SCSC 10-K & 10-Q changes, risk factors and insider trading

Our operating results could be adversely affected by increased competition for employees, difficulty in recruiting employees, higher voluntary employee turnover or increased compensation and benefit costs. Our employees are important to our success and we are dependent in part on our ability to retain the services of our employees in key roles. We have built our business on a set of core values, and we attempt to hire and retain employees who are committed to these values and our culture of providing exceptional service to our channel sales partners and suppliers. In order to compete and to continue to grow, we must attract, retain and motivate employees, including those in executive, senior management, sales, merchandising, marketing, logistics, technical support and other operating positions.

Supply Chainchain issues, includeincluding a shortage of products, may increase our costs or cause a delay in fulfilling channel sales partner orders, completing services or purchasing products and services needed to support our internal operations, resulting in an adverse impact on our financial results.

In Brazil, we use third parties to provide warehousing and logistics services in order to provide cost-effective operations and scale in certain regions. The failure or inability of one or more of these third parties to deliver products from suppliers to us, or products from us to our channel sales partners, for any reason could disrupt our business and harm our reputation and operating results. We work closely with our third-party logistics and warehousing providers to anticipate issues, and we also review public information regarding their financial health. However, issues may not be timely identified, which may lead to lack of or poor execution of services, loss or litigation. Additionally, deterioration of the financial condition of our logisticallogistics and warehousing providers could result in delayed responsiveness or delivery failure, which would ultimately affect our responsiveness to our channel sales partners and thus may adversely affect our business, financial condition and results of operations.

Meeting our channel sales partners’ needs quickly and fairly is critical to our business success. Transactions with our channel sales partners generally are performed on a purchase order basis rather than under long term supply agreements. Therefore, our channel sales partners can choose to purchase from other sources, such as from competing distributor or directly from the supplier. From time to time, we experience shortages in availability of some products from suppliers, and this impactsmay impact channel sales partnerpartners’ decisions regarding whether to make purchases from us. Anything that negatively influences channel sales partner relations can also negatively impact our operating results. As a distributor in a channel business model our offerings could create channel conflict, and the channel programs offered by our suppliersuppliers can change. These perceived channel conflicts and channel programs changes could impact our channel sales partner relationships and negatively impact our operating results and our ability to retain channel sales partners.

Liquidity and capital resources - Market factors and our business performance may increase the cost andor decrease the availability of capital. Additional capital may not be available to us on acceptable terms to fund our working capital needs and growth.

Our business requires significant levels of capital to finance accounts receivable and product inventory that is not financed by trade creditors. We have an increased demand for capital when our business is expanding, including through acquisitions and organic growth. Changes in payment terms with either suppliers or channel sales partners could also increase our capital requirements. We have historically relied on cash generated from operations, borrowings under our revolving credit facility and secured and unsecured borrowings to satisfy our capital needs and to finance growth. While we believe our existing sources of liquidity will provide sufficient resources to meet our current working capital and cash requirements, if we require an increase in capital to meet our future business needs or if we are unable to comply with covenants under our borrowings, such capital may not be available to us on terms acceptable to us, or at all. We have a multi-currency senior secured credit facility with JPMorganPNC ChaseBank, BankNational N.A.,Associations, as administrative agent, and aother syndicate of bankslenders (the “AmendedNew Credit Agreement”). The AmendedNew Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants such as a Leverage Ratio and Interest Coverage Ratio (each as such term is defined in the AmendedNew Credit Agreement). In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates.

In addition, the cost of borrowings under our existing sources of capital and any potential new sources of capital may increase as a result of variable interest rates may increase,rates, which could have an adverse effect on our financial condition. Changes in how lenders rate our credit worthiness, as well as macroeconomic factors such as an economic downturn, inflation, rising interest rates and global economic instability may restrict our ability to raise capital in adequate amounts or on terms acceptable to us, and the failure to do so could harm our ability to operate our business.

In the ordinary course of our business, we are involved in a wide range of disputes, some of which result in litigation. We are routinely involved in litigation related to commercial disputes surrounding our business activities, intellectual property disputes, employment disputes and accounts receivable collection activity. In addition, as a public company with a large shareholder base, we are susceptible to class-action lawsuits and other litigation resulting from disclosures that we or our officers and directors make (or do not make) and our other activities. Litigation is expensive to bring and to defend, and the outcome of litigation can be adverse and significant. Not all adverse outcomes can be anticipated, and applicable accounting rules do not always require or permit the establishment of a reserve until a final result has occurred or becomes probable and estimable. In some instances we are insured or indemnified for the potential losses; in other instances we are not. An uninsured, under-insured or non-indemnified adverse outcome in significant litigation could have an adverse effect on our business, financial condition and results of operations. We can make no assurances that we will ultimately be successful in any dispute to which we are a party. See Item 3. “Legal Proceedings” for further discussion of our material legal matters.

We currently have significant facilities outside the United States. For fiscal year ending June 30, 2025,2026, approximately 7.9%7.0% of our revenuerevenue, substantially from Brazil, was derived from our operations outside of the United States and Canada.States. These operations are subject to a variety of risks that are different from the risks that we face domestically or are similar risks but with potentially greater exposure. These risks include:

We have substantial operationsoperations, including our new shared services model (SourceHub) in Brazil and face risks related to Brazil's complex tax, labor, trade compliance and consumer protection laws and regulations. Additionally, developing markets such as Brazil have greater political volatility and vulnerability to infrastructure and labor disruptions, are more likely to experience market and interest rate fluctuations and may have higher inflation. In addition, doing business in foreign countries such as Brazil poses additional challenges, such as finding and retaining qualified employees, particularly management-level employees, navigating underdeveloped infrastructure and identifying and retaining qualified suppliers, resellers, advisors and service providers, among other risks. Furthermore, in developing markets, such as Brazil, it may be common for others to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act or similar local anti-bribery laws. Our commitment to legal compliance could put us at a competitive disadvantage, and any lapses in our compliance could subject us to civil and criminal penalties that could materially and adversely affect our financial condition and results of operations.

As a result of intense price competition in our industry, our gross margins and our operating profit margins historically have been narrow, and we expect them to continue to be narrow in the future. To remain competitive, we may be forced to offer more credit or extend payment terms to our channel sales partners. This could result in an increase in our capital requirements, increase our financing costs,costs and bad debt expenses and could have an adverse impact on our financial condition and results of operations. We may lose market share, reduce our prices in response to actions of our competitors, or withdraw from geographical markets where we do not believe we can earn appropriate margins. We expect continued intense competition as current competitors expand their operations and new competitors enter the market. Our inability to compete successfully against current and future competitors could cause our revenue and earnings to decline.

Disruptive technology - We may not be able to respond and adapt to rapid technological changes, evolving industry standards or changing channel sales partner needs or requirements,requirements and thus may become less competitive.

Our ability and our suppliers’ ability to anticipate and react quickly to new technology trends, including artificial intelligence developments, and channel sales partner requirements isare crucial to our overall success, financial condition and results of operations. If our suppliers fail to evolve their product and service offerings, or if we fail to evolve our product and service offerings or to engage with desirable suppliers in time to respond to, and remain ahead of, new technological developments, our ability to retain or increase market share, profit margins and revenue could be adversely affected. Some of our competitors and our suppliers’ competitors may be better at adapting to disruptive technology or entering new markets. Our future success depends, in part, on our ability to adapt and manage our product and service offerings to meet channel sales partner needs at prices that our channel sales partners are willing to pay.

Cybersecurity risk - Ransomware or other cyberattacks,cyberattacks could cause us to lose valuable financial and operational data, we could be prevented from processing channel sales partner orders, ordering and tracking inventory, and efficiently operating our business, and could cause us to lose revenue and profits and incur significant costs. In addition, we could be subject to legal claims in the event of loss, disclosure or misappropriation of, or loss of access to, our channel sales partners’, business partners’ or our own information.

Our financial results, operations and prospects depend significantly on worldwide economic and geopolitical conditions, the demand for our products and services, and the financial condition of our channel sales partners and suppliers. The macroeconomic environment, including the economic impacts of growth outlook, inflation, tariffstariffs, geopolitical conflict and shifting relations between the U.S. and other countries, continues to create significant uncertainty and may adversely affect our consolidated 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. 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 are also mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand. We expect that any price increases from our suppliers resulting from tariffs would be passed through to our channel sales partners. We are mitigating these 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.

Periods of elevated inflation contribute to increased costs for labor, materials and services. Although U.S. inflation rates have shown singssigns of moderating, the re-emergence of high levels of inflation in the countries in which we operate could further increase our costs and otherwise adversely impact our results of operations and financial condition. We monitor changes to the macroeconomic environment; however, we cannot predict any future trends in the rate of inflation or the general state of the economy.

ScanSource is a leading technology distributor connectinguniquely devicespositioned to theaddress cloudcomplex, converging technologies and acceleratingto accelerate 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, CanadaStates and Brazil.

We operate our business under a management structure that enhances our technology distribution growth strategy. Our segmentsSpecialty operateTechnology Solutions segment operates primarily in the United States, CanadaStates and Brazil: and our Intelisys & Advisory segment operates primarily in the United States.

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 primarily 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, HPE/Juniper, Ingenico, Lumen, Microsoft, NiCE, RingCentral, Ubiquiti, Verifone, Verizon, Zebra Technologies and Zoom.

Impact of the Macroeconomic Environment, Including ForecastedGrowth Growth,Outlook, Inflation and Tariffs

The macroeconomic environment, including the economic impacts of forecastedgrowth growth,outlook, inflation,inflationary pressures, tariffs and shiftingevolving relationsgeopolitical between the U.S.conflicts and othertrade countries,relationships, continues to create significant uncertainty and may adversely affect our financial condition and results of operations. In 2025,2026, the U.S. announcedSupreme aCourt varietyinvalidated of additionalthe tariffs onimposed goodsunder fromthe multipleInternational nationsEmergency andEconomic tradingPowers blocksAct and(IEEPA); hashowever, beencertain targeted with reciprocalother tariffs and other retaliatory actionsremain in response. Although the U.S. has announced pauses on certain tariffs, negotiationseffect and the statecurrent ofadministration internationalhas indicated that it will continue seeking to implement tariffs through other statutory authorities. Further, the ongoing conflict with Iran and geopolitical tensions has resulted in volatility in the global energy and commodity markets and increased uncertainty in the macroeconomic environment. International trade policy and relationsdiplomatic dynamics continue to evolve.shift, and the full implications remain uncertain. We areremain mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demanddemand. and weWe 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 tariffsthrough to our channel sales partners.partners any supplier price increases resulting from tariffs or other factors. We are also mitigating related risks through strategic planning and maintaining financial flexibility,flexibility; buthowever, we cannot predict the outcomeeffectiveness of our mitigation strategies or the ultimate impact of tariffs and the global macroeconomic environment on our financial condition or results of operations.

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 forthrough operational excellence. Our differentiated 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.

The Specialty Technology Solutions segment consists of sales to channel sales partners in the United States, CanadaStates and Brazil. During fiscal year 2025,2026, net sales for this segment decreasedincreased $224.8$182.2 million, or 7.1%,6.2%, compared to fiscal year 2024.2025. Excluding the impact from foreign exchange fluctuations and the impact of divestitures and acquisitions, adjustednon-GAAP net sales for fiscal year 20252026 decreasedincreased $212.3$154.6 million, or 6.7%,5.3%, compared to the prior fiscal year. The decreaseincrease in net sales and in adjustednon-GAAP net sales is primarily due to abroad-based more cautious technology spending environmentgrowth in theNorth first half of the fiscal year.America.

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 2025,2026, net sales for this segment increased $5.8$3.0 million, or 6.3%,3.1%, compared to fiscal year 2024.2025. The increase in net sales reflects thehigher additionIntelisys ofsales anand acquisition.higher Resourcive sales. Excluding the impact from foreign exchange rate fluctuations and the impact fromof acquisitions, adjustednon-GAAP net sales decreasedincreased $0.2$2.3 million, or 0.2%,2.3%, compared to the prior year primarily duereflects tohigher aIntelisys more cautious technology spending environment.sales.

For fiscal year 2025,2026, Intelisys net billings, which are amounts billed by suppliers to end users and represents annual recurring revenue, totaled approximately $2.79$2.88 billion, an increase of 4.5%.3.2% Thefrom the prior 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.year.

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. NetGross salesprofit derivedmargin fromin our Intelisys business& contributeAdvisory 100%segment toreflects oura grosshigher profit dollars and margin as they have no associated costcontribution of goodsrecurring sold.revenue which is recorded on a net basis.

For the Specialty Technology Solutions segment, gross profit dollars increased $4.1$26.2 million. GrossHigher marginsales volumes, after considering cost of goods sold, increased gross profit by $19.2 million. Favorable supplier program recognition, offset by unfavorable sales mix positivelyand higher freight cost, 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$7.0 million for the current fiscal year. For the fiscal year ended June 30, 2025,2026, the gross profit margin increased 8822 basis points over the prior-year to 10.6%.10.8%.

For the Intelisys & Advisory segment, gross profit dollars increased $5.4$2.5 million. Higher sales volume, largely due to higher Intelisys sales and the full year impact of our Resourcive acquisitionacquisition, increased gross profit dollars by $5.8$3.0 million. The increase was partially offset by a higher sales mix of professional services of $0.5 million. Gross profit margin decreased 3654 basis points over the prior fiscal year to 99.1%, reflecting the addition of professional services to the sales mix.98.6%.

Selling, general and administrative expenses (“SG&A”) increased $9.5$26.2 million for the fiscal year ended June 30, 20252026 compared to the prior year. The increase in SG&A expenses is primarily attributable to increased costs relatedfor toemployee-related acquisitions.expenses.

Depreciation expense decreased $1.2$4.0 million for the fiscal year ended June 30, 20252026 compared to the prior fiscal year. The decrease is primarily related to certain IT assets that became fully depreciated in the current year.depreciated.

Intangible amortization expense increaseddecreased $3.5$2.5 million for the fiscal year ended June 30, 20252026 compared to the prior fiscal year. The increasedecrease is a result of fully amortized intangible assets acquired in ourthe acquisitionsprior offiscal Advantix and Resourcive.year.

Restructuring and other charges of $5.4$1.8 million for the fiscal year ended June 30, 20252026 increaseddecreased $1.0$3.6 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.plans.

For the Specialty Technology Solutions segment, operating income decreasedincreased $0.6$8.1 million, and the operating margin increased 1413 basis points to 2.2%2.4% for the fiscal year ended June 30, 2025,2026, compared to the prior fiscal year. The decreaseincrease in operating income is primarily due to higher informationsales technologyvolume andfor consultingthe relatedfiscal costs as well as higher amortization related to recent acquisitions.year.

For the Intelisys & Advisory segment, operating income decreasedincreased $3.4$1.4 million with the operating margin decreasingincreasing to 27.7%28.3% for the fiscal year ended June 30, 2025,2026, compared to the prior fiscal year. The decreaseincrease in operating income is largely due to higher costs,sales includingvolume and lower expense for the change in fair value expenseof relatedcontingent to a recent acquisition.consideration.

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 20252026 as compared to 20242025 primarily from lower average borrowings on our multi-currencyterm revolvingloan credit facility.facility and lower interest rates.

Interest income for the fiscal year ended June 30, 20252026 increased compared to the fiscal year ended June 30, 20242025 primarily from increased interest earnedincome on higher cash balances throughoutand thecustomer fiscal year in the United States.receivables.

For the fiscal year ended June 30, 20252026 we recognized a gain of $6.7$0.8 million primarily as a result of an insurance recovery in connection with the cybersecurity attack in the fourth quarter of fiscal 2023.2023 compared to a larger gain of $5.9 million recognized in the prior fiscal year.

Income tax expense for continuing operations was $22.8$24.9 million and $22.8 million for the fiscal years ended June 30, 20252026 and 2024,2025, respectively, reflecting effective tax rates of 24.2%24.0% and 22.8%,24.2%, 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 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 net sales; 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.

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, 2025,2026, the Specialty Technology Solutions and Intelisys & Advisory reporting units' goodwill balances are $159.8$173.9 million and $71.0 million, respectively. The fair value of the reporting units exceeded its carrying value by 2% and more than 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:

Our primary sources of liquidity are cash flows from operations and borrowings under the $350$400 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.vendors, cash generated from operations and revolving lines of credit. In general, as our sales volumesvolume increase,increases, our net investment in working capital typically increases, which typically results in decreased cash flow from operating activities. Conversely, when sales volumesvolume decrease,decreases, 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$88.4 million and $185.5$126.2 million at June 30, 20252026 and 2024,2025, respectively, of which $46.3$35.4 million and $20.0$46.3 million was held outside of the United States as of June 30, 20252026 and 2024,2025, 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, 20252026 and 2024, respectively.2025.

Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, increased $14.6$18.1 million to $538.8 million at June 30, 2026 from $520.7 million at June 30, 2025 from $506.2 million at June 30, 2024,2025, primarily as a result of an increase in accounts receivable.receivable and inventory offset by an increase in accounts payable. 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.

Net cash provided by operating activities was $123.1 million for the fiscal year ended June 30, 2026 and $112.3 million for the fiscal year ended June 30, 2025 and $371.6 million for the fiscal years ended June 30, 2024.2025. The decreaseincrease in cash provided by operating activities for the fiscal year ended June 30, 20252026 is primarily due to an increase in net income and an increase in cash flowsprovided relatedby tochanges in working capital, which decreased $22.5 millioncapital 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.2026.

The number of days sales outstanding ("DSO") was 73 at June 30, 2026 compared to 70 at June 30, 2025 unchanged from June 30, 2024.2025. Throughout fiscal year 2025,2026, DSO ranged from 6668 to 72.74. Inventory turnover was 5.96.6 times during the fourth quarter fiscal year 2025,2026, compared to 5.05.9 times in the fourth quarter of fiscal year 2024.2025. Throughout fiscal year 2025,2026, inventory turnover ranged from 5.05.1 to 5.96.6 times.

Cash used in investing activities was $27.5 million for the fiscal year ended June 30, 2026 compared to $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, 2024.2025. Cash used in investing activities for fiscal yearyears 2026 and 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.

Cash used in financing activities totaled $134.5 million for the fiscal year ended June 30, 2026 primarily due to the repurchase of common stock and repayments on long-term debt. Cash used in financing activities of $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 was primarily due to repayments on the revolving line of credit and the repurchase of common stock.

In April 2025, our Board approved an additional $200 million share repurchase authorization, which supplementssupplemented the existing the $100 million repurchase program authorized in May 2024. The share repurchase authorizations do not have any time limits. In fiscal year 2025,2026, we repurchased 2,483,2992,420,668 shares totaling $106.5$97.5 million. As of June 30, 2025,2026, the Company had approximately $217.1$120.8 million available for repurchases under Board approved authorizations.

WeOn haveDecember 18, 2025, the Company entered into a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banksagreement, (as amended, the “AmendedNew Credit Agreement”). Onwith SeptemberPNC 28,Bank, 2022,National weAssociation, amendedas administrative agent (“PNC”), and restatedthe ourother Amendedlenders Creditparty Agreement,thereto which(the includes“Lenders”), providing for (i) a five-year, $350$400 million multicurrency senior secured revolving credit facility and (ii) a five-year $150$100 million senior secured term loan facility.facility The amendment extended (the revolving“New creditCredit facility maturity date to September 28, 2027.Facilities”). In addition, pursuant to an “accordion feature,” wethe Company may increase ourits borrowings by up to anthe additionalgreater of $250 million,million or 150% of the Company's EBITDA calculated on a Pro Forma Basis (each as defined in the New Credit Agreement), subject to obtaining additional credit commitments from the lendersLenders participating in the increase. The AmendedNew Credit Agreement allows for the issuance of up to $50 million for letters of credit. Borrowings under the AmendedNew Credit Agreement are guaranteedsecured by substantially all of our domesticthe assets of the Company and ourits domestic subsidiaries. Under the terms of the revolving credit facility, the payment of cash dividends is restricted. WeThe Company incurred debt issuance costs of $1.4 million in connection with the amendment and restatement of the AmendedNew 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 ourthe Company’s option, (i) the adjusted termTerm Secured Overnight Financing Rate (“"SOFR”") or adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon ourthe Company’s ratio of (A) total consolidated debt less up to $30 million ofits 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”),applicable, 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 ourthe Company’s 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.ratio.

During the fiscal year ended June 30, 2025,2026, ourthe Company's borrowings under theNew creditCredit facilityAgreement and Prior Credit Agreement were U.S. dollar loans. The spread in effect as of June 30, 20252026 was 1.00%, plus a 0.10% credit spread adjustment1.00% for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect as of June 30, 20252026 was 0.15%. The Amendedeffective interest rates for the term loan were 4.65% and 5.43% as of June 30, 2026 and June 30, 2025, respectively. The New Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants. Specifically, ourthe LeverageCompany’s Ratioleverage ratio must be less than or equal to 3.50 to 1.00 at all times.1.00. In addition, ourthe Company’s Interest Coverage Ratio (as such term is defined in the AmendedNew 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. WeThe wereCompany was in compliance with all covenants under the AmendedNew Credit Agreement as of June 30, 2025.2026.

The average daily balance outstanding on the revolving credit facility, excluding the term loan facility, was $0.3$1.6 million and $71.1$0.3 million during the fiscal yearsyear ended June 30, 20252026 and June 30, 2024,2025, respectively. There was $350.0$400.0 million and $349.9$350.0 million available for additional borrowings as of June 30, 20252026 and 2025, respectively. The effective interest rates for the revolving line of credit were 4.62% and 5.46% as of June 30, 2026 and June 30, 2024,2025, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 20252026 and June 30, 2024.2025.

The macroeconomic environment, including the economic impacts of growth outlook, inflationary pressures, tariffs and evolving geopolitical conflicts and trade relationships, continues to create significant uncertainty and may adversely affect our financial condition and results of operations. In 2025,2026, the U.S. announcedSupreme aCourt varietyinvalidated of additionalthe tariffs onimposed goodsunder fromthe multipleInternational nationsEmergency Economic Powers Act (IEEPA); however, certain other tariffs remain in effect and tradingthe blocks,current promptingadministration reciprocalhas indicated that it will continue seeking to implement tariffs andthrough other retaliatorystatutory actionsauthorities. Further, the ongoing conflict with Iran and geopolitical tensions has resulted in response.volatility in the global energy and commodity markets and increased uncertainty in the macroeconomic environment. International trade policy and diplomatic dynamics continue to shift, and the full implications remain uncertain. We remain mindful of the potential impact these conditions could have on our channel sales partners, suppliers and end-user demand. 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 through to our channel sales partners any supplier price increases resulting from tariffs.tariffs or other factors. We are also mitigating related risks through strategic planning and maintaining financial flexibility,flexibility; howeverhowever, we cannot predict the effectiveness of our mitigation strategies or the ultimate impact of tariffs and the global macroeconomic environment on our financial condition or results of operations.

We have two reportable segments, which are based on sales channels. The following tables summarize our net sales results by operating segment and by geographic location for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 20242025:

The Specialty Technology Solutions segment consists of sales to channel partners primarily in the United States and Brazil. For the quarter ended DecemberMarch 31, 2025,2026, net sales increased $18.3$62.3 million, or 2.5%,9.2%, compared to the prior-year period. Excluding the impact of acquisitions and the impact of foreign exchange rate fluctuations, adjusted net sales increased $11.8$54.1 million, or 1.6%,8.0%, for the quarter ended DecemberMarch 31, 2025.2026. The increase for the quarter is primarily a result of growth across most technologies in North America. For the sixnine months ended DecemberMarch 31, 2025,2026, net sales decreasedincreased $18.6$43.7 million, or 1.3%,2.0%, compared to the prior-year period. Excluding the impact from acquisitions and the impact from foreign exchange rate fluctuations, adjusted net sales decreasedincreased $29.8$24.4 million, or 2.0%,1.1%, for the sixnine months ended DecemberMarch 31, 2025,2026, compared to the prior-year period. The decreaseincrease in net sales for the sixnine months ended March 31, 2026 is primarily due to lowergrowth largeacross deals.most technologies in North America.

The Intelisys & Advisory segment consists of sales and services to both channel partners (Intelisys) and end users (Advisory) in the United States. For the quarter andended sixMarch 31, 2026, net sales decreased $0.4 million, or 1.5%, compared to the prior-year period. The decrease in net sales for the quarter ended March 31, 2026 primarily reflects lower Resourcive sales. For the nine months ended DecemberMarch 31, 2025,2026, net sales increased $0.8$1.3 million, or 3.1%, and $1.7 million, or 3.5%, respectively,1.7%, compared to the prior-year periods. The increase in net sales for the nine months ended March 31, 2026 primarily reflects higher Intelisys organic net sales growth.sales. Excluding the impact from foreign exchange rate fluctuations and the impact of acquisitions, adjusted net sales increased $0.8$0.5 million, or 3.1%, and $0.9 million, or 1.9%,0.7%, for the quarter and sixnine months ended DecemberMarch 31, 2025, respectively. The increase in net sales for the quarter and six months ended December 31, 2025 reflects Intelisys organic net sales growth.2026. Quarterly annualized net billings for Intelisys increased 2.5% over the prior-year quarter to bring annualized net billings tototaled approximately $2.85$2.88 billion.

(b) Countries outside of the United States and Brazil represent less than 5.0% of net sales for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 2024.2025.

The following table summarizes our gross profit for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 20242025:

For the quarter ended DecemberMarch 31, 2025,2026, gross profit dollars for the Specialty Technology Solutions segment increased $0.5$7.4 million, or 0.6%,10.0%, compared to the prior-year quarter. Higher sales volumes, after considering cost of goods sold, increased gross profit by $6.8 million, and favorable supplier recognition program,program impactedincreased gross profit by $2.6$0.6 million. Higher freight costs reduced gross profit by $2.1 million for the quarter. Gross profit margin decreasedincreased 20 basis pointsslightly over the prior-year quarter to 10.5%.11.0%.

For the sixnine months ended DecemberMarch 31, 2025,2026, gross profit dollars increased $5.9$13.3 million, or 3.8%,5.8%, compared to the prior-year period. Favorable sales mix and supplier program recognition positivelyand impactedsales mix increased gross profit by $10.6$8.7 million. Higher freight costsmillion, and lowerhigher sales volume,volumes, after considering cost of goods sold, reducedincreased gross profit by $4.7 million for the six months.million. Gross profit margin increased 5439 basis points over the prior-year quarterperiod to 11.1%.

For the quarter ended DecemberMarch 31, 2025,2026, gross profit dollars for the Intelisys & Advisory segment increaseddecreased $0.7$0.5 million, or 3.0%,1.9%, compared to the prior-year quarter. HigherLower sales volumevolumes, primarily attributable to Intelisys increaseddecreased gross profit for the quarter. Gross profit margin decreased 846 basis points compared to the prior-year quarter to 98.8%.

For the sixnine months ended DecemberMarch 31, 2025,2026, gross profit dollars increased $1.1$0.6 million, or 2.4%,0.9%, compared to the prior-year period. Higher sales volume primarily attributable to Intelisys sales growth increased gross profit for the sixnine months ended March 31, 2026 by $1.6$1.3 million. The increase in gross profit was partially offset by a less favorable sales mix of $0.5$0.7 million due to a higher mix of services. Gross profit margin decreased 10886 basis points over the prior-year quarterperiod to 98.1%.98.3%.

The following table summarizes our operating expenses for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 20242025:

Selling, general and administrative expenses (“SG&A”) increased by $4.2$8.4 million, or 5.7%,12.0%, and $7.8$16.1 million, or 5.3%,7.5%, for the quarter and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the prior-year periods. The increase for the quarter and six-monthnine periodmonths ended DecemberMarch 31, 20252026 is primarily attributable to increased costs for employee-related expenses and costs related to acquisitions. SG&A includes customer specific bad debt expenses in Brazil for the quarter and sixnine months ended DecemberMarch 31, 2025.2026.

The decrease in depreciation expense of $1.5$0.8 million and $2.7$3.6 million during the quarter and sixnine months ended DecemberMarch 31, 2025,2026, respectively, is largely due to certain ERP software assets being fully depreciated in the previous fiscal year.

Restructuring and other charges of $0.3 million and $5.4 million were incurred in the quarter and sixnine months ended DecemberMarch 31, 2024.2025. Restructuring and other charges relate to employee separation and benefit costs in connection with our expense reduction and restructuring plans implemented during the prior fiscal year.

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 $1.2$0.4 million and $1.5$2.0 million in the quarter and sixnine months ended DecemberMarch 31, 2025,2026, respectively. The expense from changes in fair value of contingent consideration for the quarter and sixnine months ended DecemberMarch 31, 20252026 is largely due to the recurring amortization of the unrecognized fair value discount as well as the addition of a new acquisition in the quarter.discount.

The following table summarizes our operating income for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 20242025:

For the IntelisysSpecialty &Technology AdvisorySolutions segment, operating income increased $1.1$0.8 million, or 16.7%,5.9%, and $0.5$1.4 million, or 3.7%, respectively,3.1%, for the quarter and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the prior-year periods. Operating margin increasedwas to2.0% 30.1%and 2.1% for the quarter ended December 31, 2025 and remained consistent at 27.1% for the sixnine months ended DecemberMarch 31, 2025.2026, respectively. The increase in operating income for the quarter comparativeand periodnine months ended March 31, 2026 is primarily drivendue byto higher bygross sales volume.profits.

For the quarter and sixnine months ended DecemberMarch 31, 2025,2026, Corporate operating losses of $0.6$0.2 million and $0.9$1.1 million, respectively, primarily represents acquisition-related costs. For the quarter and sixnine months ended DecemberMarch 31, 2024,2025, Corporate operating losses of $2.1$0.3 million and $7.6$7.9 million, respectively, represent restructuring, acquisition-related costs and a legal settlement incurred in December 2024.

The following table summarizes our total other (income) expense for the quarters and sixnine months ended DecemberMarch 31, 20252026 and 20242025:

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 for the quarter and sixnine months ended DecemberMarch 31, 20252026 compared to the prior-year periods, primarily from lower average borrowings on our multi-currencyterm revolvingloan credit facility and lower interest rates.

Interest income increased for the quarter and sixnine months ended DecemberMarch 31, 20252026 primarilywas generated from higher interest income inon Brazil.cash balances and customer receivables.

Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, which are offset by net foreign exchange forward contracts gains and losses. Foreign exchange gains and losses are primarily generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real,real and the Canadian dollar versus the U.S. dollar, the euro versus the U.S. dollar, and the British pound 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 forward contracts are included in the net foreign exchange losses.

Other net income increaseddecreased for the quarter ended DecemberMarch 31, 2025,2026 compared to the prior-year quarter, due to a $0.8 million insurance recovery in connection with the cybersecurity attack that occurred in fiscal year 2023. Other net income decreased for the sixnine months ended DecemberMarch 31, 20252026 due to a larger insurance recovery of $5.4$6.4 million related to the cybersecurity attack recognized in the prior year period.

For the quarter and sixnine months ended DecemberMarch 31, 2025,2026, income tax expense was $2.9$7.2 million and $10.0$17.2 millionmillion, respectively, reflecting an effective tax rate of 15.1%29.8% and 21.6%,24.4%, respectively. In comparison, for the quarter and sixnine months ended DecemberMarch 31, 2024,2025, income tax expense was $2.7$6.8 million and $8.6$15.4 millionmillion, respectively, reflecting an effective tax rate of 13.5%28.0% and 20.3%,23.1%, respectively. We expect the effective tax rate, excluding discrete items, for fiscal year 2026 to be approximately 27.2%27.9% to 28.2%. See Note 13 - Income Taxes to the Notes to Consolidated Financial Statements for further discussion.

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 quarters ended DecemberMarch 31, 20252026 and 2024,2025, respectively:

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-year period. We also exclude the impact of acquisitions prior to the first full year of operations from the acquisition 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. Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency excluding acquisitions:

Our cash and cash equivalents balance totaled $83.5$120.3 million at DecemberMarch 31, 2025,2026, compared to $126.2 million at June 30, 2025, including $31.1$33.8 million and $46.3 million held outside of the United States at DecemberMarch 31, 20252026 and June 30, 2025, respectively. Checks released but not yet cleared in the amount of $0.2 million and $0.1 million are included in accounts payable at DecemberMarch 31, 20252026 and June 30, 2025, respectively.

Our net investment in working capital, defined as accounts receivable plus inventories less accounts payable, decreased $1.7$52.3 million to $519.0$468.4 million at DecemberMarch 31, 20252026 from $520.7 million at June 30, 2025, primarily fromas a decreaseresult in accounts receivable, partially offset byof an increase in inventoriesaccounts payable and a decrease in accounts payable.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 vendors.

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. Net cash provided by operating activities was $54.1$125.4 million and $38.6$104.7 million for the sixnine months ended DecemberMarch 31, 20252026 and DecemberMarch 31, 2024,2025, respectively. Cash provided by operating activities for the sixnine months ended DecemberMarch 31, 20252026 is primarily attributable to net income and changes in working capital balances. Compared to DecemberMarch 31, 2024,2025, accounts payable and accounts receivable increased 10.8%19.6% and 10.3%,11.7%, respectively.

The number of days sales outstanding ("DSO") was 7174 days at DecemberMarch 31, 2025,2026, compared to 70 days at June 30, 2025 and 6672 days at DecemberMarch 31, 2024.2025. Inventory turned 5.35.4 times during the quarter ended DecemberMarch 31, 2025,2026, compared to 5.9 times during the quarter ended June 30, 2025 and 5.25.0 times in the prior-year quarter ended DecemberMarch 31, 2024.2025.

Cash used in investing activities for the sixnine months ended DecemberMarch 31, 20252026 was $22.7$25.0 million, compared to cash used in investing activities of $58.5$59.9 million in the prior-year period. Cash used in investing activities for the sixnine months ended DecemberMarch 31, 20252026 represents cash paid for acquisitions and capital expenditures. Cash used in investing activities for the sixnine months ended DecemberMarch 31, 20242025 represents cash paid for acquisitions and capital expenditures offset by cash received for disposal of business.

For the sixnine months ended DecemberMarch 31, 20252026 and DecemberMarch 31, 2024,2025, cash used in financing activities totaled $73.3$107.0 million and $52.4$83.4 million, respectively. Cash used in financing activities for the sixnine months ended DecemberMarch 31, 20252026 represents common stock repurchases and repayments on long-term debt and common stock repurchases.debt. Cash used in financing activities for the sixnine months ended DecemberMarch 31, 20242025 is primarily attributable to common stock repurchases.

During the quarter and sixnine months ended DecemberMarch 31, 2025,2026, all of the Company's borrowings under New Credit Agreement and Prior Credit Agreement were U.S. dollar loans. The spread in effect as of DecemberMarch 31, 20252026 was 1.00% for SOFR-based loans and 0.00% for alternate base rate loans. The commitment fee rate in effect at DecemberMarch 31, 20252026 was 0.15%. The effective interest rates for the term loan were 4.72%4.67% and 5.43% as of DecemberMarch 31, 20252026 and June 30, 2025, respectively. The New Credit Agreement includes customary representations, warranties and affirmative and negative covenants, including financial covenants. Specifically, the Company’s leverage ratio must be less than or equal to 3.50 to 1.00. In addition, the Company’s Interest Coverage Ratio (as such term is defined in the New Credit Agreement) must be at least 3.00 to 1.00 at 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. The Company was in compliance with all covenants under the New Credit Agreement at DecemberMarch 31, 2025.2026.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, was $1.7$1.2 million and $0.3 million during the six monthnine-month periods ended DecemberMarch 31, 20252026 and 2024,2025, respectively. There was $400.0 million and $350.0 million available for additional borrowings as of DecemberMarch 31, 20252026 and June 30, 2025, respectively. The effective interest rates for the revolving line of credit were 4.76%4.65% and 5.46% as of DecemberMarch 31, 20252026 and June 30, 2025, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of DecemberMarch 31, 20252026 and June 30, 2025.