Ingram Micro Holding Corporation

Greetings and welcome to the Ingram Micro fourth quarter and fiscal year 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Willa McMahon, Vice President of Investor Relations. Please go ahead.

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 returns. as well as our 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 FCC. We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information. Reconciliations 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, everyone, for joining today's call. I'm pleased with our strong execution and results in the quarter and for the full year. In the fourth quarter, we grew revenue by 11.5%. with growth across all regions, and delivered EPS of 96 cents, both exceeding the high end of our guidance. We also delivered adjusted free cash flow of $1.6 billion in the quarter, the highest quarterly level in more than a decade, allowing us to well surpass our goal of generating adjusted free cash flow at a rate of 30% or more of adjusted EBITDA for the year. The top-line strength in the quarter was driven by client and endpoint solutions business, and we again had significant sales of GPU and other AI-related products in our advanced solutions business, which we believe positions us well to further pursue AI-attached opportunities as customers move from the compute to application layer. From a customer category perspective, enterprise remained quite strong, while SMB continued to improve for a fourth straight quarter of sequential growth, Geographically, we had top-line growth across all four regions. Over time, we expect MIPS to improve favorably from a margin perspective as client and endpoint solution sales moderate and we execute on our advanced solutions and cloud initiatives driven by our X-Vantage platform. We are also very pleased with our strong results for the full year 2025, with net revenue up 9.5% and non-GAAP net income up 8.6%. We were able to support this strong pipeline of growth while demonstrating solid operating leverage. Because of our Xantage platform and our ongoing AI initiatives, we were able to redeploy many of our associates to high value add, go to market initiatives to better support our customers. We say that Ingram Micro has transformed to become aggressively digital while remaining amazingly human. And it is this combination of skills that is allowing us to deliver value to our customers in an increasingly complex market. Our XVantage platform uniquely positions us to help our customers succeed by digitally connecting vendors and customers at scale across the ecosystem where we play end-to-end across the demand and supply chains. As we have previously discussed, we are moving through the three phases of XVantage value creation. with the first being OpEx efficiency, the second, top line growth, and the third using data to drive growth and enhance margins and operating leverage. In 2025, we made great strides implementing the second phase of revenue growth and put in place the building blocks to capture the third phase, which will begin taking effect this year. During 2025, we delivered billions of dollars of revenue through the xVantage platform as we meaningfully scaled critical enablement capabilities for our customers and increase the consistency and predictability of revenue and operating income. We have been building XVantage for three years with proprietary data, a real-time global data mesh, and over 400 embedded AI and machine learning models, powering our AI differentiation. With AI, architecture matters, and an ERP-agnostic digital platform can deliver capabilities that a portal simply cannot. Through our proprietary real-time AI factory, which includes product ingestion, data enrichment, intelligent pricing, forecasting, and agendic workflows, we are improving the sales productivity, pricing discipline, forecasting accuracy, and cost to serve. While the high-growth AI infrastructure category may temporarily compress margins in the near Our platform-led AI architecture is designed to convert revenue scale into structural operating leverage and sustainable profit expansion. With that advantage capabilities, we are better serving our customers while empowering them to better serve the millions of end customers that rely on their competencies and capabilities. An example of how we are doing this is our intelligent digital assistant, which we call IDA, and I have discussed in prior quarters. During 2025, IDA enabled over a half a million proactive engagements, assisting our customers in converting over 100,000 opportunities in orders worth billions of dollars. IDA had a multiplier effect on our partners' outcomes, enabling the conversion of opportunities to sales orders at almost three times normal conversion ratios. And those solutions contain higher value, advanced solutions, and cloud products almost twice as often, as our non-IDA transactions. IDA enables us to accelerate the sales cycles of our partners, increase their opportunity to sale conversion ratio, and focus on higher value segments. While revenue from IDA is still in mid-single digits as a percentage of our overall revenue, we see that a majority of IDA orders contain higher margin advanced solution and cloud products, and we believe we will exit 2026 with IDA representing double-digit percentage of the total revenue. While we continue to scale IDA across our operations, we also pilot our agentic assistant, which we call Sales Brief Agent. This interactive agent combines multiple internal and external data sources, enabling associates to identify new opportunities with our customers and convert them into value-added conversations. The agent also assists with value proposition development, and the creation of appointments and follow-up tasks. It also helps customers convert these opportunities into sales orders with their end customers. An example of the power of Sales Brief Agent comes from our Canadian operation. Using the agent, our team identified opportunities with a customer to provide a solution for a large multi-quarter implementation with one of their end customers and highlighted an additional opportunity to migrate the software solution of another customer to high-value cloud-based alternatives. We are in the early stage of unleashing the full potential of our agentic roadmap, and we plan on expanding Sales Brief Agent globally during the first half of this year. In addition to IDA and Sales Brief Agent, we are seeing tangible impacts across the platform. For example, in 2025, on the expanded platform, self-service orders were up over 100% versus a year ago. improving productivity and enhancing customer experience. Average revenue per customer on xVantage increased by 14% sequentially from Q3 to Q4 and over 30% year over year. In the largest country where we have rolled out xVantage, overall headcount has decreased and the revenue and gross profit per go-to-market head have increased. These points are representative of how xVantage is driving efficiency while freeing up time for high-value personal customer engagement. Underscoring how differentiated our technology is, we were recently granted two patents, and as we have mentioned, we have over 35 patents pending to further automate and accelerate our customers' go-to-market. A recently approved patent is for email-to-order, or what we call ETO. This patent recognizes our automated solution that converts email orders into touchless order entries using generative AI technology. we received millions of emails annually that we can now process through ETO. This patent is a significant milestone for our team, and there are more to come. Proprietary capabilities like ETO further illustrate how the xVantage platform is driving optimizations from days to minutes in many areas of the business. For the last three years, we have been building xVantage on a modern data foundation. This has enabled us to incorporate AI quickly and organically into our own platform and transform the way in which we operate. We wanted to bring the lessons we have learned during this process to our partners and customers. So in 2025, we launched Enable AI to help them accelerate their own AI journeys. This program is already delivering tangible results and we are seeing more partners join every quarter. Through our digital journey with Xvantage, we can help our customers to first understand then sell and deliver AI to their end customers. Although it's early days, we are encouraged as more customers move from awareness to delivering outcomes to their customers. One example of how customers are using Enable AI is a US-based managed service provider, or MSP, serving the regulated and industrial verticals. After the MSP took the Enable AI assessment, our team facilitated a structured workshop to educate them on growth tracks for data, AI platform, and cloud. We provided targeted training sessions with our respective technical experts along the way. The customer went from chasing custom one-off AI projects to delivering consistent, repeatable solutions for their strategic vendors. Across their customer base, they are now deploying agentic automation for customer support, rolling out AI-enabled inventory, supplier workflow automation, intelligent document processing, and AI governance solutions. What was unstructured AI ambition is now a repeatable revenue motion they are deploying across multiple industries with initial six-figure engagements. Looking back on 2025 and all that we have accomplished with the initiatives I just discussed, I am incredibly proud of our team members. Together, we have navigated through complex issues, including tariffs, interest rates, and geopolitical uncertainty. as well as a cybersecurity incident in July, which we effectively remediated within days. Our associates' ability to deliver to over 165,000 customers and 1,500 vendor partners in 57 countries during this time is truly a testament to their talent, determination, and resilience. In 2025, thanks to our team members' global reach, decades of customer relationships, and our advantage platform, we grew better than the market. Our full year results highlight our focus on working capital management and profitable growth, while in tandem transforming the way distribution operates. For over four decades, we have stayed nimble in responding to the ever-changing IT spend environment, and the speed of change is faster today than it's ever been. As we look forward to the full year 2026, we are confident that we will continue to successfully navigate the inevitable challenges in the market as we have done in past cycles. And considering the data points and initiatives I have shared, we are poised to further leverage the power of our platform while maintaining the core customer-centric foundation that has made us successful. We have the people, the platform, and the programs to empower our customers in a new era of technology. Thank you as always to our team members, our customers, and our vendors who have worked beside us as we transform. We look forward to another year of relentless execution and innovation. And with that, I'll turn the call over to Mike. Mike?