PC CONNECTION INC

Previous wording

The ongoing global memory shortage (DRAM and NAND) could result in increased inventory costs, which may reduce our margins or require us to raise prices. The memory shortage could additionally result in a lack of availability of products, which could negatively impact our results of operations. As a result of these ongoing and anticipated shortages, we may purchase product in advance of customer orders, while customers may accelerate or delay purchasing depending on their capital resources.

Current wording

The ongoing global memory shortage (DRAM and NAND) could result in increased inventory costs, which may reduce our margins or require us to raise prices. The memory shortage could additionally result in a lack of availability of products, which could negatively impact our results of operations. As a result of these ongoing and anticipated shortages, we have purchased and may continue to purchase product in advance of customer orders, while customers may accelerate or delay purchasing depending on their capital resources.

Previous wording

Net sales of $854.0 million for the second quarter of 2026 reflect an increase of $94.3 million, or 12.4% compared to the second quarter of 2025. The increase was primarily driven by increases in net sales of notebooks/mobility, software, displays and sound, accessories, net/com products, and other hardware/services of $77.7 million, $10.3 million, $9.1 million, $8.2 million, $6.3 million, and $2.5 million, respectively, as shown in the table in Note 2, “Revenue,” in the Notes to our Unaudited Condensed Consolidated Financial Statements. These increases were partially offset by decreases in net sales of servers/storage and desktops of $13.0 million and $6.7 million, respectively. Gross profit for the second quarter of 2026 increased year-over-year by $19.7 million, or 14.3%, to $157.5 million as illustrated in the table and the discussion beginning on page 22 of this Quarterly Report on Form 10-Q. Gross margin increased to 18.4% from 18.1% a year ago. The increase in gross margin was primarily driven by improved invoice margins in accessories and other hardware/services primarily due to changes in customer mix, as well as an increase in the amount of software sales recognized on a net basis as these sales are recognized in the financial statements at 100% margin. SG&A expenses as a percentage of net sales decreased to 13.4% compared to 14.1% a year ago, primarily due to the increase in net sales as discussed above. Operating income as a percentage of net sales increased to 5.0% compared to 4.1% a year ago, primarily due to the increases in net sales and gross profit as discussed above.

Current wording

Net sales of $874.3 million for the third quarter of 2026 reflect an increase of $165.2 million, or 23.3% compared to the third quarter of 2025. The increase was primarily driven by increases in net sales of notebooks/mobility, desktops, servers/storage, software, net/com products, other hardware/services, displays and sound, and accessories of $44.0 million, $40.8 million, $23.1 million, $22.1 million, $20.2 million, $6.9 million, $4.6 million, and $3.6 million, respectively, as shown in the table in Note 2, “Revenue,” in the Notes to our Unaudited Condensed Consolidated Financial Statements. Gross profit for the third quarter of 2026 increased year-over-year by $23.3 million, or 16.8%, to $161.9 million as illustrated in the table and the discussion beginning on page 21 of this Quarterly Report on Form 10-Q. Gross margin decreased to 18.5% from 19.6% a year ago. The decrease in gross margin was primarily driven by a decrease in the amount of software sales recognized on a net basis relative to total net sales as these sales are recognized in the financial statements at 100% margin, as well as a decrease in invoice margins in net/com products primarily due to changes in customer mix. SG&A expenses as a percentage of net sales decreased to 13.8% compared to 15.3% a year ago, primarily due to the increase in net sales as discussed above. Operating income as a percentage of net sales increased to 4.7% compared to 4.3% a year ago, primarily due to the increases in net sales and gross profit as discussed above.

Previous wording

There were no severance expenses incurred during the three months ended June 30, 2026 and 2025. During the six months ended June 30, 2026 and 2025, we undertook actions to lower our cost structure. In connection with these initiatives, we incurred severance expenses of $3.1 million and $2.9 million for the six months ended June 30, 2026 and 2025, respectively. The severance expenses were related to voluntary and involuntary reductions in our workforce. Both the voluntary and involuntary reductions included cash severance and other related termination benefits. The majority of each of these costs are expected to be paid within a year of the applicable termination and any unpaid balances are included in accrued payroll on the condensed consolidated balance sheets as of June 30, 2026.

Current wording

There were no severance expenses incurred during the three months ended September 30, 2026 and 2025. During the nine months ended September 30, 2026 and 2025, we undertook actions to lower our cost structure. In connection with these initiatives, we incurred severance expenses of $3.1 million and $2.9 million for the nine months ended September 30, 2026 and 2025, respectively. The severance expenses were related to voluntary and involuntary reductions in our workforce. Both the voluntary and involuntary reductions included cash severance and other related termination benefits. The majority of each of these costs are expected to be paid within a year of the applicable termination and any unpaid balances are included in accrued payroll on the condensed consolidated balance sheets as of September 30, 2026.

Previous wording

In this section and elsewhere in this Quarterly Report on Form 10-Q we refer to changes in year-over-year results. Unless context otherwise requires, such references refer to changes between the three months ended June 30, 2026 and the three months ended June 30, 2025, and changes between the six months ended June 30, 2026 and the six months ended June 30, 2025.

Current wording

In this section and elsewhere in this Quarterly Report on Form 10-Q we refer to changes in year-over-year results. Unless context otherwise requires, such references refer to changes between the three months ended September 30, 2026 and the three months ended September 30, 2025, and changes between the nine months ended September 30, 2026 and the nine months ended September 30, 2025.

Previous wording

Net salesincreased for the second quarter of 2026 compared to the second quarter of 2025, as explained by the year-over-year changes discussed below:

Current wording

Net salesincreased for the third quarter of 2026 compared to the third quarter of 2025, as explained by the year-over-year changes discussed below:

Previous wording

Gross margin for the second quarter of 2026 increased year-over-year, as explained by the year-over-year changes discussed below:

Current wording

Gross margin for the third quarter of 2026 decreased year-over-year, as explained by the year-over-year changes discussed below:

Previous wording

Selling, general and administrative expenses for the second quarter of 2026 increased in dollars but decreased as a percentage of net sales compared to the second quarter of 2025. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):

Current wording

Selling, general and administrative expenses for the third quarter of 2026 increased in dollars but decreased as a percentage of net sales compared to the third quarter of 2025. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):

Previous wording

Income from operations for the second quarter of 2026 was $43.0 million, compared to $30.9 million for the second quarter of 2025. Income from operations as a percentage of net sales increased to 5.0% for the second quarter of 2026, compared to 4.1% for the prior year quarter. The increase in income from operations both in dollars and as a percentage of net sales is primarily due to the increases in net sales and gross profit as discussed above.

Current wording

Income from operations for the third quarter of 2026 was $41.0 million, compared to $30.3 million for the third quarter of 2025. Income from operations as a percentage of net sales increased to 4.7% for the third quarter of 2026, compared to 4.3% for the prior year quarter. The increase in income from operations both in dollars and as a percentage of net sales is primarily due to the increases in net sales and gross profit as discussed above.

Previous wording

Interest income, net for the second quarter of 2026 decreased to $2.5 million, compared to $3.2 million for the second quarter of 2025, primarily due to a decrease in interest income of $0.7 million. The decrease in interest income is primarily a result of lower cash equivalent balances in the current period combined with lower realized interest rates in the current period.

Current wording

Interest income, net for the third quarter of 2026 decreased to $2.5 million, compared to $3.7 million for the third quarter of 2025, primarily due to a decrease in interest income of $1.2 million. The decrease in interest income is primarily a result of lower cash equivalent balances in the current period combined with lower realized interest rates in the current period.

Previous wording

*Income taxes.*Our provision for income taxes for the second quarter of 2026 increased to $12.4 million, compared to $9.3 million for the second quarter of 2025. The increase in our provision for income taxes was primarily due to the increase in income before taxes. Our effective tax rate was 27.2% for the quarter ended June 30, 2026, compared to 27.3% for the quarter ended June 30, 2025.

Current wording

*Income taxes.*Our provision for income taxes for the third quarter of 2026 increased to $12.0 million, compared to $9.2 million for the third quarter of 2025. The increase in our provision for income taxes was primarily due to the increase in income before taxes. Our effective tax rate was 27.6% for the quarter ended September 30, 2026, compared to 27.1% for the quarter ended September 30, 2025.

Previous wording

Net income for the second quarter of 2026 increased to $33.2 million, compared to $24.8 million for the second quarter of 2025, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net and the increase in our provision for income taxes, as discussed above.

Current wording

Net income for the third quarter of 2026 increased to $31.5 million, compared to $24.7 million for the third quarter of 2025, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net and the increase in our provision for income taxes, as discussed above.

Previous wording

Net salesincreased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, as explained by the year-over-year changes discussed below:

Current wording

Net salesincreased for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, as explained by the year-over-year changes discussed below:

Previous wording

Gross margin for the six months ended June 30, 2026 increased year-over-year, as explained by the year-over-year changes discussed below:

Current wording

Gross margin for the nine months ended September 30, 2026 decreased year-over-year, as explained by the year-over-year changes discussed below:

Previous wording

Selling, general and administrative expenses for the six months ended June 30, 2026 increased in dollars but decreased as a percentage of net sales compared to the six months ended June 30, 2025. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):

Current wording

Selling, general and administrative expenses for the nine months ended September 30, 2026 increased in dollars but decreased as a percentage of net sales compared to the nine months ended September 30, 2025. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):

Previous wording

million, $0.4 million, and $0.4 million, respectively. SG&A expenses as a percentage of net sales were 15.0% for the Business Solutions segment for the six months ended June 30, 2026, which reflects a decrease of 110 basis points and is primarily due to the increase in net sales as discussed above.

Current wording

use of shared Headquarter services, personnel costs, marketing, and other expenses of $3.5 million, $2.5 million, $2.1 million, and $1.1 million, respectively. SG&A expenses as a percentage of net sales were 15.0% for the Business Solutions segment for the nine months ended September 30, 2026, which reflects a decrease of 150 basis points and is primarily due to the increase in net sales as discussed above.

Previous wording

Severance expenses for the six months ended June 30, 2026 were $3.1 million, compared to $2.9 million for the six months ended June 30, 2025. The severance expenses were related to voluntary and involuntary reductions in our workforce to lower our cost structure and included cash severance and other related termination benefits.

Current wording

Severance expenses for the nine months ended September 30, 2026 were $3.1 million, compared to $2.9 million for the nine months ended September 30, 2025. The severance expenses were related to voluntary and involuntary reductions in our workforce to lower our cost structure and included cash severance and other related termination benefits.

Previous wording

Income from operations for the six months ended June 30, 2026 was $63.2 million, compared to $45.4 million for the six months ended June 30, 2025. Income from operations as a percentage of net sales increased to 4.0% for the six months ended June 30, 2026, compared to 3.1% for the prior year period. The increase in income from operations both in dollars and as a percentage of net sales is primarily due to the increases in net sales and gross profit as discussed above.

Current wording

Income from operations for the nine months ended September 30, 2026 was $104.2 million, compared to $75.7 million for the nine months ended September 30, 2025. Income from operations as a percentage of net sales increased to 4.3% for the nine months ended September 30, 2026, compared to 3.5% for the prior year period. The increase in income from operations both in dollars and as a percentage of net sales is primarily due to the increases in net sales and gross profit as discussed above.

Previous wording

Interest income, net for the six months ended June 30, 2026 decreased to $5.9 million, compared to $7.1 million for the six months ended June 30, 2025, primarily due to a decrease in interest income of $1.2 million. The decrease in interest income is primarily a result of lower cash equivalent balances in the current period combined with lower realized interest rates in the current period.

Current wording

Interest income, net for the nine months ended September 30, 2026 decreased to $8.4 million, compared to $10.8 million for the nine months ended September 30, 2025, primarily due to a decrease in interest income of $2.4 million. The decrease in interest income is primarily a result of lower cash equivalent balances in the current period combined with lower realized interest rates in the current period.

Previous wording

*Income taxes.*Our provision for income taxes for the six months ended June 30, 2026 increased to $18.7 million, compared to $14.3 million for the six months ended June 30, 2025. The increase in our provision for income taxes was primarily due to the increase in income before taxes. Our effective tax rate was 27.1% for the six months ended June 30, 2026, compared to 27.3% for the six months ended June 30, 2025.

Current wording

*Income taxes.*Our provision for income taxes for the nine months ended September 30, 2026 increased to $30.7 million, compared to $23.6 million for the nine months ended September 30, 2025. The increase in our provision for income taxes was primarily due to the increase in income before taxes. Our effective tax rate was 27.3% for the nine months ended September 30, 2026, compared to 27.2% for the nine months ended September 30, 2025.

Previous wording

Net income for the six months ended June 30, 2026 increased to $50.4 million, compared to $38.3 million for the six months ended June 30, 2025, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net and the increase in our provision for income taxes, as discussed above.

Current wording

Net income for the nine months ended September 30, 2026 increased to $81.8 million, compared to $63.0 million for the nine months ended September 30, 2025, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net and the increase in our provision for income taxes, as discussed above.

Previous wording

We believe that funds generated from operations and short-term investments will be sufficient to finance our working capital, capital expenditures, and other requirements for at least the next twelve calendar months and beyond such twelve calendar month period. Our investments in IT systems and infrastructure are designed to enable us to operate more efficiently and to provide our customers enhanced functionality.

Current wording

We believe that funds generated from operations and short-term investments will be sufficient to finance our working capital, capital expenditures, and other requirements for at least the next twelve calendar months and beyond

Previous wording

Cash flows from operating, investing and financing activities for the six months ended June 30, 2026 and 2025, as reflected in our Unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Quarterly Report on Form 10-Q, are summarized in the following table (in millions):

Current wording

Cash flows from operating, investing and financing activities for the nine months ended September 30, 2026 and 2025, as reflected in our Unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Quarterly Report on Form 10-Q, are summarized in the following table (in millions):

Previous wording

Cash used in operating activities is summarized as follows (in millions):

Current wording

Cash (used in) provided by operating activities is summarized as follows (in millions):

Previous wording

The decrease in net cash from operating activities of $23.3 million for the six months ended June 30, 2026 was primarily attributable to changes in accounts receivable, accounts payable, and inventories of $53.9 million, $35.9 million, and $23.1 million, respectively. The change in cash from operating activities attributable to accounts receivable is primarily driven by the timing of collections. The change in cash from operating activities attributable to accounts payable is primarily due to the timing of payments. The change in cash from operating activities attributable to inventories is primarily due to an increase in inventory purchases related to customer rollouts and management’s decision to secure supply.

Current wording

The decrease in net cash from operating activities of $77.8 million for the nine months ended September 30, 2026 was primarily attributable to changes in accounts receivable, accounts payable, and inventories of $138.3 million, $62.6 million, and $43.0 million, respectively. The change in cash from operating activities attributable to accounts receivable is primarily driven by the timing of customer deliveries. The change in cash from operating activities attributable to accounts payable is primarily due to the timing of payments. The change in cash from operating activities attributable to inventories is primarily due to bringing in inventory for several large scale customer deployments.

Previous wording

The cash conversion cycle increased to 49 days at June 30, 2026, compared to 44 days at June 30, 2025, as evidenced in the above cash conversion table. The increase in DSO is primarily due to the increase in trade receivables as of June 30, 2026 compared to June 30, 2025. The increase in DIO is primarily due to the increase in inventory as of June 30, 2026 compared to June 30, 2025. The increase in DPO is primarily due to the increase in accounts payable as of June 30, 2026 compared to June 30, 2025.

Current wording

The cash conversion cycle increased to 50 days at September 30, 2026, compared to 46 days at September 30, 2025, as evidenced in the above cash conversion table. The increase in DIO is primarily due to the increase in inventory as of September 30, 2026 compared to September 30, 2025. The increase in DPO is primarily due to the increase in accounts payable as of September 30, 2026 compared to September 30, 2025.

Previous wording

securities, and $3.9 million of purchases of property and equipment. The property and equipment expenditures were primarily for computer equipment and capitalized internally developed software in connection with investments in our IT infrastructure. In the prior year period, investing activities consisted of$52.4 million of purchases of U.S. Government treasury securities, $108.8 million of sales of U.S. Government treasury securities, $50.0 million of maturities of U.S. Government treasury securities, and $3.3 million of purchases of property and equipment.

Current wording

Cash (used in) provided by investing activities for the nine months ended September 30, 2026 consisted of $161.2 million of purchases of U.S. Government treasury securities, $157.4 million of maturities of U.S. Government treasury securities, and $6.0 million of purchases of property and equipment. The property and equipment expenditures were primarily for computer equipment and capitalized internally developed software in connection with investments in our IT infrastructure. In the prior year period, investing activities consisted of$155.6 million of purchases of U.S. Government treasury securities, $108.8 million of sales of U.S. Government treasury securities, $101.3 million of maturities of U.S. Government treasury securities, and $5.2 million of purchases of property and equipment.

Previous wording

Cash used in financing activities for the six months ended June 30, 2026 consisted of $10.1 million of dividend payments, $2.5 million of treasury purchases, $0.7 million of excise tax payments on treasury purchases, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $1.0 million of payments of payroll taxes on stock-based compensation through shares withheld. In the prior year period, financing activities consisted of $0.7 million of aggregate borrowings and repayments, $60.5 million of treasury purchases, $7.7 million of dividend payments, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $0.9 million of payments of payroll taxes on stock-based compensation through shares withheld.

Current wording

Cash used in financing activities for the nine months ended September 30, 2026 consisted of $15.1 million of dividend payments, $2.5 million of treasury purchases, $0.7 million of excise tax payments on treasury purchases, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $1.4 million of payments of payroll taxes on stock-based compensation through shares withheld. In the prior year period, financing activities consisted of $0.7 million of aggregate borrowings and repayments, $65.5 million of treasury purchases, $11.5 million of dividend payments, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $1.3 million of payments of payroll taxes on stock-based compensation through shares withheld.

Previous wording

Operating Leases. We lease facilities, including our corporate headquarters and a facility adjacent to our corporate headquarters, from a related party, which is a company affiliated with us through common ownership. The lease agreements of these two Merrimack, New Hampshire facilities have expired. We continue to occupy the facilities on a month-to-month basis under the terms of the prior written lease agreements. It is our intention to enter into a written, long-term lease for our corporate headquarters. We do not expect to occupy the adjacent facility long term, and accordingly we do not intend to enter into a written, long-term lease for the adjacent facility. We also lease facilities from third parties under non-cancelable operating leases. Certain leases require us to pay real estate taxes, insurance, and common area maintenance charges. See “Item 2. Properties” in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding our operating leases.

Current wording

Operating Leases. We lease facilities, including our corporate headquarters, from a related party, which is a company affiliated with us through common ownership. The lease agreement of our corporate headquarters has expired. We continue to occupy the facility on a month-to-month basis under the terms of the prior written lease agreement. It is our intention to enter into a written, long-term lease for our corporate headquarters. We also lease facilities from third parties under non-cancelable operating leases. Certain leases require us to pay real estate taxes, insurance, and common area maintenance charges. See “Item 2. Properties” in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding our operating leases.