PC Connection, Inc. (CNXN) Earnings Call Transcript & Summary

Good morning, everyone. I'd like to welcome you to the PC Connection 2022 Annual Stockholder Meeting. I'm Tim McGrath, President and CEO of Connection, and I will be presiding over this meeting. Connection had a strong transformative year in 2021, advancing our strategy to serve as a trusted IT adviser that connects people with technology they need to enhance growth, elevate productivity and empower innovation. We believe that technology is an enabler of competitive advantage for our customers and we are proud of the significant progress that we made in 2021. Before that, I'd like to thank our dedicated employees loyal customers and you, our shareholders, for your continued support. We're confident that Connection is helping to set the stage for a stronger, better future together. At this time, I'll call the meeting to order. Due to the continuing public health impact of the COVID-19 pandemic and to support the health and well-being of our stockholders, employees, directors and communities, we have, again, this year, supplemented our in-person meeting with a courtesy dial-in for stockholders who submitted their proxy in advance of the meeting. They may wish to listen to the meeting remotely rather than attending in person. Any stockholder who's here in person may vote in person or otherwise participate. However, in addition to certain members of our Board, management and other company attendees may be participating remotely by telephone, again, for the same health and safety reasons. I'd like to introduce the members of our Board, including our new Director of our Board, Jay Bothwick, and our company officers as well as representatives of Deloitte & Touche, our external auditing firm; and WilmerHale, our external corporate counsel, each of whom is joining us remotely by phone today. Representing our Board of Directors is the Chair of our Board, Patricia Gallup; our Vice Chair, David Beffa-Negrini; Jay Bothwick; Barbara Duckett; Jack Ferguson; and Gary Kinyon, each of whom also joining us remotely by phone. With me today is our CFO and Inspector of Elections, Tom Baker. Also joining us today remotely by phone are a number of our senior members of management: Joan Evans, Rick Gilligan, Brian Hicks, Eric Keating, Cam Kelly, Jamal Khan, Larry Kirsch, John Thomas and Bob Pratt. In addition, representing WilmerHale is partner, Lily Brown; and representing Deloitte & Touche is our partner, Raymond Bigelow, again, each of whom is joining remotely by phone. At the conclusion of the meeting, Tom and I will be available to answer questions that any stockholder may have. Please note that various remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Act -- excuse me, Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the Risk Factors section of our most recent annual report on Form 10-K, which is on file with the SEC. In addition, these forward-looking statements represent the company's expectations only as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as representing the company's estimates or views as of any date subsequent to today. I'll now conduct the formal part of the meeting. I have received an affidavit from Broadridge Financial Solutions certifying that the notice of the annual meeting and proxy statement were sent to all stockholders of record as of April 6, 2022. The affidavit and the list of stockholders entitled to vote at this meeting are available for inspection by any stockholder. Our first order of business at the meeting is to determine whether the shares represented at this meeting, either in person or by proxy, are sufficient to constitute a quorum for the purpose of transacting business. Mr. Baker has been appointed to act as Inspector of Elections. Tom has reported to me that there are present at this meeting in person or through presentation by proxy a total of at least 24,739,885 shares of common stock. Since more than the majority of the outstanding shares of capital stock are represented at the meeting, I hereby declare that a quorum exists. Turning now to the items to be voted on at this meeting. As indicated in the notice of the meeting and the accompanying proxy statement, which were mailed to all stockholders, our agenda today consists of 5 items: one, to elect 6 directors to serve until the 2023 Annual Meeting of Stockholders; two, to approve on an advisory basis the compensation of our named executive officers; three, to approve an amendment to the company's 2020 stock incentive plan, increasing the number of shares of common stock authorized for issuance under such plan from 902,500 to 1,002,500; to approve an amendment to the company's amended and restated 1997 stock purchase plan increasing the number of shares of common stock authorized for issuance under such plan from 1,202,500 to 1,302,500 shares; number five, to ratify the selection by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the current fiscal year. The polls for these matters will open following a brief discussion of these matters and will remain open until I announce that the polls are closed. No ballots, proxies or revocations thereof or changes thereto will be accepted after the polls are closed. I will announce the preliminary results of the voting immediately following the tabulation of the voting. We have confirmed that there are no stockholders present who wish to vote in person because they either have not submitted a proxy or have submitted a proxy, but wish to revoke their proxy or change their vote. Now to the election of directors. The first matter to be voted on by the stockholders is the election of directors to serve until the 2023 Annual Meeting of Stockholders and until their successors are duly elected and qualified. The nominees for election are: Patricia Gallup, David Beffa-Negrini, Jay Bothwick, Barbara Duckett, Jack Ferguson and Gary Kinyon. The next matter to be voted on by the stockholders is the approval on an advisory basis of the compensation of our named executive officers. The proxy statement for this meeting contains the text of the resolution that stockholders are asked to approve. The next matter to be voted on by the stockholders is the amendment of the company's 2020 stock incentive plan to increase the number of shares of common stock that may be issued from 902,500 to 1,002,500 shares, representing an increase of 100,000 shares. And the next matter to be voted on by the company's stockholders is the amendment of the company's amended and restated 1997 employee stock purchase plan to increase the number of shares of common stock that may be issued from 1,202,500 shares to 1,302,500, representing an increase of 100,000 shares. And the final matter to be voted on by the stockholders is the ratification of the selection by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the current fiscal year. This concludes the business items on the agenda for the meeting. I hereby declare that the polls are now open for each matter to be voted upon today. We've confirmed that there are no ballots to be collected. [Voting]

The polls are now closed. The votes will be tabulated and we'll announce the preliminary results of the voting. Mr. Baker has prepared and provided to me a preliminary report of the voting on each matter. The final vote results will be included in the Form 8-K that will be filed within 4 business days after this meeting. On the motion to elect directors, a plurality of the votes cast at the meeting has been voted in favor of each of the nominees to be elected. On advisory resolution approving the compensation of our named executive officers, a majority of the votes cast at the meeting has been voted in favor of approving the compensation of named executive officers. On the motion to approve the amended -- excuse me, on the motion to approve the amendment to the 2020 stock incentive plan, a majority of the votes cast at the meeting have been voted for in favor of approving the amendment. On the motion to approve the amendment to the amended and restated 1997 employee stock purchase plan, a majority of the votes cast at the meeting have been voted for in favor of approving the amendment. On the motion to ratify the selection by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for the current fiscal year, a majority of the votes cast at the meeting have been voted in favor of the ratification. Therefore, I hereby declare that the nominees have been duly elected as directors. The compensation of our named executive officers has been approved on an advisory basis. The amendment to our stock incentive plan and our employee stock purchase plan have been duly approved. And Deloitte & Touche LLP have been duly ratified as our independent registered accounting firm for the current fiscal year. I now instruct the Secretary of the company to include in the minutes of this meeting the precise number of shares voted on each proposal. As there are no further items to come before the meeting, I declare the meeting adjourned, and thank you for your attention and time this morning. We're now available to answer any questions that any shareholder may have. Are there any questions? Now that the formal meeting has been adjourned, I'd like to share with you some additional color on our business. I want to reiterate that a number of factors contribute to our strong performance, including our continued focus on helping our customers navigate and optimize their supply chain needs. In addition, we saw continued strong demand across the majority of our customer base. Our commitment to helping our customers transition back to office in a hybrid capacity and our continued focus on cloud and data center transformation also helped to drive this performance. Cloud and data center transformation and the greater flexibility and scalability that as-a-service offerings provide remain a major focus for Connection. Driven by exponential growth of data and the promise of AI, we continue to broaden our data center optimization capabilities and deepen our cloud offerings with new services and robust hyperscale capabilities. In fact, in 2021, Connection earned 2 exclusive cloud certifications to support these efforts. Microsoft Azure Expert Managed Service Provider or MSP status and Google Cloud Premier Partner status. These certifications held by only a select few providers showcase Connection's industry-leading expertise and our team's ability to build compelling custom cloud strategies that enable our customers to move their workloads to the cloud with agility, efficiency and confidence. This is a continued focus -- and there is a continued focus on innovation and efficiency within Connection's Technology Integration and Distribution Center, our TIDC, that enabled our team to deliver exceptional service to customers. The TIDC team featured record-breaking performance in 2021, deploying over 500,000 custom configurations for customers. No matter what the evolving IT landscape brings, our market-leading product fulfillment expertise and global supply chain capabilities ensure that we'll be able to meet customer demand for the technology solutions and services that they need to adapt and to succeed. Sustainability, diversity and inclusion and our charitable giving are the foundation of the Connection Cares social responsibility program that we launched last year. This initiative continues to make great progress. Over the past year, Connection employees have committed thousands of volunteer hours to community service, raised generous donations for organizations in need and supported a diverse range of causes from environmental conservation to local food banks, coat drives, toy drives and international humanitarian relief. This employee-driven program showcases the very best of Connection's culture and the team, and we're excited to see it continue and grow. Throughout 2021, Connection helped customers find better, more efficient ways of doing business, building stronger security solutions to protect data and devices and bringing remote teams together with powerful collaboration solutions. We're proud of our team and excited about our company's future and the incredible technologies that will drive innovation and growth for our customers. As a provider of that technology, we're going to continue to invest in our workforce, infrastructure and deeper partner relationships to uphold our commitment to exceptional customer service. We believe Connection is well positioned to deliver on that promise and to create long-term value for our shareholders. Together with your support, we'll continue to guide the connection between people and technology, providing a trusted guidance in our customers' need to build stronger, better organizations. Thank you for your time and interest in Connection. We appreciate all of you for joining this morning. Have a great day.