ScanSource CEO Talks DataXoom Acquisition, Latest Quarter And Channel Changes

‘DataXoom adds more capability and more market reach,’ says ScanSource Chair and CEO Mike Baur.

ScanSource Thursday unveiled the acquisition of DataXoom, which develops two-way mobility technology for mobile data business users.

East Longmeadow, Mass.-based DataXoom will be used with ScanSource’s Advantix business to provide a complete data connectivity platform for channel partners, ScanSource Chair and CEO Mike Baur told CRN in an exclusive meeting.

“If you want to buy a mobile device, you also need to be able to connect when you’re outside of the four walls of a business potentially, and that’s what we can do now,” Baur said. “And DataXoom adds more capability and more market reach.”

The acquisition was unveiled along with ScanSource’s release of its first fiscal quarter 2026 financial report, which was centered around a 5 percent drop year-over-year in total revenue to $740 million in contrast to a 6 percent increase in grow profit to $107 million. That translated to a GAAP earnings of 89 cents per share, up 29 percent, and non-GAAP earnings of $1.06 per share, up 26 percent.

The numbers made for a very good fiscal quarter, one that let his company maintain its prior guidance, Baur said.

“We felt very good about the bottom-line growth numbers, and we used that to drive our [news] about double-digit EPS (earnings per share) growth and strong Q1 free cash flow,” Baur said. “And maybe one of the more important ones for me is the gross profit growing 6 percent year-over-year. We’re really looking at that as one of the key indicators of are we competing well in the marketplace. And gross profit growth for us is now a better indicator than top-line revenue.”

Baur also updated the company’s move to bring its partners closer together via what it calls “convergence” of hardware, software, and services capabilities.

Here’s CRN’s complete conversation with Baur, which has been lightly edited for clarity.

Congratulations on the quarter. What are the quarter’s biggest takeaways?

Well, I think the biggest takeaways were that we reaffirmed our annual guidance after these results, so we still feel good about the year’s forecast, our guidance, our annual outlook. We reaffirmed those numbers. And as part of that, we felt very good about the bottom-line growth numbers, and we used that to drive our [news] about double-digit EPS (earnings per share) growth and strong Q1 free cash flow. And maybe one of the more important ones for me is the gross profit growing 6 percent year-over-year. We’re really looking at that as one of the key indicators of are we competing well in the marketplace. And gross profit growth for us is now a better indicator than top-line revenue.

OK, gross profit is rising, but top line revenue is down. Can ScanSource stay successful on falling revenue, even if gross profit is rising?

Well, that wouldn’t be our headline. It wouldn’t be our message is that revenue will continue to decline, just so we’re clear. Our message is different. Our message is, we had lower large deals in the quarter. And part of that is what we’re what we’re seeing in channel where some of the large deals are being broken up into smaller deals and being spread over time. [Second,] in the quarter, we had a different mix of revenue. What that generally signals is that we had some of our revenue that came in lower than we expected, and some higher. Some areas actually grew really well, and so that’s why our gross profit margin was higher than most analysts expected. So it’s a mixed story and a large deal story. Our guidance implies revenue growth year-over-year for the year, so we will expect growth to resume during the year. [And] we believe that gross profits will grow faster than revenue, and that’s just going to be our business model going forward. But we are focused on growing top line.

When we met in September, we talked about ScanSource looking to change how it works with its partners, getting them to work in areas they hadn’t before, especially getting telecom partners to do more with IT. Has any progress been made since then?

That was actually a big theme of ours, this idea of our business models converging. We talked about it at our Austin [Texas] event this week with our Intelisys partners, this idea we call convergence, which is about end users wanting to acquire converged solutions, meaning hardware, software, and services. And our Intelisys partners traditionally did not sell hardware. Our partners that we formerly called VARs and we’re now calling solution providers, and that’s partly with your feedback, they typically are selling hardware and some services and some software. But we want them also to sell in the recurring agency model. So we see the business models converging, and we believe that we are bringing more capabilities for our partners, whether it’s these solution providers or our Intelisys partners. We’re now calling our Intelisys partners something new as of Tuesday: ‘technology architects.’ We believe that’s a better description than ‘trusted advisor’ of what they need to do to work with end users with the converged solutions. They architect the solutions. That means being there earlier to talk about not only the connectivity and cloud, but also what hardware will be deployed for this solution? We had meetings with these partners, and they were much more enthusiastic than I have ever seen them about selling more converged hardware, software, services, and connectivity solutions. So that was wonderful to hear, and it’s end users that are driving this.

Our IntelliSense partners now want to sell hardware. They didn’t want to, years ago. We were pushing them. And the reason now is because we’ve created a way for them to sell hardware that is different than a VAR or solution provider would typically do it, and that’s what they learned. What they’ve been learning from us over the last few quarters is we can now help them sell hardware in the same model they’re used to.

Have any of them committed to making that change yet? Or are they still mulling it over?

Well, I would say it’s early days. Remember, last year we launched something called Channel Exchange for them to sell software in a model that was different. So we’ve gotten their business appetite started with selling software. We started them with Microsoft, and many more of our Intelisys partners are now selling Microsoft. We don’t disclose the numbers, but that’s been growing, and it’s because they determined that if they can get into the account with Microsoft, they can then sell more of the technology stack. We were pushing them on this for the last three years, it’s just now starting to take hold in the marketplace. And the reason is these partners are seeing they can grow their business, that they sell more to the same end users, they don’t have to go find new end users. So now they’re deeper with their existing end users. That’s the idea.

You’re going to hear us talk more about solution providers and technology architects. We think this technology architect theme is really powerful and will explain better to the marketplace how successful these partners can be from IntelliSense.

ScanSource Thursday also unveiled the acquisition of mobile data connectivity provider DataXoom. What’s the news there?

DataXoom is an addition to our acquisition last year of Advantix to provide a data connectivity solution for our partners selling mobile devices. This is an example of convergence. If you want to buy a mobile device, you also need to be able to connect when you’re outside of the four walls of a business potentially, and that’s what we can do now. And DataXoom adds more capability and more market reach. It’s a small company with a group of 17 people. The acquisition closed in October.

How will you integrate DataXoom into what ScanSource brings to partners?

DataXoom will be partnered with Advantix that we acquired last year under the group we now call ISG, or Integrated Solutions Group. There’s an earn out for the owner of that business, so he’ll stay and he’ll be going to market side-by-side with Advantix, at least for this first year, as they then integrate the back office and the capabilities from a technology standpoint. But they’ll go to market with two teams for right now, which we think gives us an advantage right away.