ScanSource Inc (SCSC)

Short-term

Turnover ratios

The activity ratios for ScanSource Inc., namely inventory turnover, receivables turnover, payables turnover, and working capital turnover, reveal several notable trends over the analyzed period from September 2020 through June 2025.

Inventory Turnover:
Initially, the inventory turnover ratio experienced a decline from 6.84 in September 2020 to a low of approximately 4.35 in December 2022, indicating a slowdown in inventory sales or increased inventory levels relative to sales. Subsequently, the ratio exhibited a positive upward trend, reaching 5.78 by March 2024 and maintaining a relatively stable level around 5.50 to 5.70 in most of 2024 and into mid-2025. This suggests an improvement in inventory management efficiency and possibly faster inventory turnover in recent periods.

Receivables Turnover:
The receivables turnover ratio reflected a decreasing trend from 6.39 in September 2020 to a trough of 4.78 in June 2022, which implies that collection periods lengthened during this interval. From late 2022 onward, there is observable fluctuation with some improvement, notably reaching a high of 5.87 in March 2024, indicating a more aggressive collection policy or improved receivables management. The ratio remains relatively stable around 5.0 to 5.6 in the latter part of the period analyzed.

Payables Turnover:
The payables turnover ratio showed some variability but overall an increasing trend from 5.31 in September 2020 to peaks around 5.86 in December 2023. An increasing ratio suggests that the company is paying its suppliers more quickly, which might indicate improved liquidity or a strategic decision to settle obligations promptly. Conversely, periods of decline, such as in June 2025 (4.40), may reflect extended payment terms or liquidity adjustments.

Working Capital Turnover:
This ratio declined from 7.87 in September 2020 to a nadir of 4.27 in December 2022, implying that the firm was generating less sales per unit of working capital, potentially due to slowed sales activity or increased working capital levels. In recent quarters, the ratio stabilized around 4.4 to 4.6, indicating a plateau in working capital efficiency. The gradual stabilization could reflect efforts to optimize working capital utilization and improve sales efficiency.

Overall Summary:
The activity ratios depict a period of initial decline across inventory, receivables, and working capital turnover ratios, suggesting a slowdown in operational efficiency during the early 2020s, possibly associated with external economic impacts or internal operational changes. In later periods, particularly from 2023 onward, the ratios show signs of recovery and stabilization, indicating efforts toward operational improvements and more efficient management of inventory, receivables, and working capital. The payables turnover trend suggests a strategic approach to managing supplier payments, aligning with overall liquidity management.

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Average number of days

The activity ratios of ScanSource Inc, as reflected in the provided data, exhibit notable trends and fluctuations over the analyzed period. An examination of the Days of Inventory on Hand (DOH) indicates an upward trajectory from approximately 53.4 days as of September 30, 2020, to a peak of around 83.84 days by December 31, 2022. This indicates a gradual accumulation of inventory levels, suggesting possible challenges in inventory turnover or shifts in inventory management strategies during this period. Although a slight reduction occurs thereafter to approximately 66.3 days by December 31, 2023, the DOH remains elevated relative to initial levels, implying a consistent trend of elongated inventory holding periods extending into 2024 and 2025.

The Days of Sales Outstanding (DSO) demonstrate relative stability with some variability. Initially, it ranges from about 57.15 days in September 2020, rising to approximately 75.43 days in June 2022, which signals a lengthening collection cycle and potentially slower receivables turnover during that interval. A notable decrease is observed in March 2023 to approximately 65.69 days, followed by fluctuations hovering around the mid-60s to low 70s days, indicating moderate yet persistent receivables collection periods.

Regarding the Number of Days of Payables, there is considerable fluctuation. The period from September 2020 to March 2022 shows an increasing trend from approximately 68.76 days up to 85.69 days, reflecting extended periods of accounts payable outstanding, possibly indicating a negotiation with suppliers to extend payment terms or cash flow management strategies. Post-March 2022, the payables duration generally remains high but exhibits variability, with some reductions such as 62.33 days in December 2023 and subsequent increases beyond 76 days into 2024 and 2025.

Overall, the activity ratios suggest that ScanSource Inc experienced a lengthening of its inventory holding and receivables collection periods over the analyzed timeframe, which could imply strategic shifts or operational challenges in inventory and receivables management. The increased days payable indicate either supplier negotiations for extended terms or deliberate cash management policies. The combined trends underscore a phase of slower turnover in inventories and receivables, potentially impacting liquidity and working capital efficiency.

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Long-term

The analysis of ScanSource Inc.'s long-term activity ratios over the reported periods reveals the following insights:

The Fixed Asset Turnover ratio demonstrates notable fluctuation throughout the period, indicating variable efficiency in utilizing fixed assets to generate sales. The ratio exhibits peaks, such as 84.21 on December 31, 2021, and a high point of 94.19 on June 30, 2022, reflecting periods of intensified utilization or optimized fixed asset base. This ratio subsequently declined to 69.50 by September 30, 2022, suggesting a period where fixed assets were less effectively employed in generating sales, possibly due to increased asset base or decreased sales activity. Despite this decline, the ratio improved again, reaching approximately 76.02 on March 31, 2023, indicating renewed efficiency in asset utilization, but data beyond this date is not available for further analysis.

The Total Asset Turnover ratio remained relatively stable throughout the observed periods, with a slight downward trend visible towards the later periods. The ratio fluctuated within a narrow range, starting at 1.88 on September 30, 2020, and peaking at 2.02 on December 31, 2023. Earlier in the period, the ratio mostly hovered around 1.80 to 1.90, suggesting consistent use of total assets in generating sales. The recent figures indicate a marginal increase, implying slight improvements in efficiency, possibly due to better asset management or sales growth, although the overall trend shows stabilization rather than significant change.

In summary, ScanSource Inc.'s Fixed Asset Turnover ratios reflect periods of enhanced efficiency interspersed with declines, which may correlate to strategic investments or operational adjustments. The Total Asset Turnover ratios depict consistent operational performance with minor improvements, suggesting stability in managing total assets relative to sales.