PC Connection, Inc.

Good day, and thank you for standing by. Welcome to the PEC Connection second quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I will now like to hand the conference over to management. Please go ahead.

Thank you, 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 Security 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 factor section of the company's annual report on Form 10-K for the year ended December 31, 2022, 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 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 views as of any date subsequent to today. During this call, non-GAAP financial measures will be discussed. A reconciliation between any non-GAAP financial measures discussed and its most directly comparable GAAP measure 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 2023 comparisons are being made against the second quarter of 2022. 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 2023 conference call. I'll begin this afternoon with an overview of our second quarter results and highlights of our performance. Tom will then walk us through a more detailed look at our Q2 financials. As we all know, the demand for IT products and services has been under pressure for the last three quarters. While our public sector delivered a record second quarter, our commercial customers continued to exercise greater caution and selectivity with their short-term IT investment plans as we saw year-over-year declines in our business solutions and enterprise solutions segments. However, as the quarter progressed, we did see some improvement in demand in the commercial space. In addition, in Q2, we continued to make progress against our strategic plans to successfully transition our business, driving growth in integrated technology solutions and services across each of our segments. We also have taken actions to improve the depth of the executive management team, enable sales through additional training, increase technical sales resources, and improve alignment of our incentives. We believe these changes drove a higher mix of advanced technology solutions, a record number of enterprise solution engagements, and a record level of managed services performed at our technology integration center. In addition, we also continued to experience success in acquiring new accounts and expanded our solutions offerings within existing accounts during the quarter. Now let's discuss our Q2 performance. Consolidated net sales declined by 11.5% to $733.5 million compared to Q2 2022. As discussed, we saw good overall growth in our integrated solutions business, though it was not enough to offset the decreased demand for endpoint devices. As our customers worked through this economic backdrop that includes slower hiring and reduced headcounts, Gross profit declined 6.7% to 127.8 million. However, gross margins were up 90 basis points to 17.4% in Q2 compared to the prior year quarter. This increase in gross margin reflects our resilience in helping our customers solve their business challenges with technology in any economic environment, and it's evident in the shift in product mix to advanced technologies. Operating income in Q2 was $25.1 million, a decrease of 27.9% or 3.4% of net sales compared to $34.8 million or 4.2% of net sales in the record prior year quarter. Net income in Q2 was $19.7 million, a decrease of 22.4% compared to $25.4 million in the prior year quarter. In Q2 2023, our diluted earnings per share was 75 cents, a decrease of 22.3%. While diluted earnings per share adjusted for restructuring and other charges was 80 cents, a decrease of 17.2% from 96 cents in Q2 of 2022. Well, now we'll look a little deeper into our segment performance. In our business solution segment, our Q2 net sales were $261 million, a decrease of 20.5%, compared to a record $328.4 million a year ago. Gross profit for the business solution segment was $61.4 million, a decrease of 6.3% from a year ago. Gross margin increased 356 basis points to a record 23.5% in the quarter compared to the prior year. This increase was the result of our business plans to shift product mix to the sales of data center products, including services, software, and networking during the second quarter of 2023. In addition to a higher mix of netted down revenue, primarily software and services. In our public sector solution business, Q2 net sales were a record 185.4 million, an increase of 22.6% compared to 151.2 million a year ago. Sales to state and local government and educational institutions increased by 15.7% to a record 151.7 million, driven by strong demand in K-12. Sales to federal government increased by 67.8% to 33.6 million compared to the prior year quarter. Our public sector capture and pursuit teams won new contracts while expanding within existing contract vehicles during the quarter. Gross profit for the public sector segment was $23.5 million, an increase of 12.8% compared to Q2 22. Gross margin decreased by 110 basis points to 12.7% in the quarter compared to the prior year. The decrease in gross margin percentage was due to a higher mix of large rollouts of endpoint solutions in the second quarter of 2023. In our enterprise solution segment, Q2 net sales were $287.2 million, a decrease of 17.7%, compared to $349 million a year ago. Gross profit for the enterprise segment was $43 million, a decrease of 15.1%, compared to the prior year quarter. Gross margin increased by 46 basis points to 15% due to an increase in software and services. As the quarter progressed, we experienced increased momentum with respect to the number of customer engagements and quoting activity. We're also beginning to see an uptick in RFPs for integrated technology solutions within the large account segment. Taking a closer look at our industry verticals, we saw healthcare revenue grow by 5% sequentially, driven primarily by customers investing in workplace transformation solutions. In addition, demand for networking and collaboration solutions continued to be an integral component of patient care and the overall patient experience. We're also pleased to share that our team's commitment to exceptional customer service and our ability to enable digital transformation was recognized with two Partner of the Year awards. Connection was named both the Microsoft US Surface Solutions Partner of the Year and the Microsoft US Modern Work Surface Hub Reseller Partner of the Year for 2023. We will continue to build on that success as we help customers deploy the cloud and computing solutions that drive workplace transformation. 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? Thanks, Tim.