• Net Revenue: $2.2 billion, a decrease of 8% year-over-year.
• Gross Profit: Increased 5% to $453 million.
• Gross Margin: Expanded by 260 basis points to 21%.
• Cloud Gross Profit: Increased 21% to $139 million.
• Core Services Gross Profit: Increased 12% to $81 million.
• Adjusted EBITDA Margin: Expanded by 60 basis points to 6.5%.
• Adjusted EBITDA: Increased 3% to $141 million.
• Adjusted Diluted EPS: Decreased 4% to $2.46.
• Cash Flow from Operations: $46 million in Q2, $292 million year-to-date.
• Long-term Debt: $663 million, including new senior notes.
• Share Repurchase: 187,000 shares repurchased for $35 million in the first half of 2024.
• Guidance for Full Year: Gross profit growth in low double-digit range; adjusted diluted EPS between $10.60 and $10.90.

• Warning! GuruFocus has detected 9 Warning Sign with NSIT.

Release Date: August 01, 2024

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

Positive Points

• Insight Enterprises Inc (NASDAQ:NSIT) delivered double-digit growth in cloud and core services gross profit, with cloud gross profit increasing by 21% to $139 million.
• The company expanded its gross margin by 260 basis points to 21%, reflecting a favorable mix of cloud and core services.
• Adjusted EBITDA margin reached a Q2 record of 6.5%, with adjusted EBITDA increasing by 3% to $141 million.
• Insight Enterprises Inc (NASDAQ:NSIT) has been recognized by Forbes as one of America's Best Employers for Diversity for the fourth consecutive year.
• The company has enhanced its global services capabilities through strategic acquisitions, creating new cross-selling opportunities and expanding its expertise in high-growth areas.

Negative Points

• Net revenue decreased by 8% in USD terms, driven by declines in hardware, particularly infrastructure and on-prem software.
• Adjusted diluted EPS declined by 4% due to higher interest expenses related to acquisitions.
• The company faced a choppy demand environment, with lower than expected demand in its product business.
• SADA, a recent acquisition, underperformed expectations in the first half, impacting overall gross profit growth.
• The variability and seasonality of the business are changing, with elongated sales cycles affecting core services.

Q & A Highlights

Q: Can you explain the confidence in maintaining the full-year earnings guidance despite a challenging environment? A: Glynis Bryan, CFO, explained that the confidence is driven by several factors, including the benefits from the InfoCenter acquisition, expected accretive performance from SADA in the second half, strong cloud and services growth, and improvements in device and infrastructure demand. Additionally, SG&A actions and stock repurchases are expected to support the guidance.

Q: What caused the moderation in Cloud gross profit growth, and what actions are being taken to address it? A: Joyce Mullen, CEO, noted that while cloud gross profit grew double digits, network-related cloud offerings were more challenged than expected. The company expects revenue synergies with SADA and improvements in SADA's performance to enhance cloud growth in the second half.

Q: How is the company addressing the underperformance of SADA, and what is the updated expectation for its contribution? A: Glynis Bryan, CFO, acknowledged SADA's slower start but emphasized its strategic value for multi-cloud capabilities. The company has adjusted expectations for SADA, anticipating it to be accretive in the second half, and has incorporated these changes into the full-year guidance.

Q: How has the global IT outage impacted the cybersecurity business and other projects? A: Joyce Mullen, CEO, stated that the outage led to increased discussions about business resilience but did not have immediate financial implications in July. The focus has shifted to ensuring clients' environments are resilient, which may influence future business decisions.

Q: What is the outlook for acquisitions, and how is the company integrating recent acquisitions? A: Joyce Mullen, CEO, reiterated the company's commitment to a programmatic M&A strategy focused on adding capabilities in fast-growing market areas. The company remains opportunistic about scale acquisitions while integrating recent acquisitions to drive revenue synergies.

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