PC Connection Accelerates Sales Growth as Public Sector Stabilizes
Net income climbed 33.8% to $33.2 million as operating leverage strengthened.
PC Connection (CNXN), an information-technology solutions provider, accelerated second-quarter sales growth to 12.4% as its public-sector business stabilized.
Net sales had risen 3.0% in the first quarter after declining 0.8% in the fourth quarter of 2024 and 2.2% in the third. Second-quarter sales increased about 18% sequentially to $854.0 million, while gross billings rose 14.0% from a year earlier to $1.2 billion.
Diluted earnings increased to $1.31 a share from 97 cents a year earlier and 68 cents in the first quarter. Gross profit rose 14.3% to $157.5 million, and operating margin expanded to 5.0% from 4.1%. Adjusted EBITDA climbed 34% to $48.4 million.
Business Solutions led the acceleration, with sales rising 17.3% to $343.9 million after growing 6.6% in the first quarter. Public Sector Solutions sales held near the prior-year level at $140.5 million after falling 31.0% in the preceding quarter, while the segment's gross profit returned to growth with a 9.2% increase. Enterprise Solutions sales increased 13.4% to $369.6 million, supported by 17.0% growth in gross billings.
Endpoint devices supplied another lift. Notebook, mobility and desktop sales grew a combined 19%, up from 1% growth in the first quarter, and accounted for 51% of company sales. Software sales rose 15% and networking sales increased 12%, while servers and storage declined 18%.
The sales mix pressured Business Solutions gross margin, which fell to 23.0% from 24.5% in the first quarter. Companywide gross margin nevertheless held at 18.4% sequentially and expanded 30 basis points from a year earlier. SG&A rose 7.1%, slower than revenue, reducing the expense ratio to 13.4% of sales from 14.1%.
Cash conversion weakened despite the earnings growth. Operating cash flow swung to a $63.8 million use of cash from $26.3 million provided a year earlier, while inventory turns slowed and days sales outstanding increased. Cash and short-term investments declined to $340.7 million from $406.7 million at year-end, leaving working-capital performance as a counterweight to the stronger operating trajectory.