ScanSource Inc (SCSC) Reports Decline in Q1 Earnings Amid Strong Cash Flow Performance
Net sales decreased by 7.2% year-over-year to $876.3 million
Gross profit margin improved slightly to 12.15% from 12.02%
Operating cash flow showed a significant positive shift to $93.5 million
GAAP net income and diluted EPS declined by 35.8% and 35.1%, respectively
On November 9, 2023, ScanSource Inc (NASDAQ:SCSC), a leading hybrid distributor connecting devices to the cloud, released its earnings report for the first quarter ended September 30, 2023. Despite a challenging revenue environment, the company highlighted a robust cash flow and growth in its Intelisys segment as key achievements in the quarter.
Financial Performance Overview
ScanSource Inc (NASDAQ:SCSC) experienced a decrease in net sales by 7.2% to $876.3 million compared to the same quarter in the previous year. The company attributed the decline primarily to soft demand in barcode, mobility, and point of sale, which was partially offset by growth in networking and security. Gross profit followed suit, decreasing by 6.1% to $106.5 million, although the gross profit margin saw a slight improvement.
Operating income saw a significant decrease of 31.0% to $24.1 million, and GAAP net income fell by 35.8% to $15.4 million. Correspondingly, GAAP diluted earnings per share (EPS) dropped from $0.94 to $0.61. Despite these declines, ScanSource reported a substantial increase in operating cash flow to $93.5 million and free cash flow to $91.2 million, a notable improvement from the negative cash flows reported in the prior year.
Balance Sheet and Income Statement Highlights
The balance sheet of ScanSource Inc (NASDAQ:SCSC) showed a total asset value of $1.9 billion as of September 30, 2023, with current assets comprising $1.5 billion. The company's liabilities stood at $983.3 million, with shareholders' equity accounting for $915.3 million.
The condensed consolidated income statement revealed a cost of goods sold of $769.8 million, leading to a gross profit of $106.5 million. Selling, general, and administrative expenses amounted to $75.4 million, and the company incurred interest expenses of $5.6 million, reflecting higher interest rates and borrowings compared to the previous year.
Management Commentary
Mike Baur, Chairman and CEO of ScanSource Inc, commented on the results, stating,
Strong cash flow and Intelisys growth are the hallmarks of our first quarter. Our business fundamentals remain strong in a softer revenue environment."
This indicates that despite the revenue challenges, the company's underlying business remains resilient.
Outlook for Fiscal Year 2024
ScanSource Inc (NASDAQ:SCSC) has updated its full fiscal year outlook, now expecting net sales of at least $3.8 billion, adjusted EBITDA of at least $170 million, and free cash flow of at least $200 million. These figures represent adjustments from previously provided guidance, with the company showing confidence in its cash flow generation capabilities.
Investor Relations and Webcast Details
ScanSource will provide additional information about its financial results and business during a conference call. Interested parties can access the webcast on the company's website, with a replay available for 60 days.
For value investors and potential GuruFocus.com members, ScanSource Inc's first quarter results present a mixed picture with strong cash flow performance amidst a challenging revenue landscape. The company's ability to generate significant operating and free cash flow in a softer revenue environment may be of particular interest to those focused on financial stability and cash generation efficiency.
For more detailed information and analysis, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from ScanSource Inc for further details.
This article first appeared on GuruFocus.
