Insight Enterprises Inc: Form 10-Q for the period ended Mar 31, 2025

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. We refer to our customers as “clients,” our suppliers as “partners” and our employees as “teammates.”

Quarterly Overview

Today, every business is a technology business. We help our clients accelerate their digital journey to modernize their businesses and maximize the value of technology. We serve these clients in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked solutions integrator, we enable secure, end-to-end digital transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 37 years of broad IT expertise. We amplify our solutions and services with global scale, local expertise and our e-commerce experience, enabling our clients to realize their digital ambitions in multiple ways. Our offerings in North America and certain countries in EMEA and APAC include hardware, software and services, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments consist largely of software and certain software-related services and cloud solutions.

On a consolidated basis, for the three months ended March 31, 2025:

• Net sales of $2.1 billion decreased 12% compared to the three months ended March 31, 2024. The decrease in net sales reflects decreases in software and services net sales, partially offset by an increase in hardware net sales. Excluding the effects of fluctuating foreign currency exchange rates, net sales decreased 11% compared to the first quarter of 2024.
• Gross profit of $406.5 million decreased 8% compared to the three months ended March 31, 2024. Excluding the effects of fluctuating foreign currency exchange rates, gross profit decreased 7% compared to the first quarter of 2024.
• Compared to the three months ended March 31, 2024, gross margin expanded approximately 80 basis points to 19.3% of net sales in the three months ended March 31, 2025. This expansion primarily reflects higher margin contributed by hardware and services net sales compared to the same period in the prior year.
• Earnings from operations decreased 40%, year to year, to $60.1 million in the first quarter of 2025 compared to $100.0 million in the first quarter of 2024. The decrease was primarily due to a decrease in gross profit in the current quarter, combined with an increase in selling and administrative expenses and severance and restructuring expenses, net. Excluding the effects of fluctuating foreign currency exchange rates, earnings from operations decreased 39% year to year.
• Net earnings and diluted earnings per share were $7.5 million and $0.22, respectively, for the first quarter of 2025. This compares to net earnings of $67.0 million and diluted earnings per share of $1.74 for the first quarter of 2024. The decrease in net earnings was due in part to a net loss of $15.2 million from the revaluation of the Infocenter earnout liability and a net loss of $25.1 million recorded to reflect the revaluation of warrant settlement liabilities in the current year period. Diluted earnings per share decreased 87% year to year, and excluding the effects of fluctuating foreign currency exchange rates, also decreased 87% year to year.

Throughout the “Quarterly Overview” and “Results of Operations” sections of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to changes in net sales, gross profit, selling and administrative expenses and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates, which are financial measures that are adjusted from our financial results prepared in accordance with the United States generally accepted accounting principles (“GAAP”). We believe providing this information excluding the effects of fluctuating foreign currency exchange rates provides valuable supplemental information to investors regarding our underlying business and results of operations, consistent with how we, including our management, evaluate our performance. In computing the changes in amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period. The performance measures excluding the effects of fluctuating foreign currency exchange rates should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Details about segment results of operations can be found in Note 8 to the Consolidated Financial Statements in Part I, Item 1 of this report.

Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our consolidated financial statements, including the changes in certain key items in those consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

Supply Chain, Demand and Inflation Update

Inflation contributed to sustained high interest rates on all of our variable rate facilities in the first quarter of 2025 consistent with the prior year period. While these interest rates are expected to decrease, we continue to anticipate higher than historical rates throughout most of 2025. We are actively monitoring changes to the global macroeconomic environment, including those impacting our supply chain, demand for our products whether due to tariffs or otherwise and interest rates, and assessing the potential impacts these challenges may have on our current results, financial condition and liquidity. We are also mindful of the potential impact these conditions could have on our clients, partners and prospects in 2025 and beyond.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2024. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

There have been no changes to the items disclosed as critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Results of Operations

The following table sets forth certain financial data as a percentage of net sales for the three months ended March 31, 2025 and 2024:

We generally experience some seasonal trends in our net sales. Software and certain cloud net sales are typically seasonally higher in our second and fourth quarters. Business clients, particularly larger enterprise businesses in the United States, tend to spend more, particularly on product, in our fourth quarter. Sales to the federal government in the United States are often stronger in our third quarter, while sales in the state and local government and education markets are also often stronger in our second quarter. Sales to public sector clients in the United Kingdom are often stronger in our first quarter. These trends create overall variability in our consolidated results.

Our gross profit across the business and related to product versus services sales are, and will continue to be, impacted by partner incentives, which can and do change significantly in the amounts made available and the related product or services sales being incentivized by the partner. Incentives from our largest partners are significant and changes in the incentive requirements, which occur regularly, could impact our results of operations to the extent we are unable to effectively shift our focus and efficiently respond to them. For a discussion of risks associated with our reliance on partners, see “Risk Factors – Risks related to Our Business, Operations and Industry – We rely on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can and do change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Net Sales. Net sales of $2.1 billion for the three months ended March 31, 2025 decreased 12%, year to year, compared to the three months ended March 31, 2024, reflecting decreases in all of our operating segments.

Our net sales by operating segment were as follows for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Our net sales by offering category for North America for the three months ended March 31, 2025 and 2024 were as follows (dollars in thousands):

Net sales in North America decreased 11%, or $204.2 million, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, driven by decreases in software and services net sales, partially offset by an increase in hardware net sales. Software and services net sales decreased 33% and 7%, year to year, respectively. These decreases were partially offset by an increase in hardware net sales of 2%, year over year. The net changes for the three months ended March 31, 2025 were the result of the following:

• The decrease in software net sales was primarily due to a significant multi year transaction in the prior year period with no comparable transaction in the current year period. Changes in certain vendor relationships (shifting us from a principal to an agent role) as well as the continued migration of on-premise software to cloud solutions, in each case, reported net in services net sales also contributed to the year to year decrease in software net sales.
• The decrease in services net sales was primarily due to declines in sales of Insight Delivered services from our organic business, partially offset by net sales from Infocenter. Our North America organic business excludes Infocenter, which we acquired on May 1, 2024. A decrease in fees from cloud solution offerings and a decrease in warranty net sales also contributed to the year to year decrease in services net sales.
• The increase in hardware net sales was primarily due to higher volume of sales to commercial clients due to slightly higher demand. This increase was driven by an increase in device sales.

Our net sales by offering category for EMEA for the three months ended March 31, 2025 and 2024 were as follows (dollars in thousands):

AND RESULTS OF OPERATIONS (continued)

Net sales in EMEA decreased 17%, or $70.0 million, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA decreased 15%, year to year. Net sales of software and hardware decreased by 32% and 5%, respectively, year to year, partially offset by an increase in services net sales of 3%, year over year. The net changes for the three months ended March 31, 2025 were the result of the following:

• The decrease in software net sales was primarily due to lower volume of sales to large enterprise and public sector clients reflecting changes in certain vendor relationships as well as continued migration of on-premise software to cloud solutions, in each case, reported net in services net sales.
• The decrease in hardware net sales was primarily due to lower volume of sales to large enterprise and public sector clients.
• The increase in services net sales was primarily due to an increase in agency net sales, partially offset by a net decrease in fees from cloud solution offerings as a result of partner program changes.

Our net sales by offering category for APAC for the three months ended March 31, 2025 and 2024 were as follows (dollars in thousands):

Net sales in APAC decreased 3%, or $1.7 million, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC increased 1%, year over year. Net sales of hardware and services decreased by 13% and 5%, respectively, year to year. These decreases were partially offset by an increase in software net sales of 2%, year over year. The net changes for the three months ended March 31, 2025 were the result of the following:

• The decrease in services net sales was primarily due to a decrease in fees from cloud solution offerings.
• The decrease in hardware net sales was primarily the result of lower volume of sales to corporate and public sector clients.
• The increase in software net sales was due to higher volume of sales to commercial clients.

The percentage of net sales by category for North America, EMEA and APAC were as follows for the three months ended March 31, 2025 and 2024:

Gross Profit. Gross profit decreased 8%, or $34.5 million, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, with gross margin expanding approximately 80 basis points to 19.3% for the three months ended March 31, 2025 compared to 18.5% for the three months ended March 31, 2024.

Our gross profit and gross profit as a percentage of net sales by operating segment were as follows for the three months ended March 31, 2025 and 2024 (dollars in thousands):

North America's gross profit for the three months ended March 31, 2025 decreased 9%, or $30.4 million, compared to the three months ended March 31, 2024. As a percentage of net sales, gross margin expanded approximately 40 basis points to 18.8%, year over year. The year over year net expansion in gross margin was primarily attributable to the following:

• An expansion in product margin of 36 basis points and a slight increase in services margin of 5 basis points.
• The expansion in product margin reflects an increase in margin contribution from hardware net sales due to changes in product mix towards higher margin products, partially offset by a decrease in margin from software net sales.
• The slight increase in services margin reflects an increase in margin contribution from Insight Core services (consisting of Insight Delivered and managed services) from Infocenter.

EMEA's gross profit for the three months ended March 31, 2025 decreased 4%, or $3.1 million, year to year (decreasing 2% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2024. As a percentage of net sales, gross margin expanded 280 basis points, year over year. The year over year net expansion in gross margin was attributable to the following:

• An increase in services margin of 290 basis points and a slight contraction in product margin of 9 basis points.
• The increase in services margin is primarily the result of increased margin contribution from Insight Core services and an increase in agency net sales, partially offset by fees for cloud solution offerings.
• The contraction in product margin is primarily the result of sales of software at lower margins than in the prior year period, partially offset by sales of hardware at higher margins than in the same period in the prior year.

APAC's gross profit for the three months ended March 31, 2025 decreased 6%, or $1.0 million, year to year (decreasing 2% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2024. As a percentage of net sales, gross margin contracted approximately 90 basis points, year to year. The year to year net contraction in gross margin was attributable to a net contraction in services margin of 71 basis points and a net contraction in product margin of 12 basis points driven by the decrease in fees from cloud solution offerings in the current year period.

Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses for the three months ended March 31, 2025 increased 1%, or $1.7 million, compared to the three months ended March 31, 2024 (also increasing 1% when excluding the effects of fluctuating foreign currency exchange rates).

Selling and administrative expenses increased approximately 190 basis points as a percentage of net sales in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The overall net increase in selling and administrative expenses primarily reflects increases in other expenses and depreciation and amortization expenses of $18.7 million and $3.9 million, respectively, year over year. The net increase in other expenses primarily reflects a loss of $15.2 million recognized on the revaluation of the Infocenter acquisition earnout liability and an increase in fees for service agreements. We also incurred transformation costs in the current and prior year periods of $1.3 million and $2.3 million, respectively, however, these costs are unique in nature and are not expected to recur in the longer term. The increase in depreciation and amortization expenses primarily reflects higher amortization of intangible assets associated with the Infocenter acquisition. These increases were partially offset by a net decrease in personnel costs, including teammate benefits of $16.8 million. The decrease in personnel costs reflects a decrease in overall teammate headcount as well as a reduction in variable compensation compared to the prior year period.

Severance and Restructuring Expenses, net. During the three months ended March 31, 2025, we recorded severance and restructuring expenses, net of adjustments, of approximately $7.0 million. Comparatively, during the three months ended March 31, 2024, we recorded severance and restructuring expenses, net of adjustments, of approximately $2.2 million. The severance charges in both periods primarily related to a realignment of certain roles and responsibilities and reductions in workforce.

Acquisition and Integration Related Expenses. During the three months ended March 31, 2024, we recorded acquisition and integration related expenses of approximately $1.3 million. During the three months ended March 31, 2025, we had no significant comparable activity. As the Company executes its acquisition strategy, we expect to incur additional acquisition and integration related expenses.

Earnings from Operations. Earnings from operations decreased 40%, or $39.9 million, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for the three months ended March 31, 2025 and 2024 (dollars in thousands):

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North America's earnings from operations for the three months ended March 31, 2025 decreased 40%, or $33.2 million, compared to the three months ended March 31, 2024. As a percentage of net sales, earnings from operations decreased by approximately 140 basis points to 3.0%. The decrease in earnings from operations was primarily driven by a decrease in gross profit combined with an increase in selling and administrative expenses and severance and restructuring expenses, net, partially offset by a decrease in acquisition and integration related expenses, when compared to the three months ended March 31, 2024.

EMEA's earnings from operations for the three months ended March 31, 2025 decreased 55%, or $6.2 million (decreasing 54% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2024. As a percentage of net sales, earnings from operations decreased by approximately 120 basis points to 1.5%. The decrease in earnings from operations was primarily driven by a decrease in gross profit combined with an increase in severance and restructuring expenses, net, when compared to the three months ended March 31, 2024.

APAC's earnings from operations for the three months ended March 31, 2025 decreased 10%, or $0.5 million (decreasing 7% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2024. As a percentage of net sales, earnings from operations decreased by approximately 50 basis points to 7.2%. The decrease in earnings from operations was primarily driven by a decrease in gross profit, partially offset by a decrease in selling and administrative expenses, when compared to the three months ended March 31, 2024.

Adjusted Earnings from Operations. Adjusted earnings from operations decreased 16%, or $19.4 million, year to year, in three months ended March 31, 2025 compared to three months ended March 31, 2024. Our Adjusted earnings from operations and Adjusted earnings from operations as a percentage of net sales by operating segment were as follows for the three months ended March 31, 2025 and 2024 (dollars in thousands):

North America’s Adjusted earnings from operations for the three months ended March 31, 2025 decreased 15%, or $15.8 million, compared to the three months ended March 31, 2024. As a percentage of net sales, Adjusted earnings from operations decreased by approximately 30 basis points to 5.1%. The decrease in Adjusted earnings from operations was primarily driven by a decrease in gross profit, partially offset by a decrease in selling and administrative expenses.

EMEA’s Adjusted earnings from operations for the three months ended March 31, 2025 decreased 21% (decreasing 20% excluding the effects of fluctuating foreign currency exchange rates), or $3.0 million, compared to the three months ended March 31, 2024. As a percentage of net sales, Adjusted earnings from operations decreased by approximately 20 basis points to 3.2%. The decrease in Adjusted earnings from operations was primarily driven by a decrease in gross profit.

APAC’s Adjusted earnings from operations for the three months ended March 31, 2025 decreased 12% (decreasing 9% excluding the effects of fluctuating foreign currency exchange rates), or $0.6 million, compared to the three months ended March 31, 2024. As a percentage of net sales, Adjusted earnings from operations decreased by approximately 70 basis points to 7.3%. The decrease in Adjusted earnings from operations was primarily driven by a decrease in gross profit.

Non-Operating Expense (Income).

Interest Expense, Net. Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities, the Convertible Notes and the Senior Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense, net for the three months ended March 31, 2025 increased 24%, or $3.1 million, compared to the three months ended March 31, 2024. This was primarily due to the issuance of the Senior Notes in May 2024, the maturity of the Convertible Notes in February 2025 and decreased interest income partially offset by lower interest rates and lower loan balances under our ABL facility and decreased imputed interest under our inventory financing facilities.

Imputed interest under our inventory financing facilities was $2.4 million for the three months ended March 31, 2025 compared to $2.5 million for the three months ended March 31, 2024. The decrease in imputed interest under our inventory financing facilities was a result of lower average daily balances under the facilities during the period. For a description of our various financing facilities, see Note 4 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Other Expense (Income), Net. Other expense (income), net primarily reflects a net loss on the revaluation of warrant settlement liabilities of $25.1 million recorded in the three months ended March 31, 2025 in connection with the cash settlement of a portion of the outstanding Warrants, with no comparable activity in the three months ended March 31, 2024. For additional information regarding the Warrants, see Note 4 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Income Tax Expense. Our effective tax rate of 60.5% for the three months ended March 31, 2025 was higher than our effective tax rate of 24.0% for the three months ended March 31, 2024. The increase in the effective tax rate for the three months ended March 31, 2025 was primarily due to the non-deductibility of both net losses related to fair value adjustments associated with the warrant settlement liability and the revaluation of the Infocenter earnout liability. These increases are partially offset by the reduction in the valuation allowance related to our foreign tax credit carryforward.

Use of Non-GAAP Financial Measures

Adjusted non-GAAP earnings from operations exclude (i) severance and restructuring expenses, net, (ii) certain executive recruitment and hiring related expenses, (iii) amortization of intangible assets, (iv) transformation costs, (v) certain acquisition and integration related expenses, and (vi) gains and losses from revaluation of acquisition related earnout liabilities, as applicable. Adjusted non-GAAP earnings from operations is used by the Company and its management to evaluate financial performance against budgeted amounts, to calculate incentive compensation, to assist in forecasting future performance and to compare the Company’s results to those of the Company’s competitors. We believe that this non-GAAP financial measure is useful to investors because it allows for greater transparency, facilitates comparisons to prior periods and to the Company’s competitors’ results, and assists in forecasting performance for future periods. The non-GAAP financial measure is not prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

(a) In North America, other includes transformation costs of $0.9 million and $2.3 million for the three months ended March 31, 2025 and March 31, 2024, respectively. In EMEA, other includes transformation costs of $0.4 million for the three months ended March 31, 2025.

(b) Includes severance and restructuring expenses, net of $7.0 million and $2.2 million for the three months ended March 31, 2025 and 2024, respectively. Includes acquisition and integration related expenses of $0.2 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively.

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Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for the three months ended March 31, 2025 and 2024 (in thousands):

Cash and Cash Flow

• Our primary uses of cash during the three months ended March 31, 2025 were to repay debt, including the remaining principal balance upon maturity of the Convertible Notes, and to fund the cash settlement of a portion of the Warrants.
• Operating activities provided $78.1 million in cash during the three months ended March 31, 2025, compared to cash provided by operating activities of $247.2 million during the three months ended March 31, 2024.
• Capital expenditures were $7.1 million and $6.5 million for the three months ended March 31, 2025 and 2024, respectively.
• During the three months ended March 31, 2025, we did not repurchase any of our common stock compared to $35.0 million of repurchases during the three months ended March 31, 2024.
• We had net borrowings under our ABL facility during the three months ended March 31, 2025 of $423.8 million compared to net repayments of $42.2 million during the three months ended March 31, 2024.
• We had net borrowings under our inventory financing facilities of $42.7 million during the three months ended March 31, 2025 compared to net repayments of $4.5 million during the three months ended March 31, 2024.
• We repaid approximately $333.1 million for the remaining principal balance upon maturity of the Convertible Notes in the three months ended March 31, 2025.
• We paid $138.9 million to settle a portion of the Warrants relating to the Call Spread Transactions associated with the Convertible Notes.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our expected cash and working capital requirements for operations, as well as other strategic acquisitions, over the next 12 months and beyond. We expect existing cash and cash flows from operations to continue to be sufficient to fund our operating cash activities and cash commitments for investing and financing activities, such as capital expenditures, strategic acquisitions, repurchases of our common stock, any additional cash settlements of the remaining Warrants associated, debt repayments and repayment of our inventory financing facilities for the next 12 months. We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities and/or other available financing resources.

Net cash provided by operating activities

• We have an inverted cash cycle resulting from typically paying partners on shorter terms than we provide to our clients. This generally means in periods of declining hardware sales, we typically generate increased cash from operations.
• Cash flow provided by operating activities in the first three months of 2025 was $78.1 million compared to cash provided by operating activities of $247.2 million in the first three months of 2024.
• The decrease in cash provided by operating activities period over period is primarily due to lower net earnings, combined with the impact of higher hardware net sales compared to the same period in the prior year. In the first quarter of 2024 our cash generated from operations was also positively impacted by timing of receipts compared to partner payments as well as deferral of certain operating payments at March 31, 2024.
• We continue to be impacted by netted costs that we apply to our services net sales to appropriately record net sales that we earn as an agent. These netted costs, while excluded from net sales and cost of goods sold, are processed and applied to accounts receivable and accounts payable in each reporting period. As a result, calculation of our unadjusted cash conversion cycle, including days sales outstanding and days payables outstanding, do not provide an accurate reflection of our cash conversion metric, due to the metric components being inherently inflated. For example, netted costs were $2.7 billion and $2.0 billion in the first quarter of 2025 and 2024, respectively.
• We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms we grant to our clients in order to take advantage of supplier discounts.
• We intend to use cash generated in the remainder of 2025 in excess of working capital needs to pay down our ABL facility and inventory financing facilities, to settle a portion of the outstanding Warrants and for strategic acquisitions.

Net cash used in investing activities

• Capital expenditures were $7.1 million and $6.5 million for the three months ended March 31, 2025 and 2024, respectively.
• We expect capital expenditures for the full year 2025 to be in a range of $35.0 to $40.0 million.

Net cash used in financing activities

• During the three months ended March 31, 2025, we had net borrowings under our ABL facility of $423.8 million, which were primarily used to fund the repayment of the remaining principal balance upon maturity of the Convertible Notes.
• During the three months ended March 31, 2024, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by $42.2 million.
• We had net borrowings under our inventory financing facilities of $42.7 million during the three months ended March 31, 2025 compared to net repayments of $4.5 million during the three months ended March 31, 2024.
• We repaid approximately $333.1 million for the remaining principal balance upon maturity of the Convertible Notes in the three months ended March 31, 2025.
• We repaid approximately $16.9 million principal upon conversion of a portion of the Convertible Notes in the three months ended March 31, 2024.
• We paid $138.9 million to settle a portion of the Warrants relating to the Call Spread Transactions associated with the Convertible Notes in cash in the three months ended March 31, 2025.
• During the three months ended March 31, 2025, we did not make any earnout and acquisition related payments.
• During the three months ended March 31, 2024, we made earnout and acquisition related payments of $18.3 million associated with our acquisitions of Amdaris Group Limited, Hanu Software Solutions, Inc. and Hanu Software Solutions (India) Private Ltd.
• During the three months ended March 31, 2025, we did not repurchase any shares of our common stock.
• During the three months ended March 31, 2024, we repurchased $35.0 million of our common stock.

Financing Facilities

• Our debt balance as of March 31, 2025 was $961.2 million.
• Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.
• The Senior Notes are subject to certain events of default and certain acceleration clauses. As of March 31, 2025, no such events have occurred.
• Our ABL facility contains various covenants customary for transactions of this type, including complying with a minimum receivable and inventory requirement and meeting monthly, quarterly and annual reporting requirements.
• The credit agreement contains customary affirmative and negative covenants and events of default.
• At March 31, 2025, we were in compliance with all such covenants.
• While the ABL facility has a stated maximum amount, the actual availability under the ABL facility is limited by a minimum accounts receivable and inventory requirement. As of March 31, 2025, eligible accounts receivable and inventory were sufficient to permit access to the full $1.8 billion under the ABL facility of which $468.7 million was outstanding.

We also have agreements with financial intermediaries to facilitate the purchase of inventory from certain suppliers under certain terms and conditions.

• These amounts are classified separately as accounts payable – inventory financing facilities in our consolidated balance sheets.
• Our inventory financing facilities have an aggregate availability for vendor purchases of $705.0 million, of which $260.7 million was outstanding at March 31, 2025.

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation to the United States. As of March 31, 2025, we had approximately $251.8 million in cash and cash equivalents in certain of our foreign subsidiaries, primarily residing in Canada, The Netherlands, Australia and New Zealand. Certain of these cash balances will be remitted to the United States by paying down intercompany payables generated in the ordinary course of business or through actual dividend distributions.

Off-Balance Sheet Arrangements

We have entered into off-balance sheet arrangements, which include indemnifications. The indemnifications are discussed in Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this report and such discussion is incorporated by reference herein. We believe that none of our off-balance sheet arrangements have, or are reasonably likely to have, a material current or future effect on our financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Standards

The information contained in Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report concerning a description of recently issued accounting standards which affect or may affect our financial statements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Contractual Obligations

Other than as described in Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this report, there have been no material changes in our reported contractual obligations, as described under “Cash Requirements From Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Except as described below, there have been no material changes in our reported market risks, as described in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Although our Senior Notes are based on fixed rates, changes in interest rates could impact the fair market value of such notes. As of March 31, 2025, the fair market value of our Senior Notes was $505.4 million. For additional information about our Senior Notes, see Note 4 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and determined that as of March 31, 2025 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the three months ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations of Internal Control Over Financial Reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.