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)

Core Viewpoint - PC Connection (CNXN) reported quarterly earnings of $0.60 per share, exceeding the Zacks Consensus Estimate of $0.42 per share, and showing an increase from $0.50 per share a year ago, representing an earnings surprise of 42.86% [1] Financial Performance - The company posted revenues of $701.05 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 8.46%, compared to $632.03 million in the same quarter last year [2] - Over the last four quarters, PC Connection has exceeded consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - PC Connection shares have declined approximately 9.8% since the beginning of the year, while the S&P 500 has decreased by 5.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.97 on revenues of $759.44 million, and for the current fiscal year, it is $3.30 on revenues of $2.94 billion [7] - The estimate revisions trend for PC Connection is mixed, and future changes in estimates will be closely monitored following the recent earnings report [6][7] Industry Context - The Retail - Computer Hardware industry, to which PC Connection belongs, is currently in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 were $700 million, reflecting a 10.9% increase compared to Q1 2024 [6] - Gross profit rose by nearly 8% to $127.3 million, with gross margins slightly down to 18.2%, a decrease of 50 basis points year over year [6] - Operating income increased by 7.9% to $14.5 million, with operating income as a percentage of sales remaining flat at 2.1% [7] - Net income for Q1 was $13.5 million, a 2.5% increase from $13.2 million in the prior year [7] - Adjusted diluted earnings per share was $0.60, marking a 20% increase [8] Business Line Data and Key Metrics Changes - Notebooks and desktops net sales increased by 21% year over year, driven by device refresh initiatives [8] - Advanced Technologies and Integrated Solutions revenue grew by 7%, supported by software and server storage solutions [8] - Business Solutions segment net sales were $258.4 million, a 1% increase, with gross profit up 8.4% to $65.4 million [9] - Public Sector Solutions net sales reached $144.6 million, a 4.7% increase, while gross profit increased by 30.9% [10] - Enterprise Solutions segment net sales grew by 5.4% to $298 million, with gross profit slightly down by 1% [11] Market Data and Key Metrics Changes - Financial Services net sales increased by 32% and gross profit by 31% year over year [17] - Healthcare segment net sales grew by 13% and gross profit by 10% year over year [17] - The backlog at the end of Q1 was at its highest level in nearly two years, indicating strong future demand [20] Company Strategy and Development Direction - The company is focused on integrated IT solutions and customer service, aiming to drive internal efficiencies and reduce costs [5][6] - There is a strong emphasis on AI technology and its implementation in customer projects, particularly in the context of productivity and cost savings [19] - The company plans to continue investing in key projects and programs to enhance sales and service delivery [20] Management's Comments on Operating Environment and Future Outlook - Management noted a mixed customer response to economic conditions, with some accelerating purchases while others delayed due to uncertainty [25] - The company remains optimistic about outperforming the U.S. IT market growth by 200 basis points, driven by trends in device refresh and data center modernization [21] - There is confidence in the ability to navigate economic challenges and capitalize on emerging trends in technology [20] Other Important Information - The company recorded a severance expense of $2.9 million as part of its cost reduction initiatives, expecting annualized savings of approximately $5 million [11] - Cash flow used in operations for Q1 was $52.4 million, primarily due to an increase in inventory [14] - The company repurchased 697,000 shares at an average price of $64.22, totaling $44.8 million [13] Q&A Session Summary Question: Customer purchasing patterns in Q1 - Management indicated a mixed response from customers, with some focused on cost containment while others pursued technology investments [25][26] Question: Expected growth for the year - Management projected mid to high single-digit growth for the year, with a solid enterprise funnel but some market unease [33][35] Question: Q2 early read and macroeconomic concerns - Management acknowledged that tariffs are impacting customer decisions, but noted an improvement in purchasing as the quarter progressed [42][40] Question: Acquisition plans in the current market - Management confirmed they are still looking for tuck-in acquisitions to expand capabilities, despite the current economic environment [44]

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 were $700 million, representing a 10.9% increase compared to Q1 2024 [6] - Gross profit increased by nearly 8% to $127.3 million, while gross margins slightly decreased to 18.2%, down 50 basis points year over year [6][8] - Operating income for Q1 was $14.5 million, a 7.9% increase year over year, with operating income as a percentage of sales remaining flat at 2.1% [7][8] - Net income was $13.5 million, up 2.5% from $13.2 million in the prior year, with diluted earnings per share increasing by 2% to $0.51 [8][14] - Adjusted diluted earnings per share rose by 20% to $0.60 [8][14] Business Line Data and Key Metrics Changes - Net sales for notebooks and desktops increased by 21% year over year, driven by device refresh initiatives [9] - Advanced Technologies and Integrated Solutions revenue grew by 7%, supported by software and server storage solutions [9] - Business Solutions segment net sales were $258.4 million, a 1% increase, with gross profit rising by 8.4% to $65.4 million [10] - Public Sector Solutions net sales increased by 4.7% to $144.6 million, with gross profit up 30.9% [11] - Enterprise Solutions segment net sales grew by 5.4% to $298 million, although gross profit decreased by 1% [12] Market Data and Key Metrics Changes - Financial Services net sales increased by 32% and gross profit by 31% year over year [20] - Healthcare segment net sales grew by 13% and gross profit by 10% year over year [20] - The backlog at the end of Q1 was at its highest level in nearly two years, indicating strong future demand [23] Company Strategy and Development Direction - The company is focused on integrated IT solutions and customer service, aiming to drive internal efficiencies and reduce costs [6][19] - There is a strong emphasis on AI technology and its implementation, with investments in frameworks and advisory capabilities to support customer needs [21][22] - The company anticipates outperforming the U.S. IT market growth by 200 basis points, aligning its strategy with shifting customer technology consumption dynamics [24] Management Comments on Operating Environment and Future Outlook - Management noted a mixed customer response to economic conditions, with some accelerating purchases while others delayed due to cost concerns [29] - The company remains optimistic about future growth, driven by device refresh momentum and data center modernization initiatives [22][23] - There is caution regarding the economic backdrop, but management believes they can navigate through challenges and capitalize on opportunities [46][48] Other Important Information - The company declared a quarterly dividend of $0.15 per share, payable on May 30, 2025 [16] - A significant increase in share buyback activity was noted, with 697,000 shares repurchased at an average price of $64.22 [15] Q&A Session Summary Question: Customer purchasing patterns in Q1 - Management indicated a mixed response from customers, with some accelerating purchases due to cost containment concerns while others delayed spending [29][30] Question: Expected growth for the year - Management projected mid to high single-digit growth for the year, with a solid enterprise funnel but caution due to economic conditions [36][39] Question: Q1 performance progression - The quarter saw stronger performance in March compared to January and February, attributed to improved customer confidence and pre-tariff buying [43][44] Question: Q2 outlook amidst tariffs - Management acknowledged that tariffs are impacting customer decisions, but they are working to help customers navigate these challenges [46][48] Question: Acquisition plans - The company remains open to acquisitions, particularly tuck-in deals that expand capabilities or enter new markets, despite current market conditions [49][50]

PART I FINANCIAL INFORMATION [Unaudited Condensed Consolidated 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 Q1 2025, including balance sheets, income statements, and cash flows, with accompanying notes on accounting policies and financial figures [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to **$1.25 billion** from **$1.30 billion** at year-end 2024, primarily due to reduced short-term investments, while liabilities and equity also declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$1,247,503** | **$1,299,354** | | Total current assets | $1,116,519 | $1,166,850 | | Cash and cash equivalents | $182,457 | $178,318 | | Inventories, net | $151,792 | $95,054 | | **Total Liabilities** | **$370,528** | **$388,364** | | Total current liabilities | $353,885 | $371,205 | | **Total Stockholders' Equity** | **$876,975** | **$910,990** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net sales for Q1 2025 increased to **$701.0 million** from **$632.0 million** year-over-year, with gross profit rising to **$127.3 million**, while net income slightly increased to **$13.5 million** despite **$2.9 million** in severance expenses Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $701,046 | $632,025 | | Gross profit | $127,311 | $118,072 | | Income from operations | $14,522 | $13,464 | | Severance expenses | $2,930 | $0 | | Net income | $13,481 | $13,154 | | Diluted EPS | $0.51 | $0.50 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw a **$52.4 million** net cash outflow from operating activities, a reversal from the prior year's inflow, driven by increased inventories and decreased accounts payable, while investing activities provided **$104.7 million** and financing used **$48.2 million** Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(52,387) | $57,285 | | Net cash provided by (used in) investing activities | $104,694 | $(51,607) | | Net cash used in financing activities | $(48,168) | $(3,053) | | **Increase in cash and cash equivalents** | **$4,139** | **$2,625** | - The significant cash used in operating activities was driven by a **$56.7 million** increase in inventories and a **$27.0 million** decrease in accounts payable[24](index=24&type=chunk) - Financing activities included **$43.7 million** for the purchase of common stock for treasury, a substantial increase from **$0.2 million** in the prior-year period[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail revenue disaggregation, fair value measurements, segment performance, and information on leases and borrowings, notably disclosing **$2.9 million** in severance expenses and an increased share repurchase authorization - Severance expenses of **$2.9 million** were recorded in Q1 2025 due to an involuntary workforce reduction aimed at lowering the company's cost structure[36](index=36&type=chunk) - On April 30, 2025, the Board of Directors authorized a **$50 million** increase to the share repurchase program, adding to the **$14.9 million** remaining as of March 31, 2025[35](index=35&type=chunk) Revenue by Product Category (in thousands) | Product Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Notebooks/Mobility | $257,466 | $221,269 | | Desktops | $90,124 | $64,902 | | Software | $74,363 | $63,322 | | Accessories | $79,196 | $79,501 | | Displays and Sound | $52,862 | $63,619 | Segment Operating Income (in thousands) | Segment | Q1 2025 Operating Income | Q1 2024 Operating Income | | :--- | :--- | :--- | | Enterprise Solutions | $4,502 | $5,847 | | Business Solutions | $18,417 | $15,789 | | Public Sector Solutions | $(3,342) | $(5,350) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, noting a **10.9%** net sales increase to **$701.0 million** driven by Public Sector growth, a gross margin decline to **18.2%**, and stable liquidity despite **$2.9 million** in severance costs Q1 Financial Performance Summary | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $701.0M | $632.0M | | Gross Margin | 18.2% | 18.7% | | SG&A as % of Sales | 15.7% | 16.6% | | Income from Operations | 2.1% | 2.1% | - Net sales increased by **$69.0 million (10.9%)** YoY, primarily driven by higher sales of notebooks/mobility (**$36.2 million** increase) and desktops (**$25.2 million** increase)[75](index=75&type=chunk) - The Public Sector Solutions segment was the primary growth driver, with sales increasing **54.7%** YoY, while the Enterprise and Business Solutions segments grew more modestly at **5.4%** and **1.0%**, respectively[81](index=81&type=chunk) - The company's cash conversion cycle remained consistent at **53 days** for both Q1 2025 and Q1 2024[98](index=98&type=chunk)[100](index=100&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q1 2025 net sales grew **10.9%** to **$701.0 million**, primarily from a **54.7%** increase in Public Sector sales, though gross margin declined to **18.2%** due to product mix, and **$2.9 million** in severance expenses were incurred Net Sales by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Enterprise Solutions | $298.0 | $282.6 | 5.4% | | Business Solutions | $258.4 | $255.9 | 1.0% | | Public Sector Solutions | $144.6 | $93.5 | 54.7% | | **Total** | **$701.0** | **$632.0** | **10.9%** | Gross Profit by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Enterprise Solutions | $42.3 | $42.7 | (1.0)% | | Business Solutions | $65.4 | $60.4 | 8.4% | | Public Sector Solutions | $19.6 | $15.0 | 30.9% | | **Total** | **$127.3** | **$118.1** | **7.8%** | - The increase in Public Sector sales was driven by a **228.0%** increase in sales to the federal government, attributed to a few large orders[81](index=81&type=chunk)[82](index=82&type=chunk) - The company incurred **$2.9 million** in severance expenses in Q1 2025 related to a workforce reduction to lower its cost structure; no such expenses were incurred in Q1 2024[79](index=79&type=chunk)[87](index=87&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources include cash and short-term investments, with Q1 2025 operating activities using **$52.4 million** due to inventory increases, while investing provided **$104.7 million** and financing used **$48.2 million**, notably with the **$50 million** credit facility expiring unrenewed Key Liquidity Metrics (as of March 31, 2025) | Metric | Amount (in millions) | | :--- | :--- | | Cash and Cash Equivalents | $182.5 | | Short-term Investments | $157.9 | - Cash used in operating activities was **$52.4 million**, primarily due to a **$56.7 million** increase in inventory and a **$27.0 million** decrease in accounts payable[97](index=97&type=chunk) - The company's credit facility expired on March 31, 2025, and was not renewed or replaced, given the company's significant cash and investment balances[58](index=58&type=chunk)[104](index=104&type=chunk)[109](index=109&type=chunk) - A quarterly cash dividend of **$0.15 per share** was declared for Q1 2025, an increase from the prior year[96](index=96&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risks have occurred since December 31, 2024, with full disclosures referenced in the company's Annual Report on Form 10-K - No material changes in market risks have occurred since December 31, 2024[114](index=114&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[116](index=116&type=chunk) - There were no material changes in the company's internal control over financial reporting during the first quarter of 2025[117](index=117&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, which management does not expect to materially adversely affect its financial position, results of operations, or cash flows - 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[56](index=56&type=chunk)[120](index=120&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section incorporates by reference the risk factors detailed in the company's 2024 Annual Report on Form 10-K, which could materially affect business and financial results - The company incorporates by reference the risk factors disclosed in its 2024 Annual Report on Form 10-K, indicating no material updates to those risks in this report[121](index=121&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, the company repurchased **697,069** shares for approximately **$44.8 million**, with **$14.9 million** remaining under the program as of March 31, 2025, and an additional **$50 million** authorized in April 2025 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2025 | 48,667 | $69.98 | | Feb 2025 | 287,920 | $64.83 | | Mar 2025 | 360,482 | $62.96 | | **Total** | **697,069** | **$64.22** | - As of March 31, 2025, **$14.9 million** remained under the share repurchase program. The Board later authorized an additional **$50.0 million** for the program on April 30, 2025[122](index=122&type=chunk)[123](index=123&type=chunk) [Other Information](index=42&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading agreements during the first quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the first quarter of 2025[123](index=123&type=chunk)[124](index=124&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents, compensation plans, and CEO/CFO certifications, along with Interactive Data Files (XBRL) - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[125](index=125&type=chunk) - Financial statements and notes are provided in XBRL format as part of the filing[126](index=126&type=chunk)

[First Quarter 2025 Results Overview](index=1&type=section&id=First%20Quarter%202025%20Results%20Overview) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Connection reported strong Q1 2025 results with a 10.9% year-over-year increase in net sales to $701.0 million, driven by robust demand for technology solutions Key Financial Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $701.0M | $632.0M | +10.9% | | Gross Profit | $127.3M | $118.1M | +7.8% | | Gross Margin | 18.2% | 18.7% | -50 bps | | Net Income | $13.5M | $13.2M | +2.5% | | Diluted EPS | $0.51 | $0.50 | +2.0% | | Adjusted Diluted EPS | $0.60 | $0.50 | +20.0% | - Management attributed the strong performance to high demand for technology solutions that enhance operational efficiencies and productivity, leading to double-digit growth in digital workplace solutions and datacenter modernization[3](index=3&type=chunk) - Adjusted EBITDA for the twelve months ending March 31, 2025, increased by **2% to $123.1 million** compared to the prior twelve-month period[5](index=5&type=chunk) [Shareholder Returns and Corporate Actions](index=1&type=section&id=Shareholder%20Returns%20and%20Corporate%20Actions) The Board of Directors announced a quarterly dividend of $0.15 per share and increased the share repurchase program by $50.0 million, with the company repurchasing 697,069 shares for $44.8 million during the quarter - A quarterly dividend of **$0.15 per share** was declared, payable on May 30, 2025, to shareholders of record on May 13, 2025[2](index=2&type=chunk) - The Board approved a **$50.0 million increase** to the share repurchase program, raising the total authorized amount to **$170 million**, with **$50.5 million available** after the increase[2](index=2&type=chunk) - In Q1 2025, the company repurchased **697,069 shares** of stock at an aggregate cost of **$44.8 million**[11](index=11&type=chunk) [Performance Analysis](index=2&type=section&id=Performance%20Analysis) [Performance by Segment](index=2&type=section&id=Performance%20by%20Segment) The Public Sector Solutions segment delivered exceptional growth, with net sales surging 54.7% driven by a 228.0% increase in federal government sales, while Business Solutions saw modest growth and Enterprise Solutions experienced sales growth with gross margin contraction Segment Performance Overview | Segment | Q1 2025 Net Sales (in millions) | YoY Change (%) | Q1 2025 Gross Margin (%) | YoY Change (bps) | | :--- | :--- | :--- | :--- | :--- | | Business Solutions | $258.4M | +1.0% | 25.3% | +170 | | Public Sector Solutions | $144.6M | +54.7% | 13.6% | -240 | | Enterprise Solutions | $298.0M | +5.4% | 14.2% | -90 | - Within the Public Sector, sales to the federal government increased by **228.0% to $40.1 million**, while sales to state/local governments and educational institutions grew by **14.5% to $11.0 million**[12](index=12&type=chunk) [Sales by Product Mix](index=2&type=section&id=Sales%20by%20Product%20Mix) Growth in Q1 2025 was led by strong performance in key hardware categories, with Notebook/mobility and desktop sales growing 21% and representing 50% of total net sales, alongside robust double-digit growth in software and servers/storage Sales by Product Category | Product Category | YoY Sales Change (%) | % of Net Sales (Q1 2025) | % of Net Sales (Q1 2024) | | :--- | :--- | :--- | :--- | | Notebook/mobility & Desktops | +21% | 50% | 45% | | Software | +17% | 11% | 10% | | Servers/storage | +18% | 7% | 7% | | Networking | -3% | 7% | 7% | | Accessories | 0% | 11% | 13% | [Financial Condition and Operations](index=2&type=section&id=Financial%20Condition%20and%20Operations) [Operating Expenses and Other Income](index=2&type=section&id=Operating%20Expenses%20and%20Other%20Income) Selling, general and administrative (SG&A) expenses increased to $109.9 million due to higher variable compensation but improved as a percentage of net sales to 15.7%, while the quarter also included $2.9 million in severance expenses and a decline in interest income - SG&A expenses rose to **$109.9 million** from **$104.6 million** in the prior year quarter, primarily due to increased variable compensation[9](index=9&type=chunk) - Despite the absolute increase, SG&A as a percentage of net sales decreased to **15.7%** from **16.6%** in Q1 2024[9](index=9&type=chunk) - The company incurred **$2.9 million** in severance expenses during Q1 2025 related to cost reduction efforts[10](index=10&type=chunk) - Interest income for Q1 2025 was **$3.9 million**, down from **$4.6 million** in Q1 2024[10](index=10&type=chunk) [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) The company's cash and short-term investments decreased to $340.3 million at the end of Q1 2025, partly due to significant share repurchase activity, and operating activities used $52.4 million in cash, primarily driven by a substantial increase in inventory levels - Cash, cash equivalents, and short-term investments totaled **$340.3 million** as of March 31, 2025, a decrease from **$442.6 million** at the end of 2024[11](index=11&type=chunk) Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $182,457 | $178,318 | | Short-term investments | $157,868 | $264,295 | | Accounts receivable, net | $603,984 | $611,433 | | Inventories, net | $151,792 | $95,054 | | Total Assets | $1,247,503 | $1,299,354 | | Total Liabilities | $370,528 | $388,364 | | Total Stockholders' Equity | $876,975 | $910,990 | Condensed Consolidated Cash Flow Highlights | Cash Flow | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(52,387) | $57,285 | | Net cash provided by (used in) investing activities | $104,694 | $(51,607) | | Net cash used in financing activities | $(48,168) | $(3,053) | [Financial Statements](index=5&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the first quarter of 2025, the company generated $701.0 million in net sales and $127.3 million in gross profit, resulting in $14.5 million in income from operations and $13.5 million in net income Condensed Consolidated Statements of Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net sales | $701,046 | $632,025 | | Gross profit | $127,311 | $118,072 | | Income from operations | $14,522 | $13,464 | | Net income | $13,481 | $13,154 | | Diluted EPS ($) | $0.51 | $0.50 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $1.25 billion, supported by $877.0 million in stockholders' equity, with key changes including an increase in inventories and a decrease in short-term investments Condensed Consolidated Balance Sheets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total current assets | $1,116,519 | $1,166,850 | | Total Assets | $1,247,503 | $1,299,354 | | Total current liabilities | $353,885 | $371,205 | | Total Liabilities | $370,528 | $388,364 | | Total Stockholders' Equity | $876,975 | $910,990 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, operating activities used $52.4 million in cash, primarily due to a $56.7 million increase in inventories, while investing activities provided $104.7 million and financing activities used $48.2 million Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(52,387) | $57,285 | | Net cash provided by (used in) investing activities | $104,694 | $(51,607) | | Net cash used in financing activities | $(48,168) | $(3,053) | | Increase in cash and cash equivalents | $4,139 | $2,625 | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) [EBITDA and Adjusted EBITDA Reconciliation](index=9&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) The company provides a reconciliation from GAAP Net Income to non-GAAP EBITDA and Adjusted EBITDA, with Q1 2025 Adjusted EBITDA reaching $22.8 million, a 22% increase from the prior year, and LTM Adjusted EBITDA growing 2% to $123.1 million EBITDA and Adjusted EBITDA Reconciliation | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | % Change (%) | | :--- | :--- | :--- | :--- | | Net income | $13,481 | $13,154 | 2% | | EBITDA | $17,697 | $16,730 | 6% | | Adjusted EBITDA | $22,835 | $18,679 | 22% | [Adjusted Net Income and Adjusted Diluted EPS Reconciliation](index=9&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20Diluted%20EPS%20Reconciliation) By adjusting for $2.9 million in pre-tax severance expenses, the company's non-GAAP Adjusted Net Income for Q1 2025 was $15.6 million, a 19% increase year-over-year, resulting in an Adjusted Diluted EPS of $0.60 Adjusted Net Income and Adjusted Diluted EPS Reconciliation | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | % Change (%) | | :--- | :--- | :--- | :--- | | Net income | $13,481 | $13,154 | 2% | | Adjusted Net Income | $15,616 | $13,154 | 19% | | Diluted Earnings per Share ($) | $0.51 | $0.50 | 2% | | Adjusted Diluted Earnings per Share ($) | $0.60 | $0.50 | 20% |

PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) PC Connection, Inc. is a Fortune 1000 IT solutions provider operating through three segments, offering a wide range of products and services, with a focus on AI and cloud solutions - The company operates through three segments: **Connection Enterprise Solutions**, **Connection Business Solutions**, and **Connection Public Sector Solutions**[20](index=20&type=chunk) Net Sales Distribution by Operating Segment (2022-2024) | Operating Segment | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Enterprise Solutions | 42% | 42% | 42% | | Business Solutions | 38% | 38% | 40% | | Public Sector Solutions | 20% | 20% | 18% | | **Total** | **100%** | **100%** | **100%** | Net Sales by Major Product Category (2022-2024) | Product Category | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Notebooks/Mobility | 35% | 33% | 37% | | Desktops | 11% | 9% | 10% | | Software | 10% | 12% | 9% | | Servers/Storage | 7% | 7% | 7% | | Net/Com Products | 8% | 10% | 7% | | Displays and Sound | 10% | 9% | 10% | | Accessories | 12% | 11% | 13% | | Other Hardware/Services | 7% | 9% | 7% | | **Total** | **100%** | **100%** | **100%** | - In 2024, major product purchases were from distributors **Ingram Micro, Inc. (25%)** and **TD Synnex Corporation (23%)**, and manufacturer **Dell Inc. (11%)**[55](index=55&type=chunk) - Products manufactured by **Microsoft (15%)**, **HP Inc. (12%)**, and **Dell Inc. (12%)** represented approximately of total product purchases in 2024, respectively, with a disruption from these manufacturers posing a **material adverse effect**[56](index=56&type=chunk) - The company's growth strategy includes a focus on delivering **artificial intelligence (AI) and automation solutions**, driven through its **CNXN Helix effort** launched in 2023[31](index=31&type=chunk) - As of December 31, 2024, the company employed **2,580 full-time equivalent persons**, with **711 being sales representatives**[22](index=22&type=chunk)[88](index=88&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from intense competition, heavy reliance on key vendors, technological disruption from cloud computing and AI, cybersecurity threats, and control by a principal stockholder - The business is exposed to substantial competition from other national solutions providers, direct-selling manufacturers, and e-tailers, which could **reduce market share and profit margins**[104](index=104&type=chunk)[106](index=106&type=chunk) - A majority of products are acquired from a limited number of vendors, including **Ingram Micro, TD Synnex, and Dell**, and a disruption in supply from these key partners would likely have a **material adverse effect** on operations and cash flows[118](index=118&type=chunk)[119](index=119&type=chunk) - The growing demand for **cloud-based services (SaaS, IaaS, PaaS)** and **virtualization** may disrupt traditional hardware and software distribution models, potentially **reducing demand** for products sold by the company[122](index=122&type=chunk) - The business is heavily dependent on IT systems and faces risks from **cyberattacks**, which could lead to operational disruption, data loss, liability, and reputational harm[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - The company is controlled by its principal stockholder, **Patricia Gallup**, who beneficially owned approximately **52% of the outstanding common stock** as of December 31, 2024, allowing her to control board elections and all matters requiring stockholder approval[161](index=161&type=chunk) [Item 1B. Unresolved Staff Comments](index=52&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[162](index=162&type=chunk) [Item 1C. Cybersecurity](index=52&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risks through an Information Security Steering Committee and external experts, with no material threats identified as of the report date - Cybersecurity risk is managed by an **Information Security Steering Committee**, which includes the CIO and CFO, and is overseen by the **Board of Directors**[165](index=165&type=chunk)[168](index=168&type=chunk) - The company utilizes **external consultants, security firms, and risk management experts** to enhance its cybersecurity oversight[163](index=163&type=chunk) - As of the filing date, the company is not aware of any cybersecurity threats that have had or are reasonably likely to have a **material effect** on the business[164](index=164&type=chunk) [Item 2. Properties](index=54&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters from an affiliate and operates a large distribution center in Ohio, with current properties deemed sufficient for future needs - The corporate headquarters at **730 Milford Road, Merrimack, NH**, is leased from **G&H Post**, an affiliated company related through common ownership[169](index=169&type=chunk) - The company leases a facility in **Wilmington, Ohio**, for its distribution, order fulfillment, and technology integration operations, serving all three operating segments[61](index=61&type=chunk)[171](index=171&type=chunk) [Item 3. Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, none of which are expected to have a material adverse effect on its financial condition - The company is subject to various legal proceedings in the ordinary course of business but does not expect them to have a **material adverse effect** on its financial condition or results[172](index=172&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[173](index=173&type=chunk) PART II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=56&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, paid quarterly dividends in 2024, increased its share repurchase authorization to $120.0 million, and underperformed market indices over five years - The company's common stock trades on the **Nasdaq Global Select Market** under the symbol **"CNXN"**[176](index=176&type=chunk) 2024 Quarterly Dividends Paid | Declaration Date | Payment Date | Dividend per Share | Total Dividend (millions) | | :--- | :--- | :--- | :--- | | Feb 12, 2024 | Mar 15, 2024 | $0.10 | $2.6 | | Apr 30, 2024 | May 29, 2024 | $0.10 | $2.6 | | Jul 30, 2024 | Aug 13, 2024 | $0.10 | $2.6 | | Oct 29, 2024 | Nov 12, 2024 | $0.10 | $2.6 | - On February 5, 2025, the Board declared a quarterly dividend of **$0.15 per share**, payable in March 2025[177](index=177&type=chunk) Share Repurchases in Q4 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | Value of Shares Remaining for Repurchase (thousands) | | :--- | :--- | :--- | :--- | | Oct 2024 | 3,419 | $68.31 | $64,334 | | Nov 2024 | 31,097 | $70.19 | $62,152 | | Dec 2024 | 34,850 | $70.78 | $59,685 | | **Total Q4** | **69,366** | **$70.39** | **$59,685** | - The Board increased the share repurchase program authorization by **$40.0 million** in May 2024, bringing the aggregate authorized amount to **$120.0 million**[178](index=178&type=chunk)[180](index=180&type=chunk) [Item 6. [Reserved]](index=58&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved - [Reserved][183](index=183&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2024, net sales decreased by 1.7% to $2.80 billion, while gross margin improved to 18.6%, leading to a net income of $87.1 million, supported by strong liquidity and an improved cash conversion cycle [Results of Operations](index=63&type=section&id=Results%20of%20Operations) In 2024, net sales decreased by 1.7% to $2.80 billion, while gross profit increased by 1.6% to $519.8 million, and operating income declined to $97.1 million due to higher SG&A expenses Consolidated Financial Performance (2022-2024) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net Sales (in millions) | $2,802.1 | $2,850.6 | $3,125.0 | | Gross Margin | 18.6% | 18.0% | 16.8% | | SG&A as % of Net Sales | 15.1% | 14.2% | 13.0% | | Income from Operations as % of Net Sales | 3.5% | 3.6% | 3.9% | Year-Over-Year Change in Net Sales and Gross Profit by Segment (2024 vs 2023) | Segment | Net Sales Change ($M) | Net Sales Change (%) | Gross Profit Change ($M) | Gross Profit Change (%) | | :--- | :--- | :--- | :--- | :--- | | Enterprise Solutions | $(19.9) | (1.7)% | $1.1 | 0.6% | | Business Solutions | $(26.5) | (2.5)% | $5.3 | 2.2% | | Public Sector Solutions | $(2.1) | (0.4)% | $1.7 | 1.9% | | **Total** | **$(48.5)** | **(1.7)%** | **$8.1** | **1.6%** | - The decrease in 2024 net sales was primarily driven by lower sales of advanced technology categories, including **net/com products (down $85.7 million)** and **software (down $44.1 million)**, partially offset by increases in **notebooks/mobility (up $42.3 million)** and **desktops (up $31.3 million)**[197](index=197&type=chunk) - SG&A expenses increased by **$16.4 million (4.0%)** in 2024, primarily due to investments in resources to strengthen sales, technical sales, and services capabilities[197](index=197&type=chunk)[207](index=207&type=chunk) [Liquidity and Capital Resources](index=69&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $178.3 million in cash and $264.3 million in short-term investments, an undrawn $50 million credit facility, and an improved cash conversion cycle of 40 days Key Liquidity and Cash Flow Metrics (in millions) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $178.3 | $145.0 | | Short-term investments | $264.3 | $152.2 | | Credit facility availability | $50.0 | $50.0 | | Net cash from operating activities (FY) | $173.9 | $197.9 | Cash Conversion Cycle (in days) | Component | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Days of Sales Outstanding (DSO) | 72 | 73 | | Days of Supply in Inventory (DIO) | 15 | 20 | | Days of Purchases Outstanding (DPO) | (47) | (42) | | **Cash Conversion Cycle** | **40** | **51** | - The company had **no borrowings outstanding** under its **$50.0 million credit facility** as of December 31, 2024, and was in compliance with all covenants[216](index=216&type=chunk)[227](index=227&type=chunk) [Critical Accounting Policies and Estimates](index=75&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment in revenue recognition (principal vs. agent), allowances for credit losses, inventory obsolescence, and annual goodwill impairment testing, with no impairment found in 2024 - A critical judgment in revenue recognition is determining if the company is the **principal (gross revenue)** or **agent (net revenue)**, with the company generally being the principal for hardware and on-premise software, and an agent for cloud products, third-party services, and software maintenance[236](index=236&type=chunk)[238](index=238&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - For the year ended December 31, 2024, the company recognized **$147.5 million in net sales** on an agency (net) basis[244](index=244&type=chunk) - The company performs ongoing credit evaluations for its accounts receivable and maintains an allowance for credit losses, which was **$3.3 million** at year-end 2024[255](index=255&type=chunk)[417](index=417&type=chunk) - Goodwill, totaling **$73.6 million**, is tested for impairment annually, and a qualitative assessment in 2024 indicated that goodwill was **not impaired**[263](index=263&type=chunk)[265](index=265&type=chunk) [Item 7A. Quantitative and Qualitative Disclosure About Market Risk](index=83&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company faces market risk from interest rate fluctuations and inflation, but management believes a 10% interest rate change or current inflation would not materially affect its financial statements - The company is exposed to **interest rate risk** on its cash equivalents, short-term investments, and variable-rate credit facility, but management believes a hypothetical **10% change in rates** would not be material[268](index=268&type=chunk) - Inflation is noted as a risk that could increase costs, but it is not considered to have had a **material effect** on the financial statements for the reported period[268](index=268&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=83&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section indicates that the company's consolidated financial statements and supplementary data are included in the report, beginning on page F-1 - The consolidated financial statements and supplementary data required by this item are included in the report starting at page F-1[269](index=269&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=83&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[270](index=270&type=chunk) [Item 9A. Controls and Procedures](index=83&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with an unqualified audit opinion from the independent registered public accounting firm - Management, including the CEO and CFO, concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2024[271](index=271&type=chunk)[273](index=273&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2024, based on the criteria set forth by COSO[276](index=276&type=chunk)[277](index=277&type=chunk) - The independent registered public accounting firm issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[281](index=281&type=chunk) [Item 9B. Other Information](index=88&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading agreements during the fourth quarter of 2024 - No directors or officers adopted or terminated a **Rule 10b5-1 trading plan** during the fourth quarter of 2024[288](index=288&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=88&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not Applicable[289](index=289&type=chunk) PART III [Item 10. Directors, Executive Officers, and Corporate Governance](index=89&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) This section identifies key executive officers and incorporates most governance information by reference from the 2025 Proxy Statement, noting the company's Code of Business Conduct and Ethics - The company's executive officers are **Patricia Gallup (Chair)**, **Timothy McGrath (CEO)**, and **Thomas Baker (CFO)**[293](index=293&type=chunk) - Most information for this item is incorporated by reference from the definitive Proxy Statement for the 2025 Annual Meeting of Stockholders[292](index=292&type=chunk) [Item 11. Executive Compensation](index=89&type=section&id=Item%2011.%20Executive%20Compensation) The information required by this item concerning executive and director compensation is incorporated by reference from the company's 2025 definitive Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[297](index=297&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required by this item, including security ownership of beneficial owners and management, as well as equity compensation plan details, is incorporated by reference from the company's 2025 definitive Proxy Statement - Information regarding security ownership and equity compensation plans is incorporated by reference from the Proxy Statement[298](index=298&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=91&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required by this item concerning related party transactions and director independence is incorporated by reference from the company's 2025 definitive Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the Proxy Statement[300](index=300&type=chunk) [Item 14. Principal Accounting Fees and Services](index=91&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required by this item concerning principal accounting fees and services, as well as pre-approval policies, is incorporated by reference from the company's 2025 definitive Proxy Statement - Information regarding accounting fees and services is incorporated by reference from the Proxy Statement[301](index=301&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=92&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report, including consolidated financial statements, financial schedules, and a comprehensive list of exhibits - This item lists the consolidated financial statements, financial statement schedules, and all exhibits filed with the Form 10-K[304](index=304&type=chunk)[307](index=307&type=chunk) [Item 16. Form 10-K Summary](index=97&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[320](index=320&type=chunk)