PC Connection (CNXN) Q2 FY26 earnings call: guidance and Q&A

What were the monthly revenue trends within Q2, and how has July started?

April and June were strong, while May was soft. July started strong and is continuing with solid momentum. Q3 revenue is expected to be down sequentially from Q2 but up high single digits year-over-year.

“What we saw, Anthony, is we had a really strong April and a reasonably strong June, and May was, frankly, a little bit soft. I'm not quite sure why that happened that way, but that's kind of the way it rolled through. ... You asked about July. And July did start and is going strong with solid momentum.”

asked by Anthony Lebiedzinski · answered by Thomas Baker

Can you provide more color on pricing versus unit dynamics for all product categories on a consolidated basis?

For endpoint devices, units were up 3%, while revenue was up about 19%, indicating price inflation. Servers and networking also had some price inflation. Software had a particularly strong quarter due to Microsoft year-end, which helped margins.

“Yes, so Anthony, thanks. So in units, we were up 3% for M2. endpoint devices. So the unit count was up 3%. The revenue was up. about 19% overall. So that's kind of how that breaks out. ... I think in terms of what we saw with the mobility and desktops, there was absolutely price inflation. And I think we did a reasonably good job pushing that through and maintaining our market.”

asked by Anthony Lebiedzinski · answered by Timothy McGrath

How do you see accounts receivable, inventory, and accounts payable settling by year-end?

Receivables may not come down significantly if business stays at current levels, partly due to 40% of revenue in June. Inventory is expected to decrease sequentially by year-end to around $150 million, as the company deploys inventory brought in earlier.

“If business kind of stays at this level, receivables probably don't come down a ton. Where I think we'll see a little bit more movement is on the inventory, because we did bring in a bunch of inventory and we're kind of deploying that for our customers over time. So I would expect sequentially the inventory balance to come down a little bit by the end of the year, say $150 million range.”

asked by Anthony Lebiedzinski · answered by Thomas Baker

Given record backlog in Enterprise Solutions and high backlog in Business Solutions, how does this inform gross profit dollar growth and EPS expectations through year-end, especially with sequential revenue potentially down in Q3?

Q2 is historically slightly larger than Q3. The combination of pull-ins and Microsoft year-end in June contributed to Q2 strength. While Q3 might be down sequentially, the company is confident in the quarter overall.

“There are two things that jump out at us right away. The first is, as Tom mentioned, with our Microsoft business, June is their year-end and that's traditionally, the month of June is a large Microsoft month for us, and we did see that this year. Also, historically, Q2, is usually slightly larger than Q3. They're close, but slightly larger. So given the combination of pull-ins, the Microsoft year end, and just the history of Q2 versus Q3, we feel like sequentially Q3 might be down a little, but still we're pretty confident about the quarter overall.”

asked by Logan Katzman · answered by Timothy McGrath

Can you quantify the pull-in activities and any headwinds from delayed purchases?

It's hard to quantify all pull-ins, but some explicit pull-ins were over $10 million, estimating mid-single digits or lower overall for the business. The timing of backlog relief is also difficult to quantify, with some expected in Q3 and some rolling into Q4.

“Yes, it's hard to quantify all the pull-ins because we don't always know what's in the customer's mindset. Some we know explicitly. I mean, we had a couple of customers, probably did over $10 million of business with that were pretty clearly Poland. So I would say it's, you know, it certainly wasn't 10% of the business, was, let's say, mid-single digits, maybe a little lower overall. And then the question is, on some of this stuff, the supply chain issues worked their way through. When is the backlog going to get relieved? Because we do have a good, solid backlog, but it's just... It feels like some of it will go out in Q3, and I know some of it's going to roll into at least Q4. So it's a little bit difficult to quantify specifically at this point.”

asked by Logan Katzman · answered by Thomas Baker