Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements generally relate to future events or our future financial or operating performance and include statements concerning, among other things, our future financial results, business plans (including statements regarding new products and services we may offer and future expenditures, costs and investments), liabilities, impairment charges, competition, and the expected impact of current macroeconomic conditions on our businesses and results of operations. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “would,” “should,” “expects,” “plans,” “could,” “intends,” “target,” “projects,” “believes,” “estimates,” “anticipates,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements reflect our current views and are based on assumptions as of the date of this report. Such assumptions are based upon internal estimates and other analyses of current market conditions and trends, management expectations, plans, and strategies, economic conditions, and other factors. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
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:
● substantial competition reducing our market share;
● significant price competition reducing our profit margins;
● the loss of any of our major vendors adversely affecting the number or type of products we may offer;
● virtualization of information technology, or IT, resources and applications, including networks, servers, applications, and data storage disrupting or altering our traditional distribution models;
● service interruptions at third-party shippers negatively impacting our ability to deliver the products we offer to our customers;
● increases in shipping and postage costs reducing our margins and adversely affecting our results of operations;
● loss of key persons or the inability to attract, train and retain qualified personnel adversely affecting our ability to operate our business;
● cyberattacks or the failure to safeguard personal information and our IT systems resulting in liability and harm to our reputation; and
● 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, rising inflation and changing interest rates modifying the timing or reducing the level of investment our customers are willing to make in IT products.
Additional factors include those described in our Annual Report on Form 10-K for the year ended December 31, 2024, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” in our subsequent quarterly reports on Form 10-Q, including under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the other subsequent filings we make with the Securities and Exchange Commission from time to time.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements. We assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made except as required by law.
Unless the context otherwise requires, we use the terms “Connection”, the “Company”, “we”, “us”, and “our” in this Quarterly Report on Form 10-Q to refer to PC Connection, Inc. and its subsidiaries.
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OVERVIEW
We are a Fortune 1000 Global Solutions Provider that simplifies the IT customer experience, guiding the connection between people and technology. Our dedicated account managers partner with customers to design, deploy, and support cutting-edge IT environments using the latest hardware, software, and services. We 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. Our team also provides a comprehensive portfolio of managed services and professional services. These services are performed by our personnel and by third-party providers. Our GlobalServe offering ensures worldwide coverage for our multinational customers, delivering global procurement solutions through our network of in-country suppliers in over 150 countries.
The “Connection®” brand includes Connection Enterprise Solutions, Connection Business Solutions, and Connection Public Sector Solutions, which provide IT solutions and services to enterprise, small- to medium-sized businesses, and public sector markets.
Financial results for each of our segments are included in the financial statements attached hereto. 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 are able to leverage our state-of-the art logistic capabilities to rapidly ship product to customers.
As a value-added reseller in the IT supply chain, we do not manufacture IT hardware or software products. We are dependent on our suppliers—manufacturers and distributors that historically have only sold to resellers rather than directly to end users. However, certain manufacturers have, on multiple occasions, sold or attempted to sell directly to our customers, and in some cases, have restricted our ability to sell their products directly to certain customers, thereby attempting to and, in some cases successfully, eliminate our role. We believe that the success of these direct sales efforts by manufacturers will depend on their ability to meet our customers’ ongoing demands and provide solutions to meet their needs. We believe more of our customers are seeking out comprehensive and integrated IT solutions, rather than the ability to acquire specific IT products on a one-off basis. Our advantage is our ability to be product-neutral and provide a broader combination of products, services, and advice tailored to our customers’ individual needs. 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. Such service offerings carry higher margins than traditional product sales. Additionally, the technical certifications of our service engineers permit us to offer higher-end, more complex products that generally carry higher gross margins. We expect these service offerings and technical certifications to continue to play a role in sales generation and gross margin improvements in this competitive environment.
The primary challenges we continue to face in effectively managing our business are (1) increasing our product and service revenues while at the same time improving our gross margin in all three segments, (2) recruiting, retaining, and improving the productivity of our sales and technical support personnel, and (3) effectively controlling our selling, general and administrative, or SG&A, expenses while making major investments in our IT systems and solution selling personnel, especially in relation to changing revenue levels.
To support future growth, we have invested and expect to continue to invest in our IT solutions business, which requires the addition of highly skilled service engineers. Although we expect to realize the ultimate benefit of higher-margin service revenues under this multi-year initiative, we believe that our cost of services will increase as we add additional service engineers. If our service revenues do not grow enough to offset the cost of these headcount additions, our operating results may be negatively impacted.
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Market conditions and technology advances significantly affect the demand for our products and services. Virtual delivery of software products and advanced Internet technology providing customers enhanced functionality have substantially increased customer expectations, requiring us to invest on an ongoing basis in our own IT infrastructure to meet these new demands.
Our investments in IT infrastructure are designed to enable us to operate more efficiently and provide our customers enhanced functionality.
The new U.S. administration has announced or imposed a series of tariffs on U.S. trading partners. In response, several countries have threatened or imposed retaliatory measures. The imposition of new tariffs or increases in existing tariffs on goods imported from countries where our suppliers operate could result in increased inventory costs. These cost increases may reduce our margins or require us to raise prices. We continue to assess the impact of the tariffs on our supply chain. 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.
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 March 31,
2025
2024
Net sales
$
701.0
$
632.0
Gross margin
18.2
%
18.7
%
Selling, general and administrative expenses
15.7
%
16.6
%
Income from operations
2.1
%
2.1
%
Net sales of $701.0 million for the first quarter of 2025 reflect an increase of $69.0 million, or 10.9% compared to the first quarter of 2024. The increase was primarily driven by increases in net sales of notebooks/mobility, desktops, software, and servers/storage of $36.2 million, $25.2 million, $11.0 million, and $7.6 million, respectively, as shown in the table in Note 2 “Revenue” in the Notes to our Unaudited Condensed Consolidated Financial Statements. These increases were partially offset by a decrease in net sales of displays and sound of $10.8 million. Gross profit for the first quarter of 2025 increased year-over-year by $9.2 million, or 7.8%, to $127.3 million as illustrated in the table and the discussion beginning on page 18 of this Quarterly Report on Form 10-Q. Gross margin decreased to 18.2% from 18.7% a year ago. The decrease in gross margin was primarily driven by a shift in product mix to lower-margin sales of endpoint devices including notebooks/mobility and desktops as shown in the table in Note 2 “Revenue” in the Notes to the Unaudited Condensed Consolidated Financial Statements and the product mix table on page 17. SG&A expenses increased year-over-year by $5.3 million, or 5.0%, to $109.9 million. SG&A expenses as a percentage of net sales decreased to 15.7% compared to 16.6% a year ago. The increase in SG&A expenses is primarily due to increases in personnel costs related to an increase in variable compensation, service contracts/subscriptions, and marketing as shown in the table on page 17 of this Quarterly Report on Form 10-Q. Operating income for the first quarter of 2025 increased year-over-year in dollars by $1.0 million and remained consistent as a percentage of net sales. The increase in dollars is primarily a result of the increase in gross profit, partially offset by the increase in SG&A expenses as discussed above, as well as severance expenses incurred for the first quarter of 2025.
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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 March 31,
2025
2024
Operating Segment
Enterprise Solutions
42
%
45
%
Business Solutions
37
40
Public Sector Solutions
21
15
Total
100
%
100
%
Product Mix
Notebooks/Mobility
37
%
35
%
Desktops
13
10
Software
11
10
Servers/Storage
7
7
Net/Com Products
7
7
Displays and Sound
7
10
Accessories
11
13
Other Hardware/Services
7
8
Total
100
%
100
%
Gross Profit Margin
The following table summarizes our gross margin, as a percentage of net sales, for the periods indicated:
Three Months Ended March 31,
2025
2024
Operating Segment
Enterprise Solutions
14.2
%
15.1
%
Business Solutions
25.3
23.6
Public Sector Solutions
13.6
16.0
Total Company
18.2
%
18.7
%
Operating Expe nses
The following table reflects our SG&A expenses for the periods indicated (dollars in millions):
Three Months Ended March 31,
2025
2024
Personnel costs
$
82.9
$
78.5
Marketing
8.0
7.4
Service contracts/subscriptions
6.8
6.0
Professional fees
3.2
3.4
Depreciation and amortization
3.1
3.3
Facilities operations
1.8
1.8
Credit card fees
1.4
1.6
Other
2.7
2.6
Total SG&A expense
$
109.9
$
104.6
As a percentage of net sales
15.7
%
16.6
%
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Severance Expenses
During the three months ended March 31, 2025, we undertook actions to lower our cost structure. In connection with these initiatives, we incurred severance expenses of $2.9 million which included cash severance and other related termination benefits. We did not incur any severance expenses for the three months ended March 31, 2024.
Year-Over-Year Comparisons
In this section and elsewhere in this Quarterly Report on Form 10-Q we refer to changes in year-over-year results. Unless context otherwise requires, such references refer to changes between the three months ended March 31, 2025 and the three months ended March 31, 2024.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Changes in net sales and gross profit by segment are shown in the following table (dollars in millions):
Three Months Ended March 31,
2025
2024
% of
% of
$
%
Amount
Net Sales
Amount
Net Sales
Change
Change
Net Sales:
Enterprise Solutions
$
298.0
42.5
%
$
282.6
44.7
%
$
15.4
5.4
%
Business Solutions
258.4
36.9
255.9
40.5
2.5
1.0
Public Sector Solutions
144.6
20.6
93.5
14.8
51.1
54.7
Total
$
701.0
100.0
%
$
632.0
100.0
%
$
69.0
10.9
%
Gross Profit:
Enterprise Solutions
$
42.3
14.2
%
$
42.7
15.1
%
$
(0.4)
(1.0)
%
Business Solutions
65.4
25.3
60.4
23.6
5.0
8.4
Public Sector Solutions
19.6
13.6
15.0
16.0
4.6
30.9
Total
$
127.3
18.2
%
$
118.1
18.7
%
$
9.2
7.8
%
Net sales increased for the first quarter of 2025 compared to the first quarter of 2024, as explained by the year-over-year changes discussed below:
● Net sales of $298.0 million for the Enterprise Solutions segment reflect an increase of $15.4 million, or 5.4%. The increase in net sales is primarily due to increases in net sales of desktops, software, servers/storage, and other hardware/services of $15.4 million, $6.3 million, $5.5 million, and $2.4 million, respectively. These increases were partially offset by decreases in net sales of displays and sound, notebooks/mobility, accessories, and net/com products of $8.3 million, $2.7 million, $1.7 million, and $1.7 million, respectively.
● Net sales of $258.4 million for the Business Solutions segment reflect an increase of $2.5 million, or 1.0%. The increase in net sales is primarily due to increases in net sales of notebooks/mobility, desktops, and software of $10.2 million, $5.7 million, and $1.5 million, respectively. These increases were partially offset by decreases in net sales of accessories, net/com products, displays and sound, servers/storage, and other hardware/services of $6.7 million, $3.8 million, $2.4 million, $1.3 million, and $0.6 million, respectively.
● Net sales of $144.6 million for the Public Sector Solutions segment reflect an increase of $51.1 million, or 54.7%. Sales to the federal government increased by $40.1 million, or 228.0%, compared to the prior year quarter, and sales to state and local government and educational institutions increased by $11.0 million, or 14.5%. The increase in sales to the federal government was primarily driven by a few large orders in the current period. The increase in net sales is primarily due to increases in net sales of notebooks/mobility, accessories, net/com products, desktops, servers/storage, and software of $28.7 million, $8.1 million, $4.2 million, $4.1 million, $3.4 million, and $3.2 million, respectively. These increases were partially offset by a decrease in net sales of other hardware/services of $0.6 million.
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Gross profit for the first quarter of 2025 increased year-over-year, while gross margin for the first quarter of 2025 decreased year-over-year, as explained by the year-over-year changes discussed below:
● Gross profit for the Enterprise Solutions segment remained substantially the same year-over-year. Gross margin decreased by 90 basis points primarily due to reduced software agency fees and a shift in product mix to lower-margin sales of desktops as shown in the table in Note 2 “Revenue” in the Notes to the Unaudited Condensed Consolidated Financial Statements .
● Gross profit for the Business Solutions segment increased by $5.0 million year-over-year primarily due to an increase in net sales of notebooks/mobility and desktops at improved margins, as well as changes in customer mix. Gross margin increased by 170 basis points primarily due to improved margins on sales of notebooks/mobility and desktops, as well as changes in customer mix.
● Gross profit for the Public Sector Solutions segment increased by $4.6 million primarily due to the increase in net sales as discussed in the preceding paragraph. Gross margin decreased by 240 basis points primarily due to a few low-margin deals in the current period.
Selling, general and administrative expenses for the first quarter of 2025 increased in dollars but decreased as a percentage of net sales compared to the first quarter of 2024. SG&A expenses attributable to our three segments and the remaining unallocated Headquarters/Other expenses are summarized in the table below (dollars in millions):
Three Months Ended March 31,
2025
2024
% of
% of
Segment Net
Segment Net
$
%
Amount
Sales
Amount
Sales
Change
Change
Enterprise Solutions
$
37.8
12.7
%
$
36.9
13.0
%
$
0.9
2.5
%
Business Solutions
45.4
17.6
44.6
17.4
0.8
1.8
Public Sector Solutions
22.9
15.8
20.3
21.7
2.6
12.9
Headquarters/Other, unallocated
3.8
2.8
1.0
33.0
Total
$
109.9
15.7
%
$
104.6
16.6
%
$
5.3
5.0
%
● SG&A expenses for the Enterprise 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 increases in personnel costs and marketing of $0.7 million and $0.2 million, respectively.
● 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 increases in use of shared Headquarter services and marketing of $1.0 million and $0.5 million, respectively, partially offset by decreases in credit card fees, personnel costs, and other expenses of $0.3 million, $0.2 million, and $0.2 million, respectively.
● SG&A expenses for the Public Sector Solutions segment increased year-over-year in dollars but decreased as a percentage of net sales. The year-over-year change in SG&A dollars was primarily attributable to increases in personnel costs, professional fees, and use of shared Headquarter services of $1.3 million, $0.7 million, and $0.5 million, respectively . SG&A expenses as a percentage of net sales were 15.8% for the Public Sector Solutions segment for the first quarter of 2025, which reflects a decrease of 590 basis points and is primarily due to the increase in net sales discussed above .
● SG&A expenses for the Headquarters/Other increased year-over-year by $1.0 million primarily due to increases in personnel costs and service contracts/subscriptions of $2.6 million and $0.8 million, respectively, partially offset by a decrease in the allocated amounts to the sales segments of $1.4 million, as well as decreases in professional fees and other expenses of $0.8 million and $0.2 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.
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Severance expenses for the first quarter of 2025 were $2.9 million. 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. There were no severance expenses incurred for the three months ended March 31, 2024.
Income from operations for the first quarter of 2025 increased to $14.5 million, compared to $13.5 million for the first quarter of 2024, primarily due to the increase in gross profit, partially offset by the increases in SG&A expenses and severance expenses, as discussed above. Income from operations as a percentage of net sales was 2.1% for the first quarter of 2025, which was consistent with the prior year quarter.
Interest income, net for the first quarter of 2025 decreased to $3.9 million, compared to $4.6 million for the first quarter of 2024, primarily due to a decrease in interest income of $0.7 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 first quarter of 2025 increased to $5.0 million, compared to $4.9 million for the first quarter of 2024. Our effective tax rate was 27.1% for the quarter ended March 31, 2025, compared to 27.0% for the quarter ended March 31, 2024.
Net income for the first quarter of 2025 increased to $13.5 million, compared to $13.2 million for the first quarter of 2024, primarily due to the increase in income from operations, partially offset by the decrease in interest income, net, as discussed above.
Liquidity and Capital Resources
Our primary sources of liquidity are internally generated funds from operations and short-term investments. We have historically used and expect to use in the future those funds to meet our capital requirements, which consist primarily of working capital for operational needs, capital expenditures for computer equipment and software used in our business, repurchases of our common stock for treasury, dividend payments, and as opportunities arise, possible acquisitions of new businesses.
We believe that funds generated from operations and short-term investments will be sufficient to finance our working capital, capital expenditures, and other requirements for at least the next twelve calendar months and beyond such twelve calendar month period. Our investments in IT systems and infrastructure are designed to enable us to operate more efficiently and to provide our customers enhanced functionality.
We expect to meet our cash requirements for the next twelve months and beyond through a combination of cash on hand, short-term investments, and cash generated from operations, as follows:
● Cash and Cash Equivalents . As of March 31, 2025, we had $182.5 million in cash and cash equivalents.
● Short-term Investments . As of March 31, 2025, we had $157.9 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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Dividends
A summary of 2025 dividend activity for our common stock is as follows:
Dividend Amount
Declaration Date
Record Date
Payment Date
$
0.15
February 4, 2025
February 25, 2025
March 14, 2025
On April 30, 2025, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.15 per share. The dividend will be paid on May 30, 2025 to all stockholders of record as of the close of business on May 13, 2025. The declaration and payment of any future dividends is at the discretion of our Board of Directors and will depend upon our financial position, strategic plans, general business conditions and any other factors deemed relevant by our Board of Directors.
Summary of Sources and Uses of Cash
Cash flows from operating, investing and financing activities for the three months ended March 31, 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):
Three Months Ended March 31,
2025
2024
Net cash (used in) provided by operating activities
$
(52.4)
$
57.3
Net cash provided by (used in) investing activities
104.7
(51.6)
Net cash used in financing activities
(48.2)
(3.1)
Increase in cash and cash equivalents
$
4.1
$
2.6
Cash used in operating activities was $52.4 million for the three months ended March 31, 2025. Cash used in operating activities resulted primarily from an increase in inventory of $56.7 million and a decrease in accounts payable of $27.0 million. These outflows were partially offset by $13.5 million of net income, positive net adjustments to net income of $5.6 million, an increase in accrued expenses and other liabilities of $7.8 million, and a decrease in accounts receivable of $7.1 million for the three months ended March 31, 2025. The increase in inventory was primarily attributable to inventory purchases related to large customer rollouts and management associated with anticipated tariffs. The decrease in accounts payable was primarily driven by the timing of payments. For the three months ended March 31, 2024, cash provided by operating activities resulted primarily from net income adjusted for non-cash charges of $16.3 million, a decrease in accounts receivable of $79.3 million, and an increase in accrued expenses and other liabilities of $6.0 million, partially offset by a decrease in accounts payable of $45.1 million.
In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. Components of our cash conversion cycle are as follows:
March 31,
(in days)
2025
2024
Days of sales outstanding (DSO) (1)
72
70
Days of supply in inventory (DIO) (2)
24
22
Days of purchases outstanding (DPO) (3)
(43)
(39)
Cash conversion cycle
53
53
(1) Represents the trade receivable at the end of the quarter divided by average daily net sales for the same three-month period.
(2) Represents the inventory balance at the end of the quarter divided by average daily cost of sales for the same three-month period.
(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.
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The cash conversion cycle remained consistent at 53 days at March 31, 2025 and 2024. The increase in DSO is primarily due to the increase in trade receivables as of March 31, 2025 compared to March 31, 2024. The increase in DIO is primarily due to the increase in inventory as of March 31, 2025 compared to March 31, 2024. The increase in DPO is primarily due to the increase in accounts payable as of March 31, 2025 compared to March 31, 2024.
Cash provided by investing activities for the three months ended March 31, 2025 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. These 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 $100.0 million of purchases of U.S. Government treasury securities, $50.0 million of maturities of U.S. Government treasury securities, and $1.6 million of purchases of property and equipment .
Cash used in financing activities for the three months ended March 31, 2025 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. In the prior year period, financing activities primarily consisted of $8.3 million of aggregate borrowings and repayments, $0.2 million of treasury purchases, $2.6 million of dividend payments, and $0.2 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. 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. We have entered into agreements with financial institutions to facilitate the purchase of inventory from designated suppliers under certain terms and conditions to enhance liquidity. We do not incur any interest or other incremental expenses associated with these agreements as balances are paid when they are due. See “Note 10 “Supplier Finance Programs” of our Unaudited Condensed Consolidated Financial Statements for additional information.
Operating Leases. We lease facilities from a related party, which is a company affiliated with us through common ownership, and facilities from third parties under non-cancelable operating leases. Certain leases require us to pay real estate taxes, insurance, and common area maintenance charges. See “Item 2. Properties” in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information regarding our operating leases.
Factors Affecting Sources of Liquidity
Internally Generated Funds. 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.
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Capital Markets. Our ability to raise additional funds in the capital market depends upon, among other things, general economic conditions, the condition of the IT industry, our financial performance and stock price, and the state of the capital markets. In addition, market volatility, inflation and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies and estimates have not materially changed from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.