Hello, everyone, and welcome to the Insight Enterprises Business Update Conference Call. My name is Bruno, and I'll be operating your call today. During this presentation, you can register to ask a question by pressing Star followed by one on your telephone keypad. I will now hand over to your host, Glynis Bryan, Chief Financial Officer. Please go ahead. Thank you, Bruno. Welcome, everyone, and thank you for joining us for this special conference call. Today, we will be discussing the company's acquisition of SADA, which was announced in a press release earlier this morning. I'm Glynis Bryan, Chief Financial Officer, and joining me is Joyce Mullen, President and Chief Executive Officer. If you do not have a copy of the press release 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 our Investor Relations section. At the conclusion of the scripted portion of this conference call, we will answer questions from participants. Today's call, including the slide presentation and the question and answer portion, is being webcast live and can be accessed by the Investor Relations section 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, December 1, 2023. This call is the property of Insight Enterprises. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Insight Enterprises is strictly prohibited. In today's conference call, we will refer to certain non-GAAP financial measures as we discuss Insight and SADA's financial metrics. When discussing non-GAAP measures, we will refer to them as adjusted. 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 on 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 slide presentation, we will begin on slide 3. Joyce? Thank you very much, Glynis. Good morning, everyone, and thank you for joining us today. I am pleased to announce that Insight has completed the acquisition of SADA, a leading Google Cloud and technology consultancy and six-time Google Cloud Partner of the Year. We acquired SADA for $410 million on a cash-free, debt-free basis, subject to certain customary purchase price adjustments. The transaction was funded through a combination of available cash on hand and our ABL Facility. There is an additional earn-out and incentive opportunity for the sellers of up to $390 million, with a target of $210 million based on SADA's three-year performance post-closing. This acquisition advances our strategy to become the leading solutions integrator and further strengthens our position as a multi-cloud solutions provider, adding both scale and expertise while enhancing our services profitability. We anticipate that SADA will add $0.20-$0.30 to our adjusted diluted EPS in December 2023, and $0.55-$0.75 in 2024. Glynis will walk you through some very important details regarding significant seasonality associated with the SADA business model. Over 75% of enterprises utilize a multi-cloud strategy. Insight is already recognized as a top Microsoft Cloud partner worldwide, and with the addition of SADA, Insight is now considered among the top preferred partners across both the Microsoft and Google Cloud Platforms. As client interest in generative AI solutions grows, we believe that the combination of Insight's strength with Microsoft Azure and SADA's strength with GCP positions us as a top partner in the two leading GenAI platforms. Coupled with our strength in the infrastructure space, we expect to deliver even more value to our clients, partners, and shareholders. SADA also strengthens our current position as an expert in data, artificial intelligence, cybersecurity, and intelligent edge solutions across the world's top hyperscalers, Microsoft Azure, Google Cloud, and Amazon Web Services. Let me provide a little more detail on SADA's business. Headquartered in Los Angeles, California, SADA is a market-leading Google Cloud solution and service provider that has leveraged digital transformation by helping clients migrate and operate in the cloud. One of the largest Google Cloud Platform partners globally, SADA has been recognized six times as Google Cloud Partner of the Year, including this past year, 2023. SADA has approximately 850 employees across the United States, Canada, U.K., Ireland, Armenia, and India. They bring over 400 engineers and technical experts with deep capabilities across several areas, including Google Cloud Platform, Google Workspace, security, data, and GenAI. Together, Insight and SADA will have more than 6,400 skilled, certified consulting and service delivery professionals, with a majority dedicated to developing multi-cloud and digital transformation solutions. SADA also maintains 10 Google Cloud specializations, including security, infrastructure, cloud migration, data analytics, application development, and machine learning. The ability to bring even stronger GCP skills to our existing client base is a significant opportunity. Like Insight, SADA's client base spans multiple industry verticals, including healthcare and life sciences, technology, financial services, retail, and more. SADA adds immediate scale to Insight services business, net revenue, gross profit, and gross margin. Additionally, as I mentioned, we believe this will be accretive to adjusted diluted earnings per share for 2023 and 2024. In summary, we are very excited about the capabilities that SADA brings to Insight and the opportunity to unlock the value we believe exists within the combined businesses. With Insight's multibillion-dollar relationship with Microsoft and our status as a top Microsoft and Azure partner, this acquisition strengthens our position across the largest cloud hyperscalers in this important growth market. This is another step toward achieving our ambition of becoming the leading solutions integrator. We believe this strategy is important to our clients, our partners, and our teammates, and will enhance shareholder value. I'll now turn the call over to Glynis to walk through some of the financial details of this transaction. Glynis? Thank you, Joyce. As Joyce mentioned, we have completed the acquisition of SADA, and we're excited about the strong GCP capabilities and the profitability and EPS accretion that we can expect from this combination. We acquired SADA for $410 million on a cash-free, debt-free basis, subject to certain customary purchase price adjustments. There is an additional earn-out and incentive opportunity for the sellers of up to $390 million, with a target of $210 million based on their 3-year performance post-closing. We funded the transaction with a combination of cash on hand and borrowing under our ABL facility. We expect to be comfortably within our acceptable leverage range. We expect to incur approximately $27 million in incremental interest expense over the first 12 months post-closing at current borrowing rates under our ABL. Financially, SADA delivered net revenue of $251 million in 2022, and gross profit of $200 million. SADA, exclusively a Google partner, has a large GCP practice, including cloud and digital consulting services. SADA's GCP contracts typically range from 3-5 years. Based on the current terms and conditions of these contracts, SADA is acting as an agent, and as a result, under U.S. GAAP, the revenue and gross profit is recognized upfront on a net basis. An associated asset and liability for the full service amount not yet consumed is recorded on the balance sheet and is released over the contract term based on the client's actual consumption. This results in an increase in Insight's total assets and total liabilities of over $2 billion. Let me highlight some of the anticipated impact that SADA will have in 2024. SADA's business reflects significant seasonality related to a concentration of client renewals in the fourth quarter. December is SADA's strongest month of the year. It is not indicative of other months of the year. We expect that SADA will contribute between $50-$60 million to EBITDA and between $0.55-$0.75 to Adjusted Diluted EPS in 2024. This reflects SADA's expected operating performance, as well as the anticipated interest expense on the acquisition debt. However, understanding the seasonality of SADA's earnings is important. Historically, SADA has generated low to negative EBITDA in the first half of the year and significantly improved EBITDA in the second half of the year, particularly in the fourth quarter, driven by client renewals. In addition, given the high percent of negative revenue and the high gross margin from SADA, we expect that Insight's total gross margin will expand by over 100 basis points. As we close out the year and report our fourth quarter and full year 2023 financial results in February 2024, we will provide historical financials for SADA and a pro forma view of their impact to Insight's historical financials. We will appropriately reflect SADA in the guidance we provide for 2024. Moving on to 2023 guidance. With the closing of the transaction, we expect to incorporate SADA's December financials with Insight's consolidated Q4 and full year 2023 financials. Our original full-year guidance from Q3 remains unchanged. We expect that SADA will add between $0.20 to $0.30 to adjusted diluted earnings per share. We now anticipate annual adjusted EPS of $6.96-$9.90. Our updated 2023 full year guidance, including SADA, is now gross profit growth in the low to mid-single digit range, interest expense between $47-$49 million, an effective tax rate of 25%-26% for the full year, CapEx expenditures of $40-$50 million, and an average share count for the full year of 34.8 million shares. In closing, we are thrilled about the value we can deliver to clients through the combined strengths of Insight and SADA. We remain focused on the fastest-growing areas of the market, and we believe this acquisition brings us one step closer on our journey to becoming the leading solutions integrator. This concludes our prepared comments, and I will now open the line for your questions. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. ... To withdraw your question, star followed by 2. And please do also remember to unmute your microphone when it's your turn to speak. Okay, we do have our first question. Comes from Joseph Cardoso from JP Morgan. Joseph, your line is now open. Hey, good, good morning, and, congrats on the acquisition. Just first question from me, can you just walk through how this deal materialized and whether SADA was shopping or if this just shaped through other avenues? Just curious on the genesis and how it came to be, given, you know, I guess, the fast close, I guess, relative to our perception. And then I have a follow-up. Thank you. SADA did do a process. They hired an investment banker, and they did go through a process. I can't comment on how many companies were included in that process, but they did have a process independently as a—we're a GCP partner. They're a GCP partner. We've had relationships with, you know, the leadership of the SADA team via that GCP relationship. So I would say it was a combination of the auction process as well as maybe SADA knowing a little bit about... a little bit more about Insight that led to the, the successful conclusion of this project. We didn't think it was that quick. Got it. No, fair. I guess, was there any reason that you guys can allude to in the sense of why they were shopping? Was there any structural issues, or is it more just scale? Just curious. No, I don't think... There were no structural issues. I think it was, It's a family business. A family business, and maybe they're monetizing part of that in what's a good market in terms of the value that cloud platforms and GenAI bring to the table. So it was an opportune time to exit, but there are no structural issues. It's worth noting that the management team will stay around for a while. There's an earn-out provision that is designed to do just that, and we're excited about that. Awesome. No, appreciate the color there. And then, you know, my, my follow-up question: You know, when we think about the $250 million revenue outline from SADA in 2022, can you help us think about how much is accounted for Google versus potentially other partners in there? Because I, I guess what I'm trying to get to is if I assume the majority of that is from Google and kind of just simply layer on a high teens growth rate, you know, Google could represent, you know, mid-single digit total of revenue by 2026, but more in the double digit range from a gross profit perspective. I guess, just as you, you guys are standing here today and compare it, you know, even to the earn-out associated with the deal, am I thinking about this correctly or am I overappreciating something in that kind of back of the envelope math that I'm doing? Thanks. Appreciate any color on that front. SADA is a 100% Google partner, so the $250 million of revenue is completely associated with Google businesses. It includes not only resale of Google Cloud, but, and various other products, but it also includes a significant services business. So you are right to say that one of the things that we found attractive about this is because we do believe that Google Cloud is gonna Cloud in general, will be, continue to be a fast-growing area of the market. And we are excited about the additional scale associated with our ability to grow in the Google Cloud space as a result of this. Sorry, Joe, there was a, there was another question in there, but I'm not sure I caught it. Yeah. I mean, it was just more of a function of whether Google can represent a material customer, particularly obviously, you have the earn-out associated with the deal, so there is some visibility in terms of targets that you're trying to hit by 2026. So just curious, like, you know, is it correct to think of Google being, you know, and obviously, I don't want to put words into your mouth, but mid-single digit revenue, double digit from a gross profit perspective, you know, by the time we get out to 2026. Is that, like, a fair assumption in terms of how much Google can or how big Google can be sitting in kind of the Insight portfolio, or is or am I thinking about something way off or, and overappreciating something there? Yeah. Thanks. So, I think if you're talking about total Insight, I would say no, it wouldn't get to double digits. If you're talking about potentially the cloud view of the world, it could get to double digits as a percentage of our total cloud business by 2026, but not as a percentage of total Insight on the revenue line. I think, as we've said, Microsoft is a multi-billion-dollar relationship. Yeah. It's going to take a while. Yeah. Yeah. Got it. Appreciate the color there, guys. Congrats again on the acquisition. I'll cede the floor. Thank you. Thanks, Joe. Our next question comes from Matt Sheerin from Stifel. Matt, your line is now open. Yes, thanks. Good morning, everyone. Just a couple of questions from me. Just one in terms of obviously a big opportunity to expand your presence with Google Cloud. You have a very strong Azure practice. I know you've got some AWS exposure. Where are the cross-selling opportunities in terms of the enterprise customers that SADA deals with versus opportunities for you to cross-sell? As you mentioned, 75% of enterprises are multi-cloud, so as you factor in your forward or strategic plan with SADA, does that also contemplate cross-selling and incremental opportunities for market share? ... You know, as we've said a lot of times, Matt, we're very focused on the fastest growing areas of the market. We do think that our capabilities around I mean, around multi-cloud are significantly augmented by the acquisition of SADA. And that's not only Microsoft, it is also across our AWS practice, but also across the on-prem infrastructure capabilities that we have for on-prem cloud. So we do expect this gives us significant scale. We know that we have lots of customers who are interested in talking to us about multi-cloud. This improves our capabilities and skills, extends our capabilities and skills in Google. And I think if you think about SADA's customers, they get the same request for multi-cloud. So we do see an opportunity to improve the overall level of value that we can contribute to our clients and deliver to them. So certainly that is how we, how we're thinking about sort of one plus one equals three. Okay, thank you for that. And then, relative to your guidance for accretion next year, does that contemplate any opportunities to cut costs? I know, obviously they're Google only, so that's a separate business. They've got lots of operations, but are there opportunities in terms of back office or other finance and other things where you can get some costs out? And is that part of the accretion? There might be some cost synergies in the future, but in the near term, we plan on having SADA run independently, and that is not our focus. So our focus is on revenue. To be fair, the accretion is coming from the SADA business performance that we anticipate getting in 2024 and beyond. Got it. So not- Okay. Independent of any cost synergies or revenue synergies, which will come. Okay. All right. Thank you, Glynis. Our next question comes from Anthony Lebiedzinski from Sidoti. Anthony, your line is now open. Please proceed. Good morning, and thank you for taking the questions, and, congrats on getting the deal done. Can you speak to the growth rate that SADA has experienced over the last few years? And, maybe just, talk about, as far as the customer overlap between Insight and SADA. Just wondering if there are any, you know, if there is a notable number of, incremental clients that you're picking up as a result of this deal. So, on the customer overlap, SADA has about 3,000 customers. And they are, as I said, the premier cloud MSP in North America, and they, as I said, have sort of, they're pretty well dispersed across multiple verticals. And as you know, we have, you know, a significant presence in most North American customers. So... And we see about that same ratio inside the SADA customer base. But we still see, you know, we have very low share of wallet in those customers anyway, and I think there's significant opportunity to expand that. Gotcha. Okay, thank you. And then, you know, as far as the growth rate that SADA has, has had over the last few years, can you speak to that? You know, Anthony, we're going to be putting out a 8-K or in our 10-K in February. We'll detail out the normal requirements in terms of figures of performance that we have to put out for the 8-K since it's a material acquisition. So all that information will be available in February when we move forward. Okay. So we'll stay tuned for that. Okay. Okay, gotcha. And then, you know, in terms of the 2024 outlook for EBITDA, $50 million-$60 million, you know, what are you assuming for gross profits for like, you know, what's the math behind that as far as to get to that EBITDA number? What are you assuming for gross profit, you know, adding because of SADA? You know, we're not really giving guidance for 2024 independently of just SADA. And all we're sharing right now on SADA is the $50-$60 million of EBITDA. But if you look at, you know, the historical, what we gave you, we gave you $251 million of net sales and $200 million of GP. I would anticipate that's what... Not only would I anticipate, we anticipate that's what we will see going forward. All right. Well, sounds good, and, and best of luck. Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. Our next question comes from Adam Tindle, from Raymond James. Adam, your line is now open. Okay, thanks. Good morning, and congrats on the deal. I just wanted to make sure I understand, just had a couple of clarification questions. Zeroing in on the $50 million-$60 million of EBITDA, could you just help us understand how that compares to SADA on a standalone basis? Is that just basically, you know, taking what the EBITDA was over this past year and layering it into the Insight model, or are there growth assumptions embedded in that? So it is, the $50 million-$60 million is unique to SADA. It's only SADA in that number. We had a model, an acquisition model, that we used as a basis for the valuation, for the purchase price that we came up with, plus the earn-out structure that, that we included in the 8-K. And so that is based on SADA's performance, anticipated SADA performance, in 2024 and beyond. Albeit, you know, we expect SADA management to deliver more than that. But for now, that's what we're, that's what we're, that's what we've included in our, guidance going forward. Okay. So you sound confident in that number. I mean, is there a way that you could maybe help us with, what SADA was on a standalone basis in 2022, for example, just relative to that $50 million-$60 million? No. No. Sorry. No, not now. But we will, we will do that in February. We'll give you the 2021, 2022, 2023, year to date, 9/30 year to date history in, in February. Okay. I mean, I think what investors would like to understand better is just kind of what assumptions. Obviously, it looks very attractive on the surface on that $50 million-$60 million, but we're not sure, you know, how that compares to historical SADA performance and what you're assuming in that growth rate. It compares well to SADA historical performance. Yes. Okay. Okay. and I- We're confident in that number. Yeah. Yeah. Okay. Got it. Okay. You know, can I just make a comment, Adam, that, Go ahead. Part of the reason for this call, besides the fact that it's a significant acquisition and it advances our strategy to becoming that leading solutions integrator, is the seasonality associated with the business. I don't want anybody to overlook that, right? So we have $0.20-$0.30 in the month of December in terms of EPS accretion that we're anticipating from SADA. We didn't want anybody annualizing that number and thinking that was what SADA was going to be contributing in total. It is not to imply that SADA's business is falling off in 2024, in case that there's some confusion there. Maybe we weren't clear about that, but December is by far SADA's largest month. And what we see in 2024 is a consistent trend. Q4 is still going to be the largest quarter, and I don't want you thinking that the business is declining in 2020, 2024 because you-- we gave you the $0.20-$0.30 of EPS accretion in 2023 for the month of December only. Does that help clarify it? SADA's business is healthy. Yeah. We're not concerned about a decline in the business. Okay. Yep. That makes sense. So with these big renewals and back-end loaded year and big seasonality, how did you think about protecting against customer churn in that, especially, you know, in the middle of a deal, how do you kind of protect? Is there, you know, maybe just go into some of the contractual provisions or anything that give you confidence in protecting against churn? So SADA's client, clients actually commit to the GCP, and it could be work- to the GCP agreement for whatever the term is, 3, 5 years. So if the client were to leave, the client's still obligated. They can't just... The client cannot just walk away. So the issue around churn is more limited, I guess I would say. So at the point of renewal or, you know, maybe sometimes based on usage, they may renew early. There may be a motion to renew early, but I don't think churn. Churn is not something that we're concerned with in the SADA client base. Right. And we've obviously looked carefully at the client satisfaction and the renewal rates and things like that, and we feel very good about it. SADA is Google's Partner of the Year, partly because they deliver a great client experience. They have the confidence of the Google sales team as well, in terms of their ability to transact with that Google sales team, and their churn has been minimal in their history. Okay, that, that's helpful. And just... Sorry, one more clarification. I'm trying to understand the earn-out, which, you know, I understand those structures. So at the target of 210, on an earn-out, what you're... Would that be assuming EBITDA of $50-$60 million? Because what I'm trying to get at is- No. Okay, we've got 4:10. Okay. Help, help me with that, please. So, so Adam, we have a management plan that we're holding the Google management team accountable for. That is, it is the Google, it is a SADA management plan. We're holding the SADA team accountable for that. As any prudent CFO would do, we've discounted that a little bit with regard to what we think is going to happen in the first year, specifically 2024. You know, there's always a little bit of noise when you two companies come together. I think our cultures are a really incredible match. We here are very excited about what SADA can do for us, but, you know, there's always a little bit of noise when two companies come together, and 2024 may be a little bit impacted, but the SADA criteria is higher than what we're saying right now for 2024, and it is a three-year earn-out. It's 2024, 2025, and 2026. It is actually in the 8-K, not the dollars. The dollars have been redacted, but the structure of the earn-out and the min and the max in terms of what SADA would receive, the SADA leadership team would receive, is detailed out there. And I just get a sense maybe we're thinking the SADA business is not strong. That, that is not the case at all. It is a strong, very profitable business, which is why the accretion is, I don't know, as high as it is, potentially. Right. The $50 million-$60 million, Adam, is just for 2024. Just for 2024. Yeah. Okay. Yes, and Glynis, I did notice the redaction. So I think what I'm trying to get at is to understand the valuation multiple that you paid here, right? So 4.10 is the base on $55 million of EBITDA, it's a 7.5x deal, but I don't think we're factoring in properly the earn-out in that. I would—I'm just trying to understand, at $50 million-$60 million, would there be a 2.10 earn-out on top of the 4.10? Does that make sense? Oh, I see what you're trying to do now. You're trying to. So I think if you want to think about the $210, the $210 is the earn-out at target, as you can see from the 8-K information that was filed. So if you look at the $210 plus the $410, that's $620, is an anticipated purchase price that we believe ultimately is in a multiple comparable to Insight range, EBITDA multiple comparable to Insight range. Slightly lower. Okay. But remember- That's helpful. I do want to highlight this. Yes. Go ahead. Go ahead. Sorry, I interrupted you. That's okay. I think that's just surprising given the mix of business, the margin profile, what this is, you know, to have it be below Insight valuation multiple. It's just going to raise a lot of questions, and I know we've got to wait for more details and 8-K and stuff to come out. I think there's going to be a lot of questions on what are, what are we missing here? Oh, so you're concerned that the multiple we acquired it at is too low, therefore... Not too low, but is low, so therefore there's something wrong? Just trying to make sure I understand, so I can maybe address it. Yeah. Yeah, that would be... It looks like a great deal, just to be very clear, and I'm just kind of like, you know, what would we find out in the 8-K? Is this, you know, growth deteriorating? Is there something, you know, that would cause it to be such a low multiple deal? If that makes sense. We do think it's a really good deal. We do think it's a really good deal. I don't think of it as being a low multiple deal. Right. To be clear. I don't either. I don't think of it as being a low multiple deal. I don't think there's anything wrong with the SADA business. We actually are excited about the incremental value that we think we can generate together through the combination of Insight and SADA, that will make this accretive, even more accretive for our shareholders. That's what we're excited about, that opportunity that lies ahead of us. And we had talked about, you know, Yeah, great. acquisitions accelerating our strategy, our strategy and the metrics that we laid out in 2027, back in our Investor Day in October of 2022. And we think that this is a significant step in that direction. I know we'll talk more about it next week at our conference, but congrats on the deal. Looks great. Thank you. Yeah, thanks, Adam. I figured you'd have questions for that, for us at the- Our next question comes from Vincent Colicchio from Barrington Research. Vincent, your line is now open. Yeah, please remind me, did you have any Google expertise prior to this transaction? Yes, we did, Vince. We have a significant Google practice, but obviously nothing like the scale and expertise that SADA brings to us. So it's accretive in that sense, for sure. So, it's a meaningful increase in the, you know, capability set? Yes. Yes. Yes. More service, et cetera. Okay. And how did the multiple, I assume you've looked at other similar assets, how did the multiple you paid in this transaction compare to sort of other similar assets you're seeing in the market today? I think part of our analysis would say that it's a comparable multiple. Yes. We have a, our board clearly on an acquisition of this size for us, require a fairness opinion. So they got a view of, different multiples and, transaction valuations, as part of that comparison. So I think we feel pretty comfortable- Okay. with the multiple that we paid. And how does it compare to what we were seeing, say, a year ago? Have they come in? Oh, I think, I would say a year ago, multiples were higher, and we've seen them moderate a bit with interest rate increases. Okay. Seems like a nice deal. Thanks. Thanks, Vince. Thanks, Vince. We currently have no further questions, so I'd like to hand the call back to Glynis for closing remarks. Thank you. Thanks, everyone, for joining our the call this morning, and we appreciate your participation, and we'll talk to you more in the future. Thank you.