Press Release Details

FIRST QUARTER SUMMARY:

• Operating income: $15.5 million, up 35.1% y/y
• Gross profit: $96.4 million, up 11.1% y/y
• Diluted EPS: $0.42, compared to $0.28 for the prior year quarter
• Q1 Operating cash flow of $37.2 million

 

MERRIMACK, N.H--(BUSINESS WIRE)--May 3, 2018-- Connection (PC Connection, Inc.; NASDAQ: CNXN), a leading technology solutions provider to business, government, and education markets, today announced results for the first quarter ended March 31, 2018. Net income for the first quarter ended March 31, 2018 increased by 52.1% to $11.3 million, or $0.42 per basic and diluted share, compared to net income of $7.4 million, or $0.28 per basic and diluted share for the prior year’s quarter.

Effective January 1, 2018, the Company adopted a new revenue recognition standard. Please note that the financial results presented in this release include both amounts, “as presented,” which reflect the implementation of the new revenue recognition standard, as well as amounts prior to the impact of the new revenue recognition standard to allow for comparability against historical results. Starting in calendar year 2019, we will no longer present our financial results under the previous revenue recognition standard. For additional information and reconciliations of our financial results between the new and prior revenue recognition standards, please see the additional tables included in this press release.

Net sales as presented for the quarter ended March 31, 2018 were $624.9 million. Net sales prior to the impact of the new revenue recognition standard for the quarter ended March 31, 2018 increased by 4.5% to $700.5 million, compared to $670.6 million for the prior year’s quarter.

Gross profit as presented for the quarter ended March 31, 2018 was $96.4 million. Gross profit prior to the impact of the new revenue recognition standard for the quarter ended March 31, 2018 was $95.8 million, compared to $86.7 million in the first quarter a year ago, an increase of 10.4%.

Gross margin as presented for the quarter ended March 31, 2018 was 15.4%. Gross margin prior to the impact of the new revenue recognition standard was 13.7%, compared to 12.9% in the same quarter a year ago.

Operating income as presented for the quarter ended March 31, 2018 was $15.5 million. Operating income prior to the impact of the new revenue recognition standard was $15.0 million, compared to $11.5 million in the same quarter a year ago.

Net income as presented for the quarter ended March 31, 2018 was $11.3 million. Net income prior to the impact of the new revenue recognition standard was $10.9 million, compared to $7.4 million in the first quarter a year ago, an increase of 47%.

Earnings per share (“EPS”) on both a basic and diluted basis as presented for the quarter ended March 31, 2018 was $0.42. EPS prior to the impact of the new revenue recognition standard was $0.41 per share, compared to the prior year’s $0.28 on both a basic and diluted basis.

Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense and rebranding, acquisition and restructuring costs (“Adjusted EBITDA”), a non-GAAP measure, totaled $98.6 million for the twelve months ended March 31, 2018, Adjusted EBITDA prior to the impact of the new revenue recognition standard was $98.1 million, compared to $92.1 million for the twelve months ended March 31, 2017.

Quarterly Performance by Segment:

• Net sales as presented for the first quarter of 2018 were $263.3 million for the Business Solutions (SMB) segment. Net sales prior to the impact of the new revenue recognition standard for the first quarter of 2018 increased by 9.1% to $298.7 million, compared to $273.6 million for the prior year’s quarter. Servers/storage and net/com products experienced strong revenue growth in this segment with an increase of 19% and 18%, respectively. Gross margin increased by 229 basis points to 17.6% primarily due to the adoption of the new revenue recognition standard and the increase in invoice selling margins.
• Net sales as presented for the first quarter of 2018 were $257.2 million for the Enterprise Solutions (Large Account) segment. Net sales prior to the impact of the new revenue recognition standard for the first quarter of 2018 increased by 14.7% to $290.2 million, compared to $252.9 million for the prior year’s quarter. Mobility and server/storage products experienced solid growth during the quarter at 27% and 13%, respectively. Gross margin increased by 176 basis points to 14.3% primarily due to the adoption of the new revenue recognition standard and the increase in invoice selling margins.
• Net sales as presented for the first quarter of 2018 were $104.4 million for the Public Sector Solutions segment. Net sales prior to the impact of the new revenue recognition standard for the first quarter of 2018 decreased by 22.5% to $111.6 million, compared to $144.0 million for the prior year’s quarter. Gross margin increased by 364 basis points to 12.9% primarily due to the adoption of the new revenue recognition standard and the increase in invoice selling margins.

Quarterly Sales by Product Mix:

• Notebook/mobility sales, the Company’s largest product category, as presented, increased by 7% year over year and accounted for 26% of net sales in the first quarter of 2018, compared to 22% 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 6% year over year and accounted for 23% of net sales in the first quarter of 2018, compared to 22% in the prior year quarter. Sales of this product category grew year over year in Enterprise Solutions, but were offset by lower notebook sales made under federal contracts in our Public Sector, compared to the prior year quarter.
• Servers/storage, as presented, increased by 21% year over year and accounted for 12% of net sales in the first quarter of 2018, compared to 9% of net sales in the prior year quarter. Excluding the impact of the adoption of the new revenue recognition standard, servers/storage sales increased by 21% year over year and accounted for 10% of net sales in the first quarter of 2018, compared to 9% in the prior year quarter. All three selling segments experienced strong year-over-year growth in server/storage sales.
• Software sales, as presented, decreased by 46% year over year and accounted for 11% of net sales in the first quarter of 2018, compared to 19% of net sales in the prior year quarter. The decrease in software sales was due to the adoption the new revenue recognition standard. Excluding the impact of the adoption of the new revenue recognition standard, software sales increased by 15% year over year and accounted for 21% of net sales in the first quarter of 2018, compared to 19% of net sales in the prior year quarter. We experienced solid growth in cloud-based offerings, security, and office productivity.

As reported, gross profit increased by $9.6 million, or 11.1%, in the first quarter of 2018, compared to the prior year quarter. Gross profit prior to the impact of the new revenue recognition standard increased by $9.0 million, or 10.4% from the first quarter a year ago. Consolidated gross margin as reported, as a percentage of net sales, increased to 15.4% in the first quarter of 2018, compared to 12.9% for the prior year quarter. Gross margin prior to the impact of the new revenue recognition standard was 13.7% compared to 12.9% a year ago. The increase in gross margin was attributed to an increase in invoice selling margins related to an increase in higher-margin advanced solution sales.

Selling, general and administrative (“SG&A”) expenses as reported, increased in the first quarter of 2018 to $80.9 million from $75.3 million in the prior year quarter. SG&A in the first quarter of 2018 prior to the impact of the new revenue recognition standard was $80.8 million. The increase was primarily the result of increased variable compensation associated with our higher gross profits as well as investments made in our technology solutions group. SG&A as reported as a percentage of net sales was 12.9%, compared to 11.2% in the prior year quarter. However, SG&A in the first quarter of 2018, prior to the impact of the new revenue recognition standard, was 11.5%.

Cash and cash equivalents were $71.0 million at March 31, 2018, compared to $50.0 million at December 31, 2017. During the quarter we paid a $9.1 million special dividend to our shareholders. Also during the first quarter of 2018, the Company repurchased 116,241 shares of stock for $3.0 million. As of March 31, 2018, the Company had $14.8 million available for stock repurchases remaining under previous authorizations made by its Board of Directors. Days sales outstanding were 53 days at March 31, 2018, up from 48 days in the prior year quarter; the increase of 5 days from 48 days was due to the adoption of the new revenue recognition standard. Inventory turns were 23 turns in the first quarter of 2018, down from 25 turns in the prior year quarter; excluding the impact of the new revenue recognition standard, inventory turns would have increased to 26 turns.

“We are pleased with our record first quarter results in gross margin and earnings per share, while generating significant operating cash flow. It was also good to see continued execution and double-digit growth in our vertical markets; retail, manufacturing, healthcare, and finance.” said Tim McGrath, President and Chief Executive Officer. “We remain focused on our strategic plan to help our customers solve their business challenges with innovative technology solutions,” concluded Mr. McGrath.

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.

About Connection

PC Connection, Inc. and its subsidiaries, dba Connection, (www.connection.com; NASDAQ: CNXN) is a Fortune 1000 company headquartered in Merrimack, NH. With offices throughout the United States, Connection delivers custom-configured computer systems overnight from its ISO 9001:2008 certified technical configuration lab at its distribution center in Wilmington, OH. In addition, the Company has over 2,500 technical certifications to ensure it can solve the most complex issues of its customers. Connection also services international customers through its GlobalServe subsidiary, a global IT procurement and service management company. Investors and media can find more information about Connection at http://ir.pcconnection.com.

Connection – Business Solutions (800-800-5555), (the original business of PC Connection) operating through our PC Connection Sales Corp. subsidiary, is a rapid-response provider of IT products and services serving primarily the small- and medium-sized business sector. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, publications, and its website at www.connection.com.

Connection – Public Sector Solutions (800-800-0019), operating through our GovConnection, Inc. subsidiary, is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, publications, and online at www.connection.com/publicsector.

Connection – Enterprise Solutions (561-237-3300), www.connection.com/enterprise, operating through our MoreDirect, Inc. subsidiary, 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™, a proprietary cloud-based eProcurement system. The team’s engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

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"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 Securities and Exchange Commission, including 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, 2017. The Company assumes no 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, except as required by law.

CONSOLIDATED SELECTED FINANCIAL INFORMATION
At or for the Three Months Ended March 31,			2018								2017
																			%
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data)																			Change
Operating Data:
Net sales			$	624,895							$	670,594							(7	%)
Diluted earnings per share			$	0.42							$	0.28							50	%
Gross margin				15.4	%							12.9	%
Operating margin				2.5	%							1.7	%
Return on equity (1)				12.5	%							11.0	%
Inventory turns				23								25
Days sales outstanding				53								48
			% of								% of
Product Mix:			Net Sales								Net Sales
Notebooks/Mobility				26	%							22	%
Servers/Storage				12								9
Software				11								19
Net/Com Products				8								9
Other Hardware/Services				43								41
Total Net Sales				100	%							100	%
Stock Performance Indicators:
Actual shares outstanding				26,737								26,761
Total book value per share			$18.40								$16.54
Tangible book value per share			$15.25								$13.34
Closing price			$25.00								$29.79
Market capitalization			$668,425								$797,210
Trailing price/earnings ratio				11.4								17.0
LTM Adjusted EBITDA (2)			$98,551								$92,136
Adjusted market capitalization/LTM Adjusted EBITDA (3)				6.1								7.9
(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 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 March 31,			2018								2017
			Net				Gross				Net				Gross
(amounts in thousands)			Sales				Margin				Sales				Margin
Business Solutions (SMB)			$	263,278			17.6	%			$	273,633			15.3	%
Enterprise Solutions (Large Account)				257,244			14.3					252,918			12.5
Public Sector Solutions				104,373			12.9					144,043			9.2
Total			$	624,895			15.4	%			$	670,594			12.9	%

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,					2018										2017 (1)
(amounts in thousands, except per share data)					Amount					% of Net Sales					Amount					% of Net Sales
Net sales					$	624,895				100.0	%				$	670,594					100.0	%
Cost of sales						528,523				84.6						583,861					87.1
Gross profit						96,372				15.4						86,733					12.9
Selling, general and administrative expenses						80,900				12.9						75,281					11.2
Income from operations						15,472				2.5						11,452					1.7
Interest/other expense, net						116				–						19					–
Income tax provision						(4,288	)			(0.7	)					(4,039	)				(0.6	)
Net income					$	11,300				1.8	%				$	7,432					1.1	%
Earnings per common share:
Basic					$	0.42									$	0.28
Diluted					$	0.42									$	0.28
Shares used in the computation of earnings per common share:
Basic						26,835										26,697
Diluted						26,916										26,866
(1) Amounts are not restated and represent the amounts recognized under generally accepted accounting principles in place during that period.
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 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.
(amounts in thousands)		Three Months Ended March 31,													LTM Ended March 31, (1)
		2018			2017					% Change					2018					2017				% Change
Net income		$	11,300		$	7,432				52	%				$	58,725				$	46,480			26	%
Depreciation and amortization			3,301			2,855				16	%					12,285					10,892			13	%
Income tax expense			4,288			4,039				6	%					23,017					30,294			(24	%)
Interest expense			25			28				(11	%)					123					121			2	%
EBITDA			18,914			14,354				32	%					94,150					87,787			7	%
Special charges (2)			-			-				N/A						3,636					3,406			7	%
Stock-based compensation			207			183				13	%					765					943			(19	%)
Adjusted EBITDA		$	19,121		$	14,537				32	%				$	98,551				$	92,136			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 2016 consist of our acquisition of Softmart, the rebranding of the Company, and duplicate costs incurred with the move of our Chicago-area facility.

							March 31,					December 31,
CONDENSED CONSOLIDATED BALANCE SHEETS							2018					2017(1)
(amounts in thousands)
ASSETS
Current Assets:
Cash and cash equivalents							$	70,967				$	49,990
Accounts receivable, net								408,334					449,682
Inventories								85,582					106,753
Prepaid expenses and other current assets								6,437					5,737
Income taxes receivable								380					3,933
Total current assets								571,700					616,095
Property and equipment, net								44,019					41,491
Goodwill								73,602					73,602
Other intangibles, net								10,645					11,025
Long-term accounts receivable								1,890					-
Other assets								1,714					5,638
Total Assets							$	703,570				$	747,851
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Borrowings under bank line of credit							$	859				$	-
Accounts payable								152,115					194,257
Accrued expenses and other liabilities								23,434					31,096
Accrued payroll								17,207					22,662
Total current liabilities								193,615					248,015
Deferred income taxes								16,125					15,696
Other liabilities								1,871					1,888
Total Liabilities								211,611					265,599
Stockholders’ Equity:
Common stock								287					287
Additional paid-in capital								114,361					114,154
Retained earnings								396,170					383,673
Treasury stock at cost								(18,859	)				(15,862	)
Total Stockholders’ Equity								491,959					482,252
Total Liabilities and Stockholders’ Equity							$	703,570				$	747,851

(1) Amounts are not restated and represent the amounts recognized under generally accepted accounting principles in place during that period.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,					2018					2017(1)
(amounts in thousands)
Cash Flows from Operating Activities:
Net income					$	11,300				$	7,432
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						3,300					2,855
Deferred income taxes						429					38
Provision for doubtful accounts						417					545
Stock-based compensation expense						207					183
Changes in assets and liabilities:
Accounts receivable						57,389					32,885
Inventories						10,302					(9,438	)
Prepaid expenses and other current assets						2,721					1,016
Other non-current assets						(1,880	)				22
Accounts payable						(42,521	)				(6,177	)
Accrued expenses and other liabilities						(4,420	)				(3,936	)
Net cash provided by operating activities						37,244					25,425
Cash Flows from Investing Activities:
Purchases of equipment						(5,007	)				(1,487	)
Net cash used for investing activities						(5,007	)				(1,487	)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings						859					-
Purchase of treasury shares						(2,997	)				-
Dividend payment						(9,122	)				(9,041	)
Exercise of stock options						-					1,678
Net cash used for financing activities						(11,260	)				(7,363	)
Increase in cash and cash equivalents						20,977					16,575
Cash and cash equivalents, beginning of period						49,990					49,180
Cash and cash equivalents, end of period					$	70,967				$	65,755
Non-cash Investing Activities:
Accrued capital expenditures					$	1,140				$	291
Supplemental Cash Flow Information:
Income taxes paid					$	320				$	1,546

(1) Amounts are not restated and represent the amounts recognized under generally accepted accounting principles in place during that period.

RECONCILIATION OF CHANGES IN REVENUE STANDARD
(Unaudited, in thousands, except per share amounts)
																															Change									Change
		Three Months Ended March 31,																													As Presented									Previous Revenue Standard
		2018																					2017								Amount					Percent				Amount					Percent
		As								Impact of New					Previous Revenue Standard
		Presented				% of Net Sales				Revenue Standard					Amount				% of Net Sales				Amount				% of Net Sales
Net sales		$	624,895			100.0	%			$	75,558				$	700,453			100.0	%			$	670,594			100.0	%			$	(45,699	)			(6.8	%)			$	29,859				4.5	%
Cost of sales			528,523			84.6	%				76,168					604,691			86.3	%				583,861			87.1	%				(55,338	)			(9.5	%)				20,830				3.6	%
Gross profit			96,372			15.4	%				(610	)				95,762			13.7	%				86,733			12.9	%				9,639				11.1	%				9,029				10.4	%
Selling, general and administrative expenses			80,900			12.9	%				(113	)				80,787			11.5	%				75,281			11.2	%				5,619				7.5	%				5,506				7.3	%
Income from operations			15,472			2.5	%				(497	)				14,975			2.1	%				11,452			1.7	%				4,020				35.1	%				3,523				30.8	%
Interest income, net			116			-					-					116			-					19			-					97				510.5	%				97				510.5	%
Income tax provision			(4,288	)		(0.7	%)				135					(4,153	)		(0.6	%)				(4,039	)		(0.6	%)				(249	)			6.2	%				(114	)			2.8	%
Net income		$	11,300			1.8	%			$	(362	)			$	10,938			1.6	%			$	7,432			1.1	%			$	3,868				52.0	%			$	3,506				47.2	%
Earnings per common share:
Basic		$	0.42							$	(0.01	)			$	0.41							$	0.28							$	0.14				50.0	%			$	0.13				46.4	%
Diluted		$	0.42							$	(0.01	)			$	0.41							$	0.28							$	0.14				50.0	%			$	0.13				46.4	%
Shares used in the computation of earnings per common share
Basic			26,835													26,835								26,697
Diluted			26,916													26,916								26,866
CONSOLIDATED SELECTED FINANCIAL INFORMATION UNDER PREVIOUS REVENUE RECOGNITION STANDARD
		2018																	2017
		As				Impact of New
		Presented				Revenue Standard				Previous Revenue Standard
Inventory turns			23			3					26								25
Days sales outstanding			53			(5	)				48								48
		% of								% of									% of
Product Mix:		Net Sales								Net Sales									Net Sales
Notebooks/Mobility			26	%		(3	)				23	%							22	%
Servers/Storage			12			(2	)				10								9
Software			11			10					21								19
Net/Com Products			8			(1	)				7								9
Other Hardware/Services			43			(4	)				39								41
Total Net Sales			100	%							100	%							100	%

 

RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT NET SALES
(Unaudited, in thousands)
																		Change							Change
		Three Months Ended March 31,																As Presented							Previous Revenue Standard
		2018												2017				Amount				Percent			Amount				Percent
		As				Impact of New
Net sales		Presented				Revenue Standard				Previous Revenue Standard
Business Solutions (SMB)		$	263,278			$	35,388			$	298,666			$	273,633			$	(10,355	)		(3.8	%)		$	25,033			9.1	%
Enterprise Solutions (Large Account)			257,244				32,951				290,195				252,918				4,326			1.7	%			37,277			14.7	%
Public Sector Solutions			104,373				7,219				111,592				144,043				(39,670	)		(27.5	%)			(32,451	)		(22.5	%)
Total		$	624,895			$	75,558			$	700,453			$	670,594			$	(45,699	)		(6.8	%)		$	29,859			4.5	%
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT GROSS PROFITS
(Unaudited, in thousands)
																		Change							Change
		Three Months Ended March 31,																As Presented							Previous Revenue Standard
		2018												2017				Amount				Percent			Amount				Percent
		As				Impact of New
Gross profits		Presented				Revenue Standard				Previous Revenue Standard
Business Solutions (SMB)		$	46,235			$	(203	)		$	46,032			$	41,791			$	4,444			10.6	%		$	4,241			10.1	%
Enterprise Solutions (Large Account)			36,694				(408	)			36,286				31,629				5,065			16.0	%			4,657			14.7	%
Public Sector Solutions			13,443				-				13,443				13,313				130			1.0	%			130			1.0	%
Total		$	96,372			$	(611	)		$	95,761			$	86,733			$	9,639			11.1	%		$	9,028			10.4	%
RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR SEGMENT GROSS MARGINS
(Unaudited, in thousands)
																		Change				Change
		Three Months Ended March 31,																As Presented				Previous Revenue Standard
		2018												2017				Amount				Amount
		As				Impact of New
Gross margins		Presented				Revenue Standard				Previous Revenue Standard
Business Solutions (SMB)			17.6	%			(215	)			15.4	%			15.3	%			229			14
Enterprise Solutions (Large Account)			14.3	%			(176	)			12.5	%			12.5	%			176			(0	)
Public Sector Solutions			12.9	%			(83	)			12.0	%			9.2	%			364			280
Total			15.4	%			(175	)			13.7	%			12.9	%			249			74

 

RECONCILIATION OF CHANGES IN REVENUE STANDARD FOR 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 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.
															Change			Change
(amounts in thousands)		Three Months Ended March 31,													As Presented			Previous Revenue Standard
		2018										2017			Percent			Percent
		As			Impact of New
		Presented			Revenue Standard				Previous Revenue Standard
Net income		$	11,300		$	(362	)		$	10,938		$	7,432		52	%		47	%
Depreciation and amortization			3,301			-				3,301			2,855		16	%		16	%
Income tax expense			4,288			(135	)			4,153			4,039		6	%		3	%
Interest expense			25			-				25			28		(11	%)		(11	%)
EBITDA			18,914			(497	)			18,417			14,354		32	%		28	%
Special charges			-			-				-			-		N/A			N/A
Stock-based compensation			207			-				207			183		13	%		13	%
Adjusted EBITDA		$	19,121		$	(497	)		$	18,624		$	14,537		32	%		28	%
															Change			Change
(amounts in thousands)		LTM Ended March 31, (1)													As Presented			Previous Revenue Standard
		2018										2017			Percent			Percent
		As			Impact of New
		Presented			Revenue Standard				Previous Revenue Standard
Net income		$	58,725		$	(362	)		$	58,363		$	46,480		26	%		26	%
Depreciation and amortization			12,285			-				12,285			10,892		13	%		13	%
Income tax expense			23,017			(135	)			22,882			30,294		(24	%)		(24	%)
Interest expense			123			-				123			121		2	%		2	%
EBITDA			94,150			(497	)			93,653			87,787		7	%		7	%
Special charges (2)			3,636			-				3,636			3,406		7	%		7	%
Stock-based compensation			765			-				765			943		(19	%)		(19	%)
Adjusted EBITDA		$	98,551		$	(497	)		$	98,054		$	92,136		7	%		6	%

(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 2016 consist of our acquisition of Softmart, the rebranding of the Company, and duplicate costs incurred with the move of our Chicago-area facility.

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Source: PC Connection, Inc.

PC Connection, Inc.
Investor Relations Contact:
William Schulze, 603-683-2262
william.schulze@connection.com