What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-04-30 · 137 added, 65 removed, 197 unchanged (51% of the section changed)

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

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

● substantial competition reducing our market share;

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● cyberattacks or the failure to safeguard personal information and our IT systems resulting in liability and harm to our reputation.

● 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.

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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 $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.

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

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

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

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

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

The decrease in gross margin was primarily driven by 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.

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

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

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

The increase in SG&A expenses is primarily due to 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.

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

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

Net Sales 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,

Three Months Ended June 30,

Six Months Ended June 30,

Operating Segment

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating Segment

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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

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Severance Expenses

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

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

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

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.

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

Year-Over-Year Comparisons

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

Unless context otherwise requires, such references refer to changes between the three months ended 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

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

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

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

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 2025 compared to the first quarter of 2024, as explained by the year-over-year changes discussed below:

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

● Net sales of $326.0 million for the Enterprise Solutions segment reflect an increase of $27.2 million, or 9.1%.

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.

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

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

● Net sales of $293.2 million for the Business Solutions segment reflect an increase of $15.0 million, or 5.4%.

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.

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

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

● Net sales of $140.5 million for the Public Sector Solutions segment reflect a decrease of $19.0 million, or 11.9%.

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

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

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

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

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

● Gross profit for the Enterprise Solutions segment increased by $1.5 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

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

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

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

● Gross profit for the Public Sector Solutions segment decreased by $2.8 million primarily due to the decrease in net sales as discussed in the preceding paragraph.

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

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

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 an increase in personnel costs of $1.7 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Income taxes.

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

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

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

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

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

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

● Net sales of $624.0 million for the Enterprise Solutions segment reflect an increase of $42.6 million, or 7.3%.

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

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

● Net sales of $551.5 million for the Business Solutions segment reflect an increase of $17.4 million, or 3.3%.

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

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

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

Sales to the federal government increased by $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%.

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

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

The increase in net sales is primarily due to increases in net sales of notebooks/mobility, 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.

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 .

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

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

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

● Gross profit for the Enterprise Solutions segment increased by $1.1 million year-over-year primarily due to the increase in net sales as discussed in the preceding paragraph.

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

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

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

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

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

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

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Headquarters/Other, unallocated

● 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 Enterprise Solutions segment increased year-over-year in dollars but decreased as a percentage of net sales.

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

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

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

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

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

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

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

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

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

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

The 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 2025 were $2.9 million.

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

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

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

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

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

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.

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

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

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

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

Liquidity and Capital Resources

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● Cash and Cash Equivalents .

As of March 31, 2025, we had $182.5 million in cash and cash equivalents.

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

● Short-term Investments .

As of March 31, 2025, we had $157.9 million in short-term investments.

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

● Cash Generated from Operations .

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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.

April 29, 2025

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

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

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,

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

Six Months Ended June 30,

Net cash (used in) provided by operating activities

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Net cash used in financing activities

Increase in cash and cash equivalents

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.

Increase (decrease) in cash and cash equivalents

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

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

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

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

The 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.

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

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

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 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.

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

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

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

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

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

5 unchanged sentences

Government treasury securities, and $3.4 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.

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

In the prior year period, financing activities consisted of $10.6 million of aggregate borrowings and repayments, $3.6 million of treasury purchases, $5.3 million of dividend payments, $0.5 million of issuances of stock under the Employee Stock Purchase Plan, and $0.6 million of payments of payroll taxes on stock-based compensation through shares withheld.

Debt Instruments, Contractual Agreements, and Related Covenants

29 unchanged sentences

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

Quantitative and Qualitative Disclosures About Market Risk

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

“Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2024.

No material changes related to our market risks have occurred since December 31, 2024.

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