ScanSource reports record second quarter results

ScanSource, Inc. (NASDAQ:SCSC), a leading global provider of technology products and solutions, today announced financial results for fiscal year 2016 second quarter ended December 31, 2015.

“Strong demand across our business led to record net sales and record non-GAAP EPS,” said Mike Baur, CEO, ScanSource, Inc. “Sales exceeded our expectations due to large deals and excellent execution by our sales and support teams across the globe.”

Net sales for the quarter ended December 31, 2015 increased 23% year-over-year to $993.5 million. The increase in net sales includes the acquisitions of Network1 in January 2015 and KBZ in September 2015. Net sales in constant currency excluding acquisitions grew 5% year-over-year.

Operating income for the quarter ended December 31, 2015 totaled $31.9 million, compared with $26.0 million in the prior year quarter. Non-GAAP operating income of $36.3 million increased 24% year-over-year, and the non-GAAP operating margin increased to 3.7%.

On a GAAP basis, net income for the quarter ended December 31, 2015 totaled $20.7 million, or $0.77 per diluted share, compared with net income of $16.8 million, or $0.58 per diluted share, for the prior year quarter. Non-GAAP net income for the quarter ended December 31, 2015 of $23.7 million increased 20%, and non-GAAP diluted earnings per share of $0.88 increased 29% year-over-year.

Share Repurchase Update

During the quarter ended December 31, 2015, ScanSource repurchased approximately 0.8 million shares for an aggregate purchase price of approximately $29.6 million. Under the Company’s $120 million share repurchase authorization through December 31, 2015, ScanSource has repurchased approximately 2.43 million shares for approximately $90.4 million, having executed 75% of the total authorization.

ScanSource Networking and Security

As of October 1, 2015, we branded ScanSource Security as ScanSource Networking and Security to build on the growing demand for networking solutions. With this organizational change, we moved some business operations from our Communications & Services segment to our Barcode & Security segment. Prior period results have been reclassified to provide comparable financial information.

Forecast for Next Quarter

The Company announced its current expectations for the third quarter of fiscal year 2016. ScanSource expects net sales for the quarter ending March 31, 2016 to range from $850 million to $900 million and non-GAAP diluted earnings per share to range from $0.62 to $0.70 per share. Non-GAAP diluted earnings per share exclude amortization of intangibles, change in fair value of contingent consideration and acquisition costs.

Webcast Details

ScanSource will present additional information about its financial results and outlook in a conference call with presentation slides today, February 9, 2016 at 5:00 p.m. (ET). A webcast of the call and accompanying presentation slides 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.

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 financial measures, which are summarized below. Non-GAAP financial measures are used to better understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions and change in fair value of contingent consideration.

Net sales on a constant currency basis: The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods. This measure enhances comparability between periods to help analyze underlying trends.

Non-GAAP operating income, non-GAAP net income and non-GAAP EPS: To evaluate current period performance on a clearer and more consistent basis with prior periods, the Company discloses non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in the fair value of contingent consideration, and other non-GAAP adjustments. Non-GAAP operating income, non-GAAP net income, and non-GAAP EPS measures are useful in assessing and understanding the Company’s operating performance, especially when comparing results with previous periods or forecasting performance for future periods.

Return on invested capital (“ROIC”): Management uses ROIC as a performance measurement to assess efficiency in allocating capital under the Company’s control to generate returns. Management believes this metric balances the Company’s operating results with asset and liability management, is not impacted by capitalization decisions and is considered to have a strong correlation with shareholder value creation. In addition, it is easily computed, communicated and understood. ROIC also provides management a measure of the Company’s profitability on a basis more comparable to historical or future periods.

ROIC assists management in comparing the Company’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. Adjusted earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) excludes the change in fair value of contingent consideration, in addition to other non-GAAP adjustments. Management believes the calculation of ROIC provides useful information to investors and is an additional relevant comparison of the Company’s performance during the year. In addition, the Company’s Board of Directors uses ROIC in evaluating business and management performance. Certain management incentive compensation targets are set and measured relative to ROIC.

These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company’s non-GAAP financial information to GAAP is set forth in the following Supplementary Information (Unaudited) tables.

 

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ: SCSC) is a leading global provider of technology products and solutions, focusing on point-of-sale (POS), barcode, physical security, video, voice, data networking and emerging technologies. ScanSource’s teams provide value-added solutions and operate from two segments, Worldwide Barcode & Security and Worldwide Communications & Services. ScanSource is committed to helping its reseller customers choose, configure and deliver the industry’s best solutions across almost every vertical market in North America, Latin America and Europe. Founded in 1992, the Company is headquartered in Greenville, South Carolina and was named one of the 2015 Best Places to Work in South Carolina. ScanSource ranks #775 on the Fortune 1000. For more information, visit www.scansource.com.