PCM Turnaround Strikes Gold: Sales, Profits Soar in Q2

PCM bounced back from several sluggish quarters in the second quarter of 2015 and walloped its year-ago sales and profit figures for both its En Pointe and legacy businesses.

Revenue for the El Segundo, Calif.-based company, No. 29 on the 2015 CRN Solution Provider 500, leapfrogged 43 percent to a record $478.9 million, with legacy sales climbing 9 percent and En Pointe delivering a 17 percent increase in revenue, according to the company's second-quarter report. This smashed Seeking Alpha’s total revenue projection of $448.8 million.

Non-GAAP earnings from continuing operations jumped 72.1 percent to $3.26 million, or 26 cents per share, beating Seeking Alpha expectations of 22 cents per share.

[Related: PCM President: Reorganization Is Next Step In Transition To 'Solutions And Services Powerhouse']

’We’re better-positioned than ever,’ Frank Khulusi, CEO of PCM, said during the earnings call Wednesday. ’We have divested of the lesser-performing businesses and have aligned ourselves as a new PCM.’

The April acquisition of En Pointe, No. 42 on the 2014 CRN SP 500, has delivered not only additional revenue streams but also opportunities for cost savings, Khulusi said.

PCM decided to abandon development of its own customer relationship management (CRM) tool after discovering that En Pointe’s CRM tool meets the needs of its existing customers. Though this resulted in a one-time charge of $3.3 million, Khulusi said he expects it to meaningfully reduce costs going forward.

PCM President Jay Miley said the company is looking to expand En Pointe’s capabilities beyond its longstanding relationship with Microsoft to greater encompass other hardware vendors. PCM’s top vendor partners are Microsoft, Hewlett-Packard, Cisco, Dell and Apple, the company said.

The company will also relocate En Pointe’s entire workforce to the PCM headquarters in El Segundo, Khulusi said, with En Pointe’s Gardena, Calif., headquarters expected to be vacated this quarter. Cost-cutting also led to an additional $400,000 in severance costs for the quarter, with PCM anticipating to slash systems, leasing, personnel and intellectual property expenses to the tune to $6.6 million.

The bigger and better PCM saw growth across the board, with year-over-year networking sales up 38 percent, software sales up 25 percent and services sales up 22 percent.

Strength in security-related offerings has helped drive growth in PCM’s networking and software practice areas, Miley said. Security has been the hottest topic of discussing among chief information officers, Miley said, with Windows 10 further down the priority list.

Although Miley said he expects Windows 10 to have a positive effect on PCM’s sales going forward, he sees the new operating system -- which was released Wednesday -- primarily as a mid- to long-term opportunity.

From a vertical perspective, commercial sales climbed 37 percent, to $350 million, while public sector revenues jumped 108 percent, to $105.7 million. Excluding the net down, PCM’s legacy commercial business grew by 9 percent, while the public sector business grew by 20 percent.

PCM’s MacMall retail sales, though, declined 17 percent, to $23.1 million, as iMac sales continue to fall.

PCM has benefited from reorganizing its business at the start of last quarter into three new practice groups, Miley said: advanced technologies, end-point technologies and managed technologies. Each group has its own marketing, services and support resources, as well as its own dedicated leadership, Miley said.

Khulusi is most proud of PCM’s managed services offering, which he said is head and shoulders above that of many competitors, as well as the solution provider’s vibrant field services and life-cycle services practices.

"We see exciting times ahead of us," Khulusi said. "We firmly believe that our compelling solutions will win at the end of the day in the marketplace."

PCM’s stock didn’t move much in after-hours trading, climbing 0.1 percent, to $10.23 per share, though the stock was up 5.4 percent during the day. Earnings were released after the market closed Wednesday.

In the next quarter, Khulusi said, PCM is expecting to deliver earnings of between 13 and 17 cents per share.

PUBLISHED JULY 29, 2015