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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2024
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ PC Connection, Inc. is a Fortune 1000 Global Solutions Provider that simplifies the information technology, or IT, customer experience, guiding the connection between people and technology. The Company’s dedicated account managers partner with customers to design, deploy, and support cutting-edge IT environments using the latest hardware, software, and services. The Company provides a wide range of IT solutions, from the desktop to the cloud—including computer systems, data center solutions, software and peripheral equipment, networking communications, and other products and accessories that the Company purchases from manufacturers, distributors, and other suppliers. The Technology Solutions Organization, or TSO, and state-of-the-art Technology Integration and Distribution Center, with ISO 9001:2015 certified technical configuration lab, offer end-to-end services related to the design, configuration, and implementation of IT solutions. The Company also provides a comprehensive portfolio of managed services and professional services. These services are performed by the Company’s personnel and by third-party providers. The Company’s GlobalServe offering ensures worldwide coverage for the Company’s multinational customers, delivering global procurement solutions through the Company’s network of in-country suppliers in over 150 countries. ​ The Company operates through three operating segments: ​
| ● | Connection Enterprise Solutions – serving large enterprise customers
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| ● | Connection Business Solutions – serving small to medium-sized businesses, or SMBs
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| ● | Connection Public Sector Solutions – serving federal, state, and local government and educational institutions
​ The following is a summary of the Company’s significant accounting policies: ​ Principles of Consolidation ​ The consolidated financial statements include the accounts of PC Connection, Inc. and its subsidiaries, all of which are wholly-owned. Intercompany transactions and balances are eliminated in consolidation. ​ Use of Estimates in the Preparation of Financial Statements ​ The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts and disclosures of assets and liabilities and the reported amounts and disclosures of revenue and expenses during the period. Management bases its estimates and judgments on the information available at the time and various other assumptions believed to be reasonable under the circumstances. By nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates and assumptions. ​ Revenue Recognition ​ Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. In most instances, when several performance obligations are aggregated into one single transaction, these performance obligations are fulfilled at the same point in time. The Company accounts for an arrangement when it has approval and commitment from both parties, the rights are identified, the contract has commercial substance, and collectability of consideration is probable. The Company generally obtains oral or written purchase authorizations from its customers for a specified amount of product at a specified price, which constitutes an arrangement. Revenue is recognized at the amount expected to be collected, net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company generally invoices for its products at the time of shipping, and accordingly there is not a significant financing component included in its arrangements. ​ Cost of Sales and Certain Other Costs ​ Cost of sales includes the invoice cost of the product, direct employee and third-party cost of services, direct costs of packaging, inbound and outbound freight, and provisions for inventory obsolescence, adjusted for discounts, rebates, and other vendor allowances. ​ Cash and Cash Equivalents and Investments ​ The Company considers all highly liquid short-term investments with original maturities of 90 days or less to be cash equivalents. The carrying value of the Company’s cash equivalents approximates fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ​ The majority of payments due from credit card processors and banks for third-party credit card and debit card transactions process within one to five business days. All credit card and debit card transactions that process in less than seven days are classified as cash and cash equivalents. Amounts due from banks for credit card transactions classified as cash equivalents totaled $1,854 and $3,839 at December 31, 2024 and 2023, respectively. ​ At the time of purchase, the Company determines the appropriate classification of investments based upon its intent with regard to such investments. All of the Company’s investments are classified as available-for-sale. The Company classifies investments as short-term when their remaining contractual maturities are one year or less from the balance sheet date, and as long-term when the investment has a remaining contractual maturity of more than one year from the balance sheet date. The Company records investments at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income on the consolidated balance sheets. ​ Included in interest income, net on the consolidated statements of income is interest income on cash equivalents and short-term investments of $18,838, $9,983, and $1,056 for the years ended December 31, 2024, 2023, and 2022, respectively. ​ Accounts Receivable ​ Accounts receivable are recorded at the invoice amount, net of allowances. Customers are evaluated for their credit worthiness at the time of contract inception and the Company performs ongoing credit evaluations of its customers and adjusts credit limits based on payment history and customer creditworthiness. Based on the results of the credit assessments, the Company will extend credit under its standard payment terms or may request alternative early payment actions. The Company determines the required allowance for expected credit losses using information such as its customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions. Allowances can be affected by changes in the industry, customer credit issues or customer bankruptcies or expectations of any such events in a future period when reasonable and supportable. Historical information is utilized beyond reasonable and supportable forecast periods. Amounts are charged against the allowance when it is determined that expected credit losses may occur. The Company assesses collectability by reviewing account receivable on an aggregated basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with collectability issues, and if necessary, records a reserve against those receivables it determines may not be collectable. Trade receivables are written off in the period in which they are deemed uncollectible. Recoveries of trade receivables previously charged are recorded when received. ​ Inventories ​ Inventories (all finished goods) are stated at cost (which approximates the first-in, first-out method) or net realizable value, whichever is lower. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving, and nonsalable inventory. ​ Marketing Costs and Vendor Consideration ​ Vendors have the ability to fund marketing activities for which the Company receives marketing consideration. This vendor consideration, to the extent that it represents specific reimbursements of incremental and identifiable costs, is offset against selling, general and administrative, or SG&A, expenses. Marketing consideration that cannot be associated with a specific program or that exceeds the fair value of marketing expense associated with that program is classified as an offset to cost of sales. The Company’s vendor partners generally consolidate their funding of marketing and other marketing programs, and accordingly, the Company classifies substantially all vendor consideration as a reduction of cost of sales rather than a reduction of marketing expense. Other marketing costs are expensed as incurred. Marketing expense, which is classified as a component of SG&A expenses on the consolidated statements of income, totaled $25,091, $22,400, and $20,155 for the years ended December 31, 2024, 2023, and 2022, respectively. ​ Property and Equipment ​ Property and equipment are stated at cost, net of accumulated depreciation and amortization. The estimated useful lives of the assets range from three to seven years. Computer software, including licenses and internally developed software, is capitalized and amortized over lives generally ranging from three to ten years. Depreciation is recorded using the straight-line method. Leasehold improvements and facilities under capital leases are amortized over the terms of the related leases or their useful lives, whichever is shorter, whereas for income tax reporting purposes, they are amortized over the applicable tax lives. ​ Costs incurred to develop internal-use software during the application development stage are recorded in property and equipment at cost. External direct costs of materials and services consumed in developing or obtaining internal-use computer software and payroll-related costs for employees developing internal-use computer software projects, to the extent of their time spent directly on the project and specific to application development, are capitalized. ​ When events or circumstances indicate a potential impairment, the Company evaluates the carrying value of property and equipment based upon current and anticipated undiscounted cash flows. The Company recognizes impairment when it is probable that such estimated future cash flows will be less than the asset carrying value. No property and equipment impairment was recognized for each of the years ended December 31, 2024, 2023 and 2022. ​ Leases The Company enters into operating lease contracts, as assessed at contract inception, primarily for real estate and equipment. On the lease commencement date, the Company records operating lease liabilities based on the present value of the future lease payments. In determining the present value of future lease payments, the Company utilized estimated rates that it would have incurred to borrow, over a similar term, the funds necessary to purchase the respective leased asset with cash. The Company elects to apply the short-team lease exception to any leases with contractual obligations of one year or less. These leases will not have right-of-use, or ROU, assets and associated lease liabilities on the balance sheet. Instead, rent will be recognized on a straight-line basis. Goodwill and Other Intangible Assets ​ The Company’s intangible assets consist of (1) goodwill, which is not subject to amortization; (2) an Internet domain name, which is an indefinite-lived intangible asset not subject to amortization; and (3) amortizing intangibles, which consist of customer lists, trade names, and customer relationships, which are being amortized over their useful lives. ​ Note 4, “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements describes the annual impairment methodology that the Company uses each year in calculating the recoverability of goodwill and non-amortizing intangibles. This same impairment test is performed at other times during the course of a year should an event occur or circumstance change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ​ Recoverability of amortizing intangible assets is assessed only when events have occurred that may give rise to impairment. When a potential impairment has been identified, forecasted undiscounted net cash flows of the operations to which the asset relates are compared to the current carrying value of the long-lived assets present in that operation. If such cash flows are less than such carrying amounts, long-lived assets including such intangibles, are written down to their respective fair values. No intangible assets impairment was recognized for each of the years ended December 31, 2024, 2023 and 2022. ​ Concentrations ​ Concentrations of credit risk with respect to trade account receivables are limited due to the large number of customers comprising the Company’s customer base. No single customer accounted for 10% or more of total net sales in 2024, 2023, and 2022. ​ Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 25%, 23%, and 11%, respectively, of the Company’s total product purchases in 2024. Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Microsoft Corporation accounted for approximately 21%, 19%, and 11%, respectively, of the Company’s total product purchases in 2023. Product purchases from Ingram Micro, Inc., TD Synnex Corporation, and Dell Inc. accounted for approximately 23%, 22%, and 15%, respectively, of the Company’s total product purchases in 2022. No other singular vendor supplied more than 10% of the Company’s total product purchases in 2024, 2023, and 2022, as applicable. The Company believes that, while it may experience some short-term disruption if products from Ingram Micro, Inc., TD Synnex Corporation, Dell Inc., Microsoft Corporation, or any of these vendors become unavailable to it, alternative sources are available. ​ Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 12%, and 12%, respectively, of our total product purchases in 2024. Products manufactured by Microsoft Corporation, HP Inc., and Dell Inc. represented approximately 15%, 13%, and 11%, respectively, of our total product purchases in 2023. Products manufactured by HP Inc., Dell Inc., Microsoft Corporation, and Lenovo represented approximately 14%, 13%, 12%, and 11% of our total product purchases in 2022. No other singular product manufacturer produced more than 10% of our total product purchases in 2024, 2023, and 2022, as applicable. In the event the Company experiences either a short-term or permanent disruption of supply of Microsoft Corporation, HP Inc., or Dell Inc. products, such disruption would likely have a material adverse effect on the Company’s results of operations and cash flows. ​ ​ Restructuring and Other charges ​ The restructuring and other charges recorded for the years ended December 31, 2024 and 2023 were primarily related to an involuntary reduction in our headquarter workforce and included cash severance and other related termination benefits. These costs will be paid within a year of termination and any unpaid balances are included in accrued expenses and other liabilities in the consolidated balance sheets as of December 31, 2024. ​ Costs incurred for restructuring and other chargers were as follows (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
​ | ​ | 2024 |  | 2023 |  | 2022
Employee separations | ​ | $ | 415 | ​ | $ | 2,416 | ​ | $ | —
Other charges | ​ |  | — | ​ |  | 271 | ​ |  | —
Total restructuring and other charges | ​ | $ | 415 | ​ | $ | 2,687 | ​ | $ | —
​ Earnings Per Share ​ Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributable to nonvested stock units and stock options outstanding, if dilutive. ​ The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2024 |  | 2023 |  | 2022 |
Numerator: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income | ​ | $ | 87,095 | ​ | $ | 83,271 | ​ | $ | 89,219 | ​
Denominator: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Denominator for basic earnings per share | ​ |  | 26,322 | ​ |  | 26,287 | ​ |  | 26,279 | ​
Dilutive effect of employee stock awards | ​ |  | 186 | ​ |  | 142 | ​ |  | 164 | ​
Denominator for diluted earnings per share | ​ |  | 26,508 | ​ |  | 26,429 | ​ |  | 26,443 | ​
Earnings per share: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic | ​ | $ | 3.31 | ​ | $ | 3.17 | ​ | $ | 3.40 | ​
Diluted | ​ | $ | 3.29 | ​ | $ | 3.15 | ​ | $ | 3.37 | ​
​ For the years ended December 31, 2024, 2023, and 2022, the Company did not exclude any outstanding nonvested stock units or stock options from the computation of diluted earnings per share because including them would have had an anti-dilutive effect. ​ Recently Adopted and Recently Issued Financial Accounting Standards ​ In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This guidance is intended to improve segment reporting disclosures on both an interim and annual basis, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for the Company’s annual reporting periods beginning January 1, 2024, and for interim reporting periods beginning January 1, 2025, with early adoption permitted. The Company adopted this standard for the fiscal year ended December 31, 2024. See Note 15, “Segment and Related Disclosures” to the Consolidated Financial Statements for more information on the effect of this ASU adoption. ​ In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance is intended to improve the transparency of income tax disclosures through, among other things, enhancement of the disclosure requirements within the rate reconciliation, as well as increased income tax disaggregation disclosures. This ASU is effective for the Company’s annual reporting periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statement disclosures. ​

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