PC CONNECTION INC

Previous wording

Net sales of $724.7 million for the third quarter of 2024 reflected an increase of $31.6 million, or 4.6% compared to the third quarter of 2023. The increase was primarily driven by increases in net sales of notebooks/mobility, desktops, software, accessories, and displays and sound of $37.9 million, $10.8 million, $8.7 million, $8.5 million, and $4.1 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 advanced technology categories including net/com products, servers/storage, and other hardware/services of $26.3 million, $6.7 million, and $5.6 million, respectively. Gross profit for the third quarter of 2024 increased year-over-year by $3.5 million, or 2.7%, to $135.4 million as illustrated in the table and the discussion beginning on page 19 of this Quarterly Report on Form 10-Q. Gross margin decreased to 18.7% from 19.0% a year ago. The decrease in gross margin was primarily driven by a shift in product mix to lower-margin sales of endpoint devices including notebooks/mobility and desktops as shown in the table in Note 2 “Revenue” in the Notes to the Unaudited Condensed Consolidated Financial Statements and the product mix table on page 18. This decrease was partially offset by an increase in the amount of software sales recognized on a net basis. SG&A expenses increased year-over-year by $5.6 million, or 5.6%, to $105.4 million. SG&A expenses as a percentage of net sales increased to 14.5% compared to 14.4% a year ago. The increase in SG&A expenses as a percentage of net sales is primarily due to increases in personnel costs related to investments in resources designed to strengthen our sales, technical sales, and services capabilities, advertising, and service contracts/subscriptions as shown in the table on page 18 of this Quarterly Report on Form 10-Q combined with the increase in net sales as discussed above. Operating income for the third quarter of 2024 decreased year-over-year both in dollars and as a percentage of net sales by $2.0 million and 50 basis points, respectively, primarily as a result of the increase in SG&A expenses as discussed above.

Current wording

Net sales of $701.0 million for the first quarter of 2025 reflect an increase of $69.0 million, or 10.9% compared to the first quarter of 2024. The increase was primarily driven by increases in net sales of notebooks/mobility, desktops, software, and servers/storage of $36.2 million, $25.2 million, $11.0 million, and $7.6 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 a decrease in net sales of displays and sound of $10.8 million. Gross profit for the first quarter of 2025 increased year-over-year by $9.2 million, or 7.8%, to $127.3 million as illustrated in the table and the discussion beginning on page 18 of this Quarterly Report on Form 10-Q. Gross margin decreased to 18.2% from 18.7% a year ago. The decrease in gross margin was primarily driven by a shift in product mix to lower-margin sales of endpoint devices including notebooks/mobility and desktops as shown in the table in Note 2 “Revenue” in the Notes to the Unaudited Condensed Consolidated Financial Statements and the product mix table on page 17. SG&A expenses increased year-over-year by $5.3 million, or 5.0%, to $109.9 million. SG&A expenses as a percentage of net sales decreased to 15.7% compared to 16.6% a year ago. The increase in SG&A expenses is primarily due to increases in personnel costs related to an increase in variable compensation, service contracts/subscriptions, and marketing as shown in the table on page 17 of this Quarterly Report on Form 10-Q. Operating income for the first quarter of 2025 increased year-over-year in dollars by $1.0 million and remained consistent as a percentage of net sales. The increase in dollars is primarily a result of the increase in gross profit, partially offset by the increase in SG&A expenses as discussed above, as well as severance expenses incurred for the first quarter of 2025.

Previous wording

During the nine months ended September 30, 2024 and the three and nine months ended September 30, 2023, we undertook actions to lower our cost structure. In connection with these initiatives, we incurred restructuring and other

Current wording

During the three months ended March 31, 2025, we undertook actions to lower our cost structure. In connection with these initiatives, we incurred severance expenses of $2.9 million which included cash severance and other related termination benefits. We did not incur any severance expenses for the three months ended March 31, 2024.

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 September 30, 2024 and the three months ended September 30, 2023; and changes between the nine months ended September 30, 2024 and the nine months ended September 30, 2023.

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 March 31, 2025 and the three months ended March 31, 2024.

Previous wording

Net salesincreased for the third quarter of 2024 compared to the third quarter of 2023, as explained by the year-over-year changes discussed below:

Current wording

Net salesincreased for the first quarter of 2025 compared to the first quarter of 2024, as explained by the year-over-year changes discussed below:

Previous wording

Gross profit andgross margin for the third quarter of 2024 increased year-over-year, as explained by the year-over-year changes discussed below:

Current wording

Gross profit for the first quarter of 2025 increased year-over-year, whilegross margin for the first quarter of 2025 decreased year-over-year, as explained by the year-over-year changes discussed below:

Previous wording

Selling, general and administrative expenses for the third quarter of 2024 increased in dollars but remained substantially the same as a percentage of net sales compared to the third quarter of 2023. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other group expenses are summarized in the table below (dollars in millions):

Current wording

Selling, general and administrative expenses for the first quarter of 2025 increased in dollars but decreased as a percentage of net sales compared to the first quarter of 2024. 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 third quarter of 2024 decreased to $30.0 million, compared to $32.0 million for the third quarter of 2023, primarily due to the increase in SG&A expenses, partially offset by the increase in gross profit, as discussed above. Income from operations as a percentage of net sales was 4.1% for the third quarter of 2024, compared to 4.6% for the prior year quarter, primarily due to the increase in net sales, as discussed above.

Current wording

Income from operations for the first quarter of 2025 increased to $14.5 million, compared to $13.5 million for the first quarter of 2024, primarily due to the increase in gross profit, partially offset by the increases in SG&A expenses and severance expenses, as discussed above. Income from operations as a percentage of net sales was 2.1% for the first quarter of 2025, which was consistent with the prior year quarter.

Previous wording

*Income taxes.*Our provision for income taxes for the third quarter of 2024 increased to $9.5 million, compared to $9.1 million for the third quarter of 2023. Our effective tax rate decreased to 26.0% for the quarter ended September 30, 2024, compared to 26.3% for the quarter ended September 30, 2023, primarily due to non-recurring benefits included in the current year.

Current wording

*Income taxes.*Our provision for income taxes for the first quarter of 2025 increased to $5.0 million, compared to $4.9 million for the first quarter of 2024. Our effective tax rate was 27.1% for the quarter ended March 31, 2025, compared to 27.0% for the quarter ended March 31, 2024.

Previous wording

Our primary sources of liquidity are internally generated funds from operations, short-term investments, and borrowings under our credit facility. We have historically used and expect to use in the future those funds to meet our capital requirements, which consist primarily of working capital for operational needs, capital expenditures for computer equipment and software used in our business, repurchases of our common stock for treasury, dividend payments, and as opportunities arise, possible acquisitions of new businesses.

Current wording

Our primary sources of liquidity are internally generated funds from operations and short-term investments. We have historically used and expect to use in the future those funds to meet our capital requirements, which consist primarily of working capital for operational needs, capital expenditures for computer equipment and software used in our business, repurchases of our common stock for treasury, dividend payments, and as opportunities arise, possible acquisitions of new businesses.

Previous wording

We believe that funds generated from operations, short-term investments, and the available capacity under our credit facility 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 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.

Previous wording

We expect to meet our cash requirements for the next twelve months and beyond through a combination of cash on hand, short-term investments, cash generated from operations, and borrowings under our credit facility, as follows:

Current wording

We expect to meet our cash requirements for the next twelve months and beyond through a combination of cash on hand, short-term investments, and cash generated from operations, as follows:

Previous wording

On October 30, 2024, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.10 per share. The dividend will be paid on November 29, 2024 to all stockholders of record as of the close of business on November 12, 2024. The declaration and payment of any future dividends is at the discretion of our Board of Directors and will depend upon our financial position, strategic plans, general business conditions and any other factors deemed relevant by our Board of Directors.

Current wording

On April 30, 2025, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.15 per share. The dividend will be paid on May 30, 2025 to all stockholders of record as of the close of business on May 13, 2025. The declaration and payment of any future dividends is at the discretion of our Board of Directors and will depend upon our financial position, strategic plans, general business conditions and any other factors deemed relevant by our Board of Directors.

Previous wording

Cash flows from operating, investing and financing activities for the nine months ended September 30, 2024 and 2023, 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 three months ended March 31, 2025 and 2024, 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 provided by operating activities was $148.7 million for the nine months ended September 30, 2024. Cash provided by operating activities resulted primarily from $66.4 million of net income, an increase in accounts payable of $29.1 million, and a decrease in accounts receivable of $20.9 million. A decrease in inventory of $10.5 million, an increase in accrued expenses and other liabilities of $9.6 million, and depreciation and amortization and stock-based compensation expense added back to net income of $9.8 million and $6.2 million, respectively, also contributed to the positive inflow of cash for the nine months ended September 30, 2024. These inflows were partially offset by the amortization of discounts on short-term investments of $4.4 million subtracted from net income. The increase in accounts payable and decrease in accounts receivable were primarily driven by the timing of payments. For the nine months ended September 30, 2023, cash provided by operating activities resulted primarily from net income adjusted for non-cash charges of $76.8 million, a decrease in inventory of $66.4 million, an increase in accounts payable of $31.6 million, and a decrease in accounts receivable of $20.9 million, partially offset by an increase in prepaid expenses, income tax receivable, and other current assets of $9.6 million.

Current wording

Cash used in operating activities was $52.4 million for the three months ended March 31, 2025. Cash used in operating activities resulted primarily from an increase in inventory of $56.7 million and a decrease in accounts payable of $27.0 million. These outflows were partially offset by $13.5 million of net income, positive net adjustments to net income of $5.6 million, an increase in accrued expenses and other liabilities of $7.8 million, and a decrease in accounts receivable of $7.1 million for the three months ended March 31, 2025. The increase in inventory was primarily attributable to inventory purchases related to large customer rollouts and management associated with anticipated tariffs. The decrease in accounts payable was primarily driven by the timing of payments. For the three months ended March 31, 2024, cash provided by operating activities resulted primarily from net income adjusted for non-cash charges of $16.3 million, a decrease in accounts receivable of $79.3 million, and an increase in accrued expenses and other liabilities of $6.0 million, partially offset by a decrease in accounts payable of $45.1 million.

Previous wording

The cash conversion cycle decreased to 40 days at September 30, 2024, compared to 51 days at September 30, 2023. The decrease in DSO is consistent with the increase in net sales for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease in DIO is consistent with the decrease in inventory for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in DPO is consistent with the increase in accounts payable as of September 30, 2024 compared to September 30, 2023.

Current wording

The cash conversion cycle remained consistent at 53 days at March 31, 2025 and 2024. The increase in DSO is primarily due to the increase in trade receivables as of March 31, 2025 compared to March 31, 2024. The increase in DIO is primarily due to the increase in inventory as of March 31, 2025 compared to March 31, 2024. The increase in DPO is primarily due to the increase in accounts payable as of March 31, 2025 compared to March 31, 2024.

Previous wording

Cash used in investing activities for the nine months ended September 30, 2024 consisted of $255.1 million of purchases of U.S. Government treasury securities, $150.6 million of maturities of U.S. Government treasury securities, and $5.2 million of purchases of property and equipment. These 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 $48.7 million of purchases of U.S. Government treasury securities and $7.4 million of purchases of property and equipment.

Current wording

Cash provided by investing activities for the three months ended March 31, 2025 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 $1.7 million of purchases of property and equipment. These 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$100.0 million of purchases of U.S. Government treasury securities, $50.0 million of maturities of U.S. Government treasury securities, and $1.6 million of purchases of property and equipment.

Previous wording

Cash used in financing activities for the nine months ended September 30, 2024 consisted of $25.2 million of aggregate borrowings and repayments, $7.7 million of treasury purchases, $7.9 million of dividend payments, $0.5 million of issuances of stock under the Employee Stock Purchase Plan, and $1.3 million payments of payroll taxes on stock-based compensation through shares withheld. In the prior year period, financing activities primarily consisted of $70.9 million of aggregate borrowings and repayments, $5.4 million of treasury purchases, $6.3 million of dividend payments, $0.5 million of issuances of stock under the Employee Stock Purchase Plan, and $0.9 million payments of payroll taxes on stock-based compensation through shares withheld.

Current wording

Cash used in financing activities for the three months ended March 31, 2025 consisted of $0.7 million of aggregate borrowings and repayments, $43.7 million of treasury purchases, $3.9 million of dividend payments, and $0.5 million of payments of payroll taxes on stock-based compensation through shares withheld. In the prior year period, financing activities primarily consisted of $8.3 million of aggregate borrowings and repayments, $0.2 million of treasury purchases, $2.6 million of dividend payments, and $0.2 million of payments of payroll taxes on stock-based compensation through shares withheld.

Previous wording

Below is a summary of certain provisions of our credit facility and other contractual obligations. For more information about the restrictive covenants in our credit facility, see “Factors Affecting Sources of Liquidity” below. For more information about our obligations, commitments, and contingencies, see our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q.

Current wording

Below is a summary of certain provisions of our credit facility and other contractual obligations. For more information about our obligations, commitments, and contingencies, see our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q.

Previous wording

Cash receipts are automatically applied against any outstanding borrowings. Any excess cash on account may either remain on account to generate earned credits to offset up to 100% of cash management fees, or may be invested in short-term qualified investments. Borrowings under the credit facility are classified as current in our condensed consolidated balance sheets. As of September 30, 2024, the entire $50.0 million facility was available for borrowing.

Current wording

Cash receipts were automatically applied against any outstanding borrowings. Any excess cash on account could either remain on account to generate earned credits to offset up to 100% of cash management fees, or be invested in short-term qualified investments. Borrowings under the credit facility were classified as current in our condensed consolidated balance sheets.