SECOND QUARTER HIGHLIGHTS:

• Net sales: $704.2 million, up 28.0% y/y
• Gross profit: $116.3 million, up 30.7% y/y
• Net income: $17.3 million, up 126.3% y/y
• Diluted EPS: $0.66, up 125.6% y/y

Connection (PC Connection, Inc.; NASDAQ: CNXN), a leading information technology solutions provider to business, government, healthcare and education markets, today announced results for the second quarter ended June 30, 2021.

“We are pleased to report 28% revenue growth in all of our segments and we currently expect solid demand to continue through 2021,” said Tim McGrath, President and CEO of Connection. McGrath continued, “Our financial performance was strong, albeit impacted by supply chain disruptions. We continue to work collaboratively with suppliers and our customers to address these challenges. We believe we have the right team in place and are well positioned to deliver long-term shareholder value.”

Net sales for the quarter ended June 30, 2021 increased by 28.0% to $704.2 million, compared to $550.0 million for the prior year quarter. Net income for the quarter ended June 30, 2021 increased by 126.3% to $17.3 million, or $0.66 per diluted share, compared to net income of $7.6 million, or $0.29 per diluted share, for the prior year quarter.

Net sales for the six months ended June 30, 2021 increased by 6.3% to $1,341.1 million, compared to $1,261.9 million for the six months ended June 30, 2020. Net income for the six months ended June 30, 2021 increased by 21.9% to $27.5 million, or $1.04 per diluted share, compared to net income of $22.5 million, or $0.86 per diluted share for the six months ended June 30, 2020.

Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense and restructuring and other charges (“Adjusted EBITDA”) totaled $96.7 million for the twelve months ended June 30, 2021, compared to $110.0 million for the twelve months ended June 30, 2020. ¹

Quarterly Highlights

• Strong growth across three of our four vertical markets:
  • Healthcare, Connection’s largest vertical market, saw 30% year-over-year revenue growth and 19% sequentially as customers invested in technology to lower operational costs, increase patient flow efficiency, and penetrate new markets.
  • Retail had impressive revenue growth of 25% year-over-year and 10% sequentially driven by businesses seeking automated solutions to cover their productivity needs and improve the customer experience.
  • Manufacturing grew revenue 59% year-over-year as companies continued to invest in security and infrastructure, automation and data capabilities to improve efficiencies and offset workforce shortages.

• We further advanced our overall cloud strategy and we continued to see strong growth in the cloud ecosystem, including subscriptions and security.

• Our services business grew over 40% helping to support our customers hybrid work initiatives.

Quarterly Performance by Segment:

• Net sales for the Business Solutions segment increased by 39.9% to $267.3 million in the second quarter of 2021, compared to $191.1 million in the prior year quarter. Gross profit increased by 37.9% to $51.3 million in the second quarter of 2021, compared to $37.2 million in the prior year quarter. Gross margin decreased by 28 basis points to 19.2% primarily due to changes in product mix.

• Net sales for the Public Sector Solutions segment increased by 15.7% to $129.7 million in the second quarter of 2021, compared to $112.2 million in the prior year quarter. Sales to state and local government and educational institutions increased by 22.4%, compared to the prior year quarter, while sales to the federal government decreased by 6.3%. Gross profit increased by 24.6% to $18.0 million in the second quarter of 2021, compared to $14.5 million in the prior year quarter. Gross margin increased by 99 basis points to 13.9% primarily due to a change in customer mix and an increase in cloud solutions and security software.

• Net sales for the Enterprise Solutions segment increased by 24.5% to $307.2 million in the second quarter of 2021, compared to $246.8 million in the prior year quarter. Gross profit increased by 25.9% to $47.0 million in the second quarter of 2021, compared to $37.3 million in the prior year quarter. Gross margin increased by 17 basis points to 15.3% primarily due to an increase in cloud solutions and security software.

Quarterly Sales by Product Mix:

• Notebook/mobility sales had a record quarter at $254 million which represented an increase of 32% year over year and accounted for 36% of net sales in the second quarter of 2021, compared to 35% of net sales in the second quarter of 2020. The increase in this product category was due to the growing hybrid work environment.

• Accessories sales increased by 25% year over year and accounted for 11% of net sales in the second quarter of 2021, compared to 12% of net sales in the second quarter of 2020.

• Software sales increased by 24% year over year and accounted for 10% of net sales in the second quarter of 2021 and 2020.

• Desktop sales increased by 34% year over year and accounted for 10% of net sales in the second quarter of 2021, compared to 9% of net sales in the second quarter of 2020.

Selling, general and administrative (“SG&A”) expenses increased in the second quarter of 2021 to $92.6 million from $77.4 million in the prior year quarter. SG&A as a percentage of net sales was 13.1%, compared to 14.1% in the prior year quarter. The increase in SG&A was primarily due to an increase in variable compensation due to the higher level of gross profit and increased health care costs.

Cash and cash equivalents were $115.7 million at June 30, 2021, compared to $95.7 million at December 31, 2020.

Conference Call and Webcast

Connection will host a conference call and live web cast today, August 5, 2021 at 4:30 p.m. ET to discuss its second quarter financial results. To access the conference call (audio only), please dial 877-776-4016 (US) or 631-813-4880 (International) and enter the confirmation number 4558005. A web-cast of the conference call, which will be broadcast live via the Internet, and a copy of this press release, can be accessed on Connection’s website at ir.connection.com. For those unable to participate in the live call, a replay of the webcast will be available at ir.connection.com approximately 90 minutes after the completion of the call and will be accessible on the site for approximately one year.

Non-GAAP Financial Information

Adjusted EBITDA is a non-GAAP financial measure. This measure is included to provide additional information with respect to the Company’s operating performance and earnings. Non-GAAP measures are not a substitute for GAAP measures and should be considered together with the GAAP financial measures. Our non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. A reconciliation to the most directly comparable GAAP measure is available in the tables at the end of this release.

About Connection

PC Connection, Inc. and its subsidiaries, dba Connection, (www.connection.com; NASDAQ: CNXN) is a Fortune 1000 company headquartered in Merrimack, NH. With offices throughout the United States, Connection delivers custom-configured computer systems overnight from its ISO 9001:2015 certified technical configuration lab at its distribution center in Wilmington, OH. In addition, the Company has over 2,500 technical certifications to ensure that it can solve the most complex issues of its customers. Connection also services international customers through its GlobalServe subsidiary, a global IT procurement and service management company. Investors and media can find more information about Connection at http://ir.connection.com.

Connection–Business Solutions (800.800.5555) is a rapid-response provider of IT products and services serving primarily the small-and medium-sized business sector. It offers more than 425,000 brand-name products through its staff of technically trained sales account managers, publications, and its website at www.connection.com.

Connection–Enterprise Solutions (561.237.3300), www.connection.com/enterprise, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and access to over 425,000 products and 1,600 vendors through TRAXX™, a proprietary cloud-based eProcurement system. The team’s engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

Connection–Public Sector Solutions (800.800.0019), is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, publications, and online at www.connection.com/publicsector.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are based on currently available information, operating plans, and projections about future events and trends. Terms such as "believe," "expect," "intend," "plan," "estimate," "anticipate," "may," "should," "will," or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward-looking statements include such terms. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to, the continuation of the COVID-19 pandemic and responses to it, the impact of changes in market demand and the overall level of economic activity and environment, or in the level of business investment in information technology products, product availability and market acceptance, new products, continuation of key vendor and customer relationships and support programs, the ability to realize market demand for and competitive pricing pressures on the products and services marketed by the Company, fluctuations in operating results and the ability of the Company to manage personnel levels in response to fluctuations in revenue, the ability of the Company to hire and retain qualified sales representatives and other essential personnel, the impact of changes in accounting requirements, continued successful integration of the new ERP system, and other risks detailed in the Company's filings with the Securities and Exchange Commission, including under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2020. The Company assumes no obligation to update the information in this press release or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise, except as required by law.

¹ Adjusted EBITDA is a non-GAAP measure. See page 10 for the definition and reconciliation.

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