GREENVILLE - ScanSource (NASDAQ:SCSC), Inc., a leading provider of technology products and solutions, disclosed its financial results for the first quarter of fiscal year 2024 today. The company reported adjusted earnings of 74 cents per share, which fell short of the Zacks Consensus Estimate of 92 cents per share and marked a 31% year-over-year decrease. This decline was attributed to softer demand in the barcode, mobility, and point-of-sale sectors, as well as reduced sales volumes in communications hardware. The company's reported earnings also dipped to 61 cents per share from 94 cents per share in the same quarter of the previous year.
The firm's net sales experienced a downturn of 7.2% year-over-year to $876 million, missing the Zacks Consensus Estimate of $929 million. A more detailed look at the sales figures reveals that:
- Net sales in the US and Canada decreased by 8% to $791 million.
- International sales saw a modest increase of 1% to $85 million.
- Specialty Technology Solutions’ revenues dropped by 12% to $510 million due to weak demand, despite some growth in networking and security.
- Modern Communications & Cloud sales slightly declined by 0.2% year-over-year to $367 million, affected by low communications hardware sales volumes but buoyed by growth in Cisco (NASDAQ:CSCO) products.
- Intelisys' net sales for Q1 rose by 8.8%.
ScanSource also reported a gross profit of $106.5 million, which is lower than the prior year's first-quarter total of $113.5 million, resulting in a gross margin of 12.2%. Selling, general, and administrative expenses increased by 5% year-over-year to $75 million.
The company's adjusted EBITDA saw a significant drop of 23% year-over-year to $35 million with an adjusted EBITDA margin of 4%. Additionally, adjusted operating profit was down at $28.5 million from last year's first-quarter figure of $39.1 million, leading to an adjusted operating margin of 3.2%.
On the brighter side, ScanSource ended the quarter with an increase in cash and cash equivalents, standing at $42.6 million as of September 30, 2023, compared to $36 million as of June 30, 2023. The company also improved its cash flow from operating activities, generating approximately $94 million in Q1—a stark contrast to using $48 million in the same quarter the previous year.
Looking ahead at fiscal year 2024, ScanSource anticipates net sales growth of at least $3.8 billion, with projected adjusted EBITDA of at least $170 million and a free cash flow target exceeding $200 million.
Despite these projections for growth in the upcoming fiscal year, ScanSource shares have seen a depreciation of 3.6% year-over-year, underperforming compared to the industry’s growth rate of 11.8%.
InvestingPro Insights
Drawing on real-time data from InvestingPro, ScanSource Inc. (SCSC) holds a market cap of $764.99 million and an adjusted P/E ratio of 9.51 as of Q1 2024. The company's revenue for the same period was $3.72 billion, marking a growth of 2.88%. However, the quarterly revenue growth for Q1 2024 dipped by 7.15%.
In line with these data points, InvestingPro Tips shed light on some key aspects of the company's performance. Firstly, ScanSource boasts a high shareholder yield and a strong free cash flow yield, as indicated by its valuation. Secondly, the company's liquid assets exceed its short-term obligations, providing a solid financial foundation. Nevertheless, it's important to note that the company's revenue growth has been slowing down recently and it suffers from weak gross profit margins.
With these insights, investors can gain a more comprehensive understanding of ScanSource's financial health and market position. For more in-depth analysis and additional tips, consider exploring the InvestingPro platform, which offers numerous other insights into SCSC and a myriad of other companies.
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