Insight Enterprises(NSIT) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights Q2 2025 Consolidated Financial Performance Q2 2025 net sales decreased 3% to $2.1 billion, with GAAP earnings down, but adjusted metrics stable Q2 2025 Consolidated Financial Performance Summary | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------------- | :------------- | :------- | | Net Sales ($ billion) | $2.1 | $2.16 | -3% | | Gross Profit ($ million) | $442.3 | $453.4 | -2% | | Gross Margin (%) | 21.1% | 21.0% | +10 bps | | Operating Earnings (GAAP) ($ million) | $86.5 | $131.1 | -34% | | Adjusted Operating Earnings ($ million) | $129.0 | $131.1 | -2% | | Consolidated Net Earnings (GAAP) ($ million) | $46.9 | $87.4 | -46% | | Adjusted Consolidated Net Earnings ($ million) | $78.6 | $86.7 | -9.4% | | Diluted EPS (GAAP) ($) | $1.46 | $2.27 | -36% | | Adjusted Diluted EPS ($) | $2.45 | $2.46 | -0.4% | - The decrease in operating earnings was primarily due to partner program changes, real estate asset impairment losses, and net gains from earn-out revaluation in the prior year period[2] CEO Commentary CEO noted Q2 met expectations, with hardware growth and record Q2 gross and adjusted operating margins - The company's Q2 performance met expectations, successfully navigating challenges from partner program changes[3] - Hardware business achieved its second consecutive quarter of year-over-year growth[3] - Gross margin reached 21.1% and adjusted operating earnings margin reached 6.2%, both Q2 historical highs[3] Detailed Q2 2025 Performance by Segment Product and service net sales declined, hardware sales grew, with mixed regional performance across segments Net Sales by Product and Geography Q2 2025 consolidated net sales decreased 3% to $2.1 billion, with hardware up 2%, software down 14%, and all regions declining Q2 2025 Net Sales by Category and Geography | Category | Q2 2025 Net Sales | YoY Change | | :------------------------- | :--------------------- | :------- | | Consolidated Net Sales ($ billion) | $2.1 | -3% | | Product Net Sales | - | -4% | | Service Net Sales | - | -2% | | Hardware Product Net Sales | - | +2% | | Software Product Net Sales | - | -14% | | North America Net Sales ($ billion) | $1.7 | -3% | | EMEA Net Sales ($ million) | $348.6 | -5% | | APAC Net Sales ($ million) | $58.6 | -3% | - Excluding the impact of foreign currency fluctuations, consolidated net sales decreased 4% year-over-year, with North America, EMEA, and APAC declining 3%, 11%, and 1% respectively[8] Gross Profit by Segment Q2 2025 gross profit decreased 2% to $442.3 million, gross margin expanded to 21.1%, EMEA gross profit grew 4% YoY Q2 2025 Gross Profit by Segment | Metric | Q2 2025 | YoY Change | | :-------------------------------- | :------------- | :------- | | Consolidated Gross Profit ($ million) | $442.3 | -2% | | Consolidated Gross Margin (%) | 21.1% | +10 bps | | Product Gross Profit | - | -3% | | Service Gross Profit | - | -2% | | Cloud Gross Profit | - | -5% | | Insight Core Services Gross Profit | - | -3% | | North America Gross Profit ($ million) | $341.7 | -4% | | EMEA Gross Profit ($ million) | $82.4 | +4% | | APAC Gross Profit ($ million) | $18.2 | -10% | - Excluding the impact of foreign currency fluctuations, consolidated gross profit decreased 3% year-over-year, with North America, EMEA, and APAC declining 3%, 2%, and 8% respectively[13] Earnings from Operations by Segment (GAAP & Adjusted) Q2 2025 GAAP operating earnings decreased 34% to $86.5 million, while adjusted operating earnings decreased 2% to $129.0 million Q2 2025 Earnings from Operations by Segment (GAAP & Adjusted) | Metric | Q2 2025 | YoY Change | | :------------------------------------------ | :------------- | :------- | | Consolidated Operating Earnings (GAAP) ($ million) | $86.5 | -34% | | North America Operating Earnings (GAAP) ($ million) | $68.7 | -33% | | EMEA Operating Earnings (GAAP) ($ million) | $11.2 | -47% | | APAC Operating Earnings (GAAP) ($ million) | $6.7 | -19% | | Adjusted Consolidated Operating Earnings ($ million) | $129.0 | -2% | | Adjusted North America Operating Earnings ($ million) | $102.9 | -1% | | Adjusted EMEA Operating Earnings ($ million) | $19.4 | +1% | | Adjusted APAC Operating Earnings ($ million) | $6.7 | -21% | - Excluding the impact of foreign currency fluctuations, adjusted consolidated operating earnings decreased 2% year-over-year, with EMEA and APAC declining 3% and 19% respectively, while North America adjusted operating earnings remained flat[13] Net Earnings and EPS (GAAP & Adjusted) Q2 2025 GAAP net earnings $46.9 million and diluted EPS $1.46 were down 46% and 36% YoY, while adjusted metrics remained flat Q2 2025 Net Earnings and EPS (GAAP & Adjusted) | Metric | Q2 2025 | YoY Change | | :------------------------------------ | :------------- | :------- | | Consolidated Net Earnings (GAAP) ($ million) | $46.9 | -46% | | Diluted EPS (GAAP) ($) | $1.46 | -36% | | Adjusted Consolidated Net Earnings ($ million) | $78.6 | - | | Adjusted Diluted EPS ($) | $2.45 | Flat | | Effective Tax Rate (%) | 26.9% | - | - Excluding the impact of foreign currency fluctuations, adjusted diluted EPS decreased 1% year-over-year[13] Financial Outlook & Guidance Full Year 2025 Guidance Full-year 2025 adjusted diluted EPS projected between $9.70 and $10.10, with gross profit flat and gross margin around 20% Full Year 2025 Financial Guidance | Metric | Full Year 2025 Guidance | | :--------------------- | :--------------- | | Adjusted Diluted EPS ($) | $9.70 - $10.10 | | Gross Profit | Approximately flat compared to 2024 | | Gross Margin (%) | Approximately 20% | Guidance Assumptions and Exclusions Guidance excludes $74.4 million intangible asset amortization, assuming no major acquisition/restructuring costs, and stable macroeconomic conditions - Guidance excludes approximately $74.4 million in acquisition-related intangible asset amortization expenses[16] - Guidance assumes no significant acquisition or integration expenses, transformation or severance and restructuring costs, or material changes in the macroeconomic environment[16] Key Guidance Assumptions | Assumption | Full Year 2025 Guidance | | :-------------------------- | :--------------- | | Interest Expense ($ million) | $75 - $80 | | Effective Tax Rate (%) | Approximately 25% - 26% | | Capital Expenditures ($ million) | $30 - $35 | | Average Shares Outstanding (million) | 32.4 | - The company cannot provide a complete reconciliation of GAAP to non-GAAP diluted EPS due to the unpredictability of certain expenses[16] Conference Call Information A conference call and webcast on July 31, 2025, at 9:00 AM ET will discuss Q2 2025 results, details on website - The conference call and webcast will be held on July 31, 2025, at 9:00 AM ET[18] - Live and archived webcasts are available on the company's website at http://investor.insight.com/[18](index=18&type=chunk) Use of Non-GAAP Financial Measures Definition of Adjusted Measures and Exclusions Adjusted non-GAAP metrics exclude non-recurring or non-operating items like severance, intangible asset amortization, and acquisition costs - Adjusted operating earnings, adjusted net earnings, and adjusted diluted EPS exclude: severance and restructuring expenses, executive search fees, intangible asset amortization, transformation costs, acquisition and integration expenses, fair value changes in earn-out revaluation, third-party data center service interruption expenses, impairment losses on real estate assets held for sale, and their tax impacts[20] - Adjusted EBITDA additionally excludes: interest expense, income tax expense, depreciation and amortization of equipment, and fair value changes in warrant settlement liability[20] - Adjusted ROIC excludes: severance and restructuring expenses, executive search fees, intangible asset amortization, transformation costs, acquisition and integration expenses, third-party data center service interruption expenses, fair value changes in earn-out revaluation, impairment losses on real estate assets held for sale, and their tax impacts[20] - Transformation costs refer to business transformation expenses incurred to achieve strategic objectives, including becoming a leading solutions integrator[20] Purpose and Limitations of Non-GAAP Measures Non-GAAP metrics are used for performance evaluation, compensation, forecasting, and comparison, offering transparency but not replacing GAAP - Non-GAAP metrics are used to evaluate financial performance, calculate incentive compensation, forecast future performance, and compare with competitors[21] - The company believes non-GAAP metrics are useful to investors as they increase transparency, facilitate comparisons with prior periods and competitors, and aid in forecasting future performance[21] - Non-GAAP financial measures are not prepared in accordance with GAAP, may differ from non-GAAP measures presented by other companies, and should not be considered substitutes for or superior to GAAP financial results[21][23] - The company sometimes excludes the impact of foreign currency fluctuations when discussing changes in net sales, gross profit, and operating earnings to provide supplemental information about the underlying business[10] GAAP Financial Statements Consolidated Statements of Operations This statement details GAAP revenue, costs, gross profit, operating expenses, and net earnings for Q2 and H1 2025 and 2024 Consolidated Statements of Operations (GAAP) | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :----------------------------- | :------------- | :------------- | :----------- | :----------- | | Net Sales | 2,091,482 | 2,161,662 | 4,195,038 | 4,541,147 | | Cost of Sales | 1,649,155 | 1,708,297 | 3,346,234 | 3,646,854 | | Gross Profit | 442,327 | 453,365 | 848,804 | 894,293 | | Operating Expenses | 355,795 | 322,292 | 702,169 | 663,234 | | Operating Earnings | 86,532 | 131,073 | 146,635 | 231,059 | | Earnings Before Income Taxes | 64,167 | 117,352 | 83,176 | 205,544 | | Net Earnings | 46,932 | 87,444 | 54,446 | 154,471 | | Diluted EPS | 1.46 | 2.27 | 1.63 | 4.01 | Consolidated Balance Sheets This statement presents GAAP assets, liabilities, and equity as of June 30, 2025, and December 31, 2024, showing increases in receivables and long-term debt Consolidated Balance Sheets (GAAP) | Metric (USD thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------- | :------------- | | Assets | | | | Cash and Cash Equivalents | 309,135 | 259,234 | | Accounts Receivable, Net | 5,479,172 | 4,172,104 | | Inventory | 147,489 | 122,581 | | Total Assets | 8,728,766 | 7,448,578 | | Liabilities and Stockholders' Equity | | | | Accounts Payable – Trade | 4,167,396 | 3,059,667 | | Long-Term Debt | 1,324,992 | 531,233 | | Total Liabilities | 7,123,283 | 5,677,967 | | Total Stockholders' Equity | 1,605,483 | 1,770,611 | - As of June 30, 2025, total assets increased to $8.729 billion, total liabilities increased to $7.123 billion, and stockholders' equity slightly decreased[38] Consolidated Statements of Cash Flows This statement details cash flows for H1 2025 and 2024, showing $99.0 million cash used in operations due to receivables, financing shifting to inflow Consolidated Statements of Cash Flows (GAAP) | Metric (USD thousands) | First Half 2025 | First Half 2024 | | :----------------------------- | :----------- | :----------- | | Net Cash from Operating Activities | (99,001) | 292,964 | | Net Cash from Investing Activities | (11,978) | (279,048) | | Net Cash from Financing Activities | 139,118 | (20,623) | | Cash and Cash Equivalents Ending Balance | 311,565 | 258,350 | - Net cash used in operating activities was $99.0 million in the first half of 2025, primarily due to a $1.129 billion increase in accounts receivable[40] - Net cash from financing activities shifted from an outflow in the first half of 2024 to an inflow of $139.0 million in the first half of 2025, primarily due to increased borrowings under the ABL revolving credit facility[40] Reconciliation of GAAP to Non-GAAP Financial Measures Adjusted Consolidated Earnings from Operations This section reconciles GAAP to adjusted non-GAAP consolidated operating earnings, adjusting for amortization and earn-out revaluation Adjusted Consolidated Earnings from Operations Reconciliation | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP Consolidated EFO | 86,532 | 131,073 | 146,635 | 231,059 | | Amortization of Intangible Assets | 18,668 | 17,357 | 37,216 | 32,282 | | Fair Value Changes in Earn-out Revaluation | 164 | (25,148) | 15,364 | (24,207) | | Other* | 23,599 | 7,810 | 32,100 | 13,708 | | Adjusted Non-GAAP Consolidated EFO | 128,963 | 131,092 | 231,315 | 252,842 | | GAAP EFO as % of Net Sales | 4.1% | 6.1% | 3.5% | 5.1% | | Adjusted Non-GAAP EFO as % of Net Sales | 6.2% | 6.1% | 5.5% | 5.6% | Adjusted Consolidated Net Earnings This section reconciles GAAP to adjusted non-GAAP consolidated net earnings, including operating earnings adjustments and warrant revaluation Adjusted Consolidated Net Earnings Reconciliation | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP Consolidated Net Earnings | 46,932 | 87,444 | 54,446 | 154,471 | | Amortization of Intangible Assets | 18,668 | 17,357 | 37,216 | 32,282 | | Fair Value Changes in Earn-out Revaluation | 164 | (25,148) | 15,364 | (24,207) | | Net Loss from Revaluation of Warrant Settlement Liability | — | — | 25,069 | — | | Other* | 23,599 | 7,810 | 32,100 | 13,708 | | Income Tax Impact of Non-GAAP Adjustments | (10,780) | (734) | (17,787) | (6,173) | | Adjusted Non-GAAP Consolidated Net Earnings | 78,583 | 86,729 | 146,408 | 170,081 | | GAAP Net Earnings as % of Net Sales | 2.2% | 4.0% | 1.3% | 3.4% | | Adjusted Non-GAAP Net Earnings as % of Net Sales | 3.8% | 4.0% | 3.5% | 3.7% | Adjusted Diluted Earnings Per Share This section reconciles GAAP to adjusted non-GAAP diluted EPS, adjusting for amortization, earn-out revaluation, warrant liability, and tax Adjusted Diluted Earnings Per Share Reconciliation | Metric | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP Diluted EPS ($) | $1.46 | $2.27 | $1.63 | $4.01 | | Amortization of Intangible Assets | 0.58 | 0.45 | 1.11 | 0.84 | | Fair Value Changes in Earn-out Revaluation | 0.01 | (0.65) | 0.46 | (0.63) | | Net Loss from Revaluation of Warrant Settlement Liability | — | — | 0.75 | — | | Other* | 0.73 | 0.20 | 0.96 | 0.36 | | Income Tax Impact of Non-GAAP Adjustments | (0.33) | (0.02) | (0.53) | (0.16) | | Impact of Note Hedge Gains | — | 0.21 | 0.12 | 0.41 | | Adjusted Non-GAAP Diluted EPS ($) | $2.45 | $2.46 | $4.50 | $4.83 | | Shares Used in Diluted EPS Calculation (thousands) | 32,121 | 38,567 | 33,402 | 38,501 | | Shares Used in Adjusted Non-GAAP Diluted EPS Calculation (thousands) | 32,121 | 35,245 | 32,537 | 35,226 | Adjusted Segment Earnings from Operations This section reconciles GAAP to adjusted non-GAAP operating earnings for North America, EMEA, and APAC, adjusting for amortization and revaluation North America Adjusted Earnings from Operations North America's GAAP operating earnings were $68.7 million in Q2 2025, adjusted non-GAAP operating earnings $102.9 million, down 1% YoY North America Adjusted Earnings from Operations Reconciliation | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP North America EFO | 68,722 | 101,813 | 119,512 | 185,836 | | Adjusted Non-GAAP North America EFO | 102,911 | 103,429 | 189,876 | 206,213 | | Adjusted Non-GAAP EFO as % of Net Sales | 6.1% | 6.0% | 5.6% | 5.7% | EMEA Adjusted Earnings from Operations EMEA's GAAP operating earnings were $11.2 million in Q2 2025, adjusted non-GAAP operating earnings $19.4 million, up 1% YoY EMEA Adjusted Earnings from Operations Reconciliation | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP EMEA EFO | 11,156 | 21,007 | 16,167 | 32,197 | | Adjusted Non-GAAP EMEA EFO | 19,350 | 19,216 | 30,368 | 33,230 | | Adjusted Non-GAAP EFO as % of Net Sales | 5.6% | 5.2% | 4.4% | 4.3% | APAC Adjusted Earnings from Operations APAC's GAAP operating earnings were $6.7 million in Q2 2025, adjusted non-GAAP operating earnings $6.7 million, down 21% YoY APAC Adjusted Earnings from Operations Reconciliation | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP APAC EFO | 6,654 | 8,253 | 10,956 | 13,026 | | Adjusted Non-GAAP APAC EFO | 6,702 | 8,447 | 11,071 | 13,399 | | Adjusted Non-GAAP EFO as % of Net Sales | 11.4% | 14.0% | 9.3% | 11.0% | Adjusted EBITDA This section reconciles GAAP net earnings to adjusted non-GAAP EBITDA, adjusting for interest, taxes, depreciation, amortization, and revaluation Adjusted EBITDA Reconciliation | Metric (USD thousands) | Q2 2025 | Q2 2024 | First Half 2025 | First Half 2024 | | :------------------------------------------ | :------------- | :------------- | :----------- | :----------- | | GAAP Consolidated Net Earnings | 46,932 | 87,444 | 54,446 | 154,471 | | Interest Expense | 24,293 | 16,859 | 42,032 | 32,128 | | Income Tax Expense | 17,235 | 29,908 | 28,730 | 51,073 | | Depreciation and Amortization of Equipment | 7,264 | 7,208 | 14,495 | 14,169 | | Amortization of Intangible Assets | 18,668 | 17,357 | 37,216 | 32,282 | | Fair Value Changes in Earn-out Revaluation | 164 | (25,148) | 15,364 | (24,207) | | Net Loss from Revaluation of Warrant Settlement Liability | — | — | 25,069 | — | | Other* | 23,599 | 7,810 | 32,100 | 13,708 | | Adjusted Non-GAAP EBITDA | 138,155 | 141,438 | 249,452 | 273,624 | | Adjusted Non-GAAP EBITDA as % of Net Sales | 6.6% | 6.5% | 5.9% | 6.0% | Adjusted Return on Invested Capital (ROIC) This section reconciles GAAP operating earnings to adjusted non-GAAP ROIC, adjusting for amortization, revaluation, and tax impacts, with ROIC at 14.41% Adjusted Return on Invested Capital (ROIC) Reconciliation | Metric (USD thousands) | June 30, 2025 (12 months) | June 30, 2024 (12 months) | | :------------------------------------------ | :--------------------- | :--------------------- | | GAAP Consolidated EFO | 304,160 | 454,782 | | Amortization of Intangible Assets | 74,515 | 51,918 | | Fair Value Changes in Earn-out Revaluation | 31,722 | (24,207) | | Other5 | 70,448 | 38,811 | | Adjusted Non-GAAP Consolidated EFO | 480,845 | 521,304 | | Income Tax Expense | 125,020 | 135,539 | | Adjusted Non-GAAP Consolidated EFO (Tax-Effected) | 355,825 | 385,765 | | Invested Capital | 2,469,820 | 2,272,910 | | Adjusted Non-GAAP ROIC | 14.41% | 16.97% | - Adjusted non-GAAP ROIC decreased from 16.97% as of June 30, 2024, to 14.41% as of June 30, 2025[50] Forward-Looking Information & Risk Factors Forward-Looking Statement Disclaimer This press release contains 'forward-looking statements' subject to risks and uncertainties, actual results may differ, and the company disclaims any update obligation - Certain statements in this press release are 'forward-looking statements' subject to risks and uncertainties, where actual results may differ materially from expectations[30] - Forward-looking statements cover inflation, interest rates, future financial performance, gross profit growth, adjusted diluted EPS, gross margin, effective tax rate, capital expenditures, cash flow, supply chain constraints, IT market trends, tariffs and trade policies, and business strategies[30] - The company undertakes no obligation to update forward-looking statements and does not endorse any third-party projections of future performance[31][33] Key Risk Factors Key risk factors include competitor actions, reliance on partners, technological advancements, macroeconomic conditions, cyberattacks, increased debt, and talent - Competitor actions, reliance on partners, and changes in product availability, marketing funds, and purchasing incentives[32] - The ability to keep pace with rapidly evolving technological advancements, including generative artificial intelligence, and changing competitive markets[32] - Changes in general economic conditions, economic uncertainty, and geopolitical conditions, including the possibility of a recession or decline in market activity[32] - Disruptions to IT systems and data networks, cyberattacks, data privacy breaches, and related government regulatory violations[32] - Increased debt and interest expense, and the potential for reduced availability of funds under financing facilities[32] - Reliance on key personnel and the ability to attract, train, and retain skilled team members[32]