PC Connection, Inc.

Good afternoon and welcome to the first quarter 2022 Connection earnings conference call. My name is Rachel and I'll be the coordinator for today. At this time, all participants are in a 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 company. On the call today are T. 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. You may begin the conference.

Thanks, Operator, and good afternoon, everyone. I will now read our cautionary note regarding forward-looking statements. 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, 2021, 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. It 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 other than is required by law, even if estimates change. And therefore, you should not rely on these forward-looking statements as representing management's view as of any date subsequent to today. During this call... Gap and non-gap 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 first quarter 2022 comparisons are being made against the first quarter of 2021. 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? Tim?

Thank you, Samantha. Good afternoon, everyone, and thank you for joining us today for Connections Q1 2022 conference call. I'll begin this afternoon with an overview of our first quarter results, highlights of our performance, and then share our updated thoughts on 2022. Tom will walk us through a more detailed look at our financials. We are pleased to announce a record first quarter for revenue, gross profit, and net income. These results demonstrate the continued execution of our business strategy to connect our customers with technology that enhances growth, elevates productivity, and empowers innovation. A number of factors contributed to our record performance, including our focus on helping our customers navigate and optimize their supply chain needs. Our commitment to helping our customers transition back to office in a hybrid capacity and our continued focus on cloud and data center transformation helped to drive this record Q1 performance. On a consolidated basis, Q1 revenue grew by 23.8% compared to last year's first quarter. The business solution segment grew 30.1%. The enterprise segment grew 26.4%, and the public sector grew 5.8%. We also delivered strong double-digit growth across all of our vertical markets. Our healthcare vertical, which is our largest vertical, grew 25% year-over-year, while our manufacturing, retail, and finance verticals grew 20%, 26%, and 48%, respectively. The supply chain issues that we referenced in the past quarters have persisted throughout Q1. Consequently, our backlog has increased for the fifth consecutive quarter. Our team has continued to leverage our capabilities to navigate the ongoing supply constraints on behalf of our customers. Our longstanding loyal customers know that we have the expertise, scale, and capacity to secure and store product and build out customized solutions on their behalf. The supply chain issues combined with some large project rollouts currently in progress have resulted in an increased inventory level in the first quarter compared to the fourth quarter of 2021. We expect these supply chain issues to persist for at least the remainder of the year. Now let's discuss our Q1 performance in a little greater detail. As I stated earlier, first quarter revenue was up 23.8% to $788.3 million from 2021, while gross profit was up 27.6% to $128.3 million. Gross margins were 16.3%, up 49 basis points from Q1 2021, as margins increased in all three segments despite a stronger mix of endpoint devices. Operating income in Q1 was $30.1 million, an increase of 113.4%, or 3.8% of net sales, compared to $14.1 million, or 2.2% of net sales in the prior year quarter. In Q1 2022, our diluted earnings per share was $0.83, an increase of 113.6%, from $0.39 in Q1 2021. We ended Q1 with $67.4 million of cash and cash equivalents. We will now take a little deeper look into segment performance. In our business solution segment, our Q1 net sales hit an all-time record of $320.4 million, an increase of 30.1% compared to $246.3 million a year ago. Gross profit in the business solution segment was $62.1 million, an increase of 31.2% from a year ago. Gross margin increased 16 basis points to 19.4% in the quarter compared to the prior year, primarily due to changes in product mix. We saw continued demand from work-from-anywhere solutions driving endpoint growth, along with strong performance in servers, cloud solutions, networking, and services. In our public sector solutions business, Q1 net sales were 132.5 million, an increase of 5.8% compared to 125.3 million a year ago. Sales to state and local government and educational institutions were 101.8 million, an increase of 14.4% compared to the prior year. Sales to the federal government decreased $5.6 million year-over-year to $30.7 million. Gross profit for the public sector segment was $17.3 million, an increase of 10.5% compared to Q1-21. Gross margin increased by 56 basis points to 13.1%, primarily due to changes in both product and customer mix. In our enterprise solution segment, Q1 net sales were $335.4 million, an increase of 26.4% compared to $265.3 million a year ago. Gross profit for the enterprise segment was $48.9 million, an increase of 30.3% in the quarter. Gross margin for the quarter increased by 44 basis points to 14.6%. The increase in gross margin percentage was primarily due to changes in product mix as customers transitioned back into the office. In addition, we also had good growth in storage, networking, and security. I'll now turn the call over to Tom to discuss additional financial highlights from our income statement, balance sheet, and cash flow statement. Tom?