ScanSource Inc.
08/21/2025 | Press release | Distributed by Public on 08/21/2025 06:19
Annual Report for Fiscal Year Ending June 30, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Overview
ScanSource is a leading technology distributor connecting devices to the cloud and accelerating growth for channel sales partners across hardware, SaaS, connectivity and cloud. We provide technology solutions and services from approximately 500 leading suppliers of mobility and barcode, POS, payment terminals, physical security, networking, communications, connectivity and cloud services to our approximately 25,000 channel sales partners located primarily in the United States, Canada and Brazil.
We operate our business under a management structure that enhances our technology distribution growth strategy. Our segments operate primarily in the United States, Canada and Brazil:
•Specialty Technology Solutions
•Intelisys & Advisory
We sell hardware, SaaS, connectivity and cloud solutions and services to channel sales partners that are designed to solve end users' challenges. We operate distribution facilities that support our United States and Canada business in Mississippi, California and Kentucky. Brazil distribution facilities are located in the Brazilian states of Paraná, Espirito Santo and Santa Catarina. We provide some of our digital products, which include SaaS and subscriptions, through our digital tools and platforms.
Our key suppliers include AT&T, Avaya, Axis, Cisco, Comcast Business, Dell, Elo, Extreme, Five9, Fortinet, Hanwha, Honeywell, HP Poly, HPE/Aruba, Ingenico, Lumen, Microsoft, NiCE, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.
Recent Developments
Impact of the Macroeconomic Environment, Including Forecasted Growth, Inflation and Tariffs
The macroeconomic environment, including the economic impacts of forecasted growth, inflation, tariffs and shifting relations between the U.S. and other countries, continues to create significant uncertainty and may adversely affect our financial condition and results of operations. In 2025, the U.S. announced a variety of additional tariffs on goods from multiple nations and trading blocks and has been targeted with reciprocal tariffs and other retaliatory actions in response. Although the U.S. has announced pauses on certain tariffs, negotiations and the state of international trade policy and relations continue to evolve. We are mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand and we are actively monitoring changes to the global macroeconomic environment and assessing the potential impacts these challenges may have on our financial condition, results of operations and liquidity. We expect to pass price increases from our suppliers resulting from tariffs to our channel sales partners. We are also mitigating risks through strategic planning and maintaining financial flexibility, but we cannot predict the outcome of our mitigation strategies or the ultimate impact of tariffs and the global macroeconomic environment on our financial condition or results of operations.
On July 4, 2025, the One Big Beautiful Bill Act ("the Act") was signed into law. The Act permanently extends key provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation, and introduces changes to the international tax framework. We are currently assessing the impact of the Act on our future effective tax rate, tax liabilities, and cash taxes.
Business Acquisitions
On August 8, 2024, we completed the acquisition of substantially all of the assets of Secure Path Networks, LLC doing business as Resourcive ("Resourcive"), a leading technology advisor. Resourcive delivers strategic IT sourcing solutions to mid-market and enterprise businesses.
On August 15, 2024, we completed the acquisition of substantially all of the assets of Advantix Solutions Group, Inc. ("Advantix"), a managed connectivity experience provider specializing in wireless enablement solutions.
Index to Financial Statements
Cost Reduction and Restructuring Program
In September 2024, as part of a strategic review of organizational structure and operations, the Company executed a cost reduction and restructuring program to align our cost structure with demand expectations in our business. These actions are expected to result in approximately $10.5 million in annualized savings in selling, general and administrative expenses. In January 2025, we executed an additional cost reduction and restructuring plan.These actions resulted in approximately $10.0 million in annualized savings in selling, general and administrative expenses.
Our Strategy
Our strategy is to drive sustainable, profitable growth by orchestrating complex, converging technology solutions through a growing ecosystem of channel sales partners leveraging our people, processes and tools. Our goal is to provide exceptional experiences for our channel sales partners, suppliers and employees, and we strive for operational excellence. Our technology distribution strategy utilizes multiple sales models to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to channel sales partners that solve end users' challenges. ScanSource enables channel sales partners to deliver solutions for their end users to address changing buying and consumption patterns. Our solutions may include a combination of offerings from multiple suppliers or give our channel sales partners access to additional services. As a trusted adviser to our channel sales partners, we provide customized solutions through our strong understanding of end-user needs.
Results of Operations from Continuing Operations
The following table sets forth for the periods indicated certain income and expense items as a percentage of net sales. Totals may not sum due to rounding.
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Statement of income data: | |||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
| Cost of goods sold | 86.6 | 87.8 | 88.1 | ||||||||||||||
| Gross profit | 13.4 | 12.2 | 11.9 | ||||||||||||||
| Selling, general and administrative expenses | 9.4 | 8.5 | 7.5 | ||||||||||||||
| Depreciation expense | 0.3 | 0.3 | 0.3 | ||||||||||||||
| Intangible amortization expense | 0.6 | 0.5 | 0.4 | ||||||||||||||
| Restructuring and other charges | 0.2 | 0.1 | 0.0 | ||||||||||||||
| Change in fair value of contingent consideration | 0.1 | 0.0 | 0.0 | ||||||||||||||
| Operating income | 2.8 | 2.8 | 3.6 | ||||||||||||||
| Interest expense | 0.3 | 0.4 | 0.5 | ||||||||||||||
| Interest income | (0.4) | (0.3) | (0.2) | ||||||||||||||
| Gain on sale of business | 0.0 | (0.4) | 0.0 | ||||||||||||||
| Other (income) expense, net | (0.2) | 0.0 | 0.0 | ||||||||||||||
| Income from continuing operations before income taxes | 3.1 | 3.1 | 3.2 | ||||||||||||||
| Provision for income taxes | 0.8 | 0.7 | 0.9 | ||||||||||||||
| Net income from continuing operations | 2.4 | 2.4 | 2.3 | ||||||||||||||
| Net income from discontinued operations | 0.0 | 0.0 | 0.0 | ||||||||||||||
| Net income | 2.4 | % | 2.4 | % | 2.4 | % | |||||||||||
Comparison of Fiscal Years Ended June 30, 2025 and 2024
Below is a discussion of fiscal years ended June 30, 2025 and 2024. Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our form 10-K for the fiscal year ended June 30, 2024 for a discussion of fiscal year ended June 30, 2023.
Index to Financial Statements
Net Sales
We have two reportable segments, which are based on sales model. The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2025 and 2024.
| 2025 | 2024 | $ Change | % Change |
% Change Constant Currency (a)
|
|||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Sales by Segment: | |||||||||||||||||||||||||||||
| Specialty Technology Solutions | $ | 2,942,717 | $ | 3,167,549 | $ | (224,832) | (7.1) | % | (6.7) | % | |||||||||||||||||||
| Intelisys & Advisory | 98,093 | 92,260 | 5,833 | 6.3 | % | (0.2) | % | ||||||||||||||||||||||
| Total net sales | $ | 3,040,810 | $ | 3,259,809 | $ | (218,999) | (6.7) | % | (6.5) | % | |||||||||||||||||||
| Sales by Geography Category: | |||||||||||||||||||||||||||||
| United States | $ | 2,800,739 | $ | 2,921,172 | $ | (120,433) | (4.1) | % | (5.2) | % | |||||||||||||||||||
| International | 240,071 | 338,637 | (98,566) | (29.1) | % | (18.5) | % | ||||||||||||||||||||||
| Total net sales | $ | 3,040,810 | $ | 3,259,809 | $ | (218,999) | (6.7) | % | (6.5) | % | |||||||||||||||||||
|
(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions and divestitures is presented at the end of Results of Operations, under Non-GAAP Financial Information.
|
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Specialty Technology Solutions
The Specialty Technology Solutions segment consists of sales to channel sales partners in the United States, Canada and Brazil. During fiscal year 2025, net sales for this segment decreased $224.8 million, or 7.1%, compared to fiscal year 2024. Excluding the impact from foreign exchange fluctuations and the impact of divestitures and acquisitions, adjusted net sales for fiscal year 2025 decreased $212.3 million, or 6.7%, compared to the prior fiscal year. The decrease in net sales and in adjusted net sales is primarily due to a more cautious technology spending environment in the first half of the fiscal year.
Intelisys & Advisory
The Intelisys & Advisory segment consists of sales and services to both channel sales partners (Intelisys) and end users (Advisory) in the United States. During fiscal year 2025, net sales for this segment increased $5.8 million, or 6.3%, compared to fiscal year 2024. The increase in net sales reflects the addition of an acquisition. Excluding the impact from foreign exchange rate fluctuations and the impact from acquisitions, adjusted net sales decreased $0.2 million, or 0.2%, compared to the prior year primarily due to a more cautious technology spending environment.
For fiscal year 2025, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.79 billion, an increase of 4.5%. The fiscal year 2025 Intelisys net billings resulted in Intelisys net sales of approximately $85.6 million. For our Intelisys business, net sales reflect the net commissions received from suppliers after paying channel sales partner commissions.
Index to Financial Statements
Gross Profit
The following table summarizes our gross profit for the fiscal years ended June 30, 2025 and 2024:
|
% of Sales June 30, |
|||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | $ | 311,402 | $ | 307,257 | $ | 4,145 | 1.3 | % | 10.6 | % | 9.7 | % | |||||||||||||||||||||||
| Intelisys & Advisory | 97,244 | 91,795 | 5,449 | 5.9 | % | 99.1 | % | 99.5 | % | ||||||||||||||||||||||||||
| Total gross profit | $ | 408,646 | $ | 399,052 | $ | 9,594 | 2.4 | % | 13.4 | % | 12.2 | % | |||||||||||||||||||||||
Our gross profit is primarily affected by sales volume and gross margin mix. Gross margin mix is impacted by multiple factors, which include sales mix (proportion of sales of higher margin products or services relative to total sales), supplier program recognition (consisting of volume rebates, inventory price changes and purchase discounts) and freight costs. Increases in supplier program recognition decrease cost of goods sold, thereby increasing gross profit. Net sales derived from our Intelisys business contribute 100% to our gross profit dollars and margin as they have no associated cost of goods sold.
Specialty Technology Solutions
For the Specialty Technology Solutions segment, gross profit dollars increased $4.1 million. Gross margin mix positively impacted gross profit by $26.0 million, largely from favorable supplier program recognition and favorable sales mix partially offset by higher freight costs. Lower sales volume, after considering the associated cost of goods sold, impacted gross profit decline by $21.8 million for the current fiscal year. For the fiscal year ended June 30, 2025, the gross profit margin increased 88 basis points over the prior-year to 10.6%.
Intelisys & Advisory
For the Intelisys & Advisory segment, gross profit dollars increased $5.4 million. Higher sales volume, largely due to the impact of our Resourcive acquisition increased gross profit dollars by $5.8 million. Gross profit margin decreased 36 basis points over the prior fiscal year to 99.1%, reflecting the addition of professional services to the sales mix.
Operating expenses
The following table summarizes our operating expenses for the periods ended June 30, 2025 and 2024:
|
% of Sales June 30, |
|||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 286,934 | $ | 277,428 | $ | 9,506 | 3.4 | % | 9.4 | % | 8.5 | % | |||||||||||||||||||||||
| Depreciation expense | 10,004 | 11,219 | (1,215) | (10.8) | % | 0.3 | % | 0.3 | % | ||||||||||||||||||||||||||
| Intangible amortization expense | 19,227 | 15,723 | 3,504 | 22.3 | % | 0.6 | % | 0.5 | % | ||||||||||||||||||||||||||
| Restructuring and other charges | 5,381 | 4,358 | 1,023 | 23.5 | % | 0.2 | % | 0.1 | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | 1,900 | - | 1,900 | *nm | 0.1 | % | - | % | |||||||||||||||||||||||||||
| Operating expenses | $ | 323,446 | $ | 308,728 | $ | 14,718 | 4.8 | % | 10.6 | % | 9.5 | % | |||||||||||||||||||||||
*nm - not meaningful
Selling, general and administrative expenses ("SG&A") increased $9.5 million for the fiscal year ended June 30, 2025 compared to the prior year. The increase in SG&A expenses is primarily attributable to increased costs related to acquisitions.
Index to Financial Statements
Depreciation expense decreased $1.2 million for the fiscal year ended June 30, 2025 compared to the prior fiscal year. The decrease is primarily related to IT assets that became fully depreciated in the current year.
Intangible amortization expense increased $3.5 million for the fiscal year ended June 30, 2025 compared to the prior fiscal year. The increase is a result of intangible assets acquired in our acquisitions of Advantix and Resourcive.
Restructuring and other charges of $5.4 million for the fiscal year ended June 30, 2025 increased $1.0 million compared to the prior year, which primarily related to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during fiscal year 2025.
We present changes in fair value of the contingent consideration owed to the former shareholders of businesses that we acquire as a separate line item in operating expenses. We recorded a fair value adjustment expense of $1.9 million for the fiscal year ended June 30, 2025. The expense from changes in fair value of contingent consideration is largely due to the recurring amortization of the unrecognized fair value discount.
Operating Income
The following table summarizes our operating income for the periods ended June 30, 2025 and 2024:
|
% of Sales June 30, |
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| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Specialty Technology Solutions | $ | 66,049 | $ | 66,678 | $ | (629) | (0.9) | % | 2.2 | % | 2.1 | % | |||||||||||||||||||||||
| Intelisys & Advisory | 27,214 | 30,595 | (3,381) | (11.1) | % | 27.7 | % | 33.2 | % | ||||||||||||||||||||||||||
| Corporate | (8,063) | (6,949) | (1,114) | 16.0 | % | - | % | - | % | ||||||||||||||||||||||||||
| Total operating income | $ | 85,200 | $ | 90,324 | $ | (5,124) | (5.7) | % | 2.8 | % | 2.8 | % | |||||||||||||||||||||||
Specialty Technology Solutions
For the Specialty Technology Solutionssegment, operating income decreased $0.6 million, and operating margin increased 14 basis points to 2.2% for the fiscal year ended June 30, 2025, compared to the prior fiscal year. The decrease in operating income is primarily due to higher information technology and consulting related costs as well as higher amortization related to recent acquisitions.
Intelisys & Advisory
For the Intelisys & Advisory segment, operating income decreased $3.4 million with the operating margin decreasing to 27.7% for the fiscal year ended June 30, 2025, compared to the prior fiscal year. The decrease in operating income is largely due to higher costs, including change in fair value expense related to a recent acquisition.
Corporate
For the fiscal year ended June 30, 2025, Corporate operating loss totaled $8.1 million which represents $5.4 million in restructuring expenses, $1.6 million legal settlement, $0.9 million of acquisition and divestiture costs and $0.2 million in cyberattack restoration charges. During the fiscal year ended June 30, 2024 Corporate incurred a loss of $6.9 million which represents $4.4 million in restructuring expenses, $1.7 million of acquisition and divestiture costs as well as $0.9 million in cyberattack restoration charges.
Index to Financial Statements
Total Other (Income) Expense
The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2025 and 2024:
|
% of Sales June 30, |
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| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Interest expense | $ | 8,013 | $ | 13,031 | $ | (5,018) | (38.5) | % | 0.3 | % | 0.4 | % | |||||||||||||||||||||||
| Interest income | (11,247) | (9,381) | (1,866) | 19.9 | % | (0.4) | % | (0.3) | % | ||||||||||||||||||||||||||
| Net foreign exchange losses | 755 | 2,198 | (1,443) | (65.7) | % | - | % | 0.1 | % | ||||||||||||||||||||||||||
| Gain on sale of business | - | (14,155) | 14,155 | *nm | - | % | (0.4) | % | |||||||||||||||||||||||||||
| Other, net | (6,717) | (1,210) | (5,507) | 455.1 | % | (0.2) | % | - | % | ||||||||||||||||||||||||||
| Total other (income) expense | $ | (9,196) | $ | (9,517) | $ | 321 | (3.4) | % | (0.3) | % | (0.3) | % | |||||||||||||||||||||||
Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs. Interest expense decreased in fiscal year 2025 as compared to 2024 primarily from lower average borrowings on our multi-currency revolving credit facility.
Interest income for the fiscal year ended June 30, 2025 increased compared to fiscal year ended June 30, 2024 primarily from interest earned on higher cash balances throughout the fiscal year in the United States.
Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign exchange forward contracts gains and losses. Foreign exchange gains and losses are generated primarily as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real and the Canadian dollar versus the U.S. dollar. We partially offset foreign currency exposure with the use of foreign exchange contracts to hedge against these exposures. The costs associated with foreign exchange contracts are included in the net foreign exchange losses.
For the fiscal year ended June 30, 2024 we recognized a $14.2 milliongain on sale of our UK-based intY business.
For the fiscal year ended June 30, 2025 we recognized a gain of $6.7 million as a result of an insurance recovery in connection with the cybersecurity attack in the fourth quarter of fiscal 2023.
Provision for Income Taxes
Income tax expense for continuing operations was $22.8 million and $22.8 million for the fiscal years ended June 30, 2025 and 2024, respectively, reflecting effective tax rates of 24.2% and 22.8%, respectively. The increase in the effective tax rate for fiscal 2025 compared to fiscal 2024 is primarily the result of the tax treatment of the intY UK divestiture in the 2024 fiscal year, an increase in non-deductible expenses, and an increase in global intangible low taxed income tax.
In December of 2021, the Organization for Economic Co-operation and Development ("OECD") released Pillar Two Model Rules defining the global minimum tax rules, which contemplate a global minimum tax rate of 15%. Several member countries have enacted Pillar Two provisions that are effective in fiscal year 2025. The Company believes it qualifies for safe harbor exemptions in many of these jurisdictions and any remaining impact to future effective tax rates and corporate tax liability will be minimal.
We expect the fiscal year 2026 effective tax rate from continuing operations to be approximately 27.2% to 28.2%. See Note 13 - Income Taxesin the Notes to Consolidated Financial Statements for further discussion including an effective tax rate reconciliation.
Index to Financial Statements
Non-GAAP Financial Information
Evaluating Financial Condition and Operating Performance
In addition to disclosing results that are determined in accordance with United States generally accepted accounting principles ("US GAAP" or "GAAP"), we also disclose certain non-GAAP financial measures. These measures include non-GAAP operating income; non-GAAP pre-tax income; non-GAAP net income; non-GAAP EPS; adjusted earnings before interest expense, income taxes, depreciation, and amortization ("adjusted EBITDA"); adjusted return on invested capital ("adjusted ROIC"); and constant currency. Constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates between reporting periods and certain impacts related to acquisitions and divestitures. We use non-GAAP financial measures to better understand and evaluate performance, including comparisons from period to period.
These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that we report may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with US GAAP.
Adjusted Return on Invested Capital
Adjusted ROIC assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance during the year.
Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent consideration, non-cash shared-based compensation expense and other non-GAAP adjustments. Since adjusted EBITDA excludes some non-cash costs of investing in our business and people, we believe that adjusted EBITDA shows the profitability from our business operations more clearly.
We calculate adjusted ROIC as adjusted EBITDA, divided by invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. The following table summarizes annualized adjusted ROIC for the fiscal years ended June 30, 2025 and 2024.
| 2025 | 2024 | ||||||||||
| Adjusted return on invested capital ratio | 13.6 | % | 12.4 | % | |||||||
Index to Financial Statements
The components of our adjusted ROIC calculation and reconciliation to our financial statements are shown, as follows:
| Fiscal Year Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Reconciliation of net income to adjusted EBITDA: | |||||||||||
| Net income from continuing operations (GAAP) | $ | 71,548 | $ | 77,060 | |||||||
| Plus: Interest expense | 8,013 | 13,031 | |||||||||
| Plus: Income taxes | 22,848 | 22,781 | |||||||||
| Plus: Depreciation and amortization | 30,195 | 28,009 | |||||||||
| EBITDA (non-GAAP) | 132,604 | 140,881 | |||||||||
| Plus: Change in fair value of contingent consideration | 1,900 | - | |||||||||
| Plus: Share-based compensation | 11,062 | 9,537 | |||||||||
|
Plus: Acquisition and divestiture costs(a)
|
926 | 1,717 | |||||||||
| Plus: Cyberattack restoration costs | 177 | 874 | |||||||||
| Plus: Restructuring costs | 5,381 | 4,358 | |||||||||
| Plus: Tax recovery | (3,041) | (2,558) | |||||||||
| Plus: Legal settlement | 1,579 | - | |||||||||
| Plus: Insurance recovery, net of payments | (5,928) | - | |||||||||
| Plus: Gain on sale of business | - | (14,155) | |||||||||
| Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) | $ | 144,660 | $ | 140,654 | |||||||
| Fiscal Year Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Invested capital calculations: | |||||||||||
| Equity - beginning of the year | $ | 924,255 | $ | 905,298 | |||||||
| Equity - end of the year | 906,409 | 924,255 | |||||||||
| Plus: Change in fair value of contingent consideration, net | 1,432 | - | |||||||||
| Plus: Share-based compensation, net | 8,310 | 7,120 | |||||||||
|
Plus: Acquisition and divestiture costs(a)
|
926 | 1,717 | |||||||||
| Plus: Cyberattack restoration costs, net | 133 | 655 | |||||||||
| Plus: Restructuring, net | 4,054 | 3,262 | |||||||||
| Plus: Tax recovery, net | (4,072) | (2,566) | |||||||||
| Plus: Legal settlement, net | 1,189 | - | |||||||||
| Plus: Insurance recovery, net | (4,466) | - | |||||||||
| Plus: Gain on sale of business | - | (14,155) | |||||||||
| Average equity | 919,085 | 912,793 | |||||||||
|
Average funded debt(b)
|
141,173 | 220,528 | |||||||||
| Invested capital (denominator for adjusted ROIC) (non-GAAP) | $ | 1,060,258 | $ | 1,133,321 | |||||||
(a) Acquisition and divestiture costs are generally non-deductible for tax purposes.
(b) Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.
Net Sales in Constant Currency, Excluding Acquisitions and Divestitures
We make references to "constant currency," a non-GAAP performance measure that excludes the foreign exchange rate impact from fluctuations in the average foreign exchange rates between reporting periods. Constant currency is calculated by translating current period results from currencies other than the U.S. dollar into U.S. dollars using the comparable average foreign exchange rates from the prior fiscal year period. We also exclude the impact of acquisitions and divestitures prior to the
Index to Financial Statements
first full year of operations from the acquisition or divestiture date in order to show net sales results on an organic basis. This information is provided to analyze underlying trends without the translation impact of fluctuations in foreign currency rates and the impact of acquisitions or divestitures. Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisitions and divestitures:
| Net Sales by Segment: | |||||||||||||||||||||||
| Fiscal Year Ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| Specialty Technology Solutions: | (in thousands) | ||||||||||||||||||||||
| Net sales, reported | $ | 2,942,717 | $ | 3,167,549 | $ | (224,832) | (7.1) | % | |||||||||||||||
|
Foreign exchange impact(a)
|
32,754 | - | |||||||||||||||||||||
| Less: Acquisitions | (24,199) | - | |||||||||||||||||||||
| Less: Divestitures | - | (4,019) | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 2,951,272 | $ | 3,163,530 | $ | (212,258) | (6.7) | % | |||||||||||||||
| Intelisys & Advisory: | |||||||||||||||||||||||
| Net sales, reported | $ | 98,093 | 92,260 | $ | 5,833 | 6.3 | % | ||||||||||||||||
|
Foreign exchange impact(a)
|
(19) | - | |||||||||||||||||||||
| Less: Acquisitions | (5,978) | - | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 92,096 | $ | 92,260 | $ | (164) | (0.2) | % | |||||||||||||||
| Consolidated: | |||||||||||||||||||||||
| Net sales, reported | $ | 3,040,810 | $ | 3,259,809 | $ | (218,999) | (6.7) | % | |||||||||||||||
|
Foreign exchange impact(a)
|
32,735 | - | |||||||||||||||||||||
| Less: Acquisitions | (30,177) | - | |||||||||||||||||||||
| Less: Divestitures | - | (4,019) | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 3,043,368 | $ | 3,255,790 | $ | (212,422) | (6.5) | % | |||||||||||||||
|
(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the fiscal year ended June 30, 2025 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2024.
|
|||||||||||||||||||||||
Index to Financial Statements
| Net Sales by Geography: | |||||||||||||||||||||||
| Fiscal Year Ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| United States and Canada: | (in thousands) | ||||||||||||||||||||||
| Net sales, as reported | $ | 2,800,739 | $ | 2,921,172 | $ | (120,433) | (4.1) | % | |||||||||||||||
| Less: Acquisitions | (30,177) | - | |||||||||||||||||||||
| Net sales, excluding acquisitions | $ | 2,770,562 | $ | 2,921,172 | $ | (150,610) | (5.2) | % | |||||||||||||||
| International: | |||||||||||||||||||||||
| Net sales, reported | $ | 240,071 | $ | 338,637 | $ | (98,566) | (29.1) | % | |||||||||||||||
|
Foreign exchange impact(a)
|
32,735 | - | |||||||||||||||||||||
| Less: Divestitures | - | (4,019) | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 272,806 | $ | 334,618 | $ | (61,812) | (18.5) | % | |||||||||||||||
| Consolidated: | |||||||||||||||||||||||
| Net sales, reported | $ | 3,040,810 | $ | 3,259,809 | $ | (218,999) | (6.7) | % | |||||||||||||||
|
Foreign exchange impact(a)
|
32,735 | - | |||||||||||||||||||||
| Less: Acquisitions | (30,177) | - | |||||||||||||||||||||
| Less: Divestitures | - | (4,019) | |||||||||||||||||||||
| Non-GAAP net sales, constant currency | $ | 3,043,368 | $ | 3,255,790 | $ | (212,422) | (6.5) | % | |||||||||||||||
|
(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the fiscal year ended June 30, 2025 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2024.
|
|||||||||||||||||||||||
Index to Financial Statements
| Operating Income by Segment: | |||||||||||||||||||||||||||||||||||
| Fiscal Year Ended June 30, |
% of Net Sales June 30, |
||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||
| Specialty Technology Solutions: | (in thousands) | ||||||||||||||||||||||||||||||||||
| GAAP operating income | $ | 66,049 | $ | 66,678 | $ | (629) | (0.9) | % | 2.2 | % | 2.1 | % | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 10,508 | 8,041 | 2,467 | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (840) | - | (840) | ||||||||||||||||||||||||||||||||
| Tax recovery, net | (3,041) | (2,558) | (483) | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 72,676 | $ | 72,161 | $ | 515 | 0.7 | % | 2.5 | % | 2.3 | % | |||||||||||||||||||||||
| Intelisys & Advisory: | |||||||||||||||||||||||||||||||||||
| GAAP operating income | $ | 27,214 | $ | 30,595 | $ | (3,381) | (11.1) | % | 27.7 | % | 33.2 | % | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 8,719 | 7,682 | 1,037 | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | 2,740 | - | 2,740 | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 38,673 | $ | 38,277 | $ | 396 | 1.0 | % | 39.4 | % | 41.5 | % | |||||||||||||||||||||||
| Corporate: | |||||||||||||||||||||||||||||||||||
| GAAP operating loss | $ | (8,063) | $ | (6,949) | $ | (1,114) | |||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition and divestiture costs | 926 | 1,717 | (791) | ||||||||||||||||||||||||||||||||
| Restructuring costs | 5,381 | 4,358 | 1,023 | ||||||||||||||||||||||||||||||||
| Cyberattack restoration costs | 177 | 874 | (697) | ||||||||||||||||||||||||||||||||
| Legal settlement | 1,579 | - | 1,579 | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | - | $ | - | $ | - | nm* | nm* | nm* | ||||||||||||||||||||||||||
| Consolidated: | |||||||||||||||||||||||||||||||||||
| GAAP operating income | $ | 85,200 | $ | 90,324 | $ | (5,124) | (5.7) | % | 2.8 | % | 2.8 | % | |||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 19,227 | 15,723 | 3,504 | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | 1,900 | - | 1,900 | ||||||||||||||||||||||||||||||||
| Acquisition and divestiture costs | 926 | 1,717 | (791) | ||||||||||||||||||||||||||||||||
| Restructuring costs | 5,381 | 4,358 | 1,023 | ||||||||||||||||||||||||||||||||
| Tax recovery | (3,041) | (2,558) | (483) | ||||||||||||||||||||||||||||||||
| Cyberattack restoration costs | 177 | 874 | (697) | ||||||||||||||||||||||||||||||||
| Legal settlement | 1,579 | - | 1,579 | ||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 111,349 | $ | 110,438 | $ | 911 | 0.8 | % | 3.7 | % | 3.4 | % | |||||||||||||||||||||||
Index to Financial Statements
Additional Non-GAAP Metrics
To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, restructuring costs, impact of divestitures and other non-GAAP adjustments. These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Below we provide a non-GAAP reconciliation of the aforementioned metrics adjusted for the costs and charges mentioned above:
| Year ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration |
Acquisition and Divestiture costs (a)
|
Restructuring costs | Tax recovery | Cyberattack restoration costs | Legal Settlement | Insurance Recovery | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SG&A expenses | $ | 286,934 | $ | - | $ | - | $ | (926) | $ | - | $ | 3,041 | $ | (177) | $ | (1,579) | $ | - | $ | 287,293 | |||||||||||||||||||||||||||||||||||||||
| Operating income | 85,200 | 19,227 | 1,900 | 926 | 5,381 | (3,041) | 177 | 1,579 | - | 111,349 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax income | 94,396 | 19,227 | 1,900 | 926 | 5,381 | (3,041) | 177 | 1,579 | (5,928) | 114,617 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 71,548 | 14,400 | 1,432 | 926 | 4,054 | (4,072) | 133 | 1,189 | (4,466) | 85,144 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 3.00 | $ | 0.60 | $ | 0.06 | $ | 0.04 | $ | 0.17 | $ | (0.17) | $ | 0.01 | $ | 0.05 | $ | (0.19) | $ | 3.57 | |||||||||||||||||||||||||||||||||||||||
| Year ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration |
Acquisition and Divestiture costs (a)
|
Restructuring costs | Tax recovery | Cyberattack restoration costs |
Gain on sale of business (b)
|
Insurance Recovery | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SG&A expenses | $ | 277,428 | $ | - | $ | - | $ | (1,717) | $ | - | $ | 2,558 | $ | (874) | $ | - | $ | - | $ | 277,395 | |||||||||||||||||||||||||||||||||||||||
| Operating income | 90,324 | 15,723 | - | 1,717 | 4,358 | (2,558) | 874 | - | - | 110,438 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-tax income | 99,841 | 15,723 | - | 1,717 | 4,358 | (2,558) | 874 | (14,155) | - | 105,800 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 77,060 | 11,697 | - | 1,717 | 3,262 | (2,566) | 655 | (14,155) | - | 77,670 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 3.06 | $ | 0.46 | $ | - | $ | 0.07 | $ | 0.13 | $ | (0.10) | $ | 0.03 | $ | (0.56) | $ | - | $ | 3.08 | |||||||||||||||||||||||||||||||||||||||
(a)Acquisition and divestiture costs for the fiscal years ended June 30, 2025 and June 30, 2024 are generally nondeductible for tax purposes.
(b) Reflects gain on the sale of the UK-based intY business. This transaction resulted in a capital loss for tax purposes. The Company did not record a tax provision on the capital loss as there were no offsetting capital gains.
Index to Financial Statements
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with US GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis management evaluates its estimates, including those related to the allowance for uncollectible accounts receivable, inventory reserves to reduce inventories to the lower of cost or net realizable value, supplier incentives and goodwill. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. For further discussion of our significant accounting policies, refer to Note 1 - Business and Summary of Significant Accounting Policies.
Allowances for Trade and Notes Receivable
We adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326) effective July 1, 2020. The adoption did not have a material impact on our consolidated financial statements. Our policy for estimating allowances for doubtful accounts receivable is described below.
We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from channel sales partners' failure to make payments on accounts receivable due us. Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability. We account for credit losses based upon ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326). Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. Estimates of expected credit losses on trade receivables are recorded at inception and adjusted over the contractual life. Refer to Note 2 - Accounts Receivable and Notes Receivable, Netfor further details.
We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from channel sales partners' failure to make payments on accounts receivable due us. Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability. We account for credit losses based upon ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326). Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. Estimates of expected credit losses on trade receivables are recorded at inception and adjusted over the contractual life. Refer to Note 2 - Accounts Receivable and Notes Receivable, Netfor further details.
Inventory Reserves
Management determines the inventory reserves required to reduce inventories to the lower of cost or net realizable value based principally on the effects of technological changes, quantities of goods and length of time on hand and other factors. An estimate is made of the net realizable value, less cost to dispose, of products whose value is determined to be impaired. If these products are ultimately sold at less than estimated amounts, additional reserves may be required. The estimates used to calculate these reserves are applied consistently. The adjustments are recorded in the period in which the loss of utility of the inventory occurs, which establishes a new cost basis for the inventory. This new cost basis is maintained until such time that the reserved inventory is disposed of, returned to the supplier or sold. To the extent that specifically reserved inventory is sold, cost of goods sold is expensed for the new cost basis of the inventory sold.
Supplier Programs
We receive incentives from suppliers related to market development funds, volume rebates and other incentive programs. These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers. Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the supplier. Suppliers generally require that we use the suppliers' market development funds for advertising or other marketing programs. Incentives received from suppliers for specifically identified incremental market development funds are recorded as adjustments to selling, general and administrative expenses. ASC 606- Revenue from Contracts with Customers addresses accounting for consideration payable to a customer, which the Company interprets and applies as the customer (i.e., the Company) receives advertising funds from a supplier. The portion of these supplier funds in excess of our costs are reflected as a reduction of inventory. Such funds are recognized as a reduction of the cost of goods sold when the related inventory is sold.
We record unrestricted volume rebates received as a reduction of inventory and reduces the cost of goods sold when the related inventory is sold. Amounts received or receivables from suppliers that are not yet earned are deferred in the Consolidated Balance Sheets. Supplier receivables are generally collected through reductions to accounts payable authorized by the supplier. In addition, we may receive early payment discounts from certain suppliers. We record early payment discounts received as a
Index to Financial Statements
reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold. ASC 606 requires management to make certain estimates of the amounts of supplier consideration that will be received. Estimates are based on the terms of the incentive program and historical experiences. Actual recognition of the supplier consideration may vary from management estimates.
Goodwill
We account for recorded goodwill in accordance with ASC 350, Goodwill and Other Intangible Assets, which requires that goodwill be reviewed annually for impairment or more frequently if impairment indicators exist. Goodwill testing utilizes an impairment analysis, whereby we compare the carrying value of each identified reporting unit to its fair value. The carrying value of goodwill is reviewed at a reporting unit level at least annually for impairment, or more frequently if impairment indicators exist. Our goodwill reporting units align directly with our operating segments, Specialty Technology Solutions and Intelisys & Advisory. The fair values of the reporting units are estimated using the net present value of discounted cash flows generated by each reporting unit. Considerable judgment is necessary in estimating future cash flows, discount rates and other factors affecting the estimated fair value of the reporting units, including the operating and macroeconomic factors. Historical financial information, internal plans and projections and industry information are used in making such estimates.
Under ASC 350, if fair value of goodwill fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, we would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We also assess the recoverability of goodwill if facts and circumstances indicate goodwill may be impaired. In our most recent annual test, we estimated the fair value of our reporting units primarily based on the income approach utilizing the discounted cash flow method. As of June 30, 2025, the Specialty Technology Solutions and Intelisys & Advisory reporting units' goodwill balances are $159.8 million and $71.0 million, respectively. The fair value of the reporting units exceeded its carrying value by 2% and 100%, respectively, as of the annual goodwill impairment testing date. We also utilized fair value estimates derived from the market approach utilizing the public company market multiple method to validate the results of the discounted cash flow method, which required us to make assumptions about the applicability of those multiples to our reporting units. The discounted cash flow method requires us to estimate future cash flows and discount those amounts to present value. The key assumptions utilized in determining fair value included:
•Industry WACC: We utilized a WACC relative to each reporting unit's respective geography and industry as the discount rate for estimated future cash flows. The WACC is intended to represent a rate of return that would be expected by a marketplace participant in each respective geography.
•Operating income: We utilized historical and expected revenue growth rates, gross margins and operating expense percentages, which varied based on the projections of each reporting unit being evaluated.
•Cash flows from working capital changes: We utilized a projected cash flow impact pertaining to expected changes in working capital as each of our goodwill reporting units grow.
While we believe our assumptions are appropriate, they are subject to uncertainty and by nature include judgments and estimates regarding future events, including projected growth rates, margin percentages and operating efficiencies. Key assumptions used in determining fair value include projected growth and operating margin, working capital requirements and discount rates. During fiscal years 2024 and 2023, we completed our annual impairment test as of April 30th and determined that our goodwill was not impaired.
See Note 7 - Goodwill and Other Identifiable Intangible Assetsin the Notes to Consolidated Financial Statements for further discussion on our goodwill impairment testing and results.
Purchase Price Allocation
The Company accounts for business combinations in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805, Business Combinations. For each acquisition, the Company allocates the purchase price to assets acquired, liabilities assumed and goodwill and intangibles. The Company recognizes assets and liabilities acquired at their estimated fair values. Management uses judgment to (i) identify the acquired assets and liabilities assumed, (ii) estimate the fair value of these assets, (iii) estimate the useful life of the assets and (iv) assess the appropriate method for recognizing depreciation or amortization expense over the assets' useful life.
Index to Financial Statements
Accounting Standards Recently Issued
See Note 1 in the Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations and borrowings under the $350 million revolving credit facility. Our business requires significant investment in working capital, particularly accounts receivable and inventory, partially financed through our accounts payable to suppliers. In general, as our sales volumes increase, our net investment in working capital typically increases, which typically results in decreased cash flow from operating activities. Conversely, when sales volumes decrease, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.
Cash and cash equivalents totaled $126.2 million and $185.5 million at June 30, 2025 and 2024, respectively, of which $46.3 million and $20.0 million was held outside of the United States as of June 30, 2025 and 2024, respectively. Checks released but not yet cleared from these accounts in the amounts of $0.1 million and $5.9 million are classified as accounts payable as of June 30, 2025 and 2024, respectively.
We conduct business primarily in North America and Brazil where we generate and use cash. We provide for United States income taxes from the earnings of our Canadian and Brazilian subsidiaries. See Note 13 - Income Taxesin the Notes to the Consolidated Financial Statements for further discussion.
Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, increased $14.6 million to $520.7 million at June 30, 2025 from $506.2 million at June 30, 2024, primarily as a result of an increase in accounts receivable. Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from channel sales partners, increases and decreases to inventory levels and payments to suppliers.
| Year ended | |||||||||||
| Cash (used in) provided by: | June 30, 2025 | June 30, 2024 | |||||||||
| (in thousands) | |||||||||||
| Operating activities of continuing operations | $ | 112,349 | $ | 371,647 | |||||||
| Investing activities of continuing operations | (62,390) | 9,045 | |||||||||
| Financing activities of continuing operations | (110,905) | (227,767) | |||||||||
Net cash provided by operating activities was $112.3 million for the fiscal year ended June 30, 2025 and $371.6 million for the fiscal years ended June 30, 2024. The decrease in cash provided by operating activities for the fiscal year ended June 30, 2025 is primarily due to cash flows related to working capital, which decreased $22.5 million for the fiscal year ended June 30, 2025 versus a significant increase of $299.3 million for the prior year period. The prior-year period reflected lower net investment in working capital from lower sales volumes and a multi-quarter working capital improvement plan.
Operating cash flows are subject to variability period over period as a result of the timing of payments related to accounts receivable, accounts payable and other working capital items.
The number of days sales outstanding ("DSO") was 70 at June 30, 2025 unchanged from June 30, 2024. Throughout fiscal year 2025, DSO ranged from 66 to 72. Inventory turnover was 5.9 times during the fourth quarter fiscal year 2025, compared to 5.0 times in the fourth quarter of fiscal year 2024. Throughout fiscal year 2025, inventory turnover ranged from 5.0 to 5.9 times.
Cash used in investing activities was $62.4 million for the fiscal year ended June 30, 2025 compared to cash provided of $9.0 million for the fiscal year ended June 30, 2024. Cash used in investing activities for fiscal year 2025 is largely due to cash paid for acquisitions and capital expenditures. Cash provided by investing activities for the fiscal year 2024 represents proceeds from the the sale of our discontinued operations, partially offset by capital expenditures.
Management expects capital expenditures for fiscal year 2026 to range from $10.0 million to $15.0 million, primarily for IT and warehouse investments.
Index to Financial Statements
Cash used in financing activities totaled $110.9 million for the fiscal year ended June 30, 2025 primarily due to the repurchase of common stock. Cash used in financing activities of $227.8 million for the fiscal year ended June 30, 2024 wasprimarily due to repayments on the revolving line of credit and the repurchase of common stock.
Share Repurchase Program
In April 2025, our Board approved an additional $200 million share repurchase authorization, which supplements the existing the $100 million repurchase program authorized in May 2024. The share repurchase authorizations do not have any time limits. In fiscal year 2025, we repurchased 2,483,299 shares totaling $106.5 million. As of June 30, 2025, the Company had approximately $217.1 million available for repurchases under Board approved authorizations.
Credit Facility
We have a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks (as amended, the "Amended Credit Agreement"). On September 28, 2022, we amended and restated our Amended Credit Agreement, which includes (i) a five-year, $350 million multicurrency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility. The amendment extended the revolving credit facility maturity date to September 28, 2027. In addition, pursuant to an "accordion feature," we may increase our borrowings up to an additional $250 million, subject to obtaining additional credit commitments from the lenders participating in the increase. The Amended Credit Agreement allows for the issuance of up to $50 million for letters of credit. Borrowings under the Amended Credit Agreement are guaranteed by substantially all of our domestic assets and our domestic subsidiaries. Under the terms of the revolving credit facility, the payment of cash dividends is restricted. We incurred debt issuance costs of $1.4 million in connection with the amendment and restatement of the Amended Credit Agreement. These costs were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility.
Loans denominated in U.S. dollars, other than swingline loans, bear interest at a rate per annum equal to, at our option, (i) the adjusted term Secured Overnight Financing Rate ("SOFR") or adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our ratio of (A) total consolidated debt less up to $30 million of unrestricted domestic cash ("Credit Facility Net Debt") to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable (Credit Facility EBITDA"), for which financial statements have been delivered to the Lenders (the "leverage ratio"); or (ii) the alternate base rate plus an additional margin ranging from 0% to 0.75%, depending upon our leverage ratio, plus, if applicable, certain mandatory costs. All swingline loans denominated in U.S. dollars bear interest based upon the adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our leverage ratio, or such other rate as agreed upon with the applicable swingline lender. The adjusted term SOFR and adjusted daily simple SOFR include a fixed credit adjustment of 0.10% over the applicable SOFR reference rate. Loans denominated in foreign currencies bear interest at a rate per annum equal to the applicable benchmark rate set forth in the Amended Credit Agreement plus an additional margin ranging from 1.00% to 1.75%, depending upon our leverage ratio plus, if applicable, certain mandatory costs.
During the fiscal year ended June 30, 2025, our borrowings under the credit facility were U.S. dollar loans. The spread in effect as of June 30, 2025 was 1.00%, plus a 0.10% credit spread adjustment for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect as of June 30, 2025 was 0.15%. The Amended Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants. Specifically, our Leverage Ratio must be less than or equal to 3.50 to 1.00 at all times. In addition, our Interest Coverage Ratio (as such term is defined in the Amended Credit Agreement) must be at least 3.00 to 1.00 as of the end of each fiscal quarter. In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates. We were in compliance with all covenants under the Amended Credit Agreement as of June 30, 2025.
The average daily balance on the revolving credit facility, excluding the term loan facility, was $0.3 million and $71.1 million during the fiscal years ended June 30, 2025 and June 30, 2024, respectively. There was $350.0 million and $349.9 million available for additional borrowings as of June 30, 2025 and June 30, 2024, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2025 and June 30, 2024.
Availability to use this borrowing capacity depends upon, among other things, the levels of our Leverage Ratio and Interest Coverage Ratio, which, in turn, will depend upon (1) our Credit Facility Net Debt relative to our EBITDA and (2) Credit
Index to Financial Statements
Facility EBITDA relative to total interest expense respectively. As a result, our availability will increase if EBITDA increases (subject to the limit of the facility) and decrease if EBITDA decreases. At June 30, 2025, based upon the calculation of our Credit Facility Net Debt relative to our Credit Facility EBITDA, there was $350.0 million available for borrowing. While we were in compliance with the financial covenants contained in the Credit Facility as of June 30, 2025, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.
Contractual Obligations
At June 30, 2025, we did not have an outstanding balance under our revolving credit facility. We had $133.1 million outstanding under our term loan facility, $7.5 million of which matured in fiscal year 2025. Our revolving credit facility and our term loan facility have a maturity date September 28, 2027. The remaining principal debt payments on our industrial development revenue bond, which total $3.0 million, have maturity dates in 2025 through 2032. See Footnote 8 - Short Term Borrowings and Long Term Debt.
We also had a non-cancelable operating lease agreement of $11.0 million at June 30, 2025, of which $4.6 million is expected to be paid within the next 12 months. Remaining amounts are expected to be paid through 2030. See Footnote 14 - Leases.
Summary
We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet our present and future working capital and cash requirements for at least the next twelve months. We also believe that our longer-term working capital, planned expenditures and other general funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities.
Index to Financial Statements
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