CNXN - Earnings call transcript Q4 2017

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter 2017 Connection's Earnings Conference Call. My name is Amanda and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

Following the prepared remarks, there will be a question-and-answer session.

As a reminder, this conference call is the property of Connection and may not be recorded or rebroadcast without specific permission from the company.

is McGuinness, President Financial Director today Officer; Chief Reporting. call Colin and of the Tim and McGrath, Executive On Accounting and today's Unfortunately, unavailable Interim our call. attend Bill CFO Schulze, to is historical the Any or that statements deemed statements. references be during facts, statements conference be may made are call not forward-looking to of Private prospects, Act management Safe for statements the XXXX. of the In that about company's forward-looking may particular, various Reform future constitute the provisions Securities under the Harbor make of remarks expectations, Litigation plans, and purposes Securities Actual important those XX-K statements Form company's that results and other Commission, as year in Risk indicated by company as a to from the well the Exchange differ December materially on may from for those which the the these result factors, is the in ended of Report as forward-looking of documents with discussed XXXX, section time. time various XX, the files Factors Commission on with file Annual including

views should forward-looking as date. statements In as relied of any today views not of represent addition, representing upon be subsequent any management's and

should estimates statements and any may any views date to forward-looking the if to today. so, update company point of rely not obligation forward-looking some these statements the company as even the While specifically in you elect disclaims therefore, on as at do future, change, representing subsequent to

to sir. available on call McGrath. website. earnings webcast on and release be would reconciliation being proceed, also over on between A be release available Tim measures company's the call discussed. the like call, Please available I The this Connection's will non-GAAP to is in and the earnings will now During today's financial GAAP website. is turn and two website. is the Today's

Timothy McGrath

results. everyone you. us you fourth and financial quarter today to Thank joining review the company's afternoon for Good thank

$XX grew please in comparisons business in XXXX. quarter fourth million, solutions and that by quarter solutions. in $XXX against growth review unless a to our being we results, or our are the quarter X% X.X% Net million all record stated, XXXX sales by of led As otherwise growth made note fourth enterprise X.X% fourth

saw which saw also and markets segment sized and We a finance. our serves SMB increase businesses. Solutions growth a center strong which the effort for grew mobility retail, an in The to strong X%. revenues of advanced grew small-to-medium $XXX the products, client Desktop manufacturing, quarter data for million. both continues quarter. Business record client this enhance We QX grew grew as device vertical and Sales includes growth for XX% technology. productivity segment devices converged X.X% was customers services, the software technology Advanced in to and fourth straight security. also refresh and upgraded quarter in in

store technology a declined XX%. XX% for businesses account server overall Although grew large X.X% represented net solutions. sales business sales common of sales sales total, XX% a software and million. [ph] In of record advanced $XXX grew increased Sales record solutions to enterprise

Our enterprise the large investments quarter by IT project rollouts. in increased driven customers their

for Client grew and revenues the looking seeing and of strategy. trends, digital we're large their grew X% XX% software addition, a In revenues first XX% segments. technology QX represented with industry storage overall transform XX%. grew with business account Consistent and to devices companies

work a is example, device driving client For productivity refresh. force

service to $XXX in services. growth public X% strong sector million. for we addition, solutions by In decreased and managed Sales

XXXX repeat. increase did this due The government to not unusually is measured business which QX strong. in sales was federal which Our declined although of one customer sales largely last year were against federal in by XX%

by in gross mix compared was driven gross to quarter Sector margin the increase Solutions which refresh primarily and and sequential and in segment to year-over-year to vendor points year rate and competitive The in the the Our basis sales to sales Consolidated of increased margin low competitive last higher in and while local for XX.X% Solutions space. for The marketplace. and large marketplace margin profit of state to consideration our ongoing XX XX.X% increased competitive $X.X dollars the to strong Gross with was refresh. compared or decrease the to by basis higher customers for Consolidated XXXX. XXXX. profit margin account competitive to XX.X% continued XX.X% decreased marketplace decreased Gross QX Business SLED QX over education client by in by due was pleased due was primarily $XX.X year decreased was the a for governments XX XX.X% million X% the margin the busy result the the education We're due points last $X.X dollars million. due million highly by device Enterprise XX.X%. Gross season margins by both QX. federal Public selling landscape.

how vertical share in solutions me end let of we Now on in business end with model power markets. couple to you examples our with provide a the

First, In that more competitive. efficient and another their hospital be an example them productivity. large This ultimately system In helped with technology more process storage, laptops, QX case, their ambulatory innovation. we consulting their a the helps included of and we're improved delivered the services In consulting along and refresh. assessment, wireless networking, workflow how central assessment, customer servers, upgrade device empowering we to technologies.

with healthcare process helpdesk system onsite global delivery services and source Windows a and a project solution. their our staff company In provided design we helped along augmentation, one using hardware, global refresh. software XX management, global also the We

slightly quarter year. last about are improve million million charges $XX.X the SG&A our $XX.X technology. from We with helping passionate their customers to increased businesses special including in

which compensation in offset that QX disciplines QX. additional operating we introduced by expense You were higher may in sales recall

uncertain macroeconomic This to to mission the environment. continue of in business. enable should in continue areas this monitor to growth We critical costs us discipline our invest

of efforts enacted XX, changes special QX charge other consideration one-time the we release You this may week rate. and a federal In employee approximately for reduced from for tax their job our forward recorded In $XXXX XX%. has our press taxes. ended nonexecutive announced tax bonus going December, we tax we a for among awarded related of U.S. December have payroll cash the which last XXXX each that seen our year been bonus which to in Historically $X.X act federal combined income income cuts and million rate was XXXX.

Although the we're for still its we rate also impacts This tax December XXXX. new the from net will XX%. range XX, XX% to of legislation, deferred to estimate evaluating tax the our reduction adjust year the various effective required company rate fiscal ending combined balance for that XXXX

benefit Overall, of financial of XXXX. was Diluted Including performance share quarter an result the company solid. million the cash was in quarter $X.XX to compared increase of was last net As earnings the year. $XX.X a million $XX the million bonus per to $X.XX year. compared recorded for fourth our million last adjustment, income a $X.X tax the benefit, of and non-cash tax income $X.X

Excluding the to tax bonus year. $X.XX impact of was last earnings $X.XX and the adjusted benefit, compared income our one-time per share

XXXX $XX In mid dividend January million. QX a EBITDA addition, to In $X $X.XX declared we which and million shareholders. was our adjusted returned were paid

and quarter cash, free. continue days as to outstanding XX inventory XX. sheet days is turns the ended We debt strong $XX in was with Our we million be was balance

while flexibility. to Our maintaining goal shareholder value maximize financial is

assess capital opportunities dividends and to We continue other as and allocations buybacks. such M&A stock

was $XX in solid a have approximately previously a XXXX As share revenue repurchases. we million authorized growth. year for still reminder,

in saw earlier, strong vertical manufacturing. mentioned we retail, particularly As markets and growth finance

Moving investments and operational our improvements. to efficiencies continue forward we'll make in our

customers greater experience. building saw remain the workspace, security. we investing our in on formed growth touch our for of center, double-digit earlier new and and ecommerce cloud, This place in [indiscernible] workforce to capabilities. a that technologies areas example, our human the our data organization. We For and orders realigned including them website, advanced for year new business. better require www.connection.com software us enables launched frictionless and overall we result our managed hybrid and services and in dedicated website customer digital complex ecommerce of focused lot productivity defined business We a in We're

to as software our model that's through we cloud, growth relevant and continues including navigate help We more business customers and assessments. more than virtualization, Our disruptive. security is ever believe our more business complex security technology

enhanced suppliers, We customers, future. sales our the well have portfolio us positioned balance have for believe our and that solutions our capabilities and of automated We products expanded tools.

performance. markets; manufacturing, vertical to Our sustained pleased to is continue strategic in healthcare finance. deliver consistent was to I and see and goal retail, four continued our growth

gain also market long-term growth have share strong in productivity to believe increase the strategies positions We the We quarter. saw software during and and our and well Connection place value. shareholder in workforce we team

We Operator? questions. will entertain now your

Operator

is Thank of of question [Operator the James. Instructions] from first Adam Tindle you. Raymond line Our

open. Your line is

Adam Tindle

environment I thanks wanted just Okay, the good to afternoon. Tim. competitive start and on

enterprise, large SMB competitive talked you think on I in ongoing sector wasn’t press release that in the space. environment public and about the the comment an but

kind you you you So can really moving moving competitive intensify? are seeing then better? improving? where just the wondering also gets that forward, environment pieces think of the that What are if to do bifurcate maybe And

Timothy McGrath

Adam. Well thanks

but So of intense I at across definitely space. competitive subsidiaries, federal think environment it's the really sales and the all our more is enterprise three in

hyper have we driving some So bids seen there. large competition

us. going I think to going in to competition that capability it's also plans more are aggressive. place our But see of as to the we show efficient solutions and I we combined the bode into XXXX some up I for well with continue drive very think think be leveled to we're out and have be

we're hyper decline predicting it I reasonable to or think will but little to still even comes we or when up a not year, competitive whether landscape So a the for out level start little. unknown a are that

Adam Tindle

in kind little the the too solutions maybe mix, are on that's mix competitors XXXX? tell, I guess if competitive right just how up, kind find of gross early wondered to XXXX, in margin. line environment, about fair margin had you on about that a talking as but some I view Okay gross to maybe any and we could mix, it's of of think down you your bit flat

Timothy McGrath

interesting seeing technologies interesting in like grow. Raymond an the margin followed well to see in our it advanced to. so we'd XXXX that given it’s the we way James We're business like it’s much yet report, Yes, reports had and really hasn't in the history question also server thanks, growth that

XXXX. a margin environment So we also to are slightly looking at flat for down

Adam Tindle

last and fair is that's SG&A. a one done what you one, maybe nice of job controlling and done Okay have

position Tim. for a to there, you continue just As operating XXXX? in where about leverage SG&A get think talked you gross to you're make think some do so we a we know Thanks, sense wanting outpace to could about there's dollars XXXX because trying if about profit I investments think as

Timothy McGrath

no increase the keep to faster range that very absolutely today. we need is there We're Thanks. and dollars clearly is profit tight we're than pretty doubt. gross the to that plan going and so closely Yes, going to manage SG&A, there

Adam Tindle

Thank you.

Timothy McGrath

Thank you.

Operator

question is Anthony Lebiedzinski next Our Instructions] Sidoti. from the [Operator line you. Thank of of

line open. is Your

Anthony Lebiedzinski

and good taking you questions. Yes, for the afternoon thank

So each just up as of is kind competitive sounds follow far like guess within to pressures. the it I of the as SMB more insulated from so dynamics different competitive the the segments,

that to that? looking to with focus SMB segment would expand on the So capture you trying said, more to be resources

Timothy McGrath

Anthony. thanks Well,

hit me wanted segment of SMB revenue from each of let advanced come technology. So kind for did time XX%

we're stack. So the seeing solutions across success there good selling

optimistic their But solutions. our our need solve it about space team. requirements performing and team investments and pipeline in high drive really a got we're to that day So add is and our has seeing at enterprise in fuel of we're help our and great the a place that business we're to making there growth. really Because the them end investments customers’ challenges. We've to customer also the strong been

the plans across public rest on So and space of for overall true both we'll the the ad Fed for and our we're place. increasing the higher the sector. of some and year We're that advanced we the what of is that continue in very really tax and and technologies on some capabilities law bullish also infrastructure government are board based space, the in optimistic SLED call changes

Anthony Lebiedzinski

Okay, that's very helpful.

a at XXXX think has most the ones and look in, be in the vertical you markets you ones you which most when different potential which would think growth So challenged? that you're

Timothy McGrath

able what's be healthcare be of around to and happen the Anthony. going challenged is will do on administration I reverse and on I the think the challenge sort uncertainty and really The most based healthcare. most based to the think to going I that's administration think So, order the

together printing facets we to and of retail. however, significant enable sure and really really we there of perspective and manufacturing everything that you've digital that we're leveling XD in growth So rapidly is being from by know the both heard We're artificial have really change really really change. double-digit first revolution. off; industrial robotics, see that manufacturing it manufacturing that space driven coming seeing changing to I intelligence, think the Things in approach, we seeing From are a I'm all to Internet you healthcare fourth is

great the well. So digital an and we're in and seeing of retail kind retail growth excited that. doing about We're technologies approach retail end-to-end enabling as

somewhat So as the both trailing are upgrade well. strong. that verticals grow as poised financial vertical right are not those is think of they quite then finally strong very we for to And as

growth So, I education healthcare. would retail by slowdown include education as as and then manufacturing kind finance followed a a and highest so say vertical in definitely we well, of

Anthony Lebiedzinski

very Got it, much. okay. you All right, well thank

Timothy McGrath

you. Thank

Operator

Thank Tim for showing like no further over to conference I'm closing back to turn And at remarks. Mr. this I'd you. time the questions. McGrath the

Timothy McGrath

I’d support efforts. all and also our call our to like dedicated to partners thank this thank to their for listening afternoon. I'd everyone of like coworkers shareholders customers, vendor their Well, our continued and thanks. for

appreciated. Your evening. great Connection a time and interest are Have in

Operator

and program. does your participation for This conclude in conference. thank you today's Ladies gentlemen, the

have You day. disconnect. now may Everyone great a

PC Connection (CNXN) 15 Feb 182017 Q4 Earnings call transcript