Insight Enterprises (NSIT) 2 Nov 232023 Q3 Earnings call transcript

Good morning, and thank you for attending the Insight Enterprises, Inc.

Third Quarter 2023 Earnings Conference Call. My name is Elisa, and I will be your moderator. [Operator Instructions] I would now like to pass the call to our host, James Morgado, SVP of Finance and CFO of North America. James, you may proceed.

you the thank conference Enterprises and call. everyone, for Insight joining earnings Welcome, be operating Vice the quarter we North discussing Today, will company's and of XX, James America. Finance ended XXXX. I'm results Morgado, of Senior President CFO Insight September the for

is Chief Officer; Joining Bryan, Joyce and President Officer. Financial Mullen, Glynis and me Executive Chief

financial our any website information that remain Any as or form time-sensitive this conference November of to Insight only When prohibited. In non-GAAP refer as property Form is will call, the conference via and being webcast XXXX accurate the X, the in call Enterprises of rebroadcast presentation that on approximately X be contain for will today, was you have copy section. Today's and retransmission the the you a discussing Exchange archived slide If time. This completion X-K, expressed website the of on financial discuss live, will accessed the page period, call and consent Relations this it An referring be Enterprises. non-GAAP our be accompanying website the morning, This webcast is of we call available them associated also the filed will find do a not redistribution, limited measures including is without results. earnings the XXXX. with today's after call Securities and Investor at release of of the on or insight.com quarter at hours call Insight third to will posted Investor question-and-answer the and of of Commission written measures, our is insight.com. strictly Relations call, we adjusted. as can copy under we

today. Please otherwise results both included You'll find presentation earlier comparisons GAAP U.S. terms. unless issued press the highlighted adjusted constant corresponding and the our noted. growth in a relate currency, as to year, period and make the accompanying that all we in of note all release dollar last call to today are of these actual amounts measures Also, growth on slide the unless reconciliation discussed rates

made to you're forward-looking our whether result or we that the call statements to the conference information, to periodic as turn results subsequent today's by this during These forward-looking differ Slide subject cause in most uncertainties could in risks our will on the forward-looking any and are slide statements SEC. All this following are materially. Joyce, to all of now that with filed Joyce? of release are reminder, and actual update recently no and along and call press made date if except detail discussed greater on as a As required made call, as and will filings with that, reports in I statements obligation are the begin future this we X. over a otherwise. With presentation, events law, undertake call new of risks

the us becoming Services are Insight quarter. our profit much, very XX% leading grew QX delivered record for earnings per expectations XX%, progress the making for the and gross solutions to you adjusted and everyone, Cloud today. joining and you James. Thank morning, we integrator. profit met demonstrating Core share thank Good gross grew

diluted earnings for confirming year XXXX. also are of full adjusted We our per share the

consistent both last cash profitability achieved million $XXX of to of margin the expanded as and pricing over we progress in with X of XXX strategy based generated well award-winning X.X%; Here an I on from we year; AI, XX% in an mix revenue right continued in $XXX we margin integrator. edge our We operating quarters QX in first leading highlights increase highlights: on basis the year, services, adjusted flow services points becoming as and and an million gross reflecting few a towards fastest-growing are cyber. progress of our EBITDA company improvement remain solutions in data, initiatives; QX, will with later. These we focused more and provide the software and demonstrate the our and areas cloud making the to path focus Amdaris, cloud, of U.K. acquired are on market: this digital strategy the our details development on the acquisition

recognize specifically more improve and These hallucinations for reduce and to support to customer clients. We've efficiently. patents filed on about search our Generative been emulate with third-party is have acceleration support we deliver to that our more models customer the applications; support are While large enhance language time, long leveraging patents really integrate recently with providing to for GenAI-related human sentiment, outcomes a use applications; AI clients' to which focused query these usage; support allow time, reduces cases. excited types capabilities personality sales needs and applications. Combined clients and us leverage AI expertise, capabilities our to business us data we importantly, for and support GPU

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navigate clients transform. infrastructure the and help is a Our This partner requirements trust and technologies at can heart our of workplace they to new need to strategy. the digitally them

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of and very our our Our expertise solutions in part important clients. edge heritage to is

with internal value. We and proven with a mapping, solutions X,XXX the our next-gen the along to guide combining to remains help of by Agility by strength rollout help application concluded like capabilities, develop deployed a performing establishing planning project Health began development we clients. I'd high-risk improved over application talent outdated way. sprints a to Checks our element also were exceptional experience M&A processing initiative to claims experts could to effort and development significant of replace and agile of highlighted recent claims As processing them environment the them and accuracy and They delivered application delivered X important existing digital their a our time their user technical development software services, included ultimately an a our efforts. payments. The system. hardware, savings, accelerate The that realize an augment To that our we integrator enable dedicated claims introduced practices wide-ranging new customed our team provider. for story our the The strategy. development exceptional large projects highlight user I to deployment experts. They project scalable needed even bring and value a cost to more insurance

architect, developing with faster to work more project increasing global to Through Certified years We we CRM ideal based is support. addition company while bolster This manage Gartner an U.K. design to and service of record illustrates in in project right all do including an has the data digital dealing why for AI, U.K. and acquisition, transformative deliver deliver been Europe. I'd a was on more. XX% brings and the IT existing migration cloud fastest-growing and in in in Eastern software able few. Microsoft project acquisitions, Amdaris cloud data delivery and success to XX in strength Their while Gold in capabilities services transformation teammates, XXX this it our our application, to solutions cloud, delivering areas and our with clients, public working. To August, always saving and countries. firm to the for track than development, services. our has more of practices. of this solutions. recognition, making and management a strategic stepped to perfect their than award-winning centers own based a recruiting looking track managed of The application record was how and proven additional market: and our reliable of whom European we been system. to partner with a services. Amdaris industry with application We've strengthened a in with located the developers, this example add strategy, product cyber. In cloud highlight led capabilities has are and a the custom-built complement included I'll also application our the are on Amdaris the asset Amdaris costs. The earn team highlights an engineers share client, Amdaris like several acquired Magic modernization more strategy costs Quadrant of clients focus Amdaris to edge our is data, our This line scalable helping build through a

of was Innovation Employer this a we XXXX. In to performance most in on and the which and details Additionally, World's Insight making clients financial XXXX. help. With great leading In innovation. recognized outlook recognizes due the our outstanding of progress for solutions Partner operating in need Insight summary, that, to EMEA been is since Best integrator thrilled believe areas named turn for focused year's as the becoming development achieving are this Forbes Forum, Glynis? call advantage, competitive where our share our QX our the performance Canalys fastest-growing the GPT. And by Glynis culture I'll part, driving early we and the key to be has we to of towards and over at market are the

Thank Joyce. you,

growth in to profitably positioned high-margin profitability grow year. seen improve. we've conditions to services Our And as margins results has our top we're cloud and our in on well macroeconomic expanded this focus contributed the believe and business we line

growth applications, This and performance flow. of and our and gross Insight QX. Despite networking, a in decrease services decrease profit integration transact the offset decline we was mix million, offset Cloud, $XX a Moving implemented last digital of in QX year. profit slightly on by decline billion, results. reflects up constant in Insight related was margin Core offset higher Gross benefit revenue Insight Infrastructure-as-a-Service. bottom XX%. relative [ devices, Services Services also XX% in ] increase well margins Core X% market, at growth, down [ $XX growth. Last in decline infrastructure terms higher currency. to due U.S. to as and was device increase in The increased basis of increase the quarter, of Services all higher belief pricing was XX% an well gross the cloud Net was of SaaS net an we million, to of devices dollar to that by in the expressed higher as XX% primarily Sequentially, enablement due in of gross as we and $X.X other partially XX% reflects sales, approached the growth that and ] as hardware profit XXX which partially XX%, had devices the products, were devices. Cloud initiatives was an and Core our which devices. reflecting hardware, points of and in by data, decline Cloud to revenue the would reflecting decline profitability

to better in profitability also contributed our actions were hardware higher our see and market we services pricing initiatives addition, cost America of align mid-quarter, These actions environment. to X%. and margin. Last accelerated completed adjusted structure benefit gross cost started to we to expenses the In by operating quarter, North were where actions down reduction the have and the

up adjusted release in quarter, and the EBITDA of X.X%. constant reserves. the approximately of certain was XXX adjusted tax XX% points and related per Our $X.XX also $X.XX, expanded share third margin in to U.S. to the diluted terms benefit And including currency, basis earnings for dollar

on ago, XX.X% ended a progress corresponding Our months XXXX. of also XX% cash our capital adjusted XX, to and for XX $XXX from million in trailing invested was flow to compared we this demonstrates Year-to-date, for long-term goal. return September period XXXX, the of towards million generated usage a year the operations compared $XXX

evaluate our convertible notes notes of as to to well strategy. the repurchase share as convertible continue We the and options the on relative dilution our impact

Our the throughout XXXX share XXXX. net share the forecast dilution repurchases includes of impact anticipated and

X our You of million convertible with $XXX our on includes of the to and in as outstanding XXXX our QX our spending $XXX million investor strong the in flow is business. notes presentation. We Amdaris $XXX months outstanding first cash of will QX acquisition balance indicative debt This debt the the of in find of compared in the share dynamics of illustrated QX, repurchases also in and reduction is under XXXX. ABL after exited million

As end QX, of billion we ABL the under our billion had $X.X available facility. approximately of $X.X

operations deployment including We capital priorities have and our fund ample to capacity business M&A.

cloud Amdaris, As in impact services digital software and adjusted we be and an development negligible enablement August, XXXX. EPS company. Amdaris diluted our increases The in Joyce will mentioned, EMEA. significantly on capabilities acquired in award-winning digital

track shows presentation metrics we're hit in our through XX-month QX that XXXX. Investor XXXX. at October laid targets we out these performance our relative to by Our the We on Day believe trailing XXXX to

eye an and are spending under not market to quarters started at our level patterns With belt, we improve that broader keeping hardware We appreciate X the and on demand has had the are anticipated. volatile. but

in initiatives. and as and strength from Services software, as continued profitability Core well Cloud margins our expect Insight We expanded pricing

from took expense believe actions quarter. Additionally, we we will the we benefit operating last

expenses, in guidance $X.XX, $X.XX typical our count meaningful and growth this XX% profit low XX% for we're adjusted year. to between rate single-digit million of in full the expense diluted these wider tax million, and Capital maintaining includes $XX expenditures we our and QX. Given a factors, million the EPS or recognize and is turn an guidance million, for This is of than range or interest share back range, to gross assumes for $XX no expense to XX.X restructuring $XX and million the of $XX intangible full and excludes macroeconomic outlook approximately million assumes $XX now amortization outlook. I of to average severance the shares. This year a acquisition-related acquisition-related of instruments transformation and will call no change debt Joyce. effective

XX.X%; results adjusted of months Digital dynamics increased free leveraging most, we of long-term was IT ROIC At cash outcomes Services was a industry net of summarize accelerants. areas our delivering The gross Core margin focused flow grew on in adjusted our very the per trailing are and profit here staying Glynis. Cloud share our are this technologies like market. To the or Insight Generative grew as EBITDA income AI Thanks, quarter: fastest-growing adjusted XX%; percentage is the transformation skills grew to XXX%. gross strong. adjusted stay Insight, diluted value clients in earnings XX%; X.X%; XX%; profit XX to

portfolio of us navigate cycles, are prepared Our patterns when to growth capture resiliency improve. gives and opportunities through the solutions economic to spending we

will open In their market. In priorities. a partners and questions. our fastest-growing flow, comments, to teammates each to collaboration innovative capital have to help in our strong partners now closing, the clients cash of to and Insight and for line business us segments capacity healthy particular, their for allocation for fund our our want the transformational we We their our clients. This solutions in them giving balance and thank to our sheet your delivers delivering commitment the the concludes acquisitions support trusting journeys; my our clients, with other; for continued I

line [Operator JPMorgan. of Instructions] Cardoso Our first question the comes from with Joseph

your just us was I hoping in low end off follow-up. the I then the And looking you the are pressures the gross ticket XX So if at guide. full I'm versus, the starting walk to guide, a say, impacting modestly if of ago? have here, through let's year items outlook big profit that the you moderated resulting prior days just could guide incremental

Sure, sure.

What had So the improvement that we're that does And I is the profit huge would that while some seeing segment Joe, market thanks our in device for anticipated. the necessarily it drive of the device say not margin, question. -- we actually drive dollars. doesn't gross gross

We continue strength in see to Cloud.

business we that, making to services took ] quarter of we're in we recovering strength device our side actions SG&A. continue as CM [ last the improvements -- some quarter. offset side. To the not hardware had actually, around regard that have We and to but anticipated with specifically some is We the GP, this

have bit benefit we So of quarter. little a this

sorry. We expect benefit -- to XXXX fourth have quarter, in in the more

Got on devices? And devices, seeing it. a just various standpoint? touch spending behavior on then divergence are like little you as you on to the your part linearity it enterprise, you an that verticals across maybe the more customer to And not bit public just we quarter, maybe then large SMB customer relates spending could and that devices. any just the Can particularly specific improvement sector broadly, more overall from of seeing through give color us are

Joyce. you much very Joe, this Thank asking. for is

it's this cyclical know notable I thing. strategy and all, inherently the that still, we record EPS seeing lot to of that delivered is I set because for year. going we're a want on make that are quarter. devices mean, here's So of the first to that we sure we've this the And out reason be

kind seen just terms sequential devices, in of backdrop. But a of then So improvement. some that's have we

and as growth see of that point a X seeing we quarter the that's longer of the QX, in we view, we instead market. From some take to probably out hold that But to improvements. sequential that, back continued pretty in a the segment commercial our -- push year generally, we're we in know for half in or some of what space. thought with consistent of the from hearing to couple enterprise year. see first we're the And what the partners and a the takes it see space, to seeing beginning expect expect at improvement We

the segment. the Public kind us again, the requirements hybrid But cycles. and commercial device believe that -- enterprise do dynamics money in moment. amount GenAI that in strong Windows at of in see work Given requirements, segment we the will consistent refresh the sooner and drive we generally XX, those the public of of has that's later that's with sector overall, for been the sector market,

And just terms in is on transacted the linearity month differences the September quarter throughout versus see any of of a really quarter one. we the strong how piece, the of short July didn't third always

The with Stifel. line from next Matt of question Sheerin comes the

Yes.

Just storage, know the it worked related supply. I part hardware you've but networking. client were so backlog where commented products, had backlog, good with networking are servers, to down devices sales, that side, expectation improving to that the know And that on particularly but infrastructure, of are get I you've the

on you in you're how So with seeing plays give us what some into could year? next color out those that products and QX and

longer et demand. our the POs, with largely infrastructure partners. bit cetera, et a now. again, consistent quotes into so uncertainty are seeing of from softening cetera. in infrastructure to we yes, are normalized It's So And some hearing acquisition taking turn just we're what There's backlog really, has

think will However, infrastructure. accelerant an GenAI we long-term very Again, be the believe still around strong. we are dynamics

And spending so a longer. just are it's of sales a we're little cycles time, lot the

the seasonally? Would client sequential in And talked be up products about growth expect also you QX. in infrastructure Okay. you to devices

a just QX. a Well, we in of because bunch of dynamic flushed little a we have bit different backlog

dynamic we by not largely see That's backlog. driven there. So the same would

Okay.

So -- got it.

talk you capital helpful. because supply. imagine has the very has better about free That's noted, expectations coming a the client strong. and down. for been But been I And also ] working device going cash inventory slash Okay. could as know you the flow forward? I inventory of [ and

the that has this our forward. that had it we largely now as era. inventory big level move that We as normalized right back the around we And would we would quite in expect buildup constrained stay would versus of say

has soft. We stage anticipate It growing in to environment, It's range given still the it is be still Our to in working the that at devices us in very positive 'XX. working improving, capital in XX this and it's grow XX% low to kind hardware been XX digits. great did hardware be more becomes would particular capital problematic or when but in XX% very that a hardware soft. for of to in is -- the it 'XX we'd mid-single like

anticipate capital we that right [indiscernible] So we'd now. have

had just How you talk across customers And profitability successful of and Could pricing. you lastly, Great. hardware, terms been? that? your comments across the Okay. Is in that that about and increasing pricing services? has projects about that

it's been declining the evidenced improvement I we've that in very and appreciation by seen revenues. the on successful margin think gross gross as profit

have So that strategy to that a we it is hardware related think trying to way. about

some of and cetera. And our improvement put of that really we've that ceilings In processes in level customer, around metrics margin services. size to regard the as in service utilization relative of also That we floors to of we our that -- as and et the helped with across all gross floors practices. standardizing in drive well margin, has pricing looking customers place gross large we place accept and terms that put will approval from

we've we helped measuring of services. leveraged really lower the as gross fair, as to That that where So overall for rate. to we it to some consistently, that offshore well we also need utilization. And can terms be in pinpoint capability and are charge-off has focused margin our be

of various a it's anymore. I been factors. one-offs not would They're they're So now say combination systemic.

share that loss competitive terms of landscape? because or in have share Okay. issues no And there been issues of

talking we held hardware, if own. We've it client say, our results definitely largest as perspective, our from a own. relative about reseller kind from at I'm out a there, to you look our segment would held I definitely competitor of our

Lebiedzinski The with from the next line comes Sidoti. of Anthony question

for talk on such can Gum Lebiedzinski. first groups, performance your quarter the different is, client ] the public question during This as Anthony enterprise, about and you for sector large is [ SMB? Stefan My

Yes.

think about It's these. So all published it. documents, we've happy to but I talk in the

think say. the also was segments Public was for quarter -- strong. business the is I sector were pretty the I challenged, enterprise or overall. the Commercial challenged -- most would

Yes, and growth.

Yes.

with with pretty So because the we consistent that that's market. think happy I think we're

Yes.

public the low and single corporate mid area. digit. low sector So in grew the teens digit. were -- digits enterprise, maybe commercial double and the And segments Maybe down mid-teen this to

most. Yes, commercial was the down

the And when do for results devices? are think you for you do we bottom at demand for expect devices? not, Or if show positive to

said quarter, We the the that, because that we last we're was of easier. a some believe true. device expect thought We bottom we So to sequential get the we compares continue, growth largely market. lot at also that saw

The with comes Norrison next James. from Raymond of the question Jake line

Maybe guys Americas. to relative environment touch little the maybe to performance just there saw macro geographically of you overall you could touch on the out hoping more. expectations? I'm on what a EMEA relative And

Okay.

was little would to So that I delivered different. EMEA a of expectations. business our maybe business bit say mix the

think likely I in Amdaris, that EMEA. than Amdaris is be North the America. We the EMEA well going is XXXX region for the as it did for for is QX softer do anticipated an into acquisition to as outlook

we is as some to add would total you kind see time that clients. coming but services and results, to that So good the look XXXX, necessarily growth acquisition sales with that. with will expense acquisition. And also interest that, of combined into drive that outcomes through And we cloud-related material you we gross data margin by see business services for Insight not think from associated will help our improvement regard in

to forecast next So year. a light we for in into we go acquisition especially economic that think as environment EMEA softer that's the XXXX, be of beneficial EMEA should in very

Perfect. on And just off on thinking acquisition? after coming just you're the about topic of M&A, what please opine or 'XX for the can M&A fiscal you then Amdaris of sort your outlook

about we've the fastest-growing on acquisitions edge, in data, So capabilities in our of been AI, market: cloud, improve talking focusing cyber. areas consistent that us help pretty the

be the offer pleased really by to for that there. We're very in changed we has great EMEA, focused and nothing clients. acquisition can capabilities other can on very, So our acquisitions remain looking --

still So we're very on. very, focused

like talked on have of think, the about. sheet, capacity, course, also Glynis I We the balance

change So no in strategy the there.

We valuations this also the we do down year. the come -- have that are transactions and believe

bit making more to So a it's it possible things Amdaris. do like

Research. comes next line question Colicchio from of Barrington the Vincent The with

Yes. Will that boost going Joyce, that offshore levered margins. forward? was the increasing become for focus company was it an mentioned to

Yes.

Glynis work ago, capabilities that doing For work we've leverage services how the pretty a with we we so structural of figure the there. specific we're ago, years to X those services, might year bought mentioned been regions. pleased to to as the all business. remember, profitability out X.X improve far about Hanu our you We're in And done global and have working

way, for that office own capabilities, leverage specific some by for and doing expect our time, offers in expect continue doing been specific internal Manila, that both now India. back in for to the we So to and India. and primarily we we're And have in quite -- Manila we

that AI I and in there have but line to And little programming, the mentioned, is that? sight to may of of late, -- far you is that a on Is came the call a the future? off improve use how productivity

The future is now, now. Vince. It's happening

and and case lot interest some our capabilities. And a of February. We've and that's We really also environment, been to our of So their and weeks really, leverage development use work driven for X -- meetings clients, application a and we've quality excited to GPT in use of say, we clients are about and been we've educate what OpenAI announcement improve estates did some analytics in launched client data these so opportunities certainly -- I the and of driven very after help are And internal the assessments. Microsoft that lot development. lot about possibilities a to using the on done. that's can they about data want significant Insight also opportunities cases --

this absolutely medium think, start accelerant, So the it term, is over long seeing now. we we're an term or and

to that? Yes. about thoughts its improve programming curious productivity. on I'm Any ability

we're terms improvement in I in exciting as Amdaris so XXX XX% the auditing the a Primarily have leader already hearing of checks, quality number very around XXX-plus we're over from is and the we just development XX%, somewhere that quality over Well, is x range. mean again productivity terms something we're of our and for. this there improvement. partners to of Yes. in aiming seen But I But and in we productivity me gave improvement in yet, have -- productivity time. XX%, wouldn't software but developer -- say that significant well.

questions time. at registered There are additional at this are no this questions [Operator no time. Instructions] further There

now conclude call has for your all the concludes conference We further team call. participation. if remarks? That any you will the Thank today's

now may disconnect lines. You your