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PC Connection, Inc. Reports Second Quarter Results

Stocks in this article: PCCC

PC Connection, Inc. (NASDAQ: PCCC), a provider of a full range of information technology (IT) solutions to business, government, and education markets, today announced results for the quarter ended June 30, 2012. Net sales for the three months ended June 30, 2012 were $542.6 million, a year-over-year increase of $30.0 million or 5.9%. Net income for the quarter was $8.8 million, or $0.33 per share, compared to net income of $7.5 million, or $0.28 per share, for the corresponding prior year quarter.

Net sales for the six months ended June 30, 2012 were $1,041.3 million, an increase of $66.8 million or 6.9%, compared to $974.5 million for the six months ended June 30, 2011. Net income for the six months ended June 30, 2012 was $14.3 million, or $0.54 per share, compared to net income of $12.0 million, or $0.44 per share, for the six months ended June 30, 2011. Earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, and special charges (“Adjusted EBITDA”) totaled $59.6 million for the twelve months ended June 30, 2012, as compared to $52.8 million for the twelve months ended June 30, 2011.

During the first quarter of 2012, we combined our consumer and small office/home office (“SOHO”) sales company with our small- and medium-sized business (SMB) segment. In order to facilitate comparison with current period results, 2011 revenues and gross margins for the SMB segment have been restated to include consumer and SOHO sales.

Quarterly Sales by Segment:

  • Net sales for the SMB business segment were $229.6 million in the second quarter of 2012. Sales to small and medium businesses increased by 3.5% year over year, however, when combined with lower consumer and SOHO sales, overall sales for this segment decreased by 1.1%.
  • Net sales for the Large Account segment increased by 22.5% to $197.0 million compared to net sales in the second quarter of 2011. Sales for this segment increased from both new and existing customers.
  • Net sales to government and education customers (Public Sector segment) decreased year over year by 3.1% to $116.0 million. Sales to state and local government and educational institutions were relatively unchanged compared to last year, while sales to the federal government decreased by $4.0 million year over year.

Quarterly Sales by Product Mix:

  • Notebook sales, the Company’s largest product category, increased by 12% year over year and accounted for 19% of net sales in the second quarter of 2012 compared to 18% of net sales in the prior year quarter. Higher unit sales led to the growth in this product category as average selling prices were generally unchanged.
  • Software sales increased by 11%, accounting for 16% of net sales in the second quarter of 2012, compared to 15% in the prior year quarter. Software sales increased in both the Large Account and SMB segments.
  • Desktop/server sales increased slightly year over year, accounting for 15% of net sales in the second quarter of 2012 compared to 16% of net sales in the prior year quarter. Desktop sales grew primarily as a result of increased unit sales in our Large Account segment, as ASPs decreased by single digits on a rate basis.
  • Net/Com products continued to grow with an increase of 5% year over year, accounting for 10% of net sales in the second quarter of 2012 and 2011. Growth in this category was driven by a 19% year-over-year increase in Net/Com product sales in our Large Account segment.

Overall gross profit dollars for the quarter increased by $4.7 million, or 7%, compared to the second quarter of 2011. Consolidated gross margin, as a percentage of net sales, increased year over year by 14 basis points to 13.2% in the second quarter of 2012. Increased utilization of deal registrations and data analytic software, as well as increased sales of higher margin products and services, contributed to the margin increase. SMB and Public Sector increased their gross margin compared to the prior year quarter, while Large Account experienced a decline.

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