National solution provider PCM posted record first-quarter results, just weeks after Zones Chairman Firoz Lalji called PCM "one of the poorest performing companies" in the channel.
Lalji and his wife, Najma Lalji, recently purchased 5 percent of PCM's stock, according to a filing last month with the U.S. Securities and Exchange Commission. In the filing Lalji said PCM shares were "grossly undervalued" and called the company "poorly managed," while criticizing the compensation of PCM CEO and Founder Frank Khulusi as "unreasonably higher" than his peers.
PCM did not discuss Lalji's stock purchase during the earnings call, and there were no questions for PCM executives from financial analysts during the question-and-answer session of the call. According to the SEC filing, Lalji and his wife are "exploring ways to enhance stockholder value" for the company.
PCM reported record first-quarter sales of $339 million and record first-quarter diluted earnings per share, which increased 109 percent to 23 cents per share for the period ending March 31. However, the first-quarter revenue of $339 million represented just a 1 percent increase from the same period one year ago.
"We have been very busy transforming our company from PC Mall, which was primarily known as a direct marketer of personal computers and related products, to PCM, a leading IT solutions provider with world-class capabilities in procurement, consulting and managed services as PCM," Khulusi said during the earnings call. "As we continue this journey, these improvements may not manifest themselves every quarter, but overall the trend line is very solid."
PCM reported a 17 percent increase in public sector sales for the quarter. Brandon LaVerne, CFO of PCM, said during the earnings call that the public sector surge was due to new federal contracts as well as growth in the company's state, local and educational business related to the Common Core standards.
The solution provider also reported strong, double-digit growth for several product categories, including networking (32 percent increase year over year), software (19 percent), and desktop PCs (14 percent). Meanwhile, PCM said its tablet sales fell 12 percent for the quarter.
Khulusi said PCM is "now entering the next phase" of its transformation. "To that end, we will be making strategic and significant additions in headcount and our technical resources and sales force with the goal of accelerating our sales growth as we go forward," he said during the earnings call.
In addition, PCM opened a new office in Austin, Texas, and will be opening a new cloud data center in New Albany, Ohio, during the second quarter. "We believe this cloud data center further exemplifies our journey to becoming a leading IT solutions provider for the world-class consulting and managed services capabilities," Khulusi said. "We are increasingly engaging with our customers to design, build and ultimately provide sophisticated services."
PUBLISHED APRIL 30, 2014