PCM CEO: Large Services Practice Made Acrodex A Prime Acquisition Target

Acrodex's robust services capability, high-level technical certifications and heavy concentration on services-based revenue piqued PCM's interest, PCM's CEO said Thursday about the purchase of the Canadian company.

"It's also amazing how duplicative Acrodex's capabilities are compared to what we've built in the United States," Frank Khulusi, CEO of PCM, said during the company's earnings call. "It immediately catapults us into the [Canadian] market."

In his first public comments since PCM's $12.5 million purchase of Edmonton, Alberta-based Acrodex was unveiled, Khulusi said his company will bolster Acrodex's penetration of the Canadian small-business market by establishing a call center operation north of the border.

[Related: PCM Continues M&A Tear, Buys Canadian Powerhouse For $12.5M]

PCM was also very impressed with the management team at Acrodex, No. 92 on the CRN 2015 Solution Provider 500 with $111 million of annual sales, as well as the similarities between the go-to-market motions of the two companies, according to PCM President Jay Miley.

El Segundo, Calif.-based PCM, No. 29 on the CRN SP500, made yet another high-profile move Thursday by snagging an executive with two decades of experience at Cisco and Hewlett-Packard to lead PCM's public sector organization. PCM said Alan Lawrence will be tasked with accelerating growth of the company's government, education and health-care businesses.

"Our goal is to grow our top line aggressively," Khulusi said during the earnings call. "We continue to transform PCM into a full-service IT solutions provider with a much bigger platform and footprint."

PCM delivered aggressive top-line growth in the most recent quarter, with sales climbing 20 percent, to a record $404.9 million, thanks to the company's April acquisition of Microsoft superstar En Pointe. That, however, fell well short of Seeking Alpha's projected revenue of $444.1 million.

Non-GAAP earnings from continued operations soared 281 percent, to $1.09 million, or 9 cents per share, widely missed Seeking Alpha's estimate of 16 cents per share. Khulusi said the missed earnings estimates shouldn't be a big deal in the grand scheme of where the company is heading.

Right now, PCM is moving full speed ahead into Canada despite having virtually no presence there before buying 445-employee Acrodex, according to Miley.

"There are customers in the U.S. asking us to set up shop in the Canadian marketplace, and Acrodex we think will be a great platform for us to leverage," Miley said.

Acrodex is expected to boost both PCM's profitability and gross margins, thanks to the high percentage of revenue it derives from services, Miley said.

Khulusi has engineered a dramatic turnaround over the past year not only through acquisitions but also by bringing in a bevy of new leaders. Miley started things off in November 2014 when he jumped ship from Ingram Micro to occupy the newly created position of president.

Seven months later, PCM snatched two executives from rival Zones: Tom Ducatelli to lead the company's newly-created commercial sales organization, and Anne Wilcox as senior vice president of marketing.

PCM also plans to adapt best practices from the solution providers it acquires, announcing Thursday that it would take a non-cash write-off of $21.5 million to move the entire company to the SAP enterprise resource planning (ERP) platform used by En Pointe.

PCM had been implementing Microsoft Dynamics AX on its own systems before buying En Pointe, but opted to move forward with SAP as it would cost less and perform better across the entire operation. The company expects implementing SAP will cost $5 million, Miley said, with the system rolling out to major divisions within PCM starting in the second quarter of next year.

PUBLISHED OCT. 29, 2015