Press Release Details

THIRD QUARTER SUMMARY:

• Highest quarterly net sales and net income in Company history
• Net sales: $680.8 million, up 6.4% year over year
• Diluted earnings per share: $0.49 versus $0.46 last year
• Cash balance $76.9 million

MERRIMACK, N.H.--(BUSINESS WIRE)-- PC Connection, Inc. (NASDAQ: PCCC), a national provider of a full range of information technology (IT) solutions to business, government, healthcare, and education markets, today announced record results for the quarter ended September 30, 2015. Net sales for the third quarter of 2015 increased by 6.4% to $680.8 million, compared to $639.6 million for the prior year quarter. Net income for the quarter ended September 30, 2015 increased to $13.0 million, or $0.49 per diluted share, compared to net income of $12.2 million, or $0.46 per diluted share for the prior year quarter. The Company's results are compared to a very strong prior year quarter, which had revenue growth of 10% and net income growth of 15%.

Net sales for the nine months ended September 30, 2015 were $1,889.7 million, an increase of $57.1 million or 3.1%, compared to $1,832.6 million for the nine months ended September 30, 2014. Net income for the nine months ended September 30, 2015 increased by 8.1% to $33.2 million, or $1.25 per diluted share, compared to net income of $30.7 million, or $1.16 per diluted share, for the nine months ended September 30, 2014. Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense ("Adjusted EBITDA") totaled $85.4 million for the twelve months ended September 30, 2015, compared to $76.7 million for the twelve months ended September 30, 2014.

Quarterly Sales by Segment:

• Net sales for the SMB segment increased by 5.6% to $268.7 million in the third quarter of 2015, compared to the prior year quarter. The increase was due to solid growth in Mobility, Networking, and Services.
• Net sales for the Large Account segment increased by 20.2% to $242.8 million in the third quarter of 2015, compared to the prior year quarter. The increase was due to strong demand for solution-based projects from enterprise customers across a number of industries and vertical markets, including significant growth in Healthcare.
• Net sales to the Public Sector segment decreased by 7.6% to $169.3 million in the third quarter of 2015, compared to the prior year quarter. This segment's results compared to very strong 2014 numbers, as Public Sector grew 21% in Q3 of 2014.

Quarterly Sales by Product Mix:

• Notebook/mobility sales, the Company's largest product category, increased by 16% year over year and accounted for 24% of net sales in the third quarter of 2015 compared to 22% of net sales in the prior year quarter. Mobility continues to be a strategic focus area for customers in each of our three segments.
• Software sales increased by 4% year over year and accounted for 15% of net sales in the third quarter of 2015 compared to 16% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and virtualization.
• We experienced sales growth in advanced solutions including Networking and Storage as we continue to focus on solving our customer's most complex business issues with technology.

Overall gross profit increased by $4.9 million, or 5.9%, in the third quarter of 2015, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, slightly decreased to 13.0% in the third quarter of 2015, compared to 13.1% for the prior year quarter.

Selling, general and administrative dollars increased in the third quarter of 2015 to $66.7 million from $63.2 million in the prior year quarter and improved as a percentage of net sales to 9.8% due to strict cost controls. Included in these totals were $0.5 million of start-up and transition costs related to our new advanced configuration and distribution center, which was operational at the end of the third quarter. We continue to invest in technical solution sales capabilities and expect SG&A expenses to rise accordingly. However, we are highly focused on improving efficiencies and streamlining wherever possible.

The Company generated significant cash flow during the nine months ended September 30, 2015. Total cash was $76.9 million at September 30, 2015, compared to $60.9 million at December 31, 2014.

"The Company had record performance in both net sales and net income this quarter. We were able to increase sales and earnings, while making solid progress towards our Company goals as a leading National Solutions Provider connecting customers with technology solutions," said Timothy McGrath, President and Chief Executive Officer. "We believe our team and the strategies we have in place position us well to gain market share and increase long-term shareholder value."

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.

About PC Connection, Inc.

PC Connection, Inc., a Fortune 1000 company, has three wholly owned sales subsidiaries: PC Connection Sales Corporation, MoreDirect, Inc., and GovConnection, Inc., headquartered in Merrimack, NH; Boca Raton, FL; and Rockville, MD; respectively. All three companies can deliver custom-configured computer systems overnight from our ISO 9001:2008 certified technical configuration lab at our distribution center in Wilmington, OH. In addition, the company has over 2,500 technical certifications to ensure that we can solve the most complex issues of our customers. Investors and media can find more information about PC Connection, Inc. at http://ir.pcconnection.com.

PC Connection Sales Corporation (800-800-5555), the original business of PC Connection, Inc. serving primarily the small- and medium-sized business sector, is a rapid-response provider of IT products and services. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, catalogs, publications, and its website at www.pcconnection.com. This company also serves consumer and small office users and is, under its MacConnection brand (800-800-2222), one of Apple's largest authorized online resellers at www.macconnection.com.

MoreDirect, Inc. (561-237-3300), www.moredirect.com, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and access to over 300,000 products and 1,600 vendors through TRAXX™, our proprietary cloud-based eProcurement system. MoreDirect's team of engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

GovConnection, Inc. (800-800-0019) is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, catalogs, publications, and online at www.govconnection.com.

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"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are subject to risks and uncertainties, including, but 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, competitive products and pricing, product availability and market acceptance, new products, fluctuations in operating results, and the ability of the Company to manage costs in response to fluctuations in revenue, and other risks that could cause actual results to differ materially from expectations, including those detailed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2014. More specifically, the statements in this release concerning the Company's outlook for selling, general, and administrative expenses, the Company's efforts in improving efficiencies and streamlining its business and other statements of a non-historical basis (including statements regarding the Company's ability to increase market share and enhance long-term shareholder value and the Company's continuing investments in technical solution sales capabilities) are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties include the ability to realize market demand for and competitive pricing pressures on the products and services marketed by the Company, the continued acceptance of the Company's distribution channel by vendors and customers, continuation of key vendor and customer relationships and support programs, the ability of the Company to gain or maintain market share, and the ability of the Company to hire and retain qualified sales representatives and other essential personnel. The Company disclaims any obligation to update the information in this press release or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise.

CONSOLIDATED SELECTED FINANCIAL INFORMATION
At or for the Three Months Ended September 30,				2015											2014
																										%
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data)																										Change
Operating Data:
Net sales				$	680,769										$	639,570										6	%
Diluted earnings per share				$	0.49										$	0.46										7	%
Gross margin					13.0	%										13.1	%
Operating margin					3.2	%										3.2	%
Return on equity (1)					12.3	%										12.2	%
Inventory turns					23											24
Days sales outstanding					40											36
				% of											% of
Product Mix:				Net Sales											Net Sales
Notebooks/Mobility					24	%										22	%
Software					15											16
Servers/Storage					11											12
Net/Com Products					9											9
Other Hardware/Services					41											41
Total Net Sales					100	%										100	%
Stock Performance Indicators:
Actual shares outstanding					26,444											26,298
Total book value per share				$	14.70										$	13.38
Tangible book value per share				$	12.71										$	11.34
Closing price				$	20.73										$	21.47
Market capitalization				$	548,184										$	564,618
Trailing price/earnings ratio					12.2											14.0
LTM Adjusted EBITDA (2)				$	85,392										$	76,723
Adjusted market capitalization/LTM Adjusted EBITDA (3)					5.5											6.5
(1) Based on last twelve months' net income.
(2) Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation.
(3) Adjusted market capitalization is defined as gross market capitalization less cash balance.
REVENUE AND MARGIN INFORMATION
For the Three Months Ended September 30,				2015											2014
				Net						Gross					Net						Gross
(amounts in thousands)				Sales						Margin					Sales						Margin
SMB				$	268,720					15.1	%				$	254,432					14.9	%
Large Account					242,771					11.9						201,979					13.1
Public Sector					169,278					11.2						183,159					10.4
Total				$	680,769					13.0	%				$	639,570					13.1	%

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30,				2015											2014
(amounts in thousands, except per share data)				Amount						% of Net Sales					Amount						% of Net Sales
Net sales				$	680,769					100.0	%				$	639,570					100.0	%
Cost of sales					592,201					87.0						555,918					86.9
Gross profit					88,568					13.0						83,652					13.1
Start-up costs - new distribution center					459					0.1						-					-
Selling, general and administrative expenses, other					66,248					9.7						63,235					9.9
Income from operations					21,861					3.2						20,417					3.2
Interest/other expense, net					(29	)				-						(36	)				-
Income tax provision					(8,831	)				(1.3	)					(8,204	)				(1.3	)
Net income				$	13,001					1.9	%				$	12,177					1.9	%
Earnings per common share:
Basic				$	0.49										$	0.46
Diluted				$	0.49										$	0.46
Shares used in the computation of earnings per common share:
Basic					26,423											26,266
Diluted					26,622											26,524
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30,				2015											2014
(amounts in thousands, except per share data)				Amount						% of Net Sales					Amount						% of Net Sales
Net sales				$	1,889,650					100.0	%				$	1,832,574					100.0	%
Cost of sales					1,640,482					86.8						1,592,309					86.9
Gross profit					249,168					13.2						240,265					13.1
Start-up costs - new distribution center					730					-						-					-
Selling, general and administrative expenses, other					192,775					10.2						188,900					10.3
Income from operations					55,663					3.0						51,365					2.8
Interest/other expense, net					(67	)				-						(72	)				-
Income tax provision					(22,382	)				(1.2	)					(20,556	)				(1.1	)
Net income				$	33,214					1.8	%				$	30,737					1.7	%
Earnings per common share:
Basic				$	1.26										$	1.17
Diluted				$	1.25										$	1.16
Shares used in the computation of earnings per common share:
Basic					26,281											26,225
Diluted					26,514											26,498

EBITDA AND ADJUSTED EBITDA
A reconciliation of EBITDA and Adjusted EBITDA is detailed below. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation. 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.
(amounts in thousands)				Three Months Ended September 30,															LTM Ended September 30, (1)
					2015					2014				% Change						2015						2014					% Change
Net income				$	13,001				$	12,177									$	45,158					$	40,578
Depreciation and amortization					2,226					2,133										8,692						8,074
Income tax expense					8,831					8,204										30,513						27,079
Interest/other expense, net					29					36										81						86
EBITDA					24,087					22,550										84,444						75,817
Stock-based compensation					257					215										948						906
Adjusted EBITDA				$	24,344				$	22,765				7	%				$	85,392					$	76,723					11	%
(1) LTM: Last twelve months
																			September 30,						December 31,
CONDENSED CONSOLIDATED BALANCE SHEETS																				2015						2014
(amounts in thousands)
ASSETS
Current Assets:
Cash and cash equivalents																			$	76,867					$	60,909
Accounts receivable, net																				331,186						293,027
Inventories																				102,573						90,917
Deferred income taxes																				7,749						7,749
Prepaid expenses and other current assets																				4,632						5,332
Income taxes receivable																				833						212
Total current assets																				523,840						458,146
Property and equipment, net																				32,400						27,861
Goodwill																				51,276						51,276
Other intangibles, net																				1,393						1,953
Other assets																				1,173						724
Total Assets																			$	610,082					$	539,960
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable																			$	161,054					$	124,893
Accrued expenses and other liabilities																				22,871						22,011
Accrued payroll																				15,909						17,793
Total current liabilities																				199,834						164,697
Deferred income taxes																				18,859						18,803
Other liabilities																				2,723						2,452
Total Liabilities																				221,416						185,952
Stockholders' Equity:
Common stock																				283						282
Additional paid-in capital																				108,399						106,956
Retained earnings																				295,846						262,632
Treasury stock at cost																				(15,862	)					(15,862	)
Total Stockholders' Equity																				388,666						354,008
Total Liabilities and Stockholders' Equity																			$	610,082					$	539,960

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,						2015							2014
(amounts in thousands)
Cash Flows from Operating Activities:
Net income					$	33,214						$	30,737
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						6,597							5,998
Provision for doubtful accounts						1,103							826
Stock-based compensation expense						720							702
Deferred income taxes						56							50
Excess tax benefit from exercise of equity awards						(472	)						(503	)
Changes in assets and liabilities:
Accounts receivable						(39,262	)						8,287
Inventories						(11,656	)						(3,400	)
Prepaid expenses and other current assets						79							(2,102	)
Other non-current assets						(449	)						(31	)
Accounts payable						35,654							(15,430	)
Accrued expenses and other liabilities						(279	)						3,749
Net cash provided by operating activities						25,305							28,883
Cash Flows from Investing Activities:
Purchases of equipment						(10,069	)						(5,522	)
Proceeds from sale of equipment						-							10
Net cash used for investing activities						(10,069	)						(5,512	)
Cash Flows from Financing Activities:
Excess tax benefit from exercise of equity awards						472							503
Issuance of stock under Employee Stock Purchase Plan						435							360
Exercise of stock options						379							186
Payment of payroll taxes on stock-based compensation through shares withheld						(564	)						(533	)
Net cash provided by financing activities						722							516
Increase in cash and cash equivalents						15,958							23,887
Cash and cash equivalents, beginning of period						60,909							42,547
Cash and cash equivalents, end of period					$	76,867						$	66,434
Non-cash Investing Activities:
Accrued capital expenditures					$	711						$	290
Supplemental Cash Flow Information:
Income taxes paid					$	23,360						$	22,092

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151029006517/en/

PC Connection, Inc.
Joseph Driscoll, 603-683-2505
Senior Vice President, Treasurer and Chief Financial Officer

Source: PC Connection, Inc.

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