ScanSource, Inc. (SCSC) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This summary covers the quarterly period ended December 31, 2025 (Fiscal Q2 2026). ScanSource, Inc. is a leading technology distributor operating primarily in the United States and Brazil. The company serves approximately 25,000 channel sales partners with hardware, SaaS, connectivity, and cloud services through two segments: Specialty Technology Solutions (wholesale/resale) and Intelisys & Advisory (agency model).
Key Financial Metrics
| Metric | Q2 2026 (Current) | Q2 2025 (Prior Year) | 6 Months 2026 (YTD) | 6 Months 2025 (YTD) |
|---|---|---|---|---|
| Net Sales | $766.5 million | $747.5 million | $1,506.2 million | $1,523.1 million |
| Gross Profit | $102.9 million | $101.7 million | $210.4 million | $203.3 million |
| Gross Margin | 13.4% | 13.6% | 14.0% | 13.4% |
| Operating Income | $17.9 million | $18.4 million | $43.8 million | $36.1 million |
| Net Income | $16.5 million | $17.1 million | $36.4 million | $34.0 million |
| Diluted EPS | $0.75 | $0.70 | $1.63 | $1.39 |
| Cash & Equivalents | $83.5 million | $110.5 million (Dec 2024) | N/A | |
| Total Debt | $102.7 million | $136.1 million (June 2025) | N/A | |
| Operating Cash Flow (6mo) | N/A | $54.1 million | $38.6 million |
Material Changes vs. Prior Period
- Revenue Growth: Q2 net sales increased 2.5% year-over-year, driven by growth in North America. However, on a constant currency basis excluding acquisitions, organic sales grew only 1.7% for the quarter and declined 1.9% for the six-month period due to lower large deals and foreign exchange headwinds (Brazil).
- Profitability: Operating income decreased 3.1% in Q2 but increased 21.3% for the six-month period. The six-month improvement was driven by higher gross profits and reduced corporate expenses compared to the prior year, which included significant restructuring and legal settlement costs.
- Acquisitions: The company completed the acquisition of DataXoom in October 2025 for an initial cash price of $18.4 million plus $13.4 million in contingent consideration. This acquisition is included in the Specialty Technology Solutions segment.
- Debt Refinancing: On December 18, 2025, the company entered a new credit agreement providing a $400 million revolving facility and a $100 million term loan, replacing the prior facility with JPMorgan Chase. Total debt decreased from $136.1 million to $102.7 million.
- Share Repurchases: The company repurchased approximately 424,000 shares in Q2, reducing the outstanding share count to 21.6 million.
Guidance, Outlook, and Risks
- Outlook: Management expects the effective tax rate for fiscal year 2026 (excluding discrete items) to be approximately 27.2% to 28.2%. Capital expenditures for fiscal 2026 are projected to range from $8.0 million to $12.0 million.
- Macroeconomic Risks: The company cites significant uncertainty regarding tariffs, inflation, and geopolitical trade relationships. While ScanSource expects to pass through supplier price increases resulting from tariffs, the ultimate impact on demand remains uncertain.
- Cybersecurity: The company continues to incur costs related to the restoration of systems following a cybersecurity attack in fiscal 2023, though insurance recoveries have offset a portion of these costs.
- Foreign Exchange: Fluctuations in the Brazilian Real and Canadian Dollar continue to impact reported results, with foreign exchange headwinds reducing reported sales growth in Brazil by approximately 9.4% on a constant currency basis for the quarter.
Investor Verification Checklist
- Organic Growth Trends: Verify the sustainability of the 1.6% organic growth in the Specialty Technology Solutions segment given the decline in large deals.
- Acquisition Integration: Monitor the performance and earnout progress of the DataXoom acquisition and its impact on the Specialty Technology Solutions segment margins.
- Working Capital Efficiency: Review Days Sales Outstanding (DSO), which increased to 71 days from 66 days a year ago, and inventory turns, which slowed to 5.3 times.
- Tax Rate Volatility: Assess the impact of the "One Big Beautiful Bill Act" and discrete tax items on the projected 27.2% - 28.2% effective tax rate.
- Debt Covenants: Confirm continued compliance with the new leverage ratio (max 3.50x) and interest coverage ratio (min 3.00x) under the PNC credit facility.