PC Mall, Inc. (MALL)
Q2 2010 Earnings Call Transcript
August 5, 2010 9:00 am ET
Frank Khulusi – Chairman, President and CEO
Brandon LaVerne – CFO
Kris Rogers – EVP, Sales and Marketing
Brian Alexander – Raymond James
Thomas [ph] – Northland Securities
Previous Statements by MALL
» PC Mall Sales, Inc. Q1 2010 Earnings Call Transcript
» PC Mall, Inc. Q2 2009 Earnings Call Transcript
» PC Mall, Inc F1Q09 Earnings Call Transcript
Good day ladies and gentlemen and welcome to the second quarter 2010 PC Mall Incorporated earnings conference call. At this time, all participants are in listen-only mode. On the call with us today are Frank Khulusi, Chairman, President and Chief Executive Officer, Brandon LaVerne, Chief Financial Officer, and Kris Rogers, Executive Vice President.
At this time, I would like to refer to the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information, or expectations about the company's products or markets, or otherwise make statements about the future, which statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from statements made.
These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission.
I would now like to turn the call over to Mr. Frank Khulusi, please proceed sir.
Thank you Derrick. And good morning and welcome, thank you all for participating on this call with PC Mall. Today, we will be discussing the company's financial results for the second quarter of 2010.
I would like to start by sharing a few of our second quarter 2010 highlights.
Consolidated net sales for Q2 2010 were $317 million, up 21% year-over-year. Consolidated gross profit for Q2 2010 was $40.6 million, up 13% year-over-year. Consolidated gross profit margin for Q2, 2010 was 12.8% down from 13.7 in Q2 2009 and diluted earnings per share for Q2 2010 was $0.11 versus diluted earnings per share of $0.06 in Q2 2009.
Adjusted EBITDA for Q2 2010 was $5.4 million, up 46% year-over-year. We purchased 101,521 shares of our common stock in Q2 2010 at an average price of $4.90.
I'm pleased with our second quarter consolidated results. Our year-over-year growth rate significantly accelerated from the first quarter.
Our consolidated sales grew 26% over Q2 last year, excluding sales of Sun Microsystems' solutions, which were negatively affected by Oracle's acquisition of Sun. Our commercial sales companies showed very strong year-over-year growth with SMB growing 26% year-over-year and MME growing 36% year-over-year.
We believe that this growth was driven by both an improving demand environment and by the investments that we have been making in our businesses, which are beginning to benefit our results.
I am especially pleased that our consolidated operating profit grew 46% over Q2 last year, driven primarily by large increases in both our SMB and MME segments. Additionally, our previously discussed strategy shift in our MacMall segment has continued to pay off as evidenced by a 130% sequential improvement in MacMall operating profit from Q1 to Q2, marking our second straight quarter of sequential operating profit growth in what is traditionally a seasonally down quarter.
In Q2, we also continued to invest in the growth of our service business and in late Q2 our SARCOM subsidiary acquired the assets of NSPI, a managed services provider located in Atlanta, Georgia. NSPI's area of focus complement our own very well, and include data center services, remote managed IT services, including support of desktops, servers, networks and VoIP telephony systems, and professional services.
Looking forward, our results in Q2 support our previously announced goal of achieving a 1.5 to 2% quarterly non-GAAP operating profit margin by the fourth quarter of this year, and we remain committed to that goal.
Now I'd like to turn the call over to Brandon LaVerne our CFO, who will present the financial results in a bit more detail, Brandon?
Thanks, Frank. All comparisons I make will be against Q2 2009 unless otherwise noted. As Frank highlighted earlier, consolidated net sales for Q2 2010 were $317 million, up 21% year-over-year. Gross profit was $40.6 million, an increase of 13% over last year. Gross profit margin for Q2 2010 was 12.8%, down from 13.7% last year. Q2 operating profit increased 42% to $2.8 million.
Consistent with what we saw in Q1, our Q2 2010 results included a $400,000 increase in costs due to an appreciation of the Canadian dollar relative to the US dollar and $0.5 million increase in depreciation expense over Q2 2009 reflecting our IT investments in systems and infrastructure upgrades.
Net income for Q2 2010 was $1.4 million, up 67% over last year, resulted in diluted EPS of $0.11 per share versus diluted EPS of $0.06 last year. Adjusted EBITDA for Q2 2010 was $5.4 million, up 46% over last year.
Adjusted EBITDA is a non-GAAP measure that looks at operating profit plus depreciation and amortization, non-cash stock based compensation and special charges, if any; however there were no special charges reported in either period.
Information about our use of non-GAAP financial information is provided in our current report on Form 8-K filed with the SEC earlier today and available on our website.
I will now speak about our Q2 2010 segment results. For our SMB segment, Q2 sales increased 26% to $107.7 million primarily due to an improvement in a demand environment and an increase in revenues from SMB's new sales office located in Chicago.