[Management View]
Key metrics: Record gross profit of $138.6 million, up 2.4% YoY; gross margin expanded 90 basis points to 19.6%.
Strategic priorities: Focus on higher-value cloud, cybersecurity, and services solutions; deepening customer relationships; consistent operational execution.

[Outlook]
Performance guidance: Mid-single-digit sales growth expected in Q4 2025 and 2026; gross margins expected to be flat YoY.
Future plans: Continued investment in data center modernization, digital workplace transformation, and supply chain solutions.

[Financial Performance]
YoY/QoQ trends: Total net sales down 2.2% YoY to $709.1 million; Business Solutions net sales up 1.7%, Enterprise Solutions net sales up 7.7%, Public Sector Solutions net sales down 24.3%.
Compared to expectations: Gross profit and margin expansion exceeded expectations despite lower Public Sector sales.

[Q&A Highlights]
Question 1: How are you thinking about year-end and Q4 being a typical budget flush year? What are you seeing in the first months of Q4 relative to Q3? Is there a case for top-line growth in Q4?
Answer: In the enterprise segment, there is talk of budget flush, and the pipeline is building. Business Solutions also has good momentum. The wildcard remains the public sector business, with recovery timing still uncertain.

Question 2: What is leading to the backlog build? Is it due to supply challenges or customers putting off projects? When do you think it will unentangle?
Answer: The backlog is customer-driven, with delays on the customer side. The revenue line had a lot of software and cloud, which impacted gross margins positively. Public sector had a large rollout last year, and some of that will fall into next quarter.

Question 3: What are your early indications on IT spending for 2026, considering the PC refresh and other factors?
Answer: The PC refresh will continue but at a lower pace. Data center modernization and server consolidation will drive growth. Overall, expecting mid-single-digit growth for 2026, with potential for higher as things normalize.

Question 4: How did the cadence of sales during the quarter look, and what were the demand trends from July through September?
Answer: July was around 34%, August was down a bit, and September was the best month at 35%, which is typical.

Question 5: How is the federal government shutdown impacting Q4 numbers?
Answer: The shutdown affects the quarter as orders and products cannot be shipped. The longer it goes on, the more it will challenge the public sector business.

Question 6: What are your expectations for gross margins and operating margins going forward?
Answer: Expecting mid-single-digit growth next quarter. Gross margins may not be as high due to the mix of cloud and software revenues. SG&A spending may be slightly higher.

Question 7: Are you still looking at potential acquisitions given your strong cash position?
Answer: Looking at tuck-in acquisitions to enhance solutions capability, but nothing to report currently.

[Sentiment Analysis]
Tone of analysts: Cautiously optimistic, focused on growth potential and backlog resolution.
Tone of management: Confident in strategic priorities and long-term growth, cautious about public sector uncertainties.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|-------------------------------|-----------------|-----------------|
| Total Net Sales | $709.1 million | $725.1 million |
| Gross Profit | $138.6 million | $135.4 million |
| Gross Margin | 19.6% | 18.7% |
| Net Income | $24.7 million | $27.1 million |
| Diluted EPS | $0.97 | $1.02 |
| Adjusted Diluted EPS | $0.97 | $0.97 |
| Operating Income | Flat | - |
| Operating Margin | 4.3% | 4.1% |

[Risks and Concerns]
- Federal government shutdown impacting public sector sales.
- Timing of federal projects and funding cycles causing revenue fluctuations.
- Potential supply chain disruptions affecting backlog resolution.

[Final Takeaway]
PC Connection delivered record gross profit and expanded margins in Q3 2025, driven by strong performance in cloud, cybersecurity, and services solutions. While the public sector segment faced challenges due to federal funding delays, the company remains confident in its strategic priorities and long-term growth prospects. Management anticipates mid-single-digit sales growth in Q4 2025 and 2026, with continued strength in data center modernization and AI-driven technologies. Investors should monitor the resolution of public sector uncertainties and the impact of the federal government shutdown on future performance.