PC Connection, Inc.

Good afternoon, and welcome to the third quarter 2024 Connection Earnings Conference Call. My name is Antoine, and I will be your coordinator for today. At this time, our participants are in listen-only mode. Following their prepared remarks, there will be a question and answer session. As a reminder, this conference is the property of Connection and may not be recorded or rebroadcast without specific permission from the company. On the call today, we have 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.

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 31st, 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 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 as 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 third quarter 2024 comparisons are being made against the third quarter of 2023. Today's call is being webcast and will be available on Connexion'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.connexion.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 Q3 2024 conference call. I'll begin this afternoon with an overview of our third quarter results and highlights of our performance. Tom will then walk us through a more detailed look at our Q3 financials. We are in a period of rapid innovation. Technology advancements are happening at an unprecedented pace. The promise of digital transformation enabled by hybrid AI has never been greater. We are confident that as demand recovers, we have the right strategy to help our customers navigate through this challenging IT environment. Connection achieved record net income in earnings per share of $1.02 for the third quarter of 2024. In addition, we experienced moderate growth in gross profit in each of our business segments while making strategic investments to better position ourselves for the evolving technology landscape and what lies ahead for our industry. We saw some evidence of a recovery year over year in select areas of our business in Q3. We experienced notebook mobility and desktop revenue growth of 17%, driven by PC refresh initiatives by our customers. Approximately 25% of those PCs were AI-enabled. However, demand for advanced technologies has been negatively affected by our customers' ongoing struggle with their IT roadmap in the face of AI uncertainty. This resulted in a recovery that has been delayed longer than we anticipated. We believe our customers may continue to maintain this conservative approach for their IT spending for the balance of the year. In terms of advanced technology, A software category, which includes cloud and cybersecurity, had strong growth of 11%. This increase was offset by a 32% decline in networking solutions. This decrease in networking was in part the result of a tough compare against results in the prior year, which benefited from the resolution of supply chain issues, impacting networking equipment that had been backlogged. This contributed to an 11 percent decline in overall advanced technology revenue compared to the prior year quarter. Now let's discuss our Q3 performance. Consolidated net sales were 724.7 million, an increase of 4.6 percent compared to last year. Gross profit increased 2.7 percent to 135.4 million. Gross margins were down 30 basis points to 18.7% in Q3 compared to the prior year quarter. Operating income in Q3 was 30 million, a decrease of 6.2% compared to Q3 2023. Operating income as a percentage of sales was 4.1% compared to 4.6% of net sales in the prior year quarter. Net income in Q3 was a record 27.1 million, an increase of 5.7% compared to 25.6 million in the prior year quarter. In Q3 2024, our diluted earnings per share was a record $1.02, an increase of 5.4% from 97 cents in Q3 2023. We'll now look a little deeper into our segment performance. In our business solution segment, our Q3 net sales were 252.6 million 6.1% lower than a year ago, as we experienced a 20% decrease in sales of advanced technology products, partially offset by an increase of 4% in endpoint device sales. Gross profit for the business solutions segment was $63.1 million, an increase of 0.7%. Gross margin increased 170 basis points compared to the prior year quarter to a record 25%. Our net sales and gross margins were favorably affected by customer mix and increase in cybersecurity and software sales. In our public sector solutions business, Q3 net sales were $175.1 million, 18.7% higher than a year ago. Sales to federal government increased by $25.6 million, while sales to state and local government and education institutions increased by $2 million. Gross profit for the public sector segment was $26.1 million, an increase of 4.4% compared to Q3 2023. Gross margin decreased by 200 basis points to 14.9% for the quarter compared to the prior year. The revenue increase and margin decline resulted from a few large project rollouts in Q3 2024 that were at lower margins. In our enterprise solution segment, Q3 net sales were 297 million, 7.4% higher than a year ago, as we experienced a 14% increase in sales of endpoint devices. Gross profit for the enterprise segment was 46.2 million, 4.4% higher than the prior year quarter. Gross margin decreased by 40 basis points to 15.6% for the quarter. The margin decrease was a result of lower software license fees and product mix. 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?