What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2024-02-06 · 150 added, 116 removed, 505 unchanged (35% of the section changed)

4 unchanged sentences

(In thousands, except share information)

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

Current assets:

Cash and cash equivalents $ 159,050 $ 36,178

Accounts receivable, less allowance of $ 19,243 at December 31, 2023

Accounts receivable, less allowance of $ 19,566 at March 31, 2024

and $ 15,480 at June 30, 2023

26 unchanged sentences

Common stock, no par value;

45,000,000 shares authorized, 25,154,469 and 24,844,203 shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively

45,000,000 shares authorized, 24,708,808 and 24,844,203 shares issued and outstanding at March 31, 2024 and June 30, 2023, respectively

46,426 58,241

9 unchanged sentences

(In thousands, except per share data)

Quarter ended Six months ended

December 31, December 31,

Quarter ended Nine months ended

March 31, March 31,

2024 2023 2024 2023

5 unchanged sentences

Intangible amortization expense 3,752 4,170 11,982 12,561

Restructuring expense 3,923 — 3,923 —

Operating income 17,542 34,279 68,454 108,598

16 unchanged sentences

(In thousands)

Quarter ended Six months ended

December 31, December 31,

Quarter ended Nine months ended

March 31, March 31,

2024 2023 2024 2023

Net income $ 12,806 $ 21,221 $ 60,964 $ 70,997

Unrealized (loss) gain on hedged transaction, net of tax ( 1,547 ) 3 ( 1,395 ) 1,882

Unrealized gain (loss) on hedged transaction, net of tax 148 ( 1,165 ) ( 1,246 ) 718

Realized foreign currency gain on sale of business — — 3,805 —

25 unchanged sentences

Balance at December 31, 2023 25,154,469 $ 63,983 $ 984,836 $ ( 95,218 ) $ 953,601

Net income — — 12,806 — 12,806

Unrealized gain on hedged transaction, net of tax — — — 148 148

Foreign currency translation adjustment — — — ( 4,947 ) ( 4,947 )

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 24,220 180 — — 180

Common stock repurchased ( 469,881 ) ( 20,117 ) — — ( 20,117 )

Share-based compensation — 2,380 — — 2,380

Balance at March 31, 2024 24,708,808 $ 46,426 $ 997,642 $ ( 100,017 ) $ 944,051

See accompanying notes to these condensed consolidated financial statements.

20 unchanged sentences

Balance at December 31, 2022 25,343,014 $ 68,313 $ 896,645 $ ( 102,572 ) $ 862,386

Net income — — 21,221 — 21,221

Unrealized loss on hedged transaction, net of tax — — — ( 1,165 ) ( 1,165 )

Foreign currency translation adjustment — — — 4,291 4,291

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 20,851 118 — — 118

Common stock repurchased ( 356,469 ) ( 10,906 ) — — ( 10,906 )

Share-based compensation — 2,950 — — 2,950

Balance at March 31, 2023 25,007,396 $ 60,475 $ 917,866 $ ( 99,446 ) $ 878,895

See accompanying notes to these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Six months ended

Nine months ended

Cash flows from operating activities:

32 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 788 ) 879

Increase in cash and cash equivalents 8,809 28,458

Increase (decrease) in cash and cash equivalents 122,872 ( 613 )

Cash and cash equivalents at beginning of period 36,178 37,987

9 unchanged sentences

The Company brings technology solutions and services from the world’s leading suppliers of mobility and barcode, point-of-sale ("POS"), payments, networking, physical security, unified communications and collaboration, telecom and cloud services to market.

The Company operates in the United States, Canada, Brazil and the United Kingdom ("UK").

The Company's two operating segments, Specialty Technology Solutions and Modern Communications & Cloud, are based on technology type and are generally related to technology devices and communication, connectivity and cloud services, respectively.

The Company operates primarily in the United States, Canada and Brazil.

The Company's two operating segments, Specialty Technology Solutions and Modern Communications & Cloud, are based on technology type and are generally related to (i) technology devices and (ii) communication, connectivity and cloud services, respectively.

Some of the offerings of our major suppliers include products that blend technologies and include both technology devices and communication and connectivity and cloud services products.

We assign all of the offerings of those suppliers' products to the same segment based on which technology predominates the offering.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared by the Company’s management in accordance with United States generally accepted accounting principles ("U.S.

GAAP") for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934.

GAAP") for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Accordingly, they do not include all of the information and footnotes required by U.S.

GAAP for annual financial statements.

The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of normal recurring and non-recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position at December 31, 2023 and June 30, 2023, the results of operations for the quarters and six months ended December 31, 2023 and 2022, the condensed consolidated statements of comprehensive income for the quarters and six months ended December 31, 2023 and 2022, the condensed consolidated statements of shareholders' equity for the quarters and six months ended December 31, 2023 and 2022 and the condensed consolidated statements of cash flows for the six months ended December 31, 2023 and 2022.

The results of operations for the quarter and six months ended December 31, 2023 are not necessarily indicative of the results to be expected for a full year.

The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of normal recurring and non-recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position at March 31, 2024 and June 30, 2023, the results of operations for the quarters and nine months ended March 31, 2024 and 2023, the condensed consolidated statements of comprehensive income for the quarters and nine months ended March 31, 2024 and 2023, the condensed consolidated statements of shareholders' equity for the quarters and nine months ended March 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the nine months ended March 31, 2024 and 2023.

The results of operations for the quarter and nine months ended March 31, 2024 are not necessarily indicative of the results to be expected for a full year.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Unless otherwise indicated, disclosures provided in the Notes pertain to continuing operations only.

Unless otherwise indicated, disclosures provided in the notes to the Company's consolidated financial statements pertain to continuing operations only.

Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies for the six months ended December 31, 2023 from the policies described in the notes to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

There have been no material changes to the Company’s significant accounting policies for the nine months ended March 31, 2024 from the policies described in the notes to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

For a discussion of the Company’s significant accounting policies, please see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

3 unchanged sentences

Due to the terms of the agreements governing these accounts, the Company generally does not have the right to offset outstanding checks written from these accounts against cash on hand, and the respective institutions are not legally obligated to honor the checks until sufficient funds are transferred to fund the checks.

As a result, checks released but not yet cleared from these accounts in the amount of $ 8.0 million are included in accounts payable on the condensed consolidated balance sheets at December 31, 2023 and June 30, 2023.

As a result, checks released but not yet cleared from these accounts in the amount of $ 0.2 million and $ 8.0 million are included in accounts payable on the condensed consolidated balance sheets at March 31, 2024 and June 30, 2023, respectively.

Long-lived Assets

The Company presents depreciation expense and intangible amortization expense on the condensed consolidated income statements.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 3.0 million and $ 5.8 million for the quarter and six months ended December 31, 2023 and $ 2.7 million and $ 5.4 million for the quarter and six months ended December 31, 2022.

Depreciation expense reported as part of cost of goods sold on the condensed consolidated income statements totaled $ 0.3 million and $ 0.5 million for the quarter and six months ended December 31, 2023 and $ 0.2 million and $ 0.5 million for the quarter and six months ended December 31, 2022.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 2.7 million and $ 8.4 million for the quarter and nine months ended March 31, 2024 and $ 2.6 million and $ 8.1 million for the quarter and nine months ended March 31, 2023.

Depreciation expense reported as part of cost of goods sold on the condensed consolidated income statements totaled $ 0.3 million and $ 0.8 million for the quarter and nine months ended March 31, 2024 and $ 0.3 million and $ 0.7 million for the quarter and nine months ended March 31, 2023.

The Company's intangible amortization expense reported on the condensed consolidated income statements relates to selling, general and administrative costs, not the cost of selling goods.

Intangible amortization expense totaled $ 4.0 million and $ 8.2 million for the quarter and six months ended December 31, 2023 and $ 4.2 million and $ 8.4 million for the quarter and six months ended December 31, 2022.

Intangible amortization expense totaled $ 3.8 million and $ 12.0 million for the quarter and nine months ended March 31, 2024 and $ 4.2 million and $ 12.6 million for the quarter and nine months ended March 31, 2023.

Recent Accounting Pronouncements

In July 2023, the Securities and Exchange Commission issued final rules that require new and enhanced disclosures on cybersecurity risk management, strategy, governance, and incident reporting.

Under the final rules, companies must report material cybersecurity incidents within four business days of determining the incident is material on Form 8-K.

As additional information about the material aspects of the previously reported incidents become available, a Form 8-K/A must be filed with the additional disclosures.

Under the final rules, companies must report a material cybersecurity incident on Form 8-K within four business days of determining that such cybersecurity incident is material.

To the extent the nature, scope, timing or the impact of the incident is not determinable at the time such Form 8-K is required to be filed, additional information about the material aspects of the cybersecurity incident must be filed on a Form 8-K/A within four business days after such additional information becomes available.

These disclosure requirements on Form 8-K were effective beginning December 18, 2023.

20 unchanged sentences

Estimates of expected credit losses on trade receivables over the contractual life are recorded at inception and adjusted over the contractual life.

The changes in the allowance for doubtful accounts for the six months ended December 31, 2023 are set forth in the table below.

The changes in the allowance for doubtful accounts for the nine months ended March 31, 2024 are set forth in the table below.

June 30, 2023 Amounts Charged to Expense Write-offs Other (1)

December 31, 2023

March 31, 2024

(in thousands)

Trade accounts and current notes receivable allowance $ 15,480 $ 5,863 $ ( 1,975 ) $ 198 $ 19,566

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the six months ended December 31, 2023.

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the nine months ended March 31, 2024.

(3) Revenue Recognition

The Company provides technology solutions and services from the world's leading suppliers of mobility, barcode, POS, payments, physical security, unified communications, collaboration, telecom and cloud services.

The Company provides technology solutions and services from the leading global suppliers of mobility, barcode, POS, payments, physical security, unified communications, collaboration, telecom and cloud services.

This includes hardware, related accessories and device configuration as well as software licenses, professional services and hardware support programs.

28 unchanged sentences

The following tables represent the Company's disaggregation of revenue:

Quarter ended December 31, 2023

Quarter ended March 31, 2024

Specialty Technology Solutions Modern Communications & Cloud Total

4 unchanged sentences

$ 483,704 $ 268,895 $ 752,599

Six months ended December 31, 2023

Nine months ended March 31, 2024

Specialty Technology Solutions Modern Communications & Cloud Total

4 unchanged sentences

$ 1,513,926 $ 999,770 $ 2,513,696

Quarter ended December 31, 2022

Quarter ended March 31, 2023

Specialty Technology Solutions Modern Communications & Cloud Total

4 unchanged sentences

$ 565,652 $ 319,867 $ 885,519

Six months ended December 31, 2022

Nine months ended March 31, 2023

Specialty Technology Solutions Modern Communications & Cloud Total

7 unchanged sentences

Diluted earnings per share are computed by dividing net income by the weighted-average number of common and potential common shares outstanding.

Quarter ended Six months ended

December 31, December 31,

Quarter ended Nine months ended

March 31, March 31,

2024 2023 2024 2023

6 unchanged sentences

Net income per common share, diluted $ 0.50 $ 0.83 $ 2.41 $ 2.79

For the quarter and six months ended December 31, 2023, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 563,690 and 931,367 , respectively.

For the quarter and six months ended December 31, 2022, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 847,651 and 1,268,455 , respectively.

For the quarter and nine months ended March 31, 2024, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 164,093 and 755,797 , respectively.

For the quarter and nine months ended March 31, 2023, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 779,688 and 1,152,714 , respectively.

(5) Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax are as follows:

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

(in thousands)

2 unchanged sentences

Accumulated other comprehensive loss $ ( 100,017 ) $ ( 89,621 )

The tax effect of amounts in comprehensive loss reflect a tax (benefit) expense as follows:

Quarter ended December 31, Six months ended December 31,

The tax effect of amounts in comprehensive loss reflect a tax expense (benefit) as follows:

Quarter ended March 31, Nine months ended March 31,

2024 2023 2024 2023

(in thousands)

Tax (benefit) expense $ ( 637 ) $ 166 $ ( 692 ) $ 580

Tax expense (benefit) $ 136 $ ( 354 ) $ ( 555 ) $ 225

(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the six months ended December 31, 2023, by reporting segment, are set forth in the table below.

The changes in the carrying amount of goodwill for the nine months ended March 31, 2024, by reporting segment, are set forth in the table below.

Specialty Technology Solutions Modern Communications & Cloud Total

3 unchanged sentences

Foreign currency translation adjustment — ( 551 ) ( 551 )

Balance at December 31, 2023 $ 16,370 $ 191,844 $ 208,214

The following table shows changes in the amount recognized for net identifiable intangible assets for the six months ended December 31, 2023.

Balance at March 31, 2024 $ 16,370 $ 191,246 $ 207,616

The following table shows changes in the amount recognized for net identifiable intangible assets for the nine months ended March 31, 2024.

Net Identifiable Intangible Assets

4 unchanged sentences

Foreign currency translation adjustment ( 76 )

Balance at December 31, 2023 $ 45,313

Balance at March 31, 2024 $ 41,510

(7) Short-Term Borrowings and Long-Term Debt

The following table presents the Company’s debt at December 31, 2023 and June 30, 2023.

December 31, 2023 June 30, 2023

The following table presents the Company’s debt at March 31, 2024 and June 30, 2023.

March 31, 2024 June 30, 2023

(in thousands)

5 unchanged sentences

Credit Facility

The Company has a multi-currency senior secured credit facility (as amended, the "Amended Credit Agreement") with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks (collectively the "Lenders").

The Company has a multi-currency senior secured credit facility (as amended, the "Amended Credit Agreement") with JPMorgan Chase Bank N.A., as administrative agent (the "Administrative Agent"), and a syndicate of banks (collectively the "Lenders").

On September 28, 2022, the Company amended and restated the Amended Credit Agreement, which includes (i) a five-year , $ 350 million multicurrency senior secured revolving credit facility and (ii) a five-year $ 150 million senior secured term loan facility.

The Amended Credit Agreement extended the credit facility maturity date to September 28, 2027.

In addition, pursuant to an “accordion feature,” the Company may increase its borrowings up to an additional $ 250 million, subject to obtaining additional credit commitments from the lenders participating in the increase.

In addition, pursuant to an “accordion feature,” the Company may increase its borrowing limit by up to an additional $ 250 million, subject to obtaining additional credit commitments from the lenders participating in the increase.

The Amended Credit Agreement allows for the issuance of up to $ 50 million for letters of credit.

Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and its domestic subsidiaries.

Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic subsidiaries of the Company and secured by their assets.

Under the terms of the revolving credit facility, the payment of cash dividends is restricted.

8 unchanged sentences

Loans denominated in foreign currencies bear interest at a rate per annum equal to the applicable benchmark rate set forth in the Amended Credit Agreement plus an additional margin ranging from 1.00 % to 1.75 %, depending upon the Company’s leverage ratio plus, if applicable, certain mandatory costs.

During the quarter and six months ended December 31, 2023, the Company's borrowings under the credit facility were U.S.

During the quarter and nine months ended March 31, 2024, all of the Company's borrowings under the Amended Credit Agreement were U.S.

dollar loans.

The spread in effect as of December 31, 2023 was 1.25 %, plus a 0.10 % credit spread adjustment for SOFR-based loans and 0.25 % for alternate base rate loans.

The commitment fee rate in effect at December 31, 2023 was 0.20 %.

Amended Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants.

The spread in effect as of March 31, 2024 was 1.25 %, plus a 0.10 % credit spread adjustment

for SOFR-based loans and 0.25 % for alternate base rate loans.

The commitment fee rate in effect at March 31, 2024 was 0.20 %.

The Amended Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants.

Specifically, the Company’s Leverage Ratio must be less than or equal to 3.50 to 1.00 at all times.

1 unchanged sentence

In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates.

The Company was in compliance with all covenants under the credit facility at December 31, 2023.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the six month periods ended December 31, 2023 and 2022 was $ 138.7 million an d $ 219.5 million, respectively.

There was $ 329.1 million and $ 171.0 million available for additional borrowings as of December 31, 2023 and June 30, 2023, respectively.

The effective interest rates for the revolving line of credit were 6.70 % and 6.74 % as of December 31, 2023 and June 30, 2023, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at December 31, 2023 or June 30, 2023.

The Company was in compliance with all covenants under the Amended Credit Agreement at March 31, 2024.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine month periods ended March 31, 2024 and 2023 was $ 94.6 million an d $ 227.2 million, respectively.

There was $ 350.0 million and $ 171.0 million available for additional borrowings as of March 31, 2024 and June 30, 2023, respectively.

The effective interest rates for the revolving line of credit were 6.68 % and 6.74 % as of March 31, 2024 and June 30, 2023, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at March 31, 2024 or June 30, 2023.

Mississippi Revenue Bond

2 unchanged sentences

The bond accrues interest at the one-month term SOFR plus an adjustment of 0.10 % plus a spread of 0.85 %.

The terms of the bond allow for payment of interest only for the first 10 years of the agreement.

Starting on September 1, 2018 through 2032, principal and interest payments are due until the maturity date or the redemption of the bond.

The agreement also provides the bondholder with a put option, exercisable only within 180 days of each fifth anniversary of the agreement, requiring the Company to pay back the bonds at 100 % of the principal amount outstanding.

At December 31, 2023, the Company was in compliance with all covenants under this bond.

The interest rates at December 31, 2023 and June 30, 2023 were 6.29 % and 6.11 %, respectively.

At March 31, 2024, the Company was in compliance with all covenants under this bond.

The interest rates at March 31, 2024 and June 30, 2023 were 6.28 % and 6.11 %, respectively.

Debt Issuance Costs

At December 31, 2023, net debt issuance costs associated with the credit facility and bond totaled $ 1.4 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

At March 31, 2024, net debt issuance costs associated with the credit facility and bond totaled $ 1.3 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

(8) Derivatives and Hedging Activities

8 unchanged sentences

dollar, Brazilian real, euro, British pound and Canadian dollar.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 27.3 million and $ 34.3 million for the exchange of foreign currencies at December 31, 2023 and June 30, 2023, respectively.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 27.7 million and $ 34.3 million for the exchange of foreign currencies at March 31, 2024 and June 30, 2023, respectively.

To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense.

Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters and six months ended December 31, 2023 and 2022 are as follows:

Quarter ended Six months ended

December 31, December 31,

Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters and nine months ended March 31, 2024 and 2023 are as follows:

Quarter ended Nine months ended

March 31, March 31,

2024 2023 2024 2023

(in thousands)

Net foreign exchange derivative contract losses $ 1,025 $ 871 $ 658 $ 1,309

Net foreign currency transactional and re-measurement (gains) losses ( 596 ) ( 524 ) 466 ( 39 )

Net foreign exchange derivative contract (gains) losses $ ( 526 ) $ 564 $ 132 $ 1,873

Net foreign currency transactional and re-measurement losses (gains) 1,034 ( 59 ) 1,500 ( 98 )

Net foreign currency exchange losses $ 508 $ 505 $ 1,632 $ 1,775

6 unchanged sentences

On April 30, 2019, the Company entered into an interest rate swap agreement to lock into a fixed LIBOR interest rate, which was amended on September 28, 2022, to change the reference rate from LIBOR to SOFR.

The swap agreement has a notional amount of $ 100.0 million, with a $ 50.0 million tranche scheduled to mature on April 30, 2024 and a $ 50.0 million tranche scheduled to mature April 30, 2026.

The swap agreement has a notional amount of $ 100.0 million, with a $ 50.0 million tranche that matured on April 30, 2024 and a $ 50.0 million tranche scheduled to mature April 30, 2026.

On March 31, 2023, the Company entered into an interest rate swap agreement to lock into a fixed SOFR interest rate with a notional amount of $ 25 million and a maturity date of March 31, 2028.

2 unchanged sentences

To the extent the swaps are effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in current earnings but are reported as other comprehensive income (loss).

There was no ineffective portion to be recorded as an adjustment to earnings for the quarters and six months ended December 31, 2023 and 2022.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters and six months ended December 31, 2023 and 2022, are as follows:

Quarter ended Six months ended

December 31, December 31,

There was no ineffective portion to be recorded as an adjustment to earnings for the quarters and nine months ended March 31, 2024 and 2023.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters and nine months ended March 31, 2024 and 2023, are as follows:

Quarter ended Nine months ended

March 31, March 31,

2024 2023 2024 2023

1 unchanged sentence

Net interest income recognized as a result of interest rate swap $ ( 895 ) $ ( 556 ) $ ( 2,676 ) $ ( 869 )

Unrealized (loss) gain in fair value of interest rate swap ( 1,165 ) 349 ( 72 ) 2,847

Net (decrease) increase in accumulated other comprehensive income ( 2,068 ) 4 ( 1,853 ) 2,534

Unrealized gain (loss) in fair value of interest rate swap 1,093 ( 1,013 ) 1,021 1,837

Net increase (decrease) in accumulated other comprehensive income 198 ( 1,569 ) ( 1,655 ) 968

Income tax effect 50 ( 404 ) ( 409 ) 250

Net (decrease) increase in accumulated other comprehensive income, net of tax $ ( 1,547 ) $ 3 $ ( 1,395 ) $ 1,882

The Company used the following derivative instruments at December 31, 2023 and June 30, 2023, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

December 31, 2023 June 30, 2023

Net increase (decrease) in accumulated other comprehensive income, net of tax $ 148 $ ( 1,165 ) $ ( 1,246 ) $ 718

The Company used the following derivative instruments at March 31, 2024 and June 30, 2023, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

March 31, 2024 June 30, 2023

Balance Sheet Location Fair Value of

18 unchanged sentences

The carrying value of debt is considered to approximate fair value, as the Company’s debt instruments are indexed to a variable rate using the market approach (Level 2).

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at December 31, 2023:

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at March 31, 2024:

(Level 1) Significant

27 unchanged sentences

Specialty Technology Solutions Segment

The Specialty Technology Solutions segment includes the Company’s business in mobility and barcode, POS, payments, security and networking technologies.

Mobility and barcode solutions include mobile computing, barcode scanners and imagers, radio frequency identification devices, barcode printing and related services.

POS and payments solutions include POS systems, integrated POS software platforms, self-service kiosks including self-checkout, payment terminals and mobile payment devices.

Security solutions include video surveillance and analytics, video management software and access control.

Networking solutions include switching, routing and wireless products and software.

The Company has business operations within this segment in the United States, Canada and Brazil.

The Specialty Technology Solutions segment includes the Company’s business in mobility and barcode, POS, payments, security and networking technologies as summarized below:

• Mobility and barcode solutions - mobile computing, barcode scanners and imagers, radio frequency identification devices, barcode printing and related services

• POS and payments solutions - POS systems, integrated POS software platforms, self-service kiosks including self-checkout, payment terminals and mobile payment devices

• Security solutions - video surveillance and analytics, video management software and access control

• Networking solutions - switching, routing and wireless products and software

The Company primarily has business operations within this segment in the United States, Canada and Brazil.

Modern Communications & Cloud Segment

1 unchanged sentence

Communications and collaboration solutions, delivered in the cloud, on-premise or hybrid, include voice, video, integration of communication platforms and contact center solutions.

The Intelisys connectivity and cloud marketplace offers telecom, cable, Unified Communications as a Service (“UCaaS”), Contact Center as a Service (“CCaaS”), Infrastructure as a Service, Software-Defined Wide-Area Network and other cloud services.

The Intelisys connectivity and cloud services include telecom, cable, Unified Communications as a Service, Contact Center as a Service, Infrastructure as a Service, Software-Defined Wide-Area Network and other cloud services.

This segment includes SaaS and subscription services, which the Company offers using digital tools and platforms.

The Company has business operations within this segment in the United States, Canada, Brazil and the UK.

The Company's business operations within this segment primarily are in the United States, Canada and Brazil.

Selected financial information for each business segment is presented below:

Quarter ended Six months ended

December 31, December 31,

Quarter ended Nine months ended

March 31, March 31,

2024 2023 2024 2023

22 unchanged sentences

$ 752,599 $ 885,519 $ 2,513,696 $ 2,840,573

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

(in thousands)

8 unchanged sentences

In accordance with Accounting Standards Codification ("ASC") 842, at contract inception the Company determines if a contract contains a lease by assessing whether the contract contains an identified asset and whether the Company has the ability to control the asset.

The Company also determines if the lease meets the classification criteria for an operating lease versus a finance lease under ASC 842.

The Company also determines if the lease meets the classification criteria for an operating lease versus a

finance lease under ASC 842.

Substantially all of the Company's leases are operating leases for real estate, warehouse and office equipment ranging in duration from 1 year to 10 years.

The Company has elected not to record short-term operating

leases with an initial term of 12 months or less on the Condensed Consolidated Balance Sheets.

The Company has elected not to record short-term operating leases with an initial term of 12 months or less on the Condensed Consolidated Balance Sheets.

Operating leases are recorded as other non-current assets, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets.

1 unchanged sentence

Finance leases are recorded as property and equipment, net , accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets.

The gross amount of the balances recorded related to finance leases is immaterial to the condensed consolidated financial statements at December 31, 2023 and the consolidated financial statements at June 30, 2023.

The gross amount of the balances recorded related to finance leases is immaterial to the condensed consolidated financial statements at March 31, 2024 and the consolidated financial statements at June 30, 2023.

Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the net present value of future minimum lease payments over the lease term.

5 unchanged sentences

Further, the Company has elected the practical expedient to recognize all lease and non-lease components as a single lease component, where applicable.

The following table presents amounts recorded on the Condensed Consolidated Balance Sheets related to operating leases at December 31, 2023 and June 30, 2023:

December 31, 2023 June 30, 2023

The following table presents amounts recorded on the Condensed Consolidated Balance Sheets related to operating leases at March 31, 2024 and June 30, 2023:

March 31, 2024 June 30, 2023

Operating leases Balance Sheet location (in thousands)

2 unchanged sentences

Long-term operating lease liabilities Other long-term liabilities $ 7,440 $ 9,329

The following table presents amounts recorded in operating lease expense as part of selling general and administrative expenses on the Condensed Consolidated Income Statements during the quarters and six months ended December 31, 2023 and 2022.

Operating lease costs contain immaterial amounts of short-term lease costs for leases with an initial term of 12 months or less.

Quarter ended December 31, Six months ended December 31,

Quarter ended March 31, Nine months ended March 31,

2024 2023 2024 2023

3 unchanged sentences

$ 1,507 $ 1,715 $ 4,855 $ 5,054

Supplemental cash flow information related to the Company's operating leases for the six months ended December 31, 2023 and 2022 are presented in the table below:

Six months ended

Supplemental cash flow information related to the Company's operating leases for the nine months ended March 31, 2024 and 2023 are presented in the table below:

Nine months ended

(in thousands)

1 unchanged sentence

Right-of-use assets obtained in exchange for lease obligations 840 746

The weighted-average remaining lease term and discount rate at December 31, 2023 are presented in the table below:

December 31, 2023

The weighted-average remaining lease term and discount rate at March 31, 2024 are presented in the table below:

March 31, 2024

Weighted-average remaining lease term 3.2 years

Weighted-average discount rate 5.00 %

The following table presents the maturities of the Company's operating lease liabilities at December 31, 2023:

The following table presents the maturities of the Company's operating lease liabilities at March 31, 2024:

Operating leases

(in thousands)

Thereafter 523

Total future payments 13,823

4 unchanged sentences

Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

During the Company's due diligence for the Network1 acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures.

During the Company's due diligence for the Network1 acquisition completed in 2016, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures.

The Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition.

The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was $ 3.6 million and $ 3.4 million at December 31, 2023 and June 30, 2023.

The table below summarizes the balances and line item presentation of Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's Condensed Consolidated Balance Sheets at December 31, 2023 and June 30, 2023:

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

(in thousands)

4 unchanged sentences

(13) Income Taxes

Income taxes for the quarters and six months ended December 31, 2023 and 2022 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate.

Income taxes for the quarters and nine months ended March 31, 2024 and 2023 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate.

In addition to applying the estimated annual effective tax rate to pre-tax income, the Company includes certain items treated as discrete events to arrive at an estimated overall tax provision.

During the quarter ended December 31, 2023, a discrete net tax benefit of $ 3.8 million was recorded, which is primarily attributable to the sale of UK-based intY.

The Company’s effective tax rate of 18.3 % and 18.6 % for the quarter and six months ended December 31, 2023, differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, discrete items, nondeductible expenses and state income taxes.

The Company's effective tax rates were 28.9 % and 27.3 % for the quarter and six months ended December 31, 2022.

As of December 31, 2023, the Company is not permanently reinvested with respect to all earnings generated by foreign operations.

During the quarter ended March 31, 2024, a discrete net tax benefit of $ 1.5 million was recorded, which is attributable to an income tax recovery in Brazil related to a prior period.

The Company’s effective tax rate of 28.7 % and 21.0 % for the quarter and nine months ended March 31, 2024, differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, discrete items, nondeductible expenses and state income taxes.

The Company's effective tax rates were 29.1 % and 27.8 % for the quarter and nine months ended March 31, 2023.

As of March 31, 2024, the Company is not permanently reinvested with respect to all earnings generated by foreign operations.

The Company has determined that there is no material deferred tax liability for federal, state and withholding tax related to undistributed earnings.

During the six months ended December 31, 2023, foreign subsidiaries did not repatriate cash to the United States.

During the nine months ended March 31, 2024, foreign subsidiaries did not repatriate cash to the United States.

There is no certainty to the timing of any future distributions of such earnings to the U.S.

in whole or in part.

The Company had approximately $ 1.2 million of total gross unrecognized tax benefits at December 31, 2023 and June 30, 2023.

Of this total at December 31, 2023, approximately $ 1.0 million represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.

The Company had approximately $ 1.2 million of total gross unrecognized tax benefits at March 31, 2024 and June 30, 2023.

Of this total at March 31, 2024, approximately $ 1.0 million represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.

The Company does not believe that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

At December 31, 2023 and June 30, 2023, the Company had approximately $ 1.2 million accrued for interest and penalties.

At March 31, 2024 and June 30, 2023, the Company had approximately $ 1.2 million accrued for interest and penalties.

The Company conducts business globally and one or more of its subsidiaries files income tax returns in the U.S.

9 unchanged sentences

The impact of this sale was not material to the consolidated financial statements.

(15) Restructuring

In January 2024, as part of a strategic review of organizational structure and operations, the Company executed a cost reduction and restructuring program to align our cost structure with demand expectations in our hardware business.

These actions are expected to result in approximately $ 10.0 million in annualized savings in selling, general and administrative expenses.

The following table presents the restructuring and employee separation costs incurred for the quarter and nine months ended March 31, 2024:

Quarter ended March 31, 2024 Nine months ended March 31, 2024

(in thousands)

Employee separation and benefit costs $ 3,923 $ 3,923

For the quarter and nine months ended March 31, 2024, all restructuring costs are recognized in the Corporate reporting unit and have not been allocated to the Specialty Technology Solutions or Modern Communications & Cloud segments.

Accrued restructuring costs are included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

The following table represents activity for the nine months ended March 31, 2024:

Accrued Expenses

(in thousands)

Balance at June 30, 2023 $ —

Charged to expense 3,923

Cash payments ( 1,125 )

Balance at March 31, 2024 $ 2,798

The remaining balance as of March 31, 2024 of $ 2.8 million is expected to be paid through the third quarter of fiscal year 2025.

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-Q

Item 1. Financial Statements