ScanSource, Inc.

ScanSource, Inc. distributes technology products and services through sales partners and to end users. It supplies areas including barcode and mobility equipment, point-of-sale systems, security, networking, communications and cloud services. Shares trade as SCSC on Nasdaq.

Specialty Technology Solutions is the larger hardware-distribution business. Intelisys & Solution Services combines agency commissions from connectivity and cloud providers with technology solutions and managed services, including the acquired MicroAge business.

The quarterly financial record

Sales increased 26.8% after removing acquisitions and currency translation. That comparison includes price changes. Management says pricing made a material contribution but could not quantify it separately.

Large hardware deals reduced gross margin, while higher spending and credit costs weighed on operating profit. Bad debt expense was $6.4 million versus $1.9 million and remained included in adjusted earnings. Management says nearly all exposure to Oi S.A., its largest Brazilian customer credit concentration, has been reserved.

Adjusted earnings exclude intangible amortization, changes in contingent-consideration valuations, acquisition costs, restructuring and specified restoration costs. Adjusted EBITDA also removes interest, taxes, depreciation and share-based compensation. The quarter included $4.4 million of acquisition costs and $1.7 million of restructuring costs.

Recurring business contributed 32.8% of gross profit versus 31.7%. Both segments grew gross profit. Management expects the unusually heavy mix of large hardware deals to normalize after Q1.

MicroAge is now part of the company

ScanSource completed the MicroAge acquisition on September 1, 2026. Initial consideration was $248.2 million, including $30.5 million of acquired cash, resulting in $217.8 million of net cash paid. The purchase-price allocation remained provisional at the quarterly report date.

MicroAge contributed $20.0 million of revenue and approximately $0.6 million of net income during September, its first month under ScanSource ownership. It sits within Intelisys & Solution Services and expands offerings in managed services, cloud, cybersecurity, data centers and AI.

What the annual forecasts include

The annual EBITDA upgrade includes the acquisition. Management says it remains confident in its original Q2 through Q4 expectations and views Q1's margin and reserve pressures as largely confined to that quarter.

The unchanged cash floor requires approximately $129.1 million of free cash flow in the remaining nine months after Q1's $44.1 million outflow. Free cash flow is operating cash flow less capital spending and excludes acquisition payments.

For context, fiscal 2026 ended June 30 with $3.226 billion of revenue, $151.5 million of adjusted EBITDA and $113.8 million of free cash flow. MicroAge was not owned in that year.

Working capital, debt and available cash

September cash was $45.9 million, versus $88.4 million at June 30. Debt totaled $332.4 million, versus $101.4 million, including $231.9 million drawn on the revolver. The $400 million facility had $168.1 million available. The revolver and term-loan agreement dates from December 18, 2025 and has a five-year term.

Operating-lease liabilities were a separate $8.7 million. Cash share repurchases totaled $4.8 million in Q1. Management says near-term priorities include reducing leverage while continuing repurchases.

Receivable days increased to 76 from 68 a year earlier and 73 at June 30. Inventory turned 6.3 times during the quarter versus 5.1 a year earlier. The combined cash conversion cycle was 64 days, better than the prior year's 80 but above June's 61.

Growth ties up money in customer receivables and inventory, partly financed by supplier payables. Balance-sheet changes also include acquired MicroAge balances, so they do not directly equal the operating cash-flow movements.