What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-22 · 206 added, 139 removed, 333 unchanged (51% of the section changed)

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Full year 2024 financial and operational highlights included the following:

• We reported record gross profit of $1.7 billion and record gross margin of 18.2%, primarily driven by expansion in North America.

• We reported gross profit of $1.8 billion and record gross margin of 20.3%, primarily driven by margin expansion in North America.

• We generated cash flows from operations of $632.8 million.

• In December 2023, we acquired SADA to strengthen our digital transformation capabilities and accelerate the growth of our cloud services and solutions.

• In August 2023, we acquired Amdaris to support our EMEA services and solution offerings.

• In May 2024, we acquired Infocenter to strengthen our digital transformation capabilities leveraging their deep expertise in ServiceNow’s comprehensive suite of capabilities.

On a consolidated basis, for the year ended December 31, 2024:

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• Consolidated gross margin expanded approximately 210 basis points to a record 20.3% of net sales in 2024.

This increase reflects expansion in margin from services net sales, primarily from growth in cloud solution offerings, and an expansion in product margin.

• Earnings from operations increased to $419.8 million in 2023, an increase of 1% compared to the prior year, which represented 4.6% of net sales.

This increase reflects expansion in margin from services net sales, primarily from growth in Insight Delivered services and cloud solution offerings.

• Earnings from operations decreased to $388.6 million in 2024, a decrease of 7% compared to the prior year, which represented 4.5% of net sales.

• Our effective tax rate in 2024 was 25.0%, which compares to our effective tax rate of 25.6% in 2023.

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The results of operations for 2023 include the following items:

• severance and restructuring expenses of $4.2 million, $3.2 million net of tax;

• severance and restructuring expenses, net of $6.1 million, $4.4 million net of tax;

• acquisition and integration related expenses of $7.4 million, $6.0 million net of tax;

• the repurchase of approximately 1.6 million shares of the Company’s common stock for an aggregate cost of $217.1 million.

Throughout the “Overview” and “Results of Operations” sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to changes in net sales, gross profit, selling and administrative expenses and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates.

In computing these amounts and percentages, we compare the current period amount as translated into U.S.

In discussing financial results for 2024 and 2023, the Company refers to certain financial measures that are adjusted from the financial results prepared in accordance with GAAP.

When referring to non-GAAP measures, the Company refers to them as “Adjusted.” See the "Use of Non-GAAP Financial Measures" section below for additional information and a reconciliation of such non-GAAP measures to the most directly comparable GAAP financial measures.

Throughout the “Overview” and “Results of Operations” sections of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to changes in net sales, gross profit, selling and administrative expenses and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates, which are also considered to be non-GAAP measures.

We believe providing this information excluding the effects of fluctuating foreign currency exchange rates provides valuable supplemental information to investors regarding our underlying business and results of operations, consistent with how we, including our management, evaluate our performance.

In computing the changes in amounts and percentages, we compare the current period amount as translated into U.S.

dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S.

dollars utilizing the weighted average translation rate for the current period.

The performance measures excluding the effects of fluctuating foreign currency exchange rates should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

During 2023, we generated $619.5 million of cash from operating activities and primarily utilized cash for strategic acquisitions and to repurchase shares of our common stock.

We had net borrowings of $299.6 million under our senior secured revolving credit facility (the “ABL facility”).

We ended the year with $268.7 million of cash and cash equivalents and $940.5 million of debt outstanding under our long-term debt facilities, including $348.0 million related to the Notes that are classified as a current liability at December 31, 2023.

During 2024, we generated $632.8 million of cash from operating activities and primarily utilized cash for strategic acquisitions, to repurchase shares of our common stock, to repay debt and for payment of earnouts and other acquisition related payments.

We had net repayments of $554.1 million under our ABL facility and issued $500.0 million in principal amount of Senior Notes.

We ended the year with $259.2 million of cash and cash equivalents and $864.1 million of debt outstanding under our long-term debt facilities, including $332.9 million related to the Convertible Notes that are classified as a current liability at December 31, 2024.

Details about segment results of operations can be found in Note 19 to the Consolidated Financial Statements in Part II, Item 8 of this report.

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Supply Chain Constraints and Inflation Update

Supply constraints that have had an industry-wide impact since the beginning of 2020 continued to ease in the second half of 2023.

We believe that the remaining supply constraints and extended lead times for certain infrastructure, including networking products have now normalized back to historic levels.

However, we continue to see a general slowdown in our clients' decision making, which we believe will continue in the near term.

In addition, inflation resulted in higher interest rates on all of our variable rate facilities when compared to 2022 and we expect these higher rates will continue into 2024.

We are actively monitoring changes to the global macroeconomic environment, including those impacting our supply chain and interest rates, and assessing the potential impacts these challenges may have on our current results, financial condition and liquidity.

We are also mindful of the potential impact these conditions could have on our clients, partners and prospects for 2024 and beyond.

Supply constraints that have had an industry-wide impact since the beginning of 2020 eased in the second half of 2023.

We believe that any remaining supply constraints and extended lead times for certain infrastructure, including networking products, have now normalized back to near historic levels.

Despite the easing supply constraints, we continue to see a general slowdown in our clients' decision making, which we believe will continue in the short term.

Inflation contributed to higher interest rates on all of our variable rate facilities in 2024 compared to 2023.

While these interest rates are expected to eventually decrease, we continue to anticipate higher than historical rates throughout most of 2025.

We are actively monitoring

INSIGHT ENTERPRISES, INC.

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AND RESULTS OF OPERATIONS (continued)

changes to the global macroeconomic environment, including those impacting our supply chain and interest rates, and assessing the potential impacts these challenges may have on our current results, financial condition and liquidity.

We are also mindful of the potential impact these conditions could have on our clients, partners and prospects in 2025 and beyond.

RESULTS OF OPERATIONS

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Selling and administrative expenses 15.4 13.5

Severance and restructuring expenses and acquisition-related expenses 0.1 —

Severance and restructuring expenses and acquisition-related expenses, net

Earnings from operations 4.5 4.6

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Our gross profit across the business and related to product versus services sales are, and will continue to be, impacted by partner incentives, which can and do change significantly in the amounts made available and the related product or services sales being incentivized by the partner.

Incentives from our largest partners are significant and changes in the incentive requirements, which occur regularly, could impact our results of operations to the extent we are unable to shift our focus and respond to them.

For a discussion of risks associated with our reliance on partners, see “Risk Factors – Risks related to Our Business, Operations and Industry – We rely on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of this report.

Our results of operations include the results of Hanu, Amdaris and SADA from their respective acquisition dates.

For a discussion of risks associated with our reliance on partners, see “Risk Factors – Risks related to Our Business, Operations and Industry – We rely on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can and do change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of this report.

Our results of operations include the results of Amdaris, SADA and Infocenter from their respective acquisition dates.

2024 Compared to 2023

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$ 7,054,580 $ 7,382,354 (4 %)

Net sales in North America decreased 13%, or $1.1 billion, in 2023 compared to 2022.

Net sales in North America decreased 4%, or $327.8 million, in 2024 compared to 2023.

This net decrease reflects a decrease in hardware net sales, partially offset by increases in software and services net sales.

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Net sales of software and services increased 3% and 7%, respectively, year over year.

The net decrease year to year was primarily the result of the following:

• The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients.

This decrease reflects lower sales of devices throughout the year and decreases in infrastructure sales in the latter part of 2023.

We believe these decreases reflect client decisions around timing of device refreshes and investments in infrastructure in response to challenges in the broader macroeconomic environment.

We expect this trend could continue into the second half of 2024.

• The increase in software net sales was primarily due to higher volume of software licensing.

This increase was partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

• The increase in services net sales was primarily due to the continued trend toward higher sales of cloud solution offerings, including net sales attributable to SADA, which we acquired in December 2023, partially offset by decreases in Insight Delivered services net sales.

The changes were primarily the result of the following:

• The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients due to lower demand.

This decrease reflects lower sales of devices and infrastructure.

We believe these decreases reflect client decisions around timing of device refreshes and investment responses to challenges in the broader macroeconomic environment.

We expect this trend could continue into 2025.

• The increase in services net sales was primarily due to higher sales of cloud solution offerings including from SADA and an increase in sales of Insight Delivered services from SADA and Infocenter, partially offset by declines in sales of Insight Delivered services from our organic business and in software maintenance.

Our North America organic business excludes SADA, which we acquired on December 1, 2023 and excludes Infocenter, which we acquired on May 1, 2024.

• The increase in software net sales was primarily due to a significant multiyear transaction in the first quarter, partially offset by changes in certain vendor relationships (shifting from a principal to agent role), as well as the continued migration of on-premise software to cloud solutions, in each case, reported net in services net sales.

Our net sales by offering category for EMEA for 2024 and 2023, were as follows (dollars in thousands):

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$ 1,414,097 $ 1,563,654 (10 %)

Net sales in EMEA decreased 9% (also decreased 9% excluding the effects of fluctuating foreign currency exchange rates), or $148.9 million, in 2023 compared to 2022.

This net decrease reflects a decrease in hardware and software net sales, partially offset by an increase in services net sales.

Net sales of hardware and software were down 16% and 8%, respectively, year to year, partially offset by an increase in services net sales of 16%, year over year.

Net sales in EMEA decreased 10% (decreased 11% excluding the effects of fluctuating foreign currency exchange rates), or $149.6 million, in 2024 compared to 2023.

This net decrease reflects a decrease in software and hardware net sales, partially offset by an increase in services net sales.

Net sales of software and hardware were down 20% and 8%, respectively, year to year, partially offset by an increase in services net sales of 23%, year over year.

The changes were primarily the result of the following:

• The decrease in hardware net sales was primarily due to lower sales to public sector, large enterprise and corporate clients.

• The decrease in software net sales was due to the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

• The decrease in software net sales was primarily due to lower volume of sales to large enterprise and public sector clients and also reflects changes in certain vendor relationships.

INSIGHT ENTERPRISES, INC.

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AND RESULTS OF OPERATIONS (continued)

• The increase in services net sales was due to increased sales of Insight Delivered services, including from Amdaris, which we acquired in August 2023, and higher sales of cloud solution offerings.

• The decrease in hardware net sales was primarily due to lower volume of sales to public sector clients due to lower demand.

• The increase in services net sales was due to increased sales of Insight Delivered services from Amdaris, which we acquired in August 2023, partially offset by declines in sales of Insight Delivered services from our EMEA organic business.

Our EMEA organic business primarily excludes Amdaris.

Our net sales by offering category for APAC for 2024 and 2023, were as follows (dollars in thousands):

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$ 233,021 $ 229,832 1 %

Net sales in APAC decreased 2% (increased 1% excluding the effects of fluctuating foreign currency rates), or $4.4 million, in 2023 compared to 2022.

Net sales of hardware decreased 24% year to year, partially offset by increases in software and services net sales of 2% and 8%, respectively, year over year.

Net sales in APAC increased 1% (increased 2% excluding the effects of fluctuating foreign currency rates), or $3.2 million, in 2024 compared to 2023.

Net sales of services and software increased 8% and 5%, respectively, year over year, partially offset by a decrease in hardware net sales of 19% year to year.

The net changes were primarily the result of the following:

• The increase in services net sales was due to higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category and increased sales of Insight Delivered services.

• The increase in software net sales was primarily due to higher volume of sales to enterprise and public sector clients, partially offset by the continued migration of on-premise software toward higher sales of cloud solution offerings.

• The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients.

• The increase in services net sales was due to higher volume of Insight Delivered services and higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

• The increase in software net sales was primarily due to higher volume of sales to corporate and public sector clients, partially offset by the continued trend toward higher sales of cloud solution offerings.

Net sales by category for North America, EMEA and APAC were as follows for 2024 and 2023:

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100 % 100 % 100 % 100 % 100 % 100 %

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Gross Profit .

Gross profit increased 6%, or $96.5 million, in 2024 compared to 2023, with gross margin increasing approximately 210 basis points to 20.3% of net sales.

Gross profit and gross margin also increased in each of our operating segments in 2024 compared to 2023.

Our gross profit and gross profit as a percent of net sales by operating segment for 2024 and 2023 were as follows (dollars in thousands):

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Consolidated $ 1,766,016 20.3 % $ 1,669,525 18.2 %

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

North America’s gross profit increased 4%, or $56.0 million, in 2024 compared to 2023.

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• A net increase in product margin of 15 basis points year over year.

This increase was primarily due to higher margins on both hardware and software net sales compared to the prior year.

The expanded margins on hardware are due in part to the decline in lower margin devices and also reflect the results of profitability and pricing initiatives started in 2022.

• An expansion in services margin year over year of 216 basis points was due to higher margins generated from increased cloud solution offerings, including margin contributed by SADA, software maintenance and on Insight Core services, (consisting of Insight Delivered and managed services).

This increase was primarily due to slightly higher margins on software net sales compared to the prior year.

• An expansion in services margin year over year of 149 basis points was due to higher margins generated from increased cloud solution offerings, including margin expansion contributed by SADA and from increased sales of Insight Delivered services from SADA and Infocenter.

EMEA’s gross profit increased 13% (increased 11% excluding the effects of fluctuating foreign currency exchange rates), or $33.2 million, in 2024 compared to 2023.

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The year over year net increase in gross margin was primarily attributable to the following:

• An expansion in services margin year over year of 321 basis points primarily due to higher margins from increased sales of Insight Delivered services from Amdaris.

• A net increase in product margin of 90 basis points year over year.

This increase was primarily due to higher margins on both hardware and software net sales compared to the prior year, partially offset by a decrease in partner funding.

• An expansion in services margin year over year of 169 basis points was due to higher margins generated from increased cloud solution offerings and on Insight Core services from Amdaris.

This increase was primarily due to higher margins on hardware compared to the prior year.

APAC’s gross profit increased 11% (increased 12% excluding the effects of fluctuating foreign currency exchange rates), or $7.3 million, in 2024 compared to 2023.

As a percentage of net sales, gross margin increased by approximately 270 basis points year over year.

The expanded gross margin for APAC in 2023 compared to 2022 was due primarily to changes in sales mix to services net sales, including Insight Core services at higher margins than product net sales.

The expanded gross margin for APAC in 2024 compared to 2023 was due primarily to changes in sales mix to services net sales, including Insight Delivered services that are sold at higher margins than product net sales.

Our overall gross margins expanded in 2024 compared to 2023, as expected.

We believe this trend could continue into future periods as we focus on selling solutions and increasing our services net sales, including cloud solution offerings.

We believe this trend could continue into future periods as we focus on selling solutions and increasing our services net sales.

As a result of certain partner program changes, we believe we may not experience significant growth in cloud gross profit in 2025 compared to 2024.

Operating Expenses.

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Selling and administrative expenses also increased approximately 190 basis points as a percentage of net sales in 2024 compared to 2023.

The overall net increase in expenses reflects a $7.3 million increase in personnel costs, including teammate benefits, and a $19.8 million increase in other expenses, year over year.

The increase in personnel costs reflects increases in overall teammate headcount from the acquisitions of Amdaris and SADA.

The increase in other expenses is partially due to costs incurred related to a third-party data center service outage, net of recoveries of $5.0 million and an increase of $4.2 million in transformation costs incurred and paid to third parties in 2023 compared to 2022.

On July 29, 2023, a third-party data center that hosts network environments for certain Insight managed services clients, experienced a security incident that resulted in a service outage at the data center.

The incident did not impact any of Insights' information systems, credentials, or data.

To support our clients that were impacted, the Company paid for certain equipment and services required to resolve the outage.

Transformation costs are costs we incur to transform our business to help us achieve our strategic objectives, including becoming a leading solutions integrator.

We expect to continue to incur further transformation costs in 2024;

however, these costs are unique in nature and are not expected to recur in the longer term.

Depreciation and amortization expense also increased $6.2 million, year over year, primarily as a result of the Amdaris and SADA acquisitions.

These increases were partially offset by decreases in legal and professional fees of $8.3 million and marketing costs of $3.1 million.

The overall net increase in expenses reflects an increase of $43.9 million in personnel costs, including teammate benefits, an increase in depreciation and amortization expense of $35.5 million, and a net increase in other expenses of $15.5 million, year over year.

The increase in personnel costs reflects higher teammate headcount for the majority of 2024 from the acquisitions of Amdaris, SADA and Infocenter, partially offset by reductions in the fourth quarter of 2024, combined with the impact of merit increases.

The increase in depreciation and amortization expenses were also

INSIGHT ENTERPRISES, INC.

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AND RESULTS OF OPERATIONS (continued)

the result of the Amdaris, SADA and Infocenter acquisitions.

The net increase in other expenses reflects increases in service agreement expenses and an increase in transformation costs.

We incurred transformation costs in 2024 of $18.4 million compared to $16.6 million in 2023.

These costs are unique in nature and are not expected to recur in the longer term.

These increases in other expenses were partially offset by recoveries in excess of costs incurred of $2.1 million in 2024 related to a third-party data center service outage compared to costs incurred in excess of recoveries of $5.0 million in the prior year combined with net gains of $7.8 million from the change in the revaluation of earnout liabilities, with no such activity in the prior year.

The incident did not impact any of Insight's information systems, credentials, or data.

To support our clients that were impacted, the Company paid for certain equipment and services required to resolve the outage.

Severance and Restructuring Expenses, Net.

During 2023, we recorded severance expense, net of adjustments, totaling $12.9 million.

During 2024, we recorded severance and restructuring expenses, net of adjustments, totaling $34.0 million.

The increase compared to 2023 was primarily due to actions taken to reduce both our teammate count, particularly non-technical resources, as well as strategic reductions in physical locations within the United States.

These expenses were partially offset by net gains on the sale of properties due to restructuring of $2.4 million.

During 2023, we recorded severance expense, net of adjustments, totaling $12.9 million.

These expenses were partially offset by net gains on the sale of properties due to restructuring of $6.8 million.

Acquisition and Integration-related Expenses .

During 2024, we incurred $2.7 million in direct third-party costs primarily related to the acquisition of Infocenter.

During 2023, we incurred $7.4 million in direct third-party costs primarily related to the acquisitions of SADA and Amdaris.

During 2022, we incurred $2.0 million in direct third-party costs primarily related to the acquisition of Hanu.

See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our acquisitions.

Earnings from Operations.

Earnings from operations increased 1%, or $6.1 million, year over year, in 2023 compared to 2022.

Earnings from operations decreased 7%, or $31.2 million, year to year, in 2024 compared to 2023.

Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for 2024 and 2023 (dollars in thousands):

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Consolidated $ 388,584 4.5 % $ 419,795 4.6 %

North America’s earnings from operations increased 3%, or $11.6 million, year over year, in 2023 compared to 2022.

As a percentage of net sales, earnings from operations increased by approximately 80 basis points to 4.9%.

The increase in earnings from operations was primarily driven by an increase in gross profit in excess of increases in selling and administrative expenses, severance and restructuring expenses and acquisition and integration related expenses.

EMEA’s earnings from operations decreased 14% (also decreasing 14% excluding the effects of fluctuating foreign currency exchange rates), or $6.1 million, year to year, in 2023 compared to 2022.

North America’s earnings from operations decreased 12%, or $43.0 million, year to year, in 2024 compared to 2023.

As a percentage of net sales, earnings from operations decreased by approximately 40 basis points to 4.5%.

The decrease in earnings from operations was primarily driven by increases in selling and administrative expenses and acquisition and integration related expenses, partially offset by an increase in gross profit.

APAC’s earnings from operations increased 3% (increasing 6% excluding the effects of fluctuating foreign currency exchange rates), or $0.6 million, year over year, in 2023 compared to 2022.

The decrease in earnings from operations was primarily driven by increases in selling and administrative expenses and severance and restructuring expenses, partially offset by an increase in gross profit and a decrease in acquisition and integration related expenses.

EMEA’s earnings from operations increased 21% (increasing 20% excluding the effects of fluctuating foreign currency exchange rates), or $8.1 million, year over year, in 2024 compared to 2023.

As a percentage of net sales, earnings from operations increased by approximately 90 basis points to 3.3%.

The increase in earnings from operations reflects an increase in gross profit, partially offset by an increase in selling and administrative expenses in 2023 compared to 2022.

Non-Operating (Income) Expense.

The increase in earnings from operations was primarily driven by increases in gross profit and a decrease in acquisition and integration related expenses, partially offset by increases in selling and administrative expenses and severance and restructuring expenses.

APAC’s earnings from operations increased 19% (increasing 20% excluding the effects of fluctuating foreign currency exchange rates), or $3.7 million, year over year, in 2024 compared to 2023.

As a percentage of net sales, earnings from operations increased by approximately 150

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

basis points to 10.0%.

The increase in earnings from operations reflects an increase in gross profit, partially offset by increases in selling and administrative expenses, severance and restructuring expenses and acquisition and integration related expenses.

Adjusted Earnings from Operations.

Adjusted earnings from operations increased 2%, or $10.2 million, year over year, in 2024 compared to 2023.

Our Adjusted earnings from operations and Adjusted earnings from operations as a percentage of net sales by operating segment were as follows for 2024 and 2023 (dollars in thousands):

2024 % of Net

Sales 2023 % of Net

North America $ 421,977 6.0 % $ 424,359 5.7 %

EMEA 55,936 4.0 % 47,570 3.0 %

APAC 24,459 10.5 % 20,198 8.8 %

Consolidated $ 502,372 5.8 % $ 492,127 5.4 %

North America’s Adjusted earnings from operations decreased 1%, or $2.4 million, year to year, in 2024 compared to 2023.

As a percentage of net sales, Adjusted earnings from operations increased by approximately 30 basis points to 6.0%.

The decrease in Adjusted earnings from operations was primarily driven by increases in selling and administrative expenses, partially offset by an increase in gross profit.

EMEA’s Adjusted earnings from operations increased 18% (increasing 16% excluding the effects of fluctuating foreign currency exchange rates), or $8.4 million, year over year, in 2024 compared to 2023.

As a percentage of net sales, Adjusted earnings from operations increased by approximately 100 basis points to 4.0%.

The increase in Adjusted earnings from operations was primarily driven by increases in gross profit, partially offset by an increase in selling and administrative expenses.

APAC’s Adjusted earnings from operations increased 21% (increasing 22% excluding the effects of fluctuating foreign currency exchange rates), or $4.3 million, year over year, in 2024 compared to 2023.

As a percentage of net sales, Adjusted earnings from operations increased by approximately 170 basis points to 10.5%.

The increase in Adjusted earnings from operations reflects an increase in gross profit, partially offset by an increase in selling and administrative expenses.

Non-Operating Expense (Income).

Interest Expense, net.

Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities and the Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances.

Interest expense increased 4%, or $1.6 million, in 2023 compared to 2022 primarily due to higher interest rates under our ABL facility.

This was partially offset by lower average daily balances under our ABL facility, higher interest income earned in 2023 and decreased imputed interest under our inventory financing facilities.

Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities, the Convertible Notes and the Senior Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances.

Interest expense increased 41%, or $19.7 million, in 2024 compared to 2023.

This was primarily due to the issuance of the Senior Notes and higher loan balances under our ABL facility.

This was partially offset by higher interest income earned in 2024 and decreased imputed interest under our inventory financing facilities.

Imputed interest under our inventory financing facilities decreased $3.6 million due to lower average daily balances in 2024 compared to 2023.

For a description of our various financing facilities, see Notes 7 and 8 to our Consolidated Financial Statements in Part II, Item 8 of this report.

Other (Income) Expense, Net .

Other (income) expense, net, consists primarily of foreign currency exchange gains and losses.

Foreign currency exchange gains and losses result from foreign currency transactions, including foreign currency derivative contracts and intercompany balances that are not considered long-term in nature.

The changes in net foreign currency exchange gains/losses are due primarily to the underlying changes in the applicable exchange rates, partially mitigated by our use of foreign exchange forward contracts to offset the effects of fluctuations in foreign currencies on certain of our non-functional currency assets and liabilities.

INSIGHT ENTERPRISES, INC.

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AND RESULTS OF OPERATIONS (continued)

Other Expense (Income), Net .

Other expense (income), net, consists primarily of foreign currency exchange gains and losses.

Income Tax Expense.

Our effective tax rate for 2024 was 25.0% compared to 25.6% in 2023.

The increase in the tax rate was primarily due to reduced foreign and research tax credit benefits available in 2023 as compared to 2022 and the effect of valuation allowances on certain foreign loss carryforwards.

These increases were partially offset by the release of reserves related to tax years whose statute expired during the current year.

The decrease in the tax rate was primarily due to additional research and transferable energy tax credit benefits available in 2024 as compared to 2023.

The effective tax rate in 2024 was higher than the federal statutory rate of 21.0% primarily due to state income taxes and higher taxes on earnings in foreign jurisdictions.

These increases were offset partially by research tax credits.

These increases were offset partially by research and transferable energy tax credits.

See Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of income tax expense.

Use of Non-GAAP Financial Measures

Adjusted non-GAAP earnings from operations exclude (i) severance and restructuring expenses, net, (ii) certain executive recruitment and hiring related expenses, (iii) amortization of intangible assets, (iv) transformation costs, (v) certain acquisition and integration related expenses, (vi) gains and losses from revaluation of acquisition related earnout liabilities, and (vii) certain third-party data center service outage related expenses and recoveries, as applicable.

Adjusted non-GAAP earnings from operations is used by the Company and its management to evaluate financial performance against budgeted amounts, to calculate incentive compensation, to assist in forecasting future performance and to compare the Company’s results to those of the Company’s competitors.

We believe that this non-GAAP financial measure is useful to investors because it allows for greater transparency, facilitates comparisons to prior periods and to the Company’s competitors’ results, and assists in forecasting performance for future periods.

The non-GAAP financial measure is not prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

2024 Adjusted Earnings from Operations (in thousands):

North America EMEA APAC Consolidated

GAAP earnings from operations $ 319,068 $ 46,218 $ 23,298 $ 388,584

Amortization of intangible assets 62,377 6,912 292 69,581

Change in fair value of earnout liabilities, net

(1,419) (6,430) — (7,849)

41,951 9,236 869 52,056

Adjusted non-GAAP earnings from operations $ 421,977 $ 55,936 $ 24,459 $ 502,372

GAAP EFO as a percentage of net sales 4.5 % 3.3 % 10.0 % 4.5%

Adjusted non-GAAP EFO as a percentage of net sales 6.0 % 4.0 % 10.5 % 5.8%

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

2023 Adjusted Earnings from Operations (in thousands):

North America EMEA APAC Consolidated

GAAP earnings from operations $ 362,082 $ 38,128 $ 19,585 $ 419,795

Amortization of intangible assets 32,514 3,277 440 36,231

29,763 6,165 173 36,101

Adjusted non-GAAP earnings from operations $ 424,359 $ 47,570 $ 20,198 $ 492,127

GAAP EFO as a percentage of net sales 4.9 % 2.4 % 8.5 % 4.6%

Adjusted non-GAAP EFO as a percentage of net sales 5.7 % 3.0 % 8.8 % 5.4%

In North America, other includes transformation costs of $18.4 million and data center service outage recoveries of $2.1 million for the year ended December 31, 2024

(b) In North America, other includes transformation costs of $16.6 million and data center service outage related expenses, net of recoveries of $5.0 million for the year ended December 31, 2023

Includes severance and restructuring expenses, net of $31.6 million and $6.1 million for the years ended December 31, 2024 and 2023, respectively.

Includes acquisition and integration related expenses of $2.9 million and $7.4 million for the years ended December 31, 2024 and 2023, respectively.

2023 Compared to 2022

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Net cash used in investing activities (303,278) (505,201)

Net cash (used in) provided by financing activities (16,712) 114,007

Foreign currency exchange effect on cash, cash equivalent

and restricted cash balances

7,449 (14,531)

Increase in cash, cash equivalents and restricted cash 105,067 59,741

Net cash used in financing activities (321,271) (16,712)

Foreign currency exchange effect on cash, cash equivalent and restricted cash balances (17,614) 7,449

(Decrease) increase in cash, cash equivalents and restricted cash (9,318) 105,067

Cash, cash equivalents and restricted cash at beginning of period 270,785 165,718

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Cash and Cash Flow

• Our primary uses of cash during 2023 were to fund the strategic acquisitions of SADA and Amdaris, to repurchase shares of our common stock, to repay our inventory financing facilities and to purchase property and equipment.

• Operating activities generated $619.5 million in cash in 2023, compared to $98.1 million in 2022.

• We received proceeds from the sale of assets, including our properties held for sale, of $15.5 million in 2023, compared to $1.3 million in 2022.

• We had net repayments under our inventory financing facilities of $70.4 million in 2023 compared to net repayments of $8.3 million in 2022.

• Our primary uses of cash during 2024 were to fund the acquisition of Infocenter, repay debt, including principal upon conversion of a portion of the Convertible Notes, fund repurchases of our common stock and to pay earnouts and other acquisition related payments.

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AND RESULTS OF OPERATIONS (continued)

• Net borrowings under our ABL facility were $299.6 million in 2023.

• Operating activities generated $632.8 million in cash in 2024, compared to $619.5 million in 2023.

• We received proceeds from the sale of assets of $13.8 million in 2024, compared to $15.5 million in 2023.

• We had net repayments under our inventory financing facilities of $13.6 million in 2024 compared to net repayments of $70.4 million in 2023.

• Net repayments under our ABL facility were $554.1 million in 2024.

Net borrowings under our ABL facility were $299.6 million in 2023.

• We issued $500.0 million in principal amount of Senior Notes, which we used to pay down a portion of our borrowings under our ABL facility.

• Capital expenditures were $46.8 million in 2024 compared to $39.3 million in 2023.

• During 2024, we repurchased an aggregate of $200.0 million of our common stock compared to an aggregate of $217.1 million repurchased during 2023.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our cash and working capital requirements for operations as well as other strategic investments over the next 12 months and beyond.

We expect existing cash and cash flows from operations to continue to be sufficient to fund our operating cash activities and cash commitments for investing and financing activities, such as capital expenditures, strategic acquisitions, repurchases of our common stock, debt repayments, including conversion of the Notes, and repayment of our inventory financing facilities for the next 12 months.

While we expect the majority of holders of the Notes will not opt to convert their Notes early, the Notes become freely convertible at the option of the holders beginning in June 2024.

We believe we have sufficient funds available from capacity under our ABL facility as well as cash we expect to generate from operations, to fund any early conversions that may occur.

We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities or other available financing resources.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our expected cash and working capital requirements for operations, as well as other strategic acquisitions, over the next 12 months and beyond.

We expect existing cash and cash flows from operations to continue to be sufficient to fund our operating cash activities and cash commitments for investing and financing activities, such as capital expenditures, strategic acquisitions, repurchases of our common stock, early settlement of a portion of the Warrants in cash (as discussed further below), principal payment on the Convertible Notes that mature in February 2025, debt repayments and repayment of our inventory financing facilities for the next 12 months.

We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities and/or other available financing resources.

Net cash provided by operating activities.

• Cash flow from operating activities in 2023 was $619.5 million, a significant increase in cash generation compared to 2022.

The increase in cash flow from operating activities was primarily driven by the decline in devices net sales experienced throughout 2023 when compared to 2022.

• Cash flow from operating activities in 2024 was $632.8 million, compared to $619.5 million in 2023.

The nominal increase in cash flow from operating activities was partially driven by a decrease in hardware net sales.

We have an inverted cash cycle resulting from typically paying partners on shorter terms than we provide to our clients.

This generally means in periods of declining hardware sales, and particularly of devices, we typically generate increased cash from operations.

This generally means in periods of declining hardware sales, we typically generate increased cash from operations.

Our consolidated cash flow operating metrics for the quarters ended December 31, 2024 and 2023 were as follows:

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(d) Calculated as DSOs plus DIOs, less DPOs.

• Our cash conversion cycle was 29 days in the quarter ended December 31, 2023, a decrease of 11 days when compared to the fourth quarter of 2022.

• The changes in our cash conversion cycle compared to the same period in the prior year resulted from the net effect of a 35 day increase in DPOs and a 3 day decrease in DIOs partially offset by a 27 day increase in DSOs.

• The changes in our cash conversion cycle year over year were primarily the result of:

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AND RESULTS OF OPERATIONS (continued)

• the impact to DPOs of the SADA and Amdaris acquisitions combined with changes in vendor mix away from discount vendors;

• the benefit to DIOs of the easing of supply constraints;

• the impact to DSOs of the SADA and Amdaris acquisitions combined with an increase in other receivables including multi-year transactions.

• Our cash conversion cycle was 7 days in the quarter ended December 31, 2024, a decrease of 22 days when compared to the fourth quarter of 2023.

• The changes in our cash conversion cycle compared to the same period in the prior year resulted from the net effect of a 58 day increase in DPOs and a 2 day decrease in DIOs partially offset by a 38 day increase in DSOs.

• The changes in our cash conversion cycle year over year were primarily the result of:

• The impact to DPOs of netting on certain revenue streams (agent net revenue) that flow through accounts payable on a gross basis while flowing through our income statement on a net basis including a significant agency transaction that based on its terms had not cleared by quarter end as well as changes in vendor mix;

• the benefit to DIOs of the reduction in hardware sales;

• the impact to DSOs of netting on certain revenue streams (agent net revenue) that flow through accounts receivable on a gross basis while flowing through our income statement on a net basis including a significant agency transaction that based on its terms had not cleared by quarter end.

• Our cash conversion cycle is impacted by netted costs that we apply to our services net sales to appropriately record net sales that we earn as an agent.

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Netted costs were $2.2 billion and $1.8 billion in the fourth quarter of 2024 and 2023, respectively.

Adjusting our cash conversion cycle calculation by adding netted costs to both daily net sales and daily costs of goods sold results in a reduction to our cash conversion cycle from 29 days to 22 days in the fourth quarter of 2023 and from 40 days to 28 days in the fourth quarter of 2022, which we believe provides a more accurate reflection of our cash flow operating metrics.

Adjusting our cash conversion cycle calculation by adding netted costs to both daily net sales and daily costs of goods sold results in an increase in our cash conversion cycle from 7 days to 14 days in the fourth quarter of 2024 and a reduction from 29 days to 22 days in the fourth quarter of 2023, which we believe provides a more accurate reflection of our cash flow operating metrics.

• We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms we grant to our clients in order to take advantage of supplier discounts.

• We intend to use cash generated in 2024, in excess of working capital needs, to pay down our ABL facility and our inventory financing facilities as well as to fund strategic acquisitions.

• We intend to use cash generated in 2025, in excess of working capital needs to pay down our ABL facility and inventory financing facilities, to settle a portion of the Warrants in cash, and for strategic acquisitions.

Net cash used in investing activities .

• We paid $265.0 million to acquire Infocenter on May 1, 2024, net of cash and cash equivalents acquired of $5.1 million.

Additionally, we paid $5.2 million, net of cash and cash equivalents acquired, for an entity in our EMEA segment, on July 1, 2024.

• We acquired SADA and Amdaris for approximately $398.6 million and $82.9 million, respectively, net of cash and cash equivalents acquired and excluding earn outs and hold backs in 2023.

• We received proceeds from the sale of assets, including our properties held for sale, of $15.5 million and $1.3 million in 2023 and 2022, respectively.

• We received proceeds from the sale of assets, including properties held for sale, of $13.8 million and $15.5 million in 2024 and 2023, respectively.

• Capital expenditures were $46.8 million and $39.3 million in 2024 and 2023, respectively.

The majority of the capital expenditures in 2023 was used to fund technology related projects.

The majority of the capital expenditures in 2024 were used for our new Texas distribution facility and to fund technology related projects.

• We expect total capital expenditures in 2025 to be in the range of $35.0 to $40.0 million.

Net cash (used in) provided by financing activities.

• During 2023, we had net borrowings on our long-term debt under our ABL facility of $299.6 million and had net repayments under our inventory financing facilities of $70.4 million.

• During 2022, we had net borrowings on our long-term debt under our ABL facility of $244.7 million and had net repayments under our inventory financing facilities of $8.3 million.

• In 2023, we made earn out and acquisition related payments associated with our Hanu acquisition of $15.6 million in the aggregate, with the earnout finalized in November 2023.

• In 2023, we also funded $217.1 million of repurchases of our common stock, compared to $107.9 million purchased during 2022.

• We expect to repurchase shares of our common stock in 2024 under our share repurchase plan to cover the dilutive impact of stock-based awards vesting.

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AND RESULTS OF OPERATIONS (continued)

Net cash used in financing activities.

• In May 2024, we issued $500.0 million in principal amount of Senior Notes, which we used to pay down a portion of our borrowings under our ABL facility.

• During 2024, we had net repayments on our long-term debt under our ABL facility of $554.1 million and had net repayments under our inventory financing facilities of $13.6 million.

• During 2023, we had net borrowings on our long-term debt under our ABL facility of $299.6 million and had net repayments under our inventory financing facilities of $70.4 million.

• In 2024, we made earnout and acquisition related payments of $20.3 million associated with our Amdaris and Hanu acquisitions.

• In 2024, we also funded $200.0 million of repurchases of our common stock, compared to $217.1 million purchased during 2023.

• We expect to partially settle the warrants associated with the Convertible Notes in cash in the first half of 2025.

2023 Compared to 2022

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Financing Facilities

As of December 31, 2023, our long-term debt balance includes $591.5 million outstanding under our $1.8 billion ABL facility.

As of December 31, 2023, the current portion of our long-term debt relates to the Notes and other financing obligations.

Our debt balance as of December 31, 2024 was $864.1 million .

As of December 31, 2024, the current portion of our long-term debt primarily relates to the Convertible Notes.

• Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

• Our Notes are subject to certain events of default and certain acceleration clauses.

• The Convertible Notes are subject to certain events of default and certain acceleration clauses.

As of December 31, 2024, no such events have occurred.

• The Senior Notes are subject to certain events of default and certain acceleration clauses.

As of December 31, 2024, no such events have occurred.

• Our ABL facility contains various covenants customary for transactions of this type, including complying with a minimum receivable and inventory requirement and meeting monthly, quarterly and annual reporting requirements.

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• While the ABL facility has a stated maximum amount, the actual availability under the ABL facility is limited by a minimum accounts receivable and inventory requirement.

As of December 31, 2023, eligible accounts receivables and inventory were sufficient to permit access to $1.7 billion of the full $1.8 billion under the ABL facility.

As of December 31, 2024, eligible accounts receivables and inventory were sufficient to permit access to the full $1.8 billion under the ABL facility of which $39.0 million was outstanding.

We also have agreements with financial intermediaries to facilitate the purchase of inventory from certain suppliers under certain terms and conditions.

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• $96.8 million under operating leases, the majority of which are due from 2025 through 2028;

• contingent consideration (earnout payments) associated with our acquisition of SADA, up to a maximum of $390.0 million, payable upon certain defined contingencies being met from 2024 through 2027;

• contingent consideration (earnout payments) associated with our acquisition of Amdaris, up to a maximum of $54.4 million, payable upon certain defined contingencies being met from 2024 through 2026;

• remaining contingent consideration (earnout payments) associated with our acquisition of SADA, up to a maximum of $240.0 million, payable upon certain defined contingencies being met for 2025 and 2026 that would be paid in 2026 and 2027, respectively;

• contingent consideration (earnout payments) associated with our acquisition of Amdaris, up to a maximum of $9.0 million, payable upon certain defined contingencies being met for 2025 that would be paid in 2026;

• contingent consideration (earnout payments) associated with our acquisition of Infocenter, up to a maximum of $106.3 million, payable upon certain defined contingencies being met for the years ended April 30, 2025 and April 30, 2026 that would be paid in 2025 and 2026, respectively;

• a purchase commitment related to cloud services of $78.9 million that must be met by September 2029;

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• $39.0 million outstanding under our ABL facility maturing in 2027;

• $350.0 million principal amount due on the Notes maturing in 2025.

• $500.0 million outstanding under our Senior Notes maturing in 2032;

• $333.1 million principal amount due on the Convertible Notes maturing in February 2025.

Undistributed Foreign Earnings

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however, for years subsequent to 2017, we continue to assert indefinite reinvestment of foreign earnings for certain of our foreign subsidiaries.

As of December 31, 2023, we had approximately $209.1 million in cash and cash equivalents in our foreign subsidiaries, the majority of which reside in Canada, The Netherlands, New Zealand and Australia.

As of December 31, 2024, we had approximately $217.0 million in cash and cash equivalents in our foreign subsidiaries, the majority of which reside in Canada, Australia, New Zealand and The Netherlands.

Certain of these cash balances will be remitted to the U.S.

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Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the three.

See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisitions of SADA in December 2023, Amdaris in August 2023 and Hanu in June 2022.

We have historically not been adversely affected by inflation, as technological advances and competition within the IT industry have generally caused the prices of the products we sell to decline and product life cycles tend to be short.

This requires our growth in unit sales to exceed

See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisitions of Infocenter in May 2024, SADA in December 2023, Amdaris in August 2023 and Hanu in June 2022.

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AND RESULTS OF OPERATIONS (continued)

the decline in prices in order to increase our net sales.

With the exception of the impact on our variable interest rate debt facilities, we have historically not been adversely affected by inflation, as technological advances and competition within the IT industry have generally caused the prices of the products we sell to decline and product life cycles tend to be short.

This requires our growth in unit sales to exceed the decline in prices in order to increase our net sales.

We believe that most price increases could be passed on to our clients, as prices charged by us are not set by long-term contracts;

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However, if actual results are not consistent with our estimates or assumptions, it could have a material effect on our reported net sales, timing of revenue recognition and our results of operations.

We have not made any material changes in accounting methodology or key assumptions used to recognize net sales during the past three fiscal years.

We have not made any material adjustments to our financial statements as a result of actual results not being consistent with our estimates in the past three fiscal years.

We have not made any material

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AND RESULTS OF OPERATIONS (continued)

changes in accounting methodology or key assumptions used to recognize net sales during the past three fiscal years.

We have not made any material adjustments to our financial statements as a result of actual results not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to sales recognition and for a detailed description of our product and services offerings.

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We continually assess if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value and assess whether any indicators of impairment exist.

Events or circumstances that could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, significant declines in our stock price for a sustained period or significant underperformance relative to expected historical or projected future cash flows or results of operations.

Any adverse change in these

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AND RESULTS OF OPERATIONS (continued)

factors, among others, could have a significant effect on the recoverability of goodwill and could have a material effect on our consolidated financial statements.

for our overall business, significant negative industry or economic trends, significant declines in our stock price for a sustained period or significant underperformance relative to expected historical or projected future cash flows or results of operations.

Any adverse change in these factors, among others, could have a significant effect on the recoverability of goodwill and could have a material effect on our consolidated financial statements.

Judgments and Uncertainties

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Our assessments in the past three fiscal years have been qualitative assessments and no quantitative assessments have been deemed necessary.

Additionally, during the three years ended December 31, 2023, 2022 and 2021 we analyzed each of our reporting units and determined that no impairment charge was necessary.

Additionally, during each of the years ended December 31, 2024, 2023 and 2022 we analyzed each of our reporting units and determined that no impairment charge was necessary.

Acquisition Accounting/Business Combinations

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The excess purchase price over the estimated fair value of net assets acquired is recorded as goodwill.

We use various models to determine the value of assets acquired and liabilities assumed such as the cost method, market method, relief from royalty method, multi-period excess earnings and discounted cash flow methods.

We engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets.

We may adjust the preliminary purchase price

We use various models to determine the value of assets acquired and liabilities assumed such as the cost method, market method, relief from royalty method, multi-period excess earnings

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AND RESULTS OF OPERATIONS (continued)

allocation, after the acquisition closing date and through the end of the measurement period of one year or less, as we finalize the valuation of acquired assets and liabilities.

and discounted cash flow methods.

We engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets.

We may adjust the preliminary purchase price allocation, after the acquisition closing date and through the end of the measurement period of one year or less, as we finalize the valuation of acquired assets and liabilities.

Judgments and Uncertainties

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Any such impairment charges could have a material effect on our results of operations.

We completed two business combinations in fiscal 2023 and one business combination in fiscal 2022.

We completed two business combinations in fiscal 2024, including an acquisition in EMEA, and two business combinations in fiscal 2023.

We have not made any material adjustments to our financial statements as a result of business combination key assumptions not being consistent with our estimates in the past three fiscal years.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis