Insight Enterprises, Inc.

and created a single source of truth. Our client estimates this project will deliver over $10 million of benefits over two years. And because of the success of this project, we remain highly engaged with the client and have recently been retained to implement advanced analytics and AI to deliver even more benefits. It takes a world-class team to deliver these solutions to our clients, and those teammates need an environment which allows them to do their best work. I'm thrilled that we recently welcomed our teammates to our stunning new headquarters in Chandler, Arizona. The building was based on design principles that drive collaboration, problem solving, and creativity. We believe the space will inspire our teammates to design and deliver the best solutions for our clients. We are particularly proud of the new Innovation Center, which provides an interactive experience to help clients visualize exactly how our solutions can address their most ambitious challenges as they work through their digital transformation journey. And consistent with Insight's focus on sustainability, our headquarters will be Gold LEED certified, including key elements such as window sensors that automatically open and close based on UV intensity, solar panels, which provide 80% of the facility's energy consumption during peak periods, and over 800 indoor trees and plants to improve air quality. In addition to moving into our new headquarters, we also celebrated some key recognitions in the quarter. We received over 13 partner awards from Microsoft that spanned cloud, security, modern workplace, and a manufacturing vertical industry recognition. We are particularly proud of our global VP of Security and CISO, Jason Radar, who was recently honored with Microsoft Security Excellence Award as the Security Changemaker of the Year. Jason was instrumental in developing Insight's end-to-end security consulting portfolio, and under his leadership, our cybersecurity team has become a trusted advisor to help our clients navigate complexity in security and compliance. We were also named Intel's 2022 U.S. Partner of the Year for Innovation and were awarded Cradle Point's IoT Partner of the Year. Lastly, we were recognized by Fast Company for their World Changing Ideas Award, which honors companies that support positive social innovation. These recognitions cannot be achieved without the dedication of our Insight teammates. So before I hand the call back over to Glenna, I'd like to thank our Insight teammates, clients and partners around the world and reiterate how pleased I am with our first half results. I recognize that we are moving into uncertain times economically and that the environment is rapidly evolving. But as my grandmother used to say, when the going gets tough, the tough get going. and we are going. We are confident in the value of our solutions to our clients and resolute about our long-term fundamentals of our business. We are uniquely positioned in a very large market with significant expertise across hardware, software, and services, and we'll continue to invest in our solutions business to realize this opportunity. I will now turn the call over to Glenys.

Thank you, Joyce. As Joyce mentioned, we are very pleased with our record results for the second quarter. We had strong performance in both products and services, and our North America business had an outstanding quarter. As we had expected, hardware, and particularly devices, were very strong, and we saw acceleration in services growth. All of our operating results can be found in our earnings presentation, and I'll start on slide eight. For our consolidated results, net sales in the second quarter were $2.7 billion, up 26% in constant currency, and up 23% in U.S. dollars compared to the second quarter of 2021. Product net sales in the second quarter grew 24% year-over-year, primarily driven by hardware net sales. Services net sales in the second quarter grew 16% year-over-year, with insight-delivered or core services growth of 15% and partner and cloud services growth of 17%. Gross profit of $438 million increased 21% in constant currency and 19% in U.S. dollars over prior year. Gross margin was 16%, a decrease of 40 basis points compared to prior year. Product gross profit increased 23% year-over-year, driven by growth in sales of devices. Services gross profit increased 16% year-over-year, driven by growth in InsightCore services and partner and cloud services. Our cloud gross profit for the trailing 12 months ended June 30th with 19% of consolidated gross profit, up 50 basis points from prior year. And our services gross profit was 48% of total gross profit, also on a trailing 12-month basis. SG&A expenses for the second quarter were up 12% year-over-year in constant currency and up 10% in U.S. dollars. As a percentage of net sales, both adjusted SG&A and SG&A on the gap basis were 11% versus 12% in the prior year quarter. Adjusted earnings from operations for the second quarter were $142 million, up 49% year-over-year in constant currency and up 45% in U.S. dollars. On a gap basis, earnings from operations increased 46% to $130 million. For the second quarter, adjusted value-added earnings per share was $2.78 up 50% in constant currency and 46% in U.S. dollars a year over year. On a gap basis, diluted earnings per share was $2.42, an increase of 53%. Before I discuss the performance of our operating segments, I'd like to provide a little more color on backlog in Q2 as well as our expectations for the rest of 2022. While total hardware backlog remains at elevated levels going into Q3, With the continued improvements in the device supply chain, our device backlog started to decline in Q2. We expect our current device backlog will flush in the second half of 2022. On the infrastructure side, backlog continues to build in Q2. However, the infrastructure supply chain is also starting to improve, and we expect to see backlog start to decline in Q3 and estimate that it will be sometime in 2023 before all that backlog clears. Moving on now to the results of our operating segments and starting with North America. North America had an outstanding second quarter with record net sales of 2.2 billion, up 28% year-over-year. Product net sales grew 29% year-over-year, primarily driven by a 33% increase in hardware net sales. While we expected double-digit growth in hardware and primarily related to devices, this was higher than expected. As we have discussed over the year, we believe device growth will slow in the second half of 2022. However, we expect infrastructure growth and accompanying services will accelerate as that product becomes more available. Services net sales grew 20% year over year, primarily driven by Insight core services and higher sales of software assurance. Growth profit in North America in the second quarter increased 26% year over year, and gross margin at 15.6% was down 20 basis points, primarily driven by changes in products and services mix. Product gross profit increased 28% year-over-year. Services gross profit increased 23% year-over-year, primarily driven by Insight core services and cloud solutions. Selling administrative expenses increased 14% year-over-year, driven by higher personnel and variable compensation costs, primarily from higher gross profit, and our investment in solutions and services teammates. Adjusted earnings from operations grew 60% year-over-year to $116 million. Gap earnings from operations grew 63% year-over-year to $104 million. Moving on to EMEA. Net sales in the second quarter grew 14% in constant currency, driven by product net sales, specifically software. Gross profit grew 6% in constant currency, slower than net sales due to a decline in software agency fees and a decline in margin on inside core services. Adjusted earnings from operations were $19 million, up 4% in constant currency. Gas earnings from operations declined 7% year-over-year to $18 million. On to APAC. Net sales of $70 million in the second quarter increased to 41% year-over-year in constant currency driven by software, hardware, inside core services, and cloud solution sales. Gross profit of $18 million increased 35% year-over-year in constant currency, primarily due to higher profit sales and services and higher volume of cloud solutions. This led to adjusted earnings from operations of $7.4 million in the quarter, up 52% in constant currency. Gas earnings from operations grew 46% year-over-year to $7 million. Moving on to our tax rate, our effective tax rate for the second quarter of 2022 was 25.6%, relatively flat compared to 25.4% in 2021. Turning to the details of our year-to-date 2022 cash flow performance, in the first six months of 2022, our operations used $442 million of cash compared to $5 million of cash generated in the same period in 2021. As we have highlighted previously, our cash conversion cycle is inverted, meaning we pay our partners on terms shorter than we receive payments from our clients. This allows us to drive more cash flow when hardware growth decelerates, while in periods of hardware growth, more cash is used in our operation. In the first half of 2022, the decrease in cash flow from operations activities was primarily driven by growth in hardware net sales, changes in partner mix, including increased volume with distributors with early payment terms, and securing inventory for future client projects. In the second quarter of 2022, our cash conversion cycle was 48 days, up 15 days from the second quarter of 2021 as a result of increased volumes with distributors, resulting in lower DPO that I had just discussed, an increase in DIO as a result of increased inventory, including inventory for future client projects, partially offset by a decrease in DSO. In 2022, we invested $47 million in Catholic expenditures related to facility and technology investments. As a reminder, we received $27 million in proceeds from the sale of real estate assets in the prior year. We also used $68 million net of cash and cash equivalents to purchase HNU that Joyce discussed earlier. We did not have any acquisitions in the prior year. We continue to have $75 million outstanding on their current share repurchase authorization. we plan to repurchase approximately $25 million of outstanding shares in the second half of 2022 under this current authorization. At the end of the second quarter, we had a cash balance of $138 million, of which $150 million was resident in our foreign subsidiaries. We had $1.1 billion of outstanding debt, including our senior convertible notes at the end of the quarter, compared to a prior year quarter and cash balance of $108 million and total debt of $484 million. In the second quarter, our convertible notes continue to exceed the market price trigger of $88.82 and remain convertible at the option of the holders, and the principal amount will continue to be classified as current. Given the market value of the convertible notes, we do not anticipate that note holders would convert their notes in the near term. As we think about liquidity, we're exiting the quarter with a leverage position at less than 2.3 times debt to cash flows, or EBITDA, within our comfort level. Under our ABL agreement, our primary compliance covenant is a fixed charge coverage ratio, which includes trailing 12-month EBITDA coverage over capital expenditures, taxes, and cash interest. As of June 30th, we're at 3.8 times the minimum requirement of 1.0 times, and we're confident we can support our capital requirements and liquidity needs. On July 22nd, we amended and extended our ABL facility and increased the capacity from $1.2 billion to $1.8 billion with comparable or better term. As of today, we have approximately $800 million of our $1.8 billion capacity available under our ABL facility, and we have ample capacity to fund future growth. As you think about our guidance for the first full year of 2022, We expect to deliver low double-digit net sales growth. We expect adjusted diluted earnings per share for the full year of 2022 to be between $8.55 and $8.75. This outlook assumes interest expense between $30 to $35 million, an effective tax rate of 25 to 26% for the full year 2022, Capital expenditures of $65 to $70 million, including completion of our new corporate headquarters, and an average share count for the full year of 35.4 million shares after our planned repurchase of $25 million of shares. This outlook excludes acquisition-related intangible expense of approximately $34 million, assumes no acquisition-related or severance and restructuring and transformation expense, and assumes no significant change in our debt instruments. I will now turn the call back to Joyce.

Thanks, Glynis.