Pcm, Inc. (NASDAQ:PCMI)

PCMI ($11.83) reported Q2 2016 results:

• Sales of $581 million vs $478.8 million in the prior year

• Non-GAAP EPS of $0.66 vs $0.26 in the prior year and crushed analyst estimates of $0.38

• Company increased full year EPS guidance to $1.51 to $1.64, analyst estimates of $1.31.

Comments from management:

“Our results represents the highest levels of net sales and gross profit in our history and demonstrate that the changes and aggressive investments we made over the past few years, including our recent acquisitions, have successfully transformed us into a growing, diversified IT solutions powerhouse. We continue to unlock strategic and financial benefits of these transformative initiatives beyond expanded scale, a larger customer base and a more robust suite of capabilities, including experienced and successful leadership, enhanced IT systems, expanded geographic presence and heightened strategic value to our customer and vendor partners. The second quarter results validate our strategic position as a larger, more profitable, and increasingly sophisticated player in a growing industry, and I am increasingly confident that we will capture a larger share of the IT solutions market and grow faster than the industry.”

First Quarter 2012 Results

• Q1 net sales increased 2% to a first quarter record $342.3 million
• Q1 gross profit increased 8% to a first quarter record $46.8 million
• Q1 gross profit margin increased to 13.7% from 12.9%
• Q1 operating profit decreased 93% to $0.1 million
• Q1 EBITDA decreased 20% to $3.3 million
• Diluted loss per share was $0.04 for Q1 2012 compared to diluted earnings per share of $0.06

Commenting on the Company’s first quarter results, Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, “We are pleased that we grew sales by 11% excluding the program change mentioned above, and that we grew our gross margin to 13.7% from 12.9% year over year. This margin growth was primarily due to our continued focus on improving our mix of services and solutions sales. Our operating profit in Q1 was impacted by a number of factors, including our ongoing investments, our IT upgrades and $0.6 million of severance and restructuring related costs incurred during the quarter. As we previously discussed on our Q4 2011 conference call, we are committed to our goal of generating $30 million to $32 million in EBITDA in 2012, excluding any severance or restructuring related expenses.”

Strategic Developments 

Khulusi continued, “As we discussed on our Q4 2011 conference call, we are in the midst of several strategic initiatives with the goal being to unify our commercial brands and streamline our go-to-market strategies. An important part of these initiatives is a focused reduction of our overhead expenses. To that end, we took actions in Q1 that will result in $1.7 million of annualized cost savings. These and other actions resulted in severance and restructuring related expenses of approximately $0.6 million in Q1. We are evaluating additional actions to take place in Q2 and Q3 and would expect incremental annualized cost reductions of at least $3.5 million resulting from those actions. We currently expect that we will incur additional severance and restructuring related costs in connection with these actions. Looking forward, as we discussed on our fourth quarter conference call, we believe that when our commercial brands are unified and we simplify our go-to-market strategies we will be able to achieve additional synergies, including simplified and more effective sales and marketing campaigns and additional reductions in overhead.”

On 2/25/2011 we added MALL to the GeoSpecial list @ $9.93

Catalyst: Main driven force was the stock had a GPR of 6 and analyst EPS growth expectations of 55.7%

We are now removing MALL from the GeoSpeicial List @ $5.80

Current road block: Very disappointing fourth quarter 2011 results and first quarter 2012 results.

Peak performance: Reached a high of  $10.98 on 03/14/2011 for a maiximum potential return of 11%

• Current Price: $5.80

Fourth Quarter 2011 Results

• Q4 net sales decreased 8% to $389.8 million; full year 2011 net sales increased 6% to $1.5 billion
• Q4 gross profit increased 2% to $50.4 million; 2011 gross profit increased 11% to $190.5 million
• Q4 gross profit margin increased to 12.9% from 11.6%; 2011 gross profit margin increased to 13.1% from 12.5%
• Q4 GAAP operating profit decreased 84% to $1.1 million and non-GAAP operating profit decreased 42% to $4.0 million
•  Diluted loss per share for Q4 2011 was $0.03 compared to diluted EPS of $0.32 for Q4 2010.

Commenting on the Company’s fourth quarter results, Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, “In the 4^th quarter we were able to grow our gross profit by 2%, despite a sales decline driven by tough comparisons and a significant decline in sales of certain products made to promotional companies under a program change which we discussed on our Q3 conference call. Our gross margin increased to 12.9%, the highest it has been in Q4 since 2008. Our mix improved in Q4 2011, driven by our continued focus on our services and solutions business. In fact, our services revenue increased by 23% on a consolidated basis, with double digit increases in each of our commercial segments. On the SG&A side, our costs were elevated in Q4, in part because of some one-time expenses and charges. At the same time, we continue to believe that the investments we are making are critical to our success going forward. We expect our investments in people, processes and systems will benefit us in an increasingly visible way in 2012 and beyond. While we are continuing to grow and invest in our services and solutions business, are monetizing real estate assets and are today announcing important strategic developments that I will discuss below, we are always focused on the near-term profitability of our business. As we build for the future, we feel we are well positioned to reach our previously announced financial goals in 2012.”

Third Quarter 2011 Results

• Net sales increased 9% to $367.5 million, a third quarter record
• Gross profit increased 16% to $50.2 million, a third quarter record
• Gross margin increased to 13.7% from 12.9%
• GAAP operating profit decreased 5% to $3.9 million and non-GAAP operating profit increased 29% to $5.2 million
• Adjusted EBITDA increased 19% to $8.3 million
• Diluted earnings per share (EPS) decreased to $0.14 from $0.17 and non-GAAP diluted EPS for Q3 2011 increased to $0.21 from $0.17 in Q3 2010
• We repurchased 376,439 shares of our common stock in Q3 2011 at an average price of $5.97

Commenting on the Company’s third quarter results, Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, “I am pleased with our record third quarter performance. While continuing economic uncertainty makes it difficult to predict IT spending patterns, our team continues to work hard and execute well on our strategy, which includes both growth and investment. Our record third quarter revenue and gross profit, with growth of 9% and 16% respectively, is a result of continuing execution on the part of our sales organizations, along with an increasing mix of sales of services and solutions, something we have been driving towards for some time. In fact, we are very proud of our gross margin increase from 12.9% last Q3 to 13.7% in Q3 this year. In addition, our non-GAAP operating profit increased by 29%, demonstrating the operating leverage in our model. We continue to invest significant dollars in our IT upgrades and other systems improvements, and continue to selectively add headcount in our technical support and services businesses. In so doing, we believe we will be well positioned heading into 2012 and beyond.”

We are coding MALL ($9.93) as a GeoSpeical.  We have actually had this stock on our radar for some time now.  The main driving force behind our decision is due to the stocks GeoPowerRanking (GPR), which currently stands at 6. 

MALL did not possess enough of the quality criteria to be coded  as a GeoBargain.

• Debt to equity is 47.7%, well over our maximum 20% threshold
• Return on Equity is only 7.1%, well under our 15% minimum threshold.
• Current Ratio is less than 2:1
• Pre-Tax Margins are less than 1%.  Low margins are the nature of Pc-Mall's business.
• Analyst 2011 revenue growth expectations are less than 10%

These four factors may limit P/E expansion.  But we do think that ...

• a GPR of 6
• Analyst 2011 EPS growth expectations of  55.7% to $0.95...

can lead to a minimum P/E of 20 on trailing EPS of $0.61, leading to short-term valuation scenario of $12.20. (We may see a pull back i shares, which have been in a strong uptrend).