What changed in this filing

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Item 1. Business

2021-08-24 compared with 2020-08-31 · 88 added, 55 removed, 179 unchanged (44% of the section changed)

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Using a channel sales model, we provide technology solutions and services from leading suppliers of mobility and barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration, telecom and cloud services to our customers.

ScanSource was incorporated in South Carolina in 1992 and serves approximately 30,000 sales partners.

Net sales for fiscal year ended June 30, 2021 totaled $3.15 billion .

Our common stock trades on the NASDAQ Global Se lect Market under the symbol “SCSC.”

Our customers are businesses of all sizes that sell to end-customers across many industries.

Our customer channels include value-added resellers (“VARs”), sale partners or agents, independent sales organizations (“ISOs”) and independent software vendors (“ISVs”).

Our customer channels include value-added resellers (“VARs”), sales partners or agents, independent sales organizations (“ISOs”) and independent software vendors (“ISVs”).

These customer channels provide us with multiple routes-to-market.

We align our teams, tools and processes around all of our customers to help them grow through reducing their costs, creating efficiencies and generating end-customer demand for business solutions.

We enable our customers to create, deliver and manage solutions for end-customers across almost every vertical market in the United States, Canada, Brazil, additional Latin America countries, the United Kingdom ("UK") and Europe.

On August 20, 2019, the Company announced plans to divest our product distribution businesses in Europe, the UK, Mexico, Colombia, Chile, Peru and our Miami-based export operations (the "Divestitures") as these businesses have been performing below management's expectations.

The Company will continue to operate its digital business in these countries.

Management determined that the Company did not have sufficient scale to in these markets to maximize our value-added model for physical product distribution, leading us to focus and invest in our higher margin businesses.

The Divestitures have been classified as held for sale and reported as discontinued operations within this Form 10-K.

We enable our customers to create, deliver and manage solutions for end-customers across almost every vertical market in the United States, Canada, Brazil, and the United Kingdom ("UK").

In October 2020 and November 2020, we completed the sale of our product distribution businesses in Europe, the UK, Mexico, Colombia, Chile, Peru and our Miami-based export operations (the "Divestitures").

Management determined that the Company did not have sufficient scale in these markets to maximize our value-added model for physical product distribution, leading us to focus and invest in our higher margin businesses.

The Divestitures were finalized in the second quarter of the 2021 fiscal year and reported as discontinued operations within this Form 10-K.

Unless otherwise indicated, descriptions of our business and amounts reported in this Form 10-K pertain to continuing operations only.

ScanSource was incorporated in South Carolina in 1992 and serves approximately 30,000 customers.

Net sales for fiscal year ending June 30, 2020 totaled $3.0 billion.

Our common stock trades on the NASDAQ Global Se lect Market under the symbol “SCSC.”

We rely on a channel sales model to offer hardware, software, services and connectivity from technology suppliers to our sales partners (resellers, agents, ISOs, ISVs) to solve end-customer needs.

We rely on a channel sales model to offer hardware, software, services and connectivity from technology suppliers to our sales partners (resellers, agents, ISOs, ISVs) to solve end-customer challenges.

With our CASCADE platform, we also offer customers software as a service ("SaaS") and subscription services from leading technology suppliers.

While we do not manufacture products, we provide technology solutions and services from leading technology suppliers.

Our solutions may include a combination of offerings from multiple suppliers or access to additional services, such as custom configuration, key injection, integration support, custom development and other services, to deliver solutions.

We also offer the flexibility of on-premise, cloud or hybrid solutions for sales partners' end-customers.

Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional services, such as custom configuration, key injection, integration support, custom development and other services.

We also offer the flexibility of on-premise, cloud and hybrid solutions.

As a trusted adviser to our sales partners, we provide more complete solutions through a better understanding of end-customer needs.

In addition, we drive growth through enhancing our sales partners' capabilities to provide hardware, software, services recurring revenue, including connectivity, cloud services and software as a service ("SaaS") to meet these needs.

Our teams deliver value-added support programs and services, including education and training, assessments, provisioning, implementation, custom development and marketing, designed to help our sales partners' develop new technology practices and reach new end-customers and deliver new solutions to their current customers.

Part of our strategy is to expand in higher margin and adjacent markets to help our sales partners offer more products and services while building recurring revenue opportunities.

In fiscal 2020, we acquired intY and its CASCADE cloud services distribution platform.

With the CASCADE solution, we are providing our sales partners with another route to market to enable key strategic cloud services.

In fiscal 2018, we acquired POS Portal, a leading provider of payments devices and services primarily to the small and medium-sized (“SMB”) business segment.

POS Portal added to our offerings industry-leading services and capabilities in serving the U.S.

payments channel.

In fiscal 2017, we acquired Intelisys, an industry-leading technology services provider (also called a master agent) of business telecommunications and cloud services.

Using a master agent business model, Intelisys acts as an intermediary connecting sales partners with service providers and suppliers who offer services to end-customers.

Intelisys’ sales partners earn commission payments from those service providers or suppliers on end-customer sales, typically multi-year contracts.

Intelisys earns a percentage of the commission streams, building more predictable, recurring revenues.

Net sales reported for Intelisys reflect net commissions, which is the commissions on supplier billings after payment of commission earned to Intelisys’ sales partners.

Since our Intelisys business is a services model, the working capital requirements are very low and require no inventories.

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We drive growth through enhancing our sales partners' capabilities to provide hardware, software, services and connectivity solutions.

Our teams deliver value-added support programs and services, including education and training, network assessments, implementation, custom development and marketing to help our sales partners extend their capabilities, develop new technology practices or reach new end customers.

Our objective is to grow profitable sales in the technologies we offer and expand in higher margin and adjacent markets to help our sales partners offer more products and services and increase recurring revenue opportunities.

As part of our strategic plan, we consider strategic acquisitions and alliances to enhance our technology offerings and service capabilities.

Value Proposition

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• Offer training, education and marketing services

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• Provide custom configuration, services, platforms and digital tools

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Worldwide Communications & Services Segment

The Worldwide Communications & Services portfolio of solutions includes communications technologies and services for voice, video conferencing, wireless, data networking, cyber security, cable, unified communications and collaboration, cloud

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and technology services.

As these solutions come together on IP networks, new opportunities are created to move into adjacent solutions for all vertical markets, such as education, healthcare and government.

Our customers, or sales partners, are businesses of all sizes that sell to end-customers across industries ranging from manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and health care, among others.

This segment includes recurring revenue from our Intelisys and intY businesses.

Our customers provide us with multiple routes-to-market through various channels, including:

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No single customer accounted for more than 6% of our total net sales for the fiscal year ended June 30, 2021.

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Within VARs, our customers include specialty technology VARs, direct marketers, IT system integrators, network integrators, service providers, managed service providers and cloud service providers.

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They generally focus on cloud solutions and sell or certify bundled hardware, software and service solutions.

We provide products and services from approximately 500 suppliers, including 8x8, ACC Business, AT&T, Aruba/HPE, Axis, AudioCodes, Avaya, Barco, Bematech, CenturyLink, Cisco, Comcast Business, Datalogic, Dell, Dialogic, Elo, Epson, Extreme, Fortinet, Hanwha, Honeywell, HID, Ingenico, Jabra, March Networks, Masergy, Microsoft, Mitel, NCR, NICE inContact, Oracle, Panasonic, Poly, RingCentral, Samsung, Sony, Spectralink, Spectrum, Toshiba Global Commerce Solutions, TPx, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and Zoom.

We also offer customers significant choices in cloud services through our Intelisys business, including offerings in contact center, infrastructure and unified communications.

We provide products and services from approximately 500 suppliers, including 8x8, ACC Business, AT&T, Aruba/HPE, AudioCodes, Avaya, Axis, Barco, Bematech, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Hanwha, Honeywell, HID, Ingenico, Intrado, Jabra, LogMeIn, Lumen, March Networks, Masergy, Microsoft, Mitel, NCR, NICE inContact, Oracle, Palo Alto, Panasonic, Poly, RingCentral, Samsung, Sony, Spectralink, Spectrum, Toshiba Global Commerce Solutions, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and Zoom.

We also offer customers significant choices in cloud services through our Intelisys business, including "as a service" offerings in contact center, infrastructure and unified communications.

We provide products and services from many of our key suppliers in all of our geographic markets;

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Products from two suppliers, Cisco and Zebra, each constituted more than 10% of our net sales for the fiscal year ended June 30, 2021.

• We have two non-exclusive agreements with Cisco.

• We have three non-exclusive agreements with Cisco.

One agreement covers the distribution of Cisco products in the United States and has a two year term.

The other agreement covers distribution of products in Brazil and has a two year term.

The second agreement covers distribution of products in Brazil and has a two year term.

Each of these agreements must be renewed by written agreement.

Either party may terminate the agreement upon 30 days' notice to the other party.

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• We have three non-exclusive agreements with Zebra for our continuing operations.

One agreement covers sales of Zebra Enterprise Visibility & Mobility (“EVM”) products in North America and Brazil, while the other two agreements cover sales of Zebra Asset Intelligence & Tracking (“AIT”) products in North America and Brazil respectively.

Either party may terminate these agreements upon 30 days' notice to the other party.

The third agreement is an agency contract for North America and has a two year term.

Either party may terminate this agreement upon 60 days' prior written notice.

• We have three non-exclusive agreements with Zebra.

The Zebra agreements each have a one year term that automatically renews for additional one year terms.

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These agreements generally include the following terms:

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• Non-exclusive distribution rights to resell products and related services in geographical areas (supplier agreements often include territorial restrictions that limit the countries in which we can sell their products and services).

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Offerings and Markets

For our continuing operations, we currently market over 100,000 products from approximately 500 hardware, software and service suppliers to approximately 30,000 customers.

We currently market over 100,000 products from approximately 500 hardware, software and service suppliers to approximately 30,000 customers.

We sell products and services to the United States and Canada from our facilities located in Mississippi, California and Kentucky;

into Brazil from facilities located within Brazil.

into Brazil from facilities located within the Brazilian states of Paraná, Espírito Santo and Santa Catarina.

We provide digital products and services from our CASCADE platform.

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We are able to provide a combination of offerings from multiple suppliers or give our sales partners access to a number of additional services, including configuration, key injection, integration support and others to deliver solutions.

We provide our sales partners and suppliers an array of pre-sale business tools and value-added services, including market and technology solution expertise, education and training, product configuration tools, technical support, logistics and channel financial services.

We provide our sales partners and suppliers with an array of pre-sale business tools and value-added services, including market and technology solution expertise, education and training, product configuration tools, technical support, logistics and channel financial services.

These services allow our sales partners to gain knowledge and experience on marketing, negotiation and selling, to improve customer service, to profitably grow their business and be more cost effective.

Our business is enhanced by

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our ability and our willingness to provide the extra level of services that keeps both our sales partners and our suppliers satisfied.

Our business is enhanced by our ability and willingness to provide the extra level of services that keeps both our sales partners and suppliers satisfied.

We offer technology solutions and services that include the following:

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We offer automatic identification and data capture (“AIDC”) technology that incorporates the capabilities for electronic identification and data processing without the need for manual input.

These solutions consists of a wide range of products that include portable data collection terminals, wireless products, bar code label printers and scanners.

As AIDC technology has become more pervasive, applications have evolved from traditional uses, such as inventory control, materials handling, distribution, shipping and warehouse management, to more advanced applications, such as health care.

These solutions consists of a wide range of products that include portable data collection terminals, wireless products, barcode label printers and scanners.

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We provide POS solutions for retail, grocery and hospitality environments to efficiently manage in-store sales and operations.

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We have contracts with more than 150 of the world’s leading telecom carriers and cloud services providers.

Human Capital

The strength of our Company is our people, working together to help our customers grow their businesses.

Within our continuing operations, we have approximately 2,200 employees, of which approximately 1,500 are in the United States and 700 are located internationally in Canada, Brazil and the UK.

Within our discontinued operations, we have approximately 400 employees.

As of June 30, 2021, we have approximately 2,200 employees, of which approximately 1,500 are in the United States and 700 are located internationally in Canada, Brazil and the UK.

We have no organized labor or trade unions in the United States.

We pride ourselves on our strong relationships with our employees.

We have 12 office locations in the U.S., eight office locations outside of the U.S., and have a remote employee presence.

During fiscal year 2021, we added 159 new employees.

Diversity and Inclusion

Respecting and protecting our people and our partners are our highest priorities, from ensuring and supporting an inclusive and diverse workforce and partner base;

providing a safe, healthy work environment;

and working with suppliers and partners that share this commitment, we do what is right for our employees, channel partners, and end customers.

One of our core values is to promote an environment that respects and values the diverse backgrounds, interests, and talents of our employees.

In July 2020, we reaffirmed ScanSource’s commitment to diversity and inclusion with the creation of a comprehensive Diversity & Inclusion (D&I) program and the appointment of Ken Peterson as our first Chief Diversity Officer (CDO).

Since taking this role, our CDO launched a D&I strategic plan focused on awareness and education, workforce representation, supplier diversity, and community relations.

Along with the appointment of the CDO, an internal D&I Advisory Council was created to assist in

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the implementation of our D&I plan and serve as a sounding board for our employees.

Additionally, initiatives including a D&I book and movie club are allowing interested employees to broaden their knowledge on various topics in this space.

Professional Development

We want to help our employees succeed—both professionally and personally.

We focus heavily on the intellectual and professional development of our employees, and we strive to create an immersive working environment for them.

To promote personal and professional growth, we also encourage our employees to pursue ongoing training and career development opportunities, and we provide tuition assistance and reimbursement for certain pre-approved continuing education programs and professional certifications.

We recently enhanced our learning management system, The Hub, to provide a modernized and engaging user experience for our global employees at all levels of the Intern Class of 2019.

The ScanSource Leadership Institute (SLI) is another important program that focuses on identifying and helping to develop the next wave of senior leaders for the Company.

The SLI program brings together twelve hand-selected leaders from our global offices for a two-week program of intensive training and development—with organization.

While this provides a tool for an individual’s education and growth, it also nurtures cross-functional collaboration with colleagues through a unique social capability.

We offer a comprehensive benefits package which includes on average 80% coverage of employee healthcare premiums and several benefits at no cost to our employees, including life insurance, disability insurance, and work-life balance resources.

The financial future of our employees is important to us, which is why we have a 401(k) -employer match, performance-based bonus program and employee ownership opportunities for a meaningful portion of our employees through equity incentive grants.

We partner with Tuition.io to provide employees access to knowledge and tools to help manage or plan for student loan debt.

To expand our financial wellness offerings, we offer workshops and webinars focused on student debt and general debt-counselling services.

Health and Safety

We care about our employees’ overall well-being and encourage them to have a healthy lifestyle, both physically and mentally.

That’s why we offer dedicated resources to help foster a work/life balance.

At the onset of the COVID-19 pandemic, we swiftly and successfully implemented a work-from-home policy for all employees across geographies, outside of our distribution centers.

We have continued this policy and are pleased with how our employees have adjusted to this new way of doing business, maintaining an extremely high level of productivity and performance.

With a largely remote workforce, it is critical that we continue to focus on our employees’ health.

We continue to build our 360you program, which provides employees with extensive education and training/coaching opportunities, wellness and fitness challenges, screenings, and other valuable resources.

Board Role in Human Capital Management

Our Board believes that human capital management is an important component of our continued growth and success, and is essential for our ability to attract, retain and develop talented and skilled employees.

We pride ourselves on a culture that respects co-workers and values concern for others.

Management regularly reports to the Board on human capital management topics, including corporate culture, diversity and inclusion, employee development and compensation and benefits.

Our Board also engages in an active succession planning process.

On an annual basis, with the assistance of our CEO, the Board reviews the potential in-house candidates for each of the critical senior management positions and identifies areas of growth for those candidates that will best enable them to fill any need that we might have.

Where there is not a satisfactory in-house candidate for a position, the Board considers whether outside candidates are likely to be available in a timely manner and whether other alternatives need to be considered.

Employee Feedback

We foster opportunities for employee engagement and have multiple avenues for communication which allows all full-time employees to anonymously give us feedback on our workplace culture, employee programs, and more.

The Company was also named one of the 2021 Best Places to Work in South Carolina.

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We believe we are a leader in the specialty markets we serve.

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As we seek to expand our business into other areas closely related to our offerings, we may encounter increased competition from current competitors and/or from new competitors, some of which may be our current sales partners.

Our sales department consists of inside and field sales representatives located in the United States, Canada and Brazil.

The majority of our sales partners are assigned to a dedicated sales representative or team whose main focus is developing customer relationships and providing the sales partners with the solutions to meet their end-customer’s needs.

Our sales organization consists of inside and field sales representatives located in the United States, Canada, the U.K.

The majority of our sales partners are assigned to a dedicated sales representative or team whose main focus is developing customer relationships and providing our sales partners with solutions to meet their end-customer’s needs.

Our sales teams are advocates for and trusted advisers to our sales partners.

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Our information systems are scalable and capable of supporting numerous operational functions including purchasing, receiving, order processing, shipping, inventory management and accounting.

Our sales partners and employees rely on our information systems for on-line, real-time information on pricing, inventory availability and reservation and order status.

Our sales partners and employees rely on our information systems for online, real-time information on pricing, inventory availability and reservation and order status.

Our warehouse operations use bar code technology for receiving and shipping and automated systems for freight processing and shipment tracking, each of which is integrated with our multiple information systems.

The customer service and technical support departments employ systems for documentation and faster processing of sales partner inquiries.

To ensure that adequate inventory levels are maintained, our buyers depend on the system’s purchasing and receiving functions to track inventory on a perpetual basis.

To ensure that adequate

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inventory levels are maintained, our buyers depend on the system’s purchasing and receiving functions to track inventory on a perpetual basis.

Warehouse and Shipping Strategy

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Our objective is to ship all orders on the same day, using technology to expedite shipments and minimize shipping errors.

We offer reduced freight rates and flexible delivery options to minimize a sales partner’s need for inventory.

We offer reduced freight rates and flexible delivery options to minimize our sales partners' need for inventory.

Financial Services

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business