Connection (CNXN) — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the third quarter of 2026 reached $874.3 million, a 23.3% increase year-over-year (YoY).
• Gross billings for the quarter were $1.3 billion, up 19.4% YoY.
• Gross profit increased 16.7% YoY to $161.9 million, while gross margin decreased 110 basis points to 18.5%.
• Net income rose 27.2% YoY to $31.5 million, or $1.24 per diluted share, compared to $24.7 million ($0.97 per share) in the prior year quarter.
• Adjusted Diluted EPS was $1.24, up from $0.97 YoY.
• For the nine months ended September 30, 2026, net sales totaled $2.5 billion, up 12.9% YoY.
• Nine-month gross billings were $3.5 billion, up 12.8% YoY.
• Nine-month gross profit was $452.1 million, up 12.0% YoY, with gross margin at 18.5% (down 10 basis points YoY).
• Nine-month net income was $81.8 million, up 29.9% YoY, or $3.23 per diluted share.
• Nine-month Adjusted Diluted EPS was $3.31, up from $2.53 YoY.
• Adjusted EBITDA for the twelve months ended September 30, 2026, increased 26% to $155.2 million.
• Selling, general and administrative (SG&A) expenses increased 11.5% to $120.9 million in the third quarter, representing 13.8% of net sales compared to 15.3% in the prior year quarter.
• Interest income for the third quarter was $2.5 million, down from $3.7 million in the prior year quarter.
• Cash and cash equivalents plus short-term investments were $343.3 million as of September 30, 2026, down from $406.7 million as of December 31, 2025.
• Inventory turns were 14 in the third quarter of 2026, down from 18 in the prior year quarter.
• Days sales outstanding remained flat at 74 days.

Business Segments and Product Lines:

• Business Solutions Segment: Net sales increased 27.8% to $328.2 million; gross billings rose 22.1% to $522.7 million; gross profit grew 14.9% to $78.2 million; gross margin decreased 270 basis points to 23.8%.
• Public Sector Solutions Segment: Net sales increased 4.6% to $138.6 million; gross billings rose 6.8% to $233.3 million; gross profit grew 2.9% to $23.5 million; gross margin decreased 30 basis points to 16.9%.
• Enterprise Solutions Segment: Net sales increased 27.4% to $407.5 million; gross billings rose 23.1% to $521.2 million; gross profit grew 26.0% to $60.2 million; gross margin decreased 10 basis points to 14.8%.
• Product Mix: Notebooks/mobility and desktop sales increased 27% YoY, accounting for 46% of net sales (up from 45%).
• Software sales increased 23% YoY, maintaining a 13% share of net sales.
• Servers/storage sales increased 45% YoY, accounting for 9% of net sales (up from 7%).
• Networking sales increased 43% YoY, accounting for 8% of net sales (up from 7%).
• Accessories sales increased 4% YoY, accounting for 10% of net sales (down from 12%).

Management Commentary and Tone:

• CEO Timothy McGrath stated the company delivered record net sales, gross billings, and gross profit, translating strong demand and disciplined execution into earnings growth.
• McGrath noted that AI is expanding opportunities across the technology lifecycle and that the company's integrated capabilities position it to deepen customer relationships and deliver sustained profitable growth.
• The tone reflects confidence in long-term shareholder value creation.

Other Key Points:

• The Board of Directors declared a quarterly dividend of $0.20 per share.
• The dividend payment is scheduled for November 27, 2026, to shareholders of record on November 10, 2026.
• Severance expenses for the nine months ended September 30, 2026, were $3.06 million, consisting of voluntary retirement offerings and internal restructuring activities.
• The company operates a Technology Integration and Distribution Center in Wilmington, OH, which is ISO 9001:2015 and SOC 2 Type 2 certified.
• Connection serves international customers through its GlobalServe subsidiary.
• The company holds more than 5,000 professional certifications.