Good morning everyone, and thank you for being with us for the Insight Enterprises Third Quarter 2025 Operating Results Call. My name is Carly, and I’ll be your coordinator for today. I’d now like to turn it over to our host, Ryan Miyasato. Please proceed.

Welcome, everyone, and thank you for joining the Insight Enterprises earnings conference call. Today, we will be discussing the company's operating results for the quarter ended September 30, 2025. I'm Ryan Miyasato, Investor Relations Director of Insight, and joining me is Joyce Mullen, President and Chief Executive Officer; and James Morgado, Chief Financial Officer. If you do not have a copy of the earnings release or the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under the Investor Relations section. Today's call, including the question-and-answer period, is being webcast live and can also be accessed via the Investor Relations page of our website at insight.com. An archived copy of the conference call will be available approximately 2 hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, October 30, 2025. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Insight Enterprises is strictly prohibited. In today's conference call, we will be referring to non-GAAP financial measures as we discuss the third quarter 2025 financial results. When discussing non-GAAP measures, we will refer to them as adjusted. You will find a reconciliation of these adjusted measures to our actual GAAP results included in both the press release and the accompanying slide presentation issued earlier today. Please note that all growth comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. Also, unless highlighted as constant currency, all amounts and growth rates discussed are in U.S. dollar terms. As a reminder, all forward-looking statements that are made during this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today's press release and in greater detail in our most recently filed periodic reports and subsequent filings with the SEC. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update any forward-looking statement made on this call, whether as a result of new information, future events or otherwise. With that, I will now turn the call over to Joyce. And if you're following along with our slide presentation, we will begin on Slide 4.

Thank you very much, Ryan. Good morning, everyone, and thank you for joining us today. In Q3, we grew adjusted earnings from operations in every geography and delivered 11% growth in adjusted diluted earnings per share, in line with our expectations. Commercial revenue was up for the sixth consecutive quarter, and we delivered record gross margin. Additionally, cloud gross profit was above our expectations, and we continue to manage our adjusted expenses well. These results were offset by lower-than-expected gross profit performance in core services and hardware. Specifically, in the quarter, overall revenue was down 4%, driven by the netting impact of on-prem software migrating to cloud. Our influence with partners and clients continues to expand, which you can see on our balance sheet. Revenue from our commercial clients grew 5%, offset by a decline in corporate and large enterprise clients. The subdued demand from our large clients also impacted Insight Core services revenue, which was down 3%. Macro and technology uncertainty continued to delay decision-making and spending in this client group. However, we are encouraged by the strength of our services bookings in Q3. Hardware revenue grew 1% with growth in both infrastructure and devices. Cloud gross profit increased 7% and was ahead of our expectations, driven by double-digit growth in SaaS and Infrastructure as a Service. This performance was partially offset by the partner program changes we previously discussed. As we exit 2025, we believe this impact will be largely behind us. We expanded total gross margin again this quarter to a record 21.7%. By prudently managing our adjusted expenses, we delivered adjusted earnings from operations growth and adjusted earnings per share growth of 11%. We are pleased with the structural improvements we are making to our services business and the performance of the services practices we have acquired over the past 2 years. Incorporating best practices from these acquisitions is the foundation of our services growth strategy that we've been working on for the past few quarters. First, over the past 2 quarters, we have added new leaders to our services business. Second, we have implemented a more disciplined and repeatable methodology. This framework simplifies our offers, increases delivery consistency and speed to outcome and has already resulted in increased partner leads and bookings. Third, we are expanding our pipeline of cross-sell opportunities across our various practice areas. This reinforces our solutions integrator strategy and unlocks the potential from both new and existing customers. Most importantly, AI is top of mind for our clients. There is widespread interest in our solutions as our clients move out of experimentation mode and into projects to go after new use cases and value creation. Our strength in the hyperscaler platforms, security, data and business consulting positions us well for this emerging market. We are investing in an aggressive approach to seize this market opportunity with dedicated selling resources and unique intellectual property to accelerate time to value for our clients. We have made progress on our own internal AI transformation as well and plan on leveraging this to help Insight become our best reference case to utilize with our clients. We will introduce our Insight AI offerings in the next few weeks, and we'll highlight specific AI capabilities, governance, training and intellectual property to help determine client ROI and prioritization among other assets. Clients need help figuring this out, and we are the partner to do it. Services are critical to our strategy. We continue to invest in expanding our advisory, business transformation, data and cybersecurity capabilities to deliver solutions our clients need. Earlier this month, we announced the acquisition of Inspire 11, a North America data and AI services consultancy recognized for its outcome-driven approach. An example of the capabilities Inspire 11 brings us is their work with Thompson Machinery, which delivers heavy equipment solutions to keep industries like construction, mining and agriculture moving forward. Thompson Machinery partnered with Inspire 11 to transform how they manage their extensive rental fleet and make data a competitive asset. Together, they created Rentel, a predictive AI-powered platform that converts raw operational data into actionable intelligence. The platform optimizes fleet decisions by helping leaders quickly decide which equipment to buy, sell or transfer and provides real-time insight into utilization and financial performance. The platform also provides a financial value tied to each decision. What once required manual analysis now happens instantly, empowering better and faster decisions across the organization. As a result, Thompson Machinery is operating with greater agility, higher utilization and stronger return on assets, turning a historically operational process into a driver of growth. The ability to offer AI-enabled solutions across our portfolio is essential to delivering the outcomes our clients require. Importantly, outcomes like these require modern infrastructure, an area where we have significant expertise and deep relationships with partners. As an example, GTT is a leading player in the global telecommunications and networking space and has one of the world's largest Internet backbones. This client is in the middle of a paradigm shift with AI. We've been chosen as their partner in a strategic collaboration with NVIDIA to implement a comprehensive AI-powered architecture built on three core pillars: transforming the customer experience, accelerating new product innovation with AI-driven insights and scaling employee productivity through generative and agentic AI. With our support in integrating a complex ecosystem of hardware, software and services, GTT is rapidly moving from AI-enabled vision to production-ready value, creating a powerful competitive advantage. And since security is top of mind for all clients, we have expanded our security portfolio. Last week, we signed a definitive agreement to acquire Sekuro, a global provider of cybersecurity services for enterprise and government clients across the APAC region with a strong presence in Australia. Sekuro was named CrowdStrike's APJ Partner of the Year and earned numerous prestigious cybersecurity accolades. Security remains a top priority for our clients, and we are excited to expand our capabilities, especially as clients adopt AI. Inspire 11 and Sekuro support our ambition to become the leading AI-first solutions integrator as they bolster our capabilities in designing, building, deploying and managing solutions to support our clients' transformations, increase our pool of technical resources focused on security, data and AI and drive cross-sell opportunities in our broad global client base. Our partner ecosystem is fundamental to our success and a key enabler of our strategy. These collaborations not only enhance our capabilities across technology, platforms and services, but also ensure we remain agile and responsive to evolving market demands. We've recently received a variety of industry and partner recognitions, including Gartner's 2025 Magic Quadrant for Public Cloud IT Transformation Services as well as their emerging market quadrant for generative AI consulting and implementation services. Additionally, we were recognized as a major player in IDC's MarketScape's Worldwide Device-as-a-Service 2025 Vendor Assessment and a premium business partner by Apple. Our teammates deliver the value we create for our clients. We foster a collaborative environment, and Insight continues to be recognized as the best employer by Forbes, Fortune and Great Place to Work. This year has been marked by a mix of macro uncertainty and persistent delays in large enterprise spending across the industry. As we have discussed, the hyperscaler program changes created substantial headwinds we've been mitigating this year. Our updated 2025 guidance reflects continued caution among our large clients. Corporate and enterprise customers continue to grapple with investment decisions as they explore AI alternatives and deal with ongoing macro uncertainty. However, for 2026, while macroeconomic challenges persist, we believe we are positioned for growth. The hyperscaler program changes will be largely behind us. We anticipate the PC refresh cycle will continue into 2026. The improvements in our services businesses are expected to take hold and AI projects will begin to scale. We're well positioned to drive AI adoption through our broad partner base and technical capabilities. This begins with strong fundamentals, policy, governance, security, training, use case prioritization built through our client zero approach. Microsoft calls this being a frontier firm, and we're proud to be one. As we move to deliver faster time to value with AI solutions that feature built-in automation, we expect to transform traditional time and material models into agile, outcome-driven approaches. I am proud of the capabilities we have built, and we are excited to change the game with our clients. With that, I'll turn the call over to James.

Thank you, Joyce, and good morning, everyone. Our Q3 results were mixed with services and hardware performing below expectations, partially offset by outperformance in cloud. Combined with disciplined SG&A management, we drove a 5% increase in adjusted earnings from operations and an 11% increase in adjusted earnings per share. Net revenue was $2 billion, a decrease of 4%. The decrease was driven by a 6% decline in product, primarily due to on-prem software, which declined 19% and was a result of partner consolidation last year that shifted gross product revenue to net agency services. Hardware revenue increased 1%, the third consecutive quarter of growth, though below our expectations compared to earlier in the year. Gross profit was flat with mixed performance. Hardware gross profit was down 5%, reflecting pricing, mix and a challenging compare in EMEA. Hardware gross margin was flat sequentially. Insight Core Services gross profit was $79 million, a decrease of 3%, primarily due to a decline in large enterprise client spending. Cloud gross profit was $130 million, an increase of 7% with growth in both SaaS and Infrastructure as a Service, partially offset by the partner program changes we've previously discussed. Gross margin was 21.7%, an increase of 100 basis points due to mix. Adjusted SG&A declined 1%, driven by prudent expense management. This resulted in adjusted EBITDA of $137 million, up 6%, while margin expanded 60 basis points to 6.8%. Adjusted diluted earnings per share were $2.43, up 11%. For the quarter, we generated $249 million in cash flow from operations. This strong result is primarily related to working capital requirements between Q2 and Q3, as previously discussed. For the year, we continue to anticipate cash flow from operations in the range of $300 million to $400 million. In Q3, we repurchased approximately $75 million of shares. As of the end of the quarter, we have $149 million remaining on our share repurchase program. We intend to opportunistically repurchase shares while balancing organic and inorganic investments. While we settled $333 million of convertible notes in Q1, we still have approximately 600,000 associated warrants outstanding, which will be settled before the end of the year. During the first 3 quarters of the year, we settled 3.6 million warrants for $222 million in cash and settled another 900,000 warrants in shares. The net impact of the settlement of the warrants for the year has been reflected in our outstanding diluted share count. Year-to-date, the combined effect of the share repurchases and settlement of the warrants associated with the convert had the effect of reducing our adjusted diluted share count by approximately 2.7 million shares. Subsequent to the end of the quarter, on October 1, we acquired Inspire 11 for a preliminary cash purchase price of approximately $212 million. The purchase agreement also includes earnout payments, which provide an incentive opportunity for sellers of up to $66 million, contingent upon Inspire 11 achieving certain EBITDA performance targets through 2027. Additionally, on October 16, we signed an agreement to acquire Sekuro, a global provider of end-to-end cybersecurity services for an estimated cash purchase price of approximately AUD 130 million. The purchase agreement also includes up to AUD 123 million in earnouts and incentives contingent upon Sekuro achieving certain EBITDA and net revenue performance targets through October 2027. We exited Q3 with total debt of approximately $1.4 billion compared to $1.1 billion a year ago. The increase in debt was primarily related to a drawdown on our ABL ahead of the closing of the acquisition of Inspire 11 on October 1, which is reflected in our ending cash balance. As of the end of Q3, we had access to the full $1.8 billion capacity under our ABL facility, of which approximately $900 million was available. We have ample liquidity to meet our needs. Our adjusted return on invested capital for the trailing 12 months at the end of Q3 was 14.8% compared to 16.3% a year ago, reflecting lower adjusted net income and an increase in invested capital. Looking at our year-to-date performance, gross profit has fallen short of expectations, partially offset by disciplined expense control. Although recent partner program changes have impacted our cloud performance, we continue to make steady progress in pivoting towards the corporate and mid-market space and have navigated the partner program changes well. Hardware and core services are below our expectations due to muted large enterprise client demand, partially offset by multiple quarters of strong commercial growth. As we think about the rest of 2025, we expect macro uncertainty and have considered the following factors in our guidance. We expect demand with our large clients will improve slightly in Q4. We believe hardware gross profit will grow modestly in Q4 and will be approximately flat for the year. We anticipate cloud performance to continue to grow and now expect cloud gross profit to be flat to slightly up for the year. We still anticipate an approximately $70 million impact for the year related to the partner program changes we have previously discussed. Including the recent acquisitions, we expect core services will return to growth in Q4. For the year, core services gross profit will be approximately flat. Our recent and anticipated acquisitions of Inspire 11 and Sekuro will be primarily accounted for in core services. While we expect both to contribute positively to adjusted EBITDA, the impact on adjusted diluted EPS is projected to be slightly dilutive due to interest expense. We will continue to prudently manage SG&A and expect growth slower than gross profit. As a reminder, we identified incremental opportunities, including those driven by AI that will deliver improved operating expense leverage over the next 12 months. We continue to execute on that plan. Considering these factors, for the full year, our guidance is as follows: We now expect gross profit to be slightly down from 2024 and that our gross margin will be approximately 21%. Our adjusted diluted earnings per share will be between $9.60 to $9.90. This guidance includes interest and other expenses will be approximately $85 million, reflecting incremental interest related to the acquisitions of Inspire 11 and Sekuro, an effective tax rate of 25% to 26% for the full year, capital expenditures of approximately $25 million and an average share count for the full year of approximately 32 million shares, reflecting the settlement of the remaining warrants associated with our convertible notes. This outlook excludes acquisition-related intangible amortization expense of approximately $74 million. The impact from recent acquisitions is not factored into this number. Assumes no acquisition-related costs, severance and restructuring or transformation expenses and assumes no change in our debt instruments and no meaningful change in the macroeconomic outlook, either as a result of tariffs or otherwise. I will now turn the call back to Joyce.

Thank you, James. As we work to close out this year, 2025 has been challenging, and we have navigated some of the most difficult business changes in recent memory. We faced macro headwinds, evolving client needs and significant program changes. I believe it's exactly in these environments that strong companies distinguish themselves. We've been busy retooling our team, sharpening our focus, driving efficiencies and preparing for the emerging AI opportunities. As we look to 2026, we are positioned very well to take advantage of the changing landscape. We are proud of the underlying strength and profitability of this business. This gives us a clear runway to demonstrate the power of our business model, portfolio of solutions and our expertise. Our future is bright. As you may have seen in the 8-K filing this morning, the Board and I have been talking about my retirement from Insight since the beginning of the year. We began the process of preparing for an orderly transition in earnest earlier this year when we engaged a search firm. Our next step is to begin a public external search for my successor given the AI opportunity in front of us and the transformation required. I fully expect that between now and when we name the next CEO of Insight, we will continue to make progress towards delivering on the promise of becoming the leading AI solutions integrator. I will ensure a smooth transition and then we'll continue on as an adviser to the new CEO. I want to thank our teammates for their unwavering commitment to our clients, partners and each other, our clients for trusting Insight to help them with their transformational journeys and our partners for their continued collaboration and support in delivering innovative solutions to our clients. This concludes my comments, and we will now open the line for your questions.

Our first question comes from Joseph Cardoso from JPMorgan.

Maybe for my first, obviously, ticking down the guide here in the back half. I was hoping if we could have help understanding what's behind the shift in the outlook here. Maybe specifically, can you give us an update on how the large project headwinds to core services are tracking today? Are they tracking better or worse? And then it also sounds like on the hardware side, it's a bit more sluggish than you expected 90 days ago. Can you provide any more color on the drivers behind that as well? And what's kind of triangulating this more muted view there? And then I have a follow-up.

So I'll start. Joe, thank you for the question. What we have been observing is that large enterprises are struggling with a shift in how their IT budgets are being allocated. The uncertainty in the macro environment has led them to reassess how to manage their cloud expenses. They've encountered some price increases in the software they are purchasing and are working to ensure they can invest in AI. As a result, they are reprioritizing their spending and taking longer to commit to major services projects. We are encouraged by the bookings in services, and we believe that trends are shifting, although progress has been slow throughout the year. On the hardware front, the situation is somewhat similar. Enterprises are trying to determine the best way to allocate their budgets. They are evaluating their long-term investment strategies for PCs in relation to projected headcounts, which are also influenced by AI and broader market trends. Therefore, hardware sales are indeed slower than we had anticipated, and we are experiencing ongoing delays.

Got it. Appreciate the color, Joyce. And then maybe just on the other side, cloud gross profit returning to mid- to high single-digit growth here in the quarter on a gross profit basis. Just curious, though, how does that growth look like excluding the partner changes? I think the last couple of quarters, you were in kind of the mid- to high teens. Is that where we're tracking this quarter as well? And then how should we think about approaching year-end going into next year? Is that underlying growth rate what we should be kind of aiming for in terms of the growth of this business, particularly now that we should be cycling past the easier comps? Or what other variables should we be considering there?

Yes. Joe, thanks for the question. It's James. Yes, the underlying growth in cloud has been in Q3 was similar to what it's been all year. It's been in the higher teens level again in Q3. We're really pleased with the pivot that we've undertaken this year around the cloud business. As we head into Q4, as we've mentioned, the $70 million gross headwind largely normalizes as we exit Q4. There's still a little bit of an overhang into it into '26. Not ready to guide '26, but just as a rough indication, the underlying growth we're seeing would largely show through into next year. It would return largely to what we've been historically, and I think it leads all areas of growth for us into next year.

Our next question comes from Adam Tindle from Raymond James.

Early congrats, Joyce. I just wanted to start with the two acquisitions and maybe a bigger picture question on those. If I add them up, it's more than $300 million in capital deployment, which is significant compared to your current market cap. You could make an argument you could buy back 10% of the company or so. So I just was wondering how you thought about those acquisitions, given they're currently dilutive compared to a share repurchase, and in a bigger picture, how you're thinking about capital allocation moving forward?

So why don't I start with the strategic piece, and then I'll turn it over to James on the capital allocation piece. We thought long and hard about this. Of course, we understand the dynamics that you just talked about, Adam. Look, we believe that in AI is not going to wait. The ability to actually deliver outcomes and understand how to sell AI to not only the IT team but also to the business users and business unit leaders across our clients is increasingly important. Something like 65% of those decisions are being made outside of the IT department. The other thing that's dramatically changing with AI is much more focused on outcomes-based pricing, for example, and less on time and material. Insight was really excited about Inspire 11 because it is an outcome-based consultancy that is data-oriented with strong skills and specific outcomes, adding to our overall portfolio. We've seen a spectacular pull-through of the rest of the portfolio with that sort of advisory capability. We're replicating that model in North America, and we have a lot of enthusiasm around these capabilities with our clients. So that is the strategic rationale around Inspire 11. We've been working hard on security to expand our capabilities. Sekuro is a way for us to do that, and we're excited to add that to our portfolio. All in, we think these are two areas that are going to fuel our growth going forward. While we recognize the multiple issue that you mentioned, we still need to focus on delivering long-term value to shareholders.

Yes. Just to add to that, that's the way we think about this when we look at M&A. It's about the strategic lens and what generates greater long-term value. This year, we’ve done $150 million in direct share repurchases, and we've used cash to settle the warrants, resulting in a reduction of outstanding share count by almost $3 million, about a 10% reduction year-over-year. Our capital allocation this year has been quite balanced between M&A and share reduction. Long-term priorities remain the same. M&A is critical to our strategy, and any decision about capital allocation will be balanced. In the shorter term, my priority is to pay down debt while also maintaining the option for share repurchases or additional acquisitions.

We expect both of these acquisitions to be accretive by the end of next year from an EBITDA point of view.

Got it. Okay. Perfect. And maybe just as a follow-up, Joyce, double-clicking on the services commentary. It's just not as clear to me. You talked about the willingness or desire to scale more in that business, which makes sense. However, moving from time and materials to outcomes-based is typically harder to scale because every project is different. Can you elaborate on the scale aspect of services? Secondly, are the management changes going to lead to additional opportunities for changing KPIs or compensation metrics?

Yes. The discipline and the methodology I mentioned earlier are crucial. We have taken experienced leaders and placed them in different parts of the business to drive consistency and scalability. Our methodology simplifies our offers to drive repeatability across our entire set of customers. For example, we've adopted technology like RADIUS for AI, which uses a disciplined assessment with defined deliverables. We use this framework to deliver work quickly and improve profitability. In terms of KPIs, we are likely working on updates to our KPIs for next year, as James mentioned. They will be presented in the upcoming Investor Day.

AI changes the scale equation as capabilities become critical. Traditional services required extensive resource presence, but with AI and data, capabilities become far more important. Our recent acquisitions provide those essential capabilities.

Disassociating revenue growth from the time and materials aspect is something we've been aiming for in services for a long time. With AI, we actually start to realize that promise.

Thank you very much to everyone for your questions and interest. We are very optimistic about the opportunities ahead and I look forward to sharing our ongoing progress in becoming the leading AI-first solutions integrator. As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.