ScanSource Sales Earnings: Recurring Revenue 25% of Gross Profit

Intelisys partners helped drive a 17% net sales growth in the ScanSource communications and cloud business last quarter.

ScanSource reported growth and increased optimism in its fiscal year third-quarter earnings Tuesday. ScanSource reported year-over-year 16% net sales growth and 21% gross profit growth. In addition, the distributor has raised its fiscal year 2022 guidance from a 7% net sales growth to at least 10%.

Net sales totaled $846 million, which dipped from $864 million the previous quarter. However, ScanSource shrank its operating expenses to record $107 million in gross profit.

Intelisys contributes to the modern communications and cloud segment of ScanSource, which grew 17% year-over-year in net sales, to almost $343 million. Intelisys respectively grew 18.2% year-over-year in net sales.

ScanSource’s Mike Baur

ScanSource CEO Mike Baur said Intelisys represents the fastest growing part of his company’s business. Baur said recurring revenue now represents 25% of ScanSource’s profit. ScanSource acquired Intelisys in 2016.

“Our hybrid distribution strategy is working, as evidenced by our sustainable, more profitable business model,” Baur said on an earnings call.

ScanSource’s John Eldh

Executives also reported a “modest benefit” from increases in supplier prices. Namely, ScanSource reported supplier price increases of “approximately 45 basis points.”

Hybrid Distribution

ScanSource president John Eldh told analysts that larger deals have helped drive growth. He said suppliers are prioritizing allocation to enterprise-focused VARs. And he said many of these VARs are selling both hardware and software.

For example, Eldh said one communications-focused VAR recently sold a 22,000-location retail customer hardware, software and cloud connectivity. In addition, a mobility and barcoding VAR helped a 3,000-plus site construction company with surveillance cameras, SIM cards, connectivity and remote monitoring.

ScanSource’s specialty technology practice totaled $503 million in quarterly net sales — 15% year-over-year growth.