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What changed in SCANSOURCE, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SCANSOURCE, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+237 added−232 removedSource: 10-K (2024-08-27) vs 10-K (2023-08-22)

Top changes in SCANSOURCE, INC.'s 2024 10-K

237 paragraphs added · 232 removed · 204 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+1 added−5 removed42 unchanged
Biggest changeThese agreements generally include the following terms: • Non-exclusive distribution rights to resell products and related services in geographical areas (supplier agreements often include territorial restrictions that limit the countries in which we can sell their products and services). 3 Table of Contents Index to Financial Statements • Short-term periods, subject to periodic renewal, and provide for termination by either party without cause upon 30 to 120 days' notice. • Stock rotation rights, which give us the ability, subject to limitations, to return for credit or exchange a portion of the items purchased. • Price protection provisions, which enables us to take a credit for declines in inventory value resulting from the supplier's price reductions.
Biggest changeThese agreements generally include the following terms: • Non-exclusive distribution rights to resell products and related services in geographical areas (supplier agreements often include territorial restrictions that limit the countries in which we can sell their products and services). • Short-term periods, subject to periodic renewal, and termination rights by either party without cause upon 30 to 120 days' notice. • Stock rotation rights, which give us the ability, subject to limitations, to return for credit or exchange a portion of the items purchased. • Price protection provisions, which enables us to take a credit for declines in inventory value resulting from the supplier's price reductions. 3 Table of Contents Index to Financial Statements Along with our inventory management policies and practices, these stock rotation rights and price protection provisions are designed to reduce our risk of loss due to slow-moving inventory, supplier price reductions, product updates and obsolescence.
Value proposition for our customers/sales partners: • Enable end-user consumption preferences • Provide pre-sale engineering • Make it easier to sell the technology stack • Inventory availability • Offer training, education and marketing services • Provide custom configuration, services, platforms and digital tools • Offer innovative financial solutions for our customers 1 Table of Contents Index to Financial Statements Value proposition for our suppliers: • Expand reach at a variable cost • Provide access to multiple routes to market • Lower customer acquisition cost • Recruit and train new sales partners • Manage channel credit Financial Strength Our consolidated balance sheet reflects financial strength.
Value proposition for our customers/sales partners: • Enable end-user consumption preferences • Provide pre-sale engineering • Make it easier to sell the technology stack • Inventory availability • Offer training, education and marketing services • Provide custom configuration, services, platforms and digital tools • Offer innovative financial solutions for our customers Value proposition for our suppliers: • Expand reach at a variable cost • Provide access to multiple routes to market • Lower customer acquisition cost 1 Table of Contents Index to Financial Statements • Recruit and train new sales partners • Manage channel credit Financial Strength Our consolidated balance sheet reflects financial strength.
Marketing We market our technology solutions and services through a range of digital and print channels, including online product catalogs customized for our North American and Brazilian markets; social media; search engine optimization and marketing; content marketing; content automation; e-commerce; email direct marketing, among others.
Marketing We market our technology solutions and services through a range of digital and print channels, including online product catalogs customized for our North American and Brazilian markets; social media; search engine optimization and marketing; content marketing; content automation; e-commerce and email direct marketing, among others.
We purchase contracts from unrelated third parties, generally the original equipment manufacturers, to fulfill our obligations to service or replace defective product claimed on these warranty programs. To maintain customer relations, we also facilitate returns of defective products from our customers by accepting for exchange, with our prior approval, most defective products within 30 days of invoicing.
We purchase contracts from unrelated third parties, generally the original equipment manufacturers, to fulfill our obligations to service or replace defective products claimed on these warranty programs. To maintain customer relations, we also facilitate returns of defective products from our customers by accepting for exchange, with our prior approval, most defective products within 30 days of invoicing.
Our competitors include local, regional, national and international distributors, as well as suppliers that sell directly to resellers and to end users. In addition, our competitors include resellers that sell to franchisees, third-party dealers and end users. Competition has increased over the last several years as broad line and other value-added distributors have entered into the specialty technology markets.
Our competitors include local, regional, national and international distributors, as well as suppliers that sell directly to resellers and to end users. In addition, our competitors include resellers that sell to franchisees, third-party dealers and end users. Competition has increased over the last several years as broad-line and other value-added distributors have entered the specialty technology markets.
Board Role in People and Culture Management Our Board of Directors believes that people and culture management is an important component of our continued growth and success and is essential for our ability to attract, retain and develop talented and skilled employees. We pride ourselves on a culture that respects co-workers and values concern for others.
Board Role in People and Culture Management Our Board of Directors (“Board”) believes that people and culture management is an important component of our continued growth and success and is essential for our ability to attract, retain and develop talented and skilled employees. We pride ourselves on a culture that respects co-workers and values concern for others.
Our segments operate in the United States, Canada, Brazil and the UK and consist of the following: • Specialty Technology Solutions • Modern Communications & Cloud Specialty Technology Solutions Segment The Specialty Technology Solutions portfolio includes enterprise mobile computing, data capture, barcode printing, POS, payments, networking, electronic physical security, cybersecurity and other technologies.
Our segments operate in the United States, Canada and Brazil and consist of the following: • Specialty Technology Solutions • Modern Communications & Cloud Specialty Technology Solutions Segment The Specialty Technology Solutions portfolio includes enterprise mobile computing, data capture, barcode printing, POS, payments, networking, electronic physical security, cybersecurity and other technologies.
Our suppliers generally warrant their products we sell and allow returns of defective products, including those returned to us by our customers. For certain of our product offerings, we offer a self-branded warranty program.
Our suppliers generally warrant their products that we sell and allow returns of defective products, including those returned to us by our customers. For certain of our product offerings, we offer a self-branded warranty program.
These services allow our customers to gain knowledge and experience on marketing, negotiation and selling, to improve customer service, to profitably grow their business and be more cost effective. Our business is enhanced by our ability and willingness to provide the extra level of services that keeps both our sales partners and suppliers satisfied.
These services allow our customers to gain knowledge and experience on marketing, negotiation and selling, to improve customer service, to profitably grow their business and be more cost effective. Our business is enhanced by our ability and willingness to provide the extra level of services that keep both our sales partners and suppliers satisfied.
Products from two suppliers, Cisco and Zebra, each constituted more than 10% of our net sales for the fiscal year ended June 30, 2023. • We have three non-exclusive agreements with Cisco. One agreement covers the distribution of Cisco products in the United States and has a two year term.
Products from two suppliers, Cisco and Zebra, each constituted more than 10% of our net sales for the fiscal year ended June 30, 2024. • We have three non-exclusive agreements with Cisco. One agreement covers the distribution of Cisco products in the United States and has a two-year term.
We provide our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, free of charge on www.scansource.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC").
We provide our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, free of charge on www.scansource.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
We continue to build our 360you program, which provides employees with extensive education and training/coaching opportunities, wellness and fitness challenges, and other valuable resources. Diversity and Inclusion One of our core values is to promote an environment that respects and values the diverse backgrounds, interests and talents of our employees.
We continue to build our “360you” program, which provides employees with extensive education and training/coaching opportunities, wellness and fitness challenges, and other valuable resources. Diversity and Inclusion One of our core values is to promote an environment that respects and values the diverse backgrounds, interests and talents of our employees.
We are pleased with how our employees have adjusted to this new way of doing business, maintaining an extremely high level of productivity and performance. With a largely remote workforce, it is critical that we continue to focus on our employees’ health.
We are pleased with how our employees have adjusted to this new way of doing business and maintained an extremely high level of productivity and performance. With a largely remote workforce, it is critical that we continue to focus on our employees’ health.
Our Board also engages in an active succession planning process. Digital Workplace Employee outreach and engagement remain critical to the continued success and growth of ScanSource. Inclusion, participation, and appreciation are key components in retaining talent, maintaining our culture, and keeping employees engaged.
Our Board also engages in an active succession planning process. Employee Engagement Employee outreach and engagement remain critical to the continued success and growth of ScanSource. Inclusion, participation, and appreciation are key components in retaining talent, maintaining our culture, and keeping employees engaged.
In addition, local laws may in some cases impose warranty obligations on the Company. Offerings and Markets We currently market over 65,000 products from approximately 500 hardware, software and service suppliers to approximately 30,000 customers.
In addition, local laws may in some cases impose warranty obligations on the Company. Offerings and Markets We currently market over 65,000 products from approximately 500 hardware, software and service suppliers to approximately 25,000 customers.
We partner with Fidelity to provide employees access to knowledge and tools to help manage or plan for student loan debt. To expand our financial wellness offerings, we offer workshops and webinars focused on student debt and general debt-counselling services.
We also partner with Fidelity to provide employees access to knowledge and tools to help manage or plan for student loan debt. To further expand our financial wellness offerings, we offer workshops and webinars focused on student debt and general debt-counselling services.
ScanSource is committed to a diverse and inclusive workplace with our comprehensive Diversity & Inclusion (D&I) program, led by our first Chief Diversity Officer ("CDO") and an internal D&I Advisory Council. The Council is an employee-led group focused on sharing insights, ideas, and opinions from our employee base to assist in the implementation of our DEI plan.
ScanSource is committed to a diverse and inclusive workplace with our comprehensive Diversity & Inclusion (D&I) program, led by our Chief Diversity Officer (“CDO”) and an internal D&I Advisory Council. The Council is an employee-led group focused on sharing insights, ideas, and opinions from our employee base to assist in the implementation of our DEI plan.
ScanSource enables customers 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 customers access to additional services. As a trusted adviser to our customers, we provide customized solutions through our strong understanding of end user needs.
Sc anSource enables customers 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 customers access to additional services. As a trusted adviser to our customers, we provide customized solutions through our strong understanding of end user needs.
The financial future of our employees is important to us, which is why we have a 401(k) program with a market-competitive employer match, performance-based bonus program and employee ownership opportunities for a meaningful portion of our employees through our Employee Stock Purchase Plan, as well as our equity incentive grants.
The financial futures of our employees are important to us, which is why we have a 401(k) program with a market-competitive employer match, a performance-based bonus program and employee ownership opportunities for a meaningful portion of our employees through our Employee Stock Purchase Plan, as well as our equity incentive grants.
From ensuring and supporting an inclusive and diverse workforce and partner base; providing a safe, healthy work environment; and working with suppliers and partners that share this commitment, we are dedicated to doing what is right for our employees, channel partners and end customers.
From ensuring and supporting an inclusive and diverse workforce and partner base; providing a safe, healthy work environment, and working with suppliers and partners that share the same commitment, we are dedicated to doing what is right for our employees, channel partners and end customers.
ITEM 1. Business. ScanSource, Inc. (together with its subsidiaries referred to as the "Company” or “ScanSource” or “we”) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, Software as a Service ("SaaS"), connectivity and cloud. ScanSource enables customers to deliver solutions for their end users to address changing buying and consumption patterns.
ITEM 1. Business. ScanSource, Inc. (together with its subsidiaries referred to as the “Company” or “ScanSource” or “we”) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, Software as a Service (“SaaS”), connectivity and cloud. ScanSource enables customers to deliver solutions for their end users to address changing buying and consumption patterns.
See "Risk Factors" for a discussion of the risks related to our foreign operations. Our offerings to our customers include hardware, software, services and connectivity across premise, hybrid and cloud environments. We believe that customers want to offer end users complete technology solutions that solve end-user challenges and deliver positive outcomes.
See “Risk Factors” for a discussion of the risks related to our foreign operations. Our offerings to our customers include hardware, software, services and connectivity across premise, hybrid and cloud environments. We believe that customers want to offer end users complete technology solutions that solve end-user challenges and deliver positive outcomes.
Health and Safety We care about our employees’ overall well-being and encourage them to have a healthy lifestyle, both physically and mentally. That’s why we offer dedicated resources to help foster a work/life balance. We have implemented a work-from-home policy for all employees across geographies, outside of our distribution centers.
Health and Safety We care about our employees’ overall well-being and encourage a healthy lifestyle, both physically and mentally. That’s why we offer dedicated resources to help foster a healthy work/life balance. We have implemented a work-from-home policy for all employees across all geographies, except for our distribution centers.
We have contracts with more than 200 of the world’s leading telecom carriers and cloud services providers. People and Culture As a people-first organization, respecting and protecting our people and our partners are our top priorities.
We have contracts with more than 200 of the world’s leading telecom carriers and cloud services providers. People and Culture As a people-first organization, respecting and protecting our people and our partners is among our top priorities.
These solutions consists of a wide range of products that include portable data collection terminals, wireless products, barcode label printers and scanners.
These solutions consist of a wide range of products that include portable data collection terminals, wireless products, barcode label printers and scanners.
Our networking products include wireless and networking infrastructure products. • Communications and Collaboration : We offer communications and collaboration solutions, delivered in the cloud, on-premise or hybrid, such as voice, video, integration of communication platforms and contact center solutions. These offerings combine voice, video and data with computers, telecommunications and the internet to deliver communications solutions on-premise.
Our networking products include wireless and networking infrastructure products. • Communications and Collaboration : We offer communications and collaboration solutions, delivered through the cloud, on-premise or via a hybrid approach, such as voice, video, integration of communication platforms and contact center solutions. These offerings combine voice, video and data with computers, telecommunications and the internet to deliver communications solutions on-premise.
ScanSource was incorporated in South Carolina in 1992 and serves approximately 30,000 customers. Net sales for fiscal year ended June 30, 2023 totaled $3.79 billion . Our common stock trades on the NASDAQ Global Se lect Market under the symbol “SCSC.” Our customers are businesses of all sizes that sell to end-customers across many industries.
ScanSource was incorporated in South Carolina in 1992 and serves approximately 25,000 customers. Net sales for fiscal year ended June 30, 2024 totaled $3.26 billion . Our common stock trades on the NASDAQ Global Se lect Market under the symbol “SCSC.” Our customers include businesses of all sizes that sell to end-customers across many industries.
To ensure that adequate inventory levels are maintained, our buyers depend on the system’s purchasing and receiving functions to track inventory on a perpetual basis. Warehouse and Shipping Strategy We operate a 741,000 square foot distribution center in Southaven, Mississippi, which is located near the FedEx hub facility in Memphis, Tennessee, and primarily serves North America.
To ensure that adequate inventory levels are maintained, our buyers depend on the system’s purchasing and receiving functions to track inventory on a perpetual basis. 7 Table of Contents Index to Financial Statements Warehouse and Shipping Strategy We operate a 741,000 square foot distribution center in Southaven, Mississippi, which is located near the FedEx hub facility in Memphis, Tennessee, and primarily serves North America.
We also acquired warehouses in California and Kentucky through our POS Portal acquisition. Our principal warehouses for our Brazil operations are located in the Brazilian states of Paraná, Espírito Santo and Santa Catarina. Our objective is to ship all orders on the same day, using technology to expedite shipments and minimize shipping errors.
We also operate warehouses in California and Kentucky. Our principal warehouses for our Brazil operations are located in the Brazilian states of Paraná, Espírito Santo and Santa Catarina. Our objective is to ship all orders on the same day, using technology to expedite shipments and minimize shipping errors.
Our sales teams are advocates for and trusted advisers to our customers. Sales teams are responsible for developing technical expertise within broad product markets, recruiting sales partners, creating demand, negotiating pricing and reviewing overall product and service requirements of our customers.
Sales teams are responsible for developing technical expertise within broad product markets, recruiting sales partners, creating demand, negotiating pricing and reviewing overall product and service requirements of our customers.
These solutions may include self-service checkout, kiosks and products that attach to the POS network in the store, including network access points, routers and digital signage. 4 Table of Contents Index to Financial Statements • Payments : We offer payment terminals, comprehensive key injection services, reseller partner branding, extensive key libraries, ability to provide point-to-point encryption, and redundant key injection facilities.
These solutions may include self-service checkout, kiosks and products that attach to the POS network in the store, including network access points, routers and digital signage. • Payments : We offer payment terminals, comprehensive key injection services, reseller partner branding, extensive key libraries, ability to provide point-to-point encryption, and redundant key injection facilities.
Employee Feedback 6 Table of Contents Index to Financial Statements We foster opportunities for employee engagement and have multiple avenues for communication, which allows all full-time employees to anonymously give us feedback on our workplace culture, employee programs, and more. We also implement employee engagement surveys globally to gather feedback and build the best environment possible for our employees.
Employee Feedback We foster opportunities for employee engagement and have multiple avenues for communication, which allows all full-time employees to anonymously give us feedback on our workplace culture, employee programs and more. We also implement employee engagement surveys globally to gather feedback and build the best environment possible for our employees.
We have been issued registrations for many of our marks including, among others, "ScanSource," "Catalyst Telecom," and "Network1" in countries in our principal markets. Even though our marks are not registered in every country where we conduct business, in many cases we have acquired rights in those marks because of our continued use of them.
We have been issued registrations for many of our marks including, among others, “ScanSource ,” “Catalyst Telecom,” and “Network1” in countries in our principal markets. Even though our marks are not registered in every country where we conduct business, in many cases we have acquired rights in those marks because of our continued use of them.
Operations Information Technology Systems 7 Table of Contents Index to Financial Statements Our information systems are scalable and capable of supporting numerous operational functions including purchasing, receiving, order processing, shipping, inventory management and accounting. Our customers and employees rely on our information systems for online, real-time information on pricing, inventory availability and reservation and order status.
Operations Information Technology Systems Our information systems are scalable and capable of supporting numerous operational functions including purchasing, receiving, order processing, shipping, inventory management and accounting. Our customers and employees rely on our information systems for online, real-time information on pricing, inventory availability and reservation and order status.
In addition, we partner with ISVs to deliver to merchants integrated tablet POS solution hardware that a merchant may purchase outright or “as a service,” and which includes merchant hardware support and next-day replacement of tablets, terminals and peripherals. • Physical Security and Networking : We provide electronic physical security solutions that include identification, access control, video surveillance and intrusion-related products.
In addition, we partner with ISVs to deliver to merchants integrated tablet POS hardware that a merchant may purchase outright or “as a service,” and offer merchant hardware support and next-day replacement of tablets, terminals and peripherals. 4 Table of Contents Index to Financial Statements • Physical Security and Networking : We provide electronic physical security solutions that include identification, access control, video surveillance and intrusion-related products.
General Our real competitive advantage is our people, working together to help our customers and partners grow their businesses. The foundation of ScanSource has always been based on strong values and culture with the clear vision of people first.
General Our real competitive advantage is our people, who strive to help our customers and partners grow their businesses. The foundation of ScanSource has always been based on strong values and a people-first culture and vision.
ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud service offerings from the world's leading technology suppliers. We provide technology solutions and services from more than 500 leading suppliers of mobility, barcode, point-of-sale ("POS"), payments, physical security, networking, unified communications, collaboration (UCaaS, CCaaS), connectivity and cloud services.
ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud service offerings from the world's leading technology suppliers. We provide technology solutions and services from more than 500 leading suppliers of mobility, barcode, point-of-sale (“POS”), payments, physical security, networking, unified communications, collaboration unified communications as a service (“UCaaS”), Contact Center as a Service (“CCaaS”), connectivity and cloud services.
We enhanced our learning management system, The Hub, to provide a modernized and engaging user experience for our global employees at all levels. The ScanSource Leadership Institute ("SLI") is another 5 Table of Contents Index to Financial Statements important program that focuses on identifying and helping to develop the next wave of senior leaders for the Company.
We enhanced our learning management system, The Hub, to provide a modernized and engaging user experience for our global employees at all levels. The ScanSource Leadership Institute (“SLI”) is another important program that focuses on identifying and developing the next wave of senior leaders for the Company.
To support our goal of becoming a more inclusive workplace, our DEI strategic plan focuses on awareness and education, workforce representation, partner diversity, and community relations. Additionally, initiatives including a D&I book and movie club, educational DEI opportunities, and global employee resource groups are allowing interested employees to broaden their knowledge on various topics in this space.
To foster an inclusive workplace, our DEI strategic plan focuses on awareness and education, workforce representation, partner diversity and community relations. Additionally, initiatives including a D&I book and movie club, educational DEI opportunities, and global employee resource groups are allowing interested employees to broaden their knowledge on various topics related to diversity and inclusion.
Trade and Service Marks We conduct our business under the trade names "ScanSource POS and Barcode," "ScanSource Catalyst," "ScanSource Communications," "ScanSource Services," "ScanSource Networking and Security," "ScanSource KBZ," "ScanSource Brasil," "Network1, a ScanSource company," "Intelisys," "POS Portal," "RPM Software, a ScanSource company" and "intY, a ScanSource company." Certain of our tradenames, trademarks and service marks are registered, or are in the process of being registered, in the United States or various other countries.
Trade and Service Marks We conduct our business under the trade names “ScanSource POS and Barcode,” “ScanSource Catalyst,” “ScanSource Communications,” “ScanSource Services,” “ScanSource Networking and Security,” “ScanSource KBZ,” “ScanSource Brasil,” “Network1, a ScanSource company,” “Intelisys,” “POS Portal,” “RPM Software, a ScanSource company” a nd “intY, a ScanSource company.” Certain of our tradenames, trademarks and service marks are registered, or are in the process of being registered, in the United States or various other countries.
Competition We believe we are a leader in the specialty markets we serve. The market for technology products and solutions is highly competitive, both in the United States and internationally.
Competition 6 Table of Contents Index to Financial Statements We believe we are a leader in the specialty technology markets we serve. The market for technology products and solutions is highly competitive, both in the United States and internationally.
Benefits We offer a comprehensive benefits package which includes traditional health insurance, as well as telemedicine alternatives, life insurance, disability insurance and work-life balance resources.
Benefits 5 Table of Contents Index to Financial Statements We offer a comprehensive benefits package which includes traditional health insurance, as well as telemedicine alternatives, life insurance, disability insurance and work-life balance resources.
They generally focus on cloud solutions and sell or certify bundled hardware, software and service solutions.
Independent Software Vendors ISVs develop software, apps and integrated solutions. They generally focus on cloud solutions and sell or certify bundled hardware, software and service solutions.
The SLI program brings together twelve hand-selected leaders from our global offices for a two-week program of intensive training and development. While this provides a tool for an individual’s education and growth, it also nurtures cross-functional collaboration with colleagues through a unique social capability.
The SLI program brings together twelve hand-selected leaders from our global offices for a two-week program of intensive training and development. This program promotes individual education and growth and nurtures cross-functional collaboration among colleagues.
Sales Our sales organization consists of inside and field sales representatives located in the United States, Canada, the UK and Brazil. The majority of our sales partners are assigned to a dedicated sales representative or team whose main focus is developing customer relationships and providing our customers with solutions to meet their end-customer’s needs.
The majority of our sales partners are assigned to a dedicated sales representative or team whose main focus is developing customer relationships and providing our customers with solutions to meet their end-customer’s needs. Our sales teams are advocates for and trusted advisers to our customers.
In a changing environment, ScanSource is investing in new infrastructure, tools and programs to ensure a "productivity anywhere" outcome, in the new hybrid working world. In 2023, the Company was named one of the Best Places to Work in South Carolina for the eighth consecutive year.
To meet the needs of a changing work environment, including the rise in popularity of hybrid work models, ScanSource invested in new infrastructure, tools and programs to ensure a “productivity anywhere” outcome. In 2024, the Company was named one of the Best Places to Work in South Carolina for the eighth consecutive year.
As of June 30, 2023, we have approximately 2,300 employees, of which approximately 1,500 are in the United States and 800 are located internationally in Canada, Brazil and the UK. We have no organized labor or trade unions in the United States.
As of June 30, 2024, we have approximately 2,300 employees, of which approximately 1,500 are in the United States and 800 are located internationally in Canada and Brazil and a strong employee remote presence. We have no organized labor or trade unions in the United States. Professional Development We want to help our employees succeed—both personally and professionally.
IT system integrators and network integrators develop computer and networking solutions for end-customers’ IT 2 Table of Contents Index to Financial Statements needs. Service providers, managed service providers and cloud service providers deliver advanced multi-discipline services with customized solutions that bundle data, collaboration, cloud, network and digital telecommunication services for end-customers' needs.
Service providers, managed service providers and cloud service providers deliver advanced multi-discipline services with customized solutions that bundle data, collaboration, cloud, network and digital telecommunication services for end-customers' needs. 2 Table of Contents Index to Financial Statements Agents Agents focus on selling telecommunications and cloud services to end-customers and advise on various services, technologies and cost alternatives to help customers make informed choices.
Independent Sales Organizations ISOs focus on selling credit card processing and finding new merchant customers for credit card member banks. They offer on-going customer service and support and look to bundle hardware, software and processing services. Independent Software Vendors ISVs develop software, apps and integrated solutions.
Agents typically earn monthly commissions on multi-year contract sales as they build their recurring revenue business. Independent Sales Organizations ISOs focus on selling credit card processing and finding new merchant customers for credit card member banks. They offer on-going customer service and support and look to bundle hardware, software and processing services.
Customers Our customers, or sales partners, are businesses of all sizes that sell to end users across industries ranging from manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and healthcare, among others. Our customers provide us with multiple, specialized routes-to-market through various channels, including: VARs, agents, ISOs and ISVs.
This segment also includes recurring revenue from our intY US businesses. Customers Our customers, include sales partners that are businesses of all sizes that sell to end users across industries ranging from manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and healthcare, among others.
Suppliers We provide products and services from approximately 500 suppliers, including 8x8, AT&T, Aruba/HPE, Avaya, Axis, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Granite, GTT, Hanwha, Honeywell, Ingenico, Jabra, Logitech, Lumen, Microsoft, MetTel, Mitel, NCR, NICE CXone, Poly HP, RingCentral, Spectrum, Toshiba Global Commerce Solutions, Trend Micro, Ubiquiti, Verifone, Verizon, VMWare, Windstream, Zebra Technologies and Zoom.
Suppliers We provide products and services from approximately 500 suppliers, including key suppliers AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, PAX Technology, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.
For our intY business, we compete against other developers of cloud software and services platforms, such as CloudBlue and Pax8. As we seek to expand our business into other areas closely related to our offerings, we may encounter increased competition from current competitors and/or from new competitors, some of which may be our current customers.
As we seek to expand our business into other areas closely related to our offerings, we may encounter increased competition from current competitors and/or from new competitors, some of which may be our current customers. Sales Our sales organization consists of inside and field sales representatives located in the United States, Canada and Brazil.
As these solutions come together on IP networks, new opportunities are created to move into adjacent solutions for all vertical markets, such as education, healthcare and government. This segment includes recurring revenue from our Intelisys and intY businesses.
As these solutions come together on IP networks, new opportunities are created to move into adjacent solutions for all vertical markets, such as education, healthcare and government. The Intelisys recurring revenue model in the connectivity and cloud marketplace offers telecom, cable, UCaaS, CCaaS, infrastructure as a service, software-defined wide-area network and other cloud services.
Specialty technology VARs focus on one or more technologies, providing specialized knowledge and expertise for technology solutions, such as tailored software or integrated hardware. Direct marketers provide a very broad range of technology brands to business, government, education and healthcare markets.
VARs Within VARs, our customers include specialty technology VARs, direct marketers, IT system integrators, network integrators, service providers, managed service providers and cloud service providers. Specialty technology VARs focus on one or more technologies, providing specialized knowledge and expertise for technology solutions, such as tailored software or integrated hardware.
Unless otherwise indicated, descriptions of our business and amounts reported in this Form 10-K pertain to continuing operations only. Strategy Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes, and tools.
We enable our customers to create, deliver and grow hybrid technology offerings for end-customers across almost every vertical market in the United States, Canada, and Brazil. Strategy Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes, and tools.
No single customer accounted for more than 4% of our total net sales for the fiscal year ended June 30, 2023. VARs Within VARs, our customers include specialty technology VARs, direct marketers, IT system integrators, network integrators, service providers, managed service providers and cloud service providers.
Our customers provide us with multiple, specialized routes-to-market through various channels, including: VARs, agents, ISOs and ISVs. No single customer accounted for more than 5% of our total net sales for the fiscal year ended June 30, 2024.
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We enable our customers to create, deliver and grow hybrid technology offerings for end-customers across almost every vertical market in the United States, Canada, Brazil and the United Kingdom ("UK"). In fiscal year 2021, we completed the sale of our product distribution businesses in Europe, the UK, Mexico, Colombia, Chile, Peru and our Miami-based export operations (the "Divestitures").
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Direct marketers provide a very broad range of technology brands to business, government, education and healthcare markets. IT system integrators and network integrators develop computer and networking solutions for end-customers’ IT needs.
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Management determined that the Company did not have sufficient scale in these markets to maximize our value-added model for physical product distribution, leading us to focus and invest in our higher margin businesses. The Divestitures are reported as discontinued operations within this Form 10-K.
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Agents Agents focus on selling telecommunications and cloud services to end-customers, advising about various services, technologies and cost alternatives to help them make informed choices. Agents typically earn monthly commissions on multi-year contract sales as they build their recurring revenue business.
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Along with our inventory management policies and practices, these stock rotation rights and price protection provisions are designed to reduce our risk of loss due to slow-moving inventory, supplier price reductions, product updates and obsolescence.
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As of June 30, 2023 we have 10 office locations in the U.S. and three distribution centers, eight office locations outside of the U.S., and have a remote employee presence. Professional Development We want to help our employees succeed—both personally and professionally.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAnything that negatively influences customer relations can also negatively impact our operating results. Customer consolidation also may lead to changes in the nature and terms of relationships with our customers. The loss or deterioration of a major customer relationship could adversely affect our business, financial condition and results of operations.
Biggest changeAs a distributor in a channel business model our offerings can create channel conflict. These perceived channel conflicts can impact or customer relationships and negatively impact our operating results and our ability to retain those customers. Customer consolidation also may lead to changes in the nature and terms of relationships with our customers.
Our net sales and operating results may fluctuate quarterly and, as a result our performance in one period may vary significantly from our performance in the preceding quarter, and may differ significantly from our forecast of performance from quarter to quarter. The impact of these variances may cause volatility in our stock price.
Our net sales and operating results may fluctuate quarterly and, as a result, our performance in one period may vary significantly from our performance in the preceding quarter, and may differ significantly from our performance forecast from quarter to quarter. The impact of these variances may cause volatility in our stock price.
These risks should be considered in connection with evaluating an investment in our company and, in particular, the forward-looking statements contained in this Report because these risks could cause the actual results to differ materially from those suggested by the forward-looking statements. These factors are neither presented in order of importance nor weighted.
These risks should be considered in connection with evaluating an investment in our company and, in particular, together with the forward-looking statements contained in this Report because these risks could cause the actual results to differ materially from those suggested by the forward-looking statements. These factors are neither presented in order of importance nor weighted.
As a result, occasionally we are required to write down the value of excess and obsolete inventory, and should any of these write-downs occur at a significant level, they could have an adverse effect on our business, financial condition and results of operations.
As a result, we are required to write down the value of excess and obsolete inventory, and should any of these write-downs occur at a significant level, they could have an adverse effect on our business, financial condition and results of operations.
Furthermore, in developing markets it may be common for others to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act, UK Bribery Act, or similar local anti-bribery laws.
Furthermore, in developing markets it may be common for others to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act or similar local anti-bribery laws.
Our personnel, systems, procedures and controls may not be adequate to effectively manage our future operations, especially as we employ personnel in multiple domestic and international locations. We may not be able to hire, train, retain and manage the personnel required to address our growth.
Our personnel, systems, procedures and controls may not be adequate to effectively manage our future operations, especially as we employ personnel in multiple domestic and some international locations. We may not be able to hire, train, retain and manage the personnel required to address our growth.
The market for some of our products and services is subject to rapid technological change, evolving industry standards and changes in customer demand, which can contribute to the decline in value or obsolescence of inventory.
The market for some of our products and services is subject to rapid technological change, evolving industry standards and changes in customer demand, which can contribute to a decline in value or obsolescence of inventory.
Foreign Corrupt Practices Act, UK Bribery Act, and similar laws of other jurisdictions, governing our business activities outside the United States, the violation of which could result in severe penalties, including monetary fines, criminal proceedings and suspension of export or import privileges; and • Terrorist or military actions that result in destruction or seizure of our assets or suspension or disruption of our operations or those of our customers, suppliers or service providers.
Foreign Corrupt Practices Act and similar laws of other jurisdictions, governing our business activities outside the United States, the violation of which could result in severe penalties, including monetary fines, criminal proceedings and suspension of export or import privileges; and • Terrorist or military actions that result in destruction or seizure of our assets or suspension or disruption of our operations or those of our customers, suppliers or service providers.
While we have backup systems and business continuity plans, any significant or lengthy interruption of our ability to provide these centralized functions as a result of natural disasters, prolonged inclement weather, security breaches or otherwise would significantly impair our ability to continue normal business operations.
While we have backup systems and business continuity plans, any significant or lengthy interruption of our ability to provide these centralized functions as a result of natural disasters, prolonged inclement weather, security breaches (including cyberattacks) or otherwise would significantly impair our ability to continue normal business operations.
Although some of our suppliers provide us with certain protections from the loss in value of inventory (such as price protection and certain return rights), we cannot be sure that such protections will fully compensate for any loss in value, or that the suppliers will choose to, or be able to, honor such agreements.
Although some of our suppliers provide us with certain protections from a loss in value of inventory (such as price protection and certain return rights), we cannot be sure that such protections will fully compensate for any loss in value, or that such suppliers will choose to, or be able to, honor such agreements.
We work closely with our third-party logistics and warehousing providers to anticipate issues, and also review public information regarding their financial health. However, issues may not be identified quickly, which may lead to lack of or poor execution of services, loss or litigation.
We work closely with our third-party logistics and warehousing providers to anticipate issues, and also review public information regarding their financial health. However, issues may not be timely identified, which may lead to lack of or poor execution of services, loss or litigation.
In addition, we could be subject to legal claims in the event of the loss, disclosure or misappropriation of, or access to, our customer's or business partners' or our own information. We make extensive use of online services and integrated information systems, including through third-party service providers.
In addition, we could be subject to legal claims in the event of loss, disclosure or misappropriation of, or loss of access to, our customers’, business partners’ or our own information. We make extensive use of online services and integrated information systems, including through third-party service providers.
An uninsured, under insured or non-indemnified adverse outcome in significant litigation could have an adverse effect on our business, financial condition and results of operations. We can make no assurances that we will ultimately be successful in any dispute that we are a party to. See Item 3. "Legal Proceedings" for further discussion of our material legal matters.
An uninsured, under-insured or non-indemnified adverse outcome in significant litigation could have an adverse effect on our business, financial condition and results of operations. We can make no assurances that we will ultimately be successful in any dispute that we are a party to. See Item 3. “Legal Proceedings” for further discussion of our material legal matters.
Any such loss, disclosure or misappropriation of, or access to, customers' or business partners' information or our information or other breach of such information security can result in legal claims or legal proceedings, including regulatory investigations and actions, and may have a serious impact on our reputation and may adversely affect our businesses, operating results and financial condition.
Any such loss, disclosure or misappropriation of, or access to, our customers’ or business partners’ information or our information or other data breach affecting such information can result in legal claims or legal proceedings, including regulatory investigations and actions, and may have a serious impact on our reputation and may adversely affect our businesses, operating results and financial condition.
Testing goodwill and other intangibles for impairment requires the use of significant estimates and other inputs outside of our control. If the carrying value of goodwill in any of our goodwill reporting units or other intangible assets is determined to exceed their respective fair values, we may be required to record significant impairment charges.
Testing goodwill and other intangibles for impairment requires the use of significant estimates and other inputs outside of our control. If the carryi ng value of goodwill in any of our goodwill reporting units or other intangible assets is determined to exceed their respective fair values, we may be required to record significant impairment charges.
If we cannot successfully increase our business, our product sales, financial condition and results of operations could be adversely affected. Quarterly fluctuations - Our net sales and operating results are dependent on a number of factors. Our net sales will fluctuate from quarter to quarter, and these fluctuations may cause volatility in our stock price.
If we cannot successfully increase our business, our product sales, our financial condition and results of operations could be adversely affected. Quarterly fluctuations - Our net sales and operating results are dependent on several factors. Our net sales will fluctuate from quarter to quarter, and these fluctuations may cause volatility in our stock price.
Our information technology and other systems that maintain and transmit customer or employee information or those of service providers or business partners may be compromised by a malicious third-party penetration of our network security, or that of a third-party service provider or business partner, or impacted by advertent or inadvertent actions or inactions by our employees, or those of a third-party service provider or business partner.
Our information technology and other systems that maintain and transmit customer or employee information or those of our service providers or business partners may be compromised by a malicious third-party penetration of network security or impacted by the advertent or inadvertent actions or inactions of our employees, third-party service providers or business partners.
Our ability and our supplier's ability to anticipate and react quickly to new technology trends and customer requirements is crucial to our overall success, financial condition and results of operations.
Our ability and our suppliers’ ability to anticipate and react quickly to new technology trends and customer requirements is crucial to our overall success, financial condition and results of operations.
These risks include: • Fluctuations of foreign currency and exchange rates, which can impact sales, costs of the goods we sell and the reporting of our results and assets on our financial statements; • Changes in international trade laws, trade agreements, or trading relationships affecting our import and export activities, including export license requirements, restrictions on the export of certain technology and tariff changes, or the imposition of new or increased trade sanctions; • Difficulties in collecting accounts receivable and longer collection periods; • Changes in, or expiration of, various foreign incentives that provide economic benefits to us; • Labor laws or practices that impact our ability and costs to hire, retain and discharge employees; • Difficulties in staffing and managing operations in foreign countries; • Changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation), and laws related to data privacy such as GDPR and other similar privacy laws that impact our IT systems and processes; • Global economic and financial market instability; • Potential political and economic instability and changes in governments; • Compliance with foreign and domestic import and export regulations and anti-corruption laws, including the Iran Threat Reduction and Syria Human Rights Act of 2012, U.S.
These risks include: 13 Table of Contents Index to Financial Statements • Fluctuations of foreign currency and exchange rates, which can impact sales, costs of goods sold and the reporting of our results from operations and financial conditions, including the value of certain assets on our financial statements; • Changes in international trade laws, trade agreements, or trading relationships affecting our import and export activities, including export license requirements, restrictions on the export of certain technology and tariff changes, or the imposition of new or increased trade sanctions; • Difficulties in collecting accounts receivable and longer collection periods; • Changes in, or expiration of, various foreign incentives that provide economic benefits to us; • Labor laws or practices that impact our ability and costs to hire, retain and discharge employees; • Difficulties in staffing and managing operations in foreign countries; • Changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation), and laws related to data privacy and other similar privacy laws that impact our IT systems and processes; • Global economic and financial market instability; • Potential political and economic instability and changes in governments; • Compliance with foreign and domestic import and export regulations and anti-corruption laws, including the Iran Threat Reduction and Syria Human Rights Act of 2012, U.S.
To remain competitive, we may be forced to offer more credit or extended payment terms to our customers. This could result in an increase in our need for capital, increase our financing costs, increase our bad debt expenses and have an adverse impact on our results of operations.
To remain competitive, we may be forced to offer more credit or extend payment terms to our customers. This could result in an increase in our need for capital, increase our financing costs, increase our bad debt expenses and have an adverse impact on our financial condition and results of operations.
If there is deterioration in the collectability of our receivables, or if we fail to take other actions to adequately mitigate such credit risk, our earnings, cash flows and our ability to utilize receivable-based financing could deteriorate. In addition, extending credit to international customers involves additional risks.
If there is deterioration in the collectability of our receivables, or if we fail to take other actions to adequately mitigate such credit risk, our earnings, cash flows and our ability to utilize receivable-based financing could deteriorate. 10 Table of Contents Index to Financial Statements In addition, extending credit to international customers involves additional risks.
Some of our competitors and our suppliers’ competitors may be better at adapting to disruptive technology or entering 15 Table of Contents Index to Financial Statements new markets. Our future success depends, in part, on our ability to adapt and manage our product and service offerings to meet customer needs at prices that our customers are willing to pay.
Some of our competitors and our suppliers’ competitors may be better at adapting to disruptive technology or entering new markets. Our future success depends, in part, on our ability to adapt and manage our product and service offerings to meet customer needs at prices that our customers are willing to pay.
Changes in how lenders rate our credit worthiness, as well as macroeconomic factors such as an economic downturn, inflation, rising interest rates and 12 Table of Contents Index to Financial Statements global economic instability may restrict our ability to raise capital in adequate amounts or on terms acceptable to us, and the failure to do so could harm our ability to operate our business.
Changes in how lenders rate our credit worthiness, as well as macroeconomic factors such as an economic downturn, inflation, rising interest rates and global economic instability may restrict our ability to raise capital in adequate amounts or on terms acceptable to us, and the failure to do so could harm our ability to operate our business.
If any of these risks develops into actual events, our business, financial condition and 8 Table of Contents Index to Financial Statements results of operations could be negatively affected, the market price of our common stock could decline and you may lose all or part of your investment in our common stock.
If any of these risks develops into actual events, our business, financial condition and results of operations could be negatively affected, the market price of our common stock could decline and you may lose all or part of your investment in our common stock.
In complying with such laws, regulations and other requirements, we may incur additional costs. In addition, non-compliance with such laws, regulations and other requirements also may expose us to fines and penalties, including contractual damages or the loss of certain contracts or business.
In addition, non-compliance with such laws, regulations and other requirements also may expose us to fines and penalties, including contractual damages or the loss of certain contracts or business.
We have no guaranteed price or delivery agreements with our suppliers. In certain product categories, limited price protection or return rights offered by our suppliers may have a bearing on the amount of product we are willing to stock.
In certain product categories, limited price protection or return rights offered by our suppliers may have a bearing on the amount of product we are willing to stock.
In addition, unexpected and dramatic changes in foreign currency exchange rates may negatively affect our earnings from those markets. Economic weakness - Economic weakness, including recession and inflation, and geopolitical uncertainty could adversely affect our results and prospects.
In addition, unexpected and dramatic changes in foreign currency exchange rates may negatively affect our earnings from foreign markets. Economic weakness - Economic weakness and uncertainty, including the possibility of recession and heightened levels of inflation, and geopolitical uncertainty could adversely affect our results and prospects.
If our suppliers fail to evolve their product and service offerings, or if we fail to evolve our product and service offerings or engage with desirable suppliers in time to respond to, and remain ahead of, new technological developments, it would adversely affect our ability to retain or increase market share and revenue.
If our suppliers fail to evolve their product and service offerings, or if we fail to evolve our product and service offerings or to engage with desirable suppliers in time to respond to, and remain ahead of, new technological developments, our ability to retain or increase market share, profit margins and revenue could be adversely affected.
Our systems were disrupted during our recent ransomware incident, and there can be no assurance that our systems will not fail or experience disruptions again in the future, and any significant failure or disruption of these systems could prevent us from making sales, ordering and delivering products and otherwise conducting our business.
A ransomware incident in 2023 disrupted our systems, and there can be no assurance that our 9 Table of Contents Index to Financial Statements systems will not fail or experience disruptions again in the future. Any significant failure or disruption of these systems could prevent us from making sales, ordering and delivering products and otherwise conducting our business.
Additionally, any past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in the future as our operating results may fluctuate significantly quarter to quarter.
Additionally, any past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in the future as our operating results may fluctuate significantly quarter to quarter. The results of any quarterly period are not indicative of results to be expected for a full fiscal year.
In addition, the centralization of these functions increases our exposure to local risks, such as the availability of qualified employees and the lessening of competition for critical services, such as freight and communications. Risk Factors Related to our Industry Competition - We experience intense competition in all of our markets.
In addition, the centralization of these functions increases our exposure to local risks, such as the availability of qualified employees and increased competition for, or lack of access to, critical services, such as freight and communications. 14 Table of Contents Index to Financial Statements Risk Factors Related to our Industry Competition - We experience intense competition in all our markets.
Our suppliers have the ability to make adverse changes in their sales terms and conditions, such as reducing the level of purchase discounts and 11 Table of Contents Index to Financial Statements rebates they make available to us. In addition, our supplier agreements typically are short-term and may be terminated without cause on short notice.
Our suppliers have the ability to make adverse changes in their sales terms and conditions, such as reducing the level of purchase discounts and rebates they make available to us. In addition, our supplier agreements typically are short-term and may be terminated without cause on short notice. We have no guaranteed price or delivery agreements with our suppliers.
As of June 30, 2023, the Specialty Technology Solutions and Modern Communications & Cloud reporting units' goodwill balances are $16.4 million and $200.3 million, respectively. The fair value of the reporting units exceeded its carrying value by 2% and 13%, respectively, as of the annual goodwill impairment testing date.
As of June 30, 2024, the Specialty Technology Solutions and Modern Communications & Cloud reporting units' goodwill balances are $16.4 million and $189.9 million, resp ectively. The fair value of the reporting units exceeded its carrying value by 11% and 33% , respectively, as of the annual goodwill impairment testing date.
Economic recession, higher interest rates and inflation could result in some of our customers shuttering their businesses, thus negatively impacting our business. Litigation - We routinely are involved in litigation that can be costly and lead to adverse results.
The loss or deterioration of a major customer relationship could adversely affect our business, financial condition and results of operations. Economic recession, higher interest rates and inflation could result in some of our customers shuttering their businesses, thus negatively impacting our business. Litigation - We routinely are involved in litigation that can be costly and lead to adverse results.
We endeavor to monitor these financial institutions regularly for credit quality; however, we are exposed to risk of loss on such funds or we may experience significant disruptions in our liquidity needs if one or more of these financial institutions were to fail or suffer bankruptcy or similar restructuring.
We endeavor to monitor these financial institutions regularly for credit quality; however, we are exposed to risk of loss on such funds or we may experience significant disruptions in our liquidity needs if one or more of these financial institutions were to fail or suffer bankruptcy or similar restructuring. 12 Table of Contents Index to Financial Statements Customers - We operate in a highly competitive environment and good customer relations are critical to our success.
We have acquired, and may continue to acquire, companies that complement or expand our existing business in the United States and internationally, and some of these acquisitions may be in business lines where we have little, if any, experience.
Acquisitions involve unique risks and uncertainties, including difficulty in identifying and completing potential acquisitions. 8 Table of Contents Index to Financial Statements We have acquired, and may continue to acquire, companies that complement or expand our existing business in the United States and internationally, and some of these acquisitions may be in business lines where we have little, if any, experience.
In addition, for financial reporting purposes, we estimate future credit losses and establish reserves. To the extent that our credit losses exceed those reserves, our financial performance will be negatively impacted beyond what is expected.
To the extent that our credit losses exceed those reserves, our financial performance will be negatively impacted beyond what is expected.
Similarly, for the primary business operations, we utilize a single information system based in the United States for the majority of our North American operations, while our Brazilian and UK operations have separate systems.
For instance, we currently distribute products to the majority of North America from a single warehouse. Similarly, for our primary business operations, we utilize a single information system based in the United States for the majority of our North American operations, while our Brazilian operations utilize a separate system.
With constant changes in the security landscape, experienced computer programmers and hackers may be able to penetrate our network security, or that of our third-party service providers, and misappropriate or compromise our confidential information, create system disruptions, or cause shutdowns. As a result, our customers' information may be lost, disclosed, accessed or taken without our customers' consent.
With constant changes 15 Table of Contents Index to Financial Statements in the security landscape, experienced computer programmers and hackers may be able to penetrate our network security, or that of our third-party service providers and business partners, and misappropriate or compromise confidential information, create system disruptions or cause shutdowns.
As a result, a loss or reduction of use of one of our locations would have an adverse effect on our business operations and financial results. In order to be as efficient as possible, we centralize a number of critical functions. For instance, we currently distribute products to the majority of North America from a single warehouse.
Centralized functions - We have centralized several functions to provide efficient support to our business. As a result, a loss or reduction of use of one of our locations could have an adverse effect on our business operations and financial results. In order to be as efficient as possible, we centralize a number of critical functions.
We currently have significant facilities outside the United States. For fiscal year ending June 30, 2023, approximately 9.4% of our revenue is derived from our international operations outside of the United States and Canada.
International operations - Our international operations expose us to risks that are different from, and possibly greater than, the risks we are exposed to domestically. We currently have significant facilities outside the United States. For fiscal year ending June 30, 2024, approximately 10.4% of our revenue is derived from our international operations outside of the United States and Canada.
Increased government regulation - We may be subject to additional costs and subject to fines and penalties because certain governmental entities are end-customers of products that we sell. Certain of our customers sell our products to government entities, which requires us to comply with additional laws, regulations and contractual requirements relating to how we conduct business.
Certain of our customers sell our products to government entities, which requires us to comply with additional laws, regulations and contractual requirements relating to how we conduct business. In complying with such laws, regulations and other requirements, we may incur additional costs.
IT Systems - Our ability to manage our business and monitor results is highly dependent upon information and communication systems. A failure of these systems could disrupt our business. We are highly dependent upon a variety of computer and telecommunication systems to operate our business, including our enterprise resource planning systems.
We are highly dependent upon a variety of computer and telecommunication systems to operate our business, including our enterprise resource planning systems.
Economic weakness and geopolitical uncertainty may also lead us to impair assets, including goodwill, intangible assets and other long-lived assets, take restructuring actions or adjust our operating strategy and reduce expenses in response to decreased sales or margins. We may not be able to adequately adjust our cost structure in a timely fashion, which may adversely impact our profitability.
Economic weakness and geopolitical uncertainty may also lead us to impair assets, including goodwill, intangible assets and other long-lived assets, take restructuring actions or adjust our operating strategy and 16 Table of Contents Index to Financial Statements reduce expenses in response to decreased sales or margins.
Our inability to pass through to our customers the impact of these changes, as well as if we fail to develop or maintain systems to manage ongoing supplier programs, could cause us to record inventory write-downs or other losses and could have significant negative impact on our gross margins.
Our inability to pass through to our customers the impact of these changes, as well as if we fail to develop or maintain systems to manage ongoing supplier programs, could cause us to record inventory write-downs or other losses and could have significant negative impact on our gross margins. 11 Table of Contents Index to Financial Statements We receive purchase discounts and rebates from some suppliers based on various factors, including goals for quantitative and qualitative sales or purchase volume and customer related metrics.
Customers - We operate in a highly competitive environment and good customer relations are critical to our success. There can be no assurance that we will be able to retain and expand our customer relationships or acquire new customers. Meeting our customers' needs quickly and fairly is critical to our business success.
There can be no assurance that we will be able to retain and expand our customer relationships or acquire new customers. Meeting our customers’ needs quickly and fairly is critical to our business success. Transactions with our customers generally are performed on a purchase order basis rather than under long term supply agreements.
We receive purchase discounts and rebates from some suppliers based on various factors, including goals for quantitative and qualitative sales or purchase volume and customer related metrics. Certain purchase discounts and rebates may affect gross margins. Many purchase discounts from suppliers are based on percentage increases in sales of products.
Certain purchase discounts and rebates may affect gross margins. Many purchase discounts from suppliers are based on percentage increases in sales of products.
We also may be subject to increased scrutiny and investigation into our business practices, which may increase operating costs and increase legal liability, as well as expose us to additional reputational risk. Volatility of Stock Price - The trading price of our common stock fluctuates.
We also may be subject to increased scrutiny and investigation into our business practices, which may increase operating costs and increase legal liability, as well as expose us to additional reputational risk. Foreign currency - Our international operations expose us to fluctuations in foreign currency exchange rates that could adversely affect our results of operations.
Our failure to effectively manage our organic growth could have an adverse effect on our business, financial condition and results of operations. Credit exposure - We have credit exposure to our customers. Any adverse trends or significant adverse incidents in their businesses could cause us to suffer credit losses.
Our failure to effectively manage our organic growth could have an adverse effect on our business, financial condition and results of operations.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital, if needed, and the inability for you to obtain a favorable price at which you could sell your shares. 16 Table of Contents Index to Financial Statements Foreign currency - Our international operations expose us to fluctuations in foreign currency exchange rates that could adversely affect our results of operations.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital, if needed, and the inability for you to obtain a favorable price at which you could sell your shares. ITEM 1B. Unresolved Staff Comments. Not applicable.
We expressly disclaim any obligation to update or revise any risk factors, whether as a result of new information, future events or otherwise, except as required by law. Risk Factors Related to our Operations People - If we cannot continue to hire and retain high quality employees, our business and financial results may be negatively affected.
We expressly disclaim any obligation to update or revise any risk factors, whether as a result of new information, future events or otherwise, except as required by law. Risk Factors Related to our Operations Acquisitions - Our growth strategy includes acquisitions of companies that complement or expand our existing business.
Our operating results could be adversely affected by increased competition for employees, difficulty in recruiting employees, higher employee turnover or increased compensation and benefit costs. Our employees are important to our success and we are dependent in part on our ability to retain the services of our employees in key roles.
People - If we cannot continue to hire and retain high quality employees, our business and financial results may be negatively affected. Our operating results could be adversely affected by increased competition for employees, difficulty in recruiting employees, higher employee turnover or increased compensation and benefit costs.
Uncertainty about economic conditions may increase foreign currency volatility in markets in which we transact business, which may negatively impact our results. Economic weakness and geopolitical uncertainty also make it more difficult for us to manage inventory levels and/or collect customer receivables, which may result in provisions to create reserves, write-offs, reduced access to liquidity and higher financing costs.
Economic weakness and geopolitical uncertainty also make it more difficult for us to manage inventory levels and/or collect customer receivables, which may result in provisions to create reserves, write-offs, reduced access to liquidity and higher financing costs. Although U.S. inflation rates have shown signs of moderating, periods of elevated inflation contribute to increased costs for labor, materials and services.
Failure to properly or adequately address these issues could impact our ability to perform necessary business operations, which could adversely affect our reputation, competitive position, business, financial condition and results of operations. 9 Table of Contents Index to Financial Statements In addition, the information systems of companies we acquire may not meet our standards or we may not be able to successfully convert them to provide acceptable information on a timely and cost-effective basis.
In addition, the information systems of companies we acquire may not meet our standards or we may not be able to successfully convert them to provide acceptable information on a timely and cost-effective basis.
Transactions with our customers generally are performed on a purchase order basis rather than under long term supply agreements. Therefore, our customers can choose to purchase from other sources. From time to time, we experience shortages in availability of some products from suppliers, and this impacts customers' decisions regarding whether to make purchases from us.
Therefore, our customers can choose to purchase from other sources. From time to time, we experience shortages in availability of some products from suppliers, and this impacts customer decisions regarding whether to make purchases from us. Anything that negatively influences customer relations can also negatively impact our operating results.
We are subject to laws and regulations relating to customer privacy and the protection of personal information.
As a result, our customers’ information may be lost, disclosed, accessed or taken without our customers’ consent. We are subject to laws and regulations relating to customer privacy and the protection of personal information.
Any declines resulting in a goodwill impairment or long-lived asset impairment may result in material non-cash charges to our earnings.
Any declines resulting in a goodwill impairment or long-lived asset impairment may result in material non-cash charges to our earnings. Impairment charges would also reduce our consolidated shareholders' equity and increase our debt-to-total-capitalization ratio, which could negatively impact our credit rating and access to the public debt and equity markets.
Our stock price is likely to continue to be volatile in response to market and other factors; variations in our quarterly operating results from our expectations or those of securities analysts or investors; downward revisions in securities analysts’ estimates; and announcement by us or our competitors of significant acquisitions, transactions, partnerships, joint ventures or capital commitments.
Our stock price can be affected by numerous factors such as variations in our quarterly operating results or expectations with regard thereto; revisions in securities analysts’ estimates; announcements by us or our competitors of significant acquisitions, transactions, partnerships, joint ventures or capital commitments; interest rates; business conditions in our industry or the general state of the securities markets and the economy.
As is customary in our industry, we extend credit to our customers, and most of our sales are on open accounts; we also provide financing to some Intelisys customers based on their future commission flows.
Credit exposure - We have credit exposure to our customers. Any adverse trends or significant adverse incidents in their businesses could cause us to suffer credit losses. As is customary in our industry, we extend credit to our customers, and most of our sales are on open accounts.
As we grow and compete for business, our typical payment terms tend to be longer, and therefore may increase our credit risk. 10 Table of Contents Index to Financial Statements While we evaluate our customers' qualifications for credit and monitor our extensions of credit, these efforts cannot prevent all credit losses and any credit losses negatively impact our performance.
While we evaluate our customers' qualifications for credit and monitor our extensions of credit, these efforts cannot prevent all credit losses and any credit losses negatively impact our performance. In addition, for financial reporting purposes, we estimate future credit losses and establish reserves.
The stock market as a whole and the trading prices of companies with smaller capitalization have been volatile. This volatility could significantly reduce the price of our common stock at any time, without regard to our own operating performance. This volatility may affect the price at which you could sell your common stock.
This volatility could significantly reduce the price of our common stock at any time, without regard to our own operating performance, particularly because we are designated as a small cap stock that is thinly traded.
This attack interrupted our ability to accept and process orders for approximately nine business days and resulted in the disclosure on the "dark web" of various information from our systems. Although substantially all of the restoration is complete, there can be no assurance that we will not be a victim of a ransomware or other cyberattack again in the future.
We have taken steps to strengthen our existing IT security infrastructure and continue to implement additional measures to prevent unauthorized access to, or manipulation of, our systems and data. Although restoration is complete, there can be no assurance that we will not be a victim of a ransomware or other cyberattack again in the future.
Therefore, to retain our employees and attract new ones, we have to provide a satisfying work environment and competitive compensation and benefits. Acquisitions - Our growth strategy includes acquisitions of companies that complement or expand our existing business. Acquisitions involve unique risks and uncertainties, including difficulty in identifying and completing potential acquisitions.
Therefore, to retain our employees and attract new ones, we have to provide a satisfying work environment and competitive compensation and benefits. IT Systems - Our ability to manage our business and monitor results is highly dependent upon information and communication systems. A failure of these systems could disrupt our business.
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Impairment charges would also reduce our consolidated shareholders' equity and increase our debt-to-total-capitalization ratio, which could negatively impact our credit rating and access to the public debt and equity markets. 13 Table of Contents Index to Financial Statements International operations - Our international operations expose us to risks that are different from, and possibly greater than, the risks we are exposed to domestically.
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Our employees are important to our success and we are dependent in part on our ability to retain the services of our employees in key roles.
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The results of any quarterly period are not indicative of results to be expected for a full fiscal year. 14 Table of Contents Index to Financial Statements Centralized functions - We have centralized a number of functions to provide efficient support to our business.
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Failure to properly or adequately address these issues could impact our ability to perform necessary business operations, which could adversely affect our reputation, competitive position, business, financial condition and results of operations.
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New technologies may emerge that quickly surpass the capabilities of the products we currently hold in inventory or have access to sell through our existing supplier network, and our customers may no longer view our product offerings as desirable or necessary, which could result in a reduction in our market share and ability to obtain sufficient profit margins.
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We also provide financing to some Intelisys customers based on their future commission flows. As we grow and compete for business, our typical payment terms tend to get longer, increasing our credit risk.
Added
This attack interrupted our ability to accept and process orders for approximately nine business days and resulted in the disclosure on the “dark web” of various information from our systems. Upon detection, we took immediate steps to address the incident, engaged third-party experts, and notified law enforcement.
Added
Although we have insurance to offset financial losses incurred for events such as the ransomware attack we experienced in May 2023, there can be no guarantee that we will recover all insurance proceeds claimed.
Added
Any insurance proceeds received related to the cybersecurity incident will be recorded in selling, general and administrative expenses of the consolidated income statement for the relevant period. Increased government regulation - We may be subject to additional costs and subject to fines and penalties because certain governmental entities are end-customers of products that we sell.
Added
We may not be able to adequately adjust our cost structure in a timely fashion, which may adversely impact our profitability. Uncertainty about economic conditions also may increase foreign currency volatility in such markets, which may negatively impact our results.
Added
The re-emergence of high levels of inflation could further increase our costs and otherwise adversely impact our results of operations and financial condition. Although we monitor changes to the macroeconomic environment, we cannot predict any future trends in the rate of inflation or the general state of the economy.
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Volatility of Stock Price - The trading price of our common stock fluctuates. The market price of our common stock could be subject to wide fluctuations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal locations and/or properties as of June 30, 2023, were as follows: Location Approximate Square Footage Type of Interest Description of Use United States Greenville, SC 174,000 Owned Headquarters - Principal Executive and Sales Offices Greenville, SC 7,600 Leased Sales and Administration Offices Southaven, MS 741,000 Leased Warehouse Sacramento, CA 53,000 Leased Sales and Administration Offices and Warehouse Louisville, KY 22,000 Leased Warehouse Brazil São José does Pinhais, Paraná, Brazil 24,000 Leased Sales Office and Warehouse Serra, Espírito Santo, Brazil 31,000 Leased Sales Office and Warehouse Itajai, Santa Catarina, Brazil 164,000 Leased Sales Office and Warehouse Of the 174,000 owned square footage in Greenville, South Carolina approximately 40,000 square feet is subleased to an unrelated third party.
Biggest changeOur principal locations and/or properties as of June 30, 2024, were as follows: 18 Table of Contents Index to Financial Statements Location Approximate Square Footage Type of Interest Description of Use United States Greenville, SC 174,000 Owned Headquarters - Principal Executive and Sales Offices Southaven, MS 741,000 Leased Warehouse Sacramento, CA 53,000 Leased Sales and Administration Offices and Warehouse Louisville, KY 22,000 Leased Warehouse Brazil Serra, Espírito Santo, Brazil 31,000 Leased Sales Office and Warehouse Itajai, Santa Catarina, Brazil 30,100 Leased Sales Office and Warehouse Of the 174,000 owned square footage in Greenville, South Carolina approximately 40,000 square feet is subleased to an unrelated third party.
Our primary North American distribution operations are located in Southaven, Mississippi. We utilize the 17 Table of Contents Index to Financial Statements logistical services of various third party warehouses in the United States and Brazil. We also lease various additional sales offices and warehouse spaces, each approximately 20,000 square feet or less throughout the United States and international locations.
Our primary North American distribution operations are located in Southaven, Mississippi. We utilize the logistical services of various third-party warehouses in the United States and Brazil. We also lease various additional sales offices and warehouse spaces, each approximately 20,000 square feet or less throughout the United States and Brazil.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table shows the share-repurchase activity for the quarter ended June 30, 2023 (in thousands except share and per share data): Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of the publicly announced plan or program Approximate dollar value of shares that may yet be purchased under the plan or program April 1, 2023 through April 30, 2023 107,639 $28.79 107,639 $67,802,877 May 1, 2023 through May 31, 2023 60,000 $27.43 60,000 $66,157,077 June 1, 2023 through June 30, 2023 992 $30.14 — $66,157,077 Total 168,631 167,639 (1) Includes 992 shares withheld from employees' stock-based awards to satisfy required tax withholding obligations for the month of June 2023.
Biggest changeThe graph assumes the investment of $100 on June 30, 2019. 2019 2020 2021 2022 2023 2024 ScanSource, Inc. $ 100 $ 74 $ 86 $ 96 $ 91 $ 136 NASDAQ Composite $ 100 $ 127 $ 184 $ 141 $ 178 $ 231 SIC Code 5045 – Computers & Peripheral Equipment and Software $ 100 $ 110 $ 218 $ 187 $ 195 $ 248 20 Table of Contents Index to Financial Statements Share Repurchases The following table shows the share-repurchase activity for the quarter ended June 30, 2024 (in thousands except share and per share data): Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of the publicly announced plan or program (2) Approximate dollar value of shares that may yet be purchased under the plan or program (2) April 1, 2024 through April 30, 2024 70,000 $42.64 70,000 $141,930,496 May 1, 2024 through May 31, 2024 219,908 $46.78 219,908 $131,503,175 June 1, 2024 through June 30, 2024 186,180 $45.31 184,445 $123,149,303 Total 476,088 474,353 (1) Includes 1,735 shares withheld from employees' stock-based awards to satisfy required tax withholding obligations for the month of June 2024.
Stock Performance Chart The following stock performance graph compares cumulative total shareholder return on our common stock over a five-year period with the Nasdaq Market Index and with the Standard Industrial Classification ("SIC") Code Index (SIC Code 5045 – Wholesale Computers and Peripheral Equipment and Software) for the same period.
Stock Performance Chart The following stock performance graph compares cumulative total shareholder return on our common stock over a five-year period with the Nasdaq Composite Index and with the Standard Industrial Classification (“SIC”) Code Index (SIC Code 5045 – Wholesale Computers and Peripheral Equipment and Software) for the same period.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is quoted on the NASDAQ Global Select Market under the symbol "SCSC." As of August 20, 2023, there were approximately 735 holders of record of our common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is quoted on the NASDAQ Global Select Market under the symbol “SCSC.” As of August 20, 2024, there were approximately 800 holders of record of our common stock.
There were no shares withheld during the months of April and May 2023. Dividends We have never declared or paid a cash dividend. Under the terms of our credit facility, the payment of cash dividends is restricted.
In fiscal year 2024, we repurchased 980,539 shares totaling $43.3 million under the share repurchase program. Dividends We have never declared or paid a cash dividend. Under the terms of our credit facility, the payment of cash dividends is restricted.
Removed
The graph assumes the investment of $100 on June 30, 2018. 2018 2019 2020 2021 2022 2023 ScanSource, Inc. $ 100 $ 81 $ 60 $ 70 $ 77 $ 73 NASDAQ Composite $ 100 $ 108 $ 137 $ 199 $ 152 $ 192 SIC Code 5045 – Computers & Peripheral Equipment $ 100 $ 103 $ 76 $ 127 $ 116 $ 140 19 Table of Contents Index to Financial Statements Share Repurchases In August 2021, our Board of Directors authorized a $100 million share repurchase program.
Added
There were no shares withheld during the months of April and May 2024. (2) In August 2021, our Board authorized a $100 million share repurchase program, which does not have any time limit. In May 2024, our Board subsequently increased the authorization for the share repurchase program by an additional $100 million, which does not have any time limit.
Removed
The authorization does not have any time limit. In fiscal year 2023, we repurchased 524,108 shares totaling $15.8 million under the share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBelow we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above: Year ended June 30, 2023 GAAP Measure Intangible amortization expense Tax recovery Divestiture costs Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 285,695 $ — $ 2,986 $ — $ (1,460) $ 287,221 Operating income 135,886 16,746 (2,986) — 1,460 151,106 Pre-tax income 121,850 16,746 (2,986) — 1,460 137,070 Net income 88,092 12,489 (3,985) — 1,092 97,688 Diluted EPS $ 3.47 $ 0.49 $ (0.16) $ — $ 0.04 $ 3.85 Year ended June 30, 2022 GAAP Measure Intangible amortization expense Tax recovery Divestiture costs Cyberattack restoration costs Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 275,442 $ — $ — $ (30) $ — $ 275,412 Operating income 122,167 17,853 — 30 — 140,050 Pre-tax income 118,623 17,853 — 30 — 136,506 Net income 88,698 13,412 — 30 — 102,140 Diluted EPS $ 3.44 $ 0.52 $ — $ — $ — $ 3.97 31 Table of Contents Index to Financial Statements Critical Accounting Policies and Estimates Management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with US GAAP.
Biggest changeBelow we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above: Year ended June 30, 2024 GAAP Measure Intangible amortization expense Acquisition and Divestiture costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Gain on sale of business (b) Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 277,428 $ — $ (1,717) $ — $ 2,558 $ (874) $ — $ 277,395 Operating income 90,324 15,723 1,717 4,358 (2,558) 874 — 110,438 Pre-tax income 99,841 15,723 1,717 4,358 (2,558) 874 (14,155) 105,800 Net income 77,060 11,697 1,717 3,262 (2,566) 655 (14,155) 77,670 Diluted EPS $ 3.06 $ 0.46 $ 0.07 $ 0.13 $ (0.10) $ 0.03 $ (0.56) $ 3.08 Year ended June 30, 2023 GAAP Measure Intangible amortization expense Acquisition and Divestiture costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Gain on sale of business (b) Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 285,695 $ — $ — $ — $ 2,986 $ (1,460) $ — $ 287,221 Operating income 135,886 16,746 — — (2,986) 1,460 — 151,106 Pre-tax income 121,850 16,746 — — (2,986) 1,460 — 137,070 Net income 88,092 12,489 — — (3,985) 1,092 — 97,688 Diluted EPS $ 3.47 $ 0.49 $ — $ — $ (0.16) $ 0.04 $ — $ 3.85 (a) Acquisition and divestiture costs for the fiscal year ended June 30, 2024 are generally nondeductible for tax purposes.
Impact of the Macroeconomic Environment, Including Inflation and Supply Chain Constraints The macroeconomic environment, including the economic impacts of supply chain constraints, rising interest rates and inflation continues to create significant uncertainty and may adversely affect our consolidated results of operations.
Impact of the Macroeconomic Environment, Including Inflation The macroeconomic environment, including the economic impacts of supply chain constraints, rising interest rates and inflation continues to create significant uncertainty and may adversely affect our consolidated results of operations.
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.
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 fiscal year period.
During fiscal years 2023 and 2022, we completed our annual impairment test as of April 30th and determined that our goodwill was not impaired. See Note 7 - Goodwill and Other Identifiable Intangible Assets in the Notes to Consolidated Financial Statements for further discussion on our goodwill impairment testing and results.
During fiscal years 2024 and 2023, we completed our annual impairment test as of April 30th and determined that our goodwill was not impaired. See Note 7 - Goodwill and Other Identifiable Intangible Assets in the Notes to Consolidated Financial Statements for further discussion on our goodwill impairment testing and results.
While we were in compliance with the financial covenants contained in the Credit Facility as of June 30, 2023, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.
While we were in compliance with the financial covenants contained in the Credit Facility as of June 30, 2024, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.
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. 36 Table of Contents Index to Financial Statements
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. 37 Table of Contents Index to Financial Statements
Net Sales in Constant Currency, Excluding Acquisitions and Divestitures 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.
Net Sales in Constant Currency, Excluding Acquisitions and Divestitures 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.
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.
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 the impact of acquisitions or divestitures.
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 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.
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.
Cash used in operating activities for the year ended June 30, 2023 is primarily due to increases in inventory, which increased 23.2% compared to the beginning of the year, partially offset by earnings from operations.
Cash provided by operating activities for the fiscal year ended June 30, 2023 is primarily due to increases in inventory, which increased 23.2% compared to the beginning of the fiscal year, partially offset by earnings from operations.
See Note 13 - Income Taxes in the Notes to Consolidated Financial Statements for further discussion including an effective tax rate reconciliation. 26 Table of Contents Index to Financial Statements 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.
See Note 13 - Income Taxes in the Notes to Consolidated Financial Statements for further discussion including an effective tax rate reconciliation. 27 Table of Contents Index to Financial Statements 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.
Fiscal Year Ended June 30, 2023 2022 2021 Statement of income data: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 88.1 87.9 88.9 Gross profit 11.9 12.1 11.1 Selling, general and administrative expenses 7.5 7.8 7.9 Depreciation expense 0.3 0.3 0.4 Intangible amortization expense 0.4 0.5 0.6 Restructuring and other charges 0.0 0.0 0.3 Operating income 3.6 3.5 2.0 Interest expense 0.5 0.2 0.2 Interest income (0.2) (0.1) (0.1) Other (income) expense, net 0.0 0.0 0.0 Income from continuing operations before income taxes 3.2 3.4 1.8 Provision for income taxes 0.9 0.8 0.4 Net income from continuing operations 2.3 2.5 1.4 Net income (loss) from discontinued operations 0.0 0.0 (1.1) Net income 2.4 % 2.5 % 0.3 % Comparison of Fiscal Years Ended June 30, 2023 and 2022 Below is a discussion of fiscal years ended June 30, 2023 and 2022.
Fiscal Year Ended June 30, 2024 2023 2022 Statement of income data: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 87.8 88.1 87.9 Gross profit 12.2 11.9 12.1 Selling, general and administrative expenses 8.5 7.5 7.8 Depreciation expense 0.3 0.3 0.3 Intangible amortization expense 0.5 0.4 0.5 Restructuring and other charges 0.1 0.0 0.0 Operating income 2.8 3.6 3.5 Interest expense 0.4 0.5 0.2 Interest income (0.3) (0.2) (0.1) Gain on sale of business (0.4) — — Other (income) expense, net 0.0 0.0 0.0 Income from continuing operations before income taxes 3.1 3.2 3.4 Provision for income taxes 0.7 0.9 0.8 Net income from continuing operations 2.4 2.3 2.5 Net income from discontinued operations 0.0 0.0 0.0 Net income 2.4 % 2.4 % 2.5 % Comparison of Fiscal Years Ended June 30, 2024 and 2023 Below is a discussion of fiscal years ended June 30, 2024 and 2023.
Net sales derived from our Intelisys business contribute 100% to our gross profit dollars and margin as they have no associated cost of goods sold. Specialty Technology Solutions For the Specialty Technology Solutions segment, gross profit dollars increased $18.5 million.
Net sales derived from our Intelisys business contribute 100% to our gross profit dollars and margin as they have no associated cost of goods sold. Specialty Technology Solutions For the Specialty Technology Solutions segment, gross profit dollars decreased $36.5 million.
In our most recent annual test, we estimated the fair value of our reporting units primarily based on the income approach utilizing the discounted cash flow method. As of June 30, 2023, the Specialty Technology and Modern Communications & Cloud reporting units' goodwill balances are $16.4 million and $200.3 million, respectively.
In our most recent annual test, we estimated the fair value of our reporting units primarily based on the income approach utilizing the discounted cash flow method. As of June 30, 2024, the Specialty Technology and Modern Communications & Cloud reporting units' goodwill balances are $16.4 million and $189.9 million, respectively.
During the fiscal year ended June 30, 2023, our borrowings under the credit facility were U.S. dollar loans. The spread in effect as of June 30, 2023 was 1.50%, plus a 0.10% credit spread adjustment for SOFR-based loans and 0.50% for alternate base rate loans. The commitment fee rate in effect as of June 30, 2023 was 0.25%.
During the fiscal year ended June 30, 2024, our borrowings under the credit facility were U.S. dollar loans. The spread in effect as of June 30, 2024 was 1.00%, plus a 0.10% credit spread adjustment for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect as of June 30, 2024 was 0.15%.
As a result, our availability will increase if EBITDA increases (subject to the limit of the facility) and decrease if EBITDA decreases. At June 30, 2023, based upon the calculation of our Credit Facility Net Debt relative to our Credit Facility EBITDA, there was $171.0 million available for borrowing.
As a result, our availability will increase if EBITDA increases (subject to the limit of the facility) and decrease if EBITDA decreases. At June 30, 2024, based upon the calculation of our Credit Facility Net Debt relative to our Credit Facility EBITDA, there was $349.9 million available for borrowing.
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 72 at June 30, 2023, compared to 68 at June 30, 2022.
Operating cash flows are subject to variability period over period as a result of the timing of payments related to accounts receivable, accounts payable and other working capital items. The number of days sales outstanding ("DSO") was 71 at June 30, 2024 compared to 72 at June 30, 2023. Throughout fiscal year 2024, DSO ranged from 68 to 72.
The fair value of the reporting units exceeded its carrying value by 2% and 13%, respectively, as of the annual goodwill impairment testing date.
The fair value of the reporting units exceeded its carrying value by 11% and 33%, respectively, as of the annual goodwill impairment testing date.
There was $171.0 million and $214.2 million available for additional borrowings as of June 30, 2023 and 2022, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2023 and 2022.
There was $349.9 million and $171.0 million available for additional borrowings as of June 30, 2024 and June 30, 2023 , respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2024 and June 30, 2023 .
Conversely, when sales volumes decrease, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.
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.
Provision for Income Taxes Income tax expense for continuing operations was $33.8 million and $29.9 million for the fiscal years ended June 30, 2023 and 2022, respectively, reflecting effective tax rates of 27.7% and 25.2%, respectively.
Provision for Income Taxes Income tax expense for continuing operations was $22.8 million and $33.8 million for the fiscal years ended June 30, 2024 and 2023, respectively, reflecting effective tax rates of 22.8% and 27.7%, respectively.
We also had a non-cancelable operating lease agreement of $13.7 million at June 30, 2023, of which $4.8 million is expected to be paid within the next 12 months. Remaining amounts are expected to be paid through 2028. See Footnote 14 - Leases .
We also had a non-cancelable operating lease agreement of $9.9 million at June 30, 2024, of which $4.2 million is expected to be paid within the next 12 months. Remaining amounts are expected to be paid through 2030. See Footnote 14 - Leases .
We record unrestricted volume rebates received as a reduction of inventory and reduces the cost of goods sold when the related inventory is sold. Amounts received or receivables from suppliers that are not yet earned are deferred in the Consolidated Balance Sheets. Supplier receivables are generally collected through reductions to accounts payable authorized by the supplier.
We record unrestricted volume rebates received as a reduction of inventory and reduces the cost of goods sold when the related inventory is sold. Amounts received or receivables from suppliers that are not yet earned are deferred in the Consolidated Balance Sheets.
Cash and cash equivalents totaled $36.2 million and $38.0 million at June 30, 2023 and 2022, respectively, of which $31.0 million and $35.0 million was held outside of the United States as of June 30, 2023 and 2022, respectively.
Cash and cash equivalents totaled $185.5 million and $36.2 million at June 30, 2024 and 2023, respectively, of which $20.0 million and $31.0 million was held outside of the United States as of June 30, 2024 and 2023, respectively.
We operate distribution facilities that support our United States and Canada 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.
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.
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.
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.
We were in compliance with all covenants under the Amended Credit Agreement as of June 30, 2023. The average daily balance on the revolving credit facility, excluding the term loan facility, was $223.5 million and $69.0 million during the fiscal years ended June 30, 2023 and 2022, respectively.
We were in compliance with all covenants under the Amended Credit Agreement as of June 30, 2024. 36 Table of Contents Index to Financial Statements The average daily balance on the revolving credit facility, excluding the term loan facility, was $71.1 million and $223.5 million during the fiscal years ended June 30, 2024 and June 30, 2023 , respectively.
In addition, we may receive early payment discounts from certain suppliers. We record early payment discounts received as a 32 Table of Contents Index to Financial Statements reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold.
Supplier receivables are generally collected through reductions to accounts payable authorized by the supplier. 33 Table of Contents Index to Financial Statements In addition, we may receive early payment discounts from certain suppliers. We record early payment discounts received as a reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold.
Checks released but not yet cleared from these accounts in the amounts of $8.0 million and $18.0 million are classified as accounts payable as of June 30, 2023 and 2022, respectively. We conduct business in many locations throughout the world where we generate and use cash.
Checks released but not yet cleared from these accounts in the amounts of $5.9 million and $8.0 million are classified as accounts payable as of June 30, 2024 and 2023, respectively. We conduct business primarily in North America and Brazil where we generate and use cash.
Our revolving credit facility and our term loan facility have a maturity date September 28, 2027 . The remaining principal debt payments on our industrial development revenue bond, which total $3.7 million, have maturity dates in 2024 through 2032. See Footnote 8 - Short Term Borrowings and Long Term Debt .
The remaining principal debt payments on our industrial development revenue bond, which total $3.4 million, have maturity dates in 2025 through 2032. See Footnote 8 - Short Term Borrowings and Long Term Debt .
Please refer to our form 10-K for the fiscal year ended June 30, 2022 for a discussion of fiscal year ended June 30, 2021. Net Sales We have two reportable segments, which are based on technology.
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, 2023 for a discussion of fiscal year ended June 30, 2022. Net Sales We have two reportable segments, which are based on technology.
The following table summarizes annualized adjusted ROIC for the fiscal years ended June 30, 2023 and 2022. 2023 2022 Adjusted return on invested capital ratio 14.6 % 17.0 % The components of our adjusted ROIC calculation and reconciliation to our financial statements are shown, as follows: Fiscal Year Ended June 30, 2023 2022 (in thousands) Reconciliation of net income to adjusted EBITDA: Net income from continuing operations (GAAP) $ 88,092 $ 88,698 Plus: Interest expense 19,786 6,523 Plus: Income taxes 33,758 29,925 Plus: Depreciation and amortization 28,614 29,884 EBITDA (non-GAAP) 170,250 155,030 Plus: Share-based compensation 11,219 11,663 Plus: Tax recovery (2,986) — Plus: Cyberattack restoration costs 1,460 — Plus: Divestiture costs (a) — 30 Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) 179,943 166,723 27 Table of Contents Index to Financial Statements Fiscal Year Ended June 30, 2023 2022 (in thousands) Invested capital calculations: Equity – beginning of the year $ 806,528 $ 731,191 Equity – end of the year 905,298 806,528 Plus: Share-based compensation, net 8,326 8,709 Plus: Divestiture costs (a) — 30 Plus: Cyberattack restoration costs, net 1,092 — Plus: Tax recovery, net (3,985) — Plus: Impact of discontinued operations, net (1,717) (100) Average equity 857,771 773,179 Average funded debt (b) 372,235 209,114 Invested capital (denominator for adjusted ROIC) (non-GAAP) $ 1,230,006 $ 982,293 (a) Includes divestiture costs for the year ended June 30, 2022.
The following table summarizes annualized adjusted ROIC for the fiscal years ended June 30, 2024 and 2023. 2024 2023 Adjusted return on invested capital ratio 12.4 % 14.6 % The components of our adjusted ROIC calculation and reconciliation to our financial statements are shown, as follows: Fiscal Year Ended June 30, 2024 2023 (in thousands) Reconciliation of net income to adjusted EBITDA: Net income from continuing operations (GAAP) $ 77,060 $ 88,092 Plus: Interest expense 13,031 19,786 Plus: Income taxes 22,781 33,758 Plus: Depreciation and amortization 28,009 28,614 EBITDA (non-GAAP) 140,881 170,250 Plus: Share-based compensation 9,537 11,219 Plus: Tax recovery (2,558) (2,986) Plus: Cyberattack restoration costs 874 1,460 Plus: Gain on sale of business (14,155) — Plus: Acquisition and divestiture costs (a) 1,717 — Plus: Restructuring costs 4,358 — Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) $ 140,654 $ 179,943 28 Table of Contents Index to Financial Statements Fiscal Year Ended June 30, 2024 2023 (in thousands) Invested capital calculations: Equity – beginning of the year $ 905,298 $ 806,528 Equity – end of the year 924,255 905,298 Plus: Share-based compensation, net 7,120 8,326 Plus: Acquisition and divestiture costs (a) 1,717 — Plus: Cyberattack restoration costs, net 655 1,092 Plus: Restructuring, net 3,262 — Plus: Gain on sale of business (14,155) — Plus: Tax recovery, net (2,566) (3,985) Plus: Impact of discontinued operations, net — (1,717) Average equity 912,793 857,771 Average funded debt (b) 220,528 372,235 Invested capital (denominator for adjusted ROIC) (non-GAAP) $ 1,133,321 $ 1,230,006 (a) Includes divestiture costs for the fiscal year ended June 30, 2023.
Year ended Cash (used in) provided by: June 30, 2023 June 30, 2022 (in thousands) Operating activities of continuing operations $ (35,769) $ (124,354) Investing activities of continuing operations (8,262) (3,724) Financing activities of continuing operations 39,531 108,106 Net cash used in operating activities was $35.8 million and $124.4 million for the years ended June 30, 2023 and 2022, respectively.
Year ended Cash (used in) provided by: June 30, 2024 June 30, 2023 (in thousands) Operating activities of continuing operations $ 371,647 $ (35,769) Investing activities of continuing operations 9,045 (8,262) Financing activities of continuing operations (227,767) 39,531 Net cash provided by operating activities was $371.6 million for the fiscal year ended June 30, 2024 and cash used in operating activities was $35.8 million for the fiscal years ended June 30, 2023 , respectively.
The increase in operating income and operating margin is primarily due to higher gross profits. Modern Communications & Cloud For the Modern Communications & Cloud segment, operating income increased $6.1 million and the operating margin increased 40 basis points to 4.2% for the fiscal year ended June 30, 2023, compared to the prior year.
The decrease in operating income and operating margin is primarily due to lower gross profits. Modern Communications & Cloud For the Modern Communications & Cloud segment, operating income decreased $9.1 million with the operating margin increasing slightly to 4.2% for the fiscal year ended June 30, 2024, compared to the prior fiscal year.
The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2023 and 2022. 22 Table of Contents Index to Financial Statements 2023 2022 $ Change % Change % Change Constant Currency, Excluding Divestitures and Acquisitions (a) (in thousands) Sales by Segment: Specialty Technology Solutions $ 2,331,030 $ 2,082,321 $ 248,709 11.9 % 11.9 % Modern Communications & Cloud 1,456,691 1,447,614 9,077 0.6 % 0.4 % Total net sales $ 3,787,721 $ 3,529,935 $ 257,786 7.3 % 7.2 % Sales by Geography Category: United States $ 3,432,074 $ 3,173,694 $ 258,380 8.1 % 8.1 % International 355,647 356,241 (594) (0.2) % (1.4) % Total net sales $ 3,787,721 $ 3,529,935 $ 257,786 7.3 % 7.2 % (a) A reconciliation of non-GAAP net sales in constant currency, excluding divestitures and acquisitions is presented at the end of Results of Operations , under Non-GAAP Financial Information .
The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2024 and 2023. 23 Table of Contents Index to Financial Statements 2024 2023 $ Change % Change % Change Constant Currency, Excluding Divestitures (a) (in thousands) Sales by Segment: Specialty Technology Solutions $ 1,998,636 $ 2,331,030 $ (332,394) (14.3) % (14.3) % Modern Communications & Cloud 1,261,173 1,456,691 (195,518) (13.4) % (13.7) % Total net sales $ 3,259,809 $ 3,787,721 $ (527,912) (13.9) % (14.1) % Sales by Geography Category: United States $ 2,921,172 $ 3,432,074 $ (510,902) (14.9) % (14.9) % International 338,637 355,647 (17,010) (4.8) % (6.2) % Total net sales $ 3,259,809 $ 3,787,721 $ (527,912) (13.9) % (14.1) % (a) A reconciliation of non-GAAP net sales in constant currency, excluding divestitures is presented at the end of Results of Operations , under Non-GAAP Financial Information .
Gross Profit The following table summarizes our gross profit for the fiscal years ended June 30, 2023 and 2022: 23 Table of Contents Index to Financial Statements % of Sales June 30, 2023 2022 $ Change % Change 2023 2022 (in thousands) Specialty Technology Solutions $ 224,239 $ 205,757 $ 18,482 9.0 % 9.6 % 9.9 % Modern Communications & Cloud 225,000 220,767 4,233 1.9 % 15.4 % 15.3 % Total gross profit $ 449,239 $ 426,524 $ 22,715 5.3 % 11.9 % 12.1 % Our gross profit is primarily affected by sales volume and gross margin mix.
Gross Profit The following table summarizes our gross profit for the fiscal years ended June 30, 2024 and 2023: % of Sales June 30, 2024 2023 $ Change % Change 2024 2023 (in thousands) Specialty Technology Solutions $ 187,739 $ 224,239 $ (36,500) (16.3) % 9.4 % 9.6 % Modern Communications & Cloud 211,313 225,000 (13,687) (6.1) % 16.8 % 15.4 % Total gross profit $ 399,052 $ 449,239 $ (50,187) (11.2) % 12.2 % 11.9 % 24 Table of Contents Index to Financial Statements Our gross profit is primarily affected by sales volume and gross margin mix.
We provide technology solutions and services from more than 500 leading suppliers of mobility and barcode, POS and payments, physical security and networking, communications and collaboration, connectivity and cloud services to our approximately 30,000 customers located in the United States, Canada, Brazil, the UK and Europe.
We provide technology solutions and services from approximately 500 leading suppliers of mobility, barcode, POS, payments, physical security, networking, unified communications, collaboration, connectivity and cloud services to our approximately 25,000 customers located primarily in the United States, Canada and Brazil. We operate our business under a management structure that enhances our technology focus and hybrid distribution growth strategy.
Calculated by translating the net sales for the year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2022. 29 Table of Contents Index to Financial Statements Operating Income by Segment: Fiscal year ended June 30, % of Net Sales June 30, 2023 2022 $ Change % Change 2023 2022 Specialty Technology Solutions: (in thousands) GAAP operating income $ 75,688 $ 66,686 $ 9,002 13.5 % 3.2 % 3.2 % Adjustments: Amortization of intangible assets 5,136 6,005 (869) Non-GAAP operating income $ 80,824 $ 72,691 $ 8,133 11.2 % 3.5 % 3.5 % Modern Communications & Cloud: GAAP operating income $ 61,658 $ 55,511 $ 6,147 11.1 % 4.2 % 3.8 % Adjustments: Amortization of intangible assets 11,610 11,848 (238) Tax recovery (2,986) — (2,986) Non-GAAP operating income $ 70,282 $ 67,359 $ 2,923 4.3 % 4.8 % 4.7 % Corporate: GAAP operating loss $ (1,460) $ (30) $ (1,430) nm* nm* nm* Adjustments: Divestiture costs — 30 (30) Cyberattack restoration costs 1,460 — 1,460 Non-GAAP operating income $ — $ — $ — nm* nm* nm* Consolidated: GAAP operating income $ 135,886 $ 122,167 $ 13,719 11.2 % 3.6 % 3.5 % Adjustments: Amortization of intangible assets 16,746 17,853 (1,107) Cyberattack restoration costs 1,460 — 1,460 Divestiture costs — 30 (30) Tax recovery (2,986) — (2,986) Non-GAAP operating income $ 151,106 $ 140,050 $ 11,056 7.9 % 4.0 % 4.0 % 30 Table of Contents Index to Financial Statements 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.
Calculated by translating the net sales for the fiscal year ended June 30, 2024 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2023. 30 Table of Contents Index to Financial Statements Operating Income by Segment: Fiscal Year Ended June 30, % of Net Sales June 30, 2024 2023 $ Change % Change 2024 2023 Specialty Technology Solutions: (in thousands) GAAP operating income $ 44,726 $ 75,688 $ (30,962) (40.9) % 2.2 % 3.2 % Adjustments: Amortization of intangible assets 5,046 5,136 (90) Non-GAAP operating income $ 49,772 $ 80,824 $ (31,052) (38.4) % 2.5 % 3.5 % Modern Communications & Cloud: GAAP operating income $ 52,547 $ 61,658 $ (9,111) (14.8) % 4.2 % 4.2 % Adjustments: Amortization of intangible assets 10,677 11,610 (933) Tax recovery (2,558) (2,986) 428 Non-GAAP operating income $ 60,666 $ 70,282 $ (9,616) (13.7) % 4.8 % 4.8 % Corporate: GAAP operating loss $ (6,949) $ (1,460) $ (5,489) nm* nm* nm* Adjustments: Divestiture costs 1,717 — 1,717 Cyberattack restoration costs 874 1,460 (586) Restructuring costs 4,358 — 4,358 Non-GAAP operating income $ — $ — $ — nm* nm* nm* Consolidated: GAAP operating income $ 90,324 $ 135,886 $ (45,562) (33.5) % 2.8 % 3.6 % Adjustments: Amortization of intangible assets 15,723 16,746 (1,023) Cyberattack restoration costs 874 1,460 (586) Divestiture costs 1,717 — 1,717 Restructuring costs 4,358 — 4,358 Tax recovery (2,558) (2,986) 428 Non-GAAP operating income $ 110,438 $ 151,106 $ (40,668) (26.9) % 3.4 % 4.0 % 31 Table of Contents Index to Financial Statements 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.
For fiscal year 2023, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.47 billion. The fiscal year 2023 Intelisys net billings resulted in Intelisys net sales of approximately $79.5 million.
For our Intelisys business, net sal es reflect the net commissions received from suppliers after paying sales partner commissions. For fiscal year 2024, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.67 billion. The fiscal year 2024 Intelisys net billings resulted in Intelisys net sales of approximately $84.7 million.
Gross margin mix positively impacted gross profit by $2.8 million, largely from a more favorable sales mix, partially offset by lower vendor program recognition. For the year ended June 30, 2023, the gross profit margin increased 20 basis points over the prior year to 15.4%.
Gross margin mix positively impacted gross profit by $16.5 million, largely from a more favorable sales mix and lower freight costs. For the fiscal year ended June 30, 2024, the gross profit margin increased 131 basis points over the prior fiscal year to 16.8%.
Cash used in operating activities for the year ended June 30, 2022 is primarily due to increases in accounts receivable and inventory, which increased 28.2% and 30.8%, respectively, compared to the beginning of the prior year period.
Cash provided by operating activities for the fiscal year ended June 30, 2024 is primarily due to decreases in inventory and accounts receivable, which decreased 32.3% and 22.8%, respectively compared to the beginning of the fiscal year.
The authorization does not have any time limit. In fiscal year 2023 , we repurchased 524,108 shares totaling $15.8 million. 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”).
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”).
Total Other (Income) Expense The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2023 and 2022: % of Sales June 30, 2023 2022 $ Change % Change 2023 2022 (in thousands) Interest expense $ 19,786 $ 6,523 $ 13,263 203.3 % 0.5 % 0.2 % Interest income (7,414) (4,333) (3,081) 71.1 % (0.2) % (0.1) % Net foreign exchange losses 2,168 2,078 90 4.3 % 0.1 % 0.1 % Other, net (504) (724) 220 (30.4) % — % — % Total other (income) expense $ 14,036 $ 3,544 $ 10,492 296.0 % 0.4 % 0.1 % 25 Table of Contents Index to Financial Statements Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs.
Total Other (Income) Expense The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2024 and 2023: % of Sales June 30, 2024 2023 $ Change % Change 2024 2023 (in thousands) Interest expense $ 13,031 $ 19,786 $ (6,755) (34.1) % 0.4 % 0.5 % Interest income (9,381) (7,414) (1,967) 26.5 % (0.3) % (0.2) % Net foreign exchange losses 2,198 2,168 30 1.4 % 0.1 % 0.1 % Gain on sale of business (14,155) — (14,155) *nm (0.4) % — % Other, net (1,210) (504) (706) 140.1 % — % — % Total other (income) expense $ (9,517) $ 14,036 $ (23,553) (167.8) % (0.3) % 0.4 % Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs.
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. The presentation for adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods. We calculate adjusted ROIC as adjusted EBITDA, divided by invested capital.
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.
Operating Income The following table summarizes our operating income for the periods ended June 30, 2023 and 2022: % of Sales June 30, 2023 2022 $ Change % Change 2023 2022 (in thousands) Specialty Technology Solutions $ 75,688 $ 66,686 $ 9,002 13.5 % 3.2 % 3.2 % Modern Communications & Cloud 61,658 55,511 6,147 11.1 % 4.2 % 3.8 % Corporate (1,460) (30) (1,430) *nm — % — % Total operating income $ 135,886 $ 122,167 $ 13,719 11.2 % 3.6 % 3.5 % *nm - not meaningful Specialty Technology Solutions For the Specialty Technology Solutions segment, operating income increased $9.0 million, and operating margin increased 5 basis points to 3.2% for the fiscal year ended June 30, 2023, compared to the prior year.
Operating Income The following table summarizes our operating income for the periods ended June 30, 2024 and 2023: 25 Table of Contents Index to Financial Statements % of Sales June 30, 2024 2023 $ Change % Change 2024 2023 (in thousands) Specialty Technology Solutions $ 44,726 $ 75,688 $ (30,962) (40.9) % 2.2 % 3.2 % Modern Communications & Cloud 52,547 61,658 (9,111) (14.8) % 4.2 % 4.2 % Corporate (6,949) (1,460) (5,489) 376.0 % — % — % Total operating income $ 90,324 $ 135,886 $ (45,562) (33.5) % 2.8 % 3.6 % Specialty Technology Solutions For the Specialty Technology Solutions segment, operating income decreased $31.0 million, and operating margin decreased 101 basis points to 2.2% for the fiscal year ended June 30, 2024, compared to the prior fiscal year.
Operating expenses The following table summarizes our operating expenses for the periods ended June 30, 2023 and 2022: % of Sales June 30, 2023 2022 $ Change % Change 2023 2022 (in thousands) Selling, general and administrative expenses $ 285,695 $ 275,442 $ 10,253 3.7 % 7.5 % 7.8 % Depreciation expense 10,912 11,062 (150) (1.4) % 0.3 % 0.3 % Intangible amortization expense 16,746 17,853 (1,107) (6.2) % 0.4 % 0.5 % Operating expenses $ 313,353 $ 304,357 $ 8,996 3.0 % 8.3 % 8.6 % Selling, general and administrative expenses ("SG&A") increased $10.3 million for the fiscal year ended June 30, 2023 compared to the prior year.
Operating expenses The following table summarizes our operating expenses for the periods ended June 30, 2024 and 2023: % of Sales June 30, 2024 2023 $ Change % Change 2024 2023 (in thousands) Selling, general and administrative expenses $ 277,428 $ 285,695 $ (8,267) (2.9) % 8.5 % 7.5 % Depreciation expense 11,219 10,912 307 2.8 % 0.3 % 0.3 % Intangible amortization expense 15,723 16,746 (1,023) (6.1) % 0.5 % 0.4 % Restructuring and other charges 4,358 — 4,358 *nm 0.1 % — % Operating expenses $ 308,728 $ 313,353 $ (4,625) (1.5) % 9.5 % 8.3 % *nm - not meaningful Selling, general and administr ative expenses (“SG&A”) decreased $8.3 million for the fiscal year ended June 30, 2024 compared to the prior year.
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.
Foreign exchange gains and losses are generated primarily as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real and the Canadian dollar versus the U.S. dollar. We partially offset foreign currency exposure with the use of foreign exchange contracts to hedge against these exposures.
Cash provided by financing activities totaled $39.5 million and $108.1 million for the fiscal years ended June 30, 2023 and 2022, respectively , primarily from net borrowings on the revolving line of credit. Share Repurchase Program 34 Table of Contents Index to Financial Statements In August 2021, our Board of Directors authorized a $100 million share repurchase program.
Cash provided by financing activities of $39.5 million for the fiscal year ended June 30, 2023 was primarily from net borrowings on the revolving line of credit. Share Repurchase Program In May 2024, our Board approved an additional $100.0 million share repurchase authorization, which supplements the existing $100 million repurchase program authorized in August 2021.
Our key suppliers include 8x8, AT&T, Aruba/HPE, Avaya, Axis, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Granite, GTT, Hanwha, Honeywell, Ingenico, Jabra, Logitech, Lumen, Microsoft, MetTel, Mitel, NCR, NICE CXone, Poly HP, RingCentral, Spectrum, Toshiba Global Commerce Solutions, Trend Micro, Ubiquiti, Verifone, Verizon, VMWare, Windstream, Zebra Technologies and Zoom.
Our key suppliers include AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, PAX Technology, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.
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.
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.
Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. Estimates of expected credit losses on trade receivables are recorded at inception and adjusted over the contractual life.
We account for credit losses based upon ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326). Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis.
The increase in operating income and margin is largely due to higher gross profits. Corporate The fiscal year ended June 30, 2023 Corporate operating loss of $1.5 million represents cyberattack restoration charges. Corporate incurred less than $0.1 million in divestiture costs during the fiscal year ended June 30, 2022.
The decrease in operating income is largely due to lower gross profits. Corporate For the fiscal year ended June 30, 2024, Corporate operating loss totaled $6.9 million which represents $4.4 million in restructuring expenses, $1.7 million of acquisition and divestiture costs as well as $0.9 million in cyberattack restoration charges.
Our Strategy Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes and tools. Our goal is to provide exceptional experiences for our partners, suppliers and employees, and we strive for operational excellence.
In spite of these challenges and uncertainties, we believe we have managed the supply chain requirements of our customers and suppliers effectively to date. Our Strategy Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes and tools.
Inventory turnover was 4.4 times during the fourth quarter of the current fiscal year, compared to 5.6 times in the fourth quarter of fiscal year 2022. Throughout fiscal year 2023, inventory turnover ranged from 4.1 to 5.1 times. Cash used in investing activities was $8.3 million and $3.7 million for the years ended June 30, 2023 and 2022, respectively.
Inventory turnover was 5.0 times during the fourth quarter fiscal year 2024, compared to 4.4 times in the fourth quarter of fiscal year 2023. Throughout fiscal year 2024, inventory turnover ranged from 4.4 to 5.1 times.
Contractual Obligations 35 Table of Contents Index to Financial Statements At June 30, 2023, we had $179.0 million outstanding under our revolving credit facility. We also had $147.2 million outstanding under our term loan facility, $6.6 million of which matures in fiscal year 2024.
Contractual Obligations At June 30, 2024, we had less than $0.1 million outstanding under our revolving credit facility. We also had $140.6 million outstanding under our term loan facility, $7.5 million of which matures in fiscal year 2024. Our revolving credit facility and our term loan facility have a maturity date September 28, 2027 .
Higher sales volume, after considering the associated cost of goods sold, contributed $24.6 million to the growth of gross profit dollars. Gross margin mix negatively impacted gross profit by $6.1 million, largely from a less favorable sales mix. For the year ended June 30, 2023, the gross profit margin decreased 26 basis points over the prior-year to 9.6%.
For the fiscal year ended June 30, 2024, the gross profit margin decreased 23 basis points over the prior-year to 9.4%. Modern Communications & Cloud For the Modern Communications & Cloud segment, gross profit dollars decreased $13.7 million. Lower sales volume, after considering the associated cost of goods sold, unfavorably impacted gross profit dollars by $30.2 million.
Our hybrid distribution strategy relies on a channel sales model to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to customers that solve end users’ challenges. ScanSource enables customers to deliver solutions for their end users to address changing buying and 21 Table of Contents Index to Financial Statements consumption patterns.
Our goal is to provide exceptional experiences for our partners, suppliers and employees, and we strive for operational excellence. Our hybrid distribution strategy relies on a channel sales model to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to customers that solve end users’ challenges.
We operate our business under a management structure that enhances our technology focus and hybrid distribution growth strategy. Our segments operate in the United States, Canada, Brazil and the UK and consist of the following: • Specialty Technology Solutions • Modern Communications & Cloud We sell hardware, SaaS, connectivity and cloud solutions and services through channel partners to end users.
Our segments operate primarily in the United States, Canada and Brazil: • Specialty Technology Solutions • Modern Communications & Cloud We sell hardware, SaaS, connectivity and cloud solutions and services to customers that are designed to solve end users' challenges. We operate distribution facilities that support our United States and Canada business in Mississippi, California and Kentucky.
Cash used in investing activities for fiscal year 2023 and 2022 represents capital expenditures, partially offset by proceeds from the sale of our discontinued operations. Management expects capital expenditures for fiscal year 2024 to range from $6.0 million to $8.0 million, primarily for IT investments and facility improvements.
Cash provided by investing activities for fiscal year 2024 is largely due to cash received from the sale of our intY UK business, partially offset by capital expenditures. Cash used in 35 Table of Contents Index to Financial Statements investing activities for the fiscal year 2023 represents capital expenditures, partially offset by proceeds from the sale of our discontinued operations.
Interest expense increased in fiscal 2023 as compared to 2022 primarily from higher interest rates and higher average borrowings on our multi-currency revolving credit facility. Interest income for the year ended June 30, 2023 and 2022 was generated on interest-bearing investments in Brazil and customer receivables.
Interest expense decreased in fiscal 2024 as compared to 2023 primarily from lower average borrowings on our multi-currency revolving credit facility.
Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisitions: Net Sales by Segment: Fiscal Year Ended June 30, 2023 2022 $ Change % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 2,331,030 $ 2,082,321 $ 248,709 11.9 % Foreign exchange impact (a) (923) — Non-GAAP net sales, constant currency $ 2,330,107 $ 2,082,321 $ 247,786 11.9 % Modern Communications & Cloud: Net sales, reported $ 1,456,691 $ 1,447,614 $ 9,077 0.6 % Foreign exchange impact (a) (3,492) — Non-GAAP net sales, constant currency $ 1,453,199 $ 1,447,614 $ 5,585 0.4 % Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 $ 257,786 7.3 % Foreign exchange impact (a) (4,415) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 $ 253,371 7.2 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.
Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisitions and divestitures: 29 Table of Contents Index to Financial Statements Net Sales by Segment: Fiscal Year Ended June 30, 2024 2023 $ Change % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 1,998,636 $ 2,331,030 $ (332,394) (14.3) % Foreign exchange impact (a) (1,341) — Non-GAAP net sales, constant currency $ 1,997,295 $ 2,331,030 $ (333,735) (14.3) % Modern Communications & Cloud: Net sales, reported $ 1,261,173 1,456,691 $ (195,518) (13.4) % Foreign exchange impact (a) (8,542) — Less: Divestitures (3,747) (9,140) Non-GAAP net sales, constant currency $ 1,248,884 $ 1,447,551 $ (198,667) (13.7) % Consolidated: Net sales, reported $ 3,259,809 $ 3,787,721 $ (527,912) (13.9) % Foreign exchange impact (a) (9,883) — Less: Divestitures (3,747) (9,140) Non-GAAP net sales, constant currency $ 3,246,179 $ 3,778,581 $ (532,402) (14.1) % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.
The increase in the effective tax rate for fiscal year 2023 compared to fiscal year 2022 is primarily the result of an increase in global intangible low taxed income. Subsequent to the 2023 fiscal year end, the IRS issued Notice 2023-55, which provides taxpayers with Brazilian subsidiaries temporary relief from the final foreign tax credit regulations.
The decrease in the effective tax rate for fiscal 2024 compared to fiscal 2023 is primarily the result of the tax treatment for the intY divestiture, the creditability of foreign taxes as a result of IRS Notice 2023-55 and a decrease in global intangible low taxed income tax.
Accounting Standards Recently Issued See Note 1 in the Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements. Liquidity and Capital Resources Our primary sources of liquidity are cash flows from operations and borrowings under the $350 million revolving credit facility.
Liquidity and Capital Resources Our primary sources of liquidity are cash flows from operations and borrowings under the $350 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.
Our solutions may include a combination of offerings from multiple suppliers or give our customers access to additional services. As a trusted adviser to our customers, we provide customized solutions through our strong understanding of end user needs.
As a trusted adviser to our customers, we provide customized solutions through our strong understanding of e nd user needs. We have plans to expand our investments in the Agency Channel in the near term.
The increase in net sales and adjusted net sales is primarily due to increased networking sales, partially offset by lower sales volumes in our communications hardware. Intelisys connectivity and cloud net sales for fiscal year 2023 increased 7.0% year-over-year. For our Intelisys business, net sales reflect the net commissions received from suppliers after paying sales partner commissions.
Excluding the foreign exchange positive impact of $8.5 million, adjusted net sales decreased $198.7 million, or 13.7%, compared to the prior year. The decrease in net sales and adjusted net sales is primarily due to decreased lower sales volumes in our communications hardware and Cisco products. Intelisys connectivity and cloud net sales for fiscal year 2024 increased 6.6% year-over-year.
Calculated by translating the net sales for the year ended June 30, 2023 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2022. 28 Table of Contents Index to Financial Statements Net Sales by Geography: Fiscal Year Ended June 30, 2023 2022 $ Change % Change United States and Canada: (in thousands) Net sales, as reported $ 3,432,074 $ 3,173,694 $ 258,380 8.1 % International: Net sales, reported $ 355,647 $ 356,241 $ (594) (0.2) % Foreign exchange impact (a) (4,415) — Non-GAAP net sales, constant currency $ 351,232 $ 356,241 $ (5,009) (1.4) % Consolidated: Net sales, reported $ 3,787,721 $ 3,529,935 $ 257,786 7.3 % Foreign exchange impact (a) (4,415) — Non-GAAP net sales, constant currency $ 3,783,306 $ 3,529,935 $ 253,371 7.2 % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.
Net Sales by Geography: Fiscal Year Ended June 30, 2024 2023 $ Change % Change United States and Canada: (in thousands) Net sales, as reported $ 2,921,172 $ 3,432,074 $ (510,902) (14.9) % Less: Acquisitions — — Net sales, excluding acquisitions $ 2,921,172 $ 3,432,074 $ (510,902) (14.9) % International: Net sales, reported $ 338,637 $ 355,647 $ (17,010) (4.8) % Foreign exchange impact (a) (9,883) — Less: Divestitures (3,747) (9,140) Non-GAAP net sales, constant currency $ 325,007 $ 346,507 $ (21,500) (6.2) % Consolidated: Net sales, reported $ 3,259,809 $ 3,787,721 $ (527,912) (13.9) % Foreign exchange impact (a) (9,883) — Less: Divestitures (3,747) (9,140) Non-GAAP net sales, constant currency $ 3,246,179 $ 3,778,581 $ (532,402) (14.1) % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.
The increase in net sales and in adjusted net sales is primarily due to strong growth in key technologies in North America. Modern Communications & Cloud The Modern Communications & Cloud segment consists of sales to customers in North America, Brazil, Europe and the UK.
Modern Communications & Cloud The Modern Communications & Cloud segment consists of sales to customers in North America and Brazil. During fiscal year 2024, net sales for this segment decreased $195.5 million, or 13.4%, compared to fiscal year 2023.
During fiscal year 2023, net sales for this segment increased $9.1 million, or 0.6%, compared to fiscal year 2022. Excluding the foreign exchange positive impact of $3.5 million, adjusted net sales increased $5.6 million, or 0.4%, compared to the prior year.
Specialty Technology Solutions The Specialty Technology Solutions segment consists of sales to customers in North America and Brazil. During fiscal year 2024, net sales for this segment decreased $332.4 million, or 14.3%, compared to fiscal year 2023.
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.
Interest income for the fiscal year ended June 30, 2024 increased compared to fiscal year ended June 30, 2023 primarily from interest earned on higher cash balances in North America. 26 Table of Contents 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.
During fiscal year 2023, net sales for this segment increased $248.7 million, or 11.9%, compared to fiscal year 2022. Excluding the foreign exchange positive impact of $0.9 million, adjusted net sales for fiscal year 2023 increased $247.8 million, or 11.9%, compared to the prior year.
Excluding the foreign exchange positive impact of $1.3 million, adjusted net sales for fiscal year 2024 decreased $333.7 million, or 14.3%, compared to the prior fiscal year. The decrease in net sales and in adjusted net sales is primarily from lower sales volume due to softer demand in a more cautious technology spending environment.
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Recent Developments Cybersecurity Incident On May 14, 2023, we discovered that we were subject to a cybersecurity attack perpetrated by unauthorized third parties that affected our IT systems. Upon detection, we took immediate steps to address the incident, engaged third-party experts, and notified law enforcement.
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Recent Developments Cost Reduction and Restructuring Program In January 2024, as part of a strategic review of organizational structure and operations, we executed a cost reduction and restructurin g program to align our cost structure with demand expectations in our hardware business. These actions resulted in approximately $10.0 million in annualized savings in selling, general and administrative expenses.
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We have cyber insurance and are working with our insurance carriers on claims to recover costs incurred. On May 26, 2023, we substantially recovered our operations and completed the restoration of our pertinent IT systems.
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UK Divestitures On December 19, 2023, we completed the sale of our UK-based intY business. We retained our CASCADE cloud services distribution platform, which has been used to grow the Cisco and Microsoft subscription business in the United States and Brazil.
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We have taken actions to strengthen our existing IT security infrastructure and will continue to implement additional measures to prevent unauthorized access to, or manipulation of, our systems and data.
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ScanSource enables customers to deliver solutions for their end users to address changing buying and 22 Table of Contents Index to Financial Statements consumption patterns. Our solutions may include a combination of offerings from multiple suppliers or give our customers access to additional services.
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In spite of these challenges and uncertainties, we believe we have managed the supply chain requirements of our customers and suppliers effectively to date.
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Lower sales volume, after considering the associated cost of goods sold, impacted gross profit decline by $32.0 million for the current fiscal year. Gross margin mix negatively impacted gross profit by $4.5 million, largely from unfavorable vendor program recognition partially offset by lower freight costs.
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While we are unable to predict the ultimate impact these factors will have on our business, certain technologies have benefited from the widespread adoption to a work-from-anywhere business model, as well as the accelerated shift to digitize and automate processes.
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The decrease in SG&A expenses is primarily attributable to lower employee costs, partially offset by an increase in bad debt expense as a result of increases in specific customer reserves. Intangible amortization expense decreased $1.0 million for the fiscal year ended June 30, 2024 compared to the prior fiscal year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe seek to lessen such risks by having established a policy to identify, control and manage market risks which may arise from changes in interest rates, as well as limiting our counterparties to major financial institutions. Foreign Currency Exchange Rate Risk We are exposed to foreign currency risks that arise from our foreign operations in Canada, Brazil and the UK.
Biggest changeWe seek to manage such risks through our policy of identifying, controlling and managing market risks, and by otherwise limiting our counterparties for certain transactions to major financial institutions. Foreign Currency Exchange Rate Risk We are exposed to foreign currency risks that arise from our foreign operations in Canada and Brazil.
We entered into an additional interest rate swap on March 31, 2023 to lock into a fixed SOFR interest rate. The interest rate swap has notional amount of $25 million and a maturity date of March 31, 2028.
We entered into an additional interest rate swap on March 31, 2023 to lock into a fixed SOFR interest rate. The interest rate swap has a notional amount of $25 million and a maturity date of March 31, 2028.
We have elected not to designate our foreign currency contracts as hedging instruments, and therefore, the instruments are marked-to-market with changes in their values recorded in the consolidated income statement each period. Our foreign currencies are primarily Brazilian reais, British pounds and Canadian dollars.
We have elected not to designate our foreign currency contracts as hedging instruments, and therefore, the instruments are marked-to-market with changes in their values recorded in the consolidated income statement each period. Our foreign currencies are primarily Brazilian reais and Canadian dollars.
In addition, exchange rate fluctuations may cause our international results to fluctuate significantly when translated into U.S. dollars. A hypothetical 10% increase or decrease in foreign exchange rates would have resulted in approximately a $2.7 million and $2.2 million increase or decrease in pre-tax income for fiscal years ended June 30, 2023 and 2022, respectively.
In addition, exchange rate fluctuations may cause our international results to fluctuate significantly when translated into U.S. dollars. A hypothetical 10% increase or decrease in foreign exchange rates would have resulted in approximately a $0.1 million and $2.7 million increase or decrease in pre-tax income for fiscal years ended June 30, 2024 and June 30, 2023 , respectively.
We entered into an interest rate swap on April 30, 2019, which was amended on September 28, 2022. The interest rate swap has a notional amount of $100.0 million, with a $50.0 million tranche scheduled to mature on April 30, 2024 and a $50.0 million tranche scheduled to mature April 30, 2026.
We entered into an interest rate swap on April 30, 2019, which was amended on September 28, 2022. The interest rate swap has a notional amount of $100.0 million, of which a $50.0 million tranche matured on April 30, 2024 and the remaining $50.0 million tranche is scheduled to mature on April 30, 2026.
Our use of derivative instruments have the potential to expose us to certain market risks including the possibility of (1) our hedging activities not being as effective as anticipated in reducing the volatility of our cash flows, (2) the counterparty not performing its obligations under the applicable hedging arrangement, (3) the hedging arrangement being imperfect or ineffective or (4) the terms of the swap or associated debt changing.
Our use of derivative instruments have the potential to expose us to certain market risks including the possibility of (1) our hedging activities not being as effective as anticipated in reducing the volatility of our cash flows, (2) the counterparties not performing their obligations under the applicable hedging arrangement, (3) the hedging arrangement being imperfect or ineffective or (4) the terms of the swaps or associated debt changing.
A hypothetical 100 basis point increase or decrease in interest rates on total borrowings on our revolving credit facility and variable rate long-term debt, net of the impact of the interest rate swap, would have resulted in approximately a $2.5 million and $1.1 million increase or decrease in pre-tax income for the fiscal year ended June 30, 2023 and 2022, respectively.
A hypothetical 100 basis point increase or decrease in interest rates on total borrowings on our revolving credit facility and variable rate long-term debt, net of the impact of interest rate swaps, would have resulted in approximately a $1.0 million and $2.5 million increase or decrease in pre-tax income for the fiscal years ended June 30, 2024 and June 30, 2023 , respectively.
We evaluate our interest rate risk and utilize interest rate swaps to mitigate the risk of interest rate fluctuations associated with our current and long-term debt. At June 30, 2023 and 2022, we had $329.9 million and $271.2 million, respectively, in variable rate debt.
We evaluate our interest rate risk and utilize interest rate swaps to mitigate the risk of interest rate fluctuations associated with our current and long-term debt. At June 30, 2024 and June 30, 2023 , we had $144.1 million and $329.9 million, respectively, in variable rate debt.
At June 30, 2023 and 2022, the fair value of our currency forward contracts were a net asset or payable of less than $0.1 million. 37 Table of Contents Index to Financial Statements
At June 30, 2024 and June 30, 2023 , the fair value of our currency forward contracts were a net asset or payable of less th an $0.1 million. 38 Table of Contents Index to Financial Statements

Other SCSC 10-K year-over-year comparisons