Summary

  • Intelisys suppliers billed end users approximately US$2.88 billion in fiscal 2026; ScanSource did not report that amount as its own revenue.
  • Company-wide recurring revenue was US$161.209 million, about 5.0% of ScanSource’s US$3.226 billion of reported sales, yet recurring revenue supplied 33.7% of total gross profit.
  • The contrast comes partly from principal-versus-agent accounting: ScanSource records controlled hardware and some software gross, while agency services enter revenue net of the supplier’s cost.
  • Multiplying the rounded gross-profit share by total gross profit produces about US$147.389 million. Dividing that estimate by recurring revenue produces 91.4%, but it is not a disclosed recurring margin or economic take rate.

Three ledgers on the same desk

The largest number belongs furthest from ScanSource’s income statement. Intelisys net billings—approximately US$2.88 billion—are the amounts suppliers billed to end users through the channel. ScanSource says the figure represents annual recurring revenue in that network. It measures the service commerce passing between suppliers and customers, not the amount ScanSource controls as principal.

The middle number is a recognised-revenue category. ScanSource reported US$161.209 million of recurring revenue across both operating segments. It includes agency commissions, managed connectivity, SaaS, subscriptions and hardware rentals. Of that total, US$96.694 million sat in Intelisys & Advisory and US$64.515 million in Specialty Technology Solutions. The category therefore crosses organisational and accounting boundaries; it is not simply the US$2.88 billion compressed by a uniform commission rate.

The third number is a contribution claim. Recurring revenue accounted for 33.7% of ScanSource’s US$437.355 million of fiscal-year gross profit, up from 32.8% a year earlier. That percentage describes where gross-profit dollars came from. It does not say recurring revenue was 33.7% of sales. In fact, US$161.209 million was only about 5.0% of reported sales of US$3.226 billion.

Placed in sequence, the figures invite a story: billions of customer billings enter a channel, millions become ScanSource revenue, and nearly all of that revenue becomes gross profit. That story is too neat because the three disclosures do not use a shared population. Supplier billings apply to Intelisys. Recognised recurring revenue spans two segments and several offering types. Gross-profit contribution uses a rounded company-wide allocation. The first discipline is to refuse the funnel.

Control writes the sales line

The governing distinction is not whether a sale feels recurring. It is whether ScanSource controls the promised product or service before the customer receives it.

For hardware and certain software services, ScanSource says it acts as principal. It controls the item before transfer, so the income statement records the full selling price as revenue and the supplier cost in cost of goods sold. A US$100 principal sale might therefore add US$100 to sales and, if the cost were US$90, US$10 to gross profit.

For third-party service contracts such as product warranties and supplier-hosted software, ScanSource often arranges performance by the original equipment manufacturer. It does not control the specified service before transfer. As agent, it records revenue net of the supplier cost when the sale occurs. Intelisys operates under this agency model. If a supplier bills an end user US$100 and ScanSource’s contractual commission were US$4, the income statement could show only the US$4—not US$100 of revenue and US$96 of cost.

The example is illustrative, not a statement of ScanSource’s rates. Its purpose is to show why reported sales cannot be compared without knowing the role. Gross presentation expands both numerator and cost base. Net presentation leaves the economic fee visible but removes the supplier’s consideration from the reported denominator. Neither treatment proves that one transaction is more valuable, more cash generative or less risky.

This is also why the US$2.88 billion cannot be called ScanSource sales, bookings or gross merchandise value by convenience. The company defines it as amounts suppliers bill end users. The supplier owns the customer charge inside that definition; ScanSource’s recognised economics arise from arranging the relationship under its contracts.

“Recurring” is a basket, not a business model

Recurring revenue rose 10.6% in fiscal 2026, faster than the 5.9% growth in products and non-recurring services. The label is directionally useful: it tells readers that commissions, connectivity and contracted services are becoming more important. It is not a homogeneous unit.

An agency commission carries a small reported revenue denominator because the supplier performs the service. Managed connectivity can combine service management, carrier commitments and support. SaaS may be supplier-hosted or controlled differently depending on the contract. A subscription describes cadence, not necessarily who is principal. Hardware rental can carry assets, financing and residual-value exposure that a pure commission does not.

The segment table makes the mix visible. Specialty Technology Solutions reported US$3.125 billion of sales and US$337.644 million of gross profit, a 10.8% margin. Intelisys & Advisory reported only US$101.130 million of sales and US$99.711 million of gross profit, a 98.6% margin. The second figure looks almost frictionless until the denominator is examined. Management itself says that the segment margin reflects a higher contribution from recurring revenue recorded on a net basis.

Calling 98.6% a “take rate” would invert the contract. It is gross profit divided by revenue that has already been netted down for much of the segment. It is not ScanSource retaining 98.6 cents of every dollar an end user pays a supplier. Nor can it be placed beside the 10.8% hardware-heavy margin as if both begin with the same economic bill.

The 91.4% ratio that should not become a metric

There is a tempting calculation. Applying 33.7% to total gross profit of US$437.355 million yields approximately US$147.389 million attributable to recurring revenue. Divide that estimate by US$161.209 million of recurring revenue and the result is 91.4%.

The arithmetic is correct. The metric is not disclosed. The 33.7% share is rounded; a tenth of a percentage point changes the implied dollars. The recurring category mixes principal and agent arrangements. ScanSource does not publish a recurring cost-of-goods table that reconciles the basket. Nor does it say that every cost needed to operate the recurring channel sits above gross profit rather than inside selling, general and administrative expense.

The prior year offers a useful warning. Applying 32.8% to US$408.646 million of gross profit gives approximately US$134.036 million. Dividing by US$145.700 million of recurring revenue produces roughly 92.0%. The implied ratio edges down even as recurring revenue grows and its share of gross profit rises. That is possible because the constructed ratio combines rounded shares and changing mix. It is better used to expose the denominator problem than to forecast a margin.

The same restraint applies to supplier billings. Intelisys & Advisory’s US$101.130 million of reported sales equalled about 3.51% of the US$2.88 billion supplier-billing figure; its US$96.694 million recurring component equalled about 3.36%. Neither quotient is a disclosed commission rate. Advisory work, acquisitions, timing and perimeter differences sit inside the comparison. A reliable take-rate series would require like-for-like billings and recognised agency revenue, contract cohorts and explicit exclusions.

Gross profit has more than one lever

Mix receives attention because net-presented revenue can lift the reported gross-profit percentage. It did not produce the fiscal-year bridge alone.

Specialty Technology Solutions added US$26.242 million of gross profit. ScanSource attributed US$19.2 million to higher sales volume after cost of goods sold. A further US$7.0 million came from favourable supplier-program recognition, offset by unfavourable sales mix and higher freight. Supplier programmes include volume rebates, inventory price changes and purchase discounts. When recognition increases, cost of goods sold falls and gross profit rises—even if the principal-versus-agent boundary does not move.

Intelisys & Advisory added US$2.467 million of gross profit. Higher volume and the Resourcive acquisition contributed about US$3.0 million, while a greater mix of professional services reduced the benefit by about US$0.5 million. Its reported margin fell 54 basis points to 98.6%. A service can be recurring and still carry labour or delivery cost that changes the mix inside a net-presented segment.

The first nine months show the same plurality. Specialty Technology Solutions received an US$8.7 million benefit from supplier programmes and sales mix plus US$4.7 million from volume. Intelisys & Advisory gained US$1.3 million from volume but gave up US$0.7 million to a less favourable service mix. A gross-profit forecast that treats “recurring share” as the only variable would miss both the vendor contract and the work required after the sale.

The fourth quarter refuses the simple story

Full-year recurring revenue grew faster than products and non-recurring services, and total gross-profit margin increased by 20 basis points. The fourth quarter moved differently.

Quarterly sales rose 17.3% to US$953.109 million as hardware demand accelerated. Recurring revenue rose 13.5% to US$41.469 million—healthy growth, but slower than the product-led total. Gross profit rose 14.0% to US$119.849 million, while the reported gross-profit margin fell 35 basis points to 12.6%. Recurring revenue’s share of gross profit was 31.5%, almost unchanged from 31.6% a year earlier and below the fiscal-year share.

The quarter is not evidence against recurring revenue. It is evidence against using one mix label as a mechanical margin predictor. Product volume can expand the sales denominator faster. Vendor programmes and freight can change cost. Professional services can alter the cost content of recurring work. A percentage can fall while the underlying gross-profit dollars rise.

Below gross profit, the channel still has to operate

Total gross profit increased 7.0% in fiscal 2026, but adjusted EBITDA rose 4.8% to US$151.548 million and adjusted EBITDA margin slipped six basis points to 4.70%. The difference is not a contradiction. An agency network still needs partner recruitment, sales support, platforms, advice, billing administration and corporate infrastructure. Net revenue presentation removes a supplier’s service cost from the sales line; it does not remove ScanSource’s operating cost.

Working capital belongs to a separate perimeter. Accounts receivable rose to US$769.750 million, inventory to US$522.350 million and accounts payable to US$753.275 million. ScanSource’s defined net working-capital investment increased US$18.1 million to US$538.8 million. These numbers illuminate the capital consumed by the distribution business, where ScanSource buys, holds and sells products as principal. They cannot be netted against Intelisys supplier billings to invent agency cash conversion.

Operating cash flow of US$123.131 million and year-end cash of US$88.374 million are company measures after those different models meet. They are useful precisely because they restore a common cash perimeter. Even then, acquisitions, tax, payables and inventory timing prevent a clean mapping from one year’s recurring gross-profit share to cash.

The pending MicroAge acquisition will change the perimeter again if it closes. ScanSource’s fiscal-2027 guidance—6% to 10% sales growth, US$158 million to US$165 million of adjusted EBITDA and at least US$85 million of free cash flow—explicitly excludes the transaction and its purchase accounting. The discipline is to keep the new service mix outside historical ratios until it enters reported results with an explained boundary.

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