ScanSource CEO: Canpango Acquisition Will Drive Demand For UCaaS

ScanSource Tuesday reported strong quarterly and yearly revenue growth, and said its recent acquisition of IT services provider Canpango along with growth of its Intelisys telecom and cloud services business are expected to help the company return to higher margins.

Canpango, which ScanSource acquired this month as a way to bring services around customer relationship management and Salesforce.com to its channel partner community, offers significantly higher margin opportunities than ScanSource as a whole, said Mike Baur, CEO of the Greenville, S.C.-based distributor.

Canpango is a big opportunity for ScanSource and its channel partners because it presents them the chance to work with Salesforce's sales team on a worldwide basis, Baur said.

[Related: ScanSource Acquires Canpango To Bring Salesforce Services To Partners]

"Canpango is one of less than 40 partners that's managed by Salesforce directly, and so they're brought into opportunities where they have specific expertise and knowledge," he said. "I had a call with Salesforce executives, understanding better why they're excited for Canpango to be acquired by ScanSource because we'll give them the ability to add more resources as appropriate to fit the growth profile. And our business plan for them is, keep doing what you're doing, which will also drive demand for [Unified- Communications-as-a-Service and Contact-Center-as-a-Service] opportunities as they're deploying Salesforce CRM."

As Canpango helps a customer deploy Salesforce, it will be an opportunity to bring in other channel partners to help sell additional capabilities, especially for Unified Communications as a Service or Contact Center as a Service, Baur said.

"More importantly, if we can bring to Canpango through the channel one opportunity or two opportunities, we think the channel gets more than that from Canpango through Salesforce," he said. "So that's definitely a two-way street."

For the fourth fiscal quarter of 2018, ScanSource reported 12 percent gross profit growth, and 11 percent non-GAAP operating income growth, Baur said.

"We delivered strong net sales growth across our business, with year-over-year organic growth for both of our worldwide segments and for all of our geographic regions," he said.

For its fourth fiscal quarter of 2018, which ended June 30, ScanSource reported revenue of $993.9 million, up 8 percent from the $917.3 million the company reported for its fourth fiscal quarter of 2017.

ScanSource also reported GAAP net income of $10.4 million, or 40 cents per share, down from the $$19.0 million, or 74 cents per quarter, it reported last year. On a non-GAAP basis, the company reported net income of $19.9 million, or 77 cents per share, up from last year's $17.3 million, or 68 cents per share.

For all of fiscal 2018, ScanSource reported revenue of $3.846 billion, up 8 percent over last year's $3.568 billion.

Net income on a GAAP basis for the year was $33.2 million, or $1.29 per share, down from last year's $69.2 million, or $2.71 per share. On a non-GAAP basis, net income for fiscal 2018 was $79.8 million, or $3.11 per share, up from last year's $70.3 million, or $2.75 per share.

During the year, ScanSource executed very well on its six key growth opportunities, Baur said.

The first is mobile computing, where ScanSource saw growth across all geographies, including a big market transition to Android and a big refresh business, Baur said. "Year over year, mobile computing solutions grew double digits, and were a key driver for the organic growth in our worldwide barcode, networking and security segments," he said.

The second is video surveillance where ScanSource enjoyed double-digit growth from customized offerings driven by education, as well as strong networking performance.

The third is POS Portal, the purchase payment device distributor ScanSource acquired in 2017, where the signing of a large customer led to strong services growth, Baur said.

The fourth is communications channel opportunities thanks to ScanSource's expanded relationship with Mitel's on-premises products.

The fifth is continued growth of the Intelisys recurring revenue business, with year-over-year growth of 26 percent, with the fastest growth coming from its cloud suppliers, Baur said. "Approximately 60 percent of the growth is from Unified Communications as a Service, known as UCaaS, and Contact Center as a Sservice, called CCaaS," he said.

The sixth is ScanSource's Brazil operations, where that country's Network1 business had record quarterly sales, he said.