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PC Connection, Inc. Reports Third Quarter 2013 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 September 30, 2013. Net sales for the third quarter of 2013 were $580.4 million, an increase of 3.4% compared to $561.3 million for the third quarter of 2012. Net income for the quarter ended September 30, 2013 was $10.6 million, or $0.40 per diluted share, compared to net income of $9.9 million, or $0.37 per diluted share, for the corresponding prior year quarter.

Net sales for the nine months ended September 30, 2013 were $1,643.1 million, an increase of $40.4 million or 2.5%, compared to $1,602.6 million for the nine months ended September 30, 2012. Net income for the nine months ended September 30, 2013 was $25.8 million, or $0.98 per diluted share, compared to net income of $24.2 million, or $0.91 per diluted share, for the corresponding prior year period. Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense, and special charges (“Adjusted EBITDA”) totaled $65.6 million for the twelve months ended September 30, 2013, as compared to $60.0 million for the twelve months ended September 30, 2012.

Quarterly Sales by Segment:

  • Net sales for the SMB segment increased by 7.3% in the quarter to $235.3 million, compared to net sales in the third quarter of 2012. Notebook/tablet and desktop/server sales had strong growth during the quarter of 11% and 14%, respectively. SMB software sales grew by 18% due to increased demand in security, virtualization, office productivity, and operating systems software.
  • Net sales for the Large Account segment totaled $193.1 million, an increase of 0.2%, compared to net sales in the third quarter of 2012. Storage had strong growth of 18% during the quarter. Commercial sales, which consists of SMB and Large Account sales, increased by 4.0% from the prior year quarter.
  • Net sales to government and education customers (Public Sector segment) increased by 1.8% year over year to $151.9 million. Sales to state and local government and educational institutions increased by 12.7% compared to last year. Sales to the federal government decreased by 18.1% as a result of the ongoing budgetary constraints.

Quarterly Sales by Product Mix:

  • Notebook/tablet sales, the Company’s largest product category, increased by 7% year over year and accounted for 20% of net sales in the third quarter of 2013, compared to 19% of net sales in the third quarter of 2012. Both SMB and Public Sector experienced strong year-over-year growth in notebook/tablet sales.
  • Desktop/server sales accounted for 16% of net sales in the third quarter of 2013, compared to 15% of net sales in the third quarter of 2012. All three segments contributed to the 11% year-over-year growth in this category, with both SMB and Public Sector achieving double digit increases compared to prior year quarter.
  • Software sales increased by 7% year over year, accounting for 15% of net sales in the third quarters of 2013 and 2012. We experienced strong growth in security, virtualization, office productivity, and operating system software.
  • Net/Com Product sales increased by 8% year over year, accounting for 10% of net sales in the third quarters of 2013 and 2012. Strong growth in enterprise networking in the Public Sector segment contributed to the overall growth during the quarter.

Overall gross profit dollars increased by $4.3 million, or 6.0%, in the third quarter of 2013, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, increased to 13.2% in the third quarter of 2013, compared to 12.9% in the prior year quarter.

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