PC Connection (CNXN) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 net income of $26.2 million and diluted EPS of $0.99, up 32.8% year-over-year, reflecting strong execution of strategic priorities and adaptability to customer needs.

• Net sales for Q2 2024 were $736.5 million, up 0.4% year-over-year, driven by growth in desktops, servers/storage, notebooks/mobility, displays, and software, partially offset by declines in networking and accessories.

• Gross profit increased 6.9% to $136.5 million, with gross margin rising to 18.5% from 17.4% due to improved customer mix and higher invoice margins.

• Board declared a quarterly dividend of $0.10 per share, payable August 30, 2024.

• Operating income rose to $30.9 million (4.2% of net sales), up 23.3% year-over-year.

Financial highlights

• Six-month net sales were $1.37 billion, down 6.3% year-over-year, with declines in Enterprise and Public Sector Solutions segments.

• Six-month net income was $39.3 million, up from $33.9 million year-over-year.

• Adjusted diluted EPS was $1.00, up from $0.80 in Q2 2023; trailing 12-month Adjusted EBITDA was $125.4 million, up 4%.

• Cash and short-term investments totaled $385.8 million as of June 30, 2024.

• Interest income for Q2 2024 was $4.7 million, up from $1.9 million in Q2 2023.

Outlook and guidance

• Modest improvements expected for the remainder of 2024, with performance anticipated to outpace IT market growth by 200 basis points.

• Device demand expected to improve modestly, but gross margins may face downward pressure due to product mix.

• Gross profit growth for the year expected in the low to mid-single digits.

• Management expects to meet cash requirements for the next twelve months and beyond through cash on hand, operations, and available credit.

• Q3 and the second half of 2024 expected to be stronger than the first half, with sequential improvement.