Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - SCANSOURCE, INC. | a2017-q4exhibit99106302017.htm |
| 8-K - 8-K - SCANSOURCE, INC. | a2017-q4form8xk06302017.htm |
Q4 AND FY17 FINANCIAL RESULTS
CONFERENCE CALL
August 29, 2017 at 5:00 pm ET
Exhibit 99.2
SAFE HARBOR AND NON-GAAP
Safe Harbor Statement
This presentation contains certain comments that are “forward-
looking” statements, including statements about expected
EBITDA, return on invested capital (“ROIC”), sales, GAAP diluted
earnings per share (“EPS”), and non-GAAP diluted EPS, that
involve plans, strategies, economic performance and trends,
projections, expectations, costs or beliefs about future events and
other statements that are not descriptions of historical facts.
Forward-looking information is inherently subject to risks and
uncertainties.
Any number of factors could cause actual results to differ
materially from anticipated or forecasted results, including but not
limited to, changes in interest and exchange rates and regulatory
regimes impacting our international operations, the failure of
acquisitions to meet our expectations, the failure to manage and
implement our organic growth strategy, credit risks involving our
larger customers and vendors, termination of our relationship with
key vendors or a significant modification of the terms under which
we operate with a key vendor, the decline in demand for the
products and services that we provide, reduced prices for the
products and services that we provide due both to competitor and
customer actions, and other factors set forth in the “Risk Factors”
contained in our annual report on Form 10-K for the year ended
June 30, 2017, filed with the Securities and Exchange
Commission (“SEC”).
Although ScanSource believes the expectations in its forward-
looking statements are reasonable, it cannot guarantee future
results, levels of activity, performance or achievement.
ScanSource disclaims any obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events, or otherwise, except as may be
required by law.
Non-GAAP Financial Information
In addition to disclosing results that are determined in
accordance with United States Generally Accepted Accounting
Principles (“GAAP”), the Company also discloses certain non-
GAAP measures, including non-GAAP operating income, non-
GAAP operating margin, non-GAAP net income, non-GAAP
diluted EPS, adjusted EBITDA, ROIC and net sales excluding
the impact of foreign currency translation and acquisitions
(organic growth). A reconciliation of the Company's non-GAAP
financial information to GAAP financial information is provided in
the Appendix and in the Company’s Form 8-K, filed with the
SEC, with the quarterly earnings press release for the period
indicated.
2
HIGHLIGHTS
• Strong finish to FY17 with net sales and EPS at or above expected range
• Net sales of $917 million, +5% Y/Y, driven by WW Barcode, Networking &
Security segment, +7% Y/Y
• GAAP EPS of $0.74, +48% Y/Y, and non-GAAP EPS of $0.68*, +33% Y/Y
Q4 Results in
Line with
Expectations
FY17
Results
Investment in
Business and
Favorable
FY18 Plan
• Net sales, +1% Y/Y; GAAP EPS of $2.71,+14% Y/Y, and non-GAAP EPS of
$2.75, +1% Y/Y
• Return on invested capital of 13.1%*
• Stronger FY17 operating cash flow of $95 million, up from $52 million for FY16
• Acquisition of POS Portal (closed 7/31/17) creates the industry’s leading
payments channel, serving SMB, mid-market and enterprise
• Investments made to drive results in FY18 and the future; full year FY18 plan
reflects double-digit adjusted EBITDA growth and a higher ROIC
* See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures.
FY18 KEY OPPORTUNITIES FOR GROWTH
4
Mobile computing
Video surveillance
Communications channel opportunity
Intelisys
Network1
Q4 FY17 Q3 FY17 Q4 FY16
Y/Y
Change
Net sales $917.3 $813.5 $877.5 +5%
Gross profit 100.9 92.7 82.8 +22%
Gross profit margin % (of net sales) 11.0% 11.4% 9.4% +156 bps
Operating income 22.1 20.0 18.9 +17%
Non-GAAP operating income 27.8 26.2 18.9 +47%
GAAP net income 19.0 12.4 12.9 +47%
Non-GAAP net income 17.3 16.4 13.1 +32%
GAAP diluted EPS $0.74 $0.49 $0.50 +48%
Non-GAAP diluted EPS $0.68 $0.65 $0.51 +33%
HIGHLIGHTS – Q4 FY17
5
$ in millions, except EPS
Non-GAAP
Operating
Income %
2.2%
Up 51 bps
Q4 FY17 Q3 FY17 Q4 FY16
Net sales $619.2 $549.0 $581.3
Gross profit $51.7 $45.9 $46.8
Gross margin 8.3% 8.4% 8.1%
Operating income $13.0 $11.2 $8.8
Operating income % 2.1% 2.0% 1.5%
Non-GAAP operating income $13.8 $12.3 $9.9
Non-GAAP operating income % 2.2% 2.2% 1.7%
WW BARCODE, NETWORKING & SECURITY
6
$ in millions
Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and
acquisitions. Non-GAAP operating income excludes amortization of intangibles and change in fair value of contingent
consideration.
Net Sales
$619.2 million
Up 7%
Organic, Up 6%
Q4 FY17, Y/Y Summary
GAAP
Operating
Income %
2.1%
Up 58 bps
Gross Margin
8.3%
Up 29 bps
Q4 FY17 Q3 FY17 Q4 FY16
Net sales $298.0 $264.6 $296.1
Gross profit $49.2 $46.8 $35.9
Gross margin 16.5% 17.7% 12.1%
Operating income $9.5 $8.8 $10.7
Operating income % 3.2% 3.3% 3.6%
Non-GAAP operating income $14.0 $13.9 $8.9
Non-GAAP operating income % 4.7% 5.2% 3.0%
Non-GAAP
Operating
Income %
4.7%
Up 169 bps
7
$ in millions
Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and
acquisitions. Non-GAAP operating income excludes amortization of intangibles and change in fair value of contingent
consideration.
Net Sales
$298.0 million
+1%
Organic, (3)%
Q4 FY17, Y/Y Summary
GAAP
Operating
Income %
3.2%
Down (41) bps
Gross Margin
16.5%
Up 436 bps
WW COMMUNICATIONS & SERVICES
FY17 FY16 Y/Y Change
Net sales $3,568.2 $3,540.2 +1%
Gross profit 383.6 355.4 +8%
Gross profit margin % (of net sales) 10.8% 10.0% +71 bps
Operating income 88.2 96.9 -9%
Non-GAAP operating income 110.2 108.9 +1%
GAAP net income 69.2 63.6 +9%
Non-GAAP net income 70.3 72.2 -3%
GAAP diluted EPS $2.71 $2.38 +14%
Non-GAAP diluted EPS $2.75 $2.71 +1%
HIGHLIGHTS – FY17
8
$ in millions, except EPS
FY17 FY16
Net sales $2,389.3 $2,361.7
Gross profit $195.7 $196.8
Gross margin 8.2% 8.3%
Operating income $49.7 $52.2
Operating income % 2.1% 2.2%
Non-GAAP operating income $53.8 $56.2
Non-GAAP operating income % 2.3% 2.4%
Non-GAAP
Operating
Income %
2.3%
Down (13) bps
WW BARCODE, NETWORKING & SECURITY
9
$ in millions
Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and
acquisitions. Non-GAAP operating income excludes amortization of intangibles and change in fair value of contingent
consideration.
Net Sales
$2,389 million
Up 1%
Organic, (2)%
FY17, Y/Y Summary
GAAP
Operating
Income %
2.1%
Down (13) bps
Gross Margin
8.2%
Down (14) bps
FY17 FY16
Net sales $1,178.9 $1,178.6
Gross profit $187.9 $158.6
Gross margin 15.9% 13.5%
Operating income $39.8 $45.5
Operating income % 3.4% 3.9%
Non-GAAP operating income $56.5 $52.7
Non-GAAP operating income % 4.8% 4.5%
Non-GAAP
Operating
Income %
4.8%
Up 32 bps
10
$ in millions
Organic growth, a non-GAAP measure, reflects reported sales growth less impacts from foreign currency translation and
acquisitions. Non-GAAP operating income excludes amortization of intangibles and change in fair value of contingent
consideration.
Net Sales
$1,179 million
Up --%
Organic, (3)%
FY17, Y/Y Summary
GAAP
Operating
Income %
3.4%
Down (49) bps
Gross Margin
15.9%
Up 247 bps
WW COMMUNICATIONS & SERVICES
Q4 FY17 Q3 FY17 Q4 FY16
Accounts receivable (Q/E) $637.3 $565.2 $559.6
Days sales outstanding in receivables* 61* 60* 57
Inventory (Q/E) $531.3 $514.2 $558.6
Inventory turns 6.2 5.6 5.6
Accounts payable (Q/E) $513.2 $437.2 $471.5
Paid for inventory days* 4.7* 12.5* 9.9
Working capital (Q/E) (AR+INV–AP) $655.5 $642.3 $646.7
WORKING CAPITAL MEASURES
$ in millions
11
* Excludes the impact of the Intelisys acquisition, which was completed 8/29/16
Q4 FY17 Q3 FY17 Q4 FY16
Adjusted EBITDA (QTR) $31.0 $29.2 $21.0
Adjusted ROIC (QTR)* 13.2% 12.6% 10.1%
Operating cash flow, trailing 12-months $94.9 $112.0 $52.2
Cash and cash equivalents (Q/E) $56.1 $62.2 $61.4
Debt (Q/E) $97.3 $113.9 $76.9
Net debt to adjusted EBITDA, trailing 12-months 0.34x 0.46x 0.13x
Shares repurchased – # of shares (QTR) -- -- 63,651
Shares repurchased – dollars (QTR) -- -- $2.4
Cum. repurchases under plan – # shares (as of Q/E) 577,643 577,643 3,364,035
Cum. repurchases under plan – dollars (as of Q/E) $20.3 $20.3 $119.5
Remaining authorization under plan (as of Q/E) $99.7 $99.7 $0.5
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
$ in millions
12
* Excludes non-GAAP adjustments and change in fair value of contingent consideration.
Q1 FY18 OUTLOOK*
13
* Outlook as of August 29, 2017, including results for POS Portal acquisition from July 31, 2017. Non-GAAP diluted EPS
excludes amortization of intangible assets, change in fair value of contingent consideration, and acquisition costs. Reflects
the following FX rates: $1.16 to EUR 1.00 for the Euro, $0.315 to R$1.00 for the Brazilian real (R$3.175 to $1), and $1.30
to GBP 1.00 for the British pound.
For the quarter ending September 30, 2017, excluding amortization of intangible assets,
change in fair value of contingent consideration, and acquisition costs; includes results for
POS Portal acquisition from July 31, 2017:
Range from $940 million to $1 billion
Includes approximately $15 million for POS Portal
acquisition from July 31, 2017
Range from $0.49 to $0.55 per share
Net Sales
GAAP
Diluted EPS
Range from $0.74 to $0.80 per share
Non-GAAP
Diluted EPS
APPENDIX: NON-GAAP FINANCIAL INFORMATION
14
Operating Income, Pre-Tax Income, Net Income & EPS – QTR
($ in thousands) Quarter Ended June 30, 2017
Operating
Income
Pre-tax
income
Net
income
Diluted
EPS
GAAP measure $ 22,111 $ 23,420 $ 18,970 $ 0.74
Adjustments:
Amortization of intangible assets 3,987 3,987 2,625 0.10
Change in fair value of contingent consideration 1,290 1,290 680 0.03
Acquisition costs (a) 422 422 422 0.02
Tax settlement and related interest income (1,382) (5,370) (0.21)
Non-GAAP measure $ 27,810 $ 27,737 $ 17,327 $ 0.68
Quarter Ended March 31, 2017
Operating
Income
Pre-tax
income
Net
income
Diluted
EPS
GAAP measure $ 19,978 $ 19,571 $ 12,424 $ 0.49
Adjustments:
Amortization of intangible assets 4,217 4,217 2,774 0.11
Change in fair value of contingent consideration 1,960 1,960 1,194 0.05
Acquisition costs (a) - - - -
Non-GAAP measure $ 26,155 $ 25,748 $ 16,392 $ 0.65
Quarter Ended June 30, 2016
Operating
Income
Pre-tax
income
Net
income
Diluted
EPS
GAAP measure $ 18,938 $ 18,603 $ 12,925 $ 0.50
Adjustments:
Amortization of intangible assets 2,591 2,591 1,758 0.07
Change in fair value of contingent consideration (3,226) (3,226) (2,095) (0.08)
Acquisition costs (a) 553 553 553 0.02
Non-GAAP measure $ 18,856 $ 18,521 $ 13,141 $ 0.51
(a) Acquisition costs are nondeductible for tax purposes.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
15
Operating Income, Pre-Tax Income, Net Income & EPS – Full Year
($ in thousands) Year Ended June 30, 2017
Operating
Income
Pre-tax
income
Net
income
Diluted
EPS
GAAP measure $ 88,239 $ 101,495 $ 69,246 $ 2.71
Adjustments:
Amortization of intangible assets 15,524 15,524 10,247 0.40
Change in fair value of contingent consideration 5,211 5,211 2,921 0.11
Acquisition costs (a) 1,256 1,256 1,256 0.06
Legal recovery, net of attorney fees - (12,777) (8,047) (0.32)
Tax settlement and related interest income - (1,382) (5,370) (0.21)
Non-GAAP measure $ 110,230 $ 109,327 $ 70,253 $ 2.75
Year Ended June 30, 2016
Operating
Income
Pre-tax
income
Net
income
Diluted
EPS
GAAP measure $ 96,877 $ 96,010 $ 63,619 $ 2.38
Adjustments:
Amortization of intangible assets 9,828 9,828 6,790 0.25
Change in fair value of contingent consideration 1,294 1,294 977 0.04
Acquisition costs (a) 863 863 863 0.04
Non-GAAP measure $ 108,862 $ 107,995 $ 72,249 $ 2.71
(a) Acquisition costs are nondeductible for tax purposes.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
16
Net Sales, Constant Currency and Excluding Acquisitions (Organic Growth) – QTR
($ in thousands)
WW Barcode,
NW & Security
WW Comms.
& Services Consolidated
For the quarter ended June 30, 2017:
Q4 FY17 net sales, as reported $ 619,241 $ 298,050 $ 917,291
Foreign exchange impact (a) (720) (1,430) (2,150)
Q4 FY17 net sales, constant currency 618,521 296,620 915,141
Less: Acquisitions - (9,178) (9,178)
Q4 FY17 net sales, constant currency excluding acquisitions $ 618,521 $ 287,442 $ 905,963
Q4 FY16 net sales, as reported $ 581,346 $ 296,127 $ 877,473
Less: Acquisitions - - -
Q4 FY16 net sales, excluding acquisitions $ 581,346 $ 296,127 $ 877,473
Y/Y % Change:
As reported 6.5% 0.6% 4.5%
Constant currency 6.4% 0.2% 4.3%
Constant currency, excluding acquisitions (organic growth) 6.4% -2.9% 3.2%
(a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the
quarter ended June 30, 2017 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended June 30, 2016.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
17
Net Sales, Constant Currency and Excluding Acquisitions (Organic Growth) – Full Year
($ in thousands)
WW Barcode,
NW & Security
WW Comms.
& Services Consolidated
For the year ended June 30, 2017:
FY17 net sales, as reported $ 2,389,256 $ 1,178,930 $ 3,568,186
Foreign exchange impact (a) (10,229) (8,599) (18,828)
FY17 net sales, constant currency 2,379,027 1,170,331 3,549,358
Less: Acquisitions (99,332) (29,421) (128,753)
FY17 net sales, constant currency excluding acquisitions $ 2,279,695 $ 1,140,910 $ 3,420,605
FY16 net sales, as reported $ 2,361,670 $ 1,178,556 $ 3,540,226
Less: Acquisitions (34,628) - (34,628)
FY16 net sales, constant currency excluding acquisitions $ 2,327,042 $ 1,178,556 $ 3,505,598
Y/Y % Change:
As reported 1.2% 0.0% 0.8%
Constant currency 0.7% -0.7% 0.3%
Constant currency, excluding acquisitions (organic growth) -2.0% -3.2% -2.4%
(a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating net sales for the
fiscal year ended June 30, 2017 into U.S. dollars using the weighted average foreign exchange rates for fiscal year ended June 30, 2016.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
18
Highlights by Segment – QTR
Quarter Ended June 30, 2017
($ in thousands)
WW Barcode,
NW & Security
WW Comms.
& Services Corporate Consolidated
Net sales $ 619,241 $ 298,050 $ - $ 917,291
GAAP operating income $ 12,997 $ 9,536 $ (422) $ 22,111
Adjustments:
Amortization of intangible assets 770 3,217 - 3,987
Change in fair value of contingent consideration - 1,290 - 1,290
Acquisition costs - - 422 422
Non-GAAP operating income $ 13,767 $ 14,043 $ - $ 27,810
GAAP operating income % (of net sales) 2.10% 3.20% n/m 2.41%
Non-GAAP operating income % (of net sales) 2.22% 4.71% n/m 3.03%
Quarter Ended March 31, 2017
($ in thousands)
WW Barcode,
NW & Security
WW Comms.
& Services Corporate Consolidated
Net sales $ 548,971 $ 264,567 $ - $ 813,538
GAAP operating income $ 11,175 $ 8,803 $ - $ 19,978
Adjustments:
Amortization of intangible assets 1,098 3,119 - 4,217
Change in fair value of contingent consideration - 1,960 - 1,960
Acquisition costs - - - -
Non-GAAP operating income $ 12,273 $ 13,882 $ - $ 26,155
GAAP operating income % (of net sales) 2.04% 3.33% n/m 2.46%
Non-GAAP operating income % (of net sales) 2.24% 5.25% n/m 3.21%
n/m = not meaningful
APPENDIX: NON-GAAP FINANCIAL INFORMATION
19
Highlights by Segment – QTR
Quarter Ended June 30, 2016 (a)
($ in thousands)
WW Barcode,
NW & Security
WW Comms.
& Services Corporate Consolidated
Net sales $ 581,346 $ 296,127 $ - $ 877,473
GAAP operating income $ 8,808 $ 10,683 $ (553) $ 18,938
Adjustments:
Amortization of intangible assets 1,060 1,532 - 2,591
Change in fair value of contingent consideration 54 (3,280) - (3,226)
Acquisition costs - - 553 553
Non-GAAP operating income $ 9,922 $ 8,935 $ - $ 18,856
GAAP operating income % (of net sales) 1.52% 3.61% n/m 2.16%
Non-GAAP operating income % (of net sales) 1.71% 3.02% n/m 2.15%
n/m = not meaningful
(a) Reflects reclassifications between segments for certain geographies to provide comparable financial information.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
20
Highlights by Segment – Full Year
Year Ended June 30, 2017
($ in thousands) WW Barcode,
NW &
Security
WW Comms.
& Services Corporate Consolidated
Net sales $ 2,389,256 $ 1,178,930 $ - $ 3,568,186
GAAP operating income $ 49,727 $ 39,768 $ (1,256) $ 88,239
Adjustments:
Amortization of intangible assets 4,033 11,491 - 15,524
Change in fair value of contingent consideration - 5,211 - 5,211
Acquisition costs - - 1,256 1,256
Non-GAAP operating income $ 53,760 $ 56,470 $ - $ 110,230
GAAP operating income % (of net sales) 2.08% 3.37% n/m 2.47%
Non-GAAP operating income % (of net sales) 2.25% 4.79% n/m 3.09%
Year Ended June 30, 2016 (a)
($ in thousands) WW Barcode,
NW &
Security
WW Comms.
& Services Corporate Consolidated
Net sales $ 2,361,670 $ 1,178,556 $ - $ 3,540,226
GAAP operating income $ 52,227 $ 45,513 $ (863) $ 96,877
Adjustments:
Amortization of intangible assets 3,752 6,076 - 9,828
Change in fair value of contingent consideration 181 1,113 - 1,294
Acquisition costs - - 863 863
Non-GAAP operating income $ 56,160 $ 52,702 $ - $ 108,862
GAAP operating income % (of net sales) 2.21% 3.86% n/m 2.74%
Non-GAAP operating income % (of net sales) 2.38% 4.47% n/m 3.08%
n/m = not meaningful
(a) Reflects reclassifications between segments for certain geographies to provide comparable financial information.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
21
Adjusted Return on Invested Capital
($ in thousands)
Q4 FY17 Q3 FY17 Q2 FY17 Q1 FY17 Q4 FY16
Adjusted return on invested capital (ROIC), annualized (a) 13.2% 12.6% 13.8% 13.1% 10.1%
Reconciliation of Net Income to Adjusted EBITDA
Net income - GAAP $ 18,970 $ 12,424 $ 23,037 $ 14,816 $ 12,925
Plus: Income taxes 4,450 7,147 12,744 7,908 5,678
Plus: Interest expense 934 780 912 589 440
Plus: Depreciation and amortization 6,276 6,880 6,588 5,224 4,584
EBITDA 30,630 27,231 43,281 28,537 23,627
Change in fair value of contingent consideration 1,290 1,960 1,791 169 (3,226)
Acquisition costs 422 - 335 498 553
Interest income related to tax settlement (1,382) - - - -
Legal settlement, net of attorney fees - - (12,777) - -
Adjusted EBITDA (numerator for ROIC)(non-GAAP) $ 30,960 $ 29,191 $ 32,630 $ 29,204 $ 20,954
Invested Capital Calculation
Equity - beginning of the quarter $ 808,719 $ 787,536 $ 773,161 $ 774,496 $ 757,374
Equity - end of quarter 837,145 808,719 787,536 773,161 774,496
Add: Change in fair value of contingent consideration, net of tax 680 1,194 1,000 46 (2,095)
Add: Acquisition costs, net of tax 422 - 335 498 553
Add: Tax settlement and related interest income, net of tax (5,370) - - - -
Add: Legal settlement, net of attorney fees, net of tax - - (8,047) - -
Average equity 820,798 798,725 776,993 774,101 765,164
Average funded debt (b) 117,970 137,597 162,483 107,718 71,577
Invested capital (denominator for ROIC)(non-GAAP) $ 938,768 $ 936,322 $ 939,476 $ 881,819 $ 836,741
(a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for
the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures.
(b) Average daily amounts outstanding on short-term and long-term interest-bearing debt.
APPENDIX: NON-GAAP FINANCIAL INFORMATION
22
Forecasted Range for EPS – Q1 FY18 Outlook
($ in thousands)
Forecast for Quarter ending
September 30, 2017
Range Low Range High
GAAP diluted EPS $ 0.49 $ 0.55
Adjustments:
Amortization of intangible assets 0.13 0.13
Change in fair value of contingent consideration 0.10 0.10
Acquisition costs 0.02 0.02
Non-GAAP diluted EPS $ 0.74 $ 0.80