ScanSource CEO: Tariffs Moved Customer Orders Up, Government Uncertainties Remain

‘Probably the reason why customers decided to go ahead and pull those orders in is the uncertainty and the tariffs. We talked about why we thought the second half would grow faster than the first half of our FY26 and it’s those kinds of uncertainties. It’s the tariff uncertainty. It’s the interest rate environment. Uncertainties that still need to be sorted out before I think some of these larger deals start to get delivered,’ says Mike Baur, ScanSource Chair and CEO.

ScanSource reported a strong finish to its fiscal year 2025, but the good news was tempered by concerns about what that means for the beginning of fiscal 2026, ScanSource Chair and CEO Mike Baur told CRN in an exclusive conversation.

The Greenville, S.C.-based distributor’s fiscal year 2025 started out slow, as expected, due to the U.S. presidential election last November, and uncertainties in third fiscal quarter didn’t help, Baur said.

“The fourth quarter was surprisingly strong because of some of the pull-ins from buyers,” he said. “About $30 [million] to $40 million of demand, we believe, pulled into the fourth quarter from what would have been our Q1 of 2026, which is the September quarter.”

[Related: ScanSource CEO: ‘One Of Our Goals Is To Sell More Of The Technology Stack Through Channel Partners’]

That, however, is not all good news. Because of those pull-ins, the first fiscal quarter of 2026 will be slower than normal, Baur said.

“We’re just reminding our investors that, as we present our forecast for the fiscal year, understand that Q1 will be impacted by Q4,” he said. “But for the year, we still believe our forecast for fiscal year 2026 is very good. It’s going to be a good year. It’s not going to be a high growth year, but it’s going to be a strong year where we’re going to be able to make investments in the future but still deliver profitable growth.”

There’s a lot to unpack from ScanSource’s latest financials. For the details, as well as a look at the distributor’s upcoming Partner First conference, read the entire question and answer session with Baur, which has been lightly edited for clarity.

It looks like ScanSource had a great fourth quarter, but for the year as a whole, revenue slipped 6.7 percent. What happened for the year as a whole after the fourth quarter did so well?

We actually started off the year, our fiscal year ended last year in August, by trying to communicate that we really were challenged last year with all of the economic uncertainty around the upcoming election and all the other things happening. The challenge for us was forecasting the year last August, if you can remember. That was before the election, before the tariffs. But what we said last August was the second half of our fiscal year, which meant the March and June quarters would have to be much better than the first half for us to achieve our outlook for the year. As it turned out, the first and second quarters of the year were not great, and it put even more pressure on the third and fourth quarters to come through strong to make our outlook. As it turned out, third quarter wasn’t as great as we needed. And so it really came down to the fourth quarter. And the fourth quarter was surprisingly strong because of some of the pull-ins from buyers. About $30 [million] to $40 million of demand, we believe, pulled into the fourth quarter from what would have been our Q1 of 2026, which is the September quarter. And that’s what happened. We believe the pull-in happened because people needed to make purchases that they had delayed, and they finally decided to pull the trigger in Q4.

Does that pull-in from the first quarter of 2026 mean that expectations for the first quarter 2026 will drop because of the orders that would have been placed in the quarter?

We didn’t have any expectations publicly before. We’re just now giving our guidance for this fiscal year. We’re just reminding our investors that, as we present our forecast for the fiscal year, understand that Q1 will be impacted by Q4. But for the year, we still believe our forecast for fiscal year 2026 is very good. It’s going to be a good year. It’s not going to be a high growth year, but it’s going to be a strong year where we’re going to be able to make investments in the future but still deliver profitable growth. We think that’s real important.

ScanSource’s STS (Specialty Technology Solutions) revenue was up 9 percent year-over-year in the fourth quarter, but Intelisys & Advisory revenue was up only 1 percent. Is that a growth story going forward?

Yeah, let me try to unpack that a little bit. The Intelisys & Advisory segment is primarily the business where we get recurring revenue, and that’s how we report it. And what happens is, when you close a new order, it takes about 12 to 18 months before you realize the revenue as a company. What we’re seeing is, the slower growth now was because of some competition we had a year and a half ago, and our competitors used the fact that they were owned by private equity to lower margins to grab deals. So we lost some revenue and deals a year-and-a-half ago, and it’s showing up now. And as we talked about for the last four quarters, we’re now investing to turn that story around, and we believe we have, but we won’t see the results of that until the end of fiscal 2026, about four quarters from now.

What kind of investments are you making that?

We have made a lot of headcount investments to expand our sales footprint. We started some programs using our financial investments to help partners who are going to grow, meaning we’ll help them add people at their place. We have a program, we call it a revenue accelerator, where we will advance commissions to a partner to hire people in advance and then they pay us back from their commissions. These are some creative ways we can drive partners’ business, where they believe we’ve made an investment alongside them. Those are the kind of investments we started making last year under our new [Intelisys] president Ken Mills’ leadership, and we believe those will start to pay off throughout the year. But this next year that we’re facing will see slower growth than we would like, because we were behind, because we lost some customers to the private equity-backed competitors.

Who would those competitors be?

The primary competitors in the Intelisys world are Telarus and Avant Communications. They’re both owned by private equity. And those new owners came in about two to three years ago, and they got aggressive on pricing. And when it’s when they get aggressive on pricing in this business model, it shows up as revenue, because the way we report the results of these transactions it looks like 100-percent gross profit margin. I know that’s in the weeds, but the point is, when they discount it affects our revenue growth.

Let me give you one more number you can use. We did talk about the fact that the end user billings in this segment still grew 4.5 percent.

Any impact from tariffs in the fourth quarter?

I would say the impact of tariffs for the fourth quarter is really that pull-in. Probably the reason why customers decided to go ahead and pull those orders in is the uncertainty and the tariffs. We talked about why we thought the second half would grow faster than the first half of our FY26 and it’s those kinds of uncertainties. It’s the tariff uncertainty. It’s the interest rate environment. Uncertainties that still need to be sorted out before I think some of these larger deals start to get delivered.

I would say we expect right now the large deal pipeline to be lumpy in terms of when we will actually see the transactions. So fourth quarter lumpy to the upside. Next quarter might be lumpy to the downside. We just can’t put our finger on we can’t predict it right now, and so that’s why we’re just trying to throw some caution out there. But for the year, we still believe we’ll have a good year in 2026.

So what do you need from Washington for these things to balance out and return to normal?

I think end users are asking for more certainty in the tariff environment. End users want to understand better what they’re going to face as companies, because many of the customers that our channel is selling to are the ones that are also getting these tariffs. And they’re trying to say, can they invest in technology or not? My message to our channel is, the technologies we sell are mission-critical, and the end users can only delay or defer those investments for a short time, and then they will make the decision to go ahead, even in an uncertain environment. So yes, Washington can give the market more certainty on these tariffs. Soon as that happens, and interest rates [are better understood], then we will see the IT demand environment improve.

ScanSource’s outlook for fiscal 2026 is revenue of $3.1 billion to $3.3 billion, up from this year’s $3 billion. What’s the thinking behind the outlook?

I think we have confidence in the technologies that we distribute, that there are growth opportunities there. We look at that from what the suppliers think, and what the different technology producers think. And we’ve historically talked about the fact that the advanced technologies on the Intelisys side have typically grown faster than the than the traditional hardware technology, and that’s just part of the market. Those dynamics we don’t think have changed. We do think that that there will be more certainty this year in some of these macro decisions that need to be made. And if the demand is there, it’s just waiting for the choppiness to slow down.

How about ScanSource’s partner count? Is that up or down? What do you see in terms of partner recruitment?

We said on the financial conference call that we’re investing in additional headcount in Intelisys specifically to do partner recruitment, and we believe that that partner recruitment effort will expand our partner base. We’re looking to make some decisions about what kind of services we provide what we’re calling our ‘strategic partners.’ A strategic partner will get more resources from Intelisys because we believe they can grow. So we’re going to invest alongside those partners that have a growth plan for 2026, and we believe that we’re in position to help them, and we believe that more partners will accelerate our growth in 2026.

Anything else you think we need to know?

Maybe one more. We’re adding more suppliers through our program we’re calling Launch Point. We’re out identifying new suppliers that have not really been in the channel yet, and we’re going to help launch those new partners into the channel in 2026. And we’ve talked about a couple of technologies that you will hear about from us later, including private cellular networks, robots, and drones.

The ScanSource Partner First is coming up early next month. What can partners who attend the conference expect to hear about?

Well, they’re going to see a pavilion with our Launch Point team talking about the new technologies that we’re bringing to the channel. These suppliers are going to be looking for a limited number of partners who want to invest in the future. And most of these technologies have an AI component to them as well. Our keynote speaker is Ron Insana from CNBC, and he’s going to talk about the economy and user spending patterns and things like that. I think you’ll find it interesting.