NASDAQ:NSIT Insight Enterprises Q3 2023 Earnings Report $133.34 +1.74 (+1.32%) Closing price 03:59 PM EasternExtended Trading$133.24 -0.10 (-0.07%) As of 04:49 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Insight Enterprises EPS ResultsActual EPS$2.37Consensus EPS $2.33Beat/MissBeat by +$0.04One Year Ago EPSN/AInsight Enterprises Revenue ResultsActual Revenue$2.27 billionExpected Revenue$2.35 billionBeat/MissMissed by -$83.84 millionYoY Revenue GrowthN/AInsight Enterprises Announcement DetailsQuarterQ3 2023Date11/2/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Insight Enterprises Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning, and thank you for attending the Insight Enterprises Incorporated Third Quarter 2023 Earnings Conference Call. My name is Elisa, and I will be your moderator. I would now like to pass the call to our host, James Morgado, SVP of Finance and CFO of North America. James, you may proceed. Speaker 100:00:38Welcome, 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, 2023. 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 Glenys Bryant, Chief Financial Officer. If you do not have a copy of the earnings release For the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8 ks, you will find it on our website at insight.com under the Investor Relations section. Speaker 100:01:16Today'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, November 2, 2023. 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. Speaker 100:01:57In today's call, we will be referring to non GAAP financial measures as we discuss the Q3 2023 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. Speaker 100:02:32S. Dollar 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. Speaker 100:03:09And if you're following along with the slide presentation, we'll begin on Slide 4. Joyce? Operator00:03:14Thank you very much, James. Speaker 200:03:16Good morning, everyone, and thank Speaker 300:03:17you for joining us today. Q3 met our expectations and delivered record adjusted earnings per share for the quarter. Cloud gross profit grew 17% and Insight core services gross profit grew 20%, demonstrating the progress we are making to becoming the leading solutions integrator. We are also confirming our adjusted diluted earnings per share for the full year of 2023. Here are a few highlights. Speaker 300:03:41We achieved gross margin of 18% in Q3, reflecting both an improvement in our revenue mix as well as continued progress on our pricing and profitability initiatives. Q3 adjusted EBITDA margin expanded 130 basis points to 5.7%. We generated 4 $14,000,000 of operating cash flow in the 1st 3 quarters of the year, an increase of over $600,000,000 from last year. And consistent with our strategy to focus on cloud and services, we acquired Amdara's, an award winning software development and digital services company based in the UK. I will provide more details on this acquisition later. Speaker 300:04:20These highlights demonstrate we are on the right path with our strategy and making progress towards becoming the leading solutions integrator. We remain focused on the fastest growing areas of the market cloud, data, AI, edge and cyber. While we have been leveraging AI to support clients' needs for a long time, we are really excited about the acceleration that generative AI is providing to us and more importantly to our clients. We've recently filed GenAI related patents focused on customer support and sales use cases. These patents Integrate large language models with 3rd party data to enhance support applications recognize and leverage human sentiment specifically for support applications reduce hallucinations and query time, which reduces GPU usage, emulate personality types and improve search capabilities for customer support applications. Speaker 300:05:14Combined with our expertise, these capabilities allow us to deliver business outcomes to our clients more efficiently. We are also using GenAI internally to improve efficiencies with our development team and our back office support functions. Our clients need a partner they can trust to navigate new technologies and the infrastructure and workplace requirements to help them digitally transform. Speaker 200:05:37This is Speaker 300:05:37at the heart of our strategy. As a reminder, there are 4 key pillars: Captivate clients, sell solutions, was a technology leader in the public safety industry. They were experiencing a significant increase in customer demand and needed help to meet their delivery obligations and fulfill their growing backlog. They required a partner that could design, implement and execute a large scale deployment of their technology Tens of thousands of vehicles across multiple locations. Leveraging our Edge expertise, we implemented a customized solution combining routers, cameras and cloud software along with our services to deploy and test the solution at the edge. Speaker 300:06:25At every stage, we made sure their key requirements around testing and quality assurance were satisfied. We quickly ramped up a successful pilot of several 1,000 vehicles and have since moved to a multiyear contract. The positive outcomes for our client include faster times to market, improved customer satisfaction and accelerated revenue growth. The success of this project has led to exploring how we can help them seamlessly deploy more of their This is an excellent example of how we focus on business outcomes, earn the right to do more and ultimately become the partner our clients can't Our expertise in edge solutions is part of our heritage and very important to our clients. As a solutions integrator by combining hardware, software I'd like to also highlight our application development strength with a recent project we delivered for a large insurance provider. Speaker 300:07:25They began an initiative to develop a new custom internal claims processing to replace our existing outdated and high risk system. They needed help establishing a development environment that could accelerate the time to value. We introduced them to our proven agile development practices and deployed our user experience experts to guide their development efforts. The deployment included user story mapping, planning the project sprints and performing agility health checks along the way. The effort ultimately concluded with the rollout of a scalable next gen claims processing application that helped them realize significant cost savings, The two projects I highlighted were delivered by our exceptional technical team of over 6,000 dedicated experts. Speaker 300:08:15To augment our exceptional talent and wide ranging capabilities, M and A remains an important element of our strategy. We are always looking to bolster our capabilities through strategic acquisitions in line with our focus on the fastest growing areas of the market, cloud, data, AI, edge In August, we acquired Amdares, an award winning cloud and application modernization Based in the U. K. With service delivery centers located in several Eastern European countries. Amdaris has been a Microsoft Gold certified partner for more than 10 years and has a proven track record of delivering transformative digital services. Speaker 300:08:53Ambaris brings more than 850 teammates, 90% of whom are engineers and developers, making it an ideal addition to our existing application and data practices. Through this acquisition, we also strengthen our solutions capabilities in Europe. I'd like to share an example of how Amdara's was able to deliver on a project and earn the right to do more. Their client, a global recruiting firm based The U. K. Speaker 300:09:18Was dealing with increasing costs while developing their own custom built CRM system. The Amdaris team stepped in to deliver the project faster with a more scalable This illustrates why Amdara's is a perfect complement to our strategy and our strategy is working. To add to our track record of industry recognitions, I'll highlight a few. We've been included in the Gartner Magic Quadrant for Software Asset Management Managed Services and public cloud IT transformation services. This highlights our strength in helping clients architect, build and manage cloud solutions. Speaker 300:10:04Additionally, Incyte has been named EMEA Innovation Partner at this year's Canales Forum, which recognizes outstanding performance in achieving and driving innovation. In part, this was due to our early development of Insight GPT. And since we believe our culture is a competitive advantage, We are thrilled to be recognized by Forbes as a world's best employer for 2023. In summary, we are making great progress towards becoming The leading solutions integrator focused on the fastest growing areas of the market and where our clients need the most help. With that, I'll turn the call over to Glynis to share the key details of our financial and operating performance in Q3 and outlook for 2023. Speaker 300:10:45Mona? Speaker 200:10:47Thank you, Joyce. Our focus on profitability and growth in high margin cloud and services business has contributed to the expanded margins we've seen in our results this year. And we believe we're well positioned to profitably grow our top line as macroeconomic conditions improve. Moving on to Q3 results. Net revenue was $2,300,000,000 a decrease of 11% in U. Speaker 200:11:11S. Dollar terms and also in constant currency. The decline was primarily due to hardware, which was down 17% due to devices, partially offset by cloud growth. Last quarter, we expressed our belief that we had approached the bottom of the device market and that decline in our devices revenue would slow. Sequentially, devices were up slightly in Q3. Speaker 200:11:34Despite the 11% decline in net sales, Gross profit increased 2%, reflecting the hardware decline offset by higher cloud and Insight core services growth, as well as the benefit of profitability and pricing initiatives we implemented last year. Incyte core services gross profit was $71,000,000 an increase of 20%. This performance reflects growth in applications, data, digital enablement, as well as networking, partially offset by a decrease in integration and other services related to decline in devices. Cloud gross profit was $96,000,000 an increase of 17%, reflecting higher growth in SaaS and Infrastructure as a Service. Gross margin was 18%, an increase of 220 basis points and reflects the higher mix of cloud, Insight core services and infrastructure products, all of which transact at higher margins relative to devices. Speaker 200:12:36In addition, our profitability and pricing initiatives also contributed to higher hardware and services gross margin. Last quarter, we accelerated cost reduction actions to better align our cost structure to the market environment. These actions were completed by mid quarter and we have started to see the benefit of the actions in North America where adjusted operating expenses were down 4%. Our adjusted EBITDA margin expanded 130 basis points to 5.7%. And for the Q3, adjusted diluted earnings per share was $2.37 up 19% in U. Speaker 200:13:18S. Dollar terms and also in constant currency and including the benefit of approximately $0.04 related to the release of certain tax reserves. Our adjusted return on invested capital for the trailing 12 months ended September 30, 2023 was 16.8% compared to 15% a year ago and this also demonstrates progress towards our long term goal. Year to date, we generated $414,000,000 of cash flow from operations compared to a usage of $206,000,000 for the corresponding period in 2022. We continue to evaluate our options relative to the convertible notes as well as the impact of the convertible notes on dilution and our share repurchase strategy. Speaker 200:14:04Our 2023 share forecast includes the net impact of share repurchases and the anticipated dilution throughout 2023. You will find the dynamics of the convertible notes illustrated in our investor presentation. We exited Q3 with debt of $324,000,000 outstanding under our ABL compared to $438,000,000 outstanding as of Q3 2022. This reduction in our debt balance is after spending $217,000,000 on share repurchases in the 1st 9 months of 2023 and also includes the acquisition of Andares in Q3 and is indicative of the strong cash flow in our business. As of the end of Q3, we had approximately $1,500,000,000 available under our $1,800,000,000 ABL facility. Speaker 200:14:50We have ample capacity to fund our business operations and capital deployment priorities, including M and A. As Joyce mentioned in August, we acquired Amdara's, an award winning software development and digital services company. Amdara's significantly increases our digital and cloud enablement capabilities in EMEA. The impact on adjusted diluted EPS will be negligible in 2023. Our presentation shows our trailing 12 month performance through Q3 2023 relative to the metrics that we laid out at our Investor Day in October 2022. Speaker 200:15:27We believe we're on track to hit these targets by 2027. We are keeping an eye on the broader market and appreciate that demand and spending patterns are volatile. With 3 quarters under our belt, hardware has started to improve, but not at the level we had anticipated. We expect continued strength in software, cloud and Insight core services as well as expanded margins from our pricing and profitability initiatives. Additionally, We believe we will benefit from the operating expense actions we took last quarter. Speaker 200:16:00Given these factors, we're maintaining our adjusted diluted EPS guidance of $9.40 to $9.60 and we recognize this is a wider range than typical for Q4. This guidance includes gross profit growth in the low single digit range, interest expense between $45,000,000 $47,000,000 And effective tax rate of 25% to 26% for the full year, capital expenditures of $40,000,000 to $45,000,000 and an average share count for the full year of 34,800,000 shares. This outlook acquisition related intangible amortization expense of approximately $34,000,000 assumes no acquisition related or severance and restructuring and transformation expenses and assumes no meaningful change in our debt instruments or macroeconomic outlook. I will now turn the call back to Joyce. Speaker 300:16:55Thanks, Glynis. The long term dynamics of the IT industry are very strong. Digital transformation is here to Stay in technologies like generative AI or accelerants. At Incyte, we are staying focused on delivering outcomes our clients value most, Leveraging our skills in the fastest growing areas of the market. To summarize our results this quarter, Insight Core Services gross profit grew 20%, Cloud gross profit grew 17%. Speaker 300:17:23Adjusted EBITDA margin increased to 5.7%. Adjusted diluted earnings per share grew 19%. Adjusted ROIC was 16.8 percent and trailing 12 months free cash flow as a percentage of adjusted net income was 211%. Our portfolio of solutions gives us the resiliency to navigate through economic cycles and we are prepared to capture growth opportunities when spending patterns improve. We have a healthy balance sheet and our business delivers strong cash flow, giving us to fund our capital allocation priorities, in particular, acquisitions in the fastest growing segments of the market. Speaker 300:18:03In closing, I want to thank our teammates for their commitment to our clients, partners and each other, our clients Thank you for trusting Incyte to help them with their transformational journey, 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. Operator00:18:28We will now begin the question and answer session. Our first question comes from the line of Joseph Cardoso with JPMorgan. Your line is now open. Speaker 400:19:03Hey, good morning, everyone, and thanks for the questions. So just starting off here, If I'm looking at the full year guide, you moderated the gross profit outlook modestly to the low end of your prior guide. I was just hoping if you could walk us The big ticket items that are resulting in the incremental pressures impacting the guide versus, let's say, 90 days ago. And then I have a follow-up. Speaker 200:19:24Sure. So Joe, thanks for the question. What I would say is that our Device, we're not seeing the improvement in the device segment of the market that we had anticipated. And while that doesn't necessarily drive huge gross margin, it does actually drive some gross profit dollars. We continue to see strength in cloud. Speaker 200:19:44We continue to see strength in our services GP, but the hardware side of the business is not recovering As we had anticipated and it's specifically around the device side. To offset that, we have some improvements that we're making with regard to SG and A. We took some SG and A actions Last quarter actually this quarter, so we have a little bit of benefit this quarter, we expect to have more benefit in 2023 in the Q4, sorry. Speaker 400:20:16Got it. And then maybe we could just touch on that, part on devices. Can you just give us a little bit more color on the linearity of customer spending through the quarter, And then maybe just more broadly, not specific to devices, Are you seeing any divergence across your various customer verticals like large enterprise SMB and public sector from an overall spending behavior standpoint? For the questions. Appreciate it. Speaker 300:20:44Hi, Joe. This is Joyce. Thank you very much for asking. So here's the thing. I mean, first of all, I want to make sure Notable that the reason we set out on this strategy is because we know that devices are going to be inherently cyclical and that we've seen a lot of that this year and Still we've delivered record EPS for the quarter. Speaker 300:21:03So just that's kind of the backdrop. But then in terms of devices, we have seen some sequential improvement. We expect to see some continued sequential improvement. But instead of seeing growth as we thought at the beginning of the year in We expect to see that push out a couple a quarter or 2, probably to the back half of the year. And we know that that's From a segment point of view, Generally, we see some slight some improvement first in the commercial space and it takes longer for that to take hold in the enterprise space. Speaker 300:21:40Given the dynamics of the device market, we do believe that Windows 11, Gen AI requirements, Hybrid work requirements will drive refresh cycles, but again those generally we see that sooner in the Commercial segment and later in the Enterprise segment. Public sector has been strong for us overall, and that's consistent with kind of the amount of money that's in the public sector at the moment. Speaker 200:22:03And just on the linearity piece, we didn't see any differences really throughout the quarter in terms of how July versus September transacted short of Operator00:22:22Thank you. The next question comes from the line of Matt Sheerin with Stifel. Your line is now open. Speaker 500:22:31Yes. Thank you and good morning everyone. Just related to the hardware sales, I know Client devices are part of it, but so are infrastructure, products, storage, servers, networking. And I know you've commented that you've had good backlog, Particularly on the networking side, but that's the expectation where that backlog were to get worked down with improving supply. So Could you give us some color on what you're seeing with those products and how that plays out in Q4 and into next year? Speaker 300:23:04So yes, so the infrastructure backlog has largely normalized now. And we are seeing some softening in Structured demand is really again consistent with what we're hearing from our partners. There's a bit of uncertainty just acquisition quotes are taking longer Turn into POs, etcetera, etcetera. However, we still believe the long term dynamics are very strong. Again, we think Gen AI will be an accelerant around infrastructure. Speaker 300:23:32And so we're spending a lot of time. It's just the sales cycles are a little longer. Speaker 500:23:38Okay. And you talked about sequential growth in client devices in Q4. Would you expect the infrastructure products to be also up seasonally? Speaker 300:23:49Well, we have a little bit of a different dynamic because we just flushed a bunch of backlog in Q3. So we would not see the same dynamic there. That's largely driven by backlog. Speaker 400:24:00Okay. So Speaker 500:24:02got it. Okay. That's helpful. And as you noted, the free cash flow has been very strong. I know the inventory has been coming down. Speaker 500:24:11I Imagine because of the client device flush and also a better supply, could you talk about what expectation for working capital And inventory going forward? Speaker 200:24:25We would say that our inventory has largely normalized as of right now versus The buildup that we had back in the supply constraint era and we would expect that it would stay around this level as we Move forward, our working capital has been great at this stage given that hardware is very soft. It's improving, but it's still very soft. We would anticipate that we'd still be in a positive working capital environment if hardware were to grow in the kind of low to mid single digits. It becomes more problematic for us when hardware is growing in the 25 to 30 devices in particular in the 25% to 30% range like it did in 2021 and 2022. Speaker 500:25:07Okay. Thank you. Speaker 200:25:08That we have right now. Speaker 500:25:12Okay, great. And just lastly, your comments about the pricing and profitability Projects that you had in terms of customers and increasing pricing. Could you talk about that? Is that across hardware, across services? How successful has that been? Speaker 200:25:31I think it's been very successful as evidenced by the gross margin Appreciation that we've seen and the improvement in gross profit on declining revenues. So we have a strategy that is related to hardware, so I think about it that way. In terms of the floors that we pricing that we will accept from large customers and approval processes that we put in place with regard to Level of gross margin, relative size of customer, etcetera. And we've also put some floors and ceilings in place around services That has helped drive that improvement in gross margin as well as really looking and standardizing our utilization metrics across All of our service practices so that we are measuring it consistently and that we can really pinpoint where we need to be focused in terms of utilization. And to be fair, we've also leveraged some offshore capability to lower our overall charge out rates that has helped with the gross margin as well in services. Speaker 200:26:28So it's been a combination of various factors. I would say they're now systemic. They're not one offs anymore. Speaker 500:26:36Okay. And there have been no share issues or share loss issues because of that In terms of competitive landscape? Operator00:26:45I would say, if you look Speaker 200:26:46at our results relative to our Largest reseller competitor out there, as I'm talking about it from a hardware from a kind of client segment perspective, we've definitely held our own. We've definitely held our own. Speaker 500:27:00Okay, great. Thank you. Operator00:27:06Thank you. The next question comes from the line of Anthony Lebiedzinski with Sidoti. Your line is now open. Speaker 600:27:22This is Stefan Guillaume on for Anthony Lebedinsky. My first question is, can you talk about the performance during the quarter for your different client groups such as Large enterprise, public sector and SMB? Speaker 300:27:38Yes. I think we've published all this. It's in the documents, but happy to talk about it. I think the most challenged Segments for the quarter were the enterprise business overall. Commercial was also pretty challenged, I would say. Speaker 300:27:59Public sector was strong. And growth year over year. So I think we're happy with that because we think that's Pretty consistent with the market. Speaker 200:28:08Yes. So our public sector grew low single digits and mid low to mid single digits. And the Enterprise Corporate and Commercial segments were down in the double digit maybe teens area. Speaker 300:28:23Yes, commercial was down the most. Speaker 600:28:28Thank you. And do you think we are at the bottom for demand for devices? Or if not, When do you expect to show positive results for devices? Speaker 300:28:39So, we said last quarter we thought we're at the bottom Of the device market, we believe that that was true. We saw some sequential growth that we expect to continue, largely because the compares also get a lot easier. Speaker 600:29:01Thank you so much. Operator00:29:05Thank you. The next question comes from the line of Jake Morrison with Raymond James. Your line is now open. Speaker 700:29:15Hey, thank you for taking my question. I'm hoping you guys could touch on the performance geographically a little more. Maybe touch on what you saw out of EMEA relative to expectations and maybe just the overall macro environment there relative to Americas? Thank you. Speaker 200:29:32Okay. So EMEA business delivered to our expectations. I would say that maybe the mix of business was a little bit different. I think that the outlook for the EMEA region for Q4 as well as going into 2024 is likely is softer than it is anticipated to be for North America. We did do an Amdares, the Amdares acquisition in EMEA. Speaker 200:29:57So as we look into 2024, we would see some Growth coming through from that, by the time you add interest expense, it's not necessarily material to total Insight results, but you will see kind of improvement in Services gross margin associated with that acquisition and we think that that acquisition will also help with regard to Data and cloud related sales that drive combined with services business outcomes for our clients. So we think that the acquisition should be very beneficial to EMEA as we go into 2024, especially in light of a Softer economic environment that's forecast in EMEA for next year. Speaker 700:30:42Perfect. And then on the topic of M and A, can you just please opine on your sort of M and A outlook or what you're thinking about fiscal 2024 just after Coming off the AmDARIS acquisition? Thank you. Speaker 300:30:55So we've been pretty consistent in talking about Focusing on acquisitions that help us improve our capabilities in the fastest growing areas of the market, cloud, data, AI, Ed, Cyber. So nothing has changed there. We're really pleased by the acquisition in EMEA and we We remain very, very focused on looking for other acquisitions that can offer great capabilities To our clients. So, we're still very, very focused on. We also have the capacity, of course, on the balance sheet, I think, like Glenys talked about. Speaker 300:31:36So no change in the strategy there. We are also we do believe that the transactions and the valuations have come down this year. So it's making it a bit more possible to do things like MDARs. Operator00:31:54Thank you. The next Question comes from the line of Vincent Colicchio with Barrington Research. Your line is now open. Speaker 800:32:06Yes. Joyce, it was mentioned that offshore was levered to boost margins. Will that become an increasing focus for the company going forward? Speaker 300:32:17Yes. For specific services, Glynis mentioned the work that we're doing to improve the Structural profitability of our services business, we're pretty pleased with the work we've done so far there. And as you might remember, we bought Anu, about a year ago, a year and a half ago, and we have been working to figure out how to leverage those global capabilities in all three regions. So For specific offers and specific capabilities, we expect to continue to leverage India and we expect, we have been doing that for quite some time by the way for our own internal back office primarily in Manila and now we're doing that both in Speaker 800:33:00And I came out of the call a little late, you may have mentioned, but The use of AI to improve productivity and programming, is that how far off is that in the future? Is there a line of sight to that? Speaker 300:33:12The future is now, Vince. It's happening now. So, we are we've been really, really excited about the work that we've done. We launched Insight GPT I want to say about 6 weeks after Microsoft did the OpenAI announcement in February. We've been using internal use cases to help educate our clients on what the opportunities and possibilities are in their environments And that's driven a lot of interest and a lot of client meetings and a lot of assessments and that's also driven some very significant Opportunities to improve quality of data and data estates for our clients, so they can leverage these Analytics capabilities and also and certainly some use case development and application development. Speaker 300:34:01So This is absolutely an accelerant, we think, over the long term or medium term, and we're seeing it start now. Speaker 800:34:11Yes. I'm curious about its ability to improve programming productivity. Any thoughts on that? Speaker 300:34:18Yes. Well, we have so the leader of Honduras gave me a number that is very exciting in terms of The software developer productivity improvement, but I mean, and we're hearing this over and over again from our partners as well, but somewhere in 100 to 100 plus x improvement in terms of productivity is something that we're aiming for. I wouldn't say we're there yet, but we have Already significant improvement in productivity in the 20%, 30%, 40% range, primarily around Quality checks, quality auditing and just development time. Speaker 800:34:58Thank you. Operator00:35:03Thank you. There are no additional questions registered at There are no further questions at this time. We will now conclude the call if the team has any further remarks. That concludes today's conference call. Thank you all for your participation. Operator00:35:43You may now disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallInsight Enterprises Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Insight Enterprises Earnings HeadlinesInsight to Present at J.P. Morgan 53rd Annual Global Technology, Media and Communications ConferenceMay 7 at 4:06 PM | businesswire.comWhat is Barrington Research's Forecast for NSIT Q2 Earnings?May 7 at 1:27 AM | americanbankingnews.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.May 7, 2025 | Brownstone Research (Ad)Insight Enterprises, Inc. (NSIT) Q1 2025 Earnings Call TranscriptMay 3, 2025 | seekingalpha.comQ1 2025 Insight Enterprises Inc Earnings Call TranscriptMay 3, 2025 | gurufocus.comTop Esports Stocks To Watch Now - May 1stMay 3, 2025 | americanbankingnews.comSee More Insight Enterprises Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Insight Enterprises? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Insight Enterprises and other key companies, straight to your email. Email Address About Insight EnterprisesInsight Enterprises (NASDAQ:NSIT), together with its subsidiaries, provides information technology, hardware, software, and services in the United States and internationally. The company offers modern platforms/infrastructure that manages and supports cloud and data platforms, modern networks, and edge technologies; cybersecurity solutions automates and connects modern platform securely; data and artificial intelligence modernizes data platforms and architectures, and build data analytics and AI solutions; modern workplace and apps; and intelligent edge solutions that gathers and utilizes data for real-time decision making. It also provides software maintenance solutions that offers clients to obtain software upgrades, bug fixes, help desk, and other support services; vendor direct support services contracts; and cloud/software-as-a-service subscription products. In addition, the company designs, procures, deploys, implements, and manages solutions that combine hardware, software, and services to help businesses. It serves construction, esports, financial services, health care and life sciences, manufacturing, retail and restaurant, service providers, small to medium business, and travel and tourism industries. 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There are 9 speakers on the call. Operator00:00:00Good morning, and thank you for attending the Insight Enterprises Incorporated Third Quarter 2023 Earnings Conference Call. My name is Elisa, and I will be your moderator. I would now like to pass the call to our host, James Morgado, SVP of Finance and CFO of North America. James, you may proceed. Speaker 100:00:38Welcome, 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, 2023. 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 Glenys Bryant, Chief Financial Officer. If you do not have a copy of the earnings release For the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8 ks, you will find it on our website at insight.com under the Investor Relations section. Speaker 100:01:16Today'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, November 2, 2023. 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. Speaker 100:01:57In today's call, we will be referring to non GAAP financial measures as we discuss the Q3 2023 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. Speaker 100:02:32S. Dollar 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. Speaker 100:03:09And if you're following along with the slide presentation, we'll begin on Slide 4. Joyce? Operator00:03:14Thank you very much, James. Speaker 200:03:16Good morning, everyone, and thank Speaker 300:03:17you for joining us today. Q3 met our expectations and delivered record adjusted earnings per share for the quarter. Cloud gross profit grew 17% and Insight core services gross profit grew 20%, demonstrating the progress we are making to becoming the leading solutions integrator. We are also confirming our adjusted diluted earnings per share for the full year of 2023. Here are a few highlights. Speaker 300:03:41We achieved gross margin of 18% in Q3, reflecting both an improvement in our revenue mix as well as continued progress on our pricing and profitability initiatives. Q3 adjusted EBITDA margin expanded 130 basis points to 5.7%. We generated 4 $14,000,000 of operating cash flow in the 1st 3 quarters of the year, an increase of over $600,000,000 from last year. And consistent with our strategy to focus on cloud and services, we acquired Amdara's, an award winning software development and digital services company based in the UK. I will provide more details on this acquisition later. Speaker 300:04:20These highlights demonstrate we are on the right path with our strategy and making progress towards becoming the leading solutions integrator. We remain focused on the fastest growing areas of the market cloud, data, AI, edge and cyber. While we have been leveraging AI to support clients' needs for a long time, we are really excited about the acceleration that generative AI is providing to us and more importantly to our clients. We've recently filed GenAI related patents focused on customer support and sales use cases. These patents Integrate large language models with 3rd party data to enhance support applications recognize and leverage human sentiment specifically for support applications reduce hallucinations and query time, which reduces GPU usage, emulate personality types and improve search capabilities for customer support applications. Speaker 300:05:14Combined with our expertise, these capabilities allow us to deliver business outcomes to our clients more efficiently. We are also using GenAI internally to improve efficiencies with our development team and our back office support functions. Our clients need a partner they can trust to navigate new technologies and the infrastructure and workplace requirements to help them digitally transform. Speaker 200:05:37This is Speaker 300:05:37at the heart of our strategy. As a reminder, there are 4 key pillars: Captivate clients, sell solutions, was a technology leader in the public safety industry. They were experiencing a significant increase in customer demand and needed help to meet their delivery obligations and fulfill their growing backlog. They required a partner that could design, implement and execute a large scale deployment of their technology Tens of thousands of vehicles across multiple locations. Leveraging our Edge expertise, we implemented a customized solution combining routers, cameras and cloud software along with our services to deploy and test the solution at the edge. Speaker 300:06:25At every stage, we made sure their key requirements around testing and quality assurance were satisfied. We quickly ramped up a successful pilot of several 1,000 vehicles and have since moved to a multiyear contract. The positive outcomes for our client include faster times to market, improved customer satisfaction and accelerated revenue growth. The success of this project has led to exploring how we can help them seamlessly deploy more of their This is an excellent example of how we focus on business outcomes, earn the right to do more and ultimately become the partner our clients can't Our expertise in edge solutions is part of our heritage and very important to our clients. As a solutions integrator by combining hardware, software I'd like to also highlight our application development strength with a recent project we delivered for a large insurance provider. Speaker 300:07:25They began an initiative to develop a new custom internal claims processing to replace our existing outdated and high risk system. They needed help establishing a development environment that could accelerate the time to value. We introduced them to our proven agile development practices and deployed our user experience experts to guide their development efforts. The deployment included user story mapping, planning the project sprints and performing agility health checks along the way. The effort ultimately concluded with the rollout of a scalable next gen claims processing application that helped them realize significant cost savings, The two projects I highlighted were delivered by our exceptional technical team of over 6,000 dedicated experts. Speaker 300:08:15To augment our exceptional talent and wide ranging capabilities, M and A remains an important element of our strategy. We are always looking to bolster our capabilities through strategic acquisitions in line with our focus on the fastest growing areas of the market, cloud, data, AI, edge In August, we acquired Amdares, an award winning cloud and application modernization Based in the U. K. With service delivery centers located in several Eastern European countries. Amdaris has been a Microsoft Gold certified partner for more than 10 years and has a proven track record of delivering transformative digital services. Speaker 300:08:53Ambaris brings more than 850 teammates, 90% of whom are engineers and developers, making it an ideal addition to our existing application and data practices. Through this acquisition, we also strengthen our solutions capabilities in Europe. I'd like to share an example of how Amdara's was able to deliver on a project and earn the right to do more. Their client, a global recruiting firm based The U. K. Speaker 300:09:18Was dealing with increasing costs while developing their own custom built CRM system. The Amdaris team stepped in to deliver the project faster with a more scalable This illustrates why Amdara's is a perfect complement to our strategy and our strategy is working. To add to our track record of industry recognitions, I'll highlight a few. We've been included in the Gartner Magic Quadrant for Software Asset Management Managed Services and public cloud IT transformation services. This highlights our strength in helping clients architect, build and manage cloud solutions. Speaker 300:10:04Additionally, Incyte has been named EMEA Innovation Partner at this year's Canales Forum, which recognizes outstanding performance in achieving and driving innovation. In part, this was due to our early development of Insight GPT. And since we believe our culture is a competitive advantage, We are thrilled to be recognized by Forbes as a world's best employer for 2023. In summary, we are making great progress towards becoming The leading solutions integrator focused on the fastest growing areas of the market and where our clients need the most help. With that, I'll turn the call over to Glynis to share the key details of our financial and operating performance in Q3 and outlook for 2023. Speaker 300:10:45Mona? Speaker 200:10:47Thank you, Joyce. Our focus on profitability and growth in high margin cloud and services business has contributed to the expanded margins we've seen in our results this year. And we believe we're well positioned to profitably grow our top line as macroeconomic conditions improve. Moving on to Q3 results. Net revenue was $2,300,000,000 a decrease of 11% in U. Speaker 200:11:11S. Dollar terms and also in constant currency. The decline was primarily due to hardware, which was down 17% due to devices, partially offset by cloud growth. Last quarter, we expressed our belief that we had approached the bottom of the device market and that decline in our devices revenue would slow. Sequentially, devices were up slightly in Q3. Speaker 200:11:34Despite the 11% decline in net sales, Gross profit increased 2%, reflecting the hardware decline offset by higher cloud and Insight core services growth, as well as the benefit of profitability and pricing initiatives we implemented last year. Incyte core services gross profit was $71,000,000 an increase of 20%. This performance reflects growth in applications, data, digital enablement, as well as networking, partially offset by a decrease in integration and other services related to decline in devices. Cloud gross profit was $96,000,000 an increase of 17%, reflecting higher growth in SaaS and Infrastructure as a Service. Gross margin was 18%, an increase of 220 basis points and reflects the higher mix of cloud, Insight core services and infrastructure products, all of which transact at higher margins relative to devices. Speaker 200:12:36In addition, our profitability and pricing initiatives also contributed to higher hardware and services gross margin. Last quarter, we accelerated cost reduction actions to better align our cost structure to the market environment. These actions were completed by mid quarter and we have started to see the benefit of the actions in North America where adjusted operating expenses were down 4%. Our adjusted EBITDA margin expanded 130 basis points to 5.7%. And for the Q3, adjusted diluted earnings per share was $2.37 up 19% in U. Speaker 200:13:18S. Dollar terms and also in constant currency and including the benefit of approximately $0.04 related to the release of certain tax reserves. Our adjusted return on invested capital for the trailing 12 months ended September 30, 2023 was 16.8% compared to 15% a year ago and this also demonstrates progress towards our long term goal. Year to date, we generated $414,000,000 of cash flow from operations compared to a usage of $206,000,000 for the corresponding period in 2022. We continue to evaluate our options relative to the convertible notes as well as the impact of the convertible notes on dilution and our share repurchase strategy. Speaker 200:14:04Our 2023 share forecast includes the net impact of share repurchases and the anticipated dilution throughout 2023. You will find the dynamics of the convertible notes illustrated in our investor presentation. We exited Q3 with debt of $324,000,000 outstanding under our ABL compared to $438,000,000 outstanding as of Q3 2022. This reduction in our debt balance is after spending $217,000,000 on share repurchases in the 1st 9 months of 2023 and also includes the acquisition of Andares in Q3 and is indicative of the strong cash flow in our business. As of the end of Q3, we had approximately $1,500,000,000 available under our $1,800,000,000 ABL facility. Speaker 200:14:50We have ample capacity to fund our business operations and capital deployment priorities, including M and A. As Joyce mentioned in August, we acquired Amdara's, an award winning software development and digital services company. Amdara's significantly increases our digital and cloud enablement capabilities in EMEA. The impact on adjusted diluted EPS will be negligible in 2023. Our presentation shows our trailing 12 month performance through Q3 2023 relative to the metrics that we laid out at our Investor Day in October 2022. Speaker 200:15:27We believe we're on track to hit these targets by 2027. We are keeping an eye on the broader market and appreciate that demand and spending patterns are volatile. With 3 quarters under our belt, hardware has started to improve, but not at the level we had anticipated. We expect continued strength in software, cloud and Insight core services as well as expanded margins from our pricing and profitability initiatives. Additionally, We believe we will benefit from the operating expense actions we took last quarter. Speaker 200:16:00Given these factors, we're maintaining our adjusted diluted EPS guidance of $9.40 to $9.60 and we recognize this is a wider range than typical for Q4. This guidance includes gross profit growth in the low single digit range, interest expense between $45,000,000 $47,000,000 And effective tax rate of 25% to 26% for the full year, capital expenditures of $40,000,000 to $45,000,000 and an average share count for the full year of 34,800,000 shares. This outlook acquisition related intangible amortization expense of approximately $34,000,000 assumes no acquisition related or severance and restructuring and transformation expenses and assumes no meaningful change in our debt instruments or macroeconomic outlook. I will now turn the call back to Joyce. Speaker 300:16:55Thanks, Glynis. The long term dynamics of the IT industry are very strong. Digital transformation is here to Stay in technologies like generative AI or accelerants. At Incyte, we are staying focused on delivering outcomes our clients value most, Leveraging our skills in the fastest growing areas of the market. To summarize our results this quarter, Insight Core Services gross profit grew 20%, Cloud gross profit grew 17%. Speaker 300:17:23Adjusted EBITDA margin increased to 5.7%. Adjusted diluted earnings per share grew 19%. Adjusted ROIC was 16.8 percent and trailing 12 months free cash flow as a percentage of adjusted net income was 211%. Our portfolio of solutions gives us the resiliency to navigate through economic cycles and we are prepared to capture growth opportunities when spending patterns improve. We have a healthy balance sheet and our business delivers strong cash flow, giving us to fund our capital allocation priorities, in particular, acquisitions in the fastest growing segments of the market. Speaker 300:18:03In closing, I want to thank our teammates for their commitment to our clients, partners and each other, our clients Thank you for trusting Incyte to help them with their transformational journey, 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. Operator00:18:28We will now begin the question and answer session. Our first question comes from the line of Joseph Cardoso with JPMorgan. Your line is now open. Speaker 400:19:03Hey, good morning, everyone, and thanks for the questions. So just starting off here, If I'm looking at the full year guide, you moderated the gross profit outlook modestly to the low end of your prior guide. I was just hoping if you could walk us The big ticket items that are resulting in the incremental pressures impacting the guide versus, let's say, 90 days ago. And then I have a follow-up. Speaker 200:19:24Sure. So Joe, thanks for the question. What I would say is that our Device, we're not seeing the improvement in the device segment of the market that we had anticipated. And while that doesn't necessarily drive huge gross margin, it does actually drive some gross profit dollars. We continue to see strength in cloud. Speaker 200:19:44We continue to see strength in our services GP, but the hardware side of the business is not recovering As we had anticipated and it's specifically around the device side. To offset that, we have some improvements that we're making with regard to SG and A. We took some SG and A actions Last quarter actually this quarter, so we have a little bit of benefit this quarter, we expect to have more benefit in 2023 in the Q4, sorry. Speaker 400:20:16Got it. And then maybe we could just touch on that, part on devices. Can you just give us a little bit more color on the linearity of customer spending through the quarter, And then maybe just more broadly, not specific to devices, Are you seeing any divergence across your various customer verticals like large enterprise SMB and public sector from an overall spending behavior standpoint? For the questions. Appreciate it. Speaker 300:20:44Hi, Joe. This is Joyce. Thank you very much for asking. So here's the thing. I mean, first of all, I want to make sure Notable that the reason we set out on this strategy is because we know that devices are going to be inherently cyclical and that we've seen a lot of that this year and Still we've delivered record EPS for the quarter. Speaker 300:21:03So just that's kind of the backdrop. But then in terms of devices, we have seen some sequential improvement. We expect to see some continued sequential improvement. But instead of seeing growth as we thought at the beginning of the year in We expect to see that push out a couple a quarter or 2, probably to the back half of the year. And we know that that's From a segment point of view, Generally, we see some slight some improvement first in the commercial space and it takes longer for that to take hold in the enterprise space. Speaker 300:21:40Given the dynamics of the device market, we do believe that Windows 11, Gen AI requirements, Hybrid work requirements will drive refresh cycles, but again those generally we see that sooner in the Commercial segment and later in the Enterprise segment. Public sector has been strong for us overall, and that's consistent with kind of the amount of money that's in the public sector at the moment. Speaker 200:22:03And just on the linearity piece, we didn't see any differences really throughout the quarter in terms of how July versus September transacted short of Operator00:22:22Thank you. The next question comes from the line of Matt Sheerin with Stifel. Your line is now open. Speaker 500:22:31Yes. Thank you and good morning everyone. Just related to the hardware sales, I know Client devices are part of it, but so are infrastructure, products, storage, servers, networking. And I know you've commented that you've had good backlog, Particularly on the networking side, but that's the expectation where that backlog were to get worked down with improving supply. So Could you give us some color on what you're seeing with those products and how that plays out in Q4 and into next year? Speaker 300:23:04So yes, so the infrastructure backlog has largely normalized now. And we are seeing some softening in Structured demand is really again consistent with what we're hearing from our partners. There's a bit of uncertainty just acquisition quotes are taking longer Turn into POs, etcetera, etcetera. However, we still believe the long term dynamics are very strong. Again, we think Gen AI will be an accelerant around infrastructure. Speaker 300:23:32And so we're spending a lot of time. It's just the sales cycles are a little longer. Speaker 500:23:38Okay. And you talked about sequential growth in client devices in Q4. Would you expect the infrastructure products to be also up seasonally? Speaker 300:23:49Well, we have a little bit of a different dynamic because we just flushed a bunch of backlog in Q3. So we would not see the same dynamic there. That's largely driven by backlog. Speaker 400:24:00Okay. So Speaker 500:24:02got it. Okay. That's helpful. And as you noted, the free cash flow has been very strong. I know the inventory has been coming down. Speaker 500:24:11I Imagine because of the client device flush and also a better supply, could you talk about what expectation for working capital And inventory going forward? Speaker 200:24:25We would say that our inventory has largely normalized as of right now versus The buildup that we had back in the supply constraint era and we would expect that it would stay around this level as we Move forward, our working capital has been great at this stage given that hardware is very soft. It's improving, but it's still very soft. We would anticipate that we'd still be in a positive working capital environment if hardware were to grow in the kind of low to mid single digits. It becomes more problematic for us when hardware is growing in the 25 to 30 devices in particular in the 25% to 30% range like it did in 2021 and 2022. Speaker 500:25:07Okay. Thank you. Speaker 200:25:08That we have right now. Speaker 500:25:12Okay, great. And just lastly, your comments about the pricing and profitability Projects that you had in terms of customers and increasing pricing. Could you talk about that? Is that across hardware, across services? How successful has that been? Speaker 200:25:31I think it's been very successful as evidenced by the gross margin Appreciation that we've seen and the improvement in gross profit on declining revenues. So we have a strategy that is related to hardware, so I think about it that way. In terms of the floors that we pricing that we will accept from large customers and approval processes that we put in place with regard to Level of gross margin, relative size of customer, etcetera. And we've also put some floors and ceilings in place around services That has helped drive that improvement in gross margin as well as really looking and standardizing our utilization metrics across All of our service practices so that we are measuring it consistently and that we can really pinpoint where we need to be focused in terms of utilization. And to be fair, we've also leveraged some offshore capability to lower our overall charge out rates that has helped with the gross margin as well in services. Speaker 200:26:28So it's been a combination of various factors. I would say they're now systemic. They're not one offs anymore. Speaker 500:26:36Okay. And there have been no share issues or share loss issues because of that In terms of competitive landscape? Operator00:26:45I would say, if you look Speaker 200:26:46at our results relative to our Largest reseller competitor out there, as I'm talking about it from a hardware from a kind of client segment perspective, we've definitely held our own. We've definitely held our own. Speaker 500:27:00Okay, great. Thank you. Operator00:27:06Thank you. The next question comes from the line of Anthony Lebiedzinski with Sidoti. Your line is now open. Speaker 600:27:22This is Stefan Guillaume on for Anthony Lebedinsky. My first question is, can you talk about the performance during the quarter for your different client groups such as Large enterprise, public sector and SMB? Speaker 300:27:38Yes. I think we've published all this. It's in the documents, but happy to talk about it. I think the most challenged Segments for the quarter were the enterprise business overall. Commercial was also pretty challenged, I would say. Speaker 300:27:59Public sector was strong. And growth year over year. So I think we're happy with that because we think that's Pretty consistent with the market. Speaker 200:28:08Yes. So our public sector grew low single digits and mid low to mid single digits. And the Enterprise Corporate and Commercial segments were down in the double digit maybe teens area. Speaker 300:28:23Yes, commercial was down the most. Speaker 600:28:28Thank you. And do you think we are at the bottom for demand for devices? Or if not, When do you expect to show positive results for devices? Speaker 300:28:39So, we said last quarter we thought we're at the bottom Of the device market, we believe that that was true. We saw some sequential growth that we expect to continue, largely because the compares also get a lot easier. Speaker 600:29:01Thank you so much. Operator00:29:05Thank you. The next question comes from the line of Jake Morrison with Raymond James. Your line is now open. Speaker 700:29:15Hey, thank you for taking my question. I'm hoping you guys could touch on the performance geographically a little more. Maybe touch on what you saw out of EMEA relative to expectations and maybe just the overall macro environment there relative to Americas? Thank you. Speaker 200:29:32Okay. So EMEA business delivered to our expectations. I would say that maybe the mix of business was a little bit different. I think that the outlook for the EMEA region for Q4 as well as going into 2024 is likely is softer than it is anticipated to be for North America. We did do an Amdares, the Amdares acquisition in EMEA. Speaker 200:29:57So as we look into 2024, we would see some Growth coming through from that, by the time you add interest expense, it's not necessarily material to total Insight results, but you will see kind of improvement in Services gross margin associated with that acquisition and we think that that acquisition will also help with regard to Data and cloud related sales that drive combined with services business outcomes for our clients. So we think that the acquisition should be very beneficial to EMEA as we go into 2024, especially in light of a Softer economic environment that's forecast in EMEA for next year. Speaker 700:30:42Perfect. And then on the topic of M and A, can you just please opine on your sort of M and A outlook or what you're thinking about fiscal 2024 just after Coming off the AmDARIS acquisition? Thank you. Speaker 300:30:55So we've been pretty consistent in talking about Focusing on acquisitions that help us improve our capabilities in the fastest growing areas of the market, cloud, data, AI, Ed, Cyber. So nothing has changed there. We're really pleased by the acquisition in EMEA and we We remain very, very focused on looking for other acquisitions that can offer great capabilities To our clients. So, we're still very, very focused on. We also have the capacity, of course, on the balance sheet, I think, like Glenys talked about. Speaker 300:31:36So no change in the strategy there. We are also we do believe that the transactions and the valuations have come down this year. So it's making it a bit more possible to do things like MDARs. Operator00:31:54Thank you. The next Question comes from the line of Vincent Colicchio with Barrington Research. Your line is now open. Speaker 800:32:06Yes. Joyce, it was mentioned that offshore was levered to boost margins. Will that become an increasing focus for the company going forward? Speaker 300:32:17Yes. For specific services, Glynis mentioned the work that we're doing to improve the Structural profitability of our services business, we're pretty pleased with the work we've done so far there. And as you might remember, we bought Anu, about a year ago, a year and a half ago, and we have been working to figure out how to leverage those global capabilities in all three regions. So For specific offers and specific capabilities, we expect to continue to leverage India and we expect, we have been doing that for quite some time by the way for our own internal back office primarily in Manila and now we're doing that both in Speaker 800:33:00And I came out of the call a little late, you may have mentioned, but The use of AI to improve productivity and programming, is that how far off is that in the future? Is there a line of sight to that? Speaker 300:33:12The future is now, Vince. It's happening now. So, we are we've been really, really excited about the work that we've done. We launched Insight GPT I want to say about 6 weeks after Microsoft did the OpenAI announcement in February. We've been using internal use cases to help educate our clients on what the opportunities and possibilities are in their environments And that's driven a lot of interest and a lot of client meetings and a lot of assessments and that's also driven some very significant Opportunities to improve quality of data and data estates for our clients, so they can leverage these Analytics capabilities and also and certainly some use case development and application development. Speaker 300:34:01So This is absolutely an accelerant, we think, over the long term or medium term, and we're seeing it start now. Speaker 800:34:11Yes. I'm curious about its ability to improve programming productivity. Any thoughts on that? Speaker 300:34:18Yes. Well, we have so the leader of Honduras gave me a number that is very exciting in terms of The software developer productivity improvement, but I mean, and we're hearing this over and over again from our partners as well, but somewhere in 100 to 100 plus x improvement in terms of productivity is something that we're aiming for. I wouldn't say we're there yet, but we have Already significant improvement in productivity in the 20%, 30%, 40% range, primarily around Quality checks, quality auditing and just development time. Speaker 800:34:58Thank you. Operator00:35:03Thank you. There are no additional questions registered at There are no further questions at this time. We will now conclude the call if the team has any further remarks. That concludes today's conference call. Thank you all for your participation. Operator00:35:43You may now disconnect your lines.Read morePowered by