EX-99.1 2 d72396_99-1.htm PRESS RELEASE

EXHIBIT 99.1

Contact:

Frank Khulusi, Chairman, President and CEO

Brandon LaVerne, Interim CFO

PC Mall, Inc.

(310) 354-5600

or

Budd Zuckerman, (303) 415-0200

Genesis Select

 

PC MALL REPORTS RECORD SECOND QUARTER DILUTED EARNINGS PER SHARE OF $0.22 ON 12% REVENUE GROWTH

 

Highlights:

 

 

 

 

Record second quarter operating profit of $5.8 million in Q2 2007 compared with Q2 2006 operating profit of $1.6 million.

 

 

 

Record second quarter earnings per share of $0.22 in Q2 2007 compared to $0.03 in Q2 2006.

 

 

 

Record consolidated net sales of $263.0 million for Q2 2007,  an increase of 12%, compared to consolidated net sales of $234.1 million for Q2 2006.

 

 

 

Adjusted non-GAAP Core business operating profit margin in Q2 2007 of approximately 2.4%, more than double the 0.9% adjusted non-GAAP Core business operating profit margin in Q2 2006.

 

 

 

 

 

Commercial net sales for Q2 2007 increased 4% from Q2 2006.

 

 

 

Consumer net sales for Q2 2007 increased 9% from Q2 2006.

 

 

 

Public sector net sales for Q2 2007 increased 102% from Q2 2006.

 

Torrance, California –July 31, 2007 — PC Mall, Inc. (NASDAQ:MALL - news) today reported record Q2 2007 diluted earnings per share of $0.22 compared with $ 0.03 for Q2 2006. Net income for Q2 2007 was $3.0 million, an increase of $2.6 million from Q2 2006. Consolidated net sales for Q2 2007 were $263.0 million, an increase of $28.9 million or 12% from consolidated net sales of $234.1 million in Q2 2006.

 

Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, “We are very excited to report our record Q2 2007 results, which represent our fourth consecutive quarter of strong performance. This improvement in our performance was the result of a $4.9 million increase in gross profit from sales growth and our continued focus on profitability. In addition, our consumer business posted strong results this quarter, increasing 9% compared to the same quarter last year, its first year over year increase in several years. As a result of these improvements, we have surpassed our goal of a 2.0% adjusted non-GAAP Core business operating profit margin by achieving 2.4% in Q2 2007.”

 

Khulusi continued, “Our third quarter has historically been a seasonally strong federal government sales quarter, especially considering our recently acquired GMRI business. Further, Apple’s anticipated release in the fourth quarter of OS X Leopard could create additional Apple related sales opportunities for us in the fourth quarter. We remain focused on profitability, sales growth, and strategic acquisitions. While we expect that there will be quarterly fluctuations in our adjusted non-GAAP quarterly operating profit margin in part as a result of probable fluctuations in sales and the various components of gross margin, we are very pleased with our overall trend line over the last several quarters.”

 

Q2 2007 consolidated net sales were $263.0 million compared to $234.1 million in Q2 2006, an increase of $28.9 million. Core business (which excludes OnSale.com) net sales for Q2 2007 were $260.0 million compared with $231.1 million in Q2 2006, an increase of 13%. Public sector sales increased by 102% primarily due to the products business acquired from GMRI in September 2006. Consumer net sales increased by 9% in Q2 2007 compared to the same quarter last year primarily due to

 

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increased sales of Apple products. Commercial net sales grew 4% in Q2 2007 compared to Q2 2006, despite a 4% decline in average headcount during the quarter.

 

Consolidated gross profit in Q2 2007 increased to $33.9 million compared to $29.0 million in Q2 2006, and consolidated gross profit margin for Q2 2007 increased to 12.9% from 12.4% in Q2 2006. The increase in gross profit was due to the increase in sales discussed above, and the increase in gross profit margin was primarily due to strong growth in contractual licensing sales, which are accounted for on a net basis, in Q2 2007 compared to Q2 2006.

 

Consolidated SG&A expenses as a percent of net sales were 10.7% in Q2 2007 compared to 11.7% in Q2 2006, a decrease of 99 basis points, due primarily to decreases in advertising and labor costs as a percent of net sales, and the impact of increased sales. These savings were partially offset by increases in SG&A expenses from the acquisition of GMRI.

 

Commercial and public sector account executive headcount included in SG&A at the end of Q2 2007 amounted to 574 employees, up 8 account executives from Q2 2006 and up 37 account executives from Q1 2007. Total account executives, including those focused on commercial, public sector and consumer customers, numbered 646 at the end of Q2 2007, down 44 account executives from Q2 2006, but up 30 account executives from Q1 2007. The decrease of 44 account executives in Q2 2007 from Q2 2006 includes a substantial decline in the number of account executives supporting the consumer business, partially offset by increases in account executives supporting our field sales and GMRI operations. Average tenure for a commercial and public sector account executive at the end of Q2 2007 was 38 months, with 7% of the commercial and public sector workforce in training, 33% with less than one year experience and 47% with less than two years experience.

 

We had cash and cash equivalents of $4.8 million at June 30, 2007 compared to $5.8 million at December 31, 2006. Accounts receivable at June 30, 2007 increased by $5.4 million from December 31, 2006. Inventories of $50.6 million at June 30, 2007 decreased by $0.7 million from December 31, 2006. Accounts payable increased by $17.7 million from December 31, 2006, and outstanding borrowings under our line of credit decreased by $24.1 million to $8.3 million at June 30, 2007 from December 31, 2006.

 

Non-GAAP Measures

As described below, the adjusted non-GAAP Core business operating profit and related operating profit margin contained herein, which are supplemental to the financial results based on generally accepted accounting principles, exclude the results of Onsale.com and special charges if any such as litigation settlement, non-cash stock-based compensation expenses and SOX-related expenses, restructuring costs and other special items. We believe that the presentation of our results excluding these items provides meaningful supplemental information to both management and investors that is indicative of our Core business operating results across reporting periods. We include an income statement reconciliation of these non-GAAP measures to provide a more complete view of their effect on results. We are unable to reconcile our expectations and goals with respect to adjusted non-GAAP quarterly operating profits and margin for the Core business in future periods, because the GAAP financial measures are not accessible on a forward-looking basis.

 

 

* * *

 

 

Conference Call

 

Management will hold a conference call on Tuesday, July 31, 2007 at 10:00 a.m. Eastern time (7:00 a.m. Pacific time) to discuss the second quarter results. To listen to PC Mall management’s discussion of the second quarter results live, access the PC Mall website, www.pcmall.com, and click on the Investor Relations section.

A conference call replay will be available immediately following the call until August 20, 2007 and can be accessed by calling: (888) 286-8010 and inputting pass code 96883448.

 

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About PC Mall

PC Mall, Inc., together with its subsidiaries, is a rapid response supplier of technology solutions for businesses, government and educational institutions as well as consumers. More than 100,000 different products from companies such as, but not limited to, Apple, HP, IBM, Lenovo and Microsoft are marketed to customers using relationship-based selling, direct marketing, catalogs and the Internet (http://www.pcmall.com, http://www.macmall.com, http://www.pcmallgov.com, http://gmri.com, http://www.wareforce.com and http://www.onsale.com). Customer orders are rapidly filled by our distribution center strategically located near FedEx’s main hub or by our extensive network of distributors, which is one of the largest networks in the industry.

This press release contains 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 the statements regarding our expectations, hopes or intentions regarding the future, including, but not limited to, expectations or statements relating to future sales, our positive operating results trend line, future gross margin, future operating profits or future operating profit margin, including, but not limited to, our ability to achieve a particular adjusted non-GAAP Core business operating profit margin in any future quarter. 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 relating to the relationship of the number of account executives and productivity; decreases in revenues related to consumer, commercial and public sector sales including, but not limited to, potential decreases in sales resulting from the loss of customers; risks related to our ability to retain key personnel; potential decreases in sales related to changes in our vendors products; increased competition and pricing pressures, including, but not limited to, increased competition from direct sales by some of our largest vendors; risks of decreased sales related to the potential lack of availability of government funding applicable to our public sector contracts; availability of key vendor incentives and other vendor assistance; 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; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; uncertainties relating to our ability to identify suitable acquisition targets, to complete acquisitions of identified targets and to integrate companies we may acquire; risks due to shifts in market demand or price erosion of owned inventory; litigation by or against us; and inability to convert back orders to completed sales. Additional factors that could cause our actual results to differ are discussed under the heading "Risk Factors" in Item 1A, Part II of our Form 10-Q for the quarterly period ended March 31, 2007, on file with the Securities and Exchange Commission, and in our other periodic 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-

 

3


 

PC MALL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 



 


 

 

 

2007

 

 

2006

 

 

2007

 

 

2006

 

 

 







 




 


 

Net Sales

$

 262,958

  

$

234,119

   

$

519,738

  

$

468,341

 

Cost of goods sold

 

229,026

 

 

205,127

 

 

453,994

 

 

409,918

 

 


 


 


 


 

Gross profit

 

33,932

 

 

28,992

 

 

65,744

 

 

58,423

 

Selling, general and administrative expenses

 

28,130

 

 

27,366

 

 

55,902

 

 

55,859

 

 


 


 


 


 

Operating profit

 

5,802

 

 

1,626

 

 

9,842

 

 

2,564

 

Interest expense, net

 

803

 

 

971

 

 

1,730

 

 

2,000

 

 


 


 


 


 

Income before income taxes

 

4,999

 

 

655

 

 

8,112

 

 

564

 

Income tax expense

 

2,000

 

 

260

 

 

3,245

 

 

224

 

 




 




 




 




 

Net income

$

2,999

 

$

395

 

$

4,867

 

$

  340

 

 




 




 




 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Earnings Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

  0.24

 

$

0.03

 

$

0.39

 

$

  0.03

 

Diluted

 

0.22

 

 

0.03

 

 

0.36

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

12,431

 

 

11,990

 

 

12,407

 

 

11,861

 

Diluted

 

13,532

 

 

12,832

 

 

13,543

 

 

12,807

 

 

 

4


 

PC MALL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO

CORE BUSINESS OPERATING PROFIT AND OPERATING PROFIT MARGIN

(unaudited, in thousands)

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 



 


 

 

 

2007

 

 

2006

 

 

2007

 

 

2006

 

 



 



 






 

Consolidated net sales

$

262,958

   

$

234,119

   

$

519,738

   

$

468,341

 

Less net sales of OnSale.com

 

(2,991

)

 

(2,996

 

 

(5,693

)

 

(7,834

)

 


 


 


 


 

Core business net sales

$

259,967

 

$

231,123

 

$

514,045

 

$

460,507

 

 



 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated operating profit

$

5,802

 

$

1,626

 

$

9,842

 

$

2,564

 

Less operating loss of OnSale.com

 

201

 

 

167

 

 

566

 

 

840

 

 

 

 


 


 


 


 

Core business operating profit

$

6,003

 

$

1,793

 

$

10,408

 

$

3,404

 

 

  


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core business operating profit margin

 

2.31%

 

 

0.78%

 

 

2.02%

 

 

0.74%

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core business operating profit

$

6,003

 

$

1,793

 

$

10,408

 

$

3,404

 

Adjustment to reported operating profit:

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash stock-based compensation expense (a)

 

356

 

 

353

 

 

672

 

 

805

 

 


 


 


 


 

Adjusted non-GAAP Core business operating profit

$

6,359

 

$

2,146

 

$

11,080

 

$

4,209

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted non-GAAP Core business operating profit
     margin

 

2.45%

 

 

0.93%

 

 

2.16%

 

 

0.91%

 

 


 


 


 


 

 

 

 

(a)

Non-cash stock-based compensation expense relates to our adoption of SFAS 123R on January 1, 2006.

 

 

5


 

PC MALL, INC.

 

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share amounts and share data)

 

 

 

June 30,

2007

 

December 31,

2006

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,812

     

$

5,836

 

Accounts receivable, net of allowances of $4,225 and $4,630

 

 

119,613

 

 

114,184

 

Inventories, net

 

 

50,601

 

 

51,268

 

Prepaid expenses and other current assets

 

 

11,238

 

 

8,497

 

Deferred income taxes

 

 

4,577

 

 

4,594

 

 

 

 


 

 


 

Total current assets

 

 

190,841

 

 

184,379

 

Property and equipment, net

 

 

7,193

 

 

8,055

 

Deferred income taxes

 

 

3,013

 

 

6,248

 

Goodwill

 

 

3,914

 

 

3,525

 

Intangible assets, net

 

 

669

 

 

931

 

Other assets

 

 

729

 

 

429

 

 

 




 




 

Total assets

 

$

206,359

 

$

203,567

 

 

 




 




 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

93,516

 

$

75,837

 

Accrued expenses and other current liabilities

 

 

22,351

 

 

20,215

 

Deferred revenue

 

 

10,565

 

 

11,964

 

Line of credit

 

 

8,329

 

 

32,477

 

Note payable – current

 

 

600

 

 

500

 

 

 




 




 

Total current liabilities

 

 

135,361

 

 

140,993

 

Note payable

 

 

3,600

 

 

1,750

 

 

 




 




 

Total liabilities

 

 

138,961

 

 

142,743

 

 

 

 


 

 


 

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; 12,757,110 and 12,648,720 shares issued; and 12,462,910 and 12,354,520 shares outstanding, respectively

 

 

13

 

 

13

 

Additional paid-in capital

 

 

88,429

 

 

87,465

 

Treasury stock, at cost: 294,200 shares

 

 

(1,015

)

 

(1,015

)

Accumulated other comprehensive income

 

 

984

 

 

241

 

Accumulated deficit

 

 

(21,013

)

 

(25,880

)

 

 




 




 

Total stockholders’ equity

 

 

67,398

 

 

60,824

 

 

 




 




 

Total liabilities and stockholders’ equity

 

$

206,359

 

$

203,567

 

 

 




 




 

 

 

 

 

 

 

 

 

 

6