PC nection(US:CNXN)2022-05-08 13:21Financial Data and Key Metrics Changes - Q1 2022 revenue increased by 23.8% to $788.3 million compared to Q1 2021, with gross profit up 27.6% to $128.3 million [11][14] - Gross margins improved to 16.3%, an increase of 49 basis points from Q1 2021, with operating income rising 113.4% to $30.1 million [14][19] - Diluted earnings per share reached $0.83, a 113.6% increase from $0.39 in Q1 2021 [14][19] Business Line Data and Key Metrics Changes - Business Solutions segment net sales reached $320.4 million, up 30.1% year-over-year, with gross profit increasing by 31.2% [15] - Public Sector Solutions segment net sales were $132.5 million, a 5.8% increase, while Enterprise Solutions segment net sales grew by 26.4% to $335.4 million [16][17] - Gross profit margins improved across all segments, with Business Solutions at 19.4%, Public Sector at 13.1%, and Enterprise at 14.6% [15][16][17] Market Data and Key Metrics Changes - The healthcare vertical, the largest segment, grew by 25%, while manufacturing, retail, and finance verticals saw growth rates of 20%, 26%, and 48% respectively [11] - The company experienced strong double-digit growth across all vertical markets, indicating robust demand [11] Company Strategy and Development Direction - The company focuses on helping customers navigate supply chain challenges and transition to hybrid work environments, which are key growth drivers [10][22] - Customized IT solutions are emphasized as a competitive differentiator, with expectations of continued market share growth [23][24] - The company anticipates ongoing demand for data center and cloud transformation projects, with a commitment to supply chain optimization [28][29] Management Comments on Operating Environment and Future Outlook - Management acknowledges persistent supply chain issues but remains optimistic about demand for customized solutions [12][29] - The company expects to grow at rates 200 to 300 basis points above the overall IT market growth rate, despite potential market volatility [39] - Management is closely monitoring supply chain developments and believes that demand for PCs and IT solutions will remain strong [36][39] Other Important Information - Cash flow used in operations for Q1 was $38.3 million, reflecting increased business activity and inventory levels [20] - The effective tax rate was slightly reduced to 27.7% from 27.8% in the prior year [19] Q&A Session Summary Question: What are the main components of the backlog? - Management indicated that the backlog is widespread, with significant components in data center networking and security hardware products, as well as endpoint devices [32] Question: How should revenue growth be viewed in the context of ASPs versus volumes? - Management noted that the revenue increase was largely volume-driven, with some improvement in margins due to increased product throughput [33][34] Question: How does the company expect to drive continued revenue growth amid market uncertainties? - Management expressed confidence in continued demand due to the level of customization in their solutions, despite potential market pullbacks [36] Question: How does the company view its growth relative to the IT market? - Management believes it can grow 200 to 300 basis points above the overall IT market growth rate, with expectations for elevated growth in Q2 [39] Question: Are customers still booking orders far in advance for data centers? - Management confirmed that customers are indeed booking orders well in advance for data center equipment, with extended lead times still prevalent [40]