PC Connection CNXN Earnings Call Transcript

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DATE

Wednesday, February 4, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Timothy McGrath
• Senior Vice President and Chief Financial Officer — Thomas Baker
• Investor Relations — Samantha Smith

TAKEAWAYS

• Gross Billings -- $1,060,000,000, up 2.9%, with management citing this metric marks a new disclosure to better reflect total transaction value.
• Gross Profit -- $135,600,000, an increase of 4.5%, attributed to growth in software and endpoint devices sectors.
• Gross Margin -- 19.3%, expanding by 100 basis points year over year, with management referencing disciplined pricing and favorable product mix.
• Total Net Sales -- $702,900,000, down 0.8%, reflecting public sector segment decline and macro-related delays.
• Business Solutions Segment Net Sales -- $273,500,000, rising 4.2%, with double-digit growth called out in desktops, notebooks, NetComm, and software including cloud and cybersecurity.
• Business Solutions Segment Gross Profit -- $69,800,000, increasing 11.4%, demonstrating margin expansion by 160 basis points to 25.5%.
• Public Sector Segment Net Sales -- $90,800,000, falling 36.8% due to a non-repeating project and delays in project rollouts.
• Public Sector Segment Gross Billings -- $170,700,000, a decrease of 23.7% despite gross margin expansion by 400 basis points to 19.4% on mix shift.
• Enterprise Solutions Segment Net Sales -- $338,700,000, gaining 11.9%, underpinned by strong demand for advanced technologies and endpoint devices.
• Enterprise Solutions Segment Gross Profit -- $48,200,000, up 7.1%, with gross billings jumping 16.1% to $457,800,000.
• Enterprise Solutions Segment Gross Margin -- 14.2%, down 70 basis points, attributed to subscription license program and product mix changes.
• Operating Income -- $23,600,000, up 4.2%; excluding severance and other charges, operating income rose 17.8% to $26,700,000.
• SG&A Expenses -- Increased 1.7%; headcount declined 2% year over year, maintaining payroll costs.
• Severance and Related Charges -- $3,100,000 recognized in the quarter, connected to voluntary retirement and additional headcount reduction actions.
• Adjusted Diluted Earnings Per Share -- $0.91, up 16.7%, compared to diluted EPS of $0.82, up 5.1%.
• Trailing Twelve-Month Adjusted EBITDA -- $126,400,000, a 6% increase from the prior year.
• Shareholder Returns -- $91,400,000 returned through $76,100,000 in share buybacks and $15,300,000 in dividends during 2025.
• Quarterly Dividend -- $0.27 per share declared, reflecting a 33% increase, payable March 6, 2026.
• Liquidity Position -- $406,700,000 in cash, cash equivalents, and short-term investments at year-end.
• Inventory Build -- $48,500,000 increase, executed to secure product ahead of anticipated price increases and support customer rollouts.
• Board Authorization -- Additional $50,000,000 approved for the share repurchase program, expanding capacity.
• Headcount Reductions -- Actions in Q4 2025 and January 2026 expected to result in $7,000,000-$8,000,000 annualized cost savings.
• Vertical Market Performance -- Retail up 22% in net sales, financial services up 28%, and health care up 19%, each linked to large enterprise deployments, infrastructure modernization, and security investment.
• Backlog -- Stated as "at its highest level since 2022" at quarter-end, signaling elevated future demand.
• AI-enabled Endpoints -- 61% of deployed endpoints now AI-enabled, with demand expected to continue.
• 2026 Market Outlook -- Management budgets internal growth above the 4% blended U.S. IT market estimate, targeting outperformance by 200 basis points.
• Operating Margin Outlook -- Management seeks to approach 3.8%-9% by year-end, with improved leverage from cost actions.

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RISKS

• Public sector segment faced a "very large public sector contract last year that did not renew," resulting in an "almost a $30,000,000 headwind for us this quarter" and projected "almost a $40,000,000 headwind for us next quarter."
• Management cited "memory constraint and inflation as a result" as ongoing headwinds affecting some customer purchasing timelines.

SUMMARY

Management highlighted record gross profit in core business and enterprise segments, offset by significant declines in the public sector segment, tied mainly to the non-recurrence of a large contract and delayed projects. Executives confirmed new KPI disclosure with gross billings and detailed an internal focus on cost structure, with $7,000,000-$8,000,000 in targeted annual savings from headcount reductions. The call introduced a 33% increase in the dividend and announced an expanded share repurchase authorization, strengthening shareholder return priorities. Year-end liquidity remained substantial at $406,700,000, with notable inventory and receivable builds supporting anticipated customer activity and rising demand for AI-enabled endpoints. Operating leverage improvements are expected as severance costs subside and technology-driven productivity gains materialize throughout 2026, positioning the company for margin expansion and U.S. IT market outperformance.

• Executives communicated that the year-end backlog reached its highest point since 2022, signaling robust pipeline visibility.
• Inventory increased substantially as the company proactively sourced to mitigate price escalation risk, specifically for affected components.
• Management indicated gross margin expansion in the public sector segment was achieved despite sales declines, due to favorable customer and product mix.
• A new gross billings KPI was established this quarter, intended to improve investor transparency regarding customer demand and total transaction value.
• The share buyback program's authorized capacity was expanded by $50,000,000, with $33,600,000 previously remaining at year-end, enhancing capital return flexibility.
• Leadership does not foresee further material headcount reductions, citing realized operational efficiencies from recent AI and system upgrades.
• Verticals such as retail, financial services, and health care experienced double-digit growth, driven by major deployments and emphasis on modernization and security spending.
• Executives targeted operating income margin improvements to much closer to 3.8% by year-end, reflecting expected gains from cost discipline and evolving workforce mix.
• Advanced technologies and endpoint devices continued to drive demand, with 61% of endpoints now AI-enabled according to management.
• Quarterly sales cadence included a pronounced increase in December, attributed partially to customers "consuming their budget before the end of the year" and seeking to preempt price increases.

INDUSTRY GLOSSARY

• Gross Billings: Total transaction value of goods and services billed—net of returns, credits, and taxes—and includes agency fees, presented as a new operating metric to capture underlying customer demand.
• Endpoint Devices: Distributed hardware such as laptops, desktops, or mobile devices that connect end users to IT infrastructure, often targeted for upgrades or AI enablement.
• NetComm: Internal reference to networking and communications product lines encompassing switches, routers, and related connectivity hardware or software.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to the Fourth Quarter 2025 Connection Earnings Conference Call. My name is Lisa, and I will be the coordinator for the call today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question and answer session. As a reminder, this conference call is the property of PC Connection, Inc. and may not be recorded or rebroadcast without specific permission from the company. On the call today are Tim McGrath, President and Chief Executive Officer, and Tom Baker, Senior Vice President and Chief Financial Officer. I will now turn the call over to the company. Please go ahead.

Samantha Smith: Thank you, operator, and good afternoon, everyone. I will now read our cautionary note regarding forward-looking statements. Any statements or references made during the conference call that are not statements of historical fact may be deemed to be forward-looking statements. Various remarks that management may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the Risk Factors section of the company's annual report on Form 10-Ks for the year ended December 31, 2024, which is on file with the Securities and Exchange Commission as well as in other documents that the company files with the commission from time to time. In addition, any forward-looking statements represent management's view as of today and should not be relied upon as representing views as of any subsequent date.

While the company may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so other than as required by law even if estimates change. And therefore, you should not rely on these forward-looking statements as representing management's views as of any date subsequent to today. During this call, non-GAAP financial measures will be discussed. A reconciliation between any non-GAAP financial measure discussed and its most directly comparable GAAP measure is available in today's earnings release and on the company's website at www.connection.com. Please note that unless otherwise stated, all references to fourth quarter 2025 comparisons are being made against the fourth quarter 2024.

Today's call is being webcast and will be available on PC Connection, Inc.'s website. The earnings release will be available on the SEC website at www.sec.gov and in the Investor Relations section of our website at www.connection.com. I would now like to turn the call over to our host, Tim McGrath, President and CEO. Tim?

Timothy McGrath: Thank you, Samantha. Good afternoon, everyone. And thank you for joining us today for PC Connection, Inc.'s Q4 2025 conference call. I'll begin this afternoon with an overview of our fourth quarter results and highlights of our performance. Tom will then walk us through a more detailed look at our financials. I'm pleased to share that in the fourth quarter, we delivered record gross profit in our business solutions and enterprise solutions segments as they each performed above our expectations. The results in our public sector segment were disappointing and below prior year levels. This was primarily due to a non-repeating project that straddled both Q4 2024 and Q1 2025. In addition, there was a delay in several project rollouts.

The strong execution across our business solutions and enterprise solutions segments drove gross profit performance led by growth in software, including cloud and security, and supported by steady growth for endpoint devices. These results underscore the strength of our strategy delivering higher value solutions driving long-term customer relationships, and executing with consistency and discipline. Beginning this quarter, we are disclosing gross billings which represents the total dollar value of goods and services billed during the period net of customer returns and credit memos, and any applicable sales or other taxes and also includes agency fees and free. Gross billings increased by 2.9% to $1,060,000,000 compared to $1,030,000,000 from the prior year.

The increase in gross billings demonstrates the overall growth in customer demand despite the headwinds experienced in the public sector. Now I'd like to highlight our consolidated performance. Gross profit increased 4.5% year over year to $135,600,000. Gross margin expanded 100 basis points to 19.3%, reflecting our disciplined approach to pricing as well as a shift in product and customer mix. Total net sales were $702,900,000, down 0.8% from last year due to the public sector challenges previously mentioned. Excluding these headwinds, underlying sales were healthy, especially in software including cloud and security, endpoint devices, and displays. Now let's take a look at the segments. Business solutions delivered a standout quarter with broad-based growth and meaningful margin expansion.

Net sales increased 4.2% to $273,500,000 while gross profit rose 11.4% to $69,800,000. Gross billings grew 4.7% to $430,300,000 and gross margin expanded by 160 basis points year over year to 25.5%. These results reflect double-digit growth across desktops, notebooks, NetComm, and software, including cloud and cybersecurity solutions. In public sector solutions, net sales were $90,800,000, down 36.8% from a year ago for the reasons previously mentioned. While the public sector business experienced some headwinds this quarter, we believe conditions will improve later in 2026. Gross billings declined 23.7% to $170,700,000 even with lower revenue gross margin expanded 400 basis points to 19.4% due to changes in customer and product mix.

Enterprise Solutions delivered robust top-line growth with net sales increasing 11.9% to $338,700,000 driven by strong demand for advanced technologies and endpoint devices. Gross profit grew 7.1% to $48,200,000 while gross billings increased 16.1% to $457,800,000. Gross margin was 14.2%, down 70 basis points year over year, reflecting changes in subscription license programs and product mix. We continue to focus on operational efficiencies and expense management. In the quarter, we executed a voluntary retirement offering for our tenured employees. These associated charges are reflected in the severance expenses and other charges in the income statement. This, in addition to severance charges in the quarter, totaled $3,100,000. Operating income was up 4.2% to $23,600,000.

Excluding severance expenses and other charges, operating income was up 17.8% to $26,700,000 compared to the prior year, underscoring our strong expense discipline while continuing to invest in areas of our business that will drive future growth. Diluted earnings per share were $0.82, an increase of 5.1%, while adjusted diluted earnings per share was $0.91, an increase of 16.7% compared to the prior year. Looking ahead, our strategy remains clear and unchanged, expanding our solutions-led business, deepening our customer relationships, and driving profitable growth in cloud, cybersecurity, AI, and services. We continue to see strong customer engagement as organizations modernize their infrastructure and invest in AI-driven technologies.

These are several areas where we deliver differentiated value and where we expect sustained momentum. While funding cycles and project timing can impact quarter-to-quarter results, the long-term trends supporting our business remain firmly intact. With improved gross profit, expanding margins, and a growing base of recurring and solutions-driven revenue, we enter 2026 with confidence and strong strategic positioning. I'll now turn the call over to Tom to discuss additional financial highlights from our income statement, balance sheet, and cash flow statement. Tom?

Thomas Baker: Thanks, Tim. Earlier, Tim briefly discussed the new key performance metric, gross billings. We believe that this metric will provide additional insight into the company's periodic performance. We use the gross billings operating metric for evaluating the sales performance of our operating segments by providing insight into the total value of our business transactions. We believe that gross billings provide the same insight to investors. In the fourth quarter, SG&A increased by 1.7% year over year, driven primarily by higher variable compensation tied to the increase in gross profit. We remain highly disciplined on expenses.

In fact, our headcount is down 2% year over year, allowing us to keep total payroll costs flat while continuing to invest in our high-priority growth areas. As previously mentioned, we took action in the quarter to further streamline our cost structure resulting in a $3,100,000 severance charge. These actions align our expense structure with our strategic priorities and enhance operating leverage as demand continues to build. SG&A was 15.5% of sales, up 40 basis points year over year, reflecting both the increase in variable compensation and change in sales mix. Operating income margin improved to 3.4% compared to 3.2% last year. Excluding severance expense and other charges, operating income margin improved to 3.8%.

Interest income for the quarter was $3,600,000 compared to $4,800,000 last year, resulting from lower average cash balances as we deployed capital and a lower interest rate environment. Our effective tax rate for the quarter was 23.7%, down from 24.1% in the prior year. As a result, net income for the fourth quarter was flat at $20,700,000 year over year. Excluding severance expenses and other charges, net income increased $2,300,000 or 11.3% compared to last year. Diluted earnings per share were $0.82, up $0.04 year over year, while adjusted diluted earnings per share were $0.91, an increase of $0.13 year over year, highlighting the strength and underlying stability of our earnings profile.

On a trailing twelve-month basis, adjusted EBITDA was $126,400,000 compared to $118,900,000 a year ago, an increase of 6%. In addition to the Q4 voluntary retirement offering previously mentioned, we completed additional targeted headcount reductions in January. These actions are expected to result in total charges of $5,900,000 to $6,200,000 over Q4 2025 and Q1 2026, of which $3,100,000 was recognized in Q4. Together, these initiatives are expected to generate approximately $7,000,000 to $8,000,000 in ongoing annual cost savings split between both SG&A and cost of goods. During the quarter, we continued to return capital to shareholders through both dividends and share repurchases.

We paid a quarterly dividend of $0.15 per share and repurchased approximately 179,000 shares at an average price of $59.53 per share, for a total cost of $10,700,000. In 2025, we repurchased over 1,200,000 shares at an average price of $62.64. In 2025, between the share buyback of $76,100,000 and dividends paid of $15,300,000, we returned $91,400,000 to shareholders. At the end of the year, we had $33,600,000 remaining for stock repurchases under our existing stock repurchase program. But as we announced earlier today, our Board of Directors authorized an additional $50,000,000 to be added to our existing share repurchase program. We also announced today that our Board of Directors has declared a $0.27 per share dividend, a 33% increase.

The dividend is payable on March 6, 2026, to shareholders of record as of February 17, 2026. Turning to the balance sheet and cash flow. Operating cash flow for the year ended 2025 was $65,400,000. This reflects working capital investments including a $48,500,000 increase in inventory and a $38,400,000 increase in accounts receivable, partially offset by a $38,100,000 increase in accounts payable. The increase in inventory was intentional as we procured ahead of the anticipated price increases and support customer rollouts. The increased accounts receivable was primarily due to the timing of customer deliveries.

Cash generated from investing activities totaled $42,800,000, driven by $108,800,000 in proceeds from the sale of investments and $205,600,000 in investment maturities, partially offset by $264,100,000 of new investment purchases. Cash used in investing activities was $93,400,000, reflecting our ongoing share repurchase activity of $76,300,000 and dividend payments of $15,300,000 to shareholders. We ended the quarter with a strong liquidity position of $406,700,000 in cash, cash equivalents, and short-term investments, which we believe provide significant flexibility to support our strategic priorities and continued shareholder returns. We believe our disciplined approach to capital allocation, continued focus on margin execution, and targeted strategic investments position us well for 2026 and beyond.

I will now turn the call back over to Tim to discuss current market trends.

Timothy McGrath: Thanks, Tom. Let me take a moment to walk through how our key vertical markets performed. In retail, net sales grew 22% driven by several large deployments as retailers continue investing in technology to improve employee productivity and operational efficiencies which enhance the customer experience. In financial services, net sales were up 28% and gross profit increased 13% year over year. The focus here remains on modernizing infrastructure and improving security. Areas where our solutions and expertise continue to resonate with our customers. Health care grew net sales 19%, while gross profit improved 18% year over year. PC Connection, Inc. had a strong Q4 in health care, attributed to large enterprise deployments for electronic health record management and security.

Looking ahead in an AI-first IT environment, we see demand building across our customer base. Customers continue to move forward with refresh initiatives and modernization plans as AI adoption expands. We expect infrastructure strategies to evolve and security requirements to remain front and center. While there are near-term factors that can influence the timing of this demand, such as memory supply constraints, these do not change the strength or scale of the opportunity ahead of us. Rather, they may affect the pace at which demand is realized. We are building for the future, advancing our three-part growth strategy, driving data center modernization, digital workplace transformation, and supply chain solutions.

With our differentiated portfolio, disciplined execution, and loyal customer relationships, we believe we are exceptionally well-positioned to capture demand as economic and supply chain conditions stabilize. Our confidence in the business is underpinned by several technology trends that continue to drive pipeline and customer activity. The PC refresh cycle will continue into 2026 as customers modernize aging fleets and increasingly adopt AI-enabled solutions that deliver high performance, strong security, and better user experiences. Data center modernization continues as customers are taking a more balanced approach to hybrid IT, optimizing workloads across on-prem and cloud environments to improve cost predictability, enhance security, and unlock the benefits of server consolidation and infrastructure efficiency.

AI-driven demand is expanding across the edge, security, and intelligent endpoints. Customers are moving from experimentation to execution, creating meaningful opportunities for integrated solutions that combine hardware, software, and services. We continue to expand our technical services organization to help customers design, implement, migrate, and manage their IT environments end-to-end. We are investing in training and tools to ensure our teams are fully equipped to guide customers through AI adoption and next-generation architectures with confidence. As we move into 2026, our backlog remains strong. In fact, at the end of Q4, it was at its highest level since 2022.

We feel confident about where we are headed and will continue to invest in sales capability, service delivery, and systems while remaining disciplined around cost management and productivity. We are positioning PC Connection, Inc. for sustained long-term growth and expect to outperform the US IT market by 200 basis points this year. As customers rethink how they deploy and manage technology, our strategy meets them where they are. We help them navigate the complexity, modernize with purpose, and make confident, informed decisions that drive real business outcomes. In a world where technology changes fast, expertise wins. And that's where PC Connection, Inc. continues to differentiate. We'll now entertain your questions. Operator?

Operator: Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself, please press 11 again. Our first question for the day will be coming from the line of Adam Tindle of Raymond James. Your line is now open.

Adam Tindle: Okay. Thanks. Good afternoon. Tim, I think you just kind of wrapped up by saying you expect to outgrow the US IT by 200 basis points. But I guess how would you define what you're thinking of as IT market growth for 2026 as the baseline? And if you could, you know, I know that's a hard question because we've got a bunch of prognosticators trying to figure out what that market growth is. When you look internally, at your customer conversations and, you know, what budget trends are, at the customer and sales quotas and Salesforce, you know, what does growth look like, you know, internally from a budget perspective as well would be helpful. Thanks.

Timothy McGrath: Thanks. So right now, the U.S. market is a little tricky to pin down. We've seen a lot of different estimates, but around 4% is a blended growth number that we're working with. Internally, our budget for growth is a little higher than that. And, really, what we're seeing for drivers of demand out there for 2026. Right now, about 61% of our endpoints are AI-enabled, and we do see a demand continuing for AI at the edge. We also see edge product projects starting to expand for 2026. So all of that really bodes well for our business. In addition to the growth we've been experiencing in our cloud business.

So clearly, there are some headwinds, Adam, as you know, when we think about things like memory constraint and inflation as a result, those are headwinds. But there'll be some percent of our customer base that try to pull ahead of that. And then some percent that try to push a little beyond that. We're really trying to balance that equation.

Adam Tindle: Okay. I mean, as I think about those growth numbers, those are pretty healthy. And then, you know, on this call, you talked about some restructuring, essentially, voluntary early retirement as well as additional actions that you took in January. I guess, you know, maybe just double click on those decisions, you know, at the IT market environment's healthy. You know, why does it make sense to kind of pull back on headcount at this point? And how do you think about headcount on a go-forward basis? Are there more opportunities for additional actions or is this kind of, you know, it at this point?

Timothy McGrath: Well, thanks. So internally, for the past few years, we've implemented a number of system improvements and we are now starting to realize those efficiencies, which is really exciting. In addition, as you know, AI is driving some productivity gains throughout the business. So that really is the main driver of our headcount reduction. We want it to be super efficient. We really are working on being operationally excellent in a continuous improvement motion there, and we're starting to realize a lot of that. I don't see additional headcount reductions. I think that demand is going to be solid for 2026, and we're encouraged by all of that. I think we're in a pretty good place right now.

Tom, anything to add?

Thomas Baker: Yeah. I mean, I think, Adam, if you look at the quarter, right, you know, BSG grew gross profit 11.4%. Enterprise grew their gross profit 7.1%. I mean, that's pretty healthy. You know, one issue we had was we had a very large public sector contract last year that did not renew. So, you know, that was almost a $30,000,000 headwind for us this quarter. And it's been almost a $40,000,000 headwind for us next quarter. However, you know, those other businesses performing the way they are, you know, we can look at the quarter next year. Next quarter is kind of gonna look a little like this quarter, you know, flattish on revenue.

Probably low to mid-single digits increase in gross profit. And the way we're managing our costs, we're gonna be sub 3% on G&A. So that's pretty good for that next quarter. And then as we get into Q2, Q3, and beyond, we eliminate that public sector headwind. We're pretty excited about, you know, how the business is looking. Enterprise is adding a bunch of new customers. And, you know, that's just gonna ramp throughout the year.

Adam Tindle: That's helpful color. Thanks, Tom.

Timothy McGrath: Thank you, Adam.

Operator: One moment for the next question. And our next question is coming from the line of Anthony Lebiedzinski of Sidoti. Your line is open.

Anthony Lebiedzinski: Good afternoon, and thank you for taking the question. So just wondering if you guys could just comment on the cadence of sales or gross billings during the fourth quarter and whether or not you saw the notable budget flush in Q4?

Thomas Baker: Yeah, Anthony. So we definitely saw a market increase in December revenue this quarter. You know, it typically bumps along, you know, 35-ish percent of the quarter. I think it bumped over 38% this quarter. And, you know, buried in that, we saw a couple of things. We did have some customers that were, you know, very focused on consuming their budget before the end of the year. And then we haven't seen that in a number of years. And then we also did see some customers trying to get ahead of the price increases, which is why you see a little bit of a bump in our inventory as well.

So I think those two things together, I don't know if it was incredibly material, but it was, you know, it definitely did affect the quarter.

Anthony Lebiedzinski: Got it. Okay. Yeah. Thanks for that, Tom. And then Tim, I believe you mentioned earlier about the memory supply constraints, which is certainly something that's been, you know, talked about. Was that an issue in the fourth quarter? Or was that comment more about your concern for 2026?

Timothy McGrath: We did start to see in the fourth quarter some price increases, but I do not think it was an issue. Some customers probably pulled their business in, and they moved orders up. And those price increases, of course, are inflationary. And at this point, we're advising all our customers to order, you know, as soon as possible because we see those memory constraints going throughout the year. So it really didn't affect us in the fourth quarter. The inflation that we saw was reasonable, and, you know, we're thinking for the first quarter, again, that will actually spike some demand and we think that'll kind of level out throughout the year.

Anthony Lebiedzinski: Gotcha. Okay. And then, with the cost reduction that you have done with the restructuring, how do we think about operating margins here going forward? Any sort of thought on that would be very helpful.

Thomas Baker: Yeah. I mean, obviously, it's gonna help us. You know, we talked about $7,000,000 to $8,000,000 of net cost reduction, you know, for the year. And when I say net, that means, you know, some of those people that took retirement, you know, we are gonna have to replace some of them, maybe, you know, different levels, maybe in a little bit different positions, maybe with a little bit more of a technological aptitude. But as we go through the year, the operating leverage is definitely gonna improve. And, you know, we want to move much closer to the, you know, 3.789% is kind of where we think we can get to by the end of the year.

Anthony Lebiedzinski: That's very helpful color. Well, thank you very much, and best of luck.

Timothy McGrath: Thank you, Anthony.

Operator: Thank you. This concludes the Q&A session for today, and I would like to turn the call back over to management for closing remarks. Please go ahead.

Timothy McGrath: Well, thank you, operator. I'd like to thank all of our customers, vendor partners, and shareholders for their continued support. And once again, our coworkers for their efforts and extraordinary dedication. Your time and interest in PC Connection, Inc. are appreciated. I'd also like to thank those of you who are listening to our call this afternoon. Have a great evening.

Operator: Thank you all for joining today's program. You may now disconnect.

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