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INSIGHT ENTERPRISES INC (NSIT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue fell 7% year over year to $2.07B, but gross profit rose 1% to $439.6M and gross margin expanded to a record 21.2% (+170 bps); GAAP EPS dropped to $0.99 (-59% YoY) and Adjusted EPS was $2.66 (-11% YoY) .
  • Services and cloud continued to drive the mix shift: Insight Core Services gross profit grew 12% YoY to $78M and cloud gross profit rose 3% YoY to $125M in Q4 .
  • FY2025 guidance introduced: Adjusted EPS $9.70–$10.10, low-single-digit gross profit growth, gross margin ~20%, interest expense $70–$75M (reflecting settlement of convert and warrants), tax rate 25–26%, capex $35–$40M, average shares ~32.9M .
  • Management highlighted a ~$70M cloud headwind from Google Enterprise Resale and Microsoft enterprise agreements as they pivot to CSP/mid-market, and expects device refresh momentum through 2025 and into 2026, framing the key narrative drivers alongside strong cash generation ($215M in Q4; $633M FY24) .

What Went Well and What Went Wrong

What Went Well

  • Record Q4 gross margin and mix improvement: “Gross margin expanded 170 basis points [to] 21.2% and adjusted diluted earnings per share were $2.66” with services/cloud mix underpinning performance .
  • Double-digit services/cloud growth engines: Insight Core Services GP +12% YoY to $78M and cloud GP +3% YoY to $125M in Q4; FY24 Core Services GP +15% and Cloud GP +21% .
  • Strategic positioning and AI traction: New strategic collaboration agreements with Microsoft, Google and AWS; examples like Cricket Australia’s AI-driven fan experience demonstrate multi-cloud/AI execution (“processing 4x the previous workload at half the cost”) .

What Went Wrong

  • Product softness and GAAP profitability compression: Product net sales declined 10% YoY; GAAP earnings from operations fell 51% YoY to $64.7M; GAAP EPS fell 59% YoY to $0.99 .
  • SG&A and interest headwinds: Adjusted SG&A grew due to acquisitions/onetime items, and higher interest expense from debt/share buybacks pressured adjusted EPS and EBITDA (Q4 Adjusted EBITDA down 11% YoY to $141.1M) .
  • Segment pressure in North America: NA earnings from operations fell 55% YoY to $52.4M in Q4; EMEA net sales down 18% YoY despite GP gains; APAC net sales down 6% YoY .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Billions)$2.236 $2.088 $2.073
Gross Profit ($USD Millions)$436.150 $432.085 $439.638
Gross Margin (%)19.5% 20.7% 21.2%
GAAP EFO ($USD Millions)$131.861 $92.851 $64.674
Adjusted EFO ($USD Millions)$148.672 $120.117 $129.413
GAAP Diluted EPS ($)$2.42 $1.52 $0.99
Adjusted Diluted EPS ($)$2.98 $2.19 $2.66

Segment breakdown – Q4 2024:

SegmentNet Sales ($USD Millions)YoY (%)Gross Profit ($USD Millions)Gross Margin (%)GAAP EFO ($USD Millions)Adjusted EFO ($USD Millions)
North America$1,700.8 (5%) $350.0 20.6% $52.4 $109.2
EMEA$319.8 (18%) $72.6 22.7% $7.4 $14.6
APAC$52.1 (6%) $17.0 32.7% $4.9 $5.6

KPIs – Q4 2024:

KPIValue
Services Net Sales ($USD Millions)$421.2
Services Gross Profit ($USD Millions)$254.0
Insight Core Services GP ($USD Millions)$78.0
Cloud Gross Profit ($USD Millions)$125.0
Adjusted EBITDA ($USD Millions)$141.133
Cash from Operations ($USD Millions)$215.1
Cash Conversion Cycle (Days)7 (down 22 days YoY)
Total Debt ($USD Millions)$864.1 (Dec 31, 2024)
Adjusted ROIC (%)15.3% (FY2024)
Gross Margin (%)21.2%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Diluted EPSFY2025n/a (initial)$9.70–$10.10 Initiated
Gross Profit GrowthFY2025n/a (initial)Low single digits Initiated
Gross MarginFY2025n/a (initial)~20% Initiated
Interest ExpenseFY2025n/a (initial)$70–$75M Initiated
Effective Tax RateFY2025n/a (initial)25–26% Initiated
Capital ExpendituresFY2025n/a (initial)$35–$40M Initiated
Average Share CountFY2025n/a (initial)32.9M (avg) Initiated

Note: FY2025 guidance was first introduced in Q4 2024; “Change” reflects initial issuance rather than a revision.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Cloud partner program changesFocus on cloud/services; SADA consumption supports cash flow; strong cloud GP growth Cloud GP +33% YoY; declines in legacy enterprise agreements noted ~$70M headwind from Google Enterprise Resale & MSFT EAs; pivot to CSP/mid-market; accelerate transitions Near-term headwind; mitigation underway; mid-teens cloud growth ex-EA impact
Device refresh cycleChoppy product demand; margin expansion via mix Hardware devices “green shoots” emerging; margin expansion Expect device refresh across 2025–2026; bookings improving and pipeline building Improving through 2025; extends into 2026
AI/multi-cloud initiativesServiceNow/InfoCenter execution; Stripe partnership via Amdaris Case studies; solutions integrator strategy; multi-cloud positioning Strategic collaborations with Microsoft/Google/AWS; Cricket Australia AI fan engagement (4x workload, 50% cost) Strengthening ecosystem; rising client AI demand
Tariffs/macroMacro caution noted; guidance maintained Macro cautious tone; 2024 guidance reduced in Q3 Tariffs modeled with minimal demand elasticity impact at current rates; passed-through ASP increases Managed risk; limited impact assumed
SG&A/cost actionsTransformation and integration costs; adjusted SG&A up modestly Adjusted SG&A flat YoY YTD; actions ongoing ~$25M annualized SG&A reductions in 2025; OpEx to grow slightly slower than gross profit Improving operating leverage in 2H25
Financing/convert & warrantsSenior notes issuance; convert conditional conversion risk disclosed Debt up YoY; convert/warrant mechanics outlined Settle $333M convert in Feb-25 via ABL; settle warrants in 2025; higher interest expense but lower dilution over time Temporary interest headwind; share count benefit

Management Commentary

  • “Gross margin expanded 170 basis points [to] 21.2%… Cash flow from operations was $215 million, and we have completed the SG&A actions… approximately $25 million in annualized reductions” – Joyce Mullen (CEO) .
  • “Cloud gross profit was $125 million, an increase of 3%… Insight Core Services gross profit was $78 million, an increase of 12%” – James Morgado (CFO) .
  • “We expect the device refresh cycle to gain momentum throughout the year… clients will prioritize investments in their infrastructure” – Joyce Mullen (CEO) .
  • “We anticipate cloud to be flat to slightly down [in 2025]… includes an approximate $70 million impact from Google Enterprise Resale and Microsoft enterprise agreements… excluding this impact, cloud would grow mid-teens” – James Morgado (CFO) .
  • “We entered into new strategic collaboration agreements with Microsoft, Google and Amazon Web Services… strengthening our position in cloud, data, AI, cyber and intelligent edge” – Management remarks .

Q&A Highlights

  • Cloud program changes and mitigation: ~$70M cloud headwind (Google ER and MSFT EAs); accelerated transition to CSP in SMB/corporate, strong Microsoft support; improved cloud commerce platform for digital engagement .
  • Operating leverage trajectory: OpEx expected to grow slightly slower than gross profit for FY25; $25M SG&A actions annualized; headcount reductions in support functions to protect sales/technical capacity .
  • Device refresh timing: Commercial devices growth seen for three consecutive quarters; majority of refresh likely to extend into 2026 due to timing vs Windows 11 support, but bookings/pipeline improving .
  • Earnings bridge/cash flow outlook: Interest expense headwind from settling converts via ABL; share count offsets via cash-settled warrants; cash from operations to normalize ($300–$400M range) as hardware returns to growth .
  • Tariffs: Modeled multiple scenarios; current tariffs expected to be passed through; minimal demand elasticity impact assumed in guidance .

Estimates Context

  • Wall Street consensus (S&P Global) for the latest quarter was unavailable during this session due to request limits; we cannot provide a comparison vs estimates at this time. If needed, we can re-query S&P Global to add EPS and revenue consensus vs actuals once access is restored.

Key Takeaways for Investors

  • Mix-led margin resilience: Record 21.2% Q4 gross margin and 20.3% FY24 gross margin signal durable mix shift toward services/cloud despite top-line pressure .
  • Services/cloud as growth engines: Core Services GP +12% YoY and cloud GP +3% YoY in Q4; FY24 Core Services +15% and cloud +21% underpin forward margin stability .
  • Near-term headwind but plan to mitigate: ~$70M cloud headwind tied to EA changes in 2025, with CSP/mid-market pivot and Microsoft support expected to offset over time (ex-impact mid-teens cloud growth) .
  • Hardware/device refresh momentum: Green shoots in devices and double-digit server growth; cycle expected through 2025 into 2026—monitor bookings conversion to revenue in H2 .
  • FY25 setup: Adjusted EPS $9.70–$10.10 with ~20% gross margin; interest expense higher near-term from convert settlement, but reduced dilution and ample ABL liquidity support capital flexibility .
  • Cash generation remains robust: Q4 CFO $215M; FY24 $633M; expect normalization as hardware returns—aligns with M&A capacity and targeted buybacks ($300M remaining authorization) .
  • Watch operating leverage cadence: Management expects OpEx to grow slightly slower than gross profit with a stronger second half—monitor progress on SG&A actions and segment mix .