)	$	63,224	$	38,642	$	156,757
Less: Capital expenditures	(1,974)		(2,549)		(4,348)		(4,865)
Free cash flow (non-GAAP)	$	(8,164)	$	60,675	$	34,294	$	151,892