UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):   May 3, 2018

 
Registrant’s telephone number, including area code:   (603) 683-2000

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ⃞

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⃞

Item 2.02.  Results of Operations and Financial Condition

On May 3, 2018, PC Connection, Inc. announced its financial results for the quarter ended March 31, 2018.  The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.  

The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.  Financial Statements and Exhibits

(d)       Exhibits

  The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:

  99.1       Press Release issued by PC Connection, Inc. on May 3, 2018.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

Connection (CNXN) Reports Record First Quarter Results; EPS and Operating Income Increase by 50% and 35%, Respectively, from Prior Q1

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.

(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.

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

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

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