Contact: | ||||||||
Steve Jones | Mary M. Gentry | |||||||
Senior EVP, Chief Financial Officer | SVP, Treasurer and Investor Relations | |||||||
ScanSource, Inc. | ScanSource, Inc. | |||||||
(864) 286-4302 | (864) 286-4892 |
First Quarter Summary: | Quarter ended September 30, | ||||||||||||||||
2021 | 2020 | Change | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Select reported measures: | |||||||||||||||||
Net sales | $ | 857,311 | $ | 757,342 | 13.2 | % | |||||||||||
Gross profit | $ | 101,300 | $ | 80,779 | 25.4 | % | |||||||||||
Gross profit margin % | 11.82 | % | 10.67 | % | 115 | bp | |||||||||||
Operating income | $ | 30,328 | $ | 1,634 | n/m | ||||||||||||
GAAP net income | $ | 22,073 | $ | (115) | n/m | ||||||||||||
GAAP diluted EPS | $ | 0.86 | $ | (0.01) | n/m | ||||||||||||
Select Non-GAAP measures: | |||||||||||||||||
Adjusted EBITDA | $ | 41,394 | $ | 20,911 | 98.0 | % | |||||||||||
Adjusted EBITDA margin % | 4.83 | % | 2.76 | % | 207 | bp | |||||||||||
Non-GAAP net income | $ | 25,550 | $ | 10,698 | 138.8 | % | |||||||||||
Non-GAAP diluted EPS | $ | 0.99 | $ | 0.42 | 135.7 | % | |||||||||||
n/m - percentages are not meaningful |
FY22 Annual Outlook | ||||||||||||||
Net sales growth, year-over-year | At least 5.5% | |||||||||||||
Adjusted EBITDA (non-GAAP) | At least $135 million | |||||||||||||
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||||||
(in thousands) | |||||||||||
September 30, 2021 | June 30, 2021* | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 55,491 | $ | 62,718 | |||||||
Accounts receivable, less allowance of $17,620 at September 30, 2021 and $19,341 at June 30, 2021 | 589,532 | 568,984 | |||||||||
Inventories | 493,541 | 470,081 | |||||||||
Prepaid expenses and other current assets | 117,849 | 117,860 | |||||||||
Total current assets | 1,256,413 | 1,219,643 | |||||||||
Property and equipment, net | 40,763 | 42,836 | |||||||||
Goodwill | 216,948 | 218,877 | |||||||||
Identifiable intangible assets, net | 99,496 | 104,860 | |||||||||
Deferred income taxes | 21,806 | 21,853 | |||||||||
Other non-current assets | 61,925 | 63,615 | |||||||||
Non-current assets held for sale | — | — | |||||||||
Total assets | $ | 1,697,351 | $ | 1,671,684 | |||||||
Liabilities and Shareholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 602,229 | $ | 634,805 | |||||||
Accrued expenses and other current liabilities | 72,362 | 87,790 | |||||||||
Income taxes payable | 9,039 | 2,501 | |||||||||
Current portion of long-term debt | 8,785 | 7,843 | |||||||||
Total current liabilities | 692,415 | 732,939 | |||||||||
Deferred income taxes | 3,846 | 3,954 | |||||||||
Long-term debt, net of current portion | 132,171 | 135,331 | |||||||||
Borrowings under revolving credit facility | 56,400 | — | |||||||||
Other long-term liabilities | 66,425 | 68,269 | |||||||||
Total liabilities | 951,257 | 940,493 | |||||||||
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, 25,528,551 and 25,499,465 shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively | 74,817 | 71,253 | |||||||||
Retained earnings | 780,144 | 758,071 | |||||||||
Accumulated other comprehensive loss | (108,867) | (98,133) | |||||||||
Total shareholders’ equity | 746,094 | 731,191 | |||||||||
Total liabilities and shareholders’ equity | $ | 1,697,351 | $ | 1,671,684 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Income Statements (Unaudited) | |||||||||||
(in thousands, except per share data) | |||||||||||
Quarter ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Net sales | $ | 857,311 | $ | 757,342 | |||||||
Cost of goods sold | 756,011 | 676,563 | |||||||||
Gross profit | 101,300 | 80,779 | |||||||||
Selling, general and administrative expenses | 63,582 | 62,112 | |||||||||
Depreciation expense | 2,880 | 3,396 | |||||||||
Intangible amortization expense | 4,510 | 4,853 | |||||||||
Restructuring and other charges | — | 8,268 | |||||||||
Change in fair value of contingent consideration | — | 516 | |||||||||
Operating income | 30,328 | 1,634 | |||||||||
Interest expense | 1,660 | 1,913 | |||||||||
Interest income | (1,026) | (481) | |||||||||
Other expense (income), net | 263 | 364 | |||||||||
Income before income taxes | 29,431 | (162) | |||||||||
Provision for income taxes | 7,358 | (47) | |||||||||
Net income (loss) from continuing operations | 22,073 | (115) | |||||||||
Net loss from discontinued operations | — | (11,704) | |||||||||
Net income (loss) | $ | 22,073 | $ | (11,819) | |||||||
Per share data: | |||||||||||
Net income (loss) from continuing operations per common share, basic | $ | 0.87 | $ | (0.01) | |||||||
Net loss from discontinued operations per common share, basic | — | (0.46) | |||||||||
Net income (loss) per common share, basic | $ | 0.87 | $ | (0.47) | |||||||
Weighted-average shares outstanding, basic | 25,512 | 25,361 | |||||||||
Net income (loss) from continuing operations per common share, diluted | $ | 0.86 | $ | (0.01) | |||||||
Net loss from discontinued operations per common share, diluted | — | (0.46) | |||||||||
Net income (loss) per common share, diluted | $ | 0.86 | $ | (0.47) | |||||||
Weighted-average shares outstanding, diluted | 25,696 | 25,361 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||||||
(in thousands) | |||||||||||
Quarter ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | 22,073 | $ | (11,819) | |||||||
Net loss from discontinued operations | — | (11,704) | |||||||||
Net income (loss) from continuing operations | 22,073 | (115) | |||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations: | |||||||||||
Depreciation and amortization | 7,650 | 8,710 | |||||||||
Amortization of debt issue costs | 104 | 104 | |||||||||
Provision for doubtful accounts | (1,027) | (8) | |||||||||
Share-based compensation | 2,570 | 1,168 | |||||||||
Deferred income taxes | (183) | 139 | |||||||||
Change in fair value of contingent consideration | — | 516 | |||||||||
Finance lease interest | 17 | 37 | |||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
Accounts receivable | (26,714) | (68,726) | |||||||||
Inventories | (25,879) | 31,155 | |||||||||
Prepaid expenses and other assets | (1,174) | 2,369 | |||||||||
Other non-current assets | 691 | (274) | |||||||||
Accounts payable | (26,962) | 92,419 | |||||||||
Accrued expenses and other liabilities | (14,683) | 7,827 | |||||||||
Income taxes payable | 6,558 | (4,096) | |||||||||
Net cash (used in) provided by operating activities of continuing operations | (56,959) | 71,225 | |||||||||
Cash flows from investing activities of continuing operations: | |||||||||||
Capital expenditures | (1,090) | (748) | |||||||||
Net cash used in investing activities of continuing operations | (1,090) | (748) | |||||||||
Cash flows from financing activities of continuing operations: | |||||||||||
Borrowings on revolving credit, net of expenses | 526,637 | 477,381 | |||||||||
Repayments on revolving credit, net of expenses | (470,237) | (545,095) | |||||||||
Borrowings on long-term debt, net | (2,218) | (2,214) | |||||||||
Repayments of finance lease obligations | (316) | (327) | |||||||||
Exercise of stock options | 994 | — | |||||||||
Net cash provided by (used in) financing activities of continuing operations | 54,860 | (70,255) | |||||||||
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 | — | 31,853 | |||||||||
Net cash flows used in investing activities of discontinued operations | — | (36) | |||||||||
Net cash flows used in financing activities of discontinued operations | — | (9,488) | |||||||||
Net cash flows provided by discontinued operations | — | 22,329 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (4,038) | (1,439) | |||||||||
(Decrease) Increase in cash and cash equivalents | (7,227) | 21,112 | |||||||||
Consolidated cash and cash equivalents at beginning of period | 62,718 | 34,455 | |||||||||
Consolidated cash and cash equivalents at end of period | 55,491 | 55,567 | |||||||||
Cash and cash equivalents of discontinued operations | — | 5,678 | |||||||||
Cash and cash equivalents of continuing operations | $ | 55,491 | $ | 49,889 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Supplementary Information (Unaudited) | |||||||||||
(in thousands, except percentages) | |||||||||||
Non-GAAP Financial Information: | |||||||||||
Quarter ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Return on invested capital ratio (ROIC), annualized (a) | 17.5 | % | 8.9 | % | |||||||
Reconciliation of net income to adjusted EBITDA: | |||||||||||
Net income (loss) from continuing operations (GAAP) | $ | 22,073 | $ | (115) | |||||||
Plus: Interest expense | 1,660 | 1,913 | |||||||||
Plus: Income taxes | 7,358 | (47) | |||||||||
Plus: Depreciation and amortization | 7,650 | 8,710 | |||||||||
EBITDA (non-GAAP) | 38,741 | 10,461 | |||||||||
Plus: Change in fair value of contingent consideration | — | 516 | |||||||||
Plus: Share-based compensation | 2,570 | 1,168 | |||||||||
Plus: Acquisition and divestiture costs(b) | 83 | 498 | |||||||||
Plus: Restructuring costs | — | 8,268 | |||||||||
Adjusted EBITDA (numerator for ROIC) (non-GAAP) | $ | 41,394 | $ | 20,911 | |||||||
Invested Capital Calculations: | |||||||||||
Equity – beginning of the quarter | $ | 731,191 | $ | 678,246 | |||||||
Equity – end of the quarter | 746,094 | 671,227 | |||||||||
Plus: Change in fair value of contingent consideration, net of tax | — | 390 | |||||||||
Plus: Share-based compensation, net | 1,922 | 878 | |||||||||
Plus: Acquisition and divestiture costs(b) | 83 | 498 | |||||||||
Plus: Restructuring, net | — | 6,250 | |||||||||
Plus: Discontinued operations net loss | — | 11,704 | |||||||||
Average equity | 739,645 | 684,597 | |||||||||
Average funded debt (c) | 197,406 | 243,268 | |||||||||
Invested capital (denominator for ROIC) (non-GAAP) | $ | 937,051 | $ | 927,865 | |||||||
(a) 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. | |||||||||||
(b) Acquisition and divestiture costs are generally nondeductible for tax purposes. | |||||||||||
(c) 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) | |||||||||||||||||
Net Sales by Segment: | |||||||||||||||||
Quarter ended September 30, | |||||||||||||||||
2021 | 2020 | % Change | |||||||||||||||
Specialty Technology Solutions: | (in thousands) | ||||||||||||||||
Net sales, reported | $ | 501,711 | $ | 408,777 | 22.7 | % | |||||||||||
Foreign exchange impact (a) | (467) | — | |||||||||||||||
Non-GAAP net sales, constant currency | $ | 501,244 | $ | 408,777 | 22.6 | % | |||||||||||
Modern Communications & Cloud: | |||||||||||||||||
Net sales, reported | $ | 355,600 | $ | 348,565 | 2.0 | % | |||||||||||
Foreign exchange impact (a) | (1,970) | — | |||||||||||||||
Non-GAAP net sales, constant currency | $ | 353,630 | $ | 348,565 | 1.5 | % | |||||||||||
Consolidated: | |||||||||||||||||
Net sales, reported | $ | 857,311 | $ | 757,342 | 13.2 | % | |||||||||||
Foreign exchange impact (a) | (2,437) | — | |||||||||||||||
Non-GAAP net sales, constant currency | $ | 854,874 | $ | 757,342 | 12.9 | % | |||||||||||
(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 quarter ended September 30, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2020. |
ScanSource, Inc. and Subsidiaries | |||||||||||||||||
Supplementary Information (Unaudited) | |||||||||||||||||
Net Sales by Geography: | |||||||||||||||||
Quarter ended September 30, | |||||||||||||||||
2021 | 2020 | % Change | |||||||||||||||
United States and Canada: | (in thousands) | ||||||||||||||||
Net sales, as reported | $ | 769,499 | $ | 683,603 | 12.6 | % | |||||||||||
International: | |||||||||||||||||
Net sales, reported | $ | 87,812 | $ | 73,739 | 19.1 | % | |||||||||||
Foreign exchange impact(a) | (2,437) | — | |||||||||||||||
Non-GAAP net sales, constant currency | $ | 85,375 | $ | 73,739 | 15.8 | % | |||||||||||
Consolidated: | |||||||||||||||||
Net sales, reported | $ | 857,311 | $ | 757,342 | 13.2 | % | |||||||||||
Foreign exchange impact(a) | (2,437) | — | |||||||||||||||
Non-GAAP net sales, constant currency | $ | 854,874 | $ | 757,342 | 12.9 | % | |||||||||||
(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 quarter ended September 30, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2020. |
Quarter ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | ||||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
Net sales | $ | 857,311 | $ | — | $ | — | $ | — | $ | — | $ | 857,311 | |||||||||||||||||||||||
Gross profit | 101,300 | — | — | — | — | 101,300 | |||||||||||||||||||||||||||||
Operating income | 30,328 | 4,510 | — | 83 | — | 34,921 | |||||||||||||||||||||||||||||
Other expense, net | 897 | — | — | — | — | 897 | |||||||||||||||||||||||||||||
Pre-tax income | 29,431 | 4,510 | — | 83 | — | 34,024 | |||||||||||||||||||||||||||||
Net income | 22,073 | 3,394 | — | 83 | — | 25,550 | |||||||||||||||||||||||||||||
Diluted EPS | $ | 0.86 | $ | 0.13 | $ | — | $ | — | $ | — | $ | 0.99 | |||||||||||||||||||||||
Quarter ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | ||||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
Net sales | $ | 757,342 | $ | — | $ | — | $ | — | $ | — | $ | 757,342 | |||||||||||||||||||||||
Gross profit | 80,779 | — | — | — | — | 80,779 | |||||||||||||||||||||||||||||
Operating (loss) income | 1,634 | 4,853 | 516 | 498 | 8,268 | 15,769 | |||||||||||||||||||||||||||||
Other expense, net | 1,796 | — | — | — | — | 1,796 | |||||||||||||||||||||||||||||
Pre-tax (loss) income | (162) | 4,853 | 516 | 498 | 8,268 | 13,973 | |||||||||||||||||||||||||||||
Net (loss) income | (115) | 3,675 | 390 | 498 | 6,250 | 10,698 | |||||||||||||||||||||||||||||
Diluted EPS | $ | (0.01) | $ | 0.14 | $ | 0.02 | $ | 0.02 | $ | 0.25 | $ | 0.42 | |||||||||||||||||||||||
ScanSource, Inc. and Subsidiaries | ||||||||||||||
Supplementary Forward-Looking Information (Unaudited) | ||||||||||||||
Annual Financial Outlook for Fiscal Year 2022: | ||||||||||||||
FY22 Outlook | ||||||||||||||
GAAP, Operating Income | At least $92 million | |||||||||||||
Intangible amortization | $18 million | |||||||||||||
Depreciation expense | $14 million | |||||||||||||
Share-based compensation expense | $11 million | |||||||||||||
Adjusted EBITDA (non-GAAP) | At least $135 million | |||||||||||||
Quarter Ended | |||||||||||||||||||||||||||||
September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | |||||||||||||||||||||||||
Sales: | |||||||||||||||||||||||||||||
Specialty Technology Solutions | $ | 501,711 | $ | 515,445 | $ | 436,462 | $ | 455,248 | $ | 408,777 | |||||||||||||||||||
Modern Communications & Cloud | 355,600 | 337,249 | 293,411 | 355,649 | 348,565 | ||||||||||||||||||||||||
$ | 857,311 | $ | 852,694 | $ | 729,873 | $ | 810,897 | $ | 757,342 | ||||||||||||||||||||
Depreciation and amortization: | |||||||||||||||||||||||||||||
Specialty Technology Solutions | $ | 2,969 | $ | 3,139 | $ | 3,200 | $ | 3,308 | $ | 3,545 | |||||||||||||||||||
Modern Communications & Cloud | 3,962 | 4,233 | 4,439 | 4,246 | 4,370 | ||||||||||||||||||||||||
Corporate | 719 | 719 | 719 | 794 | 795 | ||||||||||||||||||||||||
$ | 7,650 | $ | 8,091 | $ | 8,358 | $ | 8,348 | $ | 8,710 | ||||||||||||||||||||
Operating income (loss): | |||||||||||||||||||||||||||||
Specialty Technology Solutions | $ | 14,104 | $ | 12,011 | $ | 8,713 | $ | 7,160 | $ | 1,684 | |||||||||||||||||||
Modern Communications & Cloud | 16,307 | 11,466 | 11,555 | 11,814 | 8,716 | ||||||||||||||||||||||||
Corporate | (83) | (191) | (832) | (1,844) | (8,766) | ||||||||||||||||||||||||
$ | 30,328 | $ | 23,286 | $ | 19,436 | $ | 17,130 | $ | 1,634 | ||||||||||||||||||||