Connection Profit Climbs 27.2% To $31.5 Million As Server Sales Jump 45%
The IT reseller posted record net sales, gross billings and gross profit, but margins thinned and nine-month operating cash flow turned negative.
Connection, which sells computers, software, networking gear and IT services to businesses and public institutions, said third-quarter net income rose 27.2% to $31.5 million, or $1.24 a diluted share, against $0.97 a year earlier. The results, in an 8-K filed Wednesday, came with a $0.20 quarterly dividend.
Sales up 23.3%, margin down 110 points
Net sales reached $874.3 million, up 23.3% from a year earlier. Gross billings rose 19.4% to $1.3 billion, and gross profit rose 16.7% to $161.9 million.
Gross margin fell 110 basis points (1.1 percentage points) to 18.5%. Selling and administrative costs grew 11.5% to $120.9 million, but fell to 13.8% of sales from 15.3%.
CEO Timothy McGrath said Connection "delivered record net sales, gross billings, and gross profit in the third quarter." He added that "AI is expanding the opportunities across the technology lifecycle."
Servers and networking lead the mix
Servers and storage sales rose 45% and made up 9% of net sales, up from 7%. Networking sales rose 43% to 8% of sales, also from 7%. Notebooks and desktops rose 27% and were 46% of sales, software rose 23%, and accessories rose 4%.
Business Solutions, which serves small and medium-sized companies, grew sales 27.8% to $328.2 million, but its gross margin dropped 270 basis points to 23.8%. Enterprise Solutions, for large companies, rose 27.4% to $407.5 million, with margin at 14.8%. Public Sector Solutions, serving government and schools, rose 4.6% to $138.6 million.
Cash drained by receivables and inventory
For the first nine months, operations used $39.8 million in cash, against $38.0 million provided a year earlier. Receivables grew $144.8 million and inventories $83.0 million over that span. Cash and short-term investments stood at $343.3 million at September 30, down from $406.7 million at the end of 2025.
Nine-month net income rose 29.9% to $81.8 million, or $3.23 a diluted share. Adjusted diluted earnings per share, which excludes severance costs, were $3.31 against $2.53.
The board declared a $0.20 dividend payable November 27 to holders of record on November 10. Management held a call at 4:30 p.m. EDT Wednesday.
The company's closing price was $90.23 at September 30, against $61.99 a year earlier, for a market value of about $2.28 billion.
Sources
- 8-K Filing — PC CONNECTION INC (CNXN) — SEC EDGAR
- Exhibit cnxn-ex99d1.htm — PC CONNECTION INC 8-K exhibit — SEC EDGAR
