SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

ScanSource, Inc.

South Carolina

(State of Incorporation)

57-0965380

(I.R.S. Employer Identification No.)

6 Logue Court

Greenville, South Carolina 29615

(864) 288-2432


Securities registered pursuant to Section 12(b) of the Act:
Title of each class:		Trading Symbol:	Name of exchange on which registered:
Common stock, no par value		SCSC
	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x☒

Smaller reporting company

☐

Accelerated filer

¨☐

~~Accelerated filer~~

Emerging growth company

☐

Non-accelerated filer

¨☐

~~Non-accelerated filer~~

~~(Do not check if a smaller reporting company)~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class			Outstanding at January 31, 2024

~~Class~~	~~Outstanding at February 2, 2018~~
Common Stock, no par value per share		~~25,571,355~~25,170,468 shares

SCANSOURCE, INC.

INDEX TO FORM 10-Q

December 31, ~~2017~~2023



		Page #
PART I. FINANCIAL INFORMATION

Item 1.			Financial Statements			45

~~Item 1.~~	~~Financial Statements~~			4
	Condensed Consolidated Balance Sheets ~~as of~~ (unaudited) at December 31, ~~2017~~2023 and June 30, ~~2017~~2023	45
			Condensed Consolidated Income Statements (unaudited) for the ~~Quarter~~Quarters and Six Months Ended December 31 ~~2017~~, 2023 and ~~2016~~2022			56
			Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~(unaudited) for the ~~Quarter~~ Quarters and Six Months Ended December 31 ~~2017~~, 2023 and ~~2016~~2022			67
			Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the Quarters and Six Months Ended December 31 , 2023 and 2022			8
			Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended December 31 ~~2017~~, 2023 and ~~2016~~2022			710
			Notes to Condensed Consolidated Financial Statements (unaudited)			811
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			2625
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			3943
Item 4.			Controls and Procedures			4044

PART II. OTHER INFORMATION

Item 1.			Legal Proceedings			4145

Item 1	~~Legal Proceedings~~1A.	41Risk Factors			45
Item ~~1A.~~2.			~~Risk Factors~~			41
~~Item 2~~	Unregistered Sales of Equity Securities and Use of Proceeds	4145
Item 6.5.			~~Exhibits~~Other Information			4246
Item 6.
~~SIGNATURES~~Exhibits		4347

SIGNATURES						48

Table of Contents

FORWARD-LOOKING STATEMENTS

~~We include forward-looking~~Forward-looking statements are included in the "Risk Factors," "Legal Proceedings," "Management’s Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk" ~~and "Risk Factors"~~ sections and elsewhere herein. ~~These statements generally can be identified by words~~Words such as "expects," "anticipates," "believes," "intends," "plans," "hopes," "forecasts," "seeks," "estimates," "goals," "projects," "strategy," "future," "likely," "may," "should," and variations of such words and similar ~~expressions.~~expressions generally identify such forward-looking statements. Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form ~~10-Q or to reflect the occurrence of unanticipated events.~~10-Q. Actual results could differ materially from those ~~suggested by~~anticipated in these forward-looking statements as a result of a number of factors including, but not limited to the following factors, which are neither presented in order of importance nor weighted: macroeconomic conditions, including potential prolonged economic weakness, inflation and supply chain challenges, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting ~~our overseas~~the Company's international operations, risk to the ~~impact of tax reform laws, the~~Company's business from a cyber attack, a failure of ~~acquisitions to meet our expectations,~~ the Company's IT systems, failure to ~~manage~~hire and ~~implement our organic growth strategy, credit risks involving our larger~~retain quality employees, loss of the Company's major customers, relationships with the Company's key suppliers and ~~vendors,~~sales partners or a termination ~~of our relationship with key vendors~~ or a significant modification of the terms under which ~~we operate~~it operates with ~~a key vendor,~~such suppliers and sales partners, changes in the ~~decline in demand for the products~~Company's operating strategy and ~~services that we provide, reduced prices for the products and services that we provide due both to competitor and customer actions, and the~~ other factors set forth in "Risk Factors" contained in our Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2023.

Table of Contents

PART I. FINANCIAL INFORMATION



Item 1.	Financial Statements

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share information)


	December 31, 2023		June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	44,987	$	36,178
Accounts receivable, less allowance of $19,243 at December 31, 2023 and $15,480 at June 30, 2023	662,799		753,236
Inventories	575,137		757,574
Prepaid expenses and other current assets	122,272		110,087

Total current assets	1,405,195		1,657,075
Property and equipment, net	36,546		37,379
Goodwill	208,214		216,706
Identifiable intangible assets, net	45,313		68,495
Deferred income taxes	19,478		17,764
Other non-current assets	66,059		70,750

Total assets	$	1,780,805	$	2,068,169
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	540,642	$	691,119
Accrued expenses and other current liabilities	58,460		78,892

Income taxes payable	3,653		9,875

Current portion of long-term debt	7,857		6,915

Total current liabilities	610,612		786,801
Deferred income taxes	—		3,816
Long-term debt, net of current portion	139,899		144,006
Borrowings under revolving credit facility	20,878		178,980

Other long-term liabilities	55,815		49,268

Total liabilities	827,204		1,162,871
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued	—		—
Common stock, no par value; 45,000,000 shares authorized, 25,154,469 and 24,844,203 shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively	63,983		58,241
Retained earnings	984,836		936,678
Accumulated other comprehensive loss	(95,218)		(89,621)
Total shareholders’ equity	953,601		905,298
Total liabilities and shareholders’ equity	$	1,780,805	$	2,068,169

June 30, 2023 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.

December 31, 2017 June 30, 2017
Assets
Current assets:
Cash and cash equivalents $ 35,435
$ 56,094
Accounts receivable, less allowance of $47,264 at December 31, 2017 and $44,434 at June 30, 2017 717,336
637,293
Inventories 581,802
531,314
Prepaid expenses and other current assets 76,667
56,322
Total current assets 1,411,240
1,281,023
Property and equipment, net 76,626
56,566
Goodwill 302,912
200,881
Identifiable intangible assets, net 148,443
101,513
Deferred income taxes 11,794
29,491
Other non-current assets 54,267
48,829
Total assets $ 2,005,282
$ 1,718,303
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt $ 104
$ —
Accounts payable 515,302
513,155
Accrued expenses and other current liabilities 97,597
104,715
Current portion of contingent consideration 38,629
30,675
Income taxes payable 5,086
7,730
Total current liabilities 656,718
656,275
Deferred income taxes 11,110
2,008
Long-term debt 5,325
5,429
Borrowings under revolving credit facility 355,503
91,871
Long-term portion of contingent consideration 58,402
83,361
Other long-term liabilities 57,437
42,214
Total liabilities 1,144,495
881,158
Commitments and contingencies

Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued —
—
Common stock, no par value; 45,000,000 shares authorized, 25,571,355 and 25,431,845 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively
64,896
61,169
Retained earnings 861,296
849,180
Accumulated other comprehensive income (loss) (65,405 ) (73,204 )
Total shareholders’ equity 860,787
837,145
Total liabilities and shareholders’ equity $ 2,005,282
$ 1,718,303

June 30, 2017 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Net sales $ 1,032,212
$ 904,792
$ 1,956,771
$ 1,837,357
Cost of goods sold 919,241
806,258
1,737,883
1,647,289
Gross profit 112,971
98,534
218,888
190,068
Selling, general and administrative expenses 74,763
66,880
147,950
130,145
Depreciation expense 3,467
2,423
6,707
4,492
Intangible amortization expense 5,487
4,165
10,498
7,320
Change in fair value of contingent consideration 6,913
1,791
23,794
1,961
Operating income 22,341
23,275
29,939
46,150
Interest expense 2,285
912
3,870
1,501
Interest income (580 ) (892 ) (1,462 ) (1,908 )
Other (income) expense, net 326
(12,526 ) 441
(11,948 )
Income before income taxes 20,310
35,781
27,090
58,505
Provision for income taxes 12,341
12,745
14,974
20,653
Net income $ 7,969
$ 23,036
$ 12,116
$ 37,852
Per share data:
Net income per common share, basic $ 0.31
$ 0.92
$ 0.48
$ 1.49
Weighted-average shares outstanding, basic 25,506
25,146
25,470
25,334

Net income per common share, diluted $ 0.31
$ 0.91
$ 0.47
$ 1.48
Weighted-average shares outstanding, diluted 25,648
25,285
25,612
25,490


	Quarter ended				Six months ended
	December 31,				December 31,
	2023		2022		2023		2022
Net sales	$	884,792	$	1,011,241	$	1,761,098	$	1,955,054
Cost of goods sold	784,044		895,907		1,553,842		1,726,236
Gross profit	100,748		115,334		207,256		228,818
Selling, general and administrative expenses	66,921		69,074		142,356		140,667
Depreciation expense	2,964		2,678		5,759		5,441
Intangible amortization expense	4,037		4,150		8,230		8,391


Operating income	26,826		39,432		50,911		74,319
Interest expense	3,359		5,060		8,945		8,507
Interest income	(2,119)		(2,027)		(3,444)		(3,618)
Gain on sale of business	(14,533)		—		(14,533)		—
Other expense, net	73		207		750		955
Income before income taxes	40,046		36,192		59,193		68,475
Provision for income taxes	7,320		10,458		11,035		18,699


Net income	$	32,726	$	25,734	$	48,158	$	49,776

Per share data:


Net income per common share, basic	$	1.31	$	1.02	$	1.93	$	1.97
Weighted-average shares outstanding, basic	25,035		25,287		24,961		25,244



Net income per common share, diluted	$	1.29	$	1.01	$	1.91	$	1.96
Weighted-average shares outstanding, diluted	25,334		25,502		25,235		25,454



See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Net income $ 7,969
$ 23,036
$ 12,116
$ 37,852
Unrealized gain on hedged transaction, net of tax 320
—
349
—
Foreign currency translation adjustment (2,435 ) (8,625 ) 7,450
(9,563 )
Comprehensive income $ 5,854
$ 14,411
$ 19,915
$ 28,289


	Quarter ended				Six months ended
	December 31,				December 31,
	2023		2022		2023		2022
Net income	$	32,726	$	25,734	$	48,158	$	49,776
Unrealized (loss) gain on hedged transaction, net of tax	(1,547)		3		(1,395)		1,882
Realized foreign currency gain on sale of business	3,805		—		3,805		—
Foreign currency translation adjustment	(1,118)		7,401		(8,007)		184
Comprehensive income	$	33,866	$	33,138	$	42,561	$	51,842



See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(In thousands, except share information)


	Common Stock (Shares)	Common Stock (Amount)		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at June 30, 2023	24,844,203	$	58,241	$	936,678	$	(89,621)	$	905,298
Net income	—	—		15,432		—		15,432
Unrealized gain on hedged transaction, net of tax	—	—		—		153		153
Foreign currency translation adjustment	—	—		—		(6,890)		(6,890)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	116,028	(1,510)		—		—		(1,510)

Share-based compensation	—	2,770		—		—		2,770

Balance at September 30, 2023	24,960,231	$	59,501	$	952,110	$	(96,358)	$	915,253
Net income	—	—		32,726		—		32,726
Unrealized loss on hedged transaction, net of tax	—	—		—		(1,547)		(1,547)
Foreign currency translation adjustment	—	—		—		(1,118)		(1,118)
Realized foreign currency translation gain from disposal of a business	—	—		—		3,805		3,805
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	230,543	3,162		—		—		3,162
Common stock repurchased	(36,305)	(1,251)		—		—		(1,251)
Share-based compensation	—	2,571		—		—		2,571

Balance at December 31, 2023	25,154,469	$	63,983	$	984,836	$	(95,218)	$	953,601








See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(In thousands, except share information)


	Common Stock (Shares)	Common Stock (Amount)		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at June 30, 2022	25,187,351	$	64,297	$	846,869	$	(104,638)	$	806,528
Net income	—	—		24,042		—		24,042
Unrealized gain on hedged transaction, net of tax	—	—		—		1,879		1,879
Foreign currency translation adjustment	—	—		—		(7,217)		(7,217)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	38,551	(586)		—		—		(586)

Share-based compensation	—	2,358		—		—		2,358
Balance at September 30, 2022	25,225,902	$	66,069	$	870,911	$	(109,976)	$	827,004
Net income	—	—		25,734		—		25,734
Unrealized gain on hedged transaction, net of tax	—	—		—		3		3
Foreign currency translation adjustment	—	—		—		7,401		7,401

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	117,112	(1,112)		—		—		(1,112)

Share-based compensation	—	3,356		—		—		3,356
Balance at December 31, 2022	25,343,014	$	68,313	$	896,645	$	(102,572)	$	862,386








See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


	Six months ended
	December 31,
	2023		2022
Cash flows from operating activities:
Net income	$	48,158	$	49,776


Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gain on sale of business	(14,533)		—
Depreciation and amortization	14,475		14,285
Amortization of debt issue costs	193		385
Provision for doubtful accounts	4,472		33
Share-based compensation	5,340		5,679

Deferred income taxes	(1,703)		932



Finance lease interest	46		24
Changes in operating assets and liabilities:
Accounts receivable	75,579		(49,541)
Inventories	182,168		(146,826)
Prepaid expenses and other assets	(11,576)		30,487
Other non-current assets	3,208		(7,168)
Accounts payable	(135,138)		33,820
Accrued expenses and other liabilities	(7,678)		(13,268)
Income taxes payable	(6,254)		6,036
Net cash provided by (used in) operating activities	156,757		(75,346)
Cash flows from investing activities:
Capital expenditures	(4,865)		(4,262)

Proceeds from sale of business, net of cash transferred	17,978		—

Net cash provided by (used in) investing activities	13,113		(4,262)
Cash flows from financing activities:

Borrowings on revolving credit, net of expenses	1,134,629		1,232,058
Repayments on revolving credit, net of expenses	(1,292,729)		(1,137,897)
(Repayments) borrowings on long-term debt, net	(3,165)		17,465
Repayments on finance lease obligation	(442)		(492)
Debt issuance costs	—		(1,407)

Exercise of stock options	4,309		634
Taxes paid on settlement of equity awards	(2,657)		(2,332)
Common stock repurchased	(1,251)		—

Net cash (used in) provided by financing activities	(161,306)		108,029
Effect of exchange rate changes on cash and cash equivalents	245		37
Increase in cash and cash equivalents	8,809		28,458
Cash and cash equivalents at beginning of period	36,178		37,987
Cash and cash equivalents at end of period	$	44,987	$	66,445

See accompanying notes to these condensed consolidated financial statements.

Six months ended
December 31,
2017 2016
Cash flows from operating activities:
Net income $ 12,116
$ 37,852
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 18,766
11,812
Amortization of debt issuance costs 158
148
Provision for doubtful accounts 5,331
4,007
Share-based compensation 3,233
3,147
Deferred income taxes (1,540 ) (57 )
Excess tax benefits from share-based payment arrangements —
(88 )
Change in fair value of contingent consideration 23,794
1,961
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (72,975 ) (49,791 )
Inventories (37,749 ) 40,792
Prepaid expenses and other assets (10,081 ) (20,805 )
Other non-current assets (4,775 ) (1,205 )
Accounts payable (11,524 ) (12,863 )
Accrued expenses and other liabilities (5,654 ) 13,892
Income taxes payable (3,283 ) 6,929
Net cash (used in) provided by operating activities (84,183 ) 35,731
Cash flows from investing activities:
Capital expenditures (3,296 ) (3,261 )
Cash paid for business acquisitions, net of cash acquired (143,768 ) (83,804 )
Net cash (used in) investing activities (147,064 ) (87,065 )
Cash flows from financing activities:
Borrowings on revolving credit 1,279,193
829,141
Repayments on revolving credit (1,015,672 ) (764,332 )
Debt issuance costs (296 ) —
Repayments on capital lease obligation (281 ) (123 )
Contingent consideration payments (54,025 ) (10,241 )
Exercise and issuance of equity awards 2,126
4,217
Taxes paid on settlement of equity awards (1,616 ) (1,736 )
Repurchase of common stock —
(20,882 )
Excess tax benefits from share-based payment arrangements —
88
Net cash provided by financing activities 209,429
36,132
Effect of exchange rate changes on cash and cash equivalents 1,159
(1,127 )
Decrease in cash and cash equivalents (20,659 ) (16,329 )
Cash and cash equivalents at beginning of period 56,094
61,400
Cash and cash equivalents at end of period $ 35,435
$ 45,071

See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Business and Summary of Significant Accounting Policies

Business Description

ScanSource,, Inc. (together with its subsidiaries referred to as “the Company” or “ScanSource”) is a leading ~~global provider~~hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, Software as a Service ("SaaS"), connectivity and cloud. The Company brings technology solutions and services from the world’s leading suppliers of ~~technology products~~mobility and ~~solutions. ScanSource, Inc.~~barcode, point-of-sale ("POS"), payments, networking, physical security, unified communications and ~~its subsidiaries (the "Company") provide value-added solutions from technology suppliers~~collaboration, telecom and ~~sell~~cloud services to ~~customers in specialty technology markets through its Worldwide Barcode, Networking & Security segment and Worldwide Communications & Services segment.~~

market. The Company operates in the United States, Canada, Latin America and Europe. The Company sells products into the United States and Canada principally from a facility located in Mississippi; into Latin America principally from facilities located in Florida, Mexico, Brazil ~~and Colombia; and into Europe from facilities located in Belgium, France, Germany~~ and the United ~~Kingdom.~~Kingdom ("UK"). The Company's two operating segments, Specialty Technology Solutions and Modern Communications & Cloud, are based on technology type and are generally related to technology devices and communication, connectivity and cloud services, respectively.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared by the Company’s management in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of normal recurring and non-recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position ~~as of~~ at December 31, ~~2017~~2023 and June 30, ~~2017~~,2023, the results of operations for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016~~,2022, the condensed consolidated statements of comprehensive income for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016~~,2022, the condensed consolidated statements of shareholders' equity for the quarters and six months ended December 31, 2023 and 2022 and the condensed consolidated statements of cash flows for the six months ended December 31, ~~2017~~2023 and ~~2016~~.2022. The results of operations for the ~~quarters~~quarter and six months ended December 31, ~~2017~~ ~~and~~ ~~2016~~2023 are not necessarily indicative of the results to be expected for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~.2023. Unless otherwise indicated, disclosures provided in the Notes pertain to continuing operations only.

Summary of Significant Accounting Policies

~~Except as described below, there~~There have been no material changes to the Company’s significant accounting policies for the six months ended December 31, ~~2017~~2023 from the policies described in the notes to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~.2023. For a discussion of the Company’s significant accounting policies, please see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~.2023.

Cash and Cash Equivalents

The Company considers all highly-liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company maintains zero-balance disbursement accounts at various financial institutions at which the Company does not maintain significant depository relationships. Due to the terms of the agreements governing these accounts, the Company generally does not have the right to offset outstanding checks written from these accounts against cash on hand, and the respective institutions are not legally obligated to honor the checks until sufficient funds are transferred to fund the checks. As a result, checks released but not yet cleared from these accounts in the ~~amounts~~amount of ~~$7.5 million~~ ~~and $8.3~~$8.0 million are included in accounts payable ~~as of~~ on the condensed consolidated balance sheets at December 31, ~~2017~~2023 and June 30, ~~2017, respectively.~~2023.

Long-lived Assets

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The Company presents depreciation expense and intangible amortization expense ~~individually~~ on the ~~Condensed Consolidated Income Statements.~~condensed consolidated income statements. The Company's depreciation expense related to selling, general and administrative costs totaled ~~$3.5~~$3.0 million and ~~$6.7~~$5.8 million for the quarter and six months ended December 31, ~~2017~~2023 and ~~$2.4~~$2.7 million and ~~$4.5~~$5.4 million for the quarter and six months ended December 31, ~~2016, respectively.~~2022. Depreciation expense reported as part of cost of goods sold on the ~~Condensed Consolidated Income Statements~~condensed consolidated income statements totaled ~~$0.9~~$0.3 million and ~~$1.6~~$0.5 million for the quarter and six months ended December 31, ~~2017. There was no depreciation expense reported as part of cost of goods sold prior to~~2023 and $0.2 million and $0.5 million for the ~~acquisition of POS Portal on July~~quarter and six months ended December 31, ~~2017.~~2022. The Company's intangible amortization expense reported on the ~~Condensed Consolidated Income Statements relate~~condensed consolidated income statements relates to selling, general and administrative costs, not the cost of selling goods. Intangible amortization expense totaled ~~$5.5~~$4.0 million and ~~$10.5~~$8.2 million for the quarter and six months ended December 31, ~~2017~~2023 and $4.2 million and ~~$7.3~~$8.4 million for the quarter and six months ended December 31, ~~2016, respectively.~~2022.

Recent Accounting Pronouncements

In ~~May 2014,~~July 2023, the Securities and Exchange Commission issued final rules that require new and enhanced disclosures on cybersecurity risk management, strategy, governance, and incident reporting. Under the final rules, companies must report material cybersecurity incidents within four business days of determining the incident is material on Form 8-K. As additional information about the material aspects of the previously reported incidents become available, a Form 8-K/A must be filed with the additional disclosures. These disclosure requirements on Form 8-K were effective beginning December 18, 2023. For fiscal years ending on or after December 15, 2023, companies must disclose their cybersecurity processes, management's role in cybersecurity governance, and cybersecurity oversight by the Board of Directors on Form 10-K.

In November 2023, the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) issued ~~a comprehensive new revenue recognition standard for contracts with customers~~ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that ~~will supersede most current revenue recognition guidance, including industry-specific guidance under Accounting Standards Update ("ASU") 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(Topic 606). In March, April, May~~are regularly provided to the chief operating decision maker and ~~December 2016 the FASB issued additional ASUs to provide supplemental adoption guidance and clarification to ASU 2014-09. The core principle~~included within each reported measure of ~~this standard is that an entity should recognize revenue to depict the transfer of promised goods~~segment profit or ~~services to customers in~~loss, an amount ~~that reflects the consideration to which the entity expects to be entitled in exchange~~and description of its composition for those goods or services. To achieve this core principle, the standard provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. This guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The new standard is effective for fiscal years,other segment items, and interim periods within those years, beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2018. The Company is currently in the process of evaluating the impact of this guidance on our consolidated financial results to determine the appropriate transition method for the Company. The Company has engaged a third-party consultant to assist with developing a multi-phase plan to assess the impact of adoption and is currently in the process of finalizing its conclusions on several aspects of the standard including principal versus agent considerations, identification of performance obligations, and the determination of when control of goods and services transfers to the Company’s customers. Additionally, the Company is in the process of evaluating the impact of the expanded disclosure requirements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ requiring lessees to reflect most leases on their balance sheets and recognize expenses on their income statements. Under the new guidance, lessees will be required to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the usedisclosures of a ~~specified asset for the lease term. The asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received,~~reportable segment’s profit or loss and the lessee's initial direct costs. For leases with a lease term of 12 months or less, as long as the lease does not include options to purchase the underlying assets, lessees can elect not to recognize a lease liability and right-of-use asset. Under the new guidance, lessor accounting is largely unchanged, and the accounting for sale and leaseback transactions is simplified. The standardassets. This ASU is effective for fiscal years beginning after December 15, ~~2018, including~~2023, and for interim periods within ~~those~~ fiscal ~~years.~~years beginning after December 15, 2024. This ~~guidance will be~~ASU is applicable to the ~~Company~~Company’s Annual Report on Form 10-K for the fiscal year beginning July 1, 2019. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.ended June 30, 2025, and subsequent interim periods, with early application permitted. The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements ~~upon the adoption of this new guidance.~~and disclosures.

In ~~March 2016,~~December 2023, the FASB issued ASU ~~2016-09,~~ ~~Compensation - Stock Compensation~~No. 2023-09 “Income Taxes (Topic ~~718)~~740): Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU is effective for ~~fiscal years~~annual periods beginning after December 15, 2016, including interim periods within those fiscal years. This guidance was adopted by the Company prospectively on July 1, 2017. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures2024 and statutory withholding requirements, as well as classification in the statement of cash flows. Under the new guidance, an entity will recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the current practice of recognizing excess tax benefits in additional paid-in-capital ("APIC") and tax deficiencies in APIC to the extent that there is a sufficient APIC pool related to previously recognized excess tax benefits. In addition, excess tax benefits and tax deficiencies are considered discrete items in the reporting period they occur and are not included in the estimate of an entity’s annual effective tax rate. As for classification on the statement of cash flows, excess tax benefits will no longer represent a financing activity since they are recognized in the income statement and will appropriately be classified as an operating activity. See the ~~Condensed Consolidated Statements of~~

~~Cash Flows~~ ~~for the six months ended December 31, 2017~~for the prospective presentation of classifying excess tax benefits as an operating activity, not a financing activity as in prior years. The ASU allows an entity to elect as an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered (as currently required) or to account for forfeitures when they occur. The Company elected to maintain its accounting policy to estimate to the total number of forfeitures for stock awards granted. In regards to statutory withholding requirements, the new guidance stipulates that the net settlement of an award would not result, by itself, in liability classification of the award provided that the amount withheld for taxes does not exceed the maximum statutory tax rate in the employees’ relevant tax jurisdictions.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230)~~ intended to reduce diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update addresses eight specific cash flow issues, with the treatment of contingent consideration payments made after a business combination being the most directly applicable to the Company. The update requires that cash payments made approximately three months or less after an acquisition's consummation date should be classified as cash outflows for investing activities. Payment made thereafter up to the amount of the original contingent consideration liability should be classified as cash outflows from financing activities. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows from operating activities. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The standard will be applicable to the Company for theCompany’s fiscal year beginning July 1, ~~2018. Early adoption is permitted, provided all eight amendments are adopted in the same period. The guidance requires adoption using a retrospective transition method.~~2025, with early application permitted. The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements ~~upon the adoption of this new guidance.~~and disclosures.

The Company has reviewed other newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption.

(2) Trade Accounts and Notes Receivable, Net

The Company maintains an allowance for doubtful accounts receivable for estimated future expected credit losses resulting from customers’ failure to make payments on accounts receivable due to the Company. The Company has notes receivable with certain customers, which are included in “Accounts receivable, less allowance” in the Condensed Consolidated Balance Sheets.

Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country-specific environment and (v) reasonable and supportable forecasts about collectability. Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. Estimates of expected credit losses on trade receivables over the contractual life are recorded at inception and adjusted over the contractual life.

The changes in the allowance for doubtful accounts for the six months ended December 31, 2023 are set forth in the table below.

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	June 30, 2023		Amounts Charged to Expense		Write-offs		Other (1)		December 31, 2023
	(in thousands)
Trade accounts and current notes receivable allowance	$	15,480	$	4,472	$	(1,197)	$	488	$	19,243

(1)"Other" amounts include recoveries and the effect of foreign currency fluctuations for the six months ended December 31, 2023.

(3) Revenue Recognition

The Company provides technology solutions and services from the world's leading suppliers of mobility, barcode, POS, payments, physical security, unified communications, collaboration, telecom and cloud services. This includes hardware, related accessories and device configuration as well as software licenses, professional services and hardware support programs.

In determining the appropriate amount of revenue to recognize, the Company applies the following five-step model: (i) identify contracts with customers; (ii) identify performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations per the contracts; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company recognizes revenue as control of products and services are transferred to customers, which is generally at the point of shipment. The Company delivers products to customers in several ways, including: (i) shipment from a Company warehouse, (ii) drop-shipment directly from the supplier, or (iii) electronic delivery for non-physical products.

Principal versus Agent Considerations

The Company is the principal for sales of all hardware and certain software and services. The Company considers itself the principal in those transactions where it has control of the product or service before it is transferred to the customer. The Company recognizes the principal-associated revenue and cost of goods sold on a gross basis.

The Company is the agent for third-party service contracts, including product warranties and supplier-hosted software. These service contracts are sold separately from the products, and the Company often serves as the agent for the contract on behalf of the original equipment manufacturer. The Company's responsibility is to arrange for the provision of the specified service by the original equipment manufacturer, and the Company does not control the specified service before it is transferred to the customer. Because the Company acts as an agent, revenue is recognized net of cost at the time of sale. The Intelisys business operates under an agency model.

Variable Considerations

For certain transactions, products are sold with a right of return and may also provide other rebates or incentives, which are accounted for as variable consideration. The Company estimates a returns allowance based on historical experience and reduces revenue accordingly. The Company estimates the amount of variable consideration for rebates and incentives by using the expected value to be given to the customer and reduces the revenue by those estimated amounts. These estimates are reviewed and updated as necessary at the end of each reporting period.

Contract Balances

The Company records contract assets and liabilities for payments received from customers in advance of services performed. These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions where control has not yet passed to the customer. These amounts are immaterial to the consolidated financial statements for the periods presented.

Disaggregation of Revenue

The following tables represent the Company's disaggregation of revenue:

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	Quarter ended December 31, 2023
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service
Hardware, software and cloud (excluding Intelisys)	$	520,651	$	342,686	$	863,337
Intelisys connectivity and cloud	—		21,455		21,455
	$	520,651	$	364,141	$	884,792

	Six months ended December 31, 2023
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	1,030,222	$	688,918	$	1,719,140
Intelisys connectivity and cloud	—		41,958		41,958
	$	1,030,222	$	730,876	$	1,761,098


	Quarter ended December 31, 2022
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service
Hardware, software and cloud (excluding Intelisys)	$	627,548	$	363,743	$	991,291
Intelisys connectivity and cloud	—		19,950		19,950
	$	627,548	$	383,693	$	1,011,241


	Six months ended December 31, 2022
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	1,203,878	$	712,373	$	1,916,251
Intelisys connectivity and cloud	—		38,803		38,803
	$	1,203,878	$	751,176	$	1,955,054

(4) Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted-average number of common and potential common shares outstanding.

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	Quarter ended				Six months ended
	Quarter ended										Quarter ended			Six months ended
	December 31,				December 31,				December 31,			December 31,
	2017		2016		2017		2016		2023	2022			2023		2022
	(in thousands, except per share data)								(in thousands, except per share data)
Numerator:
Net Income	$	7,969	$	23,036	$	12,116	$	37,852

Net income

Net income

Net income
Denominator:
Weighted-average shares, basic
Weighted-average shares, basic
Weighted-average shares, basic	25,506		25,146		25,470		25,334
Dilutive effect of share-based payments	142		139		142		156
Weighted-average shares, diluted	25,648		25,285		25,612		25,490


Net income per common share, basic	$	0.31	$	0.92	$	0.48	$	1.49

Net income per common share, basic

Net income per common share, basic

Net income per common share, diluted	$	0.31	$	0.91	$	0.47	$	1.48

Net income per common share, diluted

Net income per common share, diluted

For the quarter and six months ended December 31, ~~2017,~~2023, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were ~~405,159~~563,690 and ~~432,846,~~931,367, respectively. For the quarter and six months ended December 31, ~~2016, there were 568,955 and 517,845, respectively,~~2022, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be ~~anti-dilutive.~~anti-dilutive were 847,651 and 1,268,455, respectively.

~~(3)~~(5) Accumulated Other Comprehensive ~~Income (Loss)~~Loss

~~Accumulated~~The components of accumulated other comprehensive ~~income (loss) consists~~loss, net of ~~the following:~~tax are as follows:


	December 31, 2023		June 30, 2023
	(in thousands)
Foreign currency translation adjustment	$	(97,338)	$	(93,136)
Unrealized gain on hedged transaction, net of tax	2,120		3,515
Accumulated other comprehensive loss	$	(95,218)	$	(89,621)

December 31, 2017 June 30, 2017
(in thousands)
Foreign currency translation adjustment $ (65,767 ) $ (73,217 )
Unrealized gain (loss) on hedged transaction, net of tax 362
13
Accumulated other comprehensive income (loss) $ (65,405 ) $ (73,204 )

The tax effect of amounts in comprehensive ~~income (loss)~~loss reflect a tax (benefit) expense ~~or benefit~~ as follows:

Quarter ended December 31, Six months ended December 31,
2017 2016 2017 2016
(in thousands)
Tax expense (benefit) $ 75
$ 144
$ 379
$ 92

~~(4) Acquisitions~~

POS Portal
(in thousands)
Receivables $ 8,914
Inventory 8,352
Other current assets 917
Property and equipment 24,963
Goodwill 101,198
Identifiable intangible assets 57,000
Other non-current assets 100
$ 201,444

Accounts payable $ 10,897
Accrued expenses and other current liabilities 5,130
Contingent consideration 13,098
Other long-term liabilities 102
Long-term deferred taxes payable 28,449
Consideration transferred, net of cash acquired 143,768
$ 201,444

Intelisys
(in thousands)
Receivables $ 21,655
Other current assets 1,547
Property and equipment 5,298
Goodwill 109,005
Identifiable intangible assets 63,110
Other non-current assets 1,839
$ 202,454

Accounts payable $ 21,063
Accrued expenses and other current liabilities 2,587
Contingent consideration 95,000
Consideration transferred, net of cash acquired 83,804
$ 202,454

~~(5)~~(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the six months ended December 31, ~~2017~~,2023, by reporting segment, are ~~as follows:~~


	Specialty Technology Solutions		Modern Communications & Cloud		Total
	(in thousands)
Balance at June 30, 2023	$	16,370	$	200,336	$	216,706
Goodwill disposed upon business sale	—		(8,539)		(8,539)
Foreign currency translation adjustment	—		47		47
Balance at December 31, 2023	$	16,370	$	191,844	$	208,214

Net Identifiable Intangible Assets
(in thousands)
Balance as of June 30, 2017 $ 101,513
Additions 57,000
Amortization expense (10,498 )
Foreign currency translation adjustment 428
Balance as of December 31, 2017 $ 148,443

~~(6)~~(7) Short-Term Borrowings and Long-Term Debt

The following table presents the Company’s debt ~~as of~~at December 31, ~~2017~~2023 and June 30, ~~2017.~~2023.

December 31, 2017 June 30, 2017
(in thousands)
Current portion of long-term debt $ 104
$ —
Revolving credit facility 355,503
91,871
Long-term debt 5,325
5,429
Total debt $ 360,932
$ 97,300

~~Revolving~~ Credit Facility

The Company has a multi-currency senior secured ~~revolving~~ credit facility (as amended, the "Amended Credit Agreement") with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks ~~(the “Amended Credit Agreement”~~(collectively the "Lenders") ~~that is scheduled to mature on April 3, 2022.~~. On ~~August 8, 2017,~~September 28, 2022, the Company amended and restated the Amended Credit Agreement, ~~to increase the committed~~which includes (i) a five-year, $350 million multicurrency senior secured revolving credit facility ~~from $300~~and (ii) a five-year $150 million ~~to $400 million.~~senior secured term loan facility. The Amended Credit Agreement ~~allows for~~extended the ~~issuance of~~credit facility maturity date to September 28, 2027. In addition, pursuant to an “accordion feature,” the Company may increase its borrowings up to ~~$50~~an additional $250 million, ~~for letters of credit and has a~~ ~~$200 million~~ ~~accordion feature that allows the Company to increase the availability to~~ ~~$600 million~~, subject to obtaining additional credit commitments from the lenders participating in the increase. The ~~Company incurred $0.3~~Amended Credit Agreement allows for the issuance of up to $50 million ~~in debt issuance costs in connection with the August 8, 2017 amendment.~~

Loans denominated in U.S. dollars, other than swingline loans, bear interest at a ~~pledge~~rate per annum equal to, at the Company’s option, (i) the adjusted term Secured Overnight Financing Rate ("SOFR") or adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon the Company’s ratio of (A) total consolidated debt less up to ~~65%~~$30 million of ~~capital stock~~unrestricted domestic cash to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as 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 the 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 the Company's leverage ratio, or such other ~~equity~~rate as the Company and the applicable swingline lender may agree. 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 ~~in certain foreign subsidiaries determined~~at a rate per annum equal to ~~be either material or a subsidiary borrower as defined~~the applicable benchmark rate set forth in the Amended Credit ~~Agreement.~~Agreement plus an additional margin ranging from 1.00% to 1.75%, depending upon the Company’s leverage ratio plus, if applicable, certain mandatory costs.

AtDuring the quarter and six months ended December 31, ~~2017,~~2023, the Company's borrowings under the credit facility were U.S. dollar loans. The spread in effect as of December 31, 2023 was ~~1.625%~~1.25%, plus a 0.10% credit spread adjustment for ~~LIBOR-based~~SOFR-based loans and ~~0.625%~~0.25% for alternate base rate loans. The commitment fee rate in effect ~~as of~~at December 31, ~~2017~~2023 was ~~0.250%~~0.20%. The

Amended 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 at all times. In addition, the Company’s Interest Coverage Ratio (as such term is defined in the Amended 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 credit facility ~~as of~~at December 31, ~~2017.~~2023.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the six month periods ended December 31, ~~2017~~2023 and ~~2016~~2022 was ~~$261.8~~ $138.7 million ~~and $129.7~~and $219.5 million, respectively. There was ~~$44.6~~$329.1 million and ~~$208.1~~$171.0 million available for additional borrowings as of December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, respectively. The effective interest rates for the revolving line of credit were 6.70% and 6.74% as of December 31, 2023 and June 30, 2023, respectively. There were no letters of credit issued under the multi-currency revolving credit facility ~~as of~~at December 31, ~~2017 and~~2023 or June 30, ~~2017.~~2023.

~~Long-Term Debt~~Mississippi Revenue Bond

On August 1, 2007,, the Company entered into an agreement with the State of Mississippi to provide financing for the acquisition and installation of certain equipment to be utilized at the Company’s Southaven, Mississippi warehouse, through the issuance of an industrial development revenue bond. The bond matures on September 1, ~~2032~~ ~~and~~2032. The bond accrues interest at the ~~30-day LIBOR rate~~one-month term SOFR plus an adjustment of 0.10% plus a spread of 0.85%. The terms of the bond allow for payment of interest only for the first 10 years of the ~~agreement, and then, starting~~agreement. Starting on September 1, 2018 through 2032, principal and interest payments are due until the maturity date or the redemption of the bond. The agreement also provides the bondholder with a put option, exercisable only within 180 days of each fifth anniversary of the agreement, requiring the Company to pay back the bonds at 100% of the principal amount outstanding. ~~As of~~ At December 31, ~~2017~~,2023, the Company was in compliance with all covenants under this bond. The interest ~~rate~~rates at December 31, ~~2017~~2023 and June 30, ~~2017~~ ~~was 2.23%~~2023 were 6.29% and ~~1.93%~~6.11%, respectively.

~~As of~~At December 31, ~~2017,~~2023, net debt issuance costs associated with the credit facility and bond totaled ~~$1.5~~$1.4 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

~~(7)~~(8) Derivatives and Hedging Activities

The Company's results of operations could be materially impacted by significant changes in foreign currency exchange rates and interest rates. In an effort to manage the exposure to ~~foreign currency exchange rates and interest rates,~~these risks, the Company periodically enters into various derivative instruments. The ~~Company’s~~Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with U.S. GAAP. The Company records all derivatives on the ~~balance sheet~~Condensed Consolidated Balance Sheet at fair value. Derivatives that are not designated as hedging instruments ~~and~~or the ineffective portions of cash flow hedges ~~designated as hedging instruments~~ are adjusted to fair value through earnings in other income and expense.

Foreign Currency Derivatives – The Company conducts a portion of its business internationally in a variety of foreign ~~currencies. The exposure~~currencies and is exposed to market risk for changes in foreign currency exchange rates arises from foreign currency-denominated assets and liabilities, and transactions arising from non-functional currency financing or trading activities. The Company’s objective is to preserve the economic value of non-functional currency-denominated cash flows.rates. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted ~~through~~the Company uses currency options and forward contracts or other hedging instruments with third parties. These contracts will periodically hedge the exchange of various currencies, including the U.S. dollar, Brazilian real, euro, British pound and Canadian dollar, Mexican peso, Chilean peso, Colombian peso and Peruvian nuevo sol. While the Company utilizes foreign exchange contracts to hedge foreign currency exposure, the Company's foreign exchange policy prohibits the use of derivative financial instruments for speculative purposes.dollar.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of ~~$100.6~~$27.3 million and ~~$67.1~~$34.3 million for the exchange of foreign currencies ~~as of~~ at December 31, ~~2017~~2023 and June 30, ~~2017~~,2023, respectively. To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense. Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters and six months ended December 31, 2023 and 2022 are as follows:

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(in thousands)
Net foreign exchange derivative contract (gains) losses $ 121
$ (199 ) $ 942
$ (959 )
Net foreign currency transactional and re-measurement (gains) losses 473
507
(160 ) 1,879
Net foreign currency (gains) losses $ 594
$ 308
$ 782
$ 920


	Quarter ended				Six months ended
	December 31,				December 31,
	2023		2022		2023		2022
	(in thousands)
Net foreign exchange derivative contract losses	$	1,025	$	871	$	658	$	1,309
Net foreign currency transactional and re-measurement (gains) losses	(596)		(524)		466		(39)
Net foreign currency exchange losses	$	429	$	347	$	1,124	$	1,270

Net foreign currency exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses and are included in other income and expense. Foreign exchange gains and losses are generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real, the U.S. dollar versus the euro, the British pound versus the euro, and ~~other currencies~~the Canadian dollar versus the U.S. dollar.

Interest Rates - The ~~Company's~~Company’s earnings are also affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. ~~To manage~~The Company manages its exposure to changes in interest rates by using interest rate swaps to hedge this exposure and to achieve a desired proportion of fixed versus floating rate debt.

On April 30, 2019, the ~~exposure, the~~ Company ~~has~~ entered into an interest rate swap agreement to lock into a fixed LIBOR interest rate, which was amended on September 28, 2022, to change the reference rate from LIBOR to SOFR. The swap agreement has a notional amount of $100.0 million, with a $50.0 million tranche scheduled to mature on April 30, 2024 and a $50.0 million tranche scheduled to mature April 30, 2026.

On March 31, 2023, the Company entered into an interest rate swap agreement to lock into a fixed SOFR interest rate with a notional amount of ~~$50.0~~$25 million ~~scheduled to mature on~~ ~~April 3, 2022. This~~ and a maturity date of March 31, 2028.

These interest rate swap ~~agreement is~~agreements are designated as a cash flow ~~hedge~~hedges to hedge the variable rate interest payments on the revolving credit facility. Interest rate differentials paid or received under the swap ~~agreement~~agreements are recognized as adjustments to interest expense. To the extent the ~~swap is~~swaps are effective in offsetting the variability of the hedged cash flows, changes in the fair value of the ~~swap~~swaps are not included in current earnings but are reported as other comprehensive income (loss). There was no ineffective portion to be recorded as an adjustment to earnings for the ~~quarter~~quarters and six months ended December 31, ~~2017.~~2023 and 2022.

The components of the cash flow hedge included in ~~accumulated other comprehensive income (loss), net of income taxes, in~~ the Condensed Consolidated ~~Balance Sheets,~~Statement of Comprehensive Income for the quarters and six months ended December 31, 2023 and 2022, are as follows:

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(in thousands)
Net interest expense recognized as a result of interest rate swap $ 64
$ —
$ 133
$ —
Unrealized gain (loss) in fair value of interest rate swap 447
—
424
—
Net increase (decrease) in accumulated other comprehensive income (loss) $ 511
$ —
$ 557
$ —
Income tax effect 191
—
208
—
Net increase (decrease) in accumulated other comprehensive income (loss), net of tax $ 320
$ —
$ 349
$ —

The Company used the following derivative instruments ~~as of~~at December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

as Hedge Instruments

Not Designated as Hedge Instruments

as Hedge Instruments

Not Designated as Hedge Instruments

~~(8)~~(9) Fair Value of Financial Instruments

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company classifies certain assets and liabilities based on the fair value hierarchy, which aggregates fair value measured assets and liabilities based upon the following levels of inputs:

•Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

•Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The assets and liabilities maintained by the Company that are required to be measured ~~or disclosed~~ at fair value on a recurring basis include ~~the Company’s various debt instruments,~~ deferred compensation plan investments, ~~outstanding~~ forward foreign currency exchange contracts, foreign currency hedge agreements and interest rate swap ~~agreements and contingent consideration owed to the previous owners of Network1 and Intelisys.~~agreements. The carrying value of debt is considered to approximate fair value, as the Company’s debt instruments are indexed to a variable rate using the market approach (Level ~~2 criteria)~~2).

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis ~~as of~~ at December 31, ~~2017~~:2023:

The investments in the deferred compensation plan are held in a ~~rabbi trust~~"rabbi trust" and include mutual funds and cash equivalents for payment of non-qualified benefits for certain retired, terminated and active employees. These investments are recorded to prepaid expenses and other current assets or other non-current assets depending on their corresponding, anticipated distribution dates to recipients, which are reported in accrued expenses and other current liabilities or other long-term ~~non-current~~ liabilities, respectively.

Derivative instruments, such as foreign currency forward contracts, are measured using the market approach on a recurring basis considering foreign currency spot rates and forward rates quoted by banks or foreign currency dealers and interest rates quoted by banks (Level 2). ~~See Note 7 -~~ ~~Derivatives and Hedging Activities~~. Fair values of interest rate swaps are measured using standard valuation models with inputs that can be derived from observable market transactions, including ~~LIBOR~~SOFR spot and forward rates (Level 2). Foreign currency contracts and interest rate swap agreements are classified in the Condensed Consolidated Balance Sheets as prepaid expenses and other ~~current~~non-current assets or accrued expenses and other ~~current~~long-term liabilities, depending on the respective instruments' favorable or unfavorable positions. See Note 8 - Derivatives and Hedging Activities.

The Company recorded contingent consideration liabilities at the acquisition date of Network1, Intelisys and POS Portal representing the amounts payable to former shareholders, as outlined under the terms of the purchase agreements, based upon the achievement of a projected earnings measure, net of specific pro forma adjustments. The contingent consideration due to the former shareholders of POS Portal was paid in full during the quarter ended December 31, 2017. The current and non-current portions of these obligations are reported separately on the Condensed Consolidated Balance Sheets. The fair value of the contingent considerations (Level 3) are determined using a form of a probability weighted discounted cash flow model. Subsequent changes in the fair value of the contingent consideration liabilities are recorded to the change in fair value of contingent consideration line item in the Condensed Consolidated Income Statements. Fluctuations due to foreign currency translation are captured in other comprehensive income through the changes in foreign currency translation adjustments line item as seen in Note 3 - ~~Accumulated Other Comprehensive Income (Loss)~~.

Contingent consideration for the quarter ended Contingent consideration for the six months ended
December 31, 2016 December 31, 2016
Communications & Services Segment Communications & Services Segment
(in thousands)
Fair value at beginning of period $ 110,835
$ 24,652
Issuance of contingent consideration —
95,000
Payments (1,607 ) (10,241 )
Change in fair value of contingent consideration 1,791
1,961
Foreign currency translation adjustment (139 ) (492 )
Fair value at end of period $ 110,880
$ 110,880



~~Reporting Period~~	~~Valuation Technique~~	~~Significant Unobservable Inputs~~	~~Weighted Average Rates~~
~~December 31, 2017~~	~~Discounted cash flow~~	~~Weighted average cost of capital~~	~~15.4~~	%
		~~Adjusted EBITDA growth rate~~	~~17.9~~	%

~~June 30, 2017~~	~~Discounted cash flow~~	~~Weighted average cost of capital~~	~~14.2~~	%
		~~Adjusted EBITDA growth rate~~	~~17.0~~	%

~~Worldwide Barcode, Networking & Security~~

~~Worldwide Communications & Services Segment~~

~~(9)~~(10) Segment Information

The Company is a leading ~~global~~ provider of technology ~~products~~solutions and ~~solutions~~services to customers in specialty technology markets. The Company has two reportable segments, based on ~~product, customer and service~~technology type.

~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions Segment

The ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions segment ~~focuses on automatic identification~~includes the Company’s business in mobility and ~~data capture ("AIDC"), point-of-sale ("POS"),~~barcode, POS, payments, ~~networking, electronic physical~~ security and ~~other specialty~~networking technologies. ~~We have~~Mobility and barcode solutions include mobile computing, barcode scanners and imagers, radio frequency identification devices, barcode printing and related services. POS and payments solutions include POS systems, integrated POS software platforms, self-service kiosks including self-checkout, payment terminals and mobile payment devices. Security solutions include video surveillance and analytics, video management software and access control. Networking solutions include switching, routing and wireless products and software. The Company has business ~~units~~operations within this segment in ~~North America, Latin America~~the United States, Canada and Europe. We see adjacencies among these technologies in helping our customers develop solutions, such as with networking products. AIDC and POS products interface with computer systems used to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management and health care applications. Electronic physical security products include identification, access control, video surveillance, intrusion-related and wireless and networking infrastructure products.Brazil.

~~Worldwide~~Modern Communications & ~~Services~~Cloud Segment

The ~~Worldwide~~Modern Communications & ~~Services~~Cloud segment ~~focuses on~~includes the Company’s business in communications ~~technologies~~ and collaboration, connectivity and cloud services. ~~We have business units within this segment that offer~~Communications and collaboration solutions, delivered in the cloud, on-premise or hybrid, include voice, video, ~~conferencing, wireless, data networking,~~integration of communication platforms and contact center solutions. The Intelisys connectivity and cloud marketplace offers telecom, cable, ~~collaboration, converged communications solutions,~~Unified Communications as a Service (“UCaaS”), Contact Center as a Service (“CCaaS”), Infrastructure as a Service, Software-Defined Wide-Area Network and other cloud services. This segment includes SaaS and ~~telecom services. We have~~subscription services, which the Company offers using digital tools and platforms. The Company has business ~~units~~operations within this segment in ~~North America, Latin America~~the United States, Canada, Brazil and Europe. As these solutions come together on IP networks, new opportunities are created for customers to move into adjacent solutions for all vertical markets, such as education, healthcare and government. Our teams deliver value-added support programs and services, including education and training, network assessments, custom configuration, implementation and marketing to help customers develop a new technology practice, or to extend their capability and reach.the UK.

Selected financial information for each business segment is presented below:

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(in thousands)
Sales:
Worldwide Barcode, Networking & Security $ 719,786
$ 593,833
$ 1,340,114
$ 1,221,043
Worldwide Communications & Services 312,426
310,959
616,657
616,314
$ 1,032,212
$ 904,792
$ 1,956,771
$ 1,837,357
Depreciation and amortization:
Worldwide Barcode, Networking & Security $ 4,843
$ 1,718
$ 8,584
$ 3,355
Worldwide Communications & Services 4,173
4,051
8,431
6,820
Corporate 885
819
1,751
1,637
$ 9,901
$ 6,588
$ 18,766
$ 11,812
Change in fair value of contingent consideration:
Worldwide Barcode, Networking & Security $ —
$ —
$ 69
$ —
Worldwide Communications & Services 6,913
$ 1,791
$ 23,725
$ 1,961
$ 6,913
$ 1,791
$ 23,794
$ 1,961
Operating income:
Worldwide Barcode, Networking & Security $ 15,542
$ 12,131
$ 29,578
$ 25,554
Worldwide Communications & Services 6,799
11,479
533
21,429
Corporate —
(335 ) (172 ) (833 )
$ 22,341
$ 23,275
$ 29,939
$ 46,150
Capital expenditures:
Worldwide Barcode, Networking & Security $ 919
$ 523
$ 1,740
$ 1,378
Worldwide Communications & Services 367
476
708
1,091
Corporate 699
286
848
792
$ 1,985
$ 1,285
$ 3,296
$ 3,261
Sales by Geography Category:
United States and Canada $ 764,445
$ 676,600
$ 1,458,824
$ 1,396,971
International⁽¹⁾
276,918
236,977
514,827
459,742
Less intercompany sales (9,151 ) (8,785 ) (16,880 ) (19,356 )
$ 1,032,212
$ 904,792
$ 1,956,771
$ 1,837,357

⁽¹⁾ For the quarters and six months ended December 31, 2017 and 2016, there were no sales in excess of 10% of consolidated net sales to any single international country.


	Quarter ended				Six months ended
	December 31,				December 31,
	2023		2022		2023		2022
	(in thousands)
Sales:
Specialty Technology Solutions	$	520,651	$	627,548	$	1,030,222	$	1,203,878
Modern Communications & Cloud	364,141		383,693		730,876		751,176
	$	884,792	$	1,011,241	$	1,761,098	$	1,955,054
Depreciation and amortization:
Specialty Technology Solutions	$	2,897	$	2,758	$	5,654	$	5,462
Modern Communications & Cloud	3,593		3,738		7,334		7,385
Corporate	768		561		1,487		1,438
	$	7,258	$	7,057	$	14,475	$	14,285
Operating income (loss):
Specialty Technology Solutions	$	13,368	$	19,682	$	25,240	$	41,534
Modern Communications & Cloud	14,602		19,750		27,014		32,785
Corporate	(1,144)		—		(1,343)		—
	$	26,826	$	39,432	$	50,911	$	74,319
Capital expenditures:
Specialty Technology Solutions	$	(304)	$	(524)	$	(1,565)	$	(1,026)
Modern Communications & Cloud	(2,246)		(1,980)		(3,300)		(3,236)

	$	(2,550)	$	(2,504)	$	(4,865)	$	(4,262)
Sales by Geography Category:
United States and Canada	$	797,580	$	911,033	$	1,590,045	$	1,772,637
International	89,410		102,020		174,714		186,294
Less intercompany sales	(2,198)		(1,812)		(3,661)		(3,877)
	$	884,792	$	1,011,241	$	1,761,098	$	1,955,054


	December 31, 2023		June 30, 2023
	(in thousands)
Assets:
Specialty Technology Solutions	$	908,674	$	1,104,103
Modern Communications & Cloud	872,131		964,066
Corporate	—		—

	$	1,780,805	$	2,068,169
Property and equipment, net by Geography Category:
United States and Canada	$	24,703	$	27,323
International	11,843		10,056
	$	36,546	$	37,379

In accordance with Accounting Standards Codification ("ASC") 842, at contract inception the Company determines if a contract contains a lease by assessing whether the contract contains an identified asset and whether the Company has the ability to control the asset. The Company also determines if the lease meets the classification criteria for an operating lease versus a finance lease under ASC 842. Substantially all of the Company's leases are operating leases for real estate, warehouse and office equipment ranging in duration from 1 year to 10 years. The Company has elected not to record short-term operating

December 31, 2017 June 30, 2017
(in thousands)
Assets:
Worldwide Barcode, Networking & Security $ 1,103,863
$ 885,786
Worldwide Communications & Services 832,616
769,342
Corporate 68,803
63,175
$ 2,005,282
$ 1,718,303
Property and equipment, net by Geography Category:
United States and Canada $ 72,336
$ 51,853
International 4,290
4,713
$ 76,626
$ 56,566
leases with an initial term of 12 months or less on the Condensed Consolidated Balance Sheets. Operating leases are recorded as other non-current assets, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The Company has finance leases for information technology equipment expiring through fiscal year 2028. Finance leases are recorded as property and equipment, net, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The gross amount of the balances recorded related to finance leases is immaterial to the condensed consolidated financial statements at December 31, 2023 and the consolidated financial statements at June 30, 2023.

Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the net present value of future minimum lease payments over the lease term. The Company generally is not able to determine the rate implicit in its leases and has elected to apply an incremental borrowing rate as the discount rate for the present value determination, which is based on the Company's cost of borrowings for the relevant terms of each lease and geographical economic factors. Certain operating lease agreements contain options to extend or terminate the lease. The lease term used is adjusted for these options when the Company is reasonably certain it will exercise the option. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments not based on a rate or index, such as costs for common area maintenance, are expensed as incurred. Further, the Company has elected the practical expedient to recognize all lease and non-lease components as a single lease component, where applicable.

The following table presents amounts recorded on the Condensed Consolidated Balance Sheets related to operating leases at December 31, 2023 and June 30, 2023:

The following table presents amounts recorded in operating lease expense as part of selling general and administrative expenses on the Condensed Consolidated Income Statements during the quarters and six months ended December 31, 2023 and 2022. Operating lease costs contain immaterial amounts of short-term lease costs for leases with an initial term of 12 months or less.

Supplemental cash flow information related to the Company's operating leases for the six months ended December 31, 2023 and 2022 are presented in the table below:

The weighted-average remaining lease term and discount rate at December 31, 2023 are presented in the table below:

The following table presents the maturities of the Company's operating lease liabilities at December 31, 2023:

(12) Commitments and Contingencies

The Company ~~and its subsidiaries are,~~is, from time to time, ~~parties~~party to lawsuits arising out of operations. Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

~~The Company expects total capital expenditures to range from $8 million to $11 million for fiscal year 2018, primarily for IT investments.~~

The table below summarizes the balances and line item presentation of ~~these~~Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's Condensed Consolidated Balance Sheets ~~as of~~at December 31, ~~2017~~2023 and June 30, ~~2017:~~2023:


	December 31, 2023		June 30, 2023
	Network1
	(in thousands)
Assets
Prepaid expenses and other current assets	$	16	$	16
Other non-current assets	$	4,131	$	4,150
Liabilities
Accrued expenses and other current liabilities	$	16	$	16
Other long-term liabilities	$	4,131	$	4,150

CDC Network1
(in thousands)
Assets
Prepaid expenses and other current assets $ 2,212
$ 1,294
Other non-current assets $ —
$ 8,235
Liabilities
Accrued expenses and other current liabilities $ 2,212
$ 1,294
Other long-term liabilities $ —
$ 8,235

~~(11)~~(13) Income Taxes

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduces the corporate federal tax rate from 35% to 21% effective January 1, 2018 and implements a territorial tax system. Since the Company has a June 30th fiscal year-end, the lower tax rate will result in a blended U.S. statutory federal rate of approximately 28% for the fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. As part of the Tax Act, U.S. companies are required to pay a one-time transition tax on the deemed repatriation of undistributed foreign earnings and remeasure deferred tax assets and liabilities.

Income taxes for the ~~quarter~~quarters and six months ended December 31, ~~2017~~2023 and 2022 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate. In addition to applying the estimated annual effective tax rate to pre-tax income, the Company ~~also~~ includes certain items treated as discrete events to arrive at an estimated overall tax provision. During the quarter ended December 31, 2023, a discrete net tax benefit of $3.8 million was recorded, which is primarily attributable to the sale of UK-based intY.

The ~~table below summarizes the effect of discrete items on the income~~Company’s effective tax rate of 18.3% and 18.6% for the quarter and six months ended December 31, ~~2017.~~

Quarter ended Six months ended
December 31, 2017 December 31, 2017
(in thousands)
Income before income taxes $ 20,310
$ 27,090
Accrual income tax rate⁽¹⁾
28.0 % 29.8 %
Accrued income tax expense, before discrete items 5,681
8,074
Discrete tax expense (benefit):
Transition tax on repatriation of foreign earnings 9,300
9,300
Remeasurement of deferred taxes (U.S.) (3,510 ) (3,510 )
Remeasurement of deferred taxes (Belgium) 900
900
Other (30 ) 210
Total net discrete tax expense 6,660
6,900
Provision for income taxes $ 12,341
$ 14,974
Effective income tax rate 60.8 % 55.3 %
Income tax rate effect of discrete items 32.8 % 25.5 %

⁽¹⁾~~The estimated effect of the rate change for the quarter and six months ended December 31, 2017 is a benefit of approximately $1.6 million.~~

~~As part of transitioning to the territorial tax system the Tax Act includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax. For the~~ quarter and six months ended December 31, 2017, the Company recognized a provisional discrete income tax expense of $9.3 million for a one-time transition tax liability on total post-1986 foreign subsidiaries’ earnings and profits (“E&P”) that were previously deferred from U.S. income taxes. The Company has not yet completed the calculation of total post-1986 foreign E&P for foreign subsidiaries and the tax expense currently recognized may change as the value of cash and other specified assets changes, which is part of the basis of the transition tax. No additional income tax expense has been provided for any remaining undistributed foreign earnings not subject to the transition tax and any additional outside basis difference inherent for these entities as such amounts continue to be indefinitely reinvested in foreign operations. Further, the amount of related unrecognized deferred tax liability is under review but not practicable to estimate at this time.2022.

As ~~part~~ of accounting for the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which such deferred taxes are expected to reverse in the future, which is generally 21%. For the quarter ended December 31, ~~2017, the Company recognized a provisional discrete income tax benefit of $3.5 million for the remeasurement of the Company’s net deferred tax liability balance. However,~~2023, the Company is still analyzing certain aspects of the Tax Act and refining calculations, which are dependent on final results for fiscal year 2018, which could potentially affect the measurement of these deferred taxes or give risenot permanently reinvested with respect to ~~new deferred tax amounts.~~

At December 31, 2017, the Company has not completed accounting for the tax effects of the enactment of the Tax Act. The Securities and Exchange Commission has issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impact. The Company currently anticipates finalizing and recording any resulting adjustmentsall earnings generated by the end of the current fiscal year 2018. The Company made a reasonable estimate of the one-time transition tax and remeasurement of existing deferred tax balances. The transitional impacts resulted in a provisional income tax expense of $5.8 million as a discrete event for the quarter ended December 31, 2017. The Company has not been able to make a reasonable estimate for any additional outside basis difference inherent for foreign subsidiaries as these amounts continue to be reinvested in foreign operations. The Company ~~continues~~has determined that there is no material deferred tax liability for federal, state and withholding tax related to ~~account for those items based on existing accounting under ASC 740,~~ ~~Income Taxes. The Company will continue to provide for U.S. income taxes for~~undistributed earnings. During the ~~current earnings of its Canadian subsidiary. The provisional estimates provided may be impacted by a number of additional considerations, including, but~~six months ended December 31, 2023, foreign subsidiaries did not ~~limited~~repatriate cash to the ~~issuance~~United States. There is no certainty to the timing of ~~final regulations,~~any future distributions of such earnings to the ~~Company's ongoing analysis of the new tax law and the Company's actual earnings for the fiscal year ending June 30, 2018.~~U.S. in whole or in part.

The Company had approximately ~~$2.1 million and $2.2~~$1.2 million of total gross unrecognized tax benefits ~~as of~~at December 31, ~~2017~~2023 and June 30, ~~2017, respectively.~~2023. Of this total at December 31, ~~2017,~~2023, approximately ~~$1.4~~$1.0 million represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate. The Company does not believe that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. At December 31, 2023 and June 30, 2023, the Company had approximately $1.2 million accrued for interest and penalties.

The Company conducts business globally and one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries and states in which it operates. With certain exceptions, the Company is no longer subject to federal, state and local or non-U.S. income tax examinations by tax authorities for the years before June 30, ~~2012.~~2018.

~~The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of~~

On December ~~31, 2017 and June 30, 2017,~~19, 2023, the Company ~~had approximately $1.2~~completed the sale of its UK-based intY business. The Company retained its CASCADE cloud services distribution platform which has been used to grow the Cisco and Microsoft subscription businesses in the United States and Brazil. Under the stock purchase agreement, the Company received proceeds of $18.0 million ~~and $1.1 million accrued for interest and penalties, respectively.~~

~~Financial results~~ in ~~Belgium~~cash for the ~~quarter and six months ended December 31, 2017 produced~~sale, net of cash transferred. The business sale resulted in a ~~pre-tax loss~~$14.5 million gain on sale after considering the net assets sold. The impact of ~~approximately $1.7 million and $0.8 million, respectively. In the judgment of management, the conditions that gave rise~~this sale was not material to the recent losses are temporary and that it is more likely than not that the deferred tax asset will be realized. If Belgium business does not return to profitability as expected, this could affect the valuation of certain deferred tax assets. Belgium enacted a corporate tax reform law on December 25, 2017 which reduces the corporate tax rate from 33% to 25% over a three-year period. The Company remeasured certain deferred tax assets and liabilities based on the rates at which such deferred taxes are expected to reverse in the future. As a result, the Company recognized income tax expense of $0.9 million as a discrete event during the current quarter.consolidated financial statements.



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

ScanSource ~~Inc.~~ is a leading ~~global provider~~hybrid distributor connecting devices to the cloud and accelerating growth for customers across hardware, SaaS, connectivity and cloud. We provide technology solutions and services from more than 500 leading suppliers of ~~technology products~~mobility, barcode, POS, payments, physical security, networking, unified communications, collaboration, connectivity and ~~solutions. ScanSource, Inc. and its subsidiaries (the "Company") provide value-added solutions from over 500 technology suppliers and sell~~cloud services to ~~over 35,000~~our approximately 30,000 customers located primarily in the ~~following specialty technology markets: point-of-sale (POS), payments, barcode, physical security, unified communications~~United States, Canada and ~~collaboration, cloud and telecom services.~~Brazil.

We operate our business under a management structure that enhances our ~~worldwide~~ technology ~~market~~ focus and hybrid distribution growth strategy. ~~As a part of this structure, ScanSource has two technology segments: Worldwide Barcode, Networking & Security and Worldwide Communications & Services. We~~Our segments operate primarily in the United States, Canada ~~Latin America~~ and ~~Europe.~~Brazil:

•Specialty Technology Solutions

•Modern Communications & Cloud

We sell hardware, SaaS, connectivity and cloud services from leading technology suppliers to customers that solve end users' challenges. We operate distribution facilities that 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 ~~vendors~~suppliers include AT&T, Aruba/HPE, Avaya, Axis, ~~Bematech, CenturyLink,~~ Cisco, Comcast Business, ~~Datalogic, Elo, Epson,~~Dell, Extreme, Five9, Hanwha, Honeywell, Ingenico, Lumen, Microsoft, NCR, Poly HP, ~~Ingencio, Jabra, Mitel, NCR, Plantronics, Polycom, Ruckus Wireless, Toshiba Global Commerce Solutions,~~RingCentral, Verifone, Verizon, ~~Windstream~~Zebra Technologies and ~~Zebra Technologies.~~Zoom.

On December 19, 2023 we completed the sale of our UK-based intY business. We retained our CASCADE cloud services distribution platform, which has been used to grow the Cisco and ~~Jobs Act (the "Tax Act") was enacted~~Microsoft subscription business in the United States ~~on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, implements a territorial tax system,~~ and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, as well as creates new taxes on certain foreign-sourced earnings. See Note 11 - ~~Income Taxes~~ ~~in the Notes to the Consolidated Financial Statements for further discussion.~~Brazil.

Our ~~objective~~strategy is to ~~continue~~drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners by leveraging our people, processes and tools. Our goal is to ~~grow profitable~~provide exceptional experiences for our customers, suppliers and employees through operational excellence. Our hybrid distribution strategy relies on a channel sales ~~in the technologies~~model to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to customers that solve end users’ challenges. ScanSource enables customers 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 customers access to additional services. As a trusted adviser to our customers, we ~~sell and to focus on growth in higher margin businesses. We continue to evaluate strategic acquisitions to enhance~~provide solutions through our technological offerings and service capabilities. In doing so, we face numerous challenges that require attention and resources. Certain business units and geographies are experiencing increased competition for the products and services we sell. This competition may come in the formstrong understanding of ~~pricing, credit terms, service levels and product availability. As this competition could affect both our market share and pricing~~end user needs.

Table of ~~our products, we may change our strategy in order to effectively compete in the marketplace.~~Contents

Results of Operations

Net Sales

We have two reportable segments, which are based on technology type. The following tables summarize ~~the Company’s~~our net sales results by ~~technology~~business segment and by geographic location for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016~~.2022:


	Quarter ended December 31,								% Change, Constant Currency, Excluding Divestitures (a)
Net Sales by Segment:	2023		2022		$ Change		% Change
	(in thousands)
Specialty Technology Solutions	$	520,651	$	627,548	$	(106,897)	(17.0)	%	(17.2)	%
Modern Communications & Cloud	364,141		383,693		(19,552)		(5.1)	%	(6.1)	%
Total net sales	$	884,792	$	1,011,241	$	(126,449)	(12.5)	%	(13.0)	%

	Six months ended December 31,								% Change, Constant Currency, Excluding Divestitures (a)
	2023		2022		$ Change		% Change
	(in thousands)
Specialty Technology Solutions	$	1,030,222	$	1,203,878	$	(173,656)	(14.4)	%	(14.6)	%
Modern Communications & Cloud	730,876		751,176		(20,300)		(2.7)	%	(3.9)	%
Total net sales	$	1,761,098	$	1,955,054	$	(193,956)	(9.9)	%	(10.5)	%

Quarter ended December 31,
% Change, Constant Currency, Excluding Acquisitions^(a)
Net Sales by Segment: 2017 2016 $ Change % Change
(in thousands)
Worldwide Barcode, Networking & Security $ 719,786
$ 593,833
$ 125,953
21.2 % 16.3 %
Worldwide Communications & Services 312,426
310,959
1,467
0.5 % (0.9 )%
Total net sales $ 1,032,212
$ 904,792
$ 127,420
14.1 % 10.4 %

Six months ended December 31,
% Change, Constant Currency, Excluding Acquisitions ^(a)
2017 2016 $ Change % Change
(in thousands)

Worldwide Barcode, Networking & Security $ 1,340,114
$ 1,221,043
$ 119,071
9.8 % 5.7 %
Worldwide Communications & Services 616,657
616,314
343
0.1 % (2.1 )%
Total net sales $ 1,956,771
$ 1,837,357
$ 119,414
6.5 % 3.1 %

^(a)A reconciliation of non-GAAP net sales in constant currency ~~excluding acquisitions~~ is presented at the end of Results of Operations~~in the non-GAAP section.~~, under Non-GAAP Financial Information.

~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions

The ~~Barcode, Networking & Security~~Specialty Technology Solutions segment consists of sales to customers in North America ~~Europe~~ and ~~Latin America.~~Brazil. For the quarter and six months ended December 31, ~~2017,~~2023, net sales decreased $106.9 million, or 17.0%, and $173.7 million, or 14.4%, respectively, compared to the prior-year period. Excluding the foreign exchange positive impact, adjusted net sales decreased $107.8 million, or 17.2%, and $175.5 million, or 14.6%, for the quarter and six months ended December 31, 2023, compared to the prior-year period. The decrease in net sales and adjusted net sales for the ~~Barcode, Networking~~quarter and six-month period is primarily due to lower sales volumes in our mobility and barcoding business, partially offset by an increase in networking sales.

Modern Communications & ~~Security~~Cloud

The Modern Communications & Cloud segment ~~increased $126.0~~consists of sales to customers in North America, Brazil and the UK. For the quarter and six months ended December 31, 2023, net sales decreased $19.6 million, or 5.1%, and ~~$119.1~~$20.3 million, or 2.7%, respectively, compared to the prior-year ~~quarter and six month period, respectively.~~period. Excluding the foreign exchange positive impact and ~~net sales from~~ the ~~POS Portal acquisition,~~impact of divestitures, adjusted net sales ~~increased $96.6~~decreased $23.3 million, or ~~16.3%~~6.1%, and $28.8 million, or 3.9%, for the quarter ~~ended December 31, 2017~~ and ~~$69.5 million, or 5.7%, for the~~ six months ended December 31, ~~2017.~~2023, compared to the prior-year period. The ~~increase~~decrease in net sales and adjusted net sales for the quarter and six month period is primarily due to lower sales volumes in our communications hardware, partially offset by growth in ~~North America and Europe.~~

~~Worldwide Communications & Services~~

~~The Communications & Services segment consists of~~Cisco products. Intelisys net billings increased to approximately $2.64 billion annualized. Intelisys net sales ~~to customers in North America, Europe and Latin America. For~~for the quarter and six months ended December 31, ~~2017, net sales for the Communications & Services segment~~2023 increased ~~$1.5 million,~~7.5% and ~~$0.3 million, compared to the prior-year quarter and six month period, respectively. Excluding the foreign exchange impact, adjusted net sales decreased $2.7 million, or 0.9%~~8.1%, for the quarter ended December 31, 2017 as a result of lower sales volume in our North American business, excluding Intelisys, partially offset by sales growth in Brazil. Intelisys sales increased quarter-over-quarter. Excluding the foreign exchange impact and net sales from the Intelisys acquisition for the three months ended September 30, 2017, adjusted net sales decreased $13.1 million, or 2.1%, for the six months ended December 31, 2017, primarily due to lower sales volume in our North American business, partially offset by sales growth in Brazil.respectively, year-over-year.

Table of Contents


	Quarter ended December 31,								% Change, Constant Currency, Excluding Acquisitions^(a)				Quarter ended December 31,																							% Change, Constant Currency, Excluding Divestitures (a)
Net Sales by Geography:	2017		2016		$ Change		% Change
	(in thousands)


United States and Canada
United States and Canada
United States and Canada	$	755,312	$	667,818	$	87,494	13.1	%	10.2	%	$	795,382			$		$	909,221			$			$	(113,839)			(12.5)			(12.5)	%					(12.5)	%
International	$	276,900	$	236,974	39,926		16.8	%	11.0	%	International		89,410			102,020				102,020			(12,610)					(12,610)		(12.4)			(12.4)		%				(17.3)	%
Total net sales	$	1,032,212	$	904,792	$	127,420	14.1	%	10.4	%	Total net sales		$	884,792		$			$	1,011,241		$				$	(126,449)		(12.5)			(12.5)	%					(13.0)	%

	Six months ended December 31,								% Change, Constant Currency, Excluding Acquisitions^(a)
	2017		2016		$ Change		% Change
	(in thousands)										Six months ended December 31,																							% Change, Constant Currency, Excluding Divestitures (a)
	2023



United States and Canada
United States and Canada
United States and Canada	$	1,441,982	$	1,377,627	$	64,355	4.7	%	1.7	%	$	1,586,384			$		$	1,768,760			$			$	(182,376)			(10.3)			(10.3)	%					(10.3)	%
International	514,789		459,730		55,059		12.0	%	7.2	%	International		174,714			186,294				186,294			(11,580)					(11,580)		(6.2)			(6.2)		%				(12.0)	%
Total net sales	$	1,956,771	$	1,837,357	$	119,414	6.5	%	3.1	%	Total net sales		$	1,761,098		$			$	1,955,054		$				$	(193,956)		(9.9)			(9.9)	%					(10.5)	%

^(a)A reconciliation of non-GAAP net sales in constant currency ~~excluding acquisitions~~ is presented at the end of Results of Operations in the non-GAAP section.

The following table summarizes ~~the Company’s~~our gross profit for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016~~:2022:

Quarter ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Worldwide Barcode, Networking & Security $ 61,983
$ 48,956
$ 13,027
26.6 % 8.6 % 8.2 %
Worldwide Communications & Services 50,988
49,578
1,410
2.8 % 16.3 % 15.9 %
Gross profit $ 112,971
$ 98,534
$ 14,437
14.7 % 10.9 % 10.9 %

Six months ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Worldwide Barcode, Networking & Security $ 119,446
$ 98,207
$ 21,239
21.6 % 8.9 % 8.0 %
Worldwide Communications & Services 99,442
91,861
7,581
8.3 % 16.1 % 14.9 %
Gross profit $ 218,888
$ 190,068
$ 28,820
15.2 % 11.2 % 10.3 %


	Quarter ended December 31,								% of Net Sales December 31,
	2023		2022		$ Change		% Change		2023		2022
	(in thousands)
Specialty Technology Solutions	$	47,133	$	56,732	$	(9,599)	(16.9)	%	9.1	%	9.0	%
Modern Communications & Cloud	53,615		58,602		(4,987)		(8.5)	%	14.7	%	15.3	%
Gross profit	$	100,748	$	115,334	$	(14,586)	(12.6)	%	11.4	%	11.4	%

	Six months ended December 31,								% of Net Sales December 31,
	2023		2022		$ Change		% Change		2023		2022
	(in thousands)
Specialty Technology Solutions	$	96,315	$	115,135	$	(18,820)	(16.3)	%	9.3	%	9.6	%
Modern Communications & Cloud	110,941		113,683		(2,742)		(2.4)	%	15.2	%	15.1	%
Gross profit	$	207,256	$	228,818	$	(21,562)	(9.4)	%	11.8	%	11.7	%

~~Worldwide Barcode, Networking & Security~~

Specialty Technology Solutions

For the quarter ended December 31, 2023, gross profit ~~margin~~dollars for the ~~Barcode, Networking & Security~~Specialty Technology Solutions segment declined $9.6 million, or 16.9%, compared to the prior-year quarter. Lower sales volume, after considering the associated cost of goods sold, reduced gross profit dollars by $9.7 million. Gross profit margin increased ~~for~~slightly quarter-over-quarter to 9.1% which positively impacted gross profit dollars by less than $0.1 million.

For the~~quarter and~~ six months ended December 31, ~~2017,~~2023, gross profit dollars decreased $18.8 million, or 16.3%, compared to the prior-year ~~quarter and six month~~ period. Lower sales volume, after considering the associated cost of goods sold, reduced gross profit by $16.6 million. Gross profit margin decreased 21 basis points year-over-year to 9.3%. Gross margin mix negatively impacted gross profit by $2.2 million largely from lower vendor program recognition.

Modern Communications & Cloud

For thequarter ended December 31, 2023, gross profit dollars ~~and margin increased primarily as a result of increased sales volumes, including results contributed by POS Portal. Gross profit dollars and margin increased~~ for the ~~six month period largely due to improved vendor program recognition and the addition of POS Portal.~~

~~Worldwide~~Modern Communications & ~~Services~~

For the six months ended December 31, 2023, gross profit dollars ~~and~~declined $2.7 million, or 2.4%, compared to the prior-year period. Lower sales volume, after considering the associated cost of goods sold, reduced gross profit dollars by $3.0 million. Gross profit margin increased ~~for the six months endedDecember 31, 2017 largely due~~slightly year-over-year to ~~improved sales mix.~~15.2% which positively impacted gross profit dollars by $0.3 million.

The following table summarizes our operating expenses for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016~~:2022:

Selling, general and administrative expenses ("(“SG~~&A"~~&A”) ~~increased $7.9~~decreased by $2.2 million, ~~and $17.8 million~~or 3.1%, for the quarter ~~and~~ended December 31, 2023, compared to the prior-year period. The decrease for the quarter ended December 31, 2023 is primarily attributable to lower employee costs for the quarter.

For the six months ended December 31, ~~2017, respectively, as~~2023, SG&A expenses increased by $1.7 million, or 1.2%, compared to the ~~prior year.~~prior-year period. The increase ~~in SG&A~~ for the ~~quarter and six months is primarily due to increased employee-related expenses, largely due to recent acquisitions.~~

The following table summarizes our operating income for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016:~~2022:

~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions

For the ~~Barcode, Networking & Security~~Specialty Technology Solutions segment, operating income decreased $6.3 million, or 32.1%, and operating margin increased for the current quarter and six months ended December 31, 2017 compared to the prior year. The increase for the quarter is largely due to increased sales volume, partially offset by increased employee-related expenses, bad debt expense and intangible amortization expense. The increase for the six month period is largely due to the improved gross profit margin, partially offset by increased employee-related expenses, bad debt expense and intangible amortization expense.

~~Worldwide Communications & Services~~

Modern Communications & Cloud

For the Modern Communications & Cloud segment, operating income decreased $5.1 million, ~~were incurred for the six months ended December 31, 2017. These costs compared to $0.3~~or 26.1%, and $5.8 million, ~~and $0.8 million and~~or 17.6%, respectively, for the quarter and six months ended December 31, ~~2016,~~2023 compared to the prior-year period. Operating margin decreased to 4.0% and 3.7% for the quarter and six months ended December 31, 2023, respectively. The decrease in operating income and margin is primarily from lower gross profits and higher bad debt expense, due to increases in specific customer reserves.

For the quarter and six months ended December 31, 2023, Corporate operating loss of $1.1 million and $1.3 million, represents costs associated with the sale of our intY business and cyberattack restoration costs.

Total Other (Income) Expense

The following table summarizes our total other (income) expense for the quarters and six months ended December 31, ~~2017~~2023 and ~~2016~~:2022:


	Quarter ended December 31,								% of Net Sales December 31,
	2023		2022		$ Change		% Change		2023		2022
	(in thousands)
Interest expense	$	3,359	$	5,060	$	(1,701)	(33.6)	%	0.4	%	0.5	%
Interest income	(2,119)		(2,027)		(92)		4.5	%	(0.2)	%	(0.2)	%
Net foreign exchange losses	429		347		82		23.6	%	0.0	%	0.0	%
Gain on sale of business	(14,533)		—		(14,533)		nm*		(1.6)	%	—	%
Other, net	(356)		(140)		(216)		154.3	%	(0.0)	%	(0.0)	%
Total other (income) expense, net	$	(13,220)	$	3,240	$	(16,460)	(508.0)	%	(1.5)	%	0.3	%

	Six months ended December 31,								% of Net Sales December 31,
	2023		2022		$ Change		% Change		2023		2022
	(in thousands)
Interest expense	$	8,945	$	8,507	$	438	5.1	%	0.5	%	0.4	%
Interest income	(3,444)		(3,618)		174		(4.8)	%	(0.2)	%	(0.2)	%
Net foreign exchange losses	1,124		1,270		(146)		(11.5)	%	0.1	%	0.1	%
Gain on sale of business	(14,533)		—		(14,533)		nm*		(0.8)	%	—	%
Other, net	(374)		(315)		(59)		18.7	%	(0.0)	%	(0.0)	%
Total other (income) expense, net	$	(8,282)	$	5,844	$	(14,126)	(241.7)	%	(0.5)	%	0.3	%

Quarter ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Interest expense $ 2,285
$ 912
$ 1,373
150.5 % 0.2 % 0.1 %
Interest income (580 ) (892 ) 312
(35.0 )% (0.1 )% (0.1 )%
Net foreign exchange (gains) losses 594
308
286
92.9 % 0.1 % 0.0 %
Other, net (268 ) (12,834 ) 12,566
(97.9 )% (0.0 )% (1.4 )%
Total other (income) expense, net $ 2,031
$ (12,506 ) $ 14,537
(116.2 )% 0.2 % (1.4 )%

Six months ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Interest expense $ 3,870
$ 1,501
$ 2,369
157.8 % 0.1 % 0.1 %
Interest income (1,462 ) (1,908 ) 446
(23.4 )% (0.1 )% (0.1 )%
Net foreign exchange (gains) losses 782
920
(138 ) (15.0 )% 0.1 % 0.1 %
Other, net (341 ) (12,868 ) 12,527
(97.4 )% (0.7 )% (0.0 )%
Total other (income) expense, net $ 2,849
$ (12,355 ) $ 15,204
(123.1 )% (0.7 )% 0.0 %
*nm - percentages are not meaningful

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 ended December 31, 2023 compared to the prior-year periods, primarily from lower average borrowings on our multi-currency revolving credit facility. Interest expense increased slightly for the six months ended December 31, 2023 as a result of higher interest rates for the six-month period compared to the prior-year.

Interest income for the quarter and six months ended December 31, ~~2017 principally due to additional borrowings on our multi-currency revolving credit facility.~~

Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign ~~currency~~ exchange ~~contract~~forward contracts gains and losses. Foreign exchange gains and losses are generated ~~from~~as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real, the ~~U.S. dollar versus the euro, the British pound versus the euro, the~~ Canadian dollar versus the U.S. dollar, the euro versus the U.S. dollar, ~~versus~~and the ~~Colombian peso and other currencies~~British pound versus the U.S. dollar. ~~While we utilize foreign exchange contracts and debt in non-functional currencies to hedge~~We partially offset foreign currency exposure our foreign exchange policy prohibits the use of derivative financial instruments for speculative transactions. The Company's net foreign exchange losses are driven by changes in foreign currency exchange rates, partially offset bywith the use of foreign exchange ~~forward~~ contracts to hedge against ~~currency~~these exposures. The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses.

For the quarter and six months ended December 31, 2023, we recognized a $14.5 million gain on the sale of our UK-based intY business.

Provision for Income Taxes

For the quarter and six months ended December 31, ~~2017,~~2023, income tax expense was ~~$12.3~~$7.3 million and ~~$15.0~~$11.0 million, respectively, reflecting an effective tax rate of ~~60.8%~~18.3% and ~~55.3%~~18.6%, respectively. ~~The effective tax rate~~In comparison, for the quarter and six months ended December 31, ~~2016~~2022, income tax expense was ~~35.6%~~$10.5 million and ~~35.3%~~$18.7 million, respectively, reflecting an effective tax rate of 28.9% and 27.3%, respectively. The ~~increase~~decrease in the effective tax rate from the prior year quarter is primarily due to the recognition of a net discrete tax expense of $6.7 million and $6.9 million, respectively. There were no discrete items recognized in the prior year. Excluding the recognition of the discrete item, the effective tax rate for the quarter ~~and six months ended December 31, 2017 would have been 28.0% and 29.8%, respectively.~~is due to a $3.8 million discrete tax benefit, which is primarily attributable to the sale of our UK-based intY business. We expect the effective tax rate, excluding discrete items, for fiscal year ~~2018~~2024 to be approximately ~~30%, which reflects the application of the 21% U.S. statutory tax rate effective January 1, 2018.~~27.0% to 28.0%. See Note 1113 - Income Taxes to the Notes to Consolidated Financial Statements for further discussion.

Non-GAAP Financial Information

Evaluating Financial Condition and Operating Performance

In addition to disclosing results that are determined in accordance with United States generally accepted accounting principles ("~~U.S,~~US GAAP" or "GAAP"), we also disclose certain non-GAAP financial measures. These measures include non-GAAP operating ~~income,~~income; non-GAAP pre-tax ~~income,~~income; non-GAAP net income; non-GAAP EPS; adjusted earnings before interest expense, income ~~non-GAAP EPS,~~taxes, depreciation, and amortization ("adjusted EBITDA"); adjusted return on invested capital ("adjusted ROIC"); and ~~"constant~~constant currency." Constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates

These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that we report may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with ~~U.S.~~US GAAP.

Adjusted Return on Invested Capital

Adjusted ROIC assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of adjusted ROIC provides useful information to investors and is an additional relevant comparison of our performance during the year.

Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, share-based compensation expense, and other non-GAAP adjustments. Since adjusted EBITDA excludes some non-cash costs of investing in our business and people, we believe that adjusted EBITDA shows the profitability from our business operations more clearly.

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 December 31, 2023 and 2022, respectively:


	Quarter ended December 31,
	2023		2022
Adjusted return on invested capital ratio, annualized (a)	13.2	%	15.6	%

(a)The annualized EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 92 days in the current and prior-year quarter.

The components of this calculation and reconciliation to our financial statements are shown on the following schedule:


	Quarter ended December 31,
	2023		2022
	(in thousands)
Reconciliation of net income to adjusted EBITDA:
Net income (GAAP)	$	32,726	$	25,734
Plus: Interest expense	3,359		5,060
Plus: Income taxes	7,320		10,458
Plus: Depreciation and amortization	7,258		7,057
EBITDA (non-GAAP)	50,663		48,309

Plus: Tax recovery	(1,386)		(2,858)
Plus: Share-based compensation	2,571		3,364
Plus: Acquisition and divestiture costs	703		—
Plus: Cyberattack restoration costs	441		—

Plus: Gain on sale of business	(14,533)		—

Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP)	$	38,459	$	48,815


	Quarter ended December 31,
	2023		2022
	(in thousands)
Invested capital calculations:
Equity – beginning of the quarter	$	915,253	$	827,004
Equity – end of the quarter	953,601		862,386

Plus: Share-based compensation, net	1,919		2,496
Plus: Cyberattack restoration costs, net	329		—
Plus: Acquisition and divestiture costs	703		—

Plus: Tax recovery, net	(640)		(1,886)
Plus: Gain on sale of business	(14,533)		—

Average equity	928,316		845,000
Average funded debt (a)	227,688		392,853
Invested capital (denominator for adjusted ROIC) (non-GAAP)	$	1,156,004	$	1,237,853

(a)Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.

Net Sales in Constant Currency Excluding Acquisitions and Divestitures

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 or divestitures prior to the first full year of operations from the acquisition or divestiture 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.~~acquisitions and divestitures. Below we ~~provide~~show organic growth by providing a non-GAAP reconciliation of net sales in constant currency excluding ~~acquisition (organic growth):~~acquisitions and divestitures:

Foreign exchange impact^(a)

Foreign exchange impact (a)

(a)Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, ~~2017~~2023 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, ~~2016.~~ 2022.

Foreign exchange impact (a)

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the six months ended December 31, 2023 into U.S. dollars using the average foreign exchange rates for the six months ended December 31, 2022.

Foreign exchange impact^(a)

Foreign exchange impact (a)

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2023 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2022.

Foreign exchange impact (a)

~~(a)~~ ~~Year-over-year net sales growth rate excluding the translation impact~~



Operating Income by Segment:
	Quarter ended December 31,								% of Net Sales December 31,
	2023		2022		$ Change		% Change		2023		2022
Specialty Technology Solutions:	(in thousands)
GAAP operating income	$	13,368	$	19,682	$	(6,314)	(32.1)	%	2.6	%	3.1	%
Adjustments:
Amortization of intangible assets	1,261		1,266		(5)




Non-GAAP operating income	$	14,629	$	20,948	$	(6,319)	(30.2)	%	2.8	%	3.3	%

Modern Communications & Cloud:
GAAP operating income	$	14,602	$	19,750	$	(5,148)	(26.1)	%	4.0	%	5.1	%
Adjustments:
Amortization of intangible assets	2,776		2,884		(108)


Tax recovery (a)	(1,386)		(2,858)		1,472


Non-GAAP operating income	$	15,992	$	19,776	$	(3,784)	(19.1)	%	4.4	%	5.2	%

Corporate:
GAAP operating loss	$	(1,144)	$	—	$	(1,144)	nm*		nm*		nm*
Adjustments:
Acquisition and divestiture costs	703		—		703

Cyberattack restoration costs	441		—		441

Non-GAAP operating income	$	—	$	—	$	—	nm*		nm*		nm*

Consolidated:
GAAP operating income	$	26,826	$	39,432	$	(12,606)	(32.0)	%	3.0	%	3.9	%
Adjustments:
Amortization of intangible assets	4,037		4,150		(113)
Cyberattack restoration costs	441		—		441

Tax recovery (a)	(1,386)		(2,858)		1,472
Acquisition and divestiture costs	703		—		703



Non-GAAP operating income	$	30,621	$	40,724	$	(10,103)	(24.8)	%	3.5	%	4.0	%

(a)Recovery of prior period withholding taxes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2017 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2016. Brazil.



Operating Income by Segment:
	Six months ended December 31,								% of Net Sales December 31,
	2023		2022		$ Change		% Change		2023		2022
Specialty Technology Solutions:	(in thousands)
GAAP operating income	$	25,240	$	41,534	$	(16,294)	(39.2)	%	2.4	%	3.5	%
Adjustments:
Amortization of intangible assets	2,523		2,608		(85)




Non-GAAP operating income	$	27,763	$	44,142	$	(16,379)	(37.1)	%	2.7	%	3.7	%

Modern Communications & Cloud:
GAAP operating income	$	27,014	$	32,785	$	(5,771)	(17.6)	%	3.7	%	4.4	%
Adjustments:
Amortization of intangible assets	5,707		5,783		(76)

Tax recovery (a)	(1,386)		(2,858)		1,472



Non-GAAP operating income	$	31,335	$	35,710	$	(4,375)	(12.3)	%	4.3	%	4.8	%

Corporate:
GAAP operating loss	$	(1,343)	$	—	$	(1,343)	nm*		nm*		nm*
Adjustments:
Cyberattack restoration costs	640		—		640
Acquisition and divestiture costs	703		—		703


Non-GAAP operating income	$	—	$	—	$	—	nm*		nm*		nm*

Consolidated:
GAAP operating income	$	50,911	$	74,319	$	(23,408)	(31.5)	%	2.9	%	3.8	%
Adjustments:
Amortization of intangible assets	8,230		8,391		(161)

Cyberattack restoration costs	640		—		640
Tax recovery (a)	(1,386)		(2,858)		1,472
Acquisition and divestiture costs	703		—		703



Non-GAAP operating income	$	59,098	$	79,852	$	(20,754)	(26.0)	%	3.4	%	4.1	%

(a)Recovery of prior period withholding taxes in Brazil.

Additional Non-GAAP ~~Operating Income, Non-GAAP Pre-Tax Income, Non-GAAP Net Income and Non-GAAP EPS~~Metrics

To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP SG&A expenses, non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to ~~acquisitions, changes in fair value of contingent consideration, acquisition~~divestitures, cyberattack restoration costs and other non-GAAP adjustments. ~~Non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted EPS~~These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Below we provide a non-GAAP reconciliation of ~~operating income, pre-tax income, net income and earnings per share~~the aforementioned metrics adjusted for the costs and charges mentioned above:


		Quarter ended December 31, 2023
		GAAP Measure	Intangible amortization expense		Divestiture costs		Tax recovery	Cyberattack restoration costs		Gain on sale of a business (a)		Non-GAAP measure
	(in thousands, except per share data)
SG&A expenses		$66,921	$	—	$(703)		$1,386	$(441)		$	—	$67,163
Operating income		26,826	4,037		703		(1,386)	441		—		30,621
Pre-tax income		40,046	4,037		703		(1,386)	441		(14,533)		29,308
Net income		32,726	3,002		703		(640)	329		(14,533)		21,587
Diluted EPS		$1.29	$0.12		$0.03		$(0.03)	$0.01		$(0.57)		$0.85

		Quarter ended December 31, 2022
		GAAP Measure	Intangible amortization expense		Divestiture costs		Tax recovery	Cyberattack restoration costs		Gain on sale of a business (a)		Non-GAAP measure
	(in thousands, except per share data)
SG&A expenses		$69,074	$	—	$	—	$2,858	$	—	$	—	$71,932
Operating income		39,432	4,150		—		(2,858)	—		—		40,724
Pre-tax income		36,192	4,150		—		(2,858)	—		—		37,484
Net income		25,734	3,093		—		(1,886)	—		—		26,941
Diluted EPS		$1.01	$0.12		$	—	$(0.07)	$	—	$	—	$1.06

(a) Reflects gain on the sale of the UK-based intY business. This transaction resulted in a capital loss for tax purposes. The Company did not record a tax provision on the capital loss since there were no offsetting capital gains.

Quarter ended December 31, 2017 Quarter ended December 31, 2016
Operating Income Pre-Tax Income Net Income Diluted EPS Operating Income Pre-Tax Income Net Income Diluted EPS
(in thousands, except per share data)
GAAP Measures $ 22,341
$ 20,310
$ 7,969
$ 0.31
$ 23,275
$ 35,781
$ 23,036
$ 0.91
Adjustments:
Amortization of intangible assets 5,487
5,487
3,648
0.14
4,165
4,165
2,740
0.11
Change in fair value of contingent consideration 6,913
6,913
4,742
0.18
1,791
1,791
1,000
0.04
Acquisition costs —
—
—
—
335
335
335
0.01
Tax reform charges^(a)
6,689
0.26
—
—
—
—
Legal settlement, net of attorney fees —
—
—
—
—
(12,777 ) (8,047 ) (0.32 )
Non-GAAP measures $ 34,741
$ 32,710
$ 23,048
$ 0.90
$ 29,566
$ 29,295
$ 19,064
$ 0.75

~~(a)~~As a result of tax reform laws enacted in the United States and Belgium, we recognized a one-time charge of $6.7 million in the quarter ended December 31, 2017 from the estimated impact of the inclusion of foreign earnings and revaluation of deferred tax assets and liabilities.

~~Return on Invested Capital~~

(a) Reflects gain on the sale of the UK-based intY business. This transaction resulted in a capital loss for tax purposes. The Company did not record a tax provision on the capital loss since there were no offsetting capital gains.

Quarter ended December 31,
2017 2016
Return on invested capital ratio, annualized^(a)
13.3 % 13.8 %

Plus: Acquisition costs, net of tax ^(a)

Average funded debt ^(b)

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under our ~~$400~~$350 million revolving credit facility. Our business requires significant investment in working capital, particularly accounts receivable and inventory, partially financed through our accounts payable to vendors, cash generated from operations and revolving lines of credit. In general, as our sales ~~volumes increase,~~volume increases, our net investment in working capital increases, which typically results in decreased cash flow from operating activities. Conversely, when sales ~~volumes decrease,~~volume decreases, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.

Our cash and cash equivalents balance totaled ~~$35.4~~$45.0 million at December 31, ~~2017~~,2023, compared to ~~$56.1~~$36.2 million at June 30, ~~2017~~,2023, including ~~$26.8~~$38.3 million and ~~$47.9~~$31.0 million held outside of the United States at December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, respectively. Checks released but not yet cleared in the ~~amounts~~amount of ~~$7.5 million and $8.3~~$8.0 million are included in accounts payable ~~as of~~at December 31, ~~2017~~2023 and June 30, ~~2017, respectively.~~2023.

We conduct business in ~~many locations throughout the world~~North America and Brazil where we generate and use cash. We provide for ~~U.S.~~United States income taxes ~~for~~from the earnings of our Canadian subsidiary. Earnings from all other geographies will continue to be considered retained indefinitely for reinvestment. Due to recent tax legislation in the United States, we are required to estimate a one-time transition tax on repatriation of foreign earnings during the quarter ended December 31, 2017.and Brazilian subsidiaries. See Note 1113 - Income Taxesin the Notes to the Consolidated Financial Statements for further discussion.

Our net investment in working capital decreased $75.7 million to $794.6 million at December 31, ~~2017 was~~ ~~$754.5~~2023 from $870.3 million ~~compared to~~ ~~$624.7 million~~ at June 30, ~~2017~~2023, primarily from decreases in inventory and ~~$621.4 million~~ ~~at December 31, 2016.~~accounts receivable, partially offset by lower accounts payable, as a result of lower sales volume and our multi-quarter working capital improvement plan. Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from customers, increases and decreases to inventory levels and payments to ~~vendors,~~vendors.

Operating cash flows are subject to variability period over period as ~~well as cash generated or used by~~a result of the timing of payments related to accounts receivable, accounts payable, and other ~~financing and investing activities.~~

Six months ended
December 31,
2017 2016
Cash provided by (used in): (in thousands)
Operating activities $ (84,183 ) $ 35,731
Investing activities (147,064 ) (87,065 )
Financing activities 209,429
36,132
Effect of exchange rate change on cash and cash equivalents 1,159
(1,127 )
Increase (decrease) in cash and cash equivalents $ (20,659 ) $ (16,329 )

The number of days sales outstanding ("DSO") was 6068 days at December 31, ~~2017, excluding Intelisys,~~2023, compared to 6172 days at June 30, ~~2017~~2023 and 6069 days at December 31, ~~2016.~~2022. Inventory turned ~~6.2~~5.1 times during the ~~second~~ quarter ~~of fiscal year 2018~~ended December 31, 2023, compared to ~~5.8 for~~4.4 times during the ~~previous~~ quarter ~~excluding POS Portal,~~ended June 30, 2023 and ~~6.0~~5.0 times in the ~~prior year quarter.~~prior-year quarter ended December 31, 2022.

Cash provided by investing activities for the six months ended December 31, 2023 was $13.1 million, compared to $4.3 million used in investing activities in the prior-year period. Cash provided by investing activities for the six months ended December 31, 2023 is largely due to cash received from the sale of our intY UK business. Cash used in investing activities for the six months ended December 31, ~~2017 was $147.1~~2022 represents capital expenditures.


	Quarter ended				Six months ended
	December 31,				December 31,
	2023		2022		2023		2022
	(in thousands)
Net interest income recognized as a result of interest rate swap	$	(903)	$	(345)	$	(1,781)	$	(313)
Unrealized (loss) gain in fair value of interest rate swap	(1,165)		349		(72)		2,847
Net (decrease) increase in accumulated other comprehensive income	(2,068)		4		(1,853)		2,534
Income tax effect	(521)		1		(458)		652
Net (decrease) increase in accumulated other comprehensive income, net of tax	$	(1,547)	$	3	$	(1,395)	$	1,882


			Total
			Total
			Total

	Total			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(in thousands)									(in thousands)
Assets:
Deferred compensation plan investments, current and non-current portion	$	23,893		$	23,893	$	—	$	—
Forward foreign currency exchange contracts	71			—		71		—
Deferred compensation plan investments, current and non-current portion
Deferred compensation plan investments, current and non-current portion

Interest rate swap agreement	578			—		578		—

Interest rate swap agreement

Interest rate swap agreement
Foreign currency hedge
Foreign currency hedge
Foreign currency hedge
Total assets at fair value
Total assets at fair value
Total assets at fair value	$	24,542		$	23,893	$	649	$	—
Liabilities:
Liabilities:
Liabilities:
Deferred compensation plan investments, current and non-current portion
Deferred compensation plan investments, current and non-current portion
Deferred compensation plan investments, current and non-current portion	$	23,893		$	23,893	$	—	$	—
Forward foreign currency exchange contracts	169			—		169		—
Liability for contingent consideration, current and non-current portion	97,031			—		—		97,031
Forward foreign currency exchange contracts
Forward foreign currency exchange contracts

Total liabilities at fair value	$	121,093		$	23,893	$	169	$	97,031

Total liabilities at fair value

Total liabilities at fair value


			Total
			Total
			Total

	Total			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(in thousands)									(in thousands)
Assets:
Deferred compensation plan investments, current and non-current portion	$	21,439		$	21,439	$	—	$	—
Deferred compensation plan investments, current and non-current portion
Deferred compensation plan investments, current and non-current portion
Forward foreign currency exchange contracts	35			—		35		—
Forward foreign currency exchange contracts
Forward foreign currency exchange contracts
Foreign currency hedge
Foreign currency hedge
Foreign currency hedge
Interest rate swap agreement
Interest rate swap agreement
Interest rate swap agreement	21			—		21		—
Total assets at fair value	$	21,495		$	21,439	$	56	$	—
Total assets at fair value
Total assets at fair value
Liabilities:
Liabilities:
Liabilities:
Deferred compensation plan investments, current and non-current portion	$	21,074		$	21,074	$	—	$	—
Forward foreign currency exchange contracts	131			—		131		—
Liability for contingent consideration, current and non-current portion	114,036			—		—		114,036
Deferred compensation plan investments, current and non-current portion
Deferred compensation plan investments, current and non-current portion

Total liabilities at fair value	$	135,241		$	21,074	$	131	$	114,036

Total liabilities at fair value

Total liabilities at fair value


	December 31, 2023
Weighted-average remaining lease term	3.28 years
Weighted-average discount rate	4.53	%


☒
		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	December 31, 2017			June 30, 2017
Assets
Current assets:
Cash and cash equivalents	$	35,435		$	56,094
Accounts receivable, less allowance of $47,264 at December 31, 2017 and $44,434 at June 30, 2017	717,336			637,293
Inventories	581,802			531,314
Prepaid expenses and other current assets	76,667			56,322
Total current assets	1,411,240			1,281,023
Property and equipment, net	76,626			56,566
Goodwill	302,912			200,881
Identifiable intangible assets, net	148,443			101,513
Deferred income taxes	11,794			29,491
Other non-current assets	54,267			48,829
Total assets	$	2,005,282		$	1,718,303
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	104		$	—
Accounts payable	515,302			513,155
Accrued expenses and other current liabilities	97,597			104,715
Current portion of contingent consideration	38,629			30,675
Income taxes payable	5,086			7,730
Total current liabilities	656,718			656,275
Deferred income taxes	11,110			2,008
Long-term debt	5,325			5,429
Borrowings under revolving credit facility	355,503			91,871
Long-term portion of contingent consideration	58,402			83,361
Other long-term liabilities	57,437			42,214
Total liabilities	1,144,495			881,158
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued	—			—
Common stock, no par value; 45,000,000 shares authorized, 25,571,355 and 25,431,845 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively	64,896			61,169
Retained earnings	861,296			849,180
Accumulated other comprehensive income (loss)	(65,405		)	(73,204		)
Total shareholders’ equity	860,787			837,145
Total liabilities and shareholders’ equity	$	2,005,282		$	1,718,303

June 30, 2017 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.



	POS Portal
	(in thousands)
Receivables	$	8,914
Inventory	8,352
Other current assets	917
Property and equipment	24,963
Goodwill	101,198
Identifiable intangible assets	57,000
Other non-current assets	100
	$	201,444

Accounts payable	$	10,897
Accrued expenses and other current liabilities	5,130
Contingent consideration	13,098
Other long-term liabilities	102
Long-term deferred taxes payable	28,449
Consideration transferred, net of cash acquired	143,768
	$	201,444



	Intelisys
	(in thousands)
Receivables	$	21,655
Other current assets	1,547
Property and equipment	5,298
Goodwill	109,005
Identifiable intangible assets	63,110
Other non-current assets	1,839
	$	202,454

Accounts payable	$	21,063
Accrued expenses and other current liabilities	2,587
Contingent consideration	95,000
Consideration transferred, net of cash acquired	83,804
	$	202,454



	Barcode, Networking & Security Segment		Communications & Services Segment		Total
	(in thousands)
Balance as of June 30, 2017	$	36,260	$	164,621	$	200,881
Additions	101,198		—		101,198
Foreign currency translation adjustment	146		687		833
Balance as of December 31, 2017	$	137,604	$	165,308	$	302,912


	Net Identifiable Intangible Assets
	(in thousands)
Balance at June 30, 2023	$	68,495
Intangibles disposed upon business sale	(14,927)
Amortization expense	(8,230)
Foreign currency translation adjustment	(25)
Balance at December 31, 2023	$	45,313



	Contingent consideration for the quarter ended									Contingent consideration for the six months ended
	December 31, 2017									December 31, 2017
	Barcode, Networking & Security Segment			Communications & Services Segment			Total			Barcode, Networking & Security Segment			Communications & Services Segment			Total
	(in thousands)
Fair value at beginning of period	$	13,167		$	90,326		$	103,493		$	—		$	114,036		$	114,036
Issuance of contingent consideration	—			—			—			13,098			—			13,098
Payments	(13,167		)	—			(13,167		)	(13,167		)	(40,858		)	(54,025		)
Change in fair value of contingent consideration	—			6,913			6,913			69			23,725			23,794
Foreign currency translation adjustment	—			(208		)	(208		)	—			128			128
Fair value at end of period	$	—		$	97,031		$	97,031		$	—		$	97,031		$	97,031



	Contingent consideration for the quarter ended			Contingent consideration for the six months ended
	December 31, 2016			December 31, 2016
	Communications & Services Segment			Communications & Services Segment
	(in thousands)
Fair value at beginning of period	$	110,835		$	24,652
Issuance of contingent consideration	—			95,000
Payments	(1,607		)	(10,241		)
Change in fair value of contingent consideration	1,791			1,961
Foreign currency translation adjustment	(139		)	(492		)
Fair value at end of period	$	110,880		$	110,880


		December 31, 2023		June 30, 2023
Operating leases	Balance Sheet location	(in thousands)
Operating lease right-of-use assets	Other non-current assets	$	10,586	$	12,539
Current operating lease liabilities	Accrued expenses and other current liabilities	$	3,877	$	4,355
Long-term operating lease liabilities	Other long-term liabilities	$	7,703	$	9,329


	Operating leases
	(in thousands)
2024	$	2,372
2025	3,667
2026	3,088
2027	2,675
2028	632
Thereafter	—
Total future payments	12,434
Less: amounts representing interest	854
Present value of lease payments	$	11,580



	Quarter ended December 31, 2017								Quarter ended December 31, 2016
	Operating Income		Pre-Tax Income		Net Income		Diluted EPS		Operating Income		Pre-Tax Income			Net Income			Diluted EPS
	(in thousands, except per share data)
GAAP Measures	$	22,341	$	20,310	$	7,969	$	0.31	$	23,275	$	35,781		$	23,036		$	0.91
Adjustments:
Amortization of intangible assets	5,487		5,487		3,648		0.14		4,165		4,165			2,740			0.11
Change in fair value of contingent consideration	6,913		6,913		4,742		0.18		1,791		1,791			1,000			0.04
Acquisition costs	—		—		—		—		335		335			335			0.01
Tax reform charges^(a)					6,689		0.26		—		—			—			—
Legal settlement, net of attorney fees	—		—		—		—		—		(12,777		)	(8,047		)	(0.32		)
Non-GAAP measures	$	34,741	$	32,710	$	23,048	$	0.90	$	29,566	$	29,295		$	19,064		$	0.75


~~(a)~~	~~The annualized EBITDA amount is divided by days in the quarter times 365 days per year (366 during leap years). There were 92 days in the current and prior-year quarter.~~


~~(a)~~	~~Acquisition costs are nondeductible for tax purposes.~~


~~(b)~~	~~Average funded debt is calculated as the average daily amounts outstanding on our current and long-term interest-bearing debt.~~



Period	Total number of shares purchased^(a)	Average price paid per share^(a)		Total number of shares purchased as part of the publicly announced plan or program	Approximate dollar value of shares that may yet be purchased under the plan or program
October 1, 2017 through October 31, 2017	103	$	43.65	103	$	99,664,707
November 1, 2017 through November 30, 2017	—	$	—	—	$	99,664,707
December 1, 2017 through December 31, 2017	45,798	$	34.35	45,798	$	99,664,707
Total	45,901	$	34.37	45,901	$	99,664,707


Period	Total number of shares purchased (1)	Average price paid per share	Total number of shares purchased as part of the publicly announced plan or program	Approximate dollar value of shares that may yet be purchased under the plan or program

October 1 - 31, 2023	—	—	—	$ 66,163,962
November 1 - 30, 2023	32,567	$ 32.73	—	$ 66,163,962
December 1 - 31, 2023	36,544	$ 34.29	36,305	$ 64,913,399
Total	69,111		36,305	$ 64,913,399


Exhibit Number		Description

~~Exhibit~~ ~~Number~~		~~Description~~

~~10.1~~31.1	Form of Restricted Stock Unit Award (Performance and Service-Based) under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.1 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~10.2~~	Form of Restricted Stock Unit Award (Service-Based) under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.2 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~10.3~~	Form of Non-Qualified Stock Option Agreement under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.3 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~10.4~~	Form of Incentive Stock Option Agreement under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.4 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~31.1~~	Certification of the Chief Executive Officer, Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer, Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of the Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



101		The following materials from our Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2017,~~2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets ~~as of~~at December 31, ~~2017~~2023 and June 30, ~~2017;~~2023; (ii) the Condensed Consolidated Income ~~Statement~~Statements for the ~~quarter~~quarters and six months ended December 31, ~~2017~~2023 and ~~2016;~~2022; (iii) the Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the ~~quarter~~quarters and six months ended December 31, ~~2017~~2023 and ~~2016;~~2022; (iv) the Condensed Consolidated Statements of Shareholder's Equity at December 31, 2023 and 2022; (v) the Condensed Consolidated Statements of Cash Flows for the six months ended December 31, ~~2017~~2023 and ~~2016;~~2022; and ~~(v)~~(vi) the Notes to the Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL

104		Cover page Inline XBRL File (Included in Exhibit 101)


			ScanSource, Inc.

Date:		February 6, 2024	~~ScanSource, Inc.~~

	/s/ MICHAEL L. BAUR
				Michael L. Baur
~~Date:~~		~~February 6, 2018~~	Chair and Chief Executive Officer (Principal Executive Officer)


Date:			February 6, 2024	/s/ STEVE JONES
				Steve Jones
				~~/s/ GERALD LYONS~~
		~~Gerald Lyons~~
~~Date:~~	~~February 6, 2018~~	Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)


Date:	February 6, 2024	/s/ BRANDY FORD
		Brandy Ford
		Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)