• Full Year Revenue: $2.8 billion, a decrease of 1.7% compared to the prior year.
• Full Year Gross Profit: $519.8 million, an increase of 1.6%.
• Full Year Gross Margin: 18.6%, an increase of 60 basis points.
• Full Year SG&A: $422.3 million, an increase of 4%.
• Full Year Net Income: $87.1 million, an increase of 4.6%.
• Full Year Earnings Per Diluted Share: $3.29, compared to $3.15 in the prior year.
• Q4 Net Sales: $708.9 million, an increase of 1.8% compared to the last year.
• Q4 Gross Profit: $129.8 million, flat compared to the prior year quarter.
• Q4 Gross Margin: 18.3%, down 30 basis points.
• Q4 Operating Income: $22.6 million, a decrease of 19%.
• Q4 Net Income: $20.7 million, a decrease of 12.9%.
• Q4 Earnings Per Diluted Share: $0.78, a decrease of 12.8%.
• Business Solutions Segment Q4 Net Sales: $262.4 million, 3.7% lower than a year ago.
• Public Sector Solutions Q4 Net Sales: $143.7 million, 42.9% higher than a year ago.
• Enterprise Solutions Segment Q4 Net Sales: $302.7 million, 0.4% lower than a year ago.
• Q4 Interest Income: $4.8 million, an increase of $660,000.
• Effective Tax Rate: 24.1%, down from 25.8%.
• Adjusted EBITDA: $118.9 million, a decrease of 5%.
• Cash Flow from Operations: $173.9 million for the year.
• Cash Equivalents and Short Term Investments: $442.6 million at the end of Q4.

• Warning! GuruFocus has detected 10 Warning Signs with ARCC.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PC Connection Inc (NASDAQ:CNXN) reported a full-year revenue of $2.8 billion, with a gross profit increase of 1.6% to $519.8 million.
• The company achieved a record gross margin of 18.6%, growing by 60 basis points.
• Net income for the year increased by 4.6% to $87.1 million, with earnings per diluted share rising to $3.29.
• The public sector solutions segment saw a significant increase in net sales by 42.9%, driven by federal government contracts.
• PC Connection Inc (NASDAQ:CNXN) announced a 50% increase in its quarterly dividend, reflecting confidence in future cash flow and profitability.

Negative Points

• Full-year revenue decreased by 1.7% compared to the prior year, indicating challenges in overall sales growth.
• Q4 operating income decreased by 19% compared to the previous year, with operating income as a percent of sales dropping to 3.2%.
• Net income for Q4 decreased by 12.9%, with diluted earnings per share falling by 12.8% compared to the prior year quarter.
• The enterprise solutions segment experienced a 28% decrease in the sale of advanced technology products.
• SG&A expenses increased by 4% for the year, outpacing gross profit growth, which could impact future profitability.

Q & A Highlights

Q: Can you comment on the sales progression during the quarter and any early indications for Q1? A: October was slightly better than the past three years, November was worse, and December was about the same. We didn't see any budget flush. For Q1, we expect flat to low single-digit growth. We are seeing a large number of projects entering the funnel, which could be significant in 2025. - Thomas Baker, CFO and Timothy McGrath, CEO

Q: Which vertical markets do you see the most opportunity in, and which are you less bullish on? A: We see growth in retail, healthcare, and manufacturing. Our large enterprise group has many new projects and customers, while our SMB group is building at a lower rate. The public sector is dependent on large contracts. - Timothy McGrath, CEO

Q: How should we think about SG&A expense growth versus gross profit growth in 2025? A: We expect SG&A growth of around 3-4% over the next few quarters. We've invested in people and tools to prepare for the pipeline of opportunities. 2024 was a building year, and many investments have already been made. - Thomas Baker, CFO and Timothy McGrath, CEO

Q: Can you speak to the expected impacts from tariffs? A: It's difficult to predict due to complex supply chains. Most desktops are manufactured in Mexico, notebooks in China and Vietnam, and displays are more spread out. Suppliers are moving quickly to find alternatives. We'll work with customers to tailor programs to optimize through this. - Timothy McGrath, CEO and Thomas Baker, CFO

Q: What were the one-time items that affected Q4 results? A: There were a couple of one-time items costing $2.5 to $3 million that will not repeat. These were unexpected and impacted our results. - Thomas Baker, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.