CNXN - Earnings call transcript Q4 2024

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

Operator

Good afternoon, and welcome to the Fourth Quarter 2024 Connection Earnings Conference Call. My name is Josh, and I will be the coordinator for today. [Operator Instructions].

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

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

Samantha Smith

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

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

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

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

Timothy McGrath

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

$XXX.X year, was of revenue For margin X.X%. X.X% year, billion, prior Gross of basis points. increase XX.X%, full decrease XX a the was the was compared growing a million, $X.X while gross to an profit record

an This Our an increase SG&A of due of $XXX.X prior our our in for detail to share million, per which million, the compared $X.XX the $X.XX in call. Net compared X.X% in X% in will year. year. of areas to to the we later was investment was $XX.X business, discuss increase increase prior diluted income Earnings year. the prior to critical was compared was XXXX,

spending year in saw noted share is QX, the year-over-year XX our some income last per basis was flat for down refresh to growth discuss that mix. Operating Last taking prior quarter, X% conference in was income XX.X% we prior by recovery to primarily customers $X.XX decrease quarter XX% a Now in product than during to an XX.X% was deployment select million. of XX%, performance. million, compared to in to timing million, QX sales compared XXXX. evidence decrease advanced data points in experienced of net the $XXX.X quarter. QX by $XX.X due QX sales were notebook, XXXX, quarter. In to Gross $X.XX, of year we million, in our compared QX percent XX.X%, of and to X.X% anticipated. of QX which customers. Revenue $XX.X IT results. In Net mobility sales QX, initiatives wrestle This a the of Operating refresh. in diluted areas trend driven let's $XX.X million technologies QX our a prior challenged the of in of profit a income a margins We their continued in Gross earnings longer $XXX.X our X.X%, decrease call, was PC compared reflected of the our to at continues XXXX. QX a in Consolidated was was net our the with we and from primarily be desktop shift year. increase in compared as were year as revenue business. AI center in recovery

as the experienced XX.X%. ago, XX% to decrease of sale year a prior Business endpoint expectations for X.X%. margin points lower Gross sales Although into our future segment $XXX.X profit in our million, about were of of million, an of look net we XX devices. Gross the a offset we our for did segment QX, marked the now in technologies decrease the our X% a Solutions deeper basis results in optimistic a partially increased cautiously advanced In we've pipeline products, meet segment, as increase technology year quarter X.X% $XX.X not Business little opportunities. We'll in Solutions QX than compared to advanced increase seen our a by are our performance. was

prior million, XXX for quarter by educational 'XX. prior by local net revenue QX increase decline profit increase margin project of Our compared resulted government compared Public XX.X% statement. state by to by year balance the were quarter. large the increased Public mix. I'll highlights and the margin year. Sector Gross QX to XX.X% the net while the to points turn decrease and Sector $XX.X lower than than were as margins to increase mix an Solutions from that the were business, product of a margins. In software software profit the was to the of million, a result the our X.X% the million, decrease the sales by an $X decreased device Enterprise The margin our X% net technology. a $XX.X net to additional institutions sales points of million. Gross lower in segment Gross and decreased and favorably year XXXX $XXX.X by from were on to was for increase government experienced QX margin year basis $XX income few quarter. The Solutions over rollouts of at was XX.X% Gross X.X% affected the for Tom? now sheet Sales mix million, flow customer we cash and an financial for XX basis. In million, call and higher ago. gross our recognized discuss XX% QX lower-than-average Tom and sales, in sales sale federal $XXX.X license increased Enterprise than offset in sales to basis statement, lower a fees segment, segment in XX.X% advanced ago

Thomas Baker

fourth to net quarter, SG&A increased resources XX.X% In XX.X% technical over the to for decrease increase the primarily capabilities. prior in Tim. of to and points sales the quarter, $XXX,XXX. to increase compared amounted million, increased per our million, Thanks, and in investments of SG&A to in the decrease a $X.X of XX.X%, prior X.X% an services sales, for our was from in a year. of QX And sales tax the diluted XX million The was was strengthen last of XX.X%. Net quarter $XX.X Interest effective On income XX.X%. was XX.X% down year, to by basis, million, income sales basis percentage due SG&A year. $X.XX, $XX.X $X.X earnings rate compared from share a

At the $XXX.X Our quarterly total $X.XX shareholders trailing operations before income on was million dividend, $X.XX earnings had our record $XX.X and and stock million repurchases $XX.XX XX% XXXX. Cash and in million. share repurchased to compared a EBITDA, payable March having the our of on year has XXth fourth ended XXXX per remaining from of for declared $XXX.X decrease flow paid the a under XX-month we that we dividend was announced to we a of quarter, program. Today, our shares dividend depreciation increase taxes, $XXX.X generated or stock adjusted a of million, quarterly of end average adjusted at interest, $X.X year, X%. In an is ago, existing million per cost year a the February repurchase to The amortization, of XX, share. Directors per we Board payable for share.

reduction $X.X balance for days in for operations from year $XX.X receivable from and decreased accounts to a million benefited increased Cash XXXX, DSO from a the days of million the year. inventory Our year period ago. our the ended XX XX for same

upon capital XX% $XXX.X our an program net dividend for $XXX.X a announced $XX.X payout was and investing investment million largely ended and $XX.X cash payable year Cash committed to and on year, timing a investing have thinking opportunities million of programs, ongoing we used activities growth for with and increased organic about business investments. When focused to allocation, cash, the short-term the during maturities. We accounts we're of million ended in and remain to of Our in growing equivalents program inorganic of have million to by we of primarily XX%. $XX.X regularly due offset the financing of shareholders dividends purchases, We balance million of payment payments. range dividend stock. above, We $XXX.X expand XX% the increased later. Furthermore, as of $XXX.X of cash million million our that anticipate million used in result investment $XX.X of activities of of Tim QX evaluating will target income. of the XXXX for repurchases by

disciplined to of current Tim significantly we and so XXXX, stock, a trends. back now in to will During call continuing increased the our anticipate turn we discuss over to market repurchases do manner. I

Timothy McGrath

Tom. Thanks,

struggle XXXX, and challenging their as timing IT During of conditions continued investments. to remained the customers priority market with

QX of was lower all and expected result, As than IT overall a in for XXXX. spend

technology position system, distribution are our resources we a do and to technical XXXX, engineering refresh. related part that XXXX support in many operations. sales our in post-sales and in While year-over-year our device our beyond. We've personnel; and invested opportunities. including enhancements as investment and customers us efficiently elevated technical improvements infrastructure to to increase the and Perhaps experts; effectively we've growth in investments those larger confident XXXX. more throughout invest trends importantly, AI XXXX, coming free will up workflow initiatives. In CRM the are enabled We Helix solution initiatives server to in in in we growth from in pre the data successful ecosystem, budgets and driving integration made will advancements endpoint device and expected we sales projects we business, tools, well be we have significant expect additional personnel; a These on large, customers in technology many categories, and and to projects. more by include: pipeline. We services as technical investments advantage allow AI that focused number take resources. executives; in advanced world-class In driven in consolidation, of see continue delayed and to investments AI anticipated believe enable opportunities strategic believe this us will that have demand and growth These participation scale in made center of key

data network, at assess investment higher we on expect solutions customers investments and remains a AI AI our of component Our deployments of XXXX. AI catalysts personalized scale will of are automation and transformation. There key in ongoing security. and other customers are to marketing SG&A in focus as have their a resulted and for management many strategies. our drive their refreshing growth focus levels of hyper XXXX, in

initiatives. our strengthen advancements sector. In and capabilities, mature AI opportunities capabilities, Helix with within our to AI continue AI to bolster AI ecosystem. a continue We're which organizations of to pipeline continue strengthening developing QX, to partner and our capabilities Helix in the excited our alliances through Connection's technical key mature Connection the with excel We report we

affirms technologies This deep not challenge are AI and we've Their our real for announce with Connection's specific world as Warfare understanding a secure, the naval commercially-based Tech artificial particularly the serves clients the recognized was award face. We innovativeness, Bridge's only first Information Atlantic been place for environment Palmetto Naval in to intelligence our proud applications. also accolade challenges that of the Center. but recognition of

tone tell call, about by our the in prospects of optimistic As our XXXX. you can we're

investments. are landscape, These number customer there tariffs. developments of macroeconomic recent events AI However, of that impact with the of impact a could the include potential and the timing

the consume of We technology. how that and the remain shifting solutions that effectively evolving believe well aligned outperform meet and utilize technology strategy stay our market our points. We basis confident of IT rate ensuring growth we're XXXX, business focus needs we by customers. at of For customers forefront deploy, with XXX committed remains dynamics our the the the of to can integrated curve, U.S.

within We complex in dedicated questions. empowers and our technology, your environment. We'll customers. expertise calm technology and efforts Operator? landscape. that that and expertly continued of world set continue with help extremely like navigate connect the our rapidly a customers thank this for customers entertain extraordinary IT know technology innovation. happens growth, of We choices to to wins. On of our confusion through enhances productivity during for their our help this that change elevates We moment the now and a take note, valued complex I'd We changing to employees

Operator

Instructions]. [Operator

Our first Anthony question Sidoti. Lebiedzinski comes with from

Anthony Lebiedzinski

would about that So October has comment great. to quarter? saw you as sense QX any through December? Just I be during get first, -- a the just the that better again, can the just -- And early started, to you indication trended quarter curious, so, sales how progression on wanted how

Thomas Baker

Yes.

little So of years. [ markedly than looking I now. November November we're seen kind of really was very the of in last plush ] the had X We top we've of low. then, better terms and -- last see was think I for seeing what bit a worse think, terms the going was right QX, flat, is in was budget a forward, line sales pretty years, didn't we're at the up same. on kind expecting are what than [ we've probably but maybe X ], seen single-digits Anthony, that's how things of low And December any about in and percentage in October

Timothy McGrath

that to Anthony. that, continue of number I'd a tells seeing of Thanks, come add But into very forward, story back. we part if look looking the kind we are the projects of funnel. Yes. large

in for of a be us those we're in a confident engaging significant and XXXX. us that number of projects customers areas, Our number will

Anthony Lebiedzinski

follow-up. And a very That's helpful just color.

the just opportunity -- which about those ones far bullish conversely, of maybe forward, And markets like have do which you vertical that mean, that far, as you you markets I maybe the vertical as as terms seeing your see opportunity? on? as speak less will as of In you of? talk think going can you most I are which projects, are far guess,

Timothy McGrath

thanks. Well,

our and subsidiaries, we'll let with So start me vertical. then talk about

has group momentum of projects, enterprise large and of our into lot clearly, a customers number large So new going a new XXXX.

optimistic So about we're very that.

are of in probably the federal team, space the lower customer space. and building, SLED our then at large that team, a few markets also, Business the few our a we're vertical Solutions large And of group, the their When about Our lot SMB funnels we dependent, space. number seeing growth, in much a retail contract, clearly, underpin that Sector very a in but a it's rate. think Public projects

play. of around good looking and growth into organizations, in there, a coming of GPOs group -- the the So at number really a healthcare, purchasing and number we projects projects are are manufacturing

those So kind market be our leaders would the segment. vertical of of

Anthony Lebiedzinski

as SG&A. here guess, the just switch And as far gears I then, to

versus it XXXX X.X%. profit of growth So was in up gross X%

think should as do what versus growth? expected XXXX, expense you can gross you as we think as how look far forward about profit we So to growth

Thomas Baker

coming in I just and resources call, we it Well, in what have think we X-ish think as growth here. we've to I of percent we people and real reallocation ready. we'll your you're Obviously, doing sellers the probably infrastructure, next couple to can be a we're year-on-year. of the To seeing see pipeline we're quarters we back. and remarks, a of over Anthony, question actually, SG&A technical X-ish, we But said money answer of pull his is lot this invested directly, see everything because people. the we've lot laying throughout And tools solution a invested think Tim in

Timothy McGrath

classify Yes. And us, 'XX building year of down market. as also, We I for a a in somewhat would Anthony. invested

capacity, we investments and So of have already additional have been now capability, additional made. the many

we when think a in variable compensation. growth come that about 'XX, lot So growth, from SG&A will

Thomas Baker

specifically, X Anthony, $X a million. million, That We add on a us or would would I had cost probably blue. repeat, were out bit that there thing one-time of I of just the a other kind items say couple and there. of, will was $X.X miss the those And QX Yes. of because not X

Anthony Lebiedzinski

That's Okay. to pass I for definitely color. I very before Well, thanks guess on others. for clarifying last helpful me that. question

far to have you may to As you on expected that as tariffs that. to from speak with? can the -- Just curious your thoughts impact deal get

Timothy McGrath

chains. Thanks. It's a as question. our And great very complex suppliers supply have know, you major

The Generally few them opportunity and accuracy conversations their then, our of planning the their majority it's in our a of of to reach of any really notebook engage have standing predictions. speaking, to our But lot display the And manufacture so, is, Mexico. majority It's great little And have their of a for China. out, contingencies. China course, meaningful and upside in all other the manufacturing suppliers our and spread out display difficult in it's to out Vietnam great but a touch about speaking, customers. of generally a of suppliers sort have desktops and also more majority the of coming is a locations. opportunity up

So specific specific product depends when all to really at together, on you specific time. it start from that the the supplier put the

So work And alternatives but to tariff moving But of the that it's stand not said, clear our still are either, not this together. to many quickly to we of [indiscernible]. some clear countries. through our up suppliers will really customers

Thomas Baker

to through optimize And to programs Anthony, we're thing to us only help all customers work going other with tailor that, this. Yes. the to I'd add of

over a next to to or X weeks going evolve is lot so. I X So -- think the

Operator

McGrath Tim for you. back now the turn closing would I any to Thank like remarks. call over to

Timothy McGrath

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

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

Operator

you concludes participation. your This you. for Thank conference. Thank the

disconnect. now may You

PC Connection (CNXN) 5 Feb 252024 Q4 Earnings call transcript