PC Connection, Inc.

Good afternoon and welcome to the second quarter 2024 connection earning conference call. My name is Justin and I'll be the 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 a property of connection and may not be recorded or rebroadcast without any 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'll now turn the call over to the company.

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 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 factor section of the company's annual report on Form 10-K for the year ended December 31, 2023, 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 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 measure 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 2024 comparisons are being made against the second quarter 2023. 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.ir.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 2024 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. Connection achieved a record net income and earnings per share of 99 cents for the second quarter of 2024. These results reflect the successful execution of our strategic priorities and our ability to adapt to the needs of our customers in this dynamic environment. We remain committed to stay at the forefront of the technology curve, ensuring that our integrated solutions meet the evolving needs of our customers. In Q2, we experienced growth in endpoint device revenue of 7%, as some customers began refresh initiatives, which were primarily driven by Windows 11, and some early AI PC adopters. Gross profit for endpoint device increased 27% due to a change in customer mix. Our server storage category had strong growth of 19%, and software, including cloud and cybersecurity, increased 7%. These increases were offset by a 33% decrease in networking solutions. If you recall, a year ago, our networking business benefited from the supply chain recovery, resulting in a tough compare. Overall, advanced technology revenue was down 8.7% in Q2 compared to the prior year quarter, while gross profit for advanced technology increased by 4%. While each of our businesses experience gross profit growth in the quarter, our customers continue to be very deliberate and cautious with their IT purchases in this uncertain economic environment. Now let's discuss our Q2 performance. Consolidated net sales were 736.5 million, an increase of 0.4% compared to last year. Gross profit increased 6.9% to 136.5 million. Gross margins were up 112 basis points to 18.5% in Q2 compared to the prior year quarter. Operating income in Q2 was 30.9 million, an increase of 23.3% compared to Q2 2023. Operating income as a percentage of sales was 4.2% compared to 3.4 percent of net sales in the prior year quarter. Net income in Q2 was a record 26.2 million, an increase of 32.8 percent, compared to 19.7 million in the prior year quarter. In Q2 2024, our diluted earnings per share were 99 cents, an increase of 32 percent from 75 cents in Q2 2023. Now we'll look a little deeper into our segment performance. In our business solution segment, our Q2 net sales were 278.2 million, 6.6% higher than a year ago. Close profit for the business solution segment was 66.3 million, an increase of 8.1%. Gross margin increased 34 basis points compared to the prior year quarter to a record 23.8%. Our net sales and gross margins were favorably affected by growth in endpoint device and server sales, as well as a shift in customer mix. In our public sector solutions business, Q2 net sales were 159.5 million, 14% lower than a year ago. Sales to state and local government and education institutions decreased by 17.6 million, while sales to the federal government decreased by 8.3 million. Gross profit for the public sector segment was 24.1 million, an increase of 3% compared to Q2 23. Gross margin increased by 250 basis points to 15.2% for the quarter compared to the prior year. The revenue decline and margin improvement resulted from a few large opportunities in Q2 2023 that were at low margins and did not repeat in the current year quarter. In our enterprise solution segment, Q2 net sales were 298.8 million, 4.1% higher than a year ago, as we experienced a 15% increase in sales of endpoint devices. Gross profit for the enterprise segment was 46.1 million, 7.2% higher than the prior year quarter. Gross margin increased by 45 basis points to 15.4% for the quarter. The margin improvement was a result of changes in customer mix and an increase in software sales, including cloud and cybersecurity recognized on a net basis. 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?