Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

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This following information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company's Annual Report on Form 10-K filed with the SEC on for the fiscal year ended December 31, 2024. In addition to historical information, the following discussion contains certain forward-looking information. See "Cautionary Note Regarding Forward-Looking Statements" above for certain information concerning -forward-looking statements.

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Overview

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Our Company is a value added IT distribution and solutions company, primarily selling software and other third-party IT products and services through two reportable operating segments. Through our "Distribution" segment we sell products and services to corporate resellers, VARs, consultants and systems integrators worldwide, who in turn sell these products to end users. Through our "Solutions" segment we act as a cloud solutions provider and value-added reseller, selling computer software and hardware developed by others and provide technical services directly to end user customers worldwide. We offer an extensive line of products from leading software vendors and tools for virtualization/cloud computing, security, networking, storage and infrastructure management, application lifecycle management and other technically sophisticated domains as well as computer hardware. We market these products through creative marketing communications, including our web sites, local seminars, webinars, social media, direct e-mail, and printed materials.

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We have subsidiaries in the United States, Canada, Netherlands, United Kingdom and Ireland, through which sales are made.

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Factors Influencing Our Financial Results

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We derive most of our net sales through the sale of third-party software licenses, maintenance and service agreements. In our Distribution segment, sales are impacted by the number of product lines we distribute, and sales penetration of those products into the reseller channel, product lifecycle competition, and demand characteristics of the products which we are authorized to distribute. In our Solutions segment, sales are generally driven by sales force effectiveness and success in providing superior customer service and cloud solutions support, competitive pricing, and flexible payment solutions to our customers. Our sales are also impacted by external factors such as levels of IT spending and customer demand for products we distribute.

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We sell in a competitive environment where gross product margins have historically declined due to competition and changes in product mix towards products where no delivery of a physical product is required. In addition, we grant discounts, allowances, and rebates to certain customers, which may vary from period to period, based on volume, payment terms and other criteria. To date, we have been able to implement cost efficiencies such as the use of drop shipments, electronic digital interchange and other capabilities to be able to operate our business profitably as gross margins have declined. We evaluate the profitability of our business based on return on equity and effective margin (see discussions below).

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Gross profit is calculated as net sales less cost of sales. We record customer rebates, discounts and returns as a component of net sales and record vendor rebates, discounts and returns as a component of cost of sales.

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Selling, general and administrative expenses are comprised mainly of employee salaries, commissions and other employee related expenses, facility costs, costs to maintain our IT infrastructure, public company compliance costs and professional fees. We monitor our level of accounts payable, inventory turnover and accounts receivable turnover which are measures of how efficiently we utilize capital in our business.

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The Company's sales, gross profit and results of operations have fluctuated and are expected to continue to fluctuate on a quarterly basis as a result of a number of factors, including but not limited to: the condition of the software industry in general, shifts in demand for software products, pricing, industry shipments of new software products or upgrades, fluctuations in merchandise returns, adverse weather conditions that affect response, distribution or shipping, import and export tariffs, shifts in the timing of holidays and changes in the Company's product offerings. The Company's operating expenditures are based on sales forecasts. If sales do not meet expectations in any given quarter, operating results may be materially adversely affected.

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Dividend Policy and Share Repurchase Program. Historically we have sought to return value to investors through the payment of quarterly dividends and share repurchases. Total dividends paid and the dollar value of the shares repurchased were $0.8 million and $0.3 million, for the three months ended September 30, 2025 and 2024. The payment of future dividends and share repurchases is at the discretion of our Board of Directors and dependent on results of operations, projected capital requirements, and other factors the Board of Directors may find relevant.

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Stock Volatility. The technology, distribution and services sectors of the United States stock markets is subject to substantial volatility. Numerous conditions which impact these sectors or the stock market in general or the Company in particular, whether or not such events relate to or reflect upon the Company's operating performance, could adversely affect the market price of the Company's Common Stock. Furthermore, fluctuations in the Company's operating results, announcements regarding litigation, the loss of a significant vendor partner or customer, increased competition, reduced vendor incentives and trade credit, higher operating expenses, and other developments, could have a significant impact on the market price of our Common Stock.

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Inflation. We have historically not been adversely affected by inflation, as abrupt changes in technology, rapid changes in customer preferences, short product life cycles and evolving industry standards within the IT industry have generally caused the prices of the products we sell to decline. This requires us to sell new products and have growth in unit sales of existing products in order to increase our net sales. We believe that most price increases could be passed on to our customers, as prices charged by us are not set by long-term contracts; however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our customers or cause a reduction in our customers spending.

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Financial Overview

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Net sales increased 35%, or $42.0 million, to $161.3 million for the three months ended September 30, 2025 compared to $119.3 million for the same period in the prior year. Gross profit increased 6%, or $1.4 million, to $25.7 million for the three months ended September 30, 2025, compared to $24.3 million for the same period in the prior year. Selling, general and administrative ("SG&A") expenses increased 16%, or $2.3 million, to $16.2 million for the three months ended September 30, 2025 compared to $13.9 million for the same period in the prior year. Depreciation and amortization expense increased 65%, or $0.8 million, to $2.0 million for the three months ended September 30, 2025 compared to $1.2 million for the same period in the prior year. Net income decreased 14%, or $0.8 million, to $4.7 million for the three months ended September 30, 2025 compared to $5.5 million for the same period in the prior year. Diluted income per share decreased 14%, or $0.17 to $1.02 forthe three months ended September 30, 2025 compared to $1.19 for the same period in the prior year.

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Critical Accounting Policies and Estimates

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Management's discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

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On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, stock-based compensation, contingencies and litigation.

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The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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The Company believes the following critical accounting policies used in the preparation of its consolidated financial statements affect its more significant judgments and estimates.

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Revenue

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The Company utilizes judgment regarding performance obligations inherent in the products for services it sells including, whether ongoing maintenance obligations performed by third party vendors are distinct from the related software licenses, and allocation of sales prices among distinct performance obligations. These estimates require significant judgment to determine whether the software's functionality is dependent on ongoing maintenance or if substantially all functionality is available in the original software download. We also use judgment in the allocation of sales proceeds among performance obligations, utilizing observable data such as stand-alone selling prices, or market pricing for similar products and services.

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Allowances for Expected Credit Losses

The Company maintains allowances for expected credit losses for estimated losses resulting from the inability of its customers to make required payments. Management determines the estimate of the allowance for expected credit losses by considering a number of factors, including historical experience, aging of the accounts receivable, as well as current market conditions and future forecasts of our customers' ability to make payments for goods and services.

Business Combinations

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We apply the provisions of ASC 805, Business Combinations ("ASC 805"), in accounting for our acquisitions. ASC 805 requires that we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business. A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis; whereas the acquisition of a business requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

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Our valuation of acquired assets and assumed liabilities requires estimates, especially with respect to intangible assets that was derived using valuation techniques and models such as the income approach. Such models require use of estimates including discount rates, and future expected revenue. The approach to estimating an initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected cash flows over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured and expected volatility. Based upon these assumptions, the initial contingent consideration is then valued using a Monte Carlo simulation.

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We have used third-party qualified specialists to assist management in determining the fair value of assets acquired and liabilities assumed. This includes assistance with the determination of economic useful lives and valuation of identifiable intangibles.

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We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from our estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. As a result, during the measurement period, which may be up to one year from the business acquisition date, we record certain adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

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All acquisition-related costs are accounted for as expenses in the period in which they are incurred. Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized in change in fair value of acquisition contingent consideration in the consolidated statement of earnings.

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Goodwill

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We test goodwill for impairment on an annual basis and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performs an evaluation of goodwill, utilizing either a qualitative or quantitative impairment test. The annual test for impairment is conducted as of October 1. The Company's reporting units included in the assessment of potential goodwill impairment are the same as its operating segments. Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level.

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In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.

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If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform the quantitative goodwill impairment test. We may also elect the unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.

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In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. Conversely, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

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Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including net sales growth rates, gross profit margins, operating margins, discount rates and future market conditions, among others. Any changes in the judgments, estimates or assumptions used could produce significantly different results.

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Intangible Assets

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Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives, which is determined based on their expected period of benefit or are amortized weighted toward their expected periods of benefit. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset's carrying amount over its fair value. In addition, each quarter, the Company evaluates whether events and circumstances warrant a revision to the remaining estimated useful life of each of these intangible assets. If the Company were to determine that a change to the remaining estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life.

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Income Taxes

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The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance related to deferred tax assets. In the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

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Foreign Exchange

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The Company's foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. In cases where the Company is not able to create a natural hedge by maintaining offsetting asset and liability amounts in the same currency, it may enter into foreign exchange contracts, typically in the form of forward purchase agreements, to facilitate the hedging of foreign currency exposures to mitigate the impact of changes in foreign currency exchange rates. These contracts generally have terms of no more than three months. The Company does not apply hedge accounting to these contracts and therefore the changes in fair value are recorded in earnings. The Company does not enter into foreign exchange contracts for trading purposes and the risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the Company minimizes by limiting its counterparties to major financial institutions. The Company recognized an unrealized gain of less than $0.1 million on contracts outstanding as of September 30, 2025, which is included in foreign currency transaction loss in the Consolidated Statement of Earnings.

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Recently Issued Accounting Pronouncements

In September 2025, the FASB issued ASU No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software". This ASU amends the guidance under ASC 350-40 for internal-use software. The amendments remove referenced to development-stages, clarify when capitalization may begin, and require entities to apply to property, plant and equipment disclosure requirements under ASC 350-10 to capitalize internal-use software costs. The ASU is effective for annual periods beginning after December 15, 2027, and for interim periods within those annual periods. Early adoption of ASU No. 2025-06 is permitted. The Company has performed an initial assessment and currently does not expect the adoption of ASU No. 2025-06 to have a material effect on its financial position, results of operations or cash flows.

In July 2025, the FASB issued ASU No. 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contact Assets". The update amends the guidance in ASC 326-20 to introduce a practical expedient when estimating credit losses that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments apply to current accounts receivable and current contract assets arising from transactions under ASC 606 (Revenue from Contracts with Customers). The amendments are applied prospectively and are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those years. Early adoption of ASU No. 2025-05 is permitted. The Company has evaluated the impact of ASU No. 2025-05 on its accounting policies and internal controls related to its credit-customer receivables. The Company has determined that, given (i) the nature of its receivables (primarily receivables from customers on credit terms), (ii) its historical credit-loss experience and collection patterns, and (iii) its allowance methodology, adoption of ASU No. 2025-05 is not expected to have a material effect on the Company's consolidated financial position.

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In November 2024, the FASB issued ASU No. 2024-03, "Income Statement -Reporting Comprehensive Income -Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". This ASU requires entities to disaggregate expense items in the notes to the financial statements and requires disclosure of specified information related to purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Companies have the option to apply the guidance either on a retrospective or prospective basis, and early adoption is permitted. The Company is currently evaluating the impact of the ASU on its condensed consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted.

In December 2023, the FASB issued ASU No. 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures ". Upon adoption of this ASU, the Company will disclose specific new categories in its income tax rate reconciliation and provide additional information for reconciling items above a quantitative threshold. The Company will also disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions in which income taxes paid were above a threshold. The Company expects these amendments will first be applied in the Company's annual report on Form 10-K for the fiscal year ending December 31, 2025, on a prospective basis.​

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Results of Operations

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The following table sets forth for the periods indicated certain financial information derived from the Company's unaudited condensed consolidated statements of earnings expressed as a percentage of net sales. This comparison of financial results is not necessarily indicative of future results:

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		Nine months ended								Three months ended
		September 30,								September 30,
		2025				2024				2025				2024
Net sales			100.0	%			100.0	%			100.0	%			100.0	%
Cost of sales			83.6				80.3				84.1				79.7
Gross profit		16.4					19.7				15.9				20.3
Selling, general and administrative expenses			10.8				13.0				10.1				11.7
Acquisition related costs			0.2				0.4				0.4				0.5
Depreciation and amortization expense			1.2				1.0				1.2				1.0
Income from operations			4.3				5.4				4.3				7.1
Other income			(0.0	)			0.0				0.1				(0.2	)
Income before income taxes			4.0				5.0				3.9				6.0
Income tax provision			0.9				1.2				1.0				1.4
Net income			3.1	%			3.8	%			2.9	%			4.6	%

Key Business Metrics

GAAP and Non-GAAP Financial Measures

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Our management monitors several financial and non-financial measures and ratios on a regular basis in order to track the progress of our business. We believe that the most important of these measures and ratios include net sales, gross profit and net income, in each case based on information prepared in accordance with U.S. GAAP, as well as certain non-GAAP financial measures and ratios which include adjusted EBITDA and adjusted EBITDA as a percentage of gross profit, or effective margin. Generally, a non-GAAP financial measure is a numerical measure of a company's performance or financial position that either excludes or includes amounts that are correspondingly not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results reported under U.S. GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

		Nine months ended								Three months ended
		September 30,				September 30,				September 30,				September 30,
Net income reconciled to adjusted EBITDA (Non-GAAP):		2025				2024				2025				2024
Net income		$	14,346			$	11,620			$	4,696			$	5,459
Provision for income taxes			3,945				3,561				1,607				1,659
Depreciation and amortization			5,696				2,933				1,976				1,197
Interest expense			226				266				67				105
EBITDA			24,213				18,380				8,346				8,420
Share-based compensation			3,574				2,810				1,078				904
Acquisition related costs			733				1,201				594				609
Change in fair value of acquisition contingent consideration			1,374				1,152				860				1,152
Adjusted EBITDA		$	29,894			$	23,543			$	10,878			$	11,085

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We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation, interest, acquisition related costs and changes in the fair value of contingent considerations. We define effective margin as adjusted EBITDA as a percentage of gross profit. We provided a reconciliation of adjusted EBITDA to net income, which is the most directly comparable U.S. GAAP measure. We use adjusted EBITDA as a supplemental measure of our performance to gain insight into our businesses profitability, operating performance and performance trends, and to provide management and investors a useful measure for period-to-period comparisons by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Adjusted EBITDA and effective margin provide useful information to investors and others in understanding and evaluating our operating results. Adjusted EBITDA is also a component to our financial covenants in our credit facility. Our use of adjusted EBITDA has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Key Operational Metrics

We also use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets. Gross billings are the total dollar value of customer purchases of goods and services during the period, net of customer returns and credit memos, sales, or other taxes. Gross billings include the transaction values for certain sales transactions that are recognized on a net basis, and, therefore, include amounts that will not be recognized as revenue. We use gross billings and gross profit as a percentage of gross billings, or gross billings margin, as operational metrics to assess the volume of transactions or market share for our business as well as to understand changes in our accounts receivable and accounts payable. We believe gross billings and gross billings margin will aid investors in the same manner.

​		Nine months ended								Three months ended
​		September 30,				September 30,				September 30,				September 30,
​		2025				2024				2025				2024
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Net sales		$	458,671			$	303,847			$	161,343			$	119,349
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Gross profit		$	75,437			$	59,833			$	25,733			$	24,257
Gross profit - Distribution		$	65,847			$	51,454			$	22,400			$	21,557
Gross profit - Solutions		$	9,590			$	8,379			$	3,333			$	2,700
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Non-GAAP Financial Measures:
Adjusted EBITDA (Non-GAAP)		$	29,894			$	23,543			$	10,878			$	11,085
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Effective margin % - Adjusted EBITDA (Non-GAAP)			39.6	%			39.3	%			42.3	%			45.7	%
Operational Metrics:
Gross billings		$	1,479,750			$	1,180,294			$	504,600			$	465,184
Gross billings - Distribution		$	1,412,503			$	1,113,575			$	481,884			$	441,389
Gross billings - Solutions		$	67,247			$	66,719			$	22,716			$	23,795
Gross billings margin % - Gross billings			5.1	%			5.1	%			5.1	%			5.2	%

We consider gross profit growth and effective margin to be key metrics in evaluating our business. During the three months ended September 30, 2025, gross profit increased 6%, or $1.4 million, to $25.7 million compared to $24.3 million for the same period in the prior year while effective margin decreased to 42.3% compared to 45.7% for the same period in the prior year. During the nine months ended September 30, 2025, gross profit increased 26%, or $15.6 million, to $75.4 million compared to $59.8 million for the same period in the prior year while effective margin increased to 39.6% compared to 39.3% for the same period in the prior year.

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Acquisitions

On July 31, 2024, we completed the acquisition of DSS for an aggregate purchase price of approximately $20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment. The operating results of DSS are included in our operating results from the date of acquisition within our Distribution segment.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

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Net Sales and Gross Billings

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Net sales for the three months ended September 30, 2025increased 35%, or $42.0 million, to $161.3 millioncompared to $119.3 million for the same period in the prior year. Gross billings, an operational metric, for the three months ended September 30, 2025increased 8%, or $39.4 million, to $504.6 million compared to $465.2 million for the same period in the prior year. Net sales and gross billings increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS. Gross billings increased at a lesser rate than net sales due to differences in the product mix between the two periods. During the three months ended September 30, 2025, gross billings included a greater percentage of hardware and software products, which are recorded on a gross basis, while during the three months ended September 30, 2024, gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales.

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Distribution segment net sales for the three months ended September 30, 2025 increased 38%, or $42.5 million, to $154.4 million compared to $111.9 million for the same period in the prior year. Gross billings for the Distribution segment for the three months ended September 30, 2025increased 9%, or $40.5 million, to $481.9 million compared to $441.4 million for the same period in the prior year. Net sales increased organically at a greater rate than gross billings increased due to the impact of hardware and software sales recognized during the current period, which are recorded on a gross basis, as well as the impact of the acquisition of DSS.

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Solutions segment net sales for the three months ended September 30, 2025, decreased 7%, or $0.6 million, to $6.9 million compared to $7.5 million for the same period in the prior year. Gross billings for the Solutions segment for the three months ended September 30, 2025decreased 5%, or $1.1 million, to $22.7 million compared to $23.8 million for the same period in the prior year. Net sales decreased at a greater rate than the decrease in gross billings due to differences in the product mix between the two periods in our Solution segment.

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The Company had two major customers that accounted for 22% and 14%, respectively, of its total net sales during the three months ended September 30, 2025 and 16% and 13%, respectively, of its total net sales during the three months ended September 30, 2024. The Company had one major vendor that accounted for 13% of total purchases during the three months ended September 30, 2025, compared to no major vendors during the three months ended September 30, 2024.

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Gross Profit

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Gross profit for the three months ended September 30, 2025increased 6%, or $1.4 million, to $25.7 million compared to $24.3 million for the same period in the prior year. Gross profit increased due to both organic growth from our existing vendor partnerships as well as the impact of the DSS acquisition.

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Distribution segment gross profit for the three months ended September 30, 2025 increased 4%, or $0.8 million, to $22.4 million compared to $21.6 million for the same period in the prior year. The increase reflects the previously noted organic growth from existing vendor partnerships as well as the contribution from the DSS acquisition, partially offset by an increase in early pay discounts and other customer incentives as a percentage of gross billings.

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Solutions segment gross profit for the three months ended September 30, 2025increased 23%, or $0.6 million, to $3.3 million compared to $2.7 million for the same period in the prior year. This increase was driven by higher gross profit margins generated in both North American and Europe.

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Customer rebates and discounts for the three months ended September 30, 2025were $5.6 million compared to $3.9 million for the same period in the prior year. Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

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Vendor rebates and discounts for the three months ended September 30, 2025 were$3.9 million compared to $0.8 million for the same period in the prior year. Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors or meeting certain early payment programs offered by our vendors. The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

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Selling, General and Administrative Expenses

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SG&A expenses for the three months ended September 30, 2025 increased 16%, or $2.3 million, to $16.2 million compared to $13.9 million for the same period in the prior year. This increase was primarily due to the impact of the acquisition of DSS as well as an increase in salaries, commissions and other employees related expenses in support of the increased gross profit. SG&A expenses were 3.2% of gross billings for the three months ended September 30, 2025, compared to 3.0% for the same period in the prior year. The Company expects that its SG&A expenses, as a percentage of gross billings, may vary depending on changes in sales volume, as well as the levels of continuing investments to drive future growth.

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Depreciation and Amortization Expense

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Depreciation and amortization expense for the three months ended September 30, 2025, increased 65%, or $0.8 million, to $2.0 million compared to $1.2 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the DSS acquisition as well as amortization of previously capitalized ERP costs, which amortization commenced in the fourth quarter of 2024 and increased amortization for a vendor relationship acquired through a prior year acquisition. The Company received notice of termination of its distribution agreement from this vendor during the first quarter of 2025 and therefore changed the amortization life of the intangible asset to a shorter period to reflect the expected period of benefits.

Acquisition Related Costs

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Acquisition related costs for the three months ended September 30, 2025 and 2024 remained consistent at $0.6 million, respectively.

Income Taxes

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We compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items and discrete items. As a result, our estimated tax rate is adjusted each quarter. For the three months ended September 30, 2025 and 2024, the Company recorded a provision for income taxes of $1.6 million and $1.7 million, respectively. The effective tax rate for the three months ended September 30, 2025 and 2024was 25.5% and 23.3%, respectively. The effective tax rate for the three months ended September 30, 2025compared to the same period in the prior year was impacted by changes in the mix of jurisdictions in which taxable income was earned and limitations on the deductibility of certain executive compensation amounts during both periods, as well as a discrete item for the recognition of excess tax benefits related to share-based compensation in income tax expense during the three months ended September 30, 2025.The recognition of excess tax benefit related to share-based compensation in income tax expense resulted in a net tax benefit of $0.1 million, which reduced our effective tax rate by 1.9% during the three months ended September 30, 2025.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

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Net Sales and Gross Billings

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Net sales for the nine months ended September 30, 2025increased 51%, or $154.8 million, to $458.6 millioncompared to $303.8 million for the same period in the prior year. Gross billings, an operational metric, for the ninemonths ended September 30, 2025increased 25%, or $299.5 million, to $1,479.8 million compared to $1,180.3 million for the same period in the prior year. Net sales and gross billings increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS. Gross billings increased at a lesser rate than net sales due to differences in the product mix between the two periods. During the ninemonths ended September 30, 2025, gross billings included a greater percentage of hardware and software products, which are recorded on a gross basis, while during the ninemonths ended September 30, 2024, gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales.

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Distribution segment net sales for the nine months ended September 30, 2025 increased 53%, or $153.1 million, to $439.6 million compared to $286.5 million for the same period in the prior year. Gross billings for the Distribution segment for the ninemonths ended September 30, 2025increased 27%, or $298.9 million, to $1,412.5 million compared to $1,113.6 million for the same period in the prior year. Net sales increased organically at a greater rate than gross billings increased due to the impact of hardware and software sales recognized during the current period, which are recorded on a gross basis, as well as the impact of the acquisition of DSS.

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Solutions segment net sales for the nine months ended September 30, 2025, increased 10% or $1.8 million, to $19.1 million compared to $17.3 million for the same period in the prior year. Gross billings for the Solutions segment for the ninemonths ended September 30, 2025increased 1%, or $0.5 million, to $67.2 million compared to $66.7 million for the same period in the prior year. Net sales increased organically at a greater rate than gross billings due to differences in the product mix between the two periods.

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The Company had two major customers that accounted for 24% and 13%, respectively, of its total net sales during the ninemonths ended September 30, 2025 and 17% and 15%, respectively, of its total net sales during the ninemonths ended September 30, 2024. During the ninemonths ended September 30, 2025 the Company had no major vendors, compared to one major vendor that accounted for 11% of total purchases during the ninemonths ended September 30, 2024.

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Gross Profit

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Gross profit for the nine months ended September 30, 2025increased 26%, or $15.6 million, to $75.4 million compared to $59.8 million for the same period in the prior year. Gross profit increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS.

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Distribution segment gross profit for the nine months ended September 30, 2025 increased 28%, or $14.3 million, to $65.8 million compared to $51.5 million for the same period in the prior year. The increase in Distribution segment gross profit was due to the aforementioned organic growth from our existing vendor partnerships as well as the contribution from the acquisition of DSS, partially offset by higher early pay discounts and other rebates and discounts offered to our customers as a percentage of gross billings.

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Solutions segment gross profit for the nine months ended September 30, 2025increased 14%, or $1.2 million, to $9.6 million compared to $8.4 million for the same period in the prior year. This increase was organically driven by the aforementioned increase in gross billings compared to the same period in the prior year, as well as higher gross profit margins generated in both North America and Europe.

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Customer rebates and discounts for the ninemonths ended September 30, 2025were $16.5 million compared to $10.4 million for the same period in the prior year. Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

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Vendor rebates and discounts for the nine months ended September 30, 2025 were$14.1 million compared to $4.4 million for the same period in the prior year. Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors or meeting certain early payment programs offered by our vendors. The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

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Selling, General and Administrative Expenses

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SG&A expenses for the nine months ended September 30, 2025 increased 25%, or $9.9 million, to $49.3 million compared to $39.4 million for the same period in the prior year. This increase was primarily due to the impact of the acquisition of DSS as well as an increase in salaries, commissions and other employee related expenses in support of the increased gross profit. SG&A expenses were 3.3% of gross billings for the ninemonths ended September 30, 2025 and 2024. The Company expects that its SG&A expenses, as a percentage of gross billings, may vary depending on changes in sales volume, as well as the levels of continuing investments to drive future growth.

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Depreciation and Amortization Expense

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Depreciation and amortization expense for the ninemonths ended September 30, 2025, increased 94%, or $2.7 million, to $5.7 million compared to $3.0 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the DSS acquisition as well as amortization of previously capitalized ERP costs, which amortization commenced in the fourth quarter of 2024 and increased amortization for a vendor relationship acquired through a prior year acquisition. The Company received notice of termination of its distribution agreement from this vendor during the first quarter of 2025 and therefore changed the amortization life of the intangible asset to a shorter period to reflect the expected period of benefits.

Acquisition Related Costs

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Acquisition related costs for the nine months ended September 30, 2025 and 2024 were $0.7 million and $1.2 million, respectively.

Income Taxes

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We compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items and discrete items. As a result, our estimated tax rate is adjusted each quarter. For the nine months ended September 30, 2025 and 2024, the Company recorded a provision for income taxes of $3.9 million and $3.6 million, respectively. The effective tax rate for the ninemonths ended September 30, 2025 and 2024was 21.6% and 23.5%, respectively. The change in effective tax rate for the ninemonths ended September 30, 2025compared to the same period in the prior year was impacted by a discrete item for the recognition of excess tax benefits related to share-based compensation in income tax expense, changes in the mix of jurisdictions in which taxable income was earned, as well as limitations on the deductibility of certain executive compensation amounts during both periods. The recognition of excess tax benefit related to share-based compensation in income tax expense resulted in a net tax benefit of $0.8 million, which reduced our effective tax rate by 4.6% during the nine months ended September 30, 2025.

Liquidity and Capital Resources

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Our cash and cash equivalents as of September 30, 2025 increased 67%, or $20.0 million, to $49.8 million compared to $29.8 million as of December 31, 2024.

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Net cash and cash equivalents provided by operating activities for the nine months ended September 30, 2025was $28.5 million, comprised primarily of net income adjusted for non-cash items of $24.3 million, partially offset by changes in operating assets and liabilities of $4.2 million.

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Net cash and cash equivalents used in investing activities during the nine months ended September 30, 2025 was $1.7 million, comprised primarily of purchases of fixed assets supporting our recently completed ERP project and new leasehold improvements.

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Net cash and cash equivalents used in financing activities during the nine months ended September 30, 2025was $8.0 million, comprised of payments of contingent considerations of $3.6 million, purchases of treasury stock of $1.7 million, dividend payments on our Common Stock of $2.3 million and repayments of borrowings under term loan of $0.4 million.

On May 18, 2023, the Company entered into a revolving credit agreement (the "Credit Agreement") with JPMorgan Chase Bank, N.A. ("JPM"), providing for a revolving credit facility of up to $50.0 million, including the issuance of letters of credit and swingline loans not to exceed $2.5 million and $5.0 million, respectively, at any time outstanding. In addition, subject to certain conditions enumerated in the Credit Agreement, the Company has the right to increase the revolving credit facility by a total amount not to exceed $20.0 million. The proceeds of the revolving loans, letters of credit and swingline loans under the Credit Agreement may be used for working capital needs, general corporate purposes and for acquisitions permitted by the terms of the Credit Agreement. All outstanding loans issued pursuant to the Credit Agreement become due and payable, on May 18, 2028. There were no amounts outstanding under the Credit Agreement as of September 30, 2025.

On April 8, 2022, the Company entered into a $2.1 million term loan (the "Term Loan") with First American Commercial Bancorp, Inc. ("First American") pursuant to a Master Loan and Security Agreement. The proceeds from the Term Loan was used to fund certain capital expenditures. The borrowing under the Term Loan bears interest at a rate of 3.73% per annum and is being repaid over forty-eight monthly installments of principal and interest through April 2026. As of September 30, 2025, the Company had $0.3 million outstanding under the Term Loan.

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In connection with the acquisition of Data Solutions, which was completed October 6, 2023, the Company acquired an IDF that was with recourse to the Company. Data Solutions had previously entered into the IDF with AIB pursuant to a Debt Purchase Agreement. The Company subsequently terminated the IDF during the year ended December 31, 2024. The proceeds from the IDF were used for working capital needs of Data Solutions. Borrowings under the IDF were based on accounts receivable up to 80% of the outstanding accounts receivable balance. The discount rate under the IDF was equal to 2.5% above AIB's applicable lending rates that varied based on the currency of the accounts receivable.

We anticipate that our working capital needs will increase as we invest in the growth of our business. We believe that the funds held in cash and cash equivalents and our unused borrowings under our Credit Agreement will be sufficient to fund our working capital and cash requirements for at least the next 12 months. Our uses of cash beyond the next 12 months will depend on many factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, which we are uncertain but include funding our operations and additional capital expenditures. We continuously evaluate our liquidity and capital resources, including access to external capital, to ensure we can finance our longer-term capital requirements.

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Foreign Exchange

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The Company's foreign subsidiaries are subject to changes in demand or pricing resulting from fluctuations in currency exchange rates or other factors. We are subject to fluctuations primarily in the Canadian Dollar, Euro Dollar and British Pound-to-U.S. Dollar exchange rate.

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Off-Balance Sheet Arrangements

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As of September 30, 2025, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934, as amended.

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