PCM, Inc. (PCMI) Tops Q3 EPS by 11c, Miss on Revenues; Lifts FY18 EPS Outlook

PCM, Inc. (NASDAQ: PCMI) reported Q3 EPS of $0.61, $0.11 better than the analyst estimate of $0.50. Revenue for the quarter came in at $510.6 million versus the consensus estimate of $555.46 million.

Frank Khulusi, Chairman and CEO of PCM, Inc., stated, “Q3 was another fantastic quarter for PCM. I am very pleased with our continued success in executing in our strategic areas of focus and investment. Much like we saw in the second quarter, we increased our focus on higher margin sales such as managed services, advanced technologies, cloud and security solutions, and again walked away from some non-strategic low-margin volume business we identified as unprofitable. As a result, we achieved our highest ever gross margin of 16.7%, 170 basis points higher than the same quarter last year, and 20 basis points higher than our previous record in Q2 of this year. Our gross profit dollars, the primary volume-growth metric we are focused on, increased 5%, while net sales, a GAAP measure which in its calculation nets down certain hardware and software maintenance and subscription sales, was impacted by a higher than anticipated additional $29 million in sales reported on a net basis. Gross billings, a metric which neutralizes the effects of the net-downs, declined by only 1%, despite us walking away from the non-strategic low-margin volume business I mentioned earlier, as well as integrated circuit supply shortages from a major chip manufacturer due to their high demand, which shortages affected the supply of certain notebooks and desktops. We also reduced our consolidated SG&A by 7%, which combined with the 5% increase in gross profit, fueled a 601% increase in GAAP operating profit and a 53% increase in adjusted EBITDA. These improvements resulted in GAAP diluted EPS of $0.47 and non-GAAP adjusted EPS of $0.61. Along with our increased profitability, we continued to drive operating cash flow, bucking our normal seasonal trend, by delivering an additional $15.5 million in cash from operations in the third quarter. This brought our total cash provided by operations for the year to $87.9 million, which helped reduce our net debt by $81.3 million since the end of 2017.”

Commenting on PCM’s outlook, Mr. Khulusi concluded, “Given our continued strong performance and solid outlook for the fourth quarter, we are increasing our 2018 guidance for non-GAAP earnings per share to a range of $2.22 to $2.32 and increasing our gross margin guidance for the year to a range of 16.15% to 16.35%, assuming Q4 net revenue roughly in line with Q3. This reflects our expected focus on gross profit dollar growth while continuing to shed certain non-strategic low-margin volume business during the fourth quarter. As we cycle out of non-strategic lower-margin volume business while we continue to deliver growth in our areas of strategic focus, we should in the longer-term be able to also drive meaningful consolidated top-line growth. We strongly feel that the future for PCM is very bright, and we’re better positioned than ever. I am extremely grateful to our PCM team who through their hard work, dedication and unwavering commitment to our vision are making our success possible.

GUIDANCE:

PCM, Inc. sees FY2018 EPS of $2.22-$2.32, versus the consensus of $2.19.

For earnings history and earnings-related data on PCM, Inc. (PCMI) click here.

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