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Item 7. Management’s Discussion and Analysis

2022-08-23 compared with 2021-08-24 · 332 added, 225 removed, 307 unchanged (64% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ScanSource is at the center of the technological solution delivery channel, connecting businesses and institutions and providing solutions for their complex needs.

We provide technology solutions and services from leading suppliers of mobility and barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration, telecom and cloud services to our customers.

We serve approximately 30,000 customers located in the United States, Canada, Brazil, and the UK and provide solutions and services from approximately 500 technology suppliers.

We operate our business under a management structure that enhances our technology market focus and growth strategy.

We segment our business into two technology-focused areas that each operate in the United States, Canada, Brazil, and the UK:

• Worldwide Barcode, Networking & Security

• Worldwide Communications & Services

We sell products to the United States and Canada from our facilities located in Mississippi, California and Kentucky;

into Brazil primarily from facilities located in the Brazilian states of Paraná, Espírito Santo and Santa Catarina.

Some of our digital products and services are provided from our CASCADE platform.

We also have drop-shipment arrangements with some of our suppliers, which allow us to offer products to customers without taking physical delivery at our facilities.

Our key suppliers include 8x8, ACC Business, AT&T, Aruba/HPE, AudioCodes, Avaya, Axis, Barco, Bematech, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Hanwha, Honeywell, HID, Ingenico, Intrado, Jabra, LogMeIn, Lumen, March Networks, Masergy, Microsoft, Mitel, NCR, NICE inContact, Oracle, Palo Alto, Panasonic, Poly, RingCentral, Samsung, Sony, Spectralink, Spectrum, Toshiba Global Commerce Solutions, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and Zoom.

We also offer customers significant choices in cloud services through our Intelisys business, including "as a service" offerings in contact center, infrastructure and unified communications.

ScanSource is a leading hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, SaaS, connectivity and cloud.

We provide technology solutions and services from more than 500 leading suppliers of mobility and barcode, POS and payments, physical security and networking, communications and collaboration, connectivity and cloud services to our approximately 30,000 sales partners located in the United States, Canada, Brazil, the UK and Europe.

We operate our business under a management structure that enhances our technology focus and hybrid distribution growth strategy.

Our segments operate in the United States, Canada, Brazil and the UK and consist of the following:

• Specialty Technology Solutions

• Modern Communications & Cloud

We sell hardware, SaaS, connectivity and cloud solutions and services through channel partners to end-customers.

We operate distribution facilities that support our United States and Canada business in Mississippi, California and Kentucky.

Brazil distribution facilities are located in the Brazilian states of Paraná, Espirito Santo and Santa Catarina.

We provide some of our digital products, which include SaaS and subscriptions, through our digital tools and platforms.

Our key suppliers include 8x8, AT&T, Aruba/HPE, Avaya, Axis, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Granite, GTT, Hanwha, Honeywell, Ingenico, Jabra, Lumen, Microsoft, MetTel, Mitel, NCR, NICE CXone, Poly, RingCentral, Spectrum, Toshiba Global Commerce Solutions, Trend Micro, Ubiquiti, Verifone, Verizon, VMWare, Windstream, Zebra Technologies and Zoom.

Recent Developments

Impact of COVID-19 on our Business Environment

The spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and limitations of in-person gatherings.

The pandemic and these containment measures have had a substantial impact on businesses around the world and on global, regional and national economies.

Our top priority is protecting the health and safety of our employees.

We have transitioned our employees, where possible, to a fully remote working environment and have taken a number of measures to ensure our teams feel secure in their jobs with the flexibility and resources they need to stay safe and healthy.

We have teams monitoring the evolving situation and recommending risk mitigation actions;

We are following global guidance from authorities and health officials including travel restrictions and physical distancing guidelines.

All of our distribution facilities remain open and operational.

Our employees are committed to providing the high level of customer service our partners have grown to expect from us in order to achieve positive results.

In July 2020, we announced actions to address the business impacts of the COVID-19 pandemic and prepare for the next phase of growth.

These actions included a $30 million annualized expense reduction plan.

During the fiscal year ended June 30, 2021, we recognized approximately $9.3 million for restructuring and other charges, largely for severance and employee benefits for employees who left the Company as part of this plan.

These actions were designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of the COVID-19 pandemic.

As part of the plan, we are continuing to invest in our higher growth agency business, Intelisys.

Strong growth for the Intelisys business has continued, even with the COVID-19 pandemic.

See "Risk Factors" for information on additional impacts of COVID-19 as well as other matters that could have a material adverse effect on our results of operations and financial condition.

Index to Financial Statements

We finalized the sale of our Latin American businesses, outside of Brazil, on October 30, 2020.

We also finalized the sale of our Europe and UK products distribution businesses on November 12, 2020.

We rely on a channel sales model offering hardware, software, services and connectivity from leading technology suppliers to sales partners that solve end-customers' challenges.

With our CASCADE platform, we also offer customers SaaS and subscription services from leading technology suppliers.

While we do not manufacture products, we provide technology solutions and services from leading technology suppliers.

Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional services, such as custom configuration, key injection, integration support, custom development and other services.

We also offer the flexibility of on-premise, cloud and hybrid solutions.

As a trusted adviser to our sales partners, we provide more complete solutions through a better understanding of end-customer needs.

We drive growth through enhancing our sales partners' capabilities to provide hardware, software, services and connectivity solutions.

Our teams deliver value-added support programs and services, including education and training, network assessments, implementation, custom development and marketing to help our sales partners extend their capabilities, develop new technology practices or reach new end customers.

Our objective is to grow profitable sales in the technologies we offer and expand in higher margin and adjacent markets to help our sales partners offer more products and services and increase recurring revenue opportunities.

As part of our strategic plan, we consider strategic acquisitions and alliances to enhance our technology offerings and service capabilities.

Impact of the Macroeconomic Environment, Including Inflation and Supply Chain Constraints

The macroeconomic environment, including the economic impacts of supply chain constraints, rising interest rates and inflation continues to create significant uncertainty and may adversely affect our consolidated results of operations.

We are actively monitoring changes to the global macroeconomic environment and assessing the potential impacts these challenges may have on our financial condition, results of operations and liquidity.

We are also mindful of the potential impact these conditions could have on our customers and suppliers.

In spite of these challenges and uncertainties, we believe we have managed the supply chain requirements of our customers and suppliers effectively to date.

While we are unable to predict the ultimate impact these factors will have on our business, certain technologies have benefited from the widespread adoption to a work-from-anywhere business model, as well as the accelerated shift to digitize and automate processes.

Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes and tools.

Our goal is to provide exceptional experiences for our partners, suppliers and employees, and we strive for operational excellence.

Our hybrid distribution strategy relies on a channel sales model to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to sales partners that solve end-customers’ challenges.

ScanSource enables sales partners to deliver solutions for their customers to address changing end-customer buying and consumption patterns.

Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional services.

As a trusted adviser to our sales partners, we provide customized solutions through our strong understanding of end-customer needs.

Results of Operations from Continuing Operations

1 unchanged sentence

Totals may not sum due to rounding.

Index to Financial Statements

Fiscal Year Ended June 30,

2022 2021 2020

Statement of income data:

8 unchanged sentences

Change in fair value of contingent consideration 0.0 0.0 0.2

Operating income (loss) 2.0 (2.1)

Operating income 3.5 2.0 (2.1)

Interest expense 0.2 0.2 0.4

6 unchanged sentences

Net income (loss) 2.5 % 0.3 % (6.3) %

Index to Financial Statements

Comparison of Fiscal Years Ended June 30, 2022, 2021 and 2020

Below is a discussion of fiscal years ended June 30, 2022, 2021 and 2020.

Please refer to our Form 10-K for the fiscal year ended June 30, 2020 for a discussion of fiscal year ended June 30, 2019.

We have two reportable segments, which are based on the technologies provided to customers.

Fiscal year 2022 compared to fiscal year 2021

We have two reportable segments, which are based on technology.

The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2022 and 2021.

Index to Financial Statements

2022 2021 $ Change % Change % Change Constant Currency, Excluding Divestitures and Acquisitions (a)

1 unchanged sentence

Sales by Segment:

Worldwide Barcode, Networking & Security $ 2,175,141 $ 2,093,217 $ 81,924 3.9 % 4.8 %

Worldwide Communications & Services 975,665 954,517 21,148 2.2 % 7.1 %

Specialty Technology Solutions $ 2,082,321 $ 1,815,933 $ 266,388 14.7 % 14.6 %

Modern Communications & Cloud 1,447,614 1,334,873 112,741 8.4 % 7.9 %

Total net sales $ 3,529,935 $ 3,150,806 $ 379,129 12.0 % 11.8 %

3 unchanged sentences

Total net sales $ 3,529,935 $ 3,150,806 $ 379,129 12.0 % 11.8 %

(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions is presented at the end of Results of Operations , under Non-GAAP Financial Information .

Worldwide Barcode, Networking & Security

The Worldwide Barcode, Networking & Security segment consists of sales to technology customers in North America and Brazil.

(a) A reconciliation of non-GAAP net sales in constant currency, excluding divestitures and acquisitions is presented at the end of Results of Operations , under Non-GAAP Financial Information .

Specialty Technology Solutions

The Specialty Technology Solutions segment consists of sales to customers in North America and Brazil.

During fiscal year 2022, net sales for this segment increased $266.4 million, or 14.7%, compared to fiscal year 2021.

Excluding the foreign exchange negative impact of $19.3 million, adjusted net sales for fiscal year 2021 increased $101.2 million, or 4.8%, compared to the prior year.

The increase in net sales and in adjusted net sales is primarily due to higher sales volume across our technologies in North America and Brazil.

Worldwide Communications & Services

The Worldwide Communications & Services segment consists of sales to technology customers in North America, Brazil, Europe and the UK.

During fiscal year 2021, net sales for this segment increased $21.1 million or 2.2% compared to fiscal year 2020 primarily due to sales growth in our North America business.

Excluding the foreign exchange negative impact of $46.5 million, adjusted net sales increased $67.6 million, or 7.1%, compared to the prior year, with growth across our technologies in North America and Brazil.

In addition, net sales for our master agency business, Intelisys, increased 13% year-over-year.

Excluding the foreign exchange positive impact of $1.7 million, adjusted net sales for fiscal year 2022 increased $264.7 million, or 14.6%, compared to the prior year.

The increase in net sales and in adjusted net sales is primarily due to increased broad-based demand across our technologies.

Modern Communications & Cloud

The Modern Communications & Cloud segment consists of sales to customers in North America, Brazil, Europe and the UK.

During fiscal year 2022, net sales for this segment increased $112.7 million, or 8.4%, compared to fiscal year 2021.

Excluding the foreign exchange positive impact of $7.1 million, adjusted net sales increased $105.6 million, or 7.9%, compared to the prior year.

The increase in net sales and adjusted net sales is primarily due to increased demand across our communications solutions.

Intelisys connectivity and cloud net sales for fiscal year 2022 increased 14.4% year-over-year.

For our Intelisys business, net sales reflect the net commissions received from suppliers after paying sales partner commissions.

For fiscal year 2021, Intelisys net billings, which are amounts billed by suppliers to end users and represent annual recurring revenue (ARR), totaled approximately $2.0 billion.

For fiscal year 2022, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.25 billion.

The fiscal year 2022 Intelisys net billings resulted in Intelisys net sales of approximately $74.3 million.

Fiscal year 2021 compared to fiscal year 2020

Index to Financial Statements

2021 2020 $ Change % Change % Change Constant Currency, Excluding Divestitures and Acquisitions (a)

(in thousands)

Sales by Segment:

Specialty Technology Solutions $ 1,815,933 $ 1,580,441 $ 235,492 14.9 % 16.1 %

Modern Communications & Cloud 1,334,873 1,467,293 (132,420) (9.0) % (5.9) %

Total net sales $ 3,150,806 $ 3,047,734 $ 103,072 3.4 % 5.5 %

Sales by Geography Category:

United States $ 2,840,731 $ 2,755,134 $ 85,597 3.1 % 3.1 %

International 310,075 292,600 17,475 6.0 % 28.5 %

Total net sales $ 3,150,806 $ 3,047,734 $ 103,072 3.4 % 5.5 %

(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions is presented at the end of Results of Operations , under Non-GAAP Financial Information .

Specialty Technology Solutions

During fiscal year 2021, net sales for this segment increased $235.5 million, or 14.9%, compared to fiscal year 2020.

Excluding the foreign exchange negative impact of $19.3 million, adjusted net sales for fiscal year 2021 increased $254.8 million, or 16.1%, compared to the prior year.

The increase in net sales and in adjusted net sales is primarily due to higher sales volume across our technologies in North America.

Modern Communications & Cloud

During fiscal year 2021, net sales for this segment decreased $132.4 million, or 9.0%, compared to fiscal year 2020.

Excluding the foreign exchange negative impact of $46.5 million, adjusted net sales decreased $86.0 million, or 5.9%, compared to the prior year.

The decrease in net sales and adjusted net sales is primarily due to lower sales volume across our communications technologies.

Intelisys connectivity and cloud net sales for fiscal year 2021 increased 13.1% year-over-year.

Fiscal year 2022 compared to fiscal year 2021

The following table summarizes our gross profit for the fiscal years ended June 30, 2022 and 2021:

1 unchanged sentence

(in thousands)

Worldwide Barcode, Networking & Security $ 178,158 $ 180,582 $ (2,424) (1.3) % 8.2 % 8.6 %

Worldwide Communications & Services 172,558 174,987 (2,429) (1.4) % 17.7 % 18.3 %

Specialty Technology Solutions $ 205,757 $ 158,833 $ 46,924 29.5 % 9.9 % 8.7 %

Modern Communications & Cloud 220,767 191,883 28,884 15.1 % 15.3 % 14.4 %

Total gross profit $ 426,524 $ 350,716 $ 75,808 21.6 % 12.1 % 11.1 %

Worldwide Barcode, Networking & Security

For the Worldwide Barcode, Networking & Security segment, gross profit dollars decreased $2.4 million, and gross profit margin decreased to 8.2% for fiscal year 2021 compared to 8.6% in the prior year.

The decrease is due to a less favorable sales mix and lower vendor program recognition compared to the prior year.

Worldwide Communications & Services

For the Worldwide Communications & Services segment, gross profit dollars decreased $2.4 million, and gross profit margin decreased to 17.7% for fiscal year 2021 compared to 18.3% in the prior year.

The decrease is primarily due to a less favorable sales mix, partially offset by results contributed by our Intelisys recurring revenue business.

Our gross profit is primarily affected by sales volume and gross margin mix.

Gross margin mix is impacted by multiple factors, which include sales mix (proportion of sales of higher margin products or services relative to total sales), vendor program recognition (consisting of volume rebates, inventory price changes and purchase discounts) and freight costs.

Increases in vendor program recognition decrease cost of goods sold, thereby increasing gross profit.

Net sales derived from our Intelisys business contribute 100% to our gross profit dollars and margin as they have no associated cost of goods sold.

Index to Financial Statements

Specialty Technology Solutions

For the Specialty Technology Solutions segment, gross profit dollars increased $46.9 million.

Higher sales volume, after considering the associated cost of goods sold, contributed $23.3 million to the growth of gross profit dollars.

Gross margin mix positively impacted gross profit by $23.6 million, largely from higher vendor program recognition.

For the year ended June 30, 2022, the gross profit margin increased 113 basis points over the prior-year to 9.9%.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, gross profit dollars increased $28.9 million.

Higher sales volume, after considering the associated cost of goods sold, contributed $16.2 million to the growth of gross profit dollars.

Gross margin mix positively impacted gross profit by $12.7 million, largely from a more favorable sales mix.

For the year ended June 30, 2022, the gross profit margin increased 87 basis points over the prior year to 15.3%.

Fiscal year 2021 compared to fiscal year 2020

2021 2020 $ Change % Change 2021 2020

(in thousands)

Specialty Technology Solutions $ 158,833 $ 153,511 $ 5,322 3.5 % 8.7 % 9.7 %

Modern Communications & Cloud 191,883 202,058 (10,175) (5.0) % 14.4 % 13.8 %

Total gross profit $ 350,716 $ 355,569 $ (4,853) (1.4) % 11.1 % 11.7 %

Specialty Technology Solutions

For the Specialty Technology Solutions segment, gross profit dollars increased $5.3 million.

Higher sales volume, after considering the associated cost of goods sold, contributed $22.9 million to the growth of gross profit dollars.

Gross margin mix negatively impacted gross profit by $17.6 million, largely from lower vendor program recognition.

For the year ended June 30, 2021, the gross profit margin decreased 96 basis points over the prior-year to 8.7%.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, gross profit dollars decreased $10.2 million.

Lower sales volume, after considering the associated cost of goods sold, negatively impacted gross profit by $18.2 million.

This impact was partially offset by a more favorable sales mix, which positively impacted gross profit by $8.0 million.

For the year ended June 30, 2021, the gross profit margin increased 60 basis points over the prior year to 14.4%.

Operating expenses

Fiscal year 2022 compared to fiscal year 2021

The following table summarizes our operating expenses for the periods ended June 30, 2022 and 2021:

Index to Financial Statements

2022 2021 $ Change % Change 2022 2021

3 unchanged sentences

Intangible amortization expense 17,853 19,488 (1,635) (8.4) % 0.5 % 0.6 %

Restructuring and other charges — 9,258 (9,258) (100.0) % — % 0.3 %

Change in fair value of contingent consideration — 516 (516) (100.0) % — % — %

Operating expenses $ 304,357 $ 289,233 $ 15,124 5.2 % 8.6 % 9.2 %

Selling, general and administrative expenses ("SG&A") increased $28.0 million for the fiscal year ended June 30, 2022 compared to the prior year.

The increase in SG&A expenses is primarily attributable to higher employee costs.

Restructuring and other charges incurred of $9.3 million during the fiscal year ended June 30, 2021 primarily related to employee severance and benefit costs in connection with our expense reduction plan implemented at the end of July 2020.

We recorded expense of $0.5 million for the change in fair value of contingent consideration for the fiscal year ended June 30, 2021, all of which relates to Intelisys.

The final Intelisys earnout payment was paid in October 2020.

Fiscal year 2021 compared to fiscal year 2020

The following table summarizes our operating expenses for the periods ended June 30, 2021 and 2020:

2021 2020 $ Change % Change 2021 2020

(in thousands)

Selling, general and administrative expenses $ 247,438 $ 259,535 $ (12,097) (4.7) % 7.9 % 8.5 %

Depreciation expense 12,533 13,033 (500) (3.8) % 0.4 % 0.4 %

Intangible amortization expense 19,488 19,953 (465) (2.3) % 0.6 % 0.7 %

Restructuring and other charges 9,258 604 8,654 *nm 0.3 % — %

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*nm - percentages are not meaningful

Selling, general and administrative expenses ("SG&A") decreased $12.1 million for the fiscal year ended June 30, 2021 compared to the prior year.

The decrease in SG&A expenses is primarily due to the expense reduction plan we announced in July 2020, partially offset by a Brazilian tax recovery in the prior year that did not recur.

Intangible amortization expense decreased $0.5 million for the fiscal year ended June 30, 2021 largely due to Canpango intangible write-offs at the end of the prior fiscal year.

Index to Financial Statements

SG&A decreased $12.1 million for the fiscal year ended June 30, 2021 compared to the prior year.

The decrease in SG&A expenses is primarily due to the expense reduction plan announced in July 2020, partially offset by a Brazilian tax recovery in the prior year that did not recur.

No impairment charges were recorded in the fiscal year ended June 30, 2021.

Impairment charges during the fiscal year ended June 30, 2020 include $119.0 million in goodwill impairment charges for our Worldwide Barcode, Networking and Security segment and $1.4 million in intangible asset impairment charges for our Canpango business.

We have elected to present changes in fair value of the contingent consideration owed to former shareholders of businesses we acquire separately from other SG&A expenses.

Impairment charges for the fiscal year ended June 30, 2020 include $119.0 million in goodwill impairment charges and $1.4 million in intangible asset impairment charges for our Canpango business.

Index to Financial Statements

In fiscal 2021, we recorded a $0.5 million expense from change in fair value of contingent consideration, all of which is related to Intelisys.

1 unchanged sentence

Operating Income

Fiscal year 2022 compared to fiscal year 2021

The following table summarizes our operating income for the periods ended June 30, 2022 and 2021:

1 unchanged sentence

(in thousands)

Worldwide Barcode, Networking & Security $ 28,402 $ (83,515) $ 111,917 134.0 % 1.3 % (4.0) %

Worldwide Communications & Services 44,715 22,548 22,167 98.3 % 4.6 % 2.4 %

Specialty Technology Solutions $ 66,686 $ 29,566 $ 37,120 125.5 % 3.2 % 1.6 %

Modern Communications & Cloud 55,511 43,551 11,960 27.5 % 3.8 % 3.3 %

Corporate (30) (11,634) 11,604 99.7 % — % — %

Total operating income $ 122,167 $ 61,483 $ 60,684 98.7 % 3.5 % 2.0 %

Specialty Technology Solutions

For the Specialty Technology Solutions segment, operating income increased $37.1 million, and operating margin increased to 3.2% for the fiscal year ended June 30, 2022 compared to the prior year.

The increase in operating income and operating margin is primarily due to higher gross profits.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, operating income increased $12.0 million and the operating margin increased to 3.8% for the fiscal year ended June 30, 2022, compared to the prior year.

The increase in operating income and margin is largely due to higher gross profits.

Corporate incurred less than $0.1 million in divestiture costs for fiscal year ended June 30, 2022, compared to $11.6 million in divestiture and restructuring costs for the year ended June 30, 2021.

Fiscal year 2021 compared to fiscal year 2020

The following table summarizes our operating income for the periods ended June 30, 2021 and 2020:

2021 2020 $ Change % Change 2021 2020

(in thousands)

Specialty Technology Solutions $ 29,566 $ (67,706) $ 97,272 143.7 % 1.6 % (4.3) %

Modern Communications & Cloud 43,551 6,739 36,812 546.3 % 3.3 % 0.5 %

Corporate (11,634) (4,000) (7,634) (190.9) % — % — %

Total operating income (loss) $ 61,483 $ (64,967) $ 126,450 194.6 % 2.0 % (2.1) %

Worldwide Barcode, Networking & Security

For the Worldwide Barcode, Networking & Security segment, operating income increased $111.9 million, and operating margin increased to 1.3% for the fiscal year ended June 30, 2021 compared to the prior year.

The increase in operating income and margin for the fiscal year is due to goodwill impairment charges in fiscal year 2020.

Index to Financial Statements

Specialty Technology Solutions

For the Specialty Technology Solutions segment, operating income increased $97.3 million, and operating margin increased to 1.6% for the fiscal year ended June 30, 2021 compared to the prior-year.

The increase in operating income and operating margin for the fiscal year is due to goodwill impairment charges in the fiscal year 2020.

Excluding goodwill impairment charges of $119.0 million in fiscal year 2020, adjusted operating income for the fiscal year ended June 30, 2021 decreased $21.7 million compared to the prior-year.

The decrease in adjusted operating income is due to lower gross profits and a Brazilian tax recovery in the prior year that did not recur.

Worldwide Communications & Services

For the Worldwide Communications & Services segment, operating income increased $22.2 million compared to the prior year, and the operating margin increased to 4.6% for the fiscal year ended June 30, 2021.

The increase in operating income and margin is largely due to lower employee-related expenses and lower expense from change in fair value of the Intelisys contingent consideration.

The decrease in adjusted operating income is due to a Brazilian tax recovery in the prior year that did not recur.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, operating income increased $36.8 million and the operating margin increased to 3.3% for the fiscal year ended June 30, 2021, compared to the prior year.

The increase in operating income and margin is largely due to lower employee-related expenses, which decreased year-over-year by $16.4 million, or 11.5%.

The increase in operating income and margin is also due to impairment charges of $23.1 million in fiscal year 2020, which did not recur in fiscal year 2021.

Corporate incurred $11.6 million in divestiture and restructuring costs for fiscal year ended June 30, 2021, compared to $4.0 million in acquisition and divestiture costs for the year ended June 30, 2020.

Total Other (Income) Expense

Fiscal year 2022 compared to fiscal year 2021

The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2022 and 2021:

Index to Financial Statements

2022 2021 $ Change % Change 2022 2021

2 unchanged sentences

Interest income (4,333) (3,097) (1,236) 39.9 % (0.1) % (0.1) %

Net foreign exchange losses (gains) 845 525 320 61.0 % — % — %

Net foreign exchange losses 2,078 845 1,233 145.9 % 0.1 % — %

Other, net (724) (729) 5 (0.7) % — % — %

1 unchanged sentence

Interest expense reflects interest incurred on borrowings, non-utilization fees from our revolving credit facility and amortization of debt issuance costs.

Interest expense decreased in fiscal 2021 as compared to 2020 principally from reduced borrowings on our multi-currency revolving credit facility.

Interest income for the year ended June 30, 2021 and 2020 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents, principally in Brazil.

Interest expense decreased in fiscal 2022 as compared to 2021 primarily from lower interest rates including the spread during the first nine months of fiscal year 2022.

Interest income for the year ended June 30, 2022 and 2021 was generated on interest-bearing customer receivables principally in Brazil.

Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses.

5 unchanged sentences

The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses.

Fiscal year 2021 compared to fiscal year 2020

Index to Financial Statements

The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2021 and 2020:

2021 2020 $ Change % Change 2021 2020

(in thousands)

Interest expense $ 6,929 $ 12,224 $ (5,295) (43.3) % 0.2 % 0.4 %

Interest income (3,097) (5,826) 2,729 (46.8) % (0.1) % (0.2) %

Net foreign exchange losses 845 525 320 61.0 % — % — %

Other, net (729) (114) (615) 539.5 % — % — %

Total other (income) expense $ 3,948 $ 6,809 $ (2,861) (42.0) % 0.1 % 0.2 %

Interest expense decreased in fiscal year 2021 as compared to 2020 principally from reduced borrowings on our multi-currency revolving credit facility.

Interest income for the year ended June 30, 2021 and 2020 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents, principally in Brazil.

Provision for Income Taxes

Income tax expense for continuing operations was $29.9 million and $12.1 million for the fiscal years ended June 30, 2022 and 2021, respectively, reflecting effective tax rates of 25.2% and 21.1%, respectively.

The increase in the effective tax rate for fiscal year 2021 compared to fiscal year 2020 is primarily the result of impairment charges, most of which are not deductible for tax purposes.

The increase in the effective tax rate for fiscal year 2022 compared to fiscal year 2021 is primarily the result of an increase in non-deductible expenses and an inclusion for global intangible low taxed income.

We expect the fiscal year 2023 effective tax rate from continuing operations to be approximately 25.0% to 26.0%.

1 unchanged sentence

Index to Financial Statements

Quarterly Results

The following tables set forth certain unaudited quarterly financial data.

The information has been derived from unaudited financial statements that, in the opinion of management, reflect all adjustments.

Three Months Ended

Fiscal 2021 Fiscal 2020

(in thousands, except per share data)

Net sales $ 852,694 $ 729,873 $ 810,897 $ 757,342 $ 636,450 $ 744,584 $ 823,999 $ 842,701

Cost of goods sold 756,916 641,757 724,854 676,563 562,303 660,006 725,680 744,176

Gross profit $ 95,778 $ 88,116 $ 86,043 $ 80,779 $ 74,147 $ 84,578 $ 98,319 $ 98,525

Impairment charges — — — — 120,470 — — —

Change in fair value of contingent consideration — — — 516 674 618 3,176 2,472

Net income (loss) from continuing operations 20,657 13,786 11,061 (115) (108,859) 5,715 11,626 12,291

Net income (loss) from discontinued operations 3,053 (688) (25,255) (11,704) (108,403) (4,003) (260) (761)

Net income (loss) $ 23,710 13,098 (14,194) (11,819) $ (217,262) $ 1,712 $ 11,366 $ 11,530

Net income (loss) from continuing operations per common share, basic $ 0.81 $ 0.54 $ 0.44 $ (0.01) $ (4.29) $ 0.23 $ 0.46 $ 0.48

Net income (loss) from discontinued operations per common share, basic 0.12 (0.03) (0.99) (0.46) (4.28) (0.16) (0.01) (0.03)

Net income (loss) per common share, basic $ 0.93 $ 0.51 $ (0.56) $ (0.47) $ (8.57) $ 0.07 $ 0.45 $ 0.45

Weighted-average shares outstanding, basic 25,482 25,455 25,395 25,361 25,353 25,346 25,274 25,539

Net income (loss) from continuing operations per common share, diluted $ 0.80 $ 0.54 $ 0.43 $ (0.01) $ (4.29) $ 0.23 $ 0.46 $ 0.48

Net income (loss) from discontinued operations per common share, diluted 0.12 (0.03) (0.99) (0.46) (4.28) (0.16) (0.01) (0.03)

Net income (loss) per common share, diluted $ 0.92 $ 0.51 $ (0.56) $ (0.47) $ (8.57) $ 0.07 $ 0.45 $ 0.45

Weighted-average shares outstanding, diluted 25,664 25,572 25,475 25,361 25,353 25,363 25,358 25,617

Index to Financial Statements

Non-GAAP Financial Information

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In addition to disclosing results that are determined in accordance with United States generally accepted accounting principles ("US GAAP" or "GAAP"), we also disclose certain non-GAAP financial measures.

These measures include non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income, non-GAAP EPS, return on invested capital ("ROIC") and "constant currency." Constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates between reporting periods.

These measures include non-GAAP operating income;

non-GAAP pre-tax income;

non-GAAP net income;

non-GAAP EPS;

adjusted earnings before interest expense, income taxes, depreciation, and amortization ("adjusted EBITDA");

adjusted return on invested capital ("adjusted ROIC");

and constant currency.

Constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates between reporting periods.

We use non-GAAP financial measures to better understand and evaluate performance, including comparisons from period to period.

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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 US GAAP.

Return on Invested Capital

Management uses ROIC as a performance measurement to assess efficiency at allocating capital under our control to generate returns.

Management believes this metric balances our operating results with asset and liability management, is not impacted by capitalization decisions and correlates with shareholder value creation.

In addition, it is easily computed, communicated and understood.

ROIC also provides management a measure of our profitability on a basis more comparable to historical or future periods.

ROIC assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance.

We believe the calculation of ROIC provides useful information to investors and is an additional relevant comparison of our performance during the year.

We calculate ROIC as earnings before interest expense, income taxes, depreciation and amortization, plus change in fair value of contingent consideration and other non-GAAP adjustments ("adjusted EBITDA"), divided by invested capital.

Adjusted Return on Invested Capital

Adjusted ROIC assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance.

We believe the calculation of adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance during the year.

Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent consideration, and other non-GAAP adjustments.

Since adjusted EBITDA excludes some non-cash costs of investing in our business and people, we believe that adjusted EBITDA shows the profitability from our business operations more clearly.

Effective with the first quarter of fiscal year 2022, non-cash share-based compensation expense is also added back in calculating adjusted EBITDA.

The presentation for adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods.

We calculate adjusted ROIC as adjusted EBITDA, divided by invested capital.

Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period.

The following table summarizes annualized ROIC for the fiscal years ended June 30, 2021 and 2020, respectively.

Return on invested capital ratio 11.8 % 7.5 %

The components of our ROIC calculation and reconciliation to our financial statements are shown, as follows:

The following table summarizes annualized adjusted ROIC for the fiscal years ended June 30, 2022 and 2021, respectively.

Adjusted return on invested capital ratio 17.0 % 12.6 %

The components of our adjusted ROIC calculation and reconciliation to our financial statements are shown, as follows:

Fiscal Year Ended June 30,

(in thousands)

Reconciliation of net income to EBITDA:

Net income (loss) from continuing operations (GAAP) $ 45,389 $ (79,227)

Reconciliation of net income to adjusted EBITDA:

Net income from continuing operations (GAAP) $ 88,698 $ 45,389

Interest expense 6,523 6,929

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EBITDA (non-GAAP) 155,030 97,971

Share-based compensation 11,663 8,039

Change in fair value of contingent consideration — 516

Acquisition and divestiture costs (a)

Divestiture costs (a)

Restructuring costs — 9,047

Impairment charges — 120,470

Tax recovery — (10,744)

Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 109,910 $ 97,047

Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) 166,723 117,949

Index to Financial Statements

Invested capital calculations Fiscal Year Ended June 30,

Fiscal Year Ended June 30,

(in thousands)

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Equity – end of the year 806,528 731,191

Share-based compensation, net 8,709 6,052

Change in fair value of contingent consideration, net — 390

Acquisition and divestiture costs (a)

Divestiture costs (a)

Restructuring, net — 6,840

Impairment charges, net — 114,398

Tax recovery, net — (8,001)

Impact of discontinued operations, net (100) 34,594

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209,114 202,869

Invested capital (denominator for ROIC) (non-GAAP) $ 929,668 $ 1,301,657

(a) Includes acquisition and divestitures costs for the year ended June 30, 2021 and 2020.

Acquisition and divestiture costs are generally non-deductible for tax purposes.

(b) Average funded debt, which includes both continuing operations and discontinued operations, is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.

Invested capital (denominator for adjusted ROIC) (non-GAAP) $ 982,293 $ 932,694

(a) Includes divestiture costs for the year ended June 30, 2022 and 2021.

Divestiture costs are generally non-deductible for tax purposes.

(b) Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.

Net Sales in Constant Currency, Excluding Acquisitions and Divestitures

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This information is provided to analyze underlying trends without the translation impact of fluctuations in foreign currency rates and the impact of acquisitions.

Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisition:

Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisitions:

Net Sales by Segment:

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2022 2021 $ Change % Change

Worldwide Barcode, Networking & Security:

Specialty Technology Solutions:

(in thousands)

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Non-GAAP net sales, constant currency $ 2,080,611 $ 1,815,933 $ 264,678 14.6 %

Worldwide Communications & Services:

Modern Communications & Cloud:

Net sales, reported $ 1,447,614 $ 1,334,873 $ 112,741 8.4 %

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Index to Financial Statements

Net sales by segment

Fiscal Year Ended June 30,

2021 2020 $ Change % Change

Specialty Technology Solutions:

(in thousands)

Net sales, reported $ 1,815,933 $ 1,580,441 $ 235,492 14.9 %

Foreign exchange impact (a)

Non-GAAP net sales, constant currency $ 1,835,244 $ 1,580,441 $ 254,803 16.1 %

Modern Communications & Cloud:

Net sales, reported $ 1,334,873 $ 1,467,293 $ (132,420) (9.0) %

Foreign exchange impact (a)

Non-GAAP net sales, constant currency $ 1,381,343 $ 1,467,293 $ (85,950) (5.9) %

Consolidated:

Net sales, reported $ 3,150,806 $ 3,047,734 $ 103,072 3.4 %

Foreign exchange impact (a)

Non-GAAP net sales, constant currency $ 3,216,587 $ 3,047,734 $ 168,853 5.5 %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

Calculated by translating the net sales for the year ended June 30, 2021 into U.S.

dollars using the average foreign exchange rates for the year ended June 30, 2020.

Net Sales by Geography:

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dollars using the average foreign exchange rates for the year ended June 30, 2021.

Income Statement Non-GAAP Metrics

To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP net sales, non-GAAP gross profit, non-GAAP operating income, non-GAAP net other expense, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share.

Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, restructuring costs, and other non-GAAP adjustments.

These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods.

Below we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above:

Index to Financial Statements

Net Sales by Geography:

Fiscal Year Ended June 30,

2021 2020 $ Change % Change

United States:

(in thousands)

Net sales, as reported $ 2,840,731 $ 2,755,134 $ 85,597 3.1 %

International:

Net sales, as reported $ 310,075 $ 292,600 $ 17,475 6.0 %

Foreign exchange impact (a)

Non-GAAP net sales, constant currency $ 375,856 $ 292,600 $ 83,256 28.5 %

Consolidated:

Net sales, as reported $ 3,150,806 $ 3,047,734 $ 103,072 3.4 %

Foreign exchange impact (a)

Non-GAAP net sales, constant currency $ 3,216,587 $ 3,047,734 $ 168,853 5.5 %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

Calculated by translating the net sales for the year ended June 30, 2021 into U.S.

dollars using the average foreign exchange rates for the year ended June 30, 2020.

Index to Financial Statements

Operating Income by Segment:

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2022 2021 $ Change % Change 2022 2021

Worldwide Barcode, Networking & Security:

Specialty Technology Solutions:

(in thousands)

GAAP operating income $ 66,686 $ 29,566 $ 37,120 125.5 % 3.2 % 1.6 %

Amortization of intangible assets 6,005 6,441 (436)

Non-GAAP operating income $ 72,691 $ 36,007 $ 36,684 101.9 % 3.5 % 2.0 %

Modern Communications & Cloud:

GAAP operating income $ 55,511 $ 43,551 $ 11,960 27.5 % 3.8 % 3.3 %

Amortization of intangible assets 11,848 13,047 (1,199)

Change in fair value of contingent consideration — 516 (516)

Non-GAAP operating income $ 67,359 $ 57,114 $ 10,245 17.9 % 4.7 % 4.3 %

GAAP operating loss $ (30) $ (11,634) $ 11,604 nm* nm* nm*

Divestiture costs 30 2,376 (2,346)

Restructuring costs — 9,258 (9,258)

Non-GAAP operating income $ — $ — $ — nm* nm* nm*

Consolidated:

GAAP operating income $ 122,167 $ 61,483 $ 60,684 98.7 % 3.5 % 2.0 %

Amortization of intangible assets 17,853 19,488 (1,635)

Change in fair value of contingent consideration — 516 (516)

Divestiture costs 30 2,376 (2,346)

Restructuring costs — 9,258 (9,258)

Non-GAAP operating income $ 140,050 $ 93,121 $ 46,929 50.4 % 4.0 % 3.0 %

Index to Financial Statements

Operating Income by Segment:

Fiscal year ended June 30, % of Net Sales

2021 2020 $ Change % Change 2021 2020

Specialty Technology Solutions:

(in thousands)

GAAP operating income (loss) $ 29,566 $ (67,706) $ 97,272 143.7 % 1.6 % (4.3) %

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Non-GAAP operating income $ 36,007 $ 30,653 $ 5,354 17.5 % 2.0 % 1.9 %

Worldwide Communications & Services:

Modern Communications & Cloud:

GAAP operating income $ 43,551 $ 6,739 $ 36,812 546.3 % 3.3 % 0.5 %

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Index to Financial Statements

Additional Non-GAAP Metrics

To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share.

These year-over-year metrics include the translation impact of changes in foreign currency exchange rates.

These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods.

Below we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above:

Year ended June 30, 2022

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

GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Divestiture costs Restructuring costs Non-GAAP measure

(in thousands, except per share data)

Net sales $ 3,150,806 $ — $ — $ — $ — $ — $ 3,150,806

Gross profit 350,716 — — — — — 350,716

SG&A expenses $ 275,442 $ — $ — $ (30) $ — $ 275,412

Operating income 122,167 17,853 — 30 — 140,050

Other expense, net 3,948 — — — — — 3,948

Pre-tax income 118,623 17,853 — 30 — 136,506

Net income from continuing operations 45,389 14,753 390 9,336 — — 69,868

Diluted EPS from continuing operations $ 1.78 $ 0.58 $ 0.02 $ 0.36 $ — $ — $ 2.74

(a) Acquisition and divestiture costs totaled $2.3 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.

Net income 88,698 13,412 — 30 — 102,140

Diluted EPS $ 3.44 $ 0.52 $ — $ — $ — $ 3.97

Year ended June 30, 2021

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

GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Divestiture costs Restructuring costs Non-GAAP measure

(in thousands, except per share data)

Net sales $ 3,047,734 $ — $ — $ — $ — $ — $ 3,047,734

Gross profit 355,569 — — — — — 355,569

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 from continuing operations (79,227) 15,091 5,247 4,449 (8,001) 114,398 51,957

Diluted EPS from continuing operations $ (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.

SG&A expenses $ 247,438 $ — $ — $ (2,376) $ — $ 245,062

Operating income 61,483 19,488 516 2,376 9,258 93,121

Pre-tax income 57,535 19,488 516 2,376 9,258 89,173

Net income 45,389 14,753 390 2,337 6,999 69,868

Diluted EPS $ 1.78 $ 0.58 $ 0.02 $ 0.09 $ 0.27 $ 2.74

Index to Financial Statements

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The carrying value of goodwill is reviewed at a reporting unit level at least annually for impairment, or more frequently if impairment indicators exist.

Our goodwill reporting units align directly with our operating segments, Worldwide Barcode, Networking & Security and Worldwide Communications & Services.

Our goodwill reporting units align directly with our operating segments, Specialty Technology Solutions and Modern Communications & Cloud.

The fair values of the reporting units are estimated using the net present value of discounted cash flows generated by each reporting unit.

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The key assumptions utilized in determining fair value included:

• Industry weighted-average cost of capital ("WACC"):

• Industry WACC:

We utilized a WACC relative to each reporting unit's respective geography and industry as the discount rate for estimated future cash flows.

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Key assumptions used in determining fair value include projected growth and operating margin, working capital requirements and discount rates.

During fiscal year 2021, we completed our annual impairment test as of April 30th and determined that our goodwill was not impaired.

During fiscal year 2020, we determined that goodwill for our Worldwide Barcode, Networking and Security reporting unit was impaired and recorded an impairment charge of $119.0 million.

During fiscal years 2022 and 2021, we completed our annual impairment test as of April 30th and determined that our goodwill was not impaired.

See Note 8 - Goodwill and Other Identifiable Intangible Assets in the Notes to Consolidated Financial Statements for further discussion on our goodwill impairment testing and results.

Liability for Contingent Consideration

In addition to the initial cash consideration paid to former shareholders of Intelisys and Network1, we agreed to make additional earnout payments based on future results through a specified date based on a multiple of the subsidiary’s pro forma earnings as defined in the respective purchase agreements.

In addition to the initial cash consideration paid to former shareholders of Intelisys, we agreed to make additional earnout payments based on future results through a specified date based on a multiple of the subsidiary’s pro forma earnings as defined in the respective purchase agreements.

We paid the final earnout payments to the former shareholders of Intelisys in fiscal year 2021.

We paid the final earnout payment to the former shareholders of Network1 during fiscal year 2019.

In accordance with ASC Topic 805, Business Combinations , we determine the fair value of this liability for contingent consideration at each reporting date throughout the term of the earnout using a form of a probability weighted discounted cash flow model.

Each period we reflect the contingent consideration liability at fair value with changes recorded in the change in

Each period we reflect the contingent consideration liability at fair value with changes recorded in the change in fair value of contingent consideration line item on the Consolidated Income Statement.

Current and noncurrent portions of the

Index to Financial Statements

fair value of contingent consideration line item on the Consolidated Income Statement.

Current and noncurrent portions of the liability are presented in the current portion of contingent consideration and long-term portion of contingent consideration line items on the Consolidated Balance Sheets.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest;

or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

liability are presented in the current portion of contingent consideration and long-term portion of contingent consideration line items on the Consolidated Balance Sheets.

Accounting Standards Recently Issued

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Conversely, when sales volumes decrease, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.

Cash and cash equivalents totaled $62.7 million and $29.5 million at June 30, 2021 and 2020, respectively, of which $52.1 million and $23.6 million was held outside of the United States as of June 30, 2021 and 2020, respectively.

Checks released but not yet cleared from these accounts in the amounts of $14.3 million and $17.1 million are classified as accounts payable as of June 30, 2021 and 2020, respectively.

Cash and cash equivalents totaled $38.0 million, $62.7 million and $29.5 million at June 30, 2022, 2021 and 2020, respectively, of which $35.0 million, $52.1 million and $23.6 million was held outside of the United States as of June 30, 2022, 2021 and 2020, respectively.

Checks released but not yet cleared from these accounts in the amounts of $18.0 million, $14.3 million and $17.1 million are classified as accounts payable as of June 30, 2022, 2021 and 2020, respectively.

We conduct business in many locations throughout the world where we generate and use cash.

We provide for United States income taxes for the earnings of our Canadian subsidiary and, starting in the fourth quarter of fiscal year 2021, in Brazil.

We provide for United States income taxes from the earnings of our Canadian and Brazilian subsidiaries.

See Note 14 - Income Taxes in the Notes to the Consolidated Financial Statements for further discussion.

Our net investment in working capital increased $55.5 million to $486.7 million at June 30, 2021 from $431.3 million at June 30, 2020, primarily from increases in accounts receivable and decreases in contingent consideration, partially offset by increases in accounts payable.

Increases in accounts receivable and accounts payable in the current year are due to higher sales volumes as a result of general economic recovery following the initial impact of the COVID-19 pandemic.

Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from customers, increases and decreases to inventory levels, payments to suppliers, as well as cash generated or used by other financing and investing activities.

Cash provided by (used in):

June 30, 2021 June 30, 2020

Our net investment in working capital increased $222.8 million to $709.5 million at June 30, 2022 from $486.7 million at June 30, 2021, primarily from increases in accounts receivable and inventory.

Our net investment in working capital totaled $431.3 million at June 30, 2020.

For the fiscal year ended June 30, 2022, our working capital investment increased to support our 12.0% year-over-year net sales growth.

Cash (used in) provided by:

June 30, 2022 June 30, 2021 June 30, 2020

(in thousands)

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Financing activities of continuing operations 108,106 (118,824) (152,686)

Net cash provided by operating activities was $116.8 million for the year ended June 30, 2021, compared to $182.0 million provided by operating activities for the year ended June 30, 2020.

Operating cash flows for the year ended June 30, 2021 is primarily attributable to earnings from operations adjusted for non-cash item and increased accounts payable, partially offset by increased accounts receivable.

Operating cash flows for the year ended June 30, 2020 is primarily attributable to reduced inventory and accounts receivable balances and earnings from operations adjusted for non-cash items.

Index to Financial Statements

Excluding the master agency business, the number of days sales outstanding ("DSO") was 60 at June 30, 2021, compared to 63 at June 30, 2020.

The increase in DSO is primarily a result of changes in the aging portfolio of North America.

Net cash used in operating activities was $124.4 million for the year ended June 30, 2022, compared to $116.8 million provided by operating activities for the year ended June 30, 2021.

The decrease of $241.1 million was primarily due to increased accounts receivable, which were 28% higher than in 2021, attributable to net sales growth year-over-year.

Also contributing to the decrease in operating cash flows were increased inventory levels, which were 31% higher than in 2021, to support net sales growth.

Cash provided by operating activities is subject to variability period over period as a result of the timing of payments related to accounts receivable, accounts payable and other working capital items.

The number of days sales outstanding ("DSO") was 68 at June 30, 2022, compared to 60 at June 30, 2021 and 63 at June 30, 2020.

The increase in DSO for fiscal year 2022 is primarily a result of the timing of sales resulting in higher net receivables at period end.

Throughout the current fiscal year, DSO ranged from 62 to 69.

Inventory turnover was 6.5 times during the fourth quarter of the current fiscal year, compared to 4.5 times in the fourth quarter of fiscal year 2020.

Inventory turnover was 5.6 times during the fourth quarter of the current fiscal year, compared to 6.5 times and 4.5 times in the fourth quarter of fiscal year 2021 and 2020, respectively.

Throughout the current fiscal year, inventory turnover ranged from 5.1 to 6.3 times.

Cash provided by investing activities was $32.0 million in fiscal year June 30, 2021.

Cash used in investing activities was $55.3 million for the year ended June 30, 2020.

Cash provided by investing activities is primarily attributable to cash received for the disposal of our Latin American and Europe entities.

In fiscal year 2020, cash used in investing activities is primarily attributable to cash used to purchase intY.

Cash used in financing activities totaled to $118.8 million and $152.7 million for the fiscal years ended June 30, 2021 and 2020, respectively.

For fiscal years 2021 and 2020, cash used in financing activities is primarily attributable to net debt repayments and contingent consideration payments.

Cash used in investing activities was $3.7 million in fiscal year June 30, 2022, as compared to cash provided by investing activities of $32.0 million for the year ended June 30, 2021.

Cash used in investing activities for fiscal year 2020 was $55.3 million.

Cash used in investing activities for fiscal year 2022 represents capital expenditures, partially offset by proceeds from

Index to Financial Statements

the sale of our discontinued operations.

Cash provided by investing activities for fiscal year 2021 is primarily attributable to cash received for the disposal of our Latin American and Europe entities.

Cash used in investing activities for fiscal year 2020 is primarily attributable to cash used to purchase intY.

Management expects capital expenditures for fiscal year 2023 to range from $6.5 million to $8.5 million, primarily for IT investments and facility improvements.

Cash provided by financing activities totaled $108.1 million for the fiscal year ended June 30, 2022, primarily from net borrowings on the revolving line of credit, partially offset by our stock repurchases.

Cash used in financing activities totaled $118.8 million and $152.7 million for the fiscal years ended June 30, 2021 and 2020, primarily from net repayments on the revolving line of credit.

Share Repurchase Program

In August 2016, the Board of Directors authorized a three year $120 million share repurchase program.

The share repurchase program expired in August 2019.

Since the inception of the program, we repurchased 1.1 million shares totaling $35.9 million, of which 0.2 million totaling $5.4 million were repurchased during the year ended June 30, 2020.

In August 2021, our Board of Directors authorized a $100 million share repurchase program.

The authorization does not have any time limit.

Since the inception of the program, in fiscal year 2022, we repurchased 550,194 shares totaling $18.2 million.

Credit Facility

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On April 30, 2019, we amended this credit facility to expand the borrowing capacity and extend its maturity to April 30, 2024.

On December 23, 2021, we entered into an amendment to the Amended Credit Agreement which, among other things, replaced LIBOR as the benchmark rate for non-U.S.

Dollar loans and provided for an interpolated rate for 7-day LIBOR for U.S.

Dollar loans.

The Amended Credit Agreement includes (i) a five-year $350 million multi-currency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility.

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We were in compliance with all covenants under the credit facility as of June 30, 2022.

Including borrowings for both continuing and discontinued operations, there was $0.0 million and $92.4 million outstanding on the revolving credit facility at June 30, 2021 and 2020, respectively.

There was $135.8 million and $0.0 million outstanding on the revolving credit facility at June 30, 2022 and 2021, respectively.

The average daily balance on the revolving credit facility, excluding the term loan facility, was $69.0 million for the year ended June 30, 2022.

Including borrowings for both continuing and discontinued operations, the average daily balance on the revolving credit facility, excluding the term loan facility was $54.6 million for the year ended 2021.

There were no letters of credit issued as of June 30, 2022 and 2021.

There was $214.2 million and $350.0 million available for additional borrowings as of June 30, 2022 and 2021, respectively.

Index to Financial Statements

Including borrowings for both continuing and discontinued operations, the average daily balance on the revolving credit facility, excluding the term loan facility, was $54.6 million and $235.4 million for the years ended June 30, 2021 and 2020, respectively.

There were no letters of credit issued as of June 30, 2021.

There were letters of credit issued under the multi-currency revolving credit facility for the discontinued operations of $0.3 million as of June 30, 2020.

Taking into consideration outstanding borrowings on the multi-currency revolving credit facility for both continuing and discontinued operations, there was $350.0 million and $257.3 million available for additional borrowings as of June 30, 2021 and 2020, respectively.

Availability to use this borrowing capacity depends upon, among other things, the levels of our Leverage Ratio and Interest Coverage Ratio, which, in turn, will depend upon (1) our Credit Facility Net Debt relative to our EBITDA, and (2) Credit Facility EBITDA relative to total interest expense respectively.

relative to our EBITDA and (2) Credit Facility EBITDA relative to total interest expense respectively.

As a result, our availability will increase if EBITDA increases (subject to the limit of the facility) and decrease if EBITDA decreases.

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In fiscal year 2021, we paid the final earnout payment to the former shareholders of Intelisys related to their acquisition on August 29, 2016.

See Note 11 - Fair Value of Financial Instruments for a discussion on the liabilities recorded.

We paid the final earnout payment to the former shareholders of Network1 in fiscal year 2019.

We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet our present and future working capital and cash requirements for at least the next twelve months.

At June 30, 2021, we had contractual obligations in the form of non-cancelable operating leases, a capital lease (including interest payments), and debt (including interest payments).

See Notes 9 and 15 of the Notes to the Consolidated Financial Statements.

The following table summarizes our future contractual obligations:

Payments Due by Period

Total Year 1 Years 2-3 Years 4-5 Greater than

(in thousands)

Contractual Obligations

Non-cancelable operating leases (1)

$ 20,834 $ 5,040 $ 8,838 $ 5,977 $ 979

Capital lease 1,456 1,228 229 — —

Principal debt payments 143,174 7,843 131,950 718 2,663

Total obligations $ 165,464 $ 14,111 $ 141,017 $ 6,695 $ 3,642

(1) Amounts to be paid in future periods for real estate taxes, insurance and other operating expenses applicable to the properties pursuant to the respective operating leases have been excluded from the table above as the amounts payable in future periods are generally not specified in the lease agreements and are dependent upon amounts which are not known at this time.

Such amounts were not material in the current fiscal year.

At June 30, 2022, we had $135.8 million outstanding under our revolving credit facility.

We also had $135.3 million outstanding under our term loan facility, $11.25 million of which matures in fiscal year 2023.

Our revolving credit facility and our term loan facility have an April 30, 2024 maturity date.

The remaining principal debt payments, which total $4.1 million, have maturity dates in 2024 through 2032.

See Footnote 9 - Short Term Borrowings and Long Term Debt .

We also had a non-cancelable operating lease agreement of $17.6 million at June 30, 2022, of which $5.2 million is expected to be paid within the next 12 months.

Remaining amounts are expected to be paid through 2028.

See Footnote 15 - Leases .

We also believe that our longer-term working capital, planned expenditures and other general funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities.

Index to Financial Statements

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis