Rising Notebook, Public Sector Sales Boost PC Connection's 4Q Results

Fueled by significant growth in sales of notebook and tablet computers, and IT sales to public sector customers, PC Connection Thursday reported 9 percent revenue growth in its fourth quarter.

But president and CEO Timothy McGrath, in a conference call with financial analysts Thursday, warned "revenues will grow in the low single-digit range in 2015." Much of that is due to the substantial sales boost the company saw in the first half of 2014 as companies upgraded PCs and notebooks following the end of Microsoft support for Windows XP.

"We're not going to see the growth in notebooks [sales] that we saw last year," McGrath said. The end of Microsoft support for Windows Server 2003 in July could boost sales of server hardware and software, although McGrath said that could also mean longer sales cycles this year.

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Company executives also said profit growth this year will be constrained as the company continues to invest in people and emerging technologies in an effort to boost sales of higher-margin technology solutions. That, along with the opening of a new distribution center in Ohio this year, will add to the company's sales, general and administrative expenses.

For the fourth quarter ended Dec. 31, PC Connection reported sales of $630.8 million, up 9 percent from $578.6 million in sales in the same quarter one year earlier. Net income for the quarter surged 21 percent to $11.9 million from $9.8 million one year ago.

"We were able to grow faster than the overall market by taking [market] share from the competition and the VAR community," McGrath said.

In the fourth quarter, notebook and tablet computer sales grew 15 percent year-over-year and accounted for 20 percent of revenue, up from 19 percent the prior-year quarter. "We are seeing a lot of strength in our notebook [product] category," McGrath said.

But the company also reported solid growth in higher-margin products in the quarter. Software sales increased 13 percent year-over-year and accounted for 18 percent of revenue, while sales of storage products increased 11 percent and accounted for 7 percent of overall sales.

Networking and communications equipment sales were especially robust in the quarter, McGrath noted, growing 19 percent and accounting for 10 percent of total sales.

"Q4 was our best quarter in advanced technologies," McGrath said.

Sales to the public sector, including state and local government and education customers, also recorded significant growth in the fourth quarter, up 18.7 percent to $143.5 million. And health care is now a $400 million annual business for the company.

Sales to SMB customers in the quarter grew 9.2 percent to $261.7 million. But sales to large account customers grew only 3.5 percent to $225.6 million.

For the year ended Dec. 31, PC Connection reported sales of $2.46 billion, up almost 11 percent from $2.22 billion in 2013. Net income for the year grew nearly 20 percent to $42.7 million from $35.7 million in 2013.

PUBLISHED JAN. 29, 2015