On August 27, 2024, ScanSource Inc (SCSC, Financial) released its 8-K filing detailing the financial results for the fourth quarter and fiscal year ended June 30, 2024. ScanSource Inc provides value-added services for technology manufacturers and sells to resellers in specialty technology markets. The firm's operations are organized into two segments: Specialty Technology Solutions and Modern Communications and Cloud, with the majority of revenue derived from the United States.
Quarterly Performance
ScanSource Inc reported net sales of $746.1 million for Q4 FY24, a 21.2% decline from $947.1 million in Q4 FY23. This figure fell short of the analyst estimate of $843.14 million. However, the company reported a GAAP diluted EPS of $0.64, slightly missing the analyst estimate of $0.70.
Gross profit for the quarter decreased by 10.4% year-over-year to $97.3 million, with a gross profit margin of 13.04%, up from 11.47% in the prior-year quarter. The increase in gross profit margin is attributed to a higher contribution of Intelisys revenue, which is recorded on a net basis.
Annual Performance
For the fiscal year 2024, net sales decreased by 13.9% to $3.26 billion, compared to $3.79 billion in the previous year. The Specialty Technology Solutions segment saw a 14.3% decline in net sales to $2.0 billion, while the Modern Communications & Cloud segment experienced a 13.4% decrease to $1.3 billion. Despite the decline in sales, the gross profit margin increased to 12.2% from 11.9% in FY23.
Operating income for the fiscal year decreased to $90.3 million from $135.9 million in the prior year. GAAP net income for FY24 was $77.1 million, or $3.06 per diluted share, down from $88.1 million, or $3.47 per diluted share, in FY23. Adjusted EBITDA for the fiscal year decreased to $140.7 million, or 4.31% of net sales, compared to $179.9 million, or 4.75% of net sales, in the prior year.
Financial Achievements and Challenges
Despite a challenging demand environment, ScanSource Inc achieved strong margins and robust cash flow. The company generated $371.6 million in operating cash flow and $363.1 million in free cash flow for FY24. However, the decline in net sales and operating income highlights the challenges posed by a cautious technology spending environment and lower sales volumes in communications hardware and Cisco products.
Our results for the year reflect a soft demand environment; however, we delivered strong margins and robust cash flow," said Mike Baur, Chair and CEO, ScanSource, Inc.
Key Financial Metrics
| Metric | Q4 FY24 | Q4 FY23 | FY24 | FY23 |
|---|---|---|---|---|
| Net Sales | $746.1 million | $947.1 million | $3.26 billion | $3.79 billion |
| Gross Profit | $97.3 million | $108.7 million | $399.1 million | $449.2 million |
| Operating Income | $21.9 million | $27.3 million | $90.3 million | $135.9 million |
| GAAP Net Income | $16.1 million | $17.1 million | $77.1 million | $88.1 million |
| GAAP Diluted EPS | $0.64 | $0.68 | $3.06 | $3.47 |
Acquisitions and Future Outlook
ScanSource Inc announced the acquisition of Resourcive and Advantix in August 2024, aiming to enhance its strategic IT sourcing solutions and managed connectivity experience offerings. These acquisitions are expected to contribute to higher-margin, recurring revenue streams.
For fiscal year 2025, ScanSource Inc provided an annual outlook with net sales expected to range between $3.1 billion and $3.5 billion, adjusted EBITDA between $140 million and $160 million, and free cash flow of at least $70 million.
For more detailed information, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from ScanSource Inc for further details.
