What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2025-01-30 · 159 added, 136 removed, 577 unchanged (34% of the section changed)

4 unchanged sentences

(In thousands, except share information)

December 31, 2024 June 30, 2024

March 31, 2025 June 30, 2024

Current assets:

Cash and cash equivalents $ 146,287 $ 185,460

Accounts receivable, less allowance of $ 25,670 at December 31, 2024

Accounts receivable, less allowance of $ 27,032 at March 31, 2025

and $ 20,684 at June 30, 2024

27 unchanged sentences

Common stock, no par value;

45,000,000 shares authorized, 23,612,543 and 24,243,848 shares issued and outstanding at December 31, 2024 and June 30, 2024, respectively

45,000,000 shares authorized, 22,894,413 and 24,243,848 shares issued and outstanding at March 31, 2025 and June 30, 2024, respectively

Retained earnings 1,023,399 1,013,738

8 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,

2025 2024 2025 2024

25 unchanged sentences

(In thousands)

Quarter ended Six months ended

December 31, December 31,

Quarter ended Nine months ended

March 31, March 31,

2025 2024 2025 2024

Net income $ 17,431 $ 12,806 $ 51,458 $ 60,964

Unrealized gain (loss) on hedged transaction, net of tax 266 ( 1,547 ) ( 784 ) ( 1,395 )

Unrealized (loss) gain on hedged transaction, net of tax ( 462 ) 148 ( 1,245 ) ( 1,246 )

Realized foreign currency on sale of business — — — ( 3,805 )

15 unchanged sentences

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 349,277 2,177 — — 2,177

Common stock repurchased ( 588,018 ) ( 28,043 ) — — ( 28,043 )

Common stock repurchased, including excise tax ( 588,018 ) ( 28,043 ) — — ( 28,043 )

Share-based compensation — 2,471 — — 2,471

7 unchanged sentences

Balance at December 31, 2024 23,612,543 $ — $ 1,031,934 $ ( 131,272 ) $ 900,662

Net income — $ — $ 17,431 $ — $ 17,431

Unrealized loss on hedged transaction, net of tax — — — ( 462 ) ( 462 )

Foreign currency translation adjustment — — — 10,081 10,081

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 1,063 — — — —

Common stock repurchased, including excise tax ( 719,193 ) ( 2,899 ) ( 25,966 ) — ( 28,865 )

Share-based compensation — 2,899 — — 2,899

Balance at March 31, 2025 22,894,413 $ — $ 1,023,399 $ ( 121,653 ) $ 901,746

See accompanying notes to these condensed consolidated financial statements.

22 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, including excise tax ( 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.

3 unchanged sentences

(In thousands)

Six months ended

Nine months ended

Cash flows from operating activities:

30 unchanged sentences

Taxes paid on settlement of equity awards ( 4,819 ) ( 2,794 )

Common stock repurchased ( 52,342 ) ( 1,251 )

Common stock repurchased, including excise tax ( 81,259 ) ( 21,168 )

Net cash used in financing activities ( 83,424 ) ( 203,941 )

12 unchanged sentences

ScanSource uses multiple sales models to offer hybrid distribution solutions from leading suppliers of specialty technologies and connectivity and cloud services.

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

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

The Company's two operating segments, Specialty Technology Solutions and Intelisys & Advisory, represent the different sales models the Company uses in executing its hybrid distribution growth strategy.

4 unchanged sentences

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, 2024 and June 30, 2024, the results of operations for the quarters and six months ended December 31, 2024 and 2023, the condensed consolidated statements of comprehensive income for the quarters and six months ended December 31, 2024 and 2023, the condensed consolidated statements of shareholders' equity for the quarters and six months ended December 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the six months ended December 31, 2024 and 2023.

The results of operations for the quarter and six months ended December 31, 2024 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, 2025 and June 30, 2024, the results of operations for the quarters and nine months ended March 31, 2025 and 2024, the condensed consolidated statements of comprehensive income for the quarters and nine months ended March 31, 2025 and 2024, the condensed consolidated statements of shareholders' equity for the quarters and nine months ended March 31, 2025 and 2024 and the condensed consolidated statements of cash flows for the nine months ended March 31, 2025 and 2024.

The results of operations for the quarter and nine months ended March 31, 2025 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, 2024.

10 unchanged sentences

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, 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, 2024.

There have been no material changes to the Company’s significant accounting policies for the nine months ended March 31, 2025 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, 2024.

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, 2024.

Cash and Cash Equivalents

T he Company considers all highly-liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

The Company considers all highly-liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

The Company maintains zero-balance disbursement accounts at various financial institutions at which the Company does not maintain significant depository relationships.

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 $ 0.1 million and $ 5.9 million are included in accounts payable on the condensed consolidated balance sheets at December 31, 2024 and June 30, 2024, respectively.

As a result, checks released but not yet cleared from these accounts in the amount of $ 0.2 million and $ 5.9 million are included in accounts payable on the condensed consolidated balance sheets at March 31, 2025 and June 30, 2024, 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 $ 2.9 million and $ 5.8 million for the quarter and six months ended December 31, 2024, respectively, and $ 3.0 million and $ 5.8 million for the quarter and six months ended December 31, 2023, respectively.

Depreciation expense reported as part of cost of goods sold on the condensed consolidated income statements totaled $ 0.2 million and $ 0.5 million for the quarter and six months ended December 31, 2024, respectively, and $ 0.3 million and $ 0.5 million for the quarter and six months ended December 31, 2023, respectively.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 2.3 million and $ 8.1 million for the quarter and nine months ended March 31, 2025, respectively, and $ 2.7 million and $ 8.4 million for the quarter and nine months ended March 31, 2024, respectively.

Depreciation expense reported as part of cost of goods sold on the condensed consolidated income statements totaled $ 0.2 million and $ 0.7 million for the quarter and nine months ended March 31, 2025, respectively, and $ 0.3 million and $ 0.8 million for the quarter and nine months ended March 31, 2024, respectively.

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 $ 5.0 million and $ 9.4 million for the quarter and six months ended December 31, 2024, respectively, and $ 4.0 million and $ 8.2 million for the quarter and six months ended December 31, 2023, respectively.

Intangible amortization expense totaled $ 4.9 million and $ 14.3 million for the quarter and nine months ended March 31, 2025, respectively, and $ 3.8 million and $ 12.0 million for the quarter and nine months ended March 31, 2024, respectively.

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 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.

Companies must also disclose their cybersecurity processes, management's role in cybersecurity governance, and cybersecurity oversight by the Board of Directors on Form 10-K.

The Company adopted these rules for the fiscal year ended June 30, 2024.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

9 unchanged sentences

The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03 "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses." This ASU requires public entities to disclose specified information about certain costs and expenses.

The ASU is effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2028.

This ASU is applicable to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2027, and subsequent interim periods, with early application permitted.

The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements and disclosures.

The Company has reviewed other newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption.

7 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, 2024 are set forth in the table below.

The changes in the allowance for doubtful accounts for the nine months ended March 31, 2025 are set forth in the table below.

June 30, 2024 Amounts Charged to Expense Write-offs Other (1)

December 31, 2024

March 31, 2025

(in thousands)

Trade accounts and current notes receivable allowance $ 20,684 $ 7,699 $ ( 1,127 ) $ ( 224 ) $ 27,032

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

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the nine months ended March 31, 2025.

(3) Revenue Recognition

26 unchanged sentences

The Company records contract assets and liabilities for payments received from customers in advance of services performed.

These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions where control has not yet passed to the customer.

These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions

where control has not yet passed to the customer.

These amounts are immaterial to the consolidated financial statements for the periods presented.

1 unchanged sentence

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

Quarter ended December 31, 2024

Quarter ended March 31, 2025

Specialty Technology Solutions Intelisys & Advisory Total

5 unchanged sentences

$ 678,433 $ 26,414 $ 704,847

Six months ended December 31, 2024

Nine months ended March 31, 2025

Specialty Technology Solutions Intelisys & Advisory Total

6 unchanged sentences

(a) Recurring revenue represents revenue primarily from agency commissions, SaaS, subscriptions, and hardware rentals.

Quarter ended December 31, 2023

Quarter ended March 31, 2024

Specialty Technology Solutions Intelisys & Advisory Total

5 unchanged sentences

$ 729,834 $ 22,765 $ 752,599

Six months ended December 31, 2023

Nine months ended March 31, 2024

Specialty Technology Solutions Intelisys & Advisory Total

9 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,

2025 2024 2025 2024

6 unchanged sentences

Net income per common share, diluted $ 0.74 $ 0.50 $ 2.13 $ 2.41

For the quarter and six months ended December 31, 2024, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 197,803 and 210,206 , respectively.

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 nine months ended March 31, 2025, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 241,641 and 245,303 , 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.

(5) Accumulated Other Comprehensive Loss

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

December 31, 2024 June 30, 2024

March 31, 2025 June 30, 2024

(in thousands)

2 unchanged sentences

Accumulated other comprehensive loss $ ( 121,653 ) $ ( 115,853 )

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

Quarter ended December 31, Six months ended December 31,

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

Quarter ended March 31, Nine months ended March 31,

2025 2024 2025 2024

(in thousands)

Tax expense (benefit) $ 157 $ ( 637 ) $ ( 206 ) $ ( 692 )

Tax (benefit) expense $ ( 146 ) $ 136 $ ( 352 ) $ ( 555 )

(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the six months ended December 31, 2024, 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, 2025, by reporting segment, are set forth in the table below.

Specialty Technology Solutions Intelisys & Advisory Total

3 unchanged sentences

Foreign currency translation adjustment ( 382 ) 140 ( 242 )

Balance at December 31, 2024 $ 158,273 $ 69,659 $ 227,932

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

Balance at March 31, 2025 $ 159,168 $ 69,667 $ 228,835

The following table shows changes in the amount recognized for net identifiable intangible assets for the nine months ended March 31, 2025.

Net Identifiable Intangible Assets

4 unchanged sentences

Foreign currency translation adjustment ( 19 )

Balance at December 31, 2024 $ 72,691

Balance at March 31, 2025 $ 67,815

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

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

December 31, 2024 June 30, 2024

The following table presents the Company’s debt at March 31, 2025 and June 30, 2024.

March 31, 2025 June 30, 2024

(in thousands)

15 unchanged sentences

Loans denominated in U.S.

dollars, other than swingline loans, bear interest at a rate per annum equal to, at the Company’s option, (i) the adjusted term Secured Overnight Financing Rate ("SOFR") or adjusted daily simple SOFR plus an additional margin ranging from 1.00 % to 1.75 % depending upon the Company’s ratio of (A) total consolidated debt less up to $ 30 million of unrestricted domestic cash to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable, for which financial statements have been delivered to the Lenders (the “leverage ratio”);

or quarter, as applicable, for which financial statements have been delivered to the Lenders (the “leverage ratio”);

or (ii) the alternate base rate plus an additional margin ranging from 0 % to 0.75 %, depending upon the Company’s leverage ratio, plus, if applicable, certain mandatory costs.

3 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, 2024, all of the Company's borrowings under the Amended Credit Agreement were U.S.

During the quarter and nine months ended March 31, 2025, all of the Company's borrowings under the Amended Credit Agreement were U.S.

dollar loans.

The spread in effect as of December 31, 2024 was 1.00 %, plus a 0.10 % credit spread adjustment for SOFR-based loans and 0.00 % for alternate base rate loans.

The commitment fee rate in effect at December 31, 2024 was 0.15 %.

The effective interest rates for the term loan were 5.46 % and 6.44 % as of December 31, 2024 and June 30, 2024, respectively.

The spread in effect as of March 31, 2025 was 1.00 %, plus a 0.10 % credit spread adjustment for SOFR-based loans and 0.00 % for alternate base rate loans.

The commitment fee rate in effect at March 31, 2025 was 0.15 %.

The effective interest rates for the term loan were 5.42 % and 6.44 % as of March 31, 2025 and June 30, 2024, respectively.

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

2 unchanged sentences

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 Amended Credit Agreement at December 31, 2024.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the six month periods ended December 31, 2024 and 2023 was $ 0.3 million an d $ 138.7 million, respectively.

There was $ 350.0 million and $ 349.9 million available for additional borrowings as of December 31, 2024 and June 30, 2024, respectively.

The effective interest rates for the revolving line of credit were 5.63 % and 6.44 % as of December 31, 2024 and June 30, 2024, respectively.

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

The Company was in compliance with all covenants under the Amended Credit Agreement at March 31, 2025.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine month periods ended March 31, 2025 and 2024 was $ 0.3 million an d $ 94.6 million, respectively.

There was $ 350.0 million and $ 349.9 million available for additional borrowings as of March 31, 2025 and June 30, 2024, respectively.

The effective interest rates for the revolving line of credit were 5.45 % and 6.44 % as of March 31, 2025 and June 30, 2024, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at March 31, 2025 or June 30, 2024.

Mississippi Revenue Bond

3 unchanged sentences

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

The interest rates at December 31, 2024 and June 30, 2024 were 5.57 % and 6.28 %, respectively.

At March 31, 2025, the Company was in compliance with all covenants under this bond.

The interest rates at March 31, 2025 and June 30, 2024 were 5.27 % and 6.28 %, respectively.

Debt Issuance Costs

At December 31, 2024, net debt issuance costs associated with the credit facility and bond totaled $ 1.0 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

At March 31, 2025, net debt issuance costs associated with the credit facility and bond totaled $ 1.0 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 $ 24.8 million and $ 27.5 million for the exchange of foreign currencies at December 31, 2024 and June 30, 2024, respectively.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 27.2 million and $ 27.5 million for the exchange of foreign currencies at March 31, 2025 and June 30, 2024, 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, 2024 and 2023 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, 2025 and 2024 are as follows:

Quarter ended Nine months ended

March 31, March 31,

2025 2024 2025 2024

(in thousands)

Net foreign exchange derivative contract (gains) losses $ ( 2,418 ) $ 1,025 $ ( 1,477 ) $ 658

Net foreign currency transactional and re-measurement losses (gains) 2,166 ( 596 ) 1,560 466

Net foreign currency exchange (gains) losses $ ( 252 ) $ 429 $ 83 $ 1,124

Net foreign exchange derivative contract losses (gains) $ 1,446 $ ( 526 ) $ ( 31 ) $ 132

Net foreign currency transactional and re-measurement (gains) losses ( 1,316 ) 1,034 243 1,500

Net foreign currency exchange losses $ 130 $ 508 $ 212 $ 1,632

Net foreign currency exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses and are included in other income and expense.

9 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).

ineffective portion to be recorded as an adjustment to earnings for the quarters and six months ended December 31, 2024 and 2023.

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, 2024 and 2023, 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, 2025 and 2024.

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, 2025 and 2024, are as follows:

Quarter ended Nine months ended

March 31, March 31,

2025 2024 2025 2024

1 unchanged sentence

Net interest income recognized as a result of interest rate swap $ ( 315 ) $ ( 895 ) $ ( 1,214 ) $ ( 2,676 )

Unrealized gain (loss) in fair value of interest rate swap 745 ( 1,165 ) ( 139 ) ( 72 )

Net increase (decrease) in accumulated other comprehensive income 354 ( 2,068 ) ( 1,039 ) ( 1,853 )

Unrealized (loss) gain in fair value of interest rate swap ( 298 ) 1,093 ( 438 ) 1,021

Net (decrease) increase in accumulated other comprehensive income ( 613 ) 198 ( 1,652 ) ( 1,655 )

Income tax effect ( 151 ) 50 ( 407 ) ( 409 )

Net increase (decrease) in accumulated other comprehensive income, net of tax $ 267 $ ( 1,547 ) $ ( 783 ) $ ( 1,395 )

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

December 31, 2024 June 30, 2024

Net (decrease) increase in accumulated other comprehensive income, net of tax $ ( 462 ) $ 148 $ ( 1,245 ) $ ( 1,246 )

The Company used the following derivative instruments at March 31, 2025 and June 30, 2024, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

March 31, 2025 June 30, 2024

Balance Sheet Location Fair Value of

5 unchanged sentences

Derivative assets:

Forward foreign currency exchange contracts Prepaid expenses and other current assets — $ 17 — —

Foreign currency hedge Prepaid expenses and other current assets $ 16 $ — $ 345 $ —

1 unchanged sentence

Derivative liabilities:

Foreign exchange contracts Accrued expenses and other current liabilities $ — $ 24 $ — $ 12

Forward foreign currency exchange contracts Accrued expenses and other current liabilities $ — $ — $ — $ 12

(9) Fair Value of Financial Instruments

6 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, 2024:

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, 2025:

(Level 1) Significant

2 unchanged sentences

Deferred compensation plan investments, current and non-current $ 30,110 $ 30,110 $ — $ —

Forward foreign currency exchange contracts 17 — 17 —

Interest rate swap agreement 1,046 — 1,046 —

2 unchanged sentences

Deferred compensation plan investments, current and non-current $ 30,110 $ 30,110 $ — $ —

Forward foreign currency exchange contracts 24 — 24 —

Liability for contingent consideration, current and non-current 19,247 — — 19,247

5 unchanged sentences

Deferred compensation plan investments, current and non-current $ 31,014 $ 31,014 $ — $ —

Foreign currency hedge 345 — 345 —

Interest rate swap agreement 2,698 — 2,698 —

Foreign currency hedge 345 — 345 —

Total assets at fair value $ 34,057 $ 31,014 $ 3,043 $ —

10 unchanged sentences

These liabilities represent the amounts payable to sellers, as outlined under the terms of the asset purchase agreements, based upon the achievement of a projected earnings before interest expense, taxes, depreciation and amortization, net of specific pro forma adjustments.

The following tables represent the Company's contingent consideration liabilities at fair value at December 31, 2024:

Quarter ended December 31, 2024

The following tables represent the Company's contingent consideration liabilities at fair value at March 31, 2025:

Quarter ended March 31, 2025

Specialty Technology Solutions Intelisys & Advisory Total

3 unchanged sentences

Fair value at end of period $ 8,067 $ 11,180 $ 19,247

Six months ended December 31, 2024

Nine months ended March 31, 2025

Specialty Technology Solutions Intelisys & Advisory Total

11 unchanged sentences

The fair value of the contingent consideration is determined using a static discounted cash flow model.

The fair value of the liability for the contingent consideration related to Advantix recognized at December 31, 2024 was $ 8.0 million, of which $ 2.0 million is classified as current.

The change in fair value for the quarter ended December 31, 2024 is primarily due to the recurring amortization of the unrecognized fair value discount.

The fair value of the liability for the contingent consideration related to Advantix recognized at March 31, 2025 was $ 8.1 million, of which $ 1.7 million is classified as current.

The change in fair value for the quarter and nine months ended March 31, 2025 is primarily due to the recurring amortization of the unrecognized fair value discount.

Earnout payments to the sellers of Advantix are payable based on results from fiscal year 2025 to fiscal year 2028.

1 unchanged sentence

The fair value of the contingent consideration for Resourcive is determined using a Monte Carlo simulation.

The fair value of the liability for the contingent consideration related to Resourcive recognized at December 31, 2024 was $ 10.4 million, all of which is classified as non-current and is due to the sellers of Resourcive during fiscal year 2027.

The change in fair value for the quarter ended December 31, 2024 is primarily due to the recurring amortization of the unrecognized fair value discount.

Valuation techniques and significant observable inputs used in recurring Level 3 fair value measurements for the Company's contingent consideration liabilities related to Advantix and Resourcive at December 31, 2024 were as follows.

The fair value of the liability for the contingent consideration related to Resourcive recognized at March 31, 2025 was $ 11.2 million, all of which is classified as non-current and is due to the sellers of Resourcive during fiscal year 2027.

The change in fair value for the quarter and nine months ended March 31, 2025 is primarily due to the recurring amortization of the unrecognized fair value discount.

Acquisition Reporting Period Valuation Technique Significant Unobservable Inputs Weighted Average Rates

Advantix December 31, 2024 Discounted cash flow Adjusted EBITDA risk premium 15.7 %

Advantix March 31, 2025 Discounted cash flow Adjusted EBITDA risk premium 15.0 %

Adjusted EBITDA growth rate 28.1 %

Resourcive December 31, 2024 Monte Carlo Adjusted EBITDA risk premium 13.7 %

Resourcive March 31, 2025 Monte Carlo Adjusted EBITDA risk premium 12.9 %

Simulated commission growth percentage 15.2 %

3 unchanged sentences

Specialty Technology Solutions Segment

The Specialty Technology Solutions segment operates primarily in the United States, Canada and Brazil and includes specialty technology solutions distributed through a wholesale sales model.

The Specialty Technology Solutions segment operate s in the United States, Canada and Brazil and includes specialty technology solutions distributed through a wholesale sales model.

This segment includes hardware, SAAS and subscription services.

The specialty technology solutions include the following:

• Mobility and barcode solutions - mobile computing, barcode scanners and imagers, radio frequency identification devices, barcode printing and related services, wireless enablement and connectivity tools;

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

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

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• Communications and collaboration solutions - voice, video, communication platform integration and contact center solutions.

• Connectivity - managed connectivity and wireless enablement solutions.

Intelisys & Advisory Segment

The Intelisys & Advisory segment operates primarily in the United States and distributes connectivity and cloud services through an agency sales model.

The Intelisys & Advisory segment operates in the United States and distributes connectivity and cloud services through an agency sales model.

The connectivity and cloud services include telecom, cable, Unified Communications as a Service ("UCaaS"), Contact Center as a Service ("CCaaS"), Infrastructure as a Service ("IaaS"), Software-Defined Wide-Area Network ("SD-WAN") and other cloud services.

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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,

2025 2024 2025 2024

8 unchanged sentences

$ 7,491 $ 6,742 $ 23,095 $ 21,217

Change in fair value of contingent consideration:

Specialty Technology Solutions $ 94 $ — $ 567 $ —

Intelisys & Advisory 810 — 1,480 —

$ 904 $ — $ 2,047 $ —

Operating income (loss):

13 unchanged sentences

$ 704,847 $ 752,599 $ 2,227,924 $ 2,513,696

(a) For the quarter and six months ended December 31, 2024, the amounts shown above include restructuring expense, acquisition and divestiture, cyberattack restoration costs as well as legal settlement.

For the quarter and six months ended December 31, 2023, the amounts above include acquisition and divestiture costs as well as cyberattack restoration costs.

(b) Countries outside of Brazil represent $ 0.1 million, or 0.2 % of sales, and $ 0.2 million or 0.2 % of sales, for the quarter and six months ended December 31, 2024.

Countries outside of Brazil represent $ 1.8 million, or 2.0 % of sales, and $ 4.2 million, or 2.4 % of sales, for the quarter and six months ended December 31, 2023.

December 31, 2024 June 30, 2024

(a) For the quarter and nine months ended March 31, 2025, the amounts shown above include restructuring expense, acquisition and divestiture, cyberattack restoration costs as well as legal settlement.

For the quarter and nine months ended March 31, 2024, the amounts above include acquisition and divestiture costs as well as cyberattack restoration costs.

(b) Countries outside of Brazil represent $ 0.1 million, or 0.2 % of sales, and $ 0.3 million or 0.2 % of sales, for the quarter and nine months ended March 31, 2025.

Countries outside of Brazil represent $ 0.1 million, or 0.2 % of sales, and $ 4.3 million, or 1.7 % of sales, for the quarter and nine months ended March 31, 2024.

March 31, 2025 June 30, 2024

(in thousands)

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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, 2024 and the consolidated financial statements at June 30, 2024.

The gross amount of the balances recorded related to finance leases is immaterial to the condensed consolidated financial statements at March 31, 2025 and the consolidated financial statements at June 30, 2024.

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.

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Variable lease payments not based on a rate or index, such as costs for common area maintenance, are expensed as incurred.

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, 2024 and June 30, 2024:

December 31, 2024 June 30, 2024

Further, the Company has elected the practical expedient under ASC 842 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 March 31, 2025 and June 30, 2024:

March 31, 2025 June 30, 2024

Operating leases Balance Sheet location (in thousands)

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Long-term operating lease liabilities Other long-term liabilities $ 7,932 $ 6,507

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, 2024 and 2023.

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,

2025 2024 2025 2024

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$ 1,511 $ 1,507 $ 4,401 $ 4,855

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

Six months ended December 31,

Supplemental cash flow information related to the Company's operating leases for the nine months ended March 31, 2025 and 2024 are presented in the table below:

Nine months ended March 31,

(in thousands)

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Right-of-use assets obtained in exchange for lease obligations 5,035 840

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

December 31, 2024

The weighted-average remaining lease term and discount rate at March 31, 2025 are presented in the table below:

March 31, 2025

Weighted-average remaining lease term 3.22 years

Weighted-average discount rate 5.26 %

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

The following table presents the maturities of the Company's operating lease liabilities at March 31, 2025:

Operating leases

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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 $ 2.9 million and $ 3.2 million at December 31, 2024 and June 30, 2024, respectively.

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, 2024 and June 30, 2024:

December 31, 2024 June 30, 2024

The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was $ 3.2 million at March 31, 2025 and June 30, 2024.

March 31, 2025 June 30, 2024

(in thousands)

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(13) Income Taxes

Income taxes for the quarters and six months ended December 31, 2024 and 2023 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, 2025 and 2024 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, 2024, a discrete net tax benefit of $ 3.0 million was recorded, which is attributable to a reduction in the Company's prior-year transition tax liability, a notional interest deduction on the net equity of the Company's Brazilian subsidiary, and stock compensation.

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 the UK-based intY.

The Company’s effective tax rate of 13.5 % and 20.3 % for the quarter and six months ended December 31, 2024, respectively, 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 rate was 18.3 % and 18.6 % for the quarter and six months ended December 31, 2023, respectively.

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

During the quarter ended March 31, 2025, there were no material discrete items.

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 28.0 % and 23.1 % for the quarter and nine months ended March 31, 2025, respectively, 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 rate was 28.7 % and 21.0 % for the quarter and nine months ended March 31, 2024, respectively.

As of March 31, 2025, 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 quarter ended December 31, 2024, foreign subsidiaries repatriated cash of $ 3.5 million to the United States.

During the quarter ended March 31, 2025, 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 and $ 1.1 million of total gross unrecognized tax benefits at December 31, 2024 and June 30, 2024, respectively.

Of this total at December 31, 2024, approximately $ 0.9 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 and $ 1.1 million of total gross unrecognized tax benefits at March 31, 2025 and June 30, 2024, respectively.

Of this total at March 31, 2025, approximately $ 0.9 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, 2024 and June 30, 2024, the Company had approximately $ 1.3 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.

At March 31, 2025 and June 30, 2024, the Company had approximately $ 1.3 million accrued for interest and penalties.

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

federal, various state, local and foreign jurisdictions.

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The actions taken in January 2024 and September 2024 are expected to result in approximately $ 10.0 million and $ 10.5 million in annualized savings in selling, general and administrative expenses, respectively, most of which is expected to be realized during this fiscal year.

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

Quarter ended December 31, 2024 Six months ended December 31, 2024

The following table presents the restructuring and employee separation costs incurred for the quarter and nine months ended March 31, 2025:

Quarter ended Nine months ended

March 31, 2025 March 31, 2025

(in thousands)

Employee separation and benefit costs $ — 5,381

For the quarter and six months ended December 31, 2024, all restructuring costs are recognized in the Corporate reporting unit and have not been allocated to the Specialty Technology Solutions or Intelisys & Advisory segments.

For the quarter and nine months ended March 31, 2025, all restructuring costs are recognized in the Corporate reporting unit and have not been allocated to the Specialty Technology Solutions or Intelisys & Advisory 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 six months ended December 31, 2024:

The following table represents activity for the nine months ended March 31, 2025:

Accrued Expenses

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Cash payments ( 5,737 )

Balance at December 31, 2024

The remaining balance as of December 31, 2024 of $ 2.7 million is expected to be paid through the third quarter of fiscal year 2027.

(15) Acquisitions

Balance at March 31, 2025

The remaining balance as of March 31, 2025 of $ 1.3 million is expected to be paid through the third quarter of fiscal year 2026.

(15) Business Acquisitions

On August 8, 2024, ScanSource acquired substantially all of the assets of Resourcive, a leading technology advisor, through its subsidiary ScanSource Agency, Inc.

Resourcive delivers strategic IT sourcing solutions to mid-market and enterprise businesses, advising clients on value creation strategies that are enabled by technology.

Resourcive delivers strategic IT sourcing solutions to mid-market and enterprise businesses.

On August 15, 2024, ScanSource acquired, through its subsidiary Advantix ScanSource, LLC, substantially all of the assets of Advantix, a managed connectivity experience provider specializing in wireless enablement solutions.

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The impact of these acquisitions was not material to the consolidated financial statements.

The Company recognized $ 0.2 million and $ 0.6 million for the quarter and six months ended December 31, 2024, respectively, in acquisition-related costs included in selling, general and administrative expenses on the Condensed Consolidated Income Statements.

The Company recognized $ 0.2 million and $ 0.8 million for the quarter and nine months ended March 31, 2025, respectively, in acquisition-related costs included in selling, general and administrative expenses on the Condensed Consolidated Income Statements.

(16) Business Sale

On December 19, 2023, the Company completed the sale of its UK-based intY business.

The Company retained its CASCADE cloud services distribution platform which has been used to grow the Cisco and Microsoft subscription businesses in the United States and Brazil.

Under the stock purchase agreement, the Company received proceeds of $ 17.6 million in cash for the sale, net of cash transferred.

The business sale resulted in a $ 14.2 million gain on sale after considering the net assets sold.

During the quarter December 31, 2024, $ 2.6 million in cash was released from escrow related to the sale of intY.

During the quarter ended December 31, 2024, $ 2.6 million in cash was released from escrow related to the sale of intY.

The impact of this sale was not material to the consolidated 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-Q

Item 1. Financial Statements