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SCANSOURCE, INC. (SCSC)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 delivered year-over-year growth and beat Street estimates: net sales $812.9M (+8.9% YoY) and non-GAAP EPS $1.02; consolidated adjusted EBITDA rose 13% to $38.6M . Versus consensus, revenue beat by ~$36M and EPS beat by ~$0.10* (see Estimates Context).
  • Mix was favorable but hardware strength and late-quarter pull-ins tempered gross margin: gross profit $105.1M (+8.0% YoY) with 12.9% margin (-11 bps YoY); recurring revenue accounted for 31.6% of Q4 gross profit .
  • Segment performance: Specialty Technology Solutions (STS) net sales +9.2% YoY to $788.7M with 10.3% GP margin and 3.6% adj. EBITDA margin; Intelisys & Advisory (I&A) net sales +1.3% YoY to $24.2M with 98.9% GP margin .
  • FY26 outlook introduced: net sales $3.1–$3.3B, adjusted EBITDA $150–$160M, free cash flow ≥$80M; management expects revenue to accelerate in 2H with low single-digit growth in 1H amid a dynamic macro environment .
  • Potential stock reaction catalysts: clear beat on Q4 EPS/revenue vs consensus*, improved adjusted ROIC (14.9% in Q4), continued buybacks ($25M in Q4, $107M FY25), and new 3-year goals focused on recurring revenue and margin expansion .

What Went Well and What Went Wrong

What Went Well

  • STS drove the quarter: North America hardware strength and large-deal activity late in Q4, with mobility and barcode, physical security, and managed connectivity showing double-digit growth; estimated $30–$40M revenue pull-ins boosted results .
  • Profitability metrics expanded: adjusted EBITDA +13% YoY to $38.6M (4.75% margin) and non-GAAP EPS +27.5% YoY to $1.02 .
  • Strategic positioning and AI push: management emphasized hardware+software+services convergence and introduced LaunchPoint to onboard innovative growth suppliers (smart warehouse, private cellular, robotics, drones, IoT); narrative ties AI into channel solutions .

What Went Wrong

  • Gross margin slightly compressed despite mix tailwinds: 12.9% vs 13.0% prior year due to a higher hardware mix and large deals carrying lower margin profiles .
  • Brazil remained a headwind: Q4 Brazil net sales down 17.4% YoY reported; FX and “netted-down” revenue dynamics weigh on top line, though management sees lapping of supplier shifts and local-currency growth .
  • I&A segment adj. EBITDA declined 4% YoY amid increased SG&A investment to drive future billings growth and expand capabilities in AI and CX .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ2 FY25Q3 FY25Q4 FY25
Net Sales ($USD Millions)$747.497 $704.847 $812.886
Gross Profit ($USD Millions)$101.723 $100.202 $105.102
Gross Profit Margin %13.6% 14.2% 12.9%
GAAP Diluted EPS ($)$0.70 $0.74 $0.88
Non-GAAP Diluted EPS ($)$0.85 $0.86 $1.02
Adjusted EBITDA ($USD Millions)$35.299 $35.053 $38.639
Adjusted EBITDA Margin %4.72% 4.97% 4.75%

Q4 FY25 vs Wall Street Consensus (S&P Global)

MetricConsensusActualBeat/Miss
Revenue ($USD Millions)$776.933*$812.886 Beat*
Primary EPS ($)$0.923*$1.02 Beat*

Values marked with * were retrieved from S&P Global.

Segment Breakdown – Q4 FY25

SegmentNet Sales ($USD Millions)YoY ChangeGross Profit ($USD Millions)Gross Profit Margin %Adj. EBITDA Margin %
Specialty Technology Solutions$788.708 +9.2% $81 10.3% 3.6%
Intelisys & Advisory$24.178 +1.3% $24 98.9% N/A (adj. EBITDA down 4% YoY)

KPIs and Cash Metrics

KPIQ2 FY25Q3 FY25Q4 FY25
Recurring Revenue as % of Gross Profit32.4% 36.0% 31.6%
Adjusted ROIC %13.3% 13.6% 14.9%
Operating Cash Flow ($USD Millions)$(6.190) $66.058 $7.644
Free Cash Flow ($USD Millions)$(8.164) $64.638 $5.126
Cash & Equivalents ($USD Millions)$110.520 (Dec 31) $146.287 (Mar 31) $126.157 (Jun 30)
Net Debt Leverage (TTM Adj. EBITDA)~0.2x ~0x ~0x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY26N/A$3.1 – $3.3 New
Adjusted EBITDA ($USD Millions)FY26N/A$150 – $160 New
Free Cash Flow ($USD Millions)FY26N/A≥ $80 New
Revenue cadenceFY26N/A2H acceleration; 1H low single-digit growth expected New
Capital allocationFY26N/ATarget net leverage 1–2x; room for both M&A and repurchases New
3-Year Strategic GoalsFY26–FY28Prior mid-term goals deliveredGP growth CAGR 5–7%; recurring GP to 50%; adj. EBITDA margin ~6%; FCF conversion 80%+; adj. ROIC mid-teens Updated framework

Earnings Call Themes & Trends

TopicQ2 FY25 (Prior-2)Q3 FY25 (Prior-1)Q4 FY25 (Current)Trend
AI/technology initiativesChannel Exchange launched to enable SaaS; AI certifications and training for advisers 9 new AI/cyber suppliers; AI Master Class and AIMC framework for idea-to-execution LaunchPoint team to scale emerging tech (smart warehouse, private cellular, robotics, drones, IoT); AI central to converged solutions Increasing emphasis
Supply chain/large dealsDouble-digit decline in large deals; softer demand Hardware demand improved; return of large deals late in quarter Late-quarter pull-ins added ~$30–$40M revenue; mix impact on margins Improving but lumpy
Tariffs/macroCautious tech spending environment Tariff policies fluid; pass-through with minimal margin impact Macro remains dynamic; 1H FY26 low single-digit growth; 2H acceleration expected Stabilizing headwind
Regional trends (Brazil)Brazil sales down; FX/netted-down revenue dynamics Lower Brazil sales and FX headwinds Q4 Brazil down YoY; lapping supplier shift soon; local-currency growth Stabilizing
Product performanceBarcode/mobility, physical security, mobile connectivity showed growth Mobility/barcode, networking, physical security, payment terminals, wireless up YoY North America STS growth led by mobility/barcode; several large deals Improving
Capital allocationShare repurchases $24M; target leverage 1–2x New $200M repurchase authorization; repurchases $29M; active M&A pipeline Repurchases $25M; active M&A pipeline; leverage target reiterated Consistent execution

Management Commentary

  • “We see hardware plus software plus services convergence as the future of technology distribution… building capabilities end users require and our partners demand in our converging technology ecosystem.”
  • “We estimate the pull-ins contributed $30,000,000 to $40,000,000 of revenue in Q4… gross profits followed revenues growing 8% year over year.”
  • “Full year net sales totaled just over $3,000,000,000… gross profit margins increased 120 basis points year over year to 13.4% and adjusted EBITDA margins increased 45 basis points to 4.76%.”
  • “We will maintain a targeted net debt leverage of one to two times adjusted EBITDA… [FY26] net sales $3.1–$3.3B; adjusted EBITDA $150–$160M; at least $80M in free cash flow… revenue will accelerate in the second half.”
  • “LaunchPoint… signed contracts with companies enhancing our smart warehouse initiative, including private cellular networks, robotics, drones and additional IoT solutions.”

Q&A Highlights

  • Free cash flow conversion and capital allocation: inclusion of FCF conversion in new goals underpins a “cash culture”; balance acquisitions and shareholder returns while maintaining 1–2x leverage .
  • Intelisys competitiveness and investments: new partner segmentation to focus on growth partners; “revenue accelerator” co-investment program; Channel Exchange enabling supplier onboarding (Sophos, Trustifi) with AI/CX momentum; sequential revenue softness acknowledged with plans to rebuild through FY26 .
  • Large deals and margin dynamics: large deals typically carry lower margins; mix of recurring revenues helps offset margin pressure as large projects return .
  • Brazil outlook: local-currency growth and lapping supplier channel changes should help; FX and net revenue reporting complicate top-line optics; profitability insulated via local costs .
  • Market consolidation (Zebra/Elo): management expects potential creation of new retail solutions; converged offerings likely to still require multi-vendor components where ScanSource participates .

Estimates Context

  • Q4 FY25 beat: revenue $812.9M vs $776.9M consensus; EPS $1.02 vs $0.92 consensus* .
  • Prior quarters: Q3 FY25 beat on EPS ($0.86 vs $0.78*) but missed on revenue ($704.8M vs $777.9M*); Q2 FY25 missed on both EPS ($0.85 vs $0.91*) and revenue ($747.5M vs $847.6M*) .
  • Implications: Q4 beat and FY26 guidance may drive upward estimate revisions for margin/FCF; vigilance needed on potential normalization after late-quarter pull-ins of $30–$40M .

Values marked with * were retrieved from S&P Global.

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue Consensus Mean ($USD Millions)847.600*777.925*776.933*
Revenue Actual ($USD Millions)747.497 704.847 812.886
Primary EPS Consensus Mean ($)0.9067*0.7750*0.9233*
Primary EPS Actual ($)0.85 0.86 1.02

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Q4 execution was strong with broad-based STS growth and clear beats vs consensus*, but margin nuance reflects large-deal and hardware mix; recurring revenue continues to underpin profitability resilience .
  • The ~$30–$40M of late-quarter pull-ins suggests some revenue timing; monitor Q1 FY26 for normalization in large deals and hardware cadence .
  • FY26 guide implies back-half weighted revenue acceleration and ongoing margin expansion; capital allocation flexibility (M&A + buybacks) retained with a disciplined 1–2x leverage target .
  • Three-year goals (recurring GP to 50%, ~6% adj. EBITDA margin, 80%+ FCF conversion, mid-teens ROIC) reframe the medium-term thesis toward higher-quality, cash-generative growth .
  • Intelisys is undergoing strategic repositioning; near-term investment weighs on segment EBITDA, but AI/CX supplier adds and Channel Exchange capability should improve billings trajectory through FY26 .
  • Brazil remains a top-line headwind on reported basis due to FX and netted-down revenue; profitability and working capital discipline mitigate risk as local dynamics normalize .
  • Continued repurchases ($25M in Q4; $107M FY25) provide a shareholder return anchor while M&A targets aim to accelerate recurring and high-margin growth .