PC Connection, Inc.

Good afternoon and welcome to the second quarter 2021 connection earnings conference call. My name is Abigail and I will be the coordinator for today. At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question and answer session. As a reminder, this conference call is the property of connection and may not be recorded or rebroadcast without specific permission from the companies. 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.

Good afternoon, operator, and good afternoon, everyone. I will now read our Safe Harbor Statement. Any statements or references made 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. As a result of various important factors, including those discussed in the risk factors section of the company's annual report on Form 10-K for the year-ended December 31, 2020, which is on file with the Securities and Exchange Commission, as well as in other documents that the company files with the Commission from time to time. In addition, any forward-looking statements represent management's view as of today and should not be relied upon as representing views as of any subsequent date. While the company may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so, even if estimates change, and therefore you should not rely on these forward-looking statements as representing views as of any date subsequent to today. During this call, GAAP and non-GAAP financial measures will be discussed. A reconciliation between the two is available in today's earnings release and on the company's website at www.connection.com. Please note that unless otherwise stated, all references to second quarter 2021 comparisons are being made against the second quarter of 2020. Today's call is being webcast and will be available on Connection's website. The earnings release will be available on the SEC website at www.sec.gov and in the investor relations section of our website at www.connection.com. I would now like to turn the call over to our host, Tim McGrath, President and CEO. Tim?

Thank you, Samantha. Good afternoon, everyone, and thank you for joining us today for Connections Q2 2021 conference call. We are pleased to report double-digit growth across all three of our business segments, and we expect to benefit from positive momentum throughout the rest of this year. Overall, revenue in Q2 grew 28% compared to last year's second quarter. The business solution segment grew 39.9%. The enterprise segment grew 24.5%, and public sector grew 15.7%. It's rewarding to see that our strategic investments in helping our customers transform their businesses are delivering value for them and us. Our strong results are also a tribute to our team and the extraordinary execution they deliver on behalf of our loyal customers during this challenging supply environment. Our focus on aligning our sales strategy combined with expertise in vertical markets continues to drive positive results for the company. In fact, our manufacturing vertical grew 59% year-over-year as a result of delivering solutions including industrial infrastructure, security, cloud, and workplace productivity. In addition, our healthcare vertical grew 30% year-over-year and 19% sequentially. Demand was driven by our customers' need to improve operational efficiencies, the patient experience, and long-term care. We are also seeing continued growth in telehealth and non-contact patient monitoring. Our retail vertical also saw 25% growth year-over-year and 10% sequentially, as customers are focusing on solutions that enable smart stores, digital media, and point-of-sale technologies, which are all helping to transform and improve the retail experience. As you know, our industry is experiencing supply chain issues. As a result, our backlog once again increased to a record level. We anticipate some of these challenges will persist for the balance of the year and into 2022. We're working with our partners and customers on a daily basis to manage these issues. Fortunately, we're able to leverage our scale and our expertise to help our customers navigate through these supply chain challenges. We are collaborating with a number of our customers to secure and store product in an effort to support rollouts planned for later this year, which is driving higher inventory levels than usual. Our customers know they can rely on us, and we are seeing strong demand for digital transformation, hybrid cloud, cloud, and security. Now let's discuss our Q2 performance in a little greater detail. Second quarter revenue was up 28% to $704.2 million from 2020, while gross profit was up 30.7% to $116.3 million. Gross margins were 16.5%, up 34 basis points from Q2 2020. Operating income in Q2 was $23.8 million, an increase of 124.5%. or 3.4% of net sales, compared to 10.6 million, or 1.9% of net sales in the prior year quarter. In Q2 2021, diluted earnings per share was $0.66, an increase of 125.6% from $0.29 in Q2 2020. We ended Q2 with $115.7 million of cash and cash equivalents. Now we'll look a little deeper at the segment performance. In our business solution segments, our Q2 net sales were 267.3 million, an increase of 39.9% compared to 191.1 million a year ago. Gross profit in the business solution segment was 51.3 million, an increase of 37.9% from a year ago. Gross margin decreased by 28 basis points to 19.2% in the quarter compared to 19.5% in the prior year as a result of changes in product mix. Throughout the past year, the business solution segment has been the most affected by the pandemic, and since Q2 last year, we've seen strong recovery despite supply issues. Sequentially, the business experienced 8.5% growth in the period. In our public sector solutions business, Q2 net sales were 129.7 million, an increase of 15.7%, compared to 112.2 million a year ago. Sales to state and local government and educational institutions were 105.1 million, an increase of 22.4%, compared to the prior year. K-12 and higher ed customers were largely responsible for the increase in the SLED business. Sales to federal government were $24.6 million, a decrease of 6.3% compared to the prior year. Gross profit for the public sector segment was $18 million, an increase of 24.6% compared to Q2 2020. Gross margin increased by 99 basis points to 13.9%, primarily due to a change in customer mix and an increase in cloud-based and security software. In our enterprise solution segment, Q2 net sales were $307.2 million, a 24.5% increase compared to $246.8 million a year ago. Gross profit for the enterprise segment was $47 million, an increase of 25.9% in the quarter. Gross margin for the quarter increased by 17 basis points to 15.3%. We've continued to see strong demand in the enterprise segment, especially in the manufacturing and healthcare vertical, both of which exceeded 30% growth. It's also nice to see data center refresh projects coming back into the enterprise space. I will now turn the call over to Tom to discuss additional financial highlights from our income statement, balance sheet, and cash flow statement. Tom?