Part I Business Overview Ingram Micro is a global IT solutions provider focused on digital transformation, emerging technologies, and operational efficiency, with international operations generating 66% of FY2024 net sales - Ingram Micro is a leading global IT solutions provider with four reportable geographic segments: North America, EMEA, Asia-Pacific, and Latin America22 - The company's strategic priorities focus on digital transformation through its Xvantage platform, growth in emerging technologies like cybersecurity and AI, and enhancing profitability via operational improvements and automation26 - International operations are a significant part of the business, generating approximately 66% of consolidated net sales in Fiscal Year 202438 Key Supplier Concentration (FY2024) | Vendor | Percentage of Consolidated Net Sales | | :--- | :--- | | Apple Inc. | ~19% | | HP Inc. | ~10% | - As of December 28, 2024, the company had approximately 23,500 full-time associates and utilized about 5,250 temporary workers44 Risk Factors The company faces risks from internal control weaknesses, Xvantage platform development, substantial indebtedness, geopolitical tensions, and the influence of its controlling shareholder - The company has identified material weaknesses in its internal control over financial reporting, which could adversely affect investor confidence and the stock price59191 - Significant resources are being invested in the Ingram Micro Xvantage digital platform; its success is critical, and failure could adversely impact the business61 - The company's substantial indebtedness requires a significant portion of cash flows for debt service, potentially limiting operational funding and strategic acquisitions127128 - Platinum Equity controls approximately 90% of the voting power, making Ingram Micro a "controlled company" exempt from certain NYSE corporate governance requirements, which may create conflicts of interest180183 - The business is exposed to geopolitical risks, including U.S.-China trade tensions and tariffs, which could increase product prices and impact demand; net sales in China were $4.0 billion in Fiscal Year 202497110 Cybersecurity The company maintains a formal data protection program aligned with NIST and ISO 27001, overseen by the board and Audit Committee, with no material cybersecurity incidents reported - The company has a formal data protection program based on the NIST Cybersecurity Framework and ISO 27001, which is regularly reviewed and audited218 - Cybersecurity governance includes oversight from the full board of directors and the Audit Committee, with a CISO leading the program and reporting directly to the board as needed223 - No cybersecurity threats or incidents, individually or in aggregate, have materially affected the company during the periods covered by this report222 Properties The company occupies 281 facilities globally, totaling 12.6 million square feet, primarily leased, with its corporate headquarters in Irvine, California - The company occupies 281 facilities totaling 12.6 million square feet, with the vast majority being leased223 - Facilities are distributed across its geographic regions: North America (35), EMEA (98), Asia-Pacific (116), and Latin America (32)223 Legal Proceedings The company is involved in routine legal proceedings, none of which are expected to have a material adverse effect beyond financial statement disclosures - The company is involved in routine legal proceedings but does not expect them to have a material adverse effect, beyond what is disclosed in the financial statement notes225 Part II Market for Common Equity and Related Matters Ingram Micro's common stock began trading on the NYSE in October 2024, with its IPO raising $233.1 million for debt repayment and a $0.074 per share quarterly dividend declared - The company's common stock began trading on the NYSE under the symbol "INGM" on October 24, 2024227228 - On March 4, 2025, the board declared a quarterly cash dividend of $0.074 per share231 - Net proceeds from the October 2024 IPO were approximately $233.1 million, which were used to repay $233.1 million of debt outstanding under the Term Loan Credit Facility234 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) FY2024 consolidated net sales were $48.0 billion, a 0.1% decrease, with gross margin declining to 7.18% and income from operations falling to $817.9 million, while cash from operations significantly increased to $333.8 million Results of Operations FY2024 net sales decreased to $48.0 billion, with gross margin declining to 7.18% and income from operations falling to $817.9 million, primarily due to mix shifts and higher restructuring costs Consolidated Financial Performance (FY2024 vs. FY2023) | Metric | Fiscal Year 2024 | Fiscal Year 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $47,983.7M | $48,040.4M | ($56.7M) | (0.1)% | | Gross Profit | $3,444.9M | $3,547.1M | ($102.2M) | (2.9)% | | Gross Margin | 7.18% | 7.38% | (20 bps) | N/A | | Income from Operations | $817.9M | $944.3M | ($126.4M) | (13.4)% | | Operating Margin | 1.70% | 1.97% | (27 bps) | N/A | | Net Income | $264.2M | $352.7M | ($88.5M) | (25.1)% | Net Sales by Segment (FY2024 vs. FY2023) | Segment | FY2024 Sales | FY2023 Sales | Change (%) | | :--- | :--- | :--- | :--- | | North America | $17,373.0M | $18,195.7M | (4.5)% | | EMEA | $14,260.3M | $14,481.1M | (1.5)% | | Asia-Pacific | $12,756.8M | $11,573.5M | 10.2% | | Latin America | $3,593.6M | $3,790.2M | (5.2)% | - The decrease in gross margin was driven by a sales mix shift from higher-margin advanced solutions to lower-margin client and endpoint solutions, particularly in North America and EMEA, and a geographic shift towards the lower-margin Asia-Pacific region276 - Restructuring costs increased to $38.4 million in FY2024 from $18.8 million in FY2023, related to efforts to enhance organizational efficiency278 Liquidity and Capital Resources FY2024 cash from operations significantly increased to $333.8 million, total debt decreased to $3.35 billion, and the company maintained strong liquidity with a $3.5 billion undrawn ABL facility Cash Flow Summary (FY2024 vs. FY2023) | Cash Flow Activity | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Operating Activities | $333.8M | $58.8M | | Investing Activities | $105.5M | ($17.7M) | | Financing Activities | ($391.3M) | ($477.9M) | - Total debt was $3.35 billion as of December 28, 2024, down from $3.92 billion at the end of the prior year452 - The company has a $3.5 billion ABL Revolving Credit Facility, which was undrawn as of December 28, 2024, with its maturity extended to September 2029301456 - As of December 28, 2024, cash and cash equivalents totaled $918.4 million, with approximately 93% residing in operations outside of the United States295 Critical Accounting Estimates Critical accounting estimates involve significant judgments in revenue recognition, inventory valuation, business combinations, goodwill impairment, and income tax estimations - Key critical accounting estimates include revenue recognition, inventory valuation, business combinations, goodwill impairment, and income taxes311312 - Revenue is recognized when control of products transfers to customers, with service revenues, including from the CloudBlue platform, representing less than 10% of total net sales314315 - Goodwill is tested for impairment annually in the fourth quarter, with no impairment charges recorded in FY2024 or FY2023322324 Market Risk Disclosures The company manages foreign currency and interest rate risks through derivatives, with a VaR of $551,000 for currency risk and a $9.1 million to $9.3 million impact for a 1% interest rate change - The company uses forward contracts to manage foreign currency exchange risk, with a Value-at-Risk (VaR) model estimating the maximum potential one-day loss in fair value at $551,000 as of December 28, 2024331332 - A hypothetical 1% change in interest rates would impact annual interest expense by approximately $9.1 million to $9.3 million due to variable-rate debt exposure333 - To mitigate interest rate risk, the company has entered into interest rate cap agreements to establish an upper limit on the SOFR interest rate for a substantial portion of its Term Loan Credit Facility borrowings334 Financial Statements and Supplementary Data Audited consolidated financial statements are presented under U.S. GAAP, with key notes detailing policies, debt, segments, and contingencies, including a disclosed fraudulent activity in India leading to Q1 2024 revisions Consolidated Financial Highlights | (In thousands) | Dec 28, 2024 | Dec 30, 2023 | | :--- | :--- | :--- | | Assets | | | | Total Current Assets | $15,801,177 | $15,354,317 | | Total Assets | $18,779,690 | $18,420,314 | | Liabilities & Equity | | | | Total Current Liabilities | $11,306,531 | $10,663,131 | | Total Liabilities | $15,045,815 | $14,914,025 | | Total Stockholders' Equity | $3,733,875 | $3,506,289 | - Note 17 discloses fraudulent activity within the India Professional Services business, which resulted in misstatements of net sales, cost of sales, and other accounts, leading to a revision of the Q1 2024 statements538539 - Note 8 details restructuring costs of $38.4 million in FY2024, primarily for employee termination benefits related to headcount reductions aimed at enhancing organizational efficiency479480 - Note 9 outlines significant contingent liabilities, including tax assessments in Brazil totaling a reasonably possible loss of R$843 million ($136 million) and a tax assessment in Saudi Arabia with a reasonably possible loss of SAR 160 million ($42.6 million)485490 Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of December 28, 2024, due to two material weaknesses in internal control over financial reporting, with a remediation plan underway - Management identified two material weaknesses in internal control over financial reporting as of December 28, 2024558 - The weaknesses are: 1) an ineffective risk assessment process for evolving business areas, and 2) inadequate controls for identifying and accounting for multi-period software license agreements558 - Due to these material weaknesses, the principal executive and financial officers concluded that disclosure controls and procedures were not effective555 - A remediation plan is underway, involving policy revisions and additional training, to address the identified weaknesses560 Part III Directors, Executive Officers and Corporate Governance The company's leadership includes CEO Paul Bay, with Platinum Equity's majority ownership classifying it as a "controlled company" and exempting it from certain NYSE governance requirements - The company's leadership includes CEO Paul Bay and Chairperson of the Board Alain Monié566 - Ingram Micro is a "controlled company" under NYSE rules because Platinum Equity holds a majority of the voting power, exempting it from certain governance requirements607613 - The board has determined that directors Felicia Alvaro, Jakki Haussler, Leslie Heisz, and Sharon Wienbar are independent608 Executive Compensation FY2024 executive compensation was performance-based, with the EIP funded at 74.19% of target, and new equity awards granted under the 2024 Stock Incentive Plan following the IPO NEO Summary Compensation (FY2024) | Name | Position | Total Compensation ($) | | :--- | :--- | :--- | | Paul Bay | CEO | 17,463,003 | | Michael Zilis | CFO | 12,235,825 | | Scott Sherman | EVP, Human Resources | 8,687,935 | | Augusto Aragone | EVP, Secretary & General Counsel | 7,934,258 | | Alain Monié | Former Executive Chairman | 2,377,159 | - The 2024 Annual Executive Incentive Program (EIP) was funded at 74.19% of target, based on achieving non-GAAP EBITDAR of $1.301 billion against a target of $1.410 billion655657 - In connection with the IPO, the company terminated its 2021 Participation Plan and granted new time-based (RSUs) and performance-based (PSUs) restricted stock units under the new 2024 Stock Incentive Plan637662 - The company maintains an Executive Change in Control Severance Plan with "double-trigger" benefits and an Executive Officer Severance Policy for terminations without cause outside of a change-in-control context674678 Security Ownership As of February 25, 2025, Platinum Equity, LLC affiliates beneficially owned 89.8% of the company's common stock, while executive officers and directors as a group owned less than 1% - As of February 25, 2025, investment vehicles affiliated with Platinum Equity, LLC beneficially own 210,952,854 shares, representing 89.8% of the company's common stock722725 - All executive officers and directors as a group beneficially own 2,045,955 shares, representing less than 1% of the class722 - Under the 2024 Stock Incentive Plan, 3,601,768 securities are to be issued upon vesting of outstanding awards, and 15,920,477 securities remain available for future issuance as of December 28, 2024723 Related Party Transactions The company has key agreements with controlling stockholder Platinum Equity, including an Investor Rights Agreement and a terminated Corporate Advisory Services Agreement, with related party transactions reviewed by the Audit Committee - The company has an Investor Rights Agreement with Platinum, granting it the right to nominate a majority of the board of directors as long as it owns at least 50% of the stock726 - A Corporate Advisory Services Agreement with Platinum Advisors was terminated upon the IPO, with the company paying $20.4 million in fees under this agreement in Fiscal Year 2024728 - The company has adopted a written policy requiring the Audit Committee to review and approve or ratify related person transactions735 Principal Accountant Fees and Services PricewaterhouseCoopers LLP billed $16.8 million in total fees for FY2024, a significant increase driven by $15.3 million in audit fees related to IPO and registration services Accountant Fees (FY2024 vs. FY2023) | Service Type | 2024 Fees | 2023 Fees | | :--- | :--- | :--- | | Audit | $15,305,635 | $9,539,540 | | Audit-Related | $250,000 | $143,505 | | Tax | $1,246,644 | $1,381,428 | | Total | $16,802,279 | $11,064,473 | - The Audit Committee has established policies for pre-approving all audit and non-audit services provided by the independent accounting firm740
Ingram Micro Holding Corporation(INGM) - 2024 Q4 - Annual Report