Company History and Growth
Insight Enterprises, Inc. began operations in Arizona in 1988 and was incorporated in Delaware in 1991. The company completed its initial public offering in 1995. From its original location in the United States, Insight expanded nationwide and then entered Canada in 1997 and the United Kingdom in 1998. Through a combination of acquisitions and organic growth, Insight continued to increase its geographic coverage and expand its technical capabilities.
Prior to 2019, Insight acquired several companies to expand its business, including Software Spectrum, Inc. in 2006, Calence, LLC in 2008, MINX Limited in 2008, Ensynch, Inc. in 2011, Inmac GmbH in 2012, Micro Warehouse BV in 2012, BlueMetal Architects, Inc. in 2015, Ignia, Pty Ltd in 2016, Datalink Corporation in 2017, Caase Group B.V. in 2017, and Cardinal Solutions Group, Inc. in 2018.
From 2019 through today, Insight has continued to make strategic acquisitions to expand its capabilities. In 2019, Insight acquired PCM, Inc., a provider of multi-vendor technology offerings that complemented Insight's supply chain expertise. In 2020, Insight acquired vNext SAS, a French digital consulting services and managed services provider, to increase its capacity to deliver consulting and implementation services to clients in EMEA. Insight also acquired Hanu Software Solutions, Inc. and Hanu Software Solutions India Private Ltd. in 2022, which increased its capacity to provide cloud solutions to clients.
Insight has faced various challenges over the years, including competition from manufacturers and publishers that sell directly to customers, as well as the need to keep pace with rapidly evolving technological advances in the IT industry. The company has also had to navigate changes in the IT market, such as the shift to cloud-based solutions and the emergence of new competitors. Despite these challenges, Insight has remained a leading provider of IT hardware, software, and services, serving clients in North America, EMEA, and APAC.
Financial Performance and Key Metrics
In the fiscal year ended December 31, 2024, Insight Enterprises reported net sales of $8.7 billion, a decrease of 5% compared to the prior year. Gross profit increased 6% to $1.8 billion, with gross margin expanding by 210 basis points to a record 20.3%. Adjusted EBITDA margin expanded by 50 basis points to 6.2%, and adjusted diluted earnings per share were $9.68, flat compared to the previous year.
For the full year 2024, Insight delivered net income of $249.7 million and operating cash flow of $632.8 million. The company's performance was consistent with management's expectations, with adjusted diluted earnings per share near the high end of the range provided in October.
In the fourth quarter of 2024, Insight reported revenue of $2.07 billion, a 7% decrease year-over-year, and net income of $37.01 million, a 59% decrease compared to the same period in 2023. The revenue decline was primarily driven by a 10% decrease in product sales, particularly in large enterprise and corporate clients in North America. Hardware revenue declined 2%, and on-premise software revenue was down 23%. The decrease in net income was attributed to increases in selling and administrative expenses as well as severance and restructuring costs.
Liquidity
The company's financial position remained strong, with $259.2 million in cash and cash equivalents and $864.1 million in total debt as of December 31, 2024. Insight's cash flow from operations was $632.8 million in 2024, compared to $619.5 million in the prior year. The company's adjusted return on invested capital (ROIC) for the trailing twelve months was 15.3%, compared to 17.3% a year ago.
Insight's debt-to-equity ratio stood at 0.61 as of December 31, 2024. The company had $1.8 billion available under its senior secured revolving credit facility. Insight's current ratio was 1.18, and its quick ratio was 1.15, indicating a solid liquidity position.
Segmental Performance
Insight Enterprises operates in three reportable geographic segments: North America, EMEA (Europe, Middle East, and Africa), and APAC (Asia-Pacific).
North America: - In 2024, North America's net sales decreased 4% to $7.05 billion, with a 10% decline in hardware sales partially offset by a 3% increase in software sales and a 7% increase in services sales. - Gross profit in North America increased 4% to $1.40 billion, with gross margin expanding by 170 basis points to 19.9%. - Adjusted earnings from operations in North America decreased 1% to $422 million, while the adjusted operating margin increased by 30 basis points to 6.0%. - The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients as a result of lower demand, particularly for devices and infrastructure. - The increase in services net sales was primarily due to higher sales of cloud solution offerings, including from the SADA acquisition, as well as an increase in Insight Delivered services.
EMEA: - EMEA's net sales decreased 10% (or 11% in constant currency) to $1.41 billion, driven by declines in software and hardware sales, partially offset by a 23% increase in services sales. - Gross profit in EMEA increased 13% (or 11% in constant currency) to $293.2 million, with gross margin expanding by 410 basis points to 20.7%. - Adjusted earnings from operations in EMEA increased 18% (or 16% in constant currency) to $55.9 million, while the adjusted operating margin increased by 100 basis points to 4.0%. - The decrease in software net sales was primarily due to lower volume of sales to large enterprise and public sector clients, as well as changes in certain vendor relationships. - The increase in services net sales was due to increased sales of Insight Delivered services from the Amdaris acquisition.
APAC: - APAC's net sales increased 1% (or 2% in constant currency) to $233 million, with a 19% decline in hardware sales offset by a 5% increase in software sales and an 8% increase in services sales. - Gross profit in APAC increased 11% (or 12% in constant currency) to $70.8 million, with gross margin increasing by approximately 270 basis points to 30.4%. - Adjusted earnings from operations in APAC increased 21% (or 22% in constant currency) to $24.5 million, while the adjusted operating margin increased by 170 basis points to 10.5%. - The increase in services net sales was due to higher sales of cloud solution offerings and increased 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 to cloud solutions.
Across all segments, Insight Enterprises has continued to focus on expanding its services and solutions offerings, which generally have higher gross margins than product sales. In 2024, services net sales represented 19% of total net sales, up from 17% in 2023 and 14% in 2022. This shift in sales mix, along with ongoing efficiency initiatives, has contributed to an increase in consolidated gross margin, which reached a record 20.3% in 2024 compared to 18.2% in 2023 and 15.7% in 2022.
Strategic Initiatives and Outlook
Insight Enterprises is focused on becoming the leading solutions integrator, enabling secure, end-to-end digital transformation for its clients. The company is pursuing several strategic initiatives to drive growth and profitability:
1. Expanding solutions and services offerings: Insight is investing in high-growth areas such as cloud, data and AI, cybersecurity, and intelligent applications to help clients modernize their businesses and maximize the value of technology.
2. Strengthening partner relationships: The company has entered into new strategic collaboration agreements with Microsoft, Google, and Amazon Web Services to better serve clients' evolving data and AI needs.
3. Improving operational efficiency: Insight has implemented pricing and profitability initiatives, streamlined its go-to-market approach, and integrated recent acquisitions to drive cost synergies and enhance its financial performance.
4. Enhancing talent and culture: Insight is focused on attracting, developing, and retaining top technical and strategic talent to deliver exceptional value to its clients.
For the full year 2025, Insight Enterprises expects to deliver gross profit growth in the low single digits, with gross margin of approximately 20%. The company anticipates adjusted diluted earnings per share to be between $9.70 and $10.10, which includes an estimated $0.40 impact related to interest from settling its convertible notes. Additional guidance for 2025 includes:
- Interest expense between $70 to $75 million, primarily due to higher borrowing costs associated with settling the convertible notes and associated warrants. - An effective tax rate of 25% to 26%. - Capital expenditures of $35 to $40 million. - An average share count of 33 million shares, including the net impact of settling convertible notes and associated warrants.
Risks and Challenges
Insight Enterprises operates in a highly competitive IT industry, facing competition from systems integrators, digital consultants, and technology providers. The company's performance is also affected by macroeconomic conditions, changes in technology, and shifts in client buying patterns.
Additionally, Insight is subject to risks related to its international operations, including foreign currency fluctuations, political and economic instability, and regulatory changes. The company's ability to successfully integrate acquisitions and realize the anticipated benefits is also crucial to its long-term success.
Industry Trends
The IT industry continues to evolve rapidly, presenting both opportunities and challenges for Insight Enterprises. According to Gartner, the worldwide total addressable market for enterprise IT spend is forecasted to be $4.9 trillion by 2027. Furthermore, the IT hardware, software, and services industry is expected to grow at a compound annual growth rate (CAGR) of 9.29% from 2025 to 2033, potentially reaching $494.5 billion by 2033. These projections suggest a favorable long-term outlook for companies like Insight that can effectively navigate the changing landscape and meet evolving client needs.
Conclusion
Insight Enterprises has a strong track record of navigating industry challenges and delivering value to its clients through its comprehensive solutions portfolio and global reach. The company's strategic initiatives, focus on high-growth areas, and ongoing investments in talent and operational efficiency position it well to capitalize on the growing demand for digital transformation services. As Insight continues to evolve its business model and strengthen its partnerships, it is poised to solidify its position as a leading solutions integrator in the IT industry. With a solid financial foundation and a clear strategic direction, Insight Enterprises is well-equipped to navigate the dynamic IT landscape and drive long-term growth for its stakeholders.