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Item 7. Management’s Discussion and Analysis

2026-08-20 compared with 2025-08-21 · 115 added, 153 removed, 381 unchanged (41% of the section changed)

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

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.

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 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

• Intelisys & Advisory

Our Specialty Technology Solutions segment operates primarily in the United States and Brazil and our Intelisys & Advisory segment operates primarily in the United States.

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.

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.

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.

Our key suppliers includ e AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Elo, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, HPE/Juniper, 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.

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 conflicts and trade relationships, continues to create significant uncertainty and may adversely affect our financial condition and results of operations.

In 2026, 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 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.

Supreme Court invalidated the tariffs imposed under the International Emergency Economic Powers Act (IEEPA);

however, certain other tariffs remain in effect and the current administration has indicated that it will continue seeking to implement tariffs through other statutory authorities.

Further, the ongoing conflict with Iran and geopolitical tensions has resulted in volatility in the global energy and commodity markets and increased uncertainty in the macroeconomic environment.

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.

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 through to our channel sales partners any supplier price increases resulting from tariffs or other factors.

We 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.

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.

Our goal is to provide exceptional experiences for our channel sales partners, suppliers and employees, through 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.

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

Index to Financial Statements

Results of Operations from Continuing Operations

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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, 2025 for a discussion of fiscal year ended June 30, 2024.

Index to Financial Statements

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, 2026 and 2025.

Index to Financial Statements

2026 2025 $ Change % Change % Change Constant Currency (a)

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Specialty Technology Solutions

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 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.

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

During fiscal year 2026, net sales for this segment increased $182.2 million, or 6.2%, compared to fiscal year 2025.

Excluding the impact from foreign exchange fluctuations and the impact of acquisitions, non-GAAP net sales for fiscal year 2026 increased $154.6 million, or 5.3%, compared to the prior fiscal year.

The increase in net sales and in non-GAAP net sales is primarily due to broad-based growth in North America.

Intelisys & Advisory

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During fiscal year 2026, net sales for this segment increased $3.0 million, or 3.1%, compared to fiscal year 2025.

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 increase in net sales reflects higher Intelisys sales and higher Resourcive sales.

Excluding the impact of acquisitions, non-GAAP net sales increased $2.3 million, or 2.3%, compared to the prior year primarily reflects higher Intelisys sales.

For fiscal year 2026, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.88 billion, an increase of 3.2% from the prior fiscal year .

The following table summarizes our gross profit for the fiscal years ended June 30, 2026 and 2025:

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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.

Gross profit margin in our Intelisys & Advisory segment reflects a higher contribution of recurring revenue which is recorded on a net basis.

Index to Financial Statements

Specialty Technology Solutions

For the Specialty Technology Solutions segment, gross profit dollars increased $26.2 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.

Higher sales volumes, after considering cost of goods sold, increased gross profit by $19.2 million.

Favorable supplier program recognition, offset by unfavorable sales mix and higher freight cost, impacted gross profit by $7.0 million for the current fiscal year.

For the fiscal year ended June 30, 2026, the gross profit margin increased 22 basis points over the prior-year to 10.8%.

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For the Intelisys & Advisory segment, gross profit dollars increased $2.5 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.

Higher sales volume, largely due to higher Intelisys sales and the full year impact of our Resourcive acquisition, increased gross profit dollars by $3.0 million .

The increase was partially offset by a higher sales mix of professional services of $0.5 million.

Gross profit margin decreased 54 basis points over the prior fiscal year to 98.6%.

Operating expenses

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Restructuring and other charges 1,766 5,381 (3,615) (67.2) % 0.1 % 0.2 %

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

Change in fair value of contingent consideration 1,073 1,900 (827) (43.5) % — 0.1 %

Operating expenses $ 338,728 $ 323,446 $ 15,282 4.7 % 10.5 % 10.6 %

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Selling, general and administr ative expenses (“SG&A”) increased $26.2 million for the fiscal year ended June 30, 2026 compared to the prior year.

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

Index to Financial Statements

The increase in SG&A expenses is primarily attributable to increased costs for employee-related expenses.

Depreciation expense decreased $4.0 million for the fiscal year ended June 30, 2026 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.

The decrease is primarily related to certain IT assets that became fully depreciated.

Intangible amortization expense decreased $2.5 million for the fiscal year ended June 30, 2026 compared to the prior fiscal year.

The decrease is a result of fully amortized intangible assets in the prior fiscal year.

Restructuring and other charges of $1.8 million for the fiscal year ended June 30, 2026 decreased $3.6 million compared to the prior year, which primarily related to employee separation and benefit costs in connection with our expense reduction and restructuring plans.

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.

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

Index to Financial Statements

Operating Income

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Specialty Technology Solutions

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.

For the Specialty Technology Solutions segment, operating income increased $8.1 million, and the operating margin increased 13 basis points to 2.4% for the fiscal year ended June 30, 2026, compared to the prior fiscal year.

The increase in operating income is primarily due to higher sales volume for the fiscal year.

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

For the Intelisys & Advisory segment, operating income increased $1.4 million with the operating margin increasing to 28.3% for the fiscal year ended June 30, 2026, compared to the prior fiscal year.

The increase in operating income is largely due to higher sales volume and lower expense for the change in fair value of contingent consideration.

For the fiscal year ended June 30, 2026, Corporate operating loss totaled $4.1 million which represents $1.8 million in restructuring expenses, $0.9 million legal settlement, $1.3 million of acquisition costs and $0.1 million in cyberattack restoration charges.

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

Total Other (Income) Expense

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Net foreign exchange losses 1,600 755 845 111.9 % — % — %

Gain on sale of business — (14,155) 14,155 *nm — % (0.4) %

Other, net (1,045) (6,717) 5,672 (84.4) % — % (0.2) %

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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 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.

Interest expense decreased in fiscal year 2026 as compared to 2025 primarily from lower average borrowings on our term loan credit facility and lower interest rates.

Interest income for the fiscal year ended June 30, 2026 increased compared to the fiscal year ended June 30, 2025 primarily from increased interest income on cash balances and customer receivables.

Index to Financial Statements

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

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.

For the fiscal year ended June 30, 2026 we recognized a gain of $0.8 million primarily as a result of an insurance recovery in connection with the cybersecurity attack in the fourth quarter of fiscal 2023 compared to a larger gain of $5.9 million recognized in the prior fiscal year.

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 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 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%.

See Note 13 - Income Taxes in the Notes to Consolidated Financial Statements for further discussion including an effective tax rate reconciliation.

Income tax expense was $24.9 million and $22.8 million for the fiscal years ended June 30, 2026 and 2025, respectively, reflecting effective tax rates of 24.0% and 24.2%, respectively.

Index to Financial Statements

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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;

These measures include non-GAAP net sales;

non-GAAP operating income;

non-GAAP pre-tax income;

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Insurance recovery, net of payments (838) (5,928)

Gain on sale of business — (14,155)

Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) $ 151,548 $ 144,660

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Insurance recovery, net (629) (4,466)

Gain on sale of business — (14,155)

Average equity 914,144 919,085

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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

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.

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

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.

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:

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Acquisitions (14,119) (3,512)

Divestitures — (4,019)

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

Non-GAAP net sales $ 3,093,788 $ 2,939,205 $ 154,583 5.3 %

Intelisys & Advisory:

Net sales, reported $ 101,130 98,093 $ 3,037 3.1 %

Foreign exchange impact (a)

Acquisitions (1,336) (577)

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

Non-GAAP net sales $ 99,794 $ 97,516 $ 2,278 2.3 %

Consolidated:

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Acquisitions (15,455) (4,089)

Divestitures — (4,019)

Non-GAAP net sales, constant currency $ 3,043,368 $ 3,255,790 $ (212,422) (6.5) %

Non-GAAP net sales $ 3,193,582 $ 3,036,721 $ 156,861 5.2 %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

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dollars using the average foreign exchange rates for the fiscal year ended June 30, 2025.

Index to Financial Statements

Net Sales by Geography:

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2026 2025 $ Change % Change

United States and Canada:

United States:

(in thousands)

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Acquisitions (15,455) (4,089)

Net sales, excluding acquisitions $ 2,770,562 $ 2,921,172 $ (150,610) (5.2) %

Non-GAAP net sales $ 2,984,003 $ 2,796,650 $ 187,353 6.7 %

International:

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Foreign exchange impact (a)

Divestitures — (4,019)

Non-GAAP net sales, constant currency $ 272,806 $ 334,618 $ (61,812) (18.5) %

Non-GAAP net sales $ 209,579 $ 240,071 $ (30,492) (12.7) %

Consolidated:

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Acquisitions (15,455) (4,089)

Divestitures — (4,019)

Non-GAAP net sales, constant currency $ 3,043,368 $ 3,255,790 $ (212,422) (6.5) %

Non-GAAP net sales $ 3,193,582 $ 3,036,721 $ 156,861 5.2 %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

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Year ended June 30, 2026

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

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

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

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Year ended June 30, 2025

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)

Insurance Recovery Non-GAAP measure

GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition 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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(a) Acquisition and divestiture costs for the fiscal years ended June 30, 2026 and June 30, 2025 are generally nondeductible for tax purposes.

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

This transaction resulted in a capital loss for tax purposes.

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

Index to Financial Statements

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Allowances for Trade and Notes Receivable

We adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326) effective July 1, 2020.

The adoption did not have a material impact on our consolidated financial statements.

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 channel sales partners’ failure to make payments on accounts receivable due us.

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

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.

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.

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

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Actual recognition of the supplier consideration may vary from management estimates.

Index to Financial Statements

We account for recorded goodwill in accordance with ASC 350, Goodwill and Other Intangible Assets , which requires that goodwill be reviewed annually for impairment or more frequently if impairment indicators exist.

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Historical financial information, internal plans and projections and industry information are used in making such estimates.

Under ASC 350, if fair value of goodwill fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Under ASC 350, if fair value of goodwill is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Additionally, we would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

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As of June 30, 2026, the Specialty Technology Solutions and Intelisys & Advisory reporting units' goodwill balances are $173.9 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.

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

We also utilized fair value estimates derived from the market approach utilizing the public company market multiple method to validate the results of the discounted cash flow method, which required us to make assumptions about the applicability of those multiples to our reporting units.

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Management uses judgment to (i) identify the acquired assets and liabilities assumed, (ii) estimate the fair value of these assets, (iii) estimate the useful life of the assets and (iv) assess the appropriate method for recognizing depreciation or amortization expense over the assets' useful life.

Index to Financial Statements

Accounting Standards Recently Issued

See Note 1 in the Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.

Index to Financial Statements

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under the $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 suppliers.

In general, as our sales volumes increase, our net investment in working capital typically increases, which typically results in decreased cash flow from operating activities.

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

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.

Cash and cash equivalents totaled $88.4 million and $126.2 million at June 30, 2026 and 2025, respectively, of which $35.4 million and $46.3 million was held outside of the United States as of June 30, 2026 and 2025, respectively.

Checks released but not yet cleared from these accounts in the amounts of $0.1 million and $5.9 million are classified as accounts payable as of June 30, 2025 and 2024, respectively.

Checks released but not yet cleared from these accounts in the amounts of $0.1 million are classified as accounts payable as of June 30, 2026 and 2025.

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

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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, 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, defined as accounts receivable plus inventories less accounts payable, increased $18.1 million to $538.8 million at June 30, 2026 from $520.7 million at June 30, 2025, primarily as a result of an increase in accounts receivable and inventory offset by an increase 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 suppliers.

Cash (used in) provided by:

Cash provided (used in) by:

June 30, 2026 June 30, 2025

(in thousands)

Operating activities of continuing operations $ 112,349 $ 371,647

Investing activities of continuing operations (62,390) 9,045

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

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 activities $ 123,131 $ 112,349

Investing activities (27,506) (62,390)

Financing activities (134,478) (110,905)

Net cash provided by operating activities was $123.1 million for the fiscal year ended June 30, 2026 and $112.3 million for the fiscal year ended June 30, 2025 .

The increase in cash provided by operating activities for the fiscal year ended June 30, 2026 is primarily due to an increase in net income and an increase in cash provided by changes in working capital for the fiscal year ended June 30, 2026.

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 70 at June 30, 2025 unchanged from June 30, 2024.

The number of days sales outstanding ("DSO") was 73 at June 30, 2026 compared to 70 at June 30, 2025.

Throughout fiscal year 2026, DSO ranged from 68 to 74.

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Throughout fiscal year 2026, inventory turnover ranged from 5.1 to 6.6 times.

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.

Cash used in investing activities was $27.5 million for the fiscal year ended June 30, 2026 compared to $62.4 million for the fiscal year ended June 30, 2025.

Cash used in investing activities for fiscal years 2026 and 2025 is due to cash paid for acquisitions and capital expenditures.

Management expects capital expenditures for fiscal year 2027 to range fr om $8.0 million to $12.0 million, primarily for IT and warehouse investments.

Index to Financial Statements

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 totaled $134.5 million for the fiscal year ended June 30, 2026 primarily due to the repurchase of common stock and repayments on long-term debt.

Cash used in financing activities of $110.9 million for the fiscal year ended June 30, 2025 was primarily due to repayments on the revolving line of credit and the repurchase of common stock.

Index to Financial Statements

Share Repurchase Program

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.

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

The share repurchase authorizations do not have any time limits.

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Credit Facility

We have a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks (as amended, the “Amended Credit Agreement”).

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

The amendment extended the revolving credit facility maturity date to September 28, 2027.

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

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

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

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 the 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.

We incurred debt issuance costs of $1.4 million in connection with the amendment and restatement of the Amended 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.

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 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 our option, (i) the adjusted term Secured Overnight Financing Rate (“SOFR”) or adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our ratio of (A) total consolidated debt less up to $30 million of unrestricted domestic cash (“Credit Facility Net Debt”) to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable (Credit Facility EBITDA”), for which financial statements have been delivered to the Lenders (the “leverage ratio”);

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

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 adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our leverage ratio, or such other rate as agreed upon with the applicable swingline lender.

The adjusted term SOFR and adjusted daily simple SOFR include a fixed credit adjustment of 0.10% over the applicable SOFR reference rate.

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

During the fiscal year ended June 30, 2025, our borrowings under the credit facility were 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 rate in effect as of June 30, 2026 was 0.15%, 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 fiscal year ended June 30, 2026, the Company's borrowings under New Credit Agreement and Prior Credit Agreement were U.S.

dollar loans .

The spread in effect as of June 30, 2025 was 1.00%, plus a 0.10% credit spread adjustment for SOFR-based loans and 0.00% for alternate base rate loans.

The spread in effect as of June 30, 2026 was 1.00% for SOFR-based loans and 0.00% for alternate base rate loans.

The commitment fee rate in effect as of June 30, 2026 was 0.15%.

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

Specifically, our Leverage Ratio must be less than or equal to 3.50 to 1.00 at all times.

In addition, our Interest Coverage Ratio (as such term is defined in the Amended Credit Agreement) must be at least 3.00 to 1.00 as of the end of each fiscal quarter.

The effective interest rates for the term loan were 4.65% and 5.43% as of June 30, 2026 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 as of 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.

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

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.

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

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

The Company was in compliance with all covenants under the New Credit Agreement as of June 30, 2026.

The average daily balance outstanding on the revolving credit facility, excluding the term loan facility, was $1.6 million and $0.3 million during the fiscal year ended June 30, 2026 and 2025, respectively.

There was $400.0 million and $350.0 million available for additional borrowings as of June 30, 2026 and 2025, respectively.

The effective interest rates for the revolving line of credit were 4.62% and 5.46% as of June 30, 2026 and June 30, 2025, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2026 and 2025.

Index to Financial Statements

Facility EBITDA relative to total interest expense respectively.

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 (each as defined in the New Credit Agreement).

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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We had $98.8 million outstanding under our term loan facility, $1.3 million of which matured in fiscal year 2026.

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

Our revolving credit facility and our term loan facility have a maturity date December 18, 2030 .

The remaining principal debt payments on our industrial development revenue bond, which total $2.7 million, have maturity dates in 2026 through 2032.

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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