Summary of SCSC (ScanSource) Q4 2026 Earnings Call

1Key Financial Results and Metrics

Q4 Performance: Net sales increased by 17% year-over-year, with gross profits growing by mid-teens. Non-GAAP EPS reached a record $1.46 per share, up 43% from the previous year.

Full Year Results: For FY 2026, net sales rose by 6%, while recurring revenues increased by 10.6%. Consolidated gross profits grew by 7%, with recurring revenues contributing 34% to total gross profits.

Free Cash Flow: Generated $114 million in free cash flow, with a cash conversion rate of 124% of non-GAAP net income.

Balance Sheet: Ended Q4 with $88 million in cash and a net debt leverage ratio near zero.

2Strategic Updates and Business Highlights

Acquisition of MicroAge: Signed a definitive agreement to acquire MicroAge, which is expected to enhance ScanSource's total addressable market (TAM) and service capabilities in high-growth areas like cloud, cybersecurity, and AI.

Growth Segments: Specialty Technology Solutions saw an 18% increase in net sales for Q4, driven by hardware sales growth. The Intelisys and advisory segment reported a remarkable 78% growth in net sales and gross profits.

Converged Communication Business Unit: Launched to help partners transition from on-premises to cloud solutions, aiming to capture recurring revenue opportunities.

3Forward Guidance and Outlook

FY 2027 Guidance: Expects organic revenue growth between 6% to 10%, with adjusted EBITDA projected between $158 million and $165 million, reflecting an adjusted EBITDA margin of 4.6% to 4.65%. Anticipates generating at least $85 million in free cash flow.

Tax Rate: Expected effective income tax rate for FY 2027 is projected to be between 27.5% and 28.5%.

4Bad News, Challenges, or Points of Concern

Brazil Operations: Experienced a disappointing quarter, prompting structural changes and headcount adjustments to maintain profitability despite lower revenue.

Supply Chain Risks: While the company is currently not expecting supply disruptions, there are ongoing macroeconomic concerns that could affect future performance.

Juniper Supply Constraints: Anticipated delays in product availability due to supply chain issues with Juniper, which may impact growth in the first half of FY 2027.

5Notable Q&A Insights

Performance Drivers: Management noted that strong demand and the return of large deals contributed to better-than-expected performance in Q4.

MicroAge Revenue Mix: Details on MicroAge's revenue mix will be provided post-acquisition closure, but it is expected to enhance service offerings significantly.

Channel Conflict Concerns: Management believes the risk of channel conflict from the MicroAge acquisition is low, as they aim to support existing partners and leverage their long-standing relationships.

Intelisys Turnaround: Progress in Intelisys was noted, with a focus on winning market share rather than defending it, leading to improved performance in key technology areas. Overall, ScanSource reported strong financial results and strategic initiatives aimed at long-term growth, despite facing challenges in certain markets and supply chain constraints.