ScanSource Reports Fourth Quarter and Full-Year Results

“While we did not finish our fiscal year as strongly as we started, we delivered record net sales of $3.9 billion for fiscal year 2019,” said Mike Baur, Chairman and CEO, ScanSource, Inc. “In North America, we are executing on our strategic initiatives to offer technology solutions, services and recurring revenue as One ScanSource. Earlier today, we announced plans to divest of certain businesses outside of the United States, Canada and Brazil to align our investments with higher-growth, higher-margin businesses.”

Quarterly Results

Net sales for the fourth quarter of fiscal year 2019 decreased 3% year-over-year to $960.8 million. Organic sales, which exclude the impact of foreign currency translation and recent acquisitions, decreased 2% year-over-year, primarily in the Worldwide Barcode, Security and Networking segment. Operating income increased 1% to $20.0 million year-over-year. Non-GAAP operating income decreased 4% to $29.4 million, primarily from lower sales volumes.

On a GAAP basis, net income for the fourth quarter of fiscal year 2019 totaled $11.6 million, or $0.45 per diluted share, compared with net income of $10.4 million, or $0.40 per diluted share, for the prior-year quarter. Non-GAAP net income totaled $18.3 million, or $0.71 per diluted share, compared to $19.9 million, or $0.77 per diluted share, for the prior-year quarter.

Full-Year Results

For fiscal year 2019, net sales increased 1% to $3.9 billion. Organic sales for fiscal year 2019 increased 2% year-over-year, driven by 9% sales growth in the Worldwide Communications and Services segment. Operating income increased 33% to $90.0 million, largely from decreased expense for the change in fair value of contingent consideration. Non-GAAP operating income increased 4% to $128.5 million, driven by higher gross profit and higher margins.

On a GAAP basis, net income for fiscal year 2019 totaled $57.6 million, or $2.24 per diluted share, compared to net income of $33.2 million, or $1.29 per diluted share, for the prior-year. Non-GAAP net income increased 8% to $86.4 million, or $3.36 per diluted share, compared to $79.8 million, or $3.11 per diluted share, for the prior-year.

Acquisition of intY

On July 1, 2019, ScanSource announced the acquisition of intY and its award-winning CASCADE cloud services distribution platform. As an additional element of ScanSource’s cloud and digital strategy, intY’s CASCADE solution provides ScanSource channel partners with another route-to-market to enable key strategic cloud services, including Microsoft, Symantec, and Acronis. Founded in 1997 and based in Bristol, UK, intY has 65 employees. The acquisition closed on July 1, 2019, and the terms of the agreement were not disclosed.

Plan to Divest Certain Businesses Outside of US, Canada and Brazil

Earlier today, ScanSource announced plans to divest certain businesses outside of the United States, Canada and Brazil (the “Planned Divestitures”). ScanSource will continue to operate and invest in its digital distribution business in these geographies, including its recent acquisitions of intY, Canpango and Intelisys Global. These plans are part of a strategic portfolio repositioning to align investments with higher-growth, higher-margin businesses. The Planned Divestitures, comprised of physical product businesses in Europe, UK, Mexico, Colombia, Chile, Peru and the Miami-based export operations, had net sales of $623 million for fiscal year 2019 and at June 30, 2019 had working capital of $205 million.

Forecast for Next Quarter

ScanSource is providing the forecast for next quarter, excluding the Planned Divestitures. For the first quarter of fiscal year 2020, ScanSource expects GAAP net sales to range from $970 million to $1.03 billion and non-GAAP net sales excluding the Planned Divestitures to range from $830 million to $890 million. For the first quarter of fiscal year 2020, ScanSource expects diluted earnings per share to range from $0.47 to $0.52 and non-GAAP diluted earnings per share to range from $0.70 to $0.75. Non-GAAP diluted earnings per share exclude operating results for the Planned Divestitures, amortization of intangible assets related to acquisitions and change in fair value of contingent consideration.  (see more here)