02-05-2025
PC Connection Inc (CNXN) Q1 2025 Earnings Call Highlights: Strong Sales Growth Amid Economic ...
Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
PC Connection Inc (NASDAQ:CNXN) reported a 10.9% increase in consolidated net sales, reaching $701 million in the first quarter.
Net income rose by 2.5% to $13.5 million compared to the prior year quarter.
Adjusted diluted earnings per share increased by 20% to $0.60.
The company experienced a 21% year-over-year increase in notebook and desktop net sales, driven by device refresh initiatives.
PC Connection Inc (NASDAQ:CNXN) received several industry awards, including Intel's AIPC Partner of the Year and Samsung's Display Partner of the Year.
Gross margins decreased by 50 basis points to 18.2%, attributed to a shift towards notebooks and desktops.
The public sector solutions segment saw a gross margin decrease of 240 basis points due to large project rollouts at lower margins.
Interest income decreased by $664,000 compared to the previous year.
Cash flow used in operations was $52.4 million, primarily due to an increase in inventory and a decrease in accounts payable.
The company faced challenges with tariffs affecting customer purchasing decisions and economic uncertainty impacting spending.
Warning! GuruFocus has detected 1 Warning Sign with CNXN.
Q: Tim, you mentioned that some customers were accelerating purchases while others were delaying. Is there a pattern in the type of customer or vertical that was accelerating versus holding off? A: (Tim McGrath, CEO) It's a mixed bag. Some customers are focused on cost containment and expense reduction due to economic concerns and tariffs. Others see technology, especially AI, as a path forward for productivity. Federal projects were strong, driven by large projects, and we saw growth in finance and healthcare. Our small and mid-market teams are consistent, but large enterprises show more robust growth potential.
Q: Can you provide more detail on expected growth for the year, given the backlog and market conditions? A: (Tom Baker, CFO) We're looking at mid to high single-digit growth for the year. We started strong with 10% growth in Q1, but there's still market uneasiness. SG&A savings will start reflecting in Q2, and we're aiming for mid-single-digit growth in SG&A, keeping it below revenue growth.
Q: How did the quarter progress from January to March, and what are you seeing in Q2? A: (Tom Baker, CFO) January and February were light, but March improved significantly, with 34% of revenues coming in then. Customers are getting more comfortable with the economic situation, and there was some buying ahead of expected tariffs. In Q2, tariffs are a concern, but we're helping customers navigate through this.
Q: Are you still considering acquisitions given the current market conditions? A: (Tim McGrath, CEO) Yes, we're still looking at acquisitions, particularly tuck-ins that expand our solutions capability or enter new markets. The interest rate environment affects opportunities, but we're ready to proceed when the right opportunity arises.
Q: Can you elaborate on the impact of AI on your business and customer projects? A: (Tim McGrath, CEO) AI is driving productivity, and many customers are investing in AI-enabled projects. We saw 21% growth in our endpoint business, with 40% of that being AI-enabled. Customers are preparing for AI projects and edge computing, which is reflected in our strong backlog.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
