PC nection(CNXN) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Highlights 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] - 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] - Adjusted EBITDA for the twelve months ended June 30, 2025, decreased by 2% to $122.5 million compared to the prior year period[5] Performance by Segment and Product Mix 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 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] - 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] - The company repurchased 254,695 shares of stock for an aggregate price of $15.5 million during the second quarter[11] Consolidated Financial Statements 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 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 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 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] Non-GAAP Financial Measures 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 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][16][17][18] - 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][23]