Gross Profit Grows 13.2%
THIRD QUARTER HIGHLIGHTS:
“We continued to execute well against our strategic objectives and delivered another strong quarter. We saw a shift in product mix as our customers prioritized datacenter modernization, cloud solutions, security, and software, over end-point devices. The shift to these advanced technologies was the primary driver of our record gross margin,” said
Net sales for the quarter ended
Net sales for the nine months ended
Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense and restructuring and other charges (“Adjusted EBITDA”) increased 42% to
Quarterly Performance by Segment:
Quarterly Highlights
Quarterly Sales by Product Mix:
Selling, general and administrative (“SG&A”) expenses increased in the third quarter of 2022 to
Cash and cash equivalents were
“As evidenced by our results this quarter, our team has continued to successfully adapt to the needs of our customers,” concluded
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Non-GAAP Financial Information
EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measures are included to provide additional 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 measures is available in the tables at the end of this release.
About Connection
Connection–Business Solutions (800.800.5555) is a rapid-response provider of IT products and services serving primarily the small-and medium-sized business sector. It offers more than 460,000 brand-name products through its staff of technically trained sales account managers, publications, and its website at www.connection.com.
Connection–Enterprise Solutions (561.237.3300), www.connection.com/enterprise, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and real-time access to over 460,000 products and 2,500 vendors through MarkITplace®, a proprietary next-generation, cloud-based supply chain solution. The team’s engineers, software licensing specialists, and subject matter experts help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.
Connection–Public Sector Solutions (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, publications, and online at www.connection.com/publicsector.
Cautionary Note Regarding Forward-Looking Statements
Statements in this release, other than statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve important risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. You can generally identify forward-looking statements by words such as “believe,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “may,” “should,” “will,” or similar statements or variations of such terms, although not all forward-looking statements include such terms. Such risks and uncertainties include, but are not limited to, the continuation of the COVID-19 pandemic, including, without limitation, the actions taken by governments in response to it, disruptions impacting the global supply chain, including those attributable to the COVID-19 pandemic and the ongoing conflict between
_______________ 1 Adjusted EBITDA is a non-GAAP measure. See page 10 for the definition and reconciliation. |
CONSOLIDATED SELECTED FINANCIAL INFORMATION | ||||||||||||||||
At or for the Three Months Ended |
2022 |
2021 |
||||||||||||||
% Change |
||||||||||||||||
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data) | ||||||||||||||||
Operating Data: | ||||||||||||||||
Net sales |
$ |
775,692 |
|
$ |
751,368 |
|
3 |
% |
||||||||
Diluted earnings per share |
$ |
0.88 |
|
$ |
0.76 |
|
16 |
% |
||||||||
Gross margin |
|
17.6 |
% |
|
16.1 |
% |
||||||||||
Operating margin |
|
4.1 |
% |
|
3.6 |
% |
||||||||||
Inventory turns |
|
12 |
|
|
15 |
|
||||||||||
Days sales outstanding |
|
69 |
|
|
66 |
|
||||||||||
% of | % of | |||||||||||||||
Product Mix: | ||||||||||||||||
Notebooks/Mobility |
|
36 |
% |
|
40 |
% |
||||||||||
Accessories |
|
13 |
|
|
12 |
|
||||||||||
Software |
|
11 |
|
|
8 |
|
||||||||||
Displays |
|
10 |
|
|
10 |
|
||||||||||
Desktops |
|
9 |
|
|
9 |
|
||||||||||
Net/Com Products |
|
7 |
|
|
7 |
|
||||||||||
Servers/Storage |
|
7 |
|
|
7 |
|
||||||||||
Other Hardware/Services |
|
7 |
|
|
7 |
|
||||||||||
Total |
|
100 |
% |
|
100 |
% |
||||||||||
Stock Performance Indicators: | ||||||||||||||||
Actual shares outstanding |
|
26,288 |
|
|
26,205 |
|
||||||||||
Total book value per share |
$ |
28.76 |
|
$ |
26.18 |
|
||||||||||
Tangible book value per share |
$ |
25.77 |
|
$ |
23.14 |
|
||||||||||
Closing price |
$ |
45.09 |
|
$ |
44.03 |
|
||||||||||
Market capitalization |
$ |
1,185,326 |
|
$ |
1,153,806 |
|
||||||||||
Trailing price/earnings ratio |
|
12.9 |
|
|
18.1 |
|
||||||||||
LTM Adjusted EBITDA (1) |
$ |
145,502 |
|
$ |
102,402 |
|
||||||||||
(1) Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation and restructuring and other related charges. | ||||||||||||||||
REVENUE AND MARGIN INFORMATION | ||||||||||||||||
For the Three Months Ended |
2022 |
2021 |
||||||||||||||
Net | Gross | Net | Gross | |||||||||||||
(amounts in thousands) | Sales | Margin | Sales | Margin | ||||||||||||
Enterprise Solutions |
$ |
305,510 |
|
15.8 |
% |
$ |
309,722 |
|
14.7 |
% |
||||||
Business Solutions |
|
315,816 |
|
20.0 |
|
|
281,425 |
|
19.4 |
|
||||||
Public Sector Solutions |
|
154,366 |
|
16.3 |
|
|
160,221 |
|
12.7 |
|
||||||
Total |
$ |
775,692 |
|
17.6 |
% |
$ |
751,368 |
|
16.1 |
% |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||
(amounts in thousands, except per share data) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||
Net sales |
$ |
775,692 |
|
$ |
751,368 |
|
$ |
2,392,545 |
|
$ |
2,092,421 |
|
||||||
Cost of sales |
|
639,066 |
|
|
630,671 |
|
|
1,990,712 |
|
|
1,754,877 |
|
||||||
Gross profit |
|
136,626 |
|
|
120,697 |
|
|
401,833 |
|
|
337,544 |
|
||||||
Selling, general and administrative expenses |
|
104,887 |
|
|
93,369 |
|
|
305,189 |
|
|
272,332 |
|
||||||
Income from operations |
|
31,739 |
|
|
27,328 |
|
|
96,644 |
|
|
65,212 |
|
||||||
Other income, net |
|
308 |
|
|
- |
|
|
319 |
|
|
7 |
|
||||||
Income tax provision |
|
(8,841 |
) |
|
(7,283 |
) |
|
(26,567 |
) |
|
(17,698 |
) |
||||||
Net income |
$ |
23,206 |
|
$ |
20,045 |
|
$ |
70,396 |
|
$ |
47,521 |
|
||||||
Earnings per common share: | ||||||||||||||||||
Basic |
$ |
0.88 |
|
$ |
0.77 |
|
$ |
2.68 |
|
$ |
1.81 |
|
||||||
Diluted |
$ |
0.88 |
|
$ |
0.76 |
|
$ |
2.66 |
|
$ |
1.80 |
|
||||||
Shares used in the computation of earnings per common share: | ||||||||||||||||||
Basic |
|
26,279 |
|
|
26,197 |
|
|
26,267 |
|
|
26,186 |
|
||||||
Diluted |
|
26,455 |
|
|
26,368 |
|
|
26,432 |
|
|
26,362 |
|
||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
2022 |
|
|
2021 |
|
|||||
(amounts in thousands) | |||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents |
$ |
116,190 |
|
$ |
108,310 |
|
|||||
Accounts receivable, net |
|
646,656 |
|
|
607,532 |
|
|||||
Inventories, net |
|
213,316 |
|
|
206,555 |
|
|||||
Prepaid expenses and other current assets |
|
10,095 |
|
|
10,016 |
|
|||||
Total current assets |
|
986,257 |
|
|
932,413 |
|
|||||
Property and equipment, net |
|
59,913 |
|
|
61,011 |
|
|||||
Right-of-use assets, net |
|
8,495 |
|
|
9,579 |
|
|||||
|
73,602 |
|
|
73,602 |
|
||||||
Intangibles assets, net |
|
4,953 |
|
|
5,868 |
|
|||||
Other assets |
|
905 |
|
|
910 |
|
|||||
Total Assets |
$ |
1,134,125 |
|
$ |
1,083,383 |
|
|||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable |
$ |
258,596 |
|
$ |
281,836 |
|
|||||
Accrued payroll |
|
31,478 |
|
|
30,966 |
|
|||||
Accrued expenses and other liabilities |
|
62,846 |
|
|
61,830 |
|
|||||
Total current liabilities |
|
352,920 |
|
|
374,632 |
|
|||||
Deferred income taxes |
|
19,278 |
|
|
19,278 |
|
|||||
Operating lease liability |
|
5,620 |
|
|
6,789 |
|
|||||
Other liabilities |
|
200 |
|
|
211 |
|
|||||
Total Liabilities |
|
378,018 |
|
|
400,910 |
|
|||||
Stockholders’ Equity: | |||||||||||
Common stock |
|
291 |
|
|
290 |
|
|||||
Additional paid-in capital |
|
125,592 |
|
|
122,354 |
|
|||||
Retained earnings |
|
676,161 |
|
|
605,766 |
|
|||||
|
(45,937 |
) |
|
(45,937 |
) |
||||||
Total Stockholders’ Equity |
|
756,107 |
|
|
682,473 |
|
|||||
Total Liabilities and Stockholders’ Equity |
$ |
1,134,125 |
|
$ |
1,083,383 |
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(amounts in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||||
Cash Flows from Operating Activities: | |||||||||||||||||||
Net income |
$ |
23,206 |
|
$ |
20,045 |
|
$ |
70,396 |
|
$ |
47,521 |
|
|||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||||||
Depreciation and amortization |
|
3,020 |
|
|
2,947 |
|
|
9,000 |
|
|
9,165 |
|
|||||||
Adjustments to credit losses reserve |
|
1,016 |
|
|
645 |
|
|
2,658 |
|
|
1,704 |
|
|||||||
Stock-based compensation expense |
|
1,282 |
|
|
1,026 |
|
|
4,072 |
|
|
3,118 |
|
|||||||
Loss on disposal of fixed assets |
|
3 |
|
|
2 |
|
|
16 |
|
|
2 |
|
|||||||
Changes in assets and liabilities: | |||||||||||||||||||
Accounts receivable |
|
(3,719 |
) |
|
(4,369 |
) |
|
(41,782 |
) |
|
22,437 |
|
|||||||
Inventories |
|
9,842 |
|
|
(8,295 |
) |
|
(6,761 |
) |
|
(34,507 |
) |
|||||||
Prepaid expenses and other current assets |
|
3,273 |
|
|
1,791 |
|
|
(79 |
) |
|
(360 |
) |
|||||||
Other non-current assets |
|
(22 |
) |
|
(3 |
) |
|
5 |
|
|
314 |
|
|||||||
Accounts payable |
|
(19,823 |
) |
|
(40,863 |
) |
|
(23,268 |
) |
|
(49,997 |
) |
|||||||
Accrued expenses and other liabilities |
|
6,006 |
|
|
4,088 |
|
|
1,432 |
|
|
9,437 |
|
|||||||
Net cash provided by (used in) operating activities |
|
24,084 |
|
|
(22,986 |
) |
|
15,689 |
|
|
8,834 |
|
|||||||
Cash Flows from Investing Activities: | |||||||||||||||||||
Purchases of equipment and capitalized software |
|
(2,410 |
) |
|
(2,481 |
) |
|
(6,975 |
) |
|
(7,092 |
) |
|||||||
Proceeds from life insurance |
|
- |
|
|
- |
|
|
- |
|
|
1,500 |
|
|||||||
Net cash used in investing activities |
|
(2,410 |
) |
|
(2,481 |
) |
|
(6,975 |
) |
|
(5,592 |
) |
|||||||
Cash Flows from Financing Activities: | |||||||||||||||||||
Proceeds from short-term borrowings |
|
10,409 |
|
|
- |
|
|
36,463 |
|
|
- |
|
|||||||
Repayment of short-term borrowings |
|
(10,409 |
) |
|
- |
|
|
(36,463 |
) |
|
- |
|
|||||||
Dividend payments |
|
- |
|
|
- |
|
|
- |
|
|
(8,375 |
) |
|||||||
Payment of payroll taxes on stock-based compensation through shares withheld |
|
(380 |
) |
|
(470 |
) |
|
(834 |
) |
|
(794 |
) |
|||||||
Net cash used in financing activities |
|
(380 |
) |
|
(470 |
) |
|
(834 |
) |
|
(9,169 |
) |
|||||||
Increase (Decrease) in cash and cash equivalents |
|
21,294 |
|
|
(25,937 |
) |
|
7,880 |
|
|
(5,927 |
) |
|||||||
Cash and cash equivalents, beginning of period |
|
94,896 |
|
|
115,665 |
|
|
108,310 |
|
|
95,655 |
|
|||||||
Cash and cash equivalents, end of period |
$ |
116,190 |
|
$ |
89,728 |
|
$ |
116,190 |
|
$ |
89,728 |
|
|||||||
Non-cash Investing Activities: | |||||||||||||||||||
Accrued capital expenditures |
$ |
362 |
|
$ |
394 |
|
|
362 |
|
|
394 |
|
|||||||
Supplemental Cash Flow Information: | |||||||||||||||||||
Income taxes paid |
$ |
9,250 |
|
$ |
7,459 |
|
$ |
30,759 |
|
$ |
20,600 |
|
|||||||
Interest paid |
$ |
1 |
|
$ |
- |
|
$ |
4 |
|
$ |
- |
|
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 restructuring and other charges, and 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. When analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA in addition to, and not as alternatives for Net income or any other performance measure presented in accordance with GAAP. Our non-GAAP financial measures may not be comparable to other similar titled measures of other companies. | |||||||||||||||||||
(amounts in thousands) | Three Months Ended |
LTM Ended |
|||||||||||||||||
2022 |
|
2021 |
|
% Change |
|
2022 |
|
2021 |
|
% Change |
|||||||||
Net income |
$ |
23,206 |
$ |
20,045 |
16 |
% |
$ |
92,781 |
$ |
63,817 |
45 |
% |
|||||||
Depreciation and amortization |
|
3,020 |
|
2,947 |
2 |
% |
|
12,037 |
|
12,434 |
(3 |
%) |
|||||||
Income tax expense |
|
8,841 |
|
7,283 |
21 |
% |
|
35,485 |
|
22,203 |
60 |
% |
|||||||
Interest expense |
|
1 |
|
- |
100 |
% |
|
14 |
|
29 |
(52 |
%) |
|||||||
EBITDA |
|
35,068 |
|
30,275 |
16 |
% |
|
140,317 |
|
98,483 |
42 |
% |
|||||||
Stock-based compensation |
|
1,282 |
|
1,026 |
25 |
% |
|
5,185 |
|
3,919 |
32 |
% |
|||||||
Adjusted EBITDA |
$ |
36,350 |
$ |
31,301 |
16 |
% |
$ |
145,502 |
$ |
102,402 |
42 |
% |
|||||||
(1) LTM: Last twelve months |
View source version on businesswire.com: https://www.businesswire.com/news/home/20221103005999/en/
Investor Relations Contact:
Senior Vice President, CFO, and Treasurer
tom@connection.com
Source: