|By Business Wire||
|April 20, 2017 04:05 PM EDT|
Connection (PC Connection, Inc.; NASDAQ: CNXN), an industry-leading national technology solutions provider of a full range of information technology (IT) solutions to business, government, and education markets, today announced results for the quarter ended March 31, 2017. Net sales for the quarter ended March 31, 2017 increased by 17.2% to $670.6 million, compared to $572.4 million for the prior year quarter. Net income for the quarter ended March 31, 2017 decreased by 18.0% to $7.4 million, or $0.28 per diluted share, compared to net income of $9.1 million, or $0.34 per diluted share for the prior year quarter.
Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense and rebranding, acquisition and restructuring costs (“Adjusted EBITDA”) totaled $92.1 million for the twelve months ended March 31, 2017, compared to $90.8 million for the twelve months ended March 31, 2016.
Quarterly Performance by Segment:
- Net sales for the SMB segment increased by 5% to $273.6 million in the first quarter of 2017, compared to the prior year quarter. Software and mobility products each grew at double-digit rates. Gross margin decreased by 67 basis points due to increased sales of lower-margin mobility and desktop products.
- Net sales for the Large Account segment increased by 26% to $252.9 million in the first quarter of 2017, compared to the prior year quarter. Software, net/com products, and servers had strong growth during this quarter at 61%, 87%, and 70%, respectively. Gross margin decreased by 64 basis points due to product mix and an increase in large project rollouts, which generally carry lower margins.
- Net sales to the Public Sector segment increased by 30% to $144.0 million in the first quarter of 2017, compared to the prior year quarter. Sales to state and local government and educational institutions increased by 15%, compared to the prior year quarter, while sales to the federal government increased by 62%. Gross margin decreased by 357 basis points due to a large federal customer project rollout that consisted of lower-margin products such as desktops, which grew 288% during the quarter.
Quarterly Sales by Product Mix:
- Notebook/mobility sales, the Company’s largest product category, increased by 9% year over year and accounted for 22% of net sales in the first quarter of 2017 compared to 24% of net sales in the prior year quarter. Large Account and SMB experienced strong year-over-year growth in notebook/mobility sales.
- Software sales increased by 36% year over year and accounted for 19% of net sales in the first quarter of 2017 compared to 17% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and office productivity.
Overall gross profit increased by $4.5 million, or 5.5%, in the first quarter of 2017, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, decreased to 12.9% in the first quarter of 2017, compared to 14.4% for the prior year quarter.
Selling, general and administrative dollars increased in the first quarter of 2017 to $75.3 million from $67.0 million in the prior year quarter, with variable cost increasing due to higher levels of gross profit. We also had three months of Softmart SG&A in the current quarter. We continue to invest in technical solution sales capabilities and expect SG&A expenses to rise accordingly. However, we are highly focused on improving efficiencies and streamlining wherever possible.
The Company generated significant cash flow during the quarter ended March 31, 2017. Total cash was $65.8 million at March 31, 2017, compared to $49.2 million at December 31, 2016. During the quarter we paid a $9.0 million special dividend to shareholders. Days sales outstanding were 48 days at March 31, 2017, and inventory turns were 25 turns in the first quarter of 2017.
“We are encouraged with the acceleration of our top line during the quarter. We saw strong growth in software, networking communications, workforce productivity, and services,” said Tim McGrath, President and Chief Executive Officer. “With this market share growth, we remain focused on gross margin improvements, operating expense management, and our strategic plan to help our customers solve their business challenges with advanced technology solutions,” concluded Mr. McGrath.
Non-GAAP Financial Information
Adjusted EBITDA is a non-GAAP financial measure. This information is included to provide information with respect to the Company’s operating performance and earnings. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. Our non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.
Connection (www.connection.com; NASDAQ: CNXN), is the combined corporate brand name for PC Connection, Inc., a Fortune 1000 company, along with its subsidiaries: PC Connection Sales, GovConnection, and MoreDirect, reflecting the Company’s mission to connect people with technology that enhances growth, elevates productivity, and empowers innovation. Headquartered in Merrimack, NH with offices throughout the United States, the Company continues to deliver custom-configured computer systems overnight from our ISO 9001:2008 certified technical configuration lab at our distribution center in Wilmington, OH. In addition, the Company has over 2,500 technical certifications to ensure that we can solve the most complex issues of our customers. Connection also services international customers through its GlobalServe subsidiary, a global IT procurement and service management company. Investors and media can find more information about Connection at http://ir.pcconnection.com.
Connection – Business Solutions (800-800-5555), (the original business of PC Connection,) operating through our PC Connection Sales Corp. subsidiary, is a rapid-response provider of IT products and services serving primarily the small- and medium-sized business sector. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, publications, and its website at www.connection.com.
Connection – Public Sector Solutions (800-800-0019), our GovConnection, Inc. subsidiary, is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, publications, and online at www.connection.com/publicsector.
Connection – Enterprise Solutions (561-237-3300), www.connection.com/enterprise, our MoreDirect, Inc. subsidiary, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and access to over 300,000 products and 1,600 vendors through TRAXX™, a proprietary cloud-based eProcurement system. The team’s engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are based on currently available information, operating plans, and projections about future events and trends. Terms such as "believe," "expect," "intend," "plan," "estimate," "anticipate," "may," "should," "will," or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward-looking statements include such terms. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties, include, but are not limited to, the impact of changes in market demand and the overall level of economic activity and environment, or in the level of business investment in information technology products, competitive products and pricing, product availability and market acceptance, new products, market acceptance of the Company's new branding, fluctuations in operating results, the ability of the Company to manage personnel levels in response to fluctuations in revenue, and other risks detailed in the Company's filings with the Securities and Exchange Commission, including under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2016. More specifically, the statements in this release concerning the Company's outlook for selling, general, and administrative expenses, the Company's efforts in improving efficiencies and streamlining its business and other statements of a non-historical basis (including statements regarding the Company's ability to increase market share and enhance long-term shareholder value, and integrate its two acquisitions in an effective manner, and the Company's continuing investments in technical solution sales capabilities) are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties include the ability to realize market demand for and competitive pricing pressures on the products and services marketed by the Company, the continued acceptance of the Company's distribution channel by vendors and customers, continuation of key vendor and customer relationships and support programs, the ability of the Company to gain or maintain market share, and the ability of the Company to hire and retain qualified sales representatives and other essential personnel. The Company assumes no obligation to update the information in this press release or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise, except as required by law.
|CONSOLIDATED SELECTED FINANCIAL INFORMATION|
|At or for the Three Months Ended March 31,||2017||2016|
|% of||% of||%|
|(Amounts and shares in thousands, except operating data, P/E ratio, and per share data)||Net Sales||Net Sales||Change|
|Diluted earnings per share||$||0.28||$||0.34||(18||%)|
|Return on equity (1)||11.0||%||12.3||%|
|Days sales outstanding||48||41|
|% of||% of|
|Product Mix:||Net Sales||Net Sales|
|Total Net Sales||100||%||100||%|
|Stock Performance Indicators:|
|Actual shares outstanding||26,761||26,501|
|Total book value per share||$||16.54||$||15.16|
|Tangible book value per share||$||13.34||$||13.17|
|Trailing price/earnings ratio||17.0||14.5|
|LTM Adjusted EBITDA (2)||$||92,136||$||90,795|
|Adjusted market capitalization/LTM Adjusted EBITDA (3)||7.9||6.6|
|(1) Based on last twelve months' net income.|
|(2) Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for acquisition, rebranding, and|
|restructuring costs, and stock-based compensation.|
|(3) Adjusted market capitalization is defined as gross market capitalization less cash balance.|
|REVENUE AND MARGIN INFORMATION|
|For the Three Months Ended March 31,||2017||2016|
|(amounts in thousands)||Sales||Margin||Sales||Margin|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME|
|Three Months Ended March 31,||2017||2016|
|(amounts in thousands, except per share data)||Amount||% of Net Sales||Amount||% of Net Sales|
|Cost of sales||583,861||87.1||490,201||85.6|
|Selling, general and administrative expenses, other||75,281||11.2||67,029||11.7|
|Income from operations||11,452||1.7||15,164||2.7|
|Interest/other expense, net||19||–||(14||)||–|
|Income tax provision||(4,039||)||(0.6||)||(6,087||)||(1.1||)|
|Earnings per common share:|
|Shares used in the computation of earnings per common share:|
|EBITDA AND ADJUSTED EBITDA|
|A reconciliation of EBITDA and Adjusted EBITDA is detailed below. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either includes or excludes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance including our ability to fund our future capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements.|
|(amounts in thousands)||Three Months Ended March 31,||LTM Ended March 31, (1)|
|2017||2016||% Change||2017||2016||% Change|
|Depreciation and amortization||2,855||2,416||10,892||9,185|
|Income tax expense||4,039||6,087||30,294||32,131|
|Acquisition, rebranding and restructuring costs (2)||-||-||3,406||1,026|
|(1) LTM: Last twelve months|
(2) Acquisition, rebranding, and restructuring costs relate to our 2016 acquisitions, the re-branding of the Company to "Connection," severance related to internal restructuring, duplicate costs incurred with the move of our Chicago-area facility, and in 2015, duplicate costs incurred with the transition to our new distribution center.
|March 31,||December 31,|
|CONDENSED CONSOLIDATED BALANCE SHEETS||2017||2016|
|(amounts in thousands)|
|Cash and cash equivalents||$||65,755||$||49,180|
|Accounts receivable, net||378,453||411,883|
|Prepaid expenses and other current assets||5,604||5,453|
|Income taxes receivable||953||2,120|
|Total current assets||550,738||559,171|
|Property and equipment, net||38,650||39,402|
|Other intangibles, net||12,151||12,586|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Accrued expenses and other liabilities||24,079||31,047|
|Total current liabilities||211,517||230,254|
|Deferred income taxes||19,640||19,602|
|Additional paid-in capital||112,941||111,081|
|Treasury stock at cost||(15,862||)||(15,862||)|
|Total Stockholders’ Equity||442,735||433,442|
|Total Liabilities and Stockholders’ Equity||$||676,492||$||686,134|
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS|
|Three Months Ended March 31,||2017||2016|
|(amounts in thousands)|
|Cash Flows from Operating Activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||2,855||2,416|
|Provision for doubtful accounts||545||(103||)|
|Stock-based compensation expense||183||289|
|Deferred income taxes||38||34|
|Excess tax benefit from exercise of equity awards||-||(32||)|
|Changes in assets and liabilities:|
|Prepaid expenses and other current assets||1,016||(1,928||)|
|Other non-current assets||22||(128||)|
|Accrued expenses and other liabilities||(3,936||)||(7,156||)|
|Net cash provided by operating activities||25,425||23,469|
|Cash Flows from Investing Activities:|
|Purchases of equipment||(1,487||)||(2,078||)|
|Net cash used for investing activities||(1,487||)||(2,078||)|
|Cash Flows from Financing Activities:|
|Exercise of stock options||1,678||-|
|Excess tax benefit from exercise of equity awards||-||32|
|Payment of payroll taxes on stock-based compensation through shares withheld||-||(40||)|
|Net cash used for financing activities||(7,363||)||(10,599||)|
|Increase in cash and cash equivalents||16,575||10,792|
|Cash and cash equivalents, beginning of period||49,180||80,188|
|Cash and cash equivalents, end of period||$||65,755||$||90,980|
|Non-cash Investing Activities:|
|Accrued capital expenditures||$||291||$||578|
|Supplemental Cash Flow Information:|
|Income taxes paid||$||1,546||$||7,638|
NHK, Japan Broadcasting, will feature the upcoming @ThingsExpo Silicon Valley in a special 'Internet of Things' and smart technology documentary that will be filmed on the expo floor between November 3 to 5, 2015, in Santa Clara. NHK is the sole public TV network in Japan equivalent to the BBC in the UK and the largest in Asia with many award-winning science and technology programs. Japanese TV is producing a documentary about IoT and Smart technology and will be covering @ThingsExpo Silicon Val...
Apr. 28, 2017 01:15 AM EDT Reads: 9,248
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor – all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
Apr. 28, 2017 01:15 AM EDT Reads: 8,957
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
Apr. 28, 2017 12:45 AM EDT Reads: 1,667
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
Apr. 28, 2017 12:15 AM EDT Reads: 1,362
Building a cross-cloud operational model can be a daunting task. Per-cloud silos are not the answer, but neither is a fully generic abstraction plane that strips out capabilities unique to a particular provider. In his session at 20th Cloud Expo, Chris Wolf, VP & Chief Technology Officer, Global Field & Industry at VMware, will discuss how successful organizations approach cloud operations and management, with insights into where operations should be centralized and when it’s best to decentraliz...
Apr. 28, 2017 12:15 AM EDT Reads: 807
“DevOps is really about the business. The business is under pressure today, competitively in the marketplace to respond to the expectations of the customer. The business is driving IT and the problem is that IT isn't responding fast enough," explained Mark Levy, Senior Product Marketing Manager at Serena Software, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Apr. 28, 2017 12:00 AM EDT Reads: 16,323
@DevOpsSummit at Cloud taking place June 6-8, 2017, at Javits Center, New York City, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long developm...
Apr. 27, 2017 11:30 PM EDT Reads: 2,299
Grape Up is a software company, specialized in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market across the USA and Europe, we work with a variety of customers from emerging startups to Fortune 1000 companies.
Apr. 27, 2017 10:45 PM EDT Reads: 2,428
@GonzalezCarmen has been ranked the Number One Influencer and @ThingsExpo has been named the Number One Brand in the “M2M 2016: Top 100 Influencers and Brands” by Analytic. Onalytica analyzed tweets over the last 6 months mentioning the keywords M2M OR “Machine to Machine.” They then identified the top 100 most influential brands and individuals leading the discussion on Twitter.
Apr. 27, 2017 10:30 PM EDT Reads: 1,296
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.
Apr. 27, 2017 10:30 PM EDT Reads: 2,450
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
Apr. 27, 2017 10:15 PM EDT Reads: 1,471
Cloud Expo, Inc. has announced today that Aruna Ravichandran, vice president of DevOps Product and Solutions Marketing at CA Technologies, has been named co-conference chair of DevOps at Cloud Expo 2017. The @DevOpsSummit at Cloud Expo New York will take place on June 6-8, 2017, at the Javits Center in New York City, New York, and @DevOpsSummit at Cloud Expo Silicon Valley will take place Oct. 31-Nov. 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Apr. 27, 2017 10:15 PM EDT Reads: 2,658
Cognitive Computing is becoming the foundation for a new generation of solutions that have the potential to transform business. Unlike traditional approaches to building solutions, a cognitive computing approach allows the data to help determine the way applications are designed. This contrasts with conventional software development that begins with defining logic based on the current way a business operates. In her session at 18th Cloud Expo, Judith S. Hurwitz, President and CEO of Hurwitz & ...
Apr. 27, 2017 10:15 PM EDT Reads: 9,242
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
Apr. 27, 2017 10:00 PM EDT Reads: 2,063
With billions of sensors deployed worldwide, the amount of machine-generated data will soon exceed what our networks can handle. But consumers and businesses will expect seamless experiences and real-time responsiveness. What does this mean for IoT devices and the infrastructure that supports them? More of the data will need to be handled at - or closer to - the devices themselves.
Apr. 27, 2017 09:45 PM EDT Reads: 894