Core Insights - PC Connection (CNXN) reported quarterly earnings of $0.97 per share, missing the Zacks Consensus Estimate of $1.01 per share, representing an earnings surprise of -3.96% [1] - The company posted revenues of $709.07 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 4.66% and down from $724.72 million a year ago [2] - The stock has underperformed the market, losing about 9.9% since the beginning of the year compared to the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the coming quarter is $0.94 on revenues of $750.43 million, and for the current fiscal year, it is $3.51 on revenues of $2.95 billion [7] - The estimate revisions trend for PC Connection was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Retail - Computer Hardware industry, to which PC Connection belongs, is currently in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Data and Key Metrics Changes - Gross profit increased 2.4% year over year to $138.6 million, the highest in the company's history, with gross margin expanding 90 basis points to 19.6% [4][5] - Total net sales were $709.1 million, down 2.2% from last year, primarily due to a decrease in net sales in the public sector solutions segment [5][6] - Net income for the third quarter was $24.7 million compared to $27.1 million last year, a decrease of 8.6%, with diluted earnings per share at $0.97, down $0.05 year over year [10][11] Business Line Data and Key Metrics Changes - In business solutions, net sales grew 1.7% to $256.8 million, while gross profit increased 7.8% to $68 million, with gross margin reaching a record 26.5% [6] - Public sector solutions saw net sales decline 24.3% to $132.5 million, but gross margin increased 230 basis points to a record 17.2% [6] - Enterprise solutions net sales grew 7.7% to $319.8 million, with gross profit up 3.4% to $47.8 million [6] Market Data and Key Metrics Changes - Retail segment net sales grew 25%, and gross profit was up 42% year over year, indicating strong demand for tailored vertical market solutions [14] - Financial services net sales increased 23%, with gross profit rising 19% year over year, driven by infrastructure modernization [14] - Manufacturing segment grew 8% in net sales and 28% in gross profit year over year, despite macro challenges [15] Company Strategy and Development Direction - The company is focused on expanding its solutions-led business, deepening customer relationships, and driving profitable growth in cloud, cybersecurity, AI, and services [8][16] - The strategy aligns with customer evolution in technology deployment and management, emphasizing expertise as a differentiator [17] Management's Comments on Operating Environment and Future Outlook - Management noted that while funding cycles and project timing can affect quarterly results, long-term trends are positive, with confidence in record gross profit and expanding margins [8][16] - The public sector business is seen as a wildcard, with expectations of recovery but uncertainty regarding timing [19][31] Other Important Information - Operating cash flow for the first nine months of 2025 was $38 million, with a strong liquidity position of $399.2 million in cash and equivalents [12] - The company returned capital to shareholders through dividends and share repurchases, with $44.3 million remaining under the share repurchase authorization [11] Q&A Session Summary Question: Thoughts on year-end and Q4 growth potential - Management indicated that there is momentum in the enterprise segment and business solutions group, with potential for growth in Q4, but the public sector remains uncertain [18][19] Question: Backlog explanation and shipping delays - Management clarified that the backlog is customer-driven, with delays primarily on the customer side rather than supply chain issues [20][21] Question: Impact of federal government shutdown on public sector - The federal government shutdown is affecting the public sector business, with orders unable to be shipped due to lack of personnel to receive them [31] Question: Future profitability and gross margins outlook - Management expects gross margins to be flat year-over-year, with potential increases in spending depending on revenue growth [32][33] Question: Potential for acquisitions - The company is actively looking at tuck-in acquisitions to enhance solutions capability but has no specific updates at this time [34]

Financial Performance - Net sales for Q3 2025 were $709.1 million, a decrease of $15.6 million, or 2.2%, compared to Q3 2024[85] - Gross profit for Q3 2025 increased by $3.2 million, or 2.4%, to $138.6 million year-over-year[85] - Net income for Q3 2025 decreased to $24.7 million, down from $27.1 million in Q3 2024[104] - For the nine months ended September 30, 2025, total net sales increased to $2,169.8 million, a rise of $76.6 million or 3.7% compared to the same period in 2024[106] - Income from operations for Q3 2025 was $30.3 million, with an operating margin of 4.3%, up from 4.1% in the prior year[100] - Income from operations for the nine months ended September 30, 2025, increased to $75.7 million, compared to $74.4 million for the same period in 2024[114] - Net income decreased to $63.0 million for the nine months ended September 30, 2025, compared to $66.4 million for the same period in 2024[118] Segment Performance - Enterprise Solutions segment accounted for 45% of net sales in Q3 2025, up from 41% in Q3 2024[88] - Business Solutions segment represented 36% of net sales in Q3 2025, slightly up from 35% in Q3 2024[88] - Public Sector Solutions segment decreased to 19% of net sales in Q3 2025 from 24% in Q3 2024[88] - Enterprise Solutions segment net sales increased by $22.8 million, or 7.7%, reaching $319.8 million in Q3 2025[93] - Public Sector Solutions segment net sales decreased by $42.6 million, or 24.3%, totaling $132.5 million in Q3 2025[94] - Net sales for the Enterprise Solutions segment increased by $65.4 million, or 7.4%, totaling $943.8 million for the nine months ended September 30, 2025[107] - Net sales for the Business Solutions segment increased by $21.7 million, or 2.8%, totaling $808.4 million for the same period[107] - Net sales for the Public Sector Solutions segment decreased by $10.5 million, or 2.4%, totaling $417.6 million, with federal government sales increasing by $19.1 million, or 20.1%[107] Expenses and Margins - Gross margin increased to 19.6% in Q3 2025 from 18.7% in Q3 2024, driven by higher software sales recognized at 100% margin[85] - SG&A expenses as a percentage of net sales rose to 15.3% in Q3 2025 from 14.5% in Q3 2024, primarily due to increased personnel costs[86] - SG&A expenses for Q3 2025 totaled $108.4 million, representing 15.3% of net sales, an increase from 14.5% in Q3 2024[96] - SG&A expenses for the Enterprise Solutions segment were $112.5 million, representing 11.9% of net sales, while for the Business Solutions segment, they were $133.0 million, or 16.5% of net sales[109] Tax and Cash Flow - The effective tax rate for Q3 2025 was 27.1%, compared to 26.0% for Q3 2024, primarily due to non-recurring benefits in the prior year[103] - The effective tax rate increased to 27.2% for the nine months ended September 30, 2025, compared to 26.4% for the same period in 2024[117] - Cash and cash equivalents as of September 30, 2025, were $187.8 million, with short-term investments totaling $211.4 million[121] - Net cash provided by operating activities decreased by $110.6 million to $38.0 million for the nine months ended September 30, 2025[125] Operational Challenges and Strategies - The company faces challenges in managing product and service revenues while improving gross margins across all segments[78] - The imposition of tariffs may increase inventory costs, potentially reducing margins or requiring price increases[82] - The company expects to continue investing in IT solutions, requiring the addition of highly skilled service engineers[79] - The company continues to manage costs and improve operating efficiencies to affect internally generated funds positively[139] - The company has entered into supplier finance programs to enhance liquidity without incurring additional interest expenses[137] Inventory and Financing - The cash conversion cycle increased to 46 days as of September 30, 2025, compared to 40 days as of September 30, 2024, primarily due to an increase in days sales outstanding (DSO) from 67 days to 74 days[128][129] - Days of supply in inventory (DIO) rose from 18 days to 22 days, reflecting an increase in inventory levels[129] - Cash provided by investing activities for the nine months ended September 30, 2025, included $155.6 million in purchases of U.S. Government treasury securities and $5.2 million in property and equipment expenditures[130] - Cash used in financing activities for the nine months ended September 30, 2025, included $65.5 million in treasury purchases and $11.5 million in dividend payments, compared to $7.7 million in treasury purchases and $7.9 million in dividend payments in the prior year[131] - The company did not renew or replace its credit facility that expired on March 31, 2025, due to significant cash and short-term investment balances[134][140] - The company plans to enter into a long-term lease for its corporate headquarters facilities, which are currently occupied on a month-to-month basis[138] Accounting Policies - There have been no material changes to the company's critical accounting policies and estimates since the last annual report[142]

Financial Performance - Net sales for Q3 2025 were $709.1 million, a decrease of 2.2% year over year[6] - Net income decreased by 8.6% to $24.7 million, or $0.97 per diluted share, compared to $27.1 million, or $1.02 per diluted share, in Q3 2024[4] - Nine-month net sales increased by 3.7% year over year, with net income decreasing by 5.1% to $63.0 million[12] - Net sales for the three months ended September 30, 2025, were $709,068, a decrease of 2.3% compared to $724,717 in the same period of 2024[29] - Net income for the three months ended September 30, 2025, was $24,740, down from $27,059 in 2024, resulting in diluted earnings per share of $0.97 compared to $1.02[29] - Net income for Q3 2025 decreased by 9% to $24,740,000 compared to $27,059,000 in Q3 2024[33] - Adjusted Net Income for the nine months ended September 30, 2025, was $65,143,000, a slight decrease of 0% from $65,428,000 in the same period of 2024[36] - Diluted Earnings per Share for the nine months ended September 30, 2025, was $2.45, a decrease of 2% from $2.50 in the same period of 2024[36] Segment Performance - Business Solutions segment net sales increased by 1.7% to $256.8 million, with gross profit up 7.8% to $68.0 million and a gross margin of 26.5%[7] - Public Sector Solutions segment net sales decreased by 24.3% to $132.5 million, with gross profit down 12.4% to $22.8 million[8] - Enterprise Solutions segment net sales increased by 7.7% to $319.8 million, with gross profit up 3.4% to $47.8 million[8] Profitability Metrics - Gross profit increased by 2.4% to a record $138.6 million, with a gross margin of 19.6%, up 90 basis points year over year[4] - Gross profit for the three months ended September 30, 2025, was $138,645, representing a gross margin of 19.6%, compared to $135,406 and a gross margin of 18.7% in 2024[29] - EBITDA for Q3 2025 was $33,154,000, down 5% from $35,020,000 in Q3 2024[33] - Adjusted EBITDA for the last twelve months ended September 30, 2025, was $122,730,000, a slight decrease of 1% from $123,591,000 in the previous year[33] Expenses and Cash Flow - Selling, general and administrative expenses increased to $108.4 million, representing 15.3% of net sales, compared to 14.5% in the prior year[10] - Cash and cash equivalents and short-term investments were $399.2 million as of September 30, 2025, down from $442.6 million at the end of 2024[11] - Total current assets as of September 30, 2025, were $1,174,082, an increase from $1,166,850 as of December 31, 2024[30] - Total assets increased to $1,305,520 as of September 30, 2025, compared to $1,299,354 as of December 31, 2024[30] - Cash and cash equivalents at the end of the period were $187,845, up from $167,511 at the end of the same period in 2024[31] - Net cash provided by operating activities for the three months ended September 30, 2025, was $64,149, compared to $52,944 in 2024[31] Other Financial Metrics - The company reported severance expenses of $2,930 for the nine months ended September 30, 2025, compared to $415 in the same period of 2024[29] - Severance expenses for the nine months ended September 30, 2025, totaled $2,930,000, a significant increase of 606% from $415,000 in the same period of 2024[36] - The company experienced a decrease in interest income, netting $3,689 for the three months ended September 30, 2025, down from $4,837 in 2024[29] - Interest income decreased by 24% to $(3,737,000) in Q3 2025, compared to $(4,888,000) in Q3 2024[33] - Interest expense increased significantly by 153% to $162,000 in Q3 2025, compared to $64,000 in Q3 2024[33] - The company recorded a legal settlement income of $1,700,000 in Q3 2024, which was not repeated in Q3 2025[34]

Core Insights - Connection (PC Connection, Inc.) is a leading provider of information technology solutions across various sectors including business, government, healthcare, and education [1] Group 1 - The company hosted the 5th annual IT Superhero Awards at the Connection Technology Summit in Phoenix, Arizona [1] - The IT Superhero Awards recognize exceptional IT professionals who demonstrate innovation, dedication, and technical expertise in their organizations [1]

分组1 - PC Connection (CNXN) reported quarterly earnings of $0.97 per share, exceeding the Zacks Consensus Estimate of $0.91 per share, but down from $1 per share a year ago, resulting in an earnings surprise of +6.59% [1] - The company posted revenues of $759.69 million for the quarter ended June 2025, which missed the Zacks Consensus Estimate by 0.57%, compared to $736.48 million in the same quarter last year [2] - Over the last four quarters, PC Connection has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] 分组2 - The stock has underperformed the market, losing about 7.3% since the beginning of the year, while the S&P 500 gained 8.3% [3] - The current consensus EPS estimate for the coming quarter is $1.00 on revenues of $775.29 million, and for the current fiscal year, it is $3.38 on $3 billion in revenues [7] - The Zacks Industry Rank for Retail - Computer Hardware is currently in the bottom 4% of over 250 Zacks industries, indicating potential challenges for the stock's performance [8]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $759.7 million, an increase of 3.2% year over year [7] - Gross profit reached a record $137.8 million, while gross margins decreased to 18.1%, down 40 basis points from the previous year [7][8] - Net income for Q2 was $24.8 million, a decrease of 5.2% compared to $26.2 million in the prior year [9][14] - Diluted earnings per share for Q2 was $0.97, down $0.02 from the previous year [14] - Adjusted EBITDA for the trailing twelve months was $122.5 million, a decrease of 2% from $125.4 million a year ago [14] Business Segment Performance - Business Solutions segment net sales were $293.2 million, an increase of 5.4% year over year, with gross profit increasing by 3.8% to $68.8 million [10] - Public Sector Solutions segment net sales were $140.5 million, down 11.9% from the previous year, with gross profit decreasing by 11.9% to $21.3 million [10][11] - Enterprise Solutions segment net sales grew 9.1% to $326 million, with gross profit increasing by 3.4% to $47.6 million [11][12] Market Data and Key Metrics Changes - The company noted a decline in sales to state, local government, and educational institutions, which decreased by $20.9 million [10] - Sales to the federal government increased by $1.9 million, indicating mixed performance in the public sector [10] Company Strategy and Industry Competition - The company is focused on driving value through integrated IT solutions and outstanding customer service, with a strong emphasis on data center modernization and edge computing [6][19] - The company plans to invest in education and tools to assist customers with AI and next-generation architectures [19][21] - The backlog is at its highest level in nearly two years, indicating strong future demand [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, citing a strong pipeline and increased customer activity [27][28] - The company expects less impact from subscription licensing program changes in the second half of the year [18] - Management believes they can outperform the U.S. IT market growth by 200 basis points [22] Other Important Information - The company repurchased approximately 255,000 shares at an average price of $60.95 per share, totaling $15.5 million [15] - Cash flow used in operations for the first half of 2025 was $26.1 million, primarily due to increases in inventory and accounts receivable [15][16] Q&A Session Summary Question: Context for moving into the back half of the year and trends in July - Management noted strong customer discussions and planned rollouts for the second half, with a record backlog and increased activity continuing into July [27][28] Question: Staging inventory for customer rollouts - Approximately 67% to 75% of the staged inventory is customer-specific, with proactive buy-ins to take advantage of favorable pricing [31] Question: Cash flow expectations for the back half of the year - Management expects to generate positive cash flow for the year, with operating cash flow roughly aligning with net income for the quarter [34] Question: Gross margin expectations for the back half of the year - Management anticipates gross margins will hold about where they are, with potential fluctuations of ten to fifteen basis points [40] Question: Exciting vertical markets for the back half of the year - There is optimism in retail and manufacturing markets, with strong outlooks due to solution-driven technologies [41] Question: Long-term growth initiatives - The company is investing in personnel, productivity platforms, and AI initiatives to drive long-term growth [43][44]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements and management's discussion of financial condition [Item 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents PC Connection, Inc.'s unaudited condensed consolidated financial statements for Q2 and H1 2025 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased slightly to $1.27 billion by June 30, 2025, primarily due to reduced short-term investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $186,744 | $178,318 | | Short-term investments | $159,350 | $264,295 | | Accounts receivable, net | $637,037 | $611,433 | | Inventories, net | $133,487 | $95,054 | | **Total Assets** | **$1,269,277** | **$1,299,354** | | **Total Liabilities** | **$384,457** | **$388,364** | | **Total Stockholders' Equity** | **$884,820** | **$910,990** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 net sales increased to $759.7 million, but net income slightly decreased, a trend continuing for the six-month period Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $759,693 | $736,479 | $1,460,739 | $1,368,504 | | Gross profit | $137,766 | $136,542 | $265,077 | $254,614 | | Income from operations | $30,897 | $30,919 | $45,419 | $44,383 | | Net income | $24,789 | $26,161 | $38,270 | $39,315 | | Diluted EPS | $0.97 | $0.99 | $1.48 | $1.48 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities resulted in a $26.1 million cash outflow in H1 2025, a reversal from prior year, driven by working capital changes Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by Operating Activities | $(26,129) | $95,676 | | Net cash provided by (used in) Investing Activities | $103,074 | $(103,425) | | Net cash used in Financing Activities | $(68,519) | $(8,992) | | **Increase (decrease) in cash and cash equivalents** | **$8,426** | **$(16,741)** | - The **significant use of cash** in operating activities in H1 2025 was driven by a **$38.4 million** increase in inventories and a **$26.7 million** increase in accounts receivable[26](index=26&type=chunk) - Financing activities in H1 2025 included **$60.5 million** for the purchase of common stock for treasury, a **substantial increase** from **$3.6 million** in H1 2024[26](index=26&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, segment performance, and commitments, highlighting strong growth in Notebooks/Mobility and Desktops Net Sales by Product Category - Six Months Ended June 30 (in thousands) | Product Category | 2025 | 2024 | | :--- | :--- | :--- | | Notebooks/Mobility | $518,684 | $478,728 | | Desktops | $193,416 | $150,479 | | Software | $142,969 | $132,296 | | Servers/Storage | $121,410 | $105,871 | | Accessories | $157,857 | $158,279 | Operating Income (Loss) by Segment - Six Months Ended June 30 (in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Enterprise Solutions | $14,848 | $16,077 | | Business Solutions | $43,981 | $38,018 | | Public Sector Solutions | $(5,474) | $(2,636) | - Outstanding payment obligations under supplier finance programs increased to **$62.4 million** at June 30, 2025, from **$47.8 million** at December 31, 2024[66](index=66&type=chunk) - The company's **$50 million** credit facility expired on March 31, 2025, and the company elected **not to renew or replace it**[64](index=64&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 2025 financial performance, noting sales growth, gross margin decline, and strong liquidity despite operating cash outflow [Overview](index=26&type=section&id=Overview) PC Connection, a global IT solutions provider, faces challenges in revenue growth, gross margin improvement, and managing SG&A expenses - The company operates through three segments: Connection Enterprise Solutions, Connection Business Solutions, and Connection Public Sector Solutions[74](index=74&type=chunk) - **Key business challenges** include increasing product/service revenues while improving gross margin, recruiting and retaining sales and technical staff, and effectively controlling SG&A expenses[77](index=77&type=chunk) - The company is investing in its IT solutions business by adding highly skilled service engineers to drive **higher-margin service revenues**[78](index=78&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q2 2025 net sales increased 3.2% to $759.7 million, but gross margin declined, while H1 sales grew 6.7% Key Financial Metrics as a Percentage of Net Sales | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Gross margin | 18.1% | 18.5% | 18.1% | 18.6% | | SG&A expenses | 14.1% | 14.3% | 14.8% | 15.3% | | Income from operations | 4.1% | 4.2% | 3.1% | 3.2% | - Q2 2025 net sales increased by **$23.2 million** (**3.2%**) YoY, primarily driven by higher sales of desktops, servers/storage, and notebooks/mobility[82](index=82&type=chunk) - The company incurred severance expenses of **$2.9 million** in H1 2025 related to **workforce reductions** aimed at lowering its cost structure, compared to **$0.4 million** in H1 2024[86](index=86&type=chunk)[106](index=106&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains strong despite H1 2025 operating cash outflow of $26.2 million, driven by working capital changes Summary of Cash Flows - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(26.2) | $95.7 | | Net cash provided by (used in) investing activities | $103.1 | $(103.4) | | Net cash used in financing activities | $(68.5) | $(9.0) | - The **cash conversion cycle** increased to **44 days** at June 30, 2025, from **41 days** at June 30, 2024, primarily due to a decrease in days of purchases outstanding (DPO)[119](index=119&type=chunk)[120](index=120&type=chunk) - The company declared a quarterly cash dividend of **$0.15 per share** in Q2 2025 and announced another for Q3 2025[115](index=115&type=chunk) - The company's credit facility expired on March 31, 2025, and was **not renewed or replaced** due to **significant cash and investment balances**[124](index=124&type=chunk)[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risks have occurred since December 31, 2024, as detailed in the 2024 Annual Report - **No material changes related to market risks** have occurred since December 31, 2024[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management concluded that as of June 30, 2025, the company's **disclosure controls and procedures were effective** at the reasonable assurance level[136](index=136&type=chunk)[138](index=138&type=chunk) - There were **no material changes in the company's internal control over financial reporting** during the fiscal quarter ended June 30, 2025[139](index=139&type=chunk) [PART II OTHER INFORMATION](index=48&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other information, and exhibits [Item 1. Legal Proceedings](index=48&type=section&id=ITEM%201.%20Legal%20Proceedings) Ongoing legal proceedings are not expected to materially impact the company's financial position or results - The company states that ongoing legal proceedings from the ordinary course of business are **not expected to have a material adverse effect** on its financial condition or results[62](index=62&type=chunk)[142](index=142&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=ITEM%201A.%20Risk%20Factors) No new or materially changed risk factors are presented, referring to the 2024 Annual Report on Form 10-K - The company directs investors to review the risk factors disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[143](index=143&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 254,695 shares for $15.5 million in Q2 2025, with $49.4 million remaining for future repurchases Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | 04/01/25-04/30/25 | 237,011 | $60.67 | | 05/01/25-05/31/25 | — | $— | | 06/01/25-06/30/25 | 17,684 | $64.79 | | **Total** | **254,695** | **$60.95** | - On April 30, 2025, the Board of Directors approved a **$50.0 million** increase to the stock repurchase program, bringing the total authorized amount to **$170.0 million**[145](index=145&type=chunk) [Item 5. Other Information](index=48&type=section&id=ITEM%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading agreements in Q2 2025 - **No directors or officers adopted or terminated** a Rule 10b5-1 or non-Rule 10b5-1 trading agreement during Q2 2025[145](index=145&type=chunk)[146](index=146&type=chunk) [Item 6. Exhibits](index=50&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL data - Exhibits filed include **CEO and CFO certifications** under Sarbanes-Oxley Sections 302 and 906, as well as **XBRL financial data**[147](index=147&type=chunk)

[Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Connection reported net sales growth, but gross margin contracted and net income declined, with a quarterly dividend declared Q2 2025 Key Financial Metrics | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $759.7 | $736.5 | +3.2% | | Gross Profit | $137.8 | $136.5 | +0.9% | | Gross Margin | 18.1% | 18.5% | -40 bps | | Net Income | $24.8 | $26.2 | -5.2% | | Diluted EPS | $0.97 | $0.99 | -2.0% | | Adjusted Diluted EPS | $0.97 | $1.00 | -3.0% | - The Board of Directors declared a quarterly dividend of **$0.15 per share**, payable on August 29, 2025, to shareholders of record on August 12, 2025[2](index=2&type=chunk) - CEO Timothy McGrath attributed the sales growth to customer investments in data center refresh initiatives and the transition to Windows 11, driving momentum in advanced technologies and end-point devices[3](index=3&type=chunk) - Adjusted EBITDA for the twelve months ended June 30, 2025, decreased by **2%** to **$122.5 million** compared to the prior year period[5](index=5&type=chunk) [Performance by Segment and Product Mix](index=2&type=section&id=Performance%20by%20Segment%20and%20Product%20Mix) Enterprise and Business Solutions segments drove revenue growth, while Public Sector declined, with Servers/Storage and Notebooks leading product sales Q2 2025 Net Sales by Segment (YoY) | Segment | Q2 2025 Net Sales (in millions) | YoY Change | | :--- | :--- | :--- | | Business Solutions | $293.2 | +5.4% | | Enterprise Solutions | $326.0 | +9.1% | | Public Sector Solutions | $140.5 | -11.9% | Q2 2025 Sales by Product Mix (YoY) | Product Category | YoY Change | % of Net Sales | | :--- | :--- | :--- | | Notebook/mobility & Desktops | +6% | 48% | | Servers/storage | +12% | 9% | | Networking | +2% | 7% | | Software | -1% | 9% | | Accessories | 0% | 10% | [Financial Condition and Other Items](index=2&type=section&id=Financial%20Condition%20and%20Other%20Items) SG&A expenses increased but improved as a percentage of sales, while cash and investments decreased, and the company repurchased stock - Selling, general and administrative (SG&A) expenses increased to **$106.9 million**, but SG&A as a percentage of net sales improved, decreasing from **14.3%** to **14.1%** year-over-year[10](index=10&type=chunk) - Cash, cash equivalents, and short-term investments totaled **$346.1 million** at the end of Q2 2025, a decrease from **$442.6 million** at the end of 2024[11](index=11&type=chunk) - The company repurchased **254,695 shares** of stock for an aggregate price of **$15.5 million** during the second quarter[11](index=11&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements reflect a slight net income decrease, reduced assets and equity, and significant cash outflow from operations and share repurchases [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net sales grew to **$1.46 billion**, but higher costs and severance expenses led to a slight net income decrease to **$38.3 million** Six Months Ended June 30, (in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net Sales | $1,460,739 | $1,368,504 | | Gross Profit | $265,077 | $254,614 | | Income from Operations | $45,419 | $44,383 | | Net Income | $38,270 | $39,315 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$1.27 billion** due to lower investments, while stockholders' equity declined to **$884.8 million** from share repurchases Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash & Short-term Investments | $346,094 | $442,613 | | Total Assets | $1,269,277 | $1,299,354 | | Total Liabilities | $384,457 | $388,364 | | Total Stockholders' Equity | $884,820 | $910,990 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$26.1 million**, a shift from prior year, with investing activities providing cash and financing using **$68.5 million** Six Months Ended June 30, (in thousands) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $(26,129) | $95,676 | | Net Cash from Investing Activities | $103,074 | $(103,425) | | Net Cash from Financing Activities | $(68,519) | $(8,992) | - The company used **$60.5 million** for the purchase of common stock for treasury in the first six months of 2025, a substantial increase from **$3.6 million** in the prior year period[29](index=29&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) The company reconciles non-GAAP measures, with Q2 2025 Adjusted EBITDA decreasing to **$36.2 million** and six-month Adjusted Diluted EPS increasing Adjusted EBITDA Reconciliation (Q2 & LTM, in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | LTM Ended June 30, 2025 (in thousands) | LTM Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $24,789 | $26,161 | $86,050 | $88,691 | | EBITDA | $33,763 | $34,192 | $112,284 | $117,374 | | Adjusted EBITDA | $36,224 | $36,855 | $122,461 | $125,416 | Adjusted Diluted EPS Reconciliation (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Diluted EPS | $1.48 | $1.48 | | Adjusted Diluted EPS | $1.56 | $1.49 | [About the Company and Forward-Looking Statements](index=3&type=section&id=About%20the%20Company%20and%20Forward-Looking%20Statements) Connection is a Fortune 1000 IT solutions provider across business, government, and education, with forward-looking statements subject to various risks - Connection is a Fortune 1000 company providing IT solutions through three main subsidiaries: Connection–Business Solutions (SMB sector), Connection–Enterprise Solutions (corporate buyers), and Connection–Public Sector Solutions (government and education)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The earnings release includes forward-looking statements that are subject to risks and uncertainties. Key risks highlighted include macroeconomic factors, substantial competition, loss of major vendors, and potential cyberattacks[19](index=19&type=chunk)[23](index=23&type=chunk)