PC Connection (CNXN) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2025 increased 10.9% year-over-year to $701 million, driven by strong growth in Public Sector Solutions, notebooks/desktops, and digital workplace solutions.

• Net income rose 2.5% to $13.5 million; diluted EPS was $0.51, and adjusted diluted EPS increased 20% to $0.60, reflecting severance adjustments.

• Gross profit increased nearly 8% to $127.3 million, though gross margin declined by 50 basis points to 18.2% due to product mix.

• Backlog at quarter-end was at its highest level in nearly two years, supporting a positive outlook for 2025.

• Board approved a $50 million increase to the share repurchase program, with $50.5 million available; quarterly dividend of $0.15 per share declared.

Financial highlights

• Operating income was $14.5 million, up 7.9% year-over-year; operating margin steady at 2.1% of net sales.

• SG&A expenses rose 5% to $109.9 million, but as a percentage of sales, decreased to 15.7%.

• Adjusted EBITDA for the trailing 12 months was $123.1 million, up from $120.3 million a year ago.

• Cash, cash equivalents, and short-term investments totaled $340.3 million at quarter-end.

• Interest income declined to $3.9 million from $4.6 million year-over-year.

Outlook and guidance

• Expecting mid to high single-digit top-line growth for 2025, with gross profit growth in the high single digits.

• SG&A growth expected to be in the mid-single digits, with cost savings from Q1 initiatives realized in Q2 and beyond.

• Management expects internally generated funds and short-term investments to be sufficient for working capital and other requirements for at least the next twelve months.

• Anticipates outperforming the U.S. IT market by 200 basis points in 2025.