Pc Connection, Inc. · NASDAQ:CNXN
Pc Connection — Raymond James Institutional Investors Conference 2005
30 slides from Pc Connection's conference presentation, Mar 8, 2005
Slide 1: Raymond James Institutional Investors Conference
RAYMOND JAMES INSTITUTIONAL INVESTORS CONFERENCE MARCH 8, 2005 Patricia Gallup, Chief Executive Officer Stephen Baldridge, VP of Finance & Corporate Controller
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Under the Private Securities Litigation Reform Act of 1955: This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of changes in market demand and the overall level of economic activity, or in
Slide 3: PC Connection, Inc.
PC CONNECTION, INC. Fortune 1000 Founded 1982 Employees 1,400 Exchange NASDAQ Symbol PCCC Shares Outstanding 25.1 Million Float 8.0 Million Market Capitalization $239 Million 2004 Sales $1.35 Billion Total Book Value Per Share $6.62 Tangible Book Value Per Share $4.44 Closing Price – 12/31/04 $9.52
Slide 4: Business Overview
BUSINESS OVERVIEW A rapid response provider of information technology (IT) products and solutions Operates through three sales subsidiaries Relationship-based model with 591 sales representatives Offering more than 100,000 brand-name products Multiple vendor relationships
Slide 5: A Widely Recognized Brand Name
PC Connection, A Widely Recognized Brand Name
Slide 6: Building Brand Awareness
Building Brand Awareness Zea PC Connection: GovConnection’ = MORE’ DIRECT Connection
Slide 7: Broad Product Selection
Broad Product Selection
Slide 8: Major Vendor Partners
Major Vendor Partners
Slide 9: Organizational Structure & Business Segments
Organizational Structure & Business Segments PC Connection, Inc. (Parent Holding Company) PC Connection Sales Corporation (dba PC Connection®) Small- and Medium-Sized Business Sales Merrimack Services Corporation (dba PC Connection Services) Distribution Sales Support & Services Human Resources Info
Slide 10: PC Connection Sales Corporation (SMB)
PC Connection Sales Corporation (SMB) Focused on small- and medium-sized businesses (SMBs: 20-500 seats) Utilize outbound telemarketing (415 reps), catalog, and Web site marketing Differentiated by providing superior service and value to customers 2004 annual sales – $802 million
Slide 11: GovConnection, Inc. (Public Sector)
GovConnection, Inc. (Public Sector) Focused on Public Sector: Four distinct markets Federal State and Local K-12 Higher Ed Utilize field sales, outbound telemarketing (107 reps), teaming, catalog, and Web site Awarded new GSA Schedule 2004 annual sales – $253 million
Slide 12: MoreDirect, Inc. (Large Account)
MoreDirect, Inc. (Large Account) Focused on large customer segment (>500 seats) Knowledgeable, high-level field sales account managers (69 reps) with 10-20 years experience in IT hardware Aggregates inventories of leading wholesale distributors and manufacturers (virtual inventory–no warehousing or
Slide 13: Pursuing Market Opportunities
Pursuing Market Opportunities Company Market Share (2) Company Segments Market (1) Opportunity Small- and Medium-Sized Businesses $75 Billion 1.1% Government & Education 40 Billion 0.6% Large Corporate Accounts 85 Billion 0.4% Total $200 Billion 0.7% (1) IDC and PC Connection estimate (2) PC Connect
Slide 14: Growth Strategies Overview
Growth Strategies Overview Improve Sales Productivity Increase Number of Sales Representatives Continue Margin Rate Improvement Expand Product and Service Offerings Voice Over Internet Protocol (VOIP) ServiceConnection Pursue Strategic Initiatives
Slide 15: Improve Sales Productivity
Improve Sales Productivity ($ amounts in thousands) Average Productivity 12/31/04 Sales Reps Annual Company Segments Annual 2004 Target Small- and Medium-Sized Businesses 415 $2,049 $2,500 Government & Education 107 2,365 3,200 Large Corporate Account 69 4,033 4,500 Total/Average 591 $2,365 $2,900
Slide 16: Annualized Sales Rep Productivity
Annualized Sales Rep Productivity (Amounts in thousands) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 0% SMB +12.4% SLED +28.1% Large Account (56.6%) Federal 2003 2004
Slide 17: Increase Number of Sales Representatives
Increase Number of Sales Representatives Enhance recruitment efforts at current call centers Consider additional call centers Expand the number of field reps in our Large Account and Public Sector segments Investigate Virtual Call Centers for SMB segment
Slide 18: Strategic Initiatives
Strategic Initiatives Internal Monadnock K2 Rapid Response Sales Support External ServiceConnection Acquisition Opportunities
Slide 19: Financial Summary
Financial Summary Stephen Baldridge, VP of Finance & Corporate Controller
Slide 20: Operating Results–Consolidated
Operating Results–Consolidated (Amounts in thousands except EPS) Q4 2004 Q4 2003 2004 2003 Net Sales $339,599 $358,376 $1,353,834 $1,312,891 Gross Profit 41,346 36,321 150,839 137,679 % of Net Sales 12.2% 10.1% 11.1% 10.5% SG&A Expenses 36,576 33,108 131,514 124,824 % of Net Sales 10.8% 9.2% 9.7% 9.
Slide 21: Product Mix – 2004 vs. 2003
Product Mix – 2004 vs. 2003 2004 % of Net Sales 2003 % of Net Sales Notebooks & PDAs 20.4% 19.9% Desktops/Servers 14.2% 14.7% Storage Devices 8.2% 8.9% Software 12.0% 11.0% Net/Com Products 7.3% 7.9% Printers & Printer Supplies 11.0% 11.4% Video, Imaging, & Sound 12.2% 11.8% Memory & System Enhancem
Slide 22: Net Sales by Segment
Net Sales by Segment ($ amounts in thousands) Public Sector Large Account SMB $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 $52,632 $52,255 $178,640 $53,852 $66,359 $207,424 2003 2004 Q1 $75,023 $59,969 $186,576 $63,355 $77,942 $194,058 2003 2004 Q2 $103,596 $66,259 $179,
Slide 23: Gross Margin % of Sales
Gross Margin % of Sales 2004 (1) 2003 SMB 12.1% 11.2% Public Sector 9.4% 8.2% Large Account 10.2% 11.3% Consolidated 11.1% 10.5% (1) Includes increase of EITF Reclass: SMB +.44%, Public +.09%, & Consolidated +.27%
Slide 24: SG&A % of Sales
SG&A % of Sales 11.0% 10.0% 9.0% 8.0% 10.2% FY 2002 9.5% FY 2003 9.7% FY 2004 (Includes EITF) Note: SG&A rates exclude special charges; 2004 includes a .31% increase from the EITF reclassification
Slide 25: Operating Margin % of Sales
Operating Margin % of Sales 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1.0% 0.7% 2003 2004 Q1 0.8% 1.2% 2003 2004 Q2 1.1% 1.4% 2003 2004 Q3 0.5% 0.9% 2003 2004 Q4
Slide 26: Diluted Earnings Per Share
Diluted Earnings Per Share $0.18 $0.16 $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 $0.06 $0.06 $0.07 $0.05 2003 2004 Q1 $0.07 $0.06 $0.11 $0.09 2003 2004 Q2 $0.09 $0.09 $0.16 $0.11 2003 2004 Q3 $0.07 $0.03 $0.12 $0.08 2003 2004 Q4 Additional Pro Forma (1) GAAP (1) Pro forma EPS exclude special c
Slide 27: A Reconciliation Between GAAP and Pro Forma Results
A Reconciliation Between GAAP and Pro Forma Results This information is being furnished so as to allow for a comparison of our operating results without special charges. ($ in thousands, except EPS) Q4 Total 2004 2003 2004 2003 GAAP Net Income: $2,073 $730 $8,304 $5,888 Special Charges (after tax):
Slide 28: Working Capital Metrics
Working Capital Metrics 2004 2003 Days Sales Outstanding 42 47 Inventory Turns 15 15 Cash Flow from Operations $13,318 $3,301 Debt/Capital Ratio 6.8% 7.4%
Slide 29: Financial Model: Two-Year Target Ranges
Financial Model Two-Year Target Ranges 2001 2002 2003 2004 REVENUE GROWTH (17.6)% 0.4% 10.2% 3.1% 15% + (annual) EPS GROWTH (75.4)% (56.7)% 76.9 % 43.5% 30% + (annual) GROSS PROFIT MARGIN 11.1% 10.8% 10.5% 11.1% 11.3-11.8% SG&A (1) 9.9% 10.2% 9.5% 9.7% 8.8%-9.3% OPERATING MARGIN 1.0% 0.5% 0.8% 1.0%
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