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What changed in PC CONNECTION INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PC CONNECTION INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+171 added−164 removedSource: 10-K (2025-02-24) vs 10-K (2024-03-07)

Top changes in PC CONNECTION INC's 2024 10-K

171 paragraphs added · 164 removed · 146 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changePersonal Systems National Solution Provider of the Year Award, as well as being named to the CRN Tech Elite 250 for the eighth year. Connection has also been twice named “America’s Best-in-State Employers” by Forbes and included on Newsweek’s list of Most Trustworthy Companies in America in 2022 and 2023.
Biggest changeIn addition to being named to the CRN Tech Elite 250, Connection has twice been recognized as one of “America’s Best-in-State Employers” by Forbes, honored as a Gold NH Veteran Friendly Business by the Department of Military Affairs & Veterans Services and NH Employment Security, and earned distinction as one of the “Most Trustworthy Companies in America” by Newsweek for the past three years.
We also believe that through our strong vendor 1 Table of Contents relationships we can provide an efficient supply chain and be an effective IT solution provider for our diverse customer base. ​ We strive to identify the unique needs of our corporate, government, educational, and small business customers, and have designed our business processes to enable our customers to effectively manage their IT systems.
We also believe that through our strong vendor relationships we can provide an efficient supply chain and be an effective IT solution provider for our diverse customer base. ​ 1 Table of Contents We strive to identify the unique needs of our corporate, government, educational, and small business customers, and have designed our business processes to enable our customers to effectively manage their IT systems.
Certain manufacturers who have traditionally used resellers to distribute their products have also, from time to time, established their own direct marketing operations, including sales through the Internet. ​ We believe new entrants to the IT solutions channel must overcome a number of obstacles, including: ​ ● substantial time and resources required to build a customer base of meaningful size and profitability for cost-effective operation; ​ ● significant upfront costs of developing the information systems and operating infrastructure required to successfully compete as a national solutions provider; ​ ● purchasing and operating efficiencies enjoyed by larger and more established competitors; ​ ● difficulty building relationships with vendors needed to gain favorable product allocations and attractive pricing terms; and ​ ● difficulty identifying and recruiting management personnel with significant direct marketing experience in the industry. ​ 2 Table of Contents BUSINESS STRATEGIES ​ We believe that we have become our customers’ IT provider of choice by calming the confusion surrounding IT procurement and solving complex business challenges with innovative IT solutions designed to meet their increased productivity, mobility, virtualization, and security needs in a continuously evolving IT environment.
Certain manufacturers who have traditionally used resellers to distribute their products have also, from time to time, established their own direct marketing operations, including sales through the Internet. ​ We believe new entrants to the IT solutions channel must overcome a number of obstacles, including: ​ ● substantial time and resources required to build a customer base of meaningful size and profitability for cost-effective operation; ​ ● significant upfront costs of developing the information systems and operating infrastructure required to successfully compete as a national solutions provider; ​ ● purchasing and operating efficiencies enjoyed by larger and more established competitors; ​ ● difficulty building relationships with vendors needed to gain favorable product allocations and attractive pricing terms; and ​ ● difficulty identifying and recruiting management personnel with significant direct marketing experience in the industry. ​ BUSINESS STRATEGIES ​ We believe that we have become our customers’ IT provider of choice by calming the confusion surrounding IT procurement and solving complex business challenges with innovative IT solutions designed to meet their increased 2 Table of Contents productivity, mobility, virtualization, and security needs in a continuously evolving IT environment.
Operating Segments . We conduct our business operations through three operating segments: Enterprise Solutions, Business Solutions, and Public Sector Solutions. ​ Enterprise Solutions Segment. Through our custom designed Web-based system, we are able to offer our larger corporate customers an efficient and effective method of sourcing, evaluating, purchasing, and tracking a wide variety of IT products and services.
We conduct our business operations through three operating segments: Enterprise Solutions, Business Solutions, and Public Sector Solutions. ​ Enterprise Solutions Segment. Through our custom designed Web-based system, we are able to offer our larger corporate customers an efficient and effective method of sourcing, evaluating, purchasing, and tracking a wide variety of IT products and services.
We also compete with: ​ ● certain product manufacturers that sell directly to customers as well as some of our own suppliers, such as Apple, Dell Inc., HP Inc., and Lenovo; ​ ● software publishers, such as Microsoft Corporation, VMware, and Adobe; ​ ● distributors that sell directly to certain customers, such as Apple, Dell Inc., Lenovo, and HP Inc.; ​ ● companies that develop and deliver on bespoke AI projects, such as Palantir and Scale.ai; ​ ● local and regional VARs; 9 Table of Contents ​ ● cloud providers, such as Amazon Web Services, Google and Microsoft Corporation; ​ ● large service providers and system integrators, such as Accenture, CGI, and IBM; ​ ● communications service providers, such as AT&T and Verizon; ​ ● various franchisers, office supply superstores, and national computer retailers, such as Office Depot and Staples; and ​ ● e-tailers, such as Amazon, with more extensive commercial online networks. ​ Additional competition may arise if other new methods of distribution emerge in the future.
We also compete with: ​ ● certain product manufacturers that sell directly to customers as well as some of our own suppliers, such as Apple, Dell Inc., HP Inc., and Lenovo; ​ ● software publishers, such as Microsoft Corporation, VMware, and Adobe; ​ ● companies that develop and deliver on bespoke AI projects, such as Palantir and Scale.ai; ​ ● local and regional VARs; ​ ● cloud providers, such as Amazon Web Services, Google and Microsoft Corporation; 9 Table of Contents ​ ● large service providers and system integrators, such as Accenture, CGI, and IBM; ​ ● communications service providers, such as AT&T and Verizon; ​ ● various franchisers, office supply superstores, and national computer retailers, such as Office Depot and Staples; and ​ ● e-tailers, such as Amazon, with more extensive commercial online networks. ​ Additional competition may arise if other new methods of distribution emerge in the future.
We currently offer our customers over 460,000 IT products designed for business applications from more than 2,500 vendors. These products consist of hardware, including devices, peripherals, accessories, servers, and networking products, along with cloud solutions, software and services.
We currently offer our customers over 460,000 IT products designed for business applications from more than 2,500 vendors. These products consist of hardware, including devices, peripherals, accessories, servers, storage, and networking products, along with cloud solutions, software and services.
We believe that increasing our sales force productivity is important to our future success, and we have increased our headcount and investments in our sales and sales support teams accordingly. ​ We market our products and services through our websites: www.connection.com, www.connection.com/enterprise , www.connection.com /publicsector, and www.macconnection.com .
We believe that increasing our sales force productivity is important to our future success, and we have increased our headcount and investments in our sales and sales support teams accordingly. ​ We market our products and services through our websites: www.connection.com, www.connection.com/enterprise , www.connection.com /publicsector, www.cnxnhelix.com , and www.macconnection.com .
Such phone calls are typically shorter and have higher close rates than calls from customers who have not visited our websites first. ​ ● Leveraging the time of experienced sales representatives — Our investments in technology-based sales and service programs allow our sales representatives more time to build and maintain relationships with our customers and to help them to solve their business problems.
Such phone calls are typically shorter and have higher close rates than calls from customers who have not visited our websites first. ​ ● Leveraging the time of experienced sales representatives — Our investments in technology-based sales and service programs allow our sales representatives more time to build and maintain relationships with our customers and to help them to solve their business problems. ​ Operating Segments .
For example, we recognize AI as a potentially transformational force and anticipate that AI will significantly impact our product offerings and the business operations of our clientele in the long term. ​ REGULATORY MATTERS ​ Government Contracting ​ Our Public Sector Solutions segment is heavily regulated and, as a result, our need for compliance awareness and business and employee support is significant.
For example, we recognize AI as a potentially transformational force and anticipate that AI will significantly impact our product offerings and the business operations of our clientele in both the short term and long term. ​ REGULATORY MATTERS ​ Government Contracting ​ Our Public Sector Solutions segment is heavily regulated and, as a result, our need for compliance awareness and business and employee support is significant.
These and other factors related to our competitive position are discussed more fully in the “Overview” of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Item 1A, “Risk Factors—Substantial competition could reduce our market share and may negatively affect our business” of this Annual Report on Form 10-K. ​ We believe that price, product selection and availability, solutions capabilities, and service and support are the most important competitive factors in our industry. ​ INTELLECTUAL PROPERTY RIGHTS ​ Our trademarks include, among others, Connection®, PC Connection®, GovConnection®, MacConnection®, we solve IT®, Everything Overnight®, Mobile Connection®, Cloud Connection®, Education Connection®, MoreDirect™, WebSPOC®, Softmart®, GlobalServe®, Raccoon Character, Connection Cloud MarkITplace™, and their related logos and all iterations thereof.
These and other factors related to our competitive position are discussed more fully in the “Overview” of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Item 1A, “Risk Factors—Substantial competition could reduce our market share and may negatively affect our business” of this Annual Report on Form 10-K. ​ We believe that price, product selection and availability, solutions capabilities, and service and support are the most important competitive factors in our industry. ​ INTELLECTUAL PROPERTY RIGHTS ​ Our trademarks include, among others, Connection®, PC Connection®, GovConnection®, MacConnection®, we solve IT®, Everything Overnight®, Mobile Connection®, Cloud Connection®, Education Connection®, MoreDirect™, CNXN Helix™, WebSPOC®, Softmart®, GlobalServe®, Raccoon Character, Connection Cloud MarkITplace™, ConnectOne™, QaaM™, and their related logos and all iterations thereof.
Our technicians maintain extensive certifications and authorizations from all major manufacturers, with more than 90% of the TIDC team holding one or more CompTIA certifications.
Our technicians maintain extensive certifications and authorizations from all major manufacturers, with more than 90% of the TIDC technicians holding one or more CompTIA certifications.
We target each of the four distinct market sectors within this segment—federal government, higher educational institutions, school grades K-12, and state and local governments. ​ The following table sets forth the relative distribution of net sales by operating segment for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Operating Segment ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ 42 % 42 % 43 % Business Solutions ​ 38 ​ 40 ​ 38 ​ Public Sector Solutions ​ 20 ​ 18 ​ 19 ​ Total ​ 100 % 100 % 100 % ​ Our ISG works across all operating segments to service the unique needs of healthcare, retail, finance, and manufacturing customers.
We target each of the four distinct market sectors within this segment—federal government, higher educational institutions, school grades K-12, and state and local governments. ​ The following table sets forth the relative distribution of net sales by operating segment for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 Operating Segment ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ 42 % 42 % 42 % Business Solutions ​ 38 ​ 38 ​ 40 ​ Public Sector Solutions ​ 20 ​ 20 ​ 18 ​ Total ​ 100 % 100 % 100 % ​ Our ISG works across all operating segments to service the unique needs of healthcare, retail, finance, and manufacturing customers.
Since our founding in 1982, we have built a strong brand name and customer awareness. We have been named to the Fortune 1000 and the CRN Solution Provider 500 for each of the last twenty-three years.
Since our founding in 1982, we have built a strong brand name and customer awareness. We have been named to the Fortune 1000 and the CRN Solution Provider 500 for each of the last twenty-four years.
Electronic delivery for software licenses were approximately 12%, 9%, and 10% of total net sales in 2023, 2022, and 2021, respectively. ​ MANAGEMENT INFORMATION SYSTEMS ​ Our subsidiaries utilize management information systems which have been significantly customized for our use.
Electronic delivery for software licenses were approximately 10%, 12%, and 9% of total net sales in 2024, 2023, and 2022, respectively. ​ MANAGEMENT INFORMATION SYSTEMS ​ Our subsidiaries utilize management information systems which have been significantly customized for our use.
At our 268,000 square foot technology TIDC in Wilmington, Ohio, we receive and ship inventory, configure and integrate technology solutions, provide depot maintenance and services, and process returned products. The TIDC features a state-of-the-art ISO 9001:2015-certified Configuration Lab that completed more than 500,000 custom configurations in 2023—including personal computing devices, servers, mobile devices, and networking hardware.
At our 268,000 square foot technology TIDC in Wilmington, Ohio, we receive and ship inventory, configure and integrate technology solutions, provide depot maintenance and services, and process returned products. The TIDC features a state-of-the-art ISO 9001:2015-certified Configuration Lab that completed more than 550,000 custom configurations in 2024—including personal computing devices, servers, mobile devices, and networking hardware.
Order status with distributors is tracked online and a confirmation of shipment from manufacturers and/or distribution companies is received prior to initial recording of the transaction. Products drop shipped by suppliers were 69%, 71%, and 72%, of net sales in 2023, 2022, and 2021, respectively.
Order status with distributors is tracked online and a confirmation of shipment from manufacturers and/or distribution companies is received prior to initial recording of the transaction. Products drop shipped by suppliers were 69%, 69%, and 71%, of net sales in 2024, 2023, and 2022, respectively.
We provide value by offering our customers efficient design, integration, deployment, and support of their IT environments. As of December 31, 2023, we employed 820 sales representatives. Sales representatives are responsible for managing enterprise, commercial, and public sector accounts, as specialization and a deep understanding of unique customer environments are more important than ever.
We provide value by offering our customers efficient design, integration, deployment, and support of their IT environments. As of December 31, 2024, we employed 711 sales representatives. Sales representatives are responsible for managing enterprise, commercial, and public sector accounts, as specialization and a deep understanding of unique customer environments are more important than ever.
We meet regularly with our partners to share feedback and explore strategies to promote greater engagement and better serve our mutual customers. ​ GROWTH STRATEGIES ​ Our growth strategies are designed to increase revenues by maximizing operational efficiencies while offering innovative products and value-added service offerings, expanding our offerings to our existing customers, and expanding our customer base.
We meet regularly with our partners to share feedback and explore strategies to promote greater engagement and better serve our mutual customers. 3 Table of Contents ​ GROWTH STRATEGIES ​ Our growth strategies are designed to increase revenues by maximizing operational efficiencies while offering innovative products and value-added service offerings, expanding our offerings to our existing customers, and expanding our customer base.
We actively work with our existing customers to become their IT provider of choice for products and enhanced solution services, while seeking to ensure our reputation of high-quality customer service, tailored marketing programs, and competitive pricing lead the way to expanding our share of the overall IT market we serve.
We actively work with our existing customers to become their IT provider of choice for products and enhanced solution services, while seeking to ensure our reputation of high-quality support, tailored marketing programs, and competitive pricing that lead the way to expanding our share of the overall IT market we serve.
We believe that, while we may experience some short-term disruption if products from Ingram Micro, Inc., TD Synnex Corporation, Microsoft Corporation, Dell Inc., or any of these vendors become unavailable to us, alternative sources are available. ​ Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 13%, and 11%, respectively, of our total product purchases in 2023.
We believe that, while we may experience some short-term disruption if products from Ingram Micro, Inc., TD Synnex Corporation, Dell Inc., Microsoft Corporation, or any of these vendors become unavailable to us, alternative sources are available. ​ Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 12%, and 12%, respectively, of our total product purchases in 2024.
We believe our focus on helping customers understand this intricate landscape, discover and define their unique AI value path, and realize its envisioned potential will enable us to serve as a trusted advisor and deliver a holistic approach to AI and automation that encompasses strategy, technical expertise, and integration. ​ ● Targeting customer segments.
We believe our focus on helping customers understand this intricate landscape, discover and define their unique AI value path, and realize AI’s envisioned potential will enable us to serve as a trusted advisor and deliver a holistic approach to AI and automation that encompasses strategy, technical expertise, and integration.
We are not including the information contained in our websites as part of, or incorporating by reference into, this Annual Report on Form 10-K. ​ MARKET AND COMPETITION ​ In the fiscal year ended December 31, 2023, we generated approximately 37.7% of our sales from SMBs, 42.2% from medium-to-large businesses (Fortune 1000), and 20.1% from government and educational institutions. ​ The largest segment of the United States IT market that we operate within is served by local and regional value-added resellers, or VARs, many of whom we believe are transitioning from the hardware and software products business to higher-margin IT services.
We are not including the information contained in our websites as part of, or incorporating by reference into, this Annual Report on Form 10-K. ​ MARKET AND COMPETITION ​ In the fiscal year ended December 31, 2024, we generated approximately 42.2% of our sales from medium-to-large businesses (Fortune 1000), 37.4% from SMBs, and 20.4% from government and educational institutions. ​ The largest segment of the United States IT market that we operate within is served by local and regional value-added resellers, or VARs, many of whom engage in the sales of hardware and software products, as well as higher-margin IT services.
The following table sets forth our percentage of net sales for major product categories for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Notebooks/Mobility 33 % 37 % 38 % Desktops ​ 9 ​ 10 ​ 9 ​ Software ​ 12 ​ 9 ​ 10 ​ Servers/Storage 7 7 7 ​ Net/Com Products 10 7 7 ​ Displays and Sound ​ 9 ​ 10 ​ 10 ​ Accessories ​ 11 ​ 13 ​ 12 ​ Other Hardware/Services 9 7 7 ​ Total ​ 100 % 100 % 100 % ​ We offer a 30-day right of return generally limited to defective merchandise.
The following table sets forth our percentage of net sales for major product categories for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2024 2023 2022 Notebooks/Mobility 35 % 33 % 37 % Desktops ​ 11 ​ 9 ​ 10 ​ Software ​ 10 ​ 12 ​ 9 ​ Servers/Storage 7 7 7 ​ Net/Com Products 8 10 7 ​ Displays and Sound ​ 10 ​ 9 ​ 10 ​ Accessories ​ 12 ​ 11 ​ 13 ​ Other Hardware/Services 7 9 7 ​ Total ​ 100 % 100 % 100 % ​ We offer a 30-day right of return on most of the products we sell, generally limited to defective merchandise.
Products manufactured by HP Inc., Dell Inc., Microsoft Corporation, and Lenovo represented approximately 14%, 13%, 12%, and 11% of our total product purchases in 2022. Products manufactured by HP Inc., Dell Inc., Microsoft Corporation, and Lenovo represented approximately 15%, 14%, 11%, and 10% of our total product purchases in 2021.
Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 13%, and 11%, respectively, of our total product purchases in 2023. Products manufactured by HP Inc., Dell Inc., Microsoft Corporation, and Lenovo represented approximately 14%, 13%, 12%, and 11% of our total product purchases in 2022.
In 2023, we maintained Microsoft Azure Expert Managed Service Provider status—an exclusive designation that requires an intensive auditing process and a proven record of delivering exceptional customer service and in-depth technical expertise around core cloud competencies. ​ ● Pursuing strategic acquisitions and alliances.
Connection is a Microsoft Azure Expert Managed Service Provider—an exclusive designation that requires an intensive auditing process and a proven record of delivering exceptional customer service and in-depth technical expertise around core cloud competencies. ​ ● Pursuing strategic acquisitions and alliances.
We generally accept returns directly from the customer and then either credit the customer’s account or ship the customer a replacement or similar product from our inventory. ​ PURCHASING AND VENDOR RELATIONS ​ Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Microsoft Corporation accounted for approximately 21%, 19%, and 11%, respectively, of our total product purchases in 2023.
We generally accept returns directly from the customer and then either credit the customer’s account or ship the customer a replacement or similar product from our inventory. ​ PURCHASING AND VENDOR RELATIONS ​ Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 25%, 23%, and 11%, respectively, of our total product purchases in 2024.
Our Board of Directors understands the importance of our inclusive, performance-driven culture to our ongoing success and is actively engaged with our President and Chief Executive Officer and our Senior Vice President of Human Resources across a broad range of human capital management topics. ​ As of December 31, 2023, we employed 2,703 persons (full-time equivalent), of whom 1,152 (including 332 management and support personnel) were engaged in sales-related activities, 616 were engaged in providing IT services and customer service and support, 607 were engaged in purchasing, marketing, and distribution-related activities, 124 were engaged in the operation and development of management information systems, and 204 were engaged in administrative and finance functions.
Our Board of Directors understands the importance of our inclusive, performance-driven culture to our ongoing success and is actively engaged with our President and Chief Executive Officer and our Senior Vice President of Human Resources across a broad range of human capital management topics. ​ As of December 31, 2024, we employed 2,580 persons (full-time equivalent), of whom 1,035 (including 324 management and support personnel) were engaged in sales-related activities, 532 were engaged in providing IT services and customer service and support, 645 were engaged in purchasing, marketing, and distribution-related activities, 153 were engaged in the operation and development of management information systems, and 215 were engaged in administrative and finance functions.
No other singular vendor supplied more than 10% of our total product purchases in 2023, 2022, and 2021.
No other singular vendor supplied more than 10% of our total product purchases in 2024, 2023, and 2022, as applicable.
No other singular product manufacturer produced more than 10% of our total product purchases in 2023, 2022, and 2021.
No other singular product manufacturer produced more than 10% of our total product purchases in 2024, 2023, and 2022, as applicable.
We are currently in the process of expanding on these services to include other areas that represent a broader AI ecosystem of development.
We are currently in the process of expanding these services to include other areas that we believe are relevant to the broader AI ecosystem of development.
Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 23%, 22%, and 15%, respectively, of our total product purchases in 2022. Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 23%, 23%, and 12%, respectively, of our total product purchases in 2021.
Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Microsoft Corporation accounted for approximately 21%, 19%, and 11%, respectively, of our total product purchases in 2023. Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 23%, 22%, and 15%, respectively, of our total product purchases in 2022.
Our strategy’s effectiveness is reflected in the recognition we have received, including being named to the Fortune 1000 and the CRN Solution Provider 500 for twenty-three straight years.
Our strategy’s effectiveness is reflected in the recognition we have received, including being named to the Fortune 1000 and the CRN Solution Provider 500 for twenty-four straight years. In recent years, we have received numerous awards, including HP U.S.
We believe that in the event we experience either a short-term or permanent disruption of supply of Microsoft Corporation, HP Inc., or Dell Inc. products, such disruption would likely have a material adverse effect on our results of operations and cash flows. ​ Throughout the year, we saw continued improvement in the supply chain as constraints brought on by the COVID-19 pandemic were resolved and products now are generally in adequate supply. ​ Many product suppliers reimburse us for advertisements or other cooperative marketing programs through various marketing vehicles.
We believe that in the event we experience either a short-term or permanent disruption of supply of Microsoft Corporation, HP Inc., or Dell Inc. products, such disruption would likely have a material adverse effect on our results of operations and cash flows. ​ Throughout the year, we did not experience any significant challenges or disruptions in the supply chain and products were generally available in adequate supply. ​ Many product suppliers reimburse us for advertisements or other cooperative marketing programs through various marketing vehicles.
In addition, certain state and non-US laws, such as the California Consumer Privacy Act and the California Privacy Rights Act govern the privacy and security of personal information, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. 12 Table of Contents Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.
In addition, certain state and non-US laws, such as the California Consumer Privacy Act and the California Privacy Rights Act govern the privacy and security of personal information, many of which differ from each other in significant ways and may not have the same effect, thus 12 Table of Contents complicating compliance efforts.
We also host a series of Technology Summits each year, with a focus on building stronger relationships with our customers and reinforcing our reputation as a trusted source of expertise. ​ Customers. We maintain an extensive database of customers and prospects.
We also host a series of Technology Summits each year, with a focus on building stronger relationships with our customers and reinforcing our reputation as a trusted source of expertise. ​ Customers. We maintain an extensive database of customers and prospects. However, no single customer accounted for more than 10% of our consolidated revenue in 2024, 2023, and 2022.
We make available free of charge through our investor relations website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practical after we electronically file these materials with, or otherwise furnish them to, the SEC. 13 Table of Contents In addition, we routinely post on the “Investor Relations” section of our website news releases, announcements, and other statements about our business, some of which may contain information that may be deemed material to investors.
We make available free of charge through our investor relations website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practical after we electronically file these materials with, or otherwise furnish them to, the SEC.
By working closely with our vendors to provide an efficient channel for the advertising and distribution of their products and 3 Table of Contents solutions, we expect to expand market share and generate opportunities for optimizing partner incentive programs.
By working closely with our vendors to provide an efficient channel for the advertising and distribution of their products and solutions, we expect to expand market share and generate opportunities for optimizing partner incentive programs. We promote communication and collaboration with our partner community at every level of our organization, from sales and product management to leadership.
AVAILABLE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), and accordingly, we file reports, proxy and information statements, and other information with the Securities and Exchange Commission, or SEC.
Our employees are not represented by a labor union, and, to date, we have never experienced a labor related work stoppage. 13 Table of Contents AVAILABLE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), and accordingly, we file reports, proxy and information statements, and other information with the Securities and Exchange Commission, or SEC.
Through increased targeted marketing, we seek to expand the number of our active customers and generate additional sales to existing customers by providing more value-added services and solutions. We have also developed digital marketing capabilities, which include but are not limited to digital remarketing, digital buying guides, Google shopping integration, along with social media advertising and search engine optimization.
We have also developed digital marketing capabilities, which include but are not limited to digital remarketing, digital buying guides, Google shopping integration, along with social media advertising and search engine optimization.
Our technical experts hold more than 5,000 professional certifications, and we have been awarded industry-leading partner authorizations, including Microsoft Azure Expert Managed Service Provider status. We believe this pursuit of excellence and our ability to understand our customers’ needs and provide comprehensive and effective IT solutions has earned us strong brand name recognition and a broad and loyal customer base.
We believe this pursuit of excellence and our ability to understand our customers’ needs and provide comprehensive and effective IT solutions has earned us strong brand name recognition and a broad and loyal customer base.
The majority of our backlog historically has been and continues to be open cancelable purchase orders.
The loss of any single customer would not have a material adverse effect on any of our operating segments. The majority of our backlog historically has been and continues to be open cancelable purchase orders.
In 2023, we restructured and combined our Technology Solutions Group and Technical Sales Organization into one organization to be referred to as our Technology Solutions Organization, or TSO. Our TSO and state-of-the-art Technology Integration and Distribution Center, or TIDC, with ISO 9001:2015 certified technical configuration lab offer end-to-end services related to the design, configuration, and implementation of IT solutions.
Our Technology Solutions Organization, or TSO, and state-of-the-art Technology Integration and Distribution Center, or TIDC, with ISO 9001:2015 certified technical configuration lab, offer end-to-end services 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 providers.
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Our team also provides a comprehensive portfolio of managed services and professional services. These services are performed by our personnel and by third-party providers.
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Personal Systems 2024 National Solutions Provider Partner of the Year; Dell Technologies 2024 Federal Rising Star Partner of the Year; and ServiceNow 2024 Americas Reseller Partner of the Year.
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In recent years, we have received numerous awards, including the Microsoft Excellence in Operations, Double Gold Level Award for delivering market-leading operational excellence, Modern Work, Surface Hub Reseller 2023 Microsoft US Partner of the Year Award, Aruba Federal Public Sector Partner of the Year, HPE Federal GreenLake Partner of the Year, and HP U.S.
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Connection made its debut on Newsweek’s ranking of “World’s Most Trustworthy Companies” in 2024. Our technical experts hold more than 5,000 professional certifications, and we have been awarded industry-leading partner authorizations, including Microsoft Azure Expert Managed Service Provider status.
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We have transitioned from an end-user or desktop-centric computing supplier to a network or enterprise-wide IT solutions supplier.
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We have adapted our business over the years to become an enterprise-wide IT solutions supplier.
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We promote communication and collaboration with our partner community at every level of our organization, from sales and product management to leadership.
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We have developed and are investing in a core AI capability that is driven through our CNXN Helix effort, which was launched in 2023 and brings together industry-leading experts, resources, and support designed to help organizations of all sizes realize the benefits of AI and automation.
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The federal government (and the other government entities we service) generally has the ability to terminate contracts, in whole or in part, with little or no prior notice, for convenience or for default based upon performance. The loss of any single customer would not have a material adverse effect on any of our operating segments.
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We believe this effort will set the foundation for our expanded capabilities and services within this fast-growing AI ecosystem. ​ ● Targeting customer segments. Through increased targeted marketing, we seek to expand the number of our active customers and generate additional sales to existing customers by providing more value-added services and solutions.
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We believe we have good relations with our employees. Our employees are not represented by a labor union, and, to date, we have never experienced a labor related work stoppage.
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Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.
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We believe we have good relations with our employees.
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In addition, we routinely post on the “Investor Relations” section of our website news releases, announcements, and other statements about our business, some of which may contain information that may be deemed material to investors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result, we are subject to the risk that the activities of our business partners and third-party providers may adversely affect our business even if an attack or breach does not directly impact our systems. ​ We are reliant on the continued development of electronic commerce and Internet infrastructure development to grow our overall sales. ​ We continue to have increasing levels of sales made through our e-commerce sites.
Biggest changeSimilar risks exist with respect to our business partners and third-party providers. As a result, we are subject to the risk that the activities of our business partners and third-party providers may adversely affect our business even if an attack or breach does not directly impact our systems.
Although we maintain some redundant systems, with full data backup, a significant component of our computer and telecommunications hardware is located in a single facility in New Hampshire, and a substantial interruption in our management information systems or in our telephone communication systems, including those resulting from extreme weather and natural disasters, as well as power loss, telecommunications failure, or similar 23 Table of Contents events, would substantially hinder our ability to process customer orders and thus could have a material adverse effect on our business.
Although we maintain some redundant systems, with full data backup, a significant component of our computer and telecommunications hardware is located in a single facility in New Hampshire, and a substantial interruption in our management information systems or in our telephone communication systems, including those 23 Table of Contents resulting from extreme weather and natural disasters, as well as power loss, telecommunications failure, or similar events, would substantially hinder our ability to process customer orders and thus could have a material adverse effect on our business.
If our revenues do not meet anticipated levels in the future, we may not be able to reduce our staffing levels and operating expenses in a timely manner to avoid significant losses from operations. ​ 14 Table of Contents Our sales are dependent on continued innovations in hardware, software and services by our vendor partners and the competitiveness of their offerings, and our ability to partner with new and emerging technology providers. ​ The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, software and services, such as cloud-based solutions and other virtual services, including SaaS, infrastructure as a service, or IaaS, platform as a service, or PaaS, device as a service, or DaaS, the internet of things, or IoT, and AI.
If our revenues do not meet anticipated levels in the future, we may not be able to reduce our staffing levels and operating expenses in a timely manner to avoid significant losses from operations. ​ Our sales are dependent on continued innovations in hardware, software and services by our vendor partners and the competitiveness of their offerings, and our ability to partner with new and emerging technology providers. ​ The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, software and services, such as cloud-based solutions and other virtual services, including SaaS, infrastructure as a service, or IaaS, platform as a service, or PaaS, device as a service, or DaaS, the internet of things, or IoT, and AI.
For example, our customers exercised greater caution and selectivity with their short-term IT investment plans during 2023, which resulted in lower than anticipated sales across our customer base. Such events have in the past had and may in the future have a material adverse effect on our business, financial condition and results of operations.
For example, our customers exercised greater caution and selectivity with their short-term IT investment plans during 2024, which resulted in lower than anticipated sales across our customer base. Such events have in the past had and may in the future have a material adverse effect on our business, financial condition and results of operations.
Such pricing pressures could result in the erosion of our market share, reduced sales, and reduced operating margins, any of which could have a material adverse effect on our business, financial position, results of operations, and cash flows. ​ Inflation may adversely impact our business, financial condition and results of operations. ​ Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, including cost of products and selling, general and administrative, or SG&A, expenses.
Such pricing pressures could result in the erosion of our market share, reduced sales, and reduced operating margins, any of which could have a material adverse effect on our business, financial position, results of operations, and cash flows. ​ 16 Table of Contents Inflation may adversely impact our business, financial condition and results of operations. ​ Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, including cost of products and selling, general and administrative, or SG&A, expenses.
Inflation may further exacerbate other risk factors, including supply chain disruptions, the recruitment and retention of qualified employees. 16 Table of Contents ​ The interruption of the flow of products from suppliers could disrupt our supply chain. ​ Our business depends on the timely supply of products in order to meet the demands of our customers.
Inflation may further exacerbate other risk factors, including supply chain disruptions, the recruitment and retention of qualified employees. ​ The interruption of the flow of products from suppliers could disrupt our supply chain. ​ Our business depends on the timely supply of products in order to meet the demands of our customers.
Any of these factors could adversely affect our business, financial condition, and results of operations. ​ 15 Table of Contents Substantial competition could reduce our market share and may negatively affect our business. ​ The direct marketing industry and the computer products retail business, in particular, are highly competitive.
Any of these factors could adversely affect our business, financial condition, and results of operations. ​ Substantial competition could reduce our market share and may negatively affect our business. ​ The direct marketing industry and the computer products retail business, in particular, are highly competitive.
If we are unable to acquire products, or if we experienced a change in business relationship with any of these vendors, we could experience a short-term disruption in the availability of products, and such disruption could have a material adverse effect on our results of operations and cash flows. ​ Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 13%, and 11%, respectively, of our total product purchases in 2023.
If we are unable to acquire products, or if we experienced a change in business relationship with any of these vendors, we could experience a short-term disruption in the availability of products, and such disruption could have a material adverse effect on our results of operations and cash flows. ​ Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 12%, and 12%, respectively, of our total product purchases in 2024.
In addition, we deliver and manage mission critical software, systems and network solutions for our customers. We also offer certain services, such as asset assessment, implementation, maintenance, and disposal services, to our customers through various third-party service providers engaged to perform these services on our behalf.
In addition, we deliver and manage mission critical software, systems and network solutions for our customers. We also offer certain services, such as asset assessment, 17 Table of Contents implementation, maintenance, and disposal services, to our customers through various third-party service providers engaged to perform these services on our behalf.
The occurrence of any such failure could adversely affect our reputation, brand, business, results of operations or cash flows. 17 Table of Contents ​ General economic and political conditions, including unfavorable conditions in a business or industry sector, may lead our clients to delay or forgo investments in IT hardware, software and services. ​ Our business has been affected by changes in economic conditions that are outside of our control, including reductions in business investment, loss of consumer confidence, and fiscal uncertainty.
The occurrence of any such failure could adversely affect our reputation, brand, business, results of operations or cash flows. ​ General economic and political conditions, including unfavorable conditions in a business or industry sector, may lead our clients to delay or forgo investments in IT hardware, software and services. ​ Our business has been affected by and continues to be subject to changes in economic conditions that are outside of our control, including reductions in business investment, loss of consumer confidence, and fiscal uncertainty.
Furthermore, the evolving nature of threats to data security, in light of new and sophisticated methods used by criminals and cyberterrorists, including computer viruses, malware, phishing, misrepresentation, social engineering, and forgery make it increasingly challenging to anticipate and adequately mitigate these risks.
Furthermore, the evolving nature of threats to data security, in light of new and sophisticated methods used by threat actors, including computer viruses, malware, phishing, misrepresentation, social engineering, and forgery, make it increasingly challenging to anticipate and adequately mitigate these risks.
As a result, the integration of AI into our operations may not be successful despite expending significant time and monetary resources to attempt to do so.
As a result, the integration of AI into our operations may not be 15 Table of Contents successful despite expending significant time and monetary resources to attempt to do so.
No other singular vendor supplied more than 10% of our total product purchases in the year 2023.
No other singular vendor supplied more than 10% of our total product purchases in the year 2024.
No other singular product manufacturer produced more than 10% of our total product purchases in the year 2023.
No other singular product manufacturer produced more than 10% of our total product purchases in the year 2024.
Causes of these fluctuations include: ​ ● shifts in customer demand that affect our distribution models, including demand for total solutions; ​ ● loss of customers to competitors; ​ ● rising interest rates; ​ ● inflation; ​ ● industry shipments of new products or upgrades; ​ ● changes in overall demand and timing of product shipments related to economic markets and to government spending; ​ ● supply constraints; ​ ● changes in vendor distribution of products; ​ ● changes in our product offerings and in merchandise returns; ​ ● changes in distribution models as a result of the growing adoption of cloud and software-as-a-service, or SaaS, offerings; and ​ ● adverse weather conditions that affect response, distribution, or shipping. ​ Our results also may vary based on our ability to manage personnel levels in response to fluctuations in revenue.
Causes of these fluctuations include: ​ ● shifts in customer demand that affect our distribution models, including demand for total solutions; ​ ● loss of customers to competitors; ​ ● rising interest rates; ​ ● inflation; ​ ● industry shipments of new products or upgrades; ​ ● changes in overall demand and timing of product shipments related to economic markets and to government spending; ​ ● supply constraints; ​ ● changes in vendor distribution of products; 14 Table of Contents ​ ● changes in referral fee structures offered to us by partners; ​ ● changes in our product offerings and in merchandise returns; ​ ● changes in distribution models as a result of the growing adoption of cloud and software-as-a-service, or SaaS, offerings; and ​ ● adverse weather conditions that affect response, distribution, or shipping. ​ Our results also may vary based on our ability to manage personnel levels in response to fluctuations in revenue.
Patricia Gallup, our principal stockholder, beneficially owned or controlled, in the aggregate, approximately 55% of the outstanding shares of our common stock as of December 31, 2023.
Patricia Gallup, our principal stockholder, beneficially owned or controlled, in the aggregate, approximately 52% of the outstanding shares of our common stock as of December 31, 2024.
We acquire products for resale both directly from manufacturers and increasingly indirectly through distributors and other sources. Although we purchase from a diverse vendor base, product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Microsoft Corporation accounted for approximately 21%, 19%, and 11%, respectively, of our total product purchases in 2023.
We acquire products for resale both directly from manufacturers and increasingly indirectly through distributors and other sources. Although we purchase from a diverse vendor base, product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 25%, 23%, and 11%, respectively, of our total product purchases in 2024.
See “Cautionary Note Concerning Forward-Looking Statements.” ​ Risks Related to our Business, Operations and Industry ​ We have experienced variability in sales and may not be able to maintain profitable operations. ​ Several factors have caused our results of operations to fluctuate and we expect some of these fluctuations to continue.
See “Cautionary Note Concerning Forward-Looking Statements” of this Annual Report on Form 10-K. ​ Risks Related to our Business, Operations and Industry ​ We have experienced variability in sales and may not be able to maintain profitable operations. ​ Several factors have caused our results of operations to fluctuate and we expect some of these fluctuations to continue.
Most of our product vendors provide us with trade credit, of which the amount outstanding at December 31, 2023 was $263.7 million.
Most of our product vendors provide us with trade credit, of which the amount outstanding at December 31, 2024 was $300.2 million.
Such breaches, costs and consequences could adversely affect our business, results of operations, or cash flows. 22 Table of Contents Our business could be materially adversely affected by system failures, interruption, integration issues, or security lapses of our IT systems or those of our third-party providers. ​ Our ability to effectively manage our business depends significantly on our information systems and infrastructure as well as, in certain instances those of our business partners and third-party providers.
Such breaches, costs and consequences could adversely affect our business, results of operations, or cash flows. 22 Table of Contents Our business could be materially adversely affected by system failures, interruption, integration issues, or security lapses of our IT systems or those of our third-party providers.
The on-line experience for our clients continues to improve, but the competitive nature of the e-commerce channel also continues to increase. Growth of our overall sales is dependent on customers continuing to expand their on-line purchases in addition to traditional channels to purchase products and services.
Growth of our overall sales is dependent on customers continuing to expand their on-line purchases in addition to traditional channels to purchase products and services.
Removed
Similar risks exist with respect to our business partners and third-party providers.
Added
Our ability to effectively manage our business depends significantly on our information systems and infrastructure as well as, in certain instances those of our business partners and third-party providers.
Added
We are reliant on the continued development of electronic commerce and Internet infrastructure development to grow our overall sales. ​ We continue to have increasing levels of sales made through our e-commerce sites. The on-line experience for our clients continues to improve, but the competitive nature of the e-commerce channel also continues to increase.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Vice President of Information Security and Compliance has over 40 years of IT experience and is a certified information systems security professional. ​ As part of the administration of our Cybersecurity Risk Mitigation Practices, the Committee is tasked with managing and mitigating our exposure to cybersecurity threats, creating our cybersecurity policies, and establishing short and long- 26 Table of Contents term cybersecurity goals and objectives that are designed to protect our information systems.
Biggest changeThe Chief Information Officer has over 10 years of experience managing cybersecurity, data protection, and incident management teams, and over 20 years of experience managing compliance and regulatory processes and controls. ​ 26 Table of Contents As part of the administration of our Cybersecurity Risk Mitigation Practices, the Committee is tasked with managing and mitigating our exposure to cybersecurity threats, creating our cybersecurity policies, and establishing short and long-term cybersecurity goals and objectives that are designed to protect our information systems.
These results, along with other cybersecurity topics including updates on previously identified material cybersecurity threats or incidents, are presented at regularly scheduled meetings. Members of the Committee will also notify our Board of Directors between such meetings regarding significant new cybersecurity threats or incidents. ​
These results, along with other cybersecurity topics including updates on previously identified material cybersecurity threats or incidents, are presented at regularly scheduled meetings. Members of the Committee will also notify our Board of Directors between such meetings regarding significant new or updates to ongoing cybersecurity threats or incidents. ​
Added
The Vice President of Information Security and Compliance has over 40 years of IT experience and is a certified information systems security professional.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis figure does not include an estimate of the number of beneficial holders whose shares are held of record by brokerage firms. ​ Dividends ​ The following table summarizes our 2023 quarterly dividends paid (in millions, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividend per Share Declaration Date Record Date Payment Date Total Dividend $ 0.08 ​ February 9, 2023 ​ February 21, 2023 ​ March 10, 2023 ​ $ 2.1 $ 0.08 ​ May 4, 2023 ​ May 16, 2023 ​ June 2, 2023 ​ $ 2.1 $ 0.08 ​ August 2, 2023 ​ August 15, 2023 ​ September 1, 2023 ​ $ 2.1 $ 0.08 ​ October 31, 2023 ​ November 14, 2023 ​ December 1, 2023 ​ $ 2.1 ​ On February 14, 2024, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.10 per share.
Biggest changeThis figure does not include an estimate of the number of beneficial holders whose shares are held of record by brokerage firms. ​ Dividends ​ The following table summarizes our 2024 quarterly dividends paid (in millions, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividend per Share Declaration Date Record Date Payment Date Total Dividend $ 0.10 ​ February 12, 2024 ​ February 27, 2024 ​ March 15, 2024 ​ $ 2.6 $ 0.10 ​ April 30, 2024 ​ May 14, 2024 ​ May 29, 2024 ​ $ 2.6 $ 0.10 ​ July 30, 2024 ​ August 13, 2024 ​ August 30, 2024 ​ $ 2.6 $ 0.10 ​ October 29, 2024 ​ November 12, 2024 ​ November 29, 2024 ​ $ 2.6 ​ On February 5, 2025, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.15 per share.
This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2018, and that dividends received were immediately invested in additional shares of our common stock. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown.
This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2019, and that dividends received were immediately invested in additional shares of our common stock. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown.
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. 28 Table of Contents Stock Performance Graph ​ The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing. ​ The following graph compares our annual percentage change in cumulative total return on shares of our common stock over the past five years with the cumulative total return of companies comprising the NASDAQ Composite Index and the NASDAQ US Benchmark TR Index.
The timing and amount of any share repurchases will be based on market conditions and other factors. ​ Stock Performance Graph ​ The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing. ​ The following graph compares our annual percentage change in cumulative total return on shares of our common stock over the past five years with the cumulative total return of companies comprising the NASDAQ Composite Index and the NASDAQ US Benchmark TR Index.
The dividend will be paid on March 15, 2024 to all stockholders of record as of the close of business on February 27, 2024.
The dividend will be paid on March 14, 2025 to all stockholders of record as of the close of business on February 25, 2025.
As of February 15, 2024, there were 26,361,133 shares of our common stock outstanding, held by approximately 37 stockholders of record.
As of February 14, 2025, there were 26,160,014 shares of our common stock outstanding, held by approximately 36 stockholders of record.
Removed
The NASDAQ US Benchmark TR Index replaces the NASDAQ US Benchmark Retail TR Index in this analysis and going forward, as we determined that this index is a more accurate representation of our peers.
Added
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. ​ Share Repurchase Authorization ​ Repurchases under our stock repurchase program are made from time to time at management’s discretion in accordance with applicable federal securities laws.
Removed
The NASDAQ US Benchmark Retail TR Index has been included with this analysis for 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base Period ​ Years Ended Company Name / Index Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 PC Connection, Inc. 100.00 168.05 ​ 160.01 ​ 150.02 ​ 164.12 ​ 236.74 ​ Nasdaq Stock Market-Composite 100.00 136.69 ​ 198.10 ​ 242.03 ​ 163.28 ​ 236.17 ​ Nasdaq US Benchmark TR Index 100.00 131.17 ​ 159.07 ​ 200.26 ​ 160.75 ​ 203.23 ​ Nasdaq US Benchmark Retail TR Index 100.00 125.41 ​ 177.06 ​ 210.50 ​ 143.12 ​ 197.92 ​ ​ ​
Added
All repurchases of our common stock have been recorded as treasury stock.
Added
The following table summarizes information relating to purchases of common stock made by or on our behalf during the quarter ended December 31, 2024 (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) ​ 10/01/24-10/31/24 ​ 3,419 ​ $ 68.31 ​ 3,419 ​ $ 64,334 ​ 11/01/24-11/30/24 ​ 31,097 ​ $ 70.19 ​ 31,097 ​ $ 62,152 ​ 12/01/24-12/31/24 ​ 34,850 ​ $ 70.78 ​ 34,850 ​ $ 59,685 ​ ​ ​ 69,366 ​ $ 70.39 ​ 69,366 ​ ​ ​ ​ ​ (1) As of December 31, 2024, we have repurchased in the aggregate approximately 2.9 million shares of our common stock for approximately $60.3 million pursuant to the repurchase program approved by our Board of Directors. ​ (2) On March 28, 2001, we announced that our Board of Directors authorized the spending of up to $15.0 million to repurchase shares of our common stock.
Added
On each of February 11, 2014, December 17, 2018, November 22, 2022, and May 1, 2024, our Board of Directors approved increases of $15.0 million, $25.0 million, $25.0 million, and $40.0 million, respectively, to the repurchase program bringing the aggregate authorized amount 28 Table of Contents under the repurchase program to $120.0 million.
Added
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.
Added
Measurement points are December 31, 2019, December 31, 2020, December 31, 2021, December 31, 2022, December 31, 2023, and December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base Period ​ Years Ended Company Name / Index Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 PC Connection, Inc. 100.00 95.22 ​ 89.27 ​ 97.66 ​ 140.87 ​ 146.02 ​ Nasdaq Stock Market-Composite 100.00 144.92 ​ 177.06 ​ 119.45 ​ 172.77 ​ 223.87 ​ Nasdaq US Benchmark TR Index 100.00 121.27 ​ 152.67 ​ 122.55 ​ 154.93 ​ 192.86 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese decreases were partially offset by an increase in unallocated Headquarter services of $5.4 million. ​ Income from operations for the year ended December 31, 2023 decreased to $103.2 million, compared to $120.6 million for the same period in the prior year, primarily due to the decreases in net sales and gross profit explained above. 35 Table of Contents Income from operations as a percentage of net sales decreased to 3.6% for the year ended December 31, 2023, compared to 3.9% of net sales for the same period in the prior year, primarily due to the decreases in net sales and gross profit. ​ Other income, net for the year ended December 31, 2023 increased to $10.0 million, compared to $1.1 million for the same period in the prior year, primarily due to an increase in interest income of $8.9 million as a result of higher cash equivalent balances and interest rates on short-term investments.
Biggest changeIncome from operations as a percentage of net sales remained substantially the same for the year ended December 31, 2024, compared to the same period in the prior year. ​ Interest income, net for the year ended December 31, 2024 increased to $18.7 million, compared to $10.0 million for the same period in the prior year, primarily due to an increase in interest income of $8.9 million as a result of higher cash equivalent balances and interest rates on short-term investments. ​ Other income for the year ended December 31, 2024 was $1.7 million as a result of a legal settlement received. ​ Income taxes.
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 positive cash flow. ​ ● Credit facility . As of December 31, 2023, no borrowings were outstanding under our $50.0 million credit facility, which is available until March 2025.
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 positive cash flow. ​ ● Credit facility . As of December 31, 2024, no borrowings were outstanding under our $50.0 million credit facility, which is available until March 2025.
Accordingly, our entire line of credit was available for borrowing as of December 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.
Accordingly, our entire line of credit was available for borrowing as of December 31, 2024. 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.
We did not have any borrowings outstanding under the credit facility as of December 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.
We did not have any borrowings outstanding under the credit facility as of December 31, 2024. ​ 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.
Our investments in IT systems and infrastructure are designed to enable us to operate more efficiently and to provide our customers enhanced functionality. ​ We expect to meet our cash requirements for 2024 and beyond through a combination of cash on hand, short-term investments, cash generated from operations, and borrowings under our credit facility, as follows: ​ ● Cash on Hand .
Our investments in IT systems and infrastructure are designed to enable us to operate more efficiently and to provide our customers enhanced functionality. ​ We expect to meet our cash requirements for 2025 and beyond through a combination of cash on hand, short-term investments, cash generated from operations, and borrowings under our credit facility, as follows: ​ ● Cash on Hand .
Any impairment charge that is recorded negatively impacts our earnings. ​ Our Enterprise Solutions and Business Solutions segments hold $66.2 million and $7.4 million of goodwill, respectively. We test goodwill for impairment each year and more frequently if potential impairment indicators arise. In 2023 and 2022, we performed a “step 0” qualitative analysis.
Any impairment charge that is recorded negatively impacts our earnings. ​ Our Enterprise Solutions and Business Solutions segments hold $66.2 million and $7.4 million of goodwill, respectively. We test goodwill for impairment each year and more frequently if potential impairment indicators arise. In 2024 and 2023, we performed a “step 0” qualitative analysis.
As of December 31, 2023, the entire $50.0 million facility was available for borrowing. Our credit facility 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.
As of December 31, 2024, the entire $50.0 million facility was available for borrowing. Our credit facility 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.
Borrowings under the line of credit are classified as current in our consolidated balance sheet. As of December 31, 2023, the entire $50.0 million facility was available for borrowing. ​ Operating Leases. We lease facilities from our principal stockholders and facilities from third parties under non-cancelable operating leases.
Borrowings under the line of credit are classified as current in our consolidated balance sheet. As of December 31, 2024, the entire $50.0 million facility was available for borrowing. ​ Operating Leases. We lease facilities from our principal stockholders and facilities from third parties under non-cancelable operating leases.
Discussion of the year ended December 31, 2022 and the year-to-year comparison between the year ended December 31, 2022 and the year ended December 31, 2021 can be found in Part II, Item 7 “Management’s Discussions and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
Discussion of the year ended December 31, 2023 and the year-to-year comparison between the year ended December 31, 2023 and the year ended December 31, 2022 can be found in Part II, Item 7 “Management’s Discussions and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.
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 36 Table of Contents operations may be substantially affected.
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.
At December 31, 2023, we recorded sales reserves of $3.1 million and $0.1 million as components of accounts receivable and accrued expenses, respectively. At December 31, 2022, we recorded sales reserves of $3.8 million and $0.1 million as components of accounts receivable and accrued expenses, respectively. We regularly evaluate the adequacy of our estimates for product returns.
At December 31, 2024, we recorded sales reserves of $3.8 million and $0.1 million as components of accounts receivable and accrued expenses, respectively. At December 31, 2023, we recorded sales reserves of $3.1 million and $0.1 million as components of accounts receivable and accrued expenses, respectively. We regularly evaluate the adequacy of our estimates for product returns.
Our credit facility extends until March 2025 and is collateralized by our accounts receivable. As of December 31, 2023, our borrowing capacity under the credit facility was up to $50.0 million.
Our credit facility extends until March 2025 and is collateralized by our accounts receivable. As of December 31, 2024, our borrowing capacity under the credit facility was up to $50.0 million.
Through the formation of our TSO, we are able to provide customers complete IT solutions, from identifying their needs, to designing, developing, and managing the 30 Table of Contents integration of products and services to implement their IT projects. Such service offerings carry higher margins than traditional product sales.
Through the formation of our TSO, 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.
This 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, 38 Table of Contents and Special Charges, or Adjusted EBITDA, for the trailing four quarters) must not be more than 2.0 to 1.0.
This 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.
We did not have any outstanding borrowings under the credit facility during the fourth quarter of 2023, and accordingly, the funded debt ratio did not limit potential borrowings as of December 31, 2023.
We did not have any outstanding borrowings under the credit facility during the fourth quarter of 2024, and accordingly, the funded debt ratio did not limit potential borrowings as of December 31, 2024.
The key factors affecting our internally generated funds are our ability to manage costs and fully achieve our operating efficiencies, timely collection of our customer receivables, and management of our inventory levels. ​ Credit facility. Our credit facility extends until March 2025 and is collateralized by our accounts receivable.
The key factors affecting our internally generated funds are our ability to manage costs and fully achieve our operating efficiencies, timely collection of our customer receivables, and management of our inventory levels. ​ 38 Table of Contents Credit facility. Our credit facility extends until March 2025 and is collateralized by our accounts receivable.
We are the principal in these 39 Table of Contents transactions and recognize revenue for the on-premise license at the point in time when the software is made available to the customer and the commencement of the term of the software license or when the renewal term begins, as applicable.
We are the principal in these transactions and recognize revenue for the on-premise license at the point in time when the software is made available to the customer and the commencement of the term of the software license or when the renewal term begins, as applicable.
Amounts recognized on a net basis included in net sales for such third-party services, agency sales, and off-premise software transactions were $141.8 million, $127.5 million, and $103.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. Certain software sales include on-premise licenses that are combined with software maintenance.
Amounts recognized on a net basis included in net sales for such third-party services, agency sales, and off-premise software transactions were $147.5 million, $141.8 million, and $127.5 million for the years ended December 31, 2024, 2023, and 2022, respectively. Certain software sales include on-premise licenses that are combined with software maintenance.
While we believe that our conclusions are reasonable, different assumptions could materially affect our valuations and result in impairment charges against the carrying values of those remaining assets in our Enterprise Solutions and Business Solutions segments. ​ Please see Note 4, “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements included in Item 8 of Part II of this report for a discussion of the significant assumptions used in our annual impairment test analysis. ​ 42 Table of Contents RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS ​ Recently issued financial accounting standards are detailed in Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. ​ ​
While we believe that our conclusions are reasonable, different assumptions could materially affect our valuations and result in impairment charges against the carrying values of those remaining assets in our Enterprise Solutions and Business Solutions segments. ​ Please see Note 4, “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements included in Item 8 of Part II of this report for a discussion of the significant assumptions used in our annual impairment test analysis. ​ RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS ​ Recently issued financial accounting standards are detailed in Note 1, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. ​
As of December 31, 2023, we were in compliance with the covenants of our credit facility. ​ 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.
As of December 31, 2024, we were in compliance with the covenants of our credit facility. 36 Table of Contents ​ 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.
Increased obsolescence or decreased customer demand beyond management’s expectations could require additional provisions, which could negatively impact our earnings. Our provision for inventory obsolescence was $2.4 million, $4.3 million, and $3.5 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Increased obsolescence or decreased customer demand beyond management’s expectations could require additional provisions, which could negatively impact our earnings. Our provision for inventory obsolescence was $2.1 million, $2.4 million, and $4.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.
This section discusses the results of operations for the year ended December 31, 2023 and year-to-year comparison between the year ended December 31, 2023 and the year ended December 31, 2022.
This section discusses the results of operations for the year ended December 31, 2024 and year-to-year comparison between the year ended December 31, 2024 and the year ended December 31, 2023.
We recognize revenue as the principal in the transaction with the customer (i.e., on a gross basis), as we control the product prior to delivery to the customer and derive the economic benefits from the sales transaction given our control over customer pricing.
We recognize revenue as 39 Table of Contents the principal in the transaction with the customer (i.e., on a gross basis), as we control the product prior to delivery to the customer and derive the economic benefits from the sales transaction given our control over customer pricing.
Additionally, the technical certifications of our service engineers permit us to offer higher-end, more complex products that generally carry higher gross margins.
Additionally, the technical certifications of our service engineers permit us to offer higher-end, 30 Table of Contents more complex products that generally carry higher gross margins.
In connection with these initiatives, we incurred restructuring and other charges of $2.7 million for the year ended December 31, 2023. These restructuring charges were primarily related to an involuntary reduction in our headquarter workforce and included cash severance and other related termination benefits.
In connection with these initiatives, we incurred restructuring and other charges of $0.4 million and $2.7 million for the years ended December 31, 2024 and December 31, 2023, respectively. These restructuring charges were primarily related to an involuntary reduction in our headquarter workforce and included cash severance and other related termination benefits.
Operating income decreased year-over-year both in dollars and as a percentage of net sales by $17.4 million and 60 basis points, respectively, primarily as a result of the decrease in net sales. ​ Sales Distribution ​ The following table sets forth our percentage of net sales by operating segment and product mix: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2023 2022 2021 Operating Segment ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ 42 % 42 % 43 % Business Solutions ​ 38 40 38 ​ Public Sector Solutions ​ 20 18 19 ​ Total ​ 100 % 100 % 100 % ​ ​ ​ ​ ​ ​ ​ ​ Product Mix ​ ​ ​ ​ ​ ​ ​ Notebooks/Mobility ​ 33 % 37 % 38 % Desktops ​ 9 ​ 10 ​ 9 ​ Software ​ 12 ​ 9 ​ 10 ​ Servers/Storage ​ 7 ​ 7 ​ 7 ​ Net/Com Products ​ 10 7 7 ​ Displays and Sound ​ 9 10 10 ​ Accessories ​ 11 13 12 ​ Other Hardware/Services ​ 9 7 7 ​ Total ​ 100 % 100 % 100 % ​ 32 Table of Contents Gross Margins ​ The following table summarizes our overall gross margins, as a percentage of net sales, for the last three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2023 2022 2021 Operating Segment ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ 14.9 % 14.7 % 14.5 % Business Solutions ​ 23.0 20.1 19.2 ​ Public Sector Solutions ​ 14.9 14.4 13.3 ​ Total Company ​ 18.0 % 16.8 % 16.1 % ​ Cost of Sales ​ Cost of sales includes the invoice cost of the product, direct employee and third-party cost of services, direct costs of packaging, inbound and outbound freight, and provisions for inventory obsolescence, adjusted for discounts, rebates, and other vendor allowances. ​ Operating Expenses ​ The following table reflects our most significant operating expenses for the last three years (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ($ in millions) ​ 2023 2022 2021 Personnel costs ​ $ 311.6 ​ $ 308.4 ​ $ 277.8 ​ Advertising ​ 22.4 ​ 20.2 ​ 15.8 ​ Service contracts/subscriptions ​ ​ 21.0 ​ 19.7 ​ 17.3 ​ Professional fees ​ 12.9 ​ 15.3 ​ 16.4 ​ Depreciation and amortization ​ 12.7 ​ 12.0 ​ 12.2 ​ Facilities operations ​ 8.2 ​ 8.6 ​ 8.3 ​ Credit card fees ​ 6.7 ​ 6.9 ​ 7.0 ​ Other ​ 10.4 ​ 14.5 ​ 13.3 ​ Total SG&A expense ​ $ 405.9 ​ $ 405.6 ​ $ 368.1 ​ As a percentage of net sales ​ ​ 14.2 % ​ 13.0 % ​ 12.7 % ​ Restructuring and other charges ​ During the year ended December 31, 2023, we undertook actions to lower our cost structure.
Operating income decreased year-over-year in dollars but remained consistent as a percentage of net sales primarily due to the increase in SG&A expenses. ​ Sales Distribution ​ The following table sets forth our percentage of net sales by operating segment and product mix: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 Operating Segment ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ 42 % 42 % 42 % Business Solutions ​ 38 38 40 ​ Public Sector Solutions ​ 20 20 18 ​ Total ​ 100 % 100 % 100 % ​ ​ ​ ​ ​ ​ ​ ​ Product Mix ​ ​ ​ ​ ​ ​ ​ Notebooks/Mobility ​ 35 % 33 % 37 % Desktops ​ 11 ​ 9 ​ 10 ​ Software ​ 10 ​ 12 ​ 9 ​ Servers/Storage ​ 7 ​ 7 ​ 7 ​ Net/Com Products ​ 8 10 7 ​ Displays and Sound ​ 10 9 10 ​ Accessories ​ 12 11 13 ​ Other Hardware/Services ​ 7 9 7 ​ Total ​ 100 % 100 % 100 % ​ 32 Table of Contents Gross Margins ​ The following table summarizes our overall gross margins, as a percentage of net sales, for the last three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 Operating Segment ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ 15.2 % 14.9 % 14.7 % Business Solutions ​ 24.1 23.0 20.1 ​ Public Sector Solutions ​ 15.3 14.9 14.4 ​ Total Company ​ 18.6 % 18.0 % 16.8 % ​ Cost of Sales ​ Cost of sales includes the invoice cost of the product, direct employee and third-party cost of services, direct costs of packaging, inbound and outbound freight, and provisions for inventory obsolescence, adjusted for discounts, rebates, and other vendor allowances. ​ Operating Expenses ​ The following table reflects our most significant operating expenses for the last three years (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ($ in millions) ​ 2024 2023 2022 Personnel costs ​ $ 320.6 ​ $ 311.6 ​ $ 308.4 ​ Marketing ​ 25.1 ​ 22.4 ​ 20.2 ​ Service contracts/subscriptions ​ ​ 24.5 ​ 21.0 ​ 19.7 ​ Professional fees ​ 12.9 ​ 12.9 ​ 15.3 ​ Depreciation and amortization ​ 13.0 ​ 12.7 ​ 12.0 ​ Facilities operations ​ 7.6 ​ 8.2 ​ 8.6 ​ Credit card fees ​ 6.7 ​ 6.7 ​ 6.9 ​ Other ​ 11.9 ​ 10.4 ​ 14.5 ​ Total SG&A expense ​ $ 422.3 ​ $ 405.9 ​ $ 405.6 ​ As a percentage of net sales ​ ​ 15.1 % ​ 14.2 % ​ 13.0 % ​ Restructuring and other charges ​ During the years ended December 31, 2024 and December 31, 2023, we undertook actions to lower our cost structure.
Components of our cash conversion cycle are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in days) ​ 2023 ​ 2022 Days of sales outstanding (DSO) (1) ​ ​ 73 ​ ​ 70 Days of supply in inventory (DIO) (2) ​ ​ 20 ​ ​ 31 Days of purchases outstanding (DPO) (3) ​ ​ (42) ​ ​ (35) Cash conversion cycle ​ ​ 51 ​ ​ 66 ​ (1) Represents the trade receivable at the end of the period divided by average daily net sales for the same three-month period. ​ (2) Represents the merchandise inventory balance at the end of the period divided by average daily cost of sales for the same three-month period. ​ (3) Represents the accounts payable balance at the end of the period divided by average daily cost of sales for the same three-month period. ​ The cash conversion cycle decreased to 51 days for the quarter ended December 31, 2023, compared to 66 days for the quarter ended December 31, 2022, as evidenced in the above cash conversion table.
Components of our cash conversion cycle are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in days) ​ 2024 ​ 2023 Days of sales outstanding (DSO) (1) ​ ​ 72 ​ ​ 73 Days of supply in inventory (DIO) (2) ​ ​ 15 ​ ​ 20 Days of purchases outstanding (DPO) (3) ​ ​ (47) ​ ​ (42) Cash conversion cycle ​ ​ 40 ​ ​ 51 ​ (1) Represents the trade receivable at the end of the period divided by average daily net sales for the same three-month period. ​ (2) Represents the merchandise inventory balance at the end of the period divided by average daily cost of sales for the same three-month period. ​ (3) Represents the accounts payable balance at the end of the period divided by average daily cost of sales for the same three-month period. ​ 37 Table of Contents The cash conversion cycle decreased to 40 days for the quarter ended December 31, 2024, compared to 51 days for the quarter ended December 31, 2023, as evidenced in the above cash conversion table.
Income taxes. Our provision for income taxes for the year ended December 31, 2023 was $29.8 million, compared to $32.4 million for the same period in the prior year. The decrease in our provision for income taxes was primarily due to the decrease in income from operations, partially offset by the increase in other income, net.
Our provision for income taxes for the year ended December 31, 2024 was $30.4 million, compared to $29.8 million for the same period in the prior year. The increase in our provision for income taxes was primarily due to the increase in interest income, net, partially offset by the decrease in income from operations.
We recorded obsolescence charges of $2.8 million, $3.3 million, and $3.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
We recorded obsolescence charges of $2.5 million, $2.8 million, and $3.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Write offs of customer and vendor receivables totaled $3.3 million in 2023 and $2.8 million in 2022. 41 Table of Contents ​ Considerable estimates are used in assessing the ultimate realization of customer receivables and vendor/supplier receivables, including reviewing the financial stability of a customer, vendor information, and gauging current market conditions.
Write offs of customer and vendor receivables totaled $2.4 million in 2024 and $3.3 million in 2023. ​ Considerable estimates are used in assessing the ultimate realization of customer receivables and vendor/supplier receivables, including reviewing the financial stability of a customer, vendor information, and gauging current market conditions.
If product costs and wages increase significantly or for an extended period of time, we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting customer demand. ​ ● The Federal Reserve increased interest rates in 2023, but it is anticipated that interest rates will remain steady and potentially decrease in 2024.
If product costs and wages increase significantly or for an extended period of time, we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting customer demand. ​ ● The Federal Reserve decreased interest rates in 2024, but it is uncertain whether interest rates will remain the same, decrease, or increase in 2025.
Risk Factors” of this Annual Report on Form 10-K. ​ Summary Sources and Uses of Cash ​ The following table summarizes our sources and uses of cash over the last three years (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2023 2022 2021 Net cash provided by operating activities ​ $ 197.9 ​ $ 34.9 ​ $ 57.8 ​ Net cash used in investing activities ​ (160.2) ​ (9.1) ​ (8.7) ​ Net cash used in financing activities ​ (15.7) ​ (11.2) ​ (36.4) ​ Increase in cash and cash equivalents ​ $ 22.0 ​ $ 14.6 ​ $ 12.7 ​ ​ Cash provided by operating activities was $197.9 million for the year ended December 31, 2023, which resulted primarily from $83.3 million of net income, $18.4 million of other non-cash charges added back to net income (including $12.7 million of depreciation and amortization and $7.0 million of stock-based compensation expense), an $84.5 million decrease in inventory, and a $31.1 million increase in accounts payable.
Risk Factors” of this Annual Report on Form 10-K. ​ Summary Sources and Uses of Cash ​ The following table summarizes our sources and uses of cash over the last three years (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2024 2023 2022 Net cash provided by operating activities ​ $ 173.9 ​ $ 197.9 ​ $ 34.9 ​ Net cash used in investing activities ​ (115.3) ​ (160.2) ​ (9.1) ​ Net cash used in financing activities ​ (25.2) ​ (15.7) ​ (11.2) ​ Increase in cash and cash equivalents ​ $ 33.4 ​ $ 22.0 ​ $ 14.6 ​ ​ Cash provided by operating activities was $173.9 million for the year ended December 31, 2024, which resulted primarily from $87.1 million of net income, $18.4 million of total non-cash charges added back to net income (including $13.0 million of depreciation and amortization and $8.5 million of stock-based compensation expense added back to net income, and $4.2 million of amortization of discount on short-term investments removed from net income), a $36.5 million increase in accounts payable, and a $29.1 million decrease in inventory.
Risk Factors.” ​ OVERVIEW ​ We are a 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.
Risk Factors” of this Annual Report on Form 10-K. ​ OVERVIEW ​ We are a 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 record these agency fees as a component of net sales as earned and there is no corresponding cost of sales amount. In certain instances, we invoice the customer directly under an EA and account for the individual items sold based on the nature of each item. Our vendors typically dictate how the EA will be sold to the customer.
We record these agency fees as a component of net sales as earned and there is no corresponding cost of sales amount. In certain 40 Table of Contents instances, we invoice the customer directly under an EA and account for the individual items sold based on the nature of each item.
Cash used in investing activities for the prior year consisted of $9.1 million of purchases of property and equipment. ​ Cash used in financing activities for the year ended December 31, 2023 consisted of $88.2 million of aggregate borrowings and repayments under our credit facility, $5.4 million of treasury repurchases, $8.4 million of dividend payments, $1.1 million of issuances of stock under the 1997 Employee Stock Purchase Plan, and $3.0 million of payroll taxes on stock-based compensation through shares withheld.
Government treasury securities and $9.6 million of purchases of property and equipment. ​ Cash used in financing activities for the year ended December 31, 2024 consisted of $26.1 million of aggregate borrowings and repayments under our credit facility, $12.4 million of treasury repurchases, $10.5 million of dividend payments, $1.1 million of issuances of stock under the 1997 Employee Stock Purchase Plan, and $3.4 million of payroll taxes on stock-based compensation through shares withheld.
Based on the qualitative analysis, the Company determined goodwill was not impaired as of December 31, 2023 and 2022.
Based on the 42 Table of Contents qualitative analysis, the Company determined goodwill was not impaired as of December 31, 2024 and 2023.
SG&A expenses attributable to our three operating segments and the remaining unallocated Headquarters/Other group expenses are summarized below (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ % of $ ​ % ​ ​ Amount ​ Net Sales ​ Amount ​ Net Sales ​ Change ​ Change Enterprise Solutions ​ $ 138.5 11.5 % $ 141.5 10.7 % $ (3.0) ​ (2.1) % Business Solutions ​ ​ 170.9 ​ 15.9 ​ ​ 171.5 ​ 13.8 ​ ​ (0.6) ​ (0.3) ​ Public Sector Solutions ​ 83.6 14.6 ​ 79.1 14.2 4.5 ​ 5.7 ​ Headquarters/Other, unallocated ​ 12.9 ​ ​ ​ 13.5 ​ ​ (0.6) ​ (4.5) ​ Total ​ $ 405.9 ​ 14.2 % $ 405.6 ​ 13.0 % $ 0.3 ​ 0.1 % ​ ● SG&A expenses for the Enterprise Solutions segment decreased in dollars but increased as a percentage of net sales.
SG&A expenses attributable to our three operating segments and the remaining unallocated Headquarters/Other expenses are summarized below (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ % of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Segment Net ​ ​ ​ ​ Segment Net ​ $ ​ % ​ ​ ​ Amount ​ Sales ​ Amount ​ Sales ​ Change ​ Change ​ Enterprise Solutions ​ $ 146.0 12.4 % $ 138.5 11.5 % $ 7.5 ​ 5.4 % Business Solutions ​ ​ 175.6 ​ 16.7 ​ ​ 170.9 ​ 15.9 ​ ​ 4.7 ​ 2.7 ​ Public Sector Solutions ​ 85.1 14.9 ​ 83.6 14.6 1.5 ​ 1.9 ​ Headquarters/Other, unallocated ​ 15.6 ​ ​ ​ 12.9 ​ ​ 2.7 ​ 21.3 ​ Total ​ $ 422.3 ​ 15.1 % $ 405.9 ​ 14.2 % $ 16.4 ​ 4.0 % ​ ● SG&A expenses for the Enterprise Solutions segment increased both in dollars and as a percentage of net sales.
SG&A expenses as a percentage of net sales were 15.9% for the Business Solutions segment for the year ended December 31, 2023, which reflects an increase of 210 basis points and is primarily due to the decrease in net sales. ​ ● SG&A expenses for the Public Sector Solutions segment increased in dollars and as a percentage of net sales.
SG&A expenses as a percentage of net sales were 16.7% for the Business Solutions segment for the year ended December 31, 2024, which reflects an increase of 80 basis points and is primarily due to the decrease in net sales combined with the increase in SG&A expenses. ​ ● SG&A expenses for the Public Sector Solutions segment increased both in dollars and as a percentage of net sales.
Costs related to shipping and handling 40 Table of Contents billing are classified as cost of sales. Sales are reported net of sales, use, or other transaction taxes that are collected from customers and remitted to taxing authorities. Critical Accounting Estimates Our contracts with customers often include promises to transfer multiple products or services to a customer.
Sales are reported net of sales, use, or other transaction taxes that are collected from customers and remitted to taxing authorities. Critical Accounting Estimates Our contracts with customers often include promises to transfer multiple products or services to a customer.
The increase in DPO is consistent with the increase in accounts payable discussed above. ​ 37 Table of Contents Cash used in investing activities for the year ended December 31, 2023 consisted of $150.6 million of purchases of short-term U.S. Government treasury securities and $9.6 million of purchases of property and equipment.
The increase in DPO is consistent with the increase in accounts payable discussed above. ​ Cash used in investing activities for the year ended December 31, 2024 consisted of $358.3 million of purchases of short-term U.S. Government treasury securities, $250.6 million of maturities of U.S. Government treasury securities, and $7.6 million of purchases of property and equipment.
Amounts outstanding under this facility bear interest at the greatest of (i) the prime rate (8.50% at December 31, 2023), (ii) the federal funds effective rate plus 0.50% per annum and (iii) the daily Bloomberg Short-Term Bank Yield Index, or BSBY Rate, plus 1.00% per annum, provided that the rate shall at no time be less than 0% per annum.
Amounts outstanding under this facility bear interest at the greatest of (i) the prime rate (7.50% at December 31, 2024), (ii) the federal funds effective rate plus 0.50% per annum, and (iii) the daily Secured Overnight Financing Rate, or SOFR, plus 1.00% per annum, provided that the rate shall at no time be less than 1.00% per annum.
SG&A expenses as a percentage of net sales were 11.5% for the Enterprise Solutions segment for the year ended December 31, 2023, which reflects an increase of 80 basis points and is primarily due to the decrease in net sales. ​ ● SG&A expenses for the Business Solutions segment remained consistent in dollars but increased as a percentage of net sales.
SG&A expenses as a percentage of net sales were 12.4% for the Enterprise Solutions segment for the year ended December 31, 2024, which reflects an increase of 90 basis points and is primarily due to the decrease in net sales combined with the increase in SG&A expenses. ​ ● SG&A expenses for the Business Solutions segment increased both in dollars and as a percentage of net sales.
There were no restructuring related costs incurred for the years ended December 31, 2022 and 2021. ​ ​ 33 Table of Contents YEAR-OVER-YEAR COMPARISONS ​ Year Ended December 31, 2023 Compared to Year En ded December 31, 2022 ​ Changes in net sales and gross profit by operating segment are shown in the following table (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ % of $ ​ % ​ ​ Amount ​ Net Sales ​ Amount ​ Net Sales ​ Change ​ Change Net Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ $ 1,201.1 42.2 % $ 1,324.4 42.4 % $ (123.3) ​ (9.3) % Business Solutions ​ ​ 1,075.6 ​ 37.7 ​ ​ 1,245.3 ​ 39.8 ​ ​ (169.7) ​ (13.6) ​ Public Sector Solutions ​ 573.9 20.1 ​ 555.3 17.8 18.6 ​ 3.3 ​ Total ​ $ 2,850.6 ​ 100.0 % $ 3,125.0 ​ 100.0 % $ (274.4) ​ (8.8) % Gross Profit: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ $ 178.9 14.9 % $ 195.1 14.7 % $ (16.2) ​ (8.3) % Business Solutions ​ ​ 247.1 ​ 23.0 ​ ​ 250.9 ​ 20.1 ​ ​ (3.8) ​ (1.5) ​ Public Sector Solutions ​ 85.7 14.9 ​ 80.2 14.4 5.5 ​ 7.0 ​ Total ​ $ 511.7 ​ 18.0 % $ 526.2 ​ 16.8 % $ (14.5) ​ (2.7) % ​ Net sales decreased by 8.8% to $2,850.6 million in 2023 from $3,125.0 million in 2022, as explained below: ​ ● Net sales of $1,201.1 million for the Enterprise Solutions segment reflect a decrease of $123.3 million, or 9.3%, year-over-year, primarily due to a decrease in demand of end-point devices.
There were no restructuring related costs incurred for the year ended December 31, 2022. ​ 33 Table of Contents YEAR-OVER-YEAR COMPARISONS ​ Year Ended December 31, 2024 Compared to Year En ded December 31, 2023 ​ Changes in net sales and gross profit by operating segment are shown in the following table (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ $ ​ % ​ ​ ​ Amount ​ Net Sales ​ Amount ​ Net Sales ​ Change ​ Change ​ Net Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ $ 1,181.2 42.2 % $ 1,201.1 42.2 % $ (19.9) ​ (1.7) % Business Solutions ​ ​ 1,049.1 ​ 37.4 ​ ​ 1,075.6 ​ 37.7 ​ ​ (26.5) ​ (2.5) ​ Public Sector Solutions ​ 571.8 20.4 ​ 573.9 20.1 (2.1) ​ (0.4) ​ Total ​ $ 2,802.1 ​ 100.0 % $ 2,850.6 ​ 100.0 % $ (48.5) ​ (1.7) % Gross Profit: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Enterprise Solutions ​ $ 180.0 15.2 % $ 178.9 14.9 % $ 1.1 ​ 0.6 % Business Solutions ​ ​ 252.4 ​ 24.1 ​ ​ 247.1 ​ 23.0 ​ ​ 5.3 ​ 2.2 ​ Public Sector Solutions ​ 87.4 15.3 ​ 85.7 14.9 1.7 ​ 1.9 ​ Total ​ $ 519.8 ​ 18.6 % $ 511.7 ​ 18.0 % $ 8.1 ​ 1.6 % ​ Net sales decreased by 1.7% to $2,802.1 million in 2024 from $2,850.6 million in 2023, as explained below: ​ ● Net sales of $1,181.2 million for the Enterprise Solutions segment reflect a decrease of $19.9 million, or 1.7%, year-over-year, primarily due to a decrease in net sales of advanced technologies.
Cash provided by operating activities for the year ended December 31, 2022 resulted primarily from cash provided by net income of $89.2 million and $19.6 million of other non-cash charges added back to net income, including $12.0 million of depreciation and amortization, partially offset by increases in account payable and accrued expenses of $49.1 million and $14.7 million, respectively. ​ In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of 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.
Cash provided by operating activities for the year ended December 31, 2023 resulted primarily from net income of $83.3 million, $18.4 million of other non-cash charges added back to net income, including $12.7 million of depreciation and amortization and $7.0 million of stock-based compensation expense, an $84.5 million decrease in inventory, and a $31.1 million increase in accounts payable, partially offset by a decrease in accrued expenses and other liabilities of $11.8 million and an increase in prepaid expenses and other current assets of $8.5 million. ​ In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of 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.
Such amount was calculated as $603.1 million at December 31, 2023, whereas our actual consolidated stockholders’ equity at that date was $840.8 million. ​ Capital Markets.
Such amount was calculated as $646.6 million at December 31, 2024, whereas our actual consolidated stockholders’ equity at that date was $911.0 million. ​ Capital Markets.
As of December 31, 2023, we had $145.0 million in cash and cash equivalents. ​ ● Short-term Investments . As of December 31, 2023, we had $152.2 million in short-term investments. ​ ● Cash Generated from Operations .
As of December 31, 2024, we had $178.3 million in cash and cash equivalents. ​ ● Short-term Investments . As of December 31, 2024, we had $264.3 million in short-term investments. ​ ● Cash Generated from Operations .
Gross margin increased 290 basis 34 Table of Contents points compared to the prior year primarily due to an increase in net sales of higher margin products, such as software, which is recognized on a net basis, and net/com products, relative to lower margin products, such as notebooks/mobility and displays and sound. ​ ● Gross profit for the Public Sector Solutions segment increased by $5.5 million, or 7.0% year-over-year as referenced in the table on the previous page, primarily as a result of higher net sales in the current period.
Gross margin 34 Table of Contents increased 110 basis points compared to the prior year primarily due to an increase in the amount of software sales recognized on a net basis. ​ ● Gross profit for the Public Sector Solutions segment increased by $1.7 million, or 1.9% year-over-year as referenced in the table on the previous page, primarily as a result of improved invoice margins in notebooks/mobility.
Gross profit decreased year-over-year by $14.5 million as shown in the table on page 34 of this Annual Report on Form 10-K, primarily due to the decrease in net sales.
Gross profit increased year-over-year by $8.1 million as shown in the table on page 34 of this Annual Report on Form 10-K, primarily due to improved margins in desktops in the current year.
SG&A expenses as a percentage of net sales were 14.6% for the Public Sector Solutions segment for the year ended December 31, 2023, which reflects an increase of 40 basis points and is consistent with the 5.7% increase in SG&A expenses compared to just a 3.3% increase in net sales. ​ ● SG&A expenses for the Headquarters/Other group decreased by $0.6 million primarily due to decreases in personnel costs and professional fees of $3.9 million and $2.5 million, respectively.
SG&A expenses as a percentage of net sales were 14.9% for the Public Sector Solutions segment for the year ended December 31, 2024, which reflects an increase of 30 basis points and is primarily due to the decrease in net sales combined with the increase in SG&A expenses. ​ ● SG&A expenses for the Headquarters/Other increased by $2.7 million primarily due to increases in personnel costs and service contracts/subscriptions of $17.7 million and $4.0 million, respectively.
Additionally, if interest rates were to decrease, our interest income on our cash equivalents and short-term investments would also decrease. ​ ​ ​ 31 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2023 ​ ​ 2022 ​ 2021 ​ Net sales (in millions) ​ $ 2,850.6 ​ $ 3,125.0 ​ $ 2,892.6 ​ Gross margin ​ ​ 18.0 % ​ 16.8 % ​ 16.1 % Selling, general and administrative expenses ​ 14.2 ​ 13.0 ​ 12.7 ​ Income from operations ​ 3.6 ​ 3.9 ​ 3.3 ​ ​ Net sales of $2,850.6 million in 2023 reflected a decrease of $274.4 million compared to 2022, which was driven by lower net sales for our Enterprise Solutions and Business Solutions segments as shown in the table on page 34 of this Annual Report on Form 10-K.
If the economic impact of any imposed tariff is passed through to us by our vendors, our results of operations could be impacted. ​ ● Changes in partner funding programs could change the amount of incentives received by us, which could impact our results of operations. ​ ​ ​ 31 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2024 ​ ​ 2023 ​ 2022 ​ Net sales (in millions) ​ $ 2,802.1 ​ $ 2,850.6 ​ $ 3,125.0 ​ Gross margin ​ ​ 18.6 % ​ 18.0 % ​ 16.8 % Selling, general and administrative expenses ​ 15.1 ​ 14.2 ​ 13.0 ​ Income from operations ​ 3.5 ​ 3.6 ​ 3.9 ​ ​ Net sales of $2,802.1 million in 2024 reflected a decrease of $48.5 million compared to 2023, which was driven by lower net sales for our Enterprise Solutions and Business Solutions segments as shown in the table on page 34 of this Annual Report on Form 10-K.
Gross margin increased 20 basis points compared to the prior year primarily due to an increase in net sales of higher margin products, such as net/com products and software, which is recognized on a net basis, relative to lower margin products, such as notebooks/mobility and accessories. ​ ● Gross profit for the Business Solutions segment decreased $3.8 million, or 1.5% year-over-year as referenced in the above table.
Gross margin increased 30 basis points compared to the prior year primarily due to an increase in the amount of software sales recognized on a net basis, as well as improved invoice margins in desktops. ​ ● Gross profit for the Business Solutions segment increased $5.3 million, or 2.2% year-over-year as referenced in the above table, primarily as a result of improved invoice margins in desktops and notebooks/mobility.
The increase in SG&A dollars year-over-year is primarily attributable to an increase in personnel costs of $5.0 million related to investments in resources to strengthen our sales organization. This increase was partially offset by a decrease in the use of Headquarter services of $1.2 million.
The year-over-year increase in SG&A dollars was primarily attributable to an increase in the use of shared Headquarter services of $12.8 million. This increase was partially offset by a decrease in personnel costs of $5.7 million.
Our bad debt expense for the year ended December 31, 2023 decreased to $1.8 million, compared to $3.3 million for the year ended December 31, 2022. ​ In addition to accounts receivable from customers, we record receivables from our vendors/suppliers for cooperative advertising, price protection, supplier reimbursements, rebates, and other similar arrangements.
Our cash flows would be impacted to the extent that receivables could not be collected. ​ Our bad debt expense for the year ended December 31, 2024 was $1.9 million, compared to $1.8 million for the year ended December 31, 2023. 41 Table of Contents ​ In addition to accounts receivable from customers, we record receivables from our vendors/suppliers for cooperative marketing, price protection, supplier reimbursements, rebates, and other similar arrangements.
Net sales of notebooks/mobility, displays and sound, accessories, desktops, servers/storage, and other hardware/services decreased year-over-year by $121.3 million, $26.5 million, $21.5 million, $14.8 million, $13.0 million, and $5.6 million, respectively.
Net sales of net/com products, desktops, other hardware/services, servers/storage, software, and displays and sound decreased year-over-year by $22.0 million, $7.3 million, $5.5 million, $5.0 million, $3.5 million, and $2.8 million, respectively.
Net income decreased by $5.9 million to $83.3 million for the year ended December 31, 2023, from $89.2 million in the prior year, primarily due to the decreases in net sales and gross profit, partially offset by an increase in other income, net in the current year, as explained above. ​ LIQUIDITY AND CAPITAL RESOURCES ​ Liquidity Overview ​ Our primary sources of liquidity are internally generated funds from operations, short-term investments, and borrowings under our credit facility.
Our effective tax rate was 25.9% for the year-ended December 31, 2024, compared to 26.4% for the year ended December 31, 2023, primarily due to the release of the valuation allowance on state net operating losses. ​ Net income increased by $3.8 million to $87.1 million for the year ended December 31, 2024, from $83.3 million in the prior year, primarily due to the increase in interest income, net, partially offset by the decrease in income from operations, as explained above. ​ LIQUIDITY AND CAPITAL RESOURCES ​ Liquidity Overview ​ Our primary sources of liquidity are internally generated funds from operations, short-term investments, and borrowings under our credit facility.
Gross margin increased 50 basis points compared to the prior year primarily due to an increase in net sales of higher margin products, such as net/com products and software, which is recognized on a net basis, relative to lower margin products, such as notebooks/mobility, accessories, and displays and sound. ​ SG&A expense in 2023 remained consistent year-over-year in dollars but increased as a percentage of net sales.
Gross margin increased 40 basis points compared to the prior year primarily due to an increase in the amount of software sales recognized on a net basis. ​ SG&A expense in 2024 increased year-over-year both in dollars and as a percentage of net sales.
SG&A expenses remained consistent year-over-year in dollars but increased as a percentage of net sales primarily due to the decrease in net sales.
SG&A expenses increased year-over-year both in dollars and as a percentage of net sales primarily due to investments in resources to strengthen our sales, technical sales, and services capabilities combined with the decrease in net sales.
These increases were partially offset by decreases in net sales of notebooks/mobility, accessories, and displays and sound of $13.5 million, $8.4 million, and $7.6 million, respectively. ​ Gross profit decreased by 2.7% to $511.7 million in 2023, while gross margin increased by 120 basis points to 18.0% in 2023, as explained below: ​ ● Gross profit for the Enterprise Solutions segment decreased $16.2 million, or 8.3% year-over-year as referenced in the above table.
These decreases were partially offset by an increase in net sales of notebooks/mobility of $44.1 million. ​ Gross profit increased by 1.6% to $519.8 million in 2024, while gross margin increased by 60 basis points to 18.6% in 2024, as explained below: ​ ● Gross profit for the Enterprise Solutions segment remained substantially the same year-over-year as referenced in the above table.
The property and equipment expenditures were primarily for computer equipment and capitalized internally-developed software in connection with investments in our IT infrastructure.
The property and equipment expenditures were primarily for computer equipment and capitalized internally-developed software in connection with investments in our IT infrastructure. Cash used in investing activities for the prior year consisted of $150.6 million of purchases of short-term U.S.
Revenue allocated to ESPs is recognized at the point in time when our vendor and customer accept the terms and conditions in the sales arrangement. All amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenues earned for the goods provided, and these amounts have been included in net sales.
All amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenues earned for the goods provided, and these amounts have been included in net sales. Costs related to shipping and handling billing are classified as cost of sales.
These decreases were partially offset by increases in net sales of net/com products, software, and other hardware/services of $26.5 million, $16.2 million, and $4.8 million, respectively. ​ ● Net sales of $1,075.6 million for the Business Solutions segment reflect a decrease of $169.7 million, or 13.6% year-over-year, primarily due to a decrease in demand of end-point devices.
These decreases were partially offset by increases in net sales of desktops, displays and sound, and accessories of $38.3 million, $25.7 million, and $3.1 million, respectively. ​ ● Net sales of $1,049.1 million for the Business Solutions segment reflect a decrease of $26.5 million, or 2.5% year-over-year, primarily due to a decrease in net sales of advanced technologies.
Gross margin increased year-over-year by 120 basis points as shown in the above table primarily due to an increase in net sales of higher margin products, such as software and services, which are recognized on a net basis, and net/com products, relative to lower margin products, such as notebooks/mobility and desktops, as evidenced in the below product mix table.
Gross margin increased year-over-year by 60 basis points as shown in the above table primarily due to an increase in the amount of software sales recognized on a net basis, combined with improved margins in desktops.
The increase was primarily driven by an increase in sales to federal governments, partially offset by a decrease of sales to state and local government and educational institutions. Net sales of net/com products, software, and other hardware/services increased year-over-year by $29.9 million, $11.3 million, and $6.8 million, respectively.
The decrease was primarily driven by a decrease in sales to state and local government and educational institutions of $21.1 million, partially offset by an increase of sales to federal governments of $19.0 million.
These decreases were partially offset by increases in net sales of net/com products and software of $23.0 million and $9.9 million, respectively. ​ ● Net sales of $573.9 million for the Public Sector Solutions segment reflect an increase of $18.6 million, or 3.3%, year-over-year.
These decreases were partially offset by increases in net sales of notebooks/mobility, servers/storage, and accessories of $21.2 million, $19.6 million, and $2.7 million, respectively. ​ ● Net sales of $571.8 million for the Public Sector Solutions segment reflect a decrease of $2.1 million, or 0.4%, year-over-year.
In the prior year period, financing activities consisted primarily of $8.9 million in special dividend payments. ​ Debt Instruments, Contractual Agreements, and Related Covenants ​ Below is a summary of certain provisions of our credit facilities and other contractual obligations.
In the prior year period, financing activities consisted of $88.2 million of aggregate borrowings and repayments under our credit facility, $5.4 million of treasury repurchases, $8.4 million of dividend payments, $1.1 million of issuances of stock under the 1997 Employee Stock Purchase Plan, and $3.0 million of 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 and other contractual obligations.
We also offer extended service plans, or ESPs, on IT products, both as part of the initial arrangement and separately from the IT products. We recognize revenue related to ESPs as the agent in the transaction because we do not have control over the on-going ESPs service and do not provide any service after the sale.
We recognize revenue related to ESPs as the agent in the transaction because we do not have control over the on-going ESPs service and do not provide any service after the sale. Revenue allocated to ESPs is recognized at the point in time when our vendor and customer accept the terms and conditions in the sales arrangement.
Although we don’t have any borrowing under our credit facility, should we need to borrow in the future, we may be exposed to high interest rates.
Although we do not have any borrowing under our credit facility, should we need to borrow in the future, we may be exposed to high interest rates. Additionally, if interest rates were to decrease, our interest income on our cash equivalents and short-term investments would also decrease. ​ ● The impact of proposed tariffs remains uncertain.
Our team also provides a comprehensive portfolio of managed services and professional services. These services are performed by our personnel and by third-party providers.
Our TSO and state-of-the-art TIDC, with ISO 9001:2015 certified technical configuration lab, offer end-to-end services 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 providers.
Net sales of notebooks/mobility, accessories, desktops, and displays and sound decreased year-over-year by $70.5 million, $47.0 million, $27.8 million, and $25.9 million, respectively.
Net sales of net/com products, software, and displays and sound decreased year-over-year by $40.6 million, $21.3 million, and $8.9 million, respectively.
The year-over-year decrease in SG&A dollars was primarily attributable to decreases in the use of Headquarter services, personnel costs, and other expenses of $1.8 million, $1.8 million, and $1.1 million, respectively. The Headquarter services include services related to finance, distribution center, human resources, IT, marketing, and product management.
The year-over-year increase in SG&A dollars was primarily attributable to increases in the use of shared Headquarter services and marketing of $4.5 million and $2.4 million, respectively. These increases were partially offset by a decrease in personnel costs of $2.6 million.
The increase in DSO is primarily due to increased netted product sales which reduces the revenue, but not the receivable balance. The decrease in DIO is consistent with the decrease in inventory discussed above.
The decrease in DSO is primarily due to an increase in net sales for the quarter ended December 31, 2024 compared to the quarter ended December 31, 2023. The decrease in DIO is consistent with the decrease in inventory discussed above.
These costs will be paid within a year of termination and any unpaid balances are included in accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2023. The Company is currently evaluating additional restructuring activities for 2024 and beyond.
No amounts related to these costs are included in accrued expenses and other liabilities on the consolidated balance sheets as all such amounts have been paid as of December 31, 2024.
The decrease in inventory was primarily due to a decrease in the amount of inventory we purchased, combined with the delivery of inventory held associated with the continued fulfillment of orders in 2023 that were in backlog during 2022. The increase in accounts payable was primarily driven by the timing of payments.
The increase in accounts payable was primarily driven by the timing of payments. The decrease in inventory was primarily due to improvements in inventory management in the current year.
The decrease in net sales was primarily driven by a decrease in demand for end-point devices resulting in a decrease in net sales of notebooks/mobility of $205.2 million. Net sales of accessories, displays and sound, and desktops also decreased year-over-year, as shown in Note 2 of the Consolidated Financial Statements.
These decreases were partially offset by increases in net sales of notebooks/mobility and desktops of $42.3 million and $31.3 million, respectively, as shown in Note 2, “Revenue” to the Consolidated Financial Statements.
Removed
In 2023, we restructured and combined our Technology Solutions Group and Technical Sales Organization into one organization to be referred to as our TSO. Our TSO and state-of-the-art TIDC, with ISO 9001:2015 certified technical configuration lab offer end-to-end services related to the design, configuration, and implementation of IT solutions.
Added
The decrease in net sales was primarily driven by a decrease in net sales of advanced technology categories including net/com products and software of $85.7 million and $44.1 million, respectively.
Removed
This decrease was primarily due to the 9.3% decrease in net sales.
Added
Net sales of net/com products, notebooks/mobility, software, other hardware/services, and servers/storage decreased year-over-year by $23.1 million, $23.0 million, $19.4 million, $10.9 million, and $10.8 million, respectively.
Removed
This decrease was primarily a result of a 13.6% decrease in net sales.
Added
The year-over-year increase in SG&A dollars was primarily attributable to an increase in the use of shared Headquarter services of $2.2 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed4 unchanged
Biggest changeIn addition, our credit facility provides for borrowings which bear interest at the greatest of (i) the prime rate (8.50% at December 31, 2023), (ii) the federal funds effective rate plus 0.50% per annum and (iii) the daily BSBY Rate plus 1.00% per annum, provided that the rate shall at no time be less than 0% per annum.
Biggest changeIn addition, our credit facility provides for borrowings which bear interest at the greatest of (i) the prime rate (7.50% at December 31, 2024), (ii) the federal funds effective rate plus 0.50% per annum, and (iii) the daily SOFR Rate plus 1.00% per annum, provided that the rate shall at no time be less than 1.00% per annum.
Our average outstanding borrowings during 2023 were minimal, and as such a hypothetical 10% increase or decrease in interest rates is not material. While the nature of our short-term investments protects us from changes in short-term interest rates, a change in short-term interest rates could affect the fair value of our short-term investments.
Our average outstanding borrowings during 2024 were minimal, and as such a hypothetical 10% increase or decrease in interest rates is not material. While the nature of our short-term investments protects us from changes in short-term interest rates, a change in short-term interest rates could affect the fair value of our short-term investments.

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