PC Connection, Inc. reports 11.6% EBITDA growth in 2018 while 7.3% Revenue decline
02/07/2019 • About PC Connection, Inc. (
$CNXN) • By InTwits
PC Connection, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 3.7% in 2018 vs. 3.1% in 2017 vs. 3.2% in 2014
- PC Connection, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.5%.
- The company has highly profitable business model: ROIC is 17.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
PC Connection, Inc.'s Revenue decreased on 7.3%. Annual revenue decline showed slowdown in 18Q4 - revenue decreased on 6.9%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.63 pp from 3.1% to 3.7% in 2018.
Gross Margin increased on 2.1 pp from 13.1% to 15.2% in 2018. SG&A as a % of Revenue increased slightly on 1.6 pp from 10.5% to 12.0% in 2018.
Net Income margin increased slightly on 0.51 pp from 1.9% to 2.4% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.79% in 2018. The company's CAPEX/Revenue showed almost no change from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 0.54%.
Return on investment
The company operates at good ROIC (17.0%) and ROE (12.8%). ROIC showed almost no change in 2018. ROE increased slightly on 0.83 pp from 12.0% to 12.8% in 2018. ROIC declined at -0.95 pp per annum in 2014-2018. During the last 5 years ROE bottomed in 2016 at 11.7% and was growing since that time.
Leverage (Debt)
The company has no debt. Cash jumped on 83.4%.
Valuation and dividends
PC Connection, Inc.'s trades at EV/EBITDA 9.6x and P/E 16.2x.
Management team
PC Connection, Inc.'s CEO Timothy J Mcgrath "Tim" is a founder and has spent 8 years with the company.
Financial and operational results
FY ended 12/31/2018
PC Connection, Inc. ($CNXN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,463 | 2,574 | 2,693 | 2,912 | 2,699 | -7.3% |
| Gross Profit | 323 | 341 | 371 | 382 | 411 | 7.6% |
| SG&A | 252 | 261 | 291 | 305 | 324 | 6.5% |
| EBITDA | 80 | 88 | 91 | 89 | 100 | 11.6% |
| Net Income | 43 | 47 | 48 | 55 | 65 | 17.7% |
Balance Sheet
|
|---|
| Cash | 61 | 80 | 49 | 50 | 92 | 83.4% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 8 | 12 | 12 | 12 | 21 | 79.9% |
Ratios
|
|---|
| Revenue growth | 10.9% | 4.5% | 4.6% | 8.1% | -7.3% | |
| EBITDA growth | 19.6% | 10.0% | 4.0% | -1.8% | 11.6% | |
|
|---|
| Gross Margin | 13.1% | 13.2% | 13.8% | 13.1% | 15.2% | 2.1% |
| EBITDA Margin | 3.2% | 3.4% | 3.4% | 3.1% | 3.7% | 0.6% |
| SG&A, % of revenue | 10.2% | 10.2% | 10.8% | 10.5% | 12.0% | 1.6% |
| Net Income Margin | 1.7% | 1.8% | 1.8% | 1.9% | 2.4% | 0.5% |
| CAPEX, % of revenue | 0.3% | 0.5% | 0.4% | 0.4% | 0.8% | 0.4% |
|
|---|
| ROIC | 20.1% | 19.9% | 18.6% | 16.6% | 17.0% | 0.4% |
| ROE | 12.7% | 12.5% | 11.7% | 12.0% | 12.8% | 0.8% |
| Net Debt/EBITDA | -0.8x | -0.9x | -0.5x | -0.6x | -0.9x | -0.4x |
PC Connection, Inc. ($CNXN) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 625 | 707 | 659 | 710 | | -6.8% | -5.8% | -9.7% | -6.9% |
| EBITDA | 19 | 28 | 23 | 30 | | 31.2% | 12.2% | -8.5% | 19.6% |
| Net Income | 11 | 18 | 14 | 21 | | 52.0% | 34.2% | 4.9% | 2.8% |
Balance Sheet
|
|---|
| Cash | 71 | 69 | 102 | 92 | | 7.9% | 144.1% | 64.0% | 83.4% |
| Short Term Debt | 1 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 15.4% | 15.2% | 15.3% | 15.1% | | 2.5% | 1.9% | 2.1% | 2.0% |
| EBITDA Margin | 3.0% | 4.0% | 3.4% | 4.2% | | 0.9% | 0.6% | 0.0% | 0.9% |
| Net Income Margin | 1.8% | 2.6% | 2.1% | 3.0% | | 0.7% | 0.8% | 0.3% | 0.3% |
Peers in Technology Distributors
Below you can find PC Connection, Inc. benchmarking vs. other companies in Technology Distributors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Tech Data Corporation ($TECD) | | 3.2% | -4.7% | -8.3% | 38.9% |
| EACO Corp ($EACO) | | 4.1% | 5.9% | 5.7% | 23.1% |
| Richardson Electronics, Ltd. ($RELL) | | -0.7% | 3.7% | -3.6% | 19.2% |
| Synnex Corporation ($SNX) | | -3.6% | 5.4% | 21.2% | 17.6% |
| Wayside Technology Group, Inc. ($WSTG) | | 12.1% | 9.4% | -61.6% | 13.0% |
| |
|---|
| Median (16 companies) | | 4.1% | 5.3% | 4.2% | 8.9% |
|---|
| PC Connection, Inc. ($CNXN) | | 4.5% | 4.6% | 8.1% | -7.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | 25.4% | 31.1% | -10.8% | 39.4% | 44.0% |
| Richardson Electronics, Ltd. ($RELL) | 29.7% | 30.0% | 31.6% | 32.1% | 33.7% |
| EACO Corp ($EACO) | 27.5% | 29.3% | 29.3% | 28.5% | 28.5% |
| Surge Components Inc ($SPRS) | 24.5% | 25.0% | 25.2% | 25.2% | 25.6% |
| ADDvantage Technologies Group, Inc. ($AEY) | 32.3% | 35.0% | 32.2% | 30.4% | 23.7% |
| |
|---|
| Median (16 companies) | 15.9% | 16.3% | 14.2% | 16.9% | 16.3% |
|---|
| PC Connection, Inc. ($CNXN) | 13.1% | 13.2% | 13.8% | 13.1% | 15.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | -8.6% | -3.2% | -39.0% | 13.0% | 19.2% |
| CDW Corporation ($CDW) | 7.3% | 7.5% | 7.7% | 7.6% | 7.7% |
| ePlus inc. ($PLUS) | 7.3% | 7.5% | 7.6% | 7.3% | 7.1% |
| EACO Corp ($EACO) | 4.0% | 4.5% | 4.7% | 4.5% | 5.9% |
| Surge Components Inc ($SPRS) | 2.8% | 3.8% | -1.5% | 1.2% | 4.8% |
| |
|---|
| Median (16 companies) | 3.2% | 3.5% | 3.6% | 3.8% | 4.1% |
|---|
| PC Connection, Inc. ($CNXN) | 3.2% | 3.4% | 3.4% | 3.1% | 3.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Richardson Electronics, Ltd. ($RELL) | 2.0% | 3.5% | 3.4% | 3.8% | 3.2% |
| ePlus inc. ($PLUS) | 0.9% | 1.0% | 2.1% | 1.5% | 1.0% |
| EACO Corp ($EACO) | 0.6% | 0.4% | 0.3% | 5.5% | 0.8% |
| Avnet, Inc. ($AVT) | 0.4% | 0.6% | 0.8% | 0.7% | 0.8% |
| Synnex Corporation ($SNX) | 0.4% | 0.8% | 0.9% | 0.6% | 0.6% |
| |
|---|
| Median (16 companies) | 0.5% | 0.6% | 0.4% | 0.5% | 0.5% |
|---|
| PC Connection, Inc. ($CNXN) | 0.3% | 0.5% | 0.4% | 0.4% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Surge Components Inc ($SPRS) | 6.7% | 9.5% | -4.0% | 3.9% | 24.6% |
| CDW Corporation ($CDW) | 16.5% | 17.3% | 18.8% | 20.1% | 23.1% |
| EACO Corp ($EACO) | 19.6% | 21.8% | 22.2% | 16.1% | 21.2% |
| ePlus inc. ($PLUS) | 20.1% | 21.0% | 21.5% | 22.8% | 20.8% |
| Insight Enterprises, Inc. ($NSIT) | 17.0% | 17.4% | 20.7% | 19.3% | 20.0% |
| |
|---|
| Median (17 companies) | 11.9% | 11.9% | 12.1% | 9.9% | 11.2% |
|---|
| PC Connection, Inc. ($CNXN) | 20.1% | 19.9% | 18.6% | 16.6% | 17.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Synnex Corporation ($SNX) | 2.0x | 0.9x | 1.2x | 2.1x | 3.9x |
| Anixter International Inc. ($AXE) | 3.2x | 4.7x | 3.6x | 3.0x | 3.1x |
| ScanSource, Inc. ($SCSC) | -1.4x | -0.9x | 0.2x | 0.6x | 2.5x |
| CDW Corporation ($CDW) | 3.2x | 3.3x | 2.8x | 2.7x | 2.4x |
| Arrow Electronics, Inc. ($ARW) | 1.8x | 2.2x | 2.2x | 2.3x | 2.2x |
| |
|---|
| Median (15 companies) | 0.1x | -0.2x | 0.7x | 1.2x | 1.2x |
|---|
| PC Connection, Inc. ($CNXN) | -0.8x | -0.9x | -0.5x | -0.6x | -0.9x |
