PC Connection Q4 2025 PC Connection Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 PC Connection Inc Earnings Call
Operator: Good afternoon, and welcome to the Q4 2025 Connection Earnings Conference Call. My name is Lisa, and I will be the coordinator for the call 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 a property of Connection and may not be recorded or rebroadcast without 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 will now turn the call over to the company. Please go ahead.
Operator: Good afternoon, and welcome to the Q4 2025 Connection Earnings Conference Call. My name is Lisa, and I will be the coordinator for the call 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 a property of Connection and may not be recorded or rebroadcast without 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 will now turn the call over to the company. Please go ahead.
Speaker #1: 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.
Speaker #1: On the call today are Timothy McGrath, President and Chief Executive Officer, and Thomas Baker, Senior Vice President and Chief Financial Officer. I will now turn the call over to the company.
Samantha Smith: Thank you, operator, and good afternoon, everyone. I'll 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, 2024, 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.
[Company Representative] (Connection): Thank you, operator, and good afternoon, everyone. I'll 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, 2024, 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.
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.
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. 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 Q4 2025 comparisons are being made against the Q4 2024.
[Company Representative] (Connection): 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 Q4 2025 comparisons are being made against the Q4 2024.
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, 2024, 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 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
Samantha Smith: 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?
[Company Representative] (Connection): 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?
24.
Today's call is being webcast and will be available on 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.connection.com
I would now like to turn the call over to our host Tim McGrath, president and CEO.
Tim McGrath: Thank you, Samantha. Good afternoon, everyone, and thank you for joining us today for Connection's Q4 2025 Conference Call. I'll begin this afternoon with an overview of our fourth quarter results and highlights of our performance. Tom will then walk us through a more detailed look at our financials. I'm pleased to share that in the fourth quarter, we delivered record gross profit in our business solutions and enterprise solutions segments, as they each performed above our expectations. The results in our public sector segment were disappointing and below prior year levels. This was primarily due to a non-repeating project that straddled both Q4 2024 and Q1 2025. In addition, there was a delay in several K-12 project rollouts.
Tim McGrath: Thank you, Samantha. Good afternoon, everyone, and thank you for joining us today for Connection's Q4 2025 Conference Call. I'll begin this afternoon with an overview of our fourth quarter results and highlights of our performance. Tom will then walk us through a more detailed look at our financials. I'm pleased to share that in the fourth quarter, we delivered record gross profit in our business solutions and enterprise solutions segments, as they each performed above our expectations. The results in our public sector segment were disappointing and below prior year levels. This was primarily due to a non-repeating project that straddled both Q4 2024 and Q1 2025. In addition, there was a delay in several K-12 project rollouts.
Tim.
Thank you, Samantha. Good afternoon, everyone. And thank you for joining us today for connections Q4 2025 conference call.
I'll begin this afternoon with an overview of our fourth quarter results and highlights of our performance.
Tom will then walk us through a more detailed look at our financials.
I'm pleased to share that in the fourth quarter, we delivered record growth profits in our business solutions and Enterprise Solutions segments,
As they each performed above our expectations.
The results in our public sector, segments were disappointing. And Below prior year levels, this was primarily due to a non- repeating project that straddled, both Q4 2024 and q1 2025.
Tim McGrath: The strong execution across our business solutions and enterprise solutions segments drove gross profit performance, led by growth in software, including cloud and security, and supported by steady growth for endpoint devices. These results underscore the strength of our strategy, delivering higher value solutions, driving long-term customer relationships, and executing with consistency and discipline. Beginning this quarter, we are disclosing gross billings, which represents the total dollar value of goods and services billed during the period, net of customer returns and credit memos, and any applicable sales or other taxes, and also includes agency fees and freight. Gross billings increased by 2.9% to $1.06 billion, compared to $1.03 billion from the prior year. The increase in gross billings demonstrates the overall growth in customer demand despite the headwinds experienced in the public sector. Now I'd like to highlight our consolidated performance.
Tim McGrath: The strong execution across our business solutions and enterprise solutions segments drove gross profit performance, led by growth in software, including cloud and security, and supported by steady growth for endpoint devices. These results underscore the strength of our strategy, delivering higher value solutions, driving long-term customer relationships, and executing with consistency and discipline. Beginning this quarter, we are disclosing gross billings, which represents the total dollar value of goods and services billed during the period, net of customer returns and credit memos, and any applicable sales or other taxes, and also includes agency fees and freight. Gross billings increased by 2.9% to $1.06 billion, compared to $1.03 billion from the prior year. The increase in gross billings demonstrates the overall growth in customer demand despite the headwinds experienced in the public sector. Now I'd like to highlight our consolidated performance.
In addition, there was a delay in several K-12 project rollouts.
The strong execution, across our business solutions and Enterprise Solutions, segments, drove gross, profit performance, led by growth in software, including cloud and security and supported by Steady growth for endpoint devices.
These results underscore the strength of our strategy, delivering higher-value solutions, driving long-term customer relationships, and executing with consistency and discipline.
Beginning this quarter, we are disclosing gross billings, which represents the total dollar value of goods and services billed during the period, net of customer returns and credit memos, and any applicable sales or other taxes. It also includes agency fees and freight.
Gross bills increased by 2.9% to $1.06 billion, compared to $1.03 billion from the prior year.
The increase in growth billings demonstrates the overall growth in customer demand, despite the headwinds experienced in the public sector.
Tim McGrath: Gross profit increased 4.5% year-over-year to $135.6 million. Gross margin expanded 100 basis points to 19.3%, reflecting our disciplined approach to pricing, as well as a shift in product and customer mix. Total net sales were $702.9 million, down 0.8% from last year due to the public sector challenges previously mentioned. Excluding these headwinds, underlying sales were healthy, especially in software, including cloud and security, endpoint devices, and displays. Now let's take a look at the segments. Business Solutions delivered a standout quarter with broad-based growth and meaningful margin expansion. Net sales increased 4.2% to $273.5 million, while gross profit rose 11.4% to $69.8 million.
Tim McGrath: Gross profit increased 4.5% year-over-year to $135.6 million. Gross margin expanded 100 basis points to 19.3%, reflecting our disciplined approach to pricing, as well as a shift in product and customer mix. Total net sales were $702.9 million, down 0.8% from last year due to the public sector challenges previously mentioned. Excluding these headwinds, underlying sales were healthy, especially in software, including cloud and security, endpoint devices, and displays. Now let's take a look at the segments. Business Solutions delivered a standout quarter with broad-based growth and meaningful margin expansion. Net sales increased 4.2% to $273.5 million, while gross profit rose 11.4% to $69.8 million.
Now, I'd like to highlight our consolidated performance.
Gross profit increased 4.5% year-over-year to $135.6 million. Gross margin expanded 100 basis points to 19.3%, reflecting our disciplined approach to pricing as well as a shift in product and customer mix.
Total net sales were $702.9 million, down 8% from last year due to the public sector challenges previously mentioned. Excluding these headwinds, underlying sales were healthy, especially in software—including cloud and security—and in point devices and displays.
Now, let's take a look at the segments.
Tim McGrath: Gross billings grew 4.7% to $430.3 million, and gross margin expanded by 160 basis points year over year to 25.5%. These results reflect double-digit growth across desktops, notebooks, netcom, and software, including cloud and cybersecurity solutions. In Public Sector Solutions, net sales were $90.8 million, down 36.8% from a year ago for the reasons previously mentioned. While the public sector business experienced some headwinds this quarter, we believe conditions will improve later in 2026. Gross billings declined 23.7% to $170.7 million. Even with lower revenue, gross margin expanded 400 basis points to 19.4% due to changes in customer and product mix.
Tim McGrath: Gross billings grew 4.7% to $430.3 million, and gross margin expanded by 160 basis points year over year to 25.5%. These results reflect double-digit growth across desktops, notebooks, netcom, and software, including cloud and cybersecurity solutions. In Public Sector Solutions, net sales were $90.8 million, down 36.8% from a year ago for the reasons previously mentioned. While the public sector business experienced some headwinds this quarter, we believe conditions will improve later in 2026. Gross billings declined 23.7% to $170.7 million. Even with lower revenue, gross margin expanded 400 basis points to 19.4% due to changes in customer and product mix.
Business Solutions, delivered a standout quarter with broad-based growth and meaningful margin expansion. Net sales increase, 4.2% to 273.5 million while gross profit Rose. 11.4% to 69.8 million.
gross, buildings, grew 4.7% to 430.3 million in gross margin expanded by 160 basis points year-over-year to 25.5%
These results reflect double-digit growth across desktops, notebooks, NETCOM, and software, including cloud and cyber security solutions.
In public sector Solutions. Net sales were 90.8 million down 36.8% from a year ago for the reasons previously, mentioned while the public sector business experience. Some headwinds, this quarter We Believe conditions will improve later in 2026.
Tim McGrath: Enterprise Solutions delivered robust top-line growth, with net sales increasing 11.9% to $338.7 million, driven by strong demand for advanced technologies and endpoint devices. Gross profit grew 7.1% to $48.2 million, while gross billings increased 16.1% to $457.8 million. Gross margin was 14.2%, down 70 basis points year-over-year, reflecting changes in subscription license programs and product mix. We continue to focus on operational efficiencies and expense management. In the quarter, we executed a voluntary retirement offering for our tenured employees. These associated charges are reflected in the severance expenses and other charges in the income statement. This, in addition to severance charges in the quarter, totaled $3.1 million. Operating income was up 4.2% to $23.6 million.
Tim McGrath: Enterprise Solutions delivered robust top-line growth, with net sales increasing 11.9% to $338.7 million, driven by strong demand for advanced technologies and endpoint devices. Gross profit grew 7.1% to $48.2 million, while gross billings increased 16.1% to $457.8 million. Gross margin was 14.2%, down 70 basis points year-over-year, reflecting changes in subscription license programs and product mix. We continue to focus on operational efficiencies and expense management. In the quarter, we executed a voluntary retirement offering for our tenured employees. These associated charges are reflected in the severance expenses and other charges in the income statement. This, in addition to severance charges in the quarter, totaled $3.1 million. Operating income was up 4.2% to $23.6 million.
Gross billings declined 23.7% to $170.7 million. Even with lower revenue, gross margin expanded 400 basis points to 19.4% due to changes in customer and product mix.
Net sales increased 11.9% to $338.7 million, driven by strong demand for Advanced Technologies and endpoint devices.
Gross profit grew 7.1% to 48.2 million while gross Billings increased 16.1% to 457.8 million.
Gross margin was 14.2%, down 70 basis points year-over-year, reflecting changes in subscription licensed programs and product mix.
In the quarter, we executed a voluntary retirement offering for our 10-year employees.
These associated charges are reflected in the severance expenses and other charges in the income statement.
This, in addition to severance charges in the quarter, totaled $3.1 million.
Tim McGrath: Excluding severance expenses and other charges, operating income was up 17.8% to $26.7 million compared to the prior year, underscoring our strong expense discipline while continuing to invest in areas of our business that will drive future growth. Diluted Earnings Per Share were $0.82, an increase of 5.1%, while Adjusted Diluted Earnings Per Share was $0.91, an increase of 16.7% compared to the prior year. Looking ahead, our strategy remains clear and unchanged: expanding our solutions-led business, deepening our customer relationships, and driving profitable growth in cloud, cybersecurity, AI, and services. We continue to see strong customer engagement as organizations modernize their infrastructure and invest in AI-driven technologies. These are several areas where we deliver differentiated value and where we expect sustained momentum....
Tim McGrath: Excluding severance expenses and other charges, operating income was up 17.8% to $26.7 million compared to the prior year, underscoring our strong expense discipline while continuing to invest in areas of our business that will drive future growth. Diluted Earnings Per Share were $0.82, an increase of 5.1%, while Adjusted Diluted Earnings Per Share was $0.91, an increase of 16.7% compared to the prior year. Looking ahead, our strategy remains clear and unchanged: expanding our solutions-led business, deepening our customer relationships, and driving profitable growth in cloud, cybersecurity, AI, and services. We continue to see strong customer engagement as organizations modernize their infrastructure and invest in AI-driven technologies. These are several areas where we deliver differentiated value and where we expect sustained momentum....
Operating income was up 4.2% to $23.6 million.
Excluding 7, expenses and other charges offered to the income was up 17.8% to $26.7 million compared to the prior year, underscoring our strong expense discipline while continuing to invest in areas of our business that will drive future growth.
The lizard earnings per share were $0.82, an increase of 5.1%, while adjusted diluted earnings per share was $0.91, an increase of 16.7% compared to the prior year.
Looking ahead, our strategy remains clear and unchanged: expanding our Solutions LED business, deepening our customer relationships, and driving profitable growth in Cloud, cyber security, AI, and services.
We continue to see strong customer engagement, as organizations modernize their infrastructure and invest in AI-driven technologies.
Tim McGrath: While funding cycles and project timing can impact quarter-to-quarter results, the long-term trends supporting our business remain firmly intact. With improved gross profit, expanding margins, and a growing base of recurring and solutions-driven revenue, we enter 2026 with confidence and strong strategic positioning. 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?
Tim McGrath: While funding cycles and project timing can impact quarter-to-quarter results, the long-term trends supporting our business remain firmly intact. With improved gross profit, expanding margins, and a growing base of recurring and solutions-driven revenue, we enter 2026 with confidence and strong strategic positioning. 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?
These are several areas where we deliver differentiated value, and where we expect sustained momentum.
While funding cycles and project timing can impact quarter-to-quarter results, the long-term trends supporting our business remain firmly intact.
With improved gross profit, expanding margins. And a growing base of reoccurring in Solutions, driven Revenue we entered our 2026 with confidence and strong strategic. Positioning
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 Baker: Thanks, Tim. Earlier, Tim briefly discussed the new key performance metric, Gross Billings. We believe that this metric will provide additional insight into the company's periodic performance. We use the Gross Billings operating metric for evaluating the sales performance of our operating segments by providing insight into the total value of our business transactions. We believe that Gross Billings provides the same insight to investors. In Q4, SG&A increased by 1.7% year-over-year, driven primarily by higher variable compensation tied to the increase in gross profit. We remain highly disciplined on expenses. In fact, our headcount is down 2% year-over-year, allowing us to keep total payroll costs flat while continuing to invest in our high-priority growth areas.
Tom Baker: Thanks, Tim. Earlier, Tim briefly discussed the new key performance metric, Gross Billings. We believe that this metric will provide additional insight into the company's periodic performance. We use the Gross Billings operating metric for evaluating the sales performance of our operating segments by providing insight into the total value of our business transactions. We believe that Gross Billings provides the same insight to investors. In Q4, SG&A increased by 1.7% year-over-year, driven primarily by higher variable compensation tied to the increase in gross profit. We remain highly disciplined on expenses. In fact, our headcount is down 2% year-over-year, allowing us to keep total payroll costs flat while continuing to invest in our high-priority growth areas.
Tom.
Thanks Tim.
Earlier, Tim briefly discussed the new key performance metric gross Billings. We believe that this metric will provide additional insight into the company's periodic performance.
We use the gross Billings operating metric for evaluating the sales performance of our operating segments by providing insight into the total value of our business transactions.
We believe that gross Billings provides the same insight to investors.
In the fourth quarter, SG&A increased by 1.7% year-over-year, driven primarily by higher variable compensation tied to the increase in gross profit.
Tom Baker: As previously mentioned, we took action in the quarter to further streamline our cost structure, resulting in a $3.1 million severance charge. These actions align our expense structure with our strategic priorities and enhance operating leverage as demand continues to build. SG&A was 15.5% of sales, up 40 basis points year over year, reflecting both the increase in variable compensation and change in sales mix. Operating income margin improved to 3.4% compared to 3.2% last year. Excluding severance expense and other charges, operating income margin improved to 3.8%. Interest income for the quarter was $3.6 million, compared to $4.8 million last year, resulting from lower average cash balances as we deployed capital and a lower interest rate environment.
Tom Baker: As previously mentioned, we took action in the quarter to further streamline our cost structure, resulting in a $3.1 million severance charge. These actions align our expense structure with our strategic priorities and enhance operating leverage as demand continues to build. SG&A was 15.5% of sales, up 40 basis points year over year, reflecting both the increase in variable compensation and change in sales mix. Operating income margin improved to 3.4% compared to 3.2% last year. Excluding severance expense and other charges, operating income margin improved to 3.8%. Interest income for the quarter was $3.6 million, compared to $4.8 million last year, resulting from lower average cash balances as we deployed capital and a lower interest rate environment.
We remain highly disciplined on expenses. In fact, our headcount is down 2% year-over-year, allowing us to keep total payroll costs flat while continuing to invest in our high-priority growth areas.
As previously mentioned, we took action in the quarter to further streamline our cost structure, resulting in a 3.1 million seventy charge
These actions align our expense structure with our strategic priorities and enhance operating leverage as demand continues to build.
SG&A was 15.5% of sales, up 40 basis points year-over-year, reflecting both the increased variable compensation and change in salesmen.
Operating income margin improved to 3.4% compared to 3.2% last year.
Excluding 7 suspension and other charges operating income margin improved to 3.8%.
Tom Baker: Our effective tax rate for the quarter was 23.7%, down from 24.1% in the prior year. As a result, net income for the fourth quarter was flat at $20.7 million year-over-year. Excluding severance expenses and other charges, net income increased $2.3 million or 11.3% compared to last year. Diluted Earnings Per Share were $0.82, up $0.04 year-over-year, while Adjusted Diluted Earnings Per Share were $0.91, an increase of $0.13 year-over-year, highlighting the strength and underlying stability of our earnings profile. On a trailing twelve-month basis, Adjusted EBITDA was $126.4 million, compared to $118.9 million a year ago, an increase of 6%.
Tom Baker: Our effective tax rate for the quarter was 23.7%, down from 24.1% in the prior year. As a result, net income for the fourth quarter was flat at $20.7 million year-over-year. Excluding severance expenses and other charges, net income increased $2.3 million or 11.3% compared to last year. Diluted Earnings Per Share were $0.82, up $0.04 year-over-year, while Adjusted Diluted Earnings Per Share were $0.91, an increase of $0.13 year-over-year, highlighting the strength and underlying stability of our earnings profile. On a trailing twelve-month basis, Adjusted EBITDA was $126.4 million, compared to $118.9 million a year ago, an increase of 6%.
Interest income for the quarter was $3.6 million compared to $4.8 million last year, resulting from lower average cash balances as we deployed capital and a lower interest rate environment.
1% in the prior year.
As a result net income for the fourth quarter was flat at 20.7 million year over year.
Excluding several expenses and other charges, net income, increased 2.3 million or 11.3% compared to last year.
Diluted earnings per. Share were 82, cents up 4 cents, year-over-year while adjusted diluted earnings per. Share were 91 cents. An increase of 13 cents a year over a year, highlighting the strengths and underlying stability of our earnings profile.
Tom Baker: In addition to the Q4 voluntary retirement offering previously mentioned, we completed additional targeted headcount reductions at the end of January. These actions are expected to result in total charges of $5.9 to 6.2 million over Q4 2025 and Q1 2026, of which $3.1 million was recognized in Q4. Together, these initiatives are expected to generate approximately $7 to 8 million in ongoing annual cost savings, split between both SG&A and cost of goods. During the quarter, we continued to return capital to shareholders through both dividends and share repurchases. We paid a quarterly dividend of $0.15 per share and repurchased approximately 179,000 shares at an average price of $59.53 per share, for a total cost of $10.7 million.
Tom Baker: In addition to the Q4 voluntary retirement offering previously mentioned, we completed additional targeted headcount reductions at the end of January. These actions are expected to result in total charges of $5.9 to 6.2 million over Q4 2025 and Q1 2026, of which $3.1 million was recognized in Q4. Together, these initiatives are expected to generate approximately $7 to 8 million in ongoing annual cost savings, split between both SG&A and cost of goods. During the quarter, we continued to return capital to shareholders through both dividends and share repurchases. We paid a quarterly dividend of $0.15 per share and repurchased approximately 179,000 shares at an average price of $59.53 per share, for a total cost of $10.7 million.
On a trailing 12-month basis, adjusted EBITDOC was $126.4 million compared to $118.9 million.
In addition to the Q4, voluntary, retirement offering previously mentioned we completed additional targeted headcount. Reductions at the end of January
These actions are expected to result in total charges of 5.9, to 6.2 million, over Q4 2025 in q1 2026 of which 3.1 million was recognized in Q4.
Together, these initiatives are expected to generate approximately $7 to $8 million in ongoing annual cost savings, split between both SG&A and cost of goods.
During the quarter, we continue to return Capital to shareholders through both, dividends and share repurchases.
Tom Baker: In 2025, we repurchased over 1.2 million shares at an average price of $62.64. In 2025, between the share buyback of $76.1 million and dividends paid of $15.3 million, we returned $91.4 million to shareholders. At the end of the year, we had $33.6 million remaining for stock repurchases under our existing stock repurchase program. But as we announced earlier today, our board of directors authorized an additional $50 million to be added to our existing share repurchase program. We also announced today that our board of directors has declared a $0.20 per share dividend, a 33% increase. The dividend is payable on 6 March 2026, to shareholders of record as of 17 February 2026.
Tom Baker: In 2025, we repurchased over 1.2 million shares at an average price of $62.64. In 2025, between the share buyback of $76.1 million and dividends paid of $15.3 million, we returned $91.4 million to shareholders. At the end of the year, we had $33.6 million remaining for stock repurchases under our existing stock repurchase program. But as we announced earlier today, our board of directors authorized an additional $50 million to be added to our existing share repurchase program. We also announced today that our board of directors has declared a $0.20 per share dividend, a 33% increase. The dividend is payable on 6 March 2026, to shareholders of record as of 17 February 2026.
We paid a quarterly dividend of $0.15 per share and repurchased 179,000 shares at an average price of $59.53 per share, for a total cost of $10.7 million.
In 2025, we repurchased over 1.2 million shares at an average price of $62.64.
A 2025 between the share buyback of 76.1 million and dividends paid of 15.3 million, we returned 91.4 million to shareholders.
At the end of the year, we had $33.6 million remaining for stock repurchases under our existing stock repurchase program, but as we announced earlier today, our board of directors authorized an additional $50 million to be added to our existing share repurchase program.
We also announced today that our board of directors has declared a $0.20 per share dividend, a 33% increase.
Tom Baker: Turning to the balance sheet and cash flow, operating cash flow for the year ended in 2025 was $65.4 million. This reflects working capital investments, including $48.5 million increase in inventory and a $38.4 million increase in accounts receivable, partially offset by $38.1 million increase in accounts payable. The increase in inventory was intentional as we procured ahead of the anticipated price increases and support customer rollouts. The increased accounts receivable was primarily due to the timing of customer deliveries.
Tom Baker: Turning to the balance sheet and cash flow, operating cash flow for the year ended in 2025 was $65.4 million. This reflects working capital investments, including $48.5 million increase in inventory and a $38.4 million increase in accounts receivable, partially offset by $38.1 million increase in accounts payable. The increase in inventory was intentional as we procured ahead of the anticipated price increases and support customer rollouts. The increased accounts receivable was primarily due to the timing of customer deliveries.
The dividend is payable on March 6, 2026, to shareholders of record as of February 17, 2026.
Turning to the balance sheet and cash flow. Operating cash flow for the year ended 2025, with 65.4 million. This reflects working capital Investments, including 48.5 million, increase in inventory, and a 38.4 million increase in accounts receivable.
Partially offset by 38.1 million increase in accounts payable.
The increase in inventory was intentional, as we procured ahead of the anticipated, price increases in support, customer rollouts.
Tom Baker: Cash generated from investing activities totaled $42.8 million, driven by $108.8 million in proceeds from the sale of investments and $205.6 million in investment maturities, partially offset by $264.1 million of new investment purchases. Cash used in investing activities was $93.4 million, reflecting our ongoing share repurchase activity of $76.3 million and dividend payments of $15.3 million to shareholders. We ended the quarter with a strong liquidity position, $406.7 million in cash, cash equivalents, and short-term investments, which we believe provide significant flexibility to support our strategic priorities and continued shareholder returns. We believe our disciplined approach to capital allocation, continued focus on margin execution, and targeted strategic investments position us well for 2026 and beyond.
Tom Baker: Cash generated from investing activities totaled $42.8 million, driven by $108.8 million in proceeds from the sale of investments and $205.6 million in investment maturities, partially offset by $264.1 million of new investment purchases. Cash used in investing activities was $93.4 million, reflecting our ongoing share repurchase activity of $76.3 million and dividend payments of $15.3 million to shareholders. We ended the quarter with a strong liquidity position, $406.7 million in cash, cash equivalents, and short-term investments, which we believe provide significant flexibility to support our strategic priorities and continued shareholder returns. We believe our disciplined approach to capital allocation, continued focus on margin execution, and targeted strategic investments position us well for 2026 and beyond.
The increase to accounts receivable was primarily due to the timing of customer deliveries.
Cash generated from investing activities totaled. 42.8 million driven by 108.8 million in proceeds from the sale of Investments and 205.6 million in investment maturities, partially offset by 264.1 million of new investment purchases.
Cash used in investing activities was $93.4 million, reflecting our ongoing share repurchase activity of $76.3 million and dividend payments of $15.3 million to shareholders.
We ended the quarter with a strong liquidity position, $406.7 million in cash.
Cash equivalents and short-term investments, which we believe provide significant flexibility to support our strategic priorities and continued shareholder returns.
Tom Baker: I will now turn the call back over to Tim to discuss current market trends.
Tom Baker: I will now turn the call back over to Tim to discuss current market trends.
We believe our discipline approach to Capital allocation continued, focus on margin execution and targeted strategic Investments position us. Well for 2026 and Beyond.
Tim McGrath: Thanks, Tom. Let me take a moment to walk through how our key vertical markets perform. In retail, net sales grew 22%, driven by several large deployments as retailers continue investing in technology to improve employee productivity and operational efficiencies, which enhance the customer experience. In financial services, net sales were up 28%, and gross profit increased 13% year-over-year. The focus here remains on modernizing infrastructure and improving security, areas where our solutions and expertise continue to resonate with our customers. Healthcare grew net sales 19%, while gross profit improved 18% year-over-year. Connection had a strong Q4 in healthcare, attributed to large enterprise deployments for electronic health record management and security. Looking ahead, in an AI-first IT environment, we see demand building across our customer base. Customers continue to move forward with refresh initiatives and modernization plans.
Tim McGrath: Thanks, Tom. Let me take a moment to walk through how our key vertical markets perform. In retail, net sales grew 22%, driven by several large deployments as retailers continue investing in technology to improve employee productivity and operational efficiencies, which enhance the customer experience. In financial services, net sales were up 28%, and gross profit increased 13% year-over-year. The focus here remains on modernizing infrastructure and improving security, areas where our solutions and expertise continue to resonate with our customers. Healthcare grew net sales 19%, while gross profit improved 18% year-over-year. Connection had a strong Q4 in healthcare, attributed to large enterprise deployments for electronic health record management and security. Looking ahead, in an AI-first IT environment, we see demand building across our customer base. Customers continue to move forward with refresh initiatives and modernization plans.
I will now turn the call back over to Tim to discuss current market trends.
Thanks, Tom. Let me take a moment to walk through how our key vertical markets perform.
In retail, net sales, grew 22% driven by several large, deployments as retailers continue investigating, technology through improved employee productivity and operational efficiencies which enhance the customer experience.
in financial services, net sales were up 28% and gross profit increased 13% year-over-year
Areas where our solutions and expertise continue to resonate with our customers.
Healthcare grew net sales, 19% while gross profit improved, 18% year-over-year.
In healthcare attributed to large Enterprise, deployments for electronic health, record management, and security.
Looking ahead, in an AI-first IT environment, we see demand building across our customer base.
Tim McGrath: As AI adoption expands, we expect infrastructure strategies to evolve and security requirements to remain front and center. While there are near-term factors that can influence the timing of this demand, such as memory supply constraints, these do not change the strength or scale of the opportunity ahead of us. Rather, they may affect the pace at which demand is realized. We're building for the future, advancing our three-part growth strategy, driving data center modernization, digital workplace transformation, and supply chain solutions. With our differentiated portfolio, disciplined execution, and loyal customer relationships, we believe we're exceptionally well positioned to capture demand as economic and supply chain conditions stabilize. Our confidence in the business is underpinned by several technology trends that continue to drive pipeline and customer activity.
Tim McGrath: As AI adoption expands, we expect infrastructure strategies to evolve and security requirements to remain front and center. While there are near-term factors that can influence the timing of this demand, such as memory supply constraints, these do not change the strength or scale of the opportunity ahead of us. Rather, they may affect the pace at which demand is realized. We're building for the future, advancing our three-part growth strategy, driving data center modernization, digital workplace transformation, and supply chain solutions. With our differentiated portfolio, disciplined execution, and loyal customer relationships, we believe we're exceptionally well positioned to capture demand as economic and supply chain conditions stabilize. Our confidence in the business is underpinned by several technology trends that continue to drive pipeline and customer activity.
Customers continue to move forward with refresh initiatives and modernization plans as AI. Adoption expands. We expect infrastructure strategies to evolve and security requirements to remain front and center.
While there are near-term factors that can influence the timing of this demand such as memories Supply, constraints. These do not change the strength or scale of the opportunity ahead of us, rather. They may affect the pace at which demand is realized.
We're building for the future advancing. Our 3-part growth strategy, driving Data Center modernization.
Digital workplace transformation and supply chain solutions.
With our differentiated portfolio, disciplined execution, and loyal customer relationships. We believe we're exceptionally well, positioned to capture demand as economic and Supply chains conditions stabilize.
Tim McGrath: The PC refresh cycle will continue into 2026 as customers modernize aging fleets and increasingly adopt AI-enabled solutions that deliver high performance, strong security, and better user experiences. Data center modernization continues as customers are taking a more balanced approach to hybrid IT, optimizing workloads across on-prem and cloud environments to improve cost predictability, enhance security, and unlock the benefits of server consolidation and infrastructure efficiency. AI-driven demand is expanding across the edge, security, and intelligent endpoints. Customers are moving from experimentation to execution, creating meaningful opportunities for integrated solutions that combine hardware, software, and services. We continue to expand our technical services organization to help customers design, implement, migrate, and manage their IT environments end to end. We are investing in training and tools to ensure our teams are fully equipped to guide customers through AI adoption and next-generation architectures with confidence.
Tim McGrath: The PC refresh cycle will continue into 2026 as customers modernize aging fleets and increasingly adopt AI-enabled solutions that deliver high performance, strong security, and better user experiences. Data center modernization continues as customers are taking a more balanced approach to hybrid IT, optimizing workloads across on-prem and cloud environments to improve cost predictability, enhance security, and unlock the benefits of server consolidation and infrastructure efficiency. AI-driven demand is expanding across the edge, security, and intelligent endpoints. Customers are moving from experimentation to execution, creating meaningful opportunities for integrated solutions that combine hardware, software, and services. We continue to expand our technical services organization to help customers design, implement, migrate, and manage their IT environments end to end. We are investing in training and tools to ensure our teams are fully equipped to guide customers through AI adoption and next-generation architectures with confidence.
Our confidence in the business is underpinned by several technology trends that continue to drive pipeline and customer activity.
The PC refresh cycle will continue into 2026 as customers modernize aging fleets and increasingly adopt AI enabled solutions that deliver high performance, strong security and better user experiences.
Data center modernization continues. As customers are taking a more balanced approach to hybrid IT, they are optimizing their workloads across on-prem and cloud environments to improve cost predictability and enhance security, and unlock the benefits of server consolidation and infrastructure efficiency.
AI driven demand is expanding across the edge security and intelligent endpoints. Customers are moving from experimentation to execution, creating meaningful opportunities, for Integrated Solutions that combine Hardware software and services.
We continue to expand our Technical Services organization to help customers design Implement migrate and manage their it environments end to end.
Tim McGrath: As we move into 2026, our backlog remains strong. In fact, it ended Q4 at its highest level since 2022. We feel confident about where we're headed, and we're continuing to invest in sales capability, service delivery, and systems, while remaining disciplined around cost management and productivity. We are positioning Connection for sustained long-term growth, and we expect to outperform the US IT market by 200 basis points this year. As customers rethink how they deploy and manage technology, our strategy meets them where they are. We help them navigate the complexity, modernize with purpose, and make confident, informed decisions that drive real business outcomes. In a world where technology changes fast, expertise wins, and that's where Connection continues to differentiate. We'll now entertain your questions. Operator?
Tim McGrath: As we move into 2026, our backlog remains strong. In fact, it ended Q4 at its highest level since 2022. We feel confident about where we're headed, and we're continuing to invest in sales capability, service delivery, and systems, while remaining disciplined around cost management and productivity. We are positioning Connection for sustained long-term growth, and we expect to outperform the US IT market by 200 basis points this year. As customers rethink how they deploy and manage technology, our strategy meets them where they are. We help them navigate the complexity, modernize with purpose, and make confident, informed decisions that drive real business outcomes. In a world where technology changes fast, expertise wins, and that's where Connection continues to differentiate. We'll now entertain your questions. Operator?
We are investing in training and tools to ensure our teams are fully equipped to guide customers through AI adoption and next-generation architectures with confidence.
As we move into 2026, our backlog remains strong, in fact, it ended Q4 and its highest level since 2022. We feel confident about where we're headed is or continue to invest in sales capability Service delivery and systems, while remaining disciplined around cost management and productivity.
We are positioning connection for sustained, long-term growth and we expect to outperform the US it Market by 200 basis points this year.
As customers rethink how they deploy and manage technology, our strategy meets them where they are. We help them navigate the complexity, modernized with purpose, and make confident, informed decisions that drive real business outcomes.
In a world where technology changes fast, expertise wins, and that's where connection continues to differentiate.
Well now it's paying your questions, operator.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself, please press star one one again. One moment while we compile the Q&A roster. Our first question for the day will be coming from the line of Adam Tindle of Raymond James. Your line is open.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself, please press star one one again. One moment while we compile the Q&A roster. Our first question for the day will be coming from the line of Adam Tindle of Raymond James. Your line is open.
Thank you as a reminder. If you would like to ask a question, please press star 1 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself, please press star 1 1 again. One moment while we compile the Q&A roster.
Adam Tindle: Okay, thanks. Good afternoon. Tim, I think you just kind of wrapped up by saying you expect to outgrow the US IT market by 200 basis points. But I guess, how would you define what you're thinking of as IT market growth for 2026 as the baseline? And if you could, you know, I know that's a hard question because we've got a bunch of prognosticators, you know, trying to figure out what that market growth is. But when you look internally at your customer conversations and you know, what budget trends are at the customer and sales quotas and sales force, you know, what does growth look like, you know, internally from a budget perspective as well, would be helpful. Thanks.
Adam Tindle: Okay, thanks. Good afternoon. Tim, I think you just kind of wrapped up by saying you expect to outgrow the US IT market by 200 basis points. But I guess, how would you define what you're thinking of as IT market growth for 2026 as the baseline? And if you could, you know, I know that's a hard question because we've got a bunch of prognosticators, you know, trying to figure out what that market growth is. But when you look internally at your customer conversations and you know, what budget trends are at the customer and sales quotas and sales force, you know, what does growth look like, you know, internally from a budget perspective as well, would be helpful. Thanks.
Our first question for the day will be coming from the line of Adam Tindle of Freeman James. Your line is open.
Tim McGrath: Oh, thanks. So, right, right now, you know, the US market is a little tricky to pin down. We've seen a lot of different estimates, but around 4% is a blended growth number that we're working with. Internally, our budget for growth is a little higher than that. And really, what we're seeing for drivers of demand out there for 2026, right now, about 61% of our endpoints are AI-enabled, and we do see a demand continuing for AI at the edge. We also see edge projects starting to expand for 2026. So all of that really bodes well for our business, in addition to the growth we've been experiencing in our cloud business.
Tim McGrath: Oh, thanks. So, right, right now, you know, the US market is a little tricky to pin down. We've seen a lot of different estimates, but around 4% is a blended growth number that we're working with. Internally, our budget for growth is a little higher than that. And really, what we're seeing for drivers of demand out there for 2026, right now, about 61% of our endpoints are AI-enabled, and we do see a demand continuing for AI at the edge. We also see edge projects starting to expand for 2026. So all of that really bodes well for our business, in addition to the growth we've been experiencing in our cloud business.
Um, you know, trying to figure out what that market growth is, but when you look internally, uh, at your customer conversations and, you know, what budget trends are at the customer and sales quotas and Salesforce, you know, what does growth look like? Um, you know, uh, internally from a budget perspective as well would be helpful, thanks. Oh, thanks. So right now, you know, the U.S. market is a little tricky to pin down. We've seen a lot of different estimates, but around 4% is a blended growth number that we'll work with. Internally, our budget for growth is a little higher than that. And really, what we're seeing for drivers of demand out there for 2026.
Tim McGrath: So clearly, there are some headwinds, Adam, as you know, when we think about things like memory constraint and inflation as a result, those are headwinds. But there'll be some percent of our customer base that try to pull ahead of that, and then some percent that try to push a little beyond that. So we're really trying to balance that equation.
Tim McGrath: So clearly, there are some headwinds, Adam, as you know, when we think about things like memory constraint and inflation as a result, those are headwinds. But there'll be some percent of our customer base that try to pull ahead of that, and then some percent that try to push a little beyond that. So we're really trying to balance that equation.
Uh, right now, about 61% of our endpoints are AI-enabled, and we do see a demand continuing for AI at the edge. We also see, uh, edge projects starting to expand for 2026. So all of that, uh, really bodes well for our business, in addition to the growth we've been experiencing in our Cloud business. So clearly there are some headwinds, Adam. As you know, when we think about things like memory constraints and inflation as a result, uh, those are headwinds, but there'll be some percent of our customer base that try to pull ahead of that, and then some percent that try to push a little beyond that. So we're really trying to balance that equation.
Adam Tindle: Okay. I mean, as I think about those growth numbers, those are pretty healthy. And then, you know, on this call, you talked about some restructuring, essentially, voluntary early retirement, as well as additional actions that you took in January. I guess, you know, maybe just double-click on those decisions. You know, if the IT market environment is healthy, you know, why does it make sense to kind of pull back on headcount at this point? And how do you think about, you know, headcount on a go-forward basis? Are there, you know, more opportunities for additional actions, or is this kind of, you know, it at this point?
Adam Tindle: Okay. I mean, as I think about those growth numbers, those are pretty healthy. And then, you know, on this call, you talked about some restructuring, essentially, voluntary early retirement, as well as additional actions that you took in January. I guess, you know, maybe just double-click on those decisions. You know, if the IT market environment is healthy, you know, why does it make sense to kind of pull back on headcount at this point? And how do you think about, you know, headcount on a go-forward basis? Are there, you know, more opportunities for additional actions, or is this kind of, you know, it at this point?
Tim McGrath: Well, thanks. So internally, for the past few years, we've implemented a number of system improvements, and we are now starting to realize those efficiencies, which is really exciting. In addition, as you know, AI is driving some productivity gains throughout the business. So that really is the main driver of our headcount reduction. We want it to be super efficient. We really are working on being operationally excellent in a continuous improvement motion there, and we're starting to realize a lot of that. I don't see additional headcount reductions. I think that demand is going to be solid for 2026, and we're encouraged by all of that. So I think we're in a pretty good place right now. Tom, anything to add?
Tim McGrath: Well, thanks. So internally, for the past few years, we've implemented a number of system improvements, and we are now starting to realize those efficiencies, which is really exciting. In addition, as you know, AI is driving some productivity gains throughout the business. So that really is the main driver of our headcount reduction. We want it to be super efficient. We really are working on being operationally excellent in a continuous improvement motion there, and we're starting to realize a lot of that. I don't see additional headcount reductions. I think that demand is going to be solid for 2026, and we're encouraged by all of that. So I think we're in a pretty good place right now. Tom, anything to add?
Okay. I mean as I think about those growth numbers as are are pretty healthy. And then, you know, I'll just call you talked about some uh restructuring essentially voluntary, early retirement, as well as additional actions that you took in January. I guess, you know, maybe just double. Click on those decisions. You know, if the it Market environment is healthy. You know, why does it make sense to kind of pull back on headcount at this point? And how do you think about, uh, you know, headcount on a go forward basis, are there, you know, more opportunities for additional actions or, uh, is this kind of, you know, it at this point?
Tom Baker: Yeah. I mean, Adam, if you look at the quarter, right, you know, BSG grew gross profit 11.4%. Enterprise grew their gross profit at 7.1%. I mean, that's, that's pretty healthy. You know, the one issue we had was we had a very large public sector contract last year that did not renew. So, you know, that was almost a $30 million headwind for us this quarter, and it's going to be almost a $40 million headwind for us next quarter. However, you know, those other businesses performing the way they are, you know, we can look at a quarter next year- next quarter. It's kind of gonna look a little like this quarter, you know, flattish on revenue, probably low- to mid-single-digit increase in gross profit.
Tom Baker: Yeah. I mean, Adam, if you look at the quarter, right, you know, BSG grew gross profit 11.4%. Enterprise grew their gross profit at 7.1%. I mean, that's, that's pretty healthy. You know, the one issue we had was we had a very large public sector contract last year that did not renew. So, you know, that was almost a $30 million headwind for us this quarter, and it's going to be almost a $40 million headwind for us next quarter. However, you know, those other businesses performing the way they are, you know, we can look at a quarter next year- next quarter. It's kind of gonna look a little like this quarter, you know, flattish on revenue, probably low- to mid-single-digit increase in gross profit.
Well thanks, so internally for the past few years. We we've implemented a number of system uh improvements and we are now starting to realize those efficiencies which is really exciting. In addition, as you know, AI is driving some productivity gains throughout the business. So that really is the main driver of our headcount reduction, we wanted to be super efficient, we really are, are working on being operationally, excellent in a continuous Improvement, motion there. And we're starting to realize a lot of that, I don't see additional headcount reductions. I think that, uh, demand is going to be solid for 2026 and we're encouraged by all of that. So I think we're in a pretty good place right now. Tom and Dad. Yeah, I mean, I think out of, if you look
Look at the corner, right? You know BSG group gross profit 11.4%. Um, Enterprise through their gross profit 7.1%. I mean, that's that's pretty healthy.
Um, you know, the, the 1 is, we had was, um, we had a very large public sector, uh, contract last year that did not renew. So, you know, that was almost a million dollar headwind for a fifth quarter, and it's being almost 40 million headwind for us next quarter.
However, you know those other businesses performing the way they are.
Um,
you know, we can look at the quarter next year. No, a next quarter.
This is going to look a little like this quarter—you know, flattish on revenue.
Tom Baker: You know, the way we're managing our costs, we're gonna be, you know, sub-3% on SG&A. So, you know, that's pretty good, you know, for that next quarter. And then as we get into Q2, Q3, and beyond, we eliminate that public sector headwind. We're pretty excited about, you know, how the business is looking. Enterprise is adding a bunch of new customers, and, you know, that's just gonna ramp throughout the year.
Tom Baker: You know, the way we're managing our costs, we're gonna be, you know, sub-3% on SG&A. So, you know, that's pretty good, you know, for that next quarter. And then as we get into Q2, Q3, and beyond, we eliminate that public sector headwind. We're pretty excited about, you know, how the business is looking. Enterprise is adding a bunch of new customers, and, you know, that's just gonna ramp throughout the year.
Um probably load mid single digits increase in gross profit. And you know the way we're managing our costs, we're going to be you know sub 3% on on GNA so you know that's that's pretty good.
You know, for that next quarter. And then as we get into Q2 Q3 and Beyond
We eliminate that public sector headwind. We're pretty excited about, you know, how the business was looking.
um,
Adam Tindle: That's helpful color. Thanks, Tom.
Adam Tindle: That's helpful color. Thanks, Tom.
Enterprises adding a bunch of new customers um and you know that's just going to ramp throughout the year.
That's helpful color. Thanks Tom.
Tim McGrath: Thank you, Adam.
Tim McGrath: Thank you, Adam.
Operator: One moment for the next question. Our next question is coming from the line of Anthony Lebiedzinski of Sidoti. Your line is open.
Operator: One moment for the next question. Our next question is coming from the line of Anthony Lebiedzinski of Sidoti. Your line is open.
Thank you, Adam.
1 moment for the next question.
Anthony Lebiedzinski: Good afternoon, and thank you for taking the question. So, just wondering if you guys could just comment on the cadence of sales or gross billings during the fourth quarter and whether or not you saw the notable budget flush in Q4.
And our next question is coming from the line of Anthony Liske of Sedona. Your line is open.
Anthony Lebiedzinski: Good afternoon, and thank you for taking the question. So, just wondering if you guys could just comment on the cadence of sales or gross billings during the fourth quarter and whether or not you saw the notable budget flush in Q4.
Tom Baker: Yeah, Anthony. So we definitely saw a marked increase in December revenue this quarter. You know, it typically bumps along, you know, 35-ish percent of the quarter. I think it bumped to over 38 percent this quarter. And, you know, buried in that, we saw a couple of things. We did have some customers that were, you know, very focused on consuming their budget before the end of the year, and then we haven't seen that in a number of years. And then we also did see some customers trying to get ahead of the price increases, which is why you see a little bit of a bump in our inventory as well. So I think those two things together, I don't know if it was incredibly material, but it was... You know, it definitely did affect the quarter.
Tom Baker: Yeah, Anthony. So we definitely saw a marked increase in December revenue this quarter. You know, it typically bumps along, you know, 35-ish percent of the quarter. I think it bumped to over 38 percent this quarter. And, you know, buried in that, we saw a couple of things. We did have some customers that were, you know, very focused on consuming their budget before the end of the year, and then we haven't seen that in a number of years. And then we also did see some customers trying to get ahead of the price increases, which is why you see a little bit of a bump in our inventory as well. So I think those two things together, I don't know if it was incredibly material, but it was... You know, it definitely did affect the quarter.
Uh, good afternoon, and thank you for taking the questions. So, uh, just wondering if you guys could just comment on the the Cadence of sales or or gross Billings during the fourth quarter and the whether or not you saw the notable budget flush in 4 q.
Yeah, answer.
We definitely saw a marked increase in December revenue this quarter. You know, it typically bumps along, you know, 35% to the quarter. I think it bumped over 38% this quarter and, you know, buried in that, we saw a couple of things. We did have some customers that were
You know, very focused on consuming their budget before the end of the year.
And then we haven't seen that in a number of years. Um and then we also did see some customers trying to get ahead of the price increases which is why you see a little bit of a bump in our inventory as well. So I I think those 2 things together.
I don't know if it was incredibly material but it was, you know, it definitely did affect the for
Anthony Lebiedzinski: Got it. Okay, yeah. Thanks for that, Tom. And then, Tim, I believe you mentioned earlier about the memory supply constraints, you called that out, which is certainly something that's been, you know, talked about. Was that an issue in the fourth quarter, or was that comment more about your concern for 2026?
Anthony Lebiedzinski: Got it. Okay, yeah. Thanks for that, Tom. And then, Tim, I believe you mentioned earlier about the memory supply constraints, you called that out, which is certainly something that's been, you know, talked about. Was that an issue in the fourth quarter, or was that comment more about your concern for 2026?
Tim McGrath: We did start to see in the fourth quarter some price increases, but I do not think it was an issue. Some customers probably pulled their business in, and they moved orders up, and those price increases, of course, are inflationary. And at this point, we're advising all our customers to order, you know, as soon as possible because we see those memory constraints going throughout the year. So it really didn't affect us in the fourth quarter. The inflation that we saw was reasonable, and we're thinking for the first quarter, again, that will actually spike some demand, and we think that'll kind of level out throughout the year.
Tim McGrath: We did start to see in the fourth quarter some price increases, but I do not think it was an issue. Some customers probably pulled their business in, and they moved orders up, and those price increases, of course, are inflationary. And at this point, we're advising all our customers to order, you know, as soon as possible because we see those memory constraints going throughout the year. So it really didn't affect us in the fourth quarter. The inflation that we saw was reasonable, and we're thinking for the first quarter, again, that will actually spike some demand, and we think that'll kind of level out throughout the year.
Got it. Okay, it is. Thanks for that. The Tom and then, um, Tim I I believe you you mentioned earlier about the memory Supply, constraints constraints that you call that out, the, which is certainly something that's been, you know, talked about was that a an issue in the fourth quarter or was that common more about your, uh, concern for for 26?
We did start to see, in the fourth quarter, some price increases, but I do not think it was an issue. Uh,
some customers probably pulled their business in they, they moved orders up and uh, those
Price increases of course, are inflationary. And at this point, we're advising all our customers to order you know, as soon as possible because we see those memory constraints going throughout the year.
So it really didn't affect us in the fourth quarter. The inflation that we saw was reasonable, and, you know, we're thinking for the first quarter again that will actually spike some demand, and we think that'll kind of level out throughout the year.
Anthony Lebiedzinski: Got you. Okay. And then, with the cost reductions that you have done with the restructuring, how do we think about operating margins here going forward? You know, any sort of thought on that would be very helpful.
Anthony Lebiedzinski: Got you. Okay. And then, with the cost reductions that you have done with the restructuring, how do we think about operating margins here going forward? You know, any sort of thought on that would be very helpful.
Tom Baker: Yeah. I mean, obviously, it's, it's gonna help us. You know, we talked about $7 to 8 million of net cost reduction, you know, for the year. And when I say net, that means, you know, some of those people that took retirement, you know, we are gonna have to replace some of them, maybe, you know, different levels, maybe in a little bit different positions, maybe with a little bit more of a technological aptitude. But as we go through the year, I think the operating leverage is definitely going to improve. And, you know, we wanna, you know, move much closer to the, you know, 3.7 to 8.9% is kind of where we think we can get to by the end of the year.
Tom Baker: Yeah. I mean, obviously, it's, it's gonna help us. You know, we talked about $7 to 8 million of net cost reduction, you know, for the year. And when I say net, that means, you know, some of those people that took retirement, you know, we are gonna have to replace some of them, maybe, you know, different levels, maybe in a little bit different positions, maybe with a little bit more of a technological aptitude. But as we go through the year, I think the operating leverage is definitely going to improve. And, you know, we wanna, you know, move much closer to the, you know, 3.7 to 8.9% is kind of where we think we can get to by the end of the year.
Gotcha, okay. And then, um, with the cost reductions that you have done with the restructuring. Uh, how do how do we think about operating margins here going forward? Um, you know, any sort of thought on that would be very helpful.
Yeah.
I mean, obviously it's it's going to help us. Um, you know, we talked about 78 million of uh, net cost reduction, you know, for the year. And when I say net that means you know, some of those people that took retirement. You know, we are going to have to, to replace some of them. Maybe, you know, different levels, maybe in a little bit different positions. Uh, maybe with a little bit more of a, a, a technological, aptitude
but um,
As we go through the year, I think the operating leverage is definitely going to improve. And, you know, we want to, you know,
move much closer to the, you know, 3.789% is kind of where we think we can get to this by the end of the year.
Anthony Lebiedzinski: That's very helpful color. Well, thank you very much, and best of luck.
Anthony Lebiedzinski: That's very helpful color. Well, thank you very much, and best of luck.
Tim McGrath: Thank you, Anthony.
Tim McGrath: Thank you, Anthony.
Tom Baker: Thank you, Anthony.
Tom Baker: Thank you, Anthony.
That's very helpful color. Well, thank you very much and best of luck. Thank you, Anthony, thank you, Anthony.
Operator: Thank you. This concludes the Q&A session for today, and I would like to turn the call back over to management for closing remarks. Please go ahead.
Operator: Thank you. This concludes the Q&A session for today, and I would like to turn the call back over to management for closing remarks. Please go ahead.
Tim McGrath: Well, thank you, operator. I'd like to thank all of our customers, vendor partners, and shareholders for their continued support, and once again, our coworkers for their efforts and extraordinary dedication. I'd also like to thank those of you who are listening to our call this afternoon. Your time and interest in Connection are appreciated. Have a great evening.
Tim McGrath: Well, thank you, operator. I'd like to thank all of our customers, vendor partners, and shareholders for their continued support, and once again, our coworkers for their efforts and extraordinary dedication. I'd also like to thank those of you who are listening to our call this afternoon. Your time and interest in Connection are appreciated. Have a great evening.
Operator: Thank you all for joining today's program. You may now disconnect.
Operator: Thank you all for joining today's program. You may now disconnect.
Thank you all for joining today's program. You may now disconnect.
