PC Connection, Inc. reports 30.6% EBITDA decline in 2020 and 8.1% Revenue decline
02/24/2021 • About PC Connection, Inc. (
$CNXN) • By InTwits
PC Connection, Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 3.5% in 2020 vs. 4.6% in 2019 vs. 3.4% in 2016
- PC Connection, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.6%.
- The company has business model with average profitability: ROIC is 11.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 8.1%. Annual revenue decline showed slowdown in 20Q4 - revenue decreased on 5.7%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.8 pp from 19.0% to 20.8% in FY2020.
Gross Margin showed almost no change in 2020. Gross Margin grew at 0.77 pp per annum in 2016-2020. SG&A as a % of Revenue increased slightly on 1.3 pp from 12.0% to 13.3% in 2020. SG&A as a % of Revenue stuck to a growing trend at 0.67 pp per annum in the last 5 years.
Net Income margin decreased slightly on 0.76 pp from 2.9% to 2.2% in 2020. During the last 5 years Net Income margin topped in 2019 at 2.9%.
Investments (CAPEX, working capital and M&A)
In 2020 the company had CAPEX/Revenue of 0.43%. PC Connection, Inc.'s CAPEX/Revenue showed almost no change from 2017 to 2020. For the last three years the average CAPEX/Revenue was 0.71%.
Return on investment
The company operates at low ROIC (11.2%) and ROE (9.0%). ROIC decreased on 8.4 pp from 19.6% to 11.2% in 2020. ROE decreased on 5.6 pp from 14.6% to 9.0% in 2020. During the last 5 years ROE topped in 2019 at 14.6%.
Leverage (Debt)
Debt level is -0.9x Net Debt / EBITDA and 0.2x Debt / EBITDA. Debt decreased on 7.4% while cash increased on 6.2%.
PC Connection, Inc. has no short term refinancing risk: cash is higher than short term debt (2,435.2%).
Valuation and dividends
PC Connection, Inc.'s trades at EV/EBITDA 12.0x and P/E 20.8x.
Management team
Timothy J Mcgrath "Tim" is a the company's CEO. Timothy J Mcgrath "Tim" has spent 9 years with the company. Thomas C Baker is a the company's CFO. Thomas C Baker has spent 2 years at the company.
Financial and operational results
FY ended 12/31/2020
PC Connection, Inc. ($CNXN) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 2,693 | 2,912 | 2,699 | 2,820 | 2,590 | -8.1% |
| Gross Profit | 371 | 382 | 411 | 451 | 419 | -7.2% |
| SG&A | 291 | 305 | 324 | 339 | 346 | 2.1% |
| EBITDA | 91 | 89 | 100 | 130 | 90 | -30.6% |
| Net Income | 48 | 55 | 65 | 82 | 56 | -32.1% |
Balance Sheet
|
|---|
| Cash | 49 | 50 | 92 | 90 | 96 | 6.2% |
| Short Term Debt | 0 | 0 | 0 | 4 | 4 | -9.0% |
| Long Term Debt | 0 | 0 | 0 | 10 | 10 | -6.8% |
Cash flow
|
|---|
| Capex | 12 | 12 | 21 | 26 | 11 | -57.0% |
Ratios
|
|---|
| Revenue growth | 4.6% | 8.1% | -7.3% | 4.5% | -8.1% | |
| EBITDA growth | 4.0% | -1.8% | 11.6% | 30.3% | -30.6% | |
|
|---|
| Gross Margin | 13.8% | 13.1% | 15.2% | 16.0% | 16.2% | 0.2% |
| EBITDA Margin | 3.4% | 3.1% | 3.7% | 4.6% | 3.5% | -1.1% |
| SG&A, % of revenue | 10.8% | 10.5% | 12.0% | 12.0% | 13.3% | 1.3% |
| Net Income Margin | 1.8% | 1.9% | 2.4% | 2.9% | 2.2% | -0.8% |
| CAPEX, % of revenue | 0.4% | 0.4% | 0.8% | 0.9% | 0.4% | -0.5% |
|
|---|
| ROIC | 18.6% | 16.6% | 17.0% | 19.6% | 11.2% | -8.4% |
| ROE | 11.7% | 12.0% | 12.8% | 14.6% | 9.0% | -5.6% |
| Net Debt/EBITDA | -0.5x | -0.6x | -0.9x | -0.6x | -0.9x | -0.3x |
PC Connection, Inc. ($CNXN) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 712 | 550 | 653 | 676 | | 12.5% | -25.8% | -10.5% | -5.7% |
| EBITDA | 25 | 15 | 26 | 24 | | 11.8% | -59.0% | -29.5% | -28.8% |
| Net Income | 15 | 8 | 17 | 16 | | 17.0% | -67.7% | -28.7% | -25.8% |
Balance Sheet
|
|---|
| Cash | 111 | 166 | 108 | 96 | | 19.1% | 137.9% | 9.7% | 6.2% |
| Short Term Debt | 4 | 4 | 4 | 4 | | -10.4% | -8.3% | -7.8% | -9.0% |
| Long Term Debt | 13 | 12 | 11 | 10 | | -5.0% | -1.4% | -7.1% | -6.8% |
Ratios
|
|---|
| Gross Margin | 15.9% | 16.2% | 16.5% | 16.1% | | 0.2% | 0.4% | 0.2% | -0.1% |
| EBITDA Margin | 3.5% | 2.7% | 4.0% | 3.6% | | -0.0% | -2.2% | -1.1% | -1.2% |
| Net Income Margin | 2.1% | 1.4% | 2.6% | 2.4% | | 0.1% | -1.8% | -0.7% | -0.7% |
Peers in Technology Distributors
Below we provide PC Connection, Inc. benchmarking against other companies in Technology Distributors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Galaxy Next Generation Inc ($GAXY) | - | 3.7% | - | - | 23.3% |
| Wayside Technology Group, Inc. ($WSTG) | - | -61.6% | 13.0% | 15.1% | 20.5% |
| Insight Enterprises, Inc. ($NSIT) | - | 22.2% | 5.6% | 9.2% | 7.9% |
| Synnex Corporation ($SNX) | - | 21.2% | 17.6% | 18.5% | 3.9% |
| CDW Corporation ($CDW) | - | 6.1% | 9.5% | 11.0% | 2.4% |
| |
|---|
| Median (8 companies) | 5.3% | 4.2% | 8.9% | 14.5% | 3.1% |
|---|
| PC Connection, Inc. ($CNXN) | - | 8.1% | -7.3% | 4.5% | -8.1% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Galaxy Next Generation Inc ($GAXY) | 70.0% | 61.4% | - | 6.1% | 51.0% |
| EACO Corp ($EACO) | 29.3% | 28.5% | 28.5% | 27.7% | 27.2% |
| ADDvantage Technologies Group, Inc. ($AEY) | 32.2% | 30.4% | 23.7% | 16.5% | 23.3% |
| CDW Corporation ($CDW) | 16.6% | 16.5% | 16.7% | 16.9% | 17.4% |
| Insight Enterprises, Inc. ($NSIT) | 13.5% | 13.7% | 14.0% | 14.7% | 15.6% |
| |
|---|
| Median (8 companies) | 14.2% | 16.9% | 16.3% | 14.5% | 16.5% |
|---|
| PC Connection, Inc. ($CNXN) | 13.8% | 13.1% | 15.2% | 16.0% | 16.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CDW Corporation ($CDW) | 7.7% | 7.6% | 7.7% | 8.3% | 9.0% |
| EACO Corp ($EACO) | 4.7% | 4.5% | 5.9% | 6.4% | 6.6% |
| Synnex Corporation ($SNX) | 3.6% | 3.9% | 3.9% | 5.0% | 5.7% |
| Insight Enterprises, Inc. ($NSIT) | 3.4% | 3.3% | 4.1% | 4.0% | 4.4% |
| Arrow Electronics, Inc. ($ARW) | 4.4% | 4.1% | 4.5% | 1.4% | 4.1% |
| |
|---|
| Median (8 companies) | 3.6% | 3.8% | 4.1% | 4.3% | 4.2% |
|---|
| PC Connection, Inc. ($CNXN) | 3.4% | 3.1% | 3.7% | 4.6% | 3.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| EACO Corp ($EACO) | 0.3% | 5.5% | 0.8% | 0.8% | 3.0% |
| ADDvantage Technologies Group, Inc. ($AEY) | 0.8% | 0.4% | 0.3% | 1.1% | 1.2% |
| CDW Corporation ($CDW) | 0.5% | 0.5% | 0.5% | 1.3% | 0.9% |
| Synnex Corporation ($SNX) | 0.9% | 0.6% | 0.6% | 0.6% | 0.8% |
| Galaxy Next Generation Inc ($GAXY) | 0.0% | 15.1% | - | 0.0% | 0.8% |
| |
|---|
| Median (8 companies) | 0.4% | 0.5% | 0.5% | 0.7% | 0.8% |
|---|
| PC Connection, Inc. ($CNXN) | 0.4% | 0.4% | 0.8% | 0.9% | 0.4% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CDW Corporation ($CDW) | 18.8% | 20.1% | 23.1% | 26.0% | 23.5% |
| EACO Corp ($EACO) | 22.2% | 16.1% | 21.2% | 23.0% | 14.6% |
| Insight Enterprises, Inc. ($NSIT) | 20.7% | 19.3% | 20.0% | 14.7% | 13.7% |
| Synnex Corporation ($SNX) | 13.5% | 13.7% | 9.6% | 11.6% | 11.7% |
| Arrow Electronics, Inc. ($ARW) | 12.5% | 12.1% | 13.3% | 1.4% | 11.3% |
| |
|---|
| Median (8 companies) | 12.1% | 9.9% | 11.2% | 14.7% | 11.7% |
|---|
| PC Connection, Inc. ($CNXN) | 18.6% | 16.6% | 17.0% | 19.6% | 11.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Arrow Electronics, Inc. ($ARW) | 2.2x | 2.3x | 2.2x | 7.5x | 1.9x |
| CDW Corporation ($CDW) | 2.8x | 2.7x | 2.4x | 2.2x | 1.6x |
| Synnex Corporation ($SNX) | 1.2x | 2.1x | 3.9x | 2.4x | 1.3x |
| Insight Enterprises, Inc. ($NSIT) | -0.9x | 0.9x | 0.2x | 2.7x | 1.1x |
| EACO Corp ($EACO) | -0.7x | 1.2x | 0.5x | 0.5x | 1.0x |
| |
|---|
| Median (6 companies) | 0.7x | 1.2x | 1.2x | 2.3x | 1.2x |
|---|
| PC Connection, Inc. ($CNXN) | -0.5x | -0.6x | -0.9x | -0.6x | -0.9x |
