PC CONNECTION INC

Previous 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.

Current wording

Net sales of $759.7 million for the second quarter of 2025 reflect an increase of $23.2 million, or 3.2% compared to the second quarter of 2024. The increase was primarily driven by increases in net sales of desktops, servers/storage, notebooks/mobility, and net/com products of $17.7 million, $7.9 million, $3.8 million, and $1.1 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 a decrease in net sales of displays and sound of $6.7 million. Gross profit for the second quarter of 2025 increased year-over-year by $1.3 million, or 0.9%, to $137.8 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 18.1% from 18.5% a year ago. The decrease in gross margin was primarily driven by reduced software agency fees in the current period. SG&A expenses increased year-over-year by $1.7 million, or 1.6%, to $106.9 million. SG&A expenses as a percentage of net sales decreased to 14.1% compared to 14.3% a year ago. The increase in SG&A expenses is primarily due to an increase in professional fees as shown in the table on page 20 of this Quarterly Report on Form 10-Q. Operating income for the second quarter of 2025 remained substantially the same year-over-year both in dollars and as a percentage of net sales.

Previous 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.

Current wording

There were no severance expenses incurred during the three months ended June 30, 2025. During the six months ended June 30, 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 incurred severance expenses of $0.4 million for each of the three and six months ended June 30, 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 March 31, 2025 and the three months ended March 31, 2024.

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 June 30, 2025 and the three months ended June 30, 2024; and changes between the six months ended June 30, 2025 and the six months ended June 30, 2024.

Previous 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:

Current wording

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

Previous 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:

Current wording

Gross profit for the second quarter of 2025 increased year-over-year, whilegross margin for the second 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 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):

Current wording

Selling, general and administrative expenses for the second quarter of 2025 increased in dollars but decreased as a percentage of net sales compared to the second 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

Severance expenses for the first quarter of 2025 were $2.9 million. The severance expenses were related to an involuntary reduction in our workforce to lower our cost structure and included cash severance and other related termination benefits. There were no severance expenses incurred for the three months ended March 31, 2024.

Current wording

Severance expenses were not incurred during the second quarter of 2025. Severance expenses were $0.4 million for the second quarter of 2024. The severance expenses were related to an involuntary reduction in our workforce to lower our cost structure and included cash severance and other related termination benefits.

Previous wording

Interest income, net for the first quarter of 2025 decreased to $3.9 million, compared to $4.6 million for the first quarter of 2024, primarily due to a decrease in interest income of $0.7 million. The decrease in interest income is primarily a result of lower realized interest rates in the current period.

Current wording

Interest income, net for the second quarter of 2025 decreased to $3.2 million, compared to $4.6 million for the second quarter of 2024, primarily due to a decrease in interest income of $1.4 million. The decrease in interest income is primarily a result of lower realized interest rates in the current period combined with lower cash equivalent and investment balances in the current period.

Previous 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.

Current wording

*Income taxes.*Our provision for income taxes for the second quarter of 2025 decreased to $9.3 million, compared to $9.4 million for the second quarter of 2024. Our effective tax rate was 27.3% for the quarter ended June 30, 2025, compared to 26.4% for the quarter ended June 30, 2024. The increase in the effective tax rate was primarily due to non-recurring benefits included in the prior year period.

Previous 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.

Current wording

Income from operations for the six months ended June 30, 2025 increased to $45.4 million, compared to $44.4 million for the six months ended June 30, 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 3.1% for the six months ended June 30, 2025, which was consistent with the prior year period.

Previous wording

Net income for the first quarter of 2025 increased to $13.5 million, compared to $13.2 million for the first quarter of 2024, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net, as discussed above.

Current wording

Net income for the six months ended June 30, 2025 decreased to $38.3 million, compared to $39.3 million for the six months ended June 30, 2024, primarily due to the decrease in interest income, net, partially offset by the increase in income from operations, as discussed above.

Previous 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):

Current wording

Cash flows from operating, investing and financing activities for the six months ended June 30, 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 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.

Current wording

Cash used in operating activities was $26.2 million for the six months ended June 30, 2025. Cash used in operating activities resulted primarily from an increase in inventory of $38.4 million, an increase in accounts receivable of $26.7 million, a decrease in accrued expenses and other liabilities of $6.9 million, and an increase in other non-current assets of $1.6 million. These outflows were partially offset by $38.3 million of net income and positive net adjustments to net income of $10.0 million for the six months ended June 30, 2025. The increase in inventory was primarily attributable to inventory purchases related to large customer rollouts and management associated with anticipated tariffs. The increase in accounts receivable was primarily driven by the timing of payments. For the six months ended June 30, 2024, cash provided by operating activities resulted primarily from net income adjusted for non-cash charges of $46.5 million, an increase in accounts payable of $53.2 million, and a decrease in accounts receivable of $7.6 million, partially offset by an increase in inventory of $12.4 million.

Previous 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.

Current wording

The cash conversion cycle increased to 44 days at June 30, 2025, compared to 41 days at June 30, 2024, as evidenced in the above cash conversion table. The decrease in DIO is primarily due to the decrease in inventory as of June 30, 2025 compared to June 30, 2024 combined with the increase in cost of sales for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The decrease in DPO is primarily due to the decrease in accounts payable as of June 30, 2025 compared to June 30, 2024 combined with the increase in cost of sales for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Previous 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.

Current wording

Cash provided by investing activities for the six months ended June 30, 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 $3.3 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$203.3 million of purchases of U.S. Government treasury securities, $103.3 million of maturities of U.S. Government treasury securities, and $3.4 million of purchases of property and equipment.

Previous 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.

Current wording

Cash used in financing activities for the six months ended June 30, 2025 consisted primarily 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. In the prior year period, financing activities consisted of $10.6 million of aggregate borrowings and repayments, $3.6 million of treasury purchases, $5.3 million of dividend payments, $0.5 million of issuances of stock under the Employee Stock Purchase Plan, and $0.6 million of payments of payroll taxes on stock-based compensation through shares withheld.