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What changed in SCANSOURCE, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SCANSOURCE, INC.'s 2024 and 2025 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 2025 report.

+303 added−290 removedSource: 10-K (2025-08-21) vs 10-K (2024-08-27)

Top changes in SCANSOURCE, INC.'s 2025 10-K

303 paragraphs added · 290 removed · 252 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

68 edited+19 added−16 removed15 unchanged
Biggest changeValue 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.
Biggest changeValue proposition for our channel sales partners: • Deep specialization and technical expertise; • Enable end-user consumption preferences; • Industry-leading custom configuration services; • Comprehensive pre- and post-sales solutions engineering and advanced technology support; • Inventory availability; • Solution selling via the Integrated Solutions Group, • Flexibility and choice using ScanSource's multiple sales models; and • Offer innovative financial solutions for our channel sales partners. 1 Table of Contents Index to Financial Statements Value proposition for our suppliers: • Scalable reach with variable cost structure; • Access to multiple route to market; • Lower cost of channel sales partner acquisition; • Channel sales partner recruitment, onboarding and enablement; • Ongoing support for channel sales partner success; • Opportunity to increase channel business; and • Offering and managing channel credit.
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.
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. • Payment Terminals : 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.
Our warehouse operations use bar code technology for receiving and shipping and automated systems for freight processing and shipment tracking, each of which is integrated with our multiple information systems. The customer service and technical support departments employ systems for documentation and faster processing of sales partner inquiries.
Our warehouse operations use bar code technology for receiving and shipping and automated systems for freight processing and shipment tracking, each of which is integrated with our multiple information systems. The customer service and technical support departments employ systems for documentation and faster processing of channel sales partner inquiries.
Our comprehensive marketing efforts include sales promotions, advertisements, management of sales leads, trade show design and event management, advertorials, content creation, partner events and training and certification courses with leading suppliers in an effort to recruit prospective sales partners.
Our comprehensive marketing efforts include sales promotions, advertisements, management of sales leads, trade show design and event management, advertorials, content creation, partner events and training and certification courses with leading suppliers in an effort to recruit prospective channel sales partners.
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.
These services allow our channel sales partners 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 channel sales partners and suppliers satisfied.
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.
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 our employees through our Employee Stock Purchase Plan, as well as our equity incentive grants.
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. Inclusion and Belonging One of our core values is to promote an environment that respects and values the diverse backgrounds, interests and talents of our employees.
Our Board provides oversight of the Company's policies and strategies relating to talent including corporate culture, diversity and inclusion and employee development, as well as the Company's compensation principles and practices. Our Board, through the Compensation Committee, evaluates and approves the Company's compensation plans, policies and programs applicable to our senior executives.
Our Board provides oversight of the Company's policies and strategies relating to talent including corporate culture, inclusion and belonging and employee development, as well as the Company's compensation principles and practices. Our Board, through the Compensation Committee, evaluates and approves the Company's compensation plans, policies and programs applicable to our senior executives.
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.
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 channel sales partners is among our top priorities.
We focus on empowering and educating sales partners so they can advise end-customers in making informed choices about services, technology and cost savings. Through our digital tools and platforms, we offer sales partners another way to grow their recurring revenue practices and take the friction out of acquiring, provisioning and managing SaaS offerings.
We focus on empowering and educating channel sales partners so they can advise end users in making informed choices about services, technology and cost savings. Through our digital tools and platforms, we offer channel sales partners another way to grow their recurring revenue practices and take the friction out of acquiring, provisioning and managing SaaS offerings.
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.
Products from two suppliers, Cisco and Zebra, constituted more than 10%, of our net sales for the fiscal year ended June 30, 2025. • 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.
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.
From ensuring and supporting an inclusive and diverse workforce and partner base, providing a safe, healthy work environment, and working with suppliers and channel sales partners that share the same commitment, we are dedicated to doing what is right for our employees, channel sales partners and end users.
Our strong balance sheet and cash generated from our business provide us with the ability to execute our capital allocation plan, which includes organic growth and strategic acquisitions. We have the financial flexibility to invest in our business and in future growth.
Financial Strength Our consolidated balance sheet reflects financial strength. Our strong balance sheet and cash generated from our business provide us with the ability to execute our capital allocation plan, which includes organic growth and strategic acquisitions. We have the financial flexibility to invest in our business and in future growth.
We provide our customers and suppliers with an array of pre-sale business tools and value-added services, including market and technology solution expertise, education and training, product configuration tools, technical support, logistics and channel financial services.
We provide our channel sales partners and suppliers with an array of pre-sale business tools and value-added services, including market and technology solution expertise, education and training, product configuration tools, technical support, logistics and channel financial services.
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.
Suppliers We provide products and services from approximately 500 suppliers, including key suppliers AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Elo, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, NiCE, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.
Competitive factors include price, product availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to customer needs, quality and breadth of product lines and services and availability of technical and product information.
Competitive factors include price, product availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to channel sales partner needs, quality and breadth of product lines and services and availability of technical and product information.
Our marketing practices are tailored to fit the specific needs of our customers and suppliers - ensuring we help our partners create, deliver and manage solutions for end users across our vertical markets.
Our marketing practices are tailored to fit the specific needs of our channel sales partners and suppliers - ensuring we help our channel sales partners create, deliver and manage solutions for end users across our vertical markets.
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.
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 channel sales partners and employees rely on our information systems for online, real-time information on pricing, inventory availability and reservation and order status.
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.
Our suppliers generally warrant their products that we sell and allow returns of defective products, including those returned to us by our channel sales partners. For certain of our product offerings, we offer a self-branded warranty program.
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.
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.
We participate in various rebate, cash discount and cooperative marketing programs offered by our suppliers to support expenses associated with selling and marketing the suppliers' products and services. These rebates and purchase discounts are largely influenced by sales volumes and are subject to change.
We participate in various rebate, cash discount and market development funds offered by our suppliers to support expenses associated with selling and marketing the suppliers' products and services. These rebates and purchase discounts are largely influenced by sales volumes and are subject to change.
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.
ScanSource was incorporated in South Carolina in 1992 and serves approximately 25,000 channel sales partners. Net sales for fiscal year ended June 30, 2025 totaled $3.04 billion . Our common stock trades on the NASDAQ Global Se lect Market under the symbol “SCSC.” Our channel sales partners include businesses of all sizes that sell to end users across many industries.
We also sell products and provide services under various third-party tradenames, trademarks and service marks, some of which we reference in this report, and these tradenames, trademarks and service marks are the property of their respective owners. Additional Information Our principal internet address is www.scansource.com.
We also sell products and provide services under various third-party 8 Table of Contents Index to Financial Statements tradenames, trademarks and service marks, some of which we reference in this report, and these tradenames, trademarks and service marks are the property of their respective owners. Additional Information Our principal internet address is www.scansource.com.
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.
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 Brasil,” “Network1, a ScanSource company,” “Intelisys,” “POS Portal,” “RPM Software, a ScanSource company,” “Advantix,” “Resourcive,” “Channel Exchange,” and "SCSC Cascade." 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.
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.
Our sales teams are advocates for and trusted advisers to our channel sales partners. Sales teams are responsible for developing technical expertise within broad product markets, recruiting channel sales partners, creating demand, negotiating pricing and reviewing overall product and service requirements of our channel sales partners.
These 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.
These 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; and • Price protection provisions, which enables us to take a credit for declines in inventory value resulting from the supplier's price reductions.
Value Proposition Our customer channels and supplier relationships serve as competitive advantages. From our pivotal position at the intersection of technology distribution trends, we provide robust value to both our customers and our suppliers. We make it easier for our sales partners and suppliers to deliver leading technology solutions that drive business outcomes for end users.
From our pivotal position at the intersection of technology distribution trends, we provide robust value to both our channel sales partners and our suppliers. We make it easier for our channel sales partners and suppliers to deliver leading technology solutions that drive business outcomes for end users.
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.
As of June 30, 2025, we have approximately 2,100 employees, of which approximately 1,400 are in the United States and 700 are located internationally in Canada and Brazil. We have no organized labor or trade unions in the United States. Professional Development and Employee Engagement We want to help our employees succeed—both personally and professionally.
Cloud-delivered services, such as unified communications, contact center and video conferencing, enable end-customers to consume and pay for communications services, typically on a monthly subscription basis. • Connectivity and Cloud Services: We offer business communications services, including voice, data, access, cable collaboration, wireless and cloud.
Cloud-delivered services, such as unified communications, contact center and video conferencing, enable end users to consume and pay for communications services, typically on a monthly subscription basis. 5 Table of Contents Index to Financial Statements • Connectivity and Cloud Services: We offer business communications services, including voice, data, access, cable collaboration, managed connectivity, wireless enablement solutions and cloud.
We have the flexibility to terminate or curtail sales of one product line in favor of another due to technological change, pricing considerations, product availability, customer demand or supplier distribution policies.
We have the flexibility to 3 Table of Contents Index to Financial Statements terminate or curtail sales of one product line in favor of another due to technological change, pricing considerations, product availability, channel sales partner demand or supplier distribution policies.
The second agreement covers the distribution of products in Brazil and has a two-year term. Each of these agreements must be renewed by written agreement. Either party may terminate these agreements upon 30 days' notice to the other party. The third agreement is an agency contract for North America and has a two-year term.
The second agreement covers the distribution of products in Brazil and has a two-year term. Each of these agreements must be renewed by written agreement, which is typically entered into prior to expiration. Either party may terminate these agreements upon 30 days' notice to the other party.
We offer reduced freight rates and flexible delivery options to minimize our sales partners’ need for inventory. Financial Services Our sales terms include trade credit, various third-party financing options, which include leasing, flooring and other secured financing for qualified customers. These sales terms allow us to compete within our specific geographic areas to facilitate our growth plans.
We offer reduced freight rates and flexible delivery options to minimize our channel sales partners’ need for inventory. Financial Services Our sales terms include trade credit; and various third-party financing options, which include leasing, flooring and other secured financing for qualified channel sales partners.
Software and hardware products include IP-based telephony platforms, Voice over Internet Protocol systems, private branch exchanges, call center applications, video conferencing, desk phones, headsets and cloud-enabled endpoints.
These offerings combine voice, video and data with computers, telecommunications and the internet to deliver communications solutions on-premise. Software and hardware products include IP-based telephony platforms, Voice over Internet Protocol systems, private branch exchanges, call center applications, video conferencing, desk phones, headsets and cloud-enabled endpoints.
We align our people, processes and tools to help our sales partners grow by providing more hybrid solutions through a better understanding of end-customer needs. We are able to provide a combination of offerings from multiple suppliers or give our sales partners access to additional services, including configuration, key injection, integration support and others to deliver solutions.
We are able to provide a combination of offerings from multiple suppliers or give our channel sales partners access to additional services, including configuration, key injection, integration support and others to deliver solutions.
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.
General Our real competitive advantage is our people, who strive to help our channel sales partners grow their businesses. The foundation of ScanSource has always been based on strong values and a people-first culture and vision. In 2025 , the Company was named one of the Best Places to Work in South Carolina for the eleventh consecutive year.
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.
Channel Sales Partners Our channel sales partners, include 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 channel sales partners provide us with multiple, specialized routes-to-market, including: VARs, advisors, ISOs, ISVs and MSPs.
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.
The ScanSource Leadership Institute (“SLI”) is another important program that focuses on identifying and developing the next wave of senior leaders for the Company. The SLI program brings together twelve hand-selected leaders from across the Company for a two-week program of intensive training and development. This program promotes individual education and growth and nurtures cross-border and cross-functional collaboration among colleagues.
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.
We also partner with Fidelity to provide employees access to knowledge and tools to help manage or plan for student loan debt.
Either party may terminate the AIT agreement for Brazil upon 90 days’ notice to the other party. In addition to the agreements mentioned above, we have written agreements with almost all of our other suppliers.
In addition to the agreements mentioned above, we have written agreements with almost all of our other suppliers.
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.
Our Board also engages in an active succession planning process. Competition 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.
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.
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. IT system integrators and network integrators develop computer and networking solutions for end users’ IT needs.
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.
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 support of that, in 2023, we launched a global digital workplace, The Bridge, as our corporate intranet.
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.
Sales Our sales organization consists of inside and field sales representatives located in the United States, Canada and Brazil. The majority of our channel sales partners are assigned to a dedicated sales representative or team whose main focus is developing relationships and providing our channel sales partners with solutions to meet their end-user’s 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.
Our solutions may include a combination of offerings from multiple suppliers or give our channel sales partners access to additional services. As a trusted adviser to our channel sales partners, we provide customized solutions through our strong understanding of end-user needs. Value Proposition Our channel sales partners and supplier relationships serve as competitive advantages.
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.
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.
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.
Independent Sales Organizations ISOs focus on selling credit card processing and finding new merchant channel sales partners 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.
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 are excited to enhance global communication, increase employee recognition, and celebrate milestones through this engaging new platform. 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.
The Zebra agreements each have a one-year term that automatically renews for additional one-year terms. Either party may terminate the EVM agreement upon 30 days' notice to the other party. Either party may terminate the AIT agreement for North America upon 60 days’ notice to the other party.
Either party may terminate the EVM agreement upon 30 days' notice to the other party. Either party may terminate the AIT agreement for North America upon 60 days’ notice to the other party. Either party may terminate the AIT agreement for Brazil upon 90 days’ notice to the other party.
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,” “ScanSource,” “we,” “us,” or “our” ) is a leading technology distributor connecting devices to the cloud and accelerating growth for channel sales partners across hardware, software as a service (“SaaS”), connectivity and cloud services.
We sell products and services to the United States and Canada from our facilities located in Mississippi, California and Kentucky; into Brazil from facilities located within the Brazilian states of Paraná, Espírito Santo and Santa Catarina. We provide some of our digital products, which include SaaS and subscriptions, through our digital tools and platforms.
Offerings and Markets We currently market over 65,000 products from approximately 500 hardware, software and service suppliers to approximately 25,000 channel sales partners. We sell products and services to the United States and Canada from our facilities located in Mississippi, California and Kentucky; into Brazil from facilities located within the Brazilian states of Paraná, Espírito Santo and Santa Catarina.
Our sales teams also provide customers with online ordering, API, EDI and other information systems, allowing customers to easily gain access to product specifications, availability and customized pricing, as well as the ability to place and follow the status of orders.
Our sales representatives receive comprehensive training with respect to the technical characteristics of suppliers’ products, supplemented by frequent product and service seminars conducted by supplier representatives and bi-weekly meetings among product, marketing and sales managers. 7 Table of Contents Index to Financial Statements Our sales teams also provide channel sales partners with online ordering, API, EDI and other information systems, allowing channel sales partners to easily gain access to product specifications, availability and customized pricing, as well as the ability to place and follow the status of orders.
Either party may terminate this agreement upon 60 days' prior written notice. • We have three non-exclusive agreements with Zebra. One agreement covers sales of Zebra Enterprise Visibility & Mobility (“EVM”) products in North America and Brazil, while the other two agreements cover sales of Zebra Asset Intelligence & Tracking (“AIT”) products in North America and Brazil.
One agreement covers sales of Zebra Enterprise Visibility & Mobility (“EVM”) products in North America and Brazil, while the other two agreements cover sales of Zebra Asset Intelligence & Tracking (“AIT”) products in North America and Brazil, respectively. The Zebra agreements each have a one-year term that automatically renews for additional one-year terms.
Physical security products are used every day across every vertical market to protect lives, property and information. These technology solutions require specialized knowledge to deploy effectively, and we offer in-depth training and education to our sales partners to enable them to maintain the appropriate skill levels.
These technology solutions require specialized knowledge to deploy effectively, and we offer in-depth training and education to our channel sales partners to enable them to maintain the appropriate skill levels. • POS : We provide POS solutions for retail, grocery and hospitality environments to efficiently manage in-store sales and operations.
As AIDC technology has become more pervasive, applications have evolved from traditional uses, such as inventory control, materials handling, distribution, shipping and warehouse management, to more advanced applications, such as healthcare. • POS : We provide POS solutions for retail, grocery and hospitality environments to efficiently manage in-store sales and operations.
As AIDC technology has become more pervasive, applications have evolved from traditional uses, such as inventory control, materials handling, distribution, shipping and warehouse management, to more advanced applications, such as healthcare. • Networking: Our networking products include wireless and networking infrastructure products. Networking products are integral to our technology solutions, serving as the backbone that connects devices and applications.
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.
We also implement employee engagement surveys globally to gather feedback and build the best environment possible for our employees. 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.
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.
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. • Communications : We offer communications solutions, delivered through the cloud, on-premise or via a hybrid approach, such as voice, video, integration of communication platforms and contact center solutions.
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.
We align our teams, tools and processes around all of our channel sales partners to help them grow through providing specialized expertise, creating efficiencies and generating end-user demand for business solutions. We enable our channel sales partners to create, deliver and grow technology offerings for end users across almost every vertical market in the United States, Canada, and Brazil.
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.
To further expand our financial wellness offerings, we offer workshops and webinars focused on student debt and general debt-counselling services. 6 Table of Contents Index to Financial Statements 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.
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.
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 users' needs. Advisors Advisors focus on selling traditional and next-generation technology solutions to end users through a consultative approach.
Our goal is to provide exceptional experiences for our partners, suppliers, and people, 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.
Our technology distribution strategy utilizes multiple sales models to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to channel sales partners that solve end users’ challenges. Sc anSource enables channel sales partners 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.
We provide some of our digital products, which include SaaS and subscriptions, through our digital tools and platforms. See “Risk Factors” for a discussion of the risks related to our foreign operations. 4 Table of Contents Index to Financial Statements Our offerings to our channel sales partners include hardware, software, services and connectivity across premise, hybrid and cloud environments.
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.
Our learning management system, The Hub, provides a modernized and engaging user experience for our employees at all levels. The ScanSource Management Academy is a program custom designed to develop all newly hired and promoted managers of people.
We believe these options reduce the customer’s need to establish multiple credit relationships.
These sales terms allow us to compete within our specific geographic areas to facilitate our growth plans. We believe these options reduce the channel sales partner’s need to establish multiple credit relationships.
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.
We also compete against other more specialized AIDC and POS distributors, such as BlueStar. In our Intelisys & Advisory segment, we compete against other technology service distributors including Avant and Telarus. 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.
Our customer channels include value-added resellers (“VARs”), customers or agents, independent sales organizations (“ISOs”) and independent software vendors (“ISVs”). These customer channels provide us with multiple routes-to-market. We align our teams, tools and processes around all of our customers to help them grow through reducing their costs, creating efficiencies and generating end-customer demand for business solutions.
Our channel sales partners include value-added resellers (“VARs”), advisors, independent sales organizations (“ISOs”), independent software vendors (“ISVs”), and managed service providers (“MSPs”). These channel sales partners provide us with multiple routes-to-market.
Business Segments We operate our business under a management structure that enhances our technology focus and hybrid distribution growth strategy.
Business Segments We operate our business under a management structure that enhances our technology distribution growth strategy. Effective July 1, 2024, the Company realigned its operating segments to represent the different sales models it uses in executing its technology distribution growth strategy. The two realigned segments are Specialty Technology Solutions and Intelisys & Advisory.
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.
The Work Team is an employee-led group focused on sharing insights, ideas, and opinions from our employee base to support our goal of fostering a workplace of inclusion and belonging. Our I&B initiatives focus on awareness and education, employee network groups and community-focused events.
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 provide technology solutions and services from more than 500 leading suppliers of mobility and barcode, point-of-sale (“POS”), payment terminals, physical security, networking, communications, connectivity and cloud services. The Company's two operating segments, Specialty Technology Solutions and Intelisys & Advisory , represent the different sales models we use in executing our technology distribution growth strategy.
Removed
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.
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ScanSource enables channel sales partners to deliver solutions for their end users to address changing buying and consumption patterns. ScanSource uses multiple sales models to offer technology solutions from leading suppliers of specialty technologies, connectivity and cloud services.
Removed
There are adjacencies among these technologies to develop and deliver solutions for our customers. These solutions include data capture and POS solutions that interface with computer systems to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management and health care applications.
Added
Strategy Our strategy is to drive sustainable, profitable growth by orchestrating complex, converging technology solutions through a growing ecosystem of channel sales partners leveraging our people, processes, and tools. Our goal is to provide exceptional experiences for our channel sales partners, suppliers, and people through operational excellence.
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Electronic physical security products include identification, access control, video surveillance and intrusion-related devices. Our networking products include wireless and networking infrastructure products. This segment also includes recurring revenue from hardware rentals and other SaaS offerings.
Added
The Specialty Technology Solutions segment combines the Company's former operating segments, with the exception of the Company's Intelisys business. The Intelisys & Advisory segment includes the Intelisys and technology advisors businesses, including Channel Exchange (formerly known as intY USA), RPM Software and Resourcive. Both segments include recurring revenue.
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Modern Communications & Cloud Segment The Modern Communications & Cloud portfolio of solutions includes communications technologies and services for voice, video conferencing, wireless, data networking, cybersecurity, cable, unified communications and collaboration, cloud and technology services.
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The Company has reclassified certain prior-year amounts in the segment results to conform with the current year presentation. These reclassifications had no effect on the condensed consolidated financial results. See Note 16 - Segment Information for descriptions of the Company's segments.
Removed
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.
Added
Specialty Technology Solutions Segment The Specialty Technology Solutions segment operates in the United States, Canada and Brazil and includes specialty technology solutions distributed through a wholesale/resale sales model. This segment includes hardware, SAAS and subscription services.
Removed
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.
Added
The specialty technology solutions include the following: • Mobility and barcode - mobile computing, barcode scanners and imagers, radio frequency identification devices, barcode printing and related services; • POS - Point of Sale systems, integrated POS software platforms; • Payment terminals - Self-service kiosks including self-checkout, payment terminals and mobile payment devices; • Physical security - video surveillance and analytics, video management software and access control; • Networking - switching, routing and wireless products and software; • Communications - voice, video, communication platform integration and contact center solutions; and • Connectivity - managed connectivity and wireless enablement solutions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe 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.
Biggest changeLitigation - We routinely are involved in litigation that can be costly and lead to adverse results. In the ordinary course of our business, we are involved in a wide range of disputes, some of which result in litigation.
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.
Furthermore, in developing markets, such as Brazil, 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.
Suppliers that currently distribute their products through us, may decide to shift to or substantially increase their existing distribution with other distributors, their own dealer networks, or directly to resellers or end-customers. Suppliers have, from time to time, made efforts to reduce the number of distributors with which they do business.
Suppliers that currently distribute their products through us, may decide to shift to or substantially increase their existing distribution with other distributors, their own dealer networks, or directly to resellers or end users. Suppliers have, from time to time, made efforts to reduce the number of distributors with which they do business.
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.
These risks include: • 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 (including additional or retaliatory tariffs), 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.
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.
For instance, we currently distribute products to the majority of North America from a single warehouse in Southaven, Mississippi. 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.
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.
We also provide financing to some Intelisys advisors 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.
Our reputation, sales and profitability may suffer if suppliers are not able to provide us with an adequate supply of products to fulfill our customer orders on a timely basis or if we cannot otherwise obtain particular products or product lines. Increasingly, our suppliers are combining and merging, leaving us with fewer alternative sources.
Our reputation, sales and profitability may suffer if suppliers are not able to provide us with an adequate supply of products to fulfill our channel sales partner orders on a timely basis or if we cannot otherwise obtain particular products or product lines. Increasingly, our suppliers are combining and merging, leaving us with fewer alternative sources.
As a result of these factors and other challenges in extending credit to international customers, we generally face greater credit risk from international sales compared to domestic sales. Reliance on third parties - We are dependent on third parties for some services, including the delivery of a majority of our products, logistics and warehousing.
As a result of these factors and other challenges in extending credit to international channel sales partners, we generally face greater credit risk from international sales compared to domestic sales. Reliance on third parties - We are dependent on third parties for some services, including the delivery of a majority of our products, logistics and warehousing.
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.
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.
In order to compete and to continue to grow, we must attract, retain and motivate employees, including those in executive, senior management, sales, marketing, logistics, technical support and other operating positions. Many of our employees work in small teams to provide specific services to customers and suppliers.
In order to compete and to continue to grow, we must attract, retain and motivate employees, including those in executive, senior management, sales, marketing, logistics, technical support and other operating positions. Many of our employees work in small teams to provide specific services to channel sales partners and suppliers.
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.
In addition, we could be subject to legal claims in the event of loss, disclosure or misappropriation of, or loss of access to, our channel sales partners’, business partners’ or our own information. We make extensive use of online services and integrated information systems, including through third-party service providers.
As a result of such concentration risk, terminations of supply or services agreements or a change in terms or conditions of sale from one or more of our key suppliers could adversely affect our operating margins, revenue or the level of capital required to fund our operations.
As a result of s uch concentration risk, terminations of supply or services agreements or a change in terms or conditions of sale from one or more of our key suppliers could adversely affect our operating margins, revenue or the level of capital required to fund our 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. As is customary in our industry, we extend credit to our customers, and most of our sales are on open accounts.
Credit exposure - We have credit exposure to our channel sales partners. 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 channel sales partners, and most of our sales are on open accounts.
This could result in more intense competition as distributors strive to secure distribution rights with these suppliers, which could have an adverse impact on our operating results. We cannot provide any assurances that suppliers will maintain an adequate supply of products to fulfill all of our customer orders on a timely basis.
This could result in more intense competition as distributors strive to secure distribution rights with these suppliers, which could have an adverse impact on our operating results. We cannot provide any assurances that suppliers will maintain an adequate supply of products to fulfill all of our channel sales partner orders on a timely basis.
We compete on the basis of price, product and service availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability and terms, ability to tailor solutions to the needs of our customers, quality and breadth of product line and services and availability of technical and product information.
We compete on the basis of price, product and service availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability and terms, ability to tailor solutions to the needs of our channel sales partners, quality and breadth of product line and services and availability of technical and product information.
In addition, doing business in foreign countries poses additional challenges, such as finding and retaining qualified employees, particularly management-level employees, navigating underdeveloped infrastructure and identifying and retaining qualified suppliers, resellers, agents and service providers, among other risks.
In addition, doing business in foreign countries such as Brazil poses additional challenges, such as finding and retaining qualified employees, particularly management-level employees, navigating underdeveloped infrastructure and identifying and retaining qualified suppliers, resellers, advisors and service providers, among other risks.
Certain smaller, regional competitors, that are specialty two-tier or mixed model master resellers may be able to respond more quickly to new or emerging technologies and changes in customer requirements in their regions. Competition has increased for our sales units as broad-line and other value-added distributors have entered into the specialty technology markets.
Also, certain regional competitors, that are specialty two-tier or mixed model master resellers may be able to respond more quickly to new or emerging technologies and changes in channel sales partner requirements in their regions. Competition has increased for our sales units as broad-line and other value-added distributors have entered into the specialty technology markets.
Our inability to compete successfully against current and future competitors could cause our revenue and earnings to decline. Disruptive technology - We may not be able to respond and adapt to rapid technological changes, evolving industry standards or changing customer needs or requirements, and thus may become less competitive.
Our inability to compete successfully against current and future competitors could cause our revenue and earnings to decline. Disruptive technology - We may not be able to respond and adapt to rapid technological changes, evolving industry standards or changing channel sales partner needs or requirements, and thus may become less competitive.
Any disruption to our business due to such issues, or an increase in our costs to cover these issues, could have an adverse effect on our financial results and operations. Our customers rely on our electronic ordering, information systems and website for product information, including availability, pricing and placing orders.
Any disruption to our business due to such issues, or an increase in our costs to cover these issues, could have an adverse effect on our financial results and operations. Our channel sales partners rely on our electronic ordering, information systems and website for product information, including availability, pricing and placing orders.
In particular, we are dependent upon major shipping companies, including FedEx and UPS, for the shipment of our products to and from our centralized warehouses. Changes in shipping terms, or the inability of these third-party shippers to perform effectively, could affect our responsiveness to our customers.
In particular, we are dependent upon major shipping companies, including FedEx and UPS, for the shipment of our products to and from our centralized warehouses. Changes in shipping terms, or the inability of these third-party shippers to perform effectively, could affect our responsiveness to our channel sales partners.
They are trained to develop their knowledge of products, services, programs and practices and customer business needs, as well as to enhance the skills required to provide exceptional service and to manage our business. As they gain experience and develop their knowledge and skills, our employees become highly desired by other businesses.
They are trained to develop their knowledge of products, services, programs and practices and channel sales partners business needs, as well as to enhance the skills required to provide exceptional service and to manage our business. As they gain experience and develop their knowledge and skills, our employees become highly desired by other businesses.
Our ability to obtain particular products or product lines in the required quantities and our ability to fulfill customer orders on a timely basis is critical to our success. Our suppliers have experienced product supply shortages from time to time due to the inability of certain of their suppliers to supply products on a timely basis.
Our ability to obtain particular products or product lines in the required quantities and our ability to fulfill channel sales partner orders on a timely basis is critical to our success. Our suppliers have experienced product supply shortages from time to time due to the inability of certain of their suppliers to supply products on a timely basis.
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 information technology and other systems that maintain and transmit channel sales partner 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.
Political, social or economic instability in Asia, or in other regions in which our vendor partners purchase or manufacture the products we sell, could cause disruptions in trade, including exports to the United States.
Political, social or economic instability in Asia, or in other regions in which our suppliers purchase or manufacture the products we sell, could cause disruptions in trade, including exports to the United States.
From time to time, we have experienced significant increases in shipping costs due to increases in fuel costs and transit losses due to a congested supply chain. Increases in our shipping costs or transit losses may adversely affect our financial results if we are unable to pass on these higher costs to our customers.
From time to time, we have experienced significant increases in shipping costs due to increases in fuel costs and transit losses due to a congested supply chain. Increases in our shipping costs or transit losses may adversely affect our financial results if we are unable to pass on these higher costs to our channel sales partners.
Even if we do, we may be unable to successfully complete any such transactions on favorable terms or at all, or to successfully integrate an acquired business, facilities, technologies, or products into our business or retain any key personnel, suppliers, or customers.
Even if we do, we may be unable to successfully complete any such transactions on favorable terms or at all, or to successfully integrate an acquired business, facilities, technologies, or products into our business or retain any key personnel, suppliers, or channel sales partners.
Our business, like that of other distributors, is subject to the risk that the value of our inventory will be adversely affected by price reductions by manufacturers, by technological changes affecting the usefulness or desirability of our products or by foreign currency fluctuations.
Inventory - The value of our inventory may be adversely affected by market and other factors. Our business, like that of other distributors, is subject to the risk that the value of our inventory will be adversely affected by price reductions by manufacturers, by technological changes affecting the usefulness or desirability of our products or by foreign currency fluctuations.
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.
Certain of our channel sales partners 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.
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.
While we evaluate our channel sales partners' 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 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.
The market for some of our products and services is subject to rapid technological change, evolving industry standards and changes in channel sales partner demand, which can contribute to a decline in value or obsolescence of inventory.
The failure or inability of one or more of these third parties to deliver products from suppliers to us, or products from us to our customers, for any reason could disrupt our business and harm our reputation and operating results.
The failure or inability of one or more of these third parties to deliver products from suppliers to us, or products from us to our channel sales partners, for any reason could disrupt our business and harm our reputation and operating results.
We maintain policies to reduce our net exposure to foreign currency exchange rate fluctuations through the use of derivative financial instruments, however there can be no assurance that fluctuations in foreign currency exchange rates will not materially affect our financial results.
We maintain policies to reduce our net exposure to foreign currency exchange rate fluctuations through the use of derivative financial instruments; however, there can be no assurance that 17 Table of Contents Index to Financial Statements fluctuations in foreign currency exchange rates will not materially affect our financial results.
We rely on third parties to perform certain services for our business and for our customers, which, if not performed by these third parties in accordance with the terms of the arrangement, could result in significant disruptions or costs to our organization, including monetary damages and an adverse effect on our customer relationships.
We rely on third parties to perform certain services for our business and for our channel sales partners, which, if not performed by these third parties in accordance with the terms of the arrangement, could result in significant disruptions or costs to our organization, including monetary damages and an adverse effect on our channel sales partner relationships.
We have built our business on a set of core values, and we attempt to hire and retain employees who are committed to these values and our culture of providing exceptional service to our customers and suppliers.
We have built our business on a set of core values, and we attempt to hire and retain employees who are committed to these values and our culture of providing exceptional service to our channel sales partners and suppliers.
A significant percentage of our net sales relates to products we purchase from relatively few suppliers, including Cisco and Zebra.
A significant percentage of our net sales relates to products we purchase from relatively few supplie rs, including Cisco and Zebra.
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.
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. Risk Factors Related to our Industry Competition - We experience intense competition in all our markets.
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.
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 channel sales partner needs at prices that our channel sales partners are willing to pay.
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.
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 business partners, and misappropriate or compromise confidential information, create system disruptions or cause shutdowns.
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.
A ransomware incident in 2023 disrupted our systems, and there can be no assurance that our 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.
Certain of our current and potential competitors have greater financial, technical, marketing and other resources than we have and may be able to respond more quickly to new or emerging technologies and changes in customer requirements.
Certain of our current competitors have, and potential competitors could have, greater financial, technical, marketing and other resources than we have and may be able to respond more quickly to new or emerging technologies and changes in channel sales partner requirements.
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.
To remain competitive, we may be forced to offer more credit or extend payment terms to our channel sales partners. This could result in an increase in our capital requirements, increase our financing costs, bad debt expenses and could have an adverse impact on our financial condition and results of operations.
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.
Any such loss, disclosure or misappropriation of, or access to, our channel sales partners’ or business partners’ information or our information or other data breach affecting such information can result in legal claims or legal proceedings, including regulatory 16 Table of Contents Index to Financial Statements investigations and actions, and may have a serious impact on our reputation and may adversely affect our businesses, operating results and financial condition.
Our commitment to legal compliance could put us at a competitive disadvantage, and any lapses in our compliance could subject us to civil and criminal penalties that could materially and adversely affect our financial condition and results of operations. In addition, competition in developing markets is increasing.
Our commitment to legal compliance could put us at a competitive disadvantage, and any lapses in our compliance could subject us to civil and criminal penalties that could materially and adversely affect our financial condition and results of operations.
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.
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 9 Table of Contents Index to Financial Statements manage the personnel required to address our growth.
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.
As a result, our channel sales partners’ information may be lost, disclosed, accessed or taken without our channel sales partners’ consent. We are subject to laws and regulations relating to channel sales partner privacy and the protection of personal information.
The secure maintenance and transmission of customer information is a critical element of our operations.
The secure maintenance and transmission of channel sales partner information is a critical element of our operations.
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.
From time to time, we experience shortages in availability of some products from suppliers, and this impacts channel sales partner decisions regarding whether to make purchases from us. Anything that negatively influences channel sales partner relations can also negatively impact our operating results.
Supply Chain issues, include a shortage of products, may increase our costs or cause a delay in fulfilling customer orders, completing services or purchasing products and services needed to support our internal operations, resulting in an adverse impact on our financial results. Our business depends on the timely supply of products in order to meet the demands of our customers.
Supply Chain issues, include a shortage of products, may increase our costs or cause a delay in fulfilling channel sales partner orders, completing services or purchasing products and services needed to support our internal operations, resulting in an adverse impact on our financial results.
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.
Our ability and our suppliers’ ability to anticipate and react quickly to new technology trends, including artificial intelligence developments, and channel sales partner requirements is crucial to our overall success, financial condition and results of operations.
It is often more difficult to evaluate credit risk with a customer or obtain credit protections in our international operations. Also, credit cycles and collection periods are typically longer in our international operations.
In addition, extending credit to international channel sales partners involves additional risks. It is often more difficult to evaluate credit risk with a channel sales partner or obtain credit protections in our international operations. Also, credit cycles and collection periods are typically longer in our international operations.
Supplier consolidation may also lead to changes in the nature and terms of relationships with our suppliers. In addition, suppliers may face liquidity or solvency issues that in turn could negatively affect our business and operating results. Any loss or deterioration of a major supplier relationship could adversely affect our business, financial condition and results of operations.
Supplier consolidation may also lead to changes in the nature and terms of relationships with our suppliers. In addition, suppliers may face liquidity or 12 Table of Contents Index to Financial Statements solvency issues that in turn could negatively affect our business and operating 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. 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 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.
Our competitors include local, regional, national and international distributors as well as hardware and service suppliers that sell directly to resellers and to end-customers. In addition, we compete with resellers and master agents that sell to franchisees, third-party dealers and end-customers.
Our competitors include local, regional, national and international distributors as well as hardware and service suppliers that sell directly to resellers and to end users. In addition, we compete with resellers and technology solutions 15 Table of Contents Index to Financial Statements distributors that sell to franchisees, third-party dealers and end users.
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.
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 or that the insurance will be sufficient in type or amount to cover us against claims related to cybersecurity breaches, cyberattacks and other related breaches.
In the ordinary course of our business, we are involved in a wide range of disputes, some of which result in litigation. We are routinely involved in litigation related to commercial disputes surrounding our business activities, intellectual property disputes, employment disputes and accounts receivable collection activity.
We are routinely involved in litigation related to commercial disputes surrounding our business activities, intellectual property disputes, employment disputes and accounts receivable collection activity.
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.
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.
General Risk Factors Cybersecurity risk - If we are the subject of a ransomware or other cyberattack, we could lose valuable financial and operational data, we could be prevented from processing customer orders, ordering and tracking inventory, and efficiently operating our business, and we could lose revenue and profits and incur significant costs.
General Risk Factors Cybersecurity risk - Ransomware or other cyberattacks, could cause us to lose valuable financial and operational data, we could be prevented from processing channel sales partner orders, ordering and tracking inventory, and efficiently operating our business, and could cause us to lose revenue and profits and incur significant costs.
In addition, as a public company with a large shareholder base, we are susceptible to class-action lawsuits and other litigation resulting from disclosures that we or our officers and directors make (or do not make) and our other activities. Litigation is expensive to bring and defend, and the outcome of litigation can be adverse and significant.
In addition, as a public company with a large shareholder 13 Table of Contents Index to Financial Statements base, we are susceptible to class-action lawsuits and other litigation resulting from disclosures that we or our officers and directors make (or do not make) and our other activities.
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.
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 channel sales partners, suppliers or service providers. 14 Table of Contents Index to Financial Statements We have substantial operations in Brazil and face risks related to Brazil's complex tax, labor, trade compliance and consumer protection laws and regulations.
Additionally, deterioration of the financial condition of our logistical and warehousing providers could result in delayed responsiveness or delivery failure, which would ultimately affect our responsiveness to our customers and thus may adversely affect our business, financial condition and results of operations. Inventory - The value of our inventory may be adversely affected by market and other factors.
Additionally, deterioration of the financial condition of our logistical and warehousing 11 Table of Contents Index to Financial Statements providers could result in delayed responsiveness or delivery failure, which would ultimately affect our responsiveness to our channel sales partners and thus may adversely affect our business, financial condition and results of operations.
While we purchase our products primarily in the markets we serve (for example, products for United States customers are primarily sourced in the United States), our vendor partners manufacture or purchase a significant portion of the products we sell outside of the United States, primarily in Asia.
Our supply chain is also exposed to risks related to international operations. While we purchase our products primarily in the markets we serve (for example, products for United States channel sales partners are primarily sourced in the United States), our suppliers manufacture or purchase a significant portion of the products we sell outside of the United States, primarily in Asia.
We have historically relied on cash generated from operations, borrowings under our revolving credit facility and secured and unsecured borrowings to satisfy our capital needs and to finance growth.
Changes in payment terms with either suppliers or channel sales partners could also increase our capital requirements. We have historically relied on cash generated from operations, borrowings under our revolving credit facility and secured and unsecured borrowings to satisfy our capital needs and to finance growth.
Our business requires significant levels of capital to finance accounts receivable and product inventory that is not financed by trade creditors. We have an increased demand for capital when our business is expanding, including through acquisitions and organic growth. Changes in payment terms with either suppliers or customers could also increase our capital requirements.
Additional capital may not be available to us on acceptable terms to fund our working capital needs and growth. Our business requires significant levels of capital to finance accounts receivable and product inventory that is not financed by trade creditors. We have an increased demand for capital when our business is expanding, including through acquisitions and organic growth.
We have substantial operations in Brazil and face risks related to these countries’ complex tax, labor, trade compliance and consumer protection laws and regulations. Additionally, developing markets such as Brazil have greater political volatility and vulnerability to infrastructure and labor disruptions, are more likely to experience market and interest rate fluctuations and may have higher inflation.
Additionally, developing markets such as Brazil have greater political volatility and vulnerability to infrastructure and labor disruptions, are more likely to experience market and interest rate fluctuations and may have higher inflation.
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.
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.
Our failure to effectively manage our organic growth could have an adverse effect on our business, financial condition and 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. 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.
Not all adverse outcomes can be anticipated, and applicable accounting rules do not always require or permit the establishment of a reserve until a final result has occurred or becomes probable and estimable. In some instances we are insured or indemnified for the potential losses; in other instances we are not.
Litigation is expensive to bring and defend, and the outcome of litigation can be adverse and significant. Not all adverse outcomes can be anticipated, and applicable accounting rules do not always require or permit the establishment of a reserve until a final result has occurred or becomes probable and estimable.
Our financial results, operations and prospects depend significantly on worldwide economic and geopolitical conditions, the demand for our products and services, and the financial condition of our customers and suppliers. Economic weakness and geopolitical uncertainty have in the past resulted, and may result in the future, in reduced demand for products resulting in decreased sales, margins and earnings.
Economic weakness and geopolitical uncertainty have in the past resulted, and may result in the future, in reduced demand for products resulting in decreased sales, margins and earnings.
In addition, our Interest Coverage Ratio (as such term is defined in the Amended Credit Agreement) must be at least 3.00:1.00 as of the end of each fiscal quarter. In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates.
The Amended Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants such as a Leverage Ratio and Interest Coverage Ratio (each as such term is defined in the Amended Credit Agreement). In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates.
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.
Our inability to pass through to our channel sales partners 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.
We could experience product constraints due to the failure of suppliers to accurately forecast customer demand or to manufacture sufficient quantities of product to meet customer demand (including as a result of shortages of product components), among other reasons. Our supply chain is also exposed to risks related to international operations.
We could experience product constraints due to the failure of suppliers to accurately forecast channel sales partner demand or to manufacture 10 Table of Contents Index to Financial Statements sufficient quantities of product to meet channel sales partner demand (including as a result of shortages of product components), among other reasons.
On at least an annual basis, we are required to assess our goodwill and other intangible assets, including but not limited to customer relationships, trademarks and trade names, for impairment. This includes continuously monitoring events and circumstances that could trigger an impairment test outside of our annual impairment testing date in the fourth quarter of each year.
On at least an annual basis, we are required to assess our goodwill and other intangible assets, including but not limited to customer relationships, trademarks and trade names, for impairment.
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.
We can make no assurances that we will ultimately be successful in any dispute to which we are a party. See Item 3. “Legal Proceedings” for further discussion of our material legal matters.
Certain purchase discounts and rebates may affect gross margins. Many purchase discounts from suppliers are based on percentage increases in sales of products.
We receive purchase discounts and rebates from some suppliers based on various factors, including goals for quantitative and qualitative sales or purchase volume and channel sales partner 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.
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.
To the extent that our credit losses exceed those reserves, our financial performance will be negatively impacted beyond what is expected. 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.
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.
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. 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 Acquisitions - Our growth strategy includes acquisitions of companies that complement or expand our existing business.
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.
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.
We currently have significant facilities outside the United States. For fiscal year ending June 30, 2025, approximately 7.9% of our revenue was derived from our operations outside of the United States and Canada.
As 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.
As a distributor in a channel business model our offerings could create channel conflict, and the channel programs offered by our supplier can change. These perceived channel conflicts and channel programs could impact our channel sales partner relationships and negatively impact our operating results and our ability to retain channel sales partners.
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.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeComponents of our program include: • risk assessments designed to help identify and assess cybersecurity threats to our critical IT systems, information, and our broader enterprise IT environment; • monthly, mandatory cybersecurity awareness training for our employees, covering such topics such as phishing tactics, ransomware and developments in the current landscape of cyber-threats; • assessments of [and improvements to], among others, disaster recovery testing, access control, remote access, personnel security, system and communications protection, media protection, change management, data backup and recovery, audit logging, vulnerability and patch management, physical security, configuration management; 17 Table of Contents Index to Financial Statements • periodic engagement of independent security firms and other third-party experts, where appropriate, to assess, test, and certify components of our cybersecurity program, and to otherwise assist with various aspects of our cybersecurity processes and controls; and • regular assessments of the design and operational effectiveness of the program’s key processes and controls by our internal audit team assisted by external consultants.
Biggest changeComponents of our program include: • risk assessments designed to help identify and assess cybersecurity threats to our critical IT systems, information, and our broader enterprise IT environment; • monthly, mandatory cybersecurity awareness training for our employees, covering such topics such as phishing tactics, ransomware and developments in the current landscape of cyber-threats; • assessments of and improvements to, among others, disaster recovery testing, access control, remote access, personnel security, system and communications protection, media protection, change management, data backup and recovery, audit logging, vulnerability and patch management, physical security, configuration management; • periodic engagement of independent security firms and other third-party experts, where appropriate, to assess, test, and certify components of our cybersecurity program, and to otherwise assist with various aspects of our cybersecurity processes and controls; and • regular assessments of the design and operational effectiveness of the program’s key processes and controls by our internal audit team with the assistance of external consultants. 18 Table of Contents Index to Financial Statements We also have a cybersecurity incident response plan for the CIRT to assess and manage cybersecurity incidents, which includes escalation procedures based on the nature and severity of the incident including, where appropriate, escalation to the Board.
Our program includes protocols for preventing, detecting and responding to cybersecurity incidents, and cross-functional coordination, and planning for business continuity and disaster recovery. We rely on our information security management system supported by a set of policies based upon industry frameworks, including the NIST Cybersecurity Framework.
Our program includes protocols for preventing, detecting and responding to cybersecurity incidents; cross-functional coordination; and planning for business continuity and disaster recovery. We rely on our information security management system supported by a set of policies based upon industry frameworks, including the NIST Cybersecurity Framework.
We have a Cyber Incident Response Team ( “ CIRT ” ) in place to respond to, and prepare appropriate responses to cybersecurity threats or incidents.
We have a Cyber Incident Response Team ( “ CIRT ” ) in place to respond to prepare appropriate responses and respond to cybersecurity threats or incidents.
The Audit Committee also annually reviews the adequacy and effectiveness of our information and technology security policies and the internal controls regarding information and technology security and cybersecurity, and periodically receives updates from our internal audit function on the results of our cybersecurity audits and related mitigation activities.
The Audit Committee of the Board also annually reviews the adequacy and effectiveness of our information and technology security policies and the internal controls regarding information and technology security and cybersecurity, and periodically receives updates from our internal audit function on the results of our cybersecurity audits and related mitigation activities.
Our cybersecurity risk management program is led by our Vice President of Information Security ( “VP” ), who manages our security team principally responsible for managing our cybersecurity risk assessment processes, our security controls, and our detection and response to cybersecurity incidents.
Our cybersecurity risk management program is led by our Vice President of Information Security, who manages our security team that is principally responsible for managing our cybersecurity risk assessment processes, our security controls, and our detection and response to cybersecurity incidents.
At the management level, our VP leads our enterprise-wide cybersecurity program, and is responsible for assessing and managing our materials risks from cybersecurity threats.
At the management level, our VP of Information Security leads our enterprise-wide cybersecurity program, and is responsible for assessing and managing our materials risks from cybersecurity threats.
Our CIO has nearly 30 years of experience and has held a variety of senior information technology leadership roles at multiple Fortune 500 organizations. Members of our security team also hold industry-recognized cybersecurity certifications, including the Certified Information Systems Security Professional (CISSP) certification.
Our VP has more more than 20 years of experience building and leading cybersecurity, risk management, and information technology teams. Members of our security team also hold industry-recognized cybersecurity certifications, including the Certified Information Systems Security Professional (CISSP) certification.
Our VP reports to our CIO who, in turn, reports directly to our CEO. Our VP and our CIO, are both experienced cybersecurity executives. Our VP has more more than 20 years of experience building and leading cybersecurity, risk management, and information technology teams.
Our VP reports to our CIO who, in turn, reports directly to our CEO. Our CIO and our VP of Information Security are both experienced cybersecurity executives. Our CIO has nearly 30 years of experience and has held a variety of senior information technology leadership roles at multiple Fortune 500 organizations.
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We also have a cybersecurity incident response plan for the CIRT to assess and manage cybersecurity incidents, which includes escalation procedures based on the nature and severity of the incident including, where appropriate, escalation to the Board.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeOur principal locations and/or properties as of June 30, 2025, were as follows: 19 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 40,000 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
Biggest changeThe graph assumes the investment of $100 on June 30, 2020. 2020 2021 2022 2023 2024 2025 ScanSource, Inc. $ 100 $ 117 $ 129 $ 123 $ 184 $ 174 NASDAQ Composite $ 100 $ 145 $ 111 $ 140 $ 182 $ 210 SIC Code 5045 – Computers & Peripheral Equipment and Software $ 100 $ 198 $ 170 $ 178 $ 227 $ 261 21 Table of Contents Index to Financial Statements Share Repurchases The following table shows the share-repurchase activity for the quarter ended June 30, 2025 (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, 2025 through April 30, 2025 261,305 $31.80 261,305 $233,821,479 May 1, 2025 through May 31, 2025 220,897 $38.66 220,897 $225,280,529 June 1, 2025 through June 30, 2025 200,693 $41.35 198,833 $217,059,499 Total 682,895 681,035 (1) Includes 1,860 shares withheld from employees' stock-based awards to satisfy required tax withholding obligations for the month of June 2025.
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.
There were no shares withheld during the months of April and May 2025. (2) Our Board authorized a $100 million share repurchase program in May 2024, which does not have any time limit. In April 2025, our Board subsequently increased the authorization for the share repurchase program by an additional $200 million, which does not have any time limit.
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.
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 Ma rket under the symbol “SCSC.” As of August 18, 2025, there were approximately 800 holders of record of our common stock.
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.
In fiscal year 2025, we repurchased 2,483,299 shares totaling $106.5 million under the share repurchase program, including excise taxes. Dividends We have never declared or paid a cash dividend. Under the terms of our credit facility, the payment of cash dividends is restricted.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe 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.
Biggest changeThe following table summarizes annualized adjusted ROIC for the fiscal years ended June 30, 2025 and 2024. 2025 2024 Adjusted return on invested capital ratio 13.6 % 12.4 % 29 Table of Contents Index to Financial Statements The components of our adjusted ROIC calculation and reconciliation to our financial statements are shown, as follows: Fiscal Year Ended June 30, 2025 2024 (in thousands) Reconciliation of net income to adjusted EBITDA: Net income from continuing operations (GAAP) $ 71,548 $ 77,060 Plus: Interest expense 8,013 13,031 Plus: Income taxes 22,848 22,781 Plus: Depreciation and amortization 30,195 28,009 EBITDA (non-GAAP) 132,604 140,881 Plus: Change in fair value of contingent consideration 1,900 — Plus: Share-based compensation 11,062 9,537 Plus: Acquisition and divestiture costs (a) 926 1,717 Plus: Cyberattack restoration costs 177 874 Plus: Restructuring costs 5,381 4,358 Plus: Tax recovery (3,041) (2,558) Plus: Legal settlement 1,579 — Plus: Insurance recovery, net of payments (5,928) — Plus: Gain on sale of business — (14,155) Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) $ 144,660 $ 140,654 Fiscal Year Ended June 30, 2025 2024 (in thousands) Invested capital calculations: Equity – beginning of the year $ 924,255 $ 905,298 Equity – end of the year 906,409 924,255 Plus: Change in fair value of contingent consideration, net 1,432 — Plus: Share-based compensation, net 8,310 7,120 Plus: Acquisition and divestiture costs (a) 926 1,717 Plus: Cyberattack restoration costs, net 133 655 Plus: Restructuring, net 4,054 3,262 Plus: Tax recovery, net (4,072) (2,566) Plus: Legal settlement, net 1,189 — Plus: Insurance recovery, net (4,466) — Plus: Gain on sale of business — (14,155) Average equity 919,085 912,793 Average funded debt (b) 141,173 220,528 Invested capital (denominator for adjusted ROIC) (non-GAAP) $ 1,060,258 $ 1,133,321 (a) Acquisition and divestiture costs are generally non-deductible for tax purposes.
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.
See Note 13 - Income Taxes in the Notes to Consolidated Financial Statements for further discussion including an effective tax rate reconciliation. 28 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.
Management uses judgment to (i) identify the acquired assets and liabilities assumed, (ii) estimate the fair value of these assets, (iii) estimate the useful life of the assets and (iv) assess the appropriate method for recognizing depreciation or amortization expense over the assets' useful life. 34 Table of Contents Index to Financial Statements Accounting Standards Recently Issued See Note 1 in the Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.
Management uses judgment to (i) identify the acquired assets and liabilities assumed, (ii) estimate the fair value of these assets, (iii) estimate the useful life of the assets and (iv) assess the appropriate method for recognizing depreciation or amortization expense over the assets' useful life. 36 Table of Contents Index to Financial Statements Accounting Standards Recently Issued See Note 1 in the Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.
The Company did not record a tax provision on the capital loss as there were no offsetting capital gains. 32 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.
The Company did not record a tax provision on the capital loss as there were no offsetting capital gains. 34 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.
Gross margin mix is impacted by multiple factors, which include sales mix (proportion of sales of higher margin products or services relative to total sales), vendor program recognition (consisting of volume rebates, inventory price changes and purchase discounts) and freight costs. Increases in vendor program recognition decrease cost of goods sold, thereby increasing gross profit.
Gross margin mix is impacted by multiple factors, which include sales mix (proportion of sales of higher margin products or services relative to total sales), supplier program recognition (consisting of volume rebates, inventory price changes and purchase discounts) and freight costs. Increases in supplier program recognition decrease cost of goods sold, thereby increasing gross profit.
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.
While we were in compliance with the financial covenants contained in the Credit Facility as of June 30, 2025, 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.
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%.
During the fiscal year ended June 30, 2025, our borrowings under the credit facility were U.S. dollar loans. The spread in effect as of June 30, 2025 was 1.00%, plus a 0.10% credit spread adjustment for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect as of June 30, 2025 was 0.15%.
The WACC is intended to represent a rate of return that would be expected by a market place participant in each respective geography. • Operating income: We utilized historical and expected revenue growth rates, gross margins and operating expense percentages, which varied based on the projections of each reporting unit being evaluated. • Cash flows from working capital changes: We utilized a projected cash flow impact pertaining to expected changes in working capital as each of our goodwill reporting units grow.
The WACC is intended to represent a rate of return that would be expected by a marketplace participant in each respective geography. • Operating income: We utilized historical and expected revenue growth rates, gross margins and operating expense percentages, which varied based on the projections of each reporting unit being evaluated. • Cash flows from working capital changes: We utilized a projected cash flow impact pertaining to expected changes in working capital as each of our goodwill reporting units grow.
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
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. 39 Table of Contents Index to Financial Statements
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 .
The remaining principal debt payments on our industrial development revenue bond, which total $3.0 million, have maturity dates in 2025 through 2032. See Footnote 8 - Short Term Borrowings and Long Term Debt .
Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability.
Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of i ts customers, (i v) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability.
Incentives received from suppliers for specifically identified incremental cooperative advertising programs are recorded as adjustments to selling, general and administrative expenses. ASC 606– Revenue from Contracts with Customers addresses accounting for consideration payable to a customer, which the Company interprets and applies as the customer (i.e., the Company) receives advertising funds from a supplier.
Incentives received from suppliers for specifically identified incremental market development funds are recorded as adjustments to selling, general and administrative expenses. ASC 606– Revenue from Contracts with Customers addresses accounting for consideration payable to a customer, which the Company interprets and applies as the customer (i.e., the Company) receives advertising funds from a supplier.
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.
Checks released but not yet cleared from these accounts in the amounts of $0.1 million and $5.9 million are classified as accounts payable as of June 30, 2025 and 2024, respectively. We conduct business primarily in North America and Brazil where we generate and use cash.
Our policy for estimating allowances for doubtful accounts receivable is described below. We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from customers’ failure to make payments on accounts receivable due us.
Our policy for estimating allowances for doubtful accounts receivable is described below. We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from channel sales partners’ failure to make payments on accounts receivable due us.
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 .
There was $350.0 million and $349.9 million available for additional borrowings as of June 30, 2025 and June 30, 2024 , respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2025 and June 30, 2024 .
Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the supplier. Suppliers generally require that we use the suppliers’ cooperative advertising allowances for advertising or other marketing programs.
Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the supplier. Suppliers generally require that we use the suppliers’ market development funds for advertising or other marketing programs.
The carrying value of goodwill is reviewed at a reporting unit level at least annually for impairment, or more frequently if impairment indicators exist. Our goodwill reporting units align directly with our operating segments, Specialty Technology Solutions and Modern Communications & Cloud.
The carrying value of goodwill is reviewed at a reporting unit level at least annually for impairment, or more frequently if impairment indicators exist. Our goodwill reporting units align directly with our operating segments, Specialty Technology Solutions and Intelisys & Advisory.
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.
Fiscal Year Ended June 30, 2025 2024 2023 Statement of income data: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 86.6 87.8 88.1 Gross profit 13.4 12.2 11.9 Selling, general and administrative expenses 9.4 8.5 7.5 Depreciation expense 0.3 0.3 0.3 Intangible amortization expense 0.6 0.5 0.4 Restructuring and other charges 0.2 0.1 0.0 Change in fair value of contingent consideration 0.1 0.0 0.0 Operating income 2.8 2.8 3.6 Interest expense 0.3 0.4 0.5 Interest income (0.4) (0.3) (0.2) Gain on sale of business 0.0 (0.4) 0.0 Other (income) expense, net (0.2) 0.0 0.0 Income from continuing operations before income taxes 3.1 3.1 3.2 Provision for income taxes 0.8 0.7 0.9 Net income from continuing operations 2.4 2.4 2.3 Net income from discontinued operations 0.0 0.0 0.0 Net income 2.4 % 2.4 % 2.4 % Comparison of Fiscal Years Ended June 30, 2025 and 2024 Below is a discussion of fiscal years ended June 30, 2025 and 2024.
To the extent that specifically reserved inventory is sold, cost of goods sold is expensed for the new cost basis of the inventory sold. Supplier Programs We receive incentives from suppliers related to cooperative advertising allowances, volume rebates and other incentive programs. These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers.
To the extent that specifically reserved inventory is sold, cost of goods sold is expensed for the new cost basis of the inventory sold. Supplier Programs We receive incentives from suppliers related to market development funds, volume rebates and other incentive programs. These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers.
The Company believes it will qualify for safe harbor exemptions in many of these jurisdictions and any remaining impact to future effective tax rates and corporate tax liability will be minimal. We expect the fiscal year 2025 effective tax rate from continuing operations to be approximately 27.5% to 28.5%.
The Company believes it qualifies for safe harbor exemptions in many of these jurisdictions and any remaining impact to future effective tax rates and corporate tax liability will be minimal. We expect the fiscal year 2026 effective tax rate from continuing operations to be approximately 27.2% to 28.2%.
Availability to use this borrowing capacity depends upon, among other things, the levels of our Leverage Ratio and Interest Coverage Ratio, which, in turn, will depend upon (1) our Credit Facility Net Debt relative to our EBITDA and (2) Credit Facility EBITDA relative to total interest expense respectively.
Availability to use this borrowing capacity depends upon, among other things, the levels of our Leverage Ratio and Interest Coverage Ratio, which, in turn, will depend upon (1) our Credit Facility Net Debt relative to our EBITDA and (2) Credit 38 Table of Contents Index to Financial Statements Facility EBITDA relative to total interest expense respectively.
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.
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, 2025, based upon the calculation of our Credit Facility Net Debt relative to our Credit Facility EBITDA, there was $350.0 million available for borrowing.
Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from customers, increases and decreases to inventory levels and payments to vendors.
Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from channel sales partners, increases and decreases to inventory levels and payments to suppliers.
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.
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 $4.1 million.
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 also had a non-cancelable operating lease agreement of $11.0 million at June 30, 2025, of which $4.6 million is expected to be paid within the next 12 months. Remaining amounts are expected to be paid through 2030. See Footnote 14 - Leases .
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview ScanSource is a leading hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, SaaS, connectivity and cloud.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview ScanSource is a leading technology distributor connecting devices to the cloud and accelerating growth for channel sales partners across hardware, SaaS, connectivity and cloud.
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.
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, 2024 for a discussion of fiscal year ended June 30, 2023. 24 Table of Contents Index to Financial Statements Net Sales We have two reportable segments, which are based on sales model.
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.
Our segments operate primarily in the United States, Canada and Brazil: • Specialty Technology Solutions • Intelisys & Advisory We sell hardware, SaaS, connectivity and cloud solutions and services to channel sales partners that are designed to solve end users’ challenges. We operate distribution facilities that support our United States and Canada business in Mississippi, California and Kentucky.
The fair value of the reporting units exceeded its carrying value by 11% and 33%, respectively, as of the annual goodwill impairment testing date.
The fair value of the reporting units exceeded its carrying value by 2% and 100%, respectively, as of the annual goodwill impairment testing date.
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.
Our key suppliers includ e AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Elo, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, NiCE, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.
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.
We provide technology solutions and services from approximately 500 leading suppliers of mobility and barcode, POS, payment terminals, physical security, networking, communications, connectivity and cloud services to our approximately 25,000 channel sales partners located primarily in the United States, Canada and Brazil. We operate our business under a management structure that enhances our technology distribution growth strategy.
We are actively monitoring changes to the global macroeconomic environment and assessing the potential impacts these challenges may have on our financial condition, results of operations and liquidity. We are also mindful of the potential impact these conditions could have on our customers and suppliers.
We are mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand and we are actively monitoring changes to the global macroeconomic environment and assessing the potential impacts these challenges may have on our financial condition, results of operations and liquidity.
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.
Provision for Income Taxes Income tax expense for continuing operations was $22.8 million and $22.8 million for the fiscal years ended June 30, 2025 and 2024, respectively, reflecting effective tax rates of 24.2% and 22.8%, respectively.
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.
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.
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.
Cash and cash equivalents totaled $126.2 million and $185.5 million at June 30, 2025 and 2024, respectively, of which $46.3 million and $20.0 million was held outside of the United States as of June 30, 2025 and 2024, respectively.
The costs associated with foreign exchange contracts are included in the net foreign exchange losses. For the fiscal year ended June 30, 2024 we recognized a $14.2 million gain on sale of our UK-based intY business.
We partially offset foreign currency exposure with the use of foreign exchange contracts to hedge against these exposures. The costs associated with foreign exchange contracts are included in the net foreign exchange losses. For the fiscal year ended June 30, 2024 we recognized a $14.2 million gain on sale of our UK-based intY business.
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.
We were in compliance with all covenants under the Amended Credit Agreement as of June 30, 2025. The average daily balance on the revolving credit facility, excluding the term loan facility, was $0.3 million and $71.1 million during the fiscal years ended June 30, 2025 and June 30, 2024 , respectively.
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.
In addition, we may receive early payment discounts from certain suppliers. We record early payment discounts received as a 35 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.
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.
Gross margin mix positively impacted gross profit by $26.0 million, largely from favorable supplier program recognition and favorable sales mix partially offset by higher freight costs. Lower sales volume, after considering the associated cost of goods sold, impacted gross profit decline by $21.8 million for the current fiscal year.
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.
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, 2025, the Specialty Technology Solutions and Intelisys & Advisory reporting units' goodwill balances are $159.8 million and $71.0 million, respectively.
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 .
Contractual Obligations At June 30, 2025, we did not have an outstanding balance under our revolving credit facility. We had $133.1 million outstanding under our term loan facility, $7.5 million of which matured in fiscal year 2025. Our revolving credit facility and our term loan facility have a maturity date September 28, 2027 .
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.
(b) Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt. 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.
Management expects capital expenditures for fiscal year 2025 to range from $10.0 million to $15.0 million, primarily for IT investments. Cash used in financing activities totaled $227.8 million for the fiscal year ended June 30, 2024 primarily due to repayments on the revolving line of credit and the repurchase of common stock.
Cash used in financing activities of $227.8 million for the fiscal year ended June 30, 2024 was primarily due to repayments on the revolving line of credit and the repurchase of common stock.
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.
Year ended Cash (used in) provided by: June 30, 2025 June 30, 2024 (in thousands) Operating activities of continuing operations $ 112,349 $ 371,647 Investing activities of continuing operations (62,390) 9,045 Financing activities of continuing operations (110,905) (227,767) Net cash provided by operating activities was $112.3 million for the fiscal year ended June 30, 2025 and $371.6 million for the fiscal years ended June 30, 2024 .
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.
Excluding the impact from foreign exchange fluctuations and the impact of divestitures and acquisitions, adjusted net sales for fiscal year 2025 decreased $212.3 million, or 6.7%, compared to the prior fiscal year. The decrease in net sales and in adjusted net sales is primarily due to a more cautious technology spending environment in the first half of the fiscal year.
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.
Cash used in investing activities for fiscal year 2025 is largely due to cash paid for acquisitions and capital expenditures. Cash provided by investing activities for the fiscal year 2024 represents proceeds from the the sale of our discontinued operations, partially offset by capital expenditures.
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.
Operating expenses The following table summarizes our operating expenses for the periods ended June 30, 2025 and 2024: % of Sales June 30, 2025 2024 $ Change % Change 2025 2024 (in thousands) Selling, general and administrative expenses $ 286,934 $ 277,428 $ 9,506 3.4 % 9.4 % 8.5 % Depreciation expense 10,004 11,219 (1,215) (10.8) % 0.3 % 0.3 % Intangible amortization expense 19,227 15,723 3,504 22.3 % 0.6 % 0.5 % Restructuring and other charges 5,381 4,358 1,023 23.5 % 0.2 % 0.1 % Change in fair value of contingent consideration 1,900 — 1,900 *nm 0.1 % — % Operating expenses $ 323,446 $ 308,728 $ 14,718 4.8 % 10.6 % 9.5 % *nm - not meaningful Selling, general and administr ative expenses (“SG&A”) increased $9.5 million for the fiscal year ended June 30, 2025 compared to the prior year.
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.
Corporate For the fiscal year ended June 30, 2025, Corporate operating loss totaled $8.1 million which represents $5.4 million in restructuring expenses, $1.6 million legal settlement, $0.9 million of acquisition and divestiture costs and $0.2 million in cyberattack restoration charges.
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.
We also exclude the impact of acquisitions and divestitures prior to the 30 Table of Contents Index to Financial Statements first full year of operations from the acquisition or divestiture date in order to show net sales results on an organic basis.
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”).
As of June 30, 2025, the Company had approximately $217.1 million available for repurchases under Board approved authorizations. 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”).
Cash provided by investing activities was $9.0 million for the fiscal year ended June 30, 2024 compared to cash used in investing activities of $8.3 million for the fiscal year ended June 30, 2023.
Throughout fiscal year 2025, inventory turnover ranged from 5.0 to 5.9 times. Cash used in investing activities was $62.4 million for the fiscal year ended June 30, 2025 compared to cash provided of $9.0 million for the fiscal year ended June 30, 2024.
Below 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.
Below we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above: Year ended June 30, 2025 GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and Divestiture costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Legal Settlement Insurance Recovery Non-GAAP measure (in thousands, except per share data) SG&A expenses $ 286,934 $ — $ — $ (926) $ — $ 3,041 $ (177) $ (1,579) $ — $ 287,293 Operating income 85,200 19,227 1,900 926 5,381 (3,041) 177 1,579 — 111,349 Pre-tax income 94,396 19,227 1,900 926 5,381 (3,041) 177 1,579 (5,928) 114,617 Net income 71,548 14,400 1,432 926 4,054 (4,072) 133 1,189 (4,466) 85,144 Diluted EPS $ 3.00 $ 0.60 $ 0.06 $ 0.04 $ 0.17 $ (0.17) $ 0.01 $ 0.05 $ (0.19) $ 3.57 Year ended June 30, 2024 GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and Divestiture costs (a) Restructuring costs Tax recovery Cyberattack restoration costs Gain on sale of business (b) Insurance Recovery Non-GAAP measure (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 (a) Acquisition and divestiture costs for the fiscal years ended June 30, 2025 and June 30, 2024 are generally nondeductible for tax purposes.
Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, decreased $313.5 million to $506.2 million at June 30, 2024 from $819.7 million at June 30, 2023, primarily as a result of lower sales volumes and our multi-quarter working capital improvement plan.
Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, increased $14.6 million to $520.7 million at June 30, 2025 from $506.2 million at June 30, 2024, primarily as a result of an increase in accounts receivable.
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.
Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign exchange forward contracts gains and losses. Foreign exchange gains and losses are generated 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.
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.
During the fiscal year ended June 30, 2024 Corporate incurred a loss of $6.9 million which represents $4.4 million in restructuring expenses, $1.7 million of acquisition and divestiture costs as well as $0.9 million in cyberattack restoration charges. 27 Table of Contents Index to Financial Statements Total Other (Income) Expense The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2025 and 2024: % of Sales June 30, 2025 2024 $ Change % Change 2025 2024 (in thousands) Interest expense $ 8,013 $ 13,031 $ (5,018) (38.5) % 0.3 % 0.4 % Interest income (11,247) (9,381) (1,866) 19.9 % (0.4) % (0.3) % Net foreign exchange losses 755 2,198 (1,443) (65.7) % — % 0.1 % Gain on sale of business — (14,155) 14,155 *nm — % (0.4) % Other, net (6,717) (1,210) (5,507) 455.1 % (0.2) % — % Total other (income) expense $ (9,196) $ (9,517) $ 321 (3.4) % (0.3) % (0.3) % Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs.
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.
For fiscal year 2025, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.79 billion, an increase of 4.5% . The fiscal year 2025 Intelisys net billings resulted in Intelisys net sales of approximately $85.6 million.
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.
Specialty Technology Solutions The Specialty Technology Solutions segment consists of sales to channel sales partners in the United States, Canada and Brazil. During fiscal year 2025, net sales for this segment decreased $224.8 million, or 7.1%, compared to fiscal year 2024.
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.
The increase in the effective tax rate for fiscal 2025 compared to fiscal 2024 is primarily the result of the tax treatment of the intY UK divestiture in the 2024 fiscal year, an increase in non-deductible expenses, and an increase in global intangible low taxed income tax.
Interest expense decreased in fiscal 2024 as compared to 2023 primarily from lower average borrowings on our multi-currency revolving credit facility.
Interest expense decreased in fiscal year 2025 as compared to 2024 primarily from lower average borrowings on our multi-currency revolving credit facility. Interest income for the fiscal year ended June 30, 2025 increased compared to fiscal year ended June 30, 2024 primarily from interest earned on higher cash balances throughout the fiscal year in the United States.
Amortization expense decreased during fiscal year 2024 due to primarily due to the removal of intangible assets related to the intY UK divestiture. Restructuring and other charges of $4.4 million related to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during fiscal year 2024.
Restructuring and other charges of $5.4 million for the fiscal year ended June 30, 2025 increased $1.0 million compared to the prior year, which primarily related to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during fiscal year 2025.
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.
The number of days sales outstanding ("DSO") was 70 at June 30, 2025 unchanged from June 30, 2024. Throughout fiscal year 2025, DSO ranged from 66 to 72. Inventory turnover was 5.9 times during the fourth quarter fiscal year 2025, compared to 5.0 times in the fourth quarter of fiscal year 2024.
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.
Calculated by translating the net sales for the fiscal year ended June 30, 2025 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2024. 32 Table of Contents Index to Financial Statements Operating Income by Segment: Fiscal Year Ended June 30, % of Net Sales June 30, 2025 2024 $ Change % Change 2025 2024 Specialty Technology Solutions: (in thousands) GAAP operating income $ 66,049 $ 66,678 $ (629) (0.9) % 2.2 % 2.1 % Adjustments: Amortization of intangible assets 10,508 8,041 2,467 Change in fair value of contingent consideration (840) — (840) Tax recovery, net (3,041) (2,558) (483) Non-GAAP operating income $ 72,676 $ 72,161 $ 515 0.7 % 2.5 % 2.3 % Intelisys & Advisory: GAAP operating income $ 27,214 $ 30,595 $ (3,381) (11.1) % 27.7 % 33.2 % Adjustments: Amortization of intangible assets 8,719 7,682 1,037 Change in fair value of contingent consideration 2,740 — 2,740 Non-GAAP operating income $ 38,673 $ 38,277 $ 396 1.0 % 39.4 % 41.5 % Corporate: GAAP operating loss $ (8,063) $ (6,949) $ (1,114) Adjustments: Acquisition and divestiture costs 926 1,717 (791) Restructuring costs 5,381 4,358 1,023 Cyberattack restoration costs 177 874 (697) Legal settlement 1,579 — 1,579 Non-GAAP operating income $ — $ — $ — nm* nm* nm* Consolidated: GAAP operating income $ 85,200 $ 90,324 $ (5,124) (5.7) % 2.8 % 2.8 % Adjustments: Amortization of intangible assets 19,227 15,723 3,504 Change in fair value of contingent consideration 1,900 — 1,900 Acquisition and divestiture costs 926 1,717 (791) Restructuring costs 5,381 4,358 1,023 Tax recovery (3,041) (2,558) (483) Cyberattack restoration costs 177 874 (697) Legal settlement 1,579 — 1,579 Non-GAAP operating income $ 111,349 $ 110,438 $ 911 0.8 % 3.7 % 3.4 % 33 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.
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.
Recent Developments Impact of the Macroeconomic Environment, Including Forecasted Growth, Inflation and Tariffs The macroeconomic environment, including the economic impacts of forecasted growth, inflation, tariffs and shifting relations between the U.S. and other countries, continues to create significant uncertainty and may adversely affect our financial condition and results of operations.
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 prior-year period reflected lower net investment in working capital from lower sales volumes and a multi-quarter working capital improvement plan. 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.
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 Income The following table summarizes our operating income for the periods ended June 30, 2025 and 2024: % of Sales June 30, 2025 2024 $ Change % Change 2025 2024 (in thousands) Specialty Technology Solutions $ 66,049 $ 66,678 $ (629) (0.9) % 2.2 % 2.1 % Intelisys & Advisory 27,214 30,595 (3,381) (11.1) % 27.7 % 33.2 % Corporate (8,063) (6,949) (1,114) 16.0 % — % — % Total operating income $ 85,200 $ 90,324 $ (5,124) (5.7) % 2.8 % 2.8 % Specialty Technology Solutions For the Specialty Technology Solutions segment, operating income decreased $0.6 million, and operating margin increased 14 basis points to 2.2% for the fiscal year ended June 30, 2025, compared to the prior fiscal year.
The 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 .
The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2025 and 2024. 2025 2024 $ Change % Change % Change Constant Currency (a) (in thousands) Sales by Segment: Specialty Technology Solutions $ 2,942,717 $ 3,167,549 $ (224,832) (7.1) % (6.7) % Intelisys & Advisory 98,093 92,260 5,833 6.3 % (0.2) % Total net sales $ 3,040,810 $ 3,259,809 $ (218,999) (6.7) % (6.5) % Sales by Geography Category: United States $ 2,800,739 $ 2,921,172 $ (120,433) (4.1) % (5.2) % International 240,071 338,637 (98,566) (29.1) % (18.5) % Total net sales $ 3,040,810 $ 3,259,809 $ (218,999) (6.7) % (6.5) % (a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions and 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, 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.
For our Intelisys business, net sales reflect the net commissions received from suppliers after paying channel sales partner commissions. 25 Table of Contents Index to Financial Statements Gross Profit The following table summarizes our gross profit for the fiscal years ended June 30, 2025 and 2024: % of Sales June 30, 2025 2024 $ Change % Change 2025 2024 (in thousands) Specialty Technology Solutions $ 311,402 $ 307,257 $ 4,145 1.3 % 10.6 % 9.7 % Intelisys & Advisory 97,244 91,795 5,449 5.9 % 99.1 % 99.5 % Total gross profit $ 408,646 $ 399,052 $ 9,594 2.4 % 13.4 % 12.2 % Our gross profit is primarily affected by sales volume and gross margin mix.
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.
Our Strategy Our strategy is to drive sustainable, profitable growth by orchestrating complex, converging technology solutions through a growing ecosystem of channel sales partners leveraging our people, processes and tools. Our goal is to provide exceptional experiences for our channel sales partners, suppliers and employees, and we strive for operational excellence.
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 decrease in cash provided by operating activities for the fiscal year ended June 30, 2025 is primarily due to cash flows related to working capital, which decreased $22.5 million for the fiscal year ended June 30, 2025 versus a significant increase of $299.3 million for the prior year period.
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.
Our technology distribution strategy utilizes multiple sales models to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to channel sales partners that solve end users’ challenges. ScanSource enables channel sales partners to deliver solutions for their end users to address changing buying and consumption patterns.
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 decrease in operating income is primarily due to higher information technology and consulting related costs as well as higher amortization related to recent acquisitions. Intelisys & Advisory For the Intelisys & Advisory segment, operating income decreased $3.4 million with the operating margin decreasing to 27.7% for the fiscal year ended June 30, 2025, compared to the prior fiscal year.
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.
These actions are expected to result in approximately $10.5 million in annualized savings in selling, general and administrative expenses. In January 2025, we executed an additional cost reduction and restructuring plan. These actions resulted in approximately $10.0 million in annualized savings in selling, general and administrative expenses.
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%.
For the fiscal year ended June 30, 2025, the gross profit margin increased 88 basis points over the prior-year to 10.6%. Intelisys & Advisory For the Intelisys & Advisory segment, gross profit dollars increased $5.4 million. Higher sales volume, largely due to the impact of our Resourcive acquisition increased gross profit dollars by $5.8 million .
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.
The increase in SG&A expenses is primarily attributable to increased costs related to acquisitions. 26 Table of Contents Index to Financial Statements Depreciation expense decreased $1.2 million for the fiscal year ended June 30, 2025 compared to the prior fiscal year. The decrease is primarily related to IT assets that became fully depreciated in the current year.
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.
Our solutions may include a combination of offerings from multiple suppliers or give our channel sales partners access to additional services. As a trusted adviser to our channel sales partners, we provide customized solutions through our strong understanding of end-user needs.
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.
Calculated by translating the net sales for the fiscal year ended June 30, 2025 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2024. 31 Table of Contents Index to Financial Statements Net Sales by Geography: Fiscal Year Ended June 30, 2025 2024 $ Change % Change United States and Canada: (in thousands) Net sales, as reported $ 2,800,739 $ 2,921,172 $ (120,433) (4.1) % Less: Acquisitions (30,177) — Net sales, excluding acquisitions $ 2,770,562 $ 2,921,172 $ (150,610) (5.2) % International: Net sales, reported $ 240,071 $ 338,637 $ (98,566) (29.1) % Foreign exchange impact (a) 32,735 — Less: Divestitures — (4,019) Non-GAAP net sales, constant currency $ 272,806 $ 334,618 $ (61,812) (18.5) % Consolidated: Net sales, reported $ 3,040,810 $ 3,259,809 $ (218,999) (6.7) % Foreign exchange impact (a) 32,735 — Less: Acquisitions (30,177) — Less: Divestitures — (4,019) Non-GAAP net sales, constant currency $ 3,043,368 $ 3,255,790 $ (212,422) (6.5) % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.
The share repurchase authorizations do not have any time limits. In fiscal year 2024 , we repurchased 980,539 shares totaling $43.3 million. As of June 30, 2024, the Company had approximately $123.1 million available for repurchases under Board approved authorizations.
Share Repurchase Program In April 2025, our Board approved an additional $200 million share repurchase authorization, which supplements the existing the $100 million repurchase program authorized in May 2024. The share repurchase authorizations do not have any time limits. In fiscal year 2025 , we repurchased 2,483,299 shares totaling $106.5 million.
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.
Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisitions and divestitures: Net Sales by Segment: Fiscal Year Ended June 30, 2025 2024 $ Change % Change Specialty Technology Solutions: (in thousands) Net sales, reported $ 2,942,717 $ 3,167,549 $ (224,832) (7.1) % Foreign exchange impact (a) 32,754 — Less: Acquisitions (24,199) — Less: Divestitures — (4,019) Non-GAAP net sales, constant currency $ 2,951,272 $ 3,163,530 $ (212,258) (6.7) % Intelisys & Advisory: Net sales, reported $ 98,093 92,260 $ 5,833 6.3 % Foreign exchange impact (a) (19) — Less: Acquisitions (5,978) — Non-GAAP net sales, constant currency $ 92,096 $ 92,260 $ (164) (0.2) % Consolidated: Net sales, reported $ 3,040,810 $ 3,259,809 $ (218,999) (6.7) % Foreign exchange impact (a) 32,735 — Less: Acquisitions (30,177) — Less: Divestitures — (4,019) Non-GAAP net sales, constant currency $ 3,043,368 $ 3,255,790 $ (212,422) (6.5) % (a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.
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.
Intelisys & Advisory The Intelisys & Advisory segment consists of sales and services to both channel sales partners (Intelisys) and end users (Advisory) in t he United States. During fiscal year 2025, net sales for this segment increased $5.8 million, or 6.3%, compared to fiscal year 2024. The increase in net sales reflects the addition of an acquisition.
Removed
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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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 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.
Biggest changeA 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 approximate ly a $0.7 million a nd $1.0 million increase or decrease in pre-tax income for the fiscal years ended June 30, 2025 and June 30, 2024 , 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.
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 $1.2 million and $0.1 million increase or decrease in pre-tax income for fiscal years ended June 30, 2025 and June 30, 2024 , respectively.
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
At June 30, 2025 and June 30, 2024 , the fair value of our currency forward contracts were a net asset or payable of less th an $0.1 million. 40 Table of Contents Index to Financial Statements
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.
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, 2025 and June 30, 2024 , we had $136.1 million and $144.1 million, respectively, in variable rate debt.

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