What changed in this filing

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Item 1. Business

2023-03-06 compared with 2022-03-14 · 102 added, 93 removed, 273 unchanged (42% of the section changed)

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

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

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

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These services are performed by our personnel and by third-party providers.

Our GlobalServe offering ensures worldwide coverage for our multinational customers, delivering global procurement solutions through our network of incountry suppliers in over 150 countries.

Our GlobalServe offering ensures worldwide coverage for our multinational customers, delivering global procurement solutions through our network of in-country suppliers in over 170 countries.

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

In September 2016, we united all of our subsidiaries into one cohesive brand, reflecting the promise of our trademark blue arc and our mission to connect people with technology that enhances growth, elevates productivity, and empowers innovation.

MoreDirect, our enterprise team, became Connection Enterprise Solutions;

PC Connection Sales Corp, our SMB-focused team, became Connection Business Solutions;

and GovConnection, our public sector team, became Connection Public Sector Solutions.

Today, these entities represent our three operating segments and their respective markets:

• Connection Enterprise Solutions (formerly MoreDirect)—serving large enterprise customers (Large Accounts)

• Connection Business Solutions (formerly PC Connection Sales Corp)—serving SMBs

• Connection Public Sector Solutions (formerly GovConnection)—serving federal, state, and local government and educational institutions.

We united all of our subsidiaries into one cohesive brand, reflecting the promise of our blue arc and our mission to connect people with technology that enhances growth, elevates productivity, and empowers innovation.

These entities represent our three operating segments and their respective markets:

● Connection Enterprise Solutions – serving large enterprise customers

● Connection Business Solutions – serving SMBs

● Connection Public Sector Solutions – serving federal, state, and local government and educational institutions

Financial results for each of our segments are included in the financial statements attached hereto.

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

We are able to leverage our state-of-the art logistic capabilities to rapidly ship product to customers, typically the same day the order is received.

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

Since our founding in 1982, we have consistently served our customers’ needs by providing innovative, reliable, and timely service and technical support, and by offering an extensive assortment of industry-leading products through knowledgeable, well-trained sales and support teams.

Our strategy’s effectiveness is reflected in the recognition we have received, including being named to the Fortune 1000 and the CRN Solution Provider 500 for twenty-one straight years.

Our strategy’s effectiveness is reflected in the recognition we have received, including being named to the Fortune 1000 and the CRN Solution Provider 500 for twenty-two straight years.

In recent years, we have received numerous awards, including the Microsoft Excellence in Operations, Double Gold Level Award for delivering market-leading operational excellence, Aruba Federal Public Sector Partner of the Year, HPE Federal GreenLake Partner of the Year, and HP U.S.

Personal Systems National Solution Provider of the Year Award, as well as being named to the CRN Tech Elite 250 for the sixth year.

Personal Systems National Solution Provider of the Year Award, as well as being named to the CRN Tech Elite 250 for the seventh year.

Connection has also been twice named “America’s Best-in-State Employers” by Forbes.

Connection’s technical experts hold more than 2,500 professional certifications, and the company has been awarded industry-leading partner authorizations, including Microsoft Azure Expert Managed Service Provider status and Google Cloud premier partner status.

We believe this pursuit of excellence and our ability to understand our customers’ needs and provide comprehensive and effective IT solutions has resulted in strong brand name recognition and a broad and loyal customer base.

We also believe that through our strong vendor relationships we can provide an efficient supply chain and be an effective IT solution provider for our diverse customer segments.

We strive to identify the unique needs of our corporate, government, healthcare, educational, and small business customers, and have designed our business processes to enable our customers to effectively manage their IT systems.

Our technical experts hold more than 2,500 professional certifications, and we have been awarded industry-leading partner authorizations, including Microsoft Azure Expert Managed Service Provider status and Google Cloud premier partner status.

We believe this pursuit of excellence and our ability to understand our customers’ needs and provide comprehensive and effective IT solutions has earned us strong brand name recognition and a broad and loyal customer base.

We also believe that through our strong vendor relationships we can provide an efficient supply chain and be an effective IT solution provider for our diverse customer base.

We strive to identify the unique needs of our corporate, government, educational, and small business customers, and have designed our business processes to enable our customers to effectively manage their IT systems.

We provide value by offering our customers efficient design, integration, deployment, and support of their IT environments.

As of December 31, 2021, we employed 727 sales representatives, whose average tenure exceeded nine years.

As of December 31, 2022, we employed 752 sales representatives.

Sales representatives are responsible for managing enterprise, commercial, and public sector accounts, as specialization and a deep understanding of unique customer environments are more important than ever.

These sales representatives focus on current and prospective customers and are supported by an increasing number of engineering, technical, and administrative staff through our Technology Solutions Group and Technical Sales Organization.

Our Industry Solutions Group, or ISG, provides our sales team and customers with insights and guidance customized to the unique needs of our vertical markets, including healthcare, retail, finance, and manufacturing.

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MARKET AND COMPETITION

In the fiscal year ended December 31, 2021, we generated approximately 38.0% of our sales from small- to medium-sized customer accounts, 43.2% from medium-to-large corporate accounts (Fortune 1000), and 18.8% from government and educational institutions.

The overall IT market that we serve is estimated to be approximately $200 billion.

In the fiscal year ended December 31, 2022, we generated approximately 39.8% of our sales from SMBs, 42.4% from medium-to-large businesses (Fortune 1000), and 17.8% from government and educational institutions.

The United States IT market that we serve is estimated to be approximately $200 billion.

The largest segment of this market is served by local and regional Value-Added Resellers, or VARs, many of whom we believe are transitioning from the hardware and software products business to higher-margin IT services.

We have transitioned from an end-user or desktop-centric computing supplier to a network or enterprise-wide IT solutions supplier.

We have also partnered with third-party technology and telecommunications service providers.

We now offer our customers access to the same services and technical expertise as local and regional VARs, but with a more extensive product selection at generally lower prices.

We have also partnered with third-party technology and telecommunications service providers to offer our customers access to the same services and technical expertise as local and regional VARs, but with a more extensive product selection at generally lower prices.

Intense competition for customers has led manufacturers of our IT products to use all available channels, including solutions providers, to distribute their products.

Certain of these manufacturers who have traditionally used resellers to distribute their products have, from time to time, established their own direct marketing operations, including sales through the Internet.

Nonetheless, we believe that these manufacturers will continue to provide us and other third-party solutions providers favorable product allocations and marketing support.

We believe new entrants to the IT solutions channel must overcome a number of obstacles, including:

● the substantial time and resources required to build a customer base of meaningful size and profitability for cost-effective operation;

● the high costs of developing the information systems and operating infrastructure required to successfully compete as a national solutions provider;

● the advantages enjoyed by larger and more established competitors in terms of purchasing and operating efficiencies;

● the difficulty of building relationships with vendors to achieve favorable product allocations and attractive pricing terms;

● the difficulty of identifying and recruiting management personnel with significant direct marketing experience in the industry.

● substantial time and resources required to build a customer base of meaningful size and profitability for cost-effective operation;

● significant upfront costs of developing the information systems and operating infrastructure required to successfully compete as a national solutions provider;

● purchasing and operating efficiencies enjoyed by larger and more established competitors;

● difficulty building relationships with vendors needed to gain favorable product allocations and attractive pricing terms;

● difficulty identifying and recruiting management personnel with significant direct marketing experience in the industry.

BUSINESS STRATEGIES

We believe we become our customers’ IT provider of choice by calming the confusion of IT and solving complex business challenges with innovative IT solutions which meet their needs of increased productivity, mobility, virtualization, and security in a continually evolving IT environment.

We believe that we have become our customers’ IT provider of choice by calming the confusion surrounding IT procurement and solving complex business challenges with innovative IT solutions designed to meet their increased productivity, mobility, virtualization, and security needs in a continuously evolving IT environment.

We provide enhanced value by assisting our customers in cost-effectively maximizing business opportunities provided by new technologies and advanced service solutions.

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We believe that we have earned a reputation for providing superior customer service by consistently focusing on our customers’ needs.

Empathy for the challenges technology presenting to people is at the heart of our culture and serves as a foundation for long-lasting and rewarding partnerships with organizations of every size and industry.

Empathy for the challenges technology procurement presents to people is at the heart of our culture and serves as a foundation for long-lasting and rewarding partnerships we create with organizations of every size and industry.

We have dedicated our resources to developing strong, long-term relationships with our customers by accurately assessing their IT needs, and providing scalable, high-quality solutions and services through our knowledgeable, well-trained personnel.

Through operational excellence, we have efficient delivery programs that provide a quality buying experience for our customers.

Through operational excellence, we believe we have created efficient delivery programs that provide a quality buying experience for our customers.

● Offering a broad product selection at competitive prices .

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data and automation, workplace transformation, cloud, cybersecurity, and managed services.

Our Technology Solutions Group and Technical Sales Organization are responsible for understanding the infrastructure needs of our customers, and for designing cost-effective technology solutions to address them.

Our TSG and TSO are responsible for understanding the infrastructure needs of our customers, and for designing cost-effective technology solutions to address them.

We have also partnered with third-party providers to make available a range of IT support services, including asset assessment, implementation, maintenance, and disposal services.

We believe we can leverage these focus areas to enable us to capture a greater share of the IT expenditures of our customers.

We believe we can leverage these focus areas to enable us to capture a greater share of our customers’ IT expenditures.

● Maintaining a strong brand name and customer awareness.

Since our founding in 1982, we have built a strong brand name and customer awareness.

We have been named to the Fortune 1000 and the CRN Solution Provider 500 for each of the last twenty-one years.

We have been named to the Fortune 1000 and the CRN Solution Provider 500 for each of the last twenty-two years.

We actively work with our existing customers to become their IT provider of choice for products and enhanced solution services, while seeking to ensure our reputation of high-quality customer service, tailored marketing programs, and competitive pricing lead the way to expanding our share of the overall IT market.

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We have a history of strong relationships with vendors, and were among the first national solutions providers qualified by manufacturers to market computer systems to end users.

By working closely with our vendors to provide an efficient channel for the advertising and distribution of their products and

solutions, we expect to expand market share and generate opportunities for optimizing partner incentive programs.

By working closely with our vendors to provide an efficient channel for the advertising and distribution of their products and solutions, we expect to expand market share and generate opportunities for optimizing partner incentive

We promote communication and collaboration with our partner community at every level of our organization, from sales and product management to leadership.

We host a Partner Advisory Council that meets annually to share feedback and explore strategies to promote greater engagement with partners and better serve our mutual customers.

We meet regularly with our partners to share feedback and explore strategies to promote greater engagement and better serve our mutual customers.

GROWTH STRATEGIES

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● Expanding hardware and software offerings.

We offer our customers an extensive range of IT hardware and software products, and in response to customer demand, we continually evaluate and add new products as they become available.

We work closely with vendors to identify and source first-to-market product offerings at aggressive prices.

We offer our customers an extensive range of IT hardware and software products, and in response to customer demand, we continually evaluate and add new products to our offerings as they become available.

We also work closely with vendors to identify and source first-to-market product offerings at aggressive prices.

● Expanding IT solution services offerings.

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Our converged data center, networking, mobility, security, cloud solutions, lifecycle, and software services practice groups consist of industry-certified and product-certified engineers, as well as highly specialized third-party providers.

Our investment in these seven practice areas is anticipated to increase our share of our customers’ annual IT expenditures by broadening the range of products and services they purchase from us.

We believe our investment in these seven practice areas may increase our share of our customers’ annual IT expenditures by broadening the range of products and services they purchase from us.

● Targeting customer segments.

Through increased targeted marketing, we seek to expand the number of our active customers and generate additional sales to existing customers by providing more value-added services and solutions.

We have also developed a digital marketing capability, which includes but is not limited to digital remarketing, digital buying guides, Google shopping integration, along with social media advertising and search engine optimization.

We have also developed digital marketing capabilities, which include but are not limited to digital remarketing, digital buying guides, Google shopping integration, along with social media advertising and search engine optimization.

All of these aforementioned methods also help us fine tune and optimize our Internet marketing campaigns that focus on select markets, such as healthcare, retail, financial, and manufacturing.

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We invest significant resources in training new sales representatives and providing ongoing training to experienced personnel.

Our training and evaluation programs are focused towards assisting our sales personnel in understanding and anticipating clients’ IT needs, with the goal of fostering loyal customer relationships.

We also provide our sales representatives with technical support on more complex sales opportunities through our expanding group of technical solution specialists.

Our training and evaluation programs are focused towards assisting our sales personnel in understanding and anticipating our customers’ IT needs, with the goal of fostering loyal customer relationships.

We also provide our sales representatives with technical support on more complex sales opportunities through our group of technical solution specialists.

● Migrating to cloud-based solutions for our customers.

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This focus on cloud includes investing in the training and certification resources required to help our customers adopt and optimize cloud technologies.

In 2021, we secured Microsoft Azure Expert Managed Service Provider status as well as Google Cloud premier partner status—two exclusive designations that require an intensive auditing process and a proven record of delivering exceptional customer service and in-depth technical expertise around core cloud competencies.

In 2022, we maintained Microsoft Azure Expert Managed Service Provider status as well as Google Cloud premier partner status—two exclusive designations that require an intensive auditing process and a proven record of delivering exceptional customer service and in-depth technical expertise around core cloud competencies.

● Pursuing strategic acquisitions and alliances.

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SERVICE AND SUPPORT

Since our founding in 1982, our primary objective has been to provide products and services that meet the demands and needs of customers and to supplement those products with up-to-date product information and excellent customer service and support.

We believe that offering our customers superior value, through a combination of product knowledge, consistent and reliable service and support, and leading products at competitive prices, differentiates us from other national solutions providers and provides the foundation for developing a broad and loyal customer base.

Since our founding in 1982, our primary objective has been to provide products and services that meet the demands and needs of our customers and to supplement those products with up-to-date product information and excellent customer service and support.

We believe that offering our customers superior value, through a combination of product knowledge, consistent and reliable service and support, and leading products at competitive prices, differentiates us from other national solutions providers and serves as the foundation for developing a broad and loyal customer base.

We invest in training programs for our service and support personnel, with an emphasis on putting customer needs and service first.

Supplementing our salesforce, our Technology Solutions Group and Technical Sales Organization offer in-depth technical support across a wide range of advanced technology solutions.

Supplementing our salesforce, our TSG and TSO offer in-depth technical support across a wide range of advanced technology solutions.

These teams of engineers and solution architects design end-to-end IT solutions tailored to our customers’ unique environments and serve as technology consultants.

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The product support technicians authorize customers to return defective or incompatible products to either the manufacturer or to us for warranty service.

In-house TIDC technicians perform both warranty and non-warranty repair on most major systems and hardware products.

In-house TIDC technicians perform both warranty and non-warranty repair on most of the major systems and hardware products.

Using our customized information system, we transmit our customer orders either to our TIDC or to our drop-ship suppliers, depending on product availability, for processing immediately after a customer receives credit approval.

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MARKETING AND SALES

We sell our products through our direct marketing channels to (i) SMBs including small office/home office customers, (ii) government and educational institutions, and (iii) medium-to-large corporate accounts.

We strive to be the primary supplier of IT products and solutions to our existing and prospective customers by providing exemplary customer service.

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● targeted marketing programs to specific customer populations.

All of our marketing approaches emphasize our broad product and service offerings, fast delivery, customer support, competitive pricing, and our wide range of service solutions.

All of our marketing approaches emphasize our broad product offerings, fast delivery, customer support, competitive pricing, and our wide range of service solutions.

Sales Channels.

We believe that our ability to establish and maintain long-term customer relationships and to encourage repeat purchases is largely dependent on the strength of our sales personnel and programs.

Because our customers’ primary contact with us is through our sales representatives, we are committed to maintaining a qualified, knowledgeable, and motivated sales staff with its principal focus on customer service.

Outbound Telemarketing and Field Sales.

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Incentive compensation is tied generally to gross profit dollars produced by the individual account manager.

Account managers historically have significantly increased productivity after approximately twelve months of training and experience.

E-commerce Sales.

( www.connection.com, www.connection.com/enterprise , www.connection.com/publicsector, and www.macconnection.com ) We provide product descriptions and prices for generally all products online.

We generally provide product descriptions and prices for all of the products we offer through the e-commerce websites we maintain and operate.

Our Connection website also provides updated information for more than 460,000 items.

We offer, and continuously update, selected product offerings and other special buys.

We believe our websites are important sales sources and communication tools for improving customer service.

Our Enterprise Solutions Segment’s business process and operations are primarily Web-based.

We believe our websites are an important source of sales and a communication tool for improving customer service.

For example, our Enterprise Solutions Segment’s business process and operations are primarily Web-based.

Most of its corporate customers utilize a customized Web page to quickly search, source, and track IT products.

Our Enterprise Solution business website ( www.connection.com/enterprise ) aggregates the current available inventories of its largest IT suppliers into a single online source for its corporate customers.

Our Enterprise Solution business website aggregates the current available inventories of its largest IT suppliers into a single online source for its corporate customers.

Its custom designed Internet-based system, MarkITplace®, provides corporate buyers with comparative pricing from several suppliers as well as special pricing arranged through the manufacturer.

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If customers still have questions, they may call our account managers.

Such phone calls are typically shorter and have higher close rates than calls from customers who have not first visited our websites.

● Leveraging the time of experienced sales representatives — Our investments in technology-based sales and service programs allow our sales representatives more time to build and maintain relationships with our customers and help them to solve their business problems.

Business Segments .

We conduct our business operations through three business segments:

Such phone calls are typically shorter and have higher close rates than calls from customers who have not visited our websites first.

Operating Segments .

We conduct our business operations through three operating segments:

Business Solutions, Enterprise Solutions, and Public Sector Solutions.

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We target each of the four distinct market sectors within this segment—federal government, higher educational institutions, school grades K-12, and state and local governments.

The following table sets forth the relative distribution of net sales by business segment:

The following table sets forth the relative distribution of net sales by operating segment:

Years Ended December 31,

Sales Segment

Operating Segment

Enterprise Solutions

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Public Sector Solutions

Our ISG works across all business segments to service the unique needs of healthcare, retail, finance, and manufacturing customers.

Our ISG works across all operating segments to service the unique needs of healthcare, retail, finance, and manufacturing customers.

Within each of these vertical markets, our ISG experts offer technology solutions and guidance backed by real-world experience.

Our ISG combines extensive knowledge of the latest technologies, brands, and trends with industry experience that reassures our customers that we understand their businesses and their technology challenges.

Our brand, and each of our business segments, is supported by targeted marketing campaigns across a variety of media:

Our brand, and each of our operating segments, is supported by targeted marketing campaigns across a variety of media:

We utilize a series of digital programs, in conjunction with advanced data analytics, to identify prospective customers and generate new leads within our existing customer base.

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We also host a series of Technology Summits each year, with a focus on building stronger relationships with our customers and reinforcing our reputation as a trusted source of expertise.

Wherever possible we developed and hosted digital equivalents events throughout the year.

We maintain an extensive database of customers and prospects.

However, no single customer accounted for more than 4% of our consolidated revenue in 2021.

While no single agency of the federal government comprised more than 4% of consolidated revenue in 2021, aggregate revenue to the federal government was 3.9%, 4.6%, and 6.9% in 2021, 2020, and 2019, respectively.

The loss of any single customer would not have a material adverse effect on any of our business segments.

However, no single customer accounted for more than 4% of our consolidated revenue in 2022, 2021, and 2020.

While no single agency of the federal government comprised more than 4% of consolidated revenue in 2022, 2021, and 2020, aggregate revenue to the federal government was 3.6%, 3.9%, and 4.6% in 2022, 2021, and 2020, respectively.

The federal government (and the other government entities we service) generally has the ability to terminate contracts, in whole or in part, with little or no prior notice, for convenience or for default based upon performance.

The loss of any single customer would not have a material adverse effect on any of our operating segments.

The majority of our backlog historically has been and continues to be open cancelable purchase orders.

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We continuously focus on expanding the breadth of our product and service offerings.

We currently offer our customers over 460,000 information technology products designed for business applications from more than 2,500 vendors, including hardware and peripherals, accessories, networking products, and software.

We select the products we

sell based upon their technology and effectiveness, market demand, product features, quality, price, margins, and warranties.

We currently offer our customers over 460,000 IT products designed for business applications from more than 2,500 vendors.

These products consist of hardware, including devices, peripherals, accessories, servers, and networking products, along with software and services.

We select the products we sell based upon their technology and effectiveness, market demand, product

features, quality, price, margins, and warranties.

The following table sets forth our percentage of net sales for major product categories:

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accounted for approximately 23%, 22% and 15% respectively, of our total product purchases in 2022.

Product purchases from Ingram Micro, Inc., TD Synnex Corporation and HP Inc.

Product purchases from Ingram Micro, Inc., TD Synnex Corporation and Dell Inc.

accounted for approximately 23%, 23% and 12% respectively, of our total product purchases in 2021.

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No other singular vendor supplied more than 10% of our total product purchases in 2022, 2021 and 2020.

We believe that, while we may experience some short-term disruption if products from Ingram Micro, Inc., TD Synnex Corporation, HP Inc., Dell Inc., or any of these vendors become unavailable to us, alternative sources for these products are available.

Products manufactured by HP Inc.

collectively represented approximately 15% of our net sales in 2021, 18% in 2020, and 19% in 2019.

We believe that in the event we experience either a short-term or permanent disruption of supply of HP products, such disruption would likely have a material adverse effect on our results of operations and cash flows.

collectively represented approximately 14%, 15% and 18% of our net sales in 2022, 2021 and 2020, respectively.

We believe that in the event we experience either a short-term or permanent disruption of supply of HP Inc.

products, such disruption would likely have a material adverse effect on our results of operations and cash flows.

Throughout the year, we have seen continued improvement in the supply chain, although pockets of constraints still exist with a few suppliers, most notably with HPE and Cisco.

Many product suppliers reimburse us for advertisements or other cooperative marketing programs through various marketing vehicles.

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We fulfill orders from customers both from products we hold in inventory and through drop shipping arrangements with manufacturers and distributors.

At our 283,000 square foot technology TIDC in Wilmington, Ohio, we receive and ship inventory, configure and integrate technology solutions, provide depot maintenance and services, and process

returned products.

At our 268,000 square foot technology TIDC in Wilmington, Ohio, we receive and ship inventory, configure and integrate technology solutions, provide depot maintenance and services, and process returned products.

The TIDC features a state-of-the-art ISO 9001:2015-certified Configuration Lab that completed more than 500,000 custom configurations in 2022—including personal computing devices, servers, mobile devices, and networking hardware.

Our technicians maintain extensive certifications and authorizations from all major manufacturers, with more than 90% of the team holding one or more CompTIA certifications.

Our technicians maintain extensive certifications and authorizations from all major manufacturers, with more than 90% of the TIDC team holding one or more CompTIA certifications.

Through the TIDC, we are able to offer customers turnkey solutions for all of their IT needs, including hardware configuration, imaging and provisioning, asset management, remote management, white glove enrollment services, kitting, custom packaging, and depot repair services.

We also place product orders directly with manufacturers and/or distribution companies for drop shipment directly to our customers.

Order status with distributors is tracked online, and in all circumstances, a confirmation of shipment from manufacturers and/or distribution companies is received prior to initial recording of the transaction.

At the end of each financial reporting period, revenue is adjusted to reflect the anticipated receipt of products by the customers in the period.

Order status with distributors is tracked online and a confirmation of shipment from manufacturers and/or distribution companies is received prior to initial recording of the transaction.

Products drop shipped by suppliers were 71%, 72%, and 76%, of net sales in 2022, 2021, and 2020, respectively.

In future years, we expect that products drop shipped from suppliers may increase, both in dollars and as a percentage of net sales, as we seek to lower our overall inventory and distribution costs while maintaining excellent customer service.

Electronic delivery for software licenses were approximately 9%, 10%, and 11% of total net sales in 2022, 2021, and 2020, respectively.

MANAGEMENT INFORMATION SYSTEMS

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

Our successfully implemented ERP system, which was the result of a multi-year planning and implementation process, enables us to operate more effectively and efficiently.

The direct marketing and sale of IT-related products is highly competitive.

We compete with other national solutions providers of IT products, including CDW Corporation and Insight Enterprises, Inc., who are the current leaders in the space.

We compete with other national solutions providers of IT products, including CDW Corporation, SHI, and Insight Enterprises, Inc., who are the current leaders in the space.

We also compete with:

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● software publishers, such as Microsoft, VMware, Adobe, and Symantec;

● distributors that sell directly to certain customers;

● distributors that sell directly to certain customers, such as Apple, Dell, Lenovo, and HP;

● local and regional VARs;

● various franchisers, office supply superstores, and national computer retailers;

● e-tailers, such as Amazon Web Services, with more extensive commercial online networks.

● cloud providers, such as Amazon Web Services, Google and Microsoft;

● large service providers and system integrators, such as Accenture, Dell EMC, Hewlett Packard Enterprise and IBM;

● communications service providers, such as AT&T, CenturyLink and Verizon;

● various franchisers, office supply superstores, and national computer retailers, such as Office Depot and Staples;

● e-tailers, such as Amazon, with more extensive commercial online networks.

Additional competition may arise if other new methods of distribution emerge in the future.

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REGULATORY MATTERS

Government Contracting

Our Public Sector Solutions segment is heavily regulated and, as a result, our need for compliance awareness and business and employee support is significant.

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government contractors are generally subject to other federal and state laws and regulations, including:

We focus on the following key areas in hiring and developing our employees:

● The Federal Acquisition Regulation, or FAR, agency supplements to the FAR, and related regulations, which regulate the formation, administration, and performance of U.S.

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Our Public Sector Solutions is also subject to oversight by the U.S.

Office of Federal Contract Compliance Programs, or the OFCCP, for federal contract and affirmative action compliance, including the following areas:

Office of Federal Contract Compliance Programs, or OFCCP, for federal contract and affirmative action compliance, including the following areas:

● affirmative action plans;

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A termination resulting from our default could expose us to various liabilities, including excess re-procurement costs, and could have a material effect on our ability to compete for future contracts.

Unfair and Deceptive Trade Practices

Under applicable federal and state laws, we are required to comply with a number of requirements when sending commercial email or making telephone calls to consumers.

For example, under applicable federal and state unfair competition laws, including the California Consumer Legal Remedies Act, and U.S.

Federal Trade Commission, regulations, we must accurately identify product offerings, not make misleading claims on our platforms, and use qualifying disclosures where and when appropriate when distributing commercial emails to consumers.

We are also subject to the Federal Telecommunications Commission’s Telemarketing Sales Rule, the Telephone Consumer Protection Act, and the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, which generally limit the consumers and types of communications we can make via telephone, text, automatic telephone dialing systems, and artificial and prerecorded voices.

Data Privacy and Security

Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of personal information.

In the United States, numerous federal and state laws and regulations, including data breach notification laws and federal and state consumer protection laws and regulations, that govern the collection, use, disclosure, and protection of personal information could apply to our operations or the operations of our partners.

In addition, certain state and non-US laws, such as the California Consumer Privacy Act and the California Privacy Rights Act govern the privacy and security of personal information, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.

Privacy and security laws, regulations, and other obligations are constantly evolving, may

conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

HUMAN CAPITAL

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As of December 31, 2022, we employed 2,685 persons (full-time equivalent), of whom 1,088 (including 336 management and support personnel) were engaged in sales-related activities, 500 were engaged in providing IT services and customer service and support, 767 were engaged in purchasing, marketing, and distribution-related activities, 118 were engaged in the operation and development of management information systems, and 212 were engaged in administrative and finance functions.

We have good relations with our employees.

Our employees are not represented by a labor union, and we have never experienced a labor related work stoppage.

We believe we have good relations with our employees.

Our employees are not represented by a labor union, and, to date, we have never experienced a labor related work stoppage.

AVAILABLE INFORMATION

We are subject to the informational requirements of the Exchange Act, and accordingly, we file reports, proxy and information statements, and other information with the Securities and Exchange Commission, or the SEC.

The SEC maintains a website (http://www.sec.gov) that contains such reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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In addition, we routinely post on the “Investor Relations” section of our website news releases, announcements, and other statements about our business, some of which may contain information that may be deemed material to investors.

Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the “Investor Relations” section of our corporate website.

Therefore, we encourage investors, the media, and others interested in our company to review the information we post on

the “Investor Relations” section of our corporate website.

The contents of our corporate website are not, however, a part of this Annual Report on Form 10-K.

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-K

Item 1. Business