• Gross Profit: Increased by 1%, driven by a 12% increase in Insight core services.
• Gross Margin: Expanded by 170 basis points to 21.2%.
• Adjusted Diluted Earnings Per Share: $2.66 for Q4, with full-year earnings near the high end of the range.
• Cash Flow from Operations: $215 million for Q4, with over $600 million for the full year.
• Net Revenue: $2.1 billion for Q4, a decrease of 7% year-over-year.
• Hardware Revenue: Declined by 2% in Q4.
• On-Prem Software Revenue: Decreased by 23% in Q4.
• Cloud Gross Profit: $125 million in Q4, an increase of 3%.
• Adjusted EBITDA: $141 million for Q4, a decrease of 11%.
• Adjusted EBITDA Margin: Contracted by 30 basis points to 6.8%.
• Full-Year Net Revenue: $8.7 billion, a decrease of 5% year-over-year.
• Full-Year Gross Margin: Expanded by 210 basis points to 20.3%.
• Full-Year Adjusted Diluted Earnings Per Share: $9.68, flat compared to the previous year.
• Share Repurchases: $200 million spent in 2024, with $300 million remaining in the program.
• Total Debt: $864 million at the end of Q4, down from $941 million a year ago.

• Warning! GuruFocus has detected 5 Warning Sign with NSIT.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Insight Enterprises Inc (NASDAQ:NSIT) reported a 1% increase in gross profit, driven by a 12% rise in core services and modest growth in hardware and cloud.
• The company achieved a gross margin expansion of 170 basis points to 21.2%, with adjusted diluted earnings per share reaching $2.66.
• Cash flow from operations was strong at $215 million, with expectations of $25 million in annualized cost reductions from recent actions.
• Insight Enterprises Inc (NASDAQ:NSIT) saw double-digit growth in cloud gross profit, reflecting increased demand for SaaS and infrastructure as a service.
• The company received numerous awards and recognitions from partners, including Microsoft, Google, Cisco, and others, highlighting its strong industry position.

Negative Points

• Net revenue decreased by 7% to $2.1 billion, primarily due to a 10% decline in product sales from large enterprise and corporate clients in North America.
• Hardware revenue declined by 2%, and on-prem software was down 23%, impacted by partner consolidation.
• Adjusted EBITDA decreased by 11%, with a margin contraction of 30 basis points to 6.8%, due to higher SG&A expenses and increased interest expenses.
• The company faced challenges from partner program changes, requiring a pivot in its cloud business strategy.
• Insight Enterprises Inc (NASDAQ:NSIT) anticipates subdued demand from large enterprise and corporate clients, particularly in the first half of 2025.

Q & A Highlights

Q: Can you elaborate on the cloud program changes, particularly regarding Microsoft and Google, and how you plan to offset the headwinds in 2025? A: Joyce Mullen, President and CEO, explained that the $70 million impact is mainly due to changes in enterprise agreements, with significant changes also from Google. The company is transitioning enterprise agreements to CSP agreements in the SMB and corporate space, with support from Microsoft. This transition is expected to continue through 2025 and into 2026.

Q: It seems like operating margins for next year might be softer compared to 2024. Can you explain the drivers behind the expected OpEx expansion? A: James Morgado, CFO, clarified that OpEx is expected to grow slightly slower than gross profit. The company anticipates improved operating leverage as the year progresses, supported by $25 million in cost-saving actions and a lower starting headcount. Acquisitions will also normalize OpEx as the year progresses.

Q: Can you provide insights into the timing and magnitude of the device refresh cycle? A: Joyce Mullen noted that the device refresh cycle was expected to start earlier, but growth has been seen in the commercial business for three consecutive quarters. The refresh is anticipated to be largely complete by the time Windows 11 support requirements kick in, likely extending into 2026.

Q: Could you summarize the major headwinds and tailwinds for 2025, and provide insights into cash flow expectations? A: James Morgado highlighted headwinds such as the pivot in partner programs and increased interest expenses due to settling convertible notes. Tailwinds include growth in the commercial business and a strong services portfolio. Cash flow is expected to return to historical levels as hardware growth resumes.

Q: How should we think about the impact of tariffs on your business and how is this reflected in your guidance? A: Joyce Mullen stated that the company has modeled tariff impacts extensively and works closely with OEM partners. Current tariffs are expected to have minimal impact on demand, and the guidance reflects the current tariff situation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.