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SCANSOURCE, INC. (SCSC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered strong profitability despite a softer top line: gross profit up 5.8% YoY, GAAP EPS $0.89 and non-GAAP EPS $1.06, with Adjusted EBITDA margin at 5.22% .
  • Mixed print vs estimates: revenue missed consensus by ~6%, but non-GAAP EPS beat by ~14%; full‑year FY26 guidance was reaffirmed (net sales $3.1–$3.3B; Adjusted EBITDA $150–$160M; FCF ≥$80M) .
  • Segment performance diverged: Specialty Technology Solutions net sales −4.9% YoY on fewer large deals; Intelisys & Advisory +4.0% YoY aided by acquisition; mix and supplier price actions supported margins .
  • Management emphasized timing issues (large deals delayed/broken into smaller orders) and sustainable supplier program benefits; active M&A pipeline underscores strategy for recurring, converged solutions .

What Went Well and What Went Wrong

What Went Well

  • Gross profit and margins strengthened: gross profit +5.8% YoY to $107.5M; gross margin 14.5% vs 13.1% YoY, aided by supplier program recognition and mix .
  • Profitability and cash generation: non-GAAP EPS $1.06 (+26% YoY), Adjusted EBITDA $38.6M (+8% YoY), FCF $20.8M; cash conversion of non-GAAP net income ~88% per CFO .
  • Strategic momentum: DataXoom acquisition expands managed connectivity; management expects it to be margin accretive and to drive mobile device sales when bundled with connectivity .

Management quotes:

  • “Our team delivered double-digit EPS growth and strong free cash flow in the first quarter.” — CEO Mike Baur .
  • “We delivered 5.2% Adjusted EBITDA margins, and our cash conversion of non-GAAP net income was 88%… These results are in line with our annual outlook.” — CFO Steve Jones .
  • “They [DataXoom/Advantix] will have higher margins than our typical business in the STS segment.” — CFO Steve Jones .

What Went Wrong

  • Top line softness: consolidated net sales declined 4.6% YoY to $739.7M; STS −4.9% YoY driven by lower large deals; Brazil −9.6% YoY with FX headwinds .
  • Segment EBITDA pressure: Intelisys & Advisory Adjusted EBITDA declined slightly due to increased SG&A investments to drive future billings growth .
  • Large deals continue to slip: Q1 saw delays or fragmentation into smaller orders; CFO noted ~$40M of Q4 large-deal pull-ins impacting sequential comparison .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ1 FY25Q3 FY25Q4 FY25Q1 FY26
Net Sales ($USD Millions)$775.580 $704.847 $812.886*$739.650
GAAP Diluted EPS ($)$0.69 $0.74 $0.88*$0.89
Non-GAAP Diluted EPS ($)$0.84 $0.86 N/A$1.06
Gross Profit Margin (%)13.1% 14.2% 12.93%*14.5%
Operating Income ($USD Millions)$17.630 $22.339 $28.589*$25.903

* Values retrieved from S&P Global.

Q1 FY26 Actual vs Consensus

MetricQ1 FY26 ActualQ1 FY26 ConsensusSurprise
Revenue ($USD Millions)$739.650 $787.367*−6.1%
Non-GAAP Diluted EPS ($)$1.06 $0.93*+14.0%

* Values retrieved from S&P Global.

Segment Net Sales (Q1 FY26 vs Q1 FY25)

SegmentQ1 FY25 Reported ($MM)Q1 FY26 Reported ($MM)YoY ChangeQ1 FY25 Non-GAAP ($MM)Q1 FY26 Non-GAAP ($MM)YoY Change (Non-GAAP)
Specialty Technology Solutions$752.299 $715.447 −4.9% $748.787 $707.191 −5.6%
Intelisys & Advisory$23.281 $24.203 +4.0% $22.704 $22.864 +0.7%

Net Sales by Geography (Q1 FY26 vs Q1 FY25)

GeographyQ1 FY25 Reported ($MM)Q1 FY26 Reported ($MM)YoY ChangeQ1 FY25 Non-GAAP ($MM)Q1 FY26 Non-GAAP ($MM)YoY Change (Non-GAAP)
United States$712.019 $682.217 −4.2% $707.930 $673.710 −4.8%
Brazil$63.561 $57.433 −9.6% $63.561 $56.345 −11.4%
Consolidated$775.580 $739.650 −4.6% $771.491 $730.055 −5.4%

KPIs and Other Metrics

KPIQ1 FY25Q1 FY26
Adjusted EBITDA ($MM)$35.666 $38.590
Adjusted EBITDA Margin (%)4.60% 5.22%
Free Cash Flow ($MM)$42.455 $20.816
Recurring Revenue as % of Gross Profit31.9% 31.7%
Adjusted ROIC (annualized, %)13.3% 14.6%
Share Repurchases ($MM)$28.126 $21.285
Cash and Cash Equivalents ($MM)$145.044 $124.924
Total Debt ($MM)$132.? (not disclosed in Q1 FY25 PR)$133.9

Note: Total debt disclosed as of Sep 30, 2025 ($133.9M) ; comparable Q1 FY25 debt is not provided in the Q1 FY26 press release.

Non-GAAP Adjustments Impact (Q1 FY26)

MeasureGAAPAdjustments (EPS equivalents)Non-GAAP
Diluted EPS ($)$0.89 +$0.15 amortization, +$0.01 contingent consideration, +$0.01 acquisition/divestiture, +$0.00 cyberattack $1.06

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY26$3.1B–$3.3B $3.1B–$3.3B Maintained
Adjusted EBITDA (non-GAAP)FY26$150M–$160M $150M–$160M Maintained
Free Cash Flow (non-GAAP)FY26≥$80M ≥$80M Maintained

Management reiterated an expectation for revenue growth to accelerate in the second half of FY26 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25)Previous Mentions (Q4 FY25)Current Period (Q1 FY26)Trend
AI/technology initiativesLaunched AI Master Class; added AI suppliers; AIMC framework for advisers Continued investments in advanced technologies (AI-enabled CX) “Tech Checks” AI-powered engineering support; Smart Series solutions (Smart Warehouse/Smart Retail) Improving
Large deals timingHardware demand improved with return of large deals late in Q3 Q4 benefited from $30–$40M pull-ins Q1 saw delays/fragmentation of large deals; not canceled Choppy/Timing
Margins & supplier programsHigher vendor program recognition boosted margins Mix and recurring revenue supported margins Supplier price actions flowed through inventory turns; ~30 bps gross margin benefit Stable to improving
Recurring revenue mixConsolidated GP recurring mix 36% in Q3; Intelisys growth in CX FY recurring mix ~33%; target to move toward 50% over time Q1 recurring GP share ~31.7% ; continued recurring narrative Stable
Regional trends (Brazil)Weakness from FX and netted-down revenue; insulated profitability Lapping supplier shifts; FX headwinds Brazil net sales −9.6% YoY; −11.4% non-GAAP Deteriorating YoY
Capital allocation/M&ANew $200M repurchase authorization; preference for working-capital-light M&A FY26 outlook; active M&A pipeline; net leverage target 1–2x DataXoom acquisition completed; share repurchases $21M; pipeline remains active Active
Tariffs/macroPassing through supplier price increases; minimal margin impact Choppy tariff/interest rate environment; second-half growth expected Mixed demand; confidence in H2 acceleration reiterated Mixed

Management Commentary

  • Strategic plan centers on enabling partners to deliver converged solutions across hardware, software, connectivity and cloud, supported by new tools (Tech Checks) and Smart Series end-to-end solutions .
  • DataXoom acquisition builds on Advantix to scale managed connectivity, leveraging relationships with AT&T, Verizon and T‑Mobile; expected to be margin accretive .
  • Capital deployment: room for both acquisitions and share repurchases while maintaining 1–2x net leverage target; Q1 buybacks totaled ~$21M .

Selected quotes:

  • “We expect to play an expanded role… from traditional VAR to solution provider and from trusted advisor to technology architect.” — CEO Mike Baur .
  • “We will maintain our discipline in evaluating M&A opportunities… room for both acquisitions and share repurchases.” — CFO Steve Jones .

Q&A Highlights

  • Revenue softness vs market share: Management emphasized focus on profitable growth and GP expansion; does not believe share loss occurred, with mix and supplier additions expected to support top line over time .
  • Supplier program sustainability: CFO quantified ~30 bps consolidated gross margin uplift from prior supplier price actions; expects program evolution toward activity-based earnings to be sustainable .
  • Large deals outlook: Deals are delayed/broken into smaller orders but not canceled; reaffirmed annual guidance based on timing visibility .
  • Inventory valuation method: Weighted average FIFO basis; mix effects contributed to gross margin .
  • Intelisys investments: Double-digit new order growth QoQ and YoY; SG&A investments to accelerate billings growth and expand technical capabilities .

Estimates Context

  • Q1 FY26 revenue missed consensus ($739.7M vs $787.4M*), while non-GAAP EPS beat ($1.06 vs $0.93*), reflecting stronger mix/margins amid fewer large deals .
  • With guidance reaffirmed and commentary that large deals are timing-related, models may adjust near-term revenue cadence downward while increasing margin assumptions in STS and maintaining investment-related OpEx in Intelisys .

* Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed headline: revenue shortfall offset by margin strength and EPS beat; narrative supported by mix and supplier programs; annual guide unchanged — constructive for sentiment if H2 acceleration materializes .
  • Watch deal timing: Management sees delays rather than demand erosion; Q2 seasonality and year-end deal closures are potential near-term catalysts .
  • Margin durability: ~30 bps gross margin benefit from supplier price actions and shift toward netted-down/recurring revenues should continue to underpin profitability .
  • Connectivity strategy: DataXoom + Advantix strengthens managed connectivity offerings; expect margin accretion and potential uplift in mobile device sales via bundled solutions .
  • Capital deployment: Active M&A pipeline alongside buybacks ($21M in Q1); leverage capacity remains ample (cash ~$125M; net leverage ~0x) .
  • Brazil remains a headwind: FX and supplier channel shifts continue to weigh on reported sales; focus remains on profitability and working capital efficiency .
  • Thesis: Execution on converged solutions and recurring revenue growth — especially in AI-enabled CX and managed connectivity — is key to mid-term multiple expansion as revenue re-accelerates in H2 .

Sources: Press release and supplementary info ; Q1 FY26 earnings call ; Prior quarter materials (Q4 FY25 call) ; Q3 FY25 press release/call .