SCANSOURCE, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview ScanSource is a leading technology distributor uniquely positioned to address complex, converging technologies and to accelerate 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 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 and Brazil: • Specialty Technology Solutions • 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 primarily support our United States business in Mississippi, California and Kentucky. Brazil distribution facilities are located in the Brazilian states of Paraná, Espirito Santo and Santa Catarina. We provide some of our digital products, which include SaaS and subscriptions, through our digital tools and platforms. Recent Developments Impact of the Macroeconomic Environment, Including Growth Outlook, Inflation and Tariffs The macroeconomic environment, including the economic impacts of growth outlook, inflationary pressures, tariffs and evolving geopolitical and trade relationships , 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, prompting reciprocal tariffs and other retaliatory actions in response. International trade policy and diplomatic dynamics continue to shift, and the full implications remain uncertain. We remain mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand. W e 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 through to our channel sales partners any supplier price increases resulting from tariffs. W e are also mitigating related risks through strategic planning and maintaining financial flexibility, however we cannot predict the effectiveness 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. 29 Table of Contents On October 20, 2025, we completed the acquisition of DataXoom, a leading connectivity provider dedicated to supporting purpose-built mobile deployments across our current supplier line card and beyond. Our Strategy Our strategy is to drive sustainable, profitable growth by providing 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 differentiated 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 converged solutions through our strong understanding of end-user needs. 30 Table of Contents Results of Operations Net Sales We have two reportable segments, which are based on sales channels. The following tables summarize our net sales results by operating segment and by geographic location for the quarters and six months ended December 31, 2025 and 2024: Quarter ended December 31, % Change, Constant Currency, Excluding Acquisitions (a) Net Sales by Segment: 2025 2024 $ Change % Change (in thousands) Specialty Technology Solutions $ 741,540 $ 723,277 $ 18,263 2.5 % 1.6 % Intelisys & Advisory 24,972 24,220 752 3.1 % 3.1 % Total net sales $ 766,512 $ 747,497 $ 19,015 2.5 % 1.7 % Six months ended December 31, % Change, Constant Currency, Excluding Acquisitions (a) 2025 2024 $ Change % Change (in thousands) Specialty Technology Solutions $ 1,456,987 $ 1,475,576 $ (18,589) (1.3) % (2.0) % Intelisys & Advisory 49,175 47,501 1,674 3.5 % 1.9 % Total net sales $ 1,506,162 $ 1,523,077 $ (16,915) (1.1) % (1.9) % (a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions, is presented at the end of Results of Operations , under Non-GAAP Financial Information. Specialty Technology Solutions The Specialty Technology Solutions segment consists of sales to channel partners primarily in the United States and Brazil. For the quarter ended December 31, 2025, net sales increased $18.3 million, or 2.5%, compared to the prior-year period. Excluding the impact of acquisitions and the impact of foreign exchange rate fluctuations, adjusted net sales increased $11.8 million , or 1.6%, for the quarter ended December 31, 2025. The increase for the quarter is primarily a result of growth in North America. For the six months ended December 31, 2025, net sales decreased $18.6 million, or 1.3%, compared to the prior-year period. E xcluding the impact from acquisitions and the impact from foreign exchange rate fluctuations, adjusted net sales decreased $29.8 million, or 2.0%, for the six months ended December 31, 2025, compared to the prior-year period. The decrease in net sales for the six months is primarily due to lower large deals. Intelisys & Advisory The Intelisys & Advisory segment consists of sales and services to both channel partners (Intelisys) and end users (Advisory) in the United States. For the quarter and six months ended December 31, 2025, net sales increased $0.8 million, or 3.1%, and $1.7 million, or 3.5%, respectively, compared to the prior-year periods. The increase in net sales reflects Intelisys organic net sales growth. Excluding the impact from foreign exchange rate fluctuations and the impact of acquisitions, adjusted net sales increased $0.8 million, or 3.1%, and $0.9 million, or 1.9%, for the quarter and six months ended December 31, 2025, respectively. The increase in net sales for the quarter and six months ended December 31, 2025 reflects Intelisys organic net sales growth. Quarterly net billings for Intelisys increased 2.5% over the prior-year quarter to bring annualized net billings to approximately $2.85 billion. 31 Table of Contents Quarter ended December 31, % Change, Constant Currency, Excluding Acquisitions (a) Net Sales by Geography: 2025 2024 $ Change % Change (in thousands) United States $ 707,366 $ 687,111 $ 20,255 2.9 % 2.7 % Brazil 59,146 60,386 (1,240) (2.1) % (9.4) % Total net sales (b) $ 766,512 $ 747,497 $ 19,015 2.5 % 1.7 % Six months ended December 31, % Change, Constant Currency, Excluding Acquisitions (a) 2025 2024 $ Change % Change (in thousands) United States and Canada $ 1,389,582 $ 1,399,130 $ (9,548) (0.7) % (1.1) % Brazil 116,580 123,947 (7,367) (5.9) % (10.4) % Total net sales (b) $ 1,506,162 $ 1,523,077 $ (16,915) (1.1) % (1.9) % (a) A reconciliation of non-GAAP net sales in constant currency is presented at the end of Results of Operations in the non-GAAP section. (b) Countries outside of the United States and Brazil represent less than 5.0% of net sales for the quarters and six months ended December 31, 2025 and 2024. 32 Table of Contents Gross Profit The following table summarizes our gross profit for the quarters and six months ended December 31, 2025 and 2024: Quarter ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Specialty Technology Solutions $ 78,228 $ 77,764 $ 464 0.6 % 10.5 % 10.8 % Intelisys & Advisory 24,682 23,959 723 3.0 % 98.8 % 98.9 % Gross profit $ 102,910 $ 101,723 $ 1,187 1.2 % 13.4 % 13.6 % Six months ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Specialty Technology Solutions $ 162,131 $ 156,221 $ 5,910 3.8 % 11.1 % 10.6 % Intelisys & Advisory 48,252 47,121 1,131 2.4 % 98.1 % 99.2 % Gross profit $ 210,383 $ 203,342 $ 7,041 3.5 % 14.0 % 13.4 % 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), 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. Gross profit margin in our Intelisys & Advisory segment reflects a higher contribution of recurring revenue which is recorded on a net basis. Specialty Technology Solutions For the quarter ended December 31, 2025, gross profit dollars for the Specialty Technology Solutions segment increased $0.5 million, or 0.6%, compared to the prior-year quarter. Higher sales volumes, after considering cost of goods sold, and favorable supplier recognition program, impacted gross profit by $2.6 million. Higher freight costs reduced gross profit by $2.1 million for the quarter. Gross profit margin decreased 20 basis points over the prior-year quarter to 10.5%. For the six months ended December 31, 2025, gross profit dollars increased $5.9 million, or 3.8%, compared to the prior-year period. Favorable sales mix and supplier program recognition positively impacted gross profit by $10.6 million. Higher freight costs and lower sales volume, after considering cost of goods sold, reduced gross profit by $4.7 million for the six months . Gross profit margin increased 54 basis points over the prior-year quarter to 11.1% . Intelisys & Advisory For the quarter ended December 31, 2025, gross profit dollars for the Intelisys & Advisory segment increased $0.7 million, or 3.0%, compared to the prior-year quarter. Higher sales volume primarily attributable to Intelisys increased gross profit for the quarter. Gross profit margin decreased 8 basis points compared to the prior-year quarter to 98.8%. For the six months ended December 31, 2025, gross profit dollars increased $1.1 million, or 2.4%, compared to the prior-year period. Higher sales volume primarily attributable to Intelisys sales growth increased gross profit for the six months by $1.6 million. The increase in gross profit was partially offset by less favorable sales mix of $0.5 million due to a higher mix of services. Gross profit margin decreased 108 basis points over the prior-year quarter to 98.1% . 33 Table of Contents Operating Expenses The following table summarizes our operating expenses for the quarters and six months ended December 31, 2025 and 2024: Quarter ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Selling, general and administrative expenses $ 78,114 $ 73,920 $ 4,194 5.7 % 10.2 % 9.9 % Depreciation expense 1,434 2,902 (1,468) (50.6) % 0.2 % 0.4 % Intangible amortization expense 4,285 5,001 (716) (14.3) % 0.6 % 0.7 % Restructuring and other charges — 313 (313) (100.0) % 0.0 % 0.0 % Change in fair value of contingent consideration 1,209 1,143 66 *nm 0.2 % 0.2 % Operating expenses $ 85,042 $ 83,279 $ 1,763 2.1 % 11.1 % 11.1 % Six months ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Selling, general and administrative expenses $ 153,388 $ 145,626 $ 7,762 5.3 % 10.2 % 9.6 % Depreciation expense 3,011 5,759 (2,748) (47.7) % 0.2 % 0.4 % Intangible amortization expense 8,689 9,359 (670) (7.2) % 0.6 % 0.6 % Restructuring and other charges — 5,381 (5,381) (100.0) % 0.0 % 0.4 % Change in fair value of contingent consideration 1,523 1,143 380 *nm 0.1 % 0.1 % Operating expenses $ 166,611 $ 167,268 $ (657) (0.4) % 11.1 % 11.0 % *nm - percentages are not meaningful Selling, general and administrative expenses (“SG&A”) increased by $4.2 million, or 5.7%, and $7.8 million, or 5.3%, for the quarter and six months ended December 31, 2025, respectively, compared to the prior-year periods. The increase for the quarter and six-month period ended December 31, 2025 is primarily attributable to increased costs for employee-related expenses and costs related to acquisitions. SG&A includes customer specific bad debt expenses in Brazil for the quarter and six months ended December 31, 2025. The decrease in depreciation expense of $1.5 million and $2.7 million during the quarter and six months ended December 31, 2025, respectively, is largely due to certain ERP software assets being fully depreciated in the previous fiscal year. Restructuring and other charges of $0.3 million and $5.4 million were incurred in the quarter and six months ended December 31, 2024. Restructuring and other charges relate to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during the prior fiscal year. 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 $1.2 million and $1.5 million in the quarter and six months ended December 31, 2025, respectively. The expense from changes in fair value of contingent consideration for the quarter and six months ended December 31, 2025 is largely due to the recurring amortization of the unrecognized fair value discount as well as the addition of a new acquisition in the quarter. 34 Table of Contents Operating Income The following table summarizes our operating income for the quarters and six months ended December 31, 2025 and 2024: Quarter ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Specialty Technology Solutions $ 11,001 $ 14,077 $ (3,076) (21.9) % 1.5 % 1.9 % Intelisys & Advisory 7,513 6,440 1,073 16.7 % 30.1 % 26.6 % Corporate (646) (2,073) 1,427 *nm *nm *nm Operating income $ 17,868 $ 18,444 $ (576) (3.1) % 2.3 % 2.5 % Six months ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Specialty Technology Solutions $ 31,376 $ 30,816 $ 560 1.8 % 2.2 % 2.1 % Intelisys & Advisory 13,331 12,853 478 3.7 % 27.1 % 27.1 % Corporate (935) (7,595) 6,660 *nm *nm *nm Operating income $ 43,772 $ 36,074 $ 7,698 21.3 % 2.9 % 2.4 % *nm - percentages are not meaningful Specialty Technology Solutions For the Specialty Technology Solutions segment, operating income decreased $3.1 million, or 21.9% for the quarter ended December 31, 2025, compared to an increase of $0.6 million, or 1.8% for the six months ended December 31, 2025, compared to the prior-year periods. Operating margin was 1.5% and 2.2% for the quarter and six months ended December 31, 2025, respectively. The decrease in operating income for the quarter ended December 31, 2025 is primarily due to increased costs related to acquisitions as well as employee-related expenses. The increase in operating income for the six months is primarily due to higher gross profits for the six months ended December 31, 2025. Intelisys & Advisory For the Intelisys & Advisory segment, operating income increased $1.1 million, or 16.7%, and $0.5 million, or 3.7%, respectively, for the quarter and six months ended December 31, 2025, respectively, compared to the prior-year periods. Operating margin increased to 30.1% for the quarter ended December 31, 2025 and remained consistent at 27.1% for the six months ended December 31, 2025. The increase in operating income for the quarter comparative period is primarily driven by higher by sales volume. Corporate For the quarter and six months ended December 31, 2025, Corporate operating losses of $0.6 million and $0.9 million, respectively, primarily represents acquisition-related costs. For the quarter and six months ended December 31, 2024, Corporate operating losses of $2.1 million and $7.6 million, respectively, represent restructuring, acquisition-related costs and a legal settlement incurred in December 2024. 35 Table of Contents Total Other (Income) Expense The following table summarizes our total other (income) expense for the quarters and six months ended December 31, 2025 and 2024: Quarter ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Interest expense $ 1,946 $ 1,970 $ (24) (1.2) % 0.3 % 0.3 % Interest income (3,363) (2,693) (670) 24.9 % (0.4) % (0.4) % Net foreign exchange losses (gains) 658 (252) 910 (361.1) % 0.1 % (0.0) % Other, net (794) (291) (503) 172.9 % (0.1) % (0.0) % Total other (income) expense, net $ (1,553) $ (1,266) $ (287) 22.7 % (0.2) % (0.2) % Six months ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 (in thousands) Interest expense $ 3,859 $ 4,078 $ (219) (5.4) % 0.3 % 0.3 % Interest income (6,543) (5,352) (1,191) 22.3 % (0.4) % (0.4) % Net foreign exchange losses 1,006 83 923 1,112.0 % 0.1 % 0.0 % Other, net (969) (5,408) 4,439 nm* (0.1) % (0.4) % Total other (income) expense, net $ (2,647) $ (6,599) $ 3,952 (59.9) % (0.2) % (0.4) % *nm - percentages are not meaningful Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs. Interest expense decreased for the quarter and six months ended December 31, 2025 compared to the prior-year periods, primarily from lower average borrowings on our multi-currency revolving credit facility and lower interest rates. Interest income increased for the quarter and six months ended December 31, 2025 primarily from higher interest income in Brazil. 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. Foreign exchange gains and losses are generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real, the Canadian dollar versus the U.S. dollar, the euro versus the U.S. dollar, and the British pound versus the U.S. dollar. We partially offset foreign currency exposure with the use of foreign exchange contracts to hedge against these exposures. The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses. Other net income increased for the quarter ended December 31, 2025, due to a $0.8 million insurance recovery in connection with the cybersecurity attack in fiscal year 2023. Other net income decreased for the six months ended December 31, 2025 due to a larger insurance recovery of $5.4 million related to the cybersecurity attack recognized in the prior year period. Provision for Income Taxes For the quarter and six months ended December 31, 2025, income tax expense was $2.9 million and $10.0 million reflecting an effective tax rate of 15.1% and 21.6%, respectively. In comparison, for the quarter and six months ended December 31, 2024, income tax expense was $2.7 million and $8.6 million reflecting an effective tax rate of 13.5% and 20.3%, respectively. We expect the effective tax rate, excluding discrete items, for fiscal year 2026 to be approximately 27.2% to 28.2%. See Note 13 - Income Taxes to the Notes to Consolidated Financial Statements for further discussion. 36 Table of Contents Non-GAAP Financial Information Evaluating Financial Condition and Operating Performance In addition to disclosing results that are determined in accordance with United States generally accepted accounting principles (“US GAAP” or “GAAP”), we also disclose certain non-GAAP financial measures. These measures include non-GAAP operating income; non-GAAP pre-tax income; non-GAAP net income; non-GAAP EPS; adjusted earnings before interest expense, income taxes, depreciation, and amortization (“adjusted EBITDA”); adjusted return on invested capital (“adjusted ROIC”); and constant currency. Constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates between reporting periods. We use non-GAAP financial measures to better understand and evaluate performance, including comparisons from period to period. These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that we report may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with US GAAP. Adjusted Return on Invested Capital Adjusted ROIC assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance during the year. Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, share-based compensation expense, and other non-GAAP adjustments. Since adjusted EBITDA excludes some non-cash costs of investing in our business and people, we believe that adjusted EBITDA shows the profitability from our business operations more clearly. We calculate adjusted ROIC as adjusted EBITDA, divided by invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. The following table summarizes annualized adjusted ROIC for the quarters ended December 31, 2025 and 2024, respectively: Quarter ended December 31, 2025 2024 Adjusted return on invested capital ratio, annualized (a) 11.9 % 13.3 % (a) The annualized EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 92 days in the current and in the prior-year quarter. The components of this calculation and reconciliation to our financial statements are shown on the following schedule: 37 Table of Contents Quarter ended December 31, 2025 2024 (in thousands) Reconciliation of net income to adjusted EBITDA: Net income (GAAP) $ 16,493 $ 17,053 Plus: Interest expense 1,946 1,970 Plus: Income taxes 2,928 2,657 Plus: Depreciation and amortization 5,938 8,132 EBITDA (non-GAAP) 27,305 29,812 Plus: Change in fair value of contingent consideration 1,209 1,143 Plus: Share-based compensation 3,660 3,021 Plus: Acquisition costs (a) 593 151 Plus: Cyberattack restoration costs 53 30 Plus: Restructuring costs — 313 Plus: Legal settlement — 1,579 Plus: Tax recovery (789) (750) Plus: Insurance recovery, net of payments (838) — Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) $ 31,193 $ 35,299 (a) Acquisition costs are generally non-deductible for tax purposes. Quarter ended December 31, 2025 2024 (in thousands) Invested capital calculations: Equity – beginning of the quarter $ 914,032 $ 920,893 Equity – end of the quarter 910,886 900,662 Plus: Change in fair value of contingent consideration, net of tax 907 861 Plus: Share-based compensation, net 2,741 2,271 Plus: Acquisition costs (a) 593 151 Plus: Cyberattack restoration costs, net 39 23 Plus: Restructuring, net — 236 Plus: Legal settlement — 1,189 Plus: Insurance recovery, net of payments (629) — Plus: Tax recovery, net (2,991) (2,560) Average equity 912,789 911,863 Average funded debt (b) 131,470 142,143 Invested capital (denominator for adjusted ROIC) (non-GAAP) (c) $ 1,044,259 $ 1,054,006 (a) Acquisition 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. (c) The annualized adjusted EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for a leap year. There were 92 days in the current quarter and the prior-year quarter. Net Sales in Constant Currency Excluding Acquisitions We make references to “constant currency,” a non-GAAP performance measure that excludes the foreign exchange rate impact from fluctuations in the average foreign exchange rates between reporting periods. Constant currency is calculated by translating current period results from currencies other than the U.S. dollar into U.S. dollars using the comparable average foreign exchange rates from the prior-year period. We also exclude the impact of acquisitions prior to the first full year of operations from the acquisition 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. 38 Table of Contents Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency excluding acquisitions: Net Sales by Segment: Quarter ended December 31, 2025 2024 $ Change % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 741,540 $ 723,277 $ 18,263 2.5 % Foreign exchange impact (a) (4,412) — Less: Acquisitions (2,034) — Non-GAAP net sales $ 735,094 $ 723,277 $ 11,817 1.6 % Intelisys & Advisory: Non-GAAP net sales $ 24,972 $ 24,220 $ 752 3.1 % Consolidated: Net sales, reported $ 766,512 $ 747,497 $ 19,015 2.5 % Foreign exchange impact (a) (4,412) — Less: Acquisitions (2,034) — Non-GAAP net sales $ 760,066 $ 747,497 $ 12,569 1.7 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2025 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2024. Net Sales by Segment: Six months ended December 31, 2025 2024 $ Change % Change Specialty Technology Solutions (in thousands) Net sales, reported $ 1,456,987 $ 1,475,576 $ (18,589) (1.3) % Foreign exchange impact (a) (5,497) — Less: Acquisitions (9,204) (3,512) Non-GAAP net sales $ 1,442,286 $ 1,472,064 $ (29,778) (2.0) % Intelisys & Advisory Net sales, reported $ 49,175 $ 47,501 $ 1,674 3.5 % Less: Acquisitions (1,336) (577) Non-GAAP net sales $ 47,839 $ 46,924 $ 915 1.9 % Consolidated: Net sales, reported $ 1,506,162 $ 1,523,077 $ (16,915) (1.1) % Foreign exchange impact (a) (5,497) — Less: Acquisitions (10,540) (4,089) Non-GAAP net sales $ 1,490,125 $ 1,518,988 $ (28,863) (1.9) % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the six months ended December 31, 2025 into U.S. dollars using the average foreign exchange rates for the six months ended December 31, 2024. 39 Table of Contents Net Sales by Geography: Quarter ended December 31, 2025 2024 $ Change % Change United States: (in thousands) Net sales, reported (a) $ 707,366 $ 687,111 $ 20,255 2.9 % Less: Acquisitions (2,034) — Non-GAAP net sales $ 705,332 $ 687,111 $ 18,221 2.7 % Brazil: Net sales, reported (b) $ 59,146 $ 60,386 $ (1,240) (2.1) % Foreign exchange impact (c) (4,412) — Non-GAAP net sales, constant currency $ 54,734 $ 60,386 $ (5,652) (9.4) % Consolidated: Net sales, reported $ 766,512 $ 747,497 $ 19,015 2.5 % Foreign exchange impact (c) (4,412) — Less: Acquisitions (2,034) — Non-GAAP net sales, constant currency $ 760,066 $ 747,497 $ 12,569 1.7 % (a) Includes net sales in Canada that are supported by U.S. operations and represent less than 5.0% of United States net sales for the quarters ended December 31, 2025 and 2024. (b) Includes net sales from outside of the United States, Canada and Brazil, which represent less than 0.1% of Brazil net sales for the quarters ended December 31, 2025 and 2024. (c) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2025 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2024. Six months ended December 31, 2025 2024 $ Change % Change United States and Canada: (in thousands) Net sales, as reported $ 1,389,582 $ 1,399,130 $ (9,548) (0.7) % Less: Acquisitions (10,540) (4,089) Non-GAAP net sales 1,379,042 1,395,041 $ (15,999) (1.1) % Brazil: Net sales, reported (a) $ 116,580 $ 123,947 $ (7,367) (5.9) % Foreign exchange impact (b) (5,497) — Non-GAAP net sales, constant currency $ 111,083 $ 123,947 $ (12,864) (10.4) % Consolidated: Net sales, reported $ 1,506,162 $ 1,523,077 $ (16,915) (1.1) % Foreign exchange impact (b) (5,497) — Less: Acquisitions (10,540) (4,089) Non-GAAP net sales, constant currency $ 1,490,125 $ 1,518,988 $ (28,863) (1.9) % (a) Countries outside of Brazil represent less than $0.1 million, or 0.1% of sales, for the six months ended December 31, 2025 and $0.2 million, or 0.2% of sales, for the six months ended December 31, 2024. (b) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the six months ended December 31, 2025 into U.S. dollars using the average foreign exchange rates for the six months ended December 31, 2024. 40 Table of Contents Operating Income by Segment: Quarter ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 Specialty Technology Solutions: (in thousands) GAAP operating income $ 11,001 $ 14,077 $ (3,076) (21.9) % 1.5 % 1.9 % Adjustments: Amortization of intangible assets 2,097 2,740 (643) Change in fair value of contingent consideration 1,128 473 655 Tax recovery, net (789) (750) (39) Non-GAAP operating income $ 13,437 $ 16,540 $ (3,103) (18.8) % 1.8 % 2.3 % Intelisys & Advisory: GAAP operating income $ 7,513 $ 6,440 $ 1,073 16.7 % 30.1 % 26.6 % Adjustments: Amortization of intangible assets 2,188 2,261 (73) Change in fair value of contingent consideration 81 670 (589) Non-GAAP operating income $ 9,782 $ 9,371 $ 411 4.4 % 39.2 % 38.7 % Corporate: GAAP operating loss $ (646) $ (2,073) $ 1,427 *nm *nm *nm Adjustments: Acquisition costs 593 151 442 Restructuring costs — 313 (313) Cyberattack restoration costs 53 30 23 Legal settlement — 1,579 (1,579) Non-GAAP operating income $ — $ — $ — *nm *nm *nm Consolidated: GAAP operating income $ 17,868 $ 18,444 $ (576) (3.1) % 2.3 % 2.5 % Adjustments: Amortization of intangible assets 4,285 5,001 (716) Change in fair value of contingent consideration 1,209 1,143 66 Tax recovery (a) (789) (750) (39) Acquisition costs 593 151 442 Restructuring costs — 313 (313) Cyberattack restoration costs 53 30 23 Legal settlement — 1,579 (1,579) Non-GAAP operating income $ 23,219 $ 25,911 $ (2,692) (10.4) % 3.0 % 3.5 % (a) Recovery of prior period withholding taxes in Brazil. *nm - percentages are not meaningful 41 Table of Contents Operating Income by Segment: Six months ended December 31, % of Net Sales December 31, 2025 2024 $ Change % Change 2025 2024 Specialty Technology Solutions: (in thousands) GAAP operating income $ 31,376 $ 30,816 $ 560 1.8 % 2.2 % 2.1 % Adjustments: Amortization of intangible assets 4,313 5,016 (703) Change in fair value of contingent consideration 1,273 473 800 Tax recovery (a) (789) (750) (39) Non-GAAP operating income $ 36,173 $ 35,555 $ 618 1.7 % 2.5 % 2.4 % Intelisys & Advisory: GAAP operating income $ 13,331 $ 12,853 $ 478 3.7 % 27.1 % 27.1 % Adjustments: Amortization of intangible assets 4,376 4,343 33 Change in fair value of contingent consideration 250 670 (420) Non-GAAP operating income $ 17,957 $ 17,866 $ 91 0.5 % 36.5 % 37.6 % Corporate: GAAP operating loss $ (935) $ (7,595) $ 6,660 *nm *nm *nm Adjustments: Cyberattack restoration costs 81 106 (25) Acquisition costs 854 529 325 Restructuring costs — 5,381 (5,381) Legal settlement — 1,579 (1,579) Non-GAAP operating income $ — $ — $ — *nm *nm *nm Consolidated: GAAP operating income $ 43,772 $ 36,074 $ 7,698 21.3 % 2.9 % 2.4 % Adjustments: Amortization of intangible assets 8,689 9,359 (670) Change in fair value of contingent consideration 1,523 1,143 380 Cyberattack restoration costs 81 106 (25) Tax recovery (a) (789) (750) (39) Acquisition costs 854 529 325 Restructuring costs — 5,381 (5,381) Legal settlement — 1,579 (1,579) Non-GAAP operating income $ 54,130 $ 53,421 $ 709 1.3 % 3.6 % 3.5 % (a) Recovery of prior period withholding taxes in Brazil. *nm - percentages are not meaningful 42 Table of Contents Additional Non-GAAP Metrics To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to divestitures, cyberattack restoration costs and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Below we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above: Quarter ended December 31, 2025 GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Insurance Recovery Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 78,114 $ — $ — $ (593) $ — $ 789 $ (53) $ — $ 78,257 Operating income 17,868 4,285 1,209 593 — (789) 53 — 23,219 Pre-tax income 19,421 4,285 1,209 593 — (789) 53 (838) 23,934 Net income 16,493 3,199 907 593 — (2,991) 39 (629) 17,611 Diluted EPS $ 0.75 $ 0.14 $ 0.04 $ 0.03 $ — $ (0.14) $ — $ (0.03) $ 0.80 Quarter ended December 31, 2024 GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Legal settlement Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 73,920 $ — $ — $ (151) $ — $ 750 $ (30) $ (1,579) $ 72,910 Operating income 18,444 5,001 1,143 151 313 (750) 30 1,579 25,911 Pre-tax income 19,710 5,001 1,143 151 313 (750) 30 1,579 27,177 Net income 17,053 3,745 861 151 236 (2,560) 23 1,189 20,698 Diluted EPS $ 0.70 $ 0.15 $ 0.04 $ 0.01 $ 0.01 $ (0.11) $ — $ 0.05 $ 0.85 (a) Acquisition costs for the quarters ended December 31, 2025 and 2024 are generally nondeductible for tax purposes. 43 Table of Contents Six months ended December 31, 2025 GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Insurance recovery Legal settlement Non-GAAP measure SG&A expenses $ 153,388 $ — $ — $ (854) $ — $ 789 $ (81) $ — $ — $ 153,242 Operating income 43,772 8,689 1,523 854 — (789) 81 — — 54,130 Pre-tax income 46,419 8,689 1,523 854 — (789) 81 (838) — 55,939 Net income 36,372 6,488 1,144 854 — (2,991) 61 (629) — 41,299 Diluted EPS $ 1.63 $ 0.29 $ 0.05 $ 0.04 $ — $ (0.13) $ — $ (0.03) $ — $ 1.86 Six months ended December 31, 2024 GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Insurance recovery Legal settlement Non-GAAP measure SG&A expenses $ 145,626 $ — $ — $ (529) $ — $ 750 $ (106) $ — $ (1,579) $ 144,162 Operating income 36,074 9,359 1,143 529 5,381 (750) 106 — 1,579 53,421 Pre-tax income 42,673 9,359 1,143 529 5,381 (750) 106 (4,868) 1,579 55,152 Net income 34,028 7,010 861 529 4,054 (2,560) 80 (3,667) 1,189 41,524 Diluted EPS $ 1.39 $ 0.29 $ 0.04 $ 0.02 $ 0.17 $ (0.10) $ — $ (0.15) $ 0.05 $ 1.70 (a) Acquisition costs for the six months ended December 31, 2025 and 2024 are generally nondeductible for tax purposes. 44 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity are cash flows from operations and borrowings under our $400 million revolving credit facility. Our business requires significant investment in working capital, particularly accounts receivable and inventory, partially financed through our accounts payable to vendors, cash generated from operations and revolving lines of credit. In general, as our sales volume increases, our net investment in working capital increases, which typically results in decreased cash flow from operating activities. Conversely, when sales volume decreases, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities. Our cash and cash equivalents balance totaled $83.5 million at December 31, 2025, compared to $126.2 million at June 30, 2025, including $31.1 million and $46.3 million held outside of the United States at December 31, 2025 and June 30, 2025, respectively. Checks released but not yet cleared in the amount of $0.2 million and $0.1 million are included in accounts payable at December 31, 2025 and June 30, 2025, respectively. We conduct business primarily in the United States and Brazil where we generate and use cash. We provide for United States income taxes from the earnings of our Canadian and Brazilian subsidiaries. See Note 13 - Income Taxes in the Notes to the Consolidated Financial Statements for further discussion. Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, decreased $1.7 million to $519.0 million at December 31, 2025 from $520.7 million at June 30, 2025, primarily from a decrease in accounts receivable, partially offset by an increase in inventories and a decrease in accounts payable. 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 vendors. Six months ended December 31, 2025 2024 (in thousands) Cash provided by (used in): Operating activities $ 54,052 $ 38,642 Investing activities (22,728) (58,452) Financing activities (73,268) (52,361) Operating cash flows are subject to variability period over period as a result of the timing of payments related to accounts receivable, accounts payable, and other working capital items. Net cash provided by operating activities was $54.1 million and $38.6 million for the six months ended December 31, 2025 and December 31, 2024, respectively . Cash provided by operating activities for the six months ended December 31, 2025 is primarily attributable to net income and changes in working capital balances. Compared to December 31, 2024 , accounts payable and accounts receivable increased 10.8% and 10.3%, respectively. The number of days sales outstanding ("DSO") was 71 days at December 31, 2025, compared to 70 days at June 30, 2025 and 66 days at December 31, 2024. Inventory turned 5.3 times during the quarter ended December 31, 2025, compared to 5.9 times during the quarter ended June 30, 2025 and 5.2 times in the prior-year quarter ended December 31, 2024. Cash used in investing activities for the six months ended December 31, 2025 was $22.7 million, compared to cash used in investing activities of $58.5 million in the prior-year period. Cash used in investing activities for the six months ended December 31, 2025 represents cash paid for acquisitions and capital expenditures. Cash used in investing activities for the six months ended December 31, 2024 represents cash paid for acquisitions and capital expenditures offset by cash received for disposal of business. Management expects capital expenditures for fiscal year 2026 to range from $8.0 million to $12.0 million, primarily for IT and warehouse investments. 45 Table of Contents For the six months ended December 31, 2025 and December 31, 2024 , cash used in financing activities totaled $73.3 million and $52.4 million, respectively. Cash used in financing activities for the six months ended December 31, 2025 represents repayments on long-term debt and common stock repurchases. Cash used in financing activities for the six months ended December 31, 2024 is primarily attributable to common stock repurchases. Credit Facility On December 18, 2025, the Company entered into a credit agreement (the “New Credit Agreement”) with PNC Bank, National Association, as administrative agent (“PNC”), and the other lenders party thereto (the “Lenders”), providing for (i) a five-year, $400 million multicurrency senior secured revolving credit facility and (ii) a five-year $100 million senior secured term loan facility (the “New Credit Facilities”). In addition, pursuant to an “accordion feature,” the Company may increase its borrowings by up to the greater of $250 million or 150% of the Company’s EBITDA calculated on a Pro Forma Basis (each as defined in the New Credit Agreement), subject to obtaining additional credit commitments from the Lenders participating in the increase. The New Credit Agreement allows for issuance of up to $50 million for letters of credit. Borrowings under the New Credit Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries. Under the terms of the revolving credit facility, the payment of cash dividends is restricted. The Company incurred debt issuance costs of $1.4 million in connection with the New Credit Agreement. These costs were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility. 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 Term Secured Overnight Financing Rate ("SOFR") or 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 its 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 (ii) the base rate plus an additional margin ranging from 0% to 0.75%, depending upon the Company’s leverage ratio. All swingline loans denominated in U.S. dollars bear interest based upon the daily simple SOFR, floating daily, plus an additional margin ranging from 1.00% to 1.75% depending upon the Company's leverage ratio, or such other rate as the Company and the applicable swingline lender may agree. Loans denominated in foreign currencies bear interest at a rate per annum equal to the applicable benchmark rate set forth in the New Credit Agreement plus an additional margin ranging from 1.00% to 1.75%, depending upon the Company’s leverage ratio. A commitment fee is payable on the unused amount of commitments under the revolving credit facility. The commitment fee ranges from 0.15% to 0.30%, depending on the Company’s leverage ratio. In connection with entering into the New Credit Agreement, on December 18, 2025, the Company terminated and repaid all indebtedness and other obligations outstanding under its Third Amended and Restated Credit Agreement (the “Prior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto, which provided for (i) a five-year, $350 million multicurrency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility. During the quarter and six months ended December 31, 2025, all of the Company's borrowings under New Credit Agreement and Prior Credit Agreement were U.S. dollar loans. The spread in effect as of December 31, 2025 was 1.00% for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect at December 31, 2025 was 0.15%. The effective interest rates for the term loan were 4.72% and 5.43% as of December 31, 2025 and June 30, 2025, respectively. The New Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants. Specifically, the Company’s leverage ratio must be less than or equal to 3.50 to 1.00. In addition, the Company’s Interest Coverage Ratio (as such term is defined in the New Credit Agreement) must be at least 3.00 to 1.00 at the end of each fiscal quarter. 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 New Credit Agreement at December 31, 2025. The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, was $1.7 million an d $0.3 million during the six month periods ended December 31, 2025 and 2024, respectively. There was $400.0 million and $350.0 million available for additional borrowings as of December 31, 2025 and June 30, 2025, respectively. The effective interest rates for the revolving line of credit were 4.76% and 5.46% as of December 31, 2025 and June 30, 2025, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of December 31, 2025 and June 30, 2025. Summary We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet our present and 46 Table of Contents future working capital and cash requirements for at least the next twelve months. We also believe that our longer-term working capital, planned expenditures and other general funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities. Accounting Standards Recently Issued See Note 1 of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on our consolidated financial position and results of operations. Critical Accounting Policies and Estimates Critical accounting policies are those that are important to our financial condition and require management's most difficult, subjective or complex judgments. Different amounts would be reported under different operating conditions or under alternative assumptions. See Management's Discussion and Analysis of Financial Condition and Results from Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 for a complete discussion. 47 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk For a description of our market risks, see Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. No material changes have occurred to our market risks since June 30, 2025. 48 Table of Contents