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Item 7. Management’s Discussion and Analysis

2025-08-21 compared with 2024-08-27 · 156 added, 125 removed, 378 unchanged (43% of the section changed)

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

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

We provide technology solutions and services from approximately 500 leading suppliers of mobility, barcode, POS, payments, physical security, networking, unified communications, collaboration, connectivity and cloud services to our approximately 25,000 customers located primarily in the United States, Canada and Brazil.

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

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

We provide technology solutions and services from approximately 500 leading suppliers of mobility and barcode, POS, payment terminals, physical security, networking, communications, connectivity and cloud services to our approximately 25,000 channel sales partners located primarily in the United States, Canada and Brazil.

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

Our segments operate primarily in the United States, Canada and Brazil:

• Specialty Technology Solutions

• Modern Communications & Cloud

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

• Intelisys & Advisory

We sell hardware, SaaS, connectivity and cloud solutions and services to channel sales partners 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.

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

Our key suppliers include AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, PAX Technology, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.

Our key suppliers includ e AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Elo, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, NiCE, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.

Recent Developments

Impact of the Macroeconomic Environment, Including Forecasted Growth, Inflation and Tariffs

The macroeconomic environment, including the economic impacts of forecasted growth, inflation, tariffs and shifting relations between the U.S.

and other countries, continues to create significant uncertainty and may adversely affect our financial condition and results of operations.

In 2025, the U.S.

announced a variety of additional tariffs on goods from multiple nations and trading blocks and has been targeted with reciprocal tariffs and other retaliatory actions in response.

Although the U.S.

has announced pauses on certain tariffs, negotiations and the state of international trade policy and relations continue to evolve.

We are mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand and we are actively monitoring changes to the global macroeconomic environment and assessing the potential impacts these challenges may have on our financial condition, results of operations and liquidity.

We expect to pass price increases from our suppliers resulting from tariffs to our channel sales partners.

We are also mitigating risks through strategic planning and maintaining financial flexibility, but we cannot predict the outcome of our mitigation strategies or the ultimate impact of tariffs and the global macroeconomic environment on our financial condition or results of operations.

On July 4, 2025, the One Big Beautiful Bill Act (“the Act”) was signed into law.

The Act permanently extends key provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation, and introduces changes to the international tax framework.

We are currently assessing the impact of the Act on our future effective tax rate, tax liabilities, and cash taxes.

Business Acquisitions

On August 8, 2024, we completed the acquisition of substantially all of the assets of Secure Path Networks, LLC doing business as Resourcive ("Resourcive"), a leading technology advisor.

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

On August 15, 2024, we completed the acquisition of substantially all of the assets of Advantix Solutions Group, Inc.

("Advantix"), a managed connectivity experience provider specializing in wireless enablement solutions.

Index to Financial Statements

Cost Reduction and Restructuring Program

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

In September 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 business.

These actions are expected to result in approximately $10.5 million in annualized savings in selling, general and administrative expenses.

In January 2025, we executed an additional cost reduction and restructuring plan.

These actions resulted in approximately $10.0 million in annualized savings in selling, general and administrative expenses.

UK Divestitures

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

We retained our CASCADE cloud services distribution platform, which has been used to grow the Cisco and Microsoft subscription business in the United States and Brazil.

Impact of the Macroeconomic Environment, Including Inflation

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

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

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

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

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

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

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

ScanSource enables customers to deliver solutions for their end users to address changing buying and

Index to Financial Statements

consumption patterns.

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

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

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

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

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

Our technology distribution strategy utilizes multiple sales models to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to channel sales partners that solve end users’ challenges.

ScanSource enables channel sales partners to deliver solutions for their end users to address changing buying and consumption patterns.

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

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

Results of Operations from Continuing Operations

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Restructuring and other charges 0.2 0.1 0.0

Change in fair value of contingent consideration 0.1 0.0 0.0

Operating income 2.8 2.8 3.6

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Please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our form 10-K for the fiscal year ended June 30, 2024 for a discussion of fiscal year ended June 30, 2023.

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

The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2024 and 2023.

Index to Financial Statements

2024 2023 $ Change % Change % Change Constant Currency, Excluding Divestitures (a)

We have two reportable segments, which are based on sales model.

The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2025 and 2024.

2025 2024 $ Change % Change % Change Constant Currency (a)

(in thousands)

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Specialty Technology Solutions $ 2,942,717 $ 3,167,549 $ (224,832) (7.1) % (6.7) %

Modern Communications & Cloud 1,261,173 1,456,691 (195,518) (13.4) % (13.7) %

Intelisys & Advisory 98,093 92,260 5,833 6.3 % (0.2) %

Total net sales $ 3,040,810 $ 3,259,809 $ (218,999) (6.7) % (6.5) %

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Total net sales $ 3,040,810 $ 3,259,809 $ (218,999) (6.7) % (6.5) %

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

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

Specialty Technology Solutions

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

During fiscal year 2024, net sales for this segment decreased $332.4 million, or 14.3%, compared to fiscal year 2023.

Excluding the foreign exchange positive impact of $1.3 million, adjusted net sales for fiscal year 2024 decreased $333.7 million, or 14.3%, compared to the prior fiscal year.

The decrease in net sales and in adjusted net sales is primarily from lower sales volume due to softer demand in a more cautious technology spending environment.

Modern Communications & Cloud

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

The Specialty Technology Solutions segment consists of sales to channel sales partners in the United States, Canada and Brazil.

During fiscal year 2025, net sales for this segment decreased $224.8 million, or 7.1%, compared to fiscal year 2024.

Excluding the foreign exchange positive impact of $8.5 million, adjusted net sales decreased $198.7 million, or 13.7%, compared to the prior year.

The decrease in net sales and adjusted net sales is primarily due to decreased lower sales volumes in our communications hardware and Cisco products.

Intelisys connectivity and cloud net sales for fiscal year 2024 increased 6.6% year-over-year.

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

For fiscal year 2024, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.67 billion.

Excluding the impact from foreign exchange fluctuations and the impact of divestitures and acquisitions, adjusted net sales for fiscal year 2025 decreased $212.3 million, or 6.7%, compared to the prior fiscal year.

The decrease in net sales and in adjusted net sales is primarily due to a more cautious technology spending environment in the first half of the fiscal year.

Intelisys & Advisory

The Intelisys & Advisory segment consists of sales and services to both channel sales partners (Intelisys) and end users (Advisory) in t he United States.

During fiscal year 2025, net sales for this segment increased $5.8 million, or 6.3%, compared to fiscal year 2024.

The increase in net sales reflects the addition of an acquisition.

Excluding the impact from foreign exchange rate fluctuations and the impact from acquisitions, adjusted net sales decreased $0.2 million, or 0.2%, compared to the prior year primarily due to a more cautious technology spending environment.

For fiscal year 2025, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.79 billion, an increase of 4.5% .

The fiscal year 2025 Intelisys net billings resulted in Intelisys net sales of approximately $85.6 million.

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

Index to Financial Statements

The following table summarizes our gross profit for the fiscal years ended June 30, 2025 and 2024:

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Specialty Technology Solutions $ 311,402 $ 307,257 $ 4,145 1.3 % 10.6 % 9.7 %

Modern Communications & Cloud 211,313 225,000 (13,687) (6.1) % 16.8 % 15.4 %

Intelisys & Advisory 97,244 91,795 5,449 5.9 % 99.1 % 99.5 %

Total gross profit $ 408,646 $ 399,052 $ 9,594 2.4 % 13.4 % 12.2 %

Index to Financial Statements

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

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

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

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

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

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

Specialty Technology Solutions

For the Specialty Technology Solutions segment, gross profit dollars decreased $36.5 million.

For the Specialty Technology Solutions segment, gross profit dollars increased $4.1 million.

Gross margin mix positively impacted gross profit by $26.0 million, largely from favorable supplier program recognition and favorable sales mix partially offset by higher freight costs.

Lower sales volume, after considering the associated cost of goods sold, impacted gross profit decline by $21.8 million for the current fiscal year.

Gross margin mix negatively impacted gross profit by $4.5 million, largely from unfavorable vendor program recognition partially offset by lower freight costs.

For the fiscal year ended June 30, 2024, the gross profit margin decreased 23 basis points over the prior-year to 9.4%.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, gross profit dollars decreased $13.7 million.

Lower sales volume, after considering the associated cost of goods sold, unfavorably impacted gross profit dollars by $30.2 million.

Gross margin mix positively impacted gross profit by $16.5 million, largely from a more favorable sales mix and lower freight costs.

For the fiscal year ended June 30, 2024, the gross profit margin increased 131 basis points over the prior fiscal year to 16.8%.

For the fiscal year ended June 30, 2025, the gross profit margin increased 88 basis points over the prior-year to 10.6%.

Intelisys & Advisory

For the Intelisys & Advisory segment, gross profit dollars increased $5.4 million.

Higher sales volume, largely due to the impact of our Resourcive acquisition increased gross profit dollars by $5.8 million .

Gross profit margin decreased 36 basis points over the prior fiscal year to 99.1%, reflecting the addition of professional services to the sales mix.

Operating expenses

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Intangible amortization expense 19,227 15,723 3,504 22.3 % 0.6 % 0.5 %

Restructuring and other charges 4,358 — 4,358 *nm 0.1 % — %

Restructuring and other charges 5,381 4,358 1,023 23.5 % 0.2 % 0.1 %

Change in fair value of contingent consideration 1,900 — 1,900 *nm 0.1 % — %

Operating expenses $ 323,446 $ 308,728 $ 14,718 4.8 % 10.6 % 9.5 %

*nm - not meaningful

Selling, general and administr ative expenses (“SG&A”) decreased $8.3 million for the fiscal year ended June 30, 2024 compared to the prior year.

The decrease in SG&A expenses is primarily attributable to lower employee costs, partially offset by an increase in bad debt expense as a result of increases in specific customer reserves.

Intangible amortization expense decreased $1.0 million for the fiscal year ended June 30, 2024 compared to the prior fiscal year.

Amortization expense decreased during fiscal year 2024 due to primarily due to the removal of intangible assets related to the intY UK divestiture.

Restructuring and other charges of $4.4 million related to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during fiscal year 2024.

Selling, general and administr ative expenses (“SG&A”) increased $9.5 million for the fiscal year ended June 30, 2025 compared to the prior year.

The increase in SG&A expenses is primarily attributable to increased costs related to acquisitions.

Index to Financial Statements

Depreciation expense decreased $1.2 million for the fiscal year ended June 30, 2025 compared to the prior fiscal year.

The decrease is primarily related to IT assets that became fully depreciated in the current year.

Intangible amortization expense increased $3.5 million for the fiscal year ended June 30, 2025 compared to the prior fiscal year.

The increase is a result of intangible assets acquired in our acquisitions of Advantix and Resourcive.

Restructuring and other charges of $5.4 million for the fiscal year ended June 30, 2025 increased $1.0 million compared to the prior year, which primarily related to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during fiscal year 2025.

We present changes in fair value of the contingent consideration owed to the former shareholders of businesses that we acquire as a separate line item in operating expenses.

We recorded a fair value adjustment expense of $1.9 million for the fiscal year ended June 30, 2025.

The expense from changes in fair value of contingent consideration is largely due to the recurring amortization of the unrecognized fair value discount.

Operating Income

The following table summarizes our operating income for the periods ended June 30, 2025 and 2024:

Index to Financial Statements

2025 2024 $ Change % Change 2025 2024

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Specialty Technology Solutions $ 66,049 $ 66,678 $ (629) (0.9) % 2.2 % 2.1 %

Modern Communications & Cloud 52,547 61,658 (9,111) (14.8) % 4.2 % 4.2 %

Intelisys & Advisory 27,214 30,595 (3,381) (11.1) % 27.7 % 33.2 %

Corporate (8,063) (6,949) (1,114) 16.0 % — % — %

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Specialty Technology Solutions

For the Specialty Technology Solutions segment, operating income decreased $31.0 million, and operating margin decreased 101 basis points to 2.2% for the fiscal year ended June 30, 2024, compared to the prior fiscal year.

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

Modern Communications & Cloud

For the Modern Communications & Cloud segment, operating income decreased $9.1 million with the operating margin increasing slightly to 4.2% for the fiscal year ended June 30, 2024, compared to the prior fiscal year.

The decrease in operating income is largely due to lower gross profits.

For the fiscal year ended June 30, 2024, Corporate operating loss totaled $6.9 million which represents $4.4 million in restructuring expenses, $1.7 million of acquisition and divestiture costs as well as $0.9 million in cyberattack restoration charges.

During the fiscal year ended June 30, 2023 Corporate incurred a loss of $1.5 million representing cyberattack restoration charges.

For the Specialty Technology Solutions segment, operating income decreased $0.6 million, and operating margin increased 14 basis points to 2.2% for the fiscal year ended June 30, 2025, compared to the prior fiscal year.

The decrease in operating income is primarily due to higher information technology and consulting related costs as well as higher amortization related to recent acquisitions.

Intelisys & Advisory

For the Intelisys & Advisory segment, operating income decreased $3.4 million with the operating margin decreasing to 27.7% for the fiscal year ended June 30, 2025, compared to the prior fiscal year.

The decrease in operating income is largely due to higher costs, including change in fair value expense related to a recent acquisition.

For the fiscal year ended June 30, 2025, Corporate operating loss totaled $8.1 million which represents $5.4 million in restructuring expenses, $1.6 million legal settlement, $0.9 million of acquisition and divestiture costs and $0.2 million in cyberattack restoration charges.

During the fiscal year ended June 30, 2024 Corporate incurred a loss of $6.9 million which represents $4.4 million in restructuring expenses, $1.7 million of acquisition and divestiture costs as well as $0.9 million in cyberattack restoration charges.

Index to Financial Statements

Total Other (Income) Expense

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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 in fiscal 2024 as compared to 2023 primarily from lower average borrowings on our multi-currency revolving credit facility.

Interest income for the fiscal year ended June 30, 2024 increased compared to fiscal year ended June 30, 2023 primarily from interest earned on higher cash balances in North America.

Index to Financial Statements

Interest expense decreased in fiscal year 2025 as compared to 2024 primarily from lower average borrowings on our multi-currency revolving credit facility.

Interest income for the fiscal year ended June 30, 2025 increased compared to fiscal year ended June 30, 2024 primarily from interest earned on higher cash balances throughout the fiscal year in the United States.

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.

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For the fiscal year ended June 30, 2024 we recognized a $14.2 million gain on sale of our UK-based intY business.

For the fiscal year ended June 30, 2025 we recognized a gain of $6.7 million as a result of an insurance recovery in connection with the cybersecurity attack in the fourth quarter of fiscal 2023.

Provision for Income Taxes

Income tax expense for continuing operations was $22.8 million and $22.8 million for the fiscal years ended June 30, 2025 and 2024, respectively, reflecting effective tax rates of 24.2% and 22.8%, respectively.

The decrease in the effective tax rate for fiscal 2024 compared to fiscal 2023 is primarily the result of the tax treatment for the intY divestiture, the creditability of foreign taxes as a result of IRS Notice 2023-55 and a decrease in global intangible low taxed income tax.

The increase in the effective tax rate for fiscal 2025 compared to fiscal 2024 is primarily the result of the tax treatment of the intY UK divestiture in the 2024 fiscal year, an increase in non-deductible expenses, and an increase in global intangible low taxed income tax.

In December of 2021, the Organization for Economic Co-operation and Development ("OECD") released Pillar Two Model Rules defining the global minimum tax rules, which contemplate a global minimum tax rate of 15%.

Several member countries have enacted Pillar Two provisions that are effective in fiscal year 2025.

The Company believes it will qualify for safe harbor exemptions in many of these jurisdictions and any remaining impact to future effective tax rates and corporate tax liability will be minimal.

The Company believes it qualifies for safe harbor exemptions in many of these jurisdictions and any remaining impact to future effective tax rates and corporate tax liability will be minimal.

We expect the fiscal year 2026 effective tax rate from continuing operations to be approximately 27.2% to 28.2%.

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Adjusted return on invested capital ratio 13.6 % 12.4 %

Index to Financial Statements

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

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EBITDA (non-GAAP) 132,604 140,881

Change in fair value of contingent consideration 1,900 —

Share-based compensation 11,062 9,537

Tax recovery (2,558) (2,986)

Cyberattack restoration costs 874 1,460

Gain on sale of business (14,155) —

Acquisition and divestiture costs (a)

Cyberattack restoration costs 177 874

Restructuring costs 5,381 4,358

Tax recovery (3,041) (2,558)

Legal settlement 1,579 —

Insurance recovery, net of payments (5,928) —

Gain on sale of business — (14,155)

Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) $ 144,660 $ 140,654

Index to Financial Statements

Fiscal Year Ended June 30,

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Equity – end of the year 906,409 924,255

Change in fair value of contingent consideration, net 1,432 —

Share-based compensation, net 8,310 7,120

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Restructuring, net 4,054 3,262

Gain on sale of business (14,155) —

Tax recovery, net (4,072) (2,566)

Impact of discontinued operations, net — (1,717)

Legal settlement, net 1,189 —

Insurance recovery, net (4,466) —

Gain on sale of business — (14,155)

Average equity 919,085 912,793

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Invested capital (denominator for adjusted ROIC) (non-GAAP) $ 1,060,258 $ 1,133,321

(a) Includes divestiture costs for the fiscal year ended June 30, 2023.

Divestiture costs are generally non-deductible for tax purposes.

(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.

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dollars using the comparable average foreign exchange rates from the prior fiscal year period.

We also exclude the impact of acquisitions and divestitures prior to the first full year of operations from the acquisition or divestiture date in order to show net sales results on an organic basis.

We also exclude the impact of acquisitions and divestitures prior to the

Index to Financial Statements

first full year of operations from the acquisition or divestiture date in order to show net sales results on an organic basis.

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

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

Index to Financial Statements

Net Sales by Segment:

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Foreign exchange impact (a)

Acquisitions (24,199) —

Divestitures — (4,019)

Non-GAAP net sales, constant currency $ 2,951,272 $ 3,163,530 $ (212,258) (6.7) %

Modern Communications & Cloud:

Intelisys & Advisory:

Net sales, reported $ 98,093 92,260 $ 5,833 6.3 %

Foreign exchange impact (a)

Divestitures (3,747) (9,140)

Acquisitions (5,978) —

Non-GAAP net sales, constant currency $ 92,096 $ 92,260 $ (164) (0.2) %

2 unchanged sentences

Foreign exchange impact (a)

Acquisitions (30,177) —

Divestitures — (4,019)

3 unchanged sentences

dollars using the average foreign exchange rates for the fiscal year ended June 30, 2024.

Index to Financial Statements

Net Sales by Geography:

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Foreign exchange impact (a)

Acquisitions (30,177) —

Divestitures — (4,019)

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Amortization of intangible assets 10,508 8,041 2,467

Change in fair value of contingent consideration (840) — (840)

Tax recovery, net (3,041) (2,558) (483)

Non-GAAP operating income $ 72,676 $ 72,161 $ 515 0.7 % 2.5 % 2.3 %

Modern Communications & Cloud:

Intelisys & Advisory:

GAAP operating income $ 27,214 $ 30,595 $ (3,381) (11.1) % 27.7 % 33.2 %

Amortization of intangible assets 8,719 7,682 1,037

Tax recovery (2,558) (2,986) 428

Change in fair value of contingent consideration 2,740 — 2,740

Non-GAAP operating income $ 38,673 $ 38,277 $ 396 1.0 % 39.4 % 41.5 %

GAAP operating loss $ (6,949) $ (1,460) $ (5,489) nm* nm* nm*

Divestiture costs 1,717 — 1,717

Cyberattack restoration costs 874 1,460 (586)

GAAP operating loss $ (8,063) $ (6,949) $ (1,114)

Acquisition and divestiture costs 926 1,717 (791)

Restructuring costs 5,381 4,358 1,023

Cyberattack restoration costs 177 874 (697)

Legal settlement 1,579 — 1,579

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

2 unchanged sentences

Amortization of intangible assets 19,227 15,723 3,504

Cyberattack restoration costs 874 1,460 (586)

Divestiture costs 1,717 — 1,717

Change in fair value of contingent consideration 1,900 — 1,900

Acquisition and divestiture costs 926 1,717 (791)

Restructuring costs 5,381 4,358 1,023

Tax recovery (3,041) (2,558) (483)

Cyberattack restoration costs 177 874 (697)

Legal settlement 1,579 — 1,579

Non-GAAP operating income $ 111,349 $ 110,438 $ 911 0.8 % 3.7 % 3.4 %

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Year ended June 30, 2025

GAAP Measure Intangible amortization expense Acquisition and Divestiture costs (a)

Restructuring costs Tax recovery Cyberattack restoration costs Gain on sale of business (b)

Non-GAAP measure

GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and Divestiture costs (a)

Restructuring costs Tax recovery Cyberattack restoration costs Legal Settlement Insurance Recovery Non-GAAP measure

(in thousands, except per share data)

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Year ended June 30, 2024

GAAP Measure Intangible amortization expense Acquisition and Divestiture costs (a)

GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and Divestiture costs (a)

Restructuring costs Tax recovery Cyberattack restoration costs Gain on sale of business (b)

Non-GAAP measure

Insurance Recovery Non-GAAP measure

(in thousands, except per share data)

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Diluted EPS $ 3.06 $ 0.46 $ — $ 0.07 $ 0.13 $ (0.10) $ 0.03 $ (0.56) $ — $ 3.08

(a) Acquisition and divestiture costs for the fiscal year ended June 30, 2024 are generally nondeductible for tax purposes.

(a) Acquisition and divestiture costs for the fiscal years ended June 30, 2025 and June 30, 2024 are generally nondeductible for tax purposes.

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

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Our policy for estimating allowances for doubtful accounts receivable is described below.

We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from customers’ failure to make payments on accounts receivable due us.

We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from channel sales partners’ failure to make payments on accounts receivable due us.

Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including:

(i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability.

(i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of i ts customers, (i v) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability.

We account for credit losses based upon ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326).

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Supplier Programs

We receive incentives from suppliers related to cooperative advertising allowances, volume rebates and other incentive programs.

We receive incentives from suppliers related to market development funds, volume rebates and other incentive programs.

These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers.

Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the supplier.

Suppliers generally require that we use the suppliers’ cooperative advertising allowances for advertising or other marketing programs.

Incentives received from suppliers for specifically identified incremental cooperative advertising programs are recorded as adjustments to selling, general and administrative expenses.

Suppliers generally require that we use the suppliers’ market development funds for advertising or other marketing programs.

Incentives received from suppliers for specifically identified incremental market development funds are recorded as adjustments to selling, general and administrative expenses.

ASC 606– Revenue from Contracts with Customers addresses accounting for consideration payable to a customer, which the Company interprets and applies as the customer (i.e., the Company) receives advertising funds from a supplier.

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Supplier receivables are generally collected through reductions to accounts payable authorized by the supplier.

Index to Financial Statements

In addition, we may receive early payment discounts from certain suppliers.

We record early payment discounts received as a reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold.

We record early payment discounts received as a

Index to Financial Statements

reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold.

ASC 606 requires management to make certain estimates of the amounts of supplier consideration that will be received.

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

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

Our goodwill reporting units align directly with our operating segments, Specialty Technology Solutions and Intelisys & Advisory.

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

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In our most recent annual test, we estimated the fair value of our reporting units primarily based on the income approach utilizing the discounted cash flow method.

As of June 30, 2024, the Specialty Technology and Modern Communications & Cloud reporting units' goodwill balances are $16.4 million and $189.9 million, respectively.

As of June 30, 2025, the Specialty Technology Solutions and Intelisys & Advisory reporting units' goodwill balances are $159.8 million and $71.0 million, respectively.

The fair value of the reporting units exceeded its carrying value by 2% and 100%, respectively, as of the annual goodwill impairment testing date.

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

The WACC is intended to represent a rate of return that would be expected by a market place participant in each respective geography.

The WACC is intended to represent a rate of return that would be expected by a marketplace participant in each respective geography.

• Operating income:

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

Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, decreased $313.5 million to $506.2 million at June 30, 2024 from $819.7 million at June 30, 2023, primarily as a result of lower sales volumes 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.

For the fiscal year ended June 30, 2024, our working capital investment decreased in return growing our availability and cash on hand to help finance future growth.

Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, increased $14.6 million to $520.7 million at June 30, 2025 from $506.2 million at June 30, 2024, primarily as a result of an increase in accounts receivable.

Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from channel sales partners, increases and decreases to inventory levels and payments to suppliers.

Cash (used in) provided by:

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Financing activities of continuing operations (110,905) (227,767)

Net cash provided by operating activities was $371.6 million for the fiscal year ended June 30, 2024 and cash used in operating activities was $35.8 million for the fiscal years ended June 30, 2023 , respectively.

Cash provided by operating activities for the fiscal year ended June 30, 2024 is primarily due to decreases in inventory and accounts receivable, which decreased 32.3% and 22.8%, respectively compared to the beginning of the fiscal year.

Cash provided by operating activities for the fiscal year ended June 30, 2023 is primarily due to increases in inventory, which increased 23.2% compared to the beginning of the fiscal year, partially offset by earnings from operations.

Net cash provided by operating activities was $112.3 million for the fiscal year ended June 30, 2025 and $371.6 million for the fiscal years ended June 30, 2024 .

The decrease in cash provided by operating activities for the fiscal year ended June 30, 2025 is primarily due to cash flows related to working capital, which decreased $22.5 million for the fiscal year ended June 30, 2025 versus a significant increase of $299.3 million for the prior year period.

The prior-year period reflected lower net investment in working capital from lower sales volumes and a multi-quarter working capital improvement plan.

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.

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

The number of days sales outstanding ("DSO") was 70 at June 30, 2025 unchanged from June 30, 2024.

Throughout fiscal year 2025, DSO ranged from 66 to 72.

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Throughout fiscal year 2025, inventory turnover ranged from 5.0 to 5.9 times.

Cash provided by investing activities was $9.0 million for the fiscal year ended June 30, 2024 compared to cash used in investing activities of $8.3 million for the fiscal year ended June 30, 2023.

Cash provided by investing activities for fiscal year 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 was $62.4 million for the fiscal year ended June 30, 2025 compared to cash provided of $9.0 million for the fiscal year ended June 30, 2024.

Cash used in investing activities for fiscal year 2025 is largely due to cash paid for acquisitions and capital expenditures.

Cash provided by investing activities for the fiscal year 2024 represents proceeds from the the sale of our discontinued operations, partially offset by capital expenditures.

Management expects capital expenditures for fiscal year 2026 to range fr om $10.0 million to $15.0 million, primarily for IT and warehouse investments.

Index to Financial Statements

investing activities for the fiscal year 2023 represents capital expenditures, partially offset by proceeds from the sale of our discontinued operations.

Management expects capital expenditures for fiscal year 2025 to range from $10.0 million to $15.0 million, primarily for IT investments.

Cash used in financing activities totaled $227.8 million for the fiscal year ended June 30, 2024 primarily due to repayments on the revolving line of credit and the repurchase of common stock.

Cash provided by financing activities of $39.5 million for the fiscal year ended June 30, 2023 was primarily from net borrowings on the revolving line of credit.

Cash used in financing activities totaled $110.9 million for the fiscal year ended June 30, 2025 primarily due to the repurchase of common stock.

Cash used in financing activities of $227.8 million for the fiscal year ended June 30, 2024 was primarily due to repayments on the revolving line of credit and the repurchase of common stock.

Share Repurchase Program

In May 2024, our Board approved an additional $100.0 million share repurchase authorization, which supplements the existing $100 million repurchase program authorized in August 2021.

In April 2025, our Board approved an additional $200 million share repurchase authorization, which supplements the existing the $100 million repurchase program authorized in May 2024.

The share repurchase authorizations do not have any time limits.

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We were in compliance with all covenants under the Amended Credit Agreement as of June 30, 2025.

Index to Financial Statements

The average daily balance on the revolving credit facility, excluding the term loan facility, was $0.3 million and $71.1 million during the fiscal years ended June 30, 2025 and June 30, 2024 , respectively.

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There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2025 and June 30, 2024 .

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

Index to Financial Statements

Facility EBITDA relative to total interest expense respectively.

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

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Contractual Obligations

At June 30, 2024, we had less than $0.1 million outstanding under our revolving credit facility.

We also had $140.6 million outstanding under our term loan facility, $7.5 million of which matures in fiscal year 2024.

At June 30, 2025, we did not have an outstanding balance under our revolving credit facility.

We had $133.1 million outstanding under our term loan facility, $7.5 million of which matured in fiscal year 2025.

Our revolving credit facility and our term loan facility have a maturity date September 28, 2027 .

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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-K

Item 7. Management’s Discussion and Analysis