ScanSource Q4: Earnings Fall Short, Specialty Tech Sales Decline, Intelisys Contribution Lifts Margins

ScanSource, Inc. SCSC reported fourth-quarter revenues of $746.1 million, down 21.2% year-on-year. Revenues trailed the street view of $843.1 million.

Adjusted EPS of $0.80 missed the analyst consensus estimate of $0.93. The stock plunged after the disappointing print.

Specialty Technology Solutions’ net sales for the fourth quarter decreased 13.7% year-over-year to $484.7 million due to softer demand.

Modern Communications & Cloud’s net sales for the fourth quarter decreased 32.2% year-over-year to $261.4 million due to lower sales volumes in communications hardware and Cisco products. Intelisys net sales for the fourth quarter increased 6.2% year-over-year.

Gross profit fell 10.4% to $97.3 million. Gross margin improved to 13.04% from 11.47% in the year-ago period, reflecting Intelisys’s higher contribution to the overall revenue mix.

For the fourth quarter, operating income was $21.9 million compared to $27.3 million in the prior year quarter. Adjusted EBITDA for the fourth quarter decreased 15.0% Y/Y to $34.2 million, or 4.58% of net sales.

The company exited the quarter with cash and equivalents worth $185.5 million. It generated $53.5 million in free cash flow.

“Our results for the year reflect a soft demand environment; however, we delivered strong margins and robust cash flow,” said Mike Baur, Chair and CEO of ScanSource. “We are executing well on our capital allocation plan to invest in strategic acquisitions and share repurchases.”

Outlook: ScanSource expects fiscal 2025 net sales growth of $3.10 billion-$3.50 billion versus $3.36 billion estimate. The company projects an adjusted EBITDA of $140 million-$160 million. It expects an adjusted free cash flow of at least $70 million.

Analyst Rating: On August 15, Raymond James analyst Adam Tindle downgraded ScanSource’s rating from Outperform to Market Perform. 

ScanSource stock gained 47% in the last 12 months.

Price Action: SCSC stock traded lower by 3.29% to $47.30 at the last check Tuesday.