Exhibit 99.1
PC Connection, Inc. Reports Fourth Quarter and Full Year 2015 Results
MERRIMACK, N.H.--(BUSINESS WIRE)--January 28, 2016--PC Connection, Inc. (NASDAQ: PCCC):
FOURTH QUARTER SUMMARY: | FULL YEAR SUMMARY: | ||||
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PC Connection, Inc. (NASDAQ: PCCC), a national provider of a full range of information technology (IT) solutions to business, government, healthcare, and education markets, today announced record results for the quarter ended December 31, 2015. Net sales for the fourth quarter of 2015 increased by 8.5% to $684.3 million, compared to $630.8 million for the prior year quarter. Net income for the quarter ended December 31, 2015 increased by 14.0% to $13.6 million, or $0.51 per diluted share, compared to net income of $11.9 million, or $0.45 per diluted share for the prior year quarter.
Net sales for the year ended December 31, 2015 were $2.57 billion, an increase of $110.6 million or 4.5%, compared to $2.46 billion for the year ended December 31, 2014. Net income for the year ended December 31, 2015 increased by 9.7% to $46.8 million, or $1.76 per diluted share, compared to net income of $42.7 million, or $1.61 per diluted share, for the year ended December 31, 2014. Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense (“Adjusted EBITDA”) totaled $88.5 million for 2015, compared to $80.5 million for 2014.
Quarterly Performance by Segment:
- Net sales for the SMB segment increased by 0.4% to $262.6 million in the fourth quarter of 2015, compared to the prior year quarter. Gross margin increased by 70 basis points to 15.9% due to strong performance in advanced technology solution categories including software, networking, and services.
- Net sales for the Large Account segment increased by 22.8% to $277.0 million in the fourth quarter of 2015, compared to the prior year quarter. The increase was due to strong demand for solution-based projects from enterprise customers across a number of industries and vertical markets, including significant growth in the Healthcare market. This represented the highest quarterly revenue ever achieved by the Large Account segment.
- Net sales to the Public Sector segment increased by 0.8% to $144.7 million in the fourth quarter of 2015, compared to the prior year quarter. Gross margin improved 40 basis points due to double-digit sales increases in software and networking.
Quarterly Sales by Product Mix:
- Notebook/mobility sales, the Company’s largest product category, increased by 14% year over year and accounted for 20% of net sales in the fourth quarter of 2015 and 2014. Mobility continues to be a strategic focus area for customers in each of our three segments.
- Software sales increased by 19% year over year and accounted for 20% of net sales in the fourth quarter of 2015 compared to 18% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and virtualization.
Overall gross profit increased by $8.7 million, or 10.5%, in the fourth quarter of 2015, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, increased to 13.4% in the fourth quarter of 2015, compared to 13.2% for the prior year quarter.
Selling, general and administrative dollars increased in the fourth quarter of 2015 to $69.0 million from $63.0 million in the prior year quarter and slightly increased as a percentage of net sales to 10.1% from 10.0%. Included in these totals were $0.3 million of start-up and transition costs related to our new advanced configuration and distribution center, which was operational at the end of the third 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 year ended December 31, 2015. Total cash was $80.2 million at December 31, 2015, compared to $60.9 million at December 31, 2014. In January 2016, we paid a 40 cent per share special dividend to shareholders, which totaled $10.6 million. Days sales outstanding were 44 days at December 31, 2015, and inventory turns were 22 turns in the fourth quarter of 2015.
“The Company had record performance in both net sales and net income this quarter and for the year ended December 31, 2015. We were able to increase sales and earnings, while continuing to make investments to strengthen our capabilities as a leading National Solutions Provider,” said Timothy McGrath, President and Chief Executive Officer. “Also, for the fifth consecutive year, we paid a special dividend to shareholders. We believe our team and the strategies we have in place position us well to gain market share and increase long-term shareholder value.”
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.
About PC Connection, Inc.
PC Connection, Inc., a Fortune 1000 company, has three wholly owned sales subsidiaries: PC Connection Sales Corporation, MoreDirect, Inc., and GovConnection, Inc., headquartered in Merrimack, NH; Boca Raton, FL; and Rockville, MD; respectively. All three companies can 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. Investors and media can find more information about PC Connection, Inc. at http://ir.pcconnection.com.
PC Connection Sales Corporation (800-800-5555), the original business of PC Connection, Inc. serving primarily the small- and medium-sized business sector, is a rapid-response provider of IT products and services. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, catalogs, publications, and its website at www.pcconnection.com. This company also serves consumer and small office users and is, under its MacConnection brand (800-800-2222), one of Apple’s largest authorized online resellers at www.macconnection.com.
MoreDirect, Inc. (561-237-3300), www.moredirect.com, 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™, our proprietary cloud-based eProcurement system. MoreDirect’s team of engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.
GovConnection, Inc. (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, catalogs, publications, and online at www.govconnection.com.
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“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are subject to risks and uncertainties, including, but 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, fluctuations in operating results, and the ability of the Company to manage costs in response to fluctuations in revenue, and other risks that could cause actual results to differ materially from expectations, including those detailed 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, 2014. 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 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 disclaims any 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.
| CONSOLIDATED SELECTED FINANCIAL INFORMATION | ||||||||||||||||||||||
| At or for the Three Months Ended December 31, | 2015 | 2014 | ||||||||||||||||||||
| % | ||||||||||||||||||||||
| (Amounts and shares in thousands, except operating data, P/E ratio, and per share data) | Change | |||||||||||||||||||||
| Operating Data: | ||||||||||||||||||||||
| Net sales | $ | 684,323 | $ | 630,765 | 8 | % | ||||||||||||||||
| Diluted earnings per share | $ | 0.51 | $ | 0.45 | 13 | % | ||||||||||||||||
| Gross margin | 13.4 | % | 13.2 | % | ||||||||||||||||||
| Operating margin | 3.3 | % | 3.2 | % | ||||||||||||||||||
| Return on equity (1) | 12.5 | % | 12.5 | % | ||||||||||||||||||
| Inventory turns | 22 | 26 | ||||||||||||||||||||
| Days sales outstanding | 44 | 40 | ||||||||||||||||||||
| % of | % of | |||||||||||||||||||||
| Product Mix: | Net Sales | Net Sales | ||||||||||||||||||||
| Notebooks/Mobility | 20 | % | 20 | % | ||||||||||||||||||
| Software | 20 | 18 | ||||||||||||||||||||
| Servers/Storage | 12 | 14 | ||||||||||||||||||||
| Net/Com Products | 10 | 10 | ||||||||||||||||||||
| Other Hardware/Services | 38 | 38 | ||||||||||||||||||||
| Total Net Sales | 100 | % | 100 | % | ||||||||||||||||||
| Stock Performance Indicators: | ||||||||||||||||||||||
| Actual shares outstanding | 26,498 | 26,343 | ||||||||||||||||||||
| Total book value per share | $ | 14.81 | $ | 13.44 | ||||||||||||||||||
| Tangible book value per share | $ | 12.81 | $ | 11.42 | ||||||||||||||||||
| Closing price | $ | 22.64 | $ | 24.55 | ||||||||||||||||||
| Market capitalization | $ | 599,915 | $ | 646,721 | ||||||||||||||||||
| Trailing price/earnings ratio | 12.9 | 15.3 | ||||||||||||||||||||
| LTM Adjusted EBITDA (2) | $ | 88,509 | $ | 80,475 | ||||||||||||||||||
| Adjusted market capitalization/LTM Adjusted EBITDA (3) | 5.9 | 7.3 | ||||||||||||||||||||
| (1) Based on last twelve months' net income. | ||||||||||||||||||||||
| (2) Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for 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 December 31, | 2015 | 2014 | ||||||||||||||||||||
| Net | Gross | Net | Gross | |||||||||||||||||||
| (amounts in thousands) | Sales | Margin | Sales | Margin | ||||||||||||||||||
| SMB | $ | 262,646 | 15.9 | % | $ | 261,661 | 15.2 | % | ||||||||||||||
| Large Account | 276,980 | 11.6 | 225,609 | 11.6 | ||||||||||||||||||
| Public Sector | 144,697 | 12.3 | 143,495 | 11.9 | ||||||||||||||||||
| Total | $ | 684,323 | 13.4 | % | $ | 630,765 | 13.2 | % | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| Three Months Ended December 31, | 2015 | 2014 | ||||||||||||||||
| (amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||
| Net sales | $ | 684,323 | 100.0 | % | $ | 630,765 | 100.0 | % | ||||||||||
| Cost of sales | 592,472 | 86.6 | 547,641 | 86.8 | ||||||||||||||
| Gross profit | 91,851 | 13.4 | 83,124 | 13.2 | ||||||||||||||
| Start-up costs - new distribution center | 296 | – | – | – | ||||||||||||||
| Selling, general and administrative expenses, other | 68,664 | 10.1 | 63,035 | 10.0 | ||||||||||||||
| Income from operations | 22,891 | 3.3 | 20,089 | 3.2 | ||||||||||||||
| Interest/other expense, net | (20 | ) | – | (14 | ) | – | ||||||||||||
| Income tax provision | (9,258 | ) | (1.3 | ) | (8,131 | ) | (1.3 | ) | ||||||||||
| Net income | $ | 13,613 | 2.0 | % | $ | 11,944 | 1.9 | % | ||||||||||
| Earnings per common share: | ||||||||||||||||||
| Basic | $ | 0.51 | $ | 0.45 | ||||||||||||||
| Diluted | $ | 0.51 | $ | 0.45 | ||||||||||||||
| Shares used in the computation of earnings per common share: | ||||||||||||||||||
| Basic | 26,459 | 26,311 | ||||||||||||||||
| Diluted | 26,632 | 26,554 | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| Years Ended December 31, | 2015 | 2014 | ||||||||||||||||
| (amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||
| Net sales | $ | 2,573,973 | 100.0 | % | $ | 2,463,339 | 100.0 | % | ||||||||||
| Cost of sales | 2,232,954 | 86.8 | 2,139,950 | 86.9 | ||||||||||||||
| Gross profit | 341,019 | 13.2 | 323,389 | 13.1 | ||||||||||||||
| Start-up costs - new distribution center | 1,026 | – | – | – | ||||||||||||||
| Selling, general and administrative expenses, other | 261,439 | 10.2 | 251,935 | 10.2 | ||||||||||||||
| Income from operations | 78,554 | 3.0 | 71,454 | 2.9 | ||||||||||||||
| Interest/other expense, net | (87 | ) | – | (86 | ) | – | ||||||||||||
| Income tax provision | (31,640 | ) | (1.2 | ) | (28,687 | ) | (1.2 | ) | ||||||||||
| Net income | $ | 46,827 | 1.8 | % | $ | 42,681 | 1.7 | % | ||||||||||
| Earnings per common share: | ||||||||||||||||||
| Basic | $ | 1.77 | $ | 1.63 | ||||||||||||||
| Diluted | $ | 1.76 | $ | 1.61 | ||||||||||||||
| Shares used in the computation of earnings per common share: | ||||||||||||||||||
| Basic | 26,398 | 26,246 | ||||||||||||||||
| Diluted | 26,616 | 26,512 | ||||||||||||||||
| 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 December 31, | Years Ended December 31, | ||||||||||||||||||||||
| 2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||||||
| Net income | $ | 13,613 | $ | 11,944 | $ | 46,827 | $ | 42,681 | ||||||||||||||||
| Depreciation and amortization | 2,364 | 2,095 | 8,961 | 8,092 | ||||||||||||||||||||
| Income tax expense | 9,258 | 8,131 | 31,640 | 28,687 | ||||||||||||||||||||
| Interest/other expense, net | 20 | 14 | 87 | 86 | ||||||||||||||||||||
| EBITDA | 25,255 | 22,184 | 87,515 | 79,546 | ||||||||||||||||||||
| Stock-based compensation | 274 | 228 | 994 | 929 | ||||||||||||||||||||
| Adjusted EBITDA | $ | 25,529 | $ | 22,412 | 14 | % | $ | 88,509 | $ | 80,475 | 10 | % | ||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | 2015 | 2014 | ||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | 80,188 | $ | 60,909 | ||||||||||||||||||||
| Accounts receivable, net | 356,145 | 293,027 | ||||||||||||||||||||||
| Inventories | 102,780 | 90,917 | ||||||||||||||||||||||
| Deferred income taxes | 7,909 | 7,749 | ||||||||||||||||||||||
| Prepaid expenses and other current assets | 4,254 | 5,332 | ||||||||||||||||||||||
| Income taxes receivable | 1,575 | 212 | ||||||||||||||||||||||
| Total current assets | 552,851 | 458,146 | ||||||||||||||||||||||
| Property and equipment, net | 32,227 | 27,861 | ||||||||||||||||||||||
| Goodwill | 51,276 | 51,276 | ||||||||||||||||||||||
| Other intangibles, net | 1,668 | 1,953 | ||||||||||||||||||||||
| Other assets | 1,052 | 724 | ||||||||||||||||||||||
| Total Assets | $ | 639,074 | $ | 539,960 | ||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||||||
| Accounts payable | $ | 166,516 | $ | 124,893 | ||||||||||||||||||||
| Accrued expenses and other liabilities | 36,207 | 22,011 | ||||||||||||||||||||||
| Accrued payroll | 19,280 | 17,793 | ||||||||||||||||||||||
| Total current liabilities | 222,003 | 164,697 | ||||||||||||||||||||||
| Deferred income taxes | 21,615 | 18,803 | ||||||||||||||||||||||
| Other liabilities | 3,005 | 2,452 | ||||||||||||||||||||||
| Total Liabilities | 246,623 | 185,952 | ||||||||||||||||||||||
| Stockholders’ Equity: | ||||||||||||||||||||||||
| Common stock | 284 | 282 | ||||||||||||||||||||||
| Additional paid-in capital | 109,161 | 106,956 | ||||||||||||||||||||||
| Retained earnings | 298,868 | 262,632 | ||||||||||||||||||||||
| Treasury stock at cost | (15,862 | ) | (15,862 | ) | ||||||||||||||||||||
| Total Stockholders’ Equity | 392,451 | 354,008 | ||||||||||||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 639,074 | $ | 539,960 | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
| Years Ended December 31, | 2015 | 2014 | ||||||||||
| (amounts in thousands) | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net income | $ | 46,827 | $ | 42,681 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 8,961 | 8,092 | ||||||||||
| Provision for doubtful accounts | 1,097 | 1,383 | ||||||||||
| Stock-based compensation expense | 994 | 929 | ||||||||||
| Deferred income taxes | 2,652 | 1,212 | ||||||||||
| Loss on disposal of fixed assets | 44 | 14 | ||||||||||
| Excess tax benefit from exercise of equity awards | (552 | ) | (556 | ) | ||||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (64,215 | ) | (11,359 | ) | ||||||||
| Inventories | (11,863 | ) | (11,776 | ) | ||||||||
| Prepaid expenses and other current assets | (285 | ) | 1,829 | |||||||||
| Other non-current assets | (328 | ) | (4 | ) | ||||||||
| Accounts payable | 41,324 | 202 | ||||||||||
| Accrued expenses and other liabilities | 6,206 | 2,751 | ||||||||||
| Net cash provided by operating activities | 30,862 | 35,398 | ||||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Purchases of equipment | (12,337 | ) | (7,609 | ) | ||||||||
| Purchase of intangible asset | (450 | ) | - | |||||||||
| Proceeds from sale of equipment | - | 13 | ||||||||||
| Net cash used for investing activities | (12,787 | ) | (7,596 | ) | ||||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Dividend payment | - | (10,527 | ) | |||||||||
| Issuance of stock under Employee Stock Purchase Plan | 875 | 753 | ||||||||||
| Excess tax benefit from exercise of equity awards | 552 | 556 | ||||||||||
| Exercise of stock options | 437 | 356 | ||||||||||
| Payment of payroll taxes on stock-based compensation through shares withheld | (660 | ) | (578 | ) | ||||||||
| Net cash provided by (used for) financing activities | 1,204 | (9,440 | ) | |||||||||
| Increase in cash and cash equivalents | 19,279 | 18,362 | ||||||||||
| Cash and cash equivalents, beginning of period | 60,909 | 42,547 | ||||||||||
| Cash and cash equivalents, end of period | $ | 80,188 | $ | 60,909 | ||||||||
| Non-cash Investing Activities: | ||||||||||||
| Dividend declaration | $ | 10,591 | $ | - | ||||||||
| Accrued capital expenditures | $ | 504 | $ | 205 | ||||||||
| Supplemental Cash Flow Information: | ||||||||||||
| Income taxes paid | $ | 30,371 | $ | 24,219 | ||||||||
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CONTACT:
PC Connection, Inc.
Joseph Driscoll, 603-683-2505
Senior Vice President, Treasurer and Chief Financial Officer