Insight Enterprises, Inc.

Hello everyone and welcome to today's Insight Enterprises fourth quarter 2024 operating results call. My name is Seb and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. I will now hand the floor to Ryan Miyasato to begin. 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 and full year ended December 31st, 2024. I'm Ryan Miyasato, Investor Relations Director of Insight, and joining me is Joyce Mullen, President and Chief Executive Officer, and James Morgado, 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 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 6, 2025. 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 2024 financial results. When discussing non-GAAP measures, we will refer to them as adjusted. You will 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 are following along with the slide presentation, we will begin on slide four. Joyce?

Thank you very much, Ryan. Good morning, everyone, and thank you for joining us today. As we close out 2024, we delivered results consistent with our expectations. Here are the Q4 highlights. Growth profit was up 1% driven by a 12% increase in insight core services and modest growth in hardware and cloud, partially offset by a decline in the impact of the partner program changes we've previously discussed. For the first time in eight quarters, hardware gross profit grew as we drove improvement in devices. We expect client buying patterns will build during 2025. Gross margin expanded 170 basis points to 21.2% and adjusted diluted earnings per share were $2.66, resulting in full year earnings per share near the high end of the range we provided in October. Cash flow from operations was $215 million. And we have completed the SG&A actions discussed last quarter. We expect approximately $25 million in annualized reductions. In 2024, clients continued to exercise caution due to the macroeconomic environment, which influenced their investment priorities and prolonged decision making. Revenue from hardware, particularly in North America, declined as corporate and large enterprise clients delayed their device refresh cycle, now expected in 2025 and 2026. Commercial client demand, on the other hand, grew over the last three quarters. Partner program changes created headwinds, requiring us to pivot our cloud business. Despite the program changes, we had steady cash flow from cloud consumption. We took critical steps forward with our offerings across key growth areas. Cloud gross profit grew double digits, reflecting increased demand for SaaS and infrastructure as a service, as well as the contributions from our acquisitions. Insight Corp services gross profit grew double digits, driven by our acquisitions. We continued building expertise and scale in areas important to our clients, particularly in TCP, ServiceNow, and AWS, augmenting our existing strength in Azure. And we're seeing traction with our AI infrastructure offer, which deliver flexible support for clients' unique AI, hybrid cloud, and multi-cloud needs. Furthermore, we initiated structural improvements to enhance the effectiveness of the strategic areas of our business. We built programs to drive cross-sell and revenue synergies across our acquisitions. We also accelerated the back office integration for some of our acquisitions to drive cost synergies. We launched a program focused on expanding our go-to-market capabilities, driving deeper collaboration with our partner ecosystem in order to gain share. We pivoted our GCP practice to align with Google's priorities, focused on services growth and profitability, which will ultimately lead to a stronger partnership and better growth opportunities for us. Finally, we are encouraged by the bookings momentum we are seeing in the business. We are unwavering in our commitment to become the leading solutions integrator. Clients across all industries rely on our expertise to deliver solutions that will help their businesses excel. And in so many cases, we are helping our clients prepare for the adoption of Gen AI, already a game changer. The true most critical areas are first, ensuring the environment is secure, and second, preparing the data estates to make the data accessible and actionable. I will share examples of both. A recent example of our security capability is the environment we delivered for a $15 billion consumer health client with over 20,000 employees. The company was recently divested and needed to establish an entire cybersecurity program from scratch. This meant strengthening their security posture across multiple enterprise domains almost overnight. We architected and built their cybersecurity program from the ground up. We implemented a comprehensive security as a service solution that included deploying numerous products and provided 24-7 global support. Additionally, we consolidated security tools, conducted cloud application testing, and implemented device and endpoint security measures. Our solution manages thousands of tickets while cutting threat detection response times in half. This comprehensive approach is an example of how we deliver immediate client value while setting the foundation for ongoing security and monitoring and resilience. and preparing for an even more data and automation-intensive environment. In a very different industry, Cricket Australia oversees more than 7,000 weekly matches and major international events. They partnered with Insight and Microsoft to enhance engagement through AI-driven solutions. Insight played a critical role in developing and integrating the AI Insights feature in the Cricket Australia live app. The feature enables real-time personalized match analysis and debuted at the Women's Ashes Test in January of 2024 with strong fan engagement both remotely and in stadium. Our solution modernized their digital infrastructure. We automated tasks that previously required manual updates, delivering instant AI-powered insights to millions of users. Key results include processing four times the previous workload at half the cost. supporting millions of concurrent users and achieving full cloud adoption. Insight is now Cricket Australia's strategic technology partner and continues to support its digital transformation. From architecting and establishing a security practice for a consumer health company to modernizing digital infrastructure for Cricket Australia fans, we demonstrate expertise in delivering impactful solutions to complex business challenges across different industries. while helping clients prepare for future technology. In 2024, we received numerous awards and recognitions from our partners. There are too many to list here, but some notable Partner of the Year awards include those from Microsoft, Google, Cisco, Dell, HP, Intel, Lenovo, Broadcom, NVIDIA, NetApp, Pure Storage, and others. You can find more details in the earnings presentation. Additionally, in alignment with our multi cloud strategy insight entered into new strategic collaboration agreements with Microsoft, Google and Amazon Web Services to more effectively help clients manage their cloud roadmap, including data and AI strategies. These agreements strengthen our position as a leading provider of cloud data, AI, cyber and intelligent edge solutions. Moreover, Insight has been recognized for its workplace culture from various organizations, including Forbes Best Employers, Newsweek, America's Greatest Workplaces, and Great Places to Work in numerous countries. In 2024, we navigated a difficult environment and invested in our ambition to become the leading solutions integrator. Our partnerships with the world's best technology companies, including hyperscalers, have never been stronger. Our solutions portfolio has never been more relevant to clients. The pricing and profitability initiatives have delivered structural results and expanded adjusted EBITDA margins. And we've made significant investments in our solution selling and technical capabilities. This is a solid foundation to build upon. And as we look to 2025, we expect the device refresh cycle to gain momentum throughout the year. And anticipate that clients will prioritize investments in their infrastructure, particularly as servers and networking equipment age and need to be refreshed in anticipation of new workload demand. We re architected our business to adapt to the partner program changes from the cloud providers by focusing on services and our corporate and mid market clients. We expect to increase traction from our clients Ai investments driving further growth opportunities and solution services and infrastructure. And as we grow products and services this year, we expect to deliver profitable growth and shareholder value. With that, I'll turn the call over to James to share key details of our financial and operating performance in Q4 and the full year 2024, as well as our outlook for 2025. James?