Insight Enterprises, Inc.

and I'll be your conference operator today. At this time, I would like to welcome everyone to the Insight Enterprises first quarter 2021 operating results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press start and the number one on your telephone keypad. If you would like to refer your question, press the pound key. Thank you. I would now like to turn the conference over to Ms. Glynnis Bryan, CFO.

Thank you. Welcome, everyone, and thank you for joining the Insight Enterprises Earnings Conference Call. Today, we will be discussing companies' operating results for the quarter ended March 31, 2021. I'm Glynis Brine, Chief Financial Officer of Insight, and joining me is Ken Lanlick, President and Chief Executive Officer. If you do not have a copy of the press release and the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8 , You will find them 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 this 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, May 6, This call is the property of Insight Enterprises. Any 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 the first quarter 2021 financial results. When referring to non-GAAP measures, we will refer to such measures as adjusted. Non-GAAP measures to be discussed on today's call include adjusted selling and administrative expenses, also referred to as adjusted SG&A, adjusted earnings from operations, adjusted earnings before interest, taxes, depreciation, amortization, and stock-based compensation expense, also referred to as adjusted EBITDA, adjusted diluted earnings per share, including the benefit of the note hedge on our convertible debt, and adjusted return on invested capital. you will find a reconciliation of these adjusted measures to our actual GAAP results, including any of the press release or the accompanying slide presentation issued earlier today. Also, please note that unless highlighted as constant currency, all amounts and growth rates are discussed in U.S. dollar terms. As a reminder, all 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 any greater detail on our most recently filed periodic reports and subsequent filings 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. Thank you for joining us today to discuss our first quarter 2021 operating results. In the first quarter, with the launch of COVID-19 vaccines, parts of the world began to awaken from a long quarantine and economic pause. With renewed optimism for a stronger 2021, demand improved in the quarter. Clients continued to focus on business agility and continuity by leveraging cloud solutions for certain workloads. Our clear strategy and deep expertise delivering digital solutions to clients of all sizes allowed us to grow our sales of cloud SaaS and infrastructure as a service high double digits in the quarter, which drove cloud gross profit to 21% of our total gross profit, up more than 300 basis points year over year. In addition, hardware bookings trends improved throughout the quarter. Given the current supply constraints and long lead times, we're working with clients to assess their 2021 device refresh needs and employee hiring plans to get orders placed and in the queue for fulfillment in 2021. As a result, we exited the first quarter with elevated backlog and are pleased to see the pipeline for future sales build to healthy levels. I'm happy to report that our business returned to top-line growth year-over-year in the first quarter, fueled by low single-digit growth in corporate and enterprise clients and strong growth in public sector, particularly K-12. Largely consistent gross margins year-over-year combined with operating leverage drove adjusted earnings from operations up 3% and adjusted return on invested capital to 13.1%, up from 12.6% in the first quarter last year. Our performance for the quarter sets a good base for what we expect will be a strong year. We're happy with our team's operational execution in the first quarter, and our financial results are on track towards our 2021 commitments. Through a combination of organic investment, strategic M&A, and a culture of innovation over the last five years plus, we have transformed Insight into a leading global intelligent technology solution provider with a focus on integrated solutions, which are digital innovation solutions to help customers navigate their digital transformation journey, and improve their business end-to-end, data center and cloud services solutions to help businesses modernize and secure critical platforms to transform IT, and thirdly, modern workforce solutions that help organizations keep their employees connected, productive, and secure. And underpinning these solutions areas is our strength in supply chain optimization, providing clients with the critical products and services that they need. The world has grown digitally dependent, and every successful business is now a technology business at its core. Just ten or even five years ago, the pandemic might have completely crippled communities and markets. Instead, both private and public sector clients were resilient during the past year, quickly adopting and leveraging digital and cloud tools to better manage their business remotely and against the backdrop of increased cyber risk. Digital transformation is at the heart of what we do for our clients, and our track record of innovation over the last three decades marks our own evolution into a solutions integrator capable of providing end-to-end expertise to envision, develop, deploy, and manage modern IT solutions at scale. With stay-at-home policies or hybrid work models in place, companies want the ability to access and secure their data via the cloud. With limited internal resources to assist the migration of servers, applications, and data, companies need a partner who can not only get from point A to point B, but also can provide expert input as it relates to assessments, landscape definition, architecture, and cloud consumption. For example, our cloud and data center transformation team was tasked with helping a credit union which faced the challenges of office restrictions migrate to the public cloud. Our team deployed their expertise in cloud solutions and went to work on a strategy that simplified data protection and produced tangible benefits. They analyzed the credit union's landscape, identified dependencies, mapped the migration journey, and integrated a disaster recovery migration plan. As a result, two data centers were combined and consolidated and migrated to the cloud. Both recovery point and recovery time metrics showed improvement, and there was increased access and security via the cloud. Furthermore, Insight will also provide ongoing managed support on this continued migration to the cloud. The comprehensive methodology recommended by Insight team on data replication and disaster recovery increased the short- and long-term return on investment for the credit union. As we help clients Companies shift to public cloud and modernize their infrastructure. We're also engaged in improving data security. Whether our client needs to implement new security measures for the business or enhance security measures already in place, our connected workforce team has the expertise to provide solutions tailored to the needs of our client. For example, one of our clients who's a professional service provider for the government segment needed help identifying and implementing a security solution to meet new government compliance requirements. In addition to compliance, they also wanted to reduce costs and improve their security baselines, including end-user awareness to things like phishing. Our team implemented an architecture that included professional services and ongoing managed services that address remediation, management, and maintenance of controls to meet security and compliance requirements. The managed services are a holistic solution that address not only technical components of security, but also focus on end-user training and adoption of enlightened security practices. The important takeaway for this example is that our connected workforce team helps clients develop a technology strategy that provides the best end-user experience, execute against it, and maintain it to allow their business to reach and sustain their goals. Our team's approach is to focus on providing capabilities that address three major business shifts, anywhere operations, improving employee experience, and empowering IT. At Insight, we offer the solutions that propel our clients' workforce forward, no matter how they work. And because our clients' focused approach and the ability to execute a comprehensive portfolio of managed workplace solutions, we are positioned in Gartner's 2021 Magic Quadrant for managed workplace services for the fifth consecutive year. We're proud to be recognized once again by Gartner for the service solutions we're providing to help our clients' businesses run smarter. Our cloud and data center transformation and connected workforce teams illustrate how our client-focused solutions are key to achieving our long-term priorities and driving value for our stakeholders. As your reminder, our long-term priorities are to, one, innovate in order to capture market share in high growth areas. Second, to develop and deliver solutions that drive better business outcomes for our clients. Third, expand and scale our business with strategic clients and in markets. And lastly, continue to optimize the client experience and our execution through a relentless focus on operational excellence. These long-term priorities align to deliver on our short and long-term financial commitments. We're pleased with our execution in the first quarter and being optimistic about the market recovery strengthening over the balance of this year. We're maintaining our outlook for 2021 from our previously issued guidance, which reflects continued progress towards these goals, as well as our long-term goals that we outlined at our investor day in late 2019. The last year has reinforced our belief that the IT industry is resilient and demands for IT solutions will continue to evolve during economic downturns and recoveries. Across the markets where we do business for 2021, industry analysts expect mid-single-digit growth across hardware, software, and services sales. The recovery on a macro level has seen positive indicators in global markets. However, we expect the time and extent of the recovery to vary across our different clients and in markets. Coming into 2021, we had elevated backlog, and that trend has continued throughout this quarter. Supply constraints due to chip and display shortages are now expected to continue through the balance of the year. However, we continue to see healthy hardware booking trends that are up significantly year over year so far in the second quarter. When combined with the already elevated backlog, we feel confident that we'll see seasonally higher hardware sales in Q2 and over the balance of the year compared to the first quarter. The market is growing once again, and we expect this will accelerate in the back half of this year. This acceleration will drive stronger top-line growth in the back half of 2021 compared to what we expect to see in the first half of 2021. Strategically, we believe we're well-positioned to compete in the areas our clients need most, namely improved workforce experience, modernizing their data centers, and realizing the opportunity to go digital. Organizationally, we continue to try to optimize our resources to best position our solutions in the marketplace, including investing in our sales and technical teams to ensure we can lead with solutions in core end markets, and enhancing our scalable IT systems and processes, including our e-commerce platforms targeted at the mid-market and those supporting as-a-service consumption models. We plan to continue to invest in these critical areas with the goal to deliver a great client experience, while also optimizing our infrastructure to scale for future growth. Recently, we were recognized as Forbes as one of the best employers for diversity in 2021, ranking number 140 out of 500. The annual list covers 25 industry sectors, and Insiders ranked the highest of five Arizona companies making the rankings. We've also been recognized as a great place to work and best place to work in various locations in North America, EMEA, and in Australia. We're well-positioned to help our clients solve complex IT challenges. We believe that the strategic investments we made and go-to-market solution areas over the last several years as well as investments in our solution and technical talent position as well to achieve our business goals. As you're aware, we announced this morning that I will be retiring. This has been a difficult decision for me as I care deeply about Insight and our incredible teammates. We accomplished a lot in my time at Insight and I'm excited about our trajectory. We have a strong and talented management team and an engaged workforce who believe and continue to execute the strategy that we outlined in our investor day in 2019, and Insight is very well positioned for the future. The board has hired a top-tier search firm, and the company has undertaken a thoughtful process to evaluate internal and external candidates. This is a critical search for Insight, and I'll be working with the board to identify the new CEO. I commit to continuing to lead this team as CEO until the right successor is appointed. Thanks to all of you for your interest and insight over the years. I'll now hand the call back over to Glynis to cover the details of our financial performance.