Insight Enterprises, Inc.

Ladies and gentlemen, thank you for standing by. Your conference will begin in approximately two minutes. Until that time, your lines will again be placed on music hold. Thank you for your patience. THE END THE END Thank you. Oh, my God. Ladies and gentlemen, thank you for standing by, and welcome to the Insight Enterprises third quarter 2020 operating results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star zero on your touchtone telephone. I would now like to hand the call over to your speaker for today, Ms. Glynis Bryan. Please go ahead, ma'am.

Thank you, Deborah. Welcome, everyone, and thank you for joining the Insight Enterprises Earnings Conference Call. Today we will be discussing the company's operating results for the quarter ended September 30, 2020. I'm Glynis Bryan, Chief Financial Officer of Insight, and joining me today is Ken Lamnick, President and Chief Executive Officer. If you do not have a copy of the earnings release that was posted this morning and filed with the Securities and Exchange Commission on Form 8K, you will find it on our website at insight.com under our Investor Relations section. Today's call, including the question and answer period, is being webcast live and can be accessed by the Investor Relations page of our website at insight.com. An archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, November 3, 2020. This call is a property of Insight Enterprises, and your redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Insight Enterprises is strictly prohibited. In today's conference call, we will refer to non-GAAP financial measures as we discuss third quarter 2020 financial results. When referring to non-GAAP measures in today's call, we refer to adjusted earnings from operations, adjusted diluted earnings per share, and adjusted return on invested capital. You will find the reconciliation of these non-GAAP measures to actual GAAP results included in the press release and the accompanying slide presentation issued earlier today. Also, please note that on this highlight of this constant currency, all amounts and growth rates discussed are in U.S. dollar terms. Finally, let me remind you about forward-looking statements that will be made on today's call. Our forward-looking statements that are made during this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today's press release and in greater detail in our most recently filed annual report on Form 10-K and periodic reports subsequently filed with the SEC. With that, I will now turn the call over to Ken, and if you're following along with the slide presentation, we will begin on slide four. Ken?

Hello, everyone, and thank you for joining us today to discuss our third quarter 2020 operating results. I'm pleased to report that because of our dedicated team, resilient business model, and the PCM acquisition, we delivered another quarter of double-digit adjusted earnings from operations growth year-over-year in the third quarter. The demand environment continued to be challenged, but we focused on answering our clients' most pressing IT needs while helping many to plan for investments needed to support the businesses as the economy recovers. During the third quarter, we drove double-digit growth in services and cloud solutions, which improved those margins to a new third quarter record. And we combined with the positive effect of the acceleration of our PCM integration, helped us achieve adjusted earnings from operations growth of more than 20% year over year. Now turning to the third quarter results on slide five. Consolidated net sales in the third quarter were $1.94 billion, up 1% year-over-year, reflecting two additional months of PCMs and the results in this year since the acquisition closed on August 30, 2019, and lower sales in the May and APAC. We focused on growing our services and solution business mix, which helped drive gross margins up 150 basis points year-over-year to 15.9% in the third quarter. And adjusted diluted earnings per share was $1.38, up 25% year-over-year. And then the gap basis diluted earnings per share was $1.10, up 45% year-over-year. Within these results, gross profit generated from cloud solutions was 18% of our consolidated gross profit over the past 12 months. And finally, our business has generated $462 million in cash flow from operations in the first nine months of 2020, reflecting certain payment timing differences with partners and the benefits of our disciplined cash management practices. Turning to slide six. During the second quarter, we completed the onboarding of PCM clients to our insight systems. In the third quarter, we completed the integration of back office operations and worked to consolidate spend across key categories including IT maintenance, legal and accounting, and marketing expenses. And we began to realize some benefits of our real estate consolidation efforts. As a result, we now expect to exit the year with approximately $60 to $65 million in annualized run rate cost savings in connection with the PCM integration, which is ahead of our first-year expectations on our previously disclosed total commitment of $70 million over two years. In the third quarter, we also invested in our sales force, adding key technical talent across our solution areas and additional sales coverage to our geographic footprint. We'll continue to invest in this area in the fourth quarter to ensure we're positioned well to compete in the marketplace in 2021 when we expect the IT market will start to recover. Also in the talent front, I'm pleased to announce that just two weeks ago, Joyce Mullins joined Insight as our new president of the North America business. Joyce spent 21 years of her career at Dell Technologies in a variety of sales, service delivery, and IT solution roles. She brings to Insight a deep understanding of the channel and a history of leadership in delivering technology services and solutions to our clients. From a demand and product bookings perspective, hardware booking trends in North America improved sequentially in the third quarter, growing double digits, although ending down more than 10% year over year. The strong growth in hardware bookings did not fully translate to net sales in the quarter, leading to elevated backlog heading into the fourth quarter. In addition, hardware bookings so far in Q4 are tracking ahead of Q3 trends, which we deem an additional positive data point as we close out 2020. Now on to slide seven. Heading into the fourth quarter with the resurgence of COVID across the globe, many businesses are partially open and many are still in work-from-home mode for most of their teammates. However, as I just noted, booking trends are improving as clients appear to be focused on positioning the business to compete and a possible economic recovery in 2021. One example is that our cloud and data center transformation team, which was recently awarded a contract with a school district in Texas, to build out its wireless mesh network. Leveraging our design, project management, and implementation capabilities, this county will leverage federal COVID stimulus funding to ensure that students are able to continue their education in an ongoing remote learning environment. In addition, we believe we have gained critical market share in modern data center categories through our investments in new technical and sales talent and our differentiated offerings over the last few years. Our strategic partners are taking notice, as we were recently named NetApp's 2020 Cloud Innovation Partner of the Year in recognition of our leadership and architecture implementing and supporting hybrid storage solutions and storage as a service solutions. And in June of this year, Insight was named Dell's Transformational Partner of the Year in recognition of our deep expertise in implementing modern hybrid data center technology as well as robust IoT and edge infrastructures. We also continue to innovate to help clients recover from the impacts of the COVID-19 pandemic, including adding contact tracing capabilities to Insight's connected platform detected prevention solution. This solution developed by our digital innovation business helps clients deploy and operate critical sensors, devices, and infrastructure that can detect symptoms that help prevent the spread of the coronavirus through its screening process. This comprehensive IoT solution, which we can deliver globally, is being received well in the marketplace with recent wins in the pharmaceutical and energy sectors in North America and the mining industry in Australia. Our focus on strategic IT solution areas has allowed us to prioritize our capital investments, introduce differentiated offerings to our clients, and to bring value to our partners across the globe. In addition, we believe our values of hunger, heart, and harmony define our culture and allow us to attract talent to help us compete effectively in our industry. Just last week, our culture was recognized yet again as we were named to the Forbes World's Best Employers 2020 list. Insight ranked 27 among IT companies worldwide and number 296 overall. We believe our strong culture and clear strategy will continue to benefit our business as the market rebounds in the future. I want to thank our teammates across the globe for the commitment to Insight and our clients. As we close out 2020, we'll have a resilient team, a strong balance sheet, and access to sufficient levels of capital to meet our foreseeable operating requirements during these challenging times. and we're confident that our solution-era expertise will allow us to support our clients' needs, both in this environment and when the economy eventually rebounds. I'll now hand the call over to Glynis to provide more details on our financial performance. Glynis?