UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

Quarterly period ended March 31, ~~2021~~2022


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

For the transition period from ____ to ____

Commission File Number: 000-26926

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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

☒

Smaller reporting company

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

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 ☒

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 May ~~7, 2021~~9, 2022
Common Stock, no par value per share						~~25,466,365~~25,232,074 shares

SCANSOURCE, INC.

INDEX TO FORM 10-Q

March 31, ~~2021~~2022


		Page #
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (unaudited) at March 31, 202 12 and June 30, ~~2020~~2021	5
	Condensed Consolidated Income Statements (unaudited) for the Quarters and Nine Months Ended March 31, ~~202~~1 2022 and 20 202021	6
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Quarters and Nine Months Ended March 31, ~~202~~1 2022 and 20 202021	7
	Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the Quarters and Nine Months Ended March 31, ~~202~~1 2022 and 20 202021	8
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended March 31, ~~202~~1 2022 and 20 202021	10
	Notes to Condensed Consolidated Financial Statements (unaudited)	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3230
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5147
Item 4.	Controls and Procedures	5248

PART II. OTHER INFORMATION

Item 11.	Legal Proceedings	5349
Item 1A.	Risk Factors	5349
Item 22.	Unregistered Sales of Equity Securities and Use of Proceeds	5349
Item 6.	Exhibits	5350

SIGNATURES		5451

Table of Contents

FORWARD-LOOKING STATEMENTS

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" sections and elsewhere herein. 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 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, except as required by law.~~10-Q. Actual results could differ materially from those 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: supply chain challenges, the impact of the COVID-19 pandemic on the Company's operations and financial condition, ~~and the potential prolonged economic weakness brought on by COVID-19,~~ 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 the Company's international operations, risk to the Company's business from a cyber-security attack, a failure of the Company's IT systems, failure to hire and retain quality employees, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in "Risk Factors" contained in our Annual Report on Form 10-K for the year ended June 30, ~~2020.~~2021.

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)


		March 31, 2021		June 30, 2020			March 31, 2022		June 30, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	49,321	$	29,485	Cash and cash equivalents	$	43,539	$	62,718
Accounts receivable, less allowance of $21,180 at March 31, 2021 and $21,906 at June 30, 2020		509,404		443,185
Accounts receivable, less allowance of $16,935 at March 31, 2022 and $19,341 at June 30, 2021						Accounts receivable, less allowance of $16,935 at March 31, 2022 and $19,341 at June 30, 2021	642,384		568,984
Inventories	Inventories	459,652		454,885		Inventories	591,396		470,081
Prepaid expenses and other current assets	Prepaid expenses and other current assets	99,424		94,681		Prepaid expenses and other current assets	130,509		117,860
Current assets held for sale		0		181,231

Total current assets	Total current assets	1,117,801		1,203,467		Total current assets	1,407,828		1,219,643
Property and equipment, net	Property and equipment, net	45,316		55,641		Property and equipment, net	37,815		42,836
Goodwill	Goodwill	217,093		214,288		Goodwill	218,025		218,877
Identifiable intangible assets, net	Identifiable intangible assets, net	109,172		121,547		Identifiable intangible assets, net	90,554		104,860
Deferred income taxes	Deferred income taxes	24,405		24,630		Deferred income taxes	19,951		21,853
Other non-current assets	Other non-current assets	68,835		72,521		Other non-current assets	66,627		63,615

Total assets	Total assets	$	1,582,622	$	1,692,094	Total assets	$	1,840,800	$	1,671,684
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	521,552	$	454,240	Accounts payable	$	706,359	$	634,805
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	87,969		76,686		Accrued expenses and other current liabilities	80,931		87,790
Current portion of contingent consideration		0		46,334

Income taxes payable	Income taxes payable	5,333		5,886		Income taxes payable	3,023		2,501

Current portion of long-term debt	Current portion of long-term debt	7,843		7,839		Current portion of long-term debt	10,660		7,843
Current liabilities held for sale		0		128,022

Total current liabilities	Total current liabilities	622,697		719,007		Total current liabilities	800,973		732,939
Deferred income taxes	Deferred income taxes	4,309		3,884		Deferred income taxes	3,753		3,954
Long-term debt, net of current portion	Long-term debt, net of current portion	137,206		143,175		Long-term debt, net of current portion	126,546		135,331
Borrowings under revolving credit facility	Borrowings under revolving credit facility	53,802		67,714		Borrowings under revolving credit facility	44,294		—

Other long-term liabilities	Other long-term liabilities	74,033		80,068		Other long-term liabilities	58,580		68,269

Total liabilities	Total liabilities	892,047		1,013,848		Total liabilities	1,034,146		940,493
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, NaN issued		0		0
Common stock, no par value; 45,000,000 shares authorized, 25,466,365 and 25,361,298 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively		68,895		63,765
Preferred stock, no par value; 3,000,000 shares authorized, none issued						Preferred stock, no par value; 3,000,000 shares authorized, none issued	—		—
Common stock, no par value; 45,000,000 shares authorized, 25,429,242 and 25,499,465 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively						Common stock, no par value; 45,000,000 shares authorized, 25,429,242 and 25,499,465 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively	69,856		71,253
Retained earnings	Retained earnings	734,361		747,276		Retained earnings	826,922		758,071
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(112,681)		(132,795)		Accumulated other comprehensive loss	(90,124)		(98,133)
Total shareholders’ equity	Total shareholders’ equity	690,575		678,246		Total shareholders’ equity	806,654		731,191
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	1,582,622	$	1,692,094	Total liabilities and shareholders’ equity	$	1,840,800	$	1,671,684

June 30, 2020 amounts are derived from audited consolidated financial statements.
June 30, 2021 amounts are derived from audited consolidated financial statements.						June 30, 2021 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.	See accompanying notes to these condensed 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				Nine months ended					Quarter ended				Nine months ended
		March 31,				March 31,					March 31,				March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Net sales	Net sales	$	729,873	$	744,584	$	2,298,111	$	2,411,285	Net sales	$	845,990	$	729,873	$	2,567,652	$	2,298,111
Cost of goods sold	Cost of goods sold	641,757		660,006		2,043,172		2,129,862		Cost of goods sold	739,482		641,757		2,251,920		2,043,172
Gross profit	Gross profit	88,116		84,578		254,939		281,423		Gross profit	106,508		88,116		315,732		254,939
Selling, general and administrative expenses	Selling, general and administrative expenses	60,099		64,971		182,681		201,344		Selling, general and administrative expenses	66,522		60,099		199,538		182,681
Depreciation expense	Depreciation expense	3,141		3,268		9,634		9,729		Depreciation expense	2,612		3,141		8,039		9,634
Intangible amortization expense	Intangible amortization expense	4,880		5,159		14,595		15,007		Intangible amortization expense	4,457		4,880		13,413		14,595
Restructuring and other charges	Restructuring and other charges	560		169		9,312		604		Restructuring and other charges	—		560		—		9,312
Change in fair value of contingent consideration	Change in fair value of contingent consideration	0		618		516		6,266		Change in fair value of contingent consideration	—		—		—		516
Operating income	Operating income	19,436		10,393		38,201		48,473		Operating income	32,917		19,436		94,742		38,201
Interest expense	Interest expense	1,576		3,098		5,285		9,727		Interest expense	1,483		1,576		4,637		5,285
Interest income	Interest income	(745)		(1,080)		(1,756)		(2,627)		Interest income	(1,000)		(745)		(2,973)		(1,756)
Other (income) expense, net	Other (income) expense, net	(302)		(137)		183		198		Other (income) expense, net	(136)		(302)		668		183
Income before income taxes	Income before income taxes	18,907		8,512		34,489		41,175		Income before income taxes	32,570		18,907		92,410		34,489
Provision for income taxes	Provision for income taxes	5,121		2,797		9,757		11,542		Provision for income taxes	9,044		5,121		23,659		9,757
Net income from continuing operations	Net income from continuing operations	13,786		5,715		24,732		29,633		Net income from continuing operations	23,526		13,786		68,751		24,732
Net loss from discontinued operations		(688)		(4,002)		(37,647)		(5,025)
Net (loss) income from discontinued operations										Net (loss) income from discontinued operations	—		(688)		100		(37,647)
Net income (loss)	Net income (loss)	$	13,098	$	1,713	$	(12,915)	$	24,608	Net income (loss)	$	23,526	$	13,098	$	68,851	$	(12,915)

Per share data:	Per share data:									Per share data:

Net income from continuing operations per common share, basic	Net income from continuing operations per common share, basic	$	0.54	$	0.23	$	0.97	$	1.17	Net income from continuing operations per common share, basic	$	0.92	$	0.54	$	2.69	$	0.97
Net loss from discontinued operations per common share, basic	Net loss from discontinued operations per common share, basic	(0.03)		(0.16)		$	(1.48)	$	(0.20)	Net loss from discontinued operations per common share, basic	—		(0.03)		$	—	$	(1.48)
Net income (loss) per common share, basic	Net income (loss) per common share, basic	$	0.51	$	0.07	$	(0.51)	$	0.97	Net income (loss) per common share, basic	$	0.92	$	0.51	$	2.69	$	(0.51)
Weighted-average shares outstanding, basic	Weighted-average shares outstanding, basic	25,455		25,346		25,404		25,386		Weighted-average shares outstanding, basic	25,635		25,455		25,577		25,404

Net income from continuing operations per common share, diluted	Net income from continuing operations per common share, diluted	$	0.54	$	0.23	$	0.97	$	1.16	Net income from continuing operations per common share, diluted	$	0.91	$	0.54	$	2.66	$	0.97
Net loss from discontinued operations per common share, diluted	Net loss from discontinued operations per common share, diluted	(0.03)		(0.16)		$	(1.48)	$	(0.20)	Net loss from discontinued operations per common share, diluted	—		(0.03)		$	—	$	(1.48)
Net income (loss) per common share, diluted	Net income (loss) per common share, diluted	$	0.51	$	0.07	$	(0.51)	0.97		Net income (loss) per common share, diluted	$	0.91	$	0.51	$	2.67	(0.51)
Weighted-average shares outstanding, diluted	Weighted-average shares outstanding, diluted	25,572		25,363		25,484		25,444		Weighted-average shares outstanding, diluted	25,853		25,572		25,812		25,484


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 Nine months ended
March 31, March 31,
2021 2020 2021 2020
Net income (loss) $ 13,098 $ 1,713 $ (12,915) $ 24,608
Unrealized gain (loss) on hedged transaction, net of tax 1,582 (4,046) 2,209 (4,217)
Unrealized foreign currency translation adjustment (9,216) (28,788) 6,269 (34,869)
Realized foreign currency loss from discontinued operations 0 0 11,635 0
Comprehensive income (loss) $ 5,464 $ (31,121) $ 7,198 $ (14,478)


	Quarter ended				Nine months ended
	March 31,				March 31,
	2022		2021		2022		2021
Net income (loss)	$	23,526	$	13,098	$	68,851	$	(12,915)
Unrealized gain on hedged transaction, net of tax	3,144		1,582		4,730		2,209
Foreign currency translation adjustment	17,186		(9,216)		3,279		6,269
Realized foreign currency loss from discontinued operations	—		—		—		11,635
Comprehensive income	$	43,856	$	5,464	$	76,860	$	7,198


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			Common Stock (Shares)	Common Stock (Amount)		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at June 30, 2020		25,361,298	$	63,765	$	747,276	$	(132,795)	$	678,246
Net loss		—	—		(11,819)		—		(11,819)
Balance at June 30, 2021											Balance at June 30, 2021	25,499,465	$	71,253	$	758,071	$	(98,133)	$	731,191
Net income											Net income	—	—		22,073		—		22,073
Unrealized gain on hedged transaction, net of tax	Unrealized gain on hedged transaction, net of tax	—	—		—		109		109		Unrealized gain on hedged transaction, net of tax	—	—		—		413		413
Unrealized foreign currency translation adjustment		—	—		—		3,511		3,511

Share-based compensation		—	1,180		—		—		1,180

Balance at September 30, 2020		25,361,298	$	64,945	$	735,457	$	(129,175)	$	671,227
Net loss		—	—		(14,194)		—		(14,194)
Unrealized gain on hedged transaction, net of tax		—	—		—		519		519
Unrealized foreign currency translation adjustment		—	—		—		11,974		11,974
Realized foreign currency loss from discontinued operations		—	—		—		11,635		11,635
Foreign currency translation adjustment											Foreign currency translation adjustment	—	—		—		(11,147)		(11,147)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	90,342	(1,036)		—		—		(1,036)		Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	29,086	994		—		—		994

Share-based compensation	Share-based compensation	—	2,015		—		—		2,015		Share-based compensation	—	2,570		—		—		2,570

Balance at December 31, 2020		25,451,640	$	65,924	$	721,263	$	(105,048)	$	682,139
Balance at September 30, 2021											Balance at September 30, 2021	25,528,551	$	74,817	$	780,144	$	(108,867)	$	746,094
Net income	Net income	—	—		13,098		—		13,098		Net income	—	—		23,252		—		23,252
Unrealized gain on hedged transaction, net of tax	Unrealized gain on hedged transaction, net of tax	—	—		—		1,582		1,582		Unrealized gain on hedged transaction, net of tax	—	—		—		1,172		1,172
Unrealized foreign currency translation adjustment		—	—		—		(9,216)		(9,216)
Foreign currency translation adjustment											Foreign currency translation adjustment	—	—		—		(2,759)		(2,759)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes											Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	134,897	(2,513)		—		—		(2,513)
Common stock repurchased											Common stock repurchased	(5,903)	(183)		—		—		(183)
Share-based compensation											Share-based compensation	—	3,462		—		—		3,462

Balance at December 31, 2021											Balance at December 31, 2021	25,657,545	$	75,583	$	803,396	$	(110,454)	$	768,525
Net income											Net income	—	—		23,526		—		23,526
Unrealized gain on hedged transaction, net of tax											Unrealized gain on hedged transaction, net of tax	—	—		—		3,144		3,144
Foreign currency translation adjustment											Foreign currency translation adjustment	—	—		—		17,186		17,186
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	14,725	439		—		—		439		Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	46,549	383		—		—		383

Common stock repurchased											Common stock repurchased	(274,852)	(8,886)		—		—		(8,886)
Share-based compensation	Share-based compensation	—	2,532		—		—		2,532		Share-based compensation	—	2,776		—		—		2,776
Balance at March 31, 2021		25,466,365	$	68,895	$	734,361	$	(112,681)	$	690,575
Balance at March 31, 2022											Balance at March 31, 2022	25,429,242	$	69,856	$	826,922	$	(90,124)	$	806,654

See accompanying notes to these condensed consolidated financial statements.	See accompanying notes to these condensed consolidated financial statements.										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			Common Stock (Shares)	Common Stock (Amount)		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at June 30, 2019		25,408,397	$	64,287	$	939,930	$	(90,088)	$	914,129
Net income		—	—		11,530		—		11,530
Unrealized loss on hedged transaction, net of tax		—	—		—		(1,071)		(1,071)
Unrealized foreign currency translation adjustment		—	—		—		(14,639)		(14,639)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes		786	(12)		—		—		(12)
Common stock repurchased		(168,068)	(5,432)		—		—		(5,432)
Balance at June 30, 2020											Balance at June 30, 2020	25,361,298	$	63,765	$	747,276	$	(132,795)	$	678,246
Net loss											Net loss	—	—		(11,819)		—		(11,819)
Unrealized gain on hedged transaction, net of tax											Unrealized gain on hedged transaction, net of tax	—	—		—		109		109
Foreign currency translation adjustment											Foreign currency translation adjustment	—	—		—		3,511		3,511

Share-based compensation	Share-based compensation	—	1,246		—		—		1,246		Share-based compensation	—	1,180		—		—		1,180
Balance at September 30, 2019		25,241,115	$	60,089	$	951,460	$	(105,798)	$	905,751
Net income		—	—		11,366		—		11,366
Balance at September 30, 2020											Balance at September 30, 2020	25,361,298	$	64,945	$	735,457	$	(129,175)	$	671,227
Net loss											Net loss	—	—		(14,194)		—		(14,194)
Unrealized gain on hedged transaction, net of tax	Unrealized gain on hedged transaction, net of tax	—	—		—		900		900		Unrealized gain on hedged transaction, net of tax	—	—		—		519		519
Unrealized foreign currency translation adjustment		—	—		—		8,558		8,558
Foreign currency translation adjustment											Foreign currency translation adjustment	—	—		—		11,974		11,974
Realized foreign currency translation loss from discontinued operations											Realized foreign currency translation loss from discontinued operations	—	—		—		11,635		11,635
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	104,683	(621)		—		—		(621)		Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	90,342	(1,036)		—		—		(1,036)

Share-based compensation	Share-based compensation	—	1,627		—		—		1,627		Share-based compensation	—	2,015		—		—		2,015
Balance at December 31, 2019		25,345,798	$	61,095	$	962,825	$	(96,340)	$	927,580
Balance at December 31, 2020											Balance at December 31, 2020	25,451,640	$	65,924	$	721,263	$	(105,048)	$	682,139
Net income	Net income	—	—		1,713		—		1,713		Net income	—	—		13,098		—		13,098
Unrealized loss on hedged transaction, net of tax		—	—		—		(4,046)		(4,046)
Unrealized gain on hedged transaction, net of tax											Unrealized gain on hedged transaction, net of tax	—	—		—		1,582		1,582
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—		(28,788)		(28,788)		Foreign currency translation adjustment	—	—		—		(9,216)		(9,216)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	0	34		—		—		34		Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	14,725	439		—		—		439

Share-based compensation	Share-based compensation	—	1,185		—		—		1,185		Share-based compensation	—	2,532		—		—		2,532
Balance at March 31, 2020		25,345,798	$	62,314	$	964,538	$	(129,174)	$	897,678
Balance at March 31, 2021											Balance at March 31, 2021	25,466,365	$	68,895	$	734,361	$	(112,681)	$	690,575

See accompanying notes to these condensed consolidated financial statements.	See accompanying notes to these condensed consolidated financial statements.										See accompanying notes to these condensed consolidated financial statements.

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SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


		Nine months ended					Nine months ended
		March 31,					March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income		$	(12,915)	$	24,608
Net loss from discontinued operations		(37,647)		(5,025)
Net income (loss)						Net income (loss)	$	68,851	$	(12,915)
Net income (loss) from discontinued operations						Net income (loss) from discontinued operations	100		(37,647)
Net income from continuing operations	Net income from continuing operations	24,732		29,633		Net income from continuing operations	68,751		24,732
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Adjustments to reconcile net income to net cash (used in) provided by operating activities of continuing operations:						Adjustments to reconcile net income to net cash (used in) provided by operating activities of continuing operations:
Depreciation and amortization	Depreciation and amortization	25,417		26,585		Depreciation and amortization	22,184		25,417
Amortization of debt issue costs	Amortization of debt issue costs	313		313		Amortization of debt issue costs	313		313
Provision for doubtful accounts	Provision for doubtful accounts	226		1,399		Provision for doubtful accounts	156		226
Share-based compensation	Share-based compensation	5,711		4,053		Share-based compensation	8,792		5,711

Deferred income taxes	Deferred income taxes	(26)		(1,479)		Deferred income taxes	1,995		(26)

Change in fair value of contingent consideration	Change in fair value of contingent consideration	516		6,266		Change in fair value of contingent consideration	—		516
Contingent consideration payments excess	Contingent consideration payments excess	(5,457)		(3,050)		Contingent consideration payments excess	—		(5,457)
Finance lease interest	Finance lease interest	96		64		Finance lease interest	32		96
Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:					Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	(68,654)		(85)		Accounts receivable	(67,404)		(68,654)
Inventories	Inventories	(5,907)		(7,446)		Inventories	(118,349)		(5,907)
Prepaid expenses and other assets	Prepaid expenses and other assets	(1,641)		(10,977)		Prepaid expenses and other assets	(15,002)		(1,641)
Other non-current assets	Other non-current assets	2,846		(1,029)		Other non-current assets	(2,791)		2,846
Accounts payable	Accounts payable	69,609		55,378		Accounts payable	67,535		69,609
Accrued expenses and other liabilities	Accrued expenses and other liabilities	8,434		13,233		Accrued expenses and other liabilities	(12,745)		8,434
Income taxes payable	Income taxes payable	(793)		(4,775)		Income taxes payable	862		(793)
Net cash provided by operating activities of continuing operations		55,422		108,083
Net cash (used in) provided by operating activities of continuing operations						Net cash (used in) provided by operating activities of continuing operations	(45,671)		55,422
Cash flows from investing activities of continuing operations:	Cash flows from investing activities of continuing operations:					Cash flows from investing activities of continuing operations:
Capital expenditures	Capital expenditures	(2,283)		(6,575)		Capital expenditures	(3,326)		(2,283)
Cash paid for business acquisitions, net of cash acquired		0		(48,915)

Proceeds from the sale of discontinued operations	Proceeds from the sale of discontinued operations	34,356		0		Proceeds from the sale of discontinued operations	3,125		34,356

Net cash provided by (used in) investing activities of continuing operations		32,073		(55,490)
Net cash (used in) provided by investing activities of continuing operations						Net cash (used in) provided by investing activities of continuing operations	(201)		32,073
Cash flows from financing activities of continuing operations:	Cash flows from financing activities of continuing operations:					Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses	Borrowings on revolving credit, net of expenses	1,486,464		1,608,472		Borrowings on revolving credit, net of expenses	1,597,270		1,486,464
Repayments on revolving credit, net of expenses	Repayments on revolving credit, net of expenses	(1,500,375)		(1,650,862)		Repayments on revolving credit, net of expenses	(1,552,976)		(1,500,375)
Borrowings on long-term debt, net		(5,964)		(3,147)
Repayments on long-term debt, net						Repayments on long-term debt, net	(5,968)		(5,964)
Repayments of finance lease obligations	Repayments of finance lease obligations	(974)		(660)		Repayments of finance lease obligations	(932)		(974)

Contingent consideration payments	Contingent consideration payments	(41,393)		(35,481)		Contingent consideration payments	—		(41,393)
Exercise of stock options	Exercise of stock options	439		754		Exercise of stock options	1,592		439
Taxes paid on settlement of equity awards	Taxes paid on settlement of equity awards	(1,036)		(1,354)		Taxes paid on settlement of equity awards	(2,729)		(1,036)
Repurchase of common stock		0		(6,077)
Common stock repurchased						Common stock repurchased	(8,527)		—

Net cash used in financing activities of continuing operations		(62,839)		(88,355)
Net cash provided by (used in) financing activities of continuing operations						Net cash provided by (used in) financing activities of continuing operations	27,730		(62,839)

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SCANSOURCE, INC. AND SUBSIDIARIES	SCANSOURCE, INC. AND SUBSIDIARIES					SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), continued	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), continued					CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), continued
(In thousands)	(In thousands)					(In thousands)

Cash flows from discontinued operations:	Cash flows from discontinued operations:					Cash flows from discontinued operations:
Net cash flows provided by operating activities of discontinued operations	Net cash flows provided by operating activities of discontinued operations	21,704		42,000		Net cash flows provided by operating activities of discontinued operations	—		21,704
Net cash flows used in by investing activities of discontinued operations	Net cash flows used in by investing activities of discontinued operations	(58)		(48)		Net cash flows used in by investing activities of discontinued operations	—		(58)
Net cash flows (used in) provided by financing activities of discontinued operations		(29,494)		6,739
Net cash flows (used in) provided by discontinued operations		(7,848)		48,691
Net cash flows used in financing activities of discontinued operations						Net cash flows used in financing activities of discontinued operations	—		(29,494)
Net cash flows used in discontinued operations						Net cash flows used in discontinued operations	—		(7,848)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(1,942)		(2,151)		Effect of exchange rate changes on cash and cash equivalents	(1,037)		(1,942)
Increase in cash and cash equivalents		14,866		10,778
(Decrease) increase in cash and cash equivalents						(Decrease) increase in cash and cash equivalents	(19,179)		14,866
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	34,455		23,818		Cash and cash equivalents at beginning of period	62,718		34,455
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	49,321		34,596		Cash and cash equivalents at end of period	43,539		49,321
Cash and cash equivalents of discontinued operations	Cash and cash equivalents of discontinued operations	0		4,838		Cash and cash equivalents of discontinued operations	—		—
Cash and cash equivalents of continuing operations	Cash and cash equivalents of continuing operations	$	49,321	$	29,758	Cash and cash equivalents of continuing operations	$	43,539	$	49,321

See accompanying notes to these condensed consolidated financial statements.	See accompanying notes to these condensed consolidated financial statements.					See accompanying notes to these condensed consolidated financial statements.

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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 ata leading hybrid distributor connecting devices to the ~~center of the solution delivery channel, connecting businesses~~cloud and ~~providing technology solutions.~~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 mobility and barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration, telecom and cloud services to market. The Company operates in the United States, Canada, Brazil and the UK. During the quarter ended December 31, 2020, the Company completed the divestitures of its products distribution business in the UK, Europe and Latin America, outside of Brazil. The Company's 2 operating segments, ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions and ~~Worldwide~~Modern Communications & ~~Services,~~Cloud, are based on product ~~customer~~ and ~~service~~customer type.

~~COVID-19~~

In early March 2020, the World Health Organization characterized the novel coronavirus ("COVID-19") as a pandemic. The rapid spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. The Company moved quickly to transition its employees, where possible, to a fully remote working environment. The Company took steps to deploy teams to monitor the rapidly evolving situation and recommend risk mitigation actions; implement travel restrictions; and have employees follow physical distancing practices. The Company is following guidance from authorities and health officials including, but not limited to, checking the temperature of associates when entering its facilities, requiring associates to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitation routines. All of the Company's distribution facilities have remained open and operational. Most of the Company's office-based employees around the world are working remotely.Segment Changes

The ~~pandemic~~Company has moved all of its communications and ~~these containment measures have had,~~collaboration business to the Modern Communications & Cloud segment. This technology alignment better represents the operating and ~~are expected~~financial performance information provided to ~~continue to have, a substantial impact on businesses around~~ the ~~world, including the Company, and on global, regional and national economies.~~ Company's chief operating decision maker.

The Company ~~is unable~~has reclassified certain prior-year amounts in the segment results to ~~predict~~conform with current year presentation. These reclassifications had no effect on the ~~ultimate impact that COVID-19 will have on its business due to the inability to predict the duration or magnitude~~condensed consolidated financial results. See Note 10 - Segment Information for descriptions of the virus' impact. In fiscal year 2020, the Company experienced decreased revenue and increased employee-related healthcare and prevention costs as a result of the COVID-19 pandemic. While the Company has made adjustments, including implementing an annualized expense reduction plan for fiscal year 2021, the Company will continue to monitor and make adjustments to the operating practices that it believes to be in the best interests of its employees, customers, suppliers, and shareholders. For further discussion on the potential future impacts of COVID-19, see the Risk Factors presented in Part I, Item 1A in the Company's ~~form 10-K for fiscal year 2020.~~segments.

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 at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, the results of operations for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the statements of comprehensive income for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the statements of shareholders' equity for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 and the statements of cash flows for the nine months ended March 31, ~~2021~~2022 and ~~2020.~~2021. The results of operations for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 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, ~~2020.~~

~~The Company has reclassified certain prior year amounts for the results of discontinued operations to conform to the current year presentation.~~2021. Unless otherwise indicated, ~~amounts~~disclosures provided in ~~these~~the Notes pertain to continuing operations only.

~~Table of Contents~~

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 nine months ended March 31, ~~2021~~2022 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, ~~2020.~~2021. 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, ~~2020.~~

~~See Note 2~~ ~~- Trade Accounts and Notes Receivable~~ ~~for a discussion of the current expected credit loss policy established upon adoption of Accounting Standards Update ("ASU") 2016-13,~~ ~~Financial Instruments - Credit Losses (ASC Topic 326)~~ ~~in fiscal year~~ 2021.

~~Restructuring Costs~~

The Company groups exit or disposal cost obligations into two categories: (i) severance and benefit costs and (ii) other. Employee separation costs are recognized upon communication of the restructuring plan to the identified employees. Other associated restructuring costs are expensed as incurred. See Note 14 - ~~Restructuring~~ ~~for further disclosures.~~

Cash and Cash Equivalents

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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 of ~~$17.0~~$20.0 million and ~~$17.1~~$14.3 million are included in accounts payable on the condensed consolidated balance sheets at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively.

Long-lived Assets

The Company presents depreciation expense and intangible amortization expense on the Condensed Consolidated Income Statements. The Company's depreciation expense related to selling, general and administrative costs totaled $2.6 million and $8.0 million for the quarter and nine months ended March 31, 2022 and $3.1 million and $9.6 million for the quarter and nine months ended March 31, ~~2021, respectively, and $3.3 million and $9.7 million for the quarter and nine months ended March 31, 2020, respectively.~~2021. Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled $0.2 million and $0.7 million for the quarter and nine months ended March 31, 2022 and $0.3 million and $1.2 million for the quarter and nine months ended March 31, ~~2021, respectively, and $0.6 million and $1.8 million for the quarter and nine months ended March 31, 2020, respectively.~~2021. The Company's intangible amortization expense reported on the Condensed Consolidated Income Statements relates to selling, general and administrative costs, not the cost of selling goods. Intangible amortization expense totaled $4.5 million and $13.4 million for the quarter and nine months ended March 31, 2022 and $4.9 million and $14.6 million for the quarter and nine months ended March 31, ~~2021, respectively, and $5.2 million and $15.0 million for the quarter and nine months ended March 31, 2020, respectively.~~2021.

Recent Accounting Pronouncements

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (ASC Topic 326).~~ ~~In November 2018, the FASB issued ASU 2018-19,~~ ~~Codification Improvements to Topic 326: Financial Instruments - Credit Losses,~~ ~~which provides supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently~~. The pronouncement revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The Company adopted this standard effective July 1, 2020 and it did not have a material impact on the Company's consolidated financial statements. See Note 2 ~~- Trade Accounts and Notes Receivable~~ ~~for disclosures related to the adoption of ASU 2016-13.~~

~~In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement~~. The pronouncement eliminates, modifies and adds disclosure requirements for fair value measurements. The Company adopted this standard effective July 1, 2020 and it had no impact on its consolidated financial statements.

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.

~~Table of Contents~~

(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.

The changes in the allowance for doubtful accounts for the nine months ended March 31, ~~2021~~2022 are set forth in the table below.

June 30, 2020 Amounts Charged to Expense Write-offs
Other (1)
March 31, 2021
(in thousands)
Trade accounts and current notes receivable allowance $ 21,906 $ 226 $ (1,603) $ 651 $ 21,180


	June 30, 2021		Amounts Charged to Expense		Write-offs		Other (1)		March 31, 2022
	(in thousands)
Trade accounts and current notes receivable allowance	$	19,341	$	156	$	(1,761)	$	(801)	$	16,935

(1)"Other" amounts include recoveries and the effect of foreign currency fluctuations for the nine months ended March 31, ~~2021.~~2022.

~~Table of Contents~~

(3) Revenue Recognition

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

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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 the Company's 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, including self-branded warranty programs.~~services. The Company considers itself the principal in ~~these~~those transactions aswhere it has control of the product or service before it is transferred to the customer. When the Company provides self-branded warranty programs, it engages a third party, generally the original equipment manufacturer, to cover the fulfillment of any obligations arising from these contracts. These revenues and associated third-party costs are amortized over the life of the contract on a straight-line basis. The Company recognizes the ~~previously described~~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.

~~Related to the Company’s~~ The Intelisys business the Company acts as a master agent connecting independent sales partners with service providers or suppliers who offer telecom and cloud services to end-customers. Intelisys’ sales partners earn commission payments from those service providers or suppliers on end-customer sales. Intelisys provides commission processing services to sales partners, earning a percentage of the commission stream. Because the Company acts asoperates under an ~~agent, revenue is recognized on a net basis.~~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 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 or the most likely amount 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:

1514

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Quarter ended March 31, 2021
(in thousands)
Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total
Revenue by product/service:
Technology solutions $ 502,227 $ 211,369 $ 713,596
Intelisys 0 16,277 16,277
$ 502,227 $ 227,646 $ 729,873
Nine months ended March 31, 2021
(in thousands)
Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total
Revenue by product/service:
Technology solutions $ 1,577,197 $ 673,134 $ 2,250,331
Intelisys 0 47,780 47,780
$ 1,577,197 $ 720,914 $ 2,298,111


	Quarter ended March 31, 2022
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	503,072	$	323,684	$	826,756
Intelisys connectivity and cloud	—		19,234		19,234
	$	503,072	$	342,918	$	845,990


	Nine months ended March 31, 2022
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	1,501,702	$	1,010,825	$	2,512,527
Intelisys connectivity and cloud	—		55,125		55,125
	$	1,501,702	$	1,065,950	$	2,567,652

Quarter ended March 31, 2020
(in thousands)
Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total
Revenue by product/service:
Technology solutions $ 489,218 $ 240,819 $ 730,037
Intelisys 0 14,547 14,547
$ 489,218 $ 255,366 $ 744,584
Nine months ended March 31, 2020
(in thousands)
Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total
Revenue by product/service:
Technology solutions $ 1,645,406 $ 723,557 $ 2,368,963
Intelisys 0 42,322 42,322
$ 1,645,406 $ 765,879 $ 2,411,285


	Quarter ended March 31, 2021
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	436,462	$	277,134	$	713,596
Intelisys connectivity and cloud	—		16,277		16,277
	$	436,462	$	293,411	$	729,873


	Nine months ended March 31, 2021
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	1,300,488	$	949,843	$	2,250,331
Intelisys connectivity and cloud	—		47,780		47,780
	$	1,300,488	$	997,623	$	2,298,111

~~Table of Contents~~

(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.

Quarter ended Nine months ended
March 31, March 31,
2021 2020 2021 2020
(in thousands, except per share data)
Numerator:
Net income from continuing operations $ 13,786 $ 5,715 $ 24,732 $ 29,633
Net loss from discontinued operations (688) (4,002) (37,647) (5,025)
Net (loss) income $ 13,098 $ 1,713 $ (12,915) $ 24,608
Denominator:
Weighted-average shares, basic 25,455 25,346 25,404 25,386
Dilutive effect of share-based payments 117 17 80 58
Weighted-average shares, diluted 25,572 25,363 25,484 25,444
Net income from continuing operations per common share, basic $ 0.54 $ 0.23 $ 0.97 $ 1.17
Net loss from discontinued operations per common share, basic (0.03) (0.16) (1.48) (0.20)
Net (loss) income per common share, basic $ 0.51 $ 0.07 $ (0.51) $ 0.97
Net income from continuing operations per common share, diluted $ 0.54 $ 0.23 $ 0.97 $ 1.16
Net loss from discontinued operations per common share, diluted (0.03) (0.16) (1.48) (0.20)
Net (loss) income per common share, diluted $ 0.51 $ 0.07 $ (0.51) $ 0.97

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	Quarter ended				Nine months ended
	March 31,				March 31,
	2022		2021		2022		2021
	(in thousands, except per share data)
Numerator:
Net income from continuing operations	$	23,526	$	13,786	$	68,751	$	24,732
Net (loss) income from discontinued operations	—		(688)		100		(37,647)
Net income (loss)	$	23,526	$	13,098	$	68,851	$	(12,915)
Denominator:
Weighted-average shares, basic	25,635		25,455		25,577		25,404
Dilutive effect of share-based payments	218		117		235		80
Weighted-average shares, diluted	25,853		25,572		25,812		25,484

Net income from continuing operations per common share, basic	$	0.92	$	0.54	$	2.69	$	0.97
Net loss from discontinued operations per common share, basic	—		(0.03)		—		(1.48)
Net income (loss) per common share, basic	$	0.92	$	0.51	$	2.69	$	(0.51)

Net income from continuing operations per common share, diluted	$	0.91	$	0.54	$	2.66	$	0.97
Net loss from discontinued operations per common share, diluted	—		(0.03)		—		(1.48)
Net income (loss) per common share, diluted	$	0.91	$	0.51	$	2.67	$	(0.51)

For the quarter and nine months ended March 31, 2022 weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 429,605 and 969,871, respectively. For the quarter and nine months ended March 31, 2021, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,532,961 and 1,285,153, respectively. For the quarter and nine months ended March 31, 2020, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,036,740 and 980,803, respectively.

(5) Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:


		March 31, 2021		June 30, 2020			March 31, 2022		June 30, 2021
		(in thousands)					(in thousands)
Foreign currency translation adjustment	Foreign currency translation adjustment	$	(108,069)	$	(125,974)	Foreign currency translation adjustment	$	(90,281)	$	(93,561)
Unrealized loss on hedged transaction, net of tax		(4,612)		(6,821)
Unrealized gain (loss) on hedged transaction, net of tax						Unrealized gain (loss) on hedged transaction, net of tax	157		(4,572)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(112,681)	$	(132,795)	Accumulated other comprehensive loss	$	(90,124)	$	(98,133)

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

Quarter ended March 31, Nine months ended March 31,
2021 2020 2021 2020
(in thousands)
Tax expense (benefit) $ 1,088 $ 617 $ 1,348 $ 921


	Quarter ended March 31,				Nine months ended March 31,
	2022		2021		2022		2021
	(in thousands)
Tax expense	$	590	$	1,088	$	1,390	$	1,348

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~~(6) Acquisitions~~

~~intY~~

On July 1, 2019, the Company acquired all of the outstanding shares of intY and its CASCADE cloud services distribution platform. The purchase price of this acquisition, net of cash acquired, was approximately $48.9 million. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. Intangible assets acquired include trade names, customer relationships, and developed technology. Goodwill recognized on this acquisition is not deductible for tax purposes. The impact of this acquisition was not material to the consolidated financial statements. The Company recognized $0.1 million and $0.5 million for the quarter and nine months ended March 31, 2020, respectively, in acquisition-related costs included in selling, general and administrative expenses on the Condensed Consolidated Income Statements in connection with this acquisition. This acquisition is included in the Worldwide Communications & Services segment.

~~(7)~~(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended March 31, ~~2021,~~2022, by reporting segment, are set forth in the table below.

Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total
(in thousands)
Balance at June 30, 2020 $ 16,370 $ 197,918 $ 214,288
Foreign currency translation adjustment 0 2,805 2,805
Balance at March 31, 2021 $ 16,370 $ 200,723 $ 217,093

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	Specialty Technology Solutions		Modern Communications & Cloud		Total
	(in thousands)
Balance at June 30, 2021	$	16,370	$	202,507	$	218,877

Foreign currency translation adjustment	—		(852)		(852)
Balance at March 31, 2022	$	16,370	$	201,655	$	218,025

The following table shows changes in the amount recognized for net identifiable intangible assets for the nine months ended March 31, ~~2021.~~2022.


	Net Identifiable Intangible Assets
	(in thousands)
Balance at June 30, ~~2020~~2021	$	~~121,547~~104,860


Amortization expense	~~(14,595)~~(13,413)
Foreign currency translation adjustment	~~2,220~~ (893)
Balance at March 31, ~~2021~~2022	$	~~109,172~~90,554

~~(8)~~(7) Short-Term Borrowings and Long-Term Debt

The following table presents the Company’s debt ~~for continuing and discontinued operations~~ at March 31, ~~2021~~2022 and June 30, ~~2020.~~2021.

March 31, 2021 June 30, 2020
(in thousands)
Short-term borrowings(a)
$ 0 $ 3,524
Current portion of long-term debt 7,843 7,839
Mississippi revenue bond, net of current portion 4,081 4,425
Senior secured term loan facility, net of current portion 133,125 138,750
Borrowings under revolving credit facility(b)
53,802 92,418
Total debt $ 198,851 $ 246,956

~~(a)Short-term borrowings are classified as held for sale in the Consolidated Balance sheets for the Company's discontinued operations at June 30, 2020.~~

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~~(b)~~ ~~Borrowings under the revolving credit facility classified as held for sale in the Consolidated Balance Sheets for the Company's discontinued operations totaled $24.7 million at June 30, 2020.~~

~~Short-term Borrowings~~

The Company had a bank overdraft facility with Bank of America used by its products distribution business in the UK and European Union recognized as short-term borrowings. The facility was terminated with the sale of the business in November 2020. The facility allowed the Company to disburse checks in excess of bank balances up to $14.0 million U.S. dollar equivalent for up to seven days. Borrowings under the overdraft facility had an interest rate equal to 1% over the applicable currency's London Interbank Offered Rate ("LIBOR") with a zero percent floor. There were 0 borrowings outstanding under the overdraft facility at March 31, 2021. At June 30, 2020, there was $3.5 million outstanding under the overdraft facility classified as held for sale in the Consolidated Balance Sheets. The borrowings were denominated in euros, which bore a negative LIBOR rate at June 30, 2020, and as such the interest applicable to the Company was 1.0%.


	March 31, 2022		June 30, 2021
	(in thousands)

Current portion of long-term debt	$	10,660	$	7,843
Mississippi revenue bond, net of current portion	3,733		4,081
Senior secured term loan facility, net of current portion	122,813		131,250
Borrowings under revolving credit facility	44,294		—
Total debt	$	181,500	$	143,174

Credit Facility

The Company has a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks ~~(the~~(as amended, the “Amended Credit Agreement”). On April 30, 2019, the Company amended this credit facility to expand the borrowing capacity and extend its maturity to April 30, 2024. The Amended Credit Agreement includes (i) a five-year $350 million multi-currency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility. Pursuant to an “accordion feature,” the Company may increase its borrowings up to an additional $250 million, subject to obtaining additional credit commitments from the lenders participating in the increase. The Amended Credit Agreement allows for the issuance of up to $50 million for letters of credit, subject to obtaining additional credit commitments from the lenders participating in the increase. Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and a pledge of up to 65% of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement. Under the terms of the revolving credit facility, the payment of cash dividends is restricted. The Company incurred debt issuance costs of $1.1 million in connection with the amendments to the Amended Credit Agreement. These costs were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility.

At the Company's option, U.S. dollar loans under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread over ~~the~~ LIBOR or the alternate base rate depending upon the Company's net leverage ratio, calculated as total debt less up to $15 million of unrestricted domestic cash ("Credit Facility Net Debt") to trailing 4-quarter adjusted earnings before interest expense, taxes, depreciation and amortization ("Credit Facility EBITDA") (the "Leverage Ratio"). This spread ranges from 1.00% to 1.75% for LIBOR-based loans and 0.00% to 0.75% for alternate base rate loans. Additionally, the Company is charged commitment fees ranging from 0.15% to 0.30%, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans. The Amended Credit Agreement provides for the substitution of a new

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interest rate benchmark upon the transition from LIBOR for U.S. dollar loans, subject to agreement between the Company and the administrative agent. ~~Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of~~On December 23, 2021, the Company and a pledge of up to 65% of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement. Under the terms of the revolvingamended its credit facility to replace LIBOR as the ~~payment of cash dividends is restricted.~~benchmark rate for non-U.S. dollar loans, among other things.

During the nine months ended March 31, 2022, the Company's borrowings under the credit facility were U.S. dollar loans. The spread in effect as of March 31, ~~2021~~2022 was 1.25% for LIBOR-based loans and 0.25% for alternate base rate loans. The commitment fee rate in effect at March 31, ~~2021~~2022 was 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 at March 31, ~~2021.~~2022.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine month period ended March 31, 2022 was $60.0 million. Including borrowings for both continuing and discontinued operations, the average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine ~~month periods~~months ended March 31, 2021 ~~and 2020~~ was $62.1 million. There was $305.7 million and $252.4 million, respectively. Taking into consideration outstanding borrowings on the multi-currency revolving credit facility for both continuing and discontinued operations, there was $296.2 million and $257.3$350.0 million available for additional borrowings as of March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively. ~~At March 31, 2021, based upon the Leverage Ratio calculation, there was $172.6 million available for additional borrowings.~~ There were 0no letters of credit issued under the multi-currency revolving credit facility at March 31, ~~2021 and $0.3 million at~~2022 or June 30, ~~2020.~~2021.

Mississippi Revenue Bond

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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 accrues interest at the 30-day LIBOR rate 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 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. At March 31, ~~2021,~~2022, the Company was in compliance with all covenants under this bond. The interest rates at March 31, ~~2021~~2022 and June 30, ~~2020~~2021 were ~~0.96%~~1.08% and ~~1.03%~~0.94%, respectively.

Debt Issuance Costs

At March 31, ~~2021,~~2022, net debt issuance costs associated with the credit facility and bond totaled ~~$1.3~~$0.9 million and are being amortized through the maturity date of each respective debt instrument.

~~(9)~~(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 these risks, the Company periodically enters into various derivative instruments. The 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 consolidated balance sheet at fair value. Derivatives that are not designated as hedging instruments or the ineffective portions of cash flow hedges 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 and is exposed to market risk for changes in foreign currency exchange rates. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted 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 for continuing operations.~~dollar.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of ~~$25.5~~$35.8 million and ~~$16.6~~$27.9 million for the exchange of foreign currencies at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, 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 nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 are as follows:

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Quarter ended Nine months ended
March 31, March 31,
2021 2020 2021 2020
(in thousands)
Net foreign exchange derivative contract (gains) losses $ (1,061) $ (3,264) $ 852 $ (3,749)
Net foreign currency transactional and re-measurement losses (gains) 1,020 3,168 (74) 3,835
Net foreign currency exchange (gains) losses $ (41) $ (96) $ 778 $ 86


	Quarter ended				Nine months ended
	March 31,				March 31,
	2022		2021		2022		2021
	(in thousands)
Net foreign exchange derivative contract losses (gains)	$	3,464	$	(1,061)	$	1,289	$	852
Net foreign currency transactional and re-measurement (gains) losses	(3,206)		1,020		(66)		(74)
Net foreign currency exchange losses (gains)	$	258	$	(41)	$	1,223	$	778

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 currency 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, British pound versus the euro and other currencies versus the U.S. dollar.

Interest Rates - The 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. 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. The Company entered into an interest rate swap agreement, which was subsequently settled, and entered into a new amended agreement on April 30, 2019. The swap agreement has a notional amount of $100.0 million, with a $50.0 million tranche scheduled to mature

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on April 30, 2024 and a $50.0 million tranche scheduled to mature April 30, 2026. This swap agreement is designated as a cash flow hedge to hedge the variable rate interest payments on the revolving credit facility. Interest rate differentials paid or received under the swap agreement are recognized as adjustments to interest expense. To the extent the swap is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swap 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 quarters ~~and nine months~~ ended March 31, ~~2021~~2022 and ~~2020.~~2021.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020,~~2021, are as follows:

Quarter ended Nine months ended
March 31, March 31,
2021 2020 2021 2020
(in thousands)
Net interest expense recognized as a result of interest rate swap $ 557 $ 180 $ 1,682 $ 343
Unrealized gain (loss) in fair value of interest rate swap 1,549 (5,518) 1,281 (5,890)
Net increase (decrease) in accumulated other comprehensive income 2,106 (5,338) 2,963 (5,547)
Income tax effect 524 (1,292) 754 (1,330)
Net increase (decrease) in accumulated other comprehensive income, net of tax $ 1,582 $ (4,046) $ 2,209 $ (4,217)


	Quarter ended				Nine months ended
	March 31,				March 31,
	2022		2021		2022		2021
	(in thousands)
Net interest expense recognized as a result of interest rate swap	$	532	$	557	$	1,689	$	1,682
Unrealized gain in fair value of interest rate swap	3,675		1,549		4,658		1,281
Net increase in accumulated other comprehensive income	4,207		2,106		6,347		2,963
Income tax effect	1,062		524		1,619		754
Net increase in accumulated other comprehensive income, net of tax	$	3,145	$	1,582	$	4,728	$	2,209

The Company used the following derivative instruments at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

March 31, 2021 June 30, 2020
Balance Sheet Location Fair Value of
Derivatives
Designated
as Hedge Instruments Fair Value of
Derivatives
Not Designated as Hedge Instruments Fair Value of
Derivatives
Designated
as Hedge Instruments Fair Value of
Derivatives
Not Designated as Hedge Instruments
(in thousands)
Derivative liabilities:
Foreign exchange contracts Accrued expenses and other current liabilities $ 0 $ 45 $ 0 $ 26
Foreign currency hedge Accrued expenses and other current liabilities $ 275 $ 0 $ 0 $ 0
Interest rate swap agreement Other long-term liabilities $ 6,340 $ 0 $ 9,433 $ 0

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		March 31, 2022				June 30, 2021
	Balance Sheet Location	Fair Value of Derivatives Designated as Hedge Instruments		Fair Value of Derivatives Not Designated as Hedge Instruments		Fair Value of Derivatives Designated as Hedge Instruments		Fair Value of Derivatives Not Designated as Hedge Instruments
		(in thousands)
Derivative assets:
Foreign exchange contracts	Prepaid expenses and other current assets	$	—	$	33	$	—	$	—
Foreign currency hedge	Prepaid expenses and other current assets	$	—	$	—	$	187	$	—
Interest rate swap agreement	Other non-current assets	$	196	$	—	$	—	$	—
Derivative liabilities:
Foreign exchange contracts	Accrued expenses and other current liabilities	$	—	$	—	$	—	$	5
Foreign currency hedge	Accrued expenses and other current liabilities	$	185	$	—	$	—	$	—
Interest rate swap agreement	Other long-term liabilities	$	—	$	—	$	6,280	$	—

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~~(10)~~(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, interest rate swap agreements and contingent consideration owed to the previous owners of Intelisys. 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 at March 31, ~~2021:~~2022:


		Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
		(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Deferred compensation plan investments, current and non-current portion	Deferred compensation plan investments, current and non-current portion	$	30,145	$	30,145	$	0	$	0	Deferred compensation plan investments, current and non-current portion	$	28,587	$	28,587	$	—	$	—

Forward foreign currency exchange contracts										Forward foreign currency exchange contracts	33		—		33		—
Interest rate swap agreement										Interest rate swap agreement	196		—		196		—

Total assets at fair value	Total assets at fair value	$	30,145	$	30,145	$	0	$	0	Total assets at fair value	$	28,816	$	28,587	$	229	$	—
Liabilities:	Liabilities:									Liabilities:
Deferred compensation plan investments, current and non-current portion	Deferred compensation plan investments, current and non-current portion	$	30,145	$	30,145	$	0	$	0	Deferred compensation plan investments, current and non-current portion	$	28,495	$	28,495	$	—	$	—
Forward foreign currency exchange contracts		45		0		45		0

Foreign currency hedge	Foreign currency hedge	275		0		275		0		Foreign currency hedge	185		—		185		—
Interest rate swap agreement		6,340		0		6,340		0

Total liabilities at fair value	Total liabilities at fair value	$	36,805	$	30,145	$	6,660	$	0	Total liabilities at fair value	$	28,680	$	28,495	$	185	$	—

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at June 30, ~~2020:~~2021:

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		Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
		(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Deferred compensation plan investments, current and non-current portion	Deferred compensation plan investments, current and non-current portion	$	27,159	$	27,159	$	0	$	0	Deferred compensation plan investments, current and non-current portion	$	31,168	$	31,168	$	—	$	—

Foreign currency hedge										Foreign currency hedge	187		—		187		—

Total assets at fair value	Total assets at fair value	$	27,159	$	27,159	$	0	$	0	Total assets at fair value	$	31,355	$	31,168	$	187	$	—
Liabilities:	Liabilities:									Liabilities:
Deferred compensation plan investments, current and non-current portion	Deferred compensation plan investments, current and non-current portion	$	27,159	$	27,159	$	0	$	0	Deferred compensation plan investments, current and non-current portion	$	31,168	$	31,168	$	—	$	—
Forward foreign currency exchange contracts	Forward foreign currency exchange contracts	26		0		26		0		Forward foreign currency exchange contracts	5		—		5		—
Interest rate swap agreement	Interest rate swap agreement	9,433		0		9,433		0		Interest rate swap agreement	6,280		—		6,280		—
Liability for contingent consideration		46,334		0		0		46,334

Total liabilities at fair value	Total liabilities at fair value	$	82,952	$	27,159	$	9,459	$	46,334	Total liabilities at fair value	$	37,453	$	31,168	$	6,285	$	—

The investments in the deferred compensation plan are held in a "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 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). Fair values of interest rate swaps are measured using standard valuation models with inputs that can be derived from observable market transactions, including LIBOR 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 non-current assets or accrued expenses and other long-term liabilities, depending on the respective instruments' favorable or unfavorable positions. See Note 98 - Derivatives and Hedging Activities.

The Company recorded a contingent consideration liability at the acquisition date of Intelisys 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 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.

~~Intelisys is part of the Company's Worldwide Communications & Services segment.~~ The table below provides a summary of the changes in fair value of the Company's contingent considerations for the Intelisys earnout, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and nine months ended March 31, 2021. ~~The final earnout payment due to the former owners of Intelisys was paid in October 2020.~~

Quarter ended March 31, 2021 Nine months ended March 31, 2021
Worldwide Communications & Services Segment
(in thousands)
Fair value at beginning of period $ 0 $ 46,334
Payments 0 (46,850)
Change in fair value of contingent consideration 0 516
Fair value at end of period $ 0 $ 0


	Quarter ended March 31, 2021		Nine months ended March 31, 2021
	Modern Communications & Cloud
	(in thousands)
Fair value at beginning of period	$	—		$	46,334

Payments	—			(46,850)
Change in fair value of contingent consideration	—			516

Fair value at end of period	$	—		$	—

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~~The table below provides a summary of the changes in fair value of the Company’s contingent considerations (Level 3) for the Intelisys earnout for the quarter and nine months ended March 31, 2020.~~

Quarter ended March 31, 2020 Nine months ended March 31, 2020
Worldwide Communications & Services Segment
(in thousands)
Fair value at beginning of period $ 45,043 $ 77,925
Payments 0 (38,531)
Change in fair value of contingent consideration 617 6,266
Fair value at end of period $ 45,660 $ 45,660

The fair values of amounts owed are recorded in current portion of contingent consideration in the Company’s Condensed Consolidated Balance Sheets. In accordance with ASC 805, the Company ~~will revalue~~revalued the contingent consideration liability at each reporting date through the last payment, with changes in the fair value of the contingent consideration reflected in the change in fair value of contingent consideration line item on the Company’s Condensed Consolidated Income Statements that is included in the calculation of operating income. The fair value of the contingent consideration liability associated with future earnout payments iswas based on several factors, including:

•estimated future results, net of pro forma adjustments set forth in the purchase agreements;

•the probability of achieving these results; and

•a discount rate reflective of the Company’s creditworthiness and market risk premium associated with the United States markets.

A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration. Valuation techniques and significant observable inputs used in recurring Level 3 fair value measurements for the Company's contingent consideration liability related to Intelisys at June 30, 2020 were as follows. The ~~measurement period for the Intelisys~~final earnout ~~ended on June 30, 2020.~~

~~Reporting Period~~

~~Valuation Technique~~

~~Significant Unobservable Inputs~~

~~Weighted Average Rates(a)~~

~~June 30, 2020~~

~~Discounted cash flow~~

~~Weighted average cost of capital~~

~~3.0~~

~~(a)Weighted average rates identified for this significant unobservable input relate~~payment due to the ~~valuation~~former owners of the Intelisys contingent consideration. Since the earnout period for Intelisys closed on June 30, 2020, the weighted average cost of capital represents the cost of debt. There is no EBITDA growth or weighted average cost of capital to report in the current period.

~~Intelisys~~

~~The final contingent consideration payment related to~~ Intelisys was paid ~~during the quarter ended December 31,~~in October 2020. The Company recognized $0.5 million in expense from the change in fair value of the contingent consideration ~~recognized~~ in the Condensed Consolidated Income Statement ~~totaled $0.5 million~~ for the nine months ended March 31, 2021. The change in fair value ~~for the current nine month period is~~was due to the recurring amortization of the unrecognized fair value discount.

The fair value of the liability for the contingent consideration related to Intelisys recognized at March 31, 2020 was $45.7 million, all of which was classified as current. The expense from the change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statement totaled $0.6 million and $6.3 million for the quarter and nine months ended March 31, 2020, respectively. The change in fair value for the prior-year quarter and nine month period is primarily driven by the recurring amortization of the unrecognized fair value discount and better than expected actual results.

~~(11)~~(10) Segment Information

The Company is a leading provider of technology solutions and services to customers in specialty technology markets. The Company has 2 reportable segments, based on product ~~customer~~ and ~~service~~customer type.

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

~~Table of Contents~~

The ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions segment includes ~~a portfolio~~the Company’s business in automatic identification and data capture (“AIDC”), point of sale (“POS”), payments, security and networking technologies. AIDC solutions ~~primarily for enterprise~~include mobile computing, ~~data capture,~~barcode scanners and imagers, radio frequency identification devices (“RFID”), barcode printing and services. POS and payments ~~networking, electronic physical security, cyber security~~solutions include POS systems, integrated POS software platforms, self-service kiosks including self-checkout, payment terminals, and ~~other technologies.~~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 operations within this segment in the United States, Canada and Brazil. The Company sees adjacencies among these technologies in helping its customers develop solutions. Data capture and POS solutions 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.

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

The ~~Worldwide~~Modern Communications & ~~Services~~Cloud segment includes the Company’s business in communications and collaboration, connectivity and cloud services. Communications and collaboration solutions, delivered in the cloud, on-premise or hybrid, include voice, video, integration of communication platforms and contact center solutions. The Intelisys connectivity and cloud marketplace offers telecom, cable, Unified Communications as a ~~portfolio of solutions primarily for communications technologies~~Service (“UCaaS”), Contact Center as a Service (“CCaaS”), Infrastructure as a Service (“IaaS”), Software-Defined Wide-Area Network (“SD-WAN”) and other cloud services. This segment includes SaaS and subscription services, which the Company offers using digital tools and ~~includes the Company's acquisition of intY.~~platforms. The Company has business operations within this segment in the United States, Canada, Brazil and the UK. These offerings include voice, video conferencing, wireless, data networking, cable, unified communications and collaboration, cloud and technology services. As these solutions come together on IP networks, new opportunities are created to move into adjacent solutions for all vertical markets, such as education, healthcare and government.

Selected financial information for each business segment is presented below:

2523

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Quarter ended Nine months ended
March 31, March 31,
2021 2020 2021 2020
(in thousands)
Sales:
Worldwide Barcode, Networking & Security $ 502,227 $ 489,218 $ 1,577,197 $ 1,645,406
Worldwide Communications & Services 227,646 255,366 720,914 765,879
$ 729,873 $ 744,584 $ 2,298,111 $ 2,411,285
Depreciation and amortization:
Worldwide Barcode, Networking & Security $ 3,772 $ 4,210 $ 11,852 $ 12,765
Worldwide Communications & Services 3,867 3,981 11,257 11,436
Corporate 719 795 2,308 2,384
$ 8,358 $ 8,986 $ 25,417 $ 26,585
Change in fair value of contingent consideration:
Worldwide Communications & Services $ 0 $ 618 $ 516 $ 6,266
$ 0 $ 618 $ 516 $ 6,266
Operating income:
Worldwide Barcode, Networking & Security $ 8,054 $ 4,779 $ 16,088 $ 29,153
Worldwide Communications & Services 12,214 6,394 33,555 22,009
Corporate(1)
(832) (780) (11,442) (2,689)
$ 19,436 $ 10,393 $ 38,201 $ 48,473
Capital expenditures:
Worldwide Barcode, Networking & Security $ (532) $ (1,855) $ (1,173) $ (3,294)
Worldwide Communications & Services (297) (1,988) (1,110) (3,281)
$ (829) $ (3,843) $ (2,283) $ (6,575)
Sales by Geography Category:
United States and Canada $ 666,773 $ 677,798 $ 2,081,377 $ 2,200,644
International 64,153 74,409 228,784 237,770
Less intercompany sales (1,053) (7,623) (12,050) (27,129)
$ 729,873 $ 744,584 $ 2,298,111 $ 2,411,285
(1) Includes restructuring costs of $0.6 million and $9.3 million for the quarter and nine months ended March 31, 2021.


	Quarter ended				Nine months ended
	March 31,				March 31,
	2022		2021		2022		2021
	(in thousands)
Sales:
Specialty Technology Solutions	$	503,072	$	436,462	$	1,501,702	$	1,300,488
Modern Communications & Cloud	342,918		293,411		1,065,950		997,623
	$	845,990	$	729,873	$	2,567,652	$	2,298,111
Depreciation and amortization:
Specialty Technology Solutions	$	2,874	$	3,200	$	8,741	$	10,054
Modern Communications & Cloud	3,738		4,439		11,312		13,055
Corporate	693		719		2,131		2,308
	$	7,305	$	8,358	$	22,184	$	25,417
Change in fair value of contingent consideration:

Modern Communications & Cloud	—		—		—		516
	$	—	$	—	$	—	$	516
Operating income (loss):
Specialty Technology Solutions	$	20,623	$	8,713	$	51,278	$	17,558
Modern Communications & Cloud	12,294		11,555		43,494		32,085
Corporate	—		(832)		(30)		(11,442)
	$	32,917	$	19,436	$	94,742	$	38,201
Capital expenditures:
Specialty Technology Solutions	$	(62)	$	(532)	$	(496)	$	(1,097)
Modern Communications & Cloud	(620)		(297)		(2,830)		(1,186)

	$	(682)	$	(829)	$	(3,326)	$	(2,283)
Sales by Geography Category:
United States and Canada	$	766,035	$	666,773	$	2,312,250	$	2,081,377
International	81,461		64,153		259,693		228,784
Less intercompany sales	(1,506)		(1,053)		(4,291)		(12,050)
	$	845,990	$	729,873	$	2,567,652	$	2,298,111

March 31, 2021 June 30, 2020
(in thousands)
Assets:
Worldwide Barcode, Networking & Security $ 786,123 $ 766,746
Worldwide Communications & Services 775,359 685,053
Corporate 21,140 59,064
Assets held for sale 0 181,231
$ 1,582,622 $ 1,692,094
Property and equipment, net by Geography Category:
United States and Canada $ 42,517 $ 53,083
International 2,799 2,558
$ 45,316 $ 55,641


	March 31, 2022		June 30, 2021
	(in thousands)
Assets:
Specialty Technology Solutions	$	905,073	$	775,704
Modern Communications & Cloud	925,367		868,752
Corporate	10,360		27,228

	$	1,840,800	$	1,671,684
Property and equipment, net by Geography Category:
United States and Canada	$	33,151	$	39,930
International	4,664		2,906
	$	37,815	$	42,836

~~(12)~~

(11) Leases

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In accordance with 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 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 inthrough fiscal year ~~2022.~~2024. 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 financial statements at March 31, ~~2021~~2022 and June 30, ~~2020.~~2021.

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 Sheet related to operating leases at March 31, ~~2021~~2022 and June 30, ~~2020:~~2021:


									March 31, 2022		June 30, 2021
Operating leases	Operating leases	Balance Sheet location	March 31, 2021		June 30, 2020		Operating leases	Balance Sheet location	(in thousands)
			(in thousands)
Operating lease right-of-use assets	Operating lease right-of-use assets	Other non-current assets	$	20,265	$	23,581	Operating lease right-of-use assets	Other non-current assets	$	17,569	$	19,246
Current operating lease liabilities	Current operating lease liabilities	Accrued expenses and other current liabilities	4,283		4,476		Current operating lease liabilities	Accrued expenses and other current liabilities	$	4,391	$	4,284
Long-term operating lease liabilities	Long-term operating lease liabilities	Other long-term liabilities	17,598		20,760		Long-term operating lease liabilities	Other long-term liabilities	$	14,591	$	16,550

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 nine months ended March 31, ~~2021~~2022 and ~~2020.~~2021. Operating lease costs contain immaterial amounts of short-term lease costs for leases with an initial term of 12 months or less.

Quarter ended March 31, Nine months ended March 31,
2021 2020 2021 2020
(in thousands) (in thousands)
Operating lease cost $ 1,277 $ 1,521 $ 3,964 $ 4,685
Variable lease cost 297 389 880 919
$ 1,574 $ 1,910 $ 4,844 $ 5,604


	Quarter ended March 31,				Nine months ended March 31,
	2022		2021		2022		2021
	(in thousands)
Operating lease cost	$	1,366	$	1,277	$	3,877	$	3,964
Variable lease cost	317		297		966		880
	$	1,683	$	1,574	$	4,843	$	4,844

Supplemental cash flow information related to the Company's operating leases for the ~~quarter and~~ nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 are presented in the table below:

Nine months ended
March 31,
2021 2020
(in thousands)
Cash paid for amounts in the measurement of lease liabilities $ 4,116 $ 4,351
Right-of-use assets obtained in exchange for lease obligations 0 1,672

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	Nine months ended
	March 31,
		2022		2021
	(in thousands)
Cash paid for amounts in the measurement of lease liabilities		$	4,082	$	4,116
Right-of-use assets obtained in exchange for lease obligations		2,313		—

The weighted-average remaining lease term and discount rate at March 31, ~~2021~~2022 are presented in the table below:

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	March 31, ~~2021~~2022
Weighted-average remaining lease term	~~5.42~~4.52 years
Weighted-average discount rate	~~4.1~~4.09	%

The following table presents the maturities of the Company's operating lease liabilities at March 31, ~~2021:~~2022:


		Operating leases			Operating leases
		(in thousands)			(in thousands)
Remainder of 2021		$	1,329
2022	2022	4,992		2022	$	1,438
2023	2023	4,658		2023	5,507
2024	2024	4,158		2024	4,666
2025	2025	3,256		2025	3,563
2026				2026	3,029
Thereafter	Thereafter	5,990		Thereafter	2,621
Total future payments	Total future payments	24,383		Total future payments	20,824
Less: amounts representing interest	Less: amounts representing interest	2,502		Less: amounts representing interest	1,842
Present value of lease payments	Present value of lease payments	$	21,881	Present value of lease payments	$	18,982

~~(13)~~(12) Commitments and Contingencies

The Company and its subsidiaries are, from time to time, parties 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.

In early March 2020, the World Health Organization characterized COVID-19 as a pandemic. The rapid spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. The pandemic and these containment measures have had, and are expected to continue to have, a substantial impact on businesses around the world, including the Company’s business, and on global, regional and national economies. The Company is unable at this time to predict the ultimate impact that COVID-19 will have on its business due to the inability to predict the duration or magnitude of the virus' impact.

During the Company's due diligence for the Network1 acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures. The Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition. The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was ~~$3.5~~$4.4 million and ~~$4.8~~$4.0 million, at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively.

The table below summarizes the balances and line item presentation of Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's Condensed Consolidated Balance Sheets at March 31, ~~2021~~2022 and June 30, ~~2020:~~2021:

~~Table of Contents~~


		March 31, 2021		June 30, 2020			March 31, 2022		June 30, 2021
		Network1					Network1
		(in thousands)					(in thousands)
Assets	Assets					Assets
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	14	$	14	Prepaid expenses and other current assets	$	16	$	16
Other non-current assets	Other non-current assets	$	3,510	$	3,652	Other non-current assets	$	4,221	$	3,998
Liabilities	Liabilities					Liabilities
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	14	$	14	Accrued expenses and other current liabilities	$	16	$	16
Other long-term liabilities	Other long-term liabilities	$	3,510	$	3,652	Other long-term liabilities	$	4,221	$	3,998

~~The decrease in pre-acquisition contingencies and corresponding indemnification receivables is due to a slight decrease in the foreign exchange rate of the~~ ~~Brazilian real~~ ~~against the US dollar.~~

~~(14)~~(13) Restructuring

In July 2020, as part of a strategic review of its organizational structure and operations, the Company announced a global cost reduction and restructuring program. These actions ~~are~~were designed to better align the cost structure for the wholesale distribution business with lower sales volumes as a result of the COVID-19 pandemic. The Company also initiated the closure of its Canpango business, its ~~salesforce~~Salesforce implementation and consulting business. There ~~has~~had been limited adoption by the Company's

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partner community of the services Canpango offers. These actions include entering into severance and termination agreements with employees, legal fees to execute the reduction in force and costs associated with lease terminations.

There were no restructuring or severance costs incurred during the quarter and nine months ended March 31, 2022. The following table presents the restructuring and severance costs incurred for the quarter and nine months ended March 31, 2021:


	Quarter ended March 31, 2021		Nine months ended March 31, 2021
	(in thousands)
Severance and benefit costs	$	326	$	8,825
Other	234		487
Total restructuring and other charges	$	560	$	9,312

~~For the quarter and nine months ended March 31, 2021, all~~All restructuring costs ~~are~~were recognized in the Corporate reporting unit and ~~have~~were not ~~been~~ allocated to the ~~Worldwide~~Specialty Technology Solutions or Modern Communications & Services or Worldwide Barcode, Networking & Security segment. The Company incurred restructuring charges in the prior year that were immaterial to the condensed consolidated financial statements and unrelated to the program described above.Cloud segments.

Accrued restructuring and severance costs are included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The following table represents activity for the nine months ended March 31, ~~2021:~~2022:


	Accrued Expenses
	(in thousands)
Balance at ~~July 1, 2020~~June 30, 2021	$	01,199
Charged to expense	~~9,312~~—
Cash payments	~~(6,803)~~(1,146)
Balance at March 31, ~~2021~~2022	$	~~2,509~~53

The remaining balance as of March 31, ~~2021~~2022 of ~~$2.5~~less than $0.1 million~~, primarily related to Corporate,~~ is expected to be paid through the ~~first~~fourth quarter of fiscal year 2022.

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~~(15)~~(14) Income Taxes

Income taxes for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 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 includes certain items treated as discrete events to arrive at an estimated overall tax provision. There were no material discrete items during the quarter ended March 31, 2022. During the ~~current period,~~nine months ended March 31, 2022, a discrete net tax benefit of ~~$0.5~~$0.9 million was recorded, which is ~~primarily~~ attributable to ~~exempt foreign income.~~excess tax benefits on stock compensation and a notional interest deduction on the net equity of the Company's Brazilian subsidiary.

The Company’s effective tax rate of ~~27.1%~~27.8% and ~~28.3%~~25.6% for the quarter and nine months ended March 31, ~~2021,~~2022, respectively, differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, nondeductible expenses and state income taxes. The Company's effective tax rate was ~~32.9%~~27.1% and ~~28.0%~~28.3% for the quarter and nine months ended March 31, ~~2020,~~2021, respectively.

As of the quarter ended March 31, 2022, the Company is not permanently reinvested with respect to all earnings generated by foreign operations. The Company has ~~provided~~determined that there is no material deferred tax liability for ~~U.S. income taxes for~~federal, state and withholding tax related to undistributed earnings. During the ~~current earnings~~nine months ended March 31, 2022, foreign subsidiaries repatriated cash of ~~its Canadian subsidiary and will continue~~$17.4 million to distribute the earnings of its Canadian subsidiary. Earnings from Brazil will continue to be considered retained indefinitely for reinvestment and all other foreign geographies are immaterial. It has been the practice of the Company to reinvest those earnings in the businesses outside the United States. ~~As a result of the sale of the Latin American and European entities, the Company repatriated the proceeds~~There is no certainty to the ~~United States with minimal tax consequences.~~

~~The Tax Cuts and Jobs Act (TCJA), passed~~timing of any future distributions of such earnings to the U.S. in December 2017, created a provision known as global intangible low-tax income ("GILTI") that imposes a tax on certain earnings of foreign subsidiaries. The GILTI tax became effective for the Company during fiscal year 2019 and an accounting policy election was made to treat the tax as a current period expense.whole or in part.

The Company had approximately $1.2 million and $1.1 million of total gross unrecognized tax benefits at March 31, ~~2021~~2022 and June 30, ~~2020.~~2021, respectively. Of this total at March 31, ~~2021,~~2022, approximately $1$0.9 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.

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The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, the Company had approximately $1.2 million and $1.1 million, respectively, 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, ~~2015.~~

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2016.

~~(16)~~(15) Discontinued Operations

On August 20, 2019, the Company announced plans to divest the product distribution businesses in Europe, the UK, Mexico, Colombia, Chile, Peru and the Miami-based export operations ("Divestitures") as these businesses ~~had been~~were performing below management's expectations. The Company ~~will continue~~continues to operate its digital business in these countries. Management determined that the Company did not have sufficient scale in these markets to maximize the value-added model for product distribution, leading the Company to focus and invest in its higher-growth, higher-margin businesses. Results from the Divestitures were included within each reportable segment, which includes the ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions and ~~Worldwide~~Modern Communications & ~~Services~~Cloud segments.

During the quarter ended June 30, 2020, the Company recorded a pre-tax loss on sale classification of $88.9 million to reduce the carrying value of the Divestitures to its estimate of fair value (the net proceeds received at closing), less estimated costs to sell. As this loss was determined not to be attributable to any individual components in the Divestitures' net assets, it was reflected as a valuation allowance against the total assets of the Divestitures. During the ~~quarter and~~ nine months ended March 31, 2021, the Company recorded an additional pre-tax loss on disposal group of ~~$0.7 million and~~ $34.5 million, respectively. This loss includes the realization of cumulative translation adjustments of $0.0 million and $11.6 million for the quarter and nine months ended March 31, 2021, respectively. Additional losses during the quarter and nine months ended March 31, 2021 arewhich was primarily attributable to a reduction in the net proceeds ~~received~~realized at closing for the Divestitures. During the quarter ended December 31, 2021, the Company received the second and final payment for its businesses in Latin America, outside of Brazil, related to working capital adjustments and in accordance with the Share Purchase Agreement between Intcomex and the Company. The receipt of payment resulted in a gain on disposal group of $0.1 million.

The Company signed an agreement on July 23, 2020 with Intcomex for its businesses located in Latin America, outside of Brazil. The Company finalized the sale of the Latin America businesses on October 30, 2020. The Company also finalized the sale of the Europe and UK business on November 12, 2020. During the quarter ended December 31, 2021, the Company received a final $3.1 million cash payment for the sale of the Latin America business. Total cash received for the sale of divestitures was ~~$34.4~~$37.5 million.

Major components of net loss (income) from discontinued operations for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 were as follows:

Quarter ended March 31, Nine months ended March 31,
2021 2020 2021 2020
(in thousands) (in thousands)
Net sales $ 0 $ 127,899 $ 213,373 $ 439,527
Cost of goods sold 0 117,669 198,512 400,158
Gross profit 0 10,230 14,861 39,369
Selling, general and administrative expenses 0 13,782 17,291 42,607
Depreciation expense 0 225 0 771
Intangible amortization expense 0 327 0 1,073
Operating loss 0 (4,104) (2,430) (5,082)
Interest expense, net 0 323 394 1,236
Loss on disposal group 688 0 34,496 0
Other (income) expense, net 0 433 310 (96)
Loss from discontinued operations before taxes (688) (4,860) (37,630) (6,222)
Income tax expense (benefit) 0 (858) 17 (1,197)
Net loss from discontinued operations $ (688) $ (4,002) $ (37,647) $ (5,025)



	Quarter ended March 31, 2022		Quarter ended March 31, 2021		Nine months ended March 31, 2022		Nine months ended March 31, 2021
	(in thousands)
Net sales	$	—	$	—	$	—	$	213,373
Cost of goods sold	—		—		—		198,512
Gross profit	—		—		—		14,861
Selling, general and administrative expenses	—		—		—		17,291



Operating loss	—		—		—		(2,430)
Interest expense, net	—		—		—		394
Loss (gain) on disposal group	—		688		(100)		34,496
Other expense, net	—		—		—		310
(Loss) income from discontinued operations before taxes	—		(688)		100		(37,630)
Income tax expense	—		—		—		17
Net (loss) income from discontinued operations	$	—	$	(688)	$	100	$	(37,647)

~~The major classes~~

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There were no assets ~~and~~or liabilities classified as held-for-sale in the accompanying consolidated balance sheets ~~were as follows as of~~at March 31, ~~2021~~2022 and June 30, ~~2020:~~2021.

~~Table of Contents~~

March 31, 2021 June 30, 2020
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 0 $ 4,970
Accounts receivable, net 0 117,200
Inventories, net 0 106,779
Prepaid expenses and other current assets 0 23,808
Total current assets 0 252,757
Property and equipment, net 0 1,833
Deferred income taxes 0 9,349
Other non-current assets 0 6,215
Total assets, before valuation allowance 0 270,154
Less: valuation allowance 0 (88,923)
Total assets, net of valuation allowance (1)
$ 0 $ 181,231
Liabilities
Current liabilities:
Accounts payable $ 0 $ 56,098
Accrued expenses and other current liabilities 0 14,815
Other taxes payable 0 20,378
Short-term borrowings 0 3,524
Income tax payable 0 1,085
Total current liabilities 0 95,900
Borrowings under revolving credit facility 0 24,704
Other long-term liabilities 0 7,418
Total liabilities(1)
$ 0 $ 128,022

~~(1) Total assets and liabilities of~~There were no cash flows from discontinued operations ~~are classified in current assets and liabilities, respectively, in~~for the ~~Company's consolidated balance sheet as of June 30, 2020. The discontinued operations were disposed of during the quarter~~nine months ended ~~December~~March 31, ~~2020.~~

2022.

Significant non-cash operating items and capital expenditures reflected in the cash flows from discontinued operations for the nine months ended March 31, 2021 ~~and 2020~~ were as follows:

Nine months ended March 31,
2021 2020
(in thousands)
Loss on disposal group $ 34,496 $ 0
Depreciation and amortization 0 1,844
Capital expenditures (58) (48)



	Nine months ended March 31, 2021
	(in thousands)
Loss on disposal group	$	34,496


Capital expenditures	$	(58)

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

Overview

ScanSource is ata leading hybrid distributor connecting devices to the ~~center of the technological solution delivery channel, connecting businesses~~cloud and ~~institutions~~accelerating growth for partners across hardware, Software as a Service ("SaaS"), connectivity and ~~providing solutions for their complex needs.~~cloud. We provide technology solutions and services from more than 500 leading suppliers of mobility and

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barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration (UCaaS, CCaaS), telecom and cloud services to our ~~customers. We serve approximately~~more than 30,000 sales partners located in the United States, Canada, Brazil, the UK and ~~Europe~~Europe.

We operate our business under a management structure that enhances our technology focus and ~~provide~~hybrid distribution growth strategy. Our segments operate in the United States, Canada, Brazil and the UK and consist of the following:

•Specialty Technology Solutions

•Modern Communications & Cloud

We sell hardware, SaaS, connectivity and cloud solutions and services ~~from approximately 500 technology suppliers.~~ through channel partners to end-customers. 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 suppliers include 8x8, AT&T, Aruba/HPE, Avaya, Axis, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Granite, GTT, Hanwha, Honeywell, Ingenico, Jabra, Lumen, Microsoft, MetTel, Mitel, NCR, NICE CXone, Poly, RingCentral, Spectrum, Toshiba Global Commerce Solutions, Trend Micro, Ubiquiti, Verifone, Verizon, VMWare, Windstream, Zebra Technologies and Zoom.

Unless otherwise indicated, the amounts and analysis provided within Management's Discussion and Analysis of Financial Condition and Results of Operations pertain to our continuing operations only.

We operate our business under a management structure that enhances our technology market focus and growth strategy. We segment our business into two technology-focused areas that each operate in the United States, Canada, Brazil and the UK:

•~~Worldwide Barcode, Networking & Security~~

•~~Worldwide Communications & Services~~

We sell hardware, software, services and connectivity through channel partners to end-customers. For our hardware distribution, we sell products (i) to the United States and Canada from our facilities located in Mississippi, California and Kentucky and (ii) to Brazil primarily from facilities located in the Brazilian states of Parana, Espirito Santo and Santa Catarina. We also have drop shipment arrangements with some of our suppliers, which allow us to offer products to customers without taking physical delivery at our facilities. We provide some of our digital products, which include Software as a Service (“SaaS”) and subscriptions, through our CASCADE platform.

Our key suppliers include 8x8, ACC Business, AT&T, Aruba/HPE, Axis, AudioCodes, Avaya, Barco, Bematech, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Extreme, Fortinet, Hanwha, Honeywell, HID, Ingenico, Intrado, Jabra, Lumen, March Networks, Masergy, Microsoft, Mitel, NCR, NICE inContact, Oracle, Panasonic, Poly, RingCentral, Samsung, Sony, Spectralink, Spectrum, Toshiba Global Commerce Solutions, TPx, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and Zoom. We also offer customers significant choices in cloud services through our Intelisys business, including offerings in contact center, infrastructure and unified communications.

~~Recent Developments~~

Impact of COVID-19 on our Business Environment

~~In early March 2020, the World Health Organization characterized COVID-19 as a pandemic.~~ The ~~rapid~~ spread of COVID-19 ~~since December 2019 has resulted~~continues to disrupt global supply chains. While we have been able to broadly maintain our operations, we have experienced some disruption in ~~the implementation of numerous measures to contain the virus worldwide, such as travel bans~~our supply chain caused by product availability, labor scarcity and ~~restrictions, quarantines, shelter-in-place orders~~logistical disruptions, resulting in extended lead-times, unpredictability and ~~business shutdowns. The pandemic and these containment measures have had, and are expected~~higher costs. We intend to continue to ~~have, a substantial impact on businesses around~~work with our suppliers to implement measures to minimize disruption to the ~~world and on global, regional and national economies.~~

~~During the COVID-19 pandemic, our top priority is protecting the health and safety~~distribution of our ~~employees. We moved quickly to transition our employees, where possible, to a fully remote working environment. We have taken a number of measures to ensure our teams feel secure~~products. However, uncertainty in ~~their jobs~~the duration and ~~have the flexibility and resources they need to stay safe and healthy.~~

We have activated our contingency plans. We have deployed teams to monitor the rapidly evolving situation and recommend risk mitigation actions; we have implemented travel restrictions; and we are following physical distancing guidelines. We are following global guidance from authorities and health officials including, but not limited to, checking the temperature of associates when entering our facilities, requiring associates to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitation routines. All of our distribution facilities have remained open and operational. Most of our office-based employees around the world are working remotely. Our employees have remained productive across all areas of our business, even while working remotely, and are committed to providing the high level of customer service our partners have grown to expect from us in order to achieve positive results.

~~We continue to monitor and assess the impacts~~scope of the ~~COVID-19 pandemic. During the first~~ ~~nine~~ ~~months of~~pandemic could result in an unforeseen disruption to our ~~fiscal year, GAAP net sales declined 4.7% year-over-year while non-GAAP net sales, which exclude the negative~~supply chain and impact ~~of fluctuations in foreign currency translation, decreased 1.9% year-over-year.~~

~~In July 2020, we announced actions to address the business impacts of the COVID-19 pandemic and prepare for~~ our next phase of growth. These actions included a $30 million annualized expense reduction plan. During the quarter and nine months ended March 31, 2021, we recognized approximately $0.6 million and $9.3 million, respectively, for restructuring and other charges, largely for severance and employee benefits for employees who left the Company as part of this plan. These actions are designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of the

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COVID-19 pandemic. As part of the plan, we are continuing to invest in our higher growth agency business, Intelisys. Strong growth for the Intelisys business has continued, even with the COVID-19 pandemic.operations.

Our Strategy

~~We rely~~Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes, and tools. Our goal is to provide exceptional experiences for our partners, suppliers, and employees, and we strive for operational excellence. Our hybrid distribution strategy relies on a channel sales model ~~offering~~to offer hardware, ~~software,~~SaaS, connectivity and cloud services ~~and connectivity~~ from leading technology suppliers to sales partners that solve ~~end customers'~~end-customers’ challenges. ~~With our CASCADE platform, we also offer~~ScanSource enables sales partners to deliver solutions for their customers ~~SaaS~~to address changing end-customer buying and ~~subscription services from leading technology suppliers. While we do not manufacture products, we provide technology solutions and services from leading technology suppliers.~~consumption patterns. Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional ~~services, such as custom configuration, key injection, integration support, custom development and other~~ services. ~~We also offer the flexibility of on-premise, cloud and hybrid solutions.~~

As a trusted adviser to our sales partners, we provide ~~more complete~~customized solutions through ~~a better~~our strong understanding of ~~end customer~~end-customer needs. We drive growth through enhancing our sales partners' capabilities to provide hardware, software, services and connectivity solutions. Our teams deliver value-added support programs and services, including education and training, network assessments, implementation, custom development and marketing to help our sales partners extend their capabilities, develop new technology practices or reach new end customers.

Our objective is to grow profitable sales in the technologies we offer and expand in higher margin and adjacent markets to help our sales partners offer more products and services and increase recurring revenue opportunities. As part of our strategic plan, we consider strategic acquisitions and alliances to enhance our technology offerings and service capabilities.

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Results of Operations ~~from Continuing Operations~~

Net Sales

The following tables summarize our net sales results by technology segment and by geographic location for ~~our continuing operations for~~ the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020:~~2021:

Quarter ended March 31,
% Change, Constant Currency, Excluding Divestitures and Acquisitions (a)
Net Sales by Segment: 2021 2020 $ Change % Change
(in thousands)
Worldwide Barcode, Networking & Security $ 502,227 $ 489,218 $ 13,009 2.7 % 3.5 %
Worldwide Communications & Services 227,646 255,366 (27,720) (10.9) % (6.8) %
Total net sales $ 729,873 $ 744,584 $ (14,711) (2.0) % — %
Nine months ended March 31,
% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions (a)
2021 2020 $ Change % Change
(in thousands)
Worldwide Barcode, Networking & Security $ 1,577,197 $ 1,645,406 $ (68,209) (4.1) % (2.9) %
Worldwide Communications & Services 720,914 765,879 (44,965) (5.9) % 0.4 %
Total net sales $ 2,298,111 $ 2,411,285 $ (113,174) (4.7) % (1.9) %


	Quarter ended March 31,								% Change, Constant Currency, Excluding Divestitures and Acquisitions (a)
Net Sales by Segment:	2022		2021		$ Change		% Change
	(in thousands)
Specialty Technology Solutions	$	503,072	$	436,462	$	66,610	15.3	%	15.1	%
Modern Communications & Cloud	342,918		293,411		49,507		16.9	%	16.0	%
Total net sales	$	845,990	$	729,873	$	116,117	15.9	%	15.4	%

	Nine months ended March 31,								% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions (a)
	2022		2021		$ Change		% Change
	(in thousands)
Specialty Technology Solutions	$	1,501,702	$	1,300,488	$	201,214	15.5	%	15.4	%
Modern Communications & Cloud	1,065,950		997,623		68,327		6.8	%	6.6	%
Total net sales	$	2,567,652	$	2,298,111	$	269,541	11.7	%	11.6	%

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

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

The ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions segment consists of sales to customers in North America and Brazil. For the quarter and nine months ended March 31, ~~2021,~~2022, net sales for the ~~Barcode, Networking & Security~~Specialty Technology Solutions segment increased ~~$13.0~~$66.6 million, or ~~2.7%~~15.3%, and $201.2 million, or 15.5%, respectively, compared to the prior-year ~~quarter.~~periods. Excluding the foreign exchange ~~negative~~positive impact, adjusted net sales increased ~~$17.1~~$65.7 million, or ~~3.5%~~15.1%, for the quarter ended March 31, ~~2021~~2022 and $200.8 million, or 15.4%, for the nine months ended March 31, 2022 compared to the prior-year ~~quarter.~~periods. The increase in net sales and adjusted net sales for the quarter and nine months periods is primarily due to ~~increased sales in~~broad-based demand across our business in North America and Brazil (in local currency). During the quarter, we saw continued progress in recovering from the sales impacts of the COVID-19 pandemic across key technologies in North America and Brazil.technologies.

Net sales decreased $68.2 million, or 4.1% for the nine months ended March 31, 2021 compared to the prior nine month period. Excluding the foreign exchange negative impact, adjusted net sales decreased $48.5 million, or 2.9%, compared to the prior nine month period. The decrease in net sales and adjusted net sales is primarily due to lower sales volume across North America, partially offset by sales growth in Brazil.

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

The ~~Worldwide~~Modern Communications & ~~Services~~Cloud segment consists of sales to customers in North America, Brazil, Europe and the UK. For the quarter and nine months ended March 31, ~~2021,~~2022, net sales ~~decreased $27.7~~for the Modern Communications & Cloud segment increased $49.5 million, or ~~10.9%~~16.9%, and $68.3 million, or 6.8%, respectively, compared to the prior-year ~~quarter.~~periods. Excluding the foreign exchange ~~negative~~positive impact, adjusted net sales increased $46.8 million, or 16.0%, for the quarter ended March 31, ~~2021 decreased $17.2~~2022 and $65.7 million, or ~~6.8% from~~6.6%, for the ~~quarter~~nine months ended March 31, ~~2020.~~2022 compared to the prior-year periods. The ~~decrease~~increase in net sales and adjusted net sales ~~reflects lower sales volumes in North America, excluding Intelisys, partially offset by sales growth in Brazil (in local currency).~~

~~For~~for the quarter and nine months ended March 31, 2021, net sales decreased $45.0 million, or 5.9% compared to the prior nine month period, primarily from decreases in sales volume in North America and Brazil. Excluding the foreign exchange negative impact, adjusted net sales increased $2.7 million, or 0.4%,periods is primarily due to increased demand across our communications solutions. For our Intelisys business, net sales ~~growth in Brazil (in local currency).~~for the third quarter and nine-month period of fiscal year 2022 increased 18.2% and 15.4%, respectively, year-over-year.

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		Quarter ended March 31,								% Change, Constant Currency, Excluding Divestitures and Acquisitions (a)			Quarter ended March 31,								% Change, Constant Currency, Excluding Divestitures and Acquisitions (a)
Net Sales by Geography:	Net Sales by Geography:	2021		2020		$ Change		% Change				Net Sales by Geography:	2022		2021		$ Change		% Change
		(in thousands)											(in thousands)
United States and Canada	United States and Canada	$	665,720	$	670,175	$	(4,455)	(0.7)	%	(0.7)	%	United States and Canada	$	764,529	$	665,720	$	98,809	14.8	%	14.8	%
International	International	64,153		74,409		(10,256)		(13.8)	%	5.8	%	International	81,461		64,153		17,308		27.0	%	21.4	%
Total net sales	Total net sales	$	729,873	$	744,584	$	(14,711)	(2.0)	%	—	%	Total net sales	$	845,990	$	729,873	$	116,117	15.9	%	15.4	%

		Nine months ended March 31,								% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions (a)			Nine months ended March 31,								% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions (a)
		2021		2020		$ Change		% Change					2022		2021		$ Change		% Change
		(in thousands)											(in thousands)
United States and Canada	United States and Canada	$	2,069,327	$	2,173,515	$	(104,188)	(4.8)	%	(4.8)	%	United States and Canada	$	2,307,959	$	2,069,327	$	238,632	11.5	%	11.5	%
International	International	228,784		237,770		(8,986)		(3.8)	%	24.6	%	International	259,693		228,784		30,909		13.5	%	12.2	%
Total net sales	Total net sales	$	2,298,111	$	2,411,285	$	(113,174)	(4.7)	%	(1.9)	%	Total net sales	$	2,567,652	$	2,298,111	$	269,541	11.7	%	11.6	%

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

Gross Profit

The following tables summarize our gross profit ~~for our continuing operations~~ for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020:~~

Quarter ended March 31, % of Net Sales March 31,
2021 2020 $ Change % Change 2021 2020
(in thousands)
Worldwide Barcode, Networking & Security $ 43,869 $ 41,870 $ 1,999 4.8 % 8.7 % 8.6 %
Worldwide Communications & Services 44,247 42,708 1,539 3.6 % 19.4 % 16.7 %
Gross profit $ 88,116 $ 84,578 $ 3,538 4.2 % 12.1 % 11.4 %
Nine months ended March 31, % of Net Sales March 31,
2021 2020 $ Change % Change 2021 2020
(in thousands)
Worldwide Barcode, Networking & Security $ 127,639 $ 143,293 $ (15,654) (10.9) % 8.1 % 8.7 %
Worldwide Communications & Services 127,300 138,130 (10,830) (7.8) % 17.7 % 18.0 %
Gross profit $ 254,939 $ 281,423 $ (26,484) (9.4) % 11.1 % 11.7 %

~~Worldwide Barcode, Networking & Security~~2021:

~~Gross~~


	Quarter ended March 31,								% of Net Sales March 31,
	2022		2021		$ Change		% Change		2022		2021
	(in thousands)
Specialty Technology Solutions	$	54,021	$	39,002	$	15,019	38.5	%	10.7	%	8.9	%
Modern Communications & Cloud	52,487		49,114		3,373		6.9	%	15.3	%	16.7	%
Gross profit	$	106,508	$	88,116	$	18,392	20.9	%	12.6	%	12.1	%

	Nine months ended March 31,								% of Net Sales March 31,
	2022		2021		$ Change		% Change		2022		2021
	(in thousands)
Specialty Technology Solutions	$	151,763	$	112,279	$	39,484	35.2	%	10.1	%	8.6	%
Modern Communications & Cloud	163,969		142,660		21,309		14.9	%	15.4	%	14.3	%
Gross profit	$	315,732	$	254,939	$	60,793	23.8	%	12.3	%	11.1	%

Our gross profit ~~dollars~~is primarily affected by sales volume and gross ~~profit~~ margin ~~for the Worldwide Barcode, Networking & Security segment increased for~~mix. Gross margin mix is impacted by multiple factors, which include sales mix (proportion of sales of higher margin products or services relative to total sales), vendor program recognition (consisting of volume rebates, inventory price changes and purchase discounts) and freight costs. Increases in vendor programs decrease cost of goods sold, thereby increasing gross profit.

Specialty Technology Solutions

For the quarter ended March 31, ~~2021, primarily from~~2022, gross profit dollars for the Specialty Technology Solutions segment increased $15.0 million, or 38.5%. Higher sales volume, ~~and higher margin sales mix compared~~after considering the associated cost of goods sold, contributed $6.0 million to the ~~prior year quarter.~~growth of gross profit dollars. Gross margin mix positively impacted gross profit by $9.0 million, largely from higher vendor program recognition. For the ~~nine months~~quarter ended March 31, ~~2021, gross profit dollars and~~2022, the gross profit margin ~~decreased due to lower vendor program recognition, compared to~~increased 180 basis points over the prior-year ~~period.~~

~~Worldwide Communications & Services~~to 10.7%.

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For the nine months ended March 31, 2022, the Specialty Technology Solutions segment achieved gross profit growth of $39.5 million, or 35.2%. Increases in sales volume, after considering the associated cost of goods sold, contributed $17.4 million to the growth of gross profit dollars. Gross margin mix positively impacted gross profit ~~dollars and~~by $22.1 million, largely from higher vendor program recognition. For the nine months ended March 31, 2022, the gross profit margin increased ~~for~~150 basis points over the ~~Worldwide~~prior-year to 10.1%.

Modern Communications & ~~Services segment for~~Cloud

For the quarter ended March 31, ~~2021 primarily from~~2022, the Modern Communications & Cloud segment achieved gross profit growth of $3.4 million, or 6.9%. Higher sales volume, after considering the associated cost of goods sold, contributed $8.3 million to the growth of gross profit dollars. Lower gross margin mix negatively impacted gross profit by $4.9 million, largely driven by a ~~higher margin~~less favorable sales mix ~~and higher vendor program recognition~~in Brazil. For the quarter ended March 31, 2022, the gross profit margin decreased 140 basis points compared to the ~~prior year quarter.~~ prior-year to 15.3%.

For the nine months ended March 31, ~~2021,~~2022, the Modern Communications & Cloud segment achieved gross profit growth of $21.3 million, or 14.9%. Higher sales volume, after considering the associated cost of goods sold, contributed $9.8 million to the growth of gross profit dollars. Gross margin mix positively impacted gross profit by $11.5 million, driven by a more favorable sales mix, including our higher-margin recurring revenue business, principally from Intelisys connectivity and cloud services and SaaS subscriptions. For the nine months ended March 31, 2022, the gross profit margin ~~and gross profit dollars decreased, primarily from lower margin sales mix compared to~~increased 110 basis points over the prior-year ~~period, partially offset by the results contributed by our Intelisys recurring revenue business.~~to 15.4%.

Operating Expenses

The following tables summarize our operating expenses for ~~our continuing operations for~~ the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020:~~2021:

Quarter ended March 31, % of Net Sales March 31,
2021 2020 $ Change % Change 2021 2020
(in thousands)
Selling, general and administrative expenses $ 60,099 $ 64,971 $ (4,872) (7.5) % 8.2 % 8.7 %
Depreciation expense 3,141 3,268 (127) (3.9) % 0.4 % 0.4 %
Intangible amortization expense 4,880 5,159 (279) (5.4) % 0.7 % 0.7 %
Restructuring and other charges 560 169 391 *nm 0.1 % 0.0 %
Change in fair value of contingent consideration — 618 (618) (100.0) % 0.0 % 0.1 %
Operating expenses $ 68,680 $ 74,185 $ (5,505) (7.4) % 9.4 % 10.0 %
Nine months ended March 31, % of Net Sales March 31,
2021 2020 $ Change % Change 2021 2020
(in thousands)
Selling, general and administrative expenses $ 182,681 $ 201,344 $ (18,663) (9.3) % 7.9 % 8.4 %
Depreciation expense 9,634 9,729 (95) (1.0) % 0.4 % 0.4 %
Intangible amortization expense 14,595 15,007 (412) (2.7) % 0.6 % 0.6 %
Restructuring and other charges 9,312 604 8,708 *nm 0.4 % 0.0 %
Change in fair value of contingent consideration 516 6,266 (5,750) (91.8) % 0.0 % 0.3 %
Operating expenses $ 216,738 $ 232,950 $ (16,212) (7.0) % 9.4 % 9.7 %

*nm - percentages are not meaningful


	Quarter ended March 31,								% of Net Sales March 31,
	2022		2021		$ Change		% Change		2022		2021
	(in thousands)
Selling, general and administrative expenses	$	66,522	$	60,099	$	6,423	10.7	%	7.9	%	8.2	%
Depreciation expense	2,612		3,141		(529)		(16.8)	%	0.3	%	0.4	%
Intangible amortization expense	4,457		4,880		(423)		(8.7)	%	0.5	%	0.7	%
Restructuring and other charges	—		560		(560)		(100.0)	%	0.0	%	0.1	%

Operating expenses	$	73,591	$	68,680	$	4,911	7.2	%	8.7	%	9.4	%

	Nine months ended March 31,								% of Net Sales March 31,
	2022		2021		$ Change		% Change		2022		2021
	(in thousands)

Selling, general and administrative expenses	$	199,538	$	182,681	$	16,857	9.2	%	7.8	%	7.9	%
Depreciation expense	8,039		9,634		(1,595)		(16.6)	%	0.3	%	0.4	%
Intangible amortization expense	13,413		14,595		(1,182)		(8.1)	%	0.5	%	0.6	%
Restructuring and other charges	—		9,312		(9,312)		(100.0)	%	0.0	%	0.4	%
Change in fair value of contingent consideration	—		516		(516)		(100.0)	%	0.0	%	0.0	%
Operating expenses	$	220,990	$	216,738	$	4,252	2.0	%	8.6	%	9.4	%

Selling, general and administrative expenses ("SG&A") ~~decreased $4.9~~increased $6.4 million and ~~$18.7~~$16.9 million for the quarter and nine months ended March 31, ~~2021,~~2022, respectively, compared to the prior-year ~~periods due~~periods. The increase is attributable to ~~lower~~higher employee costs and a decrease in travel expenses due to the COVID-19 pandemic. The decrease in employee costs for the quarter and nine months ended March 31, 2021 is a result of our expense reduction plan, which was implemented at the end of July 2020.

Amortization expense decreased $0.3 million and $0.4 million for the quarter and nine months ended March 31, 2021, respectively, compared to the prior-year periods largely due to Canpango intangible write-offs at the end of the prior fiscal year.costs.

Restructuring and other charges incurred of $0.6 million and $9.3 million for the quarter and nine months ended March 31, 2021, respectively, primarily relate to employee severance and benefit costs in connection with our expense reduction plan implemented at the end of July 2020.

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We recorded no expense of $0.5 million for the change in fair value of contingent consideration ~~for the quarter ended March 31, 2021 and $0.5 million~~ for the nine months ended March 31, 2021, all of which relates to Intelisys. The ~~expense from the change in fair value for the nine months ended March 31, 2021 is due to the amortization of the unrecognized fair value discount for the~~ final Intelisys earnout payment ~~which~~ was paid in October 2020.

Operating Income

~~Table of Contents~~

The following tables summarize our operating income ~~for our continuing operations~~ for the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020:~~2021:


		Quarter ended March 31,								% of Net Sales March 31,					Quarter ended March 31,								% of Net Sales March 31,
		2021		2020		$ Change		% Change		2021		2020			2022		2021		$ Change		% Change		2022		2021
		(in thousands)													(in thousands)
Worldwide Barcode, Networking & Security		$	8,054	$	4,779	$	3,275	68.5	%	1.6	%	1.0	%
Worldwide Communications & Services		12,214		6,394		5,820		91.0	%	5.4	%	2.5	%
Specialty Technology Solutions														Specialty Technology Solutions	$	20,623	$	8,713	$	11,910	136.7	%	4.1	%	2.0	%
Modern Communications & Cloud														Modern Communications & Cloud	12,294		11,555		739		6.4	%	3.6	%	3.9	%
Corporate	Corporate	(832)		(780)		(52)		nm*		nm*		nm*		Corporate	—		(832)		832		nm*		nm*		nm*
Operating income	Operating income	$	19,436	$	10,393	$	9,043	87.0	%	2.7	%	1.4	%	Operating income	$	32,917	$	19,436	$	13,481	69.4	%	3.9	%	2.7	%

		Nine months ended March 31,								% of Net Sales March 31,					Nine months ended March 31,								% of Net Sales March 31,
		2021		2020		$ Change		% Change		2021		2020			2022		2021		$ Change		% Change		2022		2021
		(in thousands)													(in thousands)
Worldwide Barcode, Networking & Security		$	16,088	$	29,153	$	(13,065)	(44.8)	%	1.0	%	1.8	%
Worldwide Communications & Services		33,555		22,009		11,546		52.5	%	4.7	%	2.9	%
Specialty Technology Solutions														Specialty Technology Solutions	$	51,278	$	17,558	$	33,720	192.0	%	3.4	%	1.4	%
Modern Communications & Cloud														Modern Communications & Cloud	43,494		32,085		11,409		35.6	%	4.1	%	3.2	%
Corporate	Corporate	(11,442)		(2,689)		(8,753)		nm*		nm*		nm*		Corporate	(30)		(11,442)		11,412		nm*		nm*		nm*
Operating income	Operating income	$	38,201	$	48,473	$	(10,272)	(21.2)	%	1.7	%	2.0	%	Operating income	$	94,742	$	38,201	$	56,541	148.0	%	3.7	%	1.7	%

*nm - percentages are not meaningful

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

For the ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions segment, operating income increased ~~$3.3~~$11.9 million and operating margin increased to 1.6% for the quarter ended March 31, 2021 compared to the prior-year quarter. The increase in operating income and margin for the quarter is due to higher gross profits and decreased operating expenses. Operating income decreased $13.1 million and operating margin decreased to 1.0% for the nine months ended March 31, 2021, compared to the prior-year period. The decreases for the nine months ended March 31, 2021 are due to lower gross profits, partially offset by lower SG&A expenses.

~~Worldwide Communications & Services~~

~~For the Worldwide Communications & Services segment, operating income increased $5.8 million and $11.5~~$33.7 million for the quarter and nine months ended March 31, ~~2021,~~2022, respectively, ~~and operating~~compared to the prior-year period. Operating margin increased to ~~5.4%~~4.1% and ~~4.7%~~3.4% for the quarter and nine months ended March 31, ~~2021, respectively,~~2022, respectively. The increase in operating income and margin for both the quarter and nine month period is primarily due to higher gross profits.

Modern Communications & Cloud

For the Modern Communications & Cloud segment, operating income increased $0.7 million for the quarter ended March 31, 2022, compared to the prior-year ~~periods.~~period. Operating margin for the quarter ended March 31, 2022 decreased to 3.6%, primarily due to higher employee costs, partially offset by increased gross profits. For the nine months ended March 31, 2022, operating income increased $11.4 million and operating margin increased to 4.1%. The increases in operating income and ~~operating~~ margin ~~are primarily from lower SG&A expense, partially offset by lower gross profits~~ for the nine ~~months ended March 31, 2021.~~month period is primarily due to higher gross profits.

Corporate

Corporate ~~incurred $0.8 million and $11.4 million in~~recognized no restructuring ~~and~~or divestiture expenses for the quarter ~~and~~ended March 31, 2022, compared to $0.8 million in the prior-year quarter. For the nine months ended March 31, 2022 and 2021, ~~respectively, compared to $0.8 million and $2.7 million in acquisition~~corporate incurred restructuring and divestiture expenses ~~for the quarter~~of less than $0.1 million and ~~nine months ended March 31, 2020,~~$11.4 million, respectively.

Total Other (Income) Expense

The following tables summarize our total other (income) expense for ~~our continuing operations for~~ the quarters and nine months ended March 31, ~~2021~~2022 and ~~2020:~~2021:

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		Quarter ended March 31,								% of Net Sales March 31,					Quarter ended March 31,								% of Net Sales March 31,
		2021		2020		$ Change		% Change		2021		2020			2022		2021		$ Change		% Change		2022		2021
		(in thousands)													(in thousands)
Interest expense	Interest expense	$	1,576	$	3,098	$	(1,522)	(49.1)	%	0.2	%	0.4	%	Interest expense	$	1,483	$	1,576	$	(93)	(5.9)	%	0.2	%	0.2	%
Interest income	Interest income	(745)		(1,080)		335		31.0	%	(0.1)	%	(0.1)	%	Interest income	(1,000)		(745)		(255)		(34.2)	%	(0.1)	%	(0.1)	%
Net foreign exchange losses (gains)		(41)		(96)		55		57.3	%	(0.0)	%	(0.0)	%
Net foreign exchange losses														Net foreign exchange losses	258		(41)		299		(729.3)	%	0.0	%	(0.0)	%
Other, net	Other, net	(261)		(41)		(220)		(536.6)	%	(0.0)	%	(0.0)	%	Other, net	(394)		(261)		(133)		(51.0)	%	(0.0)	%	(0.0)	%
Total other expense, net	Total other expense, net	$	529	$	1,881	$	(1,352)	(71.9)	%	0.1	%	0.3	%	Total other expense, net	$	347	$	529	$	(182)	(34.4)	%	0.0	%	0.1	%

		Nine months ended March 31,								% of Net Sales March 31,					Nine months ended March 31,								% of Net Sales March 31,
		2021		2020		$ Change		% Change		2021		2020			2022		2021		$ Change		% Change		2022		2021
		(in thousands)													(in thousands)
Interest expense	Interest expense	$	5,285	$	9,727	$	(4,442)	(45.7)	%	0.2	%	0.4	%	Interest expense	$	4,637	$	5,285	$	(648)	(12.3)	%	0.2	%	0.2	%
Interest income	Interest income	(1,756)		(2,627)		871		33.2	%	(0.1)	%	(0.1)	%	Interest income	(2,973)		(1,756)		(1,217)		69.3	%	(0.1)	%	(0.1)	%
Net foreign exchange losses	Net foreign exchange losses	778		86		692		804.7	%	0.0	%	0.0	%	Net foreign exchange losses	1,223		778		445		57.2	%	0.0	%	0.0	%
Other, net	Other, net	(595)		112		(707)		(631.3)	%	(0.0)	%	0.0	%	Other, net	(555)		(595)		40		(6.7)	%	(0.0)	%	(0.0)	%
Total other expense, net	Total other expense, net	$	3,712	$	7,298	$	(3,586)	(49.1)	%	0.2	%	0.3	%	Total other expense, net	$	2,332	$	3,712	$	(1,380)	(37.2)	%	0.1	%	0.2	%

Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs. Interest expense decreased for the quarter and nine months ended March 31, 2021, compared to the prior-year quarter principally from reduced borrowings on our multi-currency revolving credit facility.

Interest income for the quarter and nine months ended March 31, ~~2021~~2022 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents. ~~Interest income decreased for the quarter and nine months ended March 31, 2021, compared to the prior-year principally from lower interest earned on customer receivables in North America.~~

Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses. Foreign exchange gains and losses are primarily generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real ~~the British pound versus the euro,~~ and the Canadian dollar versus the U.S. dollar. We partially offset foreign currency exposure with the use of foreign exchange forward contracts to hedge against these exposures. The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses.

Provision for Income Taxes

For the quarter and nine months ended March 31, 2022, income tax expense was $9.0 million and $23.7 million, respectively, reflecting an effective tax rate of 27.8% and 25.6%, respectively. In comparison, for the quarter and nine months ended March 31, 2021, income tax expense ~~was~~totaled $5.1 million and $9.8 million, respectively, reflecting an effective tax rate of 27.1% and 28.3%, respectively. ~~In comparison, for the quarter and~~ ~~nine months~~ ~~ended March 31, 2020, income tax expense totaled $2.8 million and $11.5 million, respectively, reflecting an effective tax rate of 32.9% and 28.0%, respectively.~~ The ~~decrease~~increase in the effective tax rate for the quarter is primarily due to ~~the recognition of a net discrete tax benefit of $0.5 million.~~an increase to forecasted non-deductible expenses for officer compensation. The ~~increase~~decrease in the effective tax rate for the nine months ended March 31, ~~2021~~2022 is primarily due to ~~a change~~an increase in ~~geographical mix of~~forecasted tax-exempt income ~~as compared to~~and the ~~prior-year.~~benefit from discrete items. We expect the effective tax rate, excluding discrete items, for fiscal year ~~2021~~2022 to be approximately ~~28.25%~~25.5% to ~~29.25%~~26.5%. See Note 1514 - 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 ("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"); return on invested capital ("ROIC"); and "constant currency." Constant currency is a measure that excludes the translation exchange impact from changes in foreign

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currency exchange rates between reporting periods. We use non-GAAP financial measures to better understand and evaluate performance, including comparisons from period to period.

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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 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.

~~We calculate ROIC as earnings before~~Adjusted EBITDA starts with net income and adds back interest expense, income ~~taxes,~~tax expense, depreciation ~~and~~expense, amortization ~~plus change~~of intangible assets, changes in fair value of contingent ~~consideration~~considerations, and other non-GAAP ~~adjustments ("~~adjustments. Effective with the first quarter of fiscal year 2022, non-cash share-based compensation expense is also added back in calculating adjusted ~~EBITDA"),~~EBITDA. 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. The presentation for adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods.

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 March 31, ~~2021~~2022 and ~~2020,~~2021, respectively:

Quarter ended March 31,
2021 2020
Return on invested capital ratio, annualized (a)
13.6 % 6.0 %


	Quarter ended March 31,
	2022		2021
Adjusted return on invested capital ratio, annualized (a)	18.0	%	14.7	%

(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 90 days in the current ~~quarter~~ and ~~91 days in the~~ prior-year quarter.

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


		Quarter ended March 31,				Quarter ended March 31,
		2021		2020				2022		2021
		(in thousands)				(in thousands)
Reconciliation of net income to EBITDA:
Reconciliation of net income to adjusted EBITDA:							Reconciliation of net income to adjusted EBITDA:
Net income from continuing operations (GAAP)	Net income from continuing operations (GAAP)	$	13,786	$	5,715		Net income from continuing operations (GAAP)	$	23,526	$	13,786
Plus: Interest expense	Plus: Interest expense	1,576		3,098			Plus: Interest expense	1,483		1,576
Plus: Income taxes	Plus: Income taxes	5,121		2,797			Plus: Income taxes	9,044		5,121
Plus: Depreciation and amortization	Plus: Depreciation and amortization	8,358		8,987			Plus: Depreciation and amortization	7,305		8,358
EBITDA (non-GAAP)	EBITDA (non-GAAP)	28,841		20,597			EBITDA (non-GAAP)	41,358		28,841
Plus: Change in fair value of contingent consideration		—		618

Plus: Share-based compensation							Plus: Share-based compensation	2,757		2,537
Plus: Acquisition and divestiture costs (a)	Plus: Acquisition and divestiture costs (a)	272		780			Plus: Acquisition and divestiture costs (a)	—		272
Plus: Restructuring costs	Plus: Restructuring costs	349		169			Plus: Restructuring costs	—		349

Plus: Tax recovery		—		(2,320)
Adjusted EBITDA (numerator for ROIC) (non-GAAP)		$	29,462	$	19,844
Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP)							Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP)	$	44,115	$	31,999

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		Quarter ended March 31,					Quarter ended March 31,
		2021		2020					2022		2021
		(in thousands)					(in thousands)
Invested capital calculations:	Invested capital calculations:					Invested capital calculations:
Equity – beginning of the quarter ~~(b)~~	Equity – beginning of the quarter ~~(b)~~	$	682,139	$	927,580			Equity – beginning of the quarter ~~(b)~~	$	768,525	$	682,139
Equity – end of the quarter ~~(b)~~	Equity – end of the quarter ~~(b)~~	690,575		897,678				Equity – end of the quarter ~~(b)~~	806,654		690,575
Plus: Change in fair value of contingent consideration, net of tax		—		467

Plus: Share-based compensation, net								Plus: Share-based compensation, net	2,063		1,912
Plus: Acquisition and divestiture costs (a)	Plus: Acquisition and divestiture costs (a)	272		780				Plus: Acquisition and divestiture costs (a)	—		272
Plus: Restructuring, net of tax		264		125
Plus: Tax recovery, net of tax		—		(1,754)
Plus: Restructuring, net								Plus: Restructuring, net	—		264

Plus: Discontinued operations net loss	Plus: Discontinued operations net loss	688		4,002				Plus: Discontinued operations net loss	—		688

Average equity	Average equity	686,969		914,439				Average equity	788,621		687,925
Average funded debt (c)		191,996		405,533
Invested capital (denominator for ROIC) (non-GAAP)		$	878,965	$	1,319,972
Average funded debt (b)								Average funded debt (b)	205,073		191,996
Invested capital (denominator for adjusted ROIC) (non-GAAP)								Invested capital (denominator for adjusted ROIC) (non-GAAP)	$	993,694	$	879,921

(a)Acquisition and divestiture costs are generally nondeductible for tax purposes.

(b)~~In the quarter ending June 30, 2020, the Company recorded impairment charges of $120.5 million. Impairment charges, net of tax reduced equity by $114.4 million.~~

~~(c)~~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~~prior-year period. If applicable, we also exclude the impact of acquisitions prior to the first full year of operations from the acquisition date and the impact of Divestitures 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 Divestitures and acquisitions, if applicable. Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding Divestitures:


Net Sales by Segment:	Net Sales by Segment:									Net Sales by Segment:
		Quarter ended March 31,									Quarter ended March 31,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change
Worldwide Barcode, Networking & Security:		(in thousands)
Specialty Technology Solutions:										Specialty Technology Solutions:	(in thousands)

Net sales, reported	Net sales, reported	$	502,227	$	489,218	$	13,009	2.7	%	Net sales, reported	$	503,072	$	436,462	$	66,610	15.3	%
Foreign exchange impact (a)	Foreign exchange impact (a)	4,132		—						Foreign exchange impact (a)	(915)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	506,359	$	489,218	$	17,141	3.5	%	Non-GAAP net sales, constant currency	$	502,157	$	436,462	$	65,695	15.1	%

Worldwide Communications & Services:
Modern Communications & Cloud:										Modern Communications & Cloud:

Net sales, reported	Net sales, reported	$	227,646	$	255,366	$	(27,720)	(10.9)	%	Net sales, reported	$	342,918	$	293,411	$	49,507	16.9	%
Foreign exchange impact (a)	Foreign exchange impact (a)	10,476		—						Foreign exchange impact (a)	(2,660)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	238,122	$	255,366	$	(17,244)	(6.8)	%	Non-GAAP net sales, constant currency	$	340,258	$	293,411	$	46,847	16.0	%

Consolidated:	Consolidated:									Consolidated:

Net sales, reported	Net sales, reported	$	729,873	$	744,584	$	(14,711)	(2.0)	%	Net sales, reported	$	845,990	$	729,873	$	116,117	15.9	%
Foreign exchange impact (a)	Foreign exchange impact (a)	14,608		—						Foreign exchange impact (a)	(3,575)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	744,481	$	744,584	$	(103)	—	%	Non-GAAP net sales, constant currency	$	842,415	$	729,873	$	112,542	15.4	%

(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 March 31, ~~2021~~2022 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, ~~2020.~~2021.

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Net Sales by Segment:	Net Sales by Segment:									Net Sales by Segment:
		Nine months ended March 31,									Nine months ended March 31,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change
Worldwide Barcode, Networking & Security:		(in thousands)

Specialty Technology Solutions										Specialty Technology Solutions	(in thousands)
Net sales, reported	Net sales, reported	$	1,577,197	$	1,645,406	$	(68,209)	(4.1)	%	Net sales, reported	$	1,501,702	$	1,300,488	$	201,214	15.5	%
Foreign exchange impact (a)	Foreign exchange impact (a)	19,758		—						Foreign exchange impact (a)	(372)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	1,596,955	$	1,645,406	$	(48,451)	(2.9)	%	Non-GAAP net sales, constant currency	$	1,501,330	$	1,300,488	$	200,842	15.4	%

Worldwide Communications & Services:

Modern Communications & Cloud										Modern Communications & Cloud
Net sales, reported	Net sales, reported	$	720,914	$	765,879	$	(44,965)	(5.9)	%	Net sales, reported	$	1,065,950	$	997,623	$	68,327	6.8	%
Foreign exchange impact (a)	Foreign exchange impact (a)	47,694		—						Foreign exchange impact (a)	(2,668)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	768,608	$	765,879	$	2,729	0.4	%	Non-GAAP net sales, constant currency	$	1,063,282	$	997,623	$	65,659	6.6	%

Consolidated:	Consolidated:									Consolidated:

Net sales, reported	Net sales, reported	$	2,298,111	$	2,411,285	$	(113,174)	(4.7)	%	Net sales, reported	$	2,567,652	$	2,298,111	$	269,541	11.7	%
Foreign exchange impact (a)	Foreign exchange impact (a)	67,452		—						Foreign exchange impact (a)	(3,040)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	2,365,563	$	2,411,285	$	(45,722)	(1.9)	%	Non-GAAP net sales, constant currency	$	2,564,612	$	2,298,111	$	266,501	11.6	%

(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 nine months ended March 31, 2022 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2021.										(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 nine months ended March 31, 2022 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2021.

~~(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 nine months ended March 31, 2021 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2020.

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Net Sales by Geography:	Net Sales by Geography:									Net Sales by Geography:
		Quarter ended March 31,									Quarter ended March 31,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change
United States and Canada:	United States and Canada:	(in thousands)								United States and Canada:	(in thousands)
Net sales, as reported	Net sales, as reported	$	665,720	$	670,175	$	(4,455)	(0.7)	%	Net sales, as reported	$	764,529	$	665,720	$	98,809	14.8	%

International:	International:									International:

Net sales, reported	Net sales, reported	$	64,153	$	74,409	$	(10,256)	(13.8)	%	Net sales, reported	$	81,461	$	64,153	$	17,308	27.0	%
Foreign exchange impact (a)	Foreign exchange impact (a)	14,608		—						Foreign exchange impact (a)	(3,575)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	78,761	$	74,409	$	4,352	5.8	%	Non-GAAP net sales, constant currency	$	77,886	$	64,153	$	13,733	21.4	%

Consolidated:	Consolidated:									Consolidated:

Net sales, reported	Net sales, reported	$	729,873	$	744,584	$	(14,711)	(2.0)	%	Net sales, reported	$	845,990	$	729,873	$	116,117	15.9	%
Foreign exchange impact (a)	Foreign exchange impact (a)	14,608		—						Foreign exchange impact (a)	(3,575)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	744,481	$	744,584	$	(103)	—	%	Non-GAAP net sales, constant currency	$	842,415	$	729,873	$	112,542	15.4	%

(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 March 31, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2020.
(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 March 31, 2022 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2021.										(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 March 31, 2022 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2021.

		Nine months ended March 31,									Nine months ended March 31,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change
United States and Canada:	United States and Canada:	(in thousands)								United States and Canada:	(in thousands)
Net sales, as reported	Net sales, as reported	$	2,069,327	$	2,173,515	$	(104,188)	(4.8)	%	Net sales, as reported	$	2,307,959	$	2,069,327	$	238,632	11.5	%

International:	International:									International:

Net sales, reported	Net sales, reported	$	228,784	$	237,770	$	(8,986)	(3.8)	%	Net sales, reported	$	259,693	$	228,784	$	30,909	13.5	%
Foreign exchange impact (a)	Foreign exchange impact (a)	67,452		—						Foreign exchange impact (a)	(3,040)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	296,236	$	237,770	$	58,466	24.6	%	Non-GAAP net sales, constant currency	$	256,653	$	228,784	$	27,869	12.2	%

Consolidated:	Consolidated:									Consolidated:

Net sales, reported	Net sales, reported	$	2,298,111	$	2,411,285	$	(113,174)	(4.7)	%	Net sales, reported	$	2,567,652	$	2,298,111	$	269,541	11.7	%
Foreign exchange impact (a)	Foreign exchange impact (a)	67,452		—						Foreign exchange impact (a)	(3,040)		—

Non-GAAP net sales, constant currency	Non-GAAP net sales, constant currency	$	2,365,563	$	2,411,285	$	(45,722)	(1.9)	%	Non-GAAP net sales, constant currency	$	2,564,612	$	2,298,111	$	266,501	11.6	%

(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 nine months ended March 31, 2021 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2020.
(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 nine months ended March 31, 2022 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2021.										(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 nine months ended March 31, 2022 into U.S. dollars using the average foreign exchange rates for the nine months ended March 31, 2021.

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Operating Income by Segment:	Operating Income by Segment:													Operating Income by Segment:
		Quarter ended March 31,								% of Net Sales March 31,					Quarter ended March 31,								% of Net Sales March 31,
		2021		2020		$ Change		% Change		2021		2020			2022		2021		$ Change		% Change		2022		2021
Worldwide Barcode, Networking & Security:		(in thousands)
Specialty Technology Solutions:														Specialty Technology Solutions:	(in thousands)
GAAP operating income	GAAP operating income	$	8,054	$	4,779	$	3,275	68.5	%	1.6	%	1.0	%	GAAP operating income	$	20,623	$	8,713	$	11,910	136.7	%	4.1	%	2.0	%
Adjustments:	Adjustments:													Adjustments:
Amortization of intangible assets	Amortization of intangible assets	1,968		1,968		—								Amortization of intangible assets	1,491		1,610		(119)

Tax recovery, net		—		(1,452)		1,452

Non-GAAP operating income	Non-GAAP operating income	$	10,022	$	5,295	$	4,727	89.3	%	2.0	%	1.1	%	Non-GAAP operating income	$	22,114	$	10,323	$	11,791	114.2	%	4.4	%	2.4	%

Worldwide Communications & Services:
Modern Communications & Cloud:														Modern Communications & Cloud:
GAAP operating income	GAAP operating income	$	12,214	$	6,394	$	5,820	91.0	%	5.4	%	2.5	%	GAAP operating income	$	12,294	$	11,555	$	739	6.4	%	3.6	%	3.9	%
Adjustments:	Adjustments:													Adjustments:
Amortization of intangible assets	Amortization of intangible assets	2,912		3,191		(279)								Amortization of intangible assets	2,966		3,270		(304)
Change in fair value of contingent consideration		—		618		(618)
Restructuring costs		—		169		(169)
Tax recovery, net		—		(868)		868

Non-GAAP operating income	Non-GAAP operating income	$	15,126	$	9,504	$	5,622	59.2	%	6.6	%	3.7	%	Non-GAAP operating income	$	15,260	$	14,825	$	435	2.9	%	4.5	%	5.1	%

Corporate:	Corporate:													Corporate:
GAAP operating income		$	(832)	$	(780)	$	(52)	nm*		nm*		nm*
GAAP operating income (loss)														GAAP operating income (loss)	$	—	$	(832)	$	832	nm*		nm*		nm*
Adjustments:	Adjustments:													Adjustments:
Acquisition and divestiture costs														Acquisition and divestiture costs	—		272		(272)
Restructuring costs	Restructuring costs	560		—		560								Restructuring costs	—		560		(560)
Acquisition and divestiture costs		272		780		(508)

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

Consolidated:	Consolidated:													Consolidated:
GAAP operating income	GAAP operating income	$	19,436	$	10,393	$	9,043	87.0	%	2.7	%	1.4	%	GAAP operating income	$	32,917	$	19,436	$	13,481	69.4	%	3.9	%	2.7	%
Adjustments:	Adjustments:													Adjustments:
Amortization of intangible assets	Amortization of intangible assets	4,880		5,159		(279)								Amortization of intangible assets	4,457		4,880		(423)
Change in fair value of contingent consideration		—		618		(618)
Tax recovery, net		—		(2,320)		2,320

Acquisition and divestiture costs	Acquisition and divestiture costs	272		780		(508)								Acquisition and divestiture costs	—		272		(272)
Restructuring costs	Restructuring costs	560		169		391								Restructuring costs	—		560		(560)

Non-GAAP operating income	Non-GAAP operating income	$	25,148	$	14,799	$	10,349	69.9	%	3.4	%	2.0	%	Non-GAAP operating income	$	37,374	$	25,148	$	12,226	48.6	%	4.4	%	3.4	%

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Operating Income by Segment:	Operating Income by Segment:													Operating Income by Segment:
		Nine months ended March 31,								% of Net Sales March 31,					Nine months ended March 31,								% of Net Sales March 31,
		2021		2020		$ Change		% Change		2021		2020			2022		2021		$ Change		% Change		2022		2021
Worldwide Barcode, Networking & Security:		(in thousands)
Specialty Technology Solutions:														Specialty Technology Solutions:	(in thousands)
GAAP operating income	GAAP operating income	$	16,088	$	29,153	$	(13,065)	(44.8)	%	1.0	%	1.8	%	GAAP operating income	$	51,278	$	17,558	$	33,720	192.0	%	3.4	%	1.4	%
Adjustments:	Adjustments:													Adjustments:
Amortization of intangible assets	Amortization of intangible assets	5,903		5,903		—								Amortization of intangible assets	4,514		4,831		(317)

Tax recovery, net		—		(1,452)		1,452

Non-GAAP operating income	Non-GAAP operating income	$	21,991	$	33,604	$	(11,613)	(34.6)	%	1.4	%	2.0	%	Non-GAAP operating income	$	55,792	$	22,389	$	33,403	149.2	%	3.7	%	1.7	%

Worldwide Communications & Services:
Modern Communications & Cloud:														Modern Communications & Cloud:
GAAP operating income	GAAP operating income	$	33,555	$	22,009	$	11,546	52.5	%	4.7	%	2.9	%	GAAP operating income	$	43,494	$	32,085	$	11,409	35.6	%	4.1	%	3.2	%
Adjustments:	Adjustments:													Adjustments:
Amortization of intangible assets	Amortization of intangible assets	8,692		9,104		(412)								Amortization of intangible assets	8,899		9,764		(865)
Change in fair value of contingent consideration	Change in fair value of contingent consideration	516		6,266		(5,750)								Change in fair value of contingent consideration	—		516		(516)
Tax recovery, net		—		(868)		868
Restructuring costs		—		604		(604)

Non-GAAP operating income	Non-GAAP operating income	$	42,763	$	37,115	$	5,648	15.2	%	5.9	%	4.8	%	Non-GAAP operating income	$	52,393	$	42,365	$	10,028	23.7	%	4.9	%	4.2	%

Corporate:	Corporate:													Corporate:
GAAP operating income		$	(11,442)	$	(2,689)	$	(8,753)	nm*		nm*		nm*
GAAP operating loss														GAAP operating loss	$	(30)	$	(11,442)	$	11,412	nm*		nm*		nm*
Adjustments:	Adjustments:													Adjustments:
Acquisition and divestiture costs	Acquisition and divestiture costs	2,130		2,689		(559)								Acquisition and divestiture costs	30		2,130		(2,100)
Restructuring costs	Restructuring costs	9,312		—		9,312								Restructuring costs	—		9,312		(9,312)

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

Consolidated:	Consolidated:													Consolidated:
GAAP operating income	GAAP operating income	$	38,201	$	48,473	$	(10,272)	(21.2)	%	1.7	%	2.0	%	GAAP operating income	$	94,742	$	38,201	$	56,541	148.0	%	3.7	%	1.7	%
Adjustments:	Adjustments:													Adjustments:
Amortization of intangible assets	Amortization of intangible assets	14,595		15,007		(412)								Amortization of intangible assets	13,413		14,595		(1,182)
Change in fair value of contingent consideration	Change in fair value of contingent consideration	516		6,266		(5,750)								Change in fair value of contingent consideration	—		516		(516)
Tax recovery, net		—		(2,320)		2,320

Acquisition and divestiture costs	Acquisition and divestiture costs	2,130		2,689		(559)								Acquisition and divestiture costs	30		2,130		(2,100)
Restructuring costs	Restructuring costs	9,312		604		8,708								Restructuring costs	—		9,312		(9,312)

Non-GAAP operating income	Non-GAAP operating income	64,754		70,719		$	(5,965)	(8.4)	%	2.8	%	2.9	%	Non-GAAP operating income	108,185		64,754		$	43,431	67.1	%	4.2	%	2.8	%

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~~Income Statement~~Additional Non-GAAP Metrics

To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP ~~net sales, non-GAAP gross profit,~~SG&A expenses, non-GAAP operating income, ~~non-GAAP net other expense,~~ 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 and divestiture costs, restructuring costs, impact of Divestitures and other non-GAAP adjustments. 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 the aforementioned metrics adjusted for the costs and charges mentioned above:

Quarter ended March 31, 2021
GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and divestiture costs Restructuring costs Tax recovery, net Non-GAAP measure
(in thousands, except per share data)
Net sales $ 729,873 $ — $ — $ — $ — $ — $ 729,873
Gross profit 88,116 — — — — — 88,116
Operating income 19,436 4,880 — 272 560 — 25,148
Other expense, net 529 — — — — — 529
Pre-tax income 18,907 4,880 — 272 560 — 24,619
Net income from continuing operations 13,786 3,697 — 272 423 — 18,178
Diluted EPS from continuing operations $ 0.54 $ 0.14 $ — $ 0.01 $ 0.02 $ — $ 0.71
Quarter ended March 31, 2020
GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and divestiture Restructuring costs Tax recovery, net Non-GAAP measure
(in thousands, except per share data)
Net sales $ 744,584 $ — $ — $ — $ — $ — $ 744,584
Gross profit 84,578 — — — — — 84,578
Operating income 10,393 5,159 618 780 169 (2,320) 14,799
Other expense, net 1,881 — — — — — 1,881
Pre-tax income 8,512 5,159 618 780 169 (2,320) 12,918
Net income from continuing operations 5,715 3,909 467 780 125 (1,754) 9,242
Diluted EPS from continuing operations $ 0.23 $ 0.15 $ 0.02 $ 0.03 $ — $ (0.07) $ 0.36


	Quarter ended March 31, 2022
	GAAP Measure		Intangible amortization expense		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
SG&A expenses	$	66,522	$	—	$	—	$	—	$	66,522
Operating income	32,917		4,457		—		—		37,374
Pre-tax income	32,570		4,457		—		—		37,027
Net income	23,526		3,353		—		—		26,879
Diluted EPS	$	0.91	$	0.13	$	—	$	—	$	1.04

	Quarter ended March 31, 2021
	GAAP Measure		Intangible amortization expense		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
SG&A expenses	$	60,099	$	—	$	(272)	$	—	$	59,827
Operating income	19,436		4,880		272		560		25,148
Pre-tax income	18,907		4,880		272		560		24,619
Net income	13,786		3,697		272		423		18,178
Diluted EPS	$	0.54	$	0.14	$	0.01	$	0.02	$	0.71

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Nine months ended March 31, 2021
GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and divestiture costs Restructuring costs Tax recovery, net Non-GAAP measure
(in thousands, except per share data)
Net sales $ 2,298,111 $ — $ — $ — $ — $ — $ 2,298,111
Gross profit 254,939 — — — — — 254,939
Operating income 38,201 14,595 516 2,130 9,312 — 64,754
Other expense, net 3,712 — — — — — 3,712
Pre-tax income 34,489 14,595 516 2,130 9,312 — 61,042
Net income from continuing operations 24,732 11,055 390 2,130 7,040 — 45,347
Diluted EPS from continuing operations $ 0.97 $ 0.43 $ 0.02 $ 0.08 $ 0.28 $ — $ 1.78
Nine months ended March 31, 2020
GAAP Measure Intangible amortization expense Change in fair value of contingent consideration Acquisition and divestiture Restructuring costs Tax recovery, net Non-GAAP measure
(in thousands, except per share data)
Net sales $ 2,411,285 $ — $ — $ — $ — $ — $ 2,411,285
Gross profit 281,423 — — — — — 281,423
Operating income 48,473 15,007 6,266 2,689 604 (2,320) 70,719
Other expense, net 7,298 — — — — — 7,298
Pre-tax income 41,175 15,007 6,266 2,689 604 (2,320) 63,421
Net income from continuing operations 29,633 11,347 4,737 2,689 449 (1,754) 47,101
Diluted EPS from continuing operations $ 1.16 $ 0.45 $ 0.19 $ 0.11 $ 0.02 $ (0.07) $ 1.85


	Nine months ended March 31, 2022
	GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
SG&A expenses	$	199,538	$	—	$	—	$	(30)	$	—	$	199,508
Operating income	94,742		13,413		—		30		—		108,185
Pre-tax income	92,410		13,413		—		30		—		105,853
Net income	68,751		10,094		—		30		—		78,875
Diluted EPS	$	2.66	$	0.39	$	—	$	—	$	—	$	3.06

	Nine months ended March 31, 2021
	GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
SG&A expenses	$	182,681	$	—	$	—	$	(2,130)	$	—	$	180,551
Operating income	38,201		14,595		516		2,130		9,312		64,754
Pre-tax income	34,489		14,595		516		2,130		9,312		61,042
Net income	24,732		11,055		390		2,130		7,040		45,347
Diluted EPS	$	0.97	$	0.43	$	0.02	$	0.08	$	0.28	$	1.78

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Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under our $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, our net investment in working capital increases, which typically results in decreased cash flow from operating activities. Conversely, when sales volumes decrease, 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 ~~$49.3~~$43.5 million at March 31, ~~2021,~~2022, compared to ~~$29.5~~$62.7 million at June 30, ~~2020,~~2021, including ~~$42.3~~$34.7 million and ~~$23.6~~$52.1 million held outside of the United States at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively. Checks released but not yet cleared in the amounts of ~~$17.0~~$20.0 million and ~~$17.1~~$14.3 million are included in accounts payable at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively.

We conduct business in many locations throughout the world where we generate and use cash. We provide for ~~U.S.~~United States income taxes ~~for~~from the earnings of our Canadian subsidiary, but earnings from Brazil will continue to be considered retained indefinitely for reinvestment. All other foreign geographies are immaterial. It has been our practice to reinvest those earningsand Brazilian subsidiaries. See Note 14 - Income Taxes in the ~~businesses outside the United States. As a result of the sale of the Latin American and European entities, we repatriated the proceeds~~Notes to the ~~United States with minimal tax consequences.~~Consolidated Financial Statements for further discussion.

Our net investment in working capital increased $120.2 million to $606.9 million at March 31, ~~2021 was $495.1 million, compared to $431.3~~2022 from $486.7 million at June 30, ~~2020~~2021, primarily from increases in accounts receivable and ~~$513.5 million at March 31, 2020.~~inventory. 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. For the nine months ended March 31, 2022, our working capital investment increased to support our 11.7% year-over-year net sales growth.


		Nine months ended					Nine months ended
		March 31,					March 31,
		2021		2020			2022		2021
Cash provided by (used in):		(in thousands)
							(in thousands)
Cash (used in) provided by:						Cash (used in) provided by:
Operating activities	Operating activities	$	55,422	$	108,083	Operating activities	$	(45,671)	$	55,422
Investing activities	Investing activities	32,073		(55,490)		Investing activities	(201)		32,073
Financing activities	Financing activities	(62,839)		(88,355)		Financing activities	27,730		(62,839)
Effect of exchange rate change on cash and cash equivalents		(1,942)		(2,151)
Increase in cash and cash equivalents		$	14,866	$	10,778

Net cash ~~provided by~~used in operating activities was ~~$55.4~~$45.7 million for the nine months ended March 31, ~~2021,~~2022, compared to ~~$108.1~~$55.4 million provided by operating activities in the prior-year period. The decrease of $101.1 million was primarily due to increased inventory levels, which were 29% higher than in 2021, to support net sales growth. Also contributing to the decrease in operating cash flows were fluctuations in accrued expenses and other liabilities balances, which were 8% lower than in 2021, and 7% higher than in 2020, attributable to the timing of payments at the end of the reporting period. The decrease in operating cash flows was partially offset by an increase in income from continuing operations, adjusted for non-cash items. Cash provided by operating activities ~~for~~is subject to variability period over period as a result of the ~~nine months ended March 31, 2021 is primarily attributable~~timing of payments related to ~~cash provided by increased~~accounts receivable, accounts payable, and earnings from operations adjusted for non-cash items, partially offset by increased accounts receivable. Cash provided by operating activities for the nine months ended March 31, 2020 is primarily attributable to earnings from operations adjusted for non-cash items and increased accounts payable.other working capital items.

The number of days sales outstanding ("DSO") was 69 days at March 31, 2022, compared to 60 days at June 30, 2021 and 63 days at March 31, ~~2021, compared to 63 days at June 30, 2020 and 61 days at~~2021. The increase in DSO for the quarter ended March 31, ~~2020.~~2022 is primarily due to increased net receivables from timing of sales near the end of the reporting period. Inventory turned ~~5.8~~5.1 times during the quarter ended March 31, ~~2021,~~2022, compared to ~~6.9~~5.7 times for previous quarter ended December 31, ~~2020~~2021 and ~~4.5~~5.8 times in the prior-year quarter ended March 31, ~~2020.~~2021. The decrease in inventory turns for the quarter ended March 31, 2022 is primarily due to increased average inventory.

Cash used in investing activities for the nine months ended March 31, 2022 was $0.2 million, compared to $32.1 million provided by investing activities in the prior-year period. Cash used in investing activities for the nine months ended March 31, 2022 represents capital expenditures, partially offset by proceeds from the sale of our discontinued operations. Cash provided by investing activities for the nine months ended March 31, 2021 ~~was $32.1 million, compared to $55.5 million used in the prior-year period. Cash provided by investing activities~~ primarily represents proceeds from the sale of our discontinued operations ~~in the nine months ended March 31, 2021. The prior-year period includes cash of $48.9 million used for the acquisition of intY.~~.

Management expects capital expenditures for fiscal year ~~2021~~2022 to range from $3$4 million to $5 million, primarily for IT investments and facility improvements.

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For the nine months ended March 31, ~~2021,~~2022, cash ~~used for~~provided by financing activities totaled ~~$62.8~~$27.7 million, compared to ~~$88.4~~$62.8 million used in financing activities for the prior-year period. Cash ~~used for~~provided by financing activities for ~~both periods~~the nine months ended March 31, 2022 is primarily attributable to net borrowings on the revolving credit facility. For the nine months ended March 31, 2021, cash used in financing activities was primarily for net repayments on the revolving credit facility and contingent consideration payments to the former shareholders of Intelisys.

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Credit Facility

We have a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks. On April 30, 2019, we amended this credit facility to expand the borrowing capacity and extend its maturity to April 30, 2024. The Amended Credit Agreement established (i) a five-year $350 million multi-currency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility. Pursuant to an “accordion feature,” we may increase borrowings up to an additional $250 million. The Amended Credit Agreement allows for the issuance of up to $50 million for letters of credit, subject to obtaining additional credit commitments from the lenders participating in the increase. Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and a pledge of up to 65% of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement. Under the terms of the revolving credit facility, the payment of cash dividends is restricted.

At our option, U.S. dollar loans under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread over the London Interbank Offered Rate ("LIBOR") or alternate base rate depending upon ~~the~~ our net leverage ratio, calculated as total debt less up to $15 million of unrestricted domestic cash to trailing four-quarter adjusted EBITDA.

This spread ranges from 1.00% to 1.75% for LIBOR-based loans and 0.00% to 0.75% for alternate base rate loans. The Amended Credit Agreement provides for the substitution of a new interest rate benchmark upon the transition from LIBOR for U.S. dollar loans, subject to agreement between the Company and the administrative agent. On December 23, 2021, we amended our credit facility to replace LIBOR as the benchmark rate for non-U.S. dollar loans, among other things.

The Amended Credit Agreement contains customary yield protection provisions. Additionally, we are assessed commitment fees ranging from 0.15% to 0.30%, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans. The secured term loan facility will amortize based on the percentage of original principal amount with 2.5% in Year 1, 5.0% in Year 2, 5.0% in Year 3, 7.5% in Year 4 and 10.0% in Year 5. Borrowings under the Amended Credit Agreement are guaranteed by substantially all of our domestic assets and a pledge of up to 65% of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement.

The Amended Credit Agreement includes customary representations, warranties, and affirmative and negative covenants, including financial covenants. Specifically, our Leverage Ratio must be less than or equal to 3.50 to 1.00 at all times. In addition, our 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. We were in compliance with all covenants under the credit facility at March 31, ~~2021. Including borrowings for both continuing and discontinued operations, there~~2022. There was ~~$53.8 million and $92.4~~$44.3 million in outstanding borrowings on our revolving credit facility at March 31, ~~2021 and~~2022. There was no outstanding borrowings on our revolving credit facility at June 30, ~~2020, respectively.~~2021.

The average daily balance for the revolving credit facility, excluding the term loan facility, was $60.0 million for the nine month period ended March 31, 2022. Including borrowings for both continuing and discontinued operations, the average daily balance for the revolving credit facility, excluding the term loan facility, was $62.1 million ~~and $252.4 million~~ for the nine month ~~periods~~period ended March 31, ~~2021 and 2020, respectively.~~2021. There were no letters of credit issued under the multi-currency revolving credit facility at March 31, ~~2021~~2022 and ~~$0.3 million at~~ June 30, ~~2020,~~2021, respectively. ~~Taking into consideration outstanding borrowings on the multi-currency revolving credit facility for both continuing and discontinued operations, there~~There was ~~$296.2~~$305.7 million and ~~$257.3~~$350.0 million available for additional borrowings at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively. Availability to use this borrowing capacity depends upon, among other things, the levels of our Leverage Ratio and Interest Coverage Ratio, which, in turn, will depend upon (1) our Credit Facility Net Debt relative to our Credit Facility EBITDA and (2) Credit Facility EBITDA relative to total interest expense, respectively. As a result, our availability will increase if EBITDA increases (subject to the limit of the facility) and decrease if EBITDA decreases. At March 31, ~~2021,~~2022, based upon the calculation of our Credit Facility Net Debt relative to our Credit Facility EBITDA, there was ~~$172.6~~$305.7 million available for borrowing. While we were in compliance with the financial covenants contained in the Credit Facility as of March 31, ~~2021,~~2022, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.

We had a bank overdraft facility with Bank of America used by our European subsidiaries, which was terminated with the sale of the Europe distribution business in November 2020. The facility allowed us to disburse checks in excess of bank balances up to $14.0 million U.S. dollar equivalent for up to seven days. Borrowings under the overdraft facility had interest at a rate equal to a spread of 1.0% over the applicable currency's LIBOR with a zero percent floor. There was no outstanding balance on the overdraft facility at March 31, 2021 and $3.5 million was outstanding for the discontinued operations at June 30, 2020.Summary

~~Earnout Payments~~

~~Related to the acquisition on August 29, 2016, the final earnout payment for Intelisys, which totaled $46.9 million, was paid in October 2020, funded by borrowings on our revolving credit facility.~~

~~Summary~~

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We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet the present and future working capital and cash requirements for at least the next twelve months.

~~Off-Balance Sheet Arrangements and Contractual Obligations~~

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

~~See Note 10 -~~ ~~Fair Value of Financial Instruments~~ for a discussion on the liabilities recorded. There have been no other material changes in our contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Accounting Standards Recently Issued

See Note 1 of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on our consolidated financial position and results of operations.

Critical Accounting Policies and Estimates

Critical accounting policies are those that are important to our financial condition and require management's most difficult, subjective or complex judgments. Different amounts would be reported under different operating conditions or under alternative assumptions. See Management's Discussion and Analysis of Financial Condition and Results from Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2020~~2021 for a complete discussion.

~~Allowances for Trade and Notes Receivable~~

~~We adopted ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (ASC Topic 326)~~ ~~effective July 1, 2020. The adoption did not have a material impact on our consolidated financial statements. Our policy for estimating allowance for doubtful accounts receivable is described below.~~

We maintain an allowance for doubtful accounts receivable for estimated future expected credit losses resulting from customers’ failure to make payments on accounts receivable due us. 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 us 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.

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Item 3.			Quantitative and Qualitative Disclosures About Market Risk

For a description of our market risks, see Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2020.~~2021. No material changes have occurred to our market risks since June 30, ~~2020.~~2021.

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Item 4.			Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of the effectiveness of our disclosure controls and procedures at March 31, ~~2021.~~2022. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures are effective at March 31, ~~2021.~~2022. During the quarter ~~and nine months~~ ended March 31, ~~2021,~~2022, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


Item 1.			Legal Proceedings

The Company and our subsidiaries are, from time to time, parties to lawsuits arising out of operations. Although there can be no assurance, based upon information known to us, we believe that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on our financial condition or results of operations. For a description of our material legal proceedings, see Note 1312 - Commitments and Contingencies in the notes to the condensed consolidated financial statements, which is incorporated herein by reference.


Item 1A.			Risk Factors

In addition to the risk factors discussed in our other reports and statements that we file with the SEC, you should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, ~~2020,~~2021, which could materially affect our business, financial condition and/or future operating results.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

OnPurchases of Equity Securities by the Issuer

In August ~~29, 2016, we announced a~~2021, our Board of Directors ~~("BOD") authorization to repurchase shares up to $120~~authorized a $100 million ~~of our common stock over three years. The~~ share repurchase program. The authorization ~~expired in August 2019. Final share repurchases under this authorization occurred during~~does not have any time limit. The following table presents the share-repurchase activity for the quarter ended ~~September 30, 2019, totaling 168,068~~March 31, 2022:


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



January 1 - 31, 2022	43,009	$	30.48	43,009	$	98,506,559
February 1 - 28, 2022	71,500	$	30.65	71,500	$	96,315,084
March 1 - 31, 2022	163,370	$	33.52	160,343	$	90,940,387
Total	277,879	$	32.31	274,852	$	90,940,387

(1) Includes 3,027 shares withheld from employees' stock-based awards to satisfy required tax withholding obligations for ~~$5.4 million.~~the month of March 2022. There were no shares withheld during the months of January and February 2022.

Dividends

We have never declared or paid a cash dividend. Under the terms of our credit facility, the payment of cash dividends is restricted.

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Item 6.			Exhibits


Exhibit Number			Description

~~10.1~~3.1			~~Amendment No. 16~~Second Amended and Restated Articles of Incorporation (incorporated by reference to ~~Cisco Nonexclusive Value Added Distributor Agreement~~Exhibit 3.1 to the registrant's Form 8-K filed on January 27, 2022)

~~10.2~~3.2			~~Amendment No. 17~~Amended and Restated Bylaws (incorporated by reference to ~~Cisco Nonexclusive Value Added Distributor Agreement~~Exhibit 3.2 to the registrant's Form 8-K filed on January 27, 2022)



~~10.3~~10.1			ScanSource, Inc. ~~Nonqualified Deferred~~2021 Omnibus Incentive Compensation ~~Plan, as Amended and Restated Effective~~plan (incorporated by reference to Exhibit 10.1 to the registrant's Form 8-K filed on January ~~1, 2021~~27, 2022)

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 March 31, ~~2021,~~2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at March 31, ~~2021~~2022 and June 30, ~~2020;~~2021; (ii) the Condensed Consolidated Income Statements for the ~~quarter~~quarters and nine months ended March 31, ~~2021~~2022 and ~~2020;~~2021; (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income for the ~~quarter~~quarters and nine months ended March 31, ~~2021~~2022 and ~~2020;~~2021; (iv) the Condensed Consolidated Statements of Shareholder's Equity at March 31, ~~2021~~2022 and ~~2020;~~2021; (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, ~~2021~~2022 and ~~2020;~~2021; and (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)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ScanSource, Inc.

Date:	May 10, 2022	/s/ MICHAEL L. BAUR
		Michael L. Baur
~~Date:~~	~~May 10, 2021~~	Chairman and Chief Executive Officer (Principal Executive Officer)


Date:	May 10, 2022	/s/ STEVE JONES
		Steve Jones
~~Date:~~	~~May 10, 2021~~	Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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	Quarter ended March 31, 2020
			(in thousands)
	Worldwide Barcode, Networking & Security Segment		Worldwide Communications & Services Segment		Total
Revenue by product/service:
Technology solutions	$	489,218	$	240,819	$	730,037
Intelisys	0		14,547		14,547
	$	489,218	$	255,366	$	744,584


	Nine months ended March 31, 2020
			(in thousands)
	Worldwide Barcode, Networking & Security Segment		Worldwide Communications & Services Segment		Total
Revenue by product/service:
Technology solutions	$	1,645,406	$	723,557	$	2,368,963
Intelisys	0		42,322		42,322
	$	1,645,406	$	765,879	$	2,411,285