Q1 2025 Insight Enterprises Inc Earnings Call
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Insight enterprises first quarter 2025 operating results, we're beginning shortly.
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Speaker Change: Hello, everyone and thank you for joining the insight enterprises first quarter tons 25 operating results Coke.
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Brian: I will now hand over to your host Brian <unk> to begin.
Ryan: Ryan. 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 March 31, 2025, I'm, Ryan <unk> Investor Relations director of insight and joining me is Joyce Mullen, President and Chief Executive Officer, and James Mercado.
Ryan: 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 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.
Ryan: It can also be accessed via the Investor Relations page of our website at insight dotcom, an archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time This conference call and the associated webcast contain time sensitive information that is accurate only.
Ryan: As of today May <unk> 2025. This call is the property of insight enterprises, any redistribution retransmission or rebroadcast of this call in any form without the expressed written consent of insight enterprises is strictly prohibited in today's conference call, we won't be referring to non-GAAP financial measures as we discuss the first quarter.
Ryan: 25 financial results when discussing non-GAAP measures, we will refer to them as adjusted you will find a reconciliation of these adjusted measures for 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.
Ryan: Last year, unless otherwise noted also unless highlighted as constant currency all amounts and growth rates discussed are in U S. Dollar terms as a reminder, all forward looking statements that are made during this conference call are subject to risks and uncertainties that could cause our actual results to differ materially.
Ryan: 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 statements made on this call whether as a result.
Ryan: Of new information future events or otherwise.
Ryan: With that I will now turn the call over to Joyce and if Youre following along with the slide presentation. We will begin on slide four joy.
Joyce: Thank you very much Ryan good morning, everyone and thank you for joining us today.
Joyce: Q1, we delivered adjusted earnings from operations and adjusted diluted earnings per share in line with our expectation.
Joyce: We were pleased with the continued hardware momentum led by commercial and corporate demand and our gross margin expansion. Although gross profit was slightly below our expectations, primarily due to product related services performance.
Joyce: <unk> expense management allowed us to achieve our profitability target specifically.
Joyce: Specifically in Q1 hardware revenue met our expectations with good performance in servers and storage along with continued recovery in devices cloud performance also met our expectations and the underlying SAS and infrastructure as a service gross profit grew 17% offset by the partner program changes we discussed previous.
Joyce: Lee.
Joyce: I'm kind of software revenue was down 32% due to a large transaction in Q1 2020 for making the comparison difficult.
Joyce: And in fact core services revenue was down 2% and below our expectations as our large enterprise clients delayed services projects due to lack of market clarity.
Joyce: Since our last earnings call the outlook for the macro environment has deteriorated, resulting in increased volatility and uncertainty.
Joyce: Never volatile market dynamics represented opportunity for insight given our low share position in a large and fragmented market. For example, as clients look with increased scepticism at complex contracts and entrenched service partners. We take a different approach we provide targeted solutions to specific business problems.
Joyce: <unk> delivered results fast and earn the right to do more this approach resonates with clients.
Joyce: For the year, our primary focus is accelerating profitable growth.
Joyce: First we are working closely with our partners and clients to navigate the supply chain and pricing environment with the understanding that trade policies can change rapidly.
Joyce: In addition, we are enhancing our consulting business engagement model by adopting the proven framework from our recent acquisitions, which have delivered exceptional client engagement scores. This framework includes adopting a more disciplined methodology and leverages Jenny I technologies to deliver a quick assessment of our clients' environments improve speed and effectiveness.
Joyce: It's a project scoping and define a roadmap of value creation projects and services.
Joyce: And finally as hardware demand returns, we are focused on driving attach services to hardware sales.
Joyce: We are also expanding programs with our distribution partners to further improve availability supply and to help with price uncertainty in the market increasing the frequency of our price monitoring and price adjustments across our product portfolio.
Joyce: And helping our clients optimize technology purchasing decisions, given tariffs and supply chain structures.
Joyce: In Q4 of last year, we adjusted our operating expense cost base in anticipation of demand challenges in the first half of 2025.
Joyce: As the year progresses, we will continue to make necessary adjustments.
Joyce: Despite the volatility and uncertainty in the market, we remain focused on our strategy to drive long term profitable growth and the fundamentals driving the tech industry continued to accelerate.
Joyce: I will be a huge driver of business process transformation for our clients. We are pleased to be a key partner with the leading AI platforms that will enable this change for example, as data volumes continue to grow exponentially clients turn to us to help provide actionable solutions, our data and AI teams guide clients.
Joyce: To process complex data at scale, enabling them to achieve business outcomes faster.
Speaker Change: Sure like the company is a leading creative studio serving top entertainment brands like Disney Hulu and ESPN.
Speaker Change: They faced a bottleneck and creating some nails for personalized recommendations each new campaign required days of manual image review. This labor intensive process limited content variation and engagement Sherlock turned to insight and eight time, Google cloud partner of the year to solve this problem and.
Speaker Change: A liver AI driven content creation.
Speaker Change: We implemented this AI solution, leveraging Google cloud vertex AI and Gemini to automatically analyze video content and extract on brand imagery, but once two days of manual effort now takes about 10 minutes.
Speaker Change: <unk> from this bottleneck sheer luck can now scale up creative personalization with minimal increases in cost their CEO summed it up best we anticipate we will save hundreds of hours of work per month, providing immediate value to our customers and the entertainment industry.
Speaker Change: As a result, we've become sherlock's primary AI innovation partner there are already multiple expansion opportunities in the pipeline to further optimize production workflow.
Speaker Change: In another instance of client encountered a common challenge faced by so many organizations disparate data silos that hinder effective analysis.
Speaker Change: Boeing resorts is one of north America's Premier hospitality companies with a dozen ski and golf destinations over 10000 employees and millions of guests annually. However.
Speaker Change: However, disconnected systems had created data silos that limited guest insights and put their guest first ethos at risk.
Speaker Change: Microsoft Architects developed a customer 360 platform to unify guest data from all sources into a single comprehensive customer record. We also guided boyd's transition from a monolithic system to a best of breed ecosystem incorporating data from multiple platforms, including E Commerce warehouse management.
Speaker Change: Solutions product management and data intelligence software, all designed for scalability and future flexibility.
Speaker Change: Armed with this new modern architecture Boeing is developing our my account application that gives guests a seamless digital experience in one consolidated view of all their interactions.
Speaker Change: <unk> VP of enterprise architecture called it a game changer.
Speaker Change: With the ability to attract guests activity across each touch point Boeing will be able to make smarter operational decisions to deliver more personalized guest experiences at scale quickly to meet changing market demands.
Speaker Change: These examples illustrate our broad capabilities, leveraging AI and our strong partner relationships to deliver quantifiable business outcomes to our clients.
Speaker Change: We take pride in the recognition of our efforts to develop and strengthen business relationships with these partners recently, we have been honored with the following accolades in 2025, Google partner of the year for Google Workspace, Intel U S data center partner of the year, highlighting our expertise in the infrastructure space.
Speaker Change: He said, Canada enterprise partner of the year showcasing our proficiency in a variety of enterprise security products, we have attained top tier status as an elite consulting partner with data bricks, a leader in data analytics and AI.
Speaker Change: And we have achieved five Google public sector partner expertise specializations in AI and ml data analytics maps, and geospatial security and work transformation essential components in deploying cloud environment.
Speaker Change: Our teammates are critical to delivering the value we create for our clients. We continue to foster an inclusive environment and insight has been recognized by various organizations, including Newsweek's America's greatest workplaces for diversity for 2025 best workplace for large companies in the Philippines, 2025, and a perfect score of 100 out of.
Speaker Change: 100 on the human rights campaign Foundation's 2025, corporate equality index.
Speaker Change: Finally, we are dedicated to leveraging technology to make a positive impact we are proud to present the progress we've made in our ongoing commitment to the UN global compact as described in our seventh annual corporate citizenship report.
Speaker Change: Now I'd like to share my thoughts on 2025.
Speaker Change: Entering the year, we anticipated demand with our large enterprise and corporate clients would remain challenged in the first half and hardware demand would build throughout the year.
Speaker Change: While we continue to believe that the second half will be stronger than the first we now see an added layer of complexity for the year with the impacts of tariffs potential supply chain disruptions and client spending patterns, the extent to which demand for products and services is impacted by the macro environment remains to be seen.
Speaker Change: Our view of the key puts and takes include the following mindsets and priorities have shifted from growth to cost management, but AI spend remains a priority firms are reallocating budgets from other segments to invest in AI.
Speaker Change: We're seeing delays in new projects and scaling back of current services projects and anticipate ongoing challenges, especially with our North America large enterprise clients.
Speaker Change: The drivers of hardware demand Windows, 11, and an aging installed base remain and we expect continued momentum throughout the year, we expect cloud gross profit to be flat to slightly down as we continue the pivot of our Microsoft and Google club businesses to the corporate and mid market space.
Speaker Change: And we remain diligent on expense management, while investing in strategic sales relevant services delivery and internal automation.
Speaker Change: As we navigate the near term challenges and fluctuations we are confident in the fundamental drivers of our industry. We continue to invest in areas that matter most to our clients cloud data AI edge and cyber the importance of digital transformation data accessibility and realizing the potential of Jenny I remain strong.
Speaker Change: With that I'll turn the call over to James to share key details of our financial and operating performance in Q1, 2025, as well as our outlook for 2025 James.
James: Thank you George and good morning, everyone.
James: Our Q1 adjusted earnings from operations and diluted earnings per share were in line with our expectations with gross profit slightly below offset by strong operating expense management.
James: Net revenue was $2 1 billion a decrease of 12% the decrease.
James: This was driven by a 13% decline in products, primarily due to on Prem software related to a large deal in Q1 2024 as well as the effects of a partner consolidation that's shifted gross product revenue to that agency services hardware revenue increased 1%. The first time in 10 quarters.
James: Gross profit decreased 8% due to partner program changes as well as a decline in on Prem software and agent services, primarily related to the large software deal in Q1 2024.
James: Hardware gross profit was down 1% driven by mix.
James: <unk> gross profit increased mid single digits, while infrastructure declined high single digits, primarily due to networking.
James: In fact core services gross profit was $73 million a decrease of 4% primarily due to a product attach services as large enterprise clients delayed projects.
James: Cloud gross profit was $103 million a decrease of 3% due to the decline in legacy Microsoft enterprise agreements and to a lesser extent a decline in our Google cloud business related to our pivot to the mid market.
James: This was in line with our expectations and as noted last quarter, we anticipate the headwind to be weighted more in the first half of the year.
James: Seth and infrastructure as a service increased 17% excluding the impact from the partner program changes, we described last quarter.
James: Gross margin was 19, 3% an increase of 80 basis points due to mix, primarily reflecting lower on Prem software.
James: Adjusted SG&A declined 5% driven by the actions we took in Q4 as we accelerated the integration of recent acquisitions.
James: This resulted in adjusted EBITDA of $111 million, a decrease of 16% while margin contracted 30 basis points to five 3%.
James: And adjusted diluted earnings per share were $2.06 down 13%. The decline was primarily due to lower gross profit, partially offset by lower adjusted SG&A share count and a favorable tax rate.
James: For the quarter, we generated $78 million of cash flow from operations for the year. We continue to anticipate cash flow from operations in the range of $300 million to $400 million.
James: Because at the end of Q1, we have $300 million.
James: Remaining for our share repurchase program, we intend to opportunistically repurchase shares while balancing organic and inorganic investments.
James: Our adjusted return on invested capital for the trailing 12 months at the end of Q1 was 14, 9% compared to 18% a year ago, reflecting the recent acquisitions.
James: In the quarter, we settled $333 million of convertible notes by utilizing our ABL facility.
James: In addition, we have associated warrants a portion of which we settled in cash or two one and the beginning of Q2 totaling $3 6 million warrants for $222 million.
James: We currently have approximately $1 5 million warrants remaining which we expect will mature or be settled before the end of the year.
James: We exited Q1 with total debt of $961 million compared to $882 million a year ago.
James: Over the last year, we spent $574 million on acquisitions share repurchases and the settlement of warrants while debt only increased $80 million.
James: As of the end of Q1, we had access to the full $1 8 billion capacity under our ABL facility of which $1 $3 billion was available we have ample liquidity to meet our needs.
James: Our presentation shows our performance through Q1 2025 relative to the metrics that we described at our Investor Day in October 2022.
James: On a trailing 12 month basis through Q1 here is the status.
James: Cloud gross profit growth of 14% core services gross profit growth of 8% adjusted EBITDA margin of six 2% adjusted diluted earnings per share a decline of 9%.
Adjusted ROIC of 14, 9%.
James: Adjusted free cash flow as a percentage of adjusted net income of 129%.
James: As we think about 2025, we have considered the following factors in our guidance.
And expect similar to our previous guidance in February our growth and profitability will be more heavily weighted towards the second half of the year as we navigate the partner program changes.
James: Specced hardware gross profit to grow in the mid single digits, we expect the man with our large enterprise clients to remain subdued, particularly impacting our core services business, which we anticipate will be stronger in the second half and grow in the single digits for the year.
We anticipate cloud to be flat to slightly down due to a decline of enterprise agreements and our pivot to the corporate and mid market space.
James: And we will continue to prudently manage SG&A expenses.
James: Considering these factors for the full year our guidance is as follows we expect to deliver gross profit growth in the low single digits and that our gross margin will be approximately 20%.
James: And we anticipate adjusted diluted earnings per share will be between $9 70 to $10.10.
James: This guidance includes interest expense between 70% to $75 million.
James: Effective tax rate of 45% to 26% for the full year capital expenditures of $35 million to $40 million at an average share count for the full year of $32 9 million shares reflecting the settlement of the remaining warrants associated with our convertible notes.
James: This average share count is a decrease of approximately 2 million shares from year end due to the warrants settled to date.
James: This outlook excludes acquisition related intangible amortization expenses of approximately $74 million assumes no acquisition related costs severance and restructuring or transformation expenses.
James: And assumes no change in our debt instruments and no meaningful change in the macroeconomic outlook either as a result of tariffs or otherwise.
Joyce: I will now turn the call back to Joyce Joyce. Thanks.
Joyce: Thanks, James while the current macro environment is uncertain, we remain confident in the long term drivers of our industry and in fact, the pace of innovation has been accelerating with the rise of journey, II and multi cloud environments and our clients need inside to navigate this increasingly complex set of choices.
Joyce: We continue to invest in our sales and technical resources improve our go to market execution and deepen our technical expertise in areas like cloud data AI edge in cyber. We're also driving deeper integration with our partners, who now more than ever need insight to integrate their offerings into solutions for our clients.
Joyce: This is our strategy to become the leading solutions integrator.
Joyce: I would like to thank our teammates for their unwavering commitment to our clients partners and each other our clients for trusting inside to help them with their transformational journeys and our partners for their continued collaboration and support in delivering innovative solutions to our clients. This.
Joyce: This concludes my comments and we will now open the line for your questions.
Joyce: Thank you Joyce.
Joyce: So I'll ask a question. Please press star followed by one on your telephone keypad now.
Joyce: If you change your mind, Please press star followed by <unk>.
Joyce: So ask your question please ensure devices on music locally.
Speaker Change: Our first question comes from Joseph Cardoso from J P. Morgan.
Speaker Change: Your line is open. Please go ahead.
Joseph Cardoso: Good morning, and thanks for all the details on the question here, but just maybe just the first one for me on the guidance you know, it's nice to see the reiteration here just given the macro but anecdotally. It also sounds like it's a much tougher backdrop than it was 90 days ago, exactly maybe tariffs larger customers seem to be <unk>.
Joseph Cardoso: So maybe you can just take a second and just flesh out in more detail, but from a high level, what's driving the confidence here to kind of reiterate or essentially get to the same outlook that you had 90 days ago. What are the key puts and takes that you think bally.
Joseph Cardoso: Balance each other off.
Joseph Cardoso: Do you think investors should essentially focused on that helps you achieve a similar guide from what you were thinking about you know when we last had lost earnings and then I have a follow up thank you.
Dave: Yeah, I'll start and then Dave you can chime.
Joseph Cardoso: Chime in.
Joseph Cardoso: Joe. Thank you very much for the question I have been spending a lot of time thinking about kind of the macro environment and the impacts that we see.
Joseph Cardoso: And theres been so much uncertainty that it's really hard for us to read either a very you know either a huge correction in either direction. So so if we stay kind of in the same environment that we're in today, we have a lot of reasons for optimism we're seeing good momentum in hardware spend we're seeing good momentum.
Joseph Cardoso: In AI interest and spend those are not yet big numbers for us on the services side, but we expect those to improve over time, we're seeing really good performance from the acquisitions that.
Joseph Cardoso: That we purchased last year and the year before so there's some really good reasons for optimism the drivers for device refresh remain those there's still runway there.
Joseph Cardoso: We're seeing pretty nice bookings are across the board in hardware as.
Joseph Cardoso: Decisions are being made around infrastructure and that's also an aging environment.
And then and then we have.
Joseph Cardoso: As we took that we as we talked about almost I think two quarters in a row around the partner program changes that impacted us last year and this first half of the year, especially but throughout the whole year.
Joseph Cardoso: We're managing managing through that quite effectively so.
Joseph Cardoso: That's why we're optimistic and of course, we have no crystal ball and we don't really know exactly what's going to happen with tariffs and the macro but if we stay sort of in this environment. Then we feel optimistic about the need for customers to spend money on technology to modernize and continue to improve there there are.
Joseph Cardoso: Their infrastructure and we're in a great position to do that.
Speaker Change: Joe I would just add to that and say that Q1, there were some puts and takes but largely wind up to our expectations. So seeing Q1 land.
Joseph Cardoso: On the cloud and partner program changes.
Joseph Cardoso: Q1 land into our expectations. There. That's obviously something we have to navigate through the year, but that gives us more confidence as we've navigated Q1.
Joseph Cardoso: And I am sure you or somebody else, who asked this question in terms of how Q2 is starting its early in the quarter, but but so far we're seeing the continued momentum in hardware at the start of.
Joseph Cardoso: Q2, as well so it gives us a little confidence in terms of.
Joseph Cardoso: The first half potentially shaping up to the way we have in our expectations.
Joseph Cardoso: No fair enough I appreciate the color and then maybe just a quick clarification.
Speaker Change: Obviously, you guys talked about some of the delays or pauses that youre seeing or hesitation that you're seeing from customers on the services side, but maybe if we switch gears on the hardware side, and particularly kind of the trends you saw in the first quarter, maybe second quarter. Today like are you seeing any demand pull in from the customers that you are servicing and then particularly like how has that progressed.
Speaker Change: So we kind of have gone through the first couple of months here in the year and then maybe more specifically if you are seeing any demand pull in or that type of behavior is it really focused on Pcs or are you seeing it broadly across the different categories that you guys surface on the on the infrastructure side as well. Thanks for the questions guys I appreciate it.
Speaker Change: Yeah, we saw some minimal pull ins in response to a threat of tariffs in Q1, but not not impactful.
Speaker Change: We see kind of the same trend in Q2, its mostly device related Joe, but it's you know.
Speaker Change: What we really think is driving this is.
Speaker Change: There is definitely and.
Speaker Change: General movement to figuring out how to improve and leverage AI technologies. Every single client is talking about it almost very very few clients have actually started working on it but they know that they have to have fairly robust infrastructure capability. They know they have to have improved data capability.
Speaker Change: And they know they need to make sure that their their teammates that can be productive with their devices. So I think that that's really driving the demand more than anything else.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Adam Tindle Raymond James.
Adam Tindle: Your line is open. Please go ahead. Thanks good morning.
Adam Tindle: Okay. Thanks, Good morning, good morning, I just wanted to.
Adam Tindle: To do it.
Speaker Change: Can you hear me.
Adam Tindle: Yes.
Adam Tindle: Yeah.
Adam Tindle: Okay.
Adam Tindle: Oh, sorry.
Adam Tindle: Airport at the moment.
Speaker Change: George I wanted to start or continue the conversation on hardware since I know you've got a long history in that space.
Speaker Change: In time periods like this where we've got tariffs announced what do you expect the.
Speaker Change: Vendor Oems to do as it relates to pricing going forward have you seen any of them begin to potentially raise is at this point and relatedly as you kind of think about that potential environment.
Speaker Change: And in the guidance for the year being a little bit more back half weighted.
Speaker Change: Stability, how are you thinking about the potential impact.
Speaker Change: The city of demand if we do experience.
Speaker Change: All right.
Speaker Change: Then I have a follow up.
Speaker Change: St put them, yeah, I mean, so the tariff response and preparation it depends on the OEM it depends on their supply chains and tests on their inventory positions. So we've seen.
Speaker Change: One or two Oems increased prices, we've seen a bunch of Oems talk about sort of restricting the validity of a timeframe of quotes things like that but I would say generally the pricing motion has been pretty subdued.
Speaker Change: And as I said that really depends largely on the kind of.
Where what their supply chain and other mix looks like what the mix looks like geographically.
Speaker Change: We spend a lot of time modeling the tariff impacts and trying to understand exactly what we would expect to see given what we learned in.
Speaker Change: About four or I guess eight years ago or when we dealt with this the last time and also frankly, we we use some of the same skills. During COVID-19 just because there was a similar type of impact.
Speaker Change: And generally if the tariff rates stay kind of where we think where they are today or are in that 10% range.
Speaker Change: Frankly, the impact on us as a slightly positive because asps go up and we generally pass on the cost cuts you are to our clients.
Speaker Change: Those tariffs increased beyond the dog in that 'twenty fiber.
Speaker Change: A much bigger range of of of impact then.
Speaker Change: The demand does get muted and not only that it starts to create even more uncertainty around the budget allocation capital allocation for for our clients. So that's.
Speaker Change: That's how we're thinking about it and right now as James said, we're assuming basically status quo and in our guide.
Speaker Change: Got it Okay, and then maybe just as a follow up on the services side of the house.
Speaker Change: You mentioned in a number of moving parts and things that Youre doing there I just would like to double click on why now what's happening there and if I look at some of the results of delivered services I think we're down mid single digits or so for example.
Speaker Change: What's happening in the environment to drive a little bit of the more challenge in the services business I wouldn't think that would be related to the partner program changes for example, but maybe if you could just sort of flush out.
Speaker Change: A bigger picture on the services piece.
Speaker Change: Where it goes from here thanks.
Speaker Change: Yeah, so the <unk>.
Speaker Change: Services pieces in.
Speaker Change: There are a bunch of moving parts. So we're very we're very pleased with the performance of our Saddam Doris and Info Center acquisitions, that's working very very well as we said the primary driver of the decline was product related services. So there's a couple of things going on there.
Speaker Change: James mentioned that you know what do you see that our device our hardware business was up which is but minimally so there's a little bit of a lag between but the hardware sale and the services attach. So there's that that is a big big focus for us, making sure that as that hardware business.
Speaker Change: And we're encouraged by the bookings in Q2 as James said, although it's early we expect to see that services business improve.
Speaker Change: We're also taking lessons in our consulting business broadly speaking.
Speaker Change: From one some of our acquisitions so we.
Speaker Change: We have learned that very strong methodologies lots of discipline as I described in my in my remarks, and are very very focused effort around scoping projects rapidly and keeping them small enough. So that they are digestible by our clients. So that we can follow up and earn the right to do more with exceptional execution really does.
Speaker Change: Work, we're applying those same methodologies to our entire consulting business and we're all very pleased with those results that retooling is happening now and and and I think we will we will absolutely deliver dividends. The only thing that we're doing around services I should.
Speaker Change: I wanted to mention is M&A continues to be a focus for us as we become and pivot to an AI first solutions integrator, we expect to continue to focus on data and AI and multi cloud cyber an edge, but we're also noting that there is an inextricable link between business process re imagination.
Speaker Change: And domain expertise and AI technology deployment in order to deliver those real outcomes that clients are looking for so we're in the process of building. These capabilities and we're very very excited about that and we think that has legs for a while.
Speaker Change: Thank you.
Harry Reid: Thank you next question comes from Harry Reid.
Speaker Change: Uh huh.
Speaker Change: Your line is open. Please go ahead.
Speaker Change: Hi, good morning. Thanks.
Speaker Change: So questions.
Speaker Change: So the UK is they've been saying obviously.
Speaker Change: Expectations, but the Microsoft Commission changes.
Speaker Change: Agreements.
Speaker Change: Other than expected.
Some areas I E.
Speaker Change: Clients, whether that be public private estimate et cetera.
Speaker Change: Im just wondering if you're seeing any differential.
Speaker Change: Bye.
Speaker Change: <unk>.
Speaker Change: And then the second one is just.
Speaker Change: You went through a little bit of restructuring costs.
Speaker Change: Head count just wondering how youre thinking about head count.
Speaker Change: Today, He's got more incremental information on how you expect the market to develop throughout the rest of 2025.
Speaker Change: Thanks, Harry I'll start with the first one and I'll turn it over to James for the head count conversation. So yes. We are so on the cloud on the cloud performance. Our cloud performance was in line with our expectations. We we.
Speaker Change: We expected some of.
Speaker Change: Those impacts that we talked about in our earnings call in February.
Speaker Change: We said the first half would be compares would be more difficult and that we would see improvement in the back half. We're pleased with the underlying SaaS and I ask growth at 17%.
Speaker Change: And that includes kind of the some of those.
Harry Reid: Commission changes as you called them Harry.
Harry Reid: Around the CSP products for example from Microsoft So.
Harry Reid: Those are in line with our expectations and so.
Harry Reid: So generally we are pleased with their cloud performance and expect that continue to improve throughout the year.
Harry Reid: And Harry from a from an SG&A standpoint.
Harry Reid: As you rightly mentioned, we took actions at the end of last year in anticipation of <unk>.
Harry Reid: Of the year and the headwinds that we're going to see in terms of the partner program changes pleased to see.
Harry Reid: Our performance in Q1 in terms of the discipline that we have around operating expenses.
Harry Reid: For the year, we're going to continue to be very disciplined around around our SG&A.
Harry Reid: <unk> expenses.
Harry Reid: We would expect that this year that our SG&A will grow slightly slower than our G. P.
Harry Reid: As well, we are expecting our long term model as well, but in terms of in terms of investments, we're continuing to make sure we preserve as much capacity for sales and our technical talent.
Harry Reid: We will watch that very carefully.
Harry Reid: As the year progresses, but we'll continue to be very disciplined around around SG&A.
Harry Reid: Right. Thank you.
Harry Reid: As a reminder to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Our next question comes from Vincent Colicchio from Barrington Research. Your line is open. Please go ahead.
Harry Reid: Okay.
Harry Reid: Yes.
Harry Reid: I'm curious if the market slows down.
Harry Reid: Versus expectations, what are some of the actions you want to take.
Harry Reid: Maybe.
Harry Reid: It says Oh offshoring more labor.
Harry Reid: Things of that nature.
Harry Reid: Yeah, I mean, we have an entire set of plans around significant downturns in the market that address our opex expense of course theres there.
Harry Reid: The the improvement that James alluded to in the SG&A effort that we have underway.
Harry Reid: <unk> largely are very much in process and so we have a pretty good playbook around that and yes, we have more room on an offshoring, we certainly have a lot more room on automation and we've launched an internal.
Harry Reid: Set of AI initiatives, which we're very very excited about to help us figure out how to improve our overall SG&A structure and leverage so.
Feel like we're well prepared for a for a cost management and improvement and we're going to take those actions with or without a downturn and if there's a downturn we would obviously execute those faster.
Harry Reid: And are you assuming that enterprise spending on services remains weak for the balance of the year.
Harry Reid: We expect that in the back half of the year, we will start to see services spend improve.
Harry Reid: Yeah.
Harry Reid: And that clearly.
Harry Reid: It improved with improved products product.
Harry Reid: Product sales and then there's as I mentioned a bit of a lag before we see the services associated with them.
Harry Reid: Thank you.
Speaker Change: We currently have no further questions, so harm, but Joyce Mullen for some closing remarks.
Joyce Mullen: Thank you very much everyone for your questions and your interest.
Joyce Mullen: Now more than ever our clients really do need a trusted advisor to help them navigate this increasingly fragmented and complex landscape and especially amidst the uncertainty impacting the global technology supply chain, our job is to figure out how to optimize the supply chain for our clients. So we feel very optimistic about the opportunities ahead.
Joyce Mullen: And I look forward to sharing with you our continued progress on our journey as a leading solutions integrator. So you can now close the call operator. Thank you.
Speaker Change: Thank you Joyce. This concludes today's call. Thank you very much for joining you may now disconnect your lines.
Speaker Change: [music].