Sponsored By

Early Inventory Availability, Intelisys Cloud Growth Propel ScanSource Profit in Latest Quarter

Intelisys drove $2.4 billion in annual end-user billings, according to ScanSource execs.

James Anderson

February 7, 2023

3 Min Read
revenue growth
Shutterstock

ScanSource grew gross profit by 7.1%, to $115.3 million, last quarter, buoyed by contact-center-as-a-service (CCaaS) sales and supply chain improvements.

ScanSource in its fiscal year second quarter (which ended Dec. 31, 2022) reported net sales of $1 billion. That’s up 17% from a year ago. The Greenville, South Carolina-based hybrid distributor registered an adjusted EBITDA of $48.8 million. ScanSource raised its guidance from at least 5.5% net sales growth to at least 6.5%.

The company’s specialty technology solutions segment, which includes its POS, barcode and payments offerings, grew a whopping 26.3% in net sales, from $497 million to $628 million. A significant portion of that increase came from pull-ahead revenue for deals previously expected to close in the next quarter. An estimated $40 million came through in late December thanks to ScanSource’s available inventory. Chief financial officer Stephen Jones told investors that although his team is hoping to see continued improvements in the supply chain, ScanSource is not revising its guidance to account for pull-ahead revenue in the third quarter.

Baur-Mike_ScanSource-2019.jpg

ScanSource’s Mike Baur

“We were benefiting from strong demand and $40 million of revenue that pulled in,” chairman and CEO Mike Baur told Channel Futures. “But even without the $40 million, it was still a very strong quarter.”

ScanSource reported a gross profit margin of 11.4%, slightly down from 12.5% a year ago. Executives cited the “sales mix and higher mix of big deals.”

Cloud Growth

ScanSource’s modern communications and cloud segment, which includes Intelisys, grew 4.5% in net sales, to $384 million. Sales numbers reflected ScanSource’s efforts to equip its legacy reseller customer base to sell cloud-based communications software amid a declining on-prem footprint. For example, unified communications as a service (UCaaS) associated with Intelisys grew 14% year-over-year in net sales. Moreover, contact center as a service (CCaaS) grew 60%.

That growth is offsetting the declines in ScanSource’s on-prem communications hardware business, which now represents only 10% of the modern communications unit.

“It’s really the entire life cycle of helping our customers/partners take their end user from an on-prem environment to hybrid or all-cloud, guiding them and walking them through the entire life cycle,” ScanSource president John Eldh told Channel Futures in an interview Tuesday.

Eldh also noted a trend of more strategic enterprise deals.

Eldh-John_ScanSource-2020.jpg

ScanSource’s John Eldh

“As the environment moves from where we were at the beginning of the pandemic – where people were racing to get tactical solutions deployed – we now see that we’ve moved into a more strategic enterprise project environment, where people are architecting and building for the long term. And we see that in our results,” Eldh said.

The Intelisys side of the modern communications unit once again drew praise from executives. The TSD is driving $2.4 billion in annualized end user billings, according to ScanSource. In addition, Intelisys net sales increased 9% in its second quarter.

Security

ScanSource leadership told investors and analysts that they are making investments in both physical security and cybersecurity — and seeing growth.

On the cybersecurity side, Eldh pointed to cybersecurity specialists and threat assessment workshops the distributor has made available to partners. As far as cybersecurity portfolio goes, Cisco comprises the largest portion of ScanSource’s sales, with partners selling its Duo multifactor authentication services as well as endpoint security. In addition, Eldh said the company will be seeing cybersecurity growth in Intelisys, which is working with different cybersecurity suppliers. 

Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn.

 

Read more about:

AgentsVARs/SIs

About the Author(s)

James Anderson

Senior News Editor, Channel Futures

James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.

Free Newsletters for the Channel
Register for Your Free Newsletter Now

You May Also Like