Ingram Micro Holding Corporation

Please note that this conference is being recorded. I will now turn the conference over to your host, Willa McManman, Vice President of Investor Relations. Thank you, you may begin.

Thank you, operator. I'm here today with Paul Bay, Ingram Micro's CEO, and Mike Zylis, our CFO. Before I turn the call over to Paul, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, statements about our strategy, demand plans, and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our future expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements because of risks and uncertainties discussed in today's earnings release and in our filings with the SEC. We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information. Reconciliation of non-GAAP results to GAAP results are included in our earnings press release and the related form 8K available on the SEC website or on our investor relations website. With that, I'll turn the call over to Paul.

Thank you, Willa. Good afternoon, and thank you for joining today's call, which comes on the heels of the ransomware attack we experienced in early July. While no company wants to face the increasing reality of such an attack, our response reflects the way we do business as a platform company. Although some uncertainty remains regarding the potential impact on our business and future results, which Mike will address in more detail during the Q3 guidance discussion, I want to emphasize that the incident had no impact on our Q2 results. To recap, in early July, we identified ransomware on certain internal systems, and we quickly took our systems offline, launched an investigation with top cybersecurity experts and notified law enforcement. With respect to the incident, certain data was exfiltrated from our systems in conjunction with this incident. We have engaged a third-party data analysis firm to assist us in reviewing the relevant data. This process is ongoing and complex. Should we determine that personal information was affected, we will provide notification based on relevant regulations. In terms of our response, we approached the incident as a business challenge, and the entire organization mobilized to address it. Due to our scalable and modular platform architecture and the tireless coordinated efforts of our team, we restored secure operations within days, minimizing disruption to our customers and our partners and the overall business. The investigation into the cyber incident remains ongoing, and we continue to monitor our systems closely. While this attack was unanticipated, our rapid response reinforced the critical importance of our X-vanage platform architecture and the strength of our overall teams and partnership. I'll talk more about X-vanage in a minute. But first, let me discuss some key highlights of the second quarter. We were pleased that we exceeded the high end of our net sales guidance and landed towards the top end of our gross profit and earnings per share guidance ranges. We had growth across all lines of business, particularly in client and endpoint solutions. We also saw incremental -over-year improvement in advanced solutions and continued growth in cloud. Geographically, -over-year, the lower cost of serve and lower margin Asia-Pacific region demonstrated the highest net sales growth in the corner. We also saw double digit net sales growth in North America, single digit net sales growth in EMEA, and return to growth in Latin America. India performed as we had expected, with some continued impact on gross margins from the heightened competitive market and business improving as we progressed through Q2. From a customer perspective, we saw growth across all categories, with enterprise again outperforming. We were also encouraged by the return to modest growth in SMD. Since our last call, we began the divestiture of two non-core pieces of the business. First is a divestiture of assets related to an end performing operation in our North America region, which closed in late July. And the second is cloud blue, which is expected to close in Q3. Both of these divestitures were a result of our ongoing portfolio review, as we focus on continually improving our operational effectiveness and amplifying our core strengths. As a reminder, I've talked about the more than $600 million investment that Ingram Micro has made in cloud, which has been the strategic to our long-term vision enabled us to be the first to launch a comprehensive cloud marketplace and learn early on from our cloud business. Cloud blue was part of the initial foundation for the strategy, and we have retained the relevant IT from it. Instead of building fragmented marketplaces, we have unified our cloud marketplaces within our X-Vantage platform ecosystem to provide a single pane of glass for hardware, software, cloud and service solutions. This strategy is designed to provide our customers with speed, scale and service, and as core to our evolution into a platform company, which we are executing upon through our X-Vantage platform. We think about this evolution for Ingram Micro and the subsequent transformation of our customers' journeys in three phases. The first phase, which we are already delivering upon, is to remove friction, to streamline operations and drive OPEX efficiency. The second phase, which we are in the process of rolling out, leverages AI to automate and optimize demand signals, enabling more proactive -to-market strategies and accelerating top-line growth. The third phase will unlock greater value for our customers and our vendor partners by matching supply and demand more intelligently, using data to drive growth and further enhance margins and operating leverage. It is during this phase that we expect to fully realize a flywheel network effect. Though this takes time, we continue to grow and remain profitable as we move through these phases. In July, Sanjeev Sahu, president of our Ingram Micro Global Platforms Group, showcased the progression and discussed the way in which X-Vantage is reshaping the IT distribution landscape. During the presentation, you walk through the platform's building blocks to underscore why its unique, real-time data mesh architecture and custom AI factory are foundational in building a truly single-painted glass platform. He explained how Ingram Micro's more than 45 years of experience in IT distribution gives us not only deep expertise, but significant business data to power our AI factory, which uses AI to redefine the customer journey through intelligent automation. This automation is the basis for our intelligent digital assistant, or as we call it, IDA, which helps our customers win more business and deploy their resources more effectively and efficiently. Sanjeev showed real-time examples of how IDA uses advanced AI and machine learning models to analyze our data across more than 50 attributes and help our customers identify and prioritize the sales opportunities most aligned to them. This moves them from reactive, inbound order-taking to proactive, outbound order-making. As a proof point to this, in Q2, through IDA alone, we brought in tens of thousands of opportunities to our partners valued at hundreds of millions of dollars, up nearly 50% sequentially. Some other real-world examples of how X-Sanj is delivering to our customers and partners includes a leading solution provider in the public sector space who is focused on expanding into higher-value solutions offerings while maximizing operational efficiency. Using X-Sanj's capabilities, the solution provider was able to execute a -million-dollar solution with a fraction of the effort previously required and is now looking to create the same efficiencies with other vendor partners. Another illustration of the way customers are embracing X-Sanj is a large new customer in France whose CEO engaged directly with X-Sanj and converted his company's entire -to-market and customer relationship process onto the platform. The move to X-Sanj enabled the company to generate and convert quotes into orders in under three minutes, a process that previously took up to a half a day, leading to significant revenue and market share gains. Of course, our customer success is the best reflection of our success, and last quarter we discussed a few of the many other platform metrics we used to gauge the way in which X-Sanj is adding value. These include self-service orders, which in the second quarter grew nearly 200% year over year. During Q2, we also saw a near doubling in quotes created on the platform versus the prior year, driven by ongoing enhancements of advanced search, quoting, product data, and other capabilities. In the quarter, X-Sanj also helped us reactivate nearly 2,000 dormant customers, who generated approximately 40% higher sales compared to their prior engagement. The second quarter brought with it solid business performance and entering Q3, a unique set of challenges, that demonstrated the strength of our platform. I'm incredibly grateful for the outpouring of support we received from our customers and our partners, and proud of the resilience shown by our team. As we move into the back half of the year, I'm increasingly encouraged by the impact of our platform strategy and what it's having across our entire ecosystem. By delivering a holistic platform for B2B, we are not just modernizing distribution, we are reimagining how we can help our customers solve real business problems. Thank you for your continued support, and with that, I'll turn the call over to Mike. Mike?