Insight Enterprises, Inc.

Good morning everyone and welcome to the Insight Enterprises Inc second quarter 2023 earnings conference call. My name is Chach and I'll be the coordinator for your call today. During the presentation you can register to ask a question by pressing star followed by one on your telephone keypad and if you change your mind you can press star followed by two to remove that question. I'd now like to hand over to your host James Regato, Senior Vice President of Finance and CFO of Insight North America to begin. James, please go ahead.

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 June 30th, 2023. I'm James Regato, 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 Securities and Exchange Commission on Form 8-K, 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, August 3rd, 2023. This call is a 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 second quarter 2023 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 US 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 on the slide presentation, we will begin on slide four. Joyce?

Thank you very much, James. Good morning, everyone, and thank you for joining us today. Q2 was more challenging than expected, and our performance was below our expectations. Although we did not achieve the results we anticipated, we are pleased with many of our key performance indicators that confirm we're making progress on the strategic and financial goals we've previously outlined. Here are a few highlights. We achieved record gross margin of 18.4% as we continue to make progress on our sales mix and pricing and profitability initiatives. Insight core services gross profit grew 7% and cloud gross profit grew 12% and both are key drivers of our solutions integrator strategy. Adjusted EBITDA margin was 5.9% up 50 basis points and we generated $188 million of operating cash flow in the first half of the year. These are proof points that demonstrate we are on the right path. Although we are at the beginning of this journey, we continue to gain traction in the fastest growing areas of the market, cloud, data, AI, and edge, which importantly align to our areas of expertise. In addition to our focus on growing our business, we are implementing further cost reductions designed to improve the efficiency and effectiveness of our operations and preserve capital for key areas of investment, including M&A, that support our strategy. Glenys will provide more details. Considering our Q2 results and our current expectations for the second half of the year, we are lowering our full-year adjusted diluted EPS guidance range to $9.40 to $9.60 per share, which reflects a 4% year-over-year growth at the bid point. The long-term dynamics of the IT market are very strong, and our clients remain committed to digital transformation and leveraging technology, including generative AI. to improve efficiency, reduce risk, and deliver a better customer experience. We are confident that we will see a resurgence in buyer confidence and demand in the midterm. As a reminder, there are four key pillars underpinning the strategy that we outlined last fall at our investor day. First, captivate clients. This is all about delivering exceptional value to our clients. We pride ourselves on delivering high-quality, outcome-based solutions and earning the right to do more. This leads to our second pillar. sell solutions. We are transforming our sales capabilities and aligning our incentives to focus on our solutions portfolio. The theme here is really about focus, doing a finite number of things and doing them really well. Our third pillar is delivered 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 market and where our clients need the most help. Cloud, data, AI, cyber, and edge. And the fourth pillar is champion our culture. This has been a strategic advantage for us and is critical to attracting and retaining incredible talent. Our ambition to be the leading solutions integrator requires a deep understanding and a passion for technology, and our solutions team continually strives to develop and refresh our IP. We recently launched our proprietary insight lens for gen AI this configurable ready to deploy modern data platform solution helps organizations quickly design build and deploy infrastructure to support generative AI platforms. A key element of our solutions integrator strategy is our deep partner network and we collaborate with industry technology leaders in their respective domains. For example, as NVIDIA's 2023 America's Retail Partner of the Year, our technical experts work closely with NVIDIA to help our clients leverage best fit AI, data analytics, and machine learning solutions. At the very heart of GenAI is data. This is one of our core capabilities, and it's critical to effectively implementing AI projects. We have been helping clients manage and improve their data estates for many years. I'll describe a couple of client use cases that are in progress leveraging GenAI. For example, we're working with a recruiting firm to reduce the time and effort associated with matching candidates to roles. We are building a solution that retrieves job postings and other hiring metadata and aligns those with candidate profiles to identify strong potential matches. We are leveraging Insight Lens for GenAI to streamline the development time. In another example, we've partnered with a global technology distributor to take a proof-of-concept OpenAI conversational agent to full production. The goal of this project is to drive accuracy in the responses and streamline retrieval of information while carefully controlling the user's access to information. We are also partnering with this client to develop their GenAI roadmap and develop detailed technical plans. Although it's still early for GenAI, our solutions team has been implementing AI and machine learning solutions for many years. For example, we built a solution for one of our clients that utilized machine learning to create targeted treatments for patients with high blood pressure. The recommendations were based on nearly 800 data points per patient, including the patient's symptoms, medications, and risk factors. This solution has led to a more personalized care, improved patient quality of life, healthcare cost savings, and improved treatments. With machine learning at the core of the solution, our client is significantly improving hypertension care. We are proud of the solutions we deliver to our clients, which are validated by the numerous industry recognitions we receive. We're pleased with the nine 2023 Microsoft Partner of the Year awards we've recently won, including Worldwide Solutions Assessment Partner of the Year, U.S. Azure Cloud Native Apps Development Partner of the Year, U.S. Retail and Consumer Goods Partner of the Year, Australia Partner of the Year, and Hong Kong Partner of the Year. Insight has also been recognized as one of the best places to work in the UK, Italy, and Spain, in separate evaluations by Great Place to Work and, most recently, as a Best Place to Work for Disability Inclusion. Recent awards are in addition to dozens of other recognitions Insight has received this year and highlight the strength of our partner ecosystem, the diverse solutions portfolio we offer, and our teammates that deliver terrific outcomes for our clients. In summary, we are making progress towards becoming the leading solutions integrator, as is evidenced by the performance indicators mentioned earlier. And we are focused on the fastest growing areas of the market and where our clients need the most help. I look forward to discussing our progress as we continue our journey. With that, I'll turn the call over to Gwyneth to share the key details of our financial and operating performance in Q2 and updated outlook for 2023. Gwyneth?