PC Mall Reports Record Third Quarter Net Income Diluted Earnings Per Share of $0.15

Business Wire, Nov 6, 2006

Highlights:

* Record third quarter net income of $1.9 million for Q3 2006 compared with $0.2 million for Q3 2005.

* Earnings per share for Q3 2006 of $0.15, including the dilutive impact of $0.02 per share related to stock-based compensation expense resulting from the adoption of FAS 123R, compared to $0.02 in Q3 2005.

* Adjusted non-GAAP Core business operating profit margin in Q3 2006 of approximately 2.0 percent, more than double the 0.8 percent adjusted non-GAAP operating profit margin in Q3 2005.

* Record third quarter consolidated net sales of $242.2 million for Q3 2006, an increase of four percent, compared to non-GAAP consolidated net sales of $233.5 million for Q3 2005, excluding net sales of $10.6 million to eCOST.com, a former subsidiary, in Q3 2005.

* Commercial net sales increase of eight percent for Q3 2006, which includes SMB net sales increase of 11 percent from Q3 2005.

TORRANCE, Calif. -- PC Mall, Inc. (NASDAQ:MALL) today reported Q3 2006 earnings per share of $0.15, 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"). This compares with Q3 2005 earnings per share of $0.02. During Q3 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.

Consolidated net sales for Q3 2006 was $242.2 million, an increase of $8.7 million from non-GAAP consolidated net sales of $233.5 million in Q3 2005, excluding net sales in Q3 2005 of $10.6 million to our former subsidiary, eCOST.com, generally at our cost. These sales to our former subsidiary 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. Consolidated net sales of $242.2 million for Q3 2006 decreased by $1.8 million compared to consolidated net sales (including sales to eCOST.com) of $244.0 million in Q3 2005.

Net income in Q3 2006 was $1.9 million, an increase of $1.7 million compared with net income of $0.2 million in Q3 2005. This increase reflects the result of a number of initiatives we have implemented to increase our gross profit, increase our vendor consideration and reduce our SG&A expenses. These initiatives, as well as our acquisition of GMRI's products business in September 2006, resulted in an increase in total gross profit of $2.1 million. Total gross profit margin increased to 13.0 percent of net sales in Q3 2006 compared to 12.1 percent of net sales in Q3 2005. Excluding the impact of the sales to eCOST.com in the prior year generally at our cost, non-GAAP total gross profit margin was 12.6 percent in Q3 2005. The increase was primarily due to a 66 basis point increase in vendor consideration in Q3 2006 as a percent of net sales. In Q3 2006, our SG&A expenses declined $0.7 million, a decline of 19 basis points as a percent of net sales compared to Q3 2005. On a non-GAAP basis, excluding the net sales to eCOST.com in Q3 2005, SG&A expenses as a percent of net sales declined by 72 basis points.

Frank Khulusi, Chairman, President and CEO of PC Mall, Inc., said, "We set a new third quarter record for profits in Q3 2006 and essentially hit our goal of a two percent adjusted non-GAAP Core business operating profit margin in the current quarter, one quarter ahead of schedule. We also set a new third quarter record for sales in Q3 2006, excluding last year's sales to eCOST.com. Q3 2006 was also the first quarter where the bulk of our off-shoring and other labor savings were in place for most of the quarter. Excluding the additional costs of stock-based compensation and GMRI, our labor expenses in Q3 2006 were reduced by $1.4 million from Q3 2005. Our Q3 2006 adjusted non-GAAP Core business operating profit margin more than doubled to 1.97 percent from 0.84 percent in Q3 2005. Going forward, we will maintain our focus on profitability. While we expect that there will be quarterly fluctuations in our adjusted non-GAAP quarterly operating profit margin in part as a result of probable fluctuations in sales and the various components of gross margin, we are very pleased with our overall trend line."

In Q3 2006, consolidated net sales were $242.2 million compared to $244.0 million in Q3 2005, a decrease of $1.8 million. This decrease was due to the $10.6 million of net sales in Q3 2005, generally at our cost, to eCOST.com, which we spun-off in April 2005, as discussed above. Excluding the net sales to eCOST.com in Q3 2005, our Q3 2006 consolidated net sales increased by $8.7 million to $242.2 million from non-GAAP consolidated net sales of $233.5 million in Q3 2005. Core business (which excludes OnSale.com) net sales for Q3 2006 were $239.9 million compared with $232.4 million in Q3 2005, excluding the net sales to eCOST.com, an increase of three percent. Commercial net sales grew eight percent in Q3 2006 compared to Q3 2005, primarily the result of an 11 percent increase in SMB sales. Public sector sales increased four percent, primarily due to the $7.6 million of net sales resulting from the products business acquired from GMRI in September 2006. These increases in Core business net sales were offset by a ten percent decline in consumer net sales. This ten percent decrease is an improvement from the 21 percent decreases experienced in the first and second quarters of 2006 compared to the same periods in 2005. This improvement resulted in part from a reduced negative impact on our consumer net sales of Apple's transition to Intel processors, which was completed in August 2006.