What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2024-02-06 · 147 added, 122 removed, 391 unchanged (41% of the section changed)

6 unchanged sentences

• Modern Communications & Cloud

We sell hardware, SaaS, connectivity and cloud services from leading technology suppliers to customers that solve end users' challenges.

We sell hardware, SaaS, connectivity and cloud services from leading technology suppliers to customers that are designed to solve end users' challenges.

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

3 unchanged sentences

Recent Developments

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.

On December 19, 2023 we completed the sale of our UK-based intY business.

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As a trusted adviser to our customers, we provide solutions through our strong understanding of end user needs.

We have plans to expand our investments in the Agency Channel in the near term.

Results of Operations

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

The following tables summarize our net sales results by business segment and by geographic location for the quarters and six months ended December 31, 2023 and 2022:

Quarter ended December 31, % Change, Constant Currency, Excluding Divestitures (a)

The following tables summarize our net sales results by business segment and by geographic location for the quarters and nine months ended March 31, 2024 and 2023:

Quarter ended March 31, % Change, Constant Currency, Excluding Divestitures (a)

Net Sales by Segment:

4 unchanged sentences

Total net sales $ 752,599 $ 885,519 $ (132,920) (15.0) % (15.2) %

Six months ended December 31, % Change, Constant Currency, Excluding Divestitures (a)

Nine months ended March 31, % Change, Constant Currency, Excluding Divestitures (a)

2024 2023 $ Change % Change

6 unchanged sentences

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

For the quarter and six months ended December 31, 2023, net sales decreased $106.9 million, or 17.0%, and $173.7 million, or 14.4%, respectively, compared to the prior-year period.

Excluding the foreign exchange positive impact, adjusted net sales decreased $107.8 million, or 17.2%, and $175.5 million, or 14.6%, for the quarter and six months ended December 31, 2023, compared to the prior-year period.

The decrease in net sales and adjusted net sales for the quarter and six-month period is primarily due to lower sales volumes in our mobility and barcoding business, partially offset by an increase in networking sales.

For the quarter and nine months ended March 31, 2024, net sales decreased $81.9 million, or 14.5%, and $255.6 million, or 14.4%, respectively, compared to the prior-year period.

Excluding the foreign exchange positive impact, adjusted net sales decreased $82.6 million , or 14.6%, and $258.0 million, or 14.6%, for the quarter and nine months ended March 31, 2024, respectively, compared to the prior-year period.

The decrease in net sales and adjusted net sales for the quarter is primarily due to lower sales volumes across technologies .

The decrease in net sales and adjusted net sales for the nine-month period is primarily due to lower sales volumes in our mobility and barcoding business, partially offset by an increase in networking sales.

Modern Communications & Cloud

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

For the quarter and six months ended December 31, 2023, net sales decreased $19.6 million, or 5.1%, and $20.3 million, or 2.7%, respectively, compared to the prior-year period.

Excluding the foreign exchange positive impact and the impact of divestitures, adjusted net sales decreased $23.3 million, or 6.1%, and $28.8 million, or 3.9%, for the quarter and six months ended December 31, 2023, compared to the prior-year period.

The decrease in net sales and adjusted net sales for the quarter and six month period is primarily due to lower sales volumes in o ur communications hardware, partially offset by growth in Cisco products.

Intelisys net billings increased to approximately $2.64 billion annualized.

Intelisys net sales for the quarter and six months ended December 31, 2023 increased 7.5% and 8.1%, respectively, year-over-year.

Quarter ended December 31, % Change, Constant Currency, Excluding Divestitures (a)

For the quarter and nine months ended March 31, 2024, net sales decreased $51.0 million, or 15.9%, and $71.3 million, or 6.7%, respectively, compared to the prior-year period.

Excluding the foreign exchange positive impact and the impact of divestitures, adjusted net sales decreased $51.6 million, or 16.3%, and $80.5 million, or 7.6%, for the quarter and nine months ended March 31, 2024, compared to the prior-year period.

The decrease in net sales and adjusted net sales for the quarter is primarily due to lower sales volumes in communications hardware and Cisco products.

The decrease in net sales and adjusted net sales for the nine month period is primarily due to lower sales volume in communications hardware products, partially offset by growth in Cisco products.

Net billings for Intelisys increased to approximately $2.68 billion annualized.

Intelisys net sales for the quarter and nine months ended March 31, 2024 increased 4.0% and 6.7%, respectively, year-over-year.

Quarter ended March 31, % Change, Constant Currency, Excluding Divestitures (a)

Net Sales by Geography:

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Total net sales $ 752,599 $ 885,519 $ (132,920) (15.0) % (15.2) %

Six months ended December 31, % Change, Constant Currency, Excluding Divestitures (a)

Nine months ended March 31, % Change, Constant Currency, Excluding Divestitures (a)

2024 2023 $ Change % Change

4 unchanged sentences

(a) A reconciliation of non-GAAP net sales in constant currency is presented at the end of Results of Operations in the non-GAAP section.

The following table summarizes our gross profit for the quarters and six months ended December 31, 2023 and 2022:

Quarter ended December 31, % of Net Sales December 31,

The following table summarizes our gross profit for the quarters and nine months ended March 31, 2024 and 2023:

Quarter ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

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Gross profit $ 94,481 $ 111,762 $ (17,281) (15.5) % 12.6 % 12.6 %

Six months ended December 31, % of Net Sales December 31,

Nine months ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

8 unchanged sentences

Specialty Technology Solutions

For the quarter ended December 31, 2023, gross profit dollars for the Specialty Technology Solutions segment declined $9.6 million, or 16.9%, compared to the prior-year quarter.

For the quarter ended March 31, 2024, gross profit dollars for the Specialty Technology Solutions segment declined $12.6 million, or 21.8%, compared to the prior-year quarter.

Lower sales volume, after considering the associated cost of goods sold, reduced gross profit dollars by $8.4 million.

Gross profit margin increased slightly quarter-over-quarter to 9.1% which positively impacted gross profit dollars by less than $0.1 million.

For the six months ended December 31, 2023, gross profit dollars decreased $18.8 million, or 16.3%, compared to the prior-year period.

Gross profit margin decreased 88 basis points quarter-over-quarter to 9.3%.

Gross margin mix negatively impacted gross profit by $4.2 million largely due to lower vendor program recognition.

For the nine months ended March 31, 2024, gross profit dollars decreased $31.4 million, or 18.2%, compared to the prior-year period.

Lower sales volume, after considering the associated cost of goods sold, reduced gross profit by $25.0 million.

Gross profit margin decreased 21 basis points year-over-year to 9.3%.

Gross margin mix negatively impacted gross profit by $2.2 million largely from lower vendor program recognition.

Gross profit margin decreased 4 3 basis points ye ar-over-year to 9.3%.

Gross margin mix negatively impacted gross profit by $6.4 million largely from lower vendor program recognition partially offset by lower freight costs.

Modern Communications & Cloud

For the quarter ended December 31, 2023, gross profit dollars for the Modern Communications & Cloud segment decreased $5.0 million, or 8.5%, compared to the prior-year quarter.

For the quarter ended March 31, 2024, gross profit dollars for the Modern Communications & Cloud segment decreased $4.7 million, or 8.7%, compared to the prior-year quarter.

Lower sales volume, after considering the associated cost of goods sold, reduced gross profit dollars by $8.6 million.

Gross profit margin decreased 55 basis points quarter-over-quarter to 14.7%.

Gross margin mix negatively impacted gross profit by $2.0 million largely from a less favorable sales mix.

For the six months ended December 31, 2023, gross profit dollars declined $2.7 million, or 2.4%, compared to the prior-year period.

Gross profit margin increased 146 basis points quarter-over-quarter to 18.4%.

Gross margin mix positively impacted gross profit by $3.9 million largely from a more favorable sales mix, partially offset by lower vendor program recognition.

For the nine months ended March 31, 2024, gross profit dollars declined $7.4 million, or 4.4%, compared to the prior-year period.

Lower sales volume, after considering the associated cost of goods sold, reduced gross profit dollars by $11.2 million.

Gross profit margin increased slightly year-over-year to 15.2% which positively impacted gross profit dollars by $0.3 million.

Gross profit margin increased 37 basis points year-over-year to 16.0%.

Gross margin mix positively impacted gross profit dollars by $3.7 million primarily from a reduction in freight costs.

Operating Expenses

The following table summarizes our operating expenses for the quarters and six months ended December 31, 2023 and 2022:

Quarter ended December 31, % of Net Sales December 31,

The following table summarizes our operating expenses for the quarters and nine months ended March 31, 2024 and 2023:

Quarter ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

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Intangible amortization expense 3,752 4,170 (418) (10.0) % 0.5 % 0.5 %

Restructuring and other charges 3,923 — 3,923 100.0 % 0.5 % 0.0 %

Operating expenses $ 76,939 $ 77,483 $ (544) (0.7) % 10.2 % 8.8 %

Six months ended December 31, % of Net Sales December 31,

Nine months ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

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Intangible amortization expense 11,982 12,561 (579) (4.6) % 0.5 % 0.4 %

Restructuring and other charges 3,923 — 3,923 100.0 % 0.2 % 0.0 %

Operating expenses $ 233,284 $ 231,983 $ 1,301 0.6 % 9.3 % 8.2 %

Selling, general and administrative expenses (“SG&A”) decreased by $2.2 million, or 3.1%, for the quarter ended December 31, 2023, compared to the prior-year period.

The decrease for the quarter ended December 31, 2023 is primarily attributable to lower employee costs for the quarter.

For the six months ended December 31, 2023, SG&A expenses increased by $1.7 million, or 1.2%, compared to the prior-year period.

The increase for the six months ended December 31, 2023 is primarily attributable to higher bad debt expense as a result of increases in specific customer reserves partially offset by lower employee costs.

Selling, general and administrative expenses (“SG&A”) decreased by $4.1 million, or 5.8%, for the quarter ended March 31, 2024, compared to the prior-year period.

The decrease for the quarter ended March 31, 2024 is primarily attributable to lower employee costs for the quarter.

For the nine months ended March 31, 2024, SG&A expenses decreased by $2.4 million, or 1.1%, compared to the prior-year period.

The decrease for the nine months ended March 31, 2024 is primarily attributable to lower employee costs, partially offset by higher bad debt expense as a result of increases in specific customer reserves.

Restructuring and other charges incurred of $3.9 million during the quarter ended March 31, 2024 related to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented in January 2024.

Operating Income

The following table summarizes our operating income for the quarters and six months ended December 31, 2023 and 2022:

Quarter ended December 31, % of Net Sales December 31,

The following table summarizes our operating income for the quarters and nine months ended March 31, 2024 and 2023:

Quarter ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

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Operating income $ 17,542 $ 34,279 $ (16,737) (48.8) % 2.3 % 3.9 %

Six months ended December 31, % of Net Sales December 31,

Nine months ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

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Specialty Technology Solutions

For the Specialty Technology Solutions segment, operating income decreased $6.3 million, or 32.1%, and $16.3 million, or 39.2%, respectively, for the quarter and six months ended December 31, 2023, compared to the prior-year period.

Operating margin decreased to 2.6% and 2.4% for the quarter and six months ended December 31, 2023, respectively.

For the Specialty Technology Solutions segment, operating income decreased $10.7 million, or 54.2%, and $27.0 million, or 44.1%, respectively, for the quarter and nine months ended March 31, 2024, compared to the prior-year period.

Operating margin decreased to 1.9% and 2.3% for the quarter and nine months ended March 31, 2024, respectively.

The decrease in operating income and margin for the quarter is primarily due to lower gross profits.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, operating income decreased $5.1 million, or 26.1%, and $5.8 million, or 17.6%, respectively, for the quarter and six months ended December 31, 2023 compared to the prior-year period.

Operating margin decreased to 4.0% and 3.7% for the quarter and six months ended December 31, 2023, respectively.

The decrease in operating income and margin is primarily from lower gross profits and higher bad debt expense, due to increases in specific customer reserves.

For the quarter and six months ended December 31, 2023, Corporate operating loss of $1.1 million and $1.3 million, represents costs associated with the sale of our intY business and cyberattack restoration costs.

For the Modern Communications & Cloud segment, operating income decreased $1.5 million, or 10.2%, and $7.2 million, or 15.3%, respectively, for the quarter and nine months ended March 31, 2024 compared to the prior-year period.

Operating margin increased to 4.8% for the quarter ended March 31, 2024 driven by higher gross profit margin for the quarter.

For the nine months ended March 31, 2024 operating margin decreased to 4.0%.

Operating income and margin decreased for the nine month period primarily from lower gross profits.

For the quarter and nine months ended March 31, 2024, Corporate operating loss of $4.5 million and $5.9 million, represents costs associated with the sale of our intY business, cyberattack restoration cost and restructuring costs.

Total Other (Income) Expense

The following table summarizes our total other (income) expense for the quarters and six months ended December 31, 2023 and 2022:

Quarter ended December 31, % of Net Sales December 31,

The following table summarizes our total other (income) expense for the quarters and nine months ended March 31, 2024 and 2023:

Quarter ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

6 unchanged sentences

Total other (income) expense, net $ (410) $ 4,366 $ (4,776) (109.4) % (0.1) % 0.5 %

Six months ended December 31, % of Net Sales December 31,

Nine months ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

8 unchanged sentences

Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs.

Interest expense decreased for the quarter ended December 31, 2023 compared to the prior-year periods, primarily from lower average borrowings on our multi-currency revolving credit facility.

Interest expense increased slightly for the six months ended December 31, 2023 as a result of higher interest rates for the six-month period compared to the prior-year.

Interest income for the quarter and six months ended December 31, 2023 was generated on interest-bearing investments in Brazil and customer receivables in both North America and Brazil.

Interest expense decreased for the quarter and nine months ended March 31, 2024 compared to the prior-year periods, primarily from lower average borrowings on our multi-currency revolving credit facility.

Interest income increased for the quarter and nine months ended March 31, 2024 primarily from interest earned on higher cash balances in North America.

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

5 unchanged sentences

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

For the quarter and six months ended December 31, 2023, we recognized a $14.5 million gain on the sale of our UK-based intY business.

For the nine months ended March 31, 2024, we recognized a $14.5 million gain on the sale of our UK-based intY business.

Provision for Income Taxes

For the quarter and six months ended December 31, 2023, income tax expense was $7.3 million and $11.0 million, respectively, reflecting an effective tax rate of 18.3% and 18.6%, respectively.

In comparison, for the quarter and six months ended December 31, 2022, income tax expense was $10.5 million and $18.7 million, respectively, reflecting an effective tax rate of 28.9% and 27.3%, respectively.

The decrease in the effective tax rate for the quarter is due to a $3.8 million discrete tax benefit, which is primarily attributable to the sale of our UK-based intY business.

For the quarter and nine months ended March 31, 2024, income tax expense was $5.1 million and $16.2 million, respectively, reflecting an effective tax rate of 28.7% and 21.0%, respectively.

In comparison, for the quarter and nine months ended March 31, 2023, income tax expense was $8.7 million and $27.4 million, respectively, reflecting an effective tax rate of 29.1% and 27.8%, respectively.

The decrease in the effective tax rate for the quarter is due to a $1.5 million discrete tax benefit, which is attributable to an income tax recovery in Brazil related to a prior period.

We expect the effective tax rate, excluding discrete items, for fiscal year 2024 to be approximately 29.2% to 30.2%.

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

The following table summarizes annualized adjusted ROIC for the quarters ended December 31, 2023 and 2022, respectively:

Quarter ended December 31,

The following table summarizes annualized adjusted ROIC for the quarters ended March 31, 2024 and 2023, respectively:

Quarter ended March 31,

Adjusted return on invested capital ratio, annualized (a)

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(a) The annualized EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year.

There were 92 days in the current and prior-year quarter.

There were 91 days in the current and 90 days in the prior-year quarter.

The components of this calculation and reconciliation to our financial statements are shown on the following schedule:

Quarter ended December 31,

Quarter ended March 31,

(in thousands)

9 unchanged sentences

Cyberattack restoration costs 93 —

Gain on sale of business (14,533) —

Restructuring costs 3,923 —

Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) $ 33,095 $ 45,656

Quarter ended December 31,

Quarter ended March 31,

(in thousands)

4 unchanged sentences

Cyberattack restoration costs, net 69 —

Acquisition and divestiture costs 703 —

Acquisition and divestiture costs (a)

Restructuring, net 2,935 —

Tax recovery, net (1,648) —

Gain on sale of business (14,533) —

Average equity 950,652 871,736

Average funded debt (a)

Average funded debt (b)

153,131 398,318

Invested capital (denominator for adjusted ROIC) (non-GAAP) $ 1,103,783 $ 1,270,054

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

(a) Acquisition and 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

7 unchanged sentences

Net Sales by Segment:

Quarter ended December 31,

Quarter ended March 31,

2024 2023 $ Change % Change

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(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 quarter ended December 31, 2023 into U.S.

dollars using the average foreign exchange rates for the quarter ended December 31, 2022.

Calculated by translating the net sales for the quarter ended March 31, 2024 into U.S.

dollars using the average foreign exchange rates for the quarter ended March 31, 2023.

Net Sales by Segment:

Six months ended December 31,

Nine months ended March 31,

2024 2023 $ Change % Change

14 unchanged sentences

(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 six months ended December 31, 2023 into U.S.

dollars using the average foreign exchange rates for the six months ended December 31, 2022.

Calculated by translating the net sales for the nine months ended March 31, 2024 into U.S.

dollars using the average foreign exchange rates for the nine months ended March 31, 2023.

Net Sales by Geography:

Quarter ended December 31,

Quarter ended March 31,

2024 2023 $ Change % Change

13 unchanged sentences

(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 quarter ended December 31, 2023 into U.S.

dollars using the average foreign exchange rates for the quarter ended December 31, 2022.

Six months ended December 31,

Calculated by translating the net sales for the quarter ended March 31, 2024 into U.S.

dollars using the average foreign exchange rates for the quarter ended March 31, 2023.

Nine months ended March 31,

2024 2023 $ Change % Change

13 unchanged sentences

(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 six months ended December 31, 2023 into U.S.

dollars using the average foreign exchange rates for the six months ended December 31, 2022.

Calculated by translating the net sales for the nine months ended March 31, 2024 into U.S.

dollars using the average foreign exchange rates for the nine months ended March 31, 2023.

Operating Income by Segment:

Quarter ended December 31, % of Net Sales December 31,

Quarter ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

12 unchanged sentences

Acquisition and divestiture costs 511 — 511

Restructuring costs 3,923 — 3,923

Cyberattack restoration costs 93 — 93

7 unchanged sentences

Acquisition and divestiture costs 511 — 511

Restructuring costs 3,923 — 3,923

Non-GAAP operating income $ 25,306 $ 38,449 $ (13,143) (34.2) % 3.4 % 4.3 %

(a) Recovery of prior period withholding taxes in Brazil.

(a) Recovery of prior period withholding and other taxes in Brazil.

Operating Income by Segment:

Six months ended December 31, % of Net Sales December 31,

Nine months ended March 31, % of Net Sales March 31,

2024 2023 $ Change % Change 2024 2023

13 unchanged sentences

Acquisition and divestiture costs 1,215 — 1,215

Restructuring costs 3,923 — 3,923

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

6 unchanged sentences

Acquisition and divestiture costs 1,215 — 1,215

Restructuring costs 3,923 — 3,923

Non-GAAP operating income $ 84,406 $ 118,301 $ (33,895) (28.7) % 3.4 % 4.2 %

(a) Recovery of prior period withholding taxes in Brazil.

(a) Recovery of prior period withholding and other taxes in Brazil.

Additional Non-GAAP Metrics

4 unchanged sentences

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

Quarter ended December 31, 2023

Quarter ended March 31, 2024

Measure Intangible

Divestiture costs Tax

expense Acquisition and Divestiture costs (a)

Restructuring costs Tax

recovery Cyberattack

restoration costs Gain on

a business (a)

restoration costs Non-GAAP

(in thousands, except per share data)

4 unchanged sentences

Diluted EPS $ 0.50 $ 0.11 $ 0.02 $ 0.12 $ (0.06) $ — $ 0.69

Quarter ended December 31, 2022

Quarter ended March 31, 2023

Measure Intangible

expense Divestiture costs Tax

expense Acquisition and Divestiture costs (a)

Restructuring costs Tax

recovery Cyberattack

restoration costs Gain on

a business (a)

restoration costs Non-GAAP

(in thousands, except per share data)

4 unchanged sentences

Diluted EPS $ 0.83 $ 0.12 $ — $ — $ — $ — $ 0.96

(a) Reflects gain on the sale of the UK-based intY business.

(a) Acquisition and divestiture costs for the quarter ended March 31, 2024 are generally nondeductible for tax purposes.

(b) Reflects gain on the sale of the UK-based intY business.

This transaction resulted in a capital loss for tax purposes.

The Company did not record a tax provision on the capital loss since there were no offsetting capital gains.

Six months ended December 31, 2023

Nine months ended March 31, 2024

Measure Intangible

expense Divestiture costs Tax

expense Acquisition and Divestiture costs (a)

Restructuring costs Tax

recovery Cyberattack

restoration costs Gain on

a business (a)

a business (b)

SG&A expenses $ 208,930 $ — $ (1,215) $ (3,923) $ 1,901 $ (733) $ — $ 204,960

3 unchanged sentences

Diluted EPS $ 2.41 $ 0.35 $ 0.05 $ 0.12 $ (0.09) $ 0.02 $ (0.57) $ 2.28

Six months ended December 31, 2022

Nine months ended March 31, 2023

Measure Intangible

expense Divestiture costs Tax

expense Acquisition and Divestiture costs (a)

Restructuring costs Tax

recovery Cyberattack

restoration costs Gain on

a business (a)

a business (b)

SG&A expenses $ 211,337 $ — $ — $ — $ 2,858 $ — $ — $ 214,195

3 unchanged sentences

Diluted EPS $ 2.79 $ 0.37 $ — $ — $ (0.07) $ — $ — $ 3.09

(a) Reflects gain on the sale of the UK-based intY business.

(a) Acquisition and divestiture costs for the quarter ended March 31, 2024 are generally nondeductible for tax purposes.

(b) Reflects gain on the sale of the UK-based intY business.

This transaction resulted in a capital loss for tax purposes.

5 unchanged sentences

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

Our cash and cash equivalents balance totaled $45.0 million at December 31, 2023, compared to $36.2 million at June 30, 2023, including $38.3 million and $31.0 million held outside of the United States at December 31, 2023 and June 30, 2023, respectively.

Checks released but not yet cleared in the amount of $8.0 million are included in accounts payable at December 31, 2023 and June 30, 2023.

We conduct business in North America and Brazil where we generate and use cash.

Our cash and cash equivalents balance totaled $159.1 million at March 31, 2024, compared to $36.2 million at June 30, 2023, including $23.4 million and $31.0 million held outside of the United States at March 31, 2024 and June 30, 2023, respectively.

Checks released but not yet cleared in the amount of $0.2 million and $8.0 million are included in accounts payable at March 31, 2024 and June 30, 2023, respectively.

We conduct business primarily in North America and Brazil where we generate and use cash.

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

See Note 13 - Income Taxes in the Notes to the Consolidated Financial Statements for further discussion.

Our net investment in working capital decreased $75.7 million to $794.6 million at December 31, 2023 from $870.3 million at June 30, 2023, primarily from decreases in inventory and accounts receivable, partially offset by lower accounts payable, as a result of lower sales volume and our multi-quarter working capital improvement plan.

Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, decreased $256.4 million to $563.3 million at March 31, 2024 from $819.7 million at June 30, 2023, primarily from decreases in inventory and accounts receivable, partially offset by lower accounts payable, as a result of lower sales volume and our multi-quarter working capital improvement plan.

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 and payments to vendors.

Six months ended

Nine months ended

(in thousands)

4 unchanged sentences

Operating cash flows are 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.

Net cash provided by operating activities was $156.8 million for the six months ended December 31, 2023, compared to $75.3 million used in operating activities in the prior-year period.

Cash provided by operating activities for the six months ended December 31, 2023 is attributable to reductions in inventory and accounts receivable, which decreased 24% and 12%, respectively, compared to June 30, 2023, partially offset by a reduction in accounts payable which decreased 22% comparatively.

Cash used in operating activities for the six months ended December 31, 2022 is primarily attributable to increases in inventory and accounts receivable, which increased 24% and 7%, respectively, compared to June 30, 2022.

The number of days sales outstanding ("DSO") was 68 days at December 31, 2023, compared to 72 days at June 30, 2023 and 69 days at December 31, 2022.

Inventory turned 5.1 times during the quarter ended December 31, 2023, compared to 4.4 times during the quarter ended June 30, 2023 and 5.0 times in the prior-year quarter ended December 31, 2022.

Cash provided by investing activities for the six months ended December 31, 2023 was $13.1 million, compared to $4.3 million used in investing activities in the prior-year period.

Cash provided by investing activities for the six months ended December 31, 2023 is largely due to cash received from the sale of our intY UK business.

Cash used in investing activities for the six months ended December 31, 2022 represents capital expenditures.

Net cash provided by operating activities was $316.9 million for the nine months ended March 31, 2024, compared to $20.5 million used in operating activities in the prior-year period.

Cash provided by operating activities for the nine months ended March 31, 2024 is primarily attributable to net income adjusted for non-cash items plus, reductions in inventory and accounts receivable, partially offset by a reduction in accounts payable.

Compared to June 30, 2023 , inventory and accounts receivable decreased 30% and 22% respectively, while accounts payable decreased 20%.

Cash used in operating activities for the nine months ended March 31, 2023 is primarily attributable to increases in inventory of 22% compared to June 30, 2022, partially offset by net income adjusted for non-cash items.

The number of days sales outstanding ("DSO") was 71 days at March 31, 2024, compared to 72 days at June 30, 2023 and 70 days at March 31, 2023.

Inventory turned 4.8 times during the quarter ended March 31, 2024, compared to 4.4 times during the quarter ended June 30, 2023 and 4.1 times in the prior-year quarter ended March 31, 2023.

Cash provided by investing activities for the nine months ended March 31, 2024 was $10.7 million, compared to $6.5 million used in investing activities in the prior-year period.

Cash provided by investing activities for the nine months ended March 31, 2024 is largely due to cash received from the sale of our intY UK business, partially offset by capital expenditures.

Cash used in investing activities for the nine months ended March 31, 2023 represents capital expenditures.

Management expects capital expenditures for fiscal year 2024 to range from $8.0 million to $10.0 million, primarily for IT investments and facility improvements.

For the six months ended December 31, 2023, cash used in financing activities totaled $161.3 million, compared to $108.0 million provided by financing activities for the prior-year period.

Cash used in financing activities for the six months ended December 31, 2023 is primarily attributable to net repayments on the revolving credit facility.

Cash provided by financing activities for the six months ended December 31, 2022 is primarily attributable to net borrowings on the revolving credit facility.

For the nine months ended March 31, 2024, cash used in financing activities totaled $203.9 million, compared to $25.6 million provided by financing activities for the prior-year period.

Cash used in financing activities for the nine months ended March 31, 2024 is primarily attributable to net repayments on the revolving credit facility.

Cash provided by financing activities for the nine months ended March 31, 2023 is primarily attributable to net borrowings on the revolving credit facility.

Share Repurchase Authorization

In August 2021, our Board of Directors approved a $100.0 million share repurchase authorization of which approximately $45.0 million remained outstanding as of March 31, 2024.The authorization does not have any time limit.

In May 2024, our Board of Directors approved a new $100.0 million share repurchase authorization.

This supplements the existing authorization.

The authorization does not have any time limit.

Credit Facility

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

In addition, pursuant to an “accordion feature,” we may increase our 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,” we may increase our borrowing limits 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 our domestic assets and our domestic subsidiaries.

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

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

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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 our leverage ratio plus, if applicable, certain mandatory costs.

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

During the quarter and nine months ended March 31, 2024, our borrowings under the Amended Credit Agreement were U.S.

dollar loans.

The spread in effect as of December 31, 2023 was 1.25% 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%.

The spread in effect as of March 31, 2024 was 1.25% 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.

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

We were 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 quarters ended December 31, 2023 and 2022 w as $138.7 million and $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.

We were in compliance with all covenants under the credit facility at March 31, 2024.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the quarters ended March 31, 2024 and 2023 w as $94.6 million and $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.

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 Credit Facility 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.

While we were in compliance with the financial covenants contained in the Credit Facility as of December 31, 2023, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.

While we were in compliance with the financial covenants contained in the Amended Credit Agreement as of March 31, 2024, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Amended Credit Agreement lending group has been strong and we anticipate their continued support of our long-term business.

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.

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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 2. Management’s Discussion and Analysis