CNXN - Earnings call transcript Q1 2022

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Operator

Good afternoon, and welcome to the First Quarter 2022 Connection Earnings Conference Call. My name is Rachel and I'll be the coordinator for today. At this time, all participants are in 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 a specific permission from the company.

are Baker, President Chief Senior today Officer; Chief Financial call Tom and Vice the Tim and McGrath, Executive Officer. On President and company. now will turn call to I the the over

You may conference. begin the

Samantha Tracy

in management afternoon, everyone. statements. forward-looking deemed call of may Actual to may forward-looking from on plans Securities be those company or time-to-time. differ for make materially that the Thanks, with Form Commission, including as results year Operator, not Factors these statements that and on XX-K for the discussed I’ll as read forward-looking of note file those documents statements. December XX, Any in XXXX. the the Safe forward-looking is of our expectations, during constitute Various company’s may report commission made important the and Litigation a annual be from statements now the Exchange various the with references are and regarding cautionary company’s which conference of Risk fact good the factors, the prospects other under Private by of XXXX, statements remarks result purposes future provisions section that Reform the about Harbor Securities indicated Act ended well statements historical files as the

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

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

Connection’s www.connection.com. non-GAAP are call XXXX the is in Today’s at against and website. to GAAP being reconciliation website is being the note the the host, first Investor stated, all first be turn earnings Tim? between measures XXXX. on quarter be that comparisons will release quarter I at available to two on over to A references company’s at Relations otherwise today’s Tim release SEC in available McGrath, section website website on Please of unless earnings available financial call, will and The like discussed. now this During and call would the www.sec.gov our President and webcast and will of our www.connection.com. be the CEO. made

Tim McGrath

joining results, of call. then look this Thank XXXX Good for us XXXX. more highlights us you will quarter updated walk QX thank our at begin Samantha. everyone thoughts through our a our for I'll first of performance afternoon, Tom, overview detailed on an with conference and Connection's our and you today financials. afternoon share

needs. to results continued announce and of customers focus to elevate our enhances revenue, including business and chain the performance, to their productivity growth, and a record strategy our connect first gross our record income. demonstrate pleased innovation. are navigate on profit quarter of factors our We These our A with number helping net contributed for customers optimize execution that supply empower technology

grew grew public quarter. our grew grew and commitment performance. QX our X.X%. this segment XX.X% on helping a capacity Solutions to to hybrid first a the and basis, On cloud back Business in the transition consolidated center The drive XX.X% XX.X%, record helped and continued Our QX customers to enterprise transformation year's office last compared revenue to data segment focus by sector

across delivered also of We double-digit strong all vertical our growth markets.

in throughout issues increased backlog that grew fifth have we while vertical supply which is the has our our past vertical, year-over-year, QX. verticals The quarter. XX%, manufacturing, quarters respectively. and care XX% retail the consecutive our XX%, persisted XX% health finance for referenced grew largest Our and Consequently chain

constraints supply to continued has ongoing our customers. behalf on navigate capabilities the team Our of leverage our to

Our progress know have first to behalf. in supply out an we project increased rollouts inventory and of solutions store in expertise, and some build chain compared currently have the level large The fourth on the capacity resulted customized long-standing quarter to in loyal and XXXX. customers secure product the their issues that scale combined with quarter

We the expect to issues persist these chain of for supply year. the least at remainder

let's a little our discuss Now QX detail. performance greater in

X.X% an In with XXX.X% quarter. $XXX.X XX share the QX from per to to of in of equivalents. cash was $XX.X $XX.X all earlier, of XXXX an increase XXX.X% up I earnings first diluted XXXX, of net three $XXX.X in as QX, and QX up were profit margins $X.XX, stronger XX.X% in despite ended million. of Operating X.X% or million income As from million, up was endpoint XXXX, $XX.X devices. stated in Gross $X.XX QX was quarter QX or million mix was basis revenue points XX.X% gross prior while our from margins million year compared increased segments, increase a to XX.X% XXXX. of sales net We cash sales

to solutions, a deeper a million, million, Solutions our the business We We increased hit of government solutions, will QX local XX a to to Business Public Solutions, and sales little net Enterprise into an in $XX.X compared year and to of an points profit XX.X% Sales Sales institutions gross compared the segment profit ago. XX.X% performance a XX $XX.X to ago. million, cloud of XX.X% to Gross In XX.X% mix. million, Sector year-over-year ago. transitioned $XXX.X the net QX profit the increase $XXX.X Solutions The an ago. points growth, along Enterprise was was state an to year, office. mix. segment, increase an continued educational X.X% basis sales Gross public government XX.X% of by year quarter. million changes an million, of strong in basis $XX.X increased margin servers, XXXX. for segment, primarily federal for million, a increased Business mix customers now were quarter increase compared $XXX.X million, and XX Gross was sales QX in to work-for-anywhere an of Gross increase take primarily basis million, for compared Gross to increase were our margin year from segment $XXX.X Gross year the compared in services. an with $XXX.X record saw due increase of million, increase percentage XX.X% Solutions $XXX.X by due as to changes million. to networking product to $XX.X prior to $X.X back to in into in was from XX.X%. the prior margin our the margin all-time our QX In segment performance. driving product net product year. million, points the primarily compared In demand XX.X% look of XX.X% endpoint and the due quarter $XXX.X in were the sector segment to both decreased in increase customer changes

In to cash also we to addition, from I'll networking financial Tom, discuss had flow security. turn good balance highlights call storage, in over and statement. our additional now the and sheet Tom? statement, growth income

Tom Baker

profit SG&A and quarter. quarter net points to On XXX due dollar increased an income quarter compared up SG&A costs. year basis, of was a revenue. QX $XX.X an and improved primarily This due ago. this in compensation, due prior sales this in from of XXX.X% the operating to was million higher decreased increase variable million to to Tim. million, increase basis $XX.X in increase marketing to a higher year gross efficiencies XX.X% $XX.X Thanks, levels

million income ago. from from Diluted same Our down Net $XX.X year effective was period an an a per million, increase XXX% $XX.X the year of XXX.X% tax in from prior ago. rate for increase year a XX.X% was quarter earnings was the share XX.X% the period. $X.XX, of

earnings or flow operations and cash receivable for year. $X compared of activity both income to of reflects million higher from of flow in for period The adjusted versus EBITDA increased amortization and levels cash million from taxes, first the Cash XX-month business last was inventory before $XX.X in year consequently the million was ago, in quarter the depreciation and quarter. used XX%. operations same an trailing Our operations adjusted a flow $XX.X decrease increase accounts million $XXX.X

five supply result project days a DSO in quarter, the as inventory the earlier. declined by issues mentioned rollouts large turns Our and of, chain improved while

cash of was $X.X quarter activities the first in IT investing and in primarily net the initiatives. million, purchases used result Our of equipment

$XX.X for repurchases call back have million trends. existing program. under I to stock also market we repurchase turn addition, now our discuss Tim, current stock over In the will to

Tim McGrath

review, our of some a I in business. highlights want the to Tom. minutes few Thanks, to take

and Our customers high landscape, hybrid changing solutions. our IT growth to of QX. look to innovative in deliver And a continues with to significant driver of be return the importance office to Connection

on deliver technology continue this evolving through to transformation to QX in as share market and customized that in customers, is competitive growth digital in of IT the to attributable we solutions with market. advantage largely gain they our work their efforts rapidly Our behalf

We this will trend third into continue at the quarter. least expect

Our to important years of ability growth and our for and supply our solutions us. be competitive to experience a with continue deliver custom components chain optimization of differentiator

also attributed expertise our in Our our customized to solutions to growth was vertical delivering markets.

revisiting, revitalization of the the and overall which on-premise IT for solutions saw time as decision-makers activity year-over-year, of the as vertical, For care shifts customer in a of solutions infrastructure Revenue reengaged grew major IT vertical and workplace. growth acquisition the cloud IT as include manufacturers vertical the retailers' revenue in XX% year-over-year in are and the improving investments, to example, grew health investing migrations manufacturing technology smart retail first new including center more XX% XX% customer manufacturing data for record balance and towards of The health employee the in-store in strategies, result year-over-year upgrading we as investments, infrastructure modernization. or accelerating care health experience. the have

both help services other that asking a that them focus through continue our been are pandemic. Looking of to a in center expect developments as helping to chain cloud transformation, continue More technology will extraordinary that of this as before, ever are manage our due continued off above remain to rapidly to and can their projects than for the and optimization, production XXXX, pleased effort points impact take their employees transformation, We the expect Naturally, chain basis XXX IT remainder customers to put We customers to we We're the us well as XXX are with supply focused to to in and IT IT work. their moment thank number continue data dedication say, and recent the our and and for remainder environment. and to to return take growth on supply are delivering supply like well I'd data that center. constraints we delivery center that believe of chain and valued monitoring on we configurations the infrastructure distribution we year. changing industry rates share. the deliver we our integration record market hybrid solutions. as customers forward to cloud the have

entertain questions. now Operator? We will your

Operator

Thank you. first comes [Operator Our the Lebiedzinski Instructions] of line with Anthony Sidoti. from question

Your line is open.

Anthony Lebiedzinski

well. thank doing Good I hope you afternoon. questions. taking are you And guys the

Tim McGrath

you. Yes. Thank

Anthony Lebiedzinski

as So, main hey a you the we sense -- should fifth up quarter. us give first, it's backlog? about think that are the mentioned that the you as for that? so, backlog, far components as of Can How so consecutive what to

Tim McGrath

Yes.

Anthony. It's vary does supplier. and pretty it thanks, based So widespread on

hardware those to Some networking security significant the problematic. have of backlog products and center be fairly a and continue dates data

endpoint of recently, a have comprised more the is device/laptop lot of devices. better backlog a done little Some but endpoint the still products of our

Anthony Lebiedzinski

you. Got

Okay. a get And very as I reported, the volumes. to of a All solid get year. as just in I the right. of you just But far better -- that wanted of were overall to then, obviously, just to the as ASPs components start that whether better to increase? a revenue sense just just kind that what quarter wanted of versus and -- the, sense overall, terms

Tim McGrath

Yes.

bit But also not volume -- Anthony, we improve system. it in did netting. a amount it driven. But in right software our of volume And of a all-in the part of we the business, largely it our product just margins was the the hardware now. through sheer lot going was little year-over-year the there's significant think, terms I get as a was I of the rate, tailwind think as system put And bit. from margin through did of little

Anthony Lebiedzinski

the that. market the But drive are the like so, then year, for how we maybe think lot a continued of models kind of in skittishness It And and great. as to we the about your there's Okay, about look and update year? how growth? recession. about the Obviously, a think our of should lot should a we of to of doesn't fears you ability noise balance any potential of the seeing guys balance sound revenue --

Tim McGrath

been of look that a customization others in will PCs demand an landscape pull have share do do competitive market, question. Obviously, closely customized will suppliers or great endpoint component. many the We if so And second about our everyone's our that we back you half on, still we've think device the and continue. our that's me, certainly closely, Well, with IGC solutions potential like demand customized of solutions saw forecasting the that customers And overall closely. those And optimistic. view QX dependent at devices on the in decline that the beyond overall are that of Tom? and in talked of essential. the build many But of to excuse composition watching demand. a solutions models, we watching really confident do so an gross solution, so composition still year, but our pretty we're depend profit we're level of is because endpoint and or suppliers. through and have working certainly the it much into we're have -- we're we customized the good of of we Because those going and

Tom Baker

And Yes. as pretty well. are we partners, to I them think talk most when bullish our of frankly,

it going I people more along things it's a think think will in here to like to But second seem center the half. pick sitting continue. data little generally bit be and today, plugging that looks up

Anthony Lebiedzinski

thank best luck. and of Well, right. All you hear. to great That’s Okay.

Tom Baker

Thanks, Anthony

Tim McGrath

Anthony Thanks,

Operator

Our next Huntley the question with James. line comes Catherine of Raymond from

is line open. Your

Catherine Huntley

on Catherine Adam. our results. is taking this you much for for Hey, and on congratulations Thank so the questions

Tim McGrath

Catherine. you, Thank

Catherine Huntley

just stick that into on to thinking to with year? be you've the you X% IT basis, X%. this So In the you a framework IT could looking this at how growth year, moving guys us your are of forward versus past, should you about the versus market? market Is it the blended shared we this

Tim McGrath

are mark a again, in balance the we points that that believe XXX QX, can above great we at market and grow question. certainly basis elevated And share taking Actually think we X% market to... that I XXX and of the number instances, IT above overall look When year, for believe is of growth. rate X% we we to we're many the to closer

Tom Baker

north of Maybe that.

Tim McGrath

the year. optimistic in as again, know well the back And do north Tom of mix about change. in mentioned, be cloud, Yes, QX. center, that we'll More of will the that we And we're fairly the of more balance year. data infrastructure more half

Catherine Huntley

give ahead for alleviated. a Perfect. out data That's far ahead But center orders specifically in still probably And you still since far great customers devices, constrained? color. can can endpoint orders that's sense how really and it's booking are I imagine booking in centers data for networking? are us customers

Tim McGrath

are. they Yes,

center well placed for in and in data equipment infrastructure time networking months. this data orders often planned fact we recently, in the week, So and data lead are was advance. some projects center And the

getting to front are product our as suppliers and sure encouraged -- force many it of of lead of still no they're in it, those So doubt make us sales be our those about struggling customers really extended. we've times and still that. are as proactive to possible But many

Catherine Huntley

Awesome. keep and great so you work. up much Thank the

Tim McGrath

Thank you.

Operator

Tim. to question-and-answer session. to the back conference you. Thank our concludes I like would turn this now And

Tim McGrath

thank their like efforts dedication like to again vendor this support you the extraordinary this listening I'd our also shareholders Rachel. call all for of once to thanks of dedicated Well, partners continued through for time. thank customers, and coworkers afternoon. and for all I'd our and to their

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

Operator

conference you Thank for participating. concludes This call. today's

disconnect. now You may

PC Connection (CNXN) 8 May 222022 Q1 Earnings call transcript