UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 10, 2011
PC MALL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
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000-25790 |
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95-4518700 |
(State or Other Jurisdiction of |
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(Commission File Number) |
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(I.R.S. Employer |
Incorporation or Organization) |
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Identification No.) |
2555 West 190th Street, Suite 201
Torrance, California 90504
(Address of Principal Executive Offices) (Zip Code)
(310) 354-5600
(Registrants telephone number,
including area code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 |
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Results of Operations and Financial Condition. |
On May 10, 2011, PC Mall, Inc. (the Company) issued an earnings release announcing its financial results for the quarter ended March 31, 2011. The release did not include certain financial statements, related notes and certain other financial information that will be filed with the Securities and Exchange Commission (SEC) as part of the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2011. A copy of the press release relating to such announcement is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 7.01 |
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Regulation FD Disclosure. |
On May 10, 2011, the Company issued a press release announcing the expansion of PC Mall, Inc.s OnSale subsidiary into the emerging local deal of the day coupon market. A copy of the press release relating to such announcement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
The information contained in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, is furnished pursuant to Item 2.02 and Item 7.01 and shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 |
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Financial Statements and Exhibits. |
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(d) |
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Exhibits. |
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99.1 |
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Press Release dated May 10, 2011 (furnished pursuant to Item 2.02 of Form 8-K) |
99.2 |
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Press Release dated May 10, 2011 (furnished pursuant to Item 7.01 of Form 8-K) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PC MALL, INC. | |
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(Registrant) | |
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Date: May 10, 2011 |
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By: |
/s/ Brandon H. LaVerne |
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Brandon H. LaVerne |
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Chief Financial Officer |
EXHIBIT 99.1
Contact:
Joe Hayek, Executive Vice President
PC Mall, Inc.
(310) 354-5600
or
Budd Zuckerman, President
Genesis Select Corporation
(303) 415-0200
PC MALL REPORTS FIRST QUARTER 2011 RESULTS
Sales Increased 16%; Operating Profit Increased 147%
First Quarter Highlights (first quarter of 2011 compared to the first quarter of 2010):
· Net sales increased 16% to $335.9 million
· Gross profit increased 14% to $43.5 million
· GAAP operating profit increased 147% to $1.9 million and non-GAAP operating profit increased 243% to $2.9 million
· Adjusted EBITDA increased 76% to $5.6 million
· Diluted earnings per share (EPS) increased to $0.06 from $0.01 and non-GAAP diluted EPS for Q1 2011 increased to $0.11 from $0.02
Torrance, California May 10, 2011 PC Mall, Inc. (NASDAQ:MALL), a leading IT solutions provider, today reported financial results for the first quarter of 2011. Consolidated net sales for Q1 2011 were $335.9 million, an increase of 16%, from $289.9 million in Q1 2010. Consolidated gross profit for Q1 2011 increased 14% to $43.5 million from $38.0 million in Q1 2010. Consolidated gross profit margin was 12.9% in Q1 2011 compared to 13.1% in Q1 2010. Consolidated operating profit for Q1 2011 increased 147% to $1.9 million compared to consolidated operating profit of $0.8 million for Q1 2010. Consolidated operating profit margin for Q1 2011 was 0.6% compared to 0.3% in Q1 2010. Non-GAAP operating profit margin (as defined below) was 0.9% in Q1 2011 compared to 0.3% in Q1 2010. Consolidated net income for Q1 2011 increased to $0.7 million compared to consolidated net income of $0.2 million for Q1 2010. Diluted EPS for Q1 2011 was $0.06 compared to diluted EPS of $0.01 for Q1 2010. Non-GAAP diluted EPS, excluding the results of our OnSale segment and the inventory write-down explained below, was $0.11 for Q1 2011 and $0.02 for Q1 2010. Adjusted EBITDA (as defined below) for Q1 2011 increased 76% to $5.6 million from $3.2 million in Q1 2010.
Commenting on the Companys first quarter results, Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, I am very pleased with our first quarter performance, and I would like to commend all of our employees for their continued contribution to our success, which is only possible through their hard work and dedication. We grew our revenues 16% from the first quarter of last year, as our team continued to execute well in an environment characterized by stable growth in IT spending across most of our customer base. We saw particularly strong growth in our SMB, MacMall and MME segments, which grew 28%, 18% and 15%, respectively. While gross profit grew over 14% year over year, operating profit grew by 147%, demonstrating significant operating leverage. We achieved these results despite having a $0.5 million charge, or 15 basis points of gross margin, related to end of life Apple inventory. In addition, in the first quarter we made a significant investment of $0.5 million in the growth of our OnSale segment, which we are now separately reporting. Without these costs, on a non-GAAP basis, our operating profit would have been approximately $2.9 million for the quarter. With respect to our OnSale business, details about which are contained in a separate press release we issued this afternoon, we believe that the market we are preparing to enter is incredibly exciting and represents a fantastic opportunity for us in the months and quarters to come.
In February 2011, our OnSale segment expanded with our acquisition of certain assets of eCost.com, a subsidiary of PFSweb, Inc., for $2.3 million. In conjunction with this transaction, beginning with the first quarter of 2011, our management changed the way we internally look at our business and realigned our reportable operating segments from four segments (previously SMB, MME, Public Sector and MacMall) to five segments that we now refer to as SMB, MME, Public Sector, MacMall and OnSale. As such, existing sales under the OnSale brand will no longer be reported under the MacMall segment, but rather it will be reported, together with sales under the eCost brand, as part of the OnSale segment. We expect that our MacMall segment will remain primarily focused on targeting small businesses, creative professionals and high-end
consumers, predominantly in the Apple and related products market. We will continue to include corporate related expenses such as legal, accounting, information technology, product management, certain support services and other administrative costs that are not otherwise allocated to our reportable operating segments in Corporate and Other. All historical segment financial information provided in this release has been revised to reflect these new reportable operating segments.
These efforts are part of our plan to expand our OnSale business model beyond consumer electronics and information technology and enter the rapidly expanding market for daily deals by local merchants in local markets, leveraging the principles of social commerce and what we believe are our unique competitive advantages in that marketplace.
Commenting on OnSales newly expanded business model, Khulusi stated, We are very excited about OnSales prospects as it expands into this important and growing market. We have developed what we believe will be an innovative, unique value proposition to both merchants and consumers. To date, we have hired approximately 81 people to support OnSales daily deal site, most of whom are in the Philippines, and expect to launch the site in several markets later in the second quarter. OnSale has already begun partnering with merchants who will offer discounts through the site, and consumers can sign up immediately at www.onsale.com to receive daily updates and offers once the site is launched.
Segment Results
SMB
Q1 2011 net sales for our SMB segment were $138.7 million, an increase of $30.7 million, or 28%, from $108.0 million in Q1 2010 due to increased productivity of our account executives, inclusive of significant growth in our new Chicago office, continuing economic recovery by small and medium sized businesses, and an increase in sales to promotional companies.
SMB gross profit increased by $3.5 million, or 26%, to $16.9 million in Q1 2011 compared to $13.4 million in Q1 2010 resulting primarily from the increased SMB net sales discussed above and a $0.5 million increase in vendor consideration. SMB gross profit margin decreased to 12.2% in Q1 2011 compared to 12.4% in Q1 2010 primarily due to a 47 basis point decrease in vendor consideration as a percentage of net sales.
SMB operating profit in Q1 2011 increased by $2.8 million, or 44%, to $9.2 million compared to $6.4 million in Q1 2010. The increase in SMB operating profit in Q1 2011 was primarily due to the increase in SMB gross profit discussed above, partially offset by a $0.7 million increase in SMB personnel costs. This increase in SMB personnel costs in Q1 2011 was primarily due to an increase in variable compensation expenses due to the increased SMB gross profit discussed above and our continuing investment in the growth of our Chicago office.
MME
Q1 2011 net sales for our MME segment were $110.5 million compared to $96.5 million in Q1 2010, an increase of $14.0 million, or 15%. This increase was primarily due to increased account executive productivity and increased IT spending by customers in the mid-market and enterprise sector in Q1 2011. Product revenues increased by 10% in Q1 2011 compared to Q1 2010 while service revenues increased by 19% in Q1 2011 compared to Q1 2010. Service revenues represented 20% of MME net sales in Q1 2011 compared to 19% of sales in Q1 2010. The service revenue increase was primarily due to the inclusion of service revenues of NSPI, which we acquired in June 2010, as well as a 23% increase in service sales performed under our Abreon brand, which is primarily focused on change management and eLearning consulting. These increases in service revenues were partially offset by a 6% decrease in MMEs Sarcom branded professional and managed services in Q1 2011 compared to Q1 2010.
MME gross profit increased by $1.5 million, or 9%, to $18.0 million in Q1 2011 compared to $16.5 million in Q1 2010, and MME gross profit margin decreased to 16.3% in Q1 2011 compared to 17.1% in Q1 2010 but increased 160 basis points sequentially from 14.7% in Q4 of 2010. The increase in MME gross profit was primarily due to the increased MME net sales discussed above. The decrease in MME gross profit margin was primarily due to lower selling margins in our Sarcom business as well as a lower mix of fees from enterprise software agreements that are reported on a net basis.
MME operating profit in Q1 2011 increased by $0.6 million, or 12%, to $5.2 million compared to $4.6 million in Q1 2010. The increase was primarily due to the increase in MME gross profit discussed above, partially offset by a $0.2 million increase in MME personnel costs and a $0.2 million increase in depreciation and amortization expenses primarily relating to the acquisition of NSPI. The increase in MME personnel costs was due in part to an increase in variable compensation costs related to the increased gross profit discussed above and the acquisition of NSPI.
Public Sector
Q1 2011 net sales for our Public Sector segment were $31.7 million compared to $44.0 million in Q1 2010, a decrease of $12.3 million, or 28%. This decrease in Public Sector net sales was due to a 42% decrease in our federal government business resulting primarily from an 80% reduction in sales of Sun Microsystems solutions, which we believe is substantially related to the acquisition of Sun by Oracle in January 2010 and resulting vendor program changes made in Q2 2010 in connection with Sun solutions. The decrease in our federal government business was also impacted by the delays in passage of the federal budget. Sales in our federal government business excluding sales of Sun Microsystems solutions decreased 11% in Q1 2011 over the same period in the prior year. Net sales in our state and local government and educational institution business increased 5%, driven by stronger demand.
Public Sector gross profit decreased by $0.4 million, or 12%, to $3.2 million in Q1 2011 compared to $3.6 million in Q1 2010. Public Sector gross profit margin increased to 10.1% in Q1 2011 compared to 8.2% in Q1 2010. The decrease in Public Sector gross profit was primarily due to decreased Public Sector net sales discussed above. The increase in Public Sector gross profit margin was primarily due to an increase in vendor consideration as a percentage of sales relating to an increase in higher margin solutions in Q1 2011.
Public Sector operating profit decreased to $41,000 in Q1 2011 compared to $0.4 million in Q1 2010. The decrease in Public Sector operating profit was primarily due to the decrease in Public Sector gross profit discussed above as well as our continued investment in its Health Dynamix division.
MacMall
As indicated previously, our MacMall segment no longer includes the costs associated with the OnSale business, and all historical numbers have been adjusted accordingly. Q1 2011 net sales for our MacMall segment were $46.6 million compared to $39.6 million in Q1 2010, an increase of $7.0 million, or 18%. This increase was primarily due to significant sales of iPads during Q1 2011, as well as our efforts to focus on higher profit customer segments such as small businesses, creative professionals and high-end consumers, partially offset by a reduction in web-based sales to consumers.
MacMall gross profit increased by $0.5 million, or 12%, to $4.9 million in Q1 2011 compared to $4.4 million in Q1 2010. MacMall gross profit margin decreased to 10.5% in Q1 2011 compared to 11.0% in Q1 2010. The increase in MacMall gross profit was primarily due to the increased MacMall net sales discussed above. The decrease in MacMall gross profit margin was primarily due to a large volume of lower margin iPad sales during Q1 2011, partially offset by a 49 basis point increase in vendor consideration as a percentage of net sales.
MacMall operating profit increased by $0.7 million to $1.3 million in Q1 2011 compared to $0.6 million in Q1 2010. This increase in MacMall operating profit was primarily due to the increase in MacMall gross profit discussed above and a $0.1 million decrease in advertising expenditures.
OnSale
Our OnSale segment currently includes sales made under our OnSale and eCost brand names primarily to consumers and small businesses via the Internet. As discussed above, this segment is also developing a platform to expand its model to include the marketing of daily deals in local markets through social commerce.
Q1 2011 net sales for our OnSale segment were $8.6 million compared to $1.8 million in Q1 2010, an increase of $6.8 million, or 391%. This increase was primarily due an increase in sales through our traditional OnSale business and $1.7 million of net sales resulting from our acquisition of eCost in February 2011.
OnSale gross profit increased by $0.8 million to $0.9 million in Q1 2011 compared to $0.1 million in Q1 2010. OnSale gross profit margin increased to 10.6% in Q1 2011 compared to 5.6% in Q1 2010. The increase in OnSale gross profit and gross profit margin was primarily due to the increased OnSale net sales discussed above and a better product mix.
OnSales operating loss increased by $0.4 million to $0.5 million in Q1 2011 compared to $0.1 million in Q1 2010. This increase in OnSales operating loss was primarily due to $0.5 million of costs related to the expansion of our OnSale business model, including legal and personnel investments and transition costs related to the eCost acquisition. In addition, advertising expenditures supporting our traditional OnSale business increased by $0.4 million, offset by the increase in OnSale gross profit discussed above.
Corporate & Other
Corporate & Other operating expenses includes corporate related expenses such as legal, accounting, information technology, product management and certain support services and other administrative costs that are not otherwise included in our reportable operating segments. Q1 2011 Corporate & Other operating expenses increased by $2.0 million, or 19%, to $13.2 million from $11.2 million in Q1 2010, and increased $0.7 million sequentially from Q4 of 2010. The increase in Q1 2011 compared to Q1 2010 was primarily related to an increase in personnel costs of $1.4 million resulting primarily from additions in IT and distribution personnel, increased variable incentive compensation costs and a $0.5 million charge relating to an unreimbursed write-down of end-of-life first generation Apple iPads upon the release of the iPad 2.
Consolidated Balance Sheet
Accounts receivable at March 31, 2011 of $170.0 million decreased by $13.9 million from December 31, 2010. Our inventory of $58.0 million at March 31, 2011 represents a decrease of $5.6 million from December 31, 2010, reflecting sell-through of seasonal purchases made in late 2010. Accounts payable at March 31, 2011 of $101.4 million decreased by $23.4 million from December 31, 2010. Outstanding borrowings under our line of credit increased by $11.8 million to $62.1 million at March 31, 2011 compared to December 31, 2010, primarily the result of our purchase of a new headquarters office building in El Segundo in February 2011. We intend to secure a long-term mortgage for that property in the second quarter of 2011.
Selected Segment Information
Selected information for our reportable operating segments and a reconciliation of non-GAAP operating profit to operating profit are as follows (in thousands, except headcount data):
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Three Months Ended |
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Three Months Ended |
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Net Sales |
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Gross Profit |
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Operating |
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Net Sales |
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Gross Profit |
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Operating |
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SMB |
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$ |
138,738 |
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$ |
16,918 |
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$ |
9,184 |
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$ |
107,994 |
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$ |
13,397 |
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$ |
6,384 |
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MME |
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110,509 |
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17,986 |
|
5,159 |
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96,491 |
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16,481 |
|
4,614 |
| ||||||
Public Sector |
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31,677 |
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3,197 |
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41 |
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44,015 |
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3,629 |
|
378 |
| ||||||
MacMall |
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46,630 |
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4,893 |
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1,290 |
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39,572 |
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4,363 |
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632 |
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OnSale |
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8,645 |
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919 |
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(512 |
) |
1,762 |
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98 |
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(78 |
) | ||||||
Corporate & Other |
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(261 |
) |
(444 |
) |
(13,247 |
) |
20 |
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61 |
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(11,154 |
) | ||||||
Total |
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$ |
335,938 |
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$ |
43,469 |
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$ |
1,915 |
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$ |
289,854 |
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$ |
38,029 |
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$ |
776 |
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Average Account Executive |
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Three Months Ended |
| ||
Headcount By Segment(1): |
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2011 |
|
2010 |
|
SMB |
|
374 |
|
367 |
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MME |
|
111 |
|
108 |
|
Public Sector |
|
103 |
|
88 |
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MacMall |
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118 |
|
96 |
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OnSale |
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7 |
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|
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Total |
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713 |
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659 |
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(1) Headcount numbers are calculated based on an average of all sales executives and trainees employed during the period.
Non-GAAP Measures
We are presenting adjusted earnings before interest, taxes, depreciation and amortization expenses (EBITDA), non-GAAP operating profit and related margin and non-GAAP diluted EPS, which are financial measures that are not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP. Adjusted EBITDA and non-GAAP diluted EPS eliminate the effect of non-recurring, special charges, if any, as well as non-cash stock-based compensation expenses and the results of our OnSale segment. Non-GAAP operating profit and related margin eliminates the effect of non-recurring, special charges, if any, and the results of our OnSale segment. In the quarterly period ended Q1 2011, adjusted EBITDA excludes a non-recurring, special charge relating to an unreimbursed write-down of end-of-life first generation Apple iPads upon the release of the iPad 2. Adjusted EBITDA, non-GAAP operating profit and related margin and non-GAAP diluted EPS should be used in conjunction with other GAAP financial measures and are not presented as an alternative measure of operating results, as determined in accordance with GAAP. We believe that these non-GAAP financial measures allow a more meaningful comparison of our operating performance trends to both management and investors that is more indicative of our consolidated operating results across reporting periods. Depreciation and amortization expenses primarily represent an allocation to current expense of the cost of historical capital expenditures and for acquired intangible assets resulting from prior business acquisitions. Stock-based compensation is governed by the compensation committee of our Board of Directors and results in a non-cash operating expense for stock option grants that were made in prior operating periods. A reconciliation of the non-GAAP consolidated financial measures is included in a table below.
Conference Call
Management will hold a conference call, which will be webcast, on May 10, 2011 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss first quarter results. To listen to PC Mall managements discussion of its first quarter results live, access www.pcmall.com/investor.
The archived webcast can be accessed at www.pcmall.com/investor under Calendar of Events. A replay of the conference call by phone will be available from 7:30 p.m. ET on May 10, 2011 until May 17, 2011 and can be accessed by calling: (888) 286-8010 and inputting pass code 41329244.
About PC Mall, Inc.
PC Mall, Inc., through its wholly-owned subsidiaries, is a leading value added direct marketer of technology products, services and solutions to small and medium sized businesses, mid-market and enterprise customers, government and educational institutions and individual consumers. Our brands include: PC Mall, PC Mall Gov, Sarcom, MacMall, Abreon, NSPI and OnSale. In the twelve months ended March 31, 2011, we generated $1.4 billion in revenue and have over 2,600 employees, over 65% of which are in sales or service positions. For more information please visit pcmall.com/investor or call (310) 354-5600.
Forward-looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding our expectations, hopes or intentions regarding the future, including, but not limited to expectations or statements relating to expanded business models and opportunities and benefits of our investments in these business models and markets. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause our actual results to differ materially include without limitation the following: uncertainties related to our expanded business models and related investments; risks relates to our IT infrastructure, uncertainties relating to the relationship between the number of our account executives and productivity; risks related to our ability to receive expected returns on strategic investments such as investments in new offices, decreased sales related to any of our segments, including but not limited to, potential decreases in sales resulting from the loss of or a reduction in purchases from significant customers; availability of key vendor incentives and other vendor assistance, increased competition, including, but not limited to, increased competition from direct sales by some of our largest vendors and increased pricing pressures which affect our pricing strategy in any given period; the effect of the our pricing strategy on our operating results; risks related to our ability to retain key personnel; risks and uncertainties relating to our ability to identify suitable acquisition targets, to complete acquisitions of identified targets (including the challenges and costs of closing the transaction), and our ability to integrate companies we may acquire and our ability to achieve synergies expected from such acquisitions (including our acquisition of NSPI); the impact of acquisitions on relationships with key customers and vendors; potential decreases in sales related to changes in our vendors products; risks of decreased sales related to the potential lack of
availability of government funding applicable to our PC Mall Gov contracts; the impact of seasonality on our sales; availability of products from third party suppliers at reasonable prices; risks of business and other conditions in the Asia Pacific region and our limited experience operating in the Philippines, which could prevent us from realizing expected benefits from our Philippines operations; increased expenses, including, but not limited to, interest expense, foreign currency transaction gains/losses, and other expenses which may increase as a result of future inflationary pressures; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; risks due to shifts in market demand or price erosion of owned inventory; risks related to our expanded OnSale business, including regulatory and litigation risks, market acceptance of the expanded business model, competition and emerging market risks; risks related to foreign currency fluctuations; risks related to data security; litigation by or against us; and availability of financing, including availability under our existing credit lines. Additional factors that could cause our actual results to differ are discussed under the heading Risk Factors in Item 1A, Part I of our Form 10-K for the year ended December 31, 2010, on file with the Securities and Exchange Commission, and in our other reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements.
###
-Financial Tables Follow-
PC MALL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
|
|
Three Months Ended |
| ||||
|
|
2011 |
|
2010 |
| ||
Net sales |
|
$ |
335,938 |
|
$ |
289,854 |
|
Cost of goods sold |
|
292,469 |
|
251,825 |
| ||
Gross profit |
|
43,469 |
|
38,029 |
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Selling, general and administrative expenses |
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41,554 |
|
37,253 |
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Operating profit |
|
1,915 |
|
776 |
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Interest expense, net |
|
723 |
|
482 |
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Income before income taxes |
|
1,192 |
|
294 |
| ||
Income tax expense |
|
465 |
|
121 |
| ||
Net income |
|
$ |
727 |
|
$ |
173 |
|
|
|
|
|
|
| ||
Basic and Diluted Earnings Per Common Share |
|
|
|
|
| ||
Basic |
|
$ |
0.06 |
|
$ |
0.01 |
|
Diluted |
|
0.06 |
|
0.01 |
| ||
|
|
|
|
|
| ||
Weighted average number of common shares outstanding: |
|
|
|
|
| ||
Basic |
|
12,232 |
|
12,302 |
| ||
Diluted |
|
12,607 |
|
12,499 |
|
PC MALL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO CONSOLIDATED
OPERATING PROFIT, CONSOLIDATED NET INCOME AND DILUTED EARNINGS PER SHARE
(unaudited, in thousands, except per share amounts)
|
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Three Months Ended |
| ||||
|
|
2011 |
|
2010 |
| ||
Net sales: |
|
|
|
|
| ||
Consolidated net sales |
|
$ |
335,938 |
|
$ |
289,854 |
|
Less: OnSale net sales |
|
8,645 |
|
1,762 |
| ||
Adjusted net sales |
|
$ |
327,293 |
|
$ |
288,092 |
|
|
|
|
|
|
| ||
Operating profit: |
|
|
|
|
| ||
Consolidated operating profit |
|
$ |
1,915 |
|
$ |
776 |
|
Less: OnSale operating loss |
|
(512 |
) |
(78 |
) | ||
Add: Inventory write-down (a) |
|
504 |
|
|
| ||
Non-GAAP operating profit |
|
2,931 |
|
854 |
| ||
Non-GAAP operating profit margin |
|
0.9 |
% |
0.3 |
% | ||
|
|
|
|
|
| ||
Consolidated operating profit margin |
|
0.6 |
% |
0.3 |
% | ||
|
|
|
|
|
| ||
Non-GAAP operating profit |
|
$ |
2,931 |
|
$ |
854 |
|
Add: |
|
|
|
|
| ||
Consolidated depreciation expense |
|
1,660 |
|
1,415 |
| ||
Consolidated amortization expense |
|
505 |
|
414 |
| ||
Consolidated stock-based compensation |
|
534 |
|
504 |
| ||
Less: |
|
|
|
|
| ||
OnSale depreciation expense |
|
|
|
|
| ||
OnSale amortization expense |
|
1 |
|
|
| ||
OnSale stock-based compensation |
|
4 |
|
|
| ||
Adjusted EBITDA (b) |
|
$ |
5,625 |
|
$ |
3,187 |
|
|
|
|
|
|
| ||
Net income: |
|
|
|
|
| ||
Consolidated income before income taxes |
|
$ |
1,192 |
|
$ |
294 |
|
Less: Income tax expense |
|
465 |
|
121 |
| ||
Consolidated net income |
|
$ |
727 |
|
$ |
173 |
|
|
|
|
|
|
| ||
Consolidated income before income taxes |
|
$ |
1,192 |
|
$ |
294 |
|
Add: Inventory write-down (a) |
|
504 |
|
|
| ||
Less: OnSale loss before income taxes |
|
(512 |
) |
(78 |
) | ||
Adjusted income before income taxes |
|
2,208 |
|
372 |
| ||
Less: Adjusted income taxes |
|
861 |
|
153 |
| ||
Non-GAAP net income |
|
$ |
1,347 |
|
$ |
219 |
|
|
|
|
|
|
| ||
Diluted earnings per share: |
|
|
|
|
| ||
GAAP diluted EPS |
|
$ |
0.06 |
|
$ |
0.01 |
|
Non-GAAP diluted EPS |
|
0.11 |
|
0.02 |
| ||
|
|
|
|
|
| ||
Diluted weighted average number of common shares outstanding |
|
12,607 |
|
12,499 |
|
(a) Relates to a write down of first generation iPads in conjunction with the release of the iPad 2.
(b) EBITDA earnings before interest, taxes, depreciation and amortization.
PC MALL, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts and share data)
|
|
March 31, |
|
December 31, |
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
7,599 |
|
$ |
10,711 |
|
Accounts receivable, net of allowances of $1,653 and $1,802 |
|
169,995 |
|
183,944 |
| ||
Inventories, net |
|
57,956 |
|
63,583 |
| ||
Prepaid expenses and other current assets |
|
10,949 |
|
10,022 |
| ||
Deferred income taxes |
|
3,827 |
|
3,798 |
| ||
Total current assets |
|
250,326 |
|
272,058 |
| ||
Property and equipment, net |
|
32,949 |
|
21,851 |
| ||
Deferred income taxes |
|
614 |
|
604 |
| ||
Goodwill |
|
25,510 |
|
25,510 |
| ||
Intangible assets, net |
|
12,545 |
|
11,749 |
| ||
Other assets |
|
2,400 |
|
2,319 |
| ||
Total assets |
|
$ |
324,344 |
|
$ |
334,091 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
101,433 |
|
$ |
124,851 |
|
Accrued expenses and other current liabilities |
|
25,498 |
|
31,279 |
| ||
Deferred revenue |
|
17,074 |
|
12,206 |
| ||
Line of credit |
|
62,069 |
|
50,301 |
| ||
Notes payable current |
|
783 |
|
783 |
| ||
Total current liabilities |
|
206,857 |
|
219,420 |
| ||
Notes payable and other long-term liabilities |
|
5,108 |
|
4,607 |
| ||
Deferred income taxes |
|
2,967 |
|
2,771 |
| ||
Total liabilities |
|
214,932 |
|
226,798 |
| ||
Commitments and contingencies |
|
|
|
|
| ||
Stockholders equity: |
|
|
|
|
| ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding |
|
|
|
|
| ||
Common stock, $0.001 par value; 30,000,000 shares authorized; 14,345,520 and 14,089,672 shares issued; and 12,404,348 and 12,148,500 shares outstanding, respectively |
|
14 |
|
14 |
| ||
Additional paid-in capital |
|
106,094 |
|
104,894 |
| ||
Treasury stock, at cost: 1,941,172 shares |
|
(7,176 |
) |
(7,176 |
) | ||
Accumulated other comprehensive income |
|
2,657 |
|
2,465 |
| ||
Retained earnings |
|
7,823 |
|
7,096 |
| ||
Total stockholders equity |
|
109,412 |
|
107,293 |
| ||
Total liabilities and stockholders equity |
|
$ |
324,344 |
|
$ |
334,091 |
|
PC MALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
|
Three Months Ended |
| ||||
|
|
2011 |
|
2010 |
| ||
Cash Flows From Operating Activities |
|
|
|
|
| ||
Net income |
|
$ |
727 |
|
$ |
173 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
2,165 |
|
1,829 |
| ||
Provision for deferred income taxes |
|
231 |
|
86 |
| ||
Net tax benefit related to stock option exercises |
|
1 |
|
4 |
| ||
Excess tax benefit related to stock option exercises |
|
(660 |
) |
(10 |
) | ||
Non-cash stock-based compensation |
|
534 |
|
504 |
| ||
Gain on sale of fixed assets |
|
(4 |
) |
(11 |
) | ||
Change in operating assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
|
13,949 |
|
7,730 |
| ||
Inventories |
|
6,621 |
|
25,743 |
| ||
Prepaid expenses and other current assets |
|
(714 |
) |
(782 |
) | ||
Other assets |
|
14 |
|
45 |
| ||
Accounts payable |
|
(30,291 |
) |
(21,678 |
) | ||
Accrued expenses and other current liabilities |
|
(6,005 |
) |
(5,052 |
) | ||
Deferred revenue |
|
4,868 |
|
680 |
| ||
Total adjustments |
|
(9,291 |
) |
9,088 |
| ||
Net cash (used in) provided by operating activities |
|
(8,564 |
) |
9,261 |
| ||
Cash Flows From Investing Activities |
|
|
|
|
| ||
Purchases of El Segundo building |
|
(9,565 |
) |
|
| ||
Purchases of property and equipment |
|
(1,898 |
) |
(2,164 |
) | ||
Acquisition of eCost |
|
(2,327 |
) |
|
| ||
Proceeds from sale of fixed assets |
|
9 |
|
|
| ||
Net cash used in investing activities |
|
(13,781 |
) |
(2,164 |
) | ||
Cash Flows From Financing Activities |
|
|
|
|
| ||
Net borrowings (payments) under line of credit |
|
11,730 |
|
(8,041 |
) | ||
Repayments under notes payable |
|
(196 |
) |
(253 |
) | ||
Change in book overdraft |
|
6,719 |
|
(1,590 |
) | ||
Payments of obligations under capital lease |
|
(299 |
) |
(168 |
) | ||
Payments for deferred financing costs |
|
(25 |
) |
|
| ||
Proceeds from stock issued under stock option plans |
|
665 |
|
51 |
| ||
Excess tax benefit related to stock option exercises |
|
660 |
|
10 |
| ||
Common shares repurchased and held in treasury |
|
|
|
(57 |
) | ||
Net cash provided by (used in) financing activities |
|
19,254 |
|
(10,048 |
) | ||
Effect of foreign currency on cash flow |
|
(21 |
) |
189 |
| ||
Net change in cash and cash equivalents |
|
(3,112 |
) |
(2,762 |
) | ||
Cash and cash equivalents at beginning of the period |
|
10,711 |
|
9,215 |
| ||
Cash and cash equivalents at end of the period |
|
$ |
7,599 |
|
$ |
6,453 |
|
Supplemental Cash Flow Information |
|
|
|
|
| ||
Interest paid |
|
$ |
608 |
|
$ |
455 |
|
Income taxes paid |
|
1,422 |
|
215 |
| ||
Supplemental Non-Cash Investing and Financing Activities |
|
|
|
|
| ||
Purchase of infrastructure system |
|
$ |
1,146 |
|
$ |
|
|
Deferred financing costs |
|
38 |
|
|
|
EXHIBIT 99.2
Contact:
Joe Hayek, Executive Vice President
PC Mall, Inc.
(310) 354-5600
or
Budd Zuckerman, President
Genesis Select Corporation
(303) 415-0200
PC Malls OnSale Subsidiary Expanding Into the Emerging
Local Deal of the Day Coupon Market
Expanded Site Scheduled to Launch in Several Markets in Q2; Additional Growth Planned
Consumers and merchants can sign-up as of today
Torrance, California May 10, 2011 PC Mall, Inc. (NASDAQ:MALL), a leading IT solutions provider, today announced that its OnSale subsidiary is expanding its business model to become an online destination where consumers can find daily deals on desirable goods and services in their local markets by leveraging the principles of social commerce. OnSale intends to launch this effort through its existing web-site, www.OnSale.com, in several markets with hyper-local marketing programs later in the second quarter, and quickly expand thereafter into other markets across the country. OnSale has already begun partnering with local and national merchants who will offer discounts through the site, and starting today consumers can sign up to receive daily updates and offers as soon as the site is launched. OnSale will bring unique and significant discounts to consumers by allowing merchants to harness the power of this emerging channel, through which they can attract and retain new customers. Businesses offer discounts through OnSale to consumers on terms that work for both the merchant and its customers. OnSales mission is to bring innovative value to both merchants and consumers, helping each to find the other.
Commenting on the pending launch of OnSales expanded business model, PC Malls Chairman and CEO, Frank Khulusi, commented We are very excited about OnSales prospects as it expands into this emerging market which, fueled by the social web has quickly evolved into an important growth channel for merchants. We have been working for some time to develop what we believe is an innovative, unique value proposition to both merchants and consumers. We have hired dedicated executive and management teams made up of talented professionals, and have approximately 81 people on board as of today. Most members of our support staff are currently working in our operation located in the Philippines. We are rapidly expanding our workforce to meet what we believe is a fantastic market opportunity.
Khulusi continued, We feel like our expertise and experience will enable us to drive significant value for both merchants and consumers relative to other, more established players in this market. For instance, unlike other competitors in this space, OnSale has been an online eCommerce merchant for over 10 years. As a result, OnSale can offer consumers the opportunity to leverage rewards programs that provide them significant discounts on computer and consumer electronics products, not just discounts on other third party coupons. Additionally, OnSale is committed to its merchant partners success, and has developed what we believe is a unique and value added approach to those merchants.
Khulusi concluded, Though there are others in this market that have raised significant capital, and have a bit of a head start on us from a launch perspective, this market is massive. It is an important and growing channel through which local merchants can reach and attract new customers, and consumers can try new products or services in their local markets, while securing significant discounts. We believe that the model we have built is scalable over different verticals and geographies, and can accommodate local, regional, and national deals. In many ways, this is a very natural extension for us. For instance, OnSale will leverage our significant experience in database marketing and expertise locating certain support functions off-shore in the Philippines, as well as our capabilities developing and executing on outbound calling efforts to businesses. We are firmly committed to this market as it evolves, and are already exploring additional avenues of growth for OnSale. The launch of OnSale will be a significant event for us, and we are excited about the future of OnSale and what it means to merchants, consumers and to PC Mall.
About PC Mall, Inc.
PC Mall, Inc., through its wholly-owned subsidiaries, is a leading value added direct marketer of technology products, services and solutions and is expanding its business model to become an online destination where consumers can find daily deals on desirable goods and services in their local markets by leveraging the principles of social commerce. PC Mall offers its products, services and solutions to small and medium sized businesses, mid-market and enterprise customers, government and educational institutions and individual consumers. Our brands include: PC Mall, PC Mall Gov, Sarcom, MacMall, Abreon, NSPI, eCost and OnSale. In the twelve months ended March 31, 2011, we generated $1.4 billion in revenue and have over 2,600 employees, over 65% of which are in sales or service positions. For more information please visit pcmall.com/investor or call (310) 354-5600.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding our expectations, hopes or intentions regarding the future, including, but not limited to expectations or statements relating to expanded business models and opportunities and benefits of our investments in these business models and markets; our ability to drive significant value for both merchants and consumers relative to other more established competitors; our ability to offer a unique and value added approach to merchants and consumers; the size of the market opportunity; the scalability of our models over different verticals and geographies; our ability to leverage our significant experience in database marketing; our experience locating certain support functions off-shore in the Philippines and our capabilities developing and executing on outbound calling effort to businesses. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause our actual results to differ materially include without limitation the following: uncertainties related to our expanded business models and related investments; risks relates to our IT infrastructure; risks related to our ability to receive expected returns on strategic investments; increased competition; risks related to our ability to hire and retain key personnel; availability of merchant deals and products from third party suppliers at reasonable prices; risks of business and other conditions in the Asia Pacific region and our experience operating in the Philippines, which could prevent us from realizing expected benefits from our Philippines operations; increased expenses, including, but not limited to, interest expense, foreign currency transaction gains/losses, and other expenses which may increase as a result of future inflationary pressures; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; risks due to shifts in market demand; regulatory and litigation risks, market acceptance of our expanded business models, competition and other emerging market risks; risks and uncertainties relating to our ability to identify suitable acquisition targets, to complete acquisitions of identified targets (including the challenges and costs of closing the transaction), and our ability to integrate companies we may acquire and our ability to achieve synergies expected from such acquisitions; risks related to data security; and availability of financing, including availability under our existing credit lines. Additional factors that could cause our actual results to differ are discussed under the heading Risk Factors in Item 1A, Part I of our Form 10-K for the year ended December 31, 2010, on file with the Securities and Exchange Commission, and in our other reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements.