Earnings Call Transcript - NSIT Q3 2024

Operator, Operator

Hello, everyone, and welcome to today's Insight Enterprises Third Quarter 2024 Operating Results Call. My name is Seb, and I'll be the operator for your call today. I will now hand you over to James Morgado, Senior Vice President of Finance and CFO of Insight North America.

James Morgado, CFO

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, 2024. I'm James Morgado, Senior Vice President of Finance and CFO of Insight North America. Joining me is Joyce Mullen, President and Chief Executive Officer; and Glynis Bryan, 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 two 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 31, 2024. 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 2024 financial results. When discussing non-GAAP measures, we will refer to them as adjusted. You'll 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 statements 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 the presentation, we will begin on Slide 4.

Joyce Mullen, CEO

Thank you very much, James. Good morning, everyone, and thank you for joining us today. While we're optimistic about the business's long-term health, Q3 didn't meet our expectations, and we anticipate the IT spending environment will remain cautious in the near term. As a result, we are reducing our gross profit and adjusted earnings per share guidance for 2024. As we navigate these IT market challenges, we continue to execute well on our solutions integrator strategy, delivering strong cloud growth and solid Insight Core services results fueled by our acquisitions. There are two key drivers of our revised outlook for the year. First, a delayed hardware recovery that is the result of industry-wide factors and most pronounced across our North American enterprise and corporate clients, which is our largest client group. We anticipated a hardware refresh in the second half of the year that has not materialized. Hardware will improve, and we are encouraged by growth two quarters in a row with our commercial clients which traditionally precedes a broader market recovery. We now expect the broader market recovery to be delayed until next year. The same demand drivers we have previously discussed will drive this improvement, namely the aged installed base, end-of-life of Windows 10 and Gen AI demand. Our investments in technical expertise and integration capacity position us well for this rebound, and we are ready for it. The second area is SADA. Cash flow associated with consumption was the basis of our valuation of SADA and has met our expectations. The pivot to growth in SADA services and the progress of our alignment with Google to focus on corporate and mid-market customers is ramping but not yet at scale. These benefits are offset by accelerated reductions in the enterprise retail market. The impact from these changes is exacerbated in the second half of the year because of the seasonality of SADA's business, which is heavily weighted in the fourth quarter. This is now reflected in our guidance for 2024 and will impact our cloud growth in 2025. To mitigate the impact on overall performance, we have identified actions to drive growth and further improve our cost structure. From a growth perspective, we have enhanced our global services capabilities through our recent acquisitions. Amdaris and InfoCenter services are performing well and meeting our expectations. We are pleased with the access to talent pools in Eastern Europe and India, and we are encouraged by our accelerating cross-sell opportunities and increased relevance to our clients. In North America, we launched a program to drive share gains in our key focus areas of hybrid cloud, data and AI, security and edge, including Workspace solutions. We are confident in the efficacy of this program, which is modeled after the successful effort we implemented over the past 18 months to drive services profitability improvement. Specifically, we are expanding our go-to-market team to include sales leaders and technical sales talent aligned to solutions practices. This will drive tighter alignment with our expanding partner ecosystem and our solution specialists, delivering higher technology adoption and improved outcomes. We believe this will elevate our go-to-market effectiveness and accelerate growth as the market recovers and our program ramps. From a cost perspective, we are selectively accelerating the integration of recent acquisitions and leveraging our nearshore and offshore sites to deliver a lower cost structure. We anticipate annualized operating expense reductions in the range of $20 million to $25 million, which will be fully realized in 2025. Despite these near-term challenges, we are confident in our strategy to become the leading solutions integrator. A perfect example of our execution and efficacy of this strategy is a hybrid solution we recently built for a client in the Middle East. As part of their 2030 vision for economic diversification, the Royal Kingdom of Saudi Arabia is creating a world-class luxury cruise line AROYA cruises. AROYA partnered with Insight to transform their inaugural ship into a floating smart city. We designed and implemented an integrated private cloud by tapping into our extensive partner ecosystem and activating our client fulfillment centers across EMEA. AROYA chose Insight because we manage the entire process for procurement and strategy to hardware, software and services integration to create a seamless and secure solution. By orchestrating numerous partners and managing every aspect of this transformative IT project, we've demonstrated our ability to deliver scalable solutions that drive long-term value in a market saturated with fragmented services. We also guided a U.S. healthcare giant with over 150 hospitals across the U.S. and U.K. that was lagging in cloud adoption, a common challenge in the healthcare sector. They turned to Insight for our infrastructure expertise. We helped our clients architect and build a new approach to provisioning their cloud infrastructure, using new tools and repositories to effectively manage their Azure and Google Cloud environment. We reduced the provisioning time, the time to create the underlying infrastructure for their cloud environment from one month to ten minutes, enabling the client to deploy innovative technologies almost instantly and freeing them up to focus on patient care. And speaking of infrastructure, we are now offering AI infrastructure-as-a-service. Along with our deep data and AI expertise, we rely on our best-in-class technology partnerships to combine compute, networking and storage requirements under a single as-a-service umbrella. Our solution provides flexibility for our clients as they invest in AI by offering a consumption model as well as managed services to operate the infrastructure. In the last quarter, Insight has received several important recognitions. AWS premier tier service partner, NetApp's 2024 Keystone Partner of the Year; several Cisco Partner of the Year Awards, including U.S. Partner of the Year, Dell 2024 Acquisition Partner of the Year, numerous Lenovo Partner of the Year recognition and we've also been included in a 2024 Gartner Magic Quadrant for Software Asset Management managed services. And from the workplace culture perspective, Insight has been recognized among Forbes World's Best Employers in 2024, Newsweek America's greatest workplaces for 2024 and Insight India was granted Great Place to Work certification. As you know, earlier this year, Glynis announced her upcoming retirement, and I want to thank her for almost two decades of commitment to Insight. We are grateful for her leadership and dedication to the company, our teammates, partners and clients. And we're delighted that James Morgado will assume the role as CFO in January. James, I'll turn it back over to you.

James Morgado, CFO

Thank you, Joyce, and good morning, everyone. I'm deeply honored to be selected as Insight's next CFO. During the last three years, I've worked closely with the leadership team to drive our business model and operational efficiencies. I'm confident in our strategy and our ability to drive profitable growth, particularly as the market recovers. Our solutions and technical capabilities position us well to attack the fastest-growing areas of the market. And the strength of our balance sheet and cash flow provides us with the opportunity to continue expanding our solutions capabilities in the future. I'm excited to be part of Insight's journey and to help us realize our ambition to become the leading solutions integrator. I look forward to continuing the dialogue with all of you in the coming months. I'll now turn the call over to Glynis to share key details of our financial and operating performance in Q3 as well as our outlook for 2024. Glynis?

Glynis Bryan, CFO

Thank you, James. At a high level, our results in Q3 were disappointing. On a high single-digit revenue decline, gross profit grew mid-single digits and gross margin expanded significantly. However, EBITDA was flat and adjusted diluted earnings per share declined year-to-year. Our acquisitions performed as expected in Q3. Q3 did not meet our expectations and also did not provide the foundation that we need to achieve our prior 2024 guidance. I'll now walk you through the details of Q3 and the implications for Q4. In Q3, net revenue was $2.1 billion, a decrease of 8% in U.S. dollars and also in constant currency. The decrease was driven by an 11% decline in production. This decline in product was driven primarily by weakness in our large enterprise and corporate clients in North America. Within this decline, Hardware was down 13% and on-prem software was down 9%. The decline in on-prem software is primarily related to a partner consolidation and subsequent program change that shifted revenue from product to services. Getting a little deeper in Hardware in Q3, devices were down low single digits and Infrastructure was down double digits year-to-year. Sequentially, devices were flat and Infrastructure declined high single digits. Gross profit increased 6%, reflecting strong Cloud and Insight Core services growth, partially offset by product declines. Insight Core Services gross profit was $81 million an increase of 14% and reflects the benefits of our acquisitions. Cloud gross profit was $129 million, an increase of 33% reflecting higher growth in Infrastructure-as-a-Service and Software-as-a-Service and also the benefit of the partner consolidation and program change I mentioned earlier. The cloud results are partially offset by the decline in legacy enterprise agreements. Gross margin was 20.7%, an increase of 270 basis points and reflects a higher mix of cloud and Insight Core services, primarily related to the acquisitions we have completed successfully that drive higher services gross margin. Adjusted SG&A grew 8% due to the acquisitions. Organic adjusted SG&A is down year-to-year based on the operating expense actions we took last year, as we continue to prudently manage spending in the current environment. Our philosophy is that gross profit growth should outpace SG&A growth. And with our performance this quarter, and as Joyce mentioned, we're taking further steps to align our cost structure with the current environment. This resulted in adjusted EBITDA of $129 million, flat year-over-year, while margin expanded 50 basis points to 6.2%. And adjusted diluted earnings per share were $2.19, down 8% in U.S. dollar terms and also in constant currency. The decline was due to an increase in interest expense from higher debt primarily related to the recent acquisitions and our share buybacks. Moving on to cash flow. In the quarter, we generated $125 million of cash flow from operations. Through the first three quarters of 2024, we have generated $418 million in cash flow from operations, essentially flat year-over-year. We expect that cash flow from operations will be over $500 million this year above the top end of our typical $300 million to $400 million range. In Q3, we repurchased approximately $165 million of shares. Year-to-date through the end of Q3, we spent $200 million to repurchase shares compared to $270 million spent in the same period last year. In September, our Board authorized a new $300 million share repurchase program, all of which remains outstanding. Our adjusted return on invested capital for the trailing 12 months ended September 30, 2024, was 16.3% compared to 16.8% a year ago. We exited Q3 with total debt of $1.1 billion compared to $673 million a year ago. Over the last year, we spent approximately $890 million on acquisitions and share buybacks partially funded through $480 million of cash flow from operations with the remainder in debt. The associated interest expense is adversely impacting adjusted diluted earnings per share. As of the end of Q3, we had access to the full $1.8 billion capacity under the ABL facility, of which $1.5 billion was available. We have ample liquidity to meet our needs. Our presentation shows our trailing 12-month performance through Q3 2024 relative to the metrics that we described in our Investor Day in October 2022. Here is the status. Cloud gross profit growth of 32%, core services gross profit growth of 14%, adjusted EBITDA margin of 6.3%, adjusted diluted EPS growth of 8% and adjusted ROIC of 16.3% and adjusted free cash flow as a percentage of adjusted net income of 166%. I would characterize the market year-to-date as difficult. While we had an encouraging start to the year, our large enterprise and corporate clients have not returned to growth. Our clients continue to exercise heightened caution in their spending decisions and investment priorities. Given the duration of ongoing uncertainty, and lack of demand momentum, we believe this pattern could continue into the first half of 2025. As we think about the remainder of the year, we have considered the following factors in our guidance. We're not expecting the typical hardware budget flush at year-end, particularly in the large enterprise and Corporate Client Group. SADA will be dilutive in Q4 as we continue to pivot on selling cloud solutions to corporate and mid-market clients and away from enterprise resale. Given the SADA effect, cloud gross profit growth will moderate in Q4. On-prem software revenue has been affected by partner consolidation and the new program and revenues now netted and reflected in services. We plan to reduce our operating expenses and deliver $20 million to $25 million in annualized savings. Note, the impact in 2024 will be minimal, but we should see the full benefit in 2025. Concerning these factors for the full year, our guidance is as follows: we expect to deliver gross profit growth in the mid-single-digit range and that our gross margin will still be in the 19% to 20% range and we now anticipate adjusted diluted earnings per share will be between $9.40 and $9.70. This guidance includes interest expense between $58 million to $60 million and effective tax rate of approximately 25.5% for the full year, capital expenditures of $35 million to $40 million and an average share count for the full year of 35.1 million shares. This outlook excludes acquisition-related intangible amortization expense of approximately $70 million, assumes no acquisition-related or severance and restructuring and transformation expenses and assumes no meaningful change in our debt instruments or the macroeconomic outlook. Before I pass the call back to Joyce, I would like to once again congratulate James and say a big thank you. I'm thrilled that he was a successful CFO candidate. He's had a tremendous impact on the business over the past three years and will be an excellent partner to Joyce and our executive leadership team as we continue our journey to become the leading solutions integrator. I'm also grateful to Joyce for her leadership and support and for her bold vision for Insight. I'm confident that under her leadership, Insight will be well positioned to become the leading solutions integrator. And also a big thank you to our partners, clients and the investment community for your partnership over the years. We would not be successful without our dedicated teammates who truly make our company exceptional. I'm honored to have been a part of the Insight journey over the last 18 years. Thank you. I will now turn the call back to Joyce.

Joyce Mullen, CEO

Thank you, Glynis. We are really going to miss your leadership, advice and wise counsel, and I am grateful for all that you have contributed to Insight and each one of us personally over so many years. To recap, year-to-date, we delivered positive results in strategic areas of the business in a challenging environment. Cloud and Insight Core Services gross profit grew double digits. Gross margin expanded, reflecting a favorable mix of Cloud and Insight Core Services and benefits from our pricing and profitability initiatives and adjusted EBITDA margin expanded. When we launched our solutions integrator strategy, we knew there would be twists and turns along the way. We've experienced some of those challenges and are taking the appropriate action to address them. We're confident we have developed a strong plan to help offset ongoing industry pressures. We remain laser focused on delivering exceptional value where our clients need us most, cloud, data and AI, cyber and edge. Those areas have not changed, and we have expanded our capabilities in these areas over the past year and are well positioned. In addition, we are leveraging technology and offshoring options to structurally improve our costs. We are confident that growth will resume in this $5 trillion market, and we are actively focused on improving our execution to be ready for the eventual upturn. I'd like to thank our teammates for their unwavering commitment to our clients, partners and each other, especially in this difficult environment, 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.

Operator, Operator

Our first question today comes from Joseph Cardoso from JPMorgan. Please go ahead.

Joseph Cardoso, Analyst

Hi, thanks for the question and good morning everyone. I guess just first one for me. Not super surprising the trends that you’re seeing relative to IT spending, particularly following one of your peers reporting yesterday. Curious, can you just flesh out the trends that you’re seeing between large enterprise customers versus smaller ones? And then any areas from a product or services portfolio that is tracking better or worse than anticipated previously? Just curious if you can flesh out if there’s any bright spots that you’re seeing that gives you confidence around the recovery going into next year? And then I have a follow-up. Thanks.

Joyce Mullen, CEO

Thank you, Joe. We are pleased with the growth in our cloud services and the growth in our core services, both of which are crucial to our overall strategy. These areas have been very beneficial, and we are also satisfied with our acquisitions and their performance. They have enhanced our service capabilities and are experiencing growth, both from being new to us and from organic growth when compared to their previous performance. Overall, this is encouraging. We have seen positive commercial performance for two consecutive quarters, which is significant because improvements in this sector typically precede similar developments in the enterprise and corporate sectors. We are pleased with this trend. Additionally, the APAC and EMEA regions performed well this quarter.

Joseph Cardoso, Analyst

Got it. And then maybe just following up on some of the SADA commentary. Like it does seem like that acquisition is somewhat underperforming your expectations when you first acquired at least in terms of the revenue and profit projections. And some of this may be tied to some of the shift and strategic priorities that you highlighted on the last earnings call. I'm just curious, is there any way that you can help us kind of baseline the acquisition of SADA from what you talked about historically, like I think there was like a $250 million revenue number, maybe that was a '22, '23 number, 80% of our gross margin like any way that you can help us think about what the run rate of that business is today, given the shift in strategic priorities that you guys are doing there? And then the second part of that question is, with the shift in strategic priorities, has there been any structural change in the seasonality of that business?

Joyce Mullen, CEO

Thank you for the question. First, I want to express how pleased we are to have the capability, particularly in relation to services and Google. Google is clearly becoming a vital platform for many of our clients, and we're glad to include it in our offerings. We mentioned a customer today where we experienced strong cross-selling potential due to our solid relationship and the Google capabilities we bring to that partnership. This aligns with our multi-cloud strategy and reflects our commitment to investing in the fastest-growing market areas where our customers require the most support. We evaluated the acquisition based on cash flow, and I'm pleased to report that it's meeting our expectations in that regard. However, you are correct that we anticipated growth in SADA through the expansion of services, which we are witnessing, and through resale expansion, which has not materialized. This change was what we discussed in our earnings call last quarter, and we've now pivoted to align more closely with Google's priorities. The focus has shifted primarily toward enterprise and large customer resale. We are currently targeting corporate and mid-market from a retail perspective, and that segment is still ramping up. We're optimistic about our services and the cash flow. The resale aspect has presented a different landscape, particularly in Q4, which was affected by seasonal trends linked to SADA and a decline in enterprise resale. Considering these changes, we've implemented significant improvements starting in late Q2 and early Q3 to adjust the operating expenses related to that business. We are actively working on this process to ensure that SADA can turn a corner and contribute positively in the upcoming year. Did I cover all the points, Joe? I might have overlooked something.

Joseph Cardoso, Analyst

Maybe just the last part was just on the seasonality, whether the shift in strategic priorities from Google in terms of the focus on the mid-market, does that change any of the seasonality that was assumed when you guys first acquired it in terms of it being 4Q loaded?

Joyce Mullen, CEO

It should. We don't like this Q4 seasonality thing. And we've been working to try to flatten that. Obviously, we'd like to flatten it in a different way than just but having such a large gap in Q4.

Glynis Bryan, CFO

And Joe part is guidance ranges specifically related to a view that SADA will miss their Q4. I think in my section, I said Q4 is going to be dilutive ultimately. And that is related to not having the large enterprise, the large, large enterprise deals that they typically have in Q4. We're not expecting to see those this Q4.

Joseph Cardoso, Analyst

Is there any way to triangulate how much of the headwind that represents for the business compared to the historical metrics, specifically regarding how much large enterprise used to contribute to the revenue number mentioned when the acquisition was first discussed at around $250 million?

Glynis Bryan, CFO

I can't triangulate it to at. What I think we can say is that SADA is about 1/3 of the revised guidance shortfall of the changing items.

Matt Sheerin, Analyst

Yes, thanks. Good morning and congratulations to both James and Glynis. My first question, just regarding the guidance for the year. You guided to gross profit and EPS and sort of backing into the top line and gross margin, it looks like you will grow sequentially on the top line. And last year, I think you were down slightly. So it looks like there's a little bit of seasonality and maybe you could talk to that and where you may be seeing that. And then on the gross margin, it looks like again backing into that number, it looks like gross margin will be below 19%. And is that mostly because of that SADA issues that you talked about? Or is there a mix issue where client devices are up and infrastructure is weak?

Glynis Bryan, CFO

Matt, I don't want to be bold here, but we do not believe that gross margin will be below 19%. We think gross margin will be in the range of 19% to 20%. So I think that maybe...

Matt Sheerin, Analyst

Well, I'm talking about that was your guide for the year. I was kind of backing into the December number.

Glynis Bryan, CFO

Okay. Yes, the Q4 number will be lower than 20%. Yes. That's correct. Sorry, I misunderstood. I thought you're talking about for the full year. Q4 will be...

Matt Sheerin, Analyst

Yes. Yes. I was trying to figure the dynamics. Normally, last year, it was up. And is that because of SADA or because of product mix?

Glynis Bryan, CFO

It's SADA and product mix. But primarily SADA because they're 100% gross margin on the resales. And so last year, remember, we got revenues from SADA in Q4. So the same partner consolidation we had, which you probably know about, has led to a change in how we record revenue. Previously, we recorded the revenue as growth with cost of goods sold, contributing to gross profit. Now, our new partner has taken most of the enterprise business direct. We are handling the mid-market business, which is organized as an agent relationship where we earn a fee, and that's now recorded in services. This change has been a key factor in the decline of EMEA's software revenue.

Matt Sheerin, Analyst

Understood.

Adam Tindle, Analyst

Thank you. Good morning, Joyce. I wanted to start by asking about the current quarter. You mentioned that the delayed hardware recovery in North America was a significant issue. Could you elaborate on which categories are experiencing the most impact or deviation from what was expected? We often hear about the challenges in networking, particularly with tough comparisons, but we would have anticipated that coming into this year. I'm trying to understand what specific categories are showing the most notable deviations from expectations. Additionally, you indicated that you expect this trend to continue into the first half of 2025. Can you share which categories are under the most pressure and what information you are using to make that projection into the first half of 2025?

Joyce Mullen, CEO

Yes. The overall market is quite challenging, especially for our corporate and enterprise customer segments, which account for a significant portion of our revenue. The hardware market, in particular, has been very difficult to predict. We started the quarter positively in July with strong performance, but the typical growth patterns for hardware throughout the quarter did not occur as expected. The lack of momentum in Q3 indicated that Q4 would also fall short, and we anticipated better traction in both Q3 and Q4 for the hardware category. Unfortunately, we fell short in both devices and infrastructure, particularly within the large enterprise and corporate segments. We're trying to be more realistic about our hardware expectations due to its unpredictability, which leads us to anticipate a continued slow momentum or sluggish improvement into early 2025.

James Morgado, CFO

Adam, it's James. The only other thing I would add to that is as you start thinking about 2025, I would just remind you that in 2024, Q1 of 2024, we had a very strong quarter. So the compares as we start next year will be challenging for us as well.

Joyce Mullen, CEO

We are excited to see hardware improvement in the commercial sector, as we have observed this trend for two consecutive quarters. We hope this signals an overall enhancement in our results. We began the quarter with good bookings for hardware, but we are no longer relying on the previous patterns that guided us.

James Morgado, CFO

Yes, I mean, Adam, it's James. The thing to keep in mind is that a faster recovery in commercial can be a leading indicator of broader improvement in enterprise.

Adam Tindle, Analyst

Yes, that's helpful, James. This ties into my second question. From an analyst perspective, it seems that we are not currently addressing 2025. I don’t want to put you on the spot, as I know you’re not ready to provide guidance for that year. However, as we consider the various factors for next year, we have your Q4 guidance indicating that gross profit dollars are expected to decrease by low single digits year-over-year. This will serve as our starting point, and we can make our own assumptions regarding the market. You mentioned two specific factors: first, the accelerated reduction in SADA resale which will affect cloud growth in 2025, and second, the significant decrease in resale from your largest software partner. As we evaluate the growth in gross profit dollars for 2025, is there a way to assess the combined impact of the SADA resale decline and Microsoft’s changes on our models?

Joyce Mullen, CEO

We are shifting our focus at SADA towards corporate and mid-market customers, aligning with Google's resale priorities, and we anticipate growth in our services business, making SADA a positive contributor next year. However, you are correct that we will not see any improvement in enterprise resales from SADA's perspective. Regarding Microsoft, we are acutely aware of the ongoing changes from many of our partners, which occur frequently. We do not fully understand the specifics of these changes yet. Our responsibility is to adapt our strategy to ensure we are collaborating with Microsoft in areas where we can provide the most value. We are cautious about some early quarters affected by these Microsoft changes, as it typically takes time for us to adjust. We will have more clarity when we provide guidance in 2025.

Adam Tindle, Analyst

Well, I guess you're going to offset some with the $20 million to $25 million OpEx reduction. Can you maybe just speak to the timing of that, when do you think that will be at kind of a full run rate in the quarter and then that decision's expected impact on growth?

Joyce Mullen, CEO

So Glynis mentioned that we will see a small benefit in Q4, and we will fully realize that benefit in 2025.

Operator, Operator

Thank you. We have no further questions on the call. So I'll hand the floor back to Joyce for concluding remarks.

Joyce Mullen, CEO

Thank you very much for all of your questions, and thanks for your interest. While we can navigate through this choppy demand period. We remain very confident and excited about the opportunities ahead of us, and I look forward to sharing our continued progress on our journey to become a leading solutions integrator. We can now close the call. Thank you very much, operator.

Operator, Operator

Thank you all for joining today's call. You may now disconnect.