CRN Channel Benchmarks, Week of July 31

CRN compared financial measures from the week of July 31 with those from the week of July 3 to develop the most recent data on four-week trends. The data show that during this period, commerical professional IT services and IT outsourcing were the two categories that saw the biggest gains in overall financial strength. Joining them on the upside were two other categories, direct marketers and financial IT services.

IT outsourcing was the standout category during this period. Revenue growth rates (over the 12 months preceding) increased to 5.8 percent compared to 4.0 percent and gross margin (based on revenue and gross profit over the preceding 12 months) rose to 29.3 percent from 27.4 percent.

These gains led to higher profits. CRN uses EBITDA, defined as earnings before interest, taxes, depreciation and amortization, as the basic profitability measure. Because EBITDA excludes non-cash items and is an approximate measure of operating cash flow, it is often considered to be a more useful measure than operating margin. For the IT outsourcing category, EBITDA (measured as a percentage of total revenue) increased to 14 percent from 13.6 percent.

Finally, the debt-to-asset ratio (defined as total debt divided by total assets, converted to percentage terms, declined to 20.8 percent from 21.5 percent. A decline in this percentage implies that distributors as a group are becoming less financially leveraged and less vulnerable to creditors.

Continued below chart...

Not sectors saw gains in financial strength, however. After two straight periods of increases, the IT management software saw its financial strength weaken. Revenue growth, for example, dropped to 11.4 percent from 11.9 percent and gross margins (while still very high) dipped to 77 percent from 78.1 percent. Distributors also saw their financial position weaken during the period, along with the business software category.