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Item 2. Management’s Discussion and Analysis

2026-04-29 compared with 2025-10-29 · 119 added, 185 removed, 187 unchanged (62% 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, 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;

● 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, the impact of conflicts in Iran and the Middle East, changes in tax policy, rising inflation and changing interest rates modifying our potential for investment income and the timing thereof or reducing the level of investment our customers are willing to make in IT products;

● supply constraints, such as the global memory (DRAM and NAND) shortage;

● substantial competition reducing our market share;

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and its subsidiaries.

We are a Fortune 1000 Global Solutions Provider that simplifies the IT customer experience, guiding the connection between people and technology.

We are a Fortune 1000 Global Solutions Provider that simplifies IT, guiding the connection between people and technology.

Our dedicated account managers partner with customers to design, deploy, and support cutting-edge IT environments using the latest hardware, software, and services.

We provide a wide range of IT solutions, from the desktop to the cloud—including computer systems, data center solutions, software and peripheral equipment, networking communications, and other products and accessories that we purchase from manufacturers, distributors, and other suppliers.

Our Technology Solutions Organization, or TSO, and state-of-the-art Technology Integration and Distribution Center with ISO 9001:2015 certified technical configuration lab offer end-to-end services related to the design, configuration, and implementation of IT solutions.

We provide a wide range of IT solutions, from the desktop to the cloud—including computer systems, data center solutions, security, artificial intelligence, software and peripheral equipment, networking communications, and other products and accessories that we develop internally and secure from manufacturers, distributors, and other suppliers.

Our Technology Solutions and Services Organization, or TSSO, and state-of-the-art ISO 9001:2015 SOC 2 Type 2 certified Technology Integration and Distribution Center 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.

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We generate sales through (i) outbound inside sales and field sales contacts by sales representatives focused on the business, educational, healthcare, retail, manufacturing, and government markets, (ii) our websites, and (iii) direct responses from customers responding to our advertising media.

We offer a broad selection of over 460,000 products at competitive prices, including products from vendors like Apple, Cisco, Dell Inc., Hewlett-Packard Inc., Hewlett-Packard Enterprise, Intel, Lenovo, Microsoft Corporation, and VMware, and we partner with more than 2,500 suppliers.

We offer a broad selection of over 460,000 products at competitive prices, including products from vendors like Apple, Cisco, Dell Inc., HP Inc., Hewlett-Packard Enterprise, Intel, Lenovo, Microsoft Corporation, and VMware by Broadcom, and we partner with more than 1,600 suppliers.

We are able to leverage our state-of-the art logistic capabilities to rapidly ship product to customers.

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By providing customers with customized solutions from a variety of manufacturers, we believe we can mitigate the negative impact of continued direct sales initiatives from individual manufacturers.

Through the formation of our 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.

Through the formation of our TSSO, 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.

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Our investments in IT infrastructure are designed to enable us to operate more efficiently and provide our customers enhanced functionality.

The ongoing global memory shortage (DRAM and NAND) could result in increased inventory costs, which may reduce our margins or require us to raise prices.

The memory shortage could additionally result in a lack of availability of products, which could negatively impact our results of operations.

As a result of these ongoing and anticipated shortages, we may purchase product in advance of customer orders, while customers may accelerate or delay purchasing depending on their capital resources.

administration has announced or imposed a series of tariffs on U.S.

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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.

KEY OPERATING METRIC

Gross Billings

We utilize key operating metrics to track and assess the performance of our business, including gross billings.

Gross billings is the total dollar value of goods and services billed during the period, net of customer returns, credit memos, and any applicable sales or other taxes and includes agency fees, and freight.

As certain transactions are recognized on a net basis, gross billings include amounts not recognized in net sales.

We use the gross billings operating metric for planning, forecasting, and evaluating the sales performance of our operating segments by providing insight into the total value of our business transactions.

We believe that gross billings provides the same insight to investors.

The following table sets forth the gross billings for each of our operating segments and our consolidated entity (in millions):

Three Months Ended March 31,

Gross billings

Enterprise Solutions

Business Solutions

Public Sector Solutions

Total gross billings

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Selling, general and administrative expenses

Income from operations

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.

Net sales of $721.9 million for the first quarter of 2026 reflect an increase of $20.9 million, or 3.0% compared to the first quarter of 2025.

The increase was primarily driven by increases in net sales of other hardware/services, notebooks/mobility, displays and sound, software, net/com products, and accessories of $8.0 million, $7.5 million, $4.6 million, $4.1 million, $3.9 million, and $0.9 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 decreases in net sales of servers/storage and desktops of $5.1 million and $3.0 million, respectively.

Gross profit for the first quarter of 2026 increased year-over-year by $5.4 million, or 4.3%, to $132.7 million as illustrated in the table and the discussion beginning on page 19 of this Quarterly Report on Form 10-Q.

Gross margin increased to 18.4% from 18.2% 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.

SG&A expenses as a percentage of net sales decreased to 15.2% compared to 15.7% a year ago, primarily due to the increase in net sales as discussed above.

Operating income as a percentage of net sales increased to 2.8% compared to 2.1% a year ago, primarily due to the increases in net sales and gross profit as discussed above.

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating Segment

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Personnel costs

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Severance Expenses

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.

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.

During the three months ended March 31, 2026 and 2025, we undertook actions to lower our cost structure.

In connection with these initiatives, we incurred severance expenses of $3.1 million and $2.9 million for the three months ended March 31, 2026 and 2025, respectively.

The severance expenses were related to voluntary and involuntary reductions in our workforce.

Both the voluntary and involuntary reductions included cash severance and other related termination benefits.

The majority of each of these costs are expected to be paid within a year of the applicable termination and any unpaid balances are included in accrued payroll on the condensed consolidated balance sheets as of March 31, 2026.

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 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

Unless context otherwise requires, such references refer to changes between the three months ended March 31, 2026 and the three months ended March 31, 2025.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

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

Three Months Ended September 30,

Three Months Ended March 31,

Enterprise Solutions

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Public Sector Solutions

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 increased for the first quarter of 2026 compared to the first quarter of 2025, as explained by the year-over-year changes discussed below:

● Net sales of $346.5 million for the Enterprise Solutions segment reflect an increase of $48.5 million, or 16.3%.

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.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, accessories, displays and sound, other hardware/services, and net/com products of $37.1 million, $6.8 million, $4.0 million, $3.7 million, and $3.5 million, respectively.

These increases were partially offset by decreases in net sales of software and desktops of $4.7 million and $1.8 million, respectively.

● Net sales of $275.6 million for the Business Solutions segment reflect an increase of $17.2 million, or 6.6%.

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.

The increase in net sales is primarily due to increases in net sales across all product categories, most notably software, net/com products, other hardware/services, notebooks/mobility, desktops, and displays and sound of $7.5 million, $2.6 million, $2.5 million, $2.2 million, $1.5 million, and $0.5 million, respectively.

● Net sales of $99.8 million for the Public Sector Solutions segment reflect a decrease of $44.8 million, or 31.0%.

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:

Sales to the federal government decreased by $42.1 million, or 72.9%, compared to the prior year quarter, primarily due to a few large orders in the prior period that did not repeat.

Sales to state and local government and educational institutions decreased by $2.7 million, or 3.1%.

The decrease in net sales is primarily due to decreases in net sales of notebooks/mobility, accessories, servers/storage, desktops, and net/com products of $31.9 million, $6.1 million, $5.1 million, $2.7 million, and $2.3 million, respectively.

These decreases were partially offset by increases in net sales of other hardware/services and software of $1.8 million and $1.2 million, respectively.

Gross profit for the first quarter of 2026 increased year-over-year, as explained by the year-over-year changes discussed below:

● Gross profit for the Enterprise Solutions segment increased by $7.9 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

● 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 Business Solutions segment increased by $2.1 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

● Gross profit for the Public Sector Solutions segment decreased by $4.6 million primarily due to the decrease in net sales as discussed in the preceding paragraph.

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.

Gross margin for the first quarter of 2026 increased year-over-year, as explained by the year-over-year changes discussed below:

● Gross margin for the Enterprise Solutions segment increased by 30 basis points primarily as a result of an increase in invoice margins in notebooks/mobility primarily due to changes in customer mix.

● Gross margin for the Business Solutions segment decreased by 80 basis points primarily as a result of decreases in invoice margins in notebooks/mobility and desktops primarily due to changes in customer mix.

● Gross margin for the Public Sector Solutions segment increased by 140 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, as well as a few low-margin deals in the prior period that did not repeat.

Selling, general and administrative expenses for the first quarter of 2026 decreased both in dollars and as a percentage of net sales compared to the first quarter of 2025.

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 September 30,

Three Months Ended March 31,

Enterprise Solutions

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● 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 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 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 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 first quarter of 2026, which reflects a decrease of 130 basis points and is primarily due to the increase in net sales as 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.

A decrease in marketing of $1.6 million was substantially offset by increases in use of shared Headquarter services, other expenses, and personnel costs of $1.1 million, $0.2 million, and $0.2 million, respectively.

SG&A expenses as a percentage of net sales were 16.4% for the Business Solutions segment for the first quarter of 2026, which reflects a decrease of 120 basis points and is primarily due to the increase in net sales as discussed above.

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

The year-over-year change in SG&A dollars was primarily attributable to decreases in personnel costs, professional fees, and marketing of $1.8 million, $0.7 million, and $0.3 million, respectively, partially offset by an increase in use of shared Headquarter services of $0.5 million .

SG&A expenses as a percentage of net sales were 20.5% for the Public Sector Solutions segment for the first quarter of 2026, which reflects an increase of 470 basis points and is primarily due to the decrease in net sales discussed above .

● SG&A expenses for the Headquarters/Other increased year-over-year by $0.5 million primarily due to increases in personnel costs, marketing, and professional fees of $1.5 million, $0.4 million, and $0.4 million, respectively, partially offset by an increase in the allocated amounts to the operating segments of $2.1 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.

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 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 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):

Nine Months Ended September 30,

Enterprise Solutions

Business Solutions

Public Sector Solutions

Gross Profit:

Enterprise Solutions

Business Solutions

Public Sector Solutions

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, 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 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 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):

Nine Months Ended September 30,

Enterprise Solutions

Business Solutions

Public Sector Solutions

Headquarters/Other, unallocated

● 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 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 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 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.

Severance expenses for the first quarter of 2026 were $3.1 million, compared to $2.9 million for the first quarter of 2025.

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

Income from operations for the first quarter of 2026 was $20.2 million, compared to $14.5 million for the first quarter of 2025.

Income from operations as a percentage of net sales increased to 2.8% for the first quarter of 2026, compared to 2.1% for the prior year quarter.

The increase in income from operations both in dollars and as a percentage of net sales is primarily due to the increases in net sales and gross profit as discussed above.

Interest income, net for the first quarter of 2026 decreased to $3.4 million, compared to $3.9 million for the first quarter of 2025, primarily due to a decrease in interest income of $0.5 million.

The decrease in interest income is primarily a result of lower realized interest rates in the current period.

Income taxes.

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 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.

Our provision for income taxes for the first quarter of 2026 increased to $6.4 million, compared to $5.0 million for the first quarter of 2025.

The increase in our provision for income taxes was primarily due to the increase in income before taxes.

Our effective tax rate was 27.0% for the quarter ended March 31, 2026, compared to 27.1% for the quarter ended March 31, 2025.

Net income for the first quarter of 2026 increased to $17.2 million, compared to $13.5 million for the first quarter of 2025, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net and the increase in our provision for income taxes, as discussed above.

Liquidity and Capital Resources

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● Cash and Cash Equivalents .

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

As of March 31, 2026, we had $196.3 million in cash and cash equivalents.

● Short-term Investments .

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

As of March 31, 2026, we had $215.2 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.

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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March 6, 2026

April 29, 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.

On April 29, 2026, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.20 per share.

The dividend will be paid on May 29, 2026 to all stockholders of record as of the close of business on May 12, 2026.

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 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

Cash flows from operating, investing and financing activities for the three months ended March 31, 2026 and 2025, 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):

Three Months Ended March 31,

Net cash provided by (used in) operating activities

Net cash (used in) provided by investing activities

Net cash used in financing activities

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:

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

Three Months Ended March 31,

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

Depreciation and amortization

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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.

Net cash provided by (used in) operating activities

The increase in net cash from operating activities of $66.7 million for the three months ended March 31, 2026 was primarily attributable to changes in accounts payable and accounts receivable of $85.1 million and $20.8 million, respectively.

The change in cash from operating activities attributable to accounts payable is primarily due to the timing of payments.

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

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 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.

The cash conversion cycle decreased to 46 days at March 31, 2026, compared to 53 days at March 31, 2025, as evidenced in the above cash conversion table.

The increase in DSO is primarily due to the increase in trade receivables as of March 31, 2026 compared to March 31, 2025.

The increase in DIO is primarily due to the increase in inventory as of March 31, 2026 compared to March 31, 2025.

The increase in DPO is primarily due to the increase in accounts payable as of March 31, 2026 compared to March 31, 2025.

Cash (used in) provided by investing activities for the three months ended March 31, 2026 consisted of $54.3 million of purchases of U.S.

Government treasury securities, $53.2 million of maturities of U.S.

Government treasury securities, and $2.0 million of purchases of property and equipment.

These 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.

In the prior year period, investing activities consisted of $52.4 million of purchases of U.S.

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

Government treasury securities, $50.0 million of maturities of U.S.

Government treasury securities, and $1.7 million of purchases of property and equipment .

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.

Debt Instruments, Contractual Agreements, and Related Covenants

Below is a summary of certain provisions of our credit facility and other contractual obligations.

Cash used in financing activities for the three months ended March 31, 2026 consisted of $5.0 million of dividend payments, $2.5 million of treasury purchases, and $0.7 million of payments of payroll taxes on stock-based compensation through shares withheld.

In the prior year period, financing activities consisted of $0.7 million of aggregate borrowings and repayments, $43.7 million of treasury purchases, $3.9 million of dividend payments, and $0.5 million of payments of payroll taxes on stock-based compensation through shares withheld.

Contractual Agreements

Below is a summary of our contractual obligations.

For more information about our obligations, commitments, and contingencies, see our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q .

Credit Facility.

Our credit facility collateralized by our accounts receivable expired March 31, 2025.

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.

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.

Cash receipts were automatically applied against any outstanding borrowings.

Any excess cash on account could either remain on account to generate earned credits to offset up to 100% of cash management fees, or be invested in short-term qualified investments.

Borrowings under the credit facility were classified as current in our condensed consolidated balance sheets.

Supplier Finance Programs.

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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 collateralized by our accounts receivable expired March 31, 2025 and we elected not to renew or replace the credit facility given our significant cash, cash equivalent, and short-term investment balances.

Capital Markets.

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

Quantitative and Qualitative Disclosures About Market Risk

Quantitative an d Qualitative Disclosures About Market Risk

For a description of our market risks, see Item 7A.

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No material changes related to our market risks have occurred since December 31, 2025.

Control s and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II ― OTHER INFORMATIO N

Legal Proceedings

For information related to legal proceedings, see the discussion in Note 8 “Commitments and Contingencies” in the Notes to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which information is incorporated by reference into this Part II, Item 1.

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