Insight Enterprises(NSIT) - 2025 Q2 - Quarterly Report

PART I - Financial Information This section presents the unaudited consolidated financial statements and management's discussion and analysis of Insight Enterprises, Inc.'s financial condition and results of operations Item 1 – Financial Statements This section presents Insight Enterprises, Inc.'s unaudited consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with notes on accounting policies and key financial activities Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $309,135 | $259,234 | | Accounts receivable, net | $5,479,172 | $4,172,104 | | Inventories | $147,489 | $122,581 | | Total current assets | $6,300,014 | $4,844,622 | | Goodwill | $905,218 | $893,516 | | Total Assets | $8,728,766 | $7,448,578 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Accounts payable—trade | $4,167,396 | $3,059,667 | | Current portion of long-term debt | $13 | $332,879 | | Total current liabilities | $4,895,404 | $4,122,202 | | Long-term debt | $1,324,992 | $531,233 | | Total Stockholders' Equity | $1,605,483 | $1,770,611 | | Total Liabilities and Stockholders' Equity | $8,728,766 | $7,448,578 | Consolidated Statements of Operations This statement details the company's revenues, expenses, and net earnings over specific reporting periods | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $2,091,482 | $2,161,662 | $4,195,038 | $4,541,147 | | Gross profit | $442,327 | $453,365 | $848,804 | $894,293 | | Earnings from operations | $86,532 | $131,073 | $146,635 | $231,059 | | Net earnings | $46,932 | $87,444 | $54,446 | $154,471 | | Diluted EPS | $1.46 | $2.27 | $1.63 | $4.01 | Consolidated Statements of Comprehensive Income This statement presents net earnings and other comprehensive income items, reflecting total changes in equity from non-owner sources | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net earnings | $46,932 | $87,444 | $54,446 | $154,471 | | Foreign currency translation adjustments | $35,319 | $(3,425) | $46,089 | $(15,516) | | Total comprehensive income | $82,251 | $84,019 | $100,535 | $138,955 | Consolidated Statements of Stockholders' Equity This statement outlines changes in the company's equity accounts, including net earnings, share repurchases, and foreign currency adjustments - Total stockholders' equity decreased from $1,770,611 thousand at December 31, 2024, to $1,605,483 thousand at June 30, 2025, primarily due to repurchases of common stock and settlement upon exercise of Warrants, partially offset by net earnings and foreign currency translation adjustments[24] Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(99,001) | $292,964 | | Net cash used in investing activities | $(11,978) | $(279,048) | | Net cash provided by (used in) financing activities | $139,118 | $(20,623) | | Increase (decrease) in cash, cash equivalents and restricted cash | $50,098 | $(12,435) | | Cash, cash equivalents and restricted cash at end of period | $311,565 | $258,350 | Notes to Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the consolidated financial statements 1. Basis of Presentation and Recently Issued Accounting Standards This section describes the financial statement preparation basis, segment operations, and impact of new accounting standards - The company operates in three segments: North America, EMEA, and APAC, offering hardware, software, and services, including cloud solutions[28][29][30] - The FASB issued ASU No. 2024-03 (Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures) effective after December 15, 2026, requiring detailed expense disclosures, with the company evaluating its impact[33][34] - The company adopted ASU No. 2023-07 (Segment Reporting) effective January 1, 2024 (annual) and January 1, 2025 (interim), which did not materially impact financial statements or disclosures[36] 2. Receivables, Contract Liabilities and Performance Obligations This section details the company's receivables, contract assets, liabilities, and future revenue from performance obligations | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Current receivables, net | $5,479,172 | $4,172,104 | | Contract assets, net | $63,909 | $81,980 | | Long-term accounts receivable | $748,105 | $845,943 | | Long-term contract assets, net | $64,872 | $86,953 | | Contract liabilities | $110,053 | $109,615 | - Contract assets, net of allowances, totaled $128,781,000 as of June 30, 2025, primarily from the resale of third-party consumption-based services[38] Estimated Net Sales from Remaining Performance Obligations (in thousands) | Estimated Net Sales from Remaining Performance Obligations (in thousands) | Services | | :-------------------------------------------------------- | :------- | | Remainder of 2025 | $75,780 | | 2026 | $74,983 | | 2027 | $46,484 | | 2028 and thereafter | $51,158 | | Total remaining performance obligations | $248,405 | 3. Assets Held for Sale This section reports assets classified as held for sale and any associated impairment losses - During the six months ended June 30, 2025, the company classified its Santa Monica property as held for sale and recorded an impairment loss of $12,588,000 due to its carrying value exceeding fair value less costs to sell[42] 4. Net Earnings Per Share This section presents basic and diluted earnings per share, reflecting profitability on a per-share basis | Net Earnings Per Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $1.48 | $2.69 | $1.71 | $4.74 | | Diluted EPS | $1.46 | $2.27 | $1.63 | $4.01 | - Diluted EPS for the three months ended June 30, 2025, was $1.46, a decrease from $2.27 in the prior year, reflecting lower net earnings and changes in dilutive potential common shares[43] 5. Debt, Inventory Financing Facilities, Finance Leases and Other Financing Obligations This section details the company's debt structure, financing facilities, and other financial commitments Long-Term Debt (in thousands) | Long-Term Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | ABL revolving credit facility | $832,442 | $39,000 | | Senior unsecured notes due 2032 | $492,550 | $492,222 | | Convertible senior notes due 2025 | $— | $332,867 | | Total | $1,325,005 | $864,112 | | Long-term debt | $1,324,992 | $531,233 | - The ABL facility was amended on June 16, 2025, maintaining a maximum borrowing amount of $1.8 billion and maturing on July 22, 2027, with $832.4 million outstanding as of June 30, 2025[44] - The $350 million Convertible Senior Notes due 2025 matured on February 15, 2025, with the majority settled in cash ($333.1 million) and the remainder in common stock (2,832,627 shares)[50] - The company settled 2,049,264 Warrants for $138.9 million cash on February 27, 2025, and an additional 1,536,948 Warrants for $83.1 million cash on April 2, 2025, with approximately 297,000 Warrants settled in shares during Q2 2025, and 1,239,825 Warrants remaining outstanding to be settled in shares[55][56][57] - Total maximum capacity under inventory financing facilities is $705 million, with $220.8 million outstanding as of June 30, 2025[58] 6. Income Taxes This section outlines the company's effective tax rates and the factors influencing them for the reporting periods Effective Tax Rate | Effective Tax Rate | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Effective Tax Rate | 26.9% | 25.5% | 34.5% | 24.8% | - The effective tax rate for the three months ended June 30, 2025, was 26.9%, higher than the U.S. federal statutory rate of 21.0% due to state income taxes and higher foreign earnings taxes, partially offset by R&D tax benefits[60] - The effective tax rate for the six months ended June 30, 2025, was 34.5%, significantly higher than the prior year, primarily due to the non-deductibility of losses from warrant fair value adjustments and revaluation of earnout liabilities, partially offset by a reduction in foreign tax credit valuation allowance[60] 7. Share Repurchase Program This section details the company's share repurchase activities and the remaining authorization under its plan - As of June 30, 2025, approximately $223.9 million remained available for repurchases under the $300 million share repurchase plan authorized on September 11, 2024[64] - During the three months ended June 30, 2025, the company repurchased 600,000 shares for $76.1 million (average price $126.86) in a private transaction from ValueAct Capital[65] - For the six months ended June 30, 2025, total repurchases were 600,000 shares for $76.1 million, compared to 187,357 shares for $35.0 million in the same period of 2024[66] 8. Commitments and Contingencies This section discloses the company's outstanding performance bonds, purchase commitments, and contingent liabilities - As of June 30, 2025, the company had approximately $37.1 million in performance bonds outstanding[67] - Remaining purchase commitments include $67.5 million for cloud services (5-year period ending Sept 2028) and $13.1 million for software as a service (4-year period ending Nov 2026)[69][70] - A contingent liability of approximately $24.6 million is recorded, payable to a partner for contractual commitments to resell cloud services[71] 9. Segment Information This section provides financial data broken down by the company's North America, EMEA, and APAC operating segments - The company operates in three reportable geographic segments: North America, EMEA, and APAC, with offerings including IT hardware, software, and services[78] Net Sales by Segment (in thousands) | Net Sales by Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $1,684,304 | $1,732,357 | $3,384,947 | $3,637,179 | | EMEA | $348,614 | $368,873 | $691,442 | $781,714 | | APAC | $58,564 | $60,432 | $118,649 | $122,254 | | Consolidated | $2,091,482 | $2,161,662 | $4,195,038 | $4,541,147 | Gross Profit by Segment (in thousands) | Gross Profit by Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $341,692 | $354,107 | $661,144 | $703,950 | | EMEA | $82,434 | $79,142 | $154,361 | $154,175 | | APAC | $18,201 | $20,116 | $33,299 | $36,168 | | Consolidated | $442,327 | $453,365 | $848,804 | $894,293 | Adjusted Earnings from Operations by Segment (in thousands) | Adjusted Earnings from Operations by Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $102,911 | $103,429 | $189,876 | $206,213 | | EMEA | $19,350 | $19,216 | $30,368 | $33,230 | | APAC | $6,702 | $8,447 | $11,071 | $13,399 | | Consolidated | $128,963 | $131,092 | $231,315 | $252,842 | 10. Acquisition (Infocenter) This section details the acquisition of Infocenter, including purchase price, goodwill, intangible assets, and earnout adjustments - Effective May 1, 2024, Insight acquired Infocenter.io for a cash purchase price of $265 million, net of cash acquired, including an estimated fair value of earnout payments of $24.2 million[89] - The acquisition resulted in $191.1 million in goodwill and $123.9 million in identifiable intangible assets (primarily customer relationships amortized over ten years), recorded in the North America segment[90] - The company recognized a gain of $3.3 million and a loss of $11.9 million from changes in the estimated fair value of earnout payments for the three and six months ended June 30, 2025, respectively[92] 11. Subsequent Event This section reports on the One Big Beautiful Bill Act (OBBBA) signed into law and its potential tax implications - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, enacting significant changes to U.S. federal tax law, with the company currently evaluating its impact but not expecting a material effect on its effective tax rate[94] Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, condition, and results of operations, covering sales, profits, expenses, and liquidity Quarterly Overview This overview summarizes the company's consolidated financial highlights and key drivers of performance changes for the quarter - Insight Enterprises, Inc. is a Fortune 500 solutions integrator, enabling secure, end-to-end digital transformation for clients in North America, EMEA, and APAC through a comprehensive portfolio of hardware, software, and services, including cloud solutions[97] Consolidated Financial Highlights (Three Months Ended June 30) | Consolidated Financial Highlights (Three Months Ended June 30) | 2025 | 2024 | Change (YoY) | | :----------------------------------------------------------- | :----------- | :----------- | :----------- | | Net sales | $2.1 billion | $2.16 billion | -3% | | Gross profit | $442.3 million | $453.4 million | -2% | | Gross margin | 21.1% | 21.0% | +10 bps | | Earnings from operations | $86.5 million | $131.1 million | -34% | | Net earnings | $46.9 million | $87.4 million | -46% | | Diluted EPS | $1.46 | $2.27 | -36% | - The decrease in earnings from operations was primarily due to a decrease in gross profit, an increase in selling and administrative expenses (including a $12.6 million real estate asset impairment loss in 2025 and a $25.1 million gain on earnout revaluation in 2024), and increased interest expense[98] Supply Chain, Demand and Inflation Update This section discusses the impact of inflation on interest rates and the company's monitoring of macroeconomic changes - Inflation contributed to sustained high interest rates on variable rate borrowing facilities in the first half of 2025, with expectations for higher-than-historical rates throughout most of 2025, despite anticipated decreases[102] - The company is actively monitoring macroeconomic changes, including impacts on supply chain, demand, and interest rates, and assessing potential effects on current results, financial condition, and liquidity[102] Critical Accounting Estimates This section highlights management's significant judgments and assumptions used in preparing the financial statements - The preparation of consolidated financial statements requires management to make estimates and assumptions affecting reported amounts, which are based on historical experience and reasonable assumptions[104] - There have been no changes to the critical accounting estimates disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[105] Results of Operations This section analyzes the company's financial performance, including net sales, gross profit, and operating expenses Net Sales This section details net sales performance across geographic segments and product categories, highlighting key drivers of change Net Sales by Segment (in thousands) | Net Sales by Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | North America | $1,684,304 | $1,732,357 | (3)% | $3,384,947 | $3,637,179 | (7)% | | EMEA | $348,614 | $368,873 | (5)% | $691,442 | $781,714 | (12)% | | APAC | $58,564 | $60,432 | (3)% | $118,649 | $122,254 | (3)% | | Consolidated | $2,091,482 | $2,161,662 | (3)% | $4,195,038 | $4,541,147 | (8)% | - North America net sales decreased 3% (QoQ) and 7% (YoY), primarily due to decreases in software (18% QoQ, 27% YoY) and services (6% QoQ, 6% YoY) net sales, partially offset by hardware growth (4% QoQ, 3% YoY), with software decline driven by vendor relationship changes and migration to cloud solutions[111][112][113] - EMEA net sales decreased 5% (QoQ) and 12% (YoY), with hardware down 13% (QoQ) and 9% (YoY), and software down 9% (QoQ) and 22% (YoY), while services net sales increased 15% (QoQ) and 9% (YoY), with software decline due to vendor relationship changes and cloud migration[113][114][115] - APAC net sales decreased 3% (QoQ) and 3% (YoY), with hardware down 14% (QoQ) and 14% (YoY), and services down 3% (QoQ) and 4% (YoY), while software net sales increased 1% (QoQ) and 2% (YoY)[116][117][118] Gross Profit This section analyzes gross profit and gross margin trends by segment, identifying factors influencing profitability Gross Profit (in thousands) | Gross Profit (in thousands) | Three Months Ended June 30, 2025 | Gross Margin 2025 | Three Months Ended June 30, 2024 | Gross Margin 2024 | Six Months Ended June 30, 2025 | Gross Margin 2025 | Six Months Ended June 30, 2024 | Gross Margin 2024 | | :-------------------------- | :------------------------------- | :---------------- | :------------------------------- | :---------------- | :----------------------------- | :---------------- | :----------------------------- | :---------------- | | North America | $341,692 | 20.3% | $354,107 | 20.4% | $661,144 | 19.5% | $703,950 | 19.4% | | EMEA | $82,434 | 23.6% | $79,142 | 21.5% | $154,361 | 22.3% | $154,175 | 19.7% | | APAC | $18,201 | 31.1% | $20,116 | 33.3% | $33,299 | 28.1% | $36,168 | 29.6% | | Consolidated | $442,327 | 21.1% | $453,365 | 21.0% | $848,804 | 20.2% | $894,293 | 19.7% | - Consolidated gross profit decreased 2% (QoQ) and 5% (YoY), while gross margin expanded by 10 basis points (QoQ) to 21.1% and 50 basis points (YoY) to 20.2%[119] - North America's gross profit decreased 4% (QoQ) and 6% (YoY), with gross margin contracting 10 basis points (QoQ) due to a services margin contraction, partially offset by product margin expansion from higher-margin hardware[120][121] - EMEA's gross profit increased 4% (QoQ) and was flat (YoY), with gross margin expanding 210 basis points (QoQ) and 260 basis points (YoY), driven by increased services margin from Insight Core services and agency net sales[122][124] - APAC's gross profit decreased 10% (QoQ) and 8% (YoY), with gross margin contracting 220 basis points (QoQ) and 150 basis points (YoY), primarily due to a decrease in fees from cloud solution offerings[123][125] Operating Expenses This section examines changes in selling and administrative expenses, severance, restructuring, and acquisition-related costs - Selling and administrative expenses increased 11% (QoQ) and 6% (YoY), primarily due to a $46.0 million increase in other expenses (including a $12.6 million real estate impairment loss and transformation costs), partially offset by a $9.3 million decrease in personnel costs due to reduced headcount[126][127][128] - Severance and restructuring expenses, net, were $3.4 million (QoQ) and $10.4 million (YoY), primarily related to workforce realignments[129][130] - Acquisition and integration related expenses were $0.1 million (QoQ) and $0.3 million (YoY), significantly lower than the prior year's $1.5 million which included SADA and Infocenter acquisitions[131][132] Earnings from Operations This section analyzes earnings from operations and operating margins across segments, explaining performance drivers Earnings from Operations (in thousands) | Earnings from Operations (in thousands) | Three Months Ended June 30, 2025 | % of Net Sales 2025 | Three Months Ended June 30, 2024 | % of Net Sales 2024 | Six Months Ended June 30, 2025 | % of Net Sales 2025 | Six Months Ended June 30, 2024 | % of Net Sales 2024 | | :------------------------------------ | :------------------------------- | :------------------ | :------------------------------- | :------------------ | :----------------------------- | :------------------ | :----------------------------- | :------------------ | | North America | $68,722 | 4.1% | $101,813 | 5.9% | $119,512 | 3.5% | $185,836 | 5.1% |\ | EMEA | $11,156 | 3.2% | $21,007 | 5.7% | $16,167 | 2.3% | $32,197 | 4.1% | | APAC | $6,654 | 11.4% | $8,253 | 13.7% | $10,956 | 9.2% | $13,026 | 10.7% | | Consolidated | $86,532 | 4.1% | $131,073 | 6.1% | $146,635 | 3.5% | $231,059 | 5.1% | - Consolidated earnings from operations decreased 34% (QoQ) and 37% (YoY), primarily due to decreased gross profit and increased selling and administrative expenses[133] - North America's earnings from operations decreased 33% (QoQ) and 36% (YoY), with margins contracting by 180 basis points (QoQ) and 160 basis points (YoY)[133][134] - EMEA's earnings from operations decreased 47% (QoQ) and 50% (YoY), with margins contracting by 250 basis points (QoQ) and 180 basis points (YoY), mainly due to increased selling and administrative expenses[135][136] - APAC's earnings from operations decreased 19% (QoQ) and 16% (YoY), with margins contracting by 230 basis points (QoQ) and 150 basis points (YoY), driven by decreased gross profit[137][138] Adjusted Earnings from Operations This section presents non-GAAP adjusted earnings from operations and margins, providing an alternative view of core performance Adjusted Earnings from Operations (in thousands) | Adjusted Earnings from Operations (in thousands) | Three Months Ended June 30, 2025 | % of Net Sales 2025 | Three Months Ended June 30, 2024 | % of Net Sales 2024 | Six Months Ended June 30, 2025 | % of Net Sales 2025 | Six Months Ended June 30, 2024 | % of Net Sales 2024 | | :----------------------------------------------- | :------------------------------- | :------------------ | :------------------------------- | :------------------ | :----------------------------- | :------------------ | :----------------------------- | :------------------ | | North America | $102,911 | 6.1% | $103,429 | 6.0% | $189,876 | 5.6% | $206,213 | 5.7% | | EMEA | $19,350 | 5.6% | $19,216 | 5.2% | $30,368 | 4.4% | $33,230 | 4.3% | | APAC | $6,702 | 11.4% | $8,447 | 14.0% | $11,071 | 9.3% | $13,399 | 11.0% | | Consolidated | $128,963 | 6.2% | $131,092 | 6.1% | $231,315 | 5.5% | $252,842 | 5.6% | - Consolidated Adjusted earnings from operations decreased 2% (QoQ) and 9% (YoY)[139] - North America's Adjusted earnings from operations decreased 1% (QoQ) and 8% (YoY), with margins increasing 10 basis points (QoQ) but decreasing 10 basis points (YoY)[140] - EMEA's Adjusted earnings from operations increased 1% (QoQ) but decreased 9% (YoY), with margins increasing 40 basis points (QoQ) and 10 basis points (YoY)[141][142] - APAC's Adjusted earnings from operations decreased 21% (QoQ) and 17% (YoY), with margins contracting 260 basis points (QoQ) and 170 basis points (YoY)[143][144] Non-Operating Expense (Income) This section details changes in interest expense and other non-operating income or expenses, including warrant revaluation - Interest expense, net, increased 58% (QoQ) and 42% (YoY), primarily due to the issuance of Senior Notes in May 2024, the maturity of Convertible Notes in February 2025, higher ABL facility loan balances, and decreased interest income[145] - Other expense (income), net, primarily reflects a $25.1 million net loss on the revaluation of warrant settlement liabilities in the six months ended June 30, 2025, with no comparable activity in the prior year[147] Income Tax Expense This section explains the effective tax rate fluctuations, driven by various tax benefits, non-deductible items, and foreign taxes - The effective tax rate for the three months ended June 30, 2025, was 26.9%, up from 25.5% in the prior year, due to greater tax benefits from earnout adjustments and higher excess tax benefits on employee share-based compensation in the prior year[148] - The effective tax rate for the six months ended June 30, 2025, was 34.5%, up from 24.8% in the prior year, primarily due to the non-deductibility of net losses from warrant settlement liabilities and earnout revaluation, partially offset by a reduction in foreign tax credit valuation allowance[149][150] Use of Non-GAAP Financial Measures This section defines non-GAAP adjusted earnings from operations and explains its purpose for management and investors - Adjusted non-GAAP earnings from operations exclude severance and restructuring, executive recruitment, amortization of intangibles, transformation costs, acquisition/integration expenses, earnout revaluation gains/losses, data center outage costs, and impairment losses on assets held for sale[151] - This non-GAAP measure is used by management to evaluate financial performance, calculate incentive compensation, forecast future performance, and compare results to competitors, providing greater transparency to investors[151] Liquidity and Capital Resources This section assesses the company's ability to meet short-term and long-term obligations, including cash flow, debt, and financing Cash and Cash Flow This section analyzes cash flow from operating, investing, and financing activities, highlighting key uses and sources of cash Cash Flow Information (in thousands) | Cash Flow Information (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(99,001) | $292,964 | | Net cash used in investing activities | $(11,978) | $(279,048) | | Net cash provided by (used in) financing activities | $139,118 | $(20,623) | | Increase (decrease) in cash, cash equivalents and restricted cash | $50,098 | $(12,435) | | Cash, cash equivalents and restricted cash at end of period | $311,565 | $258,350 | - Operating activities used $99.0 million in cash during the first half of 2025, a significant decrease from $293.0 million provided in the prior year, primarily due to lower net earnings and the impact of higher hardware net sales[158][161] - Primary uses of cash in H1 2025 included funding operations, cash settlement of Warrants ($222.0 million), common stock repurchases ($76.1 million), and repayment of Convertible Notes ($333.1 million)[158][161] - Net borrowings under the ABL facility were $780.4 million in H1 2025, compared to net repayments of $420.4 million in H1 2024, while net borrowings under inventory financing facilities were $2.1 million in H1 2025, compared to net repayments of $13.0 million in H1 2024[158][161] - Capital expenditures were $12.0 million in H1 2025, with full-year 2025 capital expenditures expected to be in the range of $30.0 million to $35.0 million[158][161] Financing Facilities This section outlines the company's debt balances, compliance with covenants, and available inventory financing capacity - The company's debt balance as of June 30, 2025, was $1.3 billion, with the objective to pay down debt while maintaining adequate cash balances[167] - The ABL facility and Senior Notes contain customary covenants, and the company was in compliance with all covenants as of June 30, 2025[167] - Inventory financing facilities have an aggregate availability of $705.0 million, with $220.8 million outstanding at June 30, 2025[167] Undistributed Foreign Earnings This section reports on cash and cash equivalents held by foreign subsidiaries and potential repatriation tax implications - As of June 30, 2025, approximately $260.4 million in cash and cash equivalents were held by foreign subsidiaries, primarily in Canada and Australia, subject to U.S. income taxation upon repatriation[165] Off-Balance Sheet Arrangements This section discloses off-balance sheet arrangements, including indemnifications, and their potential financial impact - Off-balance sheet arrangements include indemnifications, which management believes are not probable to result in material payments as of June 30, 2025[166] Recently Issued Accounting Standards This section refers to Note 1 for details on recently issued accounting standards and their potential impact - Information regarding recently issued accounting standards and their potential impact is incorporated by reference from Note 1 to the Consolidated Financial Statements[168] Contractual Obligations This section confirms no material changes to contractual obligations since the last annual report, except as noted - There have been no material changes to reported contractual obligations since the Annual Report on Form 10-K for the year ended December 31, 2024, other than those described in Note 8 to the Consolidated Financial Statements[169] Item 3 – Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate risk on fixed-rate Senior Notes - No material changes in reported market risks were identified, except for potential impacts of interest rate changes on the fair market value of fixed-rate Senior Notes[172] - As of June 30, 2025, the fair market value of the company's Senior Notes was $516.1 million[173] Item 4 – Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer evaluated and determined that disclosure controls and procedures were effective as of June 30, 2025[174] - There were no material changes in the company's internal control over financial reporting during the three months ended June 30, 2025[175] - Internal control over financial reporting has inherent limitations and may not prevent or detect all misstatements[176] PART II - Other Information This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits Item 1 – Legal Proceedings This section confirms no material pending legal proceedings and refers to Note 8 for routine legal matters - There are no material pending legal proceedings to which the company is a party[178] - The company is involved in various routine legal proceedings incidental to its business, as detailed in Note 8 of the Consolidated Financial Statements[178] Item 1A – Risk Factors This section directs readers to the Annual Report on Form 10-K for a comprehensive discussion of potential business risks - Readers should carefully consider the risk factors outlined in the Annual Report on Form 10-K for the year ended December 31, 2024[179] - Additional risks and uncertainties not currently known or deemed immaterial could materially and adversely affect the business[179] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity sales and details the company's share repurchase program and remaining authorization - No unregistered sales of equity securities occurred during the three months ended June 30, 2025[180] - The company does not intend to pay cash dividends in the foreseeable future, with the ABL facility containing covenants that restrict dividend payments if not met[180] Issuer Purchases of Equity Securities (May 1, 2025 - May 31, 2025) | Issuer Purchases of Equity Securities (May 1, 2025 - May 31, 2025) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------------------------------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | May 1, 2025 through May 31, 2025 | 600,000 | $126.86 | 600,000 | $223,882,772 | - As of June 30, 2025, approximately $223.9 million remained available under the $300 million share repurchase plan authorized on September 11, 2024[181] Item 3 – Defaults Upon Senior Securities This item is not applicable, indicating no defaults on senior securities Item 4 – Mine Safety Disclosures This item is not applicable, indicating no mine safety disclosures are required Item 5 – Other Information This section confirms no Rule 10b5-1 trading arrangement changes by directors or executive officers during the quarter - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[185] Item 6 – Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, agreements, and certifications - The exhibits include the Fifth Amendment to Credit Agreement, CEO and CFO certifications (Rule 13a-14), and various Inline XBRL documents[187]