Awesome. Well, thank you guys for joining us. I'm Luke Morrison with Canaccord. I cover software and IT services. With me today, I have Jack Azagury, the CEO of Insight, and then I have James Morgado, the CFO. Thank you guys both for coming. It's great to be here. Pleasure to have you guys here. Jack, maybe I'll kick things off with you. You're about four months into the job now. Still fresh. You just laid out a brand-new three-year plan. For anyone hearing the story for the first time, maybe just a quick overview of what Insight is, what your perspective is coming in, and then just thinking about the three-year plan. What were your high-level goals in fashioning that? Yeah. A two-minute history, and then I'll talk about the strategy, or less than two minutes. We're a 38-year-old company. Tim, our chair, started the company selling hard drives out of his garage out of college. We grew up as a VAR, and about 10 years ago, started the pivot to be a solution integrator. What that means is we want to be able to help our clients with the hardware, the software, the cloud, and all the services to help them get the results. I started about four months ago, almost to the date. My background, I was 30 years with Accenture. I was the CEO of their strategy and consulting business for a long time. I started my career in the software industry before Andersen Consulting and Accenture. This is my second earnings call last week. The team did a great job in Q1. We had a very strong quarter and then a very strong quarter in Q2. Very pleased with the team's performance in the second quarter. We've been working since I started on our three-year plan. I called it the One Insight plan. We've had the top leaders in the company all working on it. It's not my plan, it's our plan. Everybody's been very active on it. We talked about three things in the plan. The first is our growth strategy. There are two long-term trends that we're going to align ourselves with going forward. The first is the growth in infrastructure and AI infrastructure. We had a very strong quarter in infrastructure, especially in service. Growth in servers was through the roof, but also in storage and networking. AI infrastructure both in terms of direct and indirect impact of AI in companies' data centers and their desire to have a hybrid footprint. We see that as a continued tailwind. The second priority is AI services. Engineering, FDEs, data, cloud, and security. Those two vectors, AI infra, AI services, and we're already investing in organic talent to continue to build the depth of our engineering skills in both of those. The second priority is our OpEx leverage, our operating model. We currently stand at an OpEx leverage of around 67. We've identified an opportunity to bring that down over the next three years. We'll share more details. We'll do an Investor Day towards the back end of the year, early next year. We've got a set of initiatives underway, and have a lot of opportunities to improve our operating model. A number of things haven't been integrated. Mid, back office especially. Improve AI deployment and being client zero. James has already done a lot of AI transformation in finance. My CMO in marketing. My HR lead in HR. We've got a lot more of our opportunities to deploy AI internally, and we continue to do that. Then more simple things. We've reviewed all our direct and indirect procurement. We're reviewing the spans and the number of layers in the organization. Our plan is to keep driving operational efficiency into the business. Yep. Excellent. The third pillar is our talent strategy and how we compete for AI talent and align our team with our long-term strategy. There is one component which we spent more time in our Q1 earnings call that was out of the gate when I joined this year. We are buying back about just under $300 million, $299 million worth of stock, just under 10% of the company. We have stopped M&A this year because we have a lot of improvements and opportunities in our organic business, and getting the operating model and really integrating the great acquisitions the company did over the last two to three years, especially in the AI space. Right now, we are really focused on improving our organic business. Yep. Excellent. Fantastic. Really interesting dynamic time in the market right now. Memory prices are changing by the day it feels like. Yep. They were a little bit more dynamic maybe a few months ago. Maybe settling off now, but that is impacting your business a little bit. Gross profit grew 18% last quarter. You were originally guiding to, I think, low single-digit growth for the year. Now it is up to high single digits, potentially double digits. Maybe just talk about the current environment, what you saw, how that is impacting your business. Yeah. When you look at our hardware business, it is devices and it is infrastructure. Infrastructure is server storage networking. We have had two very strong quarters on both devices and on infrastructure. But the dynamics are a little bit different across the two. In devices, the market saw a reduction in number of units in the second quarter. We actually saw a slight increase in laptops, but a decrease in desktops and handhelds. But we expect, and most of the analysts and chip manufacturers expect a decrease in number of units going to the second half in devices, but a continued upward pressure on average selling price. So we will see growth in the device business that will be driven by price increases, and most OEMs are signaling continued upward pressure on prices going into the second half. The infrastructure business is a little bit different. The growth in data center modernization, migrating data on-prem, that I see as a more sustained long-term tailwind. Server prices have gone up significantly. That is the number one impact of memory prices. We have seen very large increases. Our clients' desire to balance a non-cloud posture and an on-prem posture is a continued trend. People want to have the data in the right places and manage their on-prem infrastructure and grow that footprint over the next few years. We see both growth in cloud and on-prem. Both of those have tailwinds behind them, and we do not see any abatement to the growth in infrastructure. Yep. Excellent. Maybe we can talk a little bit just like the underlying secular trends that are driving what your customers are telling you. Obviously, a big part is the hyperscalers and the neo clouds eating up all the memory, and that is driving inflation. Yep. Other people have talked about maybe a longer-term trend where maybe companies start to insource more of the hardware that is needed to run AI internally. Maybe just what are customers telling you today? How durable do you feel like these trends are in the hardware space? How does that flow through to the rest of your services business and everything else you have? First of all, when you look at most of our clients, especially in the mid-market, the gap between what AI can do and how companies have deployed it is still very significant. Most companies have yet to realize a significant step change in their top line or bottom line as a result of AI. Most deployments are point agents on specific parts of the process versus a complete transformation of the process, and something that meaningfully impacts the bottom line. I have predicted that this would happen in 2023, then in 2024, then in 2025, and now we are in 2026, and I still think in terms of AI deployment, especially in the mid-market, we are probably in the second inning. The need to build AI capabilities, deploy agents, transform process is still significant. That is underlying trend, the power of the technology, and being able to realize that. I think we've got a lot of runway to go on that. The second thing we're seeing is token economics are at the forefront of every conversation. Educating what models to use for which use case. Not every problem requires a frontier model. Booking dinner reservations does not require a frontier model. There's a lot of work to do. When you look at most companies have realized they need a cloud capability, and we see Our cloud business grew 39% GP in Q2. It's phenomenal growth. Microsoft is a massive partner of ours, so is Google. We see a continued trend of growth in cloud. But we do see companies now wanting to have a hybrid posture, and that investment in their data center, whether it's their data, whether it's their compute, whether it's wanting to have the ability to do AI compute and inference in their own data centers to manage token cost, we see that as a continued trend. Yep. Okay, excellent. Maybe just sticking on that topic for one more question, just on the partner side. Your OEM partners are absorbing real cost inflation with these memory price passthroughs. When you sit with them today, are they asking you to do anything differently? Are they contracting differently? How has that evolved? Originally, they were pricing up until basically the delivery window, and have things sort of stabilized there, just- Yeah, I would say that it's stabilizing, but we're not seeing a retraction in either memory prices, I think those continue to expand, nor are we seeing the lead times come down. We're seeing the lead times not extending anymore, and I think our partners continue to meet the commitments that are out there in terms of ship dates. We've seen some stabilization in terms of some of the pricing dynamics that were going on. For example, we would have certain partners would reserve the right to change the price all the way up until shipment, where that's not been the norm historically. We're seeing some of that retract back. But I think the environment is still in an impacted space. Yep. Okay. Maybe just your customers are. There's a big gap in the market, and investors are talking about it between ability to get productivity out of AI, essentially. Especially in the mid-market, it sounds like that gap is wider than at the top end. Where are your mid-market clients today on that curve? What closes it? How do you play a part in closing that productivity gap? I'm going to generalize. There are obviously mid-market companies that are driving exceptional results. As a broad view of the mid-market, first of all, companies have been really focused on the technology. When I started doing transformation work 30 years ago, we talked about people, process, and technology, and that's no different with AI. In order to get the benefits, you've got to look at the processes, you got to train your people, and then the technology enables you to get the benefit. A lot of focus in AI the first few years since 2022 has been on the tech and not enough on really transforming how things get done. The second thing that we see is I see a lot of companies with insufficient governance around their AI deployments. Not enough rigor on the business case. Spending a lot of money on tokens, equipping a lot of people. The rigor around how we're going to get an impact that is measurable on the P&L, or on the balance sheet, but mostly on the P&L, is still lacking. A lot of it is companies want to drive innovation and encourage usage and encourage people to experiment and encourage people to build agents. At some point, you have to look at the economic and say, "I'm going to give you $100 on AI. I want this many benefits." That rigor is not widespread yet. It should be. We're helping our clients with that. How do you balance the need for innovation with the need for rigor in the business case? That is not widespread. You see token economics. Most companies are starting to get a lot of visibility into their agents. You deploy a product like Agent 365 by Microsoft. We found out we deployed an early release in early part of the year. We found out we have over 7,000 agents, 8,000 agents in our environment. A lot of companies will talk about, some of the high-tech companies will talk about having two agents for every employee in the company. How many of those agents are the right agents? How many of them are not being used and still consuming tokens? How many of those agents have the right security privileges, no more, no less than they need? There's a lot of work managing tokens, and so that's an area we're having a lot of discussions with client, managing their agent estate, managing their tokens. Should we hire somebody or deploy an agent? You are starting to look at people making trade-offs between payroll costs and agent costs, and that is a real discussion right now. Those are some of the factors where there is a lot of areas for improvement in terms of really getting the leverage of this technology and getting to full impact and full potential. Yeah. Luke, I would love to give an example of this as a customer zero. Please do. Within finance, this is a great example. We looked at our accounts payable, and we had an opportunity to insert into specific spots, potentially using agents, for example. We could have created an agent to process invoices by itself. The ROI of those individual pieces are relatively small, but when I can look across end to end, which is exactly what we have recently done with accounts payable, from not only the processing of invoices but to handling vendor communication and calls that we get. That entire process is now agentic for us. We recently did this, but we are watching the curve in terms of how much is processed purely by the agents end to end versus how much human interaction. We are going to see that get to in excess of 90% over the next 12 months. That is how you get an ROI. If I had just inserted an agent in one step of that process versus relooking at our entire process end to end, the ROI would've been very different. I think that's what's coming, especially when we look at the mid-market customers. Yep. Okay, good. We've talked a lot about the hardware piece of the business so far. I feel like we haven't really talked about the financial aspect of the services business. You've been consistent that organic growth maybe today isn't where you want it to be. It's been improving over the last couple quarters. There's some organic piece in that, so we don't, as investors, as outsiders, don't have perfect visibility into where that's trending. Just help us think about where that stands today. What's holding it back? What is the trajectory and the potential fix look like over the next, call it 12 to 18 months? In our core services, our organic revenue growth rate has improved from Q4 to Q1 to Q2, and we still have work to do to where I want it to be. A few areas that we're very focused on. One is we've done a lot of acquisitions, and we're integrating them to make sure if we're going to be a full solution provider to our clients, we need our AEs to see a full integrated suite of solutions that are integrated. Second is productizing our offerings. We relaunched and packaged all our security offerings in Q1. You may have seen it on our website, Insight Managed Exposure Defense, IMED. Quotes on the 24 hours, everything productized. Just by packaging it, rapid quote, standard statements of work, standard everything, we've seen our pipeline increase. In the third leg, which relates to that, is equipping our Account Executives to be able to represent the full suite of Insight solutions. We're on a journey. We've deployed our AI sales coach. Increasing the adoption of that is helping our Account Executives be able to figure out what does my client have? What do they need? What questions should I ask? What services should I propose? How do I help them? So on and so forth. We see that as driving a step change in performance for our frontline Account Executives. We're working on all those pieces. I've seen good improvements over the last few months and more work to do. Yep. Good. Jack, you have already covered One Insight and what that is and what the overarching plan looks like. If I ask you to dumb it down for me and just think about what is most exciting to you, where you see the lowest hanging fruit, what tangible results it could really drive over the next three years, what is most exciting to you? When we look at the key things that we are going to be measuring over the next three years in our plan, one is our two growth vectors, AI infrastructure and AI services, and making sure we are growing ahead of the market on those. Two is our OpEx leverage, making sure we become increasingly productive, a more unified operating model, faster decision making through fewer layers. We have got that identified. We have got a roadmap, better processes, better systems, better AI internally. Then the third component is satisfaction from our clients. We have an NPS of 60 the last three years. We need to keep earning that every day and improving on that. Then our teammate NPS, which is very strong. Our culture is a very important part of who we are. I think culture these days in companies, when you are especially competing for AI talent, the culture has to be differentiated. It is one of the reasons I joined the company is our culture, and we are going to continue to make sure we spend time with our teammates on that. Yep. Good. James, one of the topics that probably comes up increasingly so nowadays is just this OpEx leverage opportunity and what that looks like over the next few years. I think you are in the mid to high 60s range today. You have talked about getting it, I think, into the low 60s. You have talked about putting out a more robust plan and statement around that, maybe at an Analyst Day in the future, and I do not want you to spoil that, but just thinking about the opportunity there, put it in perspective, like where maybe peers today, where you see that going. Yeah, we can definitely talk about that in terms of the peers that have public compares. You are right. In the first half of this year, just to clarify how we think about operating expense leverage, it is as a percentage of gross profit. Because our revenue still is subject to significant netting, particularly as cloud grows and we are seeing continued migration from on-prem to cloud, it has an impact to the top line. A more stable metric is gross profit, and I think many of the competitors and peers would measure their OpEx leverage the same way as we do. We sit today in the first half at 67% OpEx as a percentage of gross profit. Most of the peers will sit somewhere between the high 50s and low 60s, and that is our opportunity moving forward. I think there is no reason, as I look at the next several years, that we would not be able to close that gap. At the same time, we are creating the room that we would need to be able to invest organically in the areas that Jack Azagury has just outlined. I think it is many of the forms that Jack Azagury has mentioned, both looking at how our processes are organized internally. One Insight plan unlocks significant portions of that. We have a very strong footprint in Manila and the Philippines that gives us cost arbitrage. We have done a good job of leveraging that. I think there is an opportunity to continue to leverage low-cost locations. But I am quite bullish on what that could mean in terms of accelerating our earnings over the next several years. Yeah. Good. Maybe focusing on the top line for a second, just stepping back from precise numbers. I do not want to ask you to guide here, but just thinking about the dynamics in the market, memory prices are normalizing. You have some acquisitions you are going to be lapping. You have some cloud partner headwinds in the back half that you are going to be lapping. Just how should we be thinking about the growth curve and how that shapes over the next, call it two to three years, as we lap some of these transitory things happening? Yeah. I will start, but you- Yeah Our focus is making sure we grow faster than the market. There are some businesses that are going to be more in optimize mode for us, the device business. We want to gain a little bit of market share every year, but really drive operational efficiency in everything we do as a channel partner and also optimize our services. We provide device lifecycle management, our flex service, where companies of all sizes come to us to do the imaging, the refresh, the maintenance, the repairs, and everything else. Then we have our growth business, AI Infra, AI services, where we want to grab more market share relative to our optimized businesses. But in our plan, we measure us against the market, and our intent is to and our focus is making sure we grab share in everything we do. Yep. Excellent. I think in the categories, as you think about the categories, you will still see cloud and core services likely lead our growth. Then in the hardware side, AI infrastructure, I think is the three key growth vectors as we think about this over the next several years. Yep. Good. I have a few more. I want to make sure I open up to the audience in case anyone has any questions here. So maybe I'll just take a pause. If anyone has a question, feel free to raise your hand and shoot. All you, Luke. Okay. We'll keep going. Just cash generation. I think if I'm remembering correctly, you have a $350 million target out there for the year. $300 million to $400 million is our target. $300 million to $400 million. Yeah. Okay. Maybe just walk through the shape of the year. I think most of that is back half loaded, confidence in your ability to meet that and what the shape of that typically looks like and maybe how current dynamics may affect that. Yeah. Hardware revenue growth is typically the piece that would impact the cash flow generation the most. In a typical year, we see a much stronger second half than first half. I think last year demonstrated that. I think at the midpoint, we were minus $100 or so in cash flow. So most of the cash flow generated in the second half last year, that is what we are looking at this year. We are at the midpoint of the year. We are in a better spot from a cash flow standpoint than we were last year. And that is just the dynamics of the business particularly with Microsoft. Q2 tends to be a use of cash for us, and then that is made up for in Q3 and Q4. So this is, I would call it more of a typical year like last year was in terms of cash flow generation. If you went back to 2022, where we had heavy device growth in 2023, you would have actually seen negative cash flow. Devices tend to use capital for us. And so this year we are looking at more of a typical trend where we would see a stronger second half, so we have maintained our guidance in the $300 million-$400 million range. Okay, great. I know we are pretty much up on time here. Maybe I will just leave one last thoughtful question with you, Jack. If we are sitting here a year from now, what would you want investors to be saying about Insight and about what they are not saying today and just the trajectory of the business? Yeah, first of all, we have had a very strong Q1 and Q2, and our focus is making sure, I talked on the earnings call about focus and execution, that we continue to deliver for our investors quarter- after- quarter- after- quarter. Execution of our plan, the growth, the two vectors of growth around AI infrastructure and cloud data and AI, those services and security, continued improvement in our OpEx leverage. With that has to be the engagement of our teammates and client side. Our focus right now is executing on what we have and continuing to deliver for our shareholders like we have done in the first two quarters of the year. Good. Excellent. All right, Jack