Connection (CNXN) Reports Third Quarter Results
Net Income Increases by 4.9% from Prior Q3
THIRD QUARTER SUMMARY:
-
Gross profit:
$100.4 million , up 4.5% y/y -
Net income:
$13.8 million , up 4.9% y/y -
Diluted EPS:
$0.51 , compared to$0.49 y/y -
Cash balance:
$102.2 million
As previously disclosed, effective
Net sales as presented for the quarter ended
Gross profit as presented for the quarter ended
Gross margin as presented for the quarter ended
Operating income as presented for the quarter ended
Net income as presented for the quarter ended
Earnings per share (“EPS”) on a diluted basis as presented for the
quarter ended
Net income, totaled
Net sales as presented for the nine months ended
Gross profit as presented for the nine months ended
Gross margin as presented for the nine months ended
Operating income as presented for the nine months ended
Net income as presented for the nine months ended
Quarterly Performance by Segment:
-
Net sales for the Business Solutions segment, as presented, for the
third quarter of 2018 were
$244.9 million . Net sales prior to the impact of the new revenue recognition standard for the third quarter of 2018 increased by 1.3% to$294.2 million , compared to$290.6 million for the prior year’s quarter. Net/com products experienced solid growth during the quarter at 14%. Gross margin increased by 327 basis points to 18.2% primarily due to the adoption of the new revenue recognition standard and the increase in invoice selling margins. Gross margin prior to the impact of the new revenue recognition standard for the third quarter of 2018 was 15.3%. -
Net sales for the Enterprise Solutions segment, as presented, for the
third quarter of 2018 were
$265.5 million . Net sales prior to the impact of the new revenue recognition standard for the third quarter of 2018 increased by 13.3% to$303.6 million , compared to$268.0 million for the prior year’s quarter. Mobility, desktops and net/com products experienced strong growth in this segment with an increase of 26%, 16%, and 13%, respectively. Gross margin increased by 156 basis points to 14.3% primarily due to the adoption of the new revenue recognition standard. Gross margin prior to the impact of the new revenue recognition standard for the third quarter of 2018 was 12.5%. -
Net sales for the Public Sector Solutions segment, as presented, for
the third quarter of 2018 were
$148.2 million . Net sales prior to the impact of the new revenue recognition standard for the third quarter of 2018 decreased by 1.2% to$168.5 million , compared to$170.6 million for the prior year’s quarter. Mobility and net/com products experienced strong revenue growth in this segment with an increase of 27% and 8%, respectively. Gross margin increased by 118 basis points to 12.1% primarily due to the adoption of the new revenue recognition standard. Gross margin prior to the impact of the new revenue recognition standard for the third quarter of 2018 was 10.6%.
Quarterly Sales by Product Mix:
- Notebook/mobility sales, the Company’s largest product category, as presented, increased by 9% year over year and accounted for 28% of net sales in the third quarter of 2018, compared to 23% of net sales in the prior year quarter. Excluding the impact of the adoption of the new revenue recognition standard, notebook/mobility sales increased by 10% year over year and accounted for 24% of net sales in the third quarter of 2018, compared to 23% in the prior year quarter. The Enterprise Solutions and Public Sector segments experienced strong year-over-year growth in notebook sales.
- Software sales, as presented, decreased by 58% year over year and accounted for 11% of net sales in the third quarter of 2018, compared to 24% of net sales in the prior year quarter. The decrease in software sales was due to the adoption of the new revenue recognition standard. Excluding the impact of the adoption of the new revenue recognition standard, software sales increased by 2% year over year and accounted for 23% of net sales in the third quarter of 2018, compared to 24% of net sales in the prior year quarter. We experienced solid growth in cloud-based offerings, security, and office productivity.
- Net/Com products, as presented, increased by 12% year over year and accounted for 9% of net sales in the third quarter of 2018, compared to 7% of net sales in the prior year quarter. Excluding the impact of the adoption of the new revenue recognition standard, net/com product sales increased by 13% year over year and accounted for 8% of net sales in the third quarter of 2018, compared to 7% in the prior year quarter. All three selling segments experienced strong year-over-year growth in net/com sales.
Selling, general and administrative (“SG&A”) expenses as presented,
increased in the third quarter of 2018 to
Cash and cash equivalents were
“We are pleased with our vertical market growth in the quarter, as well
as with our strong operating cash flows. In addition, we saw
acceleration in our cloud and security software, and in our mobility
solutions,” said
Conference Call and Webcast
Connection will host a conference call and live web cast today,
Non-GAAP Financial Information
Adjusted EBITDA is a non-GAAP financial measure. This information is included to provide information with respect to the Company’s operating performance and earnings. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. Our non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. A reconciliation to the most directly comparable GAAP measure is available in the tables at the end of this release.
About Connection
Connection – Business Solutions (800-800-5555), (the original business
of
Connection – Enterprise Solutions (561-237-3300), www.connection.com/enterprise,
operating through our
Connection – Public Sector Solutions (800-800-0019), operating through
our
cnxn-g
"Safe Harbor" Statement Under the Private Securities Litigation Reform
Act of 1995: This release contains forward-looking statements that are
based on currently available information, operating plans, and
projections about future events and trends. Terms such as "believe,"
"expect," "intend," "plan," "estimate," "anticipate," "may," "should,"
"will," or similar statements or variations of such terms are intended
to identify forward-looking statements, although not all forward-looking
statements include such terms. Forward-looking statements inherently
involve risks and uncertainties that could cause actual results to
differ materially from those predicted in such forward-looking
statements. Such risks and uncertainties include, but are not limited
to, the impact of changes in market demand and the overall level of
economic activity and environment, or in the level of business
investment in information technology products, product availability and
market acceptance, new products, continuation of key vendor and customer
relationships and support programs, the ability to realize market demand
for and competitive pricing pressures on the products and services
marketed by the Company, fluctuations in operating results and the
ability of the Company to manage personnel levels in response to
fluctuations in revenue, the ability of the Company to hire and retain
qualified sales representatives and other essential personnel, the
impact of changes in accounting requirements, and other risks detailed
in the Company's filings with the
CONSOLIDATED SELECTED FINANCIAL INFORMATION At or for the Three Months Ended September 30, |
2018 | 2017 | ||||||||||||
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data) |
% Change |
|||||||||||||
Operating Data: | ||||||||||||||
Net sales | $ | 658,504 | $ | 729,230 | (10 | %) | ||||||||
Diluted earnings per share | $ | 0.51 | $ | 0.49 | 4 | % | ||||||||
Gross margin | 15.3 | % | 13.2 | % | ||||||||||
Operating margin | 2.9 | % | 3.0 | % | ||||||||||
Return on equity (1) | 12.9 | % | 10.6 | % | ||||||||||
Inventory turns | 22 | 22 | ||||||||||||
Days sales outstanding | 50 | 43 | ||||||||||||
Product Mix: |
% of Net Sales |
% of Net Sales |
||||||||||||
Notebooks/Mobility | 28 | % | 23 | % | ||||||||||
Software | 11 | 24 | ||||||||||||
Desktops | 10 | 10 | ||||||||||||
Servers/Storage | 9 | 8 | ||||||||||||
Net/Com Products | 9 | 7 | ||||||||||||
Other Hardware/Services | 33 | 28 | ||||||||||||
Total Net Sales |
100 | % | 100 | % | ||||||||||
Stock Performance Indicators: | ||||||||||||||
Actual shares outstanding | 26,730 | 26,816 | ||||||||||||
Total book value per share | $ | 19.58 | $ | 17.52 | ||||||||||
Tangible book value per share | $ | 16.45 | $ | 14.35 | ||||||||||
Closing price | $ | 38.89 | $ | 28.19 | ||||||||||
Market capitalization | $ | 1,039,530 | $ | 755,943 | ||||||||||
Trailing price/earnings ratio | 16.3 | 15.9 | ||||||||||||
LTM Adjusted EBITDA (2) | $ | 99,068 | $ | 92,359 | ||||||||||
Adjusted market capitalization/LTM Adjusted EBITDA (3) | 9.5 | 7.5 | ||||||||||||
(1) Calculated as the trailing twelve months' of net income divided by
the average trailing twelve months' of equity.
(2) Adjusted EBITDA
is defined as EBITDA (earnings before interest, taxes, depreciation and
amortization) adjusted for stock-based compensation and acquisition,
rebranding, and restructuring costs.
(3) Adjusted market
capitalization is defined as gross market capitalization less cash
balance.
REVENUE AND MARGIN INFORMATION For the Three Months Ended September 30, |
2018 | 2017 | ||||||||||||||
(amounts in thousands) | Net Sales |
Gross Margin |
Net Sales |
Gross Margin |
||||||||||||
Business Solutions | $ | 244,872 | 18.2 | % | $ | 290,569 | 14.9 | % | ||||||||
Enterprise Solutions | 265,477 | 14.3 | 268,022 | 12.7 | ||||||||||||
Public Sector Solutions | 148,155 | 12.1 | 170,639 | 11.0 | ||||||||||||
Total | $ | 658,504 | 15.3 | % | $ | 729,230 | 13.2 | % | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
(amounts in thousands, except per share data) | 2018 | 2017 ((1)) | 2018 | 2017 ((1)) | ||||||||||||||||
Net sales | $ | 658,504 | $ | 729,230 | $ | 1,989,969 | $ | 2,149,616 | ||||||||||||
Cost of sales | 558,060 | 633,087 | 1,685,685 | 1,867,070 | ||||||||||||||||
Gross profit | 100,444 | 96,143 | 304,284 | 282,546 | ||||||||||||||||
Selling, general and administrative expenses | 81,494 | 74,404 | 244,915 | 226,915 | ||||||||||||||||
Income from operations | 18,950 | 21,739 | 59,369 | 55,631 | ||||||||||||||||
Interest/other expense, net | 114 | (8 | ) | 412 | 20 | |||||||||||||||
Income tax provision | (5,298 | ) | (8,614 | ) | (16,489 | ) | (21,517 | ) | ||||||||||||
Net income | $ | 13,766 | $ | 13,117 | $ | 43,292 | $ | 34,134 | ||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 0.52 | $ | 0.49 | $ | 1.62 | $ | 1.28 | ||||||||||||
Diluted | $ | 0.51 | $ | 0.49 | $ | 1.61 | $ | 1.27 | ||||||||||||
Shares used in the computation of earnings per common share: | ||||||||||||||||||||
Basic | 26,716 | 26,802 | 26,745 | 26,754 | ||||||||||||||||
Diluted | 26,902 | 26,899 | 26,883 | 26,886 | ||||||||||||||||
(1) Amounts are not restated and represent the amounts recognized under generally accepted accounting principles in place during the relevant reporting period.
CONDENSED CONSOLIDATED BALANCE SHEETS | September 30, 2018 |
December 31, 2017 (1) |
||||||||
(amounts in thousands) | ||||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | $ | 102,243 | $ | 49,990 | ||||||
Accounts receivable, net | 400,831 | 449,682 | ||||||||
Inventories, net | 105,283 | 106,753 | ||||||||
Prepaid expenses and other current assets | 6,068 | 5,737 | ||||||||
Income taxes receivable | 2,658 | 3,933 | ||||||||
Total current assets | 617,083 | 616,095 | ||||||||
Property and equipment, net | 48,176 | 41,491 | ||||||||
Goodwill | 73,602 | 73,602 | ||||||||
Intangibles assets, net | 9,924 | 11,025 | ||||||||
Other assets | 1,442 | 5,638 | ||||||||
Total Assets | $ | 750,227 | $ | 747,851 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | $ | 165,190 | $ | 194,257 | ||||||
Accrued expenses and other liabilities | 23,475 | 31,096 | ||||||||
Accrued payroll | 20,359 | 22,662 | ||||||||
Total current liabilities | 209,024 | 248,015 | ||||||||
Deferred income taxes | 16,125 | 15,696 | ||||||||
Other liabilities | 1,836 | 1,888 | ||||||||
Total Liabilities | 226,985 | 265,599 | ||||||||
Stockholders’ Equity: | ||||||||||
Common stock | 287 | 287 | ||||||||
Additional paid-in capital | 115,039 | 114,154 | ||||||||
Retained earnings | 428,162 | 383,673 | ||||||||
Treasury stock at cost | (20,246 | ) | (15,862 | ) | ||||||
Total Stockholders’ Equity | 523,242 | 482,252 | ||||||||
Total Liabilities and Stockholders’ Equity | $ | 750,227 | $ | 747,851 | ||||||
(1) Amounts are not restated and represent the amounts recognized under generally accepted accounting principles in place during the relevant reporting period.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||
Three Months Ended |
Nine Month Ended |
|||||||||||||||||||
(amounts in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||||||
Net income | $ | 13,766 | $ | 13,117 | $ | 43,292 | $ | 34,134 | ||||||||||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||||||||||||||
Depreciation and amortization | 3,633 | 2,935 | 10,362 | 8,645 | ||||||||||||||||
Provision for doubtful accounts | 734 | 503 | 1,428 | 1,116 | ||||||||||||||||
Stock-based compensation expense | 273 | 175 | 738 | 560 | ||||||||||||||||
Deferred income taxes | - | - | 429 | 164 | ||||||||||||||||
Loss on disposal of fixed assets | 51 | - | 51 | - | ||||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||||||
Accounts receivable | 62,429 | 43,270 | 63,881 | 28,101 | ||||||||||||||||
Inventories | 2,166 | 11,502 | (9,399 | ) | (16,189 | ) | ||||||||||||||
Prepaid expenses and other current assets | (1,514 | ) | 357 | 812 | (2,191 | ) | ||||||||||||||
Other non-current assets | 2,279 | 132 | 282 | (3,945 | ) | |||||||||||||||
Accounts payable | (35,524 | ) | (22,092 | ) | (29,361 | ) | (13,162 | ) | ||||||||||||
Accrued expenses and other liabilities | (8,558 | ) | (11,780 | ) | (1,262 | ) | (8,872 | ) | ||||||||||||
Net cash provided by operating activities | 39,735 | 38,119 | 81,253 | 28,361 | ||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Purchases of equipment | (5,714 | ) | (3,413 | ) | (15,641 | ) | (7,944 | ) | ||||||||||||
Net cash used for investing activities | (5,714 | ) | (3,413 | ) | (15,641 | ) | (7,944 | ) | ||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Proceeds from short-term borrowings | - | - | 859 | - | ||||||||||||||||
Repayment of short-term borrowings | - | - | (859 | ) | - | |||||||||||||||
Purchase of treasury shares | - | - | (4,384 | ) | - | |||||||||||||||
Dividend payment | - | - | (9,122 | ) | (9,041 | ) | ||||||||||||||
Exercise of stock options | - | 1 | - | 1,679 | ||||||||||||||||
Issuance of stock under Employee Stock Purchase Plan | - | - | 605 | 603 | ||||||||||||||||
Payment of payroll taxes on stock-based compensation through shares withheld | (458 | ) | (500 | ) | (458 | ) | (500 | ) | ||||||||||||
Net cash (used for) provided by financing activities | (458 | ) | (499 | ) | (13,359 | ) | (7,259 | ) | ||||||||||||
Increase (decrease) in cash and cash equivalents | 33,563 | 34,207 | 52,253 | 13,158 | ||||||||||||||||
Cash and cash equivalents, beginning of period | 68,680 | 28,131 | 49,990 | 49,180 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 102,243 | $ | 62,338 | $ | 102,243 | $ | 62,338 | ||||||||||||
Non-cash Investing Activities: | ||||||||||||||||||||
Accrued capital expenditures | $ | 1,055 | $ | 294 | $ | 1,055 | $ | 294 | ||||||||||||
Supplemental Cash Flow Information: | ||||||||||||||||||||
Income taxes paid | $ | 6,825 | $ | 8,589 | $ | 15,134 | $ | 24,293 | ||||||||||||
(1) Amounts are not restated and represent the amounts recognized under generally accepted accounting principles in place during the relevant reporting period.
EBITDA AND ADJUSTED EBITDA | ||||||||||||||||||||||||
A reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure is detailed below. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation and special charges. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either includes or excludes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance including our ability to fund our future capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. Our non-GAAP financial measures may not be comparable to other similar titled measures of other companies. |
||||||||||||||||||||||||
(amounts in thousands) | Three Months Ended September 30, | LTM Ended September 30, (1) | ||||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||
Net income | $ | 13,766 | $ | 13,117 | 5 | % | $ | 64,015 | $ | 47,131 | 36 | % | ||||||||||||
Depreciation and amortization | 3,634 | 2,935 | 24 | % | 13,557 | 11,593 | 17 | % | ||||||||||||||||
Income tax expense | 5,298 | 8,614 | (38 | %) | 17,740 | 30,407 | (42 | %) | ||||||||||||||||
Interest expense | 51 | 30 | 70 | % | 142 | 142 | 0 | % | ||||||||||||||||
EBITDA | 22,749 | 24,696 | (8 | %) | 95,454 | 89,273 | 7 | % | ||||||||||||||||
Special charges (2) | - | - | 0 | % | 2,695 | 2,452 | 10 | % | ||||||||||||||||
Stock-based compensation | 273 | 176 | 55 | % | 919 | 634 | 45 | % | ||||||||||||||||
Adjusted EBITDA | $ | 23,022 | $ | 24,872 | (7 | %) | $ | 99,068 | $ | 92,359 | 7 | % | ||||||||||||
(1) LTM: Last twelve months
(2) Special charges in 2017 consist of
a fourth quarter one-time bonus paid to all employees except executive
officers as well as severance and relocation costs for our Softmart
facility incurred in the second quarter 2017. Special charges in last
twelve months of 2017 consist of our acquisition of Softmart, the
rebranding of the Company, and duplicate costs incurred with the move of
our
RECONCILIATION OF CHANGES IN REVENUE STANDARD | ||||||||||||||||||||||||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, |
Change |
Change |
||||||||||||||||||||||||||||||||||||||
2018 | 2017 | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||
Previous Revenue Standard |
||||||||||||||||||||||||||||||||||||||||
As Presented |
% of Net Sales | Impact of New Revenue Standard |
Amount |
% of Net Sales | Amount | % of Net Sales | ||||||||||||||||||||||||||||||||||
Net sales | $ | 658,504 | 100.0 | % | $ | 107,826 | $ | 766,330 | 100.0 | % | $ | 729,230 | 100.0 | % | $ | (70,726 | ) | (9.7 | %) | $ | 37,100 | 5.1 | % | |||||||||||||||||
Cost of sales | 558,060 | 84.7 | % | 107,575 | 665,635 | 86.9 | % | 633,087 | 86.8 | % | (75,027 | ) | (11.9 | %) | 32,548 | 5.1 | % | |||||||||||||||||||||||
Gross profit | 100,444 | 15.3 | % | 251 | 100,695 | 13.1 | % | 96,143 | 13.2 | % | 4,301 | 4.5 | % | 4,552 | 4.7 | % | ||||||||||||||||||||||||
Selling, general and administrative expenses | 81,494 | 12.4 | % | 27 | 81,521 | 10.6 | % | 74,404 | 10.2 | % | 7,090 | 9.5 | % | 7,117 | 9.6 | % | ||||||||||||||||||||||||
Income from operations | 18,950 | 2.9 | % | 224 | 19,174 | 2.5 | % | 21,739 | 3.0 | % | (2,789 | ) | (12.8 | %) | (2,565 | ) | (11.8 | %) | ||||||||||||||||||||||
Interest income, net | 114 | - | - | 114 | - | (8 | ) | - | 122 | (1,525.0 | %) | 122 | (1,525.0 | %) | ||||||||||||||||||||||||||
Income tax provision | (5,298 | ) | (0.8 | %) | (62 | ) | (5,360 | ) | (0.7 | %) | (8,614 | ) | (1.2 | %) | 3,316 | (38.5 | %) | 3,254 | (37.8 | %) | ||||||||||||||||||||
Net income | $ | 13,766 | 2.1 | % | $ | 162 | $ | 13,928 | 1.8 | % | $ | 13,117 | 1.8 | % | $ | 649 | 4.9 | % | $ | 811 | 6.2 | % | ||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||||||||||||||||
Basic | $ | 0.52 | $ | - | $ | 0.52 | $ | 0.49 | $ | 0.03 | 6.1 | % | $ | 0.03 | 6.1 | % | ||||||||||||||||||||||||
Diluted | $ | 0.51 | $ | 0.01 | $ | 0.52 | $ | 0.49 | $ | 0.02 | 4.1 | % | $ | 0.03 | 6.1 | % | ||||||||||||||||||||||||
Shares used in the computation of earnings per common share | ||||||||||||||||||||||||||||||||||||||||
Basic | 26,716 | 26,716 | 26,802 | |||||||||||||||||||||||||||||||||||||
Diluted | 26,902 | 26,902 | 26,899 | |||||||||||||||||||||||||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD | |||||||||||||||||||||||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||||||||||
2018 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||||
Previous Revenue Standard |
|||||||||||||||||||||||||||||||||||||||
As Presented |
% of Net Sales | Impact of New Revenue Standard |
Amount |
% of Net Sales | Amount | % of Net Sales | |||||||||||||||||||||||||||||||||
Net sales | $ | 1,989,969 | 100.0 | % | $ | 296,583 | $ | 2,286,552 | 100.0 | % | $ | 2,149,616 | 100.0 | % | $ | (159,647 | ) | (7.4 | %) | $ | 136,936 | 6.4 | % | ||||||||||||||||
Cost of sales | 1,685,685 | 84.7 | % | 295,540 | 1,981,225 | 86.6 | % | 1,867,070 | 86.9 | % | (181,385 | ) | (9.7 | %) | 114,155 | 6.1 | % | ||||||||||||||||||||||
Gross profit | 304,284 | 15.3 | % | 1,043 | 305,327 | 13.4 | % | 282,546 | 13.1 | % | 21,738 | 7.7 | % | 22,781 | 8.1 | % | |||||||||||||||||||||||
Selling, general and administrative expenses | 244,915 | 12.3 | % | 235 | 245,150 | 10.7 | % | 226,915 | 10.5 | % | 18,000 | 7.9 | % | 18,235 | 8.0 | % | |||||||||||||||||||||||
Income from operations | 59,369 | 3.0 | % | 808 | 60,177 | 2.7 | % | 55,631 | 2.6 | % | 3,738 | 6.7 | % | 4,546 | 8.2 | % | |||||||||||||||||||||||
Interest income, net | 412 | - | - | 412 | 0.0 | % | 20 | 0.0 | % | 392 | 1,960.0 | % | 392 | 1,960.0 | % | ||||||||||||||||||||||||
Income tax provision | (16,489 | ) | (0.8 | %) | (224 | ) | (16,713 | ) | (0.7 | %) | (21,517 | ) | (1.0 | %) | 5,028 | (23.4 | %) | 4,804 | (22.3 | %) | |||||||||||||||||||
Net income | $ | 43,292 | 2.2 | % | $ | 584 | $ | 43,876 | 1.9 | % | $ | 34,134 | 1.6 | % | $ | 9,158 | 26.8 | % | $ | 9,742 | 28.5 | % | |||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||||||||||
Basic | $ | 1.62 | $ | 0.02 | $ | 1.64 | $ | 1.28 | $ | 0.34 | 26.6 | % | $ | 0.36 | 28.1 | % | |||||||||||||||||||||||
Diluted | $ | 1.61 | $ | 0.02 | $ | 1.63 | $ | 1.27 | $ | 0.34 | 26.8 | % | $ | 0.36 | 28.3 | % | |||||||||||||||||||||||
Shares used in the computation of earnings per common share | |||||||||||||||||||||||||||||||||||||||
Basic | 26,745 | 26,745 | 26,754 | ||||||||||||||||||||||||||||||||||||
Diluted | 26,883 | 26,883 | 26,886 | ||||||||||||||||||||||||||||||||||||
CONSOLIDATED SELECTED FINANCIAL INFORMATION UNDER PREVIOUS REVENUE RECOGNITION STANDARD | |||||||||||||
2018 | 2017 | ||||||||||||
As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | |||||||||||
Inventory turns | 22 | 4 | 26 | 22 | |||||||||
Days sales outstanding | 50 | (7 | ) | 43 | 43 | ||||||||
Product Mix: | % of Net Sales |
% of Net Sales |
% of Net Sales |
||||||||||
Notebooks/Mobility | 28 | % | (4 | ) | 24 | % | 23 | % | |||||
Software | 11 | 12 | 23 | 24 | |||||||||
Desktops | 10 | (1 | ) | 9 | 10 | ||||||||
Servers/Storage | 9 | (1 | ) | 8 | 8 | ||||||||
Net/Com Products | 9 | (1 | ) | 8 | 7 | ||||||||
Other Hardware/Services | 33 | (5 | ) | 28 | 28 | ||||||||
Total Net Sales | 100 | % | 100 | % | 100 | % |
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT NET SALES | |||||||||||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||
2018 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
Net sales | As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | ||||||||||||||||||||||||||||
Business Solutions | $ | 244,872 | $ | 49,335 | $ | 294,207 | $ | 290,569 | $ | (45,697 | ) | (15.7 | %) | $ | 3,638 | 1.3 | % | ||||||||||||||
Enterprise Solutions | 265,477 | 38,106 | 303,583 | 268,022 | (2,545 | ) | (0.9 | %) | 35,561 | 13.3 | % | ||||||||||||||||||||
Public Sector Solutions | 148,155 | 20,385 | 168,540 | 170,639 | (22,484 | ) | (13.2 | %) | (2,099 | ) | (1.2 | %) | |||||||||||||||||||
Total | $ | 658,504 | $ | 107,826 | $ | 766,330 | $ | 729,230 | $ | (70,726 | ) | (9.7 | %) | $ | 37,100 | 5.1 | % | ||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT GROSS PROFITS | |||||||||||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||
2018 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
Gross profits | As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | ||||||||||||||||||||||||||||
Business Solutions | $ | 44,586 | $ | 377 | $ | 44,963 | $ | 43,393 | $ | 1,193 | 2.7 | % | $ | 1,570 | 3.6 | % | |||||||||||||||
Enterprise Solutions | 37,880 | (13 | ) | 37,867 | 34,064 | 3,816 | 11.2 | % | 3,803 | 11.2 | % | ||||||||||||||||||||
Public Sector Solutions | 17,978 | (113 | ) | 17,865 | 18,686 | (708 | ) | (3.8 | %) | (821 | ) | (4.4 | %) | ||||||||||||||||||
Total | $ | 100,444 | $ | 251 | $ | 100,695 | $ | 96,143 | $ | 4,301 | 4.5 | % | $ | 4,552 | 4.7 | % | |||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT GROSS MARGINS | |||||||||||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||
2018 | 2017 | Amount | Amount | ||||||||||||||||||||||||||||
Gross margins | As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | ||||||||||||||||||||||||||||
Business Solutions | 18.2 | % | (293 | ) | 15.3 | % | 14.9 | % | 327 | 35 | |||||||||||||||||||||
Enterprise Solutions | 14.3 | % | (180 | ) | 12.5 | % | 12.7 | % | 156 | (24 | ) | ||||||||||||||||||||
Public Sector Solutions | 12.1 | % | (153 | ) | 10.6 | % | 11.0 | % | 118 | (35 | ) | ||||||||||||||||||||
Total | 15.3 | % | (211 | ) | 13.1 | % | 13.2 | % | 207 | (4 | ) | ||||||||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT NET SALES | |||||||||||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||
2018 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
Net sales | As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | ||||||||||||||||||||||||||||
Business Solutions | $ | 778,192 | $ | 125,983 | $ | 904,175 | $ | 860,622 | $ | (82,430 | ) | (9.6 | %) | $ | 43,553 | 5.1 | % | ||||||||||||||
Enterprise Solutions | 823,786 | 119,034 | 942,820 | 823,017 | 769 | 0.1 | % | 119,803 | 14.6 | % | |||||||||||||||||||||
Public Sector Solutions | 387,991 | 51,566 | 439,557 | 465,977 | (77,986 | ) | (16.7 | %) | (26,420 | ) | (5.7 | %) | |||||||||||||||||||
Total | $ | 1,989,969 | $ | 296,583 | $ | 2,286,552 | $ | 2,149,616 | $ | (159,647 | ) | (7.4 | %) | $ | 136,936 | 6.4 | % | ||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT GROSS PROFITS | |||||||||||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||
2018 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
Gross profits | As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | ||||||||||||||||||||||||||||
Business Solutions | $ | 138,150 | $ | 958 | $ | 139,108 | $ | 131,461 | $ | 6,689 | 5.1 | % | $ | 7,647 | 5.8 | % | |||||||||||||||
Enterprise Solutions | 117,830 | 198 | 118,028 | 102,800 | 15,030 | 14.6 | % | 15,228 | 14.8 | % | |||||||||||||||||||||
Public Sector Solutions | 48,304 | (113 | ) | 48,191 | 48,285 | 19 | 0.0 | % | (94 | ) | (0.2 | %) | |||||||||||||||||||
Total | $ | 304,284 | $ | 1,043 | $ | 305,327 | $ | 282,546 | $ | 21,738 | 7.7 | % | $ | 22,781 | 8.1 | % | |||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT GROSS MARGINS | |||||||||||||||||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
|||||||||||||||||||||||||||||
2018 | 2017 | Amount | Amount | ||||||||||||||||||||||||||||
Gross margins | As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | ||||||||||||||||||||||||||||
Business Solutions | 17.8 | % | (237 | ) | 15.4 | % | 15.3 | % | 248 | 11 | |||||||||||||||||||||
Enterprise Solutions | 14.3 | % | (178 | ) | 12.5 | % | 12.5 | % | 181 | 3 | |||||||||||||||||||||
Public Sector Solutions | 12.4 | % | (149 | ) | 11.0 | % | 10.4 | % | 209 | 60 | |||||||||||||||||||||
Total | 15.3 | % | (194 | ) | 13.4 | % | 13.1 | % | 215 | 21 | |||||||||||||||||||||
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR EBITDA AND ADJUSTED EBITDA | |||||||||||||||||||
A reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure is detailed below. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation and special charges. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either includes or excludes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance including our ability to fund our future capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. Our non-GAAP financial measures may not be comparable to other similar titled measures of other companies. | |||||||||||||||||||
(amounts in thousands) | Three Months Ended September 30, | Change As Presented |
Change Previous Revenue Standard |
||||||||||||||||
2018 | 2017 | Percent | Percent | ||||||||||||||||
As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | |||||||||||||||||
Net income | $ | 13,766 | $ | 162 | $ | 13,928 | $ | 13,117 | 5 | % | 6 | % | |||||||
Depreciation and amortization | 3,634 | - | 3,634 | 2,935 | 24 | % | 24 | % | |||||||||||
Income tax expense | 5,298 | 62 | 5,360 | 8,614 | (38 | %) | (38 | %) | |||||||||||
Interest expense | 51 | - | 51 | 30 | 70 | % | 70 | % | |||||||||||
EBITDA | 22,749 | 224 | 22,973 | 24,696 | (8 | %) | (7 | %) | |||||||||||
Stock-based compensation | 273 | - | 273 | 176 | 55 | % | 55 | % | |||||||||||
Adjusted EBITDA | $ | 23,022 | $ | 224 | $ | 23,246 | $ | 24,872 | (7 | %) | (7 | %) | |||||||
(amounts in thousands) | LTM Ended September 30, (1) | Change As Presented |
Change Previous Revenue Standard |
||||||||||||||||
2018 | 2017 | Percent | Percent | ||||||||||||||||
As Presented |
Impact of New Revenue Standard |
Previous Revenue Standard | |||||||||||||||||
Net income | $ | 64,015 | $ | 584 | $ | 64,599 | $ | 47,131 | 36 | % | 37 | % | |||||||
Depreciation and amortization | 13,557 | - | 13,557 | 11,593 | 17 | % | 17 | % | |||||||||||
Income tax expense | 17,740 | 224 | 17,964 | 30,407 | (42 | %) | (41 | %) | |||||||||||
Interest expense | 142 | - | 142 | 142 | 0 | % | 0 | % | |||||||||||
EBITDA | 95,454 | 808 | 96,262 | 89,273 | 7 | % | 8 | % | |||||||||||
Special charges (2) | 2,695 | - | 2,695 | 2,482 | 9 | % | 9 | % | |||||||||||
Stock-based compensation | 919 | - | 919 | 634 | 45 | % | 45 | % | |||||||||||
Adjusted EBITDA | $ | 99,068 | $ | 808 | $ | 99,876 | $ | 92,389 | 7 | % | 8 | % | |||||||
(1) LTM: Last twelve months
(2) Special charges in 2017 consist of
a fourth quarter one-time bonus paid to all employees except executive
officers as well as severance and relocation costs for our Softmart
facility incurred in the second quarter 2017. Special charges in last
twelve months of 2017 consist of our acquisition of Softmart, the
rebranding of the Company, and duplicate costs incurred with the move of
our
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View source version on businesswire.com: https://www.businesswire.com/news/home/20181101006060/en/
Source: Connection
Investor Relations Contact:
Connection
Steve Sarno,
603-683-2505
Steve.Sarno@connection.com