UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934*

For the quarterly period ended ~~September 30, 2017~~March 31, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file ~~number~~ number: 0-23827

PC CONNECTION, INC.

(Exact name of registrant as specified in its charter)


~~DELAWARE~~Delaware	02-0513618
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)


730 Milford Road
~~730 MILFORD ROAD,~~Merrimack, New Hampshire
~~MERRIMACK, NEW HAMPSHIRE~~	03054
(Address of principal executive offices)	(Zip Code)


	(603) 683-2000
	~~(603) 683-2000~~
	(Registrant's telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

C
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	CNXN	Nasdaq Global Select Market

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

~~YES~~ Yes☑ NO No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

~~YES~~ Yes☑ NO No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


	Large accelerated filer ☐		Accelerated filer ☑
	Non-accelerated filer ☐		Smaller reporting company ☐
	~~(Do not check if smaller reporting company)~~		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~YES~~ Yes ☐ NO No ☑

The number of shares outstanding of the issuer’s common stock as of ~~November 3, 2017~~ April 27, 2023 was ~~26,815,634.~~26,277,597.

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


	PART I FINANCIAL INFORMATION

		Page
ITEM 11..	Unaudited Condensed Consolidated Financial ~~Statements~~Statements::

	Condensed Consolidated Balance Sheets–~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022	1


	Condensed Consolidated Statements of Income–Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	2


	Condensed Consolidated Statements of Stockholders’ Equity–Three Months Ended March 31, 2023 and 2022	3

	Condensed Consolidated Statements of Cash Flows–~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	3
		4

	Notes to Unaudited Condensed Consolidated Financial Statements	4 5

ITEM 22..	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	21

ITEM 4.	Controls and Procedures	22





	PART II OTHER INFORMATION

ITEM 1A1.	~~Risk Factors~~Legal Proceedings	23

ITEM 61A.	~~Exhibits~~Risk Factors	23

~~SIGNATURES~~ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

ITEM 6.	Exhibits	24

SIGNATURES		25

Table of Contents

~~PC CONNECTION, INC. AND SUBSIDIARIES~~

PART ~~I -~~I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PC CONNECTION, INC. AND SUBSIDIARIES

~~Item 1 - Financial Statements~~

CONDENSED CONSOLIDATED BALANCE ~~SHEETS~~ SHEETS

(Unaudited)

(amounts in thousands)

September 30,

December 31,

2017

2016

ASSETS

Current Assets:

Cash and cash equivalents

$
62,338

$
49,180

Accounts receivable, net

382,666

411,883

Inventories

106,724

90,535

Prepaid expenses and other current assets

5,185

5,453

Income taxes receivable

4,579

2,120

Total current assets

561,492

559,171

Property and equipment, net

40,077

39,402

Goodwill

73,602

73,602

Other intangibles, net

11,393

12,586

Other assets

5,318

1,373

Total Assets

$
691,882

$
686,134

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$
164,883

$
177,862

Accrued expenses and other liabilities

18,294

31,047

Accrued payroll

16,938

21,345

Total current liabilities

200,115

230,254

Deferred income taxes

19,766

19,602

Other liabilities

2,083

2,836

Total Liabilities

221,964

252,692

Stockholders’ Equity:

Common stock

287

285

Additional paid-in capital

113,421

111,081

Retained earnings

372,072

337,938

Treasury stock, at cost

(15,862)

(15,862)

Total Stockholders’ Equity

469,918

433,442

Total Liabilities and Stockholders’ Equity

$
691,882

$
686,134


	March 31,		December 31,
	2023		2022
ASSETS
Current Assets:
Cash and cash equivalents	$	134,810	$	122,930
Accounts receivable, net		621,844		610,280
Inventories, net		199,317		208,682
Prepaid expenses and other current assets		18,145		11,900
Total current assets		974,116		953,792
Property and equipment, net		58,372		59,171
Right-of-use assets		6,611		7,558
Goodwill		73,602		73,602
Intangibles, net		4,343		4,648
Other assets		1,013		1,055
Total Assets	$	1,118,057	$	1,099,826
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	239,058	$	232,638
Accrued payroll		24,304		24,071
Accrued expenses and other liabilities		54,947		53,808
Total current liabilities		318,309		310,517
Deferred income taxes		17,970		17,970
Noncurrent operating lease liabilities		4,623		4,994
Other liabilities		672		170
Total Liabilities		341,574		333,651
Stockholders’ Equity:
Common Stock		291		291
Additional paid-in capital		127,424		125,784
Retained earnings		698,128		686,037
Treasury stock, at cost		(49,360)		(45,937)
Total Stockholders’ Equity		776,483		766,175
Total Liabilities and Stockholders’ Equity	$	1,118,057	$	1,099,826

See notes to unaudited condensed consolidated financial statements.

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

~~PART I―FINANCIAL INFORMATION~~

~~Item 1―Financial Statements~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~ INCOME

(Unaudited)

(amounts in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Net sales

$
729,230

$
708,485

$
2,149,616

$
1,957,044

Cost of sales

633,087

611,518

1,867,070

1,684,010

Gross profit

96,143

96,967

282,546

273,034

Selling, general and administrative expenses

74,404

74,522

226,915

214,415

Income from operations

21,739

22,445

55,631

58,619

Interest income (expense)

(8)

(27)

20

(53)

Income before taxes

21,731

22,418

55,651

58,566

Income tax provision

(8,614)

(8,825)

(21,517)

(23,452)

Net income

$
13,117

$
13,593

$
34,134

$
35,114

Earnings per common share:

Basic

$
0.49

$
0.51

$
1.28

$
1.32

Diluted

$
0.49

$
0.51

$
1.27

$
1.32

Shares used in computation of earnings per common share:

Basic

26,802

26,542

26,754

26,514

Diluted

26,899

26,736

26,886

26,699


	Three Months Ended
	March 31,
	2023		2022
Net sales	$	727,545	$	788,344
Cost of sales		605,249		660,038
Gross profit		122,296		128,306
Selling, general and administrative expenses		103,282		98,172
Restructuring and other charges		897		—
Income from operations		18,117		30,134
Other income (expense), net		1,286		(3)
Income before taxes		19,403		30,131
Income tax provision		(5,205)		(8,339)
Net income	$	14,198	$	21,792

Earnings per common share:
Basic	$	0.54	$	0.83
Diluted	$	0.54	$	0.83

Shares used in computation of earnings per common share:
Basic		26,325		26,255
Diluted		26,436		26,405

See notes to unaudited condensed consolidated financial statements.

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

~~PART I―FINANCIAL INFORMATION~~

~~Item 1―Financial Statements~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~ STOCKHOLDERS’ EQUITY

(Unaudited)

(amounts in thousands)

Nine Months Ended

September 30,

2017

2016

Cash Flows from Operating Activities:

Net income

$
34,134

$
35,114

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

8,645

7,504

Provision for doubtful accounts

1,116

239

Stock-based compensation expense

560

975

Deferred income taxes

164

165

Excess tax benefit from exercise of equity awards

—

(385)

Changes in assets and liabilities:

Accounts receivable

28,101

19,530

Inventories

(16,189)

954

Prepaid expenses and other current assets

(2,191)

506

Other non-current assets

(3,945)

(141)

Accounts payable

(13,162)

(20,922)

Accrued expenses and other liabilities

(8,872)

(3,757)

Net cash provided by operating activities

28,361

39,782

Cash Flows from Investing Activities:

Purchases of equipment

(7,944)

(8,746)

Cash paid for Softmart

—

(33,983)

Net cash used for investing activities

(7,944)

(42,729)

Cash Flows from Financing Activities:

Dividend payment

(9,041)

(10,591)

Exercise of stock options

1,679

—

Issuance of stock under Employee Stock Purchase Plan

603

473

Excess tax benefit from exercise of equity awards

—

385

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

(500)

(625)

Net cash used for financing activities

(7,259)

(10,358)

Increase (decrease) in cash and cash equivalents

13,158

(13,305)

Cash and cash equivalents, beginning of period

49,180

80,188

Cash and cash equivalents, end of period

$
62,338

$
66,883

Non-cash Investing and Financing Activities:

Accrued capital expenditures

$
294

$
160

Supplemental Cash Flow Information:

Income taxes paid

$
24,293

$
23,953


	Three Months Ended March 31, 2023
	Common Stock			Additional		Retained		Treasury Shares
	Shares	Amount		Paid-In Capital		Earnings		Shares	Amount		Total
Balance - December 31, 2022	29,123	$	291	$	125,784	$	686,037	(2,773)	$	(45,937)	$	766,175
Stock-based compensation expense	—		—		1,853		—	—		—		1,853
Restricted stock units vested	10		—		—		—	—		—		—
Shares withheld for taxes paid on stock awards	—		—		(213)		—	—		—		(213)
Repurchase of common stock for treasury	—		—		—		—	(79)		(3,423)		(3,423)
Dividend declaration ($0.08 per share)	—		—		—		(2,107)	—		—		(2,107)
Net income	—		—		—		14,198	—		—		14,198
Balance - March 31, 2023	29,133	$	291	$	127,424	$	698,128	(2,852)	$	(49,360)	$	776,483

	Three Months Ended March 31, 2022
	Common Stock			Additional		Retained		Treasury Shares
	Shares	Amount		Paid-In Capital		Earnings		Shares	Amount		Total
Balance - December 31, 2021	29,025	$	290	$	122,354	$	605,766	(2,773)	$	(45,937)	$	682,473
Stock-based compensation expense	—		—		1,382		—	—		—		1,382
Restricted stock units vested	9		—		—		—	—		—		—
Shares withheld for taxes paid on stock awards	—		—		(165)		—	—		—		(165)
Net income	—		—		—		21,792	—		—		21,792
Balance - March 31, 2022	29,034	$	290	$	123,571	$	627,558	(2,773)	$	(45,937)	$	705,482

See notes to unaudited condensed consolidated financial statements.

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)


	Three Months Ended
	March 31,
	2023		2022
Cash Flows provided by (used in) Operating Activities:
Net income	$	14,198	$	21,792
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		3,073		2,991
Adjustments to credit losses reserve		(99)		567
Stock-based compensation expense		1,853		1,382
Loss on disposal of fixed assets		474		10
Changes in assets and liabilities:
Accounts receivable		(11,465)		(27,177)
Inventories		9,365		(28,046)
Prepaid expenses and other current assets		(6,245)		(4,572)
Other non-current assets		42		32
Accounts payable		5,859		(10,494)
Accrued expenses and other liabilities		2,450		5,230
Net cash provided by (used in) operating activities		19,505		(38,285)
Cash Flows used in Investing Activities:
Purchases of equipment and capitalized software		(1,882)		(2,451)
Net cash used in investing activities		(1,882)		(2,451)
Cash Flows used in Financing Activities:
Proceeds from short-term borrowings		59,310		1,385
Repayment of short-term borrowings		(59,310)		(1,385)
Purchase of common stock for treasury shares		(3,423)		—
Dividend payments		(2,107)		—
Payment of payroll taxes on stock-based compensation through shares withheld		(213)		(165)
Net cash used in financing activities		(5,743)		(165)
Increase (decrease) in cash and cash equivalents		11,880		(40,901)
Cash and cash equivalents, beginning of year		122,930		108,310
Cash and cash equivalents, end of period	$	134,810	$	67,409

Non-cash Investing and Financing Activities:
Accrued capital expenditures	$	753	$	266
Supplemental Cash Flow Information:
Income taxes paid	$	7,279	$	287
Interest paid	$	17	$	—

See notes to unaudited condensed consolidated financial statements.

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

PART I―FINANCIAL INFORMATION

Item 1―Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS~~ STATEMENTS

(amounts in thousands, except per share data)

Note 1–Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of PC Connection, Inc. and its subsidiaries, ~~(the “Company,” “we,” “us,”~~ or ~~“our”)~~the Company, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of ~~America.~~America, or U.S. GAAP. Such principles were applied on a basis consistent with the accounting policies described in ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, filed with the ~~Securities and Exchange Commission (the “SEC”).~~SEC. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in ~~our~~the Company’s Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2022.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, ~~2017.~~2023.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts and disclosures of assets and liabilities and the reported inamounts and disclosures of revenue and expenses during the ~~accompanying condensed consolidated financial statements.~~period. Management bases its estimates and judgments on the information available at the time and various other assumptions believed to be reasonable under the circumstances. By nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those ~~estimates.~~estimates and assumptions.

~~Comprehensive Income~~Restructuring and Other Charges

~~We had no items~~The restructuring and other charges recorded in the first quarter of ~~comprehensive income,~~2023 were primarily related to an involuntary reduction in our headquarter workforce and included cash severance and other ~~than our net income for each~~related termination benefits. These costs will be paid within a year of ~~the periods presented.~~termination and any unpaid balances are included in accrued expenses as of March 31, 2023.

Restructuring and other charges are presented separately from selling, general and administrative expenses. Costs incurred were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Employee separations	$	698	$	—
Other charges		199		—
Total restructuring and other charges	$	897	$	—

Included in accrued expenses and other liabilities as of March 31, 2023 was $308 related to unpaid termination benefits.

Table of Contents

Recently Issued Financial Accounting Standards

~~On May 28, 2014,~~In March 2020, the Financial Accounting Standards Board ~~or the FASB,~~ issued Accounting Standards Update ~~(“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which amends the existing accounting standards for revenue recognition. The core principle~~(ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate, or LIBOR, and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. This ASU is ~~that an entity should recognize revenue to depict~~applied prospectively and becomes effective immediately upon the ~~transfer of promised goods or services to customers in an amount that reflects the consideration to~~transition from LIBOR. The Company’s secured credit facility agreement references LIBOR, which ~~the entity expects~~is expected to be ~~entitled in exchange for those goods or services. In July 2015, the FASB voted to amend~~discontinued as a result of reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022; however, ASU ~~2014-09 by approving a one-year deferral~~2022-06, Reference Rate Reform (Topic 848): Deferral of the ~~mandatory~~Sunset Date of Topic 848 has extended the effective date ~~as well as providing~~through December 31, 2024. The Company is currently evaluating the ~~option to early adopt~~effect of the adoption of this standard on the ~~original effective date. Accordingly, the~~ Company, will adopt the standard in its first quarter of 2018. An entity may choose to adopt the new standard either through a full retrospective method with application to all periods presented or on a modified retrospective method through a cumulative effect adjustment as of the start of the first period for which it applies the new standard. We are in the process of determining the effect thatbut does not believe the adoption will have a material effect on ~~our~~its consolidated financial statements. ~~Based on our analysis to date, we have reached~~

Note 2–Revenue

The Company disaggregates revenue from its arrangements with customers by type of products and services, as it believes this method best depicts how the ~~following tentative conclusions regarding the new standard~~nature, amount, timing, and ~~how we expect it to affect our consolidated financial statements~~uncertainty of revenue and ~~related disclosures:~~

~~We expect to adopt the standard in the first quarter of 2018 and will not early adopt.~~

We expect to use the full retrospective method. Such method provides that upon applying the new standard, prior periods will be retrospectively adjusted and the cumulative effect of the change recognized in the opening retained earnings and other accounts as of January 1, 2016.

~~Table of Contents~~

~~We believe that since substantially all of our revenue is contractual, substantially all of our revenue falls within the scope of ASU No. 2014-09, as amended.~~

Our hardware revenue is generally recognized on a gross basis upon delivery. Upon adoption of the new standard, we do expect to recognize revenue at an earlier point in time than we are recognizing under current accounting standards for contracts where shipping terms are FOB shipping point. However, we are continuing to analyze each of our other revenue streams, including software to determine any changes that may be required under the new standard.

We hold inventories not available for sale related to certain product sales transactions in which we are warehousing the product and will be deploying the product to our clients’ designated locations subsequent to period-end. We are currently evaluating the effect of the new standard on our inventories not available for sale to identify the differing performance obligations within the underlying contracts and to determine if a portion of revenue under the contracts should be recognized at an earlier point in time than we are recognizing under current accounting standards.

~~We expect that our disclosures in our notes to our consolidated financial statements related to revenue recognition will be significantly expanded under the new standard.~~

Our analysis and evaluation of the new standard will continue through its effective date in the first quarter of 2018. A substantial amount of work remains to be completed due to the complexity of the new standard, the application of judgment, and the requirement for the use of estimates in applying the new standard, as well as the volume of our client portfolio and the related terms and conditions of our contracts that must be reviewed.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently assessing the potential impact of the adoption of ASU 2016-02 on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment and clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for us beginning January 1, 2020 for both interim and annual reporting periods. We are currently assessing the potential impact of the adoption of ASC 2017-04 on our consolidated financial statements.

~~In July 2015, the FASB issued ASU 2015-11,~~ ~~Simplifying the Measurement of Inventory~~, which modifies existing requirements regarding measuring inventory at the lower of cost or market. Under prior standards, the market amount required consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. We adopted the standard in the first quarter of 2017 and applied the provisions prospectively. The adoption of ASU 2015-11 did not have a material impact on our consolidated financial statements.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as

~~Table of Contents~~

income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid-in capital pool and reduces the complexity in accounting for excess tax benefits and tax deficiencies. The primary impact of our adoption was the recognition of excess tax benefits related to equity compensation in our provision for income taxes rather than paid-in capital, which is a change required to be applied on a prospective basis in accordance with the new guidance. There were no unrecognized excess tax benefits at implementation. Accordingly, we recorded discrete income tax benefits in the consolidated statements of income of $995 during the nine months ended September 30, 2017, for excess tax benefits related to equity compensation. The corresponding cash flows are ~~reflected~~affected by economic factors.

The following tables represent a disaggregation of revenue from arrangements with customers for the three months ended March 31, 2023 and 2022, along with the segment for each category (in thousands).


	Three Months Ended March 31, 2023
	Business Solutions		Enterprise Solutions		Public Sector Solutions		Total
Notebooks/Mobility	$	94,919	$	114,318	$	51,774	$	261,011
Desktops		18,762		30,142		14,417		63,321
Software		34,576		39,234		9,917		83,727
Servers/Storage		24,291		12,507		9,987		46,785
Net/Com Products		28,304		20,532		13,320		62,156
Displays and Sound		22,813		26,720		13,202		62,735
Accessories		28,735		47,594		13,473		89,802
Other Hardware/Services		20,714		22,896		14,398		58,008
Total net sales	$	273,114	$	313,943	$	140,488	$	727,545


	Three Months Ended March 31, 2022
	Business Solutions		Enterprise Solutions		Public Sector Solutions		Total
Notebooks/Mobility	$	130,434	$	121,339	$	56,850	$	308,623
Desktops		23,559		44,864		17,988		86,411
Software		34,908		21,010		5,269		61,187
Servers/Storage		22,164		15,371		9,630		47,165
Net/Com Products		22,627		22,191		8,027		52,845
Displays and Sound		32,824		37,079		13,423		83,326
Accessories		32,241		48,007		12,932		93,180
Other Hardware/Services		21,687		25,535		8,385		55,607
Total net sales	$	320,444	$	335,396	$	132,504	$	788,344

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Contract Balances

The following table provides information about contract liabilities from arrangements with customers as of March 31, 2023 and December 31, 2022 (in thousands).


	March 31, 2023		December 31, 2022
Contract liabilities, which are included in "Accrued expenses and other liabilities"	$	7,534	$	4,266

Changes in ~~cash provided by operating activities instead of financing activities,~~the contract liability balances during the three months ended March 31, 2023 and 2022 are as was previously required. We adopted the cash flow presentation that requires presentation of excess tax benefits within operating activities on a prospective basis. Additionally, under ASU 2016-09, we have elected to continue to estimate equity award forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact on our results of operations. The presentation requirements for cash flows related to employee taxes paid for withheld shares also had no impact to any of the periods presented in our condensed consolidated statements of cash flows since such cash flows have historically been presented as a financing activity. follows (in thousands):


	2023
Balance at December 31, 2022	$	4,266
Cash received in advance and not recognized as revenue		7,656
Amounts recognized as revenue as performance obligations satisfied		(4,388)
Balance at March 31, 2023	$	7,534

	2022
Balance at December 31, 2021	$	8,628
Cash received in advance and not recognized as revenue		3,870
Amounts recognized as revenue as performance obligations satisfied		(5,455)
Balance at March 31, 2022	$	7,043

Note 2–3–Earnings Per Share

Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributable to ~~nonvested~~non-vested stock units and stock options outstanding, if dilutive.

The following table sets forth the computation of basic and diluted earnings per ~~share:~~share (in thousands, except per share data):


	Three Months Ended				Nine Months Ended
September 30,	2017		2016		2017		2016

									Three Months Ended March 31,
									2023		2022
Numerator:
Net income	$	13,117	$	13,593	$	34,134	$	35,114	$	14,198	$	21,792
Denominator:
Denominator for basic earnings per share		26,802		26,542		26,754		26,514		26,325		26,255
Dilutive effect of employee stock awards		97		194		132		185		111		150
Denominator for diluted earnings per share		26,899		26,736		26,886		26,699		26,436		26,405
Earnings per share:
Basic	$	0.49	$	0.51	$	1.28	$	1.32	$	0.54	$	0.83
Diluted	$	0.49	$	0.51	$	1.27	$	1.32	$	0.54	$	0.83

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the ~~following~~Company had no outstanding ~~nonvested~~non-vested stock units that were excluded from the computation of diluted earnings per share because including them would have had an anti-dilutive ~~effect:~~effect.

Three Months Ended

Nine Months Ended

September 30,

2017

2016

2017

2016

Employee stock based awards

$
—

$
—

$
—

$
80

Note ~~3–Acquisitions~~4–Leases

~~Softmart Acquisition~~The Company leases certain facilities from a related party, which is a company affiliated with us through common ownership. Included in the right-of-use, or ROU, asset as of March 31, 2023 was $826 and a corresponding lease liability of $826 associated with related party leases.

~~On May 27, 2016, we acquired substantially all~~7

Table of ~~the assets~~Contents

As of Softmart Inc. (“Softmart”), a global supplier of information technology and software services solutions. The purchase of Softmart is consistent with our strategy to expand our software services capabilities. Under the terms of the asset purchase agreement, we paid $31,889, net of cash acquired, and allocated the total purchase priceMarch 31, 2023, there were no additional operating leases that have not yet commenced. Refer to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The excess of the purchase price over the net assets acquired represents potential synergies from Softmart’s customer base and its assembled workforce of sales representatives and software service specialists that we acquired in the transaction. This excess of purchase price over the aggregate fair values was recorded as goodwill. We incurred $357 of transaction costs in 2016 related to the

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acquisition which we reported in selling, general and administrative expenses, or SG&A, in our consolidated statement of income for the year ended December 31, 2016. The operating results of Softmart have been included in the SMB and Large Accounts segments. The revenues and income from operations of Softmart were not material to our consolidated results, and accordingly, we have not presented Softmart’s revenues or operating results on a pro forma basis.

~~The~~ following table ~~reflects components of the net assets acquired and liabilities assumed at fair value as of the closing date.~~

Purchase Price

Allocation

Current assets

$
22,812

Fixed assets

343

Goodwill

14,314

Customer relationships

11,300

Total assets acquired

48,769

Acquired liabilities

(16,252)

Net assets acquired

32,517

Less cash acquired

(628)

Purchase price at closing, net of cash acquired

$
31,889

~~We recorded goodwill of $7,366 and $6,948 in our SMB and Large Account segments, respectively, and the aggregate is expected to be fully deductible~~ for ~~tax purposes.~~

~~GlobalServe Acquisition~~

On October 11, 2016, we acquired the outstanding common shares of GlobalServe, Inc. (“GlobalServe”), which has developed an internet portal tool that simplifies customers’ global IT procurement. Under the terms of the stock purchase agreement, we paid $11,101, net of cash acquired. The purchase of GlobalServe allows us to service our customers’ global IT needs through their OneSource internet portal with consistent delivery, reporting, pricing, and logistics. We allocated the total purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition and recorded the excess of purchase price over the aggregate fair values as goodwill. In 2016 we incurred $118 of transaction costsquantitative information related to the ~~acquisition which we reported in SG&A expenses in our consolidated statement of income~~Company’s leases for the ~~year~~three months ended ~~December~~March 31, ~~2016. We have~~2023 and 2022 (dollars in thousands):


	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
	Related Parties		Others		Total		Related Parties		Others		Total
Lease Cost
Capitalized operating lease cost	$	313	$	709	$	1,022	$	313	$	709	$	1,022
Short-term lease cost		107		21		128		107		21		128
Total lease cost	$	420	$	730	$	1,150	$	420	$	730	$	1,150

Other Information
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$	313	$	643	$	956	$	313	$	687	$	1,000

Weighted-average remaining lease term (in years):
Capitalized operating leases		0.67		3.81		3.45		1.67		4.34		3.79

Weighted-average discount rate:
Capitalized operating leases		3.92%		4.06%		4.04%		3.92%		3.91%		3.92%

As of March 31, 2023, future lease payments over the remaining term of capitalized operating leases were as follows (in thousands):


For the Years Ended December 31,		Related Parties		Others		Total
2023, excluding the three months ended March 31, 2023	$	958	$	1,495	$	2,453
2024		163		1,697		1,860
2025		163		1,635		1,798
2026		163		952		1,115
2027		1		232		233
Thereafter		—		340		340
	$	1,448	$	6,351	$	7,799

Imputed interest						(516)
Lease liability balance at March 31, 2023					$	7,283

As of March 31, 2023, the ROU asset had a balance of $6,611. The long-term lease liability was $4,623 and the short-term lease liability, which is included ~~the operating results of GlobalServe~~in accrued expenses and other liabilities in the ~~Large Account segment since~~consolidated balance sheets, was $2,660. As of March 31, 2022, the ~~acquisition date.~~ROU asset had a balance of $9,201. The ~~revenues~~long-term lease liability was $6,077 and ~~income from operations of GlobalServe were not material to our~~the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated ~~results, and accordingly, we have not presented GlobalServe’s revenues or operating results on a pro forma basis.~~balance sheets, was $3,777.

~~The following table reflects components of the net assets acquired and liabilities assumed at fair value as of the closing date.~~ Note 5–Segment Information

Purchase Price

Allocation

Current assets

$
1,486

Fixed assets

4,609

Goodwill

8,012

Customer relationships

900

Total assets acquired

15,007

Acquired liabilities

(734)

Deferred taxes and unrecognized tax benefits

(2,390)

Net assets acquired

11,883

Less cash acquired

(782)

Purchase price at closing, net of cash acquired

$
11,101

~~We recorded $8,012 of goodwill as a result of our acquisition of GlobalServe in our Large Account segment. None of the goodwill related to this acquisition will be deductible for tax purposes.~~

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~~Note 4–Segment and Related Disclosures~~

The internal reporting structure used by ~~our~~the Company’s chief operating decision maker, ~~(“CODM”)~~or CODM, to assess performance and allocate resources determines the basis for ~~our reportable~~the Company’s operating segments. ~~Our~~The Company’s CODM is ~~our~~its Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of operating income.

~~Our~~The Company’s operations are organized under three ~~reportable~~ segments—the ~~SMB~~Business Solutions segment, which serves primarily small- ~~and~~to medium-sized businesses; the ~~Large Account~~Enterprise Solutions segment, which serves primarily medium-to-large corporations; and the Public Sector Solutions segment, which serves primarily federal, state, and local ~~governmental~~government and educational institutions. In addition, the Headquarters/Other group provides services in areas such as finance, human

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resources, information technology, or IT, marketing, and product management. Most of the operating costs associated with the Headquarters/Other group functions are charged to the operating segments based on their estimated usage of the underlying functions. ~~We report~~The Company reports these charges to the operating segments as ~~“Allocations.”~~“Allocations”. Certain headquarters costs relating to executive oversight and other fiduciary functions that are not allocated to the operating segments are included under the heading of Headquarters/Other in the tables below.

In May 2016, we acquired Softmart. As initially reported in our third quarter results for 2016, the operating results of Softmart were included in the SMB segment. This segment allocation was revised in our results for the year as reported in our 2016 10-K. Under this revised reporting, the operating results of Softmart that were initially included in the SMB segment are now allocated between the SMB and Large Account segments and continue to be allocated between these two segments.

~~In October 2016, we acquired GlobalServe. We have included the operating results for GlobalServe in our Large Account segment. The external~~Net sales ~~and operating results of GlobalServe were immaterial to our consolidated results.~~

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presented below exclude inter-segment product revenues. Segment information applicable to ~~our reportable~~the Company’s operating segments for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 is shown ~~below:~~below (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2017		2016		2017		2016

									Three Months Ended
									March 31,		March 31,
									2023		2022
Net sales:
SMB	$	290,569	$	281,915	$	860,622	$	814,123
Large Account		268,022		254,273		823,017		723,864
Public Sector		170,639		172,297		465,977		419,057
Business Solutions									$	273,114	$	320,444
Enterprise Solutions										313,943		335,396
Public Sector Solutions										140,488		132,504
Total net sales	$	729,230	$	708,485	$	2,149,616	$	1,957,044	$	727,545	$	788,344
Operating income (loss):
SMB	$	9,543	$	9,989	$	29,430	$	32,104
Large Account		12,389		11,832		35,777		31,188
Public Sector		2,793		3,593		169		4,555
Business Solutions									$	16,553	$	20,673
Enterprise Solutions										6,522		14,314
Public Sector Solutions										29		(1,126)
Headquarters/Other		(2,986)		(2,969)		(9,745)		(9,228)		(4,987)		(3,727)
Total operating income		21,739		22,445		55,631		58,619		18,117		30,134
Interest income (expense)		(8)		(27)		20		(53)
Other income (expense), net										1,286		(3)
Income before taxes	$	21,731	$	22,418	$	55,651	$	58,566	$	19,403	$	30,131
Selected operating expense:
Depreciation and amortization:
SMB	$	145	$	184	$	448	$	252
Large Account		519		466		1,661		1,138
Public Sector		45		40		126		121
Business Solutions									$	159	$	167
Enterprise Solutions										424		534
Public Sector Solutions										19		20
Headquarters/Other		2,226		2,011		6,410		5,993		2,471		2,270
Total depreciation and amortization	$	2,935	$	2,701	$	8,645	$	7,504	$	3,073	$	2,991
Total assets:
SMB					$	241,030
Large Account						376,001
Public Sector						69,162
Business Solutions									$	467,444	$	426,103
Enterprise Solutions										661,670		651,905
Public Sector Solutions										104,880		94,540
Headquarters/Other						5,689				(115,937)		(71,729)
Total assets					$	691,882			$	1,118,057	$	1,100,819

The assets of ~~our~~the Company’s three operating segments presented above consist primarily of accounts receivable, net intercompany receivable, goodwill, and other intangibles. Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash ~~inventory,~~ and cash equivalents, inventories, property and ~~equipment. Total~~equipment, ROU assets, and intercompany balance, net. As of March 31, 2023 and 2022, total assets for the Headquarters/Other group ~~are~~were presented net of intercompany balance eliminations of ~~$16,728 as of September 30, 2017. Our~~$60,176 and $50,234, respectively. The Company’s capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade ~~our~~its management information systems. These information systems serve all of ~~our~~the Company’s segments, to varying degrees, and accordingly, ~~our~~the CODM does not evaluate capital expenditures on a ~~segment~~segment-by-segment basis.

Note 5–6–Commitments and Contingencies

~~We are~~The Company is subject to various legal proceedings and ~~claims, including patent infringement~~ claims, which have arisen during the ordinary course of business. ~~In the opinion of management, the~~The outcome of such matters is not expected to have a material, adverse effect on ~~our~~the Company’s financial position, results of operations, ~~and~~and/or cash flows.

~~We are~~9

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The Company is subject to audits by states on sales and income taxes, employment matters, and other assessments. Additional liabilities for these and other audits could be assessed, ~~and~~but such outcomes ~~could~~are not expected to have a material, ~~negative~~adverse impact on ~~our~~the Company’s financial position, results of operations, ~~and~~and/or cash flows.

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Note 7–Bank Borrowings

~~Note 6–Bank Borrowing~~

~~We have~~The Company has a $50,000 credit facility collateralized by ~~our accounts receivable~~its account receivables that expires ~~February 10, 2022.~~March 31, 2025. This facility can be increased, at ~~our~~the Company’s option, to $80,000 for ~~approved~~permitted acquisitions or other uses authorized by the lender on substantially the same terms. Amounts outstanding under this facility bear interest at the one-month ~~London Interbank Offered Rate, or~~ LIBOR, plus a spread based on ~~our~~the Company’s funded debt ratio, or in the absence of LIBOR, the prime rate ~~(4.25%~~(8.00% at ~~September 30, 2017). The one-month LIBOR rate at September 30, 2017 was 1.23%~~March 31, 2023). The credit facility includes various customary financial ratios and operating covenants, including minimum net worth and maximum funded debt ratio requirements, and default acceleration provisions. The credit facility does not include restrictions on future dividend payments. Funded debt ratio is the ratio of average outstanding advances under the credit facility for a given quarter to consolidated trailing twelve months Adjusted ~~EBITDA (Earnings~~Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special ~~Charges).~~Charges, or Adjusted EBITDA. The maximum allowable funded debt ratio under the agreement is 2.0 to 1.0. Decreases in ~~our~~the Company’s consolidated trailing twelve months Adjusted EBITDA could limit ~~our~~its potential borrowing capacity under the credit facility. As of March 31, 2023, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

During the three months ended March 31, 2023, the Company borrowed $59,310 under the credit facility, which was fully repaid prior to March 31, 2023. The Company had no outstanding borrowings under the credit ~~facility. We had no outstanding bank borrowings at September 30, 2017~~facility as of March 31, 2023 or ~~December 31, 2016,~~2022, and accordingly, the entire $50,000 credit facility was available for borrowings ~~under the credit facility.~~on such date.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~PC CONNECTION, INC. AND SUBSIDIARIES~~

~~PART I―FINANCIAL INFORMATION~~CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

~~Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS~~

~~Statements contained or incorporated by reference in this~~This Quarterly Report on Form ~~10‑Q that are not based on historical fact are “forward-looking statements”~~10-Q contains forward-looking statements within the meaning of ~~the Private Securities Litigation Reform Act of 1995,~~ Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange ~~Act. These~~Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, financial results, business plans (including statements regarding new products and services we may offer and future expenditures, costs and investments), future liabilities, impairments, competition, and the impact of current macroeconomic conditions on our businesses and results of operations. In some cases, you can identify forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of management including, without limitation, our expectations with regard to the industry’s rapid technological change and exposure to inventory obsolescence, availability and allocations of goods, reliance on vendor support and relationships, competitive risks, pricing risks, and the overall level of economic activity and the level of business investment in information technology products. Forward-looking statements may be identified by the use of forward-looking terminologybecause they contain words such as “may,” “will,” “would,” “should,” “expects,” “plans,” “could,” ~~“expect,~~“intends,” ~~“believe,~~“target,” ~~“estimate,~~“projects,” ~~“anticipate,~~“believes,” ~~“continue,~~“estimates,” ~~“seek,~~“anticipates,” ~~“plan,” “intend,”~~“potential” or ~~similar terms, variations of such terms,~~“continue” or the negative of ~~those terms.~~

~~We cannot assure investors~~these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements reflect our current views with respect to future events and are based on assumptions ~~and expectations will prove to have been correct. Because forward-looking~~as of the date of this report. These statements ~~relate to the future, they~~ are subject to ~~inherent uncertainties, risks, and changes in circumstances that are difficult to predict. These statements involve~~ known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from ~~any future~~expectations or results performance, or achievements expressed or implied by the forward-looking statements. We therefore caution you against undue reliance on any of these forward-looking statements. Important factors that could cause our actual results to differ materially from those indicatedprojected or implied by forward-looking ~~statements~~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), our execution of our business plans (including our inventory management, our cost structure and our management and other personnel decisions) or other business decisions, as well as from developments beyond our control, including

●

substantial competition reducing our market share;

●

significant price competition reducing our profit margins;

●

the loss of any of our major vendors adversely affecting the number of type of products we may offer;

●

virtualization of information technology, or IT, resources and applications, including networks, servers, applications, and data storage disrupting or altering our traditional distribution models;

●

service interruptions at third-party shippers negatively impacting our ability to deliver the products we offer to our customers;

●

increases in shipping and postage costs reducing our margins and adversely affecting our results of operations;

●

loss of key persons or the inability to attract, train and retain qualified personnel adversely affecting our ability to operate our business;

●

cyberattacks or the failure to safeguard personal information and our IT systems resulting in liability and harm to our reputation; and

●

macroeconomic factors facing the global economy, including disruptions in the capital markets, economic sanctions and economic slowdowns or recessions, rising inflation and changing interest rates reducing the level of investment our customers are willing to make in IT products.

Additional factors include those ~~discussed~~described in ~~Item 2.~~this Annual Report on Form 10-K for the year ended December 31, 2022, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations” of this Quarterly Report~~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 ~~Item 1A. “Risk Factors” in~~ our ~~Annual Report on Form 10-K for~~subsequent filings with the ~~fiscal year ended December 31, 2016. Any~~Securities and Exchange Commission.

A forward-looking statement ~~made~~is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements. Unless required by uslaw, 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.

Unless the context otherwise requires, we use the terms “Connection”, the “Company”, “we”, “us”, and “our” in this Quarterly Report on Form 10-Q ~~speaks only as~~to refer to PC Connection, Inc. and its subsidiaries.

Table of the date on which this Quarterly Report on Form 10-Q was first filed. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law.Contents

OVERVIEW

~~OVERVIEW~~

We are a ~~leading solutions provider of~~Fortune 1000 Global Solutions Provider that simplifies the IT customer experience, guiding the connection between people and technology. Our dedicated account managers partner with customers to design, deploy, and support cutting-edge IT environments using the latest hardware, software, and services. We provide a wide range of ~~information technology, or~~ IT ~~solutions. We help our customers design, enable, manage, and service their IT environments. We provide IT products,~~ solutions, from the desktop to the cloud—including computer systems, data center solutions, software and peripheral equipment, networking communications, and other products and accessories that we purchase from manufacturers, distributors, and other suppliers. ~~We also~~Our Technology Solutions Group, or TSG, and state-of-the-art Technology Integration and Distribution Center with ISO 9001:2015 certified technical configuration lab offer end-to-end services ~~involving~~related to the design, configuration, and implementation of IT solutions. Our team also provides a comprehensive portfolio of managed services and professional services. These services are performed by our personnel and by third-party ~~service~~ providers. ~~We operate~~Our GlobalServe offering ensures worldwide coverage for our multinational customers, delivering global procurement solutions through ~~three sales segments,~~our network of in-country suppliers in over 150 countries.

The “Connection®” brand includes Connection Business Solutions, Connection Enterprise Solutions, and Connection Public Sector Solutions, which ~~serve primarily: (a)~~provide IT solutions and services to small- to medium-sized businesses, ~~or SMBs, through~~enterprise, and public sector markets.

Financial results for each of our ~~PC Connection Sales subsidiary, (b) large enterprise customers,~~segments are included in our Large Account segment, through our MoreDirect subsidiary, and (c) federal, state, and local governmental and educational institutions, in our Public Sector segment, through our GovConnection subsidiary.

the financial statements attached hereto. We generate sales ~~primarily~~ through (i) outbound telemarketing and field sales contacts by ~~account managers~~sales representatives focused on the business, ~~education,~~educational, healthcare, and government markets, (ii) our websites, and ~~inbound calls~~(iii) direct responses from customers responding to our ~~catalogs and other~~ advertising media. We ~~seek~~offer a broad selection of over 460,000 products at competitive prices, including products from vendors like Apple, Cisco Systems, Dell, Dell-EMC, Hewlett-Packard Inc., Hewlett-Packard Enterprise, Lenovo, Microsoft, and VMware, and we partner with more than 2,500 suppliers. We are able to ~~recruit, retain, and increase the productivity of~~leverage our ~~sales personnel through training, mentoring, financial incentives based on performance, and updating and streamlining our information systems~~state-of-the art logistic capabilities to ~~make our operations more efficient.~~rapidly ship product to customers.

As a ~~value added~~value-added reseller in the IT supply chain, we do not manufacture IT hardware or software. We are dependent on our suppliers—manufacturers and distributors that historically have sold only to resellers rather than directly to end users. However, certain manufacturers have, on multiple occasions, sold or attempted to sell directly to our customers, and in some cases, have restricted our ability to sell their products directly to certain customers, thereby attempting to and, in some case successfully, eliminate our role. We believe that the success of these direct sales efforts by ~~suppliers~~manufacturers will depend on their ability to meet our customers’ ongoing demands and provide ~~objective, unbiased~~ solutions to meet their needs. We believe more of our customers are seeking out comprehensive and integrated IT solutions, rather than ~~simply~~ the ~~acquisition of~~ability to acquire specific IT ~~products.~~products on a one-off basis. Our

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advantage is our ability to be product-neutral and provide a broader combination of products, services, and advice tailored to ~~customer~~customers’ individual needs. By providing customers with customized solutions from a variety of manufacturers, we believe we can mitigate the negative impact of continued direct sales initiatives from individual manufacturers. Through the formation of our ~~Technology Solutions Group,~~TSG, we are able to provide customers complete IT solutions, from identifying their needs, to designing, developing, and managing the integration of products and services to implement their IT projects. Such service offerings carry higher margins than traditional product sales. Additionally, the technical certifications of our service engineers permit us to offer higher-end, more complex ~~solutions~~products that generally carry higher gross margins. We expect these service offerings and technical certifications to continue to play a role in sales generation and ~~improve~~ gross ~~margins~~margin improvements in this competitive environment.

The primary challenges we continue to face in effectively managing our business are (1) increasing our product and service revenues while at the same time improving our gross margin in all three segments, (2) recruiting, retaining, and improving the productivity of our sales and technical support personnel, and (3) effectively controlling our selling, general and administrative, or SG&A, expenses while making ~~major~~ investments in our IT systems and solution selling personnel, especially in relation to changing revenue levels.

To support future growth, we are ~~expanding~~investing in our IT ~~solution~~solutions business, which requires the addition of ~~highly-skilled advanced solution~~highly skilled service engineers. Although we expect to realize the ultimate benefit of higher-margin ~~advanced solution services and product~~service revenues under this multi-year initiative, we believe that our cost of ~~sales may~~services will increase ~~significantly~~ as we add ~~such~~additional service engineers. If our ~~advanced solution~~service revenues do not grow enough to offset the cost of these headcount additions, our operating results may ~~decline.~~be negatively impacted.

Market and economic conditions and technology advances significantly affect the demand for our products and services. Virtual delivery of software products and advanced ~~internet~~Internet technology providing customers enhanced

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functionality have substantially increased customer expectations, requiring us to invest ~~more heavily~~on an ongoing basis in our own IT development to meet these new demands. ~~This investment includes significant planned expenditures to update our websites, as buying trends change and electronic commerce continues to grow.~~

Our investments in IT infrastructure are designed to enable us to operate more efficiently and to provide our customers enhanced functionality. In October 2017, we began a multi-year initiative to upgrade our IT infrastructure, and accordingly we expect to increase our related capital investments over the next two to three years. This will also likely increase SG&A expenses as assets are placed into service and depreciated.

RESULTS OF OPERATIONS

The following table sets forth information derived from our statements of income expressed as a percentage of net sales for the periods indicated:


	Three Months Ended						Nine Months Ended
	2017			2016			2017			2016
Net sales (in millions)	$	729.2		$	708.5		$	2,149.6		$	1,957.0

													Three Months Ended March 31,
													2023			2022
Net sales (dollars in millions)													$	727.5		$	788.3
Gross margin		13.2	%		13.7	%		13.1	%		14.0	%		16.8	%		16.3	%
Selling, general and administrative expenses		10.2	%		10.5	%		10.5	%		11.0	%		14.2	%		12.5	%
Income from operations		3.0	%		3.2	%		2.6	%		3.0	%		2.5	%		3.8	%

Net sales inof $727.5 million for the ~~third~~first quarter of ~~2017 increased year over year by $20.7~~2023 reflected a decrease of $60.8 million, or ~~2.9%,~~7.7% compared to the ~~third~~first quarter of ~~2016, due to increased revenues~~2022. The decrease was primarily driven by decreases in sales of notebooks/mobility, desktops, and displays and sound of $47.6 million, $23.1 million, and $20.6 million, respectively, as shown in the ~~Large Account and SMB sales segments. Net~~table in Note 2. These decreases were partially offset by increases in sales of software and ~~desktops grew~~net/com products of $22.5 million and $9.3 million, respectively. Gross profit decreased year-over-year by $6.0 million, or 4.7%, to $122.3 million as illustrated in the table and discussion beginning on page 15 of this Form 10-Q. Gross margin increased to 16.8% from 16.3% a year ~~over year~~ago. The increase in gross margin was primarily driven by ~~14%~~increased net sales of higher margin software, security, and ~~8%, respectively.~~networking solutions. SG&A expenses ~~decreased year over year~~increased year-over-year by $5.1 million, or 5.2%, to $103.3 million. The increase in ~~dollars~~SG&A expenses was primarily driven by a $5.1 million increase in personnel cost related to investments in resources to strengthen our sales, technical sales, IT, and ~~as a percentage of net sales. The decrease~~services organizations. SG&A expenses as a percentage of net sales ~~was~~increased to 14.2% compared to 12.5% a year ago. The increase in SG&A expenses as a percentage of net sales is primarily due to ~~higher~~the decrease in net sales, in the third quarter of 2017, compared to the prior year quarter. Gross margin decreased due to a competitive demand environment and changes in vendor funding programs. The decrease in SG&A expenses in dollars was primarily due to lower personnel costs due to lower gross profit and cost reductions implemented in the second quarter of 2017.as discussed above. Operating income in the ~~third~~first quarter of ~~2017~~2023 decreased ~~year over year~~year-over-year both in dollars and as a percentage of net sales ~~compared to~~by $12.0 million and 130 basis points, respectively, primarily as a result of the ~~prior year period due to lower~~decrease in gross ~~profit. Gross~~ profit ~~was adversely affected by lower invoice selling margins and lower vendor funding which reduces our cost of sales.~~combined with the increase in SG&A expenses.

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Net Sales Distribution

The following table sets forth our percentage of net sales by segment and product mix:


	Three Months Ended				Nine Months Ended
	2017		2016		2017		2016
Sales Segment
SMB	40	%	40	%	40	%	42	%
Large Account	37		36		38		37
Public Sector	23		24		22		21

									Three Months Ended March 31,
									2023		2022
Operating Segment
Enterprise Solutions									43	%	42	%
Business Solutions									38		41
Public Sector Solutions									19		17
Total	100	%	100	%	100	%	100	%	100	%	100	%


Product Mix
Notebooks/Mobility									36	%	39	%
Desktops									9		11
Software	24	%	21	%	22	%	20	%	12		8
Notebooks/Mobility	23		24		22		24
Servers/Storage	8		9		9		10		6		6
Net/Com Product	7		8		8		8
Net/Com Products									9		7
Displays and Sound									9		11
Accessories									12		12
Other Hardware/Services	38		38		39		38		7		6
Total	100	%	100	%	100	%	100	%	100	%	100	%

Gross Profit Margin

The following table summarizes our gross margin, as a percentage of net sales, over the periods indicated:

Three Months Ended

Nine Months Ended

2017

2016

2017

2016

Sales Segment

SMB

14.9
%
15.5
%

15.3
%
15.8
%

Large Account

12.7

13.4

12.5

13.1

Public Sector

11.0

11.1

10.4

11.8

Total

13.2
%
13.7
%

13.1
%
14.0
%


	Three Months Ended March 31,
	2023		2022
Operating Segment
Enterprise Solutions	13.4	%	14.6	%
Business Solutions	21.9		19.4
Public Sector Solutions	14.5		13.1
Total Company	16.8	%	16.3	%

Operating Expenses

The following table reflects our SG&A expenses for the periods ~~indicated (dollars~~indicated:


	Three Months Ended March 31,
($ in millions)	2023			2022
Personnel costs	$	79.2		$	74.1
Advertising		6.6			4.6
Service contracts/subscriptions		5.2			4.9
Professional fees		3.8			3.9
Depreciation and amortization		3.1			3.0
Facilities operations		2.2			2.1
Credit card fees		1.5			1.7
Other		1.7			3.9
Total SG&A expense	$	103.3		$	98.2
As a percentage of net sales		14.2	%		12.5	%

Restructuring and Other Charges

In the first quarter of 2023, we undertook actions to lower our cost structure. In connection with these initiatives, we incurred restructuring and other charges of $0.9 million in ~~millions):~~

Three Months Ended

Nine Months Ended

2017

2016

2017

2016

Personnel costs

$
57.4

$
58.6

$
175.4

$
167.2

Advertising

3.6

3.5

10.8

12.4

Facilities operations

3.7

3.5

11.1

10.1

Professional fees

2.0

1.8

6.4

5.4

Credit card fees

1.8

1.9

5.5

5.0

Depreciation and amortization

2.9

2.7

8.7

7.5

Other, net

3.0

2.5

9.0

6.8

Total

$
74.4

$
74.5

$
226.9

$
214.4

Percentage of net sales

10.2
%

10.5
%

10.6
%

11.0
%

the first quarter of 2023, which were primarily related to an

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involuntary reduction in our headquarter workforce and included cash severance and other related termination benefits. These costs will be paid within a year of termination and any unpaid balances are included in accrued expenses and other liabilities as of March 31, 2023. There were no restructuring and other charges recorded in the first quarter of 2022. The Company is currently evaluating additional restructuring activities for the second quarter of 2023 and beyond.

Year-Over-Year Comparisons

In this section and elsewhere in this Quarterly Report on Form 10-Q we refer to changes in year-over-year results. Unless context otherwise requires, such references refer to changes between the three months ended March 31, 2023 and the three months ended March 31, 2022.

Three Months Ended ~~September 30, 2017~~March 31, 2023 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2022

Changes in net sales and gross profit by segment are shown in the following table (dollars in millions):

Three Months Ended September 30,

2017

2016

% of

% of

%


Amount

Net Sales

Amount

Net Sales

Change


Sales:

SMB

$
290.6

39.8
%
$
281.9

39.8
%
3.1
%

Large Account

268.0

36.8

254.3

35.9

5.4

Public Sector

170.6

23.4

172.3

24.3

(1.0)

Total

$
729.2

100.0
%
$
708.5

100.0
%
2.9
%

Gross Profit:

SMB

$
43.4

14.9
%
$
43.7

15.5
%
(0.6)
%

Large Account

34.0

12.7

34.1

13.4

(0.2)

Public Sector

18.7

11.0

19.2

11.1

(2.6)

Total

$
96.1

13.2
%
$
97.0

13.7
%
(0.8)
%


	Three Months Ended March 31,
	2023				2022
			% of				% of		$		%
	Amount		Net Sales		Amount		Net Sales		Change		Change
Net Sales:
Enterprise Solutions	$	313.9	43.2	%	$	335.4	42.5	%	$	(21.5)	(6.4)	%
Business Solutions		273.1	37.5			320.4	40.6			(47.3)	(14.8)
Public Sector Solutions		140.5	19.3			132.5	16.9			8.0	6.0
Total	$	727.5	100.0	%	$	788.3	100.0	%	$	(60.8)	(7.7)	%
Gross Profit:
Enterprise Solutions	$	42.1	13.4	%	$	48.9	14.6	%	$	(6.8)	(13.9)	%
Business Solutions		59.9	21.9			62.1	19.4			(2.2)	(3.6)
Public Sector Solutions		20.3	14.5			17.3	13.1			3.0	17.5
Total	$	122.3	16.8	%	$	128.3	16.3	%	$	(6.0)	(4.7)	%

Net sales ~~increased~~decreased in the ~~third~~first quarter of ~~2017~~2023 compared to the ~~third~~first quarter of ~~2016,~~2022, as explained by the year-over-year changes discussed below:

●

Net sales of $313.9 million for the ~~SMB~~Enterprise Solutions segment ~~increased~~reflect a decrease of $21.5 million, or 6.4%. The decrease in net sales is primarily due to ~~higher~~decreases in net sales of desktops, displays and ~~notebook/~~sound, notebooks/mobility, ~~products. Desktop sales increased by $6.7~~servers/storage, other hardware/services, and net/com products of $14.7 million, $10.4 million, $7.0 million, $2.9 million, $2.6 million, and ~~notebook/mobility products increased~~$1.7 million, respectively. These decreases were partially offset by ~~$7.7 million primarily driven by customer refresh of these client devices.~~

~~Net sales for the Large Account segment increased due to higher~~an increase in net sales of software of $18.2 million.

●

Net sales of $273.1 million for the Business Solutions segment reflect a decrease of $47.3 million, or 14.8%. The decrease in net sales is primarily due to decreases in net sales of notebooks/mobility, displays and ~~mobility. On a dollar basis, software~~sound, desktops, and ~~mobility product revenues increased by $4.0~~accessories of $35.5 million, $10.0 million, $4.8 million, and ~~$3.1~~$3.5 million, ~~respectively~~respectively. These decreases were partially offset by increases in ~~the third quarter.~~ ~~Software increased by 6% due to increased demand~~net sales of ~~security~~net/com products and ~~office productivity products. Mobility increased by 6% due to Large Account customers refresh~~servers/storage of ~~client devices.~~

$5.7 million and $2.1 million, respectively.

●

Net sales toof $140.5 million for the Public Sector Solutions segment ~~decreased in the quarter. Net sales~~reflect an increase of $8.0 million, or 6.0%. Sales to state and local government and educational institutions decreased by ~~$3.0~~$18.4 million, ~~primarily due~~or 18.1%, compared to ~~lower sales to higher education customers. Net~~the prior year quarter, while sales to the federal government ~~however~~ increased by ~~$1.3~~$26.4 million, ~~as federal defense spending continued~~or 86.0%. The overall increase in net sales is primarily due to ~~grow~~increases in ~~the quarter. On a dollar basis, mobility, servers/storage, and~~net sales of other hardware/services, ~~decreased $10.1~~net/com products, and software of $6.0 million, ~~$4.1~~$5.3 million, and ~~$3.8~~$4.6 million, respectively, partially offset by decreases in notebooks/mobility and desktops of $5.1 million and $3.6 million, respectively.

Gross profit for the first quarter of 2023 decreased year-over-year, while gross margin for the first quarter of 2023 increased year-over-year, as explained by the year-over-year changes discussed below:

●

Gross profit for the Enterprise Solutions segment decreased primarily due to the decrease in net sales as referenced in the ~~third quarter.~~above table. Gross margin decreased by 120 basis points primarily due to a shift in product

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mix as shown in the table in Note 2 and the product mix table on page 14. The changes in the product mix show that the increase in software sales did not offset the sales declines in higher-margin net/com and servers/storage product categories. The decrease in ~~these~~gross margin is also attributable to the timing of a few low-margin customer projects during the first quarter of 2023.

●

Gross profit for the Business Solutions segment decreased primarily due to the decrease in net sales as referenced in the above table. Gross margin increased by 250 basis points primarily due to a shift in product mix to higher-margin sales ~~were offset~~of datacenter products including software, networking, and servers as shown in the table in Note 2 and the product mix table on page 14 during the first quarter of 2023.

●

Gross profit for the Public Sector Solutions segment increased primarily due to the increase in net sales as referenced in the above table. Gross margin increased by 140 basis points primarily due to an increase in sales of ~~$17.6 million~~higher-margin software, security, services, and networking solutions as shown in ~~software sales driven by security~~the table in Note 2 and ~~office productivity products.~~

the product mix table on page 14.

~~Gross profit~~ ~~for~~Selling, general and administrative expenses in the ~~third~~first quarter of ~~2017 decreased year over year~~2023 increased in dollars ~~and~~as well as a percentage of net sales ~~(gross margin), as explained below:~~

~~Gross profit for the SMB segment decreased~~ ~~due to lower invoice selling margins. I~~nvoice selling margins decreased by 91 basis points due to lower vendor funding and a shift in both client and product mix, which included increased sales of lower-margin transactional products (notebooks/mobility and desktops). We also receive agency fees from suppliers for certain software and hardware sales which are recorded as revenue with no corresponding cost of goods sold, and accordingly such fees have a positive impact on gross margin. A 30 basis point increases in these agency revenues partially offset the decrease in invoice selling margins.

Gross profit for the Large Account segment decreased due to lower invoice selling margins. Invoice selling margins decreased by 101 basis points in the quarter due to a hyper-competitive demand environment. This margin decrease was partially offset by higher agency revenues (14 basis points).

Gross profit for the Public Sector segment decreased due to a decrease in both net sales and invoice selling margins. Invoice selling margins decreased by 18 basis points due to lower vendor funding.

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~~Selling, general and administrative expenses~~ ~~decreased in dollars and as a percentage of net sales in the third quarter of 2017~~ compared to the ~~prior year quarter.~~first quarter of 2022. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other group expenses are summarized in the table below (dollars in millions):

Three Months Ended September 30,

2017

2016

% of

% of Net

Segment Net

Segment Net

%


Amount

Sales

Amount

Sales

Change


SMB

$
33.8

11.6
%
$
33.7

11.9
%
0.3
%

Large Account

21.7

8.1

22.3

8.8

(2.7)

Public Sector

15.9

9.3

15.6

9.0

1.9

Headquarters/Other, unallocated

3.0

2.9

3.4

Total

$
74.4

10.2
%
$
74.5

10.5
%
(0.1)
%


	Three Months Ended March 31,
	2023				2022
			% of				% of
			Segment Net				Segment Net		$		%
	Amount		Sales		Amount		Sales		Change		Change
Enterprise Solutions	$	35.5	11.3	%	$	34.6	10.3	%	$	0.9	2.9	%
Business Solutions		43.4	15.9			41.5	13.0			1.9	4.6
Public Sector Solutions		20.3	14.4			18.4	13.9			1.9	10.1
Headquarters/Other, unallocated		4.1				3.7				0.4	9.8
Total	$	103.3	14.2	%	$	98.2	12.5	%	$	5.1	5.2	%

●

SG&A expenses for the ~~SMB~~Enterprise Solutions segment increased year-over-year in dollars ~~but decreased~~as well as a percentage of net sales. The ~~year-over year increase~~year-over-year change in SG&A dollars was ~~due~~primarily attributable to ~~$0.1 million of higher usage of Headquarter services~~. ~~The decrease in~~increased advertising costs. SG&A expenses as a percentage of net sales ~~was~~were 11.3% for the Enterprise Solutions segment in the first quarter of 2023, which reflects an increase of 100 basis points and is primarily due to the ~~leveraging of fixed costs over larger~~decrease in net sales,.

as discussed above.

●

SG&A expenses for the ~~Large Account~~Business Solutions segment ~~decreased~~increased year-over-year in dollars ~~and~~as well as a percentage of net sales. The year-over-year ~~decrease~~change in SG&A dollars was ~~due to~~driven primarily by a ~~decrease of $1.0~~$1.4 million increase in personnel ~~costs~~cost related to ~~cost reductions implemented~~investments in ~~April 2017 and transfers of technical staff~~resources to ~~Headquarters, offset by an~~strengthen our sales organization. The year-over-year increase in ~~bad debt expense~~SG&A expenses was also attributable toincreased advertising costs of ~~$0.3~~$0.5 million and increased use of shared Headquarter services of $0.6 million. ~~The decrease in SG&A as a percentage of net sales was due to the leveraging of fixed costs over larger net sales.~~

●

SG&A expenses for the Public Sector ~~segmen~~tSolutions segment increased year-over-year in dollars ~~and~~as well as a percentage of net sales. The increase of $1.9 million in SG&A dollars was primarily driven by a $1.3 million increase in personnel cost related to investments in resources to strengthen our sales organization. The year-over-year increase in SG&A ~~dollars~~expenses was ~~primarily due~~also attributable to ~~an increase~~increased advertising costs of ~~$0.2~~$0.3 million and increased use of ~~personnel costs related to the transfers~~shared Headquarter services of ~~technical solutions staff from Headquarters.~~

$0.3 million.

●

SG&Aexpenses for the Headquarters/Other group increased year-over-year by $0.4 million primarily due to ana $2.2 million increase in personnel cost related to investments in resources to strengthen our IT, technical sales, and product management organizations. This increase was partially offset by a decrease in unallocated ~~executive oversight costs.~~Headquarter overhead costs year-over-year of $1.4 million. The Headquarters/Other group provides services to the three segments in areas such as finance, distribution center, human resources, IT, marketing, and product management. Most of the operating costs associated with such corporate Headquarters services are charged to the segments based on their estimated allocation usage of the underlying services. ~~The amounts shown above represent the remaining unallocated costs.~~

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Restructuring and other charges incurred in the first quarter of 2023 were $0.9 million, which were primarily related to an involuntary reduction in our headquarter workforce and included cash severance and other related termination benefits. There were no such charges incurred in the first quarter of 2022.

Income from operations for the ~~third~~first quarter of ~~2017~~2023 decreased to ~~$21.7~~$18.1 million, compared to ~~$22.4~~$30.1 million for the ~~third~~first quarter of ~~2016,~~2022, primarily due to ~~the~~a decrease in gross ~~profit.~~profit combined with an increase in SG&A expenses. Income from operations as a percentage of net sales was ~~3.0%~~2.5% for the ~~third~~first quarter of ~~2017,~~2023, compared to ~~3.2% of net sales~~3.8% for the prior year ~~quarter.~~quarter, primarily due to a 4.7% decrease in gross profit combined with a 5.2% increase in SG&A expenses.

Income taxes. Our ~~effective tax rate was 39.6%~~provision for income taxes in the ~~third~~first quarter of 2017, compared to 39.4% for the third quarter of 2016. Our tax rate will vary based on fluctuations in state tax levels for certain subsidiaries, valuation reserves, and accounting for uncertain tax positions.

~~Net income~~ ~~for the third quarter of 2017 decreased to $13.1~~2023 was $5.2 million, compared to ~~$13.6~~$8.3 million for the ~~third~~first quarter of ~~2016,~~2022, primarily due to the decrease in operating income.

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~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Changes in net sales and gross profit by segment are shown in the following table (dollars in millions):~~

Nine Months Ended September 30,

2017

2016

% of

% of

%


Amount

Net Sales

Amount

Net Sales

Change


Sales:

SMB

$
860.6

40.0
%
$
814.1

41.6
%
5.7
%

Large Account

823.0

38.3

723.9

37.0

13.7

Public Sector

466.0

21.7

419.0

21.4

11.2

Total

$
2,149.6

100.0
%
$
1,957.0

100.0
%
9.8
%

Gross Profit:

SMB

$
131.4

15.3
%
$
128.8

15.8
%
2.0
%

Large Account

102.8

12.5

94.6

13.1

8.7

Public Sector

48.3

10.4

49.6

11.8

(2.7)

Total

$
282.5

13.1
%
$
273.0

14.0
%
3.5
%

~~Net sales~~ ~~increased for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, as explained below:~~

Net sales for the SMB segment increased due to higher sales of software and transactional products. Software sales increased by $17.7 million due to the inclusion of revenue from Softmart, which we acquired on May 27, 2016, and due to our investments in advanced solution sales including security and software services. On a dollar basis, notebooks/mobility and desktop products increased by $21.9 million and $11.1 million, respectively for the nine months ended September 30, 2017. Mobility continues to be a strategic focus for SMB customers.

Net sales for the Large Account segment increased significantly due to an increase in large project rollouts. On a dollar basis, software, accessories, and net/com products increased year over year by $39.7 million, $19.5 million, and $13.5 million, respectively. All three product categories increased by double-digit rates year over year.

Net sales to the Public Sector segment increased significantly in the nine months ended September 30, 2017. Net sales to the federal government increased by $35.4 million due to higher sales made under federal government contracts and a large project rollout to the federal government. Net sales to state and local government and educational institutions increased by $11.5 million due to increased sales to higher education and K-12 customers. On a dollar basis, desktops, software, and net/com products increased year over year by $36.1 million, $21.0 million, and $8.7 million, respectively.

~~Gross profit~~ ~~for the nine months ended September 30, 2017 increased year over year in dollars, but decreased as a percentage of net sales (gross margin), as explained below:~~

~~Gross profit for the SMB segment increased~~ ~~due to higher net sales.~~ However, invoice selling margins decreased by 87 basis points due to a shift in both client and product mix, which reflected increased sales of lower-margin mobility products, as well as lower vendor funding. The decrease in invoice selling margins was partially offset by higher agency revenues (33 basis points).

Gross profit for the Large Account segment increased due to higher net sales. However, invoice selling margins decreased by 71 basis points due to a shift in product mix and an increase in large project rollouts, which generally carry lower gross margins. The decrease in invoice selling margins was partially offset by higher agency revenues (9 basis points).

Gross profit for the Public Sector segment decreased despite higher net sales. Invoice selling margins decreased by 115 basis points due to a shift in sales mix to lower-margin transactional products, including several large federal government project rollout.

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~~Selling, general and administrative expenses~~ increased in dollars, but decreased as a percentage of net sales in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other group expenses are summarized in the table below (dollars in millions):

Nine Months Ended September 30,

2017

2016

% of

% of

Segment Net

Segment Net

%


Amount

Sales

Amount

Sales

Change


SMB

$
102.0

11.9
%
$
96.7

11.9
%
5.5
%

Large Account

67.0

8.1

63.4

8.8

5.7

Public Sector

48.1

10.3

45.1

10.8

6.7

Headquarters/Other, unallocated

9.8

9.2

6.5

Total

$
226.9

10.6
%
$
214.4

11.0
%
5.8
%

SG&A expenses for the SMB segment increased in dollars and remained unchanged as a percentage of net sales. The year-over-year increase in SG&A dollars was due to the inclusion of $2.4 million of personnel costs related to technical staff transferred from Headquarters and higher usage of Headquarter services of $2.5 million. The increase in Headquarter services was related to our investments in technical and engineering support provided to the SMB segment.

~~SG&A expenses for the Large Account segment~~ ~~increased in dollars, but decreased as a percentage of net sales.~~ ~~The year-over-year increase in SG&A dollars was due to the inclusion of $2.7 million of operating expenses for Globalserve~~ and higher usage of Headquarter services of $0.8 million. The increase in Headquarter services was related to our investments in technical and engineering support provided to the Large Account segment. ~~The decrease in SG&A as a percentage of net sales was due to the leveraging of fixed costs over larger net sales.~~

~~SG&A expenses for the Public Sector segment increased in dollars, but decreased as a percentage of net sales.~~ The year-over-year increase in SG&A dollars was due to $1.0 million of personnel costs which is primarily due to transfers of technical staff transferred from Headquarters and increased headcount, an increase in credit card fees of $0.4 million, and $1.3 million of higher usage of Headquarter services. ~~The increase in Headquarter services was related to our investments in technical and engineering support provided to the Public Sector segment.~~ ~~The decrease in SG&A as a percentage of net sales was due to the leveraging of fixed costs over larger net sales.~~

~~SG&A~~expenses for the Headquarters/Other group increased due to an increase in unallocated executive oversight costs. The Headquarters/Other group provides services to the three segments in areas such as finance, human resources, IT, marketing, and product management. Most of the operating costs associated with such corporate headquarters services are charged to the segments based on their estimated usage of the underlying services. The amounts shown above represent the remaining unallocated costs.

~~Income from operations~~ for the nine months ended September 30, 2017 decreased to $55.7 million, compared to $58.6 million for the nine months ended September 30, 2016, due to the increase in SG&A. Income from operations as a percentage of net sales was 2.6% for the nine months ended September 30, 2017, compared to 3.0% of net sales for the nine months ended September 30, 2016.

Our effective tax rate was ~~38.7%~~26.8% for the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2023, compared to ~~40.0%~~27.7% for the ~~nine months~~quarter ended ~~September 30, 2016. Our~~March 31, 2022. The decrease in our effective tax rate ~~was mainly impacted by the recognition of excess tax benefit associated with stock based compensation exercised during the nine months ended September 30, 2017.~~is primarily attributable to changes in state apportionment factors.

Net income for the ~~nine months ended September 30, 2017~~first quarter of 2023 decreased to ~~$34.1~~$14.2 million, compared to ~~$35.1~~$21.8 million for the ~~nine months ended September 30, 2016,~~first quarter of 2022, primarily due to the $12.0 million, or 39.9%, decrease in operating income.

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Liquidity and Capital Resources

Our primary sources of liquidity have historically been internally generated funds from operations and borrowings under our bank line of credit. We have historically used and expect to use in the future those funds to meet our capital requirements, which consist primarily of working capital for operational needs, capital expenditures for computer equipment and software used in our business, ~~special dividend payments,~~ repurchases of common stock for treasury, dividend payments, and as opportunities arise, possible acquisitions of new businesses.

We believe that funds generated from operations, together with available credit under our bank line of credit, will be sufficient to finance our working capital, capital expenditures, and other requirements for ~~at least~~ the next twelve calendar months. ~~We expect~~Our investments in IT systems and infrastructure are designed to enable us to operate more efficiently and to provide our capital needs for the next twelve months to consist primarily of capital expenditures of $18.0 to $20.0 million, and payments on leases and other contractual obligations of approximately $5.0 million. We have completed a comprehensive review and assessment of our entire business software needs, including commercially available software that meets, or can be configured to meet, those needs better than our existing software. In October 2017, we began a multi-year initiative to upgrade our IT infrastructure, and accordingly we expect our related capital investments to range from $20.0 to $25.0 million over the next two to three years.customers enhanced functionality.

We expect to meet our cash requirements for the next twelve months through a combination of cash on hand, cash generated from operations, and borrowings onunder our bank line of credit, as follows:

●

Cash ~~on Hand~~and Cash Equivalents. At ~~September 30, 2017,~~March 31, 2023, we had ~~approximately $62.3~~$134.8 million in cash and cash equivalents.

●

Cash Generated from Operations. We expect to generate cash flows from operations in excess of operating cash needs by generating earnings and managing net changes in inventories and receivables with changes in payables to generate a positive cash flow.

●

~~Credit Facilities.~~Bank Line of Credit. As of ~~September 30, 2017,~~March 31, 2023, no borrowings were outstanding ~~against~~under our $50.0 million bank line of credit, which is available until ~~February 10, 2022.~~March 31, 2025. Accordingly, our entire line of credit was available for borrowing ~~at September 30, 2017.~~as of March 31, 2023. This line of credit can be increased, at our option, to $80.0 million for approved acquisitions or other uses authorized by the bank. Borrowings are, however, limited by certain minimum collateral and earnings requirements, as described more fully below.

As of March 31, 2023, we were in compliance with all of the covenants under our bank line of credit.

Our ability to continue funding our planned growth, both internally and externally, is dependent upon our ability to generate sufficient cash flow from operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. While we do not anticipate needing any additional sources of financing to fund our operations at this time, if demand for IT products declines, or our customers are materially adversely impacted by the developing macroeconomic trends characterized by inflation and increased interest rates, our cash flows from operations may be substantially affected. ~~See also related risks listed below under “Item 1A. “Risk Factors.”~~

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Dividends

A summary of 2023 dividend activity for our common stock is as follows:


Dividend Amount		Declaration Date	Record Date	Payment Date
$	0.08	February 9, 2023	February 21, 2023	March 10, 2023

On May 4, 2023, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.08 per share. The dividend will be paid on June 2, 2023 to all stockholders of record as of the close of business on May 16, 2023. The declaration and payment of any future dividends is at the discretion of our Board of Directors and will depend upon our financial position, strategic plans, general business conditions and any other factors deemed relevant by our Board of Directors.

Summary of Sources and Uses of Cash

~~The~~Cash flows from operating, investing and financing activities for the three months ended March 31, 2023 and 2022, as reflected in the unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Form 10-Q, are summarized in the following table ~~summarizes our sources and uses of cash over the periods indicated (in~~(dollars in millions):



	Three Months Ended March 31,
	2023		2022
Net cash provided by (used in) operating activities	$	19.5	$	(38.3)
Net cash used in investing activities		(1.9)		(2.5)
Net cash used in financing activities		(5.7)		(0.2)
Increase (decrease) in cash and cash equivalents	$	11.9	$	(41.0)

Nine Months Ended

2017

2016

Net cash provided by operating activities

$
28.4

$
39.8

Net cash used for investing activities

(7.9)

(42.7)

Net cash used for financing activities

(7.3)

(10.4)

Increase (decrease) in cash and cash equivalents

$
13.2

$
(13.3)

Cash provided by operating activities was ~~$28.4~~$19.5 million infor the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2023. Cash ~~flow~~ provided ~~for operations in the nine months ended September 30, 2017~~by operating activities resulted primarily from $14.2 million of net income ~~before~~and $5.3 million of other non-cash items added back to net income, including $3.1 million of depreciation and amortization and $1.9 million of stock-based compensation expense. A decrease in inventory of $9.4 million and increases in accounts payable and accrued expenses and other liabilities of $5.9 million and $2.5 million, respectively, also contributed to the positive inflow of cash. These inflows were partially offset by increases in accounts receivable and prepaid expenses and other current assets of $11.5 million and $6.2 million, respectively. The decrease in inventory was primarily due to a decrease in the amount of inventory we purchased during the first quarter of 2023. The increases in accounts payable and accounts receivable ~~offset~~were primarily driven by anthe timing of payments and receipts, respectively. For the three months ended March 31, 2022, cash used in operating activities resulted primarily from a $28.0 million increase in inventory, a $27.2 million increase in accounts receivable, and a $10.5 million decrease in accounts payable. ~~Accounts receivable decreased~~These cash outflows were partially offset by ~~$28.1~~net income of $21.8 million, ~~from the prior year-end balance. Days sales outstanding increased~~non-cash items added back to ~~43 days at September 30, 2017, compared to 42 days at September 30, 2016. Inventory increased from the prior year-end balance by $16.2~~net income of $5.0 million, ~~due to higher levels of inventory on-hand related to future backlog~~ and an increase in ~~shipments not received by~~accrued expenses and other liabilities of $5.3 million.

In order to manage our ~~customers~~working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of ~~September 30, 2017 compared to December~~sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. Components of our cash conversion cycle are as follows:


	March 31,
(in days)	2023		2022
Days of sales outstanding (DSO)⁽¹⁾		71		69
Days of supply in inventory (DIO)⁽²⁾		30		32
Days of purchases outstanding (DPO)⁽³⁾		(36)		(37)
Cash conversion cycle		65		64

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

(2)	Represents the inventory balance at the end of the quarter divided by average daily cost of sales for the same three-month period.

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(3)	Represents the accounts payable balance at the end of the quarter divided by average daily cost of sales for the same three-month period.

The cash conversion cycle increased slightly to 65 days at March 31, ~~2016. Inventory turns decreased~~2023, compared to ~~22 turns~~64 days at March 31, 2022. The increase in DSO is primarily a function of netted products recorded in accounts receivable on a gross basis, while the revenue is recorded on a net basis. The decrease in DIO is consistent with the decrease in inventory for the ~~third~~ quarter ~~of 2017~~ended March 31, 2023 compared to ~~23 turns~~the quarter ended March 31, 2022. The decrease in DPO is consistent with the decrease in accounts payable for the ~~prior year quarter.~~ quarter ended March 31, 2023 compared to the quarter ended March 31, 2022.

At ~~September 30, 2017~~, we had $164.9 million in outstanding accounts payable. Such accounts are generally paid within 30 days of incurrence, or earlier when favorable cash discounts are offered. This balance will be paid by cash flows from operations or short-term borrowings under the line of credit. We believe we will be able to meet our obligations under our accounts payable with cash flows from operations and our existing line of credit.

Cash used ~~for~~in investing activities in for the ~~nine~~three months ended ~~September 30, 2017 represented $7.9~~March 31, 2023 represents $1.9 million of purchases of property and equipment. These expenditures were primarily for computer equipment and capitalized ~~internally-developed~~internally developed software in connection with investments in our IT infrastructure. ~~Whereas in~~In the prior year period, ~~investing activities represented $34.0~~we made similar investments of $2.5 million ~~payment for the acquisition of Softmart, Inc. and $8.7 million of~~in purchases of property and equipment.

Cash used ~~for~~in financing activities in for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 consisted ~~primarily~~ of $59.3 million of borrowings and repayments, $3.4 million of treasury purchases, a ~~$9.0~~$2.1 million payment of a special ~~$0.34~~$0.08 per share dividend, ~~offset by $1.6~~and $0.2 million payment of ~~proceeds from the exercise of stock options. Whereas in~~payroll taxes on stock-based compensation through shares withheld. In the prior year period, financing activities primarily ~~represented a $10.6~~consisted of $0.2 million payment of ~~a special $0.40 per share dividend.~~payroll taxes on stock-based compensation through shares withheld.

Debt Instruments, Contractual Agreements, and Related Covenants

Below is a summary of certain provisions of our credit ~~facilities~~facility and other contractual obligations. For more information about the restrictive covenants in our debt instruments and inventory financing agreements, see “Factors Affecting Sources of Liquidity” below. For more information about our obligations, commitments, and contingencies, see our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report. on Form 10-Q.

Bank Line of ~~Credit~~.Credit. Our bank line of credit extends until ~~February 2022~~March 2025 and is collateralized by our accounts receivable. ~~Our~~As of March 31, 2023, our borrowing capacity isunder the bank line of credit was up to $50.0 ~~million~~million. Amounts outstanding under this facility bear interest at the greatest of (i) the prime rate (8.00% at March 31, 2023), (ii) the federal funds effective rate plus 0.50% per annum, and (iii) the one-month London Interbank Offered Rate, ~~or LIBOR,~~ plus ~~a spread based on our funded debt ratio, or in~~1.00% per annum, provided that the ~~absence of LIBOR, the prime~~ rate ~~(4.25%~~shall at ~~September 30, 2017). The one-month LIBOR rate at September 30, 2017 was 1.23%.~~no time be less than 0% per annum. In addition, we have the ~~option~~ability to increase our borrowing capacity under the ~~facility~~bank line of credit by an additional $30.0 million toprovided that we meet certain additional borrowing ~~requirements.~~requirements and obtain the consent of the administrative agent. Our credit facility is subject to certain covenant requirements which are described below under “Factors Affecting Sources of ~~Liquidity.” At September 30, 2017,~~Liquidity”. We did not have any borrowings outstanding under the ~~entire $50.0 million~~credit facility ~~was available for borrowing.~~as of March 31, 2023.

Cash receipts are automatically applied against any outstanding borrowings. Any excess cash on account may either remain on account to generate earned credits to offset up to 100% of cash management fees, or may be invested in short-term qualified investments. Borrowings under the line of credit are classified as current. As of March 31, 2023, the entire $50.0 million facility was available for borrowing.

Operating ~~Leases~~.Leases. We lease facilities from ~~our principal stockholders~~a related party, which is a company affiliated with us through common ownership, and facilities ~~and equipment~~ from third parties under non-cancelable operating leases. Certain leases ~~which have been reported in the “Contractual Obligations” section of our Annual Report on Form 10-K for the year ended December 31, 2016.~~require us to pay real estate taxes, insurance, and common area maintenance charges.

~~Off-Balance Sheet Arrangements.~~ We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

~~Contractual Obligations.~~ ~~The disclosures relating to our contractual obligations in our Annual Report on Form 10-K for the year ended December 31, 2016 have not materially changed since the report was filed.~~

Factors Affecting Sources of Liquidity

Internally Generated Funds.The key factors affecting our internally generated funds are our ability to ~~minimize~~manage costs and fully achieve our operating efficiencies, timely collection of our customer receivables, and management of our inventory levels.

Bank ~~Line~~line of Credit. Our bank line of credit extends until ~~February 2022~~March 2025 and is collateralized by our accounts receivable. As of ~~September 30, 2017,~~March 31, 2023, the entire $50.0 million facility was available for borrowing. Our credit facility

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contains certain financial ratios and operational covenants and other restrictions (including restrictions on additional debt, guarantees, and other distributions, investments, and liens) with which we and all of our subsidiaries must comply. ~~Our credit facility does not include restrictions on future dividend payments.~~

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Any failure to comply with ~~the~~these covenants ~~and other restrictions~~ would constitute a default and could prevent us from borrowing additional funds under this line of credit. This line of credit ~~facility~~ contains two financial tests:

●

The funded debt ratio (defined as the average outstanding advances under the line for the quarter, divided by the consolidated trailing twelve months Adjusted Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special Charges, or Adjusted EBITDA, for the trailing four quarters) must not be more than 2.0 to 1.0. ~~Our actual funded ratio~~We did not have any outstanding borrowings under our line of credit as of ~~September 30, 2017 was 0.01 to 1.0,~~March 31, 2023, and accordingly, the funded debt ratio did not limit potential borrowings as ~~average borrowings against our credit facility were minimal during the three months ended September 30, 2017.~~of March 31, 2023. Future decreases in our consolidated trailing twelve months Adjusted EBITDA could limit our potential borrowings under the ~~credit facility.~~

line of credit.

●

Minimum ~~Consolidated Net Worth~~consolidated net worth (defined as our consolidated total assets less our consolidated total liabilities) must be at least $346.7 million, plus 50% of consolidated net income for each quarter, beginning with the quarter ended December 31, 2016 (loss quarters not counted). Such amount was calculated as ~~$370.3~~$568.5 million at ~~September 30, 2017,~~March 31, 2023, whereas our actual consolidated stockholders’ equity at ~~this~~that date was ~~in compliance at $469.9~~$776.5 million.

Capital Markets. Our ability to raise additional funds in the capital market depends upon, among other things, general economic conditions, the condition of the ~~information technology~~IT industry, our financial performance and stock price, and the state of the capital markets. In addition, market volatility, inflation and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity.

~~SUMMARY~~APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies and estimates have not materially changed from those discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2016. These policies include revenue recognition, accounts receivable, vendor allowances, inventory, and the value of goodwill and long-lived assets, including intangibles.~~2022.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

Recently issued financial accounting standards are detailed in Note 1, ~~“Summary~~“Basis of ~~Significant Accounting Policies,~~Presentation,” in the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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~~PC CONNECTION, INC. AND SUBSIDIARIES~~

~~PART I―FINANCIAL INFORMATION~~

Item ~~3 -~~3. QUANTITATIVE AND QUALITATIVE ~~DISCLOSURES~~DISCLOSURES ABOUT MARKET RISK

For a description of our market risks, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2016.~~2022. No material changes ~~have occurred in~~related to our market risks have occurred since December 31, ~~2016.~~2022.

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~~PC CONNECTION, INC. AND SUBSIDIARIES~~

~~PART I―FINANCIAL INFORMATION~~

Item ~~4 -~~4. CONTROLS AND ~~PROCEDURES~~PROCEDURES

Disclosure Controls and Procedures

~~The Company’s~~

Our management, with the participation of the Chief Executive Officer and ~~Interim~~ Chief Financial Officer, evaluated the effectiveness of ~~the Company’s~~our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ means controls and other procedures of a company that are designed to ensure that information required to be disclosed by athe company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. ~~The Company’s~~Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above. Based on this evaluation, the Chief Executive Officer and ~~Interim~~ Chief Financial Officer concluded that, as of the end of the period covered by this report, ~~the Company’s~~our disclosure controls and procedures were effective at the reasonable assurance level.

NoChanges in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended ~~September 30, 2017~~March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II ―OTHER INFORMATION

Item 1. Legal Proceedings

For information related to legal proceedings, see the discussion in Note 6 - ~~OTHER INFORMATION~~“Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which information is incorporated by reference into this Part II, Item 1.

Item ~~1A -~~1A. Risk Factors

In addition to other information set forth in this ~~report,~~Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, which could materially affect our business, financial position, and results of operations. Risk factors which could cause actual results to differ materially from those suggested by forward-looking statements include but are not limited to those discussed or identified in this document, in our other public filings with the SEC, and those ~~incorporated by reference~~contained in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022, incorporated by reference herein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases under our stock repurchase program are made from time to time at management’s discretion in accordance with applicable federal securities laws. All repurchases of our common stock have been recorded as treasury stock. The following table summarizes information relating to purchases of common stock made by or on our behalf during the quarter ended March 31, 2023 (dollars in thousands, except per share data):


Issuer Purchases of Equity Securities
				Total Number of	Approximate Dollar Value
				Shares Purchased as	of Shares that May Yet Be
	Total Number			Part of Publicly	Purchased Under the Plans
	of Shares	Average Price Paid		Announced Plans or	or Programs
Period	Purchased	Per Share		Programs (1)	(in thousands) (1)(2)
01/01/23-01/31/23	—	$	—	—	$	37,692
02/01/23-02/28/23	52,902		43.02	52,902	$	35,416
03/01/23-03/31/23	26,295		43.63	26,295	$	34,269
	79,197	$	43.22	79,197

(1)

We have repurchased in aggregate approximately 2.7 million shares of our common stock for approximately $45.7 million pursuant to the repurchase program approved by the Board of Directors.

(2)

On March 28, 2001, our Board of Directors authorized the spending of up to $15.0 million to repurchase shares of our common stock. On each of February 11, 2014, December 17, 2018, and November 22, 2022, our Board of Directors approved increases of $15.0 million, $25.0 million, and $25.0 million, respectively, to the repurchase program bringing the aggregate authorized amount under the repurchase program to $80.0 million. There is no fixed termination date for this repurchase program. Purchases may be made in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. The timing and amount of any share repurchases will be based on market conditions and other factors.

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Item 6 - Exhibits


Exhibit Number				Description
~~Exhibit~~ ~~Number~~		~~Description~~
3.1			Amended and Restated Certificate of Incorporation of PC Connection, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form S-4 (333-63272) filed on June 19, 2001).

3.2			Amended and Restated Bylaws of PC Connection, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K, filed on January 9, 2008).
10.1	*		Director Compensation and Executive Bonus Plan, as amended.

31.1	*		Certification of the Company’s President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*		Certification of the Company’s Senior Vice President and ~~Interim~~ Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	*		Certification of the Company’s President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	*		Certification of the Company’s Senior Vice President and ~~Interim~~ Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	**		Inline XBRL Instance ~~Document.~~Document* - The Instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH	**		Inline XBRL Taxonomy Extension Schema Document.

101.CAL	**		Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF	**		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	**		Inline XBRL Taxonomy Label Linkbase Document.

101.PRE	**		Inline XBRL Taxonomy Presentation Linkbase Document.

104

*			~~Filed herewith.~~
**			~~Submitted electronically herewith.~~Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

* Filed herewith.

** Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, (ii) Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016,~~2022, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022, (iv) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016,~~2022, and (v) Notes to Unaudited Condensed Consolidated Financial Statements.

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~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PC CONNECTION, INC.


Date:	~~November 9, 2017~~May 4, 2023	By:	/S/s/ TIMOTHY J. MCGRATH
			Timothy J. McGrath
			President and Chief Executive Officer (Duly Authorized Officer)

Date:	~~November 9, 2017~~May 4, 2023	By:	/s/ ~~G. WILLIAM SCHULZE~~THOMAS C. BAKER
			~~G. William Schulze~~Thomas C. Baker
			Senior Vice President, ~~Interim Treasurer and~~ Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

2425


	September 30,		December 31,
	2017		2016

ASSETS
Current Assets:
Cash and cash equivalents	$	62,338	$	49,180
Accounts receivable, net		382,666		411,883
Inventories		106,724		90,535
Prepaid expenses and other current assets		5,185		5,453
Income taxes receivable		4,579		2,120
Total current assets		561,492		559,171
Property and equipment, net		40,077		39,402
Goodwill		73,602		73,602
Other intangibles, net		11,393		12,586
Other assets		5,318		1,373
Total Assets	$	691,882	$	686,134
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	164,883	$	177,862
Accrued expenses and other liabilities		18,294		31,047
Accrued payroll		16,938		21,345
Total current liabilities		200,115		230,254
Deferred income taxes		19,766		19,602
Other liabilities		2,083		2,836
Total Liabilities		221,964		252,692
Stockholders’ Equity:
Common stock		287		285
Additional paid-in capital		113,421		111,081
Retained earnings		372,072		337,938
Treasury stock, at cost		(15,862)		(15,862)
Total Stockholders’ Equity		469,918		433,442
Total Liabilities and Stockholders’ Equity	$	691,882	$	686,134


	Purchase Price
	Allocation
Current assets	$	22,812
Fixed assets		343
Goodwill		14,314
Customer relationships		11,300
Total assets acquired		48,769
Acquired liabilities		(16,252)
Net assets acquired		32,517
Less cash acquired		(628)
Purchase price at closing, net of cash acquired	$	31,889


	Three Months Ended September 30,
	2017				2016
			% of				% of		%
	Amount		Net Sales		Amount		Net Sales		Change
Sales:
SMB	$	290.6	39.8	%	$	281.9	39.8	%	3.1	%
Large Account		268.0	36.8			254.3	35.9		5.4
Public Sector		170.6	23.4			172.3	24.3		(1.0)
Total	$	729.2	100.0	%	$	708.5	100.0	%	2.9	%
Gross Profit:
SMB	$	43.4	14.9	%	$	43.7	15.5	%	(0.6)	%
Large Account		34.0	12.7			34.1	13.4		(0.2)
Public Sector		18.7	11.0			19.2	11.1		(2.6)
Total	$	96.1	13.2	%	$	97.0	13.7	%	(0.8)	%


	Nine Months Ended September 30,
	2017				2016
			% of				% of		%
	Amount		Net Sales		Amount		Net Sales		Change
Sales:
SMB	$	860.6	40.0	%	$	814.1	41.6	%	5.7	%
Large Account		823.0	38.3			723.9	37.0		13.7
Public Sector		466.0	21.7			419.0	21.4		11.2
Total	$	2,149.6	100.0	%	$	1,957.0	100.0	%	9.8	%
Gross Profit:
SMB	$	131.4	15.3	%	$	128.8	15.8	%	2.0	%
Large Account		102.8	12.5			94.6	13.1		8.7
Public Sector		48.3	10.4			49.6	11.8		(2.7)
Total	$	282.5	13.1	%	$	273.0	14.0	%	3.5	%