GREENVILLE, S.C. - ScanSource , Inc. (NASDAQ: NASDAQ:SCSC), a leading hybrid distributor connecting devices to the cloud, reported third-quarter earnings that fell short of analysts' expectations, prompting a 4.6% decline in its stock price.
The company announced a third-quarter adjusted EPS of $0.69, which was $0.17 below the analyst estimate of $0.86. Revenue for the quarter was $752.59 million, a significant drop from the consensus estimate of $832.35 million and a 15% decrease from the same quarter last year.
The company's financial performance was impacted by lower hardware sales than anticipated, although it managed to maintain strong margins and robust free cash flow, according to Mike Baur, Chair and CEO of ScanSource. Despite the challenges, the company's balance sheet remains solid, giving it the flexibility to execute its disciplined capital allocation plans.
ScanSource's updated annual financial outlook for fiscal year 2024 forecasts revenues of approximately $3.3 billion, which is also below the analyst consensus of $3.52 billion. This revised guidance reflects the company's expectations in a market still grappling with economic uncertainties.
ScanSource's third-quarter results also showed a decrease in gross profit by 15.5% to $94.5 million, with a gross profit margin of 12.55%, slightly down from 12.62% in the prior-year quarter. Operating income saw a sharp decline of 48.8% to $17.5 million. On a GAAP basis, net income for the quarter was $12.8 million, or $0.50 per diluted share, compared to $21.2 million, or $0.83 per diluted share, in the prior-year quarter.
In addition to the financial results, ScanSource announced a new $100 million authorization by its Board of Directors to purchase shares of the company's common stock. This authorization supplements the existing authorization, with approximately $45 million remaining as of March 31, 2024.
Despite the setbacks in the third quarter, the company generated $316.9 million of operating cash flow and $309.6 million of free cash flow (non-GAAP) in the first nine months of fiscal year 2024. This financial stability has enabled ScanSource to continue its share repurchase program, demonstrating confidence in the company's long-term value proposition.
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