Tech Data CEO Highlights 'Best First Quarter Ever' For Sales, But Earnings Down Overall For Q1

Tech Data kicked off its 40th year in business with strong sales, but earnings overall were down for the distributor in its first-quarter earnings, revealed Thursday for the quarter ended April 30.

Sales for the quarter were $6.7 billion, up 9.8 percent from the $6.1 billion in sales the year before. Net income, however, for the quarter was $13.5 million, down 24 percent from the same quarter the year before.

Shares of the Clearwater, Fla.-based company's stock dropped as much as 4.3 percent on the news, closing at $60.26.

However, despite the drop in earnings, Tech Data CEO Bob Dutkowsky said in an interview with CRN after the earnings call that the first quarter was the distributor's "best first quarter ever" in regard to sales.

[Related: Tech Data Third To Market With Google Chromebook Management Console ]

"It's the company's 40th birthday this year. To have the best first quarter we've ever had saleswise is, I think, pretty notable," Dutkowsky said.

The distributor reported non-GAAP net income of $27.7 million, up 10 percent from the same quarter the year before, excluding one-time charges for acquisition-related and restatement expenses.

"That says the company performed very well on the top line and dropped that performance to the bottom line. I think the company had a really good quarter, without a doubt," Dutkowsky said.

Since Tech Data had to restate its earnings last year, Dutkowsky said that the company is putting a "tremendous amount of time, energy and money" into fixing the "weaknesses" within the company and repair the aspects that weren't working correctly before. Now, Dutkowsky said, "it's not an issue anymore."

Tech Data spent $12.2 million in restatement-related expenses during the quarter, the company reported.

Part of the "record" sales quarter can be attributed to a double-digit boost in PC sales, driven by an improving economy and the expiration of Windows XP in April, Dutkowsky said. The XP expiration is causing a complete hardware refresh, Dutkowsky said, as it is often easier to implement a completely new hardware system rather than update the operating system on older hardware. The good news for Tech Data, Dutkowsky said, is that he isn't expecting the benefit from the cycle to end any time soon.

"I don’t think it's an event; it's more of a campaign," he said. "It's going to run for a while."

Tablet sales also were up for the quarter, Dutkowsky said. While the tablet has clearly been linked to the decline of the PC, Dutkowsky said that their "purpose built" nature means that the devices will coincide going forward and not completely stunt PC sales.

The benefit for Tech Data in the transition, he said, is that the distributor just has to provide all the technology the reseller is looking for in its portfolio, where a vendor might have to place its bets on a single technology sector.

"The beauty of it from Tech Data's point of view is we sell all of them," Dutkowsky said. "We don’t have to pick the winner; we just have to have phones, tablets and PCs and let the market decide what they want."

Vertically, Dutkowsky said the distributor is seeing double-digit growth in health care, SMB and the public-sector markets. The SMB and public-sector growth are particularly encouraging for Tech Data, he said, because it shows an improving economy and market for technology in sectors that have been slower in previous quarters.

Going into the second quarter ending July 31, 2014, Tech Data is forecasting low-to-mid single-digit growth in year-over-year sales for the quarter, with gross margins in line with current levels.

PUBLISHED MAY 29, 2014