Insight Enterprises, Inc.

Ladies and gentlemen, welcome to the Insight Enterprise Inc. Fourth Quarter Full Year 2022 Earnings Conference Call. My name is Glenn, and I'll be the moderator for today's call. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on the telephone keypad. I will now hand you over to your host, James Mogado, SVP Finance and CFO in North America, to begin. James, please go ahead.

Welcome, everyone, and thank you for joining the Insight Enterprise's Earnings Conference Call. Today, we will be discussing the company's operating results for the quarter and full year ended December 31st, 2022. I'm James Murgado, Senior Vice President of Finance and CFO of Insight North America. Joining me is Joyce Mullen, President and Chief Executive Officer, and Glenys Bryan, Chief Financial Officer. If you do not have a copy of the earnings release or the accompanying slide presentation that was posted this morning and filed with the security on Form 8K, You'll find it on our website at insight.com under the investor relations section. Today's call, including the question and answer period, is being webcast live and can also be accessed via 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, February 9th, 2023. 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 be referring to non-GAAP financial measures as we discuss the fourth quarter and full year 2022 financial results. When discussing non-GAAP measures, we will refer to them as adjusted, You'll find a reconciliation of these adjusted measures to our actual GAAP results included in both the press release and the accompanying slide presentation issued earlier today. Also, please note that unless highlighted as constant currency, all amounts and growth rates discussed are 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 and in greater detail in our most recently filed periodic reports and subsequent filings with the SEC. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update any forward-looking statement made on this call, whether as a result of new information, future events, or otherwise. With that, I will now turn the call over to Joyce, and if you're following along with the slide presentation, we'll begin on slide four. Joyce?

Thank you very much, James. Good morning, everyone, and thank you so much for joining us today. It is my pleasure to report that we ended 2022 with an outstanding fourth quarter that topped off a record-setting year. For 2022, we delivered record debt sales, gross profit, gross margin, adjusted EFO, and adjusted diluted EPS. And we ended the year with positive cash flow from operations of $98 million. These are stellar results in a volatile macro environment. For the past year, we have articulated our focus on delivering differentiated value for our clients, improving and scaling our solutions offerings, and enhancing our technical expertise in the areas where we know we excel. And while there is no finish line in this race, I feel great about the progress we've made so far. Our clients choose us because we help them improve and transform their businesses and achieve the outcomes they need. This is evident from our record-setting results this year, and in fact, we outpace the global IT market across all categories, software, including cloud, services, and hardware. The foundation of our services business is based upon long-standing relationships and understanding of the outcomes our clients need and what is required to make them successful. We deliver this through our deep technical expertise, which has led to record performance in inside core services with gross profit growth of 14% for the year. We are still in the early stages of executing against our long-term strategy, but the progress we made in 2022 propels us forward in pursuit of becoming the leading solutions integrator. We outlined this strategy at our Investor Day last fall, and as a reminder, there are four key pillars underpinning that strategy. First, captivate clients. This is a people and outcome-focused business. We plan to drive continued improvement in net promoter scores by delivering exceptional results. We pride ourselves in earning the right to do more by delivering high-quality and outcome-based solutions. And our investments in e-commerce and automation will allow our clients to transact with us even more efficiently via self-service. This creates a seamless customer experience for our clients and frees up our sales teammates to focus on our second pillar, which is selling solutions. We are transforming our sales capabilities and aligning our incentives to focus on our solutions portfolio. We continue to streamline our account coverage to match skills with our clients' need and propensity to buy services. The theme here is really about focus, that is, doing a finite number of things and doing them really well. Our third pillar is deliver differentiation. This is all about providing innovative, scalable solutions through reusable IP, exceptional technical talent, and our very compelling solutions portfolio. Again, we are focusing on our strengths that align with the fastest-growing areas of the market and the areas where our clients need the most help, cloud, data, AI, cybersecurity, and edge. And the fourth pillar is to champion our culture. This has been a strategic advantage for us, and we will continue to leverage our values of hunger, heart, and harmony to evolve our high-performance culture. This is critical to attracting and retaining such incredible talent. And speaking of incredible talent, I am happy to announce the addition of two new leaders. First, we are pleased to welcome Adrian Gregory as our new president of Europe, the Middle East, and Africa, EMEA. Adrian held various leadership positions at both ATOS and HPE and brings over 27 years of experience in the technology sector. He will lead our EMEA team as we continue to build our services and solutions capabilities in that region. Additionally, Kate Savage joined as an SVP in our solutions segment, where she is focused on all operational aspects of our services business. Kate joins us from Capgemini, where she was executive vice president driving operations and people strategies. M&A is also an important part of our strategy and supports the four pillars I outlined above. As we enter 2023, we have nearly $1.5 billion in financing capacity to fuel this strategy. We will be deliberate in our acquisitions to support our solutions business in key growth areas such as cloud, data, AI, and cyber. One such example is our acquisition of HANU last year. As a reminder, HANU is a Gartner Magic Quadrant Azure migration company that allows us to scale our cloud business. HANU also has a robust recruiting and development academy to build more technical expertise in India. And to support these changes I outlined above, we stood up a global transformation office to manage the initiatives across the company. As I mentioned earlier, we had a record-setting 2022. Glynis will walk you through our Q4 performance, and I'll highlight some of our full year results now. Net sales of $10.4 billion, up 11% year-on-year. Cloud gross profit of $340 million, growth of 29% year-on-year. Insight Core Services gross profit of $253 million, an increase of 14%. Gross profit grew 13% and gross margin expanded 40 basis points to 15.7%. Adjusted EPS was $9.11 per share and grew by 28%. Adjusted EBITDA margin expanded by 60 basis points to 4.7%. And we generated operating cash flows of $304 million in Q4, taking the full year to $98 million. These results demonstrate our team's ability to execute in a challenging environment and the resilience of our business model. We've talked a lot about our ambition to become the leading solutions integrator by combining our strengths in hardware, software, and services to offer comprehensive solutions that drive business outcomes for our clients. And I want to share a recent example of this. Vivli is a nonprofit organization whose mission is to facilitate the sharing of clinical research data and to enable their partners to develop treatments for diseases such as Alzheimer's, diabetes, and many others. To do this effectively, they needed an intuitive platform that would provide researchers around the globe with secure access to a vast array of clinical trial data. We worked with Vivli to define this new platform and determined three critical requirements for success. Those were ensure the solution was secure, patient privacy is clearly critical, create a smooth user experience with an intuitive front end, and ensure the platform was scalable and manageable. Our highly experienced technical team developed a solution using the full complement of Azure services, which ultimately drove business efficiency, eliminated manual and redundant processes, and made a significant impact on the research community. For Vidly, success is all about adoption. After delivering this project vividly has been pleased with the clinical data growth of 42% year over year and more researchers are using this platform than ever with user growth of 20% per year. This is a great example of our purpose accelerating transformation by unlocking the power of people and technology. We love the human aspect of this example and how the solution has not only helped Visley, but has helped potentially thousands of patients at critical moments in their lives. Customer success stories like this reinforce confidence in our strategy. As I mentioned, we see cybersecurity as a major focus for us, and I want to talk through a really meaningful example of our capability in this space as well. When a Fortune 100 insurance and financial services provider needed to modernize security, they turned to Insight. They needed to address a challenge called secret sprawl, or more plainly, a situation that many organizations face when passwords, encryption keys, and other sensitive authentication information is stored in many different locations. Secret sprawl leads to mismatched credentials and creates a risk of security breach. To address this challenge, we implemented HashiCorp's Vault software to consolidate user credentials. We also developed customizable self-service API templates to direct authentication between multiple applications and developed automation to monitor expiration of web security certificates. The solution we deployed is a seamless credential management system with automated compliance. We're really proud of the work done on this project and the value we provided. I think it's a testament to the deep technical talent we have at Insight, and we see that as an important differentiator in the industry. We also earned some tremendous industry recognitions in 2022. You can see the details in the accompanying presentation, so I'll just highlight a few recent recognitions now. We earned three Cisco Partner of the Year recognitions, achieved all of Microsoft Solutions partner designations, earned Microsoft's 2022 Partner of the Year for Manufacturing, as well as the 2022 Canadian Partner of the Year Award. Additionally, as champions of people, leadership, and culture, we strive to be a company where all teammates have the opportunity to reach their full potential, and I'm proud that Insight was recognized by Forbes as one of the world's top female-friendly companies. Before handing the call over to Glenys, who will share our 2023 outlook, let me briefly touch on the year ahead. As we head into 2023, we expect continued economic uncertainty, and now more than ever, it is critical that we support our clients as we navigate these uncertain times together. We are uniquely positioned with our combination of deep expertise in hardware and software and our portfolio of digital transformation services focused on cloud, data, AI, and cyber to deliver cost-effective technology solutions and business outcomes for our clients. The $4 trillion IT market is growing in the low single digits. However, cloud, data, and AI, cybersecurity, and the edge are expected to grow in double digits, which plays to the strength of our portfolio and our technical talent. We remain focused on our ambition to become the leading solutions integrator, and I look forward to discussing our progress as we continue our journey. With that, I'll turn the call over to Glenys to walk you through the important details of our financial and operating performance in Q4 2022, as well as our outlook for 2023. Glenys?