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• Net Sales: Declined 15.5% year-over-year for Q2.

• Gross Profit Margin: Achieved 13.6% for the quarter.

• Adjusted EBITDA Margin: Recorded at 4.7% for Q2.

• Non-GAAP Net Income: Decreased by 4% year-over-year.

• Non-GAAP Diluted EPS: Remained flat year-over-year.

• Free Cash Flow: Generated $34 million year-to-date; used $8 million in Q2.

• Cash Position: Ended Q2 with $111 million in cash.

• Net Debt Leverage Ratio: 0.2 times on a trailing 12-month adjusted EBITDA basis.

• Adjusted ROIC: 13.3% for the quarter.

• Share Repurchases: Totaled $24 million for Q2.

• Specialty Technology Solutions Segment: Net sales declined 16% year-over-year.

• Intelisys & Advisory Segment: Net sales and gross profits increased 4% and 3% year-over-year.

• Recurring Revenue: Represents 32% of consolidated gross profit for Q2.

• Annual Guidance: Net sales between $3.1 billion and $3.5 billion; adjusted EBITDA between $140 million and $160 million; free cash flow of at least $70 million.

• Warning! GuruFocus has detected 5 Warning Signs with FFWM.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ScanSource Inc (NASDAQ:SCSC) delivered strong gross profit growth and maintained a robust gross profit margin despite a challenging demand environment.

• The company is executing a hybrid distribution strategy, offering flexibility and choice with multiple sales models for hardware, SaaS, connectivity, and cloud.

• Recent acquisitions have expanded recurring revenue opportunities for channel partners, enhancing the company's technology offerings.

• The Advantix solution represents a high-margin recurring revenue opportunity, combining devices and recurring revenue to add value in the barcode and mobility market.

• ScanSource Inc (NASDAQ:SCSC) generated $34 million in free cash flow year-to-date, demonstrating a focus on building a cash culture and improving working capital efficiency.

Negative Points

• Net sales declined 4% sequentially and 15.5% year-over-year, missing expectations due to a soft demand environment and challenges with large deals.

• The specialty technology solutions segment experienced a 16% year-over-year decline in net sales, with significant FX headwinds in the Brazil business.

• Non-GAAP net income decreased by 4%, and the company faced a flat year-over-year non-GAAP diluted EPS.

• The company used $8 million of free cash flow in the quarter due to late quarter timing for sales and vendor payments.

• The demand environment remains uncertain, with cautious tech spending and limited visibility on top-line growth due to the lack of backlog.