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Item 2. Management’s Discussion and Analysis

2026-07-29 compared with 2026-04-29 · 141 added, 72 removed, 234 unchanged (48% of the section changed)

72 unchanged sentences

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,

Three Months Ended June 30,

Six Months Ended June 30,

Gross billings

5 unchanged sentences

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Selling, general and administrative expenses

Income from operations

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.

Net sales of $854.0 million for the second quarter of 2026 reflect an increase of $94.3 million, or 12.4% compared to the second quarter of 2025.

The increase was primarily driven by increases in net sales of notebooks/mobility, software, displays and sound, accessories, net/com products, and other hardware/services of $77.7 million, $10.3 million, $9.1 million, $8.2 million, $6.3 million, and $2.5 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 $13.0 million and $6.7 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 profit for the second quarter of 2026 increased year-over-year by $19.7 million, or 14.3%, to $157.5 million as illustrated in the table and the discussion beginning on page 22 of this Quarterly Report on Form 10-Q.

Gross margin increased to 18.4% from 18.1% 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.

The increase in gross margin was primarily driven by improved invoice margins in accessories and other hardware/services primarily due to changes in customer mix, as well as 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 decreased to 13.4% compared to 14.1% a year ago, primarily due to the increase in net sales as discussed above.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating Segment

9 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating Segment

5 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Personnel costs

7 unchanged sentences

Severance Expenses

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.

There were no severance expenses incurred during the three months ended June 30, 2026 and 2025.

During the six months ended June 30, 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 six months ended June 30, 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 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

Unless context otherwise requires, such references refer to changes between the three months ended June 30, 2026 and the three months ended June 30, 2025, and changes between the six months ended June 30, 2026 and the six months ended June 30, 2025.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

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

Three Months Ended March 31,

Three Months Ended June 30,

Enterprise Solutions

5 unchanged sentences

Public Sector Solutions

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

● Net sales of $369.6 million for the Enterprise Solutions segment reflect an increase of $43.6 million, or 13.4%.

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.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, displays and sound, software, accessories, other hardware/services, and servers/storage of $25.3 million, $8.5 million, $8.0 million, $4.2 million, $1.8 million, and $1.5 million, respectively.

These increases were partially offset by decreases in net sales of desktops and net/com products of $4.5 million and $1.3 million, respectively.

● Net sales of $343.9 million for the Business Solutions segment reflect an increase of $50.7 million, or 17.3%.

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.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, net/com products, accessories, and other hardware/services of $48.6 million, $7.9 million, $2.4 million, and $1.1 million, respectively.

These increases were partially offset by decreases in net sales of servers/storage and desktops of $8.2 million and $1.7 million, respectively.

● Net sales of $140.5 million for the Public Sector Solutions segment were substantially the same as in the second quarter of 2025.

Sales to the federal government decreased by $6.8 million, or 24.7%, compared to the prior year quarter, while sales to state and local government and educational institutions increased by $6.8 million, or 6.0%.

Increases in net sales of notebooks/mobility, software, accessories, and displays and sound of $3.8 million, $1.9 million, $1.5 million, and $0.3 million, respectively, were offset by decreases in net sales of servers/storage, desktops, other hardware/services, and net/com products of $6.3 million, $0.5 million, $0.5 million, and $0.3 million, respectively.

Gross profit for the second 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 $7.6 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 $10.2 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 increased by $1.9 million primarily as a result of improved invoice margins in notebooks/mobility primarily due to changes in customer mix.

Gross margin for the second 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 the amount of software sales recognized on a net basis, as well as improved invoice margins in other hardware/services primarily due to changes in customer mix.

● Gross margin for the Business Solutions segment decreased by 50 basis points primarily as a result of a shift in product mix to sales of lower-margin notebooks/mobility.

● Gross margin for the Public Sector Solutions segment increased by 130 basis points primarily as a result of improved invoice margins in notebooks/mobility primarily due to changes in customer mix, as well as an increase in the amount of software sales recognized on a net basis.

Selling, general and administrative expenses for the second quarter of 2026 increased in dollars but decreased as a percentage of net sales compared to the second 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 June 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 marketing of $1.0 million, $0.9 million, and $0.8 million, respectively .

SG&A expenses as a percentage of net sales were 10.8% for the Enterprise Solutions segment for the second quarter of 2026, which reflects a decrease of 60 basis points and is primarily due to the increase in net sales as 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 increases in marketing, use of shared Headquarter services, and other expenses of $2.0 million, $1.3 million, and $0.5 million, respectively.

SG&A expenses as a percentage of net sales were 13.8% for the Business Solutions segment for the second quarter of 2026, which reflects a decrease of 100 basis points and is primarily due to the increase in net sales as discussed above.

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

A decrease in professional fees of $1.5 million was substantially offset by increases in marketing and use of shared Headquarter services of $0.7 million and $0.6 million, respectively.

● SG&A expenses for the Headquarters/Other increased year-over-year by $0.8 million primarily due to an increase in personnel costs of $3.3 million, partially offset by an increase in the allocated amounts to the operating segments of $2.8 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.

Income from operations for the second quarter of 2026 was $43.0 million, compared to $30.9 million for the second quarter of 2025.

Income from operations as a percentage of net sales increased to 5.0% for the second quarter of 2026, compared to 4.1% 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 second quarter of 2026 decreased to $2.5 million, compared to $3.2 million for the second quarter of 2025, primarily due to a decrease in interest income of $0.7 million.

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

Income taxes.

Our provision for income taxes for the second quarter of 2026 increased to $12.4 million, compared to $9.3 million for the second 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 27.2% for the quarter ended June 30, 2026, compared to 27.3% for the quarter ended June 30, 2025.

Net income for the second quarter of 2026 increased to $33.2 million, compared to $24.8 million for the second 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.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

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

Six Months Ended June 30,

Enterprise Solutions

Business Solutions

Public Sector Solutions

Gross Profit:

Enterprise Solutions

Business Solutions

Public Sector Solutions

Net sales increased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, as explained by the year-over-year changes discussed below:

● Net sales of $716.1 million for the Enterprise Solutions segment reflect an increase of $92.1 million, or 14.8%.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, displays and sound, accessories, other hardware/services, software, net/com products, and servers/storage of $62.4 million, $12.5 million, $11.0 million, $5.5 million, $3.3 million, $2.2 million, and $1.4 million, respectively.

These increases were partially offset by a decrease in net sales of desktops of $6.3 million.

● Net sales of $619.4 million for the Business Solutions segment reflect an increase of $67.9 million, or 12.3%.

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, net/com products, software, other hardware/services, and accessories of $50.8 million, $10.5 million, $7.9 million, $3.6 million, and $2.6 million, respectively.

These increases were partially offset by a decrease in net sales of servers/storage of $8.1 million.

● Net sales of $240.4 million for the Public Sector Solutions segment reflect a decrease of $44.8 million, or 15.7%.

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:

Sales to the federal government decreased by $48.9 million, or 57.4%, compared to the prior year period, primarily due to a few large orders in the prior period that did not repeat.

Sales to state and local

government and educational institutions increased by $4.1 million, or 2.0%.

The decrease in net sales is primarily due to decreases in net sales of notebooks/mobility, servers/storage, accessories, desktops, and net/com products of $28.1 million, $11.3 million, $4.6 million, $3.2 million, and $2.6 million, respectively.

These decreases were partially offset by increases in net sales of software and other hardware/services of $3.1 million and $1.4 million, respectively.

Gross profit for the six months ended June 30, 2026 increased year-over-year, as explained by the year-over-year changes discussed below:

● Gross profit for the Enterprise Solutions segment increased by $15.5 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 $12.3 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 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.

● Gross profit for the Public Sector Solutions segment decreased by $2.7 million year-over-year primarily due to the decrease in net sales as discussed in the preceding paragraph.

Gross margin for the six months ended June 30, 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 improved invoice margins in other hardware/services primarily due to changes in customer mix.

● Gross margin for the Business Solutions segment decreased by 60 basis points primarily as a result of decreases in invoice margins in desktops and notebooks/mobility primarily due to changes in customer mix.

● Gross margin for the Public Sector Solutions segment increased by 160 basis points primarily due to an increase in the amount of software sales recognized on a net basis, as well as a few low-margin deals in the prior period that did not repeat.

Selling, general and administrative expenses for the six months ended June 30, 2026 increased in dollars but decreased as a percentage of net sales compared to the six months ended June 30, 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 March 31,

Six Months Ended June 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 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.

The year-over-year change in SG&A dollars was primarily attributable to increases in personnel costs and use of shared Headquarter services of $2.8 million and $1.4 million, respectively .

SG&A expenses as a percentage of net sales were 11.1% for the Enterprise Solutions segment for the six months ended June 30, 2026, which reflects a decrease of 90 basis points and is primarily due to the increase in net sales as 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 increases in use of shared Headquarter services, other expenses, personnel costs, and marketing of $2.4 million, $0.7

million, $0.4 million, and $0.4 million, respectively.

SG&A expenses as a percentage of net sales were 15.0% for the Business Solutions segment for the six months ended June 30, 2026, which reflects a decrease of 110 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 year-over-year change in SG&A dollars was primarily attributable to decreases in professional fees and personnel costs of $2.2 million and $1.8 million, respectively, partially offset by an increase in use of shared Headquarter services of $1.2 million .

SG&A expenses as a percentage of net sales were 18.2% for the Public Sector Solutions segment for the six months ended June 30, 2026, which reflects an increase of 190 basis points and is primarily due to the decrease in net sales as discussed above .

● SG&A expenses for the Headquarters/Other increased year-over-year by $1.4 million primarily due to increases in personnel costs, service contracts/subscriptions, and marketing of $4.9 million, $0.8 million, and $0.4 million, respectively, partially offset by an increase in the allocated amounts to the operating segments of $4.9 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 for the first quarter of 2026 were $3.1 million, compared to $2.9 million for the first quarter of 2025.

Severance expenses for the six months ended June 30, 2026 were $3.1 million, compared to $2.9 million for the six months ended June 30, 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.

Income from operations for the six months ended June 30, 2026 was $63.2 million, compared to $45.4 million for the six months ended June 30, 2025.

Income from operations as a percentage of net sales increased to 4.0% for the six months ended June 30, 2026, compared to 3.1% for the prior year period.

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.

Interest income, net for the six months ended June 30, 2026 decreased to $5.9 million, compared to $7.1 million for the six months ended June 30, 2025, primarily due to a decrease in interest income of $1.2 million.

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

Income taxes.

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.

Our provision for income taxes for the six months ended June 30, 2026 increased to $18.7 million, compared to $14.3 million for the six months ended June 30, 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.

Our effective tax rate was 27.1% for the six months ended June 30, 2026, compared to 27.3% for the six months ended June 30, 2025.

Net income for the six months ended June 30, 2026 increased to $50.4 million, compared to $38.3 million for the six months ended June 30, 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 March 31, 2026, we had $196.3 million in cash and cash equivalents.

As of June 30, 2026, we had $123.7 million in cash and cash equivalents.

● Short-term Investments .

As of March 31, 2026, we had $215.2 million in short-term investments.

As of June 30, 2026, we had $217.0 million in short-term investments.

● Cash Generated from Operations .

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March 6, 2026

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.

April 28, 2026

On July 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 August 28, 2026 to all stockholders of record as of the close of business on August 11, 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 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

Cash flows from operating, investing and financing activities for the six months ended June 30, 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):

Six Months Ended June 30,

Net cash 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 (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:

(Decrease) increase in cash and cash equivalents

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

Six Months Ended June 30,

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

10 unchanged sentences

Accrued expenses and other liabilities

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.

Net cash used in operating activities

The decrease in net cash from operating activities of $23.3 million for the six months ended June 30, 2026 was primarily attributable to changes in accounts receivable, accounts payable, and inventories of $53.9 million, $35.9 million, and $23.1 million, respectively.

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

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 inventories is primarily due to an increase in inventory purchases related to customer rollouts and management’s decision to secure supply.

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.

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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 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.

The cash conversion cycle increased to 49 days at June 30, 2026, compared to 44 days at June 30, 2025, as evidenced in the above cash conversion table.

The increase in DSO is primarily due to the increase in trade receivables as of June 30, 2026 compared to June 30, 2025.

The increase in DIO is primarily due to the increase in inventory as of June 30, 2026 compared to June 30, 2025.

The increase in DPO is primarily due to the increase in accounts payable as of June 30, 2026 compared to June 30, 2025.

Cash (used in) provided by investing activities for the six months ended June 30, 2026 consisted of $105.7 million of purchases of U.S.

Government treasury securities, $103.2 million of maturities of U.S.

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

Government treasury

securities, and $3.9 million of purchases of property and equipment.

The property and equipment expenditures were primarily for computer equipment and capitalized internally developed software in connection with investments in our IT infrastructure.

3 unchanged sentences

Government treasury securities, and $3.3 million of purchases of property and equipment .

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.

Cash used in financing activities for the six months ended June 30, 2026 consisted of $10.1 million of dividend payments, $2.5 million of treasury purchases, $0.7 million of excise tax payments on treasury purchases, $0.6 million of issuances of stock under the Employee Stock Purchase Plan, and $1.0 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, $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.

Contractual Agreements

9 unchanged sentences

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.

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

We do not expect to occupy the adjacent facility long term, and accordingly we do not intend to enter into a written, long-term lease for the adjacent facility.

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

17 unchanged sentences

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.

4 unchanged sentences

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.

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 June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II ― OTHER INFORMATIO N

2 unchanged sentences

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