ScanSource’s second quarter results were driven by a higher mix of recurring revenue and continued expansion of its hybrid distribution model, which blends hardware, software, and services. While demand remained soft and large deals were a challenge, management pointed to robust gross profit margins and strong contributions from recently acquired businesses such as Advantix and Resourcive. CEO Mike Baur commented that “barcode mobility came through, we feel very good about that,” while also acknowledging that outside these areas, the quarter was “a challenge... that we didn’t expect.”
Is now the time to buy SCSC? Find out in our full research report (it’s free).
ScanSource (SCSC) Q2 CY2025 Highlights:
- Revenue: $812.9 million vs analyst estimates of $776.9 million (8.9% year-on-year growth, 4.6% beat)
- Adjusted EPS: $1.02 vs analyst estimates of $0.92 (10.5% beat)
- Adjusted EBITDA: $38.64 million vs analyst estimates of $36.63 million (4.8% margin, 5.5% beat)
- The company lifted its revenue guidance for the full year to $3.2 billion at the midpoint from $3 billion, a 6.7% increase
- EBITDA guidance for the full year is $155 million at the midpoint, above analyst estimates of $151.2 million
- Operating Margin: 3.5%, in line with the same quarter last year
- Market Capitalization: $978 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From ScanSource’s Q2 Earnings Call
- Greg Burns (Sidoti): Asked about the cadence of demand during the quarter and whether large deal activity improved towards the end. CEO Mike Baur explained that large deals were expected to close by quarter-end, but a double-digit decline in this area was the primary surprise and driver of underperformance.
- Greg Burns (Sidoti): Inquired about confidence in achieving full-year guidance given the current demand environment. CFO Steve Jones responded that while visibility is limited, recurring revenue streams add predictability and the company still sees growth opportunities in the second half.
- Keith Housum (Northcoast Research): Questioned whether challenges were broad-based across technologies or concentrated in specific areas. Baur clarified that barcode mobility and physical security performed well, but most other areas were soft and need to improve for full-year guidance to be met.
- Keith Housum (Northcoast Research): Asked if the Intelisys business was impacted by competitive dynamics and if the acquisition strategy is changing. Baur described recent platform and segmentation changes, emphasizing that acquisitions now focus more on building a future-proof channel model rather than simply rolling up agents.
- Greg Burns (Sidoti): Followed up on the Intelisys segment, querying whether declines in older technologies would moderate. Baur noted that while older technologies are not growing, they remain large and contract renewals often shift to newer solutions, supporting segment stability.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will be watching (1) the pace at which recurring revenue from Advantix, Resourcive, and new SaaS platforms scales and offsets hardware volatility; (2) whether technology demand recovers across underperforming product lines outside of barcode and mobility; and (3) the effectiveness of Intelisys’ new platform and partner segmentation strategy in attracting new suppliers and driving channel partner growth. The execution of additional acquisitions and integration of new capabilities will also be key areas of focus.
ScanSource currently trades at $44.69, up from $42.59 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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