EXHIBIT 99.1
Contact: |
Frank Khulusi, Chairman, President and CEO
Brandon LaVerne, CFO
Joe Hayek, Executive Vice President
PC Mall, Inc.
(310) 354-5600
PC MALL REPORTS FIRST QUARTER RESULTS
Consolidated First Quarter Highlights: |
| • | Net sales for Q1 2009 were $259.3 million, down 23% year-over-year (YOY) |
| • | Gross profit for Q1 2009 was $37.5 million, down 17% YOY |
| • | Gross profit margin for the quarter was 14.5% vs. 13.5% in Q1 2008 |
| • | Diluted EPS for the quarter was $0.08 per share vs. $0.21 in Q1 2008 |
| • | Operating cash flow was $19.0 million in Q1 2009 |
| • | We purchased 430,374 shares of our common stock in Q1 2009 at an average price of $3.80 per share |
Torrance, California –May 6, 2009 — PC Mall, Inc. (NASDAQ:MALL - news) today reported first quarter financial results. Consolidated net sales for Q1 2009 were $259.3 million, a $77.3 million or 23% decrease from consolidated net sales of $336.6 million in Q1 2008. Consolidated gross profit for Q1 2009 decreased 17% to $37.5 million from $45.3 million in Q1 2008. Consolidated gross profit margin was 14.5% for Q1 2009 compared to 13.5% for Q1 2008. Consolidated operating profit for Q1 2009 decreased 67% to $2.1 million, compared to $6.2 million for Q1 2008. Consolidated net income for Q1 2009 was $1.0 million compared to $3.0 million in Q1 2008, a decrease of $2.0 million or 66%. Diluted EPS for Q1 2009 was $0.08 compared to diluted EPS of $0.21 for Q1 2008.
Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, “In the first quarter, demand was under significant pressure as commercial and public sector clients delayed the approval of IT budgets, which we believe was driven by ongoing economic uncertainty. Though the environment remained challenging during the entire quarter, we continued to execute on our strategy of containing costs while making strategic investments. I am proud of the way our team has executed during these challenging times. We remain focused on exceeding our customers’ expectations as a value added provider of comprehensive IT solutions. We believe our value proposition is as strong as it has ever been and we continue to be dedicated to optimizing our results in the current environment while positioning ourselves for future growth.”
Segment Results
SMB
Q1 2009 net sales for our SMB segment were $89.5 million compared to $130.6 million in Q1 2008, a decrease of $41.1 million, or 32%, primarily due to continued softening in IT spending by small and medium sized businesses and a decrease of $8 million in lower margin volume iPod sales to certain customers.
SMB gross profit decreased by $4.8 million, or 30%, to $11.3 million in Q1 2009 compared to $16.1 million in Q1 2008 resulting primarily from decreased SMB net sales discussed above. SMB gross profit margin increased by 30 basis points to 12.6% in Q1 2009 compared to 12.3% in Q1 2008 primarily due to the reduction in lower margin volume iPod sales to certain customers discussed above.
SMB operating profit in Q1 2009 decreased by $2.4 million, or 30%, to $5.4 million compared to $7.8 million in Q1 2008. The decrease in SMB operating profit in Q1 2009 was primarily due to the decrease in gross profit discussed above, partially offset by a $2.2 million decrease in SMB personnel costs. The $2.2 million decrease in SMB personnel costs resulted from decreased variable commission and bonus expenses, a reduction in headcount and a one-time $0.6 million benefit related to the Canadian government labor subsidy program.
1
MME
Q1 2009 net sales for our MME segment were $84.9 million compared to $102.9 million in Q1 2008, a decrease of $18.0 million, or 18%. This decrease was primarily due to continued softening demand by customers in the mid-market enterprise sector in Q1 2009. Product revenues declined by 24% in Q1 of 2009 compared to Q1 of 2008, while service revenues increased by 7% in Q1 2009 compared to Q1 2008. Service revenues represented 27% of MME net sales in Q1 2009 compared to 21% of MME net sales in Q1 2008.
MME gross profit decreased by $1.7 million, or 10%, to $15.9 million in Q1 2009 compared to $17.6 million in Q1 2008 and MME gross profit margin increased by 160 basis points to 18.7% in Q1 2009 compared to 17.1% in Q1 2008. The decrease in MME gross profit was primarily due to the decreased MME net sales discussed above. The increase in MME gross profit margin was primarily due to an increase in service revenues as a percentage of MME’s total revenues for Q1 2009 compared to Q1 2008, as well as an increase in vendor consideration.
Our MME operating profit in Q1 2009 increased by $0.8 million, or 22%, to $4.2 million compared to $3.4 million in Q1 2008. The improvement was primarily due to a decrease in MME personnel costs of $2.2 million, which resulted primarily from centralization of resources of $1.3 million to our Corporate & Other segment, a $0.4 million decrease in variable compensation costs and a reduction in MME headcount in Q1 2009, partially offset by the decrease in MME gross profit discussed above and a $0.4 million increase in bad debt expense, primarily related to a single customer.
Public Sector
Q1 2009 net sales for our Public Sector segment were $27.2 million compared to $35.2 million in Q1 2008, a decrease of $8.0 million, or 23%. This decrease was primarily due to reduced sales in our federal government business relating to the delay in approval of the federal budget by the Federal government, partially offset by an increase in sales in our state and local business.
Public Sector gross profit increased by $0.1 million, or 2%, to $3.7 million in Q1 2009 compared to $3.6 million in Q1 2008. Public Sector gross profit margin increased by 320 basis points to 13.5% in Q1 2009 compared to 10.3% in Q1 2008. The increase in our Public Sector gross profit and gross profit margin was primarily due to a stronger product mix in Q1 2009 compared to Q1 2008.
Our Public Sector segment reported an operating profit of $0.9 million in Q1 2009 compared to $0.8 million in Q1 2008. The $0.1 million increase in Public Sector operating profit in Q1 2009 was primarily due to the increase in its gross profit.
Consumer
Q1 2009 net sales for our Consumer segment were $57.6 million compared to $67.8 million in Q1 2008, a decrease of $10.2 million, or 15%. This decrease was primarily due to continued softness in consumer spending.
Consumer gross profit decreased by $1.4 million, or 17%, to $6.6 million in Q1 2009 compared to $8.0 million in Q1 2008. Consumer gross profit margin decreased by 30 basis points to 11.5% in Q1 2009 compared to 11.8% in Q1 2008. The decrease in our Consumer gross profit was primarily due to the decrease in Consumer net sales discussed above. The decrease in our Consumer gross profit margin was primarily due to a very competitive pricing environment, partially offset by sales of higher margin opportunistic product purchases we made in late 2008.
Consumer operating profit in Q1 2009 decreased by $1.0 million, or 34%, to $1.8 million compared to $2.8 million in Q1 2008 primarily due to the decrease in Consumer gross profit discussed above, partially offset by reduction in advertising expenditures and a reduction in Consumer credit card related charges.
Corporate and Other
Corporate and Other selling, general and administrative expenses includes corporate related expenses such as legal, accounting, information technology, product management and other administrative costs that are not otherwise included in our reportable operating segments. Q1 2009 Corporate and Other SG&A expenses increased by $1.6 million, or 18%, to
2
$10.3 million from $8.7 million in Q1 2008. The increase was primarily due to $1.3 million of centralization of certain resources from our MME segment, $0.5 million of increased professional fees, which we expect will be substantially non-recurring, and investments in IT infrastructure, partially offset by headcount reductions.
Consolidated Balance Sheet
Accounts receivable at March 31, 2009 of $127.8 million decreased by $20.7 million from December 31, 2008 primarily due to lower open account sales during Q1 2009 compared to Q4 2008. Our inventory of $47.5 million at March 31, 2009 represents a decrease of $20.3 million from December 31, 2008 reflecting the sell-through of seasonal and strategic purchases made in late 2008. Outstanding borrowings under our line of credit decreased by $12.7 million to $16.3 million at March 31, 2009 compared to December 31, 2008. Operating cash flow generated during Q1 2009 was $19.0 million compared to a negative operating cash flow of $16.5 million in Q1 2008.
Outlook
Commenting on outlook for the remainder of 2009, Mr. Khulusi said, “We expect the demand environment to be challenging for the remainder of 2009. As a result, we continue to implement cost reduction measures, including personnel and other general and administrative cost reductions. As part of these cost reduction measures, we have implemented an employee furlough program applicable for 2009, which we expect will result in pre-tax savings of approximately $1.7 million during the remainder of 2009. Partially offsetting these cost reductions are strategic investments we intend to make to better position ourselves for future growth.”
Selected Segment Information
Selected information for our reportable operating segments is as follows (in thousands, except headcount data):
| Three Months Ended March 31, 2009 |
| Three Months Ended March 31, 2008 | ||||||||||||||
|
| Net Sales |
|
| Gross Profit |
|
| Operating Profit |
|
| Net Sales |
|
| Gross Profit |
|
| Operating Profit |
SMB | $ | 89,504 |
| $ | 11,281 |
| $ | 5,439 |
| $ | 130,649 |
| $ | 16,094 |
| $ | 7,804 |
MME |
| 84,930 |
|
| 15,871 |
|
| 4,147 |
|
| 102,920 |
|
| 17,588 |
|
| 3,389 |
Public Sector |
| 27,240 |
|
| 3,683 |
|
| 894 |
|
| 35,201 |
|
| 3,618 |
|
| 844 |
Consumer |
| 57,619 |
|
| 6,632 |
|
| 1,841 |
|
| 67,843 |
|
| 7,977 |
|
| 2,795 |
Corporate & Other |
| 7 |
|
| 28 |
|
| (10,261) |
|
| 14 |
|
| 58 |
|
| (8,682) |
Consolidated | $ | 259,300 |
| $ | 37,495 |
| $ | 2,060 |
| $ | 336,627 |
| $ | 45,335 |
| $ | 6,150 |
|
| Three Months Ended March 31, |
| Three Months Ended December 31, | ||||
Average Account Executive Headcount By Segment(1): |
|
| 2009 |
|
| 2008 |
| 2008 |
SMB |
|
| 366 |
|
| 411 |
| 364 |
MME |
|
| 101 |
|
| 112 |
| 107 |
Public Sector |
|
| 79 |
|
| 99 |
| 81 |
Consumer |
|
| 103 |
|
| 125 |
| 100 |
Total |
|
| 649 |
|
| 747 |
| 652 |
|
|
|
|
|
|
|
|
|
______________________
(1) Headcount numbers are calculated based on an average of all sales executives and trainees employed during the period.
* * *
3
Conference Call
Management will hold a conference call, which will be webcast, on Wednesday, May 6, 2009 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss first quarter results. To listen to PC Mall management’s discussion of its first quarter results live, access www.pcmall.com/investor.
The archived webcast can be accessed at www.pcmall.com/investor under “Calendar of Events.” A replay of the conference call by phone will be available from 7:30 p.m. ET on May 6, 2009 until May 13, 2009 and can be accessed by calling: (888) 286-8010 and inputting pass code 16692579.
About PC Mall, Inc.
PC Mall, Inc., together with its wholly-owned subsidiaries, founded in 1987, is a value added direct marketer of technology products, services and solutions, to businesses, government and educational institutions and individual consumers. We offer our products, services and solutions through dedicated account executives, various direct marketing techniques, and three retail stores. We also utilize distinctive full-color catalogs under the PC Mall, MacMall, PC Mall Gov and SARCOM brands and our websites pcmall.com, macmall.com, pcmallgov.com, gmri.com, sarcom.com, abreon.com and onsale.com, and other promotional materials. Customer product orders are rapidly filled by our distribution center strategically located near FedEx's main hub or by our extensive network of distributors, which is one of the largest networks in the industry.
Forward-looking Statements
This press release may contain 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. Such forward-looking statements include statements regarding our expectations, hopes or intentions regarding the future, including, but not limited to, expectations or statements relating to our ability to exceed our customers’ expectations as a value added provider of comprehensive IT solutions, the strength of our value proposition, our ability to optimize our results in the current environment while positioning ourself for future growth, and expectations regarding cost reductions and investments. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause our actual results to differ materially include without limitation the following: uncertainties relating to the relationship between the number of our account executives and productivity; decreases in revenues related to decreased sales related to any of our segments, including but not limited to, potential decreases in sales resulting from the loss of customer or a further downturn in the economy or continued economic recession; increased competition, including, but not limited to, increased competition from direct sales by some of our largest vendors and increased pricing pressures which affect our pricing strategy in any given period; the effect of the our pricing strategy on our operating results; risks related to our ability to retain key personnel; risks and uncertainties relating to our ability to identify suitable acquisition targets, to complete acquisitions of identified targets (including the challenges and costs of closing the transaction), and our ability to integrate companies we may acquire and our ability to achieve synergies expected from such acquisitions (including our acquisition of SARCOM); the impact of acquisitions on relationships with key customers and vendors; potential decreases in sales related to changes in our vendors products; risks of decreased sales related to the potential lack of availability of government funding applicable to our public sector contracts; availability of key vendor incentives and other vendor assistance; the impact of seasonality on our sales; availability of products from third party suppliers at reasonable prices; risks of business and other conditions in the Asia Pacific region and our limited experience operating in the Philippines, which could prevent us from realizing expected benefits from our Philippines operations; increased expenses, including, but not limited to, interest expense, foreign currency transaction gains/losses, and other expenses which may increase as a result of future inflationary pressures; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; risks due to shifts in market demand or price erosion of owned inventory; risks related to foreign currency fluctuations; risks related to data security; litigation by or against us; availability of financing, including availability under our existing credit lines; and inability to convert back orders to completed sales. Additional factors that could cause our actual results to differ are discussed under the heading "Risk Factors" in Item 1A, Part I of our Form 10-K for the year ended December 31, 2008, on file with the Securities and Exchange Commission, and in our other reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements.
###
-Financial Tables Follow-
4
PC MALL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
|
| Three Months Ended March 31, |
| |||||
|
|
| 2009 |
|
| 2008 |
| |
Net Sales |
| $ | 259,300 |
| $ | 336,627 |
| |
Cost of goods sold |
|
| 221,805 |
|
| 291,292 |
| |
Gross profit |
|
| 37,495 |
|
| 45,335 |
| |
Selling, general and administrative expenses |
|
| 35,435 |
|
| 39,185 |
| |
Operating profit |
|
| 2,060 |
|
| 6,150 |
| |
Interest expense, net |
|
| 364 |
|
| 1,213 |
| |
Income before income taxes |
|
| 1,696 |
|
| 4,937 |
| |
Income tax expense |
|
| 685 |
|
| 1,941 |
| |
Net income |
| $ | 1,011 |
| $ | 2,996 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Basic and Diluted Earnings Per Common Share |
|
|
|
|
|
|
| |
Basic |
| $ | 0.08 |
| $ | 0.23 |
| |
Diluted |
|
| 0.08 |
|
| 0.21 |
| |
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
| |
Basic |
|
| 12,416 |
|
| 13,267 |
| |
Diluted |
|
| 12,620 |
|
| 13,998 |
| |
5
PC MALL, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts and share data)
|
| March 31, 2009 |
| December 31, 2008 |
| ||
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 4,876 |
| $ | 6,748 |
|
Accounts receivable, net of allowances of $4,413 and $4,241 |
|
| 127,805 |
|
| 148,547 |
|
Inventories, net |
|
| 47,538 |
|
| 67,845 |
|
Prepaid expenses and other current assets |
|
| 8,872 |
|
| 7,328 |
|
Deferred income taxes |
|
| 4,791 |
|
| 4,820 |
|
Total current assets |
|
| 193,882 |
|
| 235,288 |
|
Property and equipment, net |
|
| 12,474 |
|
| 11,839 |
|
Deferred income taxes |
|
| 3,942 |
|
| 4,173 |
|
Goodwill |
|
| 18,781 |
|
| 18,781 |
|
Intangible assets, net |
|
| 10,890 |
|
| 11,260 |
|
Other assets |
|
| 985 |
|
| 1,044 |
|
Total assets |
| $ | 240,954 |
| $ | 282,385 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
| $ | 91,503 |
| $ | 110,669 |
|
Accrued expenses and other current liabilities |
|
| 23,379 |
|
| 29,262 |
|
Deferred revenue |
|
| 11,396 |
|
| 14,462 |
|
Line of credit |
|
| 16,341 |
|
| 29,010 |
|
Notes payable – current |
|
| 1,038 |
|
| 1,038 |
|
Total current liabilities |
|
| 143,657 |
|
| 184,441 |
|
Notes payable and other long-term liabilities |
|
| 4,129 |
|
| 4,393 |
|
Total liabilities |
|
| 147,786 |
|
| 188,834 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding |
|
| — |
|
| — |
|
Common stock, $0.001 par value; 30,000,000 shares authorized; 13,842,109 and 13,839,609 shares issued; and 12,253,426 and 12,681,300 shares outstanding, respectively |
|
| 14 |
|
| 14 |
|
Additional paid-in capital |
|
| 100,070 |
|
| 99,732 |
|
Treasury stock, at cost: 1,588,683 and 1,158,309 shares, respectively |
|
| (5,211 | ) |
| (3,623 | ) |
Accumulated other comprehensive income |
|
| 1,118 |
|
| 1,262 |
|
Accumulated deficit |
|
| (2,823 | ) |
| (3,834 | ) |
Total stockholders’ equity |
|
| 93,168 |
|
| 93,551 |
|
Total liabilities and stockholders’ equity |
| $ | 240,954 |
| $ | 282,385 |
|
|
|
|
|
|
|
|
|
6
PC MALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
| Three Months Ended |
| |||||
|
| 2009 |
|
| 2008 |
| ||
Cash Flows From Operating Activities |
|
|
|
|
|
| ||
Net income |
| $ | 1,011 |
|
| $ | 2,996 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
| 1,290 |
|
| 1,512 |
| ||
Provision for deferred income taxes |
| 231 |
|
| 147 |
| ||
Net tax expense related to stock option exercises |
| (82) |
|
| — |
| ||
Excess tax benefit related to stock option exercises |
| (3 | ) |
| — |
| ||
Non-cash stock-based compensation |
| 416 |
|
| 382 |
| ||
Change in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
| 20,742 |
|
| 10,966 |
| ||
Inventories |
| 20,307 |
|
| 12,158 |
| ||
Prepaid expenses and other current assets |
| (1,544 | ) |
| (413 | ) | ||
Other assets |
| 59 |
|
| 235 |
| ||
Accounts payable |
| (14,506 | ) |
| (42,519 | ) | ||
Accrued expenses and other current liabilities |
| (5,842 | ) |
| (2,892 | ) | ||
Deferred revenue |
| (3,066 | ) |
| 882 |
| ||
Total adjustments |
| 18,002 |
|
| (19,542 | ) | ||
Net cash provided by (used in) operating activities |
| 19,013 |
|
| (16,546 | ) | ||
Cash Flows From Investing Activities |
|
|
|
|
|
| ||
Purchases of property and equipment |
| (1,555 | ) |
| (807 | ) | ||
Net cash used in investing activities |
| (1,555 | ) |
| (807 | ) | ||
Cash Flows From Financing Activities |
|
|
|
|
|
| ||
Repayments under notes payable |
| (244 | ) |
| (193 | ) | ||
Net (payments) borrowings under line of credit |
| (12,669 | ) |
| 4,380 |
| ||
Change in book overdraft |
| (4,660 | ) |
| 11,447 |
| ||
Payments of obligations under capital lease |
| (32 | ) |
| (64 | ) | ||
Proceeds from stock issued under stock option plans |
| 4 |
|
| 36 |
| ||
Excess tax benefit related to stock option exercises |
| 3 |
|
| — |
| ||
Common shares repurchased and held in treasury |
| (1,588 | ) |
| — |
| ||
Net cash (used in) provided by financing activities |
| (19,186 | ) |
| 15,606 |
| ||
Effect of foreign currency on cash flow |
| (144 | ) |
| (186 | ) | ||
Net change in cash and cash equivalents |
| (1,872 | ) |
| (1,933 | ) | ||
Cash and cash equivalents at beginning of the period |
| 6,748 |
|
| 6,623 |
| ||
Cash and cash equivalents at end of the period |
| $ | 4,876 |
|
| $ | 4,690 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
| ||
Interest paid |
| $ | 432 |
|
| $ | 1,241 |
|
Income taxes paid |
| 1,821 |
|
| 78 |
| ||
Supplemental Non-Cash Investing and Financing Activities |
|
|
|
|
|
| ||
Goodwill related to acquisitions |
| $ | — |
|
| $ | 234 |
|
7