PC CONNECTION INC Q1 FY2025 earnings call

• Consolidated net sales: $701 million, +10.9% year-over-year. Gross profit: $127.3 million, +8% year-over-year. Gross margin: 18.2%, 50 basis points below last year.
• Operating income: $14.5 million, +7.9% year-over-year. Operating income excluding severance expense: $17.5 million, +29.6% year-over-year.
• Net income: $13.5 million, +2.5% year-over-year. Diluted EPS: $0.51, +2% year-over-year. Adjusted diluted EPS: $0.60, +20% year-over-year.
• Notebooks and desktops net sales: +21% year-over-year, +7% sequential due to device refresh. Advanced Technologies and Integrated Solutions: +7% year-over-year due to software and server storage sales.
• Recognized awards from partners like Intel, HP, HPI, Samsung.
• Focus on AI PC momentum, AI trust, and ROI as key decision factors in AI deployments.
• Backlog at end of Q1 is highest in nearly two years.

Business Solutions Segment

• Q1 net sales: $258.4 million, +1% year-over-year. Gross profit: $65.4 million, +8.4% year-over-year. Gross margin: 25.3%, +170 basis points compared to prior year.

Public Sector Solutions

• Q1 net sales: $144.6 million, 54.7% higher than year ago. Gross profit: $19.6 million, +30.9% year-over-year. Gross margin: 13.6%, -240 basis points compared to prior year (due to lower-than-average margin projects).

Enterprise Solutions Segment

• Q1 net sales: $298 million, +5.4% year-over-year. Gross profit: $42.3 million, -1% year-over-year. Gross margin: 14.2%, -90 basis points (due to lower license fees from enterprise agreements).

• Top-line growth: Anticipates mid to high single-digit growth for the year.
• SG&A growth: Expecting mid single-digit year-over-year growth, keeping below revenue growth.
• Outlook: Optimistic about 2025 outperforming 2024 results and outperforming US IT market growth by 200 basis points.

• Macroeconomic uncertainty affecting customer purchasing decisions (some accelerating, some delaying purchases).
• Tariffs impacting customer future outlook and expense optimization efforts.
• Economic backdrop posing challenges to project approvals for non-mission-critical initiatives.

Q: Adam Tindle asked about the pattern of customers accelerating vs. delaying purchases and product categories. Tim McGrath responded that it's a mixed bag with some customers focused on cost containment and others moving forward with AI-driven projects; notebooks/desktops saw 21% year-over-year growth with 40% of that from AI-enabled customers.

Q: Anthony Lebiedzinski inquired about Q2 outlook, acquisitions. Tim McGrath stated tariffs are weighing on customers, projects are scrutinized unless mission-critical; acquisitions are still on the table with a dry powder position looking for tuck-in acquisitions to expand solutions or enter new markets.