ScanSource Inc ((SCSC)) has held its Q4 earnings call. Read on for the main highlights of the call.
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ScanSource Inc’s recent earnings call presented a mixed sentiment, reflecting both strong quarterly results and strategic advancements, alongside ongoing challenges in specific segments. The company showcased optimism for future growth, driven by strategic investments and acquisitions, despite facing competitive pressures and a decline in full-year net sales.
Strong Q4 Performance
ScanSource reported a robust performance for the fourth quarter, with net sales growing nearly 9% year-over-year. The company also saw a 13% increase in adjusted EBITDA and a 17% rise in non-GAAP net income. Notably, the non-GAAP EPS surged by 27.5% year-over-year, reaching $1.02.
Specialty Technology Solutions Growth
The Specialty Technology Solutions segment experienced significant growth, with net sales increasing by 9% year-over-year and 16% quarter-over-quarter. This growth was driven by strong performances in mobility, barcode, physical security, and managed connectivity.
Improved Gross Profit Margins
ScanSource achieved an increase in gross profit margins, which rose by 120 basis points year-over-year to 13.4%. Additionally, adjusted EBITDA margins improved by 45 basis points, reaching 4.76%.
Successful Acquisitions
The acquisitions of Resourcive and Advantix proved successful, contributing positively to EPS and ROIC for both the quarter and the full year. The company’s non-GAAP net income saw a 9.6% increase over the previous year.
Intelisys & Advisory Segment Challenges
The Intelisys & Advisory segment faced challenges, with net sales and gross profits increasing by only 1% year-over-year. Adjusted EBITDA for the segment declined by 4%, attributed to increased SG&A investments.
Full Year Net Sales Decline
ScanSource reported a decline in full-year net sales, totaling just over $3 billion, which represents a 6.7% decrease year-over-year.
Competitive Pressures
The company is experiencing competitive pressures from private equity-backed competitors in the Intelisys & Advisory segment, leading to margin pressure and necessitating strategic investments.
Macro Environment Uncertainty
ScanSource expressed caution due to the macroeconomic environment, with interest rate and tariff impacts. The company expects growth to accelerate only in the second half of fiscal year 2026.
Forward-Looking Guidance
Looking ahead, ScanSource provided guidance for fiscal year 2026, forecasting net sales between $3.1 billion and $3.3 billion, with adjusted EBITDA expected to range from $150 million to $160 million. The company anticipates generating at least $80 million in free cash flow, with revenue growth accelerating in the latter half of the fiscal year. ScanSource aims to expand its recurring revenue to 50% of consolidated gross profits, while maintaining a disciplined approach to capital allocation and targeting a net debt leverage of 1 to 2 times adjusted EBITDA.
In conclusion, ScanSource Inc’s earnings call highlighted a mixture of strong quarterly achievements and strategic progress, alongside challenges in certain segments. The company remains optimistic about future growth, driven by strategic investments and acquisitions, despite facing competitive pressures and a decline in full-year net sales.