Q2 2024 PC Connection Inc Earnings Call

July 31, 2024

Good afternoon, and welcome to the second quarter 2024 Connection Earning Conference Call.

Justin: My name is Justin, and I will 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.

Operator: As a reminder, this conference calls the property of connection and may not be recorded or re-barked without any specific permission from the company.

Speaker Change: 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.

Justin: On the call today, our Tim McGrath, President and Chief Executive Officer, and Tom Baker, Senior Vice President and Chief Financial Officer, now turn the call over to the company.

Operator: Justin and I will be the coordinators for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there'll 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.

Timothy McGrath: 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, both 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 made different materially from those indicated by these forward-looking statements.

Samantha Smith: Thank you, operator. And good afternoon, everyone.

Speaker Change: 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.

Samantha Smith: 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.

Speaker Change: 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.

Timothy McGrath: 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 another document 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 its required by law, even if estimates change.

Speaker Change: 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, 2017.

Speaker Change: 2023, which is on file with the Securities and Exchange Commission, as well as other documents that the company files with the Commission from time to time.

Samantha Smith: 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.

Speaker Change: 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.

Speaker Change: While the company may elect update forward-looking statements at some point in the future.

Speaker Change: 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.

Timothy McGrath: And therefore, you should not rely on forward-looking statements as representing management's views as of any date subsequent to today.

Timothy McGrath: 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.connections.com. Please note that, unless otherwise stated, all references to Second Quarter 2024 comparisons are being made against the Second Quarter 2023.

Samantha Smith: 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.connexion.com. Please note that, unless otherwise stated, all references to second quarter 2020 for comparisons are being made against 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.

Speaker Change: 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.connexion.com.

Speaker Change: Please note that unless otherwise stated, all references to second quarter 2020 for comparisons are being made against the second quarter 2023.

Justin: Today's call is being broadcast and will be available on the Connections 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.connections.com.

Speaker Change: Today's call is being webcast and will be available on Connection's website.

Speaker Change: 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.

Timothy McGrath: I would now like to turn the call over to our host and Hemograph President NCEO 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. Connections achieve 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.

Timothy J. McGrath: 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 financial... Connection is expected to achieve 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 staying at the forefront of the technology curve, ensuring that our integrated solutions meet the evolving needs of our customers.

Speaker Change: 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.

Timothy J. McGrath: 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 devices 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.

Speaker Change: 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.

Speaker Change: Connection achieved a record net income and earnings per share of $0.99 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.

Timothy McGrath: 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 and endpoint device revenue of 7%, as some customers began refresh initiatives, which were primarily driven by Windows 11 in some early AI PC adopters. Growth 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.

Thomas C. Baker: We remain committed to stay at the forefront of the technology curve, ensuring that our integrated solutions meet the evolving needs of our customers.

Speaker Change: 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.

Speaker Change: 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%.

Speaker Change: These increases were offset by a 33% decrease in networking solutions.

Timothy J. McGrath: 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 experienced 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.

Speaker Change: If you recall, a year ago, our networking business benefited from the supply chain recovery resulting in a tough compare.

Timothy McGrath: Overall, advanced technology revenue was down 8.7% in Q2 compared to the prior year quarter, while growth profit for advanced technology increased by 4%. While each of our businesses experience growth profit growth in the quarter, our customers continue to be very deliberate and cautious with their IT purchases in this uncertain economic environment.

Speaker Change: Overall, advanced technology revenue was down 8.7 percent in Q2 compared to the prior year quarter, while gross profit for advanced technology increased by 4 percent.

Speaker Change: While each of our businesses experienced gross profit growth in the quarter, our customers continue to be very deliberate and cautious with their IT purchases in this uncertain economic environment.

Timothy McGrath: Now let's discuss our Q2 performance. Consolidated net sales were 736.5 million and increase of 0.4% compared to last year. Growth profit increased 6.9% to 136.5 million. Growth margins were up 112 basis points to 18.5% in Q2 compared to the prior year quarter. Operating a common Q2 was 30.9 million and increase of 23.3% compared to Q2 2023. Operating the income as a percentage of sales was 4.2% compared to 3.4% of net sales in the prior year quarter. Net income in Q2 was a record 26.2 million and an increase of 32.8% compared to 19.7 million in the prior year quarter.

Timothy J. McGrath: 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% of net sales in the prior year quarter. Operating income in Q2 was a record $26.2 million, an increase of 32.8%, compared to $19.7 million in the prior year quarter. In Q2 2024, our diluted earnings per share were $0.99, an increase of 32% from $0.75 in Q2 2023.

Speaker Change: Now let's discuss our Q2 performance.

Speaker Change: 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.

Speaker Change: Gross margins were up 112 basis points to 18.5% in Q2 compared to the prior year quarter.

Speaker Change: Operating income in Q2 was $30.9 million, an increase of 23.3% compared to Q2 2023.

Speaker Change: Operating income as a percentage of sales was 4.2% compared to 3.4% of net sales in the prior year quarter.

Speaker Change: That 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.

Timothy McGrath: In Q2 2024, our diluted earnings per share were 99 cents and increased of 32% from 75 cents in Q2 2023.

Speaker Change: In Q2 2024, our diluted earnings per share were $0.99, an increase of 32% from $0.75 in Q2 2023.

Timothy McGrath: 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. Cost profit for the business solution segment was 66.3 million and an increase of 8.1%. Growth margin increased 34 basis points compared to the prior year quarter to a record 23.8%. Our net sales and growth margins were favorably affected by growth at endpoint device and server sales as well as a shift in customer mix.

Timothy J. McGrath: 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.

Speaker Change: Now we'll look a little deeper into our segment performance.

Speaker Change: 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%.

Speaker Change: Gross Margin increased 34 basis points compared to the prior year quarter to a record 23.8%.

Speaker Change: Our net sales and gross margins were favorably affected by growth at endpoint device and server sales, as well as a shift in customer mix.

Timothy McGrath: 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. Growth's profit for the public sector segment, the $24.1 million, an increase of 3% compared to Q2-23. Growth's 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 Q2-23 that were at low margins and did not repeat in the current year quarter.

Timothy J. McGrath: In our public sector solutions business, Q2 net sales were $159.5 million, 14% lower than a year ago. Sales to state and local governments and education institutions decreased by $17.6 million, while sales to the federal government decreased by $8.3 million.

Speaker Change: In our public sector solutions business, Q2 net sales were $159.5 million.

Speaker Change: 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.

Timothy J. McGrath: 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.

Speaker Change: Gross profit for the public sector segment was $24.1 million, an increase of 3% compared to Q2'23.

Speaker Change: Gross margin increase by 250 basis points to 50.2% for the quarter compared to the prior year.

Speaker Change: 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.

Timothy McGrath: In our enterprise solution segment, Q2 net sales were 298.8 million, 4.1% higher than a year ago, as we experience a 15% increase in sales of endpoint devices. Growth's profit for the enterprise segment was 46.1 million, 7.2% higher than the prior year quarter. Growth's margin increased by 45 basis points to 15.4% for the quarter. The margin improvement was the result of changes in customer mix, and it increased in software sales, including cloud and cyber security recognized on a net basis.

Timothy J. McGrath: 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-based basis. I will now turn the call over to Tom to discuss additional financial highlights from our Income Statement, Balance Sheet, and Cash Flow Statements. Tom?

Speaker Change: In our Enterprise Solutions 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.

Speaker Change: Gross profit for the enterprise segment was $46.1 million, 7.2% higher than the prior year quarter.

Speaker Change: Gross margin increase by 45 basis points to 15.4% for the quarter.

Speaker Change: 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.

Timothy McGrath: I will now turn the call over to Tom to discuss additional financial highlights from our income statement, balance sheet, and cash flow statements.

Speaker Change: [inaudible]

Thomas Baker: Tom, thanks, Tim. SG&A increased by 4.2% compared to the prior year quarter. The increase in SGNA was primarily due to an increase in variable compensation due to higher levels of growth profit in the quarter. On a percentage of sales basis, SGNA increased 52 basis points to 14.3% of net sales in the quarter compared to 13.8% in the prior year. Interesting income for Q2 amounted to 4.7 million compared to 1.9 million last year, an increase of 2.8 million. Our effective tax rate was 26.4%, down from 26.9% last year. That income for the quarter was 26.2 million, an increase of 32.8% from 19.7 million last year, and diluted earnings per share was 99 cents, an increase of 32%.

Thomas C. Baker: Thanks Tim. SG&A increased by 4.2% compared to the prior year quarter. The increase in SG&A was primarily due to an increase in variable compensation due to higher levels of gross profit in the quarter. On a percentage of sales basis, SG&A increased 52 basis points to 14.3% of net sales in the quarter, compared to 13.8% in the prior year. Interest income for Q2 amounted to $4.7 million compared to $1.9 million last year, an increase of $2.8 million. Our effective tax rate was 26.4%, down from 26.9% last year.

Timothy J. McGrath: Thanks, Tim. SG&A increased by 4.2% compared to the prior year quarter. The increase in SG&A was primarily due to an increase in variable compensation due to higher levels of gross profit in the quarter.

Timothy J. McGrath: On a percentage of sales basis, SG&A increased 52 basis points to 14.3% of net sales in the quarter, compared to 13.8% in the prior year.

Timothy J. McGrath: Interest income for Q2 amounted to $4.7 million compared to $1.9 million last year, an increase of $2.8 million.

Timothy J. McGrath: Our effective tax rate was 26.4% down from 26.9% last year.

Thomas C. Baker: Net income for the quarter was $26.2 million, an increase of 32.8% from $19.7 million last year, and diluted earnings per share was $0.99, an increase of 32%. Adjusted earnings per share was $1, an increase of 25.5%.

Timothy J. McGrath: Net income for the quarter was $26.2 million, an increase of 32.8% from $19.7 million last year. And diluted earnings per share was $0.99, an increase of 32%.

Thomas Baker: Adjusted earnings per share was $1, an increase of 25.5%. Our current 12 month adjusted earnings for interest in compacted depreciation and amortization, or adjusted EBITDA, was $125.4 million compared to $120.2 million a year ago, an increase of 4%.

Timothy J. McGrath: Adjusted earnings per share was $1.00, an increase of 25.5%.

Thomas C. Baker: Our current 12-month adjusted earnings before interest, income taxes, depreciation, and amortization, or adjusted EBITDA, was $125.4 million compared to $120.2 million a year ago, an increase of 4%. In terms of returning cash to shareholders, we paid a 10 cents per share quarterly dividend in May, and we repurchased shares having an aggregate purchase price of $3.6 million in the quarter at an average price of $64.14 per share. As of June 30, 2024, we had $68.5 million remaining for stock repurchases under our existing repurchase program.

Timothy J. McGrath: Our trailing 12-month adjusted earnings before interest, income taxes, depreciation, and amortization, or adjusted EBITDA, was $125.4 million compared to $120.2 million a year ago, an increase of 4%.

Thomas Baker: In terms of returning cash to shareholders, we paid a 10% per share quarterly dividend in May and we repurchased shares having an aggregate purchase price of $3.6 million in the quarter at an average price of $64.14 per share. As of June 30, 2024, we had $68.5 million remaining for stock repurchases under our existing repurchase program. Today we announced that our Board of Directors has declared a quarterly dividend of 10 cents per share. The dividend is payable to shareholders of record on August 13, 2024, and payable on August 30, 2024. Tax flow generated from operations for the first half of 2024 was 95.7 million.

Timothy J. McGrath: In terms of returning cash to shareholders, we paid a 10 cent per share quarterly dividend in May and we repurchased shares having an aggregate purchase price of $3.6 million in the quarter at an average price of $64.14 per share.

Timothy J. McGrath: As of June 30, 2024, we had $68.5 million remaining for stock repurchases under our existing repurchase program.

Thomas C. Baker: Today we announce that our Board of Directors has declared a quarterly dividend of 10 cents per share. The dividend will be payable to shareholders of record on August 13, 2024, and will be paid on August 30, 2024. The tax bill generated from operations for the first half of 2024 was 95.7 million. Our accounts receivable balance decreased $7.6 million for the first half of 2024, and our DSO remained at 68 days, while our inventory balance increased $12.4 million for the first half of 2024.

Timothy J. McGrath: Today we announce that our Board of Directors has declared a quarterly dividend of 10 cents per share. The dividend is payable to shareholders of record on August 13, 2024 and payable on August 30, 2024.

Timothy J. McGrath: Tax bill generated from operations for the first half of 2024 was $95.7 million.

Thomas Baker: Our accounts receivable balance decreased 7.6 million for the first half of 2024, and our DSO remained at 68 days, while our inventory balance increased 12.4 million for the first half of 2024. Our accounts payable balance increased 53.2 million for the first half of 2024, largely due to the timing of payments at the end of the quarter. Cash used an investing activity of 103.4 million was a result of 203.3 million of investment purchases offset by 103.3 million of investment maturities. We used 9 million of cash for financing activities during the first half of 2024, consisting primarily of payments of 5.3 million of different shareholders and 3.6 million of stock repurchases.

Timothy J. McGrath: Our accounts receivable balance decreased $7.6 million for the first half of 2024, and our DSO remained at 68 days, while our inventory balance increased $12.4 million for the first half of 2024.

Thomas C. Baker: Our accounts payable balance increased $53.2 million for the first half of 2024, largely due to the timing of payments at the end of the quarter. Cash used in investing activities of $103.4 million was a result of $203.3 million of investment purchases offset by $103.3 million of investment maturities. We used 9 million of cash for financing activities during the first half of 2024, consisting primarily of payments of 5.3 million of dividends to shareholders and 3.6 million of stock repurchase.

Timothy J. McGrath: Our accounts payable balance increased $53.2 million for the first half of 2024, largely due to timing of payments at the end of the quarter.

Timothy J. McGrath: Cash used in investing activities of $103.4 million was a result of $203.3 million of investment purchases offset by $103.3 million of investment maturities.

Timothy J. McGrath: We used $9 million of cash for financing activities during the first half of 2024, consisting primarily of payments of $5.3 million of dividends to shareholders and $3.6 million of stock repurchases.

Thomas Baker: We ended Q2 with 385.8 million of cash, cash equivalence, and short-term investments.

Thomas C. Baker: We ended Q2 with $385.8 million of cash, tax equivalents, and short-term investments. In terms of capital allocation, we remain committed to growing our business and have an ongoing program focused on investing in both organic and inorganic growth opportunities. Furthermore, as announced above, we have continued to return cash to shareholders in the form of a quarterly dividend and plan to continue to repurchase stock in a disciplined manner. I will now turn the call back over to Tim to discuss current market trends. Thanks, Tom.

Timothy J. McGrath: We ended Q2 with $385.8 million of cash, cash equivalents, and short-term investment.

Thomas Baker: In terms of capital allocation, we remained committed to growing our business and have an ongoing program focused on investing in both organic and inorganic growth opportunities. Furthermore, as announced above, we have continued to return cash to shareholders in the form of quarterly dividend and plan to continue to repurchase stock in a disciplined manner.

Timothy J. McGrath: In terms of capital allocation, we remain committed to growing our business and have an ongoing program focused on investing in both organic and inorganic growth opportunities.

Timothy J. McGrath: Furthermore, as announced above, we have continued to return cash to shareholders in the form of a quarterly dividend and plan to continue to repurchase stock in a disciplined manner.

Timothy McGrath: I will now turn the call back over to Tim to discuss current market trends. Thanks, Tom. During the quarter, we saw a strong growth in several of our vertical markets. Manufacturing revenue increased 13% year-over-year. Software and point devices, networking and cybersecurity, continue to be a heavy focus for manufacturers as they look for productivity gains while keeping their businesses secure. Health care revenue increased 4% year-over-year, driven by major software and system upgrades in our customer base. Financial services increased revenue 15% year-over-year in part to address flexibility and interoperability between IT systems. In our solutions business, we continue to make progress as a result of our ongoing investments in technology, talent, and tools, which resulted in strong growth in cloud, cybersecurity, and our managed services.

Timothy J. McGrath: Thanks, Tom. During the quarter, we saw strong growth in several of our vertical markets. Manufacturing revenue increased 13% year over year. Software and point devices, networking, and cybersecurity continue to be a heavy focus for manufacturers as they look for productivity gains while keeping their businesses secure. Healthcare revenue increased 4% year over year, driven by major software and system upgrades in our customer base. Financial services revenue increased 15% year over year, in part to address flexibility and interoperability between IT systems.

Timothy J. McGrath: I will now turn the call back over to Tim to discuss current market trends.

Timothy J. McGrath: Thanks, Tom. During the quarter, we saw strong growth in several of our vertical markets.

Timothy J. McGrath: Manufacturing revenue increased 13% year over year. Software and point devices, networking and cybersecurity continue to be a heavy focus for manufacturers as they look for productivity gains while keeping their businesses secure.

Timothy J. McGrath: Healthcare revenue increased four percent year-over-year driven by major software and system upgrades in our customer base.

Timothy J. McGrath: Financial services increase revenue 15% year-over-year in part to address flexibility and interoperability between IT systems.

Timothy J. McGrath: In our solutions business, we continue to make progress as a result of our ongoing investments in technology, talent, and tools, which resulted in strong growth in cloud, cybersecurity, and our managed services. AI is an important area of investment as a majority of our customers are evaluating their AI strategy. We continue to strengthen our AI capabilities through the Connection Helix initiative, as a central element of our go-to-market strategy. We're actively delivering AI workshops to our customers to help them with their AI journey.

Timothy McGrath: AI is an important area of investment, as a majority of our customers are evaluating their AI strategy. We continue to strengthen our AI capabilities through the Connection Helix initiative. As a central element of our go-to-market strategy, we're actively delivering AI workshops to our customers to help them with their AI journey. Furthermore, the Connection Helix team is crafting a targeted approach for the SMV sector, which presents exciting long-term growth opportunities, underscoring our commitment to the success and ongoing development of the Connection Helix program. We are also pleased that in Q2, for the third consecutive year, Connection was recognized on Newsweek with the Most Trustworthy Companies in America for outstanding customer, investor, and employee trust.

Timothy J. McGrath: AI is an important area of investment as a majority of our customers are evaluating their AI strategy.

Timothy J. McGrath: We continue to strengthen our AI capabilities through the Connection Helix Initiative.

Timothy J. McGrath: As a central element of our go-to-market strategy, we're actively delivering AI workshops to our customers to help them with their AI journey.

Timothy J. McGrath: Furthermore, the Connection Helix team is crafting a targeted approach for the SMB sector, which presents exciting long-term growth opportunities, underscoring our commitment to the success and ongoing development of the Connection Helix program. We are also pleased that, in Q2, for the third consecutive year, Connection was recognized on Newsweek's list of the most trustworthy companies in America for outstanding customer, investor, and employee trust.

Timothy J. McGrath: We are also pleased that in Q2, for the third consecutive year, Connection was recognized on Newsweek's list of the Most Trustworthy Companies in America for Outstanding Customer, Investor, and Employee Trust.

Timothy McGrath: We were recognized as a ServiceNow 2024 America's Reseller Partner of the Year as a result of driving sales of platform products in packaged ServiceNow, professional services in the enterprise market. We believe that we may be entering the beginning stages of the device refresh cycle based on our Q2 growth, as well as discussions with several of our OEM partners. As a result, we believe that device demand will improve modestly for the balance of the year. We expect aggregate IT demand to be impacted by cautious investment in infrastructure due to uncertainty with the macroeconomic backdrop, as well as concerns about this being an election year.

Timothy J. McGrath: We were recognized as a ServiceNow 2024 America's Reseller Partner of the Year as a result of driving sales of platform products and packaged ServiceNow professional services in the enterprise market. We believe that we may be entering the beginning stages of the device refresh cycle based on our Q2 growth, as well as discussions with several of our OEM partners. As a result, we believe that device demand will improve modestly for the balance of the year.

Timothy J. McGrath: We believe that we may be entering the beginning stages of the device refresh cycle based on our Q2 growth, as well as discussions with several of our OEM partners.

Timothy J. McGrath: As a result, we believe that device demand will improve modestly for the balance of the year.

Timothy J. McGrath: We expect aggregate IT demand to be impacted by cautious investment in infrastructure due to uncertainty about the macroeconomic backdrop, as well as concerns about this being an election year. In terms of profitability, the device refresh and the anticipated change in product mix are likely to produce downward pressure on gross margin.

Timothy J. McGrath: We expect aggregate IT demand to be impacted by cautious investment in infrastructure due to uncertainty with the macroeconomic backdrop, as well as concerns about this being an election year.

Timothy McGrath: In terms of profitability, the device refresh and the anticipated change in product mix is likely to produce downward pressure on gross margins. As a result for the balance of 2024, we expect that we'll see modest improvements in our performance, and we are confident that we can outperform the IT market rate of growth by 200 basis points. Our focus and business strategy we made well aligned with the shifting dynamics of how customers deploy, utilize, and consume technology. We continue to connect our customers with technology that enhances growth, elevates productivity, and empowers innovation. We help our customers expertly navigate through our complex set of choices within the technology landscape.

Timothy J. McGrath: In terms of profitability, the device refresh and the anticipated change in product mix is likely to produce downward pressure on gross margins.

Timothy J. McGrath: As a result, for the balance of 2024, we expect that we'll see modest improvements in our performance, and we are confident that we can outperform the IT market rate of growth by 200 basis points. Our focus and business strategy remain well aligned with the shifting dynamics of how customers deploy, utilize, and consume technology. We continue to connect our customers with technology that enhances growth, elevates productivity, and empowers innovation. We help our customers expertly navigate through a complex set of choices within the technology landscape.

Timothy J. McGrath: Our focus and business strategy remain well aligned with the shifting dynamics of how customers deploy, utilize, and consume technology.

Timothy J. McGrath: We continue to connect our customers with technology that enhances growth, elevates productivity, and empowers innovation.

Timothy J. McGrath: We help our customers expertly navigate through a complex set of choices within the technology landscape.

Timothy McGrath: We help calm the confusion of IT for our customers. We know that in this complex world of technology, change happens and expertise wins.

Timothy J. McGrath: We help calm the confusion of IT for our customers. We know that in this complex world of technology, change happens, and expertise wins. On that note, I'd like to take a moment to thank our extremely dedicated and valued employees for their continued and extraordinary efforts in this rapidly changing environment. I will now entertain your questions. Operator.

Timothy J. McGrath: We help calm the confusion of IT for our customers.

Timothy J. McGrath: We know that in this complex world of technology, change happens and expertise wins.

Timothy McGrath: On that note, I'd like to take a moment to thank our extremely dedicated and valued employees for their continued and extraordinary efforts during this rapidly changing environment.

Timothy J. McGrath: On that note, I'd like to take a moment to thank our extremely dedicated and valued employees for their continued and extraordinary efforts during this rapidly changing environment.

Timothy McGrath: We'll now entertain your questions. Operator, thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by. We'll compile the Q&A roster, and one moment for our first question. And our first question comes from Adam Tindle from Raymond James. Your line is not open. Okay, thanks. Good afternoon, Tim. I wanted to start with that comment down. See the beginning stages of the device refresh.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster, and our first question comes from Adam Tindle from Raymond James. Your line is now open.

Speaker Change: will now entertain your questions.

Timothy J. McGrath: Operator.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Please stand by while we compile the Q&A roster.

Speaker Change: And one moment for our first question.

Adam Tyler Tindle: Okay, thanks. Good afternoon, Tim.

Speaker Change: And our first question comes from Adam Tindle from Raymond James. Your line is now open.

Timothy J. McGrath: I wanted to start with that comment there on seeing the beginning stages of the device refresh. I was wondering if you could maybe share a little bit more color, whether that's from the OEMs or the customers on, you know, why that is materializing now or what's underpinning your belief. Any metrics like your pipeline that might be kind of quantitatively supporting quantitatively on that. And then maybe for Tom, in light of this, understand that there's going to be a close margin headwind on NICs related to this. But for gross profit dollar growth, I think for the year, it was kind of a low single-digit expectation prior to this. How would you update that now? Thanks.

Adam Tyler Tindle: Okay, thanks. Good afternoon, Tim. I wanted to start with that comment there on seeing the beginning stages of the device refresh. I was wondering if you could maybe share a little bit more color, whether that's from the OEMs and or the customers, on why that is materializing now or what's underpinning your belief.

Timothy McGrath: So we're going to give you to share a little bit more color, whether that's from the OEMs and or the customers on, you know, why that is materializing now or what's underpinning your belief. Any metrics like your pipeline that might be kind of supporting quantitatively on that. And then maybe for Tom in light of this, understand that there's going to be a close margin headwind on X related to this, but for gross profit dollar growth, I think for the year it was kind of a low single digit expectation prior to this. How would you update that now?

Speaker Change: any metrics like your pipeline that might be kind of supporting quantitatively on that.

Speaker Change: And then maybe for Tom, in light of this.

Thomas C. Baker: understand that there's going to be a close margin headwind on VIX related to this.

Thomas C. Baker: But for gross profit dollar growth, I think for the year, it was kind of a low single-digit expectation.

Timothy McGrath: Thanks. Well, Adam, thanks and appreciate the question. So I'll start. We'll talk a little bit about the device refresh that we mentioned. So we are starting to see the device refresh primarily around Windows 11 take hold. And the question that so many people want to know is how much of that device refresh is purely Windows 11 refresh and how much is AI PC based? And the reality is a very little of it is AI PC-based. You know, around 10% of our sales are AI PCs in the device market, but that doesn't mean that those customers are using them in an AI application.

Timothy J. McGrath: Well, Adam, thanks, and I appreciate the question. So I'll start, we'll talk a little bit about the device refresh that we mentioned. So we are starting to see the device refresh primarily around Windows 11 take hold. And, you know, the question that so many people want to know is, how much of that device refresh is purely Windows 11 refresh?

Thomas C. Baker: prior to this. How would you update that now? Thanks.

Thomas C. Baker: Well...

Speaker Change: Adam, thanks and I appreciate the question. So, I'll start, we'll talk a little bit about the device refresh that we mentioned.

Speaker Change: So we are starting to see the device refresh primarily around Windows 11 take hold.

Speaker Change: The question that so many people want to know is how much of that device refresh is purely Windows 11 refresh and how much is AI PC based?

Timothy J. McGrath: And how much of it is AI PC based? And the reality is, very little of it is AI PC based. You know, around 10% of our sales are AI PCs in the device market, but that doesn't mean that those customers are using them in an AI application. In some cases, they're just looking ahead to applications in the future. And we do work closely with our OEM partners, and they continue to believe that as the next generation PCs are available toward the end of 2024 and the early parts of 2025, there will then be a much bigger adoption and pickup in that device market that would be AI PC driven.

Speaker Change: and the reality is a very little of it is AI PC based.

Speaker Change: Around 10% of our sales are AI PCs in the device market, but that doesn't mean that those customers are using them in an AI application. In some cases, they're just forward-looking for applications in the future.

Timothy McGrath: In some cases, they're just forward looking for applications in the future. And we do work closely with our OEM partners, and they continue to believe that as the next generation PCs are available toward the end of 2024 and the early parts of 2025, it will then see a much bigger adoption and pick up in that device market that would be AI PC driven. So today we are seeing some early adopters, but that next gen technology will really drive much greater adoption in the future. In terms of our funnels across the business, I'd say probably enterprise is seeing the most traction right now in terms of funnel and forecast pickup for very large projects.

Speaker Change: And we do work closely with our OEM partners, and they continue to believe that as the next generation PCs are available toward the end of 2024 and the early parts of 2025, that we'll then see a much bigger adoption and pickup in that device market that would be AI PC driven.

Speaker Change: So today we are seeing some early adopters, but that next-gen technology will really drive much greater adoption in the future.

Timothy J. McGrath: So today we are seeing some early adopters, but next-gen technology will really drive much greater adoption in the future. In terms of our funnels across the business, I'd say probably enterprise is seeing the most traction right now in terms of funnel and forecast pickup for very large projects. We also are bullish on our public sector business, knowing that we had a rough Q2, but we're anticipating a better Q3. And then finally, our business solutions team is really consistently performing well. And we expect that for the balance of 2024, they'll continue to perform that way.

Speaker Change: In terms of our funnels across the business, I'd say probably enterprise is seeing the most traction right now in terms of funnel and forecast pickup for very large projects.

Timothy McGrath: We also are bullish on our public sector business, knowing that we had a rough Q2, but we're anticipating a better Q3. And then finally, our business solutions team is really consistently performing well, and we expect for the balance of 2024 to continue to perform that way. So, Adam's in terms of growth, I think we're still in the low single digits, maybe mid single digits, in terms of GP growth, you know, for the year. You know, as you heard in the first part of our remarks, our endpoint device is rough 7% and revenue 27% and GP.

Speaker Change: We also are bullish on our public sector business, knowing that we had a rough Q2, but we're anticipating a better Q3. And then finally, our

Thomas C. Baker: Tom?

Speaker Change: Our business solutions team is really consistently performing well, and we expect for the balance of 2024, they'll continue to perform that way. Tom?

Thomas C. Baker: So Adams, in terms of gross profit growth, I think we're still in the low single digits, maybe mid single digits. In terms of GP growth, you know, for the year. You know, as you heard in the first part of our remarks, our device, or endpoint devices, were up 7% in revenue and 27% in GP. So that was a pretty good headwind for the quarter that I'm frankly not sure is gonna persist through the balance of the year. So that's tempering our expectations on GP growth a little bit. I'm not sure we're gonna hold that for the balance of the year.

Thomas C. Baker: So Adams, in terms of gross profit growth, I think we're still in the low single digits, maybe mid-single digits in terms of GP growth for the year.

Speaker Change: You know, as you heard in the first part of our remarks,

Thomas C. Baker: Our end point devices were up 7% in revenue and 27% in GP.

Timothy McGrath: So, that was a pretty good headwind to the quarter that I'm frankly not sure is going to persist through the balance of the year. So, that's what's tempering our expectations on GP growth a little bit. I'm not sure we're going to hold that, you know, for the balance of the year. Okay, that makes sense.

Thomas C. Baker: So, that was a pretty good headwind for the quarter that I'm frankly not sure is going to persist through the balance of the year. So that's what's tempering our expectations on GP growth a little bit. I'm not sure we're going to hold that for the balance of the year.

Thomas C. Baker: Okay, that makes sense. And maybe below the GP line, Tom, you've obviously done a nice job driving operating leverage. How about the trajectory from here? Obviously, some indications that the environment is getting better could make the argument that it might be time to make some additional investments, just how you're thinking about balancing operating leverage versus investments at this point and what that means for the operating margin going forward.

Thomas Baker: And maybe below the GP line, Tom, you've obviously done a nice job driving operating leverage. How about the trajectory from here? Obviously, some indications that the environment is getting better could make the argument that it might be time to make some additional investments. Just how you're thinking about balancing operating leverage versus investments at this point and what that means for the operating margin going forward. So, we, I think reasonably discipline to try very hard as we go through the past couple quarters looking at our investments, we continue to put a significant amount of capital into our services and solutions business and we're just trying to fund it by cutting other areas.

Thomas C. Baker: Okay, that makes sense. And maybe below the GP line, Tom, you've obviously done a nice job driving operating leverage.

Speaker Change: How about the trajectory from here, obviously, some indications that the environment is getting better. Could make the argument that it might be time to make some additional investments. Just how you're thinking about balancing operating leverage versus investments at this point, and what that means for the operating margin going forward.

Thomas C. Baker: So we have, I think, been reasonably disciplined and tried very hard. As we go through the past couple of quarters looking at our investments, we continue to put a significant amount of capital into our services and solutions business, and we're just trying to fund it by cutting other areas. So I think we've been pretty good about investing as we go along. I think for the next quarter or two, you'll see a little bit of a tick up in SG&A, although, So I think we're on track with our investment plan, and I think we can, you know, continue on the trajectory we're at.

Speaker Change: So we have, I think, reasonably disciplined and tried very hard.

Speaker Change: As we go through the past couple quarters, looking at our investments, we continue to put a significant amount of capital into our services and solutions business, and we're just trying to fund it by cutting other areas.

Thomas Baker: So, I think we've been pretty good about investing as we go along. I think, you know, for the next quarter or two, you'll see a little bit of a pickup in SG&A, although the rates should come down a little bit, especially if the revenues improve some. So, I think we're on track with our investment plan, and I think we can, you know, continue to about the trajectory we're at. Very helpful. Thank you very much. Thank you. And thank you. And one moment for our next question. And our next question comes from Anthony Lebedinsky from Stodolian Company.

Speaker Change: So, I think we've been pretty good about investing as we go along. I think, you know, for the next quarter or two, you'll see a little bit of a tick up in SG&A, although the rate should come down a little bit, especially if the revenues improve some.

Speaker Change: So I think we're on track with our investment plan, and I think we can continue about the trajectory we're at.

Adam Tyler Tindle: Very helpful. Thank you very much.

Speaker Change: Very helpful. Thank you very much.

Operator: and thank you. And one moment for our next question. And our next question comes from Anthony Lebiedzinski from Thodolian Company. Your line is now open.

Speaker Change: Thank you.

Speaker Change: And thank you.

Speaker Change: And one moment for our next question.

Anthony Lebiedzinski: Your line is now open. Good afternoon, and thank you for taking the questions. So, I guess, you know, first of all, you're just curious. Can you comment on the trends that you saw throughout the quarter and kind of early education as far as Q3, how that started here for you? Yeah, so Anthony, when I look at the linearity in the order, we're kind of about 35% in June, which is down a couple of points from what we've been the past two years, about like 37%. And the thing that happened within the, within the month of June, believe it or not, you know, the first couple, three weeks were pretty...

Speaker Change: And our next question comes from Anthony Lebiedzinski from Thodolian Company. Your line is now open.

Anthony Chester Lebiedzinski: Good afternoon, and thank you for taking the questions. So I guess, you know, first, I'm just curious, can you comment on the trends that you saw throughout the quarter and the kind of early indication as far as Q3 is concerned, how that started here for you?

Anthony Chester Lebiedzinski: Good afternoon and thank you for taking the questions.

Anthony Chester Lebiedzinski: So, I guess, you know, first, I'm just curious, can you comment on the trends that you saw throughout the quarter and kind of any early indication as far as Q3, how that started here for you?

Thomas C. Baker: Yes, Lampley. When I look at the linearity in the quarter, we're kind of about 35% in June, which is down a couple of points from what we've been the past two years. We've got like 37%. And, and the thing that happened within the month of June, believe it or not, the first couple of three weeks were pretty, We're a little bit tough. And then our last week of the quarter, we actually shipped about 30% more than we did in the same last seven days last year. So we did see a spike at the end of the quarter, which was, you know, we're glad to have it, to be honest with you, but it was a little bit unexpected.

Anthony Chester Lebiedzinski: Yeah, so Anthony...

Speaker Change: When I look at the linearity in the quarter, we're kind of about 35% in June , which is down a couple of points from what we've been the past two years, we've got like 37%.

Speaker Change: And the thing that happened within the month of June , believe it or not, you know, the first couple, three weeks were pretty...

Timothy McGrath: We're a little bit tough. And then our last week of a quarter, we actually shipped about 30% more than we did in the same last seven days last year. So we did see a spike at the end of the quarter, which was, you know, we're glad to have it, to be honest with you, but it was a little bit unexpected. Okay. And as far as Q3 so far, July, I mean, any comments there as far as what you're seeing. Anthony, so Q3 is historically a strong quarter for us. And you know, we think we're firing on all cylinders there.

Speaker Change: We're a little bit tough.

Speaker Change: And then our last week of the quarter, we actually shipped about 30% more than we did in the same last seven days last year. So we did see a spike at the end of the quarter, which was, you know, we're glad to have it, to be honest with you, but it was a little bit unexpected.

Thomas C. Baker: Okay. And as far as Q3 so far, July, I mean, any comments there as far as what you're seeing?

Speaker Change: Okay, and as far as Q3 so far, July , I mean, any comments there as far as what you're seeing?

Timothy J. McGrath: Anthony, so Q3 is historically a strong quarter for us, and you know we think we're firing on all cylinders there. Obviously, in a tough macro environment, we want to be cautious and tempered with our forecast, but we are seeing large projects come in the funnel. We're also seeing good projects with our public sector business and kind of steady as she goes with our business solutions team. So for Q3, as I think you've been hearing in our competitive landscape, we do expect the second half of 24 to be better than the first half.

Speaker Change: Anthony, so Q3 is historically a strong quarter for us, and

Timothy McGrath: Obviously, in a tough macro environment, we want to be cautious and tempered with our forecast. But we are seeing on the enterprise large projects come in to the funnel. We're seeing also good projects with our public sector business in kind of steady as she goes with our business solutions team. So for Q3, as I think you've been hearing in our competitive landscape, we do expect a second half of 24 to be better than the first half. We do expect some improvement in Q3 over Q2 sequentially, which is very common for our business. And we're optimistic that we're not calling this quite an inflection point yet.

Anthony Chester Lebiedzinski: We think we're firing on all cylinders there, obviously in a tough macro environment. We want to be cautious and tempered.

Speaker Change: with our forecast.

Anthony Chester Lebiedzinski: What we are seeing on the enterprise...

Unknown Speaker: Unknown Speaker We have seen large projects come into the funnel. We're seeing also good projects with our public sector business.

Speaker Change: and kind of steady as she goes with our business solutions team.

Speaker Change: So for Q3...

Speaker Change: As I think you've been hearing.

Speaker Change: in our competitive landscape.

Timothy J. McGrath: We do expect some improvement in Q3 over Q2 sequentially, which is very common for our business, and you know we're optimistic that We're not calling this quite an inflection point yet, but we are starting to see device refresh come into the picture. And that certainly is a welcome change.

Speaker Change: We do expect the second half of 24 to be better than the first half. We do expect some improvement in Q3 over Q2 sequentially, which is very common for our business.

Speaker Change: And, you know, we're optimistic that, you know, we're not calling this quite an inflection point yet, but we are starting to see device refresh come into the picture, and that certainly is a welcome change.

Timothy McGrath: But we are starting to see device refreshes come into the picture. And that certainly is a welcome change. Gotcha. Yeah, that's good to hear.

Timothy J. McGrath: Gotcha. Yeah, that's good to hear. And then, you know, as far as, you know, just recent events, you know, just curious, you know, with the issues with the crowd strike, was that positive or negative for you in terms of your work with your clients?

Timothy McGrath: And then, as far as just recent events, you know, just curious, you know, with the issues with CrowdStrike, was that a positive or negative for you in terms of your work with your clients? So thanks. So we do self CrowdStrike. And we were not affected as a company; however, several of our clients were. And it turned out to be a great opportunity for us to support them with their needs. And in most cases, the fix was provided by CrowdStrike working with Microsoft. So we could provide bodies, you know, hands and feet on the ground to help them.

Speaker Change: Gotcha. Yeah, that's good to hear. And then, you know, as far as, you know, just...

Speaker Change: Recent events, you know, I'm just curious, you know, with the issues with CrowdStrike, was that a positive or negative for you in terms of your work with your clients?

Timothy J. McGrath: So thanks. So we do own CrowdStrike, and we were not affected as a company, however, several of our clients were, and it turned out to be a great opportunity for us to support them with their needs. And in most cases, the fix was provided by CrowdStrike working with Microsoft so we could provide bodies, you know, hands and feet on the ground to help them, and in some cases, setting up 24-hour call centers to help walk customers through the changes needed. So it was an opportunity for us to help our customers in that regard. A very tragic event was good for us in that we were able to help our customers.

Speaker Change: So thanks. So we do sell CrowdStrike and we were not affected as a company, however, several of our clients were, and it turned out to be a great opportunity for us to support them with their needs. And in most cases, the fix was provided by CrowdStrike.

Speaker Change: working with Microsoft so we could provide bodies you know hands and feet on the ground to help them and in some cases setting up 24-hour call centers to help walk

Timothy McGrath: And in some cases, setting up 24-hour call centers to help walk customers through the changes needed. So it was an opportunity for us to help our customers in that regard. You know, a very tragic event was good for us in that we were able to help our customers. That's that’s good to hear. So, yeah, you comment on also on the device refresh cycle picking up here. You know, as far as other areas of your business, you know, software was up 7%; servers and storage up 19% in the quarter. You know, for those two, I mean, how do you think about the sustainability of that going forward here?

Speaker Change: customers through the changes needed. So it was an opportunity for us to help our customers in that regard, you know, a very tragic event was good for us in that we were able to help our customers.

Timothy J. McGrath: That's good to hear. So yeah, you comment on the device refresh cycle picking up here, you know, as far as you know, other areas of your business, software was up 7%, servers, and storage up 19% in the quarter. You know, for those two, I mean, how do you think about the sustainability of that going forward here?

Speaker Change: That's good to hear. So yeah, you commented also on the device refresh cycle, picking up here, you know, as far as, you know, other areas of your business, you know, software was up 7%, servers and storage up 19% in the quarter.

Speaker Change: You know for those two, I mean, how do you think about the sustainability of that going forward here?

Timothy McGrath: Yeah, I think, especially in the enterprise business, you know, we're seeing a lot of activity, but we're very, it's very unclear as to, you know, when they actually start cutting POs. So, you know, I think it's going to be a function of what the overall spending environment does. I think we're, you know, well positioned when it happens. We're just waiting for the budget to cut loose. And that's why we're a little bit tempered on, you know, what we think is going to happen with the infrastructure business. Gotcha. Okay. All right. Well, that's all I had.

Thomas C. Baker: Yeah, I think, especially in the enterprise business, we're seeing a lot of activity, but it's very, it's very unclear as to when they'll actually start cutting POs. So, you know, I think it's going to be a function of what the overall spending environment does. I think we're, you know, well positioned when it happens. We're just waiting for the budget to be cut loose, and that's why we're a little bit tempered on even what we think is going to happen with the infrastructure business.

Speaker Change: Yeah, I think, especially in the enterprise business, you know, we're seeing a lot of activity, but we're very, it's very unclear as to, you know, when they actually start cutting POs. So,

Speaker Change: I think it's going to be a function of what the overall spending environment does. I think we're well positioned when it happens. We're just waiting for the budget to cut loose, and that's why we're a little bit tempered on what we think is going to happen with the infrastructure business.

Anthony Chester Lebiedzinski: Gotcha. Okay. All right. Well, that's all I had. Thanks very much and best of luck.

Timothy McGrath: Thanks very much. And best of luck. Thank you. And thank you. And I'm showing no further questions.

Speaker Change: Gotcha. Okay. All right. Well, that's all I had. Thanks very much and best of luck.

Operator: And thank you. And I'm showing no further questions. I would now like to turn the call back over to Tim McGrath for closing remarks.

Timothy McGrath: I would not like to turn the call back over to Tim McGrath for closing remarks. Thank you, Justin. I'd like to thank all of our customers, vendor partners, and shareholders for their continued support. And once again, our co-workers for their efforts and extraordinary dedication. I'd also like to thank those of you listening to our call this afternoon. Your time and interest in connection are appreciated.

Speaker Change: And thank you. And I'm showing no further questions. I would now like to turn the call back over to Tim McGrath for closing remarks.

Timothy J. McGrath: Thank you, Justin. I'd like to thank all of our customers, vendor partners, and shareholders for their continued support, and, once again, our co-workers for their efforts and extraordinary dedication. I'd also like to thank those of you listening to our call this afternoon. Your time and interest in Connection are appreciated. Have a great evening.

Timothy J. McGrath: Thank you, Justin. I'd like to thank all of our customers, vendor partners, and shareholders for their continued support, and once again, our co-workers for their efforts and extraordinary dedication.

Timothy J. McGrath: I'd also like to thank those of you listening to our call this afternoon. Your time and interest in Connection are appreciated. Have a great evening.

Justin: Have a great evening. Thank you.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you very much. Thank you.

Speaker Change: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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