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Item 2. Management’s Discussion and Analysis

2025-10-29 compared with 2025-07-30 · 157 added, 119 removed, 215 unchanged (56% of the section changed)

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

● macroeconomic factors facing the global economy, including disruptions in or increased volatility of the capital markets, changes in trade policy, which may include the imposition of tariffs or other trade barriers, economic sanctions and economic slowdowns or recessions, changes in tax policy, rising inflation and changing interest rates modifying our potential for investment income and the timing or reducing the level of investment our customers are willing to make in IT products;

● macroeconomic factors facing the global economy, including disruptions in or increased volatility of the capital markets, changes in trade policy, which may include the imposition of tariffs or other trade barriers, economic sanctions and economic slowdowns or recessions, government shutdowns, changes in tax policy, rising inflation and changing interest rates modifying our potential for investment income and the timing or reducing the level of investment our customers are willing to make in IT products;

● substantial competition reducing our market share;

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In addition, these actions and threatened actions and increased volatility in financial markets may affect customer decisions about the timing or size of IT investments.

If the current government shutdown continues, our net sales may decrease, specifically within our Public Sector Solutions segment, as it would delay government IT investments.

RECENT EVENTS

On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was enacted in the U.S.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

We have evaluated the OBBBA’s expected impact on the unaudited condensed consolidated financial statements.

As of and for the period ended September 30, 2025, there was an immaterial amount recorded to the balance sheet associated with our deferred income tax balances, primarily through adjustments to deferred tax liabilities and income taxes payable.

The OBBBA is not expected to have a material impact on our income statement or annual effective tax rate.

We will continue to monitor additional guidance related to the OBBBA as it becomes available.

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 (dollars in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Selling, general and administrative expenses

Income from operations

Net sales of $759.7 million for the second quarter of 2025 reflect an increase of $23.2 million, or 3.2% compared to the second quarter of 2024.

The increase was primarily driven by increases in net sales of desktops, servers/storage, notebooks/mobility, and net/com products of $17.7 million, $7.9 million, $3.8 million, and $1.1 million, respectively, as shown in the table in Note 2 “Revenue” in the Notes to our Unaudited Condensed Consolidated Financial Statements.

These increases were partially offset by a decrease in net sales of displays and sound of $6.7 million.

Gross profit for the second quarter of 2025 increased year-over-year by $1.3 million, or 0.9%, to $137.8 million as illustrated in the table and the discussion beginning on page 21 of this Quarterly Report on Form 10-Q.

Gross margin decreased to 18.1% from 18.5% a year ago.

The decrease in gross margin was primarily driven by reduced software agency fees in the current period.

SG&A expenses increased year-over-year by $1.7 million, or 1.6%, to $106.9 million.

SG&A expenses as a percentage of net sales decreased to 14.1% compared to 14.3% a year ago.

The increase in SG&A expenses is primarily due to an increase in professional fees as shown in the table on page 20 of this Quarterly Report on Form 10-Q.

Operating income for the second quarter of 2025 remained substantially the same year-over-year both in dollars and as a percentage of net sales.

Net sales of $709.1 million for the third quarter of 2025 reflect a decrease of $15.6 million, or 2.2% compared to the third quarter of 2024.

The decrease was primarily driven by decreases in net sales of notebooks/mobility, displays and sound, and net/com products of $20.5 million, $12.1 million, and $9.3 million, respectively, as shown in the table in Note 2 “Revenue” in the Notes to our Unaudited Condensed Consolidated Financial Statements.

These decreases were partially offset by increases in net sales of software, servers/storage, other hardware/services, desktops, and accessories of $9.1 million, $7.6 million, $4.5 million, $2.6 million, and $2.5 million, respectively.

Gross profit for the third quarter of 2025 increased year-over-year by $3.2 million, or 2.4%, to $138.6 million as illustrated in the table and the discussion beginning on page 21 of this Quarterly Report on Form 10-Q.

Gross margin increased to 19.6% from 18.7% a year ago.

The increase in gross margin was primarily driven by an increase in the amount of software sales recognized on a net basis as these sales are recognized in the financial statements at 100% margin.

SG&A expenses as a percentage of net sales increased to 15.3% compared to 14.5% a year ago.

The increase in SG&A expenses is primarily due to an increase in personnel costs as shown in the table on page 20 of this Quarterly Report on Form 10-Q.

Operating income for the

third quarter of 2025 remained substantially the same year-over-year in dollars and increased as a percentage of net sales.

Net Sales Distribution

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating Segment

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating Segment

5 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Personnel costs

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Severance Expenses

There were no severance expenses incurred during the three months ended June 30, 2025.

During the six months ended June 30, 2025, we undertook actions to lower our cost structure.

There were no severance expenses incurred during the three months ended September 30, 2025.

During the nine months ended September 30, 2025, we undertook actions to lower our cost structure.

In connection with these initiatives, we incurred severance expenses of $2.9 million which included cash severance and other related termination benefits.

We incurred severance expenses of $0.4 million for each of the three and six months ended June 30, 2024.

There were no severance expenses incurred during the three months ended September 30, 2024.

We incurred severance expenses of $0.4 million for the nine months ended September 30, 2024.

Year-Over-Year Comparisons

In this section and elsewhere in this Quarterly Report on Form 10-Q we refer to changes in year-over-year results.

Unless context otherwise requires, such references refer to changes between the three months ended June 30, 2025 and the three months ended June 30, 2024;

and changes between the six months ended June 30, 2025 and the six months ended June 30, 2024.

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Unless context otherwise requires, such references refer to changes between the three months ended September 30, 2025 and the three months ended September 30, 2024;

and changes between the nine months ended September 30, 2025 and the nine months ended September 30, 2024.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

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

Three Months Ended June 30,

Three Months Ended September 30,

Enterprise Solutions

5 unchanged sentences

Public Sector Solutions

Net sales increased for the second quarter of 2025 compared to the second quarter of 2024, as explained by the year-over-year changes discussed below:

Net sales decreased for the third quarter of 2025 compared to the third quarter of 2024, as explained by the year-over-year changes discussed below:

● Net sales of $319.8 million for the Enterprise Solutions segment reflect an increase of $22.8 million, or 7.7%.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, servers/storage, accessories, desktops, net/com products, other hardware/services, and software of $7.9 million, $6.0 million, $5.5 million, $5.0 million, $4.4 million, $3.8 million, and $1.8 million, respectively.

These increases were partially offset by a decrease in net sales of displays and sound of $7.2 million.

The increase in net sales is primarily due to increases in net sales of accessories, notebooks/mobility, servers/storage, software, and other hardware/services of $12.7 million, $11.2 million, $5.9 million, $5.4 million, and $3.6 million, respectively.

These increases were partially offset by decreases in net sales of displays and sound, net/com products, and desktops of $8.6 million, $4.7 million, and $2.7 million, respectively.

● Net sales of $256.8 million for the Business Solutions segment reflect an increase of $4.2 million, or 1.7%.

The increase in net sales is primarily due to increases in net sales of desktops, notebooks/mobility, and displays and sound of $8.5 million, $8.2 million, and $3.6 million, respectively.

These increases were partially offset by decreases in net sales of accessories and other hardware/services of $4.1 million and $0.7 million, respectively.

The increase in net sales is primarily due to increases in net sales of software, desktops, other hardware/services, and displays and sound of $7.0 million, $5.8 million, $1.5 million, and $0.5 million, respectively.

These increases were partially offset by decreases in net sales of notebooks/mobility, net/com products, and accessories of $4.3 million, $3.7 million, and $2.6 million, respectively.

● Net sales of $132.5 million for the Public Sector Solutions segment reflect a decrease of $42.6 million, or 24.3%.

Sales to the federal government increased by $1.9 million, or 7.8%, compared to the prior year quarter, while sales to state and local government and educational institutions decreased by $20.9 million, or 15.6%.

The decrease in sales to state and local government and educational institutions was primarily driven by the timing of purchases associated with a few large K-12 customers.

The decrease in net sales is primarily due to decreases in net sales of notebooks/mobility, other hardware/services, displays and sound, net/com products, software, and accessories of $12.4 million, $3.2 million, $3.1 million, $2.9 million, $1.9 million, and $1.5 million, respectively.

These decreases were partially offset by increases in net sales of desktops and servers/storage of $4.2 million and $1.8 million, respectively.

Gross profit for the second quarter of 2025 increased year-over-year, while gross margin for the second quarter of 2025 decreased year-over-year, as explained by the year-over-year changes discussed below:

Sales to the federal government decreased by $23.0 million, or 44.3%, compared to the prior year quarter, while sales to state and local government and educational institutions decreased by $19.6 million, or 15.9%.

The decrease in sales to the federal government was primarily driven by a few large orders in the prior period.

The decrease in sales to state and local government and educational institutions was primarily driven by the timing of purchases associated with government funding reductions.

The decrease in net sales is primarily due to decreases in net sales of notebooks/mobility, accessories, displays and sound, software, net/com

products, other hardware/services, and desktops of $27.4 million, $7.6 million, $4.1 million, $3.2 million, $0.9 million, $0.6 million, and $0.5 million, respectively.

These decreases were partially offset by an increase in net sales of servers/storage of $1.7 million.

Gross profit for the third quarter of 2025 increased year-over-year, as explained by the year-over-year changes discussed below:

● Gross profit for the Enterprise Solutions segment increased by $1.6 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

Gross margin decreased by 80 basis points primarily due to reduced software agency fees, as well as a decrease in the amount of software sales recognized on a net basis.

● Gross profit for the Business Solutions segment increased by $2.6 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

Gross margin decreased by 30 basis points primarily due to reduced software agency fees.

● Gross profit for the Business Solutions segment increased by $4.9 million year-over-year primarily due to net sales of notebooks/mobility at improved invoice margins primarily as a result of low-margin deals in the prior period.

● Gross profit for the Public Sector Solutions segment decreased by $3.3 million primarily due to the decrease in net sales as discussed in the preceding paragraph.

Gross margin remained substantially the same year-over-year.

Selling, general and administrative expenses for the second quarter of 2025 increased in dollars but decreased as a percentage of net sales compared to the second quarter of 2024.

Gross margin for the third quarter of 2025 increased year-over-year, as explained by the year-over-year changes discussed below:

● Gross margin for the Enterprise Solutions segment decreased by 70 basis points primarily due to a decrease in the amount of software sales recognized on a net basis, as well as reduced software agency fees.

● Gross margin for the Business Solutions segment increased by 150 basis points primarily due to an increase in the amount of software sales recognized on a net basis.

● Gross margin for the Public Sector Solutions segment increased by 230 basis points primarily due to an increase in the amount of software sales recognized on a net basis relative to total net sales in the segment.

Selling, general and administrative expenses for the third quarter of 2025 increased both in dollars and as a percentage of net sales compared to the third quarter of 2024.

SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):

Three Months Ended June 30,

Three Months Ended September 30,

Enterprise Solutions

3 unchanged sentences

● SG&A expenses for the Enterprise Solutions segment increased year-over-year in dollars but decreased as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to an increase in personnel costs of $1.7 million.

SG&A expenses as a percentage of net sales were 11.4% for the Enterprise Solutions segment for the second quarter of 2025, which reflects a decrease of 60 basis points and is primarily due to the increase in net sales discussed above.

● SG&A expenses for the Business Solutions segment decreased year-over-year both in dollars and as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to decreases in marketing and personnel costs of $1.1 million and $0.5 million, respectively, partially offset by an increase in use of shared Headquarter services of $0.8 million.

SG&A expenses as a percentage of net sales were 14.8% for the Business Solutions segment for the second quarter of 2025, which reflects a decrease of 110 basis points and is primarily due to the increase in net sales discussed above, combined with the decrease in SG&A dollars.

The year-over-year change in SG&A dollars was primarily attributable to increases in use of shared Headquarter services and personnel costs of $1.2 million and $0.8 million, respectively, partially offset by decreases in marketing and service contracts/subscriptions of $0.3 million each.

SG&A expenses as a percentage of net sales were 11.7% for the Enterprise Solutions segment for the third quarter of 2025, which reflects a decrease of 40 basis points and is primarily due to the increase in net sales discussed above.

● SG&A expenses for the Business Solutions segment increased year-over-year in dollars but remained substantially the same as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to an increase in use of shared Headquarter services of $2.8 million, partially offset by a decrease in marketing of $1.5 million.

● SG&A expenses for the Public Sector Solutions segment increased year-over-year both in dollars and as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to increases in professional fees and use of shared Headquarter services of $1.5 million and $0.4 million, respectively .

SG&A expenses as a percentage of net sales were 16.7% for the Public Sector Solutions segment for the second quarter of 2025, which reflects an increase of 320 basis points and is primarily due to the decrease in net sales discussed above, combined with the increase in SG&A dollars .

● SG&A expenses for the Headquarters/Other decreased year-over-year by $0.9 million primarily due to a decrease in personnel costs of $1.0 million and an increase in the allocated amounts to the sales segments of $0.9 million, partially offset by an increase in service contracts/subscriptions of $1.0 million.

The year-over-year change in SG&A dollars was primarily attributable to increases in use of shared Headquarter services and professional fees of $1.4 million and $0.7 million, respectively, partially offset by a decrease in personnel costs of $0.2 million .

SG&A expenses as a percentage of net sales were 17.7% for the Public Sector Solutions segment for the third quarter of 2025, which reflects an increase of 530 basis points and is primarily due to the decrease in net sales discussed above, combined with the increase in SG&A dollars .

● SG&A expenses for the Headquarters/Other decreased year-over-year by $1.5 million primarily due to an increase in the allocated amounts to the operating segments of $5.5 million, partially offset by an increase in personnel costs of $3.8 million.

The Headquarters/Other provides services to the three segments in areas such as finance, distribution center, human resources, IT, marketing, and product management.

Most of the operating costs associated with such corporate Headquarters/Other services are charged to the segments based on their estimated allocation usage of the underlying services.

Severance expenses were not incurred during the second quarter of 2025.

Severance expenses were $0.4 million for the second quarter of 2024.

The severance expenses were related to an involuntary reduction in our workforce to lower our cost structure and included cash severance and other related termination benefits.

Income from operations for the second quarter of 2025 was $30.9 million, which was consistent with the prior year quarter.

Income from operations as a percentage of net sales was 4.1% for the second quarter of 2025, which was consistent with the prior year quarter.

Interest income, net for the second quarter of 2025 decreased to $3.2 million, compared to $4.6 million for the second quarter of 2024, primarily due to a decrease in interest income of $1.4 million.

Income from operations for the third quarter of 2025 was $30.3 million, which was substantially the same as the prior year quarter.

Income from operations as a percentage of net sales increased to 4.3% for the third quarter of 2025, compared to 4.1% for the prior year quarter, primarily due to the decrease in net sales, as discussed above.

Interest income, net for the third quarter of 2025 decreased to $3.7 million, compared to $4.8 million for the third quarter of 2024, primarily due to a decrease in interest income of $1.2 million.

The decrease in interest income is primarily a result of lower realized interest rates in the current period combined with lower cash equivalent and investment balances in the current period.

Other income was not received during the third quarter of 2025.

Other income for the third quarter of 2024 was $1.7 million as a result of a legal settlement received.

Income taxes.

Our provision for income taxes for the second quarter of 2025 decreased to $9.3 million, compared to $9.4 million for the second quarter of 2024.

Our effective tax rate was 27.3% for the quarter ended June 30, 2025, compared to 26.4% for the quarter ended June 30, 2024.

Our provision for income taxes for the third quarter of 2025 decreased to $9.2 million, compared to $9.5 million for the third quarter of 2024.

Our effective tax rate was 27.1% for the quarter ended September 30, 2025, compared to 26.0% for the quarter ended September 30, 2024.

The increase in the effective tax rate was primarily due to non-recurring benefits included in the prior year period.

Net income for the second quarter of 2025 decreased to $24.8 million, compared to $26.2 million for the second quarter of 2024, primarily due to the decrease in interest income, net, as discussed above.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Net income for the third quarter of 2025 decreased to $24.7 million, compared to $27.1 million for the third quarter of 2024, primarily due to the decrease in other income combined with the decrease in interest income, net, as discussed above.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

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

Six Months Ended June 30,

Nine Months Ended September 30,

Enterprise Solutions

5 unchanged sentences

Public Sector Solutions

Net sales increased for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, as explained by the year-over-year changes discussed below:

Net sales increased for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, as explained by the year-over-year changes discussed below:

● Net sales of $943.8 million for the Enterprise Solutions segment reflect an increase of $65.4 million, or 7.4%.

The increase in net sales is primarily due to increases in net sales of desktops, servers/storage, software, other hardware/services, notebooks/mobility, accessories, and net/com products of $20.5 million, $11.6 million, $8.1 million, $6.2 million, $5.2 million, $3.8 million, and $2.7 million, respectively.

These increases were partially offset by a decrease in net sales of displays and sound of $15.5 million.

The increase in net sales is primarily due to increases in net sales of desktops, servers/storage, accessories, notebooks/mobility, software, and other hardware/services of $17.7 million, $17.5 million, $16.5 million, $16.4 million, $13.4 million, and $9.9 million, respectively.

These increases were partially offset by decreases in net sales of displays and sound and net/com products of $24.0 million and $2.0 million, respectively.

● Net sales of $808.4 million for the Business Solutions segment reflect an increase of $21.7 million, or 2.8%.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, desktops, software, and displays and sound of $18.4 million, $14.1 million, $1.3 million, and $1.2 million, respectively.

These increases were partially offset by decreases in net sales of accessories, net/com products, other hardware/services, and servers/storage of $10.9 million, $4.2 million, $1.3 million, and $1.3 million, respectively.

● Net sales of $285.2 million for the Public Sector Solutions segment reflect an increase of $32.2 million, or 12.7%.

Sales to the federal government increased by $42.1 million, or 98.0%, compared to the prior year quarter, while sales to state and local government and educational institutions decreased by $9.9 million, or 4.7%.

The increase in sales to the federal government was primarily driven by a few large orders in the current period.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, desktops, accessories, servers/storage, net/com products, and software of $16.3 million, $8.3 million, $6.7 million, $5.2 million, $1.3 million, and $1.3 million, respectively.

These increases were partially offset by decreases in net sales of other hardware/services and displays and sound of $3.8 million and $3.1 million, respectively.

Gross profit for the six months ended June 30, 2025 increased year-over-year, while gross margin for the second quarter of 2025 decreased year-over-year, as explained by the year-over-year changes discussed below:

The increase in net sales is primarily due to increases in net sales of desktops, notebooks/mobility, software, and displays and sound of $19.9 million, $14.2 million, $8.3 million, and $1.7 million, respectively.

These increases were partially offset by decreases in net sales of accessories, net/com products, and servers/storage of $13.5 million, $7.9 million, and $1.2 million, respectively.

● Net sales of $417.6 million for the Public Sector Solutions segment reflect a decrease of $10.5 million, or 2.4%.

Sales to the federal government increased by $19.1 million, or 20.1%, while sales to state and local government and educational institutions decreased by $29.6 million, or 8.9%.

The decrease in net sales is primarily due to decreases in net sales of notebooks/mobility, displays and sound, other hardware/services, and software of $11.1 million, $7.2 million, $4.4 million, and $2.0 million, respectively.

These decreases were partially offset by increases in net sales of desktops and servers/storage of $7.9 million and $6.9 million, respectively.

Gross profit for the nine months ended September 30, 2025 increased year-over-year, as explained by the year-over-year changes discussed below:

● Gross profit for the Enterprise Solutions segment increased by $2.7 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

Gross margin decreased by 90 basis points primarily due to reduced software agency fees, as well as a shift in product mix to lower-margin sales of desktops as shown in the table in Note 2 “Revenue” in the Notes to the Unaudited Condensed Consolidated Financial Statements and a decrease in the amount of software sales recognized on a net basis.

● Gross profit for the Business Solutions segment increased by $7.6 million year-over-year primarily due to an increase in net sales of notebooks/mobility and desktops at improved margins, as well as changes in customer mix.

Gross margin increased by 60 basis points primarily due to improved margins on sales of notebooks/mobility and desktops, as well as changes in customer mix.

● Gross profit for the Public Sector Solutions segment increased by $1.8 million primarily due to the increase in net sales as discussed in the preceding paragraph.

Gross margin decreased by 120 basis points primarily due to a few low-margin deals in the current period.

Selling, general and administrative expenses for the six months ended June 30, 2025 increased in dollars but decreased as a percentage of net sales compared to the six months ended June 30, 2024.

● Gross profit for the Business Solutions segment increased by $12.5 million year-over-year primarily due to net sales of notebooks/mobility at improved invoice margins primarily as a result of low-margin deals in the prior period.

● Gross profit for the Public Sector Solutions segment decreased by $1.5 million primarily due to the decrease in net sales as discussed in the preceding paragraph.

Gross margin for the nine months ended September 30, 2025 remained substantially the same year-over-year, as explained by the year-over-year changes discussed below:

● Gross margin for the Enterprise Solutions segment decreased by 80 basis points primarily due to a decrease in the amount of software sales recognized on a net basis, as well as reduced software agency fees.

● Gross margin for the Business Solutions segment increased by 90 basis points primarily due to an increase in the amount of software sales recognized on a net basis.

● Gross margin for the Public Sector Solutions segment remained substantially the same year-over-year.

Selling, general and administrative expenses for the nine months ended September 30, 2025 increased in dollars but remained substantially the same as a percentage of net sales compared to the nine months ended September 30, 2024.

SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Enterprise Solutions

3 unchanged sentences

● SG&A expenses for the Enterprise Solutions segment increased year-over-year in dollars but decreased as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to an increase in personnel costs of $2.3 million.

SG&A expenses as a percentage of net sales were 12.0% for the Enterprise Solutions segment for the six months ended June 30, 2025, which reflects a decrease of 50 basis points and is primarily due to the increase in net sales discussed above.

● SG&A expenses for the Business Solutions segment remained substantially the same year-over-year in dollars but decreased as a percentage of net sales.

An increase in the use of shared Headquarter services of $1.8 million was offset by decreases in personnel costs, marketing, credit card fees, professional fees, and facilities operations of $0.6 million, $0.6 million, $0.4 million, $0.1 million, and $0.1 million, respectively.

SG&A expenses as a percentage of net sales were 16.1% for the Business Solutions segment for the six months ended June 30, 2025, which reflects a decrease of 50 basis points and is primarily due to the increase in net sales discussed above .

● SG&A expenses for the Public Sector Solutions segment increased year-over-year in dollars but decreased as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to increases in professional fees, personnel costs, use of shared Headquarter services, and other expenses of $2.2 million, $1.2 million, $0.9 million, and $0.5 million, respectively .

SG&A expenses as a percentage of net sales were 16.3% for the Public Sector Solutions segment for the six months ended June 30, 2025, which reflects a decrease of 20 basis points and is primarily due to the increase in net sales discussed above .

● SG&A expenses for the Headquarters/Other remained substantially the same year-over-year.

Increases in service contracts/subscriptions, personnel costs, and marketing of $1.8 million, $1.6 million, and $0.4 million, respectively, were offset by an increase in the allocated amounts to the sales segments of $2.2 million, as well as decreases in professional fees, depreciation and amortization, and other expenses of $0.9 million, $0.5 million, and $0.2 million, respectively.

The year-over-year change in SG&A dollars was primarily attributable to increases in personnel costs, use of shared Headquarter services, and professional fees of $3.2 million, $0.8 million, and $0.5 million, respectively, partially offset by a decrease in service contracts/subscriptions of $0.8 million.

SG&A expenses as a percentage of net sales were 11.9% for the Enterprise Solutions segment for the nine months ended September 30, 2025, which reflects a decrease of 50 basis points and is primarily due to the increase in net sales discussed above.

● SG&A expenses for the Business Solutions segment increased year-over-year in dollars but decreased as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to an increase in the use of shared Headquarter services of $4.6 million, partially offset by decreases in marketing, personnel costs, and credit card fees of $2.1 million, $0.5 million, and $0.4 million, respectively.

SG&A expenses as a percentage of net sales were 16.5% for the Business Solutions segment for the nine months ended September 30, 2025, which reflects a decrease of 30 basis points and is primarily due to the increase in net sales discussed above .

● SG&A expenses for the Public Sector Solutions segment increased year-over-year both in dollars and as a percentage of net sales.

The year-over-year change in SG&A dollars was primarily attributable to increases in professional fees, use of shared Headquarter services, and personnel costs of $2.9 million, $2.3 million, and $1.0 million, respectively .

SG&A expenses as a percentage of net sales were 16.7% for the Public Sector Solutions segment for the nine months ended September 30, 2025, which reflects an increase of 190 basis points and is primarily due to the decrease in net sales discussed above combined with the increase in SG&A dollars .

● SG&A expenses for the Headquarters/Other decreased year-over-year primarily due to an increase in the allocated amounts to the operating segments of $7.7 million, as well as decreases in professional fees and depreciation and amortization of $1.0 million and $0.9 million, respectively, partially offset by increases in personnel costs, service contracts/subscriptions, and marketing of $5.4 million, $2.0 million, and $1.1 million, respectively.

The Headquarters/Other provides services to the three segments in areas such as finance, distribution center, human resources, IT, marketing, and product management.

Most of the operating costs associated with such corporate Headquarters/Other services are charged to the segments based on their estimated allocation usage of the underlying services.

Severance expenses for the six months ended June 30, 2025 were $2.9 million, compared to $0.4 million for the six months ended June 30, 2024.

Most of the operating costs

associated with such corporate Headquarters/Other services are charged to the segments based on their estimated allocation usage of the underlying services.

Severance expenses for the nine months ended September 30, 2025 were $2.9 million, compared to $0.4 million for the nine months ended September 30, 2024.

The severance expenses were related to an involuntary reduction in our workforce to lower our cost structure and included cash severance and other related termination benefits.

Income from operations for the six months ended June 30, 2025 increased to $45.4 million, compared to $44.4 million for the six months ended June 30, 2024, primarily due to the increase in gross profit, partially offset by the increases in SG&A expenses and severance expenses, as discussed above.

Income from operations as a percentage of net sales was 3.1% for the six months ended June 30, 2025, which was consistent with the prior year period.

Interest income, net for the six months ended June 30, 2025 decreased to $7.1 million, compared to $9.2 million for the six months ended June 30, 2024, primarily due to a decrease in interest income of $2.1 million.

Income from operations for the nine months ended September 30, 2025 increased to $75.7 million, compared to $74.4 million for the nine months ended September 30, 2024, primarily due to the increase in gross profit, partially offset by the increases in SG&A expenses and severance expenses, as discussed above.

Income from operations as a percentage of net sales decreased to 3.5% for the nine months ended September 30, 2025, compared to 3.6% for the nine months ended September 30, 2024, primarily due to the increase in net sales, as discussed above.

Interest income, net for the nine months ended September 30, 2025 decreased to $10.8 million, compared to $14.1 million for the nine months ended September 30, 2024, primarily due to a decrease in interest income of $3.3 million.

The decrease in interest income is primarily a result of lower realized interest rates in the current period combined with lower cash equivalent and investment balances in the current period.

Other income for the nine months ended September 30, 2025 was $0.1 million related to a realized gain on sale of short-term investments, compared to $1.7 million for the nine months ended September 30, 2024 as a result of a legal settlement received.

Income taxes.

Our provision for income taxes for the six months ended June 30, 2025 remained consistent year-over-year.

Our effective tax rate was 27.3% for the six months ended June 30, 2025, compared to 26.6% for the six months ended June 30, 2024.

Our provision for income taxes for the nine months ended September 30, 2025 decreased to $23.6 million, compared to $23.8 million for the nine months ended September 30, 2024.

Our effective tax rate was 27.2% for the nine months ended September 30, 2025, compared to 26.4% for the nine months ended September 30, 2024.

The increase in the effective tax rate was primarily due to non-recurring benefits included in the prior year period.

Net income for the six months ended June 30, 2025 decreased to $38.3 million, compared to $39.3 million for the six months ended June 30, 2024, primarily due to the decrease in interest income, net, partially offset by the increase in income from operations, as discussed above.

Net income for the nine months ended September 30, 2025 decreased to $63.0 million, compared to $66.4 million for the nine months ended September 30, 2024, primarily due to the decrease in interest income, net combined with the decrease in other income, partially offset by the increase in income from operations, as discussed above.

Liquidity and Capital Resources

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● Cash and Cash Equivalents .

As of June 30, 2025, we had $186.7 million in cash and cash equivalents.

As of September 30, 2025, we had $187.8 million in cash and cash equivalents.

● Short-term Investments .

As of June 30, 2025, we had $159.4 million in short-term investments.

As of September 30, 2025, we had $211.4 million in short-term investments.

● Cash Generated from Operations .

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

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.

other sources of financing, as may be required.

While we do not anticipate needing any additional sources of financing to fund our operations at this time, if demand for IT products declines, or our customers are materially adversely impacted by the developing macroeconomic trends characterized by inflation and increased interest rates, our cash flows from operations may be substantially affected.

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April 29, 2025

On July 30, 2025, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.15 per share.

The dividend will be paid on August 29, 2025 to all stockholders of record as of the close of business on August 12, 2025.

July 29, 2025

August 12, 2025

August 29, 2025

On October 29, 2025, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.15 per share.

The dividend will be paid on November 28, 2025 to all stockholders of record as of the close of business on November 11, 2025.

The declaration and payment of any future dividends is at the discretion of our Board of Directors and will depend upon our financial position, strategic plans, general business conditions and any other factors deemed relevant by our Board of Directors.

Summary of Sources and Uses of Cash

Cash flows from operating, investing and financing activities for the six months ended June 30, 2025 and 2024, as reflected in our Unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Quarterly Report on Form 10-Q, are summarized in the following table (in millions):

Six Months Ended June 30,

Net cash (used in) provided by operating activities

Cash flows from operating, investing and financing activities for the nine months ended September 30, 2025 and 2024, as reflected in our Unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Quarterly Report on Form 10-Q, are summarized in the following table (in millions):

Nine Months Ended September 30,

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Increase (decrease) in cash and cash equivalents

Cash used in operating activities was $26.2 million for the six months ended June 30, 2025.

Cash used in operating activities resulted primarily from an increase in inventory of $38.4 million, an increase in accounts receivable of $26.7 million, a decrease in accrued expenses and other liabilities of $6.9 million, and an increase in other non-current assets of $1.6 million.

These outflows were partially offset by $38.3 million of net income and positive net adjustments to net income of $10.0 million for the six months ended June 30, 2025.

The increase in inventory was primarily attributable to inventory purchases related to large customer rollouts and management associated with anticipated tariffs.

The increase in accounts receivable was primarily driven by the timing of payments.

For the six months ended June 30, 2024, cash provided by operating activities resulted primarily from net income adjusted for non-cash charges of $46.5 million, an increase in accounts payable of $53.2 million, and a decrease in accounts receivable of $7.6 million, partially offset by an increase in inventory of $12.4 million.

Increase in cash and cash equivalents

Cash provided by operating activities is summarized as follows (in millions):

Nine Months Ended September 30,

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

Depreciation and amortization

Adjustments to credit losses reserve

Stock-based compensation expense

Deferred income taxes

Amortization of discount on short-term investments, net

Other adjustments

Changes in assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Other non-current assets

Accounts payable

Accrued expenses and other liabilities

Net cash provided by operating activities

The decrease in net cash from operating activities of $110.6 million for the nine months ended September 30, 2025 was primarily attributable to changes in inventories, accounts receivable, accounts payable, and accrued expenses and other liabilities of $50.5 million, $27.4 million, $17.2 million, and $10.1 million, respectively.

The decrease in cash from

operating activities attributable to inventories is primarily due to increased inventory purchases related to customer rollouts.

The decrease in cash from operating activities attributable to accounts receivable is primarily driven by the timing of collections.

The decrease in cash from operating activities attributable to accounts payable and accrued expenses and other liabilities is primarily due to the timing of payments.

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.

Components of our cash conversion cycle are as follows:

September 30,

Days of sales outstanding (DSO) (1)

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

The cash conversion cycle increased to 44 days at June 30, 2025, compared to 41 days at June 30, 2024, as evidenced in the above cash conversion table.

The decrease in DIO is primarily due to the decrease in inventory as of June 30, 2025 compared to June 30, 2024 combined with the increase in cost of sales for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

The decrease in DPO is primarily due to the decrease in accounts payable as of June 30, 2025 compared to June 30, 2024 combined with the increase in cost of sales for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Cash provided by investing activities for the six months ended June 30, 2025 consisted of $52.4 million of purchases of U.S.

The cash conversion cycle increased to 46 days at September 30, 2025, compared to 40 days at September 30, 2024, as evidenced in the above cash conversion table.

The increase in DSO is primarily due to the increase in trade receivables as of September 30, 2025 compared to September 30, 2024 combined with the decrease in net sales for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

The increase in DIO is primarily due to the increase in inventory as of September 30, 2025 compared to September 30, 2024.

The increase in DPO is primarily due to the increase in accounts payable as of September 30, 2025 compared to September 30, 2024.

Cash provided by investing activities for the nine months ended September 30, 2025 consisted of $155.6 million of purchases of U.S.

Government treasury securities, $108.8 million of sales of U.S.

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Government treasury securities, and $5.2 million of purchases of property and equipment .

Cash used in financing activities for the six months ended June 30, 2025 consisted primarily of $0.7 million of aggregate borrowings and repayments, $60.5 million of treasury purchases, $7.7 million of dividend payments, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $0.9 million of payments of payroll taxes on stock-based compensation through shares withheld.

Cash used in financing activities for the nine months ended September 30, 2025 consisted primarily of $0.7 million of aggregate borrowings and repayments, $65.5 million of treasury purchases, $11.5 million of dividend payments, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $1.3 million of payments of payroll taxes on stock-based compensation through shares withheld.

In the prior year period, financing activities consisted of $25.2 million of aggregate borrowings and repayments, $7.7 million of treasury purchases, $7.9 million of dividend payments, $0.5 million of issuances of stock under the Employee Stock Purchase Plan, and $1.3 million of payments of payroll taxes on stock-based compensation through shares withheld.

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We did not elect to extend or replace this credit facility given our significant cash, cash equivalent, and short-term investment balances.

Amounts outstanding under this credit facility bore interest at the greatest of (i) the prime rate (7.50% at March 31, 2025), (ii) the federal funds effective rate plus 0.50% per annum, and (iii) the daily BSBY Rate, plus 1.00% per annum, but at no time less than 0% per annum.

Amounts outstanding under this credit facility bore interest at the greatest of (i) the prime rate (7.50% at March

31, 2025), (ii) the federal funds effective rate plus 0.50% per annum, and (iii) the daily BSBY Rate, plus 1.00% per annum, but at no time less than 0% per annum.

While we used this credit facility from time to time, we did not have borrowings outstanding at any recent quarter-end nor immediately prior to the expiration of the credit facility.

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Operating Leases.

We lease facilities from a related party, which is a company affiliated with us through common ownership, and facilities from third parties under non-cancelable operating leases.

We lease facilities, including our corporate headquarters and a facility adjacent to our corporate headquarters, from a related party, which is a company affiliated with us through common ownership.

The lease agreements of these two Merrimack, New Hampshire facilities have expired.

We continue to occupy the facilities on a month-to-month basis under the terms of the prior written lease agreements.

It is our intention to enter into a written, long-term lease for the facilities.

We also lease facilities from third parties under non-cancelable operating leases.

Certain leases require us to pay real estate taxes, insurance, and common area maintenance charges.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis