ScanSource, Inc. (NASDAQ:SCSC), a leading global provider of technology products and solutions, today announced financial results for the fourth quarter and fiscal year ended June 30, 2016.
| Quarter ended June 30, |
Year ended June 30, |
| 2016 |
2015 |
Change |
2016 |
2015 |
Change |
| (in millions, except per share data) |
(in millions, except per share data) |
| Net sales |
$ |
877.5 |
$ |
856.7 |
2 |
% |
$ |
3,540 |
$ |
3,219 |
10 |
% |
| Operating income |
18.9 |
25.0 |
(24 |
)% |
96.9 |
101.4 |
(4 |
)% |
| Non-GAAP operating income(1) |
18.9 |
28.6 |
(34 |
)% |
108.9 |
114.0 |
(5 |
)% |
| GAAP net income |
12.9 |
16.4 |
(21 |
)% |
63.6 |
65.4 |
(3 |
)% |
| Non-GAAP net income(1) |
13.1 |
19.0 |
(31 |
)% |
72.2 |
75.1 |
(4 |
)% |
| GAAP diluted EPS |
$ |
0.50 |
$ |
0.57 |
(12 |
)% |
$ |
2.38 |
$ |
2.27 |
5 |
% |
| Non-GAAP diluted EPS(1) |
$ |
0.51 |
$ |
0.66 |
(23 |
)% |
$ |
2.71 |
$ |
2.61 |
4 |
% |
| (1) A reconciliation of non-GAAP financial information to GAAP financial information is presented in the Supplementary Information (Unaudited) below. |
“While we had strong profitable growth in the first half of our fiscal year, we faced organic growth and margin challenges in the second half,” said Mike Baur, CEO, ScanSource, Inc. "We had a disappointing finish to fiscal year 2016 with sales and EPS below our expectations due to lower sales volume and lower gross margins. Throughout the year, we executed well on our capital allocation plan to invest in strategic acquisitions and share repurchases. Today, we are pleased to announce the closing of the acquisition of Intelisys, which allows us to enter the high-growth and high-margin telecom and cloud services market. This will provide the ScanSource VAR channel with new opportunities for recurring revenue. Also, the Intelisys sales partner channel will have new opportunities to sell products and solutions from the ScanSource vendor community.”
Quarterly Results Net sales for the fourth quarter increased 2% to $877.5 million. The increase in net sales includes the acquisition of KBZ in September 2015. On a constant currency basis, excluding sales from businesses acquired during the year, net sales decreased 6% year-over-year, principally in our Worldwide Barcode and Security segment. Both operating income and non-GAAP operating income for the fourth quarter totaled $18.9 million, down from the prior year as a result of lower organic sales volume and lower gross profit margins. On a GAAP basis, net income for the fourth quarter totaled $12.9 million, or $0.50 per diluted share, compared with net income of $16.4 million, or $0.57 per diluted share, for the prior year quarter. Non-GAAP net income for the fourth quarter decreased to $13.1 million, or $0.51 per diluted share.
Full-Year Results For fiscal year 2016, net sales increased 10% to $3.5 billion. On a constant currency basis, excluding sales from businesses acquired during the year, net sales were unchanged from the prior year. Operating income totaled $96.9 million, while non-GAAP operating income totaled $108.9 million. On a GAAP basis, net income was $63.6 million, compared with net income of $65.4 million for the prior year. GAAP diluted earnings per share of $2.38 increased 5% over the prior year. Non-GAAP net income totaled $72.2 million, compared with non-GAAP net income of $75.1 million for the prior year. Non-GAAP earnings per share of $2.71 increased 4% over the prior year.
New Share Repurchase Authorization During the quarter ended June 30, 2016, ScanSource repurchased approximately $2 million of common stock, completing its $120 million share repurchase authorization. ScanSource also announced a new $120 million three-year authorization by its Board of Directors to repurchase shares of the Company’s common stock. Repurchases may be made in the open market or through privately negotiated transactions, and ScanSource may enter into Rule 10b5-1 plans to facilitate repurchases. This share repurchase authorization does not obligate ScanSource to purchase any particular amount of common stock, and it may be suspended at any time at the Company’s discretion.
Acquisition of Intelisys On August 8, 2016, ScanSource announced an agreement to acquire Intelisys Communications, Inc., the industry-leading technology services distributor of business telecommunications and cloud services. Founded in 1994 and based in Petaluma, California, Intelisys operates in the United States and has approximately 120 employees, more than 130 supplier partners, and over 2,300 sales partners. Under the agreement, the all-cash transaction includes an initial purchase price of approximately $83.6 million, plus earn-out payments based on a multiple of EBITDA over the next four years, which could range from $100 million to $150 million. The acquisition received regulatory approval on August 25, 2016 and closed on August 29, 2016.
Forecast for Next Quarter For the first quarter of fiscal year 2017, ScanSource expects net sales to range from $875 million to $925 million, diluted earnings per share to range from $0.49 to $0.57 per share, and non-GAAP diluted earnings per share to range from $0.60 to $0.68 per share. These ranges exclude results for the pending Intelisys acquisition. Non-GAAP diluted earnings per share exclude amortization of intangibles, change in fair value of contingent consideration and acquisition costs.
Webcast Details ScanSource will present additional information about its financial results and outlook in a conference call with presentation slides today, August 29, 2016 at 5:00 p.m. (ET). A webcast of the call and accompanying presentation slides will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section). The webcast will be available for replay for 60 days.