Insight Enterprises, Inc.

Good morning and thank you all for joining. I would like to welcome you all to the Insight Enterprises fourth quarter 2023 earnings conference call. My name is Brika and I will be your moderator for today. All lines are on mute for the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your touch phone keypad. And I please ask that you remind yourself to mute and locally when speaking. And now I would like to hand the conference over to your host, James Mogado, Senior Vice President of Finance and CFO of Insight North America to begin. So, 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 December 31st, 2023. 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 Glenis Bryan, Chief Financial Officer. If you do not have a copy of the earnings release or the company slide presentation 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 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 15, 2024. 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 fourth quarter and full year 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. Please note that all growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. Also, 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 for joining us today. In the fourth quarter, our adjusted diluted earnings per share grew by an impressive 18%. This performance was strengthened by the acquisitions we made in the second half of the year. While device revenue showed sequential improvement, Demand remained muted. Infrastructure orders softened in December as clients deployed shipments from earlier in the year. Despite a decline in hardware gross profit, we grew total gross profit by 4%, driven by cloud and services. Gladys will cover Q4 results in more detail. We are incredibly proud of our execution and the progress we made on our journey to becoming the leading solutions integrator. Our profitability and pricing initiatives drove significant improvements in our hardware and services gross margins, which we expect will continue. We improved our cost structure while continuing to invest in our teammates, our capabilities, our infrastructure, and our future. We continued to invest in our solution selling capabilities. We made two strategic acquisitions, strengthening our cloud and services portfolio. We launched our initial Gen AI offerings, which have been well received by clients. We improved adjusted ROIC by 140 basis points to 17.3%. And we continued to make progress on our e-commerce and digital engagement platforms, enhancing the client experience. These critical shifts in our operational model allowed us to achieve outsized results in our profitability despite declines in hardware demand. The following highlights represent record level performance for 2023. Gross margin expanded by 250 basis points to 18.2%. Cloud gross profit grew 26% to $429 million. Insight Core Services gross profit grew 8% to $273 million. Adjusted EBITDA margin expanded by 100 basis points to 5.7%. Adjusted diluted earnings per share were $9.69, up 6%. And finally, operating cash flow was $620 million. representing an increase of 521 million from 2022. We are very pleased with our progress and remain focused on driving profitable growth, particularly as market conditions improve. Additionally, we prudently deployed capital, investing in our people and technical infrastructure, including our state-of-the-art Texas Integration Center. We repurchased over $200 million of shares and made two strategic acquisitions that are immediately accretive and are well aligned to deliver long-term profitable growth. As a reminder, in Q3, we acquired Amdaris, an award-winning cloud and application modernization company based in the UK that significantly increases our digital and cloud enablement capabilities in EMEA. As a Microsoft Gold-certified partner for more than 10 years, Amdaris brings more than 800 employees, the majority of whom are engineers and developers. making it an ideal addition to our existing application and data practices. It's increasingly clear that clients operate in a multi-cloud environment. In Q4, we expanded our multi-cloud capabilities with the acquisition of SADA, a leading Google Cloud and technology consultancy and six-time Google Cloud Partner of the Year. SADA has approximately 850 employees and over 400 technical experts with deep capabilities across the Google Cloud platform, Google Workspace, Security, and Data Analytics. This acquisition positions Insight as a leader in both Azure and GCP, two of the three major hyperscalers and the clear leaders in generative AI, and expands our services business. With this enhanced ability to provide multi-cloud solutions to our clients, Insight is significantly differentiated from other solution providers because it is coupled with our long-standing expertise and deep capabilities with on-prem solutions. We believe this is a powerful combination for clients. While we're still early in the process, we're pleased with the progress we've achieved, including lead flow, and we're excited about the collaboration opportunities across the Andares, SADA, and Insight teams. Venice will provide additional details on SADA. Lastly, in 2023, we continue to build a world-class leadership team, including adding Adrian Gregory as our EMEA president, and Reem Gideon as our Canadian leader, promoting Rob Green to Chief Digital Officer and hiring our Chief Marketing Officer, Hilary Kerner. These financial and operating highlights demonstrate that we are on the right path with our strategy and that we're making progress towards becoming the leading solutions integrator. Key to that strategy is to become the partner our clients can't live without. They need a partner they can trust to navigate new technologies, and the infrastructure and workplace requirements to help them digitally transform. There are four key pillars to our strategy to becoming the leading solutions integrator. Put clients first, deliver differentiation, champion our culture, and drive profitable growth. Within our solutions portfolio, security is a key offering that is critical to every enterprise. The cybersecurity landscape is constantly evolving and becoming increasingly complex with new threats and vulnerabilities emerging every day. A cyber attack on our client, a global consumer products company, resulted in a worst case scenario, causing a breach of critical systems, infrastructure, and user credentials, and ultimately led to a complete outage. Because of the outage, their operations team's remote access was revoked, and therefore they were unable to help in the recovery efforts. That's where we stepped in. We responded immediately by deploying over 100 experts, technicians, software engineers, and security professionals. We expedited the remediation process and helped our client restore critical infrastructure, employee access, and credentials. Additionally, we enhanced their security posture by developing a comprehensive roadmap to secure their infrastructure and identified and segmented different parts of their network to ensure an incident at one plant wouldn't impact the entire enterprise and improved management and visibility of their systems to protect against future incidents. Our expertise in cybersecurity was integral in helping our client and is an important element of our services portfolio. I'd also like to share an example of the complementary strengths that SADA brings to Insight. A large retailer had grown rapidly through acquisitions, which resulted in a disparate technology stack and challenges managing data. The client selected Google Cloud and engaged with SADA as their trusted supplier to drive their cloud transformation journey. SADA built a secure and reliable cloud-enabled data warehouse and consolidated the client's fragmented data sources into a data estate for a unified view of critical business information. SADA streamlined their data flows, slashed processing times, enabled faster data analysis that led to quicker decision-making, and improved business agility. A key element to our strategy is to champion our culture, and we're proud of the industry acknowledgments we receive. Most recently, Insight was ranked number 20 on Fortune's World's Best Workplaces. This prestigious accolade highlights the company's commitment to creating an inclusive and supportive work environment. And from a partner perspective, Insight has been recognized by Cisco as the America's IoT Industry Partner of the Year and named HashiCorp's 2023 Focus Partner of the Year. You can find a broader list of our recent recognitions and awards in the accompanying slide presentation. Additionally, we signed a multi-year strategic partner framework with Microsoft. This agreement drives our continued transformation as a leading solutions integrator for Azure and Microsoft 365 related offerings, including GenAI. As we enter 2024, we expect another year of strong growth in cloud and insight core services gross profit. With regards to the hardware cycle, we believe device demand will slowly improve in the first half. with a more meaningful contribution later in the year as upgrade cycles begin. Infrastructure backlog has normalized and we're seeing slower demand as clients deploy equipment from shipments in 2023. We will continue to drive our pricing and profitability programs while also prudently managing operating expenses. We are proud of what we were able to deliver in 2023 and believe we are well positioned to drive profitable growth in the fastest growing areas of the market. With that, I'll turn the call over to Glynis to share the key details of our financial and operating performance in Q4 and for the full year 2023, as well as our outlook for 2024. Glynis?