FOURTH QUARTER SUMMARY:
- Net sales: $708.9 million, up 1.8% y/y
- Gross profit: $129.8 million, flat y/y
- Gross margin: 18.3%, down 30 basis points y/y
- Net income: $20.7 million, down 12.9% y/y
- Diluted EPS: $0.78, compared to $0.90 y/y
FULL YEAR SUMMARY:
- Net sales: $2.8 billion, down 1.7% y/y
- Gross profit: $519.8 million, up 1.6% y/y
- Gross margin: 18.6%, up 60 basis points y/y
- Net income: $87.1 million, up 4.6% y/y
- Diluted EPS: $3.29, compared to $3.15 y/y
Connection (PC Connection, Inc.; NASDAQ: CNXN), a leading
information technology solutions provider to business, government,
healthcare and education markets, today announced results for the
fourth quarter and year ended December 31, 2024. The Company also
announced that its Board of Directors declared a quarterly dividend
of $0.15 per share of the Company’s common stock. Payment will be
made on March 14, 2025, to shareholders of record on February 25,
2025.
"In 2024, we had record gross margins driven by sales of
advanced technologies, which include cloud, software, and security
solutions," said Timothy McGrath, President and Chief Executive
Officer of Connection. "Also, during the year we made significant
investments to enhance our integrated solutions capabilities
including AI and modern infrastructure. Moving forward, we believe
that the market for IT products and solutions will gradually
improve as the year progresses," concluded Mr. McGrath.
Fourth Quarter of 2024 Results:
Net sales for the quarter ended December 31, 2024 increased by
1.8%, year over year. Gross profit was flat while gross margin
decreased 30 basis points to 18.3%, compared to the prior year
quarter. Net income for the quarter ended December 31, 2024
decreased by 12.9% to $20.7 million, or $0.78 per diluted share,
compared to net income of $23.8 million, or $0.90 per diluted
share, for the prior year quarter.
Performance by Segment:
- Net sales for the Business Solutions segment decreased by 3.7%
to $262.4 million in the fourth quarter of 2024, compared to $272.4
million in the prior year quarter. Gross profit decreased by 0.8%
to $62.6 million in the fourth quarter of 2024, compared to $63.2
million in the prior year quarter. Gross margin increased by 70
basis points to 23.9% for the fourth quarter of 2024.
- Net sales for the Public Sector Solutions segment increased by
42.9% to $143.7 million in the fourth quarter of 2024, compared to
$100.6 million in the prior year quarter. Sales to the federal
government increased by $41.1 million, while sales to state and
local governments and educational institutions increased by $2.0
million, compared to the prior year quarter. Gross profit increased
by 30.2% to $22.2 million in the fourth quarter of 2024, compared
to $17.0 million in the prior year quarter. Gross margin decreased
by 150 basis points to 15.4% for the fourth quarter of 2024.
- Net sales for the Enterprise Solutions segment decreased by
6.4% to $302.7 million in the fourth quarter of 2024, compared to
$323.5 million in the prior year quarter. Gross profit decreased by
9.3% to $45.0 million in the fourth quarter of 2024, compared to
$49.6 million in the prior year quarter. Gross margin decreased by
50 basis points to 14.9% for the fourth quarter of 2024.
Sales by Product Mix:
- Notebook/mobility and desktop sales increased by 14% year over
year and accounted for 46% of net sales in the fourth quarter of
2024, compared to 41% of net sales in the fourth quarter of
2023.
- Software sales decreased by 35% year over year and accounted
for 9% of net sales in the fourth quarter of 2024, compared to 15%
of net sales in the fourth quarter of 2023.
- Servers/storage sales increased by 9% year over year and
accounted for 8% of net sales in the fourth quarter of 2024,
compared to 7% of net sales in the fourth quarter of 2023.
- Networking sales decreased by 25% year over year and accounted
for 8% of net sales in the fourth quarter of 2024, compared to 10%
of net sales in the fourth quarter of 2023.
- Accessories sales increased by 18% year over year and accounted
for 12% of net sales in the fourth quarter of 2024, compared to 10%
of net sales in the fourth quarter of 2023.
Selling, general and administrative (“SG&A”) expenses
increased in the fourth quarter of 2024 to $107.1 million from
$101.8 million in the prior year quarter. SG&A as a percentage
of net sales increased to 15.1%, compared to 14.6% in the prior
year quarter. The increase in SG&A was driven by an increase in
investments in resources to strengthen our sales, technical sales
and services capabilities.
Interest income in the fourth quarter of 2024 was $4.8 million,
compared to $4.1 million in the fourth quarter of 2023.
Cash and cash equivalents and short-term investments were $442.6
million as of December 31, 2024, compared to $297.2 million as of
December 31, 2023. During the fourth quarter of 2024, the Company
repurchased 69,366 shares of stock at an aggregate purchase price
of $4.9 million.
Full Year 2024 Results:
Net sales for the year ended December 31, 2024 decreased by
1.7%, compared to the year ended December 31, 2023. Gross profit
increased by 1.6% while gross margin expanded 60 basis points to
18.6%, compared to the year ended December 31, 2023. Net income for
the year ended December 31, 2024 increased by 4.6% to $87.1
million, or $3.29 per diluted share, compared to net income of
$83.3 million, or $3.15 per diluted share, for the year ended
December 31, 2023. Adjusted Diluted Earnings per Share1 increased
to $3.25 per share for the year ended December 31, 2024, compared
to $3.23 per share for the year ended December 31, 2023.
Earnings before interest, taxes, depreciation and amortization,
adjusted for stock-based compensation expense, restructuring and
other charges and non-routine legal settlements (“Adjusted
EBITDA”)1 decreased 5% to $118.9 million for the year ended
December 31, 2024, compared to $125.5 million for the year ended
December 31, 2023.
________________________________ 1 Adjusted EBITDA and Adjusted
Diluted Earnings per Share are non-GAAP measures. See pages 9 and
10 for definitions and reconciliations of these measures.
Conference Call and Webcast
Connection will host a conference call and live web cast today,
February 5, 2025 at 4:30 p.m. EST to discuss its fourth quarter
financial results. For participants who would like to participate
via telephone, please register here to receive the dial-in number
along with a unique PIN number that is required to access the call.
A web-cast of the conference call, which will be broadcast live via
the Internet, and a copy of this press release, can be accessed on
Connection’s website at ir.connection.com. For those unable to
participate in the live call, a replay of the webcast will be
available at ir.connection.com approximately 90 minutes after the
completion of the call and will be accessible on the site for
approximately one year.
Non-GAAP Financial Information
EBITDA, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted Net
Income and Adjusted Diluted Earnings per Share are non-GAAP
financial measures. These measures are included to provide
additional 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 similarly titled measures of other companies.
Definitions for each Non-GAAP measure and a reconciliation to their
most directly comparable GAAP measures are available in the tables
at the end of this release.
About Connection
PC Connection, Inc. and its subsidiaries, dba Connection,
(www.connection.com; NASDAQ: CNXN) is a Fortune 1000 company
headquartered in Merrimack, NH. With offices throughout the United
States, Connection delivers custom-configured computer systems
overnight from its ISO 9001:2015 certified technical configuration
lab at its distribution center in Wilmington, OH. In addition, the
Company has over 2,500 technical certifications to ensure that it
can solve the most complex issues of its 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.connection.com.
Connection–Business Solutions (800.800.5555) is a rapid-response
provider of IT products and services serving primarily the
small-and medium-sized business sector. It offers more than 460,000
brand-name products through its staff of technically trained sales
account managers, publications, and its website at
www.connection.com.
Connection–Enterprise Solutions (561.237.3300),
www.connection.com/enterprise, provides corporate technology buyers
with best-in-class IT solutions, in-depth IT supply-chain
expertise, and real-time access to over 460,000 products and 2,500
vendors through MarkITplace®, a proprietary next-generation,
cloud-based supply chain solution. The team’s engineers, software
licensing specialists, and subject matter experts help reduce the
cost and complexity of buying hardware, software, and services
throughout the entire IT lifecycle.
Connection–Public Sector Solutions (800.800.0019), 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.
Cautionary Note Regarding Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements generally relate to future
events or our future financial or operating performance and include
statements concerning, among other things, our future financial
results, business plans (including statements regarding new
products and services we may offer and future expenditures, costs
and investments), liabilities, impairment charges, competition and
the expected impact of current macroeconomic conditions on our
businesses and results of operations. You can generally identify
forward-looking statements by words such as “believe,” “expect,”
“intend,” “plan,” “estimate,” “anticipate,” “may,” “should,”
“will,” or similar statements or variations of such terms, although
not all forward-looking statements include such terms. These
statements reflect our current views and are based on assumptions
as of the date of this report. Such assumptions are based upon
internal estimates and other analysis of current market conditions
and trends, management’s expectations, plans and strategies,
economic conditions and other factors. These statements are subject
to known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be
materially different from expectations or results projected or
implied by forward-looking statements.
Such differences may result from actions taken by us, including
expense reduction or strategic initiatives (including reductions in
force, capital investments and new or expanded product offerings or
services), the execution of our business plans (including our
inventory management, cost structure and management and other
personnel decisions) or other business decisions, as well as from
developments beyond our control, including;
- substantial competition reducing our market share;
- significant price competition reducing our profit margins;
- the loss of any of our major vendors adversely affecting the
number of type of products we may offer;
- virtualization of information technology resources and
applications, including networks, servers, applications, and data
storage disrupting or altering our traditional distribution
models;
- service interruptions at fourth-partly shippers negatively
impacting our ability to deliver the products we offer to our
customers;
- increases in shipping costs reducing our margins and adversely
affecting our results of operations;
- loss of key persons or the inability to attract, train and
retain qualified personnel adversely affecting our ability to
operate our business;
- cyberattacks or the failure to safeguard personal information
and our IT systems resulting in liability and harm to our
reputation; and
- macroeconomic factors facing the global economy, including
disruptions in the capital markets, economic sanctions and economic
slowdowns or recessions, rising inflation and changing interest
rates reducing the level of investment our customers are willing to
make in IT products.
Additional factors include those described in this Annual Report
on Form 10-K for the year ended December 31, 2023, including under
the captions “Risk Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and “Business,”
in our subsequent quarterly reports on Form 10-Q, including under
the captions “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and in
the other subsequent filings we make with the Securities and
Exchange Commission from time to time.
A forward-looking statement is neither a prediction nor a
guarantee of future events or circumstances. You should not place
undue reliance on the forward-looking statements included in this
release. We assume no obligation to update any of these
forward-looking statements, or to update the reasons actual results
could differ materially from those anticipated, to reflect
circumstances or events that occur after the statements are made
except as required by law.
CONSOLIDATED SELECTED FINANCIAL INFORMATION
At or for the Three Months
Ended December 31,
2024
2023
% Change
Operating Data:
Net sales (in thousands)
$
708,897
$
696,466
2
%
Diluted earnings per share
$
0.78
$
0.90
(13
)%
Gross margin
18.3
%
18.6
%
Operating margin
3.2
%
4.0
%
Inventory turns (1)
23
17
Days sales outstanding (2)
72
73
% of
% of
Product Mix:
Net Sales
Net Sales
Notebooks/Mobility
36
%
32
%
Accessories
12
10
Desktops
10
10
Software
9
15
Displays and Sound
8
8
Net/Com Products
8
10
Servers/Storage
8
7
Other Hardware/Services
9
8
Total Net Sales
100
%
100
%
Stock Performance Indicators:
Actual shares outstanding (in
thousands)
26,300
26,360
Closing price
$
69.27
$
67.21
Market capitalization (in thousands)
$
1,821,801
$
1,771,656
Trailing price/earnings ratio
21.1
21.3
LTM Net Income (in thousands)
$
87,095
$
83,271
LTM Adjusted EBITDA (3) (in thousands)
$
118,936
$
125,516
(1)
Represents the annualized cost of goods sold for the period divided
by the average inventory for the prior four-month period.
(2)
Represents the trade receivable at the end of the period divided by
average daily net sales for the same three-month period.
(3)
LTM Adjusted EBITDA is a non-GAAP measure defined as EBITDA
(earnings before interest, taxes, depreciation and amortization)
adjusted for stock-based compensation, restructuring and other
charges and non-routine legal settlements for the last twelve
months. See page 9 for a reconciliation.
REVENUE AND MARGIN INFORMATION
For the Three Months Ended
December 31,
2024
2023
Net
Gross
Net
Gross
(amounts in thousands)
Sales
Margin
Sales
Margin
Enterprise Solutions
$
302,711
14.9
%
$
323,469
15.3
%
Business Solutions
262,440
23.9
272,437
23.2
Public Sector Solutions
143,746
15.4
100,560
16.9
Total
$
708,897
18.3
%
$
696,466
18.6
%
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December
31,
Year Ended December
31,
(amounts in thousands, except per share
data)
2024
2023
2024
2023
Net sales
$
708,897
$
696,466
$
2,802,118
$
2,850,644
Cost of sales
579,123
566,691
2,282,324
2,338,908
Gross profit
129,774
129,775
519,794
511,736
Selling, general and administrative
expenses
107,136
101,831
422,317
405,896
Restructuring and other charges
—
—
415
2,687
Income from operations
22,638
27,944
97,062
103,153
Interest income, net
4,672
4,112
18,725
9,961
Other income
—
—
1,700
—
Income before taxes
27,310
32,056
117,487
113,114
Income tax provision
(6,589
)
(8,278
)
(30,392
)
(29,843
)
Net income
$
20,721
$
23,778
$
87,095
$
83,271
Earnings per common share:
Basic
$
0.79
$
0.90
$
3.31
$
3.17
Diluted
$
0.78
$
0.90
$
3.29
$
3.15
Shares used in the computation of earnings
per common share:
Basic
26,289
26,305
26,322
26,287
Diluted
26,484
26,488
26,508
26,429
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
(amounts in thousands)
2024
2023
ASSETS
Current Assets:
Cash and cash equivalents
$
178,318
$
144,954
Short-term investments
264,295
152,232
Accounts receivable, net
611,433
606,834
Inventories, net
95,054
124,179
Income taxes receivable
2,394
4,348
Prepaid expenses and other current
assets
15,356
16,092
Total current assets
1,166,850
1,048,639
Property and equipment, net
52,520
56,658
Right-of-use assets
3,077
4,340
Goodwill
73,602
73,602
Intangibles, net
2,209
3,428
Other assets
1,096
1,714
Total Assets
$
1,299,354
$
1,188,381
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable
$
300,242
$
263,682
Accrued payroll
23,330
20,440
Accrued expenses and other liabilities
47,633
43,843
Total current liabilities
371,205
327,965
Deferred income taxes
15,091
15,844
Non-current operating lease
liabilities
1,552
3,181
Other liabilities
516
624
Total Liabilities
388,364
347,614
Stockholders’ Equity:
Common stock
294
293
Additional paid-in capital
137,036
130,878
Retained earnings
837,466
760,898
Accumulated other comprehensive income
174
81
Treasury stock at cost
(63,980
)
(51,383
)
Total Stockholders’ Equity
910,990
840,767
Total Liabilities and Stockholders’
Equity
$
1,299,354
$
1,188,381
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December
31,
Year Ended December
31,
(amounts in thousands)
2024
2023
2024
2023
Cash Flows provided by Operating
Activities:
Net income
$
20,721
$
23,778
$
87,095
$
83,271
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
3,166
3,198
12,984
12,654
Adjustments to credit losses reserve
1,084
33
1,914
1,847
Stock-based compensation expense
2,279
1,597
8,475
7,022
Deferred income taxes
(3,211
)
(2,148
)
(777
)
(2,148
)
Amortization of discount on short-term
investments
167
(1,522
)
(4,235
)
(1,522
)
Loss on disposal of fixed assets
9
9
58
572
Changes in assets and liabilities:
Accounts receivable
(27,441
)
(19,270
)
(6,513
)
1,599
Inventories
18,637
18,064
29,125
84,503
Prepaid expenses, income tax receivable,
and other current assets
6,095
1,016
2,690
(8,540
)
Other non-current assets
92
(893
)
618
(659
)
Accounts payable
7,309
(502
)
36,450
31,146
Accrued expenses and other liabilities
(3,659
)
(11,071
)
5,984
(11,791
)
Net cash provided by operating
activities
25,248
12,289
173,868
197,954
Cash Flows used in Investing
Activities:
Purchases of short-term investments
(103,242
)
(101,908
)
(358,317
)
(150,607
)
Maturities of short-term investments
99,999
—
250,606
—
Purchases of equipment and capitalized
software
(2,360
)
(2,240
)
(7,575
)
(9,595
)
Net cash used in investing activities
(5,603
)
(104,148
)
(115,286
)
(160,202
)
Cash Flows used in Financing
Activities:
Proceeds from short-term borrowings
847
17,321
26,051
88,198
Repayment of short-term borrowings
(847
)
(17,321
)
(26,051
)
(88,198
)
Purchase of treasury shares
(4,643
)
—
(12,375
)
(5,392
)
Dividend payments
(2,627
)
(2,103
)
(10,527
)
(8,410
)
Issuance of stock under Employee Stock
Purchase Plan
571
552
1,108
1,089
Payment of payroll taxes on stock-based
compensation through shares withheld
(2,139
)
(2,145
)
(3,424
)
(3,015
)
Net cash used in financing activities
(8,838
)
(3,696
)
(25,218
)
(15,728
)
Increase in cash and cash equivalents
10,807
(95,555
)
33,364
22,024
Cash and cash equivalents, beginning of
year
167,511
240,509
144,954
122,930
Cash and cash equivalents, end of year
$
178,318
$
144,954
$
178,318
$
144,954
Non-cash Investing and Financing
Activities:
Accrued capital expenditures
$
200
$
90
$
200
$
90
Accrued purchase of treasury shares
$
240
$
—
$
240
$
—
Accrued excise tax on treasury
purchases
$
36
$
54
$
36
$
54
Supplemental Cash Flow
Information:
Income taxes paid
$
4,762
$
7,417
$
29,295
$
41,668
Interest paid
$
1
$
5
$
6
$
24
EBITDA AND ADJUSTED EBITDA
A reconciliation from Net Income to EBITDA and Adjusted EBITDA
is detailed below. Adjusted EBITDA is defined as EBITDA (defined as
earnings before interest, taxes, depreciation and amortization)
adjusted for stock-based compensation, restructuring and other
charges and non-routine legal settlements. 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 agreement. When
analyzing our operating performance, investors should use EBITDA
and Adjusted EBITDA in addition to, and not as alternatives for Net
income or any other performance measure presented in accordance
with GAAP. Our non-GAAP financial measures may not be comparable to
other similar titled measures of other companies.
Three Months Ended December
31,
LTM Ended December 31,
(1)
(amounts in thousands)
2024
2023
% Change
2024
2023
% Change
Net income
$
20,721
$
23,778
(13
)%
$
87,095
$
83,271
5
%
Depreciation and amortization
3,166
3,198
(1
)
12,984
12,654
3
Income tax expense
6,589
8,278
(20
)
30,392
29,843
2
Interest income
(4,779
)
(4,118
)
16
(18,891
)
(9,993
)
89
Interest expense
107
5
2,040
166
32
419
EBITDA
25,804
31,141
(17
)
111,746
115,807
(4
)
Restructuring and other charges (2)
—
—
—
415
2,687
(85
)
Legal settlement (3)
—
—
—
(1,700
)
—
100
Stock-based compensation
2,279
1,597
43
8,475
7,022
21
Adjusted EBITDA
$
28,083
$
32,738
(14
)%
$
118,936
$
125,516
(5
)%
(1)
LTM: Last twelve months
(2)
Restructuring and other charges in 2024 and 2023 consisted of
severance and other charges related to internal restructuring
activities.
(3)
The Company recorded $1.7 million of income in other income as a
result of a legal settlement received.
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER
SHARE
A reconciliation from Net Income to Adjusted Net Income is
detailed below. Adjusted Net Income is defined as Net Income plus
restructuring and other charges, net of tax plus or minus loss or
income from non-routine legal settlements. A reconciliation from
Diluted Earnings per Share to Adjusted Diluted Earnings per Share
is detailed below. Adjusted Diluted Earnings per Share is defined
diluted earnings per share adjusted for restructuring and other
charges, net of tax. Adjusted Net Income and Adjusted Diluted
Earnings Per Share are considered non-GAAP financial measures (see
note above in EBITDA and Adjusted EBITDA for a description of
non-GAAP financial measures). The Company believes that Adjusted
Net Income and Adjusted Diluted Earnings per Share provide helpful
information with respect to the Company's operating performance.
When analyzing our operating performance, investors should use
Adjusted Net Income and Adjusted Diluted Earnings per Share in
addition to, and not as alternatives for Net income and Diluted
Earnings per Share or any other performance measure presented in
accordance with GAAP. Our non-GAAP financial measures may not be
comparable to other similar titled measures of other companies.
Three Months Ended December
31,
Year Ended December
31,
(amounts in thousands, except per share
data)
2024
2023
% Change
2024
2023
% Change
Net income
$
20,721
$
23,778
(13
)%
$
87,095
$
83,271
5
%
Restructuring and other charges (1)
—
—
—
415
2,687
(85
)
Legal settlement (2)
—
—
—
(1,700
)
—
100
Tax benefit
—
—
—
332
(709
)
(147
)
Adjusted Net Income
$
20,721
$
23,778
(13
)%
$
86,142
$
85,249
1
%
Diluted shares
26,484
26,488
26,508
26,429
Diluted Earnings per Share
$
0.78
$
0.90
(13
)%
$
3.29
$
3.15
4
%
Adjusted Diluted Earnings per
Share
$
0.78
$
0.90
(13
)%
$
3.25
$
3.23
1
%
(1)
Restructuring and other charges in 2024 and 2023 consisted of
severance and other charges related to internal restructuring
activities.
(2)
The Company recorded $1.7 million of income in other income as a
result of a legal settlement received.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250205623753/en/
Investor Relations Contact: Thomas Baker, 603.683.2505
Senior Vice President, CFO, and Treasurer tom@connection.com
PC Connection (NASDAQ:CNXN)
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