Q4 2023 Insight Enterprises Inc Earnings Call

Operator: www.insightenterprises.com Thank you all for standing by for today's conference call with Insight Enterprises. We have today's host, James Morgado, starting today's conference. And again, if you would like to ask a question, I remind you that you should press star followed by one on your telephone keypad. Thank you all for staying connected. We will resume today's conference call shortly. Good morning, and thank you all for joining us. I would like to welcome you all to the Insight Enterprises fourth quarter 2023 earnings conference. 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 this time. If you would like to ask a question, please press star followed by one on your touch screen, and I please ask that you remind yourself to mute and localize when speaking.

Thank you for standing by for todays conference call with insight enterprises, we have today's host James Mackay de stocking today's conference and again, if you would like to ask a question I'll remind you that you. Please press star followed by one on your telephone keypad.

Speaker Change: Thank you will foot staying connected we will begin todays conference call shortly.

Speaker Change: [music].

James Mackay: Good morning, and thank you all for joining I would like to welcome you to the insight enterprises fourth quarter 2023 earnings conference call.

Greta: My name is Greta and I will be your moderator for today.

Greta: All lines are on mute the presentation portion of the cool with local community for questions and answers at the end.

Greta: If you got to ask a question. Please press star followed by one on your touch phone keypad.

Greta: Can I. Please ask that you remind yourself to meet them locally when speaking.

Greta: And now I would like to hand, the conference over to your host James <unk> Senior Vice President of Finance and CFO of inside North America to begin so James. Please go ahead.

James Morgado: And now I would like to hand the conference over to your host, James Morgado, 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 31, 2023. I'm James Morgado, Senior Vice President of Finance and CFO of Insight North America. Joining me is Joyce Mullen, President and Chief Executive Officer, and Glynis 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 8K, you will find them 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 the completion of the call and will remain on our website for a limited time.

James Mackay: 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 31 2023.

James Mackay: James <unk> Senior Vice President of Finance and CFO of insight in North America.

James Mackay: Joining me is Joyce Mullen, President and Chief Executive Officer, and Glenn, It's Brian Chief Financial Officer.

James Mackay: 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 will find it on our website at insight Dot 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 Dot com.

James Mackay: 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.

James Morgado: This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, February 15, 2024. This call is the 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.

James Mackay: This conference call and the associated webcast contain time sensitive information that is accurate only as of today February 15 2024.

James Mackay: This call is the 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.

James Mackay: And today's conference call, we'll be referring to non-GAAP financial measures as we discuss the fourth quarter and full year 2023 financial results when.

James Mackay: 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.

James Morgado: 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. dollars.

James Mackay: Please note that all growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted.

James Mackay: Also unless highlighted as constant currency all amounts and growth rates discussed are in U S dollar terms.

James Mackay: 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 day.

James Morgado: 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. And if you're following along with the slide presentation, we'll begin on slide four. Joyce?

<unk> 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.

James Mackay: With that I will now turn the call over to Joyce and if Youre following along with the slide presentation, we'll begin on slide four toys. Thanks.

Joyce Mullen: 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.

Joyce Mullen: 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.

Joyce Mullen: While device revenue showed sequential improvement demand remained muted infrastructure orders softened in December as clients deployed shipments from earlier in the year.

Joyce Mullen: Despite a decline in hardware gross profit, we grew total gross profit by 4%, driven by cloud and services. Glynis 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 continue to invest in our solution selling capability 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.

Joyce Mullen: Despite a decline in hardware gross profit we grew total gross profit by 4% driven by cloud and services, but it will cover Q4 results in more detail.

Joyce Mullen: We are incredibly proud of our execution and the progress we've 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.

Joyce Mullen: We continue to invest in our solutions selling capabilities, we made two strategic acquisitions strengthening our cloud and services portfolio. We launched our initial journey I offerings, which have been well received by clients.

Joyce Mullen: We improved adjusted ROIC by 140 basis points to 17.3%. And we continue 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%, and cloud gross profit grew 26% to $429 million. Insight Core Services gross profit grew 8% to $273 million. The adjusted EBITDA margin expanded by 100 basis points to 5.7%. Adjusted diluted earnings per share were $9.69, up 6%.

Proved adjusted ROIC by 140 basis points to 17, 3% and we continued to make progress on our e-commerce and digital engagement platform enhancing the client experience.

Joyce Mullen: These critical shifted 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.

Joyce Mullen: Margin expanded by 250 basis points to 18, 2%.

Joyce Mullen: Cloud gross profit grew 26% to $429 million in.

Joyce Mullen: In fact core services gross profit grew 8% to $273 million.

Joyce Mullen: Adjusted EBITDA margin expanded by 100 basis points to five 7% adjust.

Joyce Mullen: Adjusted diluted earnings per share or $9 69 up 6% and finally operating cash flow was $620 million, representing an increase of $521 million from 2022.

Joyce Mullen: 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 Amdaras, 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, Amdaras 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.

Joyce Mullen: We are very pleased with our progress and remain focused on driving profitable growth, particularly as market conditions improve.

Joyce Mullen: 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.

Joyce Mullen: As a reminder, in Q3, we acquired them Doris and award winning cloud and application modernization company based in the UK that significantly increases our digital and cloud enablement capabilities in EMEA.

Joyce Mullen: As a Microsoft gold certified partner for more than 10 years I'm Doris 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.

Joyce Mullen: It's increasingly clear that clients operate in a multi cloud environment in Q4, we extended our multi cloud capabilities with the acquisition of Saba, a leading Google cloud and technology consultancy and six time, Google cloud partner of the year.

Joyce Mullen: 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.

Joyce Mullen: So all that has approximately 850 employees and over 400 technical experts with deep capabilities across the Google Cloud platform, Google Workspace security and data analytics.

Joyce Mullen: 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. 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 in on-premise 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 Amdaras, SADA, and Insight teams. Glynis will provide additional details on SADA.

Joyce Mullen: This acquisition positions insight as a leader in both Azure and DCP two of the three major hyperscale and the clear leaders in generative AI and expands our services business with.

Joyce Mullen: 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.

Joyce Mullen: 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 other darice Sada and insight teams.

Joyce Mullen: This will provide additional details on sort of.

Joyce Mullen: Lastly, in 2023, we continue to build a world-class leadership team, including adding Adrienne Gregory as our EMEA president and Reem Gedeon 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 are making progress toward becoming the leading solutions integrator. The 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.

Joyce Mullen: Lastly in 2023, we continue to build a world class leadership team, including adding Adrian Gregory as our EMEA, President and really getting in as our Canadian leader promoting Rob Green, Chief Digital officer, and hiring our Chief marketing Officer Hilary Carter.

Joyce Mullen: These financial and operating highlights demonstrate that we're on the right path with our strategy and that we're making progress towards becoming the leading solutions integrator.

Joyce Mullen: Key to that strategy is to become a partner of 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 of becoming the leading solutions integrator put clients first deliver differentiation.

Joyce Mullen: There are four key pillars to our strategy of 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.

Joyce Mullen: Champion of our culture and drive profitable growth.

Joyce Mullen: Within our solutions portfolio security is a key offering that is critical to every enterprise cyber security landscape is constantly evolving and becoming increasingly complex with new threats and vulnerabilities emerging every day.

Joyce Mullen: 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.

Joyce Mullen: Cause of the outage their operations teams remote access was revoked and therefore, they were unable to help in the recovery efforts.

Joyce Mullen: 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 improve 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 Solder brings to Insight.

Joyce Mullen: That's where we stepped in we responded immediately by deploying over 100 experts technician software engineers and security professionals.

Joyce Mullen: We expedited the remediation process and helped our client restore critical infrastructure employee access and credentials.

Joyce Mullen: Additionally, we enhance their security posture by developing a comprehensive roadmap to secure their infrastructure and identified in segments of different parts of their network to ensure an incident at one plant wouldnt impact the entire enterprise.

Joyce Mullen: And improved management and visibility of their systems to protect against future incidents.

Joyce Mullen: Our expertise in cyber security was integral in helping our client and is an important element of our services portfolio.

Speaker Change: I'd also like to share. An example of the complementary strengths that sort of brings to insight.

Joyce Mullen: A large retailer had grown rapidly through acquisition, 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, sought to streamline their data flows, slash processing times, and 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 acknowledgements we receive. Most recently, Insight was ranked number 20 on Fortune's World's Best Workplaces list.

Speaker Change: A large retailer had grown rapidly through acquisition, which resulted in a disparate technology stack and challenges managing data.

Speaker Change: The client selected Google cloud and engaged with thought of as a trusted supplier to drive their cloud transformation journey.

Speaker Change: So to build 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.

Speaker Change: So how to streamline their data flows slashed processing times enabled faster data analysis that lead to quicker decision, making and improve business agility.

Speaker Change: A key element to our strategy is to champion of our culture and we're proud of the industry acknowledgment that we receive.

Speaker Change: Most recently insight was ranked number 20, Unfortunately world's best workplaces.

Joyce Mullen: 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 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.

Speaker Change: This prestigious accolade highlights the company's commitment to creating an inclusive and supportive work environment.

Speaker Change: And from a partner perspective insight has been recognized by Cisco as the Americas Iot industry partner of the year and named Kashi course, 2023 focused partner of the year.

Speaker Change: You can find a broader list of our recent recognitions and awards in the accompanying slide presentation.

Joyce Mullen: 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 Gen AI. As we enter 2024, we expect another year of strong growth in cloud and Insight Core Services gross profit. With regard 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.

Speaker Change: 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 Gen AI.

Speaker Change: As we enter 2024, we expect another year of strong growth in cloud and insight core services gross profit.

Speaker Change: With regards to the hardware cycle, we believe device demand will slowly improve in the first half.

Speaker Change: With a more meaningful contribution later in the year as upgrade cycles to begin.

Speaker Change: Infrastructure backlog has normalized and we're seeing slower demand as clients deploy equipment from shipments in 2023.

Speaker Change: 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 and the fastest growing areas of the market.

Glynis A. Bryan: 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.

Speaker Change: 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: Thank you Joyce and 2023, we successfully navigated through an unpredictable macroeconomic environment that caused increased caution and slower decision, making by our clients across all segments. In response to this we accelerated our gross margin expansion and profitability improvement plan increased our focus on optimizing.

Glynis A. Bryan: Thank you, Joyce. In 2023, we successfully navigated through an unpredictable macroeconomic environment that caused increased caution and slower decision-making by our clients across all sectors. In response to this, we accelerated our gross margin expansion and profitability improvement plans, increased our focus on optimizing our operating expenses, and built a strong foundation to support future growth. In addition, we completed two strategic acquisitions, MDARIS in the UK and SADA in North America, both of which expand our cloud and solutions capability and accelerate our ambition to become the leading solutions innovator. Both deals have been immediately accretive, which, as you know, is exceptional.

Glynis: Our operating expenses and built a strong foundation to support future growth in.

Glynis: In addition, we completed two strategic acquisitions in Paris, and the U K and North America, both of which expand our cloud and solutions capability and accelerate our ambition to become the leading solutions integrator.

Those deals have been immediately accretive which as you know is exceptional.

Glynis: I'll cover Q4, 2023, then briefly summarize the full year 2023 resolve.

Glynis A. Bryan: I'll cover Q4 2023, then briefly summarize the full year 2023 results. It should be noted that the contributions from SADA and MDARIS post-acquisition are included in my discussions on Q4 and full year 2023 and are also included in Cloud and Insight core services. Moving on to Q4 2023 results, Cloud and Insight Core Services gross profit were standouts in the quarter, helped by SADA and the Andaris acquisition. As we have seen all year, the revenue decline was primarily driven by hardware, and most recently, Infrastructure.

It should be noted that the contributions from disorder and I'm Dara post acquisition.

Glynis: In my discussions on Q4 and full year 2023 and are also included in cloud and insight core services.

Glynis: Moving on to Q4 2023 results cloud and insight core services gross profit were standouts in the quarter helped by sort of in the <unk> acquisition.

Glynis: As we have seen all year. The revenue decline was primarily driven by hardware, particularly the devices and most recently infrastructure.

Glynis: We've seen some strengthening in devices the ear to ear decline in Q4 was in the single digit range compared to the double digit declines we had seen in prior quarters.

Glynis A. Bryan: We've seen some strengthening in devices. The year-to-year decline in Q4 was in the single-digit range compared to the double-digit decline we had seen in prior quarters. The initiatives we implemented to improve profitability and increase productivity and our acquisitions helped mitigate the effects of the slowdown in Q4. Net revenue was $2.2 billion, a decrease of 11% in U.S. dollar terms and in constant currency.

Glynis: As we implemented to improve profitability and increase productivity and our acquisitions helped mitigate the effects of the slowdown in Q4.

Glynis: Net revenue was $2 $2 billion, a decrease of 11% in U S. Dollar terms and in constant currency. The decline was primarily due to hardware, which was down 22% related to devices and infrastructure, partially offset by cloud growth.

Glynis A. Bryan: The decline was primarily due to hardware, which was down 22% related to devices and infrastructure, partially offset by cloud growth. In Q3, we expressed our belief that we had approached the bottom of the device market and that the decline in our device revenue would slow. We did see that as devices were up slightly in Q4. Despite the 11% decline in net sales, gross profit increased 4%, reflecting the hardware decline offset by higher cloud and insight core services growth. Gross margin was a record at 19.5%, an increase of 270 basis points, and reflects the contributions of SADA and a higher mix of cloud and insight core services. In addition, our profitability and pricing initiatives also contributed to high hardware and services gross margin. Insight Core Services' gross profit was $69 million, an increase of 7%.

Glynis: In Q3, we expressed our belief that we had approached the bottom of the device market and that the decline in our devices revenue would slow we.

Glynis: We did see that as devices were up slightly in Q4.

Glynis: Despite the 11% decline in net sales gross profit increased 4%, reflecting the hardware decline offset by higher cloud and insight core services growth.

Glynis: Gross margin was a record at 19, 5% an increase of 270 basis points and reflects the contributions of sada and a higher mix of cloud and insight core services.

Glynis: In addition, our profitability on pricing initiatives also contributed to high hardware and services gross margin.

Glynis: <unk> core services gross profit was $69 million an increase of 7%.

Glynis A. Bryan: This performance reflects growth in applications, data, digital enablement, as well as networking, partially offset by a decrease in integration and other services related to the decline in devices. CloudGrowth's profit was $130 million, an increase of 43%, reflecting Stata's contribution, as well as higher growth in SaaS and infrastructure as a service. Our adjusted EBITDA margin expanded 170 basis points to 7.1%, a record, and Adjusted Diluted Earnings Per Share was $2.98, up 18% in U.S. dollar terms and in constant currency. Moving on to full year 2023 results. Many of the factors that drove Q4 2023 were similar for the full year 2020. Specifically, our 2022 revenue decline was primarily related to hardware, as we discussed throughout the year. Our gross profit and gross margin improvements are related to strong cloud, services, and infrastructure growth, profitability improvements, and cost optimization initiatives in 2023, as well as the benefits of the acquisitions completed in the second half of last year. Net revenue was $9.2 billion, a decrease of 12% in U.S. dollar terms and in constant currency.

Glynis: This performance reflects growth in applications data digital enablement as well as networking, partially offset by a decrease in integration and other services related to the decline in devices.

Glynis: Gross profit was $130 million, an increase of 43%, reflecting solid contribution as well as higher growth in SaaS and infrastructure as a service.

Glynis: Our adjusted EBITDA margin expanded 170 basis points to seven 1% a record.

Glynis: And adjusted diluted earnings per share was $2 98 up 18% in U S dollar terms and in constant currency.

Glynis: Moving on to full year 2023 results.

Many of the factors that drove Q4 2023 were similar for the full year 2023, specifically our 2022 revenue decline was primarily related to hardware as we discussed throughout the year.

Glynis: Our gross profit and gross margin improvements are related to strong cloud services infrastructure growth and profitability improvements and cost optimization initiatives in 2023 as well as the benefits of the acquisitions completed in the second half of last year.

Glynis: Net revenue was $9 2 billion a decrease of 12% in U S dollar terms and in constant currency and this decline we increased gross profit by 2% and expanded gross margin by 250 basis points to 18, 2%.

Glynis A. Bryan: On this decline, we increased gross profit by 2% and expanded gross margin by 250 basis points to 18.2%. Our cloud business was a standout with a growth profit of $429 million, an increase of 26%, reflecting high growth in SaaS and infrastructure as a service. Our adjusted EBITDA margin expanded 100 basis points to 5.7%, and Adjusted Diligence Earnings Per Share were $9.69, up 6% in U.S. dollar terms and 7% in constant currency. For the year, we generated $620 million of cash flow from operations compared to $98 million in 2022.

Glynis: Our club business was a standout with gross profit of $429 million, an increase of 26%, reflecting higher growth in SaaS and infrastructure as a service.

Glynis: Our adjusted EBITDA margin expanded 100 basis points to five 7%.

Glynis: And adjusted diluted earnings per share.

Glynis: We're $9 69 up 6% in U S dollar terms and 7% in constant currency.

Glynis: For the year, we generated $620 million of cash flow from operations compared to $98 million in 2022.

Glynis A. Bryan: This reflects a continued decline in devices, as well as a strong cash conversion cycle, which improved by 11 days. As devices normalize in 2024, we anticipate cash flow for operations in the range of $300 to $400 million. Our adjusted return on invested capital for the trailing 12 months ended December 31, 2023, was 17.3% compared to 15.9% a year ago, and this also demonstrates good progress towards our long-term goal. We exited Q4 with debt of $592 million outstanding under our ABL, lower than we had estimated given the acquisition of SADA in December.

Glynis: This reflects the continued decline in devices as well as a strong cash conversion cycle, which improved by 11 days.

Glynis: As devices normalize in 2024, we anticipate cashless operations in the range of $300 million to $400 million.

Glynis: Our adjusted return on invested capital for the trailing 12 months ended December 31, 2023 was 17, 3% compared to 15, 9% a year ago and this also demonstrates good progress towards our long term goal.

Glynis: We exited Q4 with debt of $592 million outstanding under our ABL.

Glynis: Lower than we had estimated given the acquisition of Saada in December our business generated strong cash flow throughout the year and despite spending over $217 million in share repurchases in 2023, and almost $500 million and the acquisition of <unk> and sort of in the second half of the year that in 2023.

Glynis A. Bryan: Our business generated strong cash flows throughout the year, and despite spending over $217 million in share repurchases in 2023 and almost $500 million on the acquisition of Amdaras Ansada in the second half of the year, debt in 2023 increased by only $300 million over 2022. As of the end of Q4, we have approximately $1.1 billion available under a $1.8 billion EBL facility and believe we have ample capacity to fund our business operations and capital deployment priorities, including M&A. We continue to evaluate our options relative to the convertible notes, as well as the impact of the convertible notes on dilution and our share repurchase strategy.

Glynis: <unk> increased by only $300 million over 2022.

Glynis: As of the end of Q4, we have approximately $1 $1 billion available under our $1 8 billion ABL facility and believe we have ample capacity to fund our business operations and capital deployment priorities, including M&A.

Glynis: We continue to evaluate our options relative to the convertible notes as well as the impact of the convertible notes on dilution and our share repurchase strategy you will find the dynamics of the convertible notes illustrated in our investor presentation.

Glynis: Our presentation shows 2023 performance relative to the metrics that we laid out at our Investor day in October 2022.

Glynis A. Bryan: You will find the dynamics of the convertible notes illustrated in our investor presentation. Our presentation shows 2023 performance relative to the metrics that we laid out at our Investor Day in October 2022. We believe we are on track to hit these targets by 2027, as demonstrated by strong starts from cloud gross profit growth of 26 percent, adjusted EBITDA margin expansion of 100 basis points to 5.7 percent, adjusted ROIC expansion of 140 basis points to 17.3 percent, and adjusted free cash flow as a percentage of adjusted net income of 173 percent. Moving on to SADA,

Glynis: We believe we are on track to hit these targets by 2027 as demonstrated by the strong starts from gross profit growth of 26% adjusted EBITDA margin expansion of 100 basis points to five 7% adjusted ROIC expansion of 140 basis points to 17, 3% and adjusted free.

Cash flow as a percentage of adjusted net income of 173%.

Speaker Change: Moving onto Sada, we're quiet side on December 1st sorry.

Speaker Change: It was immediately accretive to our margin expansion in Q4.

Speaker Change: Total gross margin expanded 270 basis points to 19, 5% and <unk> contributed 110 basis points to that performance.

Speaker Change: Cider performed at the top end of the adjusted diluted EPS guidance range, we shared in December.

Speaker Change: As a reminder December is historically, the strongest month of the episodic and as I just outlined was a strong contributor to our results in the quarter.

Glynis A. Bryan: We acquired SADA in December, and SADA was immediately accretive to our margin expansion in Q4. Total growth margin expanded 270 basis points to 19.5%, and SADA contributed 110 basis points to that performance. SADA performed at the top end of the Adjusted Diluted EPS Guidance Range we shared in December.

Speaker Change: Google is also very excited about our acquisition of Sada.

Speaker Change: We expect to work closely on alignment with them as we focus on our mutual priorities to significantly grow the business and our partners.

Speaker Change: In 2024, we expect cited to contribute between 55 to 65.

Glynis A. Bryan: As a reminder, December is historically the strongest month of the year for SATA and, as I just outlined, was a strong contributor to our results in the quarter. Google is also very excited about our acquisition of SATA. We expect to work closely on alignment with them as we focus on our mutual priorities to significantly grow the business and our partnership. In 2024, we expect SADA to contribute between $0.55 to $0.65 of adjusted diluted earnings per share. Let's talk about Saugusies now.

Speaker Change: Adjusted diluted earnings per share.

Speaker Change: Let's talk about sort of seasonality.

Speaker Change: As we discussed in December based on the contractual commitments.

Speaker Change: Revenue on multiyear contracts is recognized upfront.

Speaker Change: This creates volatility in GAAP earnings based on the historical timing of deals across the quarters.

Speaker Change: It is important to note that the underlying cash flow of business is consistent and growing quarter over quarter and year over year.

Speaker Change: For <unk>, the second half of the year typically contributes over 100% of full year adjusted EBITDA in Q4 is typically between 70% to 75% of the total adjusted EBITDA.

Speaker Change: So I think typically reports negative adjusted EBITDA in the first half Q1 is significantly negative with Q2 being breakeven. This.

Glynis A. Bryan: As we discussed in December, based on the contractual commitment, revenue on multi-year contracts is recognized up front. This creates volatility and gap earnings based on the historical timing of deals across the quarters. It is important to note that the underlying cash flow of the business is consistent and growing quarter over quarter and year over year. For SADA, the second half of the year typically contributes over 100% of fully-adjusted EBITDA.

Speaker Change: This is related to the historical timing of appeals and lower revenue and GP in the first half and Q1 in particular was essentially the same monthly operating expense level throughout the year and our December results. We had the benefit of sort of the highest gross profit month on essentially flat monthly operating expenses, resulting in a high adjusted diluted EPS.

Speaker Change: Contribution for one month.

Speaker Change: As described in the form 8-K filed this morning, when we worked through the detail. Following the acquisition, we determined that some of it is not significant to insight under SEC rules and therefore, we're not planning to provide additional financial information.

Glynis A. Bryan: And Q4 is typically between 70% to 75% of the total adjusted EBITDA. SADA typically reports negative adjusted EBITDA in the first... Q1 is significantly negative, with Q2 being breakeven. This is related to the historical timing of deals and lower revenue and GP in the first half, and Q1 in particular was essentially the same monthly operating expense level throughout the year. For example, in our December results, we had the benefit of SADA's highest gross profit month on essentially flat monthly operating expenses, resulting in a high adjusted diluted EPS contribution for one month. As described in the Form 8KA filed this morning, when we worked through the details following the acquisition, we determined that SADA is not significant to Insight under SEC rules, and therefore, we're not planning to provide additional financial information.

Speaker Change: As we look towards 2024, we expect continued strength in software cloud and insight core services, both organically and with the acquisitions. We have made we anticipate cloud gross profit will grow in excess of 35% and insight core services GP will also grow in <unk>.

Speaker Change: Excess of 20%, we believe our pricing and profitability initiatives are now part of our operating rhythm and the improvements in our gross margin profile should continue in 2024 and beyond.

Speaker Change: We expect our clients remain cautious with their spending particularly in the first half.

Speaker Change: We anticipate modest sequential improvement in device demand with a stronger second half driven by an upcoming refresh cycle based on our conversations with our partners and clients.

Speaker Change: We expect our business will strengthen throughout the year, we expect side it will be accretive to our results and meaningfully contribute to gross margin expansion and operating cash flow.

Glynis A. Bryan: As we look towards 2024, we expect continued strength in software, cloud, and Insight core services, both organically and with the acquisitions we have made. We anticipate cloud gross profit will grow in excess of 35%, and Insight core services GP will also grow in excess of 20%. We believe our pricing and profitability initiatives are now part of our operating rhythm, and the improvements in our growth margin profile should continue in 2024 and beyond. However, we expect our clients to remain cautious with their spending, particularly in the first half.

Speaker Change: And in a more muted way to adjusted EBITDA margin expansion.

Speaker Change: So it has higher operating expenses as a percentage of revenue and as a percentage of gross profit and this will drive higher operating expense growth in 2024 compared to gross profit growth.

Speaker Change: As we think about our guidance for the full year of 2024.

Speaker Change: We expect to deliver gross profit growth in the mid to high teens range and expect that our gross margin will be approximately 19% we.

Speaker Change: We expect that operating expenses will grow at a higher rate than gross profit.

Glynis A. Bryan: We anticipate modest sequential improvement in device demand with a stronger second half driven by an upcoming refresh cycle based on our conversations with our partners and clients. We expect our business will strengthen throughout the year. We expect SADA to be accretive to our results and meaningfully contribute to gross margin expansion and operating cash flow, and in a more muted way to adjust it even more. SADA has higher operating expenses as a percentage of revenue and as a percentage of gross profit, and this will drive higher operating expense growth in 2024 compared to gross profit growth, as we think about our guidance for the full year of 2024. We expect to deliver gross profit growth in the mid- to high-teens range and expect that our growth margin will be approximately 19 percent. We expect that operating expenses will grow at a higher rate than gross profit. And we expect adjusted diluted earnings per share for the full year will be between $10.50 and $10.80, which represents a 10% growth at the midpoint.

Speaker Change: And we expect adjusted diluted earnings per share for the full year will be between $10 50.

Speaker Change: And $10 87, which represents a 10% growth at the midpoint.

Speaker Change: With the impact of side of seasonality, we anticipate that insights Q1, adjusted diluted earnings per share will be flat.

Speaker Change: Compared to last year.

Speaker Change: And we expect that Q4 will now be the largest quarter in all respects in terms of net sales gross profit gross margin adjusted EBITDA and adjusted diluted EPS.

Speaker Change: This guidance includes interest expense between.

Speaker Change: <unk> $40 $42 million and effective tax rate of 26% for the full year capital expenditures of $50 million to $55 million and average share count for the year of $35 2 million shares.

Speaker Change: This outlook excludes acquisition related intangible amortization expense of approximately $60 million assumes no acquisition related or severance and restructuring and transformation expenses and assumes no meaningful change in our debt instruments are the macroeconomic outlook I will now turn the call back to Jay.

Speaker Change: Goodness.

Jay: We are pleased with the numerous foundational improvements we made in 2023 and our results demonstrate the resilience of our business, we have accelerated our pricing and profitability programs enhanced our ecommerce platform expanded our leadership team invested in our internal systems to increase productivity and improved our cost structure.

Glynis A. Bryan: With the impact of thawed seasonality, we anticipate that Insight's Q1 adjusted diluted earnings per share will be flat, and Prepared2Live. And we expect that Q4 will now be the largest quarter in all respects in terms of net sales, gross profit, gross margin, adjusted EBITDA, and adjusted diluted EBITDA. This guidance includes interest expense between $40 and $42 million, an effective tax rate of 26% for the full year.

Jay: Additionally, we acquired two strategic cloud and services companies. These improvements coupled with our focus on the fastest growing areas of our market position us well for the future.

Jay: We have a healthy balance sheet and our business to deliver strong cash flow, giving us the capacity to fund our capital allocation priorities, particularly strategic acquisitions to drive long term profitable growth and return capital to our shareholders.

Joyce Mullen: Capital expenditures of $50 to $55 million, and an average share count for the year of 35.2 million shares. This Outlook excludes acquisition-related and tangible amortization expense of approximately $60 million, assumes no acquisition-related or severance and restructuring and transformation expenses, and assumes no meaningful change in our debt instruments or the macroeconomic outlook. I will now turn the call back to Joyce. Thanks, Glynis. We are pleased with the numerous foundational improvements we made in 2023, and our results demonstrate the resilience of our business. We have accelerated our pricing and profitability programs, enhanced our e-commerce platform, expanded our leadership team, invested in our internal systems to increase productivity, and improved our cost structure. Additionally, we acquired two strategic cloud and services businesses.

Jay: We recognize the market will remain challenged in the short term, but believe our portfolio of solutions gives us the resiliency to navigate through this economic cycle and the long term dynamics of the industry are very strong and we believe we are well positioned to drive profitable growth.

Jay: Our performance over the past year in the face of a difficult hardware demand environment has reinforced our confidence in our strategy and ability to deliver outcomes to our clients.

Speaker Change: In closing I want to thank our teammates for their commitment to our clients partners and each other our clients for trusting insight to help them with their transformational journeys our partners for their continued collaboration and support in delivering innovative solutions to our clients. This concludes my comments and we will now open the line for your questions.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question. Please press star followed by one on your kind of thing keypad.

Speaker Change: If you do change your mind any time I would like to meet you request. Please press star followed by T.

Joyce Mullen: These improvements, coupled with our focus on the fastest-growing areas of the market, position us well for the future. We have a healthy balance sheet, and our business delivers strong cash flow, giving us the capacity to fund our capital allocation priorities, particularly strategic acquisitions, to drive long-term profitable growth and return capital to our shareholders. We recognize the market will remain challenged in the short term, but we believe our portfolio of solutions gives us the resiliency to navigate through this economic cycle. And the long-term dynamics of the IT industry are very strong, and we believe we are well positioned to drive profitable growth. Our performance over the past year in the face of a difficult hardware demand environment has reinforced our confidence in our strategy and ability to deliver results to our clients.

Speaker Change: We will pause for a moment whilst questions are registered.

Speaker Change: We have the first question from Joseph <unk> from J P. Morgan.

Joseph: Your line is now open.

Joseph: Okay.

Joseph: Good morning, everyone and thanks for the question. So maybe first question here Big picture question.

Joseph: We're sitting here two months into the new year can you just touch on how your customer R&D budgets are shaping up for 2024, and a sense of whether you've seen an expansion or contraction relative to 2023.

Joseph: And then within that budget framework, what are you seeing as the key investment priorities for 24 and have you seen any.

Joseph: Dramatic shifts in key focus areas for your customers like for example, AI for it.

Joseph: Acuity or some.

Joseph: Some other infrastructure areas, just curious if youre seeing any dramatic shifts in terms of priorities and then I have a follow up on the guidance. Thanks.

Joyce Mullen: In closing, I want to thank our teammates for their commitment to our clients, partners, and each other. Our clients for trusting Insight to help them with their transformational journey, and our partners for the continued collaboration and support in delivering innovative solutions to our clients. This concludes my comments, and we will now open the line for your questions. Thank you, and Woodlight, press star followed by one on your telephone.

Joseph: Yeah.

Speaker Change: Hi, Joe Good morning.

Speaker Change: So when we think about our 2024 sort of trajectory are just as good as I was saying I mean, it's really we're seeing some improvement sequentially, but we expect the first half to be a little bit lighter and we expect more strength in the second half and that's playing out certainly with what we're seeing in the first couple of months in terms of budge.

Joseph Cardoso: If you do change your mind at any time and would like to remove your request, please press star followed by. We will pause for a moment while the questions are ready. We have the first question from Joseph Cardoso from JP Morgan. Your line is now open. Good morning, everyone, and thanks for the question.

Speaker Change: Priorities were.

Speaker Change: Well I should also note that we are seeing a bit more optimism in the commercial segment, which is kind of typical for an economic recovery because we generally see smaller customers recover.

Joyce Mullen: So maybe my first question here, the big picture question, you know, as we're sitting here two months into the new year, can you just touch on how your customer IT budgets are shaping up for 2024 in the sense of whether you've seen an expansion or contraction relative to 2023? And then within that budget framework, what are you seeing as the key investment priorities for 2024? And have you seen any, you know, dramatic shifts in key focus areas for your customers, like, for example, AI for security or, you know, some other infrastructure areas? Just curious if you're seeing any dramatic shifts in terms of priorities. And then I will follow up on the guidance. Thanks. Hi Joe.

Speaker Change: Recover sooner and it takes a little while for that to to lead into the enterprise space and so I would say we're also seeing that in terms of budget priorities no real changes from where we've been over the last couple of quarters I mean lots of interest of course in prioritization around security we have seen.

Speaker Change: As Glenn noted some softening in the infrastructure space and that's really digestion of all of the deliveries that we shipped over the.

Speaker Change: Past year frankly.

Speaker Change: And we are we are seeing a bit more interest in device refresh as windows 11 sort of looms, but also AIP CS are are pretty interesting to our clients and this notion of edge edge, our management of smaller and large lot small language models.

Joyce Mullen: Good morning. You know, so when we think about our 2024 sort of trajectory, just as Glynis was saying, I mean, we're really seeing some improvement sequentially, but we expect this first half to be a little bit lighter, and we expect more strength in the second half, and that's playing out certainly with what we're seeing in the first couple of months. In terms of budget priorities, I should also note that we are seeing a bit more optimism in the commercial segment, which is kind of typical for an economic recovery because we generally see smaller customers recover sooner, and it takes a little while for that to lead into the enterprise space, and so I would say we're also seeing that.

Speaker Change: Language models.

Speaker Change: So I think no real dramatic changes except for infrastructure softening as we digest the deliveries that we talked about.

Speaker Change: Yeah.

Speaker Change: Yeah, Yeah yeah.

Speaker Change: The color was also influenced by the way are probably more backend loaded for sure and then the other thing we should probably noticed now now everybody's notebook fleets are getting pretty old. So I think that's also driving some of the interest in device refresh we expect that more to be stronger in the back half of the year.

Speaker Change: Got it I appreciate the color there and then just my next question on the guidance.

Joyce Mullen: In terms of budget priorities, there are no real changes from where we've been over the last couple of quarters. I mean, lots of interest, of course, in prioritization around security. We have seen, as Glynis noted, some softening in the infrastructure space, and that's really digestion of all of the deliveries that we shipped over the last, past year, frankly, and we are seeing a bit more interest in device refresh, as Windows 11, sort of looms, but also AI PCs are pretty interesting to our clients, and this notion of edge management of smaller and large, small language models, large language models, so I think no The AI team is also, just by the way, probably more backend-loaded, for sure.

Speaker Change: Gross profit growth you're embedding into the full year is quite robust I think most of us were a bit surprised to see the expectation for operating expense to a piece of it particularly just given the execution relative to operating leverage over the past two years can you maybe just double click there and provide more granularity where those investments are being made and probably more importantly, how should we should.

Speaker Change: About the transitory nature of them versus say structural thanks, I appreciate the questions guys.

Speaker Change: Okay, So Alex when Im sorry.

Speaker Change: Joe.

Speaker Change: What I would say is when you look at when you look at the guidance implies embedded in there is our organic business is maintaining the standard insight trajectory at.

Joyce Mullen: And then the other thing we should probably note is that now everybody's notebook fleets are getting pretty old, so I think that's also driving some of the interest in device refresh. We expect that to be stronger in the back half of the year.

Speaker Change: Low single digit mid to low single digit increase in SG&A, what youre seeing is the impact primarily of Sada, which does have higher SG&A growth relative to GP growth in the 11 months that we have of that in in 2027, thats driving that impact. The 2024, that's driving that impact I apologize that's driving.

Glynis A. Bryan: And then just my next question on the guidance, you know, while the gross profit growth you're embedding into the full year is quite robust, I think most of us were a bit surprised to see the expectation for operating expense to outpace it, particularly just given the execution relative to operating leverage over the past two years. Can you maybe just double-click there and provide more granularity where those investments are being made? And probably more importantly, how should we think about the transitory nature of them versus, say, structural?

Speaker Change: That impact so we anticipate that we didn't do the Santa acquisition for cost synergies, we did it for the strategic impact on the revenue synergies that we thought we could get with being a robust multi cloud provider. We will take a look at SG&A over the next year or so but for the main.

Glynis A. Bryan: Thanks. I appreciate the questions, guys. What I would say is when you look at the guidance, embedded in there is our organic business maintaining the standard insight trajectory at a mid to low single-digit increase in SG&A. What you're seeing is the impact primarily of SADA, which does have higher SG&A growth relative to GP growth and the 11 months that we have of that in 2027 that's driving that. The ongoing... 2024. 2024. That's driving that impact. I apologize.

Speaker Change: 2024 year, we anticipate that we will be much more focused on revenue synergies and we will be on opex synergies associated with China and.

Speaker Change: And we'll address it overtime.

Speaker Change: Got it.

Speaker Change: Based on what you guys despite that despite the lower organic.

Speaker Change: Growth rates.

Speaker Change: If you look at North America, North America, SG&A is down year over year, we made some reductions in North America in 2023, specifically to free up dollars to make investments in the technical areas and sales areas.

Speaker Change: Going forward in 2024.

And we're still continuing with those.

Speaker Change: Yeah.

Thank you I appreciate it.

Speaker Change: Thank you.

We have the next question from.

Matt Sheerin: Matt Sheerin with Stifel.

Glynis A. Bryan: That's driving that impact. So we anticipate that... We didn't do the SADA acquisition for cost synergies; we did it for the strategic impact and the revenue synergies that we thought we could get with being a robust multi-credit provider. We'll take a look at SG&A over the next year or so, but for the main... 2024, we anticipate that we will be much more focused on revenue synergies and will be on optic synergies associated, and we'll address it all. Got it, thanks, appreciate the call you guys. Despite that, yeah, despite the lower organic growth rates, we took, you know, if you look at North America, North America, SG&A is down year over year; we made some reductions in North America in 2023, specifically to free up dollars to make investments in the technical areas and sales areas going forward, and we're still continuing with those. Thank you.

Matt Sheerin: You May proceed with your question.

Matt Sheerin: Yes. Thank you good morning.

Matt Sheerin: A couple of questions from me first in terms of the hardware or the decline that you've seen.

Matt Sheerin: It looks like it actually accelerated.

Matt Sheerin: And year over year, particularly in North America, and I know part of that was on the infrastructure side was that the first down quarter year over year in terms of infrastructure, particularly in networking.

Matt Sheerin: And what's your sense of how many quarters, it's going to take before you start to see that recover.

Speaker Change: Hi, Matt.

Matt Sheerin: So infrastructure I mean, so we started just to remind you we started shipping backlog basically in Q1 of last year and ship backlog all the way through about Q3.

Matt Sheerin: Backlog is largely normalize I think when we talked to you at the end of Q3.

Glynis A. Bryan: Thank you. We have the next question from Matt Sheerin of Stifel.

Matt Sheerin: And we saw it infrastructure decline in Q4, and so so we expect that that will be soft for a few quarters.

Matt Sheerin: You may proceed with your call. Yes, thank you. Good morning.

Matt Sheerin: A couple of questions for me. First, in terms of the hardware decline that you've seen, it looks like it actually accelerated year over year, particularly in North America. I know part of that was on the infrastructure side. Was that the first down quarter year over year in terms of infrastructure and particularly networking? And what's your sense of how many quarters it's going to take before you start to see that recover? Matt.

Matt Sheerin: And that's really just everyone digesting.

Matt Sheerin: The equipment that they've acquired during the last year is kind of the same same.

Matt Sheerin: Same sort of shape of demand that we saw with devices. It just happens now that we're starting to see sequential improvement in devices, and we expect that to strengthen through the back half of the year.

Matt Sheerin: Okay.

Matt Sheerin: Correct.

Matt Sheerin: Right.

Speaker Change: Yeah, sorry go ahead.

Speaker Change: No I am sorry, you said you expect to grow later this year.

Joyce Mullen: So infrastructure, I mean, just to remind you, we started shipping backlog basically in Q1 of last year and shipped backlog all the way through about Q3. Backlog had largely normalized, I think, when we talked to you at the end of Q3. And we saw infrastructure decline in Q4. And so we expect that that will be soft for a few quarters. And that's really just everyone digesting the equipment that they acquired during the last year.

Speaker Change: Yeah mid single digits.

Speaker Change: Oh got it.

Speaker Change: Yes client devices is growing faster.

Speaker Change: What does the attach rate I know that in the solution side. There is a good attach rate of services and other things I know theres, some attach rate to client devices, but in terms of how the gross margin shakes out is it is it greater for the infrastructure side, so that that could be a little bit of a headwind on gross margin.

Joyce Mullen: It's kind of the same, same sort of shape of demand that we saw with devices. It just happens now that we're starting to see sequential improvement in devices, and we expect that to strengthen through the PAC effort. Okay, so like a three-quarter lag. Sorry, go ahead. No, I'm sorry, did you say you expected Hardenware to grow later this year? Yeah, mid-single-digit.

Speaker Change: So gross margin on devices is lower than the hardware gross margin on infrastructure. There is significant on attachment of services and devices are generally a bigger part of the business than infrastructure. So we expect that device recoveries should help services.

Glynis A. Bryan: All in. Got it. And that's... Yeah, and if client devices are growing faster, what's the attach rate? I know that on the solution side, you know, there's a good attach rate of services and other things. I know there's some attach rate to client devices, but in terms of how the gross margin shakes out, is it greater for the infrastructure side?

Speaker Change: Overall.

Speaker Change: Strong margin and and by the way we've put in as we've mentioned a few times profitability at pricing programs on hardware that we expect to continue.

Speaker Change: Got it Okay, and then it looks like Youre guiding share count for the year up.

Speaker Change: 700000 shares or so.

Glynis A. Bryan: So that could be a little bit of a headwind on gross margin, because the gross margin on devices is lower than the hardware gross margin on infrastructure. There is a significant attachment of services, and devices are generally a bigger part of the business than infrastructure. So we expect that device recovery should help services overall. And by the way, we've put in, as we've mentioned a few times, profitability and pricing programs on hardware that we expect. Got it.

Speaker Change: Glenn This is the right number for the first quarter and is that is that increase due to the.

Speaker Change: The converts and could you walk us through the mechanics there.

Glenn Brian: Yes, we have a schedule in the back that can help you walk in the back of the presentation that can help walk you through the mechanics, we will be doing a $335 million share repurchase is included in the guidance and then the share count that you you have there and we will evaluate our stock price goes relative to the warrants that really triggered that.

Matt Sheerin: Okay. And then it looks like you're guiding the share count for the year up 700,000 shares or so. What's the right number for the first quarter? And is that increased due to the conversions? And could you walk us through the mechanics there?

Glenn Brian: Increase in the share count as we go throughout the year and would be willing to make other adjustments as we go forward. The three 5 million purchases primarily around equity dilution.

Glenn Brian: Offsetting equity dilution and we're doing that in Q1, and we're doing that in Q1.

Speaker Change: Got it okay and just if I can ask another question regarding gross margin just because of the significant impact from side last quarter. I think you said 110 basis points.

Glynis A. Bryan: Yes, we have a schedule in the back of the presentation that can help walk you through the mechanics. We will be doing a $35 million share repurchase, it is included in the guidance and in the share count that you have there, and we'll evaluate where our stock price goes relative to the warrants that really trigger the increase in the share count as we go throughout the year and would be willing to make other adjustments as we go forward, but the $35 million purchase is primarily around, Okay, and just if I can ask another question regarding gross margin, just because of the significant impact from SADA last quarter, I think you said 110 basis points. So I guess right off the bat, we wouldn't expect that decline, but it could be greater, right? Because their gross margin is much lower seasonally, correct? No, so the seasonal impact façade is driven because revenue and GP, the dollars, are lower in the first quarter and second quarter than they are in the second half of the year, in Q3 and in Q4, and essentially, SG&A is flat.

Speaker Change: So I guess right off the bat, we wouldn't expect that.

Speaker Change: <unk> declined but it could be greater right because their gross margin is so much lower seasonally you're correct.

Speaker Change: No so the seasonal impact.

Speaker Change: Is driven because revenue and GP dollars are lower in the first quarter and second quarter than they are in the second half of the guide in Q3 and in Q4 and essentially SG&A is flat. So the impacts of Saada in Q1 is really much more around the the.

Speaker Change: EBIT impact that they will have on us relative to the negative.

Speaker Change: Got it.

Speaker Change: Because of the Opex, okay in the office.

Speaker Change: Because of the Opex, yes, yes, but it's not going to be a decline in GDP, but but overall remember we got the strongest quarter of sada.

Speaker Change: In the second strongest month Asada in December so the SG&A in <unk> and it had an impact of 110 basis points, but I wouldn't want you to think that every quarter is going to be 110 basis points.

Glynis A. Bryan: So the impact façade in Q1 is really much more around the, um..., eBit impact that they will have on us relative to the negative... I got it. Because of the OPEX. Okay. Because of the OPEX.

Speaker Change: Which is why we got it Doug.

Speaker Change: 19% range right.

Speaker Change: Got it exactly okay. Thank you very much.

Speaker Change: Thank you Tom investing during periods of.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: We have the next question from Adam Tindle Raymond James.

Glynis A. Bryan: Because of OPEX, yeah. Yeah, but it's not going to be a decline in VPE. But overall, remember we got the strongest quarter of SADA, the strongest month of SADA in December. So the SG&A, and it had an impact of 110 basis points, but I wouldn't want you to think that every quarter..., which is why we work by margins at a 19% rate. Got it. Exactly. Okay. Thank you very much.

Adam Tindle: You May proceed with your question.

Adam Tindle: Okay. Thank you. This is Jake <unk> on for Adam I, just wanted to start on linearity in the quarter.

Jake: We heard from some peers that the month of December was weaker than anticipated then they didn't see the budget flush. They were expecting can you just touch on the environment you saw.

Jake: In the core business in December and how about.

Speaker Change: No played into your 2024 outlook. Thank you.

Speaker Change: Yeah, Thanks, Jake yes.

Speaker Change: Would agree with that that's exactly what we thought we didn't expect as much budget flush as we had seen in previous years, but we.

Adam Tyndall: Thanks. We have the next question from Adam Tyndall of Raymond James. Adam, you may proceed. Okay, thank you. This is Jake Norrison on behalf of Adam.

Speaker Change: Definitely saw softness in December, particularly on the infrastructure.

Operator: I just wanted to start on linearity in the quarter. We heard from some peers that the month of December was weaker than anticipated, and they didn't see the budget flush they were expecting. Can you just touch on the environment you saw in the core business in December and how that played into your 2024 outlook? Thank you. Yeah, thanks Jake. Yeah, we would agree with that. It's exactly what we saw.

Speaker Change: And although we're seeing we saw some sequential increase in Q4 associated with devices, it's still down on a year over year basis and as you go into 2024, we do believe that we'll see some strengthening in hardware specifically devices throughout the year.

Speaker Change: And there's some sequential improvement in hardware and between Q4 and Q1, but its still ultimately muted and down relative to the product relative to the first half of 2023.

Glynis A. Bryan: We didn't expect as much budget flush as we had seen in previous years, but we definitely saw softness in December, particularly on. And although we saw some sequential increase in q4 associated with devices, it's still down on a year over year basis. And as you go into 2024, we do believe that we'll see some strengthening in hardware, specifically devices throughout the year. And there's some sequential improvement in hardware between q4 and q1, but it's still ultimately muted and down relative to the prior relative to the first half of 2020. Got it, that makes sense. And then last one for me, just double clicking on that.

Speaker Change: Got it that makes sense and then last one for me just double clicking on that one.

Speaker Change: What exactly is this 19% gross margin contemplating in terms of return of returned to device spending.

What are you guys hearing I know you mentioned that there's sort of AI enabled computers coming out.

Speaker Change: What are you guys contemplating in terms of the return to device spending.

Speaker Change: The concert relative to price increases thank you.

Speaker Change: So so when we think about the device. So first of all we think devices are going to improve sequentially, but as Glenn has just said they are down still.

Glynis A. Bryan: What exactly is this 19% gross margin contemplating in terms of return on return to device spending? What are you guys hearing? I know you mentioned that this sort of AI-enabled computers are coming out, but what are you guys contemplating in terms of a return to device spending in concert relative to price increases? So, when we think about the device, first of all, we think devices are going to improve sequentially, but as Glynis just said, they're still down. We expect them to be in some sort of growth spurt, growing in the back half of the year. Overall, we expect hardware to grow mid-single year. When it comes to devices, we believe that, First of all, everybody's got notebooks now, and there are many fewer desktops. The life of notebooks is generally shorter. Those notebooks are aging.

Speaker Change: We expect them to be in sort of the growth.

Growing in the back half of the year overall, we expect hardware to grow mid single digits.

Speaker Change: When it comes to devices, we believe that first of all everybody's got notebooks now.

Speaker Change: Many of your desktop the life of notebooks is generally shorter those notebooks are aging and theres a lot of interest in AI enabled Pcs, but also refresh due to windows 11, and also everyone needs to be able to operate in a hybrid environment and so there's improvements around quality sound top quality.

Speaker Change: Cameras et cetera et cetera.

Speaker Change: So the asps are likely to be higher and that will help us.

Speaker Change: Perfect. Thank you.

Speaker Change: Thanks Jake.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Next question.

Speaker Change: Okay.

Your next question comes from Anthony Netherlands from Sidoti <unk> Company.

Joyce Mullen: And there's a lot of interest in AI-enabled PCs, but also due to Windows 11. And also, everyone needs to be able to operate in a hybrid environment. And so there are improvements around quality, sound quality, cameras, etc, etc. So the ASPs are likely to be higher, and that will help us. Perfect, thank you.

Anthony Netherlands: Good morning, and thank you for taking the questions. So firstly I just wanted to follow up on the.

Anthony Netherlands: Last.

Anthony Netherlands: Person asking the question about the AI enabled Pcs is that something that you have in your conversations with your customers.

Operator: Next question. Thank you. Your next question comes from Anthony Lebedinsky from Sudoki and Company. Good morning, and thank you for taking the questions.

Anthony Netherlands: Have they brought up.

Anthony Netherlands: Topic.

Anthony Netherlands: Arms.

Anthony Netherlands: Actually do you think that there is pent up demand for that and.

Anthony Lebedinsky: So first, I just wanted to follow up on the last person asking the question about the AI-enabled PCs. Is that something that you, in your conversations with your customers, have they brought up that topic, you know, as far as, you know, are they, is there actually, do you sense that there's pent-up demand for that? And do you think that's part of the reason why you haven't seen devices come back? Is it just that customers are waiting for those AI-enabled PCs? Anthony, I would not say that.

Anthony Netherlands: Do you think that's part of the reason why.

Anthony Netherlands: Haven't seen devices come back its just yet.

Speaker Change: <unk> are waiting.

Speaker Change: For those AI enabled Pcs.

Speaker Change: Anthony I would not say that.

Anthony Netherlands: I think we're at the beginning of the beginning of this journey I sort of period. So I think a very customers are very very interested in understanding what it can do they are trying to understand things like security and policy governance training change management, how to make sure their data set up theres lots of.

Joyce Mullen: I think we're at the beginning of the beginning of this Gen-AI sort of period, so I think customers are very, very interested in understanding what Gen-AI can do. They are trying to understand things like security and policy, governance, training, change management, how to make sure their data is set up. There are lots and lots of questions.

Anthony Netherlands: Lots of questions, we're spending a lot of time on this with our clients.

Joyce Mullen: We're spending a lot of time on this with our clients, but I don't think that is materially impacting spend yet in sort of standard customers. Of course, there are a lot of people buying chips and a lot of people building data centers and things like that, but in terms of sort of normal enterprises and organizations, I would not say that that is driving it. I think the caution, the overall macro caution, is driving some delay in spending, and lots and lots of our customers are just trying to figure out how their year is going to shake out, and I think that is the big issue. I think there is a forcing function in the back half of the year, primarily around refresh and also around Windows 11, that we're starting to hear lots of questions about that, and this AI PC, I think, is going to help us with I don't think that's a driving factor of the caution.

But I don't think that is materially impacting spend yet in sort of standard customers of course, there's a lot of people buying chips and a lot of people building data centers and things like that but but in certain in terms of sort of normal enterprises and organizations I would not say that that is driving it I think.

Anthony Netherlands: I think the caution in the you know the overall macro caution is is driving some some.

Anthony Netherlands: Delay in spending and lots and lots of our customers are just trying to figure out how they are other years going to shakeout.

Anthony Netherlands: And I think that is that the big issue I think there is a forcing function in the back half of the year primarily around refresh.

Anthony Netherlands: And also around around Windows 11 that we were we're starting to hear lots of questions about that and this AIP C. I think is going to help us with with certain a certain segment of our customer base as they use cases become clearer in the value has become it becomes more obvious.

Anthony Netherlands: Would not call that a I don't think that's the driving factor of the caution and the spend on devices.

Speaker Change: Okay. Thanks for that color and definitely appreciate that and then.

Glynis A. Bryan: Okay, thanks for that color. I definitely appreciate that. And then also, just overall, in terms of thinking about the guidance that you provided for this year for gross profit and operating expense growth, I guess, as we move beyond this year, would it be reasonable to assume that your operating expenses would grow at a lower rate than gross profit growth? Just, you know, in terms of looking at your 2027 KPIs, I would think that once you get into next year, your operating expenses would grow at a more modest rate than Is that the right way to think about that?

Speaker Change: Also.

Speaker Change: Just overall in terms of thinking about that.

Speaker Change: The guidance that you provided for this year for gross profit and operating expense growth I guess as we move beyond this year would it be reasonable to assume that your operating expenses would grow at a lower rate than gross profit growth just looking.

Speaker Change: Looking at your 2027, Tpi's I would think that.

Speaker Change: Once you get into next year your operating expenses should grow at a more modest rate.

Speaker Change: Gross profit growth.

Speaker Change: Great way to think about that.

Speaker Change: Absolutely and that is really driven by the continued growth in cloud and services and software like we've been talking about the fastest are the fastest growing areas of the market there, it's where our customers need the most help and also normalizing opex as we learn more about how to manage these businesses for sure.

Glynis A. Bryan: Absolutely. And that is really driven by the continued growth in cloud and services and software, as we've been talking about the fastest areas, the fastest growing areas of the market, areas where our customers need the most help. And also normalizing OP access, we learn more about how to manage these businesses, for sure. That is consistent with our KPIs that we put out in October. Okay. And just a quick balance sheet question. So there was a big spike in long-term accounts receivable and long-term accounts payable. Is this because of SADA, or is there something else driving that?

Speaker Change: Consistent with our Kpis that we put out in October of 2022.

Speaker Change: Understood and just a quick balance sheet question. So there was a big spike in long term accounts receivable and long term accounts payable is this because of sada or is there something else driving that.

Speaker Change: Yes, it's primarily related to the <unk> acquisition in terms of how we are reflecting the committed contract terms on our books.

Glynis A. Bryan: Yes, it's primarily related to the SADA acquisition in terms of how we are reflecting the committed contract terms on our books. I can walk you through that in more detail if you'd like, but that is generally related to the Accounting Mechanics Association. Understood. Okay. Well, thank you very much and best of luck. Thanks, Anthony. We now have a good question from the line of Vincent Colascio from Barrington Research. Please, your line is now open.

Speaker Change: I can walk you through that in more detail if you'd like.

Speaker Change: Weighted to the accounting mechanism mechanics asada.

Speaker Change: Understood. Okay, well, thank you very much and best of luck.

Speaker Change: Thanks, Anthony appreciate it.

Speaker Change: Thank you.

Speaker Change: Hi.

Speaker Change: The question from the line of Vincent Colicchio from Barrington Research.

Speaker Change: Please.

Vincent Colicchio: Line is now open.

Vincent Colascio: A question on the pricing and profitability initiatives: did they perform as expected in the quarter, or are there any areas of pushback? Yeah, I mean, they absolutely performed as per our expectations, and we're really pleased with those initiatives, and we think they have a lot of staying power. As Glynis said, we have built them into the mechanics of our operating rhythm, and we expect to drive continued improvement. And how do you feel about growth prospects in North America versus EMEA in 24? We expect North America to be stronger, and we expect every segment in North America to grow, but we also expect EMEA to improve as well. You had called out Enterprise Spend. Curious on S&B and government, anything to call out there? We are seeing sequential improvement in both, and we expect both to grow for the year. As I said earlier, SMB spend is usually a good indicator that the other segments will follow, and so we expect that to be true, and we're encouraged by what we're seeing in the SMB market.

Vincent Colicchio: On the pricing and profitability initiatives.

Did they perform as expected in the quarter.

Vincent Colicchio: Or are there any areas of pushback.

Speaker Change: Yeah, I mean, they absolutely performed that per our expectations and we're really pleased with those initiatives and we think they have a lot of staying power as I said, we have built them into the mechanics of our operating rhythm and and we expect to drive continued improvement there.

Speaker Change: And.

Speaker Change: How are you feeling about growth prospects in North America versus EMEA.

Speaker Change: Four.

Speaker Change: We expect North America to be stronger and we expect every segment in North America to grow, but we also expect demand to improve as well.

Speaker Change: Okay.

Speaker Change: You had called out.

Speaker Change: Enterprise spend curious on SMB and government anything to call out there.

Speaker Change: We are seeing sequential improvement in both and we expect both to grow for the year as I said earlier that you know F&B spend is usually a good indicator that the other segments will follow.

Speaker Change: And so we expect that to be true and we're encouraged by what we're seeing in the SMB space.

Speaker Change: Thank you.

Operator: Thank you. We have no further questions on the line, so I'd like to hand it back to the management team for any final remarks. Thank you very much to all of you for your questions and your interest. We are very excited about the opportunities ahead of us, and I look forward to sharing our continued progress on our journey to becoming the leading solutions integrator can now close the call operator. Thank you all again for joining today's conference call with Insight Enterprises. You may now disconnect your line and please enjoy the rest of your day.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: We have no further questions in the line so I'd like to hand, it back to the management team for any final remarks.

Speaker Change: Thank you very much to all of you for your questions and your interest we are very excited about the opportunities ahead of us and I look forward to sharing our continued progress on our journey to becoming the leading solutions integrator.

Speaker Change: Now close the call operator, thank you.

Speaker Change: Okay.

Speaker Change: Thank you thank.

Speaker Change: Thank you all again for joining today's conference call with insight enterprises.

Speaker Change: You may now disconnect your line and please enjoy the rest of your day.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.