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1. Company Snapshot

1.a. Company Description

ScanSource, Inc.distributes technology products and solutions in the United States, Canada, and internationally.It operates through two segments, Specialty Technology Solutions and Modern Communications & Cloud.


The Specialty Technology Solutions segment provides a portfolio of solutions primarily for enterprise mobile computing, data capture, barcode printing, point of sale (POS), payments, networking, electronic physical security, cyber security, and other technologies.This segment offers data capture and POS solutions 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.It also provides electronic physical security products, such as identification, access control, video surveillance, intrusion-related, and wireless and networking infrastructure products.


The Modern Communications & Cloud segment offers a portfolio of solutions primarily for communications technologies and services comprising voice, video conferencing, wireless, data networking, cable, unified communications and collaboration, cloud, and technology services, as well as IP networks and other solutions for various vertical markets, such as education, healthcare, and government.The company serves manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and healthcare, and other industries.ScanSource, Inc.


was incorporated in 1992 and is headquartered in Greenville, South Carolina.

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1.b. Last Insights on SCSC

ScanSource's recent performance is driven by its efforts to enhance operational efficiency, lower debt, and drive growth through acquisitions. The company's Q1 earnings beat estimates, with a quarterly earnings of $0.84 per share, surpassing the consensus estimate of $0.77 per share. Additionally, ScanSource's upgrade to a Strong Buy rating by analysts suggests growing optimism about its earnings prospects. The company's focus on operational efficiency and debt reduction, as well as its acquisition-driven growth strategy, are key drivers of its recent momentum.

1.c. Company Highlights

2. ScanSource's Q1 Earnings: A Strong Bottom Line Amidst Top-Line Pressures

The company's financial performance for the quarter was marked by a decline in net sales, with the Specialty Technology Solutions segment seeing a 5% year-over-year decline and a 9% quarter-over-quarter decline. However, gross profits increased 7% year-over-year and 3% quarter-over-quarter, highlighting the strength of their business model. The actual EPS came out at $1.06, beating estimates of $0.91. Gross profits grew 6% and non-GAAP EPS grew 26% year-over-year.

Publication Date: Nov -24

📋 Highlights
  • Gross Profit Growth:: Gross profits increased 6% YoY, with non-GAAP EPS rising 26% year-over-year.
  • Specialty Tech Sales Decline:: Net sales in the Specialty Technology Solutions segment fell 5% YoY and 9% quarter-over-quarter, though gross profits rose 7% YoY.
  • Intelisys Revenue Momentum:: Intelisys & Advisory segment achieved 4% YoY sales growth, with annualized net billings reaching $2.78 billion.
  • Strong Cash Position:: The company ended Q1 with $125 million in cash, a net debt leverage ratio of ~0, and $21 million in share repurchases.
  • Supplier Rebate Impact:: Supplier rebates contributed 30 basis points to gross profit margins, with Steve Jones confirming sustainability of program shifts.

Segment Performance

The Intelisys & Advisory segment saw net sales increase 4% year-over-year, in line with expectations. Annualized net billings increased to approximately $2.78 billion, and the company believes it maintained market share. As Mike Baur, the Chair and CEO, mentioned, "We are investing to accelerate new order growth" in this segment, with a focus on solutions engineering teams with expertise in advanced technologies.

Gross Margin Expansion

The company's gross margin expansion was driven by a mix of factors, including supplier rebates and changes in product mix. According to Stephen Jones, the CFO, supplier rebates contributed around 30 basis points to the consolidated gross profit margin. Guy Drummond Hardwick's analysis suggests that the remaining 100 basis points came from mix, indicating a positive shift in the company's product sales.

Guidance and Outlook

The company reaffirmed its FY '26 full year outlook, which includes net sales growth of $3.1 billion to $3.3 billion, adjusted EBITDA of $150 million to $160 million, and at least $80 million in free cash flow. Mike Baur mentioned that Q1 was "fairly close to what we thought," giving them confidence to reaffirm their guidance. Analysts estimate next year's revenue growth at 3.8%.

Valuation Metrics

With a P/E Ratio of 12.9, P/B Ratio of 1.02, and EV/EBITDA of 6.7, the company's valuation appears reasonable. The Free Cash Flow Yield of 12.0% is also attractive. The ROIC of 5.79% and ROE of 7.88% indicate a decent return on capital, although there is room for improvement. The Net Debt / EBITDA ratio of 0.16 is low, indicating a healthy balance sheet.

3. NewsRoom

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Scansource to Present at the Raymond James TMT and Consumer Conference

Dec -04

Source: businesswire.com

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Does ScanSource (SCSC) Have the Potential to Rally 26.58% as Wall Street Analysts Expect?

Dec -03

Source: zacks.com

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Looking for a Growth Stock? 3 Reasons Why ScanSource (SCSC) is a Solid Choice

Nov -26

Source: zacks.com

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SCSC or SIEGY: Which Is the Better Value Stock Right Now?

Nov -26

Source: zacks.com

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Envestnet Asset Management Inc. Has $592,000 Stake in ScanSource, Inc. $SCSC

Nov -25

Source: defenseworld.net

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Down 12% in 4 Weeks, Here's Why You Should You Buy the Dip in ScanSource (SCSC)

Nov -21

Source: zacks.com

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3 Industrial Stocks Poised to Benefit as Treasury Yields Hold Steady

Nov -20

Source: zacks.com

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Tap These 5 Bargain Stocks With Enticing EV-to-EBITDA Ratios

Nov -18

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.33%)

6. Segments

Specialty Technology Solutions

Expected Growth: 8.97%

ScanSource's Specialty Technology Solutions segment growth of 8.97% is driven by increasing demand for cloud-based solutions, cybersecurity, and data analytics. Additionally, the company's strategic acquisitions and partnerships have expanded its product offerings and geographic reach, contributing to the segment's growth.

Modern Communications & Cloud

Expected Growth: 9.9%

ScanSource's Modern Communications & Cloud segment growth of 9.9% is driven by increasing demand for cloud-based unified communication solutions, growing adoption of Microsoft Teams and Zoom, and rising need for secure remote work infrastructure. Additionally, the company's strategic partnerships and expanded product offerings in cloud and cybersecurity contribute to the segment's growth.

7. Detailed Products

Barcode Scanners

ScanSource offers a wide range of barcode scanners from leading manufacturers, designed to improve inventory management, track assets, and enhance supply chain efficiency.

Point of Sale (POS) Systems

ScanSource provides POS systems that enable businesses to process transactions, manage inventory, and analyze sales data, all in one integrated solution.

Mobile Computers

ScanSource offers a range of mobile computers designed for use in warehouses, retail stores, and other environments, enabling workers to scan, track, and manage inventory on-the-go.

Printers and Printing Supplies

ScanSource provides a wide range of printers and printing supplies, including thermal printers, label printers, and barcode printers, designed for use in various industries.

Kiosks and Self-Service Solutions

ScanSource offers kiosks and self-service solutions that enable customers to interact with businesses in a convenient and efficient manner.

Security and Surveillance Solutions

ScanSource provides security and surveillance solutions, including IP cameras, access control systems, and video management software, designed to enhance safety and security.

Communication and Collaboration Solutions

ScanSource offers communication and collaboration solutions, including video conferencing systems, audio conferencing systems, and unified communication platforms.

8. ScanSource, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for ScanSource, Inc. is medium due to the availability of alternative products and services in the market.

Bargaining Power Of Customers

The bargaining power of customers for ScanSource, Inc. is high due to the concentration of large customers and the availability of alternative suppliers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for ScanSource, Inc. is low due to the company's large scale of operations and its ability to negotiate better prices.

Threat Of New Entrants

The threat of new entrants for ScanSource, Inc. is low due to the high barriers to entry in the industry, including high capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for ScanSource, Inc. is high due to the presence of several established competitors in the market, leading to a highly competitive environment.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 26.97%
Debt Cost 8.19%
Equity Weight 73.03%
Equity Cost 11.47%
WACC 10.58%
Leverage 36.92%

11. Quality Control: ScanSource, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
LSI Industries

A-Score: 5.7/10

Value: 3.9

Growth: 6.3

Quality: 6.0

Yield: 3.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Avnet

A-Score: 5.6/10

Value: 6.9

Growth: 5.2

Quality: 3.2

Yield: 6.0

Momentum: 4.0

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Climb Global Solutions

A-Score: 5.4/10

Value: 3.9

Growth: 8.2

Quality: 6.1

Yield: 2.0

Momentum: 8.0

Volatility: 4.0

1-Year Total Return ->

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PC Connection

A-Score: 5.1/10

Value: 5.5

Growth: 5.8

Quality: 5.9

Yield: 2.0

Momentum: 2.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
ScanSource

A-Score: 4.6/10

Value: 7.3

Growth: 4.6

Quality: 5.6

Yield: 0.0

Momentum: 4.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Snap One

A-Score: 3.9/10

Value: 6.9

Growth: 6.7

Quality: 2.9

Yield: 0.0

Momentum: 5.0

Volatility: 1.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

40.95$

Current Price

40.95$

Potential

-0.00%

Expected Cash-Flows