Attached files
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| 8-K - 8-K - SCANSOURCE, INC. | scsc-20210818.htm |
| EX-99.3 - EX-99.3 - SCANSOURCE, INC. | a2021-q4exhibit9936302021.htm |
| EX-99.1 - EX-99.1 - SCANSOURCE, INC. | a2021-q4exhibit9916302021.htm |
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com FINANCIAL INFORMATION AND CONFERENCE CALL Please see the accompanying earnings press release available at www.scansource.com in the Investor Relations section. The information included in this CFO commentary is unaudited and should be read in conjunction with the Company’s SEC filings on Form 10-K for the year ended June 30, 2021. All results reflect continuing operations only unless otherwise noted. ScanSource will present additional information about its financial results and outlook in a conference call on Tuesday, August 24, 2021 at 5:00 pm ET. A webcast of the call is available and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days. FOURTH QUARTER SUMMARY Our teams delivered strong fourth quarter net sales and profitability growth. Each quarter of our fiscal year we have had consistent execution and strong momentum in driving our strategic plan. For the quarter, net sales of $853 million increased 34% Y/Y and exceeded pre-COVID levels. Intelisys net sales grew 13% Y/Y, marking our 20th quarter in a row of double-digit growth. Our fourth quarter metrics reflect operational excellence by our teams, including navigating a challenging and supply-constrained environment. We had an 11.2% gross profit margin, 2.73% operating margin, 3.33% non-GAAP operating margin, strong operating cash flow ($117 million for the year), and the highest quarterly ROIC in over 5 years at 14.9%. GAAP EPS was $0.80 for the quarter and $1.78 for the year. Non-GAAP EPS was $0.96 for the quarter (including $0.19 benefit from discrete tax items) and $2.74 for the year. We are initiating an annual financial outlook for fiscal year 2022, reflecting confidence in our growth strategy. We also announced a new $100 million share repurchase authorization. CFO COMMENTARY Q4 FY 2021 August 24, 20211 Please see the Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures. Q4 FY2021: 34% Y/Y net sales growth and 14.9% ROIC reflect strong execution Exhibit 99.2
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com Q4 FY21 Q3 FY21 Q4 FY20 Q/Q Change Y/Y Change Net sales $852.7 $729.9 $636.5 +17% +34% Gross profit $95.8 $88.1 $74.1 +9% +29% Gross profit margin % 11.2% 12.1% 11.7% -84 bps -42 bps SG&A expenses $64.8 $60.1 $58.2 +8% +11% Non-GAAP SG&A expenses $64.5 $59.8 $62.6 +8% +3% Operating income $23.3 $19.4 ($113.4) +20% n/m Operating income % 2.73% 2.66% -17.8% +7 bps n/m Non-GAAP operating income $28.4 $25.1 $8.2 +13% +245% Non-GAAP operating income % 3.33% 3.45% 1.29% -12 bps +204 bps GAAP net income $20.7 $13.8 ($108.9) +50% n/m Non-GAAP net income $24.5 $18.2 $4.9 +35% +405% GAAP diluted EPS $0.80 $0.54 ($4.29) +48% n/m Non-GAAP diluted EPS $0.96 $0.71 $0.19 +35% +405% • Net sales of $852.7 million, up 34% Y/Y - Favorable FX impact of $1.7 million - Up 17% Q/Q - Net sales exceed pre-COVID levels - Intelisys recurring revenue increased 13% Y/Y • Gross profit margin decreased to 11.2% - Lower margin sales mix, including large deals • Operating income margin of 2.73% and non-GAAP operating income margin of 3.33% • SG&A expenses and non-GAAP SG&A expenses up 11% Y/Y and 3% Y/Y, respectively - Includes investments in strategic headcount for Intelisys and other growth areas • GAAP diluted EPS of $0.80 and non- GAAP diluted EPS of $0.96 • EPS includes $0.19 benefit from discrete tax items $ in millions, except EPS August 24, 2021 QUARTERLY HIGHLIGHTS Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and acquisitions. Non- GAAP SG&A expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted EPS exclude amortization of intangibles, change in fair value of contingent consideration, impairment charges, restructuring charges, acquisition/divestiture costs, and other non-GAAP items. 2
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com • Net sales of $597.9 million, up 19% Q/Q and 34% Y/Y - Growth across key technologies including mobile computing, self- checkout, video surveillance, and networking - Higher customer counts • Gross profit margin of 8.4% - Large margin sales mix, including large deals • Operating income margin of 2.1% and non-GAAP operating income margin of 2.4% - SG&A leverage driving higher OI Q4 FY21 Q3 FY21 Q4 FY20 Net sales $597.9 $502.2 $447.8 Gross profit $50.5 $43.9 $37.3 Gross profit margin % 8.4% 8.7% 8.3% Operating income $12.3 $8.1 $(112.7) Operating income % 2.1% 1.6% (25.2)% Non-GAAP operating income $14.3 $10.0 $3.7 Non-GAAP operating income % 2.4% 2.0% 0.8% August 24, 2021 WORLDWIDE BARCODE, NETWORKING & SECURITY $448 $524 $551 $502 $598 $300 $400 $500 $600 $700 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Net Sales, $ in millions Y/Y Growth +34% Y/Y Organic Growth +33% $ in millions Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and acquisitions. Non-GAAP operating income excludes amortization of intangibles, impairment charges and other non-GAAP items. 3
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com Q4 FY21 Q3 FY21 Q4 FY20 Net sales $254.8 $227.6 $188.6 Gross profit $45.3 $44.2 $36.9 Gross profit margin % 17.8% 19.4% 19.5% Operating income $11.2 $12.2 $0.5 Operating income % 4.4% 5.4% 0.3% Non-GAAP operating income $14.1 $15.1 $4.5 Non-GAAP operating income % 5.5% 6.6% 2.4% August 24, 2021 WORLDWIDE COMMUNICATIONS & SERVICES $189 $234 $260 $228 $255 $- $100 $200 $300 $400 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Net Sales, $ in millions Y/Y Growth 35% Y/Y Organic Growth 34% $ in millions • Net sales of $254.8 million, up 12% Q/Q and 35% Y/Y - For North America Unified Communications, growth in cloud- enabled endpoints, accelerated by the shift to cloud, outpaced the decline in premise-based communications - Net sales for Intelisys agency, up 13% Y/Y; 19.5% Y/Y growth for UCaaS and 68% Y/Y growth for CCaaS • Gross profit margin of 17.8% - Less favorable sales mix - Normalizing margin in Brazil (compared to Q3) • Operating income margin of 4.4% and non- GAAP operating income margin of 5.5% - Lower gross profit margin Q/Q - Y/Y SG&A cost reductions 4 Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and acquisitions. Non-GAAP operating income excludes amortization of intangibles, change in fair value of contingent consideration, impairment charges, and other non-GAAP items.
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com Q4 FY21 Q3 FY21 Q4 FY20 Accounts receivable (Q/E) $569.0 $509.4 $443.2 Days sales outstanding in receivables 60 63 63 Inventory (Q/E) $470.1 $459.7 $454.9 Inventory turns 6.5 5.8 4.5 Accounts payable (Q/E) $634.8 $521.6 $454.2 Paid for inventory days* (9.4) 2.2 10.9 Working capital (Q/E) (AR+INV–AP) $404.3 $447.5 $443.8 August 24, 2021 WORKING CAPITAL • Working capital of $404.3 million, down 10% Q/Q and down 9% Y/Y • Days sales outstanding in receivables of 60 days, in line with typical levels • Inventory of $470.1 million, up 2% Q/Q and up 3% Y/Y • Inventory turns increased to 6.5x, faster than typical range • Paid for inventory days of (9.4), driven by lower inventory days and timing of accounts payable • Cash conversion cycle improves to 51 days (down from 65 from previous quarter and 74 for previous year) $ in millions * Paid for inventory days represent Q/E inventory days less Q/E accounts payable days 5
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com Q4 FY21 Q3 FY21 Q4 FY20 Adjusted EBITDA (QTR)* $33.0 $29.5 $12.3 Adjusted ROIC (QTR)* 14.9% 13.6% 4.0% Operating cash flow (QTR) $61.3 ($60.3) $74.0 Operating cash flow, trailing 12 months $116.8 $129.4 $182.0 Cash and cash equivalents (Q/E), including discontinued operations $62.7 $49.3 $34.5 Debt (Q/E), including discontinued operations $143.2 $198.9 $247.0 Net debt, including discontinued operations to adjusted EBITDA, trailing 12 months* 0.7x 1.7x 2.2x August 24, 2021 CASH FLOW AND BALANCE SHEET HIGHLIGHTS • Adjusted EBITDA of $33.0 million - Up 12% Q/Q from higher sales volume - Up 168% Y/Y from higher sales volume and SG&A operating leverage, including cost savings • Q4 FY21 ROIC of 14.9%; highest quarterly ROIC in over 5 years • Generated operating cash of $61.3 million for the quarter and $116.8 million for the year • Cash and cash equivalent balances of $62.7 million at 6/30/21, including $52.1 million held outside of the U.S. • Net debt to trailing 12-month adjusted EBITDA is 0.7x • Announced new $100 million share repurchase authorization $ in millions * Excludes non-GAAP adjustments and change in fair value of contingent consideration 6
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com August 24, 2021 ANNUAL FINANCIAL OUTLOOK FOR FISCAL YEAR 2022 Current expectation for the full year ended June 30, 2022: • Outlook as of August 24, 2021 • Effective with the first quarter of FY22, adjusted EBITDA excludes share-based compensation expense • Assumes a 25% to 26% effective tax rate for fiscal year 2022, excluding discrete items 7 FY22 Annual Outlook Net sales growth, year-over-year At least 5.5% Adjusted EBITDA (non-GAAP) At least $135 million FY22 Annual Outlook Reconciliation: 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 FY21 Adjusted EBITDA excluding Share-Based Compensation Expense: FY21 Adjusted EBITDA, as reported (non-GAAP) $109.9 million Add: Share-based compensation expense $8.0 million Adjusted EBITDA, excluding share-based compensation expense (non-GAAP) $117.9 million
CFO COMMENTARY Q4 FY2021 ScanSource, Inc. scansource.com FORWARD-LOOKING STATEMENTS This CFO Commentary contains certain comments that are “forward-looking” statements, including statements about our FY22 outlook, the impact of the COVID-19 pandemic and our operating strategies that involve plans, strategies, economic performance and trends, projections, expectations, costs or beliefs about future events and other statements that are not descriptions of historical facts. Forward- looking information is inherently subject to risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including but not limited to, the failure to hire and retain quality employees, risk to our business from a cyber-security attack, the failure to manage and implement our organic growth strategy, impact of the COVID-19 pandemic on our operations and financial condition and the potential prolonged economic weakness brought on by COVID-19, a failure of our IT systems, credit risks involving our larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting our international operations, loss of our major customers, termination of our relationship with key suppliers or a significant modification of the terms under which we operate with a key supplier, changes in our operating strategy, and other factors set forth in the “Risk Factors” contained in our annual report on Form 10-K for the year ended June 30, 2021, filed with the Securities and Exchange Commission (“SEC”). Although ScanSource believes the expectations in its forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement. ScanSource disclaims any obligation to update or revise any forward- looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. 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 measures, including non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, non- GAAP diluted EPS, non-GAAP net sales, non- GAAP gross profit, non-GAAP gross margin, non-GAAP SG&A expenses, adjusted EBITDA, ROIC and net sales less impacts from foreign currency translation and acquisitions (organic growth). A reconciliation of the Company's non-GAAP financial information to GAAP financial information is provided in the Appendix and in the Company’s Form 8-K, filed with the SEC, with the quarterly earnings press release for the period indicated. August 24, 20218
5-Quarter Financial Summary - for continuing operations ($ in thousands, except per share data) Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q4 FY20 Q/Q Y/Y Select reported GAAP measures: Net sales $ 852,694 $ 729,873 $ 810,897 $ 757,342 $ 636,450 17% 34% Gross profit $ 95,778 $ 88,116 $ 86,043 $ 80,779 $ 74,147 9% 29% Gross profit margin % 11.2 % 12.1 % 10.6 % 10.7 % 11.7 % (84) bp (42) bp SG&A expenses $ 64,758 $ 60,099 $ 60,470 $ 62,112 $ 58,192 8% 11% Operating income (loss) $ 23,283 $ 19,436 $ 17,130 $ 1,634 $ (113,439) 20% *nm Operating income (loss) % 2.73 % 2.66 % 2.11 % 0.22 % (17.82) % 7 bp *nm Net income (loss) $ 20,657 $ 13,786 $ 11,061 $ (115) $ (108,859) 50% *nm Diluted EPS $ 0.80 $ 0.54 $ 0.43 $ (0.01) $ (4.29) 48% *nm Select reported Non-GAAP measures: (a) Net sales $ 852,694 $ 729,873 $ 810,897 $ 757,342 $ 636,450 17% 34% Gross profit $ 95,778 $ 88,116 $ 86,043 $ 80,779 $ 74,147 9% 29% Gross profit margin % 11.2 % 12.1 % 10.6 % 10.7 % 11.7 % (84) bp (42) bp Non-GAAP SG&A expenses $ 64,512 $ 59,827 $ 59,110 $ 61,614 $ 62,624 8% 3% Non-GAAP operating income $ 28,368 $ 25,148 $ 23,836 $ 15,769 $ 8,219 13% 245% Non-GAAP operating income % 3.33 % 3.45 % 2.94 % 2.08 % 1.29 % (12) bp 204 bp Non-GAAP net income $ 24,522 $ 18,178 $ 16,469 $ 10,698 $ 4,857 35% 405% Non-GAAP diluted EPS $ 0.96 $ 0.71 $ 0.65 $ 0.42 $ 0.19 35% 405% Adjusted EBITDA $ 32,971 $ 29,462 $ 27,732 $ 19,743 $ 12,321 12% 168% Adjusted ROIC 14.9 % 13.6 % 12.4 % 8.4 % 4.0 % 130 bp 1090 bp Operating cash flow (QTR) $ 61,345 $ (60,252) $ 44,449 $ 71,225 $ 73,953 202% (17)% Operating cash flow (TTM) $ 116,767 $ 129,375 $ 214,975 $ 225,630 $ 182,035 (10)% (36)% (a) See pages 10 through 12 of the Appendix for the calculation of non-GAAP measures and reconciliations to GAAP measures. *nm - percentages are not meaningful ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 9 August 24, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - QTR ($ in thousands) Quarter ended June 30, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 852,694 $ — $ — $ — $ — $ — $ 852,694 Gross profit 95,778 — — — — — 95,778 SG&A expenses 64,758 — — (246) — — 64,512 Operating income 23,283 4,893 — 192 — — 28,368 Other expense, net 237 — — — — — 237 Pre-tax income 23,046 4,893 — 192 — — 28,131 Net income 20,657 3,698 — 167 — — 24,522 Diluted EPS $ 0.80 $ 0.14 $ — $ 0.01 $ — $ — $ 0.96 (a) Acquisition and divestiture costs totaled $0.2 million for the quarter ended June 30, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $(0.1) million for the quarter ended June 30, 2021. ($ in thousands) Quarter ended March 31, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 729,873 $ — $ — $ — $ — $ — $ 729,873 Gross profit 88,116 — — — — — 88,116 SG&A expenses 60,099 — — (272) — — 59,827 Operating income 19,436 4,880 — 832 — — 25,148 Other expense, net 529 — — — — — 529 Pre-tax income 18,907 4,880 — 832 — — 24,619 Net income 13,786 3,697 — 695 — — 18,178 Diluted EPS $ 0.54 $ 0.14 $ — $ 0.03 $ — $ — $ 0.71 (a) Acquisition and divestiture costs totaled $0.3 million for the quarter ended March 31, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.6 million for the quarter ended March 31, 2021. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 10 August 24, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - QTR, continued ($ in thousands) Quarter ended December 31, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 810,897 $ — $ — $ — $ — $ — $ 810,897 Gross profit 86,043 — — — — — 86,043 SG&A expenses 60,470 — — (1,360) — — 59,110 Operating income 17,130 4,862 — 1,844 — — 23,836 Other expense, net 1,386 — — — — — 1,386 Pre-tax income 15,744 4,862 — 1,844 — — 22,450 Net income 11,061 3,682 — 1,726 — — 16,469 Diluted EPS $ 0.43 $ 0.15 $ — $ 0.08 $ — $ — $ 0.65 (a) Acquisition and divestiture costs totaled $1.4 million for the quarter ended December 31, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.5 million for the quarter ended December 31, 2020. ($ in thousands) Quarter ended September 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 757,342 $ — $ — $ — $ — $ — $ 757,342 Gross profit 80,779 — — — — — 80,779 SG&A expenses 62,112 — — (498) — — 61,614 Operating income 1,634 4,853 516 8,766 — — 15,769 Other expense, net 1,796 — — — — — 1,796 Pre-tax (loss) income (162) 4,853 516 8,766 — — 13,973 Net (loss) income (115) 3,675 390 6,748 — — 10,698 Diluted EPS $ (0.01) $ 0.14 $ 0.02 $ 0.26 $ — $ — $ 0.42 (a) Acquisition and divestiture costs totaled $0.5 million for the quarter ended June 30, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $8.3 million for the quarter ended September 30, 2020. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 11 August 24, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - QTR, continued ($ in thousands) Quarter ended June 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 636,450 $ — $ — $ — $ — $ — $ 636,450 Gross profit 74,147 — — — — — 74,147 SG&A expenses 58,192 — — (1,311) 5,743 — 62,624 Operating (loss) income (113,439) 4,946 674 1,311 (5,743) 120,470 8,219 Other expense, net (489) — — — 2,681 — 2,192 Pre-tax (loss) income (112,950) 4,946 674 1,311 (8,424) 120,470 6,027 Net (loss) income (108,859) 3,744 510 1,311 (6,247) 114,398 4,857 Diluted EPS $ (4.29) $ 0.15 $ 0.02 $ 0.05 $ (0.25) $ 4.51 $ 0.19 (a) Acquisition and divestiture costs totaled $1.3 million for the quarter ended June 30, 2020 and are generally nondeductible for tax purposes. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 12 August 24, 2021
Operating Income, Pre-Tax Income, Net Income & EPS - FY ($ in thousands) Fiscal year ended June 30, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 3,150,806 $ — $ — $ — $ — $ — $ 3,150,806 Gross profit 350,716 — — — — — 350,716 SG&A expenses 247,438 — — (2,376) — — 245,062 Operating income 61,483 19,488 516 11,634 — — 93,121 Other expense, net 3,948 — — — — — 3,948 Pre-tax income 57,535 19,488 516 11,634 — — 89,173 Net income 45,389 14,753 390 9,336 — — 69,868 Diluted EPS $ 1.78 $ 0.58 $ 0.02 $ 0.36 $ — $ — $ 2.74 (a) Acquisition and divestiture costs totaled $2.4 million for the fiscal year ended June 30, 2021 and are generally nondeductible for tax purposes. Restructuring costs totaled $9.3 million for the fiscal year ended June 30, 2021. ($ in thousands) Fiscal year ended June 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, divestiture and restructuring costs(a) Tax recovery, net Impairment charges Non-GAAP measure Net sales $ 3,047,734 $ — $ — $ — $ — $ — $ 3,047,734 Gross profit 355,569 — — — — — 355,569 SG&A expenses 259,535 — — (4,000) 8,063 — 263,598 Operating (loss) income (64,967) 19,953 6,941 4,604 (8,063) 120,470 78,938 Other expense, net 6,809 — — — 2,681 — 9,490 Pre-tax (loss) income (71,776) 19,953 6,941 4,604 (10,744) 120,470 69,448 Net (loss) income (79,227) 15,091 5,247 4,449 (8,001) 114,398 51,957 Diluted EPS $ (3.12) $ 0.59 $ 0.21 $ 0.18 $ (0.32) $ 4.51 $ 2.05 (a) Acquisition and divestiture costs totaled $4.0 million for the fiscal year ended June 30, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.6 million for the fiscal year ended June 30, 2020. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 13 August 24, 2021
Net Sales, Constant Currency (Organic Growth) - QTR ($ in thousands) WW Barcode, NW & Security WW Comms. & Services Consolidated For the quarter ended June 30, 2021: Q4 FY21 net sales, as reported $ 597,943 $ 254,751 $ 852,694 Foreign exchange impact (a) (447) (1,224) (1,671) Q4 FY21 net sales, constant currency (non-GAAP) $ 597,496 $ 253,527 $ 851,023 For the quarter ended June 30, 2020: Q4 FY20 net sales, as reported $ 447,812 $ 188,638 $ 636,450 Y/Y % Change: As reported 33.5 % 35.0 % 34.0 % Constant currency (non-GAAP) 33.4 % 34.4 % 33.7 % (a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the quarter ended June 30, 2021 into U.S. dollars using the weighted-average foreign exchange rates for the quarter ended June 30, 2020. Net Sales, Constant Currency (Organic Growth) - FY ($ in thousands) WW Barcode, NW & Security WW Comms. & Services Consolidated For the fiscal year ended June 30, 2021: FY21 net sales, as reported $ 2,175,141 $ 975,665 $ 3,150,806 Foreign exchange impact (a) 19,311 46,470 65,781 FY21 net sales, constant currency (non-GAAP) $ 2,194,452 $ 1,022,135 $ 3,216,587 For the fiscal year ended June 30, 2020: FY20 net sales, as reported $ 2,093,217 $ 954,517 $ 3,047,734 Y/Y % Change: As reported 3.9 % 2.2 % 3.4 % Constant currency, excluding Divestitures and acquisitions (organic growth) 4.8 % 7.1 % 5.5 % (a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the fiscal year ended June 30, 2021 into U.S. dollars using the weighted-average foreign exchange rates for the fiscal year ended June 30, 2020. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 14 August 24, 2021
Highlights by Segment - QTR ($ in thousands) Quarter Ended June 30, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax recovery, net Impairment charges Non-GAAP measure Worldwide Barcode, NW & Security: Net sales 597,943 — — — — — $ 597,943 Gross profit 50,519 — — — — — $ 50,519 Gross profit margin % 8.4 % — % — % — — % — % 8.4 % Operating income 12,315 1,968 — — — — $ 14,283 Operating income margin % 2.1 % — % — % — — % — % 2.4 % Worldwide Communications & Services: Net sales 254,751 — — — — — $ 254,751 Gross profit 45,259 — — — — — $ 45,259 Gross profit margin % 17.8 % — % — % — % — % — % 17.8 % Operating income 11,159 2,925 — — — — $ 14,084 Operating income margin % 4.4 % — % — % — % — % — % 5.5 % ($ in thousands) Quarter Ended March 31, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax recovery, net Impairment charges Non-GAAP measure Worldwide Barcode, NW & Security: Net sales 502,227 — — — — — $ 502,227 Gross profit 43,869 — — — — — $ 43,869 Gross profit margin % 8.7 % — % — % — % — % — % 8.7 % Operating income 8,054 1,968 — — — — $ 10,022 Operating income margin % 1.6 % — % — % — % — % — % 2.0 % ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 15 August 24, 2021
Highlights by Segment - QTR, continued ($ in thousands) Quarter Ended March 31, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax recovery, net Impairment charges Non-GAAP measure Worldwide Communications & Services: Net sales 227,646 — — — — — $ 227,646 Gross profit 44,247 — — — — — $ 44,247 Gross profit margin % 19.4 % — % — % — % — % — % 19.4 % Operating income 12,214 2,912 — — — — $ 15,126 Operating income margin % 5.4 % — % — % — % — % — % 6.6 % ($ in thousands) Quarter Ended June 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax recovery, net Impairment charges Non-GAAP measure Worldwide Barcode, NW & Security: Net sales 447,812 — — — — — $ 447,812 Gross profit 37,289 — — — — — $ 37,289 Gross profit margin % 8.3 % — % — % — % — % — % 8.3 % Operating income (112,669) 1,968 — — (4,648) 119,037 $ 3,688 Operating income margin % (25.2) % — % — % — % — % — % 0.8 % Worldwide Communications & Services: Net sales 188,638 — — — — — $ 188,638 Gross profit 36,858 — — — — — $ 36,858 Gross profit margin % 19.5 % — % — % — % — % — % 19.5 % Operating income 540 2,978 674 — (1,095) 1,433 $ 4,530 Operating income margin % 0.3 % — % — % — % — % — % 2.4 % ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 16 August 24, 2021
Highlights by Segment - FY ($ in thousands) Fiscal year ended June 30, 2021 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax reform and settlement Impairment charges Non-GAAP measure Worldwide Barcode, NW & Security: Net sales 2,175,141 — — — — — $ 2,175,141 Gross Profit 178,158 — — — — — $ 178,158 Gross profit margin % 8.2 % — % — % — % — % — % 8.2 % Operating income 28,402 7,871 — — — — $ 36,273 Operating income margin % 1.3 % — % — % — % — % — % 1.7 % Worldwide Communications & Services: Net sales 975,665 — — — — — $ 975,665 Gross Profit 172,558 — — — — — $ 172,558 Gross profit margin % 17.7 % — % — % — % — % — % 17.7 % Operating income 44,715 11,617 516 — — — $ 56,848 Operating income margin % 4.6 % — % — % — % — % — % 5.8 % ($ in thousands) Fiscal year ended June 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax reform and settlement Impairment charges Non-GAAP measure Worldwide Barcode, NW & Security: Net sales 2,093,217 — — — — — $ 2,093,217 Gross Profit 180,582 — — — — — $ 180,582 Gross profit margin % 8.6 % — % — % — % — % — % 8.6 % Operating (loss) income (83,515) 7,871 — — (5,480) 119,037 $ 37,913 Operating income margin % (4.0) % — % — % — % — % — % 1.8 % ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 17 August 24, 2021
Highlights by Segment - FY, continued Fiscal year ended June 30, 2020 Reported GAAP measure Intangible amortization expense Change in fair value of contingent consideration Acquisition, Divestiture, and Restructuring costs Tax reform and settlement Impairment charges Non-GAAP measure Worldwide Communications & Services: Net sales 954,517 — — — — — $ 954,517 Gross Profit 174,987 — — — — — $ 174,987 Gross profit margin % 18.3 % — % — % — % — % — % 18.3 % Operating income 22,548 12,082 6,941 604 (2,583) 1,433 $ 41,025 Operating income margin % 2.4 % — % — % — % — % — % 4.3 % ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 18 August 24, 2021
Average Return on Invested Capital - QTR ($ in thousands) Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q4 FY20 Adjusted return on invested capital (ROIC), annualized (a) 14.9 % 13.6 % 12.4 % 8.4 % 4.0 % Reconciliation of Net Income to Adjusted EBITDA Net income (loss) from continuing operations - GAAP $ 20,657 $ 13,786 $ 11,061 $ (115) $ (108,859) Plus: Interest expense 1,643 1,576 1,796 1,913 2,497 Income taxes 2,389 5,121 4,683 (47) (4,091) Depreciation and amortization 8,090 8,358 8,349 8,710 8,743 EBITDA 32,779 28,841 25,889 10,461 (101,710) Adjustments: Change in fair value of contingent consideration — — — 516 674 Tax recovery, net — — — — (8,424) Acquisition and divestiture costs 246 272 1,360 498 1,311 Restructuring costs (54) 349 484 8,268 — Impairment charges — — — — 120,470 Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 32,971 $ 29,462 $ 27,733 $ 19,743 $ 12,321 Invested Capital Calculation Equity - beginning of the quarter (b) $ 690,575 $ 682,139 $ 671,227 $ 678,246 $ 897,678 Equity - end of quarter (b) 731,191 690,575 682,139 671,227 678,246 Adjustments: Change in fair value of contingent consideration, net of tax — — — 390 510 Tax recovery, net and related interest income, net of tax — — — — (6,247) Acquisition and divestiture costs 207 272 1,360 498 1,311 Asset impairment, net of tax — — — — 114,398 Restructuring, net of tax (40) 264 366 6,250 — Discontinued operations net (income) loss (3,053) 688 25,255 11,704 108,403 Average equity 709,440 686,969 690,174 684,158 897,150 Average funded debt (c) 177,074 191,996 198,620 243,268 337,973 Invested capital (denominator for ROIC) (non-GAAP) $ 886,514 $ 878,965 $ 888,794 $ 927,426 $ 1,235,123 (a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures. (b) In the quarter ending June 30, 2020, the Company recorded impairment charges of $120.5 million. Impairment charges, net of tax reduced equity by $114.4 million. (c) Average funded debt, which includes both continuing and discontinued operations, is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 19 August 24, 2021
Average Return on Invested Capital - FY ($ in thousands) FY21 FY20 Adjusted return on invested capital (ROIC), annualized (a) 11.8 % 7.5 % Reconciliation of Net Income to Adjusted EBITDA Net income (loss) from continuing operations - GAAP $ 45,389 $ (79,227) Plus: Interest expense 6,929 12,224 Income taxes 12,146 7,451 Depreciation and amortization 33,507 35,328 EBITDA 97,971 (24,224) Adjustments: Change in fair value of contingent consideration 516 6,941 Tax recovery, net — (10,744) Acquisition and divestiture costs 2,376 4,000 Restructuring costs 9,047 604 Impairment charges — 120,470 Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 109,910 $ 97,047 Invested Capital Calculation Equity - beginning of the year $ 678,246 $ 914,129 Equity - end of the year 731,191 678,246 Adjustments: Change in fair value of contingent consideration, net of tax 390 5,247 Tax recovery, net of tax — (8,001) Acquisition and divestiture costs 2,337 4,000 Asset impairment, net of tax — 114,398 Restructuring costs, net of tax 6,840 449 Impact of discontinued operations, net of tax 34,594 113,427 Average equity 726,799 910,948 Average funded debt (b) 202,869 390,709 Invested capital (denominator for ROIC) (non-GAAP) $ 929,668 $ 1,301,657 (a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures. (b) Average funded debt, which includes both continuing and discontinued operations, is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt. ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 20 August 24, 2021
Net Debt and EBITDA Metrics ($ in thousands) Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q4 FY20 Debt of continuing operations (Q/E) $ 143,174 $ 198,851 $ 151,924 $ 148,799 $ 218,728 Debt of discontinued operations (Q/E) — — — 19,932 28,228 Consolidated debt (Q/E) 143,174 198,851 151,924 168,731 246,956 Less: Cash and cash equivalents of continuing operations (Q/E) (62,718) (49,321) (67,187) (49,889) (29,485) Cash and cash equivalents of discontinued operations (Q/E) — — — (5,678) (4,970) Consolidated cash and cash equivalents (Q/E) (62,718) (49,321) (67,187) (55,567) (34,455) Net debt (Q/E) $ 80,456 $ 149,530 $ 84,737 $ 113,164 $ 212,501 Reconciliation of Net Income to Adjusted EBITDA Net income (loss) from continuing operations - GAAP $ 20,657 $ 13,786 $ 11,061 $ (115) $ (108,859) Plus: Interest expense 1,643 1,576 1,796 1,913 2,497 Income taxes 2,389 5,121 4,683 (47) (4,091) Depreciation and amortization 8,090 8,358 8,349 8,710 8,743 EBITDA 32,779 28,841 25,889 10,461 (101,710) Adjustments: Change in fair value of contingent consideration — — — 516 674 Tax recovery, net — — — — (8,424) Acquisition and divestiture costs 246 272 1,360 498 1,311 Restructuring costs (54) 349 484 8,268 — Impairment charges — — — — 120,470 Adjusted EBITDA (non-GAAP) $ 32,971 $ 29,462 $ 27,733 $ 19,743 $ 12,321 Adjusted EBITDA, TTM (a) $ 109,909 $ 89,471 $ 79,642 $ 84,929 $ 97,047 Net Debt / Adjusted EBITDA, TTM (a) 0.7x 1.7x 1.1x 1.3x 2.2x (a) Adjusted EBITDA for the trailing 12-month period ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 21 August 24, 2021
Discontinued Operations, Net Sales and Working Capital ($ in thousands) Q4 FY21 Q3 FY21 Q2 FY21 Q1 FY21 Q4 FY20 Net sales from continuing operations $ 852,694 $ 729,873 $ 810,897 $ 757,342 $ 636,450 Net sales from discontinued operations — — 668,323 145,049 121,969 Working capital Net accounts receivable of continuing operations $ 568,984 $ 509,404 $ 534,583 $ 509,779 $ 443,185 Net accounts receivable of discontinued operations — — — 130,553 117,200 Inventory of continuing operations $ 470,081 $ 459,652 $ 421,003 $ 423,088 $ 454,885 Inventory of discontinued operations — — — 95,560 106,779 Accounts payable of continuing operations $ 634,805 $ 521,552 $ 589,292 $ 544,856 $ 454,240 Accounts payable of discontinued operations — — — 84,657 56,098 Working capital of continuing operations $ 404,260 $ 447,504 $ 366,294 $ 388,011 $ 443,830 Working capital of discontinued operations — — — 141,456 167,881 ScanSource, Inc. CFO COMMENTARY Q4 FY2021 APPENDIX: RECONCILIATIONS FOR NON-GAAP FINANCIAL INFORMATION scansource.com 22 August 24, 2021