PC Mall Reports Second Quarter Non-GAAP Earnings Per Share of $0.05, Excluding Stock-Based Compensation Expense

Business Wire, August 7, 2006

TORRANCE, Calif. -- PC Mall, Inc. (NASDAQ:MALL):

Highlights:

--Non-GAAP earnings per share from continuing operations, excluding stock-based compensation expense, for Q2 2006 of $0.05 per share, compared with a loss per share in Q2 2005 of $(0.05).

--Earnings per share from continuing operations for Q2 2006 of $0.03 compared to a loss per share of $(0.05) in Q2 2005. Earnings per share from continuing operations for Q2 2006 includes the dilutive impact of $0.02 per share related to stock-based compensation expense resulting from the adoption of FAS 123R.

--Core business reports an adjusted non-GAAP operating profit margin in Q2 2006 of 0.93 percent (0.78% on a GAAP basis), more than a sevenfold improvement over Q2 2005.

--Consolidated net sales in Q2 2006 of $234.1 million, an increase of $0.5 million from non-GAAP consolidated net sales of $233.6 million for Q2 2005, which excludes net sales of $19.6 million to our former subsidiary eCOST.com in Q2 2005.

--Consolidated net sales in Q2 2006 of $234.1 million, a decrease of $19.1 million from consolidated net sales of $253.2 million for Q2 2005.

--Commercial net sales for the quarter increase of eight percent, which includes SMB net sales increase of 13 percent from Q2 2005.

PC Mall, Inc. (NASDAQ:MALL) today reported Q2 2006 earnings per share from continuing operations of $0.03, which includes the dilutive impact of $0.02 per share related to stock-based compensation expense resulting from our adoption of Financial Accounting Standards Board Statement No. 123 (revised 2004), "Share-Based Payment" ("FAS 123R") on a modified prospective basis on January 1, 2006. This compares with Q2 2005 loss per share from continuing operations of $(0.05). During Q2 2006, we incurred a pre-tax non-cash stock-based compensation expense of $0.4 million, which is included in our selling, general and administrative ("SG&A") expenses, and a related deferred income tax benefit of $0.1 million. Excluding this $0.4 million stock-based compensation expense in Q2 2006, non-GAAP earnings per share from continuing operations for Q2 2006 was $0.05 per share, compared with a loss per share of $(0.05) in Q2 2005.

Consolidated net sales for Q2 2006 were $234.1 million compared to $253.2 million in Q2 2005, a decrease of $19.1 million. Consolidated net sales for Q2 2006 increased by $0.5 million from non-GAAP consolidated net sales of $233.6 million in Q2 2005 (excluding net sales in Q2 2005 of $19.6 million to our former subsidiary eCOST.com, generally at our cost). These sales to eCOST.com were made under product sales and consignment agreements entered into during the post-spin transition period. Such product sales and consignment agreements terminated pursuant to their terms in Q3 2005.

Income from continuing operations in Q2 2006 was $0.4 million, an increase of $1.0 million compared with a loss from continuing operations of $0.6 million in Q2 2005. This increase reflects the results of a number of initiatives we have implemented to increase our gross profit and reduce our SG&A expenses. These initiatives, which include enhancements to account executive productivity and cost reductions, resulted in an increase in total gross profit of $0.4 million, or 14 basis points as a percent of net sales. The remaining increase in total gross profit margin was primarily the result of the impact of net sales to eCOST.com in the prior year quarter. In Q2 2006, our SG&A expenses declined $1.4 million, but increased by 31 basis points as a percent of net sales compared to Q2 2005. On a non-GAAP basis, excluding the net sales to eCOST.com in Q2 2005, SG&A expenses as a percent of net sales declined by 64 basis points.

Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, "We produced significantly improved results in Q2 2006 versus Q2 2005 despite an $11 million decline in consumer sales and related gross profit. This consumer performance was primarily the result of Apple's accelerated transition to Intel processors consistent with our previously articulated expectation that this transition would have an impact on the first half of 2006 results and gradually dissipate in the second half 2006. Our consolidated net sales for the quarter grew from a year ago on a non-GAAP basis despite the 21 percent decline in consumer net sales. Our Q2 2006 adjusted non-GAAP Core business operating profit margin improved over sevenfold to 93 basis points from 13 basis points in Q2 2005. Our total SG&A expenses declined by $1.4 million in Q2 2006 compared to Q2 2005 and we increased the productivity of our commercial account executives in Q2 2006 by 27 percent over Q2 2005."

In Q2 2006, consolidated net sales were $234.1 million compared to $253.2 million in Q2 2005, a decrease of $19.1 million. This decrease was due to the $19.6 million of net sales in Q2 2005, generally at our cost to our former subsidiary eCOST.com, which we spun-off in April 2005, as discussed above. Excluding the net sales to eCOST.com, our Q2 2006 consolidated net sales increased by $0.5 million to $234.1 million from non-GAAP consolidated net sales of $233.6 million in Q2 2005. Core business (which excludes OnSale.com) net sales for Q2 2006 were $231.1 million compared with $252.4 million in Q2 2005. Commercial net sales grew eight percent in Q2 2006 compared to Q2 2005, primarily due to improved productivity of our commercial account executives, but were offset by a 21 percent decline in consumer net sales and a 12 percent decline in public sector net sales. The decline in consumer net sales was primarily due to Apple's January 2006 announcement of an accelerated time-line for its transition to Intel processors.