On August 20, ScanSource (NASDAQ:SCSC) reported fourth-quarter results that included a record non-GAAP profit and revealed a $220.5 million deal to acquire MicroAge. Net sales climbed 17.3% year over year to $953.1 million, and non-GAAP diluted earnings per share jumped 43.1% to $1.46. Management framed the results as a shift from playing defense to actively pursuing market share, a notable change in tone for a distributor that spent years fighting just to hold its ground.
Hardware Demand Comes Roaring Back
The quarter’s growth wasn’t confined to one corner of the business. Specialty Technology Solutions, ScanSource’s hardware distribution segment, generated $927.2 million in net sales, up 17.6% year over year on demand for physical security, mobility, and networking gear. Segment adjusted EBITDA rose 28% to $36.7 million. The Intelisys and Advisory segment, which sells cloud and connectivity services through the channel, added $25.9 million in quarterly revenue, up 7.2% on higher Resourcive sales, and net billings for the full fiscal year reached $2.88 billion.
Recurring revenue is becoming a bigger part of the story. It grew 10.6% for the fiscal year to $161.2 million and now makes up 33.7% of consolidated gross profit, a mix shift that tends to smooth out the lumpiness of hardware sales. The pending MicroAge acquisition, an all-cash purchase expected to close by the end of the first quarter of fiscal 2027, pushes further in that direction, adding cloud migration, cybersecurity, and AI implementation services that ScanSource’s channel partners have historically had to source elsewhere. Many solution providers cannot pair a security sale with the ongoing implementation and support it requires, and that gap is what MicroAge is meant to close.
The balance sheet backs up the growth. ScanSource generated $113.8 million in free cash flow for the year, a 124% conversion of non-GAAP net income, while net debt leverage sat at roughly zero relative to trailing 12-month adjusted EBITDA. The company still bought back $97.9 million in stock during the year and has about $121 million left under its current authorization.
Brazil And Networking Hit Snags
Not every region moved in the same direction. Net sales in Brazil fell 21.6% year over year to $53.5 million in the quarter, and the company said it had to reduce headcount there to protect profitability. The unit stayed profitable, but a double-digit sales decline in an international market isn’t a small item to write off.
Networking carries its own friction. Supply constraints tied to Juniper are expected to slow partner opportunities in the first half of fiscal 2027, even though most of the technology portfolio should see normal lead times. That’s a reminder that ScanSource’s growth still depends on getting physical product from vendors to partners on schedule.
