Connection (CNXN) Reports Fourth Quarter and Full Year 2023 Results
- Increased quarterly dividend by 25% to $0.10 per share on common stock.
- Net sales for Q4 2023 down by 4.9% year over year, but gross profit increased by 4.4%.
- Net income for Q4 2023 increased by 26.3% to $23.8 million, or $0.90 per diluted share.
- Business Solutions segment saw a decrease in net sales but an increase in gross profit.
- Public Sector Solutions segment experienced a decrease in net sales, especially in sales to the federal government.
- Enterprise Solutions segment also faced a decrease in net sales but an increase in gross profit.
- Notebook/mobility sales decreased while software and networking sales increased in Q4 2023.
- SG&A expenses increased due to investments in solutions business and marketing.
- Interest income in Q4 2023 was significantly higher compared to Q4 2022.
- Cash and cash equivalents at the end of 2023 were significantly higher than at the end of 2022.
- Full-year 2023 results show a decrease in net sales, gross profit, and net income compared to 2022.
- Adjusted EBITDA and Adjusted Diluted Earnings per Share also decreased for the year ended December 31, 2023.
- Conference call and webcast scheduled to discuss Q4 financial results.
- Non-GAAP financial measures provided for additional information on the company's performance.
- Net sales for the year ended December 31, 2023, decreased by 8.8% compared to the previous year.
- Gross profit for the full year 2023 decreased by 2.7%.
- Net income for the full year 2023 decreased by 6.7%.
- Adjusted EBITDA and Adjusted Diluted Earnings per Share decreased for the year ended December 31, 2023.
- Soft market conditions and decreased demand in certain segments impacted overall sales performance.
- Decrease in net sales across segments raises concerns about future growth prospects.
- Increase in SG&A expenses may affect profitability in the long run.
- Continued decline in notebook/mobility sales is a negative trend for the company's product mix.
Insights
Analyzing the performance of Connection (PC Connection, Inc.) from a market research perspective, the decrease in net sales by 4.9% for the quarter and 8.8% for the full year suggests a contraction in the company's market reach or demand for its products and services. Despite this, the increase in gross profit by 4.4% for the quarter indicates an improvement in cost management or a shift towards higher-margin offerings. The significant increase in net income by 26.3% for the quarter is noteworthy, showcasing effective operational efficiency or cost reduction strategies.
The company's focus on advanced technologies and improvements in profitability, as evidenced by record gross margins and cash flow, reflect a strategic pivot that could enhance long-term shareholder value. The soft market for end-point devices is a concern, but the company's anticipation of a recovery and demand driven by AI for modern infrastructure and multi-cloud solutions may position it well for future growth.
From a financial analysis standpoint, the 25% increase in the quarterly dividend is a strong signal of confidence by the board in the company's financial health and its commitment to returning value to shareholders. This move could potentially attract income-focused investors. The expansion of gross margins across all segments, despite reduced net sales, suggests that the company is successfully transitioning towards more profitable lines of business.
However, the year-over-year decrease in net income and diluted EPS for the full year raises some concerns about the company's ability to maintain its profitability in the face of declining sales. The increase in SG&A expenses as a percentage of net sales could indicate rising operating costs that may need to be monitored closely in future quarters. The substantial increase in cash and cash equivalents and short-term investments provides a strong liquidity position, which could support strategic investments or cushion against market downturns.
Examining the product mix and segment performance, the decline in notebook/mobility sales and accessories, coupled with the increase in software and networking sales, indicates a shift in consumer and business purchasing behavior within the IT solutions market. The growth in software sales by 42% and networking by 36% year over year suggests a robust demand for these categories, likely driven by the ongoing digital transformation across industries.
The Business Solutions segment's increased gross profit and margin due to integrated solutions and advanced technologies point to a successful strategy in offering value-added services. In contrast, the Public Sector Solutions segment's decrease in sales to the federal government by 33.3% could be a result of budgetary constraints or shifts in government spending priorities. The Enterprise Solutions segment's performance reflects a stable demand for advanced technology solutions despite a slight decrease in net sales.
FOURTH QUARTER SUMMARY: |
FULL YEAR SUMMARY: |
|
|
Connection (PC Connection, Inc.; NASDAQ: CNXN), a leading information technology solutions provider to business, government, healthcare and education markets, today announced results for the fourth quarter and year ended December 31, 2023, and that its board of directors has increased the quarterly dividend by
“Throughout the year we have made significant progress growing the sale of advanced technologies and improving our profitability with record gross margins and record cash flow. The market for end-point devices remains soft, however we continue to prepare for the gradual recovery in endpoints and improvements in demand driven by A-I for modern infrastructure and multi-cloud solutions.” said Timothy McGrath, President and Chief Executive Officer of Connection.
Fourth Quarter of 2023 Results:
Net sales for the quarter ended December 31, 2023 decreased by
Performance by Segment:
-
Net sales for the Business Solutions segment decreased by
2.9% to$272.4 million $280.7 million 5.2% to$63.2 million $60.0 million 23.2% due to increased sales of integrated solutions and advanced technologies, contributed primarily by services and software, which are recorded on a net basis during the fourth quarter of 2023. -
Net sales for the Public Sector Solutions segment decreased by
14.2% to$100.6 million $117.3 million 5.2% to$75.4 million 33.3% to$25.1 million $17.0 million 16.9% primarily due to a higher mix of software and services, which are recorded on a net basis during the fourth quarter of 2023. -
Net sales for the Enterprise Solutions segment decreased by
3.3% to$323.5 million $334.5 million 4.8% to$49.6 million $47.3 million 15.3% primarily due to growth of advanced technologies sales which includes networking, servers, storage, software, and services during the fourth quarter of 2023.
Sales by Product Mix:
-
Notebook/mobility sales decreased
17% year over year and accounted for32% of net sales in the fourth quarter of 2023, compared to36% of net sales in the fourth quarter of 2022. -
Software sales increased by
42% year over year and accounted for15% of net sales in the fourth quarter of 2023 and 2022, compared to10% of net sales in the fourth quarter of 2022. -
Networking sales increased by
36% year over year and accounted for10% of net sales in the fourth quarter of 2023, compared to7% of net sales in the fourth quarter of 2022. -
Accessories sales decreased by
24% year over year and accounted for10% of net sales in the fourth quarter of 2023, compared to13% of net sales in the fourth quarter of 2022.
Selling, general and administrative (“SG&A”) expenses increased in the fourth quarter of 2023 to
Interest income in the fourth quarter of 2023 was
Cash and cash equivalents and short-term investments were
Full Year 2023 Results:
Net sales for the year ended December 31, 2023 decreased by
Conference Call and Webcast
Connection will host a conference call and live web cast today, February 14, 2023 at 4:30 p.m. EST to discuss its fourth quarter financial results. For participants who would like to participate via telephone, please register here to receive the dial-in number along with a unique PIN number that is required to access the call. A web-cast of the conference call, which will be broadcast live via the Internet, and a copy of this press release, can be accessed on Connection’s website at ir.connection.com. For those unable to participate in the live call, a replay of the webcast will be available at ir.connection.com approximately 90 minutes after the completion of the call and will be accessible on the site for approximately one year.
Non-GAAP Financial Information
EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per Share 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 similarly titled measures of other companies. Definitions for each Non-GAAP measure and a reconciliation to their most directly comparable GAAP measures are available in the tables at the end of this release.
About Connection
PC Connection, Inc. and its subsidiaries, dba Connection, (www.connection.com; NASDAQ: CNXN) is a Fortune 1000 company headquartered in
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
This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and include statements concerning, among other things, our future financial results, business plans (including statements regarding new products and services we may offer and future expenditures, costs and investments), liabilities, impairment charges, competition and the expected impact of current macroeconomic conditions on our businesses and results of operations. 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. These statements reflect our current views and are based on assumptions as of the date of this report. Such assumptions are based upon internal estimates and other analysis of current market conditions and trends, management’s expectations, plans and strategies, economic conditions and other factors. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
Such differences may result from actions taken by us, including expense reduction or strategic initiatives (including reductions in force, capital investments and new or expanded product offerings or services), the execution of our business plans (including our inventory management, cost structure and management and other personnel decisions) or other business decisions, as well as from developments beyond our control, including;
- substantial competition reducing our market share;
- significant price competition reducing our profit margins;
- the loss of any of our major vendors adversely affecting the number of type of products we may offer;
- virtualization of information technology resources and applications, including networks, servers, applications, and data storage disrupting or altering our traditional distribution models;
- service interruptions at fourth-partly shippers negatively impacting our ability to deliver the products we offer to our customers;
- increases in shipping and postage costs reducing our margins and adversely affecting our results of operations;
- loss of key persons or the inability to attract, train and retain qualified personnel adversely affecting our ability to operate our business;
- cyberattacks or the failure to safeguard personal information and our IT systems resulting in liability and harm to our reputation; and
- the rate of innovations in the hardware, software and services we offer as well as macroeconomics factors facing the global economy, including disruptions in the capital markets, economic sanctions and economic slowdowns or recessions, rising inflation and changing interest rates have impacted and are expected to continue to impact the level of investment our customers are willing to make in IT products.
Additional factors include those described in this Annual Report on Form 10-K for the year ended December 31, 2022, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” in our subsequent quarterly reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the other subsequent filings we make with the Securities and Exchange Commission from time to time.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements included in this release. We assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made except as required by law.
_________________________
1 Adjusted EBITDA and Adjusted Earnings per Share are non-GAAP measures. See page 10 for the definition and reconciliation. |
| CONSOLIDATED SELECTED FINANCIAL INFORMATION | |||||||||
| At or for the Three Months Ended December 31, | 2023 |
2022 |
|||||||
% |
|||||||||
| (Amounts and shares in thousands, except operating data, P/E ratio, and per share data) | Change |
||||||||
| Operating Data: | |||||||||
| Net sales |
|
|
( |
||||||
| Diluted earnings per share |
|
|
|
||||||
| Gross margin |
|
|
|||||||
| Operating margin |
|
|
|||||||
| Inventory turns (1) | 17 |
11 |
|||||||
| Days sales outstanding (2) | 73 |
70 |
|||||||
| % of | % of | ||||||||
| Product Mix: | Net Sales | Net Sales | |||||||
| Notebooks/Mobility |
|
|
|||||||
| Software | 15 |
10 |
|||||||
| Net/Com Products | 10 |
7 |
|||||||
| Accessories | 10 |
13 |
|||||||
| Desktops | 10 |
9 |
|||||||
| Displays | 8 |
9 |
|||||||
| Servers/Storage | 7 |
8 |
|||||||
| Other Hardware/Services | 8 |
8 |
|||||||
| Total Net Sales |
|
|
|||||||
| Stock Performance Indicators: | |||||||||
| Actual shares outstanding | 26,360 |
26,350 |
|||||||
| Closing price |
|
|
|||||||
| Market capitalization |
|
|
|||||||
| Trailing price/earnings ratio | 21.3 |
13.9 |
|||||||
| LTM Net Income |
|
|
|||||||
| LTM Adjusted EBITDA (3) |
|
|
|||||||
| (1) Represents the annualized cost of goods sold for the period divided by the average inventory for the prior four-month period. | |||||||||
| (2) Represents the trade receivable at the end of the period divided by average daily net sales for the same three-month period. | |||||||||
| (3) LTM Adjusted EBITDA is a non-GAAP measure defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation and restructuring and other related charges for the last twelve months. See page 10 for a reconciliation. | |||||||||
| REVENUE AND MARGIN INFORMATION | |||||||||||
| For the Three Months Ended December 31, | 2023 |
2022 |
|||||||||
| Net | Gross | Net | Gross | ||||||||
| (amounts in thousands) | Sales | Margin | Sales | Margin | |||||||
| Enterprise Solutions | $ |
323,469 |
15.3 |
% |
$ |
334,501 |
14.1 |
% |
|||
| Business Solutions |
|
272,437 |
23.2 |
|
|
280,700 |
21.4 |
|
|||
| Public Sector Solutions |
|
100,560 |
16.9 |
|
|
117,250 |
14.5 |
|
|||
| Total | $ |
696,466 |
18.6 |
% |
$ |
732,451 |
17.0 |
% |
|||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||||
| (amounts in thousands, except per share data) | 2023 |
2022 |
2023 |
2022 |
||||||||||||||
| Net sales | $ |
696,466 |
|
$ |
732,451 |
|
$ |
2,850,644 |
|
$ |
3,124,996 |
|
||||||
| Cost of sales |
|
566,691 |
|
|
608,107 |
|
|
2,338,908 |
|
|
2,598,819 |
|
||||||
| Gross profit |
|
129,775 |
|
|
124,344 |
|
|
511,736 |
|
|
526,177 |
|
||||||
| Selling, general and administrative expenses |
|
101,831 |
|
|
100,436 |
|
|
405,896 |
|
|
405,625 |
|
||||||
| Restructuring and other charges |
|
- |
|
|
- |
|
|
2,687 |
|
|
- |
|
||||||
| Income from operations |
|
27,944 |
|
|
23,908 |
|
|
103,153 |
|
|
120,552 |
|
||||||
| Other income, net |
|
4,112 |
|
|
764 |
|
|
9,961 |
|
|
1,083 |
|
||||||
| Income tax provision |
|
(8,278 |
) |
|
(5,849 |
) |
|
(29,843 |
) |
|
(32,416 |
) |
||||||
| Net income | $ |
23,778 |
|
$ |
18,823 |
|
$ |
83,271 |
|
$ |
89,219 |
|
||||||
| Earnings per common share: | ||||||||||||||||||
| Basic | $ |
0.90 |
|
$ |
0.72 |
|
$ |
3.17 |
|
$ |
3.40 |
|
||||||
| Diluted | $ |
0.90 |
|
$ |
0.71 |
|
$ |
3.15 |
|
$ |
3.37 |
|
||||||
| Shares used in the computation of earnings per common share: | ||||||||||||||||||
| Basic |
|
26,305 |
|
|
26,312 |
|
|
26,287 |
|
|
26,279 |
|
||||||
| Diluted |
|
26,488 |
|
|
26,478 |
|
|
26,429 |
|
|
26,443 |
|
||||||
| December 31, | December 31, | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | 2023 |
2022 |
||||||
| (amounts in thousands) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ |
144,954 |
|
$ |
122,930 |
|
||
| Short-term investments |
|
152,232 |
|
|
- |
|
||
| Accounts receivable, net |
|
606,834 |
|
|
610,280 |
|
||
| Inventories, net |
|
124,179 |
|
|
208,682 |
|
||
| Income taxes receivable |
|
4,348 |
|
|
- |
|
||
| Prepaid expenses and other current assets |
|
16,092 |
|
|
11,900 |
|
||
| Total current assets |
|
1,048,639 |
|
|
953,792 |
|
||
| Property and equipment, net |
|
56,658 |
|
|
59,171 |
|
||
| Right-of-use assets, net |
|
4,340 |
|
|
7,558 |
|
||
| Goodwill |
|
73,602 |
|
|
73,602 |
|
||
| Intangibles assets, net |
|
3,428 |
|
|
4,648 |
|
||
| Other assets |
|
1,714 |
|
|
1,055 |
|
||
| Total Assets | $ |
1,188,381 |
|
$ |
1,099,826 |
|
||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ |
263,682 |
|
$ |
232,638 |
|
||
| Accrued payroll |
|
20,440 |
|
|
24,071 |
|
||
| Accrued expenses and other liabilities |
|
43,843 |
|
|
53,808 |
|
||
| Total current liabilities |
|
327,965 |
|
|
310,517 |
|
||
| Deferred income taxes |
|
15,844 |
|
|
17,970 |
|
||
| Operating lease liability |
|
3,181 |
|
|
4,994 |
|
||
| Other liabilities |
|
624 |
|
|
170 |
|
||
| Total Liabilities |
|
347,614 |
|
|
333,651 |
|
||
| Stockholders’ Equity: | ||||||||
| Common stock |
|
293 |
|
|
291 |
|
||
| Additional paid-in capital |
|
130,878 |
|
|
125,784 |
|
||
| Retained earnings |
|
760,898 |
|
|
686,037 |
|
||
| Accumulated other comprehensive income |
|
81 |
|
|
- |
|
||
| Treasury stock at cost |
|
(51,383 |
) |
|
(45,937 |
) |
||
| Total Stockholders’ Equity |
|
840,767 |
|
|
766,175 |
|
||
| Total Liabilities and Stockholders’ Equity | $ |
1,188,381 |
|
$ |
1,099,826 |
|
||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| (amounts in thousands) | 2023 |
2022 |
2023 |
2022 |
||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||
| Net income | $ |
23,778 |
|
$ |
18,823 |
|
$ |
83,271 |
|
$ |
89,219 |
|
||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization |
|
3,198 |
|
|
2,978 |
|
|
12,654 |
|
|
11,978 |
|
||||
| Adjustments to credit losses reserve |
|
33 |
|
|
594 |
|
|
1,847 |
|
|
3,252 |
|
||||
| Stock-based compensation expense |
|
1,597 |
|
|
1,603 |
|
|
7,022 |
|
|
5,675 |
|
||||
| Deferred income taxes |
|
(2,148 |
) |
|
(1,308 |
) |
|
(2,148 |
) |
|
(1,308 |
) |
||||
| Amortization of discount on short-term investments |
|
(1,522 |
) |
|
- |
|
|
(1,522 |
) |
|
- |
|
||||
| Loss on disposal of fixed assets |
|
9 |
|
|
1 |
|
|
572 |
|
|
17 |
|
||||
| Changes in assets and liabilities: | ||||||||||||||||
| Accounts receivable |
|
(19,270 |
) |
|
35,782 |
|
|
1,599 |
|
|
(6,000 |
) |
||||
| Inventories |
|
18,064 |
|
|
4,634 |
|
|
84,503 |
|
|
(2,127 |
) |
||||
| Prepaid expenses and other current assets |
|
1,016 |
|
|
(1,805 |
) |
|
(8,540 |
) |
|
(1,884 |
) |
||||
| Other non-current assets |
|
(893 |
) |
|
(150 |
) |
|
(659 |
) |
|
(145 |
) |
||||
| Accounts payable |
|
(502 |
) |
|
(25,788 |
) |
|
31,146 |
|
|
(49,056 |
) |
||||
| Accrued expenses and other liabilities |
|
(11,071 |
) |
|
(16,164 |
) |
|
(11,791 |
) |
|
(14,732 |
) |
||||
| Net cash provided by operating activities |
|
12,289 |
|
|
19,200 |
|
|
197,954 |
|
|
34,889 |
|
||||
| Cash Flows from Investing Activities: | ||||||||||||||||
| Purchases of short-term investments |
|
(101,908 |
) |
|
- |
|
|
(150,607 |
) |
|
- |
|
||||
| Purchases of property and equipment |
|
(2,240 |
) |
|
(2,102 |
) |
|
(9,595 |
) |
|
(9,077 |
) |
||||
| Net cash used in investing activities |
|
(104,148 |
) |
|
(2,102 |
) |
|
(160,202 |
) |
|
(9,077 |
) |
||||
| Cash Flows from Financing Activities: | ||||||||||||||||
| Proceeds from short-term borrowings |
|
17,321 |
|
|
- |
|
|
88,198 |
|
|
36,463 |
|
||||
| Repayment of short-term borrowings |
|
(17,321 |
) |
|
- |
|
|
(88,198 |
) |
|
(36,463 |
) |
||||
| Dividend payments |
|
(2,103 |
) |
|
(8,948 |
) |
|
(8,410 |
) |
|
(8,948 |
) |
||||
| Purchase of common stock for treasury shares |
|
- |
|
|
- |
|
|
(5,392 |
) |
|
- |
|
||||
| Issuance of stock under Employee Stock Purchase Plan |
|
552 |
|
|
- |
|
|
1,089 |
|
|
- |
|
||||
| Payment of payroll taxes on stock-based compensation through shares withheld |
|
(2,145 |
) |
|
(1,410 |
) |
|
(3,015 |
) |
|
(2,244 |
) |
||||
| Net cash used in financing activities |
|
(3,696 |
) |
|
(10,358 |
) |
|
(15,728 |
) |
|
(11,192 |
) |
||||
| Increase (decrease) in cash and cash equivalents |
|
(95,555 |
) |
|
6,740 |
|
|
22,024 |
|
|
14,620 |
|
||||
| Cash and cash equivalents, beginning of period |
|
240,509 |
|
|
116,190 |
|
|
122,930 |
|
|
108,310 |
|
||||
| Cash and cash equivalents, end of period | $ |
144,954 |
|
$ |
122,930 |
|
$ |
144,954 |
|
$ |
122,930 |
|
||||
| Non-cash Investing Activities: | ||||||||||||||||
| Accrued purchases of property and equipment | $ |
90 |
|
$ |
192 |
|
|
90 |
|
|
192 |
|
||||
| Accrued excise tax on treasury purchases | $ |
54 |
|
$ |
- |
|
|
54 |
|
|
- |
|
||||
| Supplemental Cash Flow Information: | ||||||||||||||||
| Income taxes paid | $ |
7,417 |
|
$ |
2,928 |
|
$ |
41,668 |
|
$ |
33,687 |
|
||||
| Interest paid | $ |
5 |
|
$ |
- |
|
$ |
24 |
|
$ |
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 (defined as 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 agreement. 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 December 31, | LTM Ended December 31, (1) | ||||||||||||||||||
2023 |
2022 |
% Change | 2023 |
2022 |
% Change | |||||||||||||||
| Net income | $ |
23,778 |
$ |
18,823 |
26 |
% |
$ |
83,271 |
|
$ |
89,219 |
(7 |
%) |
|||||||
| Depreciation and amortization |
|
3,198 |
|
2,978 |
7 |
% |
|
12,654 |
|
|
11,978 |
6 |
% |
|||||||
| Income tax expense |
|
8,278 |
|
5,849 |
42 |
% |
|
29,843 |
|
|
32,416 |
(8 |
%) |
|||||||
| Interest expense |
|
5 |
|
- |
100 |
% |
|
32 |
|
|
10 |
220 |
% |
|||||||
| EBITDA |
|
35,259 |
|
27,650 |
28 |
% |
|
125,800 |
|
|
133,623 |
(6 |
%) |
|||||||
| Restructuring and other charges (2) |
|
- |
|
- |
0 |
% |
|
2,687 |
|
|
- |
100 |
% |
|||||||
| Stock-based compensation |
|
1,597 |
|
1,603 |
(0 |
%) |
|
7,022 |
|
|
5,675 |
24 |
% |
|||||||
| Adjusted EBITDA | $ |
36,856 |
$ |
29,253 |
26 |
% |
$ |
135,509 |
|
$ |
139,298 |
(3 |
%) |
|||||||
| (1) LTM: Last twelve months | ||||||||||||||||||||
| (2) Restructuring and other charges in 2023 consist of severance and other charges related to internal restructuring activities. | ||||||||||||||||||||
| ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE | ||||||||||||||||||||
| A reconciliation from Net Income to Adjusted Net Income is detailed below. Adjusted Net Income is defined as Net Income plus restructuring and other charges, net of tax. A reconciliation from Diluted Earnings per Share to Adjusted Diluted Earnings per Share is detailed below. Adjusted Diluted Earnings per Share is defined diluted earnings per share adjusted for restructuring and other charges, net of tax. Adjusted Net Income and Adjusted Diluted Earnings Per Share are considered non-GAAP financial measures (see note above in EBITDA and Adjusted EBITDA for a description of non-GAAP financial measures). The Company believes that Adjusted Net Income and Adjusted Diluted Earnings per Share provide helpful information with respect to the Company's operating performance. When analyzing our operating performance, investors should use Adjusted Net Income and Adjusted Diluted Earnings per Share in addition to, and not as alternatives for Net income and Diluted Earnings per Share 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, except per share data) | Three Months Ended December 31, |
Years Ended December 31, |
||||||||||||||||||
2023 |
2022 |
% Change |
2023 |
2022 |
% Change |
|||||||||||||||
| Net income | $ |
23,778 |
$ |
18,823 |
26 |
% |
$ |
83,271 |
|
$ |
89,219 |
(7 |
%) |
|||||||
| Restructuring and other charges (1) |
|
- |
|
- |
0 |
% |
|
2,687 |
|
|
- |
100 |
% |
|||||||
| Tax benefit |
|
- |
|
- |
0 |
% |
|
(709 |
) |
|
- |
(100 |
%) |
|||||||
| Restructuring and other charges, net of tax |
|
- |
|
- |
0 |
% |
|
1,978 |
|
|
- |
100 |
% |
|||||||
| Adjusted Net Income | $ |
23,778 |
$ |
18,823 |
26 |
% |
$ |
85,249 |
|
$ |
89,219 |
(4 |
%) |
|||||||
| Diluted shares |
|
26,488 |
|
26,478 |
|
26,429 |
|
|
26,443 |
|||||||||||
| Diluted Earnings per Share | $ |
0.90 |
$ |
0.71 |
26 |
% |
$ |
3.15 |
|
$ |
3.37 |
(7 |
%) |
|||||||
| Adjusted Diluted Earnings per Share | $ |
0.90 |
$ |
0.71 |
26 |
% |
$ |
3.23 |
|
$ |
3.37 |
(4 |
%) |
|||||||
| (1) Restructuring and other charges in 2023 consist of severance and other charges related to internal restructuring activities. | ||||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240214122923/en/
Investor Relations Contact:
Thomas Baker, 603.683.2505
Senior Vice President, CFO, and Treasurer
tom@connection.com
Source: PC Connection, Inc.
FAQ
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