ScanSource Unveils Business Development Team To Recruit New Suppliers

‘We believe there’s a lot of new suppliers that maybe aren’t ready for the channel yet. Maybe they’re early stage companies. We want to develop a custom program for them that will allow them to scale their business quickly through this special team under the umbrella of our group that we’re calling the ISG [Integrated Solutions Group], says ScanSource Chair Mike Baur.

ScanSource Thursday reported a drop in its third fiscal quarter 2025 revenue but said that it expects growth for this year as a whole despite macroeconomic environment fluctuations.

Steve Jones, senior executive vice president and CFO at the Greenville, S.C.-based distributor, told CRN that the company saw a choppy environment that helped cause a 6 percent year-over-year drop in revenue but it actually performed very well for the quarter.

“As we looked at Q3, we saw acceleration late in the quarter, which gave us a lot of confidence as we got into this [fourth] quarter,” Jones said. “And where we stand right now in the quarter, it still gives us a lot of confidence. But we’ve still got technologies that are not growing in North America, and we’ve got those headwinds in Brazil that kind of cap our top line down. If you look at our GP [gross profit] dollars, which we think are probably more indicative of the health of the company and kind of where we’re going as we’ve got more and more netted-down revenues being reported, those grew. And that’s [why we say] our business performed well.”

“Netting down revenue” refers to subtracting any discounts or allowances from gross revenue before reporting it. Jones explained that netting down the revenue combined with a high-margin business like that of ScanSource’s Intelisys’ connectivity and cloud services distribution business, where the company is seeing a 100 percent gross profit margin, means revenue can grow and not really impact the top line much.

ScanSource Chair and CEO Mike Baur told CRN that his company is not alone in having a netted-down revenue effect on the company’s top line.

“CDW talked about it on their call yesterday, just to give you a little more perspective,” Baur said. “We’re all having to go through this, I’ll call it a little bit of a ‘fire drill’ with comparing year-over-year numbers, which is different now because of this netted-down revenue phenomenon. Just so you know, it’s making the growth look less than it is until you get to the gross profit line. If you go to the gross profit line, you’ll get what we believe is a better reflection on how the business is going.”

The use of netted-down revenue really started a few years ago in the SaaS, or software-as-a-service, business, Baur said. At that time, distributors and channel partners used to primarily sell licenses, where they would get the revenue and gross margin and net margin, he said.

“With Software as a Service, the way you treat those sales is you count the commissions as your revenue, which essentially is a much, much smaller number,” he said. “Making this as simple as I can, the way I look at it is, then you don’t recognize the value that you used to. It’s a much smaller number. The profitability is the same, but the top-line revenue number goes down.”

Tariffs for the time being have had a very small impact on ScanSource, Baur said.

“The tariffs for a distributor like us on our hardware is something where we really pass through the price increases as they come,” he said. “This tariff stuff has happened before. It’s just different this time. The suppliers that sell to us, they raise prices, and we pass through that price increase. So our profitability margin stays the same. At this point, we’re passing through price increases. It will not have an impact on our margins. It will not.”

ScanSource adjusted its annual guidance to $3 billion for the year, which implies growth from the third fiscal quarter to the fourth quarter, Baur said.

“We believe we can grow even with the tariffs,” he said. “All things considered, that could change, but based on what we know now, that’s what we confirmed.”

ScanSource focuses on selling mission-critical technologies and not commodity products like PCs, Baur said.

“We believe businesses can sometimes delay buying them, but eventually they’ll need them and so we don’t believe we will see an impact on demand as we would if it was a laptop or a server,” he said. “So at this point, we still are planning for Q4, which is our June quarter, to grow, and we’re saying that here on May 8, so we’ve already got April numbers in our back pocket.”

ScanSource is also seeing little impact from the Trump administration’s government cost-cutting moves because the distributor has a very small federal government business, Baur said.

“When we have any government business, it’s in state and local rather than federal,” he said. “Most of our government business is state and local, including around school systems and our security, video surveillance and physical security business. That is a state and local government business for our partners.”

ScanSource has not seen any negative impact from federal government cuts to education, Baur said.

“We didn’t report it out that way,” he said. “Here’s what I will tell you. We reported that our physical security business grew in the quarter, year over year, and one of the big users of our physical security products is schools. That implies that business is still doing quite well.”

ScanSource Thursday also unveiled the creation of a new business development team focused on recruiting new suppliers to its channel, Baur said.

“We believe there’s a lot of new suppliers that maybe aren’t ready for the channel yet,” he said. “Maybe they’re early stage companies. We want to develop a custom program for them that will allow them to scale their business quickly through this special team under the umbrella of our group that we’re calling the ISG [Integrated Solutions Group]. ISG is going to hire a team of business development people to recruit new suppliers to ScanSource across all of our businesses. So stay tuned for more on that.”

The new recruitment effort will not see ScanSource investing in the equity of its new early stage vendors, Baur said.

“Really, we’re there to help provide sales and marketing and program expertise so that these vendors who’ve never used a distributor, for example, we can help them understand how to use a distributor, how to use an Intelisys channel effectively,” he said. “We’re going to have people that are essentially going to be an extension of the vendor, their sales force, their marketing.”

ScanSource By The Numbers

For its fiscal third quarter 2025, which ended March 31, ScanSource reported total net revenue of $704.8 million, down about 6.3 percent from the $752.6 million the company reported for its third fiscal quarter 2024.

That was down by about $73 million from analyst expectations, according to Seeking Alpha.

ScanSource also reported GAAP net income of $17.4 million, or 74 cents per share, up from last year’s $12.8 million, or 50 cents per share. On a non-GAAP basis, the company reported net income of $20.3 million, or 86 cents per share, up from last year’s $17.5 million, or 69 cents per share.

Non-GAAP earnings beat analyst expectations by about 8 cents per share, according to Seeking Alpha.

Looking ahead, ScanSource adjusted its fiscal full-year 2025 guidance. The company now expects full-year revenue of about $3.0 billion, down from its previous guidance for the year of $3.1 billion to $3.5 billion.