What changed in this filing

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Item 1. Business

2022-08-23 compared with 2021-08-24 · 79 added, 85 removed, 182 unchanged (47% of the section changed)

ScanSource, Inc.

(together with its subsidiaries referred to as the "Company” or “ScanSource” or “we”) is at the center of the technology solution delivery channel, connecting businesses and providing solutions for their complex needs.

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.

(together with its subsidiaries referred to as the "Company” or “ScanSource” or “we”) is a leading hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, Software as a Service ("SaaS"), connectivity and cloud.

ScanSource enables partners to deliver solutions for their customers to address changing end-user buying and consumption patterns.

ScanSource sells through multiple, specialized routes-to-market with hardware, SaaS, connectivity and cloud service offerings from the world's leading technology suppliers.

We provide technology solutions and services from more than 500 leading suppliers of mobility, barcode, point-of-sale ("POS"), payments, physical security, networking, unified communications, collaboration (UCaaS, CCaaS), connectivity and cloud services.

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

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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, 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").

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

In fiscal year 2021, 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.

The Divestitures were 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.

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 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.

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.

Our strategy is to drive sustainable, profitable growth by orchestrating hybrid technology solutions through a growing ecosystem of partners leveraging our people, processes, and tools.

Our goal is to provide exceptional experiences for our partners, suppliers, and people, and we strive for operational excellence.

Our hybrid distribution strategy relies on a channel sales model to offer hardware, SaaS, connectivity and cloud services from leading technology suppliers to sales partners that solve end-customers’ challenges.

ScanSource enables sales partners to deliver solutions for their customers to address changing end-customer buying and consumption patterns.

Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional services.

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

Value Proposition

Our customer channels and supplier relationships serve as competitive advantages.

From our position in the center of the solution delivery channel, we provide robust value to both our sales partners and our suppliers.

From our pivotal position at the intersection of technology distribution trends, we provide robust value to both our sales partners and our suppliers.

We make it easier for our sales partners and suppliers to deliver leading technology solutions that drive business outcomes for end-customers.

Value proposition for our customers/sales partners:

• Understand end-customer needs

• Provide more complete technology solutions

• Offer market and technology solutions expertise

• Enable end-user consumption preferences

• Provide pre-sale engineering

• Make it easier to sell the technology stack

• Inventory availability

• Offer training, education and marketing services

Index to Financial Statements

• Provide custom configuration, services, platforms and digital tools

• Deliver technical support

• Enable opportunities in emerging technologies

• Reduce working capital requirements

• Offer flexible financing solutions

• Increased ability to navigate supplier programs

• Offer innovative financial solutions for our sales partners

Index to Financial Statements

Value proposition for our suppliers:

• Provide access to emerging, diverse and established customer channels and routes to market

• Create scale and efficiency

• Serve small- and medium-sized businesses more efficiently

• Deliver more complete technology solutions

• Provide market insights

• Offer expertise and technical support

• Expand reach at a variable cost

• Provide access to multiple routes to market

• Lower customer acquisition cost

• Recruit and train new sales partners

• Manage channel credit

• Create demand

Financial Strength

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Business Segments

We segment our business into two technology-focused areas that operate in the United States, Canada, Brazil and the UK:

• Worldwide Barcode, Networking & Security;

• Worldwide Communications & Services.

Worldwide Barcode, Networking & Security Segment

The Worldwide Barcode, Networking & Security portfolio of solutions includes enterprise mobile computing, data capture, barcode printing, POS, payments, networking, electronic physical security, cyber security and other technologies.

We operate our business under a management structure that enhances our technology focus and hybrid distribution growth strategy.

Our segments operate in the United States, Canada, Brazil and the UK and consist of the following:

• Specialty Technology Solutions

• Modern Communications & Cloud

Specialty Technology Solutions Segment

The Specialty Technology Solutions portfolio includes enterprise mobile computing, data capture, barcode printing, POS, payments, networking, electronic physical security, cyber security and other technologies.

There are adjacencies among these technologies to develop and deliver solutions for our customers.

These solutions include data capture and POS solutions that interface with computer systems to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management and health care applications.

Electronic physical security products include identification, access control, video surveillance, intrusion-related and wireless and networking infrastructure products.

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 and technology services.

Electronic physical security products include identification, access control, video surveillance and intrusion-related devices.

Our networking products include wireless and networking infrastructure products.

This segment also includes recurring revenue from hardware rentals and other SaaS offerings.

Modern Communications & Cloud Segment

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

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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 healthcare, among others.

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

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

VARs, agents, ISOs and ISVs.

No single customer accounted for more than 4% of our total net sales for the fiscal year ended June 30, 2022.

Index to Financial Statements

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

Specialty technology VARs focus on one or more technologies, providing specialized knowledge and expertise for technology solutions, such as tailored software or integrated hardware.

Direct marketers provide a very broad range of technology brands to business, government, education and healthcare markets.

Direct marketers provide a very broad range of technology brands to business, government, education and healthcare

Index to Financial Statements

IT system integrators and network integrators develop computer and networking solutions for end-customers’ IT needs.

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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, 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 approximately 500 suppliers, including 8x8, AT&T, Aruba/HPE, Avaya, Axis, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Granite, GTT, Hanwha, Honeywell, Ingenico, Jabra, Lumen, Microsoft, MetTel, Mitel, NCR, NICE CXone, Poly, RingCentral, Spectrum, Toshiba Global Commerce Solutions, Trend Micro, Ubiquiti, Verifone, Verizon, VMWare, Windstream, Zebra Technologies and Zoom.

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

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

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

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

Each of these agreements must be renewed by written agreement.

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These agreements generally include the following terms:

Index to Financial Statements

• 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).

Index to Financial Statements

• Short-term periods, subject to periodic renewal, and provide for termination by either party without cause upon 30 to 120 days' notice.

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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.

We provide some of our digital products, which include SaaS and subscriptions, through our digital tools and platforms.

See "Risk Factors" for a discussion of the risks related to our foreign operations.

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Our offerings to our customers include hardware, software, services and connectivity across premise, hybrid and cloud environments.

With our CASCADE platform, we also offer customers SaaS and subscription services from leading technology suppliers.

We believe that sales partners want to offer end-customers complete technology solutions that solve end-user challenges and deliver positive outcomes.

We align our teams, tools, and processes to help our sales partners grow by providing more complete solutions through a better understanding of end-customer needs.

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 align our people, processes and tools to help our sales partners grow by providing more hybrid solutions through a better understanding of end-customer needs.

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

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.

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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 healthcare.

Index to Financial Statements

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

POS solutions include computer-based terminals, tablets, monitors, payment processing solutions, receipt printers, pole displays, cash drawers, keyboards, peripheral equipment and fully integrated processing units.

Index to Financial Statements

These solutions may include self-service checkout, kiosks and products that attach to the POS network in the store, including network access points, routers and digital signage.

We offer payment terminals, comprehensive key injection services, reseller partner branding, extensive key libraries, ability to provide point-to-point encryption (“P2PE”), and redundant key injection facilities.

We offer payment terminals, comprehensive key injection services, reseller partner branding, extensive key libraries, ability to provide point-to-point encryption, and redundant key injection facilities.

We have the resources to deliver secure payment devices that are preconfigured and ready for use.

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• Physical Security :

We provide electronic physical security solutions that include identification, access control, video surveillance and intrusion-related products and networking infrastructure.

We provide electronic physical security solutions that include identification, access control, video surveillance and intrusion-related products.

Our networking products include wireless and networking infrastructure products.

Physical security products are used every day across every vertical market to protect lives, property and information.

These technology solutions require specialized knowledge to deploy effectively, and we offer in-depth training and education to our sales partners to enable them to maintain the appropriate skill levels.

• Unified Communications and Collaboration :

We provide unified communications and collaboration capabilities, such as voice, video, audio conferencing, web conferencing and messaging.

These offerings combine voice, data, fax and speech technologies with computers, telecommunications and the internet to deliver communications solutions on-premise, from the cloud and as a hybrid.

Software and hardware products include IP-based telephony platforms, Voice over Internet Protocol ("VoIP") systems, private branch exchanges (“PBXs”), call center applications, video conferencing, desk phones and other endpoints.

• Communications and Collaboration :

We offer communications and collaboration solutions, delivered in the cloud, on-premise or hybrid, such as voice, video, integration of communication platforms and contact center solutions.

These offerings combine voice, video and data with computers, telecommunications and the internet to deliver communications solutions on-premise.

Software and hardware products include IP-based telephony platforms, Voice over Internet Protocol systems, private branch exchanges, call center applications, video conferencing, desk phones, headsets and cloud-enabled endpoints.

Cloud-delivered services, such as unified communications, contact center and video conferencing, enable end-customers to consume and pay for communications services typically on a monthly subscription basis.

• Cloud and Telecom Services :

• Connectivity and Cloud Services:

We offer business communications services, including voice, data, access, cable collaboration, wireless and cloud.

We focus on empowering and educating sales partners so they can advise end-customers in making informed choices about services, technology and cost savings.

With the CASCADE cloud services distribution platform, we offer sales partners another way to grow their recurring revenue practices.

CASCADE takes the friction out of acquiring, provisioning and managing SaaS offerings.

Through our digital tools and platforms, we offer sales partners another way to grow their recurring revenue practices, and take the friction out of acquiring, provisioning and managing SaaS offerings.

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.

People and Culture

Our real competitive advantage is our people, working together to help our customers and partners grow their businesses.

The foundation of ScanSource has always been based on strong values and culture with the clear vision of people first.

In a changing environment, ScanSource is investing in new infrastructure, tools and programs to ensure a "productivity anywhere" outcome, in the new hybrid working world.

In 2022, the Company was named, once again, one of the Best Places to Work in South Carolina.

As of June 30, 2022, we have approximately 2,700 employees, of which approximately 1,800 are in the United States and 900 are located internationally in Canada, Brazil and the UK.

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

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

As of June 30, 2022 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 2022, we added 175 new employees.

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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).

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 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

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

Index to Financial Statements

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.

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

Additionally, initiatives including a D&I book and movie club and employee resource groups 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 want to help our employees succeed—both personally and professionally.

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.

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

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.

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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.

Board Role in People and Culture Management

Our Board of Directors believes that people and culture 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 provides oversight of the Company's policies and strategies relating to talent including corporate culture, diversity and inclusion, and employee development as well as the Company's compensation principles and practices.

Our Board, through the Compensation Committee, evaluates and approves the Company's compensation plans, policies, and programs applicable to our senior executives.

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.

Index to Financial Statements

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

The market for technology products and solutions is highly competitive, both in the United States and internationally.

Competitive factors include price, product availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to customer needs, quality and breadth of product lines and services, and availability of technical and product information.

Competitive factors include price, product availability, speed and

Index to Financial Statements

accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to customer needs, quality and breadth of product lines and services and availability of technical and product information.

Our competitors include local, regional, national and international distributors, as well as suppliers that sell directly to resellers and to end-customers.

In addition, our competitors include master resellers that sell to franchisees, third-party dealers and end-customers.

In addition, our competitors include resellers that sell to franchisees, third-party dealers and end-customers.

Competition has increased over the last several years as broad line and other value-added distributors have entered into the specialty technology markets.

Such competition could also result in price reductions, reduced margins and loss of market share.

In our Worldwide Barcode, Networking & Security segment, we compete with broad-line distributors, such as Ingram Micro, Synnex and Tech Data in most geographic areas, and more specialized security distributors, such as ADI and Anixter.

In our Specialty Technology Solutions segment, we compete with broad-line distributors, such as Ingram Micro and TD Synnex, in most geographic areas, and more specialized security distributors, such as ADI and Wesco.

Additionally, we also compete against other smaller, more specialized AIDC and POS distributors, such as BlueStar.

In our Worldwide Communications & Services segment, we compete against broad-line distributors, such as Ingram Micro, Synnex and Tech Data, and more specialized distributors, such as Jenne.

Additionally, for Intelisys' technology services, we also compete against other smaller, master agents, such as Avant and Telarus.

In our Modern Communications & Cloud segment, we compete against broad-line distributors, such as Ingram Micro and TD Synnex, and more specialized distributors, such as Jenne.

Additionally, for Intelisys' technology services, we also compete against other smaller, technology services distributors, such as Avant and Telarus.

For our intY business, we compete against other developers of cloud software and services platforms, such as CloudBlue and Pax8.

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

Our sales organization consists of inside and field sales representatives located in the United States, Canada, the UK 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 our sales partners with solutions to meet their end-customer’s needs.

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

To ensure that adequate

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.

Index to Financial Statements

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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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