CNXN - Earnings call transcript Q2 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2018 Connection Earnings Conference Call. My name is Jonathan, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference call is the property of Connection and may not be recorded or rebroadcasted without specific permission from the company.

On the call today are Tim McGrath, President and Chief Executive Officer; and Steve Sarno, Chief Financial Officer. I'll now turn the call over to Steve Sarno.

Steve Sarno

you. Thank of read on statement webcast page presented as now which today's slides safe today also is X part our will for harbor call, being I call. our of the Investor today's for after be in our will And Relations at slides of www.connection.com. call section call made also available the the website historical made deemed to be references or call statements may the conference that forward-looking fact statements. are Any during not statements of be statements may management Securities and make about purposes future harbor company's safe plans forward-looking of Litigation XXXX. Private that the prospects expectations, provisions constitute remarks for Act the the of Various under Reform Actual year with which other annual of time as indicated by commissions well file December various report is on may section in these Commission and files result the including materially factors, in Factors a to discussed Securities Form those ended XX-K as XXXX, results company on from the important Exchange the the differ XX, the with company's as time. forward-looking from the documents those Risk that statements for of

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

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

available The XXXX. Connection's the that being earnings stated, is the website. website and non-GAAP made references company's and quarter will webcast release supplemental are unless with is on call GAAP second Today's the call, website. will note today's discussed. all along be www.connection.com. reconciliation this measures release also Please presented being otherwise at to available slides comparisons two During against be second A on and available in are quarter financial between the on earnings XXXX

quarter at and with our www.connection.com. the the our XX-Q today, Relations both website of Commission. Investor In The Form the Form available, Securities we is www.sec.gov earlier XX-Q Exchange in filed at SEC addition, and second website for section also the on

today's QX our like few recognition new it you company's we operating of adoption Before standard results, of to of the of impacts the spend remind to and our revenue begin I'd reporting minutes the results. QX how a review

for revenue net revenue standard the $XXX.X $.X build-and-hold on an the to related this reported, we arrangements, recognition software treating revenue, was standard. revenue Connection the related under to such was impact QX million million we've certain of recognition prior as today's recognition, $XXX under prior as years using recognition stated As and the of retrospective accounting standard while recognition approach January stated new the X, of current revenue full new between new opposed In our previous earnings standard QX are results revenue the approach. standard. recognition the our to as comparison the we the In other revenue revenue our under would've the than new reported basis. licenses under XXXX, of adopted million recognition to impact to main retrospective XXXX to of words, prior the XXXX adopting software, for The cloud-based are of release, standard million delivered modified related provided is by timing QX standards. a offset results a XX.X security shipments and transactions. customers timing maintenance addition mainly This the less

quarters. as the be conference new operating Tim? on well to comparability $XX prior adjustment to for which provide I'll next new we earnings new today, our amounts plan this to reviewing to adjustment revenue reflects be term the the the comparative In as releases of million will recognition now QX in saw historic standard the referencing QX's financial and expect we implementation two turn allow over presented, as color against results. our some standard to the Tim revenue provide the information similar to for We We results for that QX. impact our of to results. call the calls standard

Tim McGrath

executed quarter. across In Steve. and and segments record we our all achieved of profit QX, company second another delivered The operating gross business well Thanks, quarter income. record strong

focus growth, drive continued Our on excellence margin record improvement us operational and helping these results. profitable to is

the ago. presented, million. months X. three XXXX, Net slide XXX.X XXX.X for sales to to impact Moving standard Net prior by were million the compared X.X% increased million June QX to a sales, of XX, year the new ended revenue to XXX.X as in

to by quarter. presented, X.X% slide increased compared X, a XX.X% the was profit, compared to to year margin, as in year million to million presented, XXX.X gross XX.X prior Moving as XX.X% Gross ago.

QX our expect our similar XXXX levels. be gross year-to-date to margins We to

slide ago. an year segment. a $XXX million. margin, presented, of to to Prior this as to our compared points more representing X the in increased performance increase detailed basis standard, Moving revenue XXX.X QX sales impact discussion quarter. XXX.X of for revenue, the of In our a new for net X% million, group, Solutions Gross Business XXX segment as presented, by XX.X% as the were million to

execute the Business Solutions well in segment. to continue We

Our Business products. in XX.X% as Solutions and group, X% growth edge mobility growth in presented, and hardware net/com has intelligent

technologies. strong across advanced We seeing the solution are selling growth in stack and

needs. unique core-to-edge business project office best the segment. Sector Let needed complex energy quarter. value of Public our in do a our and collaboratively deliver customers understanding we a customers' with our they focus energy growth to a to software, work This for An the their an and to building. during this of that what on an a required chain return you business. support provide new saw deep was we enabling me share network and In running a included solutions supply Solutions, company example to system customer hardware, We net/com, services, security, high-rise

a million. Prior as basis presented, year presented, year were XX. to Solutions points was to representing from decreased large segment, for million segment an new refresh XXX XXX.X ago. compared Sales by by increase a to XX.X%. federal This standard. Gross XX.X%. for an of million and prior to revenue, presented, our higher continue XXX adoption the increase million, and was segment XXX.X by of QX increased compared margin, standard, growth XX.X% margin, spending. education XXX.X was new Enterprise million Windows this XXX million sales benefit due ago. X.X as Enterprise Gross strength to in revenue basis as As to to In were the of to XXX.X this points XXX.X presented, The group project the million,

server/storage in our at our during through leveraging which, capabilities are division. drove mobility This presented, grew quarter products, and as XX%, we and addition, respectively. GlobalServe combination XX% the global strong In growth

Let customers GlobalServe example of me team have the Enterprise to share our power with that operations. bring international who our you an and

devices team tens and GlobalServe provider of providing of statement. recently reporting, of a Steve statement, highlights thousands thus medical with and enabled balance gross Having customers efficient sheet successfully cash Enterprise a our to customers, flow and over turn Steve? additional a from OneSource helped I'll call pharmaceutical discuss delivery, solution. XX devices and unique margin over software and platform our and countries. financial rollout covered Our the now our pricing to to and global design logistics new in deliver income our for consistent performance, and our portal sales

Steve Sarno

Thanks, Tim.

XX.X was presentation. XX.X% XX.X% from as versus slides, this X of revenue of net of percentage XXX and to SG&A, which of revenue a would our ago. Under as to year due have online on on revenue expense recognition added following standard, as prior been those new a percentage increase presented, recognition million our basis and in SG&A, points. the the a net Page our presented, ago. This increased SG&A quarter standard, we're the XX.X% XX.X% sales of XX.X million webcast For sales year

SG&A to XXXX of to a revenue in as expect be QX We levels. percentage year-to-date our similar

new was million improvement quarter due which in recognition or XX to operating almost or the entirely presented, and percentage, XX.X as which a as would been SG&A. sales sales standard, X.X%. points, of basis operating year XX income our the by percentage basis increase the of performance, income, The standard, business Under X.X% to have as from point basis XX revenue this prior due in X% added a presented, operating driven points of added million revenue increased QX income net revenue Our in $XX.X net ago. to

purposes. rose year less Our a act federal to federal a our QX Cuts This and offset in decrease same rate effective in effective from tax by at of QX rate a was taxes Tax the state average X.X% the due of the ago, was the rate from was XX.X%, period state as to from to the in XX.X% XX%. The tax deduct for X% of down tax which to federal impact decrease Act, being XX% an in became this approximately partially that there rate year. Connection result Jobs

in accounting XX%. during of of range We of the expect XX% per from quarter, our XX% million rate XXXX. million tax Prior rate share for $XX.X to and XX% the the increased to to ago. Earnings a to be share the the Prior income, The million $X.XX per $X.XX. a Net to compared the new $XX.X approximately diluted presented, year to QX to presented, increased ago. new for per have or income increased contributed $X as XX.X% impact accounting lower year year increased million $X.XX the share, to to impact and $XX XX% ago. a have as would net EPS basic year basic standard, $X.XX would diluted of standard,

EBITDA Earnings $XX increased to XX-month to standard, as to from presented, of adjusted XX-month the revenue trailing and XXX.X new slide impact before our increased million. our EBITDA a year or have XXX.X EBITDA, X. would adjusted trailing X% to ago. depreciation Prior Moving million X% amortization the million income taxes,

same flow We result balance and shown an to for equipment $XX.X $XX.X use versus primarily of cash activities the of of cash our of generated of the first Turning of representing half million purchases million million $XX.X a slide for increase slide of from on December an operations, sheet of the XXXX XX. QX a Investing from million equivalents, million generated. Cash X, cash X. upgrade. X.X cash and cash increase on capitalization with XX.X were system in year ago, period million of $X.X of representing ended

program. declared payment during an million at was million dividend $XX.X of from million our our activities price through June cash, our of previously due XXXX, issuance our XX plans. $XXX,XXX by we stock under of $XX.XX months authorized the million XX, first shares employee generated previously that on was XXXX partially share offset six have used of back note use buy repurchases of the XXX,XXX stock combined financing $XX.X special This cash purchase $X.X our for stock QX repurchase existing million of repurchase average common $X.X slide of Our plan. Please stock XX.X per stock of to to for used and as remaining the under of stock which

Moving accounts receivable. to

Our of lower which impact our increased use revenue denominator days days XX due to of days the resulted ago DSO The to the a entire standard, DSO a calculation. X-day the sales QX. XX outstanding, from at the increase year end is new in or in of sales

expenditures. Moving to capitalized

QX, ERP $X.X to system was is upgrade that capitalized our due During we million, progress. which mainly in currently

both this expansible months. in to our capitalizable over range the project $XX to spend, the expect We to million be next of for remaining XX million $XX and XX

now back maximize us capital discuss allocations, will which M&A and dividends to market and such maintaining as allows continue financial other goal buybacks. call to Tim shareholder opportunities turn to stock trends. current is to flexibility, value, I over Our assess the while to

Tim McGrath

products Steve. flow in good as execution to see technology gross shape strong, for Demand solutions and and strength has our cash using and future. their customers our continued and IT transform earnings. are It's margins, been Thanks, to

solutions. drive We with helping our improved will focus remain on technology customers, their success

IT customers Our the the faster taking industry goal approximately to environment. improve this X-plus rate in business grow advanced of percent, to success complex goal is growth. by robust innovation. order invest ways We'll is double at our in with estimated of market this market Customer is technologies. our to Consistent IT-demand productivity grow by and to areas help than share and trends, continue many empower to and in enabled is in our measured

Our grow, to Software including security. business virtualization cloud, and continues

also retail. We're financial addition, in In net/com. vertical our manufacturing health continued care, markets, strong we're and and growth seeing growth server/storage in services, seeing

model the with as of solutions. strong and advantage competitive For the example, our business look retail entertain to our sustained We'll seeing in initiatives to We customers focused space in deliver on gain upgraded strategic believe strength your technology demand and performance. questions. predictable remain Operator? our now we're

Operator

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

Adam Tindle

was growth, gross reported days revenue so just and past margin higher aggressive pricing. traded to wanted the flattish, to was I Tim, that be publicly certainly peers than start wouldn't appear two few larger over

about talking in the to you by start share some maybe quarter? So presumably enabled what gain

Tim McGrath

on business. segment the Well, by a the was the board, but Adam, side that focused led primarily rollouts. across of growth think solution with thanks. We've revenue been with very And the our good led I Enterprise by project larger Enterprise growth

So really, larger count of has driver it's the the growth. additional been

We think our are margins we're in that group the board, Enterprise And of industry-leading in across business, margin larger part and side with peer pleased of the business counts side are at on percent. fairly we're seeing the think Public very line we often they so you XX-plus SMB a margins are with that. On know, I'm with Sector. space, and business solution as the that the of the competitive, we more

Adam Tindle

Okay.

provide a modest you the growth, for year-over-year to about the in that peers And year? some seeing to range. of of of you're that of see guidance somewhere more what revenue about the half back Can right think for way maybe those year talk half is back the also Connection, mid-single-digit kind this

Tim McGrath

Adam. thanks, Yes,

going think visibility half and which now second a were so that We're in competitors growth only and look term range to X-plus - using we the I that at that's So forecast, the for percent best our out the muted is stick have. of right to few that.

Operator

Our next comes & the from Company. Sidoti Lebiedzinski Anthony line of question from

Anthony Lebiedzinski

Enterprise Solutions best-performing was Obviously, first just that your So I guess segment. the on space.

of a follow-up of that, the sustainability sort to Just the question. wondering previous about

think to wanted get how that sense segment, about specifically? a as should Just we to

Tim McGrath

enterprise. will rest crystal at up consistently don't we of through letting point, We're Well, we a are seeing we but year. demand in Anthony, carry don't enterprise certainly ball, thanks. the large for And any strong demand have that that, see the Naturally, projects. optimistic this that

know, spotty, As can on be projects large you year-over-year comps. somewhat also depending

growth. And that be will forecast so single-digit high again, kind our of stick by

Anthony Lebiedzinski

okay. was wondering for your just could it, you Got on potential comment And if appetite then outlook and I acquisitions.

Tim McGrath

Thanks, again.

watching market obviously, the closely. we - we're So

with competitive I powder pretty And think is balance in know, dry. landscape sheet feel our space. comfortable the our clean, We is the has you a business done lot M&A our as plan.

that solutions a specific are, direction, round would opportunities So accretive move out to we we in feel don't need that for always optimistically, our any looking but capability. would be and

Anthony Lebiedzinski

the And just it, okay. flows. lastly, cash Got then at looking

there. payable there. to else Is So Steve, as driver was accounts payable? timing issue? Looks a the accounts you Or pointed predominant out, there nice this like improvement is something specifically going on,

Steve Sarno

No. certainly within Actually I - you look year-over-year, that. thought within improvement the accounts some payable generated in when we there

payable grew X%. about sheet, X% the on while balance think grew at I accounts revenue only

year did perspective, it than job the the as we've of ago. So year-over-year generating some sheet of balance certainly you timing QX income that a more from quarter. is a heavy certainly, But well managing net of the the end look at at better we a as I when done think of

Operator

from Instructions] William line from Gibson Partners. the Our [Operator of next Roth question Capital comes

William Gibson

margins record but higher. quarter, surprised you quarter, year a the Microsoft's is in know them? your little I'm it's end second I with the in had given business How of the may what gross Tim, be

Tim McGrath

thanks, Good hear to So you. Bill. from

been very Microsoft strong very software have and overall. We strong with

In fact, of XX% - software in in quarter our QX, was the revenue.

see some That you down didn't has at quarter netting consistent spike our we And think nearly there, said, regard. of changes our a in large very we specific that as percentage the that. programs, been our of a So know, a look you of that we but are revenue. publishers' when margin in

William Gibson

sector margins the under little weren't guess, surprised is pleasantly surprised And more the I'm I - maybe was growth good. Okay, that in pressure. public a by actually, I

Tim McGrath

that we growth that momentum We're and to forward. return carry to there we Thanks. pleased need now

know, we and also in and As X%. you space really had the the educational in growth was federal space, growth, combined some we a it good the growth about had

So we can that we're that forward. optimistic carry

Operator

to to hand today's back of any I'd remarks. question-and-answer Tim program. program further McGrath This the does session like for conclude the

Tim McGrath

for to I'd all efforts. I'd their this vendor customers, operator. support, our of partners our call listening coworkers like to for to also afternoon. you, and like you dedicated thank their and the Thank all of thank continued shareholders

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

Operator

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

day. now may Good disconnect. You

PC Connection (CNXN) 5 Aug 182018 Q2 Earnings call transcript