ScanSource Earnings: Gross Profit Up Amid TSD Margin Pressure
The latest ScanSource earnings show the hybrid distributor growing both its net sales and gross profit by 5% in a quarter where partners, suppliers and rival distributors faced pressure.
Greenville, South Carolina-based company revealed the numbers from its fiscal year third quarter, which ended March 31, 2023. The company netted $111.8 million in gross profit. Net sales for the company registered at $885.5 million, up 5% from a year prior.
ScanSource chairman and CEO Mike Baur said the earnings exceeded expectations.
“Even in an environment where a lot of people were saying, ‘It’s tough out there,’ we really are pleased with the growth we had in the quarter,” Baur told Channel Futures in an interview.

ScanSource’s Mike Baur
The company ultimately raised its guidance for its fiscal year from at least a $176 million adjusted EBITDA growth to at least $182 million. It continues to forecast at least a 6.5% net sales growth for the year.
ScanSource operates two distinct business segments: specialty technology solutions, and modern communications and cloud. The former contains ScanSource’s legacy POS, barcode and payments solutions, while the latter contains Intelisys’ carrier and cloud services as well as legacy networking and communications technologies from the ScanSource side. Specialty technology once again saw a big year-over-year improvement, growing 12.4% in net sales to to $565.7 million. Executives pointed to physical security, networking and barcode.
While the previous quarter saw a big pull-in coming from earlier-than-expected inventory, ScanSource chief financial officer Steve Jones said he didn’t see significant pull-in in the latest quarter.
“We are seeing supply lead times return to normal levels for most of the products we sell,” Baur added.
Meantime, modern communications and cloud decreased 6.7% in net sales to $319.9 million. As previous quarters have also reflected, on-prem communications hardware continues to decline. Cloud-based communications growth kept profit margin growth positive (3%) at $54 million. Within the modern communications and cloud segment, the Intelisys services distributor business saw net sales growth. As the company stated in its previous quarterly earnings, annualized end user billings exceed $2.4 billion for Intelisys.
Aruba Growth
ScanSource has been reporting strong growth in its Cisco business, and that trend continued in these earnings with “double-digit” Cisco growth. However, ScanSource’s modern communications and cloud unit saw growth with another networking vendor: HPE’s Aruba.
ScanSource recently earned Aruba’s North American Distributor of the Year. Baur said ScanSource and Aruba have known each other very well over the years.
“We were one of their first distributors, if not the first. Aruba really built a presence in our channel,” Baur told Channel Futures.
However, HP’s 2015 acquisition of Aruba spelled a big adjustment for ScanSource. On one hand, it saw goodbye to some of the Aruba channel people it had built relationships. Moreover, it had entered a much larger pool of partners by virtue of the HP/HPE connection.
“We got new competitors. Overnight we had to compete with the broadline distributors,” Baur said.
Now the award from Aruba represents ScanSource’s “specialized expertise in this space and successful engagement with the Aruba team,” Baur said in the earnings call.
“For us, Aruba was a strong player before. And now over the last year and a half, our team and the Aruba team have really gelled together,” Baur said.
On-Prem Communications
As noted above and as executives have disclosed over the last several ScanSource earnings calls, on-prem communication hardware continues to fall. It now represents only 10% of the total sales within the modern communications and cloud segment, and it represents less than 4% of total consolidated net sales in the overall ScanSource portfolio.

ScanSource’s Steve Jones
ScanSource chief financial officer Steve Jones said this particular technology has been falling at a consistent rate.
“Now it’s really the minimum terms of the total amount of revenue that it’s driving for our company,” Jones told analysts.
The decline of on-prem communications is known to the larger channel ecosystem, with Avaya’s second bankruptcy capturing headlines. The hybrid work era has helped pushed more and more businesses into cloud-based systems, notably unified communications as a service (UCaaS).
To that point, ScanSource executives view the UCaaS offerings contained within the Intelisys agency business as a key remedy for …
- Page 1
- Page 2