PC Connection, Inc.

Good afternoon and welcome to the first quarter 2020 Connection Earnings Conference call. My name is Kevin and I'll be your coordinator for today. At this time, all participants are on a listen-only mode. Following the prepared remarks, there will be a question and answer session. As a reminder, this conference call is property of Connection. It may not be recorded or rebroadcast without specific permission from the company. On the call today are Tim McGrath, President and Chief Executive Officer, and Tom Baker, Senior Vice President and Chief Financial Officer. I will now turn the call over to the company.

Any statements or references during the conference call that are not statements of historical fact may be deemed to be forward-looking statements. Various remarks that management may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements. Thank you for joining us today. Thank you for joining us. Thank you for joining us. I would now like to turn the call over to our host, Tim McGrath, President and CEO. Please proceed, sir.

Good afternoon, everyone, and thank you for joining us today. It's Q1 2020 conference call. I'll be sharing a brief update on our business, including our strategic initiatives, and Tom Baker, our Chief Financial Officer, will join me to provide a review of the company's first quarter financial results. This quarter's earnings call Finds us in unprecedented times. We are all facing one of the greatest health threats the world has experienced in recent history. As an essential business in the fight against COVID-19, we are currently operating with the majority of our employees working remotely, a transition we made rapidly and to date successfully. As you can imagine, the needs of our customers have evolved significantly over the past two months. During this time, the depth and frequency of our communication with our employees, customers, and partners has intensified. This pandemic is top of mind for all of us. The challenges that we are facing together continue to unfold. Naturally, we cannot predict the precise impact to our business. We are confident that our committed and resilient team of employees, combined with our scalable business model, will enable us to adapt and respond appropriately to the future economic conditions. We will do everything in our power to serve our customers and the communities where we live and work. I'm pleased to announce that we have 21 results in our history, and I thought this would be a good opportunity to start our call with a review of our strengths that have fueled Connection's success. Connection's three distinct sales subsidiaries deliver a level of service and a deep understanding of our customers' environments. When combined with the expertise of our industry solutions group, Connection's vertical market-focused team, we're able to deliver technology solutions customized to the specific needs of our public sector organizations, small and medium-sized businesses, and large enterprises. This specialization goes beyond a different department name or a unique sales rep title. It's baked into the training, the culture, and the focus of our team's. We understand our customers' needs and can collaborate with our customers to deliver specific solutions based on their needs. This level of service would not be possible without the specialization I just mentioned, and it really grows out of our understanding of the customer's environment, their team, and their business. After all, Connection is a purpose-driven organization, and our sales and sales support teams have done an exceptional job of living our mission. We built a committed team around our mission of enhancing growth, elevating productivity, and empowering innovations for our customers. I'd also like to highlight the great work that's being done in our Technology Solutions Group, or TSG, Technology Integration and Distribution Center. Our TSG team continues to drive the sales of advanced technology solutions, delivering the technical expertise and outstanding follow-through Thank you for joining us. During the first quarter, revenue increased by 12.5% to $711.9 million and gross profit increased by 13.9% compared to Q1 of 2019. We achieved gross margins of 15.9%, which represented growth of 19 basis points. Operating income increased by 86% to $20.7 million or 2.9% of net sales compared to $17.4 million or 2.8% of net sales in the prior year quarter. In Q1 2020, diluted earnings per share increased by 18% from Q1 2019. We experienced strong growth in both our enterprise solutions and business solutions operating segments. The enterprise solution segment, 21% revenue growth in the quarter compared to Q1 2019, followed by the business solution segment, which experienced growth of 10%. The growth in these segments was partially offset by a 5% decrease in our public sector segment. We believe that growth in gross profit is a better indicator of our success serving our customers than using revenue alone as a growth metric. Gross profit in the quarter increased by 17% in business solutions, 12% in enterprise solutions, and 10% in public sector solutions compared to Q1 2019. In March, we benefited from the Work From Home initiative and a higher demand from healthcare customers due to the global pandemic. The increase in both revenue and gross profit was enhanced by strong growth in all of our vertical markets. We also saw strong growth in mobility, accessories, and networking categories. We remain committed to helping our customers efficiently and intelligently build out solutions that help our customers solve IT. Now I'd like to provide a more detailed discussion of our performance by segment. In our business solution segment, Q1 net sales increased by 10.2% to $278.8 million. compared to $252.9 million a year ago. Gross profit in the business solution segment increased 16.7% from a year ago, and gross margin for this segment increased by 105 basis points to 18.8% in the quarter. Our business solution segment margins benefited from an increase in volume and a change in customer mix. Business solutions continue to focus on advanced technologies that have higher margins and represented a larger percentage of our revenue this quarter. Public sector solutions business, Q1 net sales decreased by 4.5% to 99.6 million compared to 104 million a year ago. Sales to the federal government decreased by 42.2% compared to the prior year. Q1 of 2019 benefited from the timing of several large project rollouts that did not repeat in Q1 2020. Sales to state and local governments and educational institutes increased by 15.6%. This increase was driven by mobility and Netcom products. Gross profit for the public sector segment increased by 9.7% in the quarter, and gross margin grew by 187 basis points to 14.5% due to changes in customer mix, along with increased sales of cloud-based software. In our enterprise solution segment, Q1 net sales were $333.4 million, a 21% increase compared to $275.6 million a year ago. Gross profit for the enterprise segment increased by 12.1% in the quarter. Gross margin for the enterprise segment decreased by 110 basis points to 13.9%. The decrease in gross margin was related to the changes in customer hardware and product mix. Having covered our sales and gross margin performance, I'll turn the call over to Tom to discuss additional financial highlights from our income statement, balance sheet, and cash flow statement. Tom?