Connection (CNXN) Reports First Quarter 2026 Results

Published: 2026-04-29 16:07:08 ET CNXN

FIRST QUARTER SUMMARY: Net sales: $721.9 million, up 3.0% y/y Gross billings: $1.0 billion, up 4.3%1 Gross profit: $132.7 million, up 4.3% y/y Gross margin: 18.4%, up 20 basis points y/y Net income: $17.2 million, up 27.8% y/y Diluted EPS: $0.68, compared to $0.51 y/y Adjusted Diluted EPS: $0.77, compared to $0.602

Published on 04/29/2026 at 04:07 pm EDT

Connection (PC Connection, Inc.; NASDAQ: CNXN), a leading information technology solutions provider to business, government, healthcare and education markets, today announced results for the first quarter ended March 31, 2026. The Company also announced that its Board of Directors declared a quarterly dividend of $0.20 per share of the Company’s common stock. Payment will be made on May 29, 2026, to shareholders of record on May 12, 2026.

“Our financial performance was strong as we experienced solid demand in Q1 for both our Enterprise and Business Solutions segments, driven in part by our customers moving from AI experimentation to AI production,” said Timothy McGrath, President and Chief Executive Officer. McGrath continued, “We believe that our experienced team is well positioned to help our customers navigate through the waves of technology.”

First Quarter of 2026 Results:

Net sales for the quarter ended March 31, 2026 increased by 3.0%, year over year. Gross billings increased by 4.3% to $1.0 billion, compared to $978.9 million in the first quarter of 20251. Gross profit increased by 4.3% to $132.7 million, compared to $127.3 million for the first quarter of 2025, and gross margin increased 20 basis points to 18.4%, compared to the prior year quarter. Net income increased 27.8% to $17.2 million, or $0.68 per diluted share, compared to $13.5 million, or $0.51 per diluted share, for the first quarter of 2025. Adjusted Diluted Earnings per Share2 was $0.77 for the quarter ended March 31, 2026, compared to $0.60 per share for the quarter ended March 31, 2025.

Performance by Segment:

Sales by Product Mix:

Selling, general and administrative (“SG&A”) expenses decreased slightly in the first quarter of 2026 by 0.4% to $109.5 million from $109.9 million in the prior year quarter. SG&A as a percentage of net sales decreased to 15.2%, compared to 15.7% in the prior year quarter.

In addition, the first quarter of 2026 results include $3.1 million of severance expenses related to internal cost reduction initiatives.

Interest income in the first quarter of 2026 was $3.4 million, compared to $3.9 million in the first quarter of 2025.

Cash and cash equivalents and short-term investments were $411.4 million as of March 31, 2026, compared to $406.7 million as of December 31, 2025. During the first quarter of 2026, the Company repurchased 41,987 shares of stock at an aggregate purchase price of $2.4 million.

Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense, restructuring and other charges and non-routine legal settlements (“Adjusted EBITDA”)2 increased 7% to $132.3 million for the twelve months ended March 31, 2026, compared to $123.1 million for the twelve months ended March 31, 2025.

1 Gross billings is the total dollar value of goods and services billed during the period, net of customer returns, credit memos, and any applicable sales or other taxes and include agency fees, and freight. As certain transactions are recognized on a net basis, gross billings include amounts not recognized in net sales.

2 Adjusted Diluted Earnings per Share and Adjusted EBITDA are non-GAAP measures. See page 9 for definitions and reconciliations of these measures.

Conference Call and Webcast

Connection will host a conference call and live web cast today, April 29, 2026 at 4:30 p.m. EDT to discuss its first quarter financial results. For participants who would like to participate via telephone, please register here to receive the dial-in number along with a unique PIN number that is required to access the call. A web-cast of the conference call, which will be broadcast live via the Internet, and a copy of this press release, can be accessed on Connection’s website at ir.connection.com. For those unable to participate in the live call, a replay of the webcast will be available at ir.connection.com approximately 90 minutes after the completion of the call and will be accessible on the site for approximately one year.

Non-GAAP Financial Information

EBITDA, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per Share are non-GAAP financial measures. These measures are included to provide additional information with respect to the Company’s operating performance and earnings. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Definitions for each Non-GAAP measure and a reconciliation to their most directly comparable GAAP measures are available in the tables at the end of this release.

About Connection

PC Connection, Inc. and its subsidiaries, dba Connection, (www.connection.com; NASDAQ: CNXN) is a Fortune 1000 company headquartered in Merrimack, NH. With offices throughout the United States, Connection delivers custom-configured IT solutions from its ISO 9001:2015 SOC 2 Type 2 certified Technology Integration and Distribution Center in Wilmington, OH. In addition, the Company has more than 5,000 professional certifications to ensure that it can solve the most complex issues of its customers. Connection also services international customers through its GlobalServe subsidiary, a global IT procurement and service management company. Investors and media can find more information about Connection at http://ir.connection.com.

Connection Business Solutions (800.800.5555) is a rapid-response provider of IT products and services serving primarily the small- and medium-sized business sector. It offers more than 460,000 brand-name products through its staff of technically trained sales account managers, publications, and its website at www.connection.com.

Connection–Enterprise Solutions (561.237.3300), www.connection.com/enterprise, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and real-time access to over 460,000 products and 1,600 vendors through MarkITplace®, a proprietary next-generation, cloud-based supply chain solution. The team’s engineers, software licensing specialists, and subject matter experts help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

Connection Public Sector Solutions (800.800.0019), is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, publications, and online at www.connection.com/publicsector.

Cautionary Note Regarding Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and include statements concerning, among other things, our future financial results, business plans (including statements regarding new products and services we may offer and future expenditures, costs and investments), liabilities, impairment charges, competition and the expected impact of current macroeconomic conditions on our businesses and results of operations. You can generally identify forward-looking statements by words such as “believe,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “may,” “should,” “will,” or similar statements or variations of such terms, although not all forward-looking statements include such terms. These statements reflect our current views and are based on assumptions as of the date of this report. Such assumptions are based upon internal estimates and other analysis of current market conditions and trends, management’s expectations, plans and strategies, economic conditions and other factors. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.

Such differences may result from actions taken by us, including expense reduction or strategic initiatives (including reductions in force, capital investments and new or expanded product offerings or services), the execution of our business plans (including our inventory management, cost structure and management and other personnel decisions) or other business decisions, as well as from developments beyond our control, including;

Additional factors include those described in our Annual Report on Form 10-K for the year ended December 31, 2025, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” in our subsequent Quarterly Reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the other subsequent filings we make with the Securities and Exchange Commission from time to time.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements included in this release. We assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made except as required by law.

CONSOLIDATED SELECTED FINANCIAL INFORMATION

At or for the Three Months Ended March 31,

2026

2025

% Change

Operating Data:

Net sales (in thousands)

721,866

701,046

Diluted earnings per share

0.68

0.51

Gross margin

18.4

18.2

Operating margin

2.8

2.1

Inventory turns (1)

Days sales outstanding (2)

% of

Product Mix:

Net Sales

Notebooks/Mobility

Desktops

Accessories

Software

Displays and Sound

Net/Com Products

Servers/Storage

Other Hardware/Services

Total Net Sales

100

Stock Performance Indicators:

Actual shares outstanding (in thousands)

25,220

25,628

Closing price

58.46

62.42

Market capitalization (in thousands)

1,474,361

1,599,700

Trailing price/earnings ratio

17.0

18.9

LTM Net Income (in thousands)

87,464

87,422

LTM Adjusted EBITDA (3) (in thousands)

132,303

123,092

(1)

Represents the annualized cost of goods sold for the period divided by the average inventory for the prior four-month period.

(2)

Represents the trade receivable at the end of the period divided by average daily net sales for the same three-month period.

(3)

LTM Adjusted EBITDA is a non-GAAP measure defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation, severance expenses and non-routine legal settlements for the last twelve months. See page 9 for a reconciliation.

REVENUE AND MARGIN INFORMATION

For the Three Months Ended March 31,

2026

2025

Net

Gross

Net

Gross

(amounts in thousands)

Sales

Margin

Sales

Margin

Enterprise Solutions

346,471

14.5

298,003

14.2

Business Solutions

275,562

24.5

258,385

25.3

Public Sector Solutions

99,833

15.0

144,658

13.6

Total

721,866

18.4

701,046

18.2

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

(amounts in thousands, except per share data)

2026

2025

Net sales

721,866

701,046

Cost of sales

589,129

573,735

Gross profit

132,737

127,311

Selling, general and administrative expenses

109,452

109,859

Severance expenses

3,060

2,930

Income from operations

20,225

14,522

Interest income, net

3,363

3,900

Other income

—

Income tax provision

(6,365)

(5,017)

Net income

17,223

13,481

Earnings per common share:

Basic

0.68

0.52

Diluted

0.68

0.51

Shares used in the computation of earnings per common share:

Basic

25,201

26,076

Diluted

25,281

26,218

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,

December 31,

(amounts in thousands)

2026

2025

ASSETS

Current Assets:

Cash and cash equivalents

196,259

193,221

Short-term investments

215,189

213,457

Accounts receivable, net

661,481

648,020

Inventories, net

194,294

143,567

Prepaid expenses and other current assets

23,382

22,607

Total current assets

1,290,605

1,220,872

Property and equipment, net

46,547

46,912

Right-of-use assets, net

7,173

1,569

Goodwill

73,602

Intangibles, net

684

989

Other assets

6,407

6,981

Total Assets

1,425,018

1,350,925

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

396,481

338,202

Accrued payroll

28,142

30,939

Accrued expenses and other liabilities

52,582

51,251

Total current liabilities

477,205

420,392

Deferred income taxes

19,695

19,905

Operating lease liability

6,426

498

Total Liabilities

503,326

440,795

Stockholders’ Equity:

Common stock

296

295

Additional paid-in capital

146,575

144,608

Retained earnings

918,073

905,890

Accumulated other comprehensive (loss) income

(88)

Treasury stock at cost

(143,164)

(140,741)

Total Stockholders’ Equity

921,692

910,130

Total Liabilities and Stockholders’ Equity

1,425,018

1,350,925

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

(amounts in thousands)

2026

2025

Cash Flows provided by (used in) Operating Activities:

Net income

17,223

13,481

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

2,797

3,099

Adjustments to credit losses reserve

239

395

Stock-based compensation expense

2,639

2,208

Deferred income taxes

(166)

—

Amortization of discount on short-term investments, net

(889)

(45)

Gain on sale of short-term investments

—

(76)

Loss on disposal of fixed assets

Changes in assets and liabilities:

Accounts receivable

(13,700)

7,054

Inventories

(50,727)

(56,738)

Prepaid expenses and other current assets

(775)

(2,668)

Other non-current assets

574

Accounts payable

58,086

(26,958)

Accrued expenses and other liabilities

(1,084)

7,761

Net cash provided by (used in) operating activities

14,267

(52,387)

Cash Flows (used in) provided by Investing Activities:

Purchases of short-term investments

(54,270)

(52,358)

Proceeds from sale of short-term investments

—

108,763

Maturities of short-term investments

53,217

50,000

Purchases of property and equipment

(1,984)

(1,711)

Net cash (used in) provided by investing activities

(3,037)

104,694

Cash Flows used in Financing Activities:

Proceeds from short-term borrowings

—

732

Repayment of short-term borrowings

—

(732)

Purchase of common stock for treasury shares

(2,481)

(43,739)

Dividend payments

(5,040)

(3,910)

Payment of payroll taxes on stock-based compensation through shares withheld

(671)

(519)

Net cash used in financing activities

(8,192)

(48,168)

Increase in cash and cash equivalents

3,038

4,139

Cash and cash equivalents, beginning of period

193,221

178,318

Cash and cash equivalents, end of period

196,259

182,457

Non-cash Investing and Financing Activities:

Accrued purchases of property and equipment

278

437

Accrued purchase of treasury shares

—

1,027

Accrued excise tax on treasury purchases

678

432

EBITDA AND ADJUSTED EBITDA

A reconciliation of EBITDA and Adjusted EBITDA to Net Income is detailed below. Adjusted EBITDA is defined as EBITDA (defined as earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation, severance expenses and non-routine legal settlements. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either includes or excludes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance including our ability to fund our future capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreement. When analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA in addition to, and not as alternatives for Net income or any other performance measure presented in accordance with GAAP. Our non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

Three Months Ended March 31,

LTM Ended March 31, (1)

(amounts in thousands)

2026

2025

% Change

2026

2025

% Change

Net income

17,223

13,481

87,464

87,422

Depreciation and amortization

2,797

3,099

(10)

11,401

12,817

(11)

Income tax expense

6,365

5,017

31,354

30,532

Interest income

(3,364)

(3,904)

(14)

(13,911)

(18,227)

(24)

Interest expense

(75)

169

(54)

EBITDA

23,022

17,697

116,386

112,713

Severance expenses (2)

3,060

2,930

6,143

3,345

Legal settlement (3)

—

(1,700)

(100)

Stock-based compensation

2,639

2,208

9,774

8,734

Adjusted EBITDA

28,721

22,835

132,303

123,092

(1)

LTM: Last twelve months

(2)

Severance expenses and other charges in 2026 consisted of voluntary retirement offering and internal restructuring activities and in 2025 consisted of internal restructuring activities.

(3)

The Company recorded $1.7 million of other income as a result of a legal settlement received.

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE

A reconciliation of Adjusted Net Income to Net Income is detailed below. Adjusted Net Income is defined as Net Income plus severance expenses, net of tax plus or minus loss or income from non-routine legal settlements. A reconciliation of Adjusted Diluted Earnings per Share to Diluted Earnings per Share is detailed below. Adjusted Diluted Earnings per Share is defined as diluted earnings per share adjusted for severance expenses, net of tax. Adjusted Net Income and Adjusted Diluted Earnings Per Share are considered non-GAAP financial measures (see note above in EBITDA and Adjusted EBITDA for a description of non-GAAP financial measures). The Company believes that Adjusted Net Income and Adjusted Diluted Earnings per Share provide helpful information with respect to the Company's operating performance. When analyzing our operating performance, investors should use Adjusted Net Income and Adjusted Diluted Earnings per Share in addition to, and not as alternatives for Net income and Diluted Earnings per Share or any other performance measure presented in accordance with GAAP. Our non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

Three Months Ended March 31,

(amounts in thousands, except per share data)

2026

2025

% Change

Net income

17,223

13,481

Severance expenses (1)

3,060

2,930

Tax benefit

(826)

(795)

Adjusted Net Income

19,457

15,616

Diluted shares

25,281

26,218

Diluted Earnings per Share

0.68

0.51

Adjusted Diluted Earnings per Share

0.77

0.60

(1)

Severance expenses and other charges in 2026 consisted of voluntary retirement offering and internal restructuring activities and in 2025 consisted of internal restructuring activities.

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