- Revenue: $736.5 million, an increase of 0.4% compared to last year.
- Gross Profit: $136.5 million, an increase of 6.9%.
- Gross Margin: 18.5%, up 112 basis points.
- Operating Income: $30.9 million, an increase of 23.3%.
- Net Income: $26.2 million, an increase of 32.8%.
- Diluted Earnings Per Share: $0.99, an increase of 32%.
- Adjusted Earnings Per Share: $1, an increase of 25.5%.
- Endpoint Device Revenue: Growth of 7%.
- Server Storage Category Growth: 19%.
- Software (including cloud and cybersecurity) Growth: 7%.
- Networking Solutions: Decrease of 33%.
- Advanced Technology Revenue: Down 8.7%.
- Business Solutions Segment Net Sales: $278.2 million, 6.6% higher.
- Public Sector Solutions Net Sales: $159.5 million, 14% lower.
- Enterprise Solutions Segment Net Sales: $298.8 million, 4.1% higher.
- SG&A: Increased by 4.2%, 14.3% of net sales.
- Interest Income: $4.7 million, an increase of $2.8 million.
- Effective Tax Rate: 26.4%, down from 26.9%.
- Trailing 12-Month Adjusted EBITDA: $125.4 million, an increase of 4%.
- Quarterly Dividend: $0.10 per share.
- Stock Repurchases: $3.6 million, average price of $64.14 per share.
- Cash Flow from Operations: $95.7 million for the first half of 2024.
- Cash, Cash Equivalents, and Short-Term Investments: $385.8 million.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PC Connection Inc (CNXN, Financial) achieved record net income and earnings per share of $0.99 for Q2 2024.
- Gross profit increased by 6.9% to $136.5 million, with gross margins up 112 basis points to 18.5%.
- Operating income rose by 23.3% compared to Q2 2023, reaching $30.9 million.
- The enterprise solutions segment saw a 15% increase in sales of endpoint devices.
- PC Connection Inc (CNXN) was recognized on Newsweek's list of the Most Trustworthy Companies in America for the third consecutive year.
Negative Points
- Advanced technology revenue was down 8.7% in Q2 compared to the prior-year quarter.
- Networking solutions revenue decreased by 33%, attributed to a tough comparison with the previous year's supply chain recovery.
- Public sector solutions business saw a 14% decline in net sales compared to the previous year.
- SG&A expenses increased by 4.2%, primarily due to higher variable compensation.
- The company anticipates downward pressure on gross margins due to the device refresh and anticipated change in product mix.
Q & A Highlights
Q: Can you share more details on the beginning stages of the device refresh cycle and what is driving it?
A: We are seeing the device refresh primarily driven by Windows 11. Only about 10% of our sales are AI PC-based, and most of these are forward-looking purchases. We expect greater adoption of next-gen technology towards the end of 2024 and early 2025. Our enterprise segment is seeing the most traction, and we are optimistic about our public sector business improving in Q3. (Timothy McGrath, CEO)
Q: How would you update your gross profit dollar growth expectations for the year?
A: We still expect low to mid-single-digit gross profit growth for the year. While our endpoint devices saw a 27% increase in gross profit in Q2, we are tempering our expectations for the rest of the year. (Thomas Baker, CFO)
Q: How are you balancing operating leverage versus investments, and what does this mean for operating margins going forward?
A: We are disciplined in our investments, particularly in our services and solutions business. We expect a slight increase in SG&A in the next quarter or two, but the rate should decrease if revenues improve. We are on track with our investment plan and expect to maintain our current trajectory. (Thomas Baker, CFO)
Q: Can you comment on the trends you saw throughout Q2 and any early indications for Q3?
A: June accounted for about 35% of the quarter's revenue, with a significant spike in the last week. For Q3, we are seeing strong project funnels in the enterprise and public sector segments and steady performance in business solutions. We expect Q3 to be better than Q2 sequentially. (Thomas Baker, CFO; Timothy McGrath, CEO)
Q: How did the recent issues with CrowdStrike affect your work with clients?
A: We were not affected as a company, but several clients were. This provided an opportunity for us to support them, including setting up 24-hour call centers to assist with necessary changes. (Timothy McGrath, CEO)
Q: What is the sustainability of growth in software and server/storage segments?
A: We are seeing a lot of activity, especially in the enterprise business, but the timing of budget releases is uncertain. We are well-positioned for when spending picks up, but we remain cautious about the overall spending environment. (Thomas Baker, CFO)
Q: How did the linearity of sales in Q2 compare to previous years?
A: June accounted for about 35% of the quarter's revenue, down from 37% in the past two years. The last week of June saw a 30% increase in shipments compared to the same period last year. (Thomas Baker, CFO)
Q: What are your expectations for the second half of 2024?
A: We expect the second half of 2024 to be better than the first half, with modest improvements in performance. We are confident in outperforming the IT market growth rate by 200 basis points. (Timothy McGrath, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
