ScanSource Earnings: Net Sales Up, Eyeing Bank of Intelisys Expansion

Hybrid distributor ScanSource reported a 6.6% increase in net sales and ongoing growth in its Intelisys cloud brokerage business.

ScanSource announced earnings for the second quarter of its fiscal year on Tuesday. The South Carolina-based company reported $864 million in net sales, up from $811 million a year ago. Its gross profit of $108 million marked a 25% improvement from the year-ago quarter. Adjusted EBITDA ticked up 43%, to $42.5 million. Meantime, Intelisys net sales rounded out at $17.4 million, up from $15.3 million a year prior.

ScanSource raised its guidance for its fiscal year 2022 to more than 7% year-over-year net sales growth and more than $148 million in adjusted EBITDA.

Supply Chain

ScanSource executives said the company successfully weathered supply chain problems that have impacted the hardware distribution industry. They cited close communication with customers and suppliers to get a sense of their forecast needs and met those needs. Moreover, chief financial officer Steve Jones said ScanSource started deploying its balance sheet at the beginning of the pandemic to determine in which parts of its inventory it needed to make strategic investments.

ScanSource’s Steve Jones

“Our inventory levels have stayed fairly consistent, and our inventory is turning about about six times a year,” Jones told Channel Futures. “So we feel like we’re in a really healthy position, not only to have supply and deploy our balance sheet for that inventory level, but also a really healthy set of inventory.”

Intelisys

Intelisys, which ScanSource bought in 2016, reported a more than a 14% year-over-year increase in net sales. ScanSource also noted that it delivered its final earnout payment to Intelisys’ former owners in October 2020.

Executives told Channel Futures last year that VARs had come to account for 57% of the Intelisys business.

ScanSource’s John Eldh

“We’re even more excited to help more of our partners move into what we’re calling a hardware-plus environment where they are learning (and we’re helping to enable them) to take advantage of what’s happening in cloud today and cloud services,” president John Eldh told Channel Futures.

Eldh said ScanSource has identified Intelisys as a key investment area. Those investments will include sales personnel, events and thought leadership. Moreover, Eldh said Intelisys will offer development tools to its partners.

“That’s such an area of importance for our customers: to get insight and intelligence to help them drive more demand and more sales. So we’ll invest heavily there as well,” he said.

In addition, Jones said ScanSource expects its Bank of Intelisys financing program to grow dramatically in 2022.

“We kind of had to push pause a little bit as we were in the middle of the pandemic, as we were conserving our balance sheet, but we see more and more activity now,” Jones said.

Jones said participating partners get the freedom to choose what they do with the money.

“We’re not looking to take them over or own them. We’re looking for them to grow, and we’re looking for strategic investments in their business to help them accelerate their growth,” he said.

Promotion

ScanSource on Tuesday announced John Eldh’s promotion as president. He previously was chief revenue officer for the company, having joined in 2019. ScanSource credits Eldh as having “successfully transitioned leadership at Intelisys.” Former president Jay Bradley moved to an advisory role in 2020, replaced by Mark Morgan. John DeLozier went on to take up the president role in 2021.