ScanSource, Inc. (SCSC) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company's earnings call reflects strong financial performance with a 9% YoY increase in net sales and a 10% increase in gross profit. Despite a slight decline in the Intelisys segment, the overall growth and profitability are strong. The cautious guidance and strategic investments suggest optimism for future growth. Share repurchases and strong free cash flow enhance shareholder value. Although there are risks, the positive financial metrics and strategic focus outweigh them. Given the small-cap nature, the stock is likely to react positively, projecting a 2% to 8% increase.
Key Financial Performance
Net Sales Increased 9% year-over-year, driven by improved hardware demand and growth across most technologies, especially networking and security.
Gross Profit (Specialty Technology Solutions) Increased 10% year-over-year to $81 million, with approximately 15% of segment gross profit coming from recurring revenue, led by managed connectivity growth from Advantix and DataXoom acquisitions.
Adjusted EBITDA (Specialty Technology Solutions) Grew 6% year-over-year to $24.7 million, with an adjusted EBITDA margin of 3.3%.
Net Sales (Intelisys & Advisory segment) Declined 1% year-over-year, but quarter-over-quarter, both segment net sales and gross profits increased 4%.
Adjusted EBITDA (Intelisys & Advisory segment) Was $11 million, showing a sequential quarter growth of 6%, with an adjusted EBITDA margin of 42%.
Free Cash Flow Generated $69 million in the quarter, bringing year-to-date free cash flow to $119 million.
Share Repurchases Totaled $33 million in the quarter, with $146 million remaining under the share repurchase authorization as of March 31, 2026.
Adjusted ROIC 14.3% for the quarter and 13.6% year-to-date.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Converged Communications business unit: Launched to deliver a unified partner experience, combining specialty communications and Intelisys CX cloud-based solutions. Focused on helping partners grow by selling more cloud recurring revenue products and solutions.
AI-enabled CX solutions: Introduced innovative AI solutions for partners, including automation and augmentation. Examples include AI-powered platforms for financial institutions and real-time recommendations for inside sales agents.
North America hardware sales: Achieved 9% year-over-year growth across most technologies, especially networking and security.
Recurring revenue: 15% of segment gross profit from recurring revenue, driven by managed connectivity growth from Advantix and DataXoom acquisitions.
Free cash flow: Generated $69 million in Q3, bringing year-to-date free cash flow to $119 million.
Share repurchases: Repurchased $33 million in shares during the quarter, with $146 million remaining under authorization.
Acquisition opportunities: Exploring acquisitions to expand technology stack, capabilities, and accelerate recurring revenue growth.
3-year goals: Focus on growing gross profit from recurring revenue, expanding profitability, delivering strong free cash flow, and disciplined capital deployment.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Market Conditions: Net sales in the Intelisys & Advisory segment declined 1% year-over-year, indicating potential challenges in maintaining growth in this segment.
Strategic Execution Risks: The company is undergoing a significant restructuring by launching a new Converged Communications business unit, which could pose risks related to integration, execution, and alignment of resources.
Competitive Pressures: End users have more choices than ever, and solutions are becoming more complex, which could increase competition and pressure on the company to deliver comprehensive solutions.
Economic Uncertainties: The company’s forward-looking statements are subject to risks and uncertainties, as highlighted in their earnings release and Form 10-K, which could impact future performance.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Converged Communications business unit: Launch of a new business unit combining ScanSource specialty communications team and Intelisys CX cloud-based solutions team to deliver a unified partner experience. This includes business development, sales resources, pre-sales engineering, marketing, and supplier management functions.
AI-driven solutions: Focus on delivering innovative AI-enabled CX solutions, including automation and augmentation, to help partners grow. Examples include AI-powered platforms for routine inquiries and real-time recommendations for sales agents.
Fiscal Year 2026 Outlook: Maintaining full-year projections for revenue and adjusted EBITDA. Raising FY '26 free cash flow expectations to at least $90 million.
3-Year Goals: Focus on growing gross profit contributions from recurring revenue, expanding profitability, delivering strong free cash flow, and maintaining disciplined capital deployment.
Acquisition Strategy: Exploring acquisition opportunities to expand technology stack, capabilities, and accelerate recurring revenue growth.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Share repurchases: Share repurchases totaled $33 million in the quarter, and we had $146 million remaining as of March 31, 2026, under our share repurchase authorization.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Was the revenue guidance for the full year intentionally conservative, given the strong quarter?
A:Stephen Jones explained that the full-year outlook required large deals and projected growth in the second half. While Q3 delivered, they are cautious about Q4 and do not want to overestimate.
Q:Was there any indication that business was pulled forward from Q4 into Q3 due to memory pricing chaos?
A:Stephen Jones stated that visibility on pull-forwards is difficult, but they do not believe there were material pull-forwards in Q3 results.
Q:Why were resource sales down in the quarter when they are expected to grow sequentially?
A:Stephen Jones clarified that resource sales include recurring and services revenue, and services revenue can fluctuate quarter-over-quarter.
Q:What happened to Intelisys orders during the quarter, given that billings were $2.88 billion?
A:Mike Baur stated that they are focusing on accelerating new order growth, especially through the VAR community, and have established a new team to achieve this. However, order growth is not at the desired rate.
Q:Did order growth for Intelisys decline year-over-year?
A:Mike Baur did not confirm a decline but stated that while they are meeting their commitments, growth is not at the desired rate, and they aim to accelerate it.
Q:Why did the STS segment show higher gross margins despite similar revenue to Q3?
A:Stephen Jones attributed the improved gross margins to a mix benefit and normalized freight costs, which were previously a one-time impact.
Q:Why haven't previous investments in Intelisys driven the expected growth?
A:Mike Baur explained that new order growth has a lag between actions and results, and current growth reflects actions from a year ago. They are making additional investments now to see better results in 6 to 18 months.
Q:Are there any guidelines or parameters for modeling FY 2027, and what are customer conversations like for that period?
A:Stephen Jones stated that FY 2027 guidance has not been provided yet and will be shared with Q4 results. He noted momentum in security and networking sales and growth across most technologies as positive signs for FY 2027.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to the question about whether Intelisys order growth declined year-over-year. Mike Baur did not confirm or deny a decline but emphasized that growth is not at the desired rate and needs acceleration. Additionally, Stephen Jones avoided providing specific guidance or parameters for FY 2027, stating that it is too early to discuss.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI adoption
AI agent
AI augmentation
AI automation
AI channel
AI expansion
AI partner
AI platform
AI sale
CX cloud
CX partner
CX solution
Communications unit
Converged AI
Converged Communications
Finance risk
Intelisys CX
Investor Relations
ROIC hardware
Research user
ScanSource experience
ScanSource partner
ScanSource portfolio
VARs Intelisys
VARs product
adoption CX
agent inquiry
agent interaction
agent week
area example
opportunity AI
partner Converged
sale resource
specialty communication
SCSC Transcript
ScanSource, Inc. (SCSC) Q3 2026 Earnings Call Transcript
Positive5-7
The company's earnings call reflects strong financial performance with a 9% YoY increase in net sales and a 10% increase in gross profit. Despite a slight decline in the Intelisys segment, the overall growth and profitability are strong. The cautious guidance and strategic investments suggest optimism for future growth. Share repurchases and strong free cash flow enhance shareholder value. Although there are risks, the positive financial metrics and strategic focus outweigh them. Given the small-cap nature, the stock is likely to react positively, projecting a 2% to 8% increase.
ScanSource, Inc. (SCSC) Q2 2026 Earnings Call Transcript
Unknown2-5
The earnings call summary presents a mixed picture. Financial performance is stable, but there are concerns about slow growth in the Technology segment and competitive pressures. Share repurchases are positive, but memory supply issues and challenges in Brazil pose risks. The Q&A reveals management's confidence in future growth and strategic initiatives, but the lack of visibility on memory issues and guidance reduction due to large deal delays temper enthusiasm. Considering the company's small market cap, the stock is likely to remain neutral in the short term, with potential for slight positive movement if growth accelerates.
ScanSource, Inc. (SCSC) Q1 2026 Earnings Call Transcript
Unknown11-6
The earnings call presents a mixed picture: strong gross profits and EBITDA margins in some segments, but also declining net sales in the Specialty Technology Solutions segment. The management's optimistic guidance and strategic acquisitions like DataXoom are positive, but concerns about market share and sustainability of supplier rebates persist. The Q&A section reveals cautious optimism but lacks clarity on large deals and market specifics. Given the company's market cap, these mixed signals suggest a neutral stock price movement in the short term.
ScanSource, Inc. (SCSC) Q4 2025 Earnings Conference Call Transcript
Positive8-21
The earnings call summary shows strong financial performance with increased revenue, EPS, and cash flow. The company has a solid balance sheet and has returned significant capital to shareholders. The Q&A highlights strategic investments and a focus on growing recurring revenue, with management expressing optimism about future growth. Despite some competitive challenges, the overall sentiment is positive, supported by strong financial metrics and strategic initiatives. The market cap indicates a medium reaction potential, suggesting a positive stock price movement of 2% to 8%.
SCSC Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
