INSIGHT ENTERPRISES INC (NSIT)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this report. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including those discussed in “Risk Factors” in Part I, Item 1A and elsewhere in this report.

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 transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 36 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.

Full year 2024 financial and operational highlights included the following:

•We reported gross profit of $1.8 billion and record gross margin of 20.3%, primarily driven by margin expansion in North America.

•We generated cash flows from operations of $632.8 million.

•In May 2024, we acquired Infocenter to strengthen our digital transformation capabilities leveraging their deep expertise in ServiceNow’s comprehensive suite of capabilities.

On a consolidated basis, for the year ended December 31, 2024:

•Net sales of $8.7 billion decreased 5% compared to 2023.

•Gross profit of $1.8 billion increased 6% compared to 2023.

•Consolidated gross margin expanded approximately 210 basis points to a record 20.3% of net sales in 2024. This increase reflects expansion in margin from services net sales, primarily from growth in Insight Delivered services and cloud solution offerings.

•Earnings from operations decreased to $388.6 million in 2024, a decrease of 7% compared to the prior year, which represented 4.5% of net sales.

•Our effective tax rate in 2024 was 25.0%, which compares to our effective tax rate of 25.6% in 2023.

•Net earnings and diluted net earnings per share were $249.7 million and $6.55, respectively, in 2024. In 2023, we reported net earnings of $281.3 million and diluted net earnings per share of $7.55.

The results of operations for 2024 include the following items:

•severance and restructuring expenses, net of $25.0 million, $18.6 million net of tax;

•acquisition and integration related expenses of $2.7 million, $2.5 million net of tax; and

•the repurchase of approximately 1.0 million shares of the Company’s common stock for an aggregate cost of $200.0 million.

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The results of operations for 2023 include the following items:

•severance and restructuring expenses, net of $6.1 million, $4.4 million net of tax;

•acquisition and integration related expenses of $7.4 million, $6.0 million net of tax; and

•the repurchase of approximately 1.6 million shares of the Company’s common stock for an aggregate cost of $217.1 million.

In discussing financial results for 2024 and 2023, the Company refers to certain financial measures that are adjusted from the financial results prepared in accordance with GAAP. When referring to non-GAAP measures, the Company refers to them as “Adjusted.” See the "Use of Non-GAAP Financial Measures" section below for additional information and a reconciliation of such non-GAAP measures to the most directly comparable GAAP financial measures.

Throughout the “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 also considered to be non-GAAP measures. 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.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

During 2024, we generated $632.8 million of cash from operating activities and primarily utilized cash for strategic acquisitions, to repurchase shares of our common stock, to repay debt and for payment of earnouts and other acquisition related payments. We had net repayments of $554.1 million under our ABL facility and issued $500.0 million in principal amount of Senior Notes. We ended the year with $259.2 million of cash and cash equivalents and $864.1 million of debt outstanding under our long-term debt facilities, including $332.9 million related to the Convertible Notes that are classified as a current liability at December 31, 2024.

Details about segment results of operations can be found in Note 19 to the Consolidated Financial Statements in Part II, Item 8 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 year to year and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

Supply Chain Constraints and Inflation Update

Supply constraints that have had an industry-wide impact since the beginning of 2020 eased in the second half of 2023. We believe that any remaining supply constraints and extended lead times for certain infrastructure, including networking products, have now normalized back to near historic levels. Despite the easing supply constraints, we continue to see a general slowdown in our clients' decision making, which we believe will continue in the short term.

Inflation contributed to higher interest rates on all of our variable rate facilities in 2024 compared to 2023. While these interest rates are expected to eventually decrease, we continue to anticipate higher than historical rates throughout most of 2025. We are actively monitoring

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changes to the global macroeconomic environment, including those impacting our supply chain 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.

RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of net sales for the years ended December 31, 2024 and 2023:

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 this report.

Our results of operations include the results of Amdaris, SADA and Infocenter from their respective acquisition dates.

2024 Compared to 2023

Net Sales. Net sales decreased 5%, or $0.5 billion, in 2024 compared to 2023. Net sales of products (hardware and software) decreased 8%, year to year, while net sales of services increased 9%, year over year, in 2024 compared to 2023. Our net sales by operating segment for 2024 and 2023 were as follows (dollars in thousands):

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Our net sales by offering category for North America for 2024 and 2023 were as follows (dollars in thousands):

Net sales in North America decreased 4%, or $327.8 million, in 2024 compared to 2023. This net decrease reflects a decrease in hardware net sales, partially offset by increases in software and services net sales. Net sales of hardware decreased 10%, year to year. Net sales of software and services increased 3% and 7%, respectively, year over year. The changes were primarily the result of the following:

•The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients due to lower demand. This decrease reflects lower sales of devices and infrastructure. We believe these decreases reflect client decisions around timing of device refreshes and investment responses to challenges in the broader macroeconomic environment. We expect this trend could continue into 2025.

•The increase in services net sales was primarily due to higher sales of cloud solution offerings including from SADA and an increase in sales of Insight Delivered services from SADA and Infocenter, partially offset by declines in sales of Insight Delivered services from our organic business and in software maintenance. Our North America organic business excludes SADA, which we acquired on December 1, 2023 and excludes Infocenter, which we acquired on May 1, 2024.

•The increase in software net sales was primarily due to a significant multiyear transaction in the first quarter, partially offset by changes in certain vendor relationships (shifting from a principal to agent role), as well as the continued migration of on-premise software to cloud solutions, in each case, reported net in services net sales.

Our net sales by offering category for EMEA for 2024 and 2023, were as follows (dollars in thousands):

Net sales in EMEA decreased 10% (decreased 11% excluding the effects of fluctuating foreign currency exchange rates), or $149.6 million, in 2024 compared to 2023. This net decrease reflects a decrease in software and hardware net sales, partially offset by an increase in services net sales. Net sales of software and hardware were down 20% and 8%, respectively, year to year, partially offset by an increase in services net sales of 23%, year over year. The changes were primarily 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 and also reflects changes in certain vendor relationships.

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•The decrease in hardware net sales was primarily due to lower volume of sales to public sector clients due to lower demand.

•The increase in services net sales was due to increased sales of Insight Delivered services from Amdaris, which we acquired in August 2023, partially offset by declines in sales of Insight Delivered services from our EMEA organic business. Our EMEA organic business primarily excludes Amdaris.

Our net sales by offering category for APAC for 2024 and 2023, were as follows (dollars in thousands):

Net sales in APAC increased 1% (increased 2% excluding the effects of fluctuating foreign currency rates), or $3.2 million, in 2024 compared to 2023. Net sales of services and software increased 8% and 5%, respectively, year over year, partially offset by a decrease in hardware net sales of 19% year to year. The net changes were primarily the result of the following:

•The increase in services net sales was due to higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category and increased sales of Insight Delivered services.

•The increase in software net sales was primarily due to higher volume of sales to enterprise and public sector clients, partially offset by the continued migration of on-premise software toward higher sales of cloud solution offerings.

•The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients.

Net sales by category for North America, EMEA and APAC were as follows for 2024 and 2023:

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Gross Profit. Gross profit increased 6%, or $96.5 million, in 2024 compared to 2023, with gross margin increasing approximately 210 basis points to 20.3% of net sales. Gross profit and gross margin also increased in each of our operating segments in 2024 compared to 2023. Our gross profit and gross profit as a percent of net sales by operating segment for 2024 and 2023 were as follows (dollars in thousands):

North America’s gross profit increased 4%, or $56.0 million, in 2024 compared to 2023. As a percentage of net sales, gross margin expanded by approximately 170 basis points year over year. The year over year net increase in gross margin was primarily attributable to the following:

•A net increase in product margin of 15 basis points year over year. This increase was primarily due to slightly higher margins on software net sales compared to the prior year.

•An expansion in services margin year over year of 149 basis points was due to higher margins generated from increased cloud solution offerings, including margin expansion contributed by SADA and from increased sales of Insight Delivered services from SADA and Infocenter.

EMEA’s gross profit increased 13% (increased 11% excluding the effects of fluctuating foreign currency exchange rates), or $33.2 million, in 2024 compared to 2023. As a percentage of net sales, gross margin expanded 410 basis points to 20.7%. The year over year net increase in gross margin was primarily attributable to the following:

•An expansion in services margin year over year of 321 basis points primarily due to higher margins from increased sales of Insight Delivered services from Amdaris.

•A net increase in product margin of 90 basis points year over year. This increase was primarily due to higher margins on hardware compared to the prior year.

APAC’s gross profit increased 11% (increased 12% excluding the effects of fluctuating foreign currency exchange rates), or $7.3 million, in 2024 compared to 2023. As a percentage of net sales, gross margin increased by approximately 270 basis points year over year. The expanded gross margin for APAC in 2024 compared to 2023 was due primarily to changes in sales mix to services net sales, including Insight Delivered services that are sold at higher margins than product net sales.

Our overall gross margins expanded in 2024 compared to 2023, as expected. We believe this trend could continue into future periods as we focus on selling solutions and increasing our services net sales. As a result of certain partner program changes, we believe we may not experience significant growth in cloud gross profit in 2025 compared to 2024.

Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $106.9 million in 2024 compared to 2023. Selling and administrative expenses also increased approximately 190 basis points as a percentage of net sales in 2024 compared to 2023. The overall net increase in expenses reflects an increase of $43.9 million in personnel costs, including teammate benefits, an increase in depreciation and amortization expense of $35.5 million, and a net increase in other expenses of $15.5 million, year over year. The increase in personnel costs reflects higher teammate headcount for the majority of 2024 from the acquisitions of Amdaris, SADA and Infocenter, partially offset by reductions in the fourth quarter of 2024, combined with the impact of merit increases. The increase in depreciation and amortization expenses were also

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the result of the Amdaris, SADA and Infocenter acquisitions. The net increase in other expenses reflects increases in service agreement expenses and an increase in transformation costs. We incurred transformation costs in 2024 of $18.4 million compared to $16.6 million in 2023. These costs are unique in nature and are not expected to recur in the longer term. These increases in other expenses were partially offset by recoveries in excess of costs incurred of $2.1 million in 2024 related to a third-party data center service outage compared to costs incurred in excess of recoveries of $5.0 million in the prior year combined with net gains of $7.8 million from the change in the revaluation of earnout liabilities, with no such activity in the prior year. On July 29, 2023, a third-party data center that hosts network environments for certain Insight managed services clients, experienced a security incident that resulted in a service outage at the data center. The incident did not impact any of Insight's information systems, credentials, or data. To support our clients that were impacted, the Company paid for certain equipment and services required to resolve the outage.

Severance and Restructuring Expenses, Net. During 2024, we recorded severance and restructuring expenses, net of adjustments, totaling $34.0 million. The increase compared to 2023 was primarily due to actions taken to reduce both our teammate count, particularly non-technical resources, as well as strategic reductions in physical locations within the United States. These expenses were partially offset by net gains on the sale of properties due to restructuring of $2.4 million. During 2023, we recorded severance expense, net of adjustments, totaling $12.9 million. These expenses were partially offset by net gains on the sale of properties due to restructuring of $6.8 million.

Acquisition and Integration-related Expenses. During 2024, we incurred $2.7 million in direct third-party costs primarily related to the acquisition of Infocenter. During 2023, we incurred $7.4 million in direct third-party costs primarily related to the acquisitions of SADA and Amdaris. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our acquisitions.

Earnings from Operations. Earnings from operations decreased 7%, or $31.2 million, year to year, in 2024 compared to 2023. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for 2024 and 2023 (dollars in thousands):

North America’s earnings from operations decreased 12%, or $43.0 million, year to year, in 2024 compared to 2023. As a percentage of net sales, earnings from operations decreased by approximately 40 basis points to 4.5%. The decrease in earnings from operations was primarily driven by increases in selling and administrative expenses and severance and restructuring expenses, partially offset by an increase in gross profit and a decrease in acquisition and integration related expenses.

EMEA’s earnings from operations increased 21% (increasing 20% excluding the effects of fluctuating foreign currency exchange rates), or $8.1 million, year over year, in 2024 compared to 2023. As a percentage of net sales, earnings from operations increased by approximately 90 basis points to 3.3%. The increase in earnings from operations was primarily driven by increases in gross profit and a decrease in acquisition and integration related expenses, partially offset by increases in selling and administrative expenses and severance and restructuring expenses.

APAC’s earnings from operations increased 19% (increasing 20% excluding the effects of fluctuating foreign currency exchange rates), or $3.7 million, year over year, in 2024 compared to 2023. As a percentage of net sales, earnings from operations increased by approximately 150

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basis points to 10.0%. The increase in earnings from operations reflects an increase in gross profit, partially offset by increases in selling and administrative expenses, severance and restructuring expenses and acquisition and integration related expenses.

Adjusted Earnings from Operations. Adjusted earnings from operations increased 2%, or $10.2 million, year over year, in 2024 compared to 2023. Our Adjusted earnings from operations and Adjusted earnings from operations as a percentage of net sales by operating segment were as follows for 2024 and 2023 (dollars in thousands):

North America’s Adjusted earnings from operations decreased 1%, or $2.4 million, year to year, in 2024 compared to 2023. As a percentage of net sales, Adjusted earnings from operations increased by approximately 30 basis points to 6.0%. The decrease in Adjusted earnings from operations was primarily driven by increases in selling and administrative expenses, partially offset by an increase in gross profit.

EMEA’s Adjusted earnings from operations increased 18% (increasing 16% excluding the effects of fluctuating foreign currency exchange rates), or $8.4 million, year over year, in 2024 compared to 2023. As a percentage of net sales, Adjusted earnings from operations increased by approximately 100 basis points to 4.0%. The increase in Adjusted earnings from operations was primarily driven by increases in gross profit, partially offset by an increase in selling and administrative expenses.

APAC’s Adjusted earnings from operations increased 21% (increasing 22% excluding the effects of fluctuating foreign currency exchange rates), or $4.3 million, year over year, in 2024 compared to 2023. As a percentage of net sales, Adjusted earnings from operations increased by approximately 170 basis points to 10.5%. The increase in Adjusted earnings from operations reflects an increase in gross profit, partially offset by an increase in selling and administrative expenses.

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 increased 41%, or $19.7 million, in 2024 compared to 2023. This was primarily due to the issuance of the Senior Notes and higher loan balances under our ABL facility. This was partially offset by higher interest income earned in 2024 and decreased imputed interest under our inventory financing facilities. Imputed interest under our inventory financing facilities decreased $3.6 million due to lower average daily balances in 2024 compared to 2023. For a description of our various financing facilities, see Notes 7 and 8 to our Consolidated Financial Statements in Part II, Item 8 of this report.

Other (Income) Expense, Net. Other (income) expense, net, consists primarily of foreign currency exchange gains and losses. Foreign currency exchange gains and losses result from foreign currency transactions, including foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The changes in net foreign currency exchange gains/losses are due primarily to the underlying changes in the applicable exchange rates, partially mitigated by our use of foreign exchange forward contracts to offset the effects of fluctuations in foreign currencies on certain of our non-functional currency assets and liabilities.

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Income Tax Expense. Our effective tax rate for 2024 was 25.0% compared to 25.6% in 2023. The decrease in the tax rate was primarily due to additional research and transferable energy tax credit benefits available in 2024 as compared to 2023.

The effective tax rate in 2024 was higher than the federal statutory rate of 21.0% primarily due to state income taxes and higher taxes on earnings in foreign jurisdictions. These increases were offset partially by research and transferable energy tax credits. See Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of income tax expense.

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, (vi) gains and losses from revaluation of acquisition related earnout liabilities, and (vii) certain third-party data center service outage related expenses and recoveries, 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.

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2023 Compared to 2022

For a comparison of our results of operations for the fiscal years ended December 31, 2023 and 2022, see “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 fiscal year ended December 31, 2023 filed with the SEC on February 22, 2024.

Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for 2024 and 2023 (in thousands):

Cash and Cash Flow

•Our primary uses of cash during 2024 were to fund the acquisition of Infocenter, repay debt, including principal upon conversion of a portion of the Convertible Notes, fund repurchases of our common stock and to pay earnouts and other acquisition related payments.

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•Operating activities generated $632.8 million in cash in 2024, compared to $619.5 million in 2023.

•We received proceeds from the sale of assets of $13.8 million in 2024, compared to $15.5 million in 2023.

•We had net repayments under our inventory financing facilities of $13.6 million in 2024 compared to net repayments of $70.4 million in 2023.

•Net repayments under our ABL facility were $554.1 million in 2024. Net borrowings under our ABL facility were $299.6 million in 2023.

•We issued $500.0 million in principal amount of Senior Notes, which we used to pay down a portion of our borrowings under our ABL facility.

•Capital expenditures were $46.8 million in 2024 compared to $39.3 million in 2023.

•During 2024, we repurchased an aggregate of $200.0 million of our common stock compared to an aggregate of $217.1 million repurchased during 2023.

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, early settlement of a portion of the Warrants in cash (as discussed further below), principal payment on the Convertible Notes that mature in February 2025, 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.

•Cash flow from operating activities in 2024 was $632.8 million, compared to $619.5 million in 2023. The nominal increase in cash flow from operating activities was partially driven by a decrease in hardware net sales. 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.

Our consolidated cash flow operating metrics for the quarters ended December 31, 2024 and 2023 were as follows:

(a)Calculated as the balance of accounts receivable, net at the end of the period divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days.

(b)Calculated as average inventories divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the period plus inventories at the end of the period divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(c)Calculated as the sum of the balances of accounts payable – trade and accounts payable – inventory financing facilities at the end of the period divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(d)Calculated as DSOs plus DIOs, less DPOs.

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•Our cash conversion cycle was 7 days in the quarter ended December 31, 2024, a decrease of 22 days when compared to the fourth quarter of 2023.

•The changes in our cash conversion cycle compared to the same period in the prior year resulted from the net effect of a 58 day increase in DPOs and a 2 day decrease in DIOs partially offset by a 38 day increase in DSOs.

•The changes in our cash conversion cycle year over year were primarily the result of:

•The impact to DPOs of netting on certain revenue streams (agent net revenue) that flow through accounts payable on a gross basis while flowing through our income statement on a net basis including a significant agency transaction that based on its terms had not cleared by quarter end as well as changes in vendor mix;

•the benefit to DIOs of the reduction in hardware sales; and

•the impact to DSOs of netting on certain revenue streams (agent net revenue) that flow through accounts receivable on a gross basis while flowing through our income statement on a net basis including a significant agency transaction that based on its terms had not cleared by quarter end.

•Our cash conversion cycle is 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 both net sales and cost of goods sold, are processed and applied to accounts receivable and accounts payable in each reporting period. As a result, our DSO and DPO calculated on the basis of unadjusted net sales and unadjusted cost of goods sold are inherently inflated. Netted costs were $2.2 billion and $1.8 billion in the fourth quarter of 2024 and 2023, respectively. Adjusting our cash conversion cycle calculation by adding netted costs to both daily net sales and daily costs of goods sold results in an increase in our cash conversion cycle from 7 days to 14 days in the fourth quarter of 2024 and a reduction from 29 days to 22 days in the fourth quarter of 2023, which we believe provides a more accurate reflection of our cash flow operating metrics.

•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 2025, in excess of working capital needs to pay down our ABL facility and inventory financing facilities, to settle a portion of the Warrants in cash, and for strategic acquisitions.

Net cash used in investing activities.

•We paid $265.0 million to acquire Infocenter on May 1, 2024, net of cash and cash equivalents acquired of $5.1 million. Additionally, we paid $5.2 million, net of cash and cash equivalents acquired, for an entity in our EMEA segment, on July 1, 2024.

•We acquired SADA and Amdaris for approximately $398.6 million and $82.9 million, respectively, net of cash and cash equivalents acquired and excluding earn outs and hold backs in 2023.

•We received proceeds from the sale of assets, including properties held for sale, of $13.8 million and $15.5 million in 2024 and 2023, respectively.

•Capital expenditures were $46.8 million and $39.3 million in 2024 and 2023, respectively. The majority of the capital expenditures in 2024 were used for our new Texas distribution facility and to fund technology related projects.

•We expect total capital expenditures in 2025 to be in the range of $35.0 to $40.0 million.

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Net cash used in financing activities.

•In May 2024, we issued $500.0 million in principal amount of Senior Notes, which we used to pay down a portion of our borrowings under our ABL facility.

•During 2024, we had net repayments on our long-term debt under our ABL facility of $554.1 million and had net repayments under our inventory financing facilities of $13.6 million.

•During 2023, we had net borrowings on our long-term debt under our ABL facility of $299.6 million and had net repayments under our inventory financing facilities of $70.4 million.

•In 2024, we made earnout and acquisition related payments of $20.3 million associated with our Amdaris and Hanu acquisitions.

•In 2024, we also funded $200.0 million of repurchases of our common stock, compared to $217.1 million purchased during 2023.

•We expect to partially settle the warrants associated with the Convertible Notes in cash in the first half of 2025.

2023 Compared to 2022

For a comparison of our cash flows for the fiscal years ended December 31, 2023 and 2022, see “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 fiscal year ended December 31, 2023 filed with the SEC on February 22, 2024.

Financing Facilities

Our debt balance as of December 31, 2024 was $864.1 million. As of December 31, 2024, the current portion of our long-term debt primarily relates to the Convertible Notes.

•Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

•The Convertible Notes are subject to certain events of default and certain acceleration clauses. As of December 31, 2024, no such events have occurred.

•The Senior Notes are subject to certain events of default and certain acceleration clauses. As of December 31, 2024, 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 December 31, 2024, 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 December 31, 2024, eligible accounts receivables and inventory were sufficient to permit access to the full $1.8 billion under the ABL facility of which $39.0 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.

Notes 7 and 8 to the Consolidated Financial Statements in Part II, Item 8 of this report also include: a description of our financing facilities; amounts outstanding; amounts available and weighted average borrowings and interest rates during the year.

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Cash Requirements From Contractual Obligations

At December 31, 2024, our contractual obligations for continuing operations primarily consist of:

•$217.6 million under our inventory financing facilities due in 2025;

•$96.8 million under operating leases, the majority of which are due from 2025 through 2028;

•remaining contingent consideration (earnout payments) associated with our acquisition of SADA, up to a maximum of $240.0 million, payable upon certain defined contingencies being met for 2025 and 2026 that would be paid in 2026 and 2027, respectively;

•contingent consideration (earnout payments) associated with our acquisition of Amdaris, up to a maximum of $9.0 million, payable upon certain defined contingencies being met for 2025 that would be paid in 2026;

•contingent consideration (earnout payments) associated with our acquisition of Infocenter, up to a maximum of $106.3 million, payable upon certain defined contingencies being met for the years ended April 30, 2025 and April 30, 2026 that would be paid in 2025 and 2026, respectively;

•a purchase commitment related to cloud services of $78.9 million that must be met by September 2029;

•a purchase commitment related to software as a service of $26.1 million that must be met by November 2026;

•$39.0 million outstanding under our ABL facility maturing in 2027;

•$500.0 million outstanding under our Senior Notes maturing in 2032; and

•$333.1 million principal amount due on the Convertible Notes maturing in February 2025.

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries may be subject to U.S. income taxation upon repatriation to the United States. Certain of our foreign earnings were deemed distributed as a result of the Tax Cuts and Jobs Act of 2017; however, for years subsequent to 2017, we continue to assert indefinite reinvestment of foreign earnings for certain of our foreign subsidiaries. As of December 31, 2024, we had approximately $217.0 million in cash and cash equivalents in our foreign subsidiaries, the majority of which reside in Canada, Australia, New Zealand and The Netherlands. Certain of these cash balances will be remitted to the U.S. by paying down intercompany payables generated in the ordinary course of business or through dividend distributions.

Off-Balance Sheet Arrangements

We have entered into off-balance sheet arrangements, which include guarantees and indemnifications. These arrangements are discussed in Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this report. 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.

Acquisitions

Our strategy includes the possible acquisition of, or investments in, other businesses to expand or complement our operations or to add certain services capabilities. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions. Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the three. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisitions of Infocenter in May 2024, SADA in December 2023, Amdaris in August 2023 and Hanu in June 2022.

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Inflation

With the exception of the impact on our variable interest rate debt facilities, we have historically not been adversely affected by inflation, as technological advances and competition within the IT industry have generally caused the prices of the products we sell to decline and product life cycles tend to be short. This requires our growth in unit sales to exceed the decline in prices in order to increase our net sales. We believe that most price increases could be passed on to our clients, as prices charged by us are not set by long-term contracts; however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our clients.

Critical Accounting Estimates

General

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 this report. 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 our estimates. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

We consider the following to be our critical accounting estimates used in the preparation of our consolidated financial statements:

Sales Recognition

Description

For each of our product and services offerings, the determination needs to be made as to whether we are the principal or the agent in the transaction. This determination leads to how the revenue for each offering is recognized, either gross, where we are the principal in the transaction, or net, where we are the agent in the transaction. This determination is made by assessing whether or not we control the product or service prior to delivery to the client.

Judgments and Uncertainties

If we take control of the product or service prior to delivery to the client, then we are the principal in the transaction. If we do not take control of the product or service prior to delivery to the client, we are the agent in the transaction. The determination of whether we take control of products or services prior to delivery to the client can be judgmental and depends upon the specific facts and circumstances for each transaction. Key assumptions used in our estimates for transactions where we have determined we are the agent are the consistency of transactions with multiple performance obligations and consistency of transactions involving security software. Based on our current methodology to recognize net sales, the amount of reported net sales is not highly sensitive to changes in these key assumptions. For example, a 5% change in one of our key assumptions would not materially affect our reported net sales.

Effect if actual results differ from assumptions

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize net sales. However, if actual results are not consistent with our estimates or assumptions, it could have a material effect on our reported net sales, timing of revenue recognition and our results of operations. We have not made any material

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changes in accounting methodology or key assumptions used to recognize net sales during the past three fiscal years. We have not made any material adjustments to our financial statements as a result of actual results not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to sales recognition and for a detailed description of our product and services offerings.

Partner Funding

Description

We receive payments and credits from partners, including consideration pursuant to volume sales incentive programs, volume purchase incentive programs and shared marketing expense programs. Partner funding received pursuant to volume sales incentive programs is recognized as it is earned as a reduction to costs of goods sold. Partner funding received pursuant to volume purchase incentive programs is allocated as a reduction to inventories based on the applicable incentives earned from each partner and is recorded in costs of goods sold as the related inventory is sold. Partner funding received pursuant to shared marketing expense programs is recorded as it is earned as a reduction of the related selling and administrative expenses in the period the program takes place if the consideration represents a reimbursement of specific, incremental, identifiable costs. Partner funding received pursuant to certain services delivered is recorded as services net sales. Consideration that exceeds the specific, incremental, identifiable costs is classified as a reduction of costs of goods sold.

Judgments and Uncertainties

We make period-end estimates about the anticipated achievement levels under the various partner programs in order to accrue amounts earned. These estimates and assumptions primarily include whether we have met key net sales targets under the various partner programs. Based on our current methodology to recognize partner funding, the amount of reported net sales and gross profit is not highly sensitive to changes in key assumptions around achievement levels. For example, a revised assessment of the achievement level for any individual partner program would not materially affect our reported net sales or gross profit.

Effect if actual results differ from assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate estimates of anticipated achievement levels under individual partner programs during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize partner funding. However, if our actual results are not consistent with our assumptions it could have a material effect on our results of operations and our cash flows. We have not made any material adjustments to our financial statements as a result of actual results for partner funding not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to partner funding.

Goodwill

Description

We perform an annual review of our goodwill in the fourth quarter of every year. We continually assess if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value and assess whether any indicators of impairment exist. Events or circumstances that could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, significant changes in the manner of our use of the acquired assets or the strategy

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for our overall business, significant negative industry or economic trends, significant declines in our stock price for a sustained period or significant underperformance relative to expected historical or projected future cash flows or results of operations. Any adverse change in these factors, among others, could have a significant effect on the recoverability of goodwill and could have a material effect on our consolidated financial statements.

Judgments and Uncertainties

We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform a quantitative goodwill impairment test. Otherwise, the goodwill impairment test is not required. In completing a quantitative test for a potential impairment of goodwill, we compare the estimated fair value of each reporting unit in which the goodwill resides to its book value, including goodwill. Our reporting units are our operating segments.

Management must apply judgment in determining the reporting units and in estimating the fair value of our reporting units. Multiple valuation techniques can be used to assess the fair value of the reporting unit, including the market and income approaches. All of these techniques include the use of estimates and assumptions that are inherently uncertain. Changes in these estimates and assumptions could materially impact the determination of fair value or goodwill impairment, or both. These estimates and assumptions primarily include, but are not limited to, an appropriate control premium in excess of the market capitalization of the Company, future market growth, forecasted sales and costs and appropriate discount rates. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

Management evaluates the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If the carrying amount of the reporting unit exceeds its fair value, then an impairment charge is recognized for the amount by which the carrying value exceeds the fair value. To ensure the reasonableness of the estimated fair values of our reporting units, we perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units. Based on qualitative assessments performed in most recent years a quantitative assessment has not been determined to be necessary for any of our reporting units. As such, the amount of reported goodwill is not sensitive to changes in key assumptions.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate impairment of goodwill during the past three fiscal years. Our assessments in the past three fiscal years have been qualitative assessments and no quantitative assessments have been deemed necessary. Additionally, during each of the years ended December 31, 2024, 2023 and 2022 we analyzed each of our reporting units and determined that no impairment charge was necessary.

Acquisition Accounting/Business Combinations

Description

We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, all of the assets acquired and liabilities assumed, be recorded at the date of acquisition at their respective fair values, or other basis as applicable. The excess purchase price over the estimated fair value of net assets acquired is recorded as goodwill.

We use various models to determine the value of assets acquired and liabilities assumed such as the cost method, market method, relief from royalty method, multi-period excess earnings

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and discounted cash flow methods. We engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets. We may adjust the preliminary purchase price allocation, after the acquisition closing date and through the end of the measurement period of one year or less, as we finalize the valuation of acquired assets and liabilities.

Judgments and Uncertainties

Significant judgment is often required in estimating the fair value of assets acquired (particularly intangible assets), liabilities assumed, and contingent consideration. We make estimates and assumptions about projected future cash flows including net sales, gross margin, attrition rates, growth rates, and discount rates based on historical results, business plans, expected synergies, if any, perceived risk and marketplace data considering the perspective of marketplace participants. Based on our current methodology to estimate the fair value of assets acquired and liabilities assumed, the amount of intangible assets recognized in each business combination is not highly sensitive to changes in these key assumptions. For example, with the exception of the discount rate, a 5% change in one of our key assumptions would not materially affect our reported intangible assets balance.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate the fair value of assets acquired and liabilities assumed during the past three fiscal years. While management believes the expectations and assumptions used in valuing assets acquired and liabilities assumed are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could then result in subsequent impairment. Any such impairment charges could have a material effect on our results of operations. We completed two business combinations in fiscal 2024, including an acquisition in EMEA, and two business combinations in fiscal 2023. We have not made any material adjustments to our financial statements as a result of business combination key assumptions not being consistent with our estimates in the past three fiscal years.

See Notes 1 and 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to acquisition accounting and recent acquisitions.

Recently Issued Accounting Standards

The information contained in Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report concerning a description of recent accounting pronouncements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this report. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including those discussed in “Risk Factors” in Part I, Item 1A and elsewhere in this report.

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 transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 35 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.

Full year 2023 financial and operational highlights included the following:

•We reported record gross profit of $1.7 billion and record gross margin of 18.2%, primarily driven by expansion in North America.

•We generated cash flows from operations of $619.5 million.

•In December 2023, we acquired SADA to strengthen our digital transformation capabilities and accelerate the growth of our cloud services and solutions.

•In August 2023, we acquired Amdaris to support our EMEA services and solution offerings.

On a consolidated basis, for the year ended December 31, 2023:

•Net sales of $9.2 billion decreased 12% compared to 2022.

•Gross profit of $1.7 billion increased 2% compared to 2022.

•Consolidated gross margin expanded approximately 250 basis points to a record 18.2% of net sales in 2023. This increase reflects expansion in margin from services net sales, primarily from growth in cloud solution offerings, and an expansion in product margin.

•Earnings from operations increased to $419.8 million in 2023, an increase of 1% compared to the prior year, which represented 4.6% of net sales.

•Our effective tax rate in 2023 was 25.6%, which compares to our effective tax rate of 25.1% in 2022.

•Net earnings and diluted net earnings per share were $281.3 million and $7.55, respectively, in 2023. In 2022, we reported net earnings of $280.6 million and diluted net earnings per share of $7.66.

The results of operations for 2023 include the following items:

•severance and restructuring expenses, net of $6.1 million, $4.4 million net of tax;

•acquisition and integration related expenses of $7.4 million, $6.0 million net of tax; and

•the repurchase of approximately 1.6 million shares of the Company’s common stock for an aggregate cost of $217.1 million.

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The results of operations for 2022 include the following items:

•severance and restructuring expenses of $4.2 million, $3.2 million net of tax; and

•the repurchase of approximately 1.1 million shares of the Company’s common stock for an aggregate cost of $107.9 million.

Throughout the “Overview” and “Results of Operations” sections of “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. In computing these 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.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

During 2023, we generated $619.5 million of cash from operating activities and primarily utilized cash for strategic acquisitions and to repurchase shares of our common stock. We had net borrowings of $299.6 million under our senior secured revolving credit facility (the “ABL facility”). We ended the year with $268.7 million of cash and cash equivalents and $940.5 million of debt outstanding under our long-term debt facilities, including $348.0 million related to the Notes that are classified as a current liability at December 31, 2023.

Details about segment results of operations can be found in Note 19 to the Consolidated Financial Statements in Part II, Item 8 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 year to year and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

Supply Chain Constraints and Inflation Update

Supply constraints that have had an industry-wide impact since the beginning of 2020 continued to ease in the second half of 2023. We believe that the remaining supply constraints and extended lead times for certain infrastructure, including networking products have now normalized back to historic levels. However, we continue to see a general slowdown in our clients' decision making, which we believe will continue in the near term. In addition, inflation resulted in higher interest rates on all of our variable rate facilities when compared to 2022 and we expect these higher rates will continue into 2024. We are actively monitoring changes to the global macroeconomic environment, including those impacting our supply chain 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 for 2024 and beyond.

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RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of net sales for the years ended December 31, 2023 and 2022:

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 shift our focus and 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 change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of this report.

Our results of operations include the results of Hanu, Amdaris and SADA from their respective acquisition dates.

2023 Compared to 2022

Net Sales. Net sales decreased 12%, or $1.3 billion, in 2023 compared to 2022. Net sales of products (hardware and software) decreased 15%, year to year, while net sales of services increased 4%, year over year, in 2023 compared to 2022. Our net sales by operating segment for 2023 and 2022 were as follows (dollars in thousands):

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Our net sales by offering category for North America for 2023 and 2022 were as follows (dollars in thousands):

Net sales in North America decreased 13%, or $1.1 billion, in 2023 compared to 2022. This net decrease reflects a decrease in hardware net sales, partially offset by increases in software and services net sales. Net sales of hardware decreased 22%, year to year. Net sales of software and services increased 7% and 2%, respectively, year over year. The net decrease year to year was primarily the result of the following:

•The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients. This decrease reflects lower sales of devices throughout the year and decreases in infrastructure sales in the latter part of 2023. We believe these decreases reflect client decisions around timing of device refreshes and investments in infrastructure in response to challenges in the broader macroeconomic environment. We expect this trend could continue into the second half of 2024.

•The increase in software net sales was primarily due to higher volume of software licensing. This increase was partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The increase in services net sales was primarily due to the continued trend toward higher sales of cloud solution offerings, including net sales attributable to SADA, which we acquired in December 2023, partially offset by decreases in Insight Delivered services net sales.

Our net sales by offering category for EMEA for 2023 and 2022, were as follows (dollars in thousands):

Net sales in EMEA decreased 9% (also decreased 9% excluding the effects of fluctuating foreign currency exchange rates), or $148.9 million, in 2023 compared to 2022. This net decrease reflects a decrease in hardware and software net sales, partially offset by an increase in services net sales. Net sales of hardware and software were down 16% and 8%, respectively, year to year, partially offset by an increase in services net sales of 16%, year over year. The changes were primarily the result of the following:

•The decrease in hardware net sales was primarily due to lower sales to public sector, large enterprise and corporate clients.

•The decrease in software net sales was due to the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

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•The increase in services net sales was due to increased sales of Insight Delivered services, including from Amdaris, which we acquired in August 2023, and higher sales of cloud solution offerings.

Our net sales by offering category for APAC for 2023 and 2022, were as follows (dollars in thousands):

Net sales in APAC decreased 2% (increased 1% excluding the effects of fluctuating foreign currency rates), or $4.4 million, in 2023 compared to 2022. Net sales of hardware decreased 24% year to year, partially offset by increases in software and services net sales of 2% and 8%, respectively, year over year. The net changes were primarily the result of the following:

•The decrease in hardware net sales was due to lower volume of sales to large enterprise and corporate clients.

•The increase in services net sales was due to higher volume of Insight Delivered services and higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The increase in software net sales was primarily due to higher volume of sales to corporate and public sector clients, partially offset by the continued trend toward higher sales of cloud solution offerings.

Net sales by category for North America, EMEA and APAC were as follows for 2023 and 2022:

Gross Profit. Gross profit increased 2%, or $33.0 million, in 2023 compared to 2022, with gross margin increasing approximately 250 basis points to 18.2% of net sales. Our gross profit and gross profit as a percent of net sales by operating segment for 2023 and 2022 were as follows (dollars in thousands):

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North America’s gross profit increased 1%, or $17.6 million, in 2023 compared to 2022. As a percentage of net sales, gross margin expanded by approximately 250 basis points year over year. The year over year net increase in gross margin was primarily attributable to the following:

•A net increase in product margin of 41 basis points year over year. This increase was primarily due to higher margins on both hardware and software net sales compared to the prior year. The expanded margins on hardware are due in part to the decline in lower margin devices and also reflect the results of profitability and pricing initiatives started in 2022.

•An expansion in services margin year over year of 216 basis points was due to higher margins generated from increased cloud solution offerings, including margin contributed by SADA, software maintenance and on Insight Core services, (consisting of Insight Delivered and managed services).

EMEA’s gross profit increased 5% (increased 4% excluding the effects of fluctuating foreign currency exchange rates), or $12.7 million, in 2023 compared to 2022. As a percentage of net sales, gross margin expanded 220 basis points to 16.6%. The year over year net increase in gross margin was primarily attributable to the following:

•A net increase in product margin of 50 basis points year over year. This increase was primarily due to higher margins on both hardware and software net sales compared to the prior year, partially offset by a decrease in partner funding.

•An expansion in services margin year over year of 169 basis points was due to higher margins generated from increased cloud solution offerings and on Insight Core services from Amdaris.

APAC’s gross profit increased 4% (increased 8% excluding the effects of fluctuating foreign currency exchange rates), or $2.6 million, in 2023 compared to 2022. As a percentage of net sales, gross margin increased by approximately 170 basis points year over year. The expanded gross margin for APAC in 2023 compared to 2022 was due primarily to changes in sales mix to services net sales, including Insight Core services at higher margins than product net sales.

Our overall gross margins expanded in 2023 compared to 2022, as expected. We believe this trend could continue into future periods as we focus on selling solutions and increasing our services net sales, including cloud solution offerings.

Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $19.6 million in 2023 compared to 2022. Selling and administrative expenses also increased approximately 180 basis points as a percentage of net sales in 2023 compared to 2022. The overall net increase in expenses reflects a $7.3 million increase in personnel costs, including teammate benefits, and a $19.8 million increase in other expenses, year over year. The increase in personnel costs reflects increases in overall teammate headcount from the acquisitions of Amdaris and SADA. The increase in other expenses is partially due to costs incurred related to a third-party data center service outage, net of recoveries of $5.0 million and an increase of $4.2 million in transformation costs incurred and paid to third parties in 2023 compared to 2022. On July 29, 2023, a third-party data center that hosts network environments for certain Insight managed services clients, experienced a security incident that resulted in a service outage at the data center. The incident did not impact any of Insights' information systems, credentials, or data. To support our clients that were impacted, the Company paid for certain equipment and services required to resolve the outage. Transformation costs are costs we incur to transform our business to help us achieve our strategic objectives, including becoming a leading solutions integrator. We expect to continue to incur further transformation costs in 2024; however, these costs are unique in nature and are not expected to recur in the longer term. Depreciation and amortization expense also increased $6.2 million, year over year, primarily as a result of the Amdaris and SADA acquisitions. These increases were partially offset by decreases in legal and professional fees of $8.3 million and marketing costs of $3.1 million.

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Severance and Restructuring Expenses, Net. During 2023, we recorded severance expense, net of adjustments, totaling $12.9 million. These expenses were partially offset by net gains on the sale of properties due to restructuring of $6.8 million. During 2022, we recorded severance expense, net of adjustments, totaling $4.2 million.

Acquisition and Integration-related Expenses. During 2023, we incurred $7.4 million in direct third-party costs primarily related to the acquisitions of SADA and Amdaris. During 2022, we incurred $2.0 million in direct third-party costs primarily related to the acquisition of Hanu. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our acquisitions.

Earnings from Operations. Earnings from operations increased 1%, or $6.1 million, year over year, in 2023 compared to 2022. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for 2023 and 2022 (dollars in thousands):

North America’s earnings from operations increased 3%, or $11.6 million, year over year, in 2023 compared to 2022. As a percentage of net sales, earnings from operations increased by approximately 80 basis points to 4.9%. The increase in earnings from operations was primarily driven by an increase in gross profit in excess of increases in selling and administrative expenses, severance and restructuring expenses and acquisition and integration related expenses.

EMEA’s earnings from operations decreased 14% (also decreasing 14% excluding the effects of fluctuating foreign currency exchange rates), or $6.1 million, year to year, in 2023 compared to 2022. As a percentage of net sales, earnings from operations decreased by approximately 20 basis points to 2.4%. The decrease in earnings from operations was primarily driven by increases in selling and administrative expenses and acquisition and integration related expenses, partially offset by an increase in gross profit.

APAC’s earnings from operations increased 3% (increasing 6% excluding the effects of fluctuating foreign currency exchange rates), or $0.6 million, year over year, in 2023 compared to 2022. As a percentage of net sales, earnings from operations increased by approximately 40 basis points to 8.5%. The increase in earnings from operations reflects an increase in gross profit, partially offset by an increase in selling and administrative expenses in 2023 compared to 2022.

Non-Operating (Income) Expense.

Interest Expense, net. Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities and the Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense increased 4%, or $1.6 million, in 2023 compared to 2022 primarily due to higher interest rates under our ABL facility. This was partially offset by lower average daily balances under our ABL facility, higher interest income earned in 2023 and decreased imputed interest under our inventory financing facilities. Imputed interest under our inventory financing facilities decreased $2.2 million due to lower average daily balances in 2023 compared to 2022. For a description of our various financing facilities, see Notes 7 and 8 to our Consolidated Financial Statements in Part II, Item 8 of this report.

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Other Expense (Income), Net. Other expense (income), net, consists primarily of foreign currency exchange gains and losses. Foreign currency exchange gains and losses result from foreign currency transactions, including foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The changes in net foreign currency exchange gains/losses are due primarily to the underlying changes in the applicable exchange rates, partially mitigated by our use of foreign exchange forward contracts to offset the effects of fluctuations in foreign currencies on certain of our non-functional currency assets and liabilities.

Income Tax Expense. Our effective tax rate for 2023 was 25.6% compared to 25.1% in 2022. The increase in the tax rate was primarily due to reduced foreign and research tax credit benefits available in 2023 as compared to 2022 and the effect of valuation allowances on certain foreign loss carryforwards. These increases were partially offset by the release of reserves related to tax years whose statute expired during the current year.

The effective tax rate in 2023 was higher than the federal statutory rate of 21.0% primarily due to state income taxes and higher taxes on earnings in foreign jurisdictions. These increases were offset partially by research tax credits. See Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of income tax expense.

2022 Compared to 2021

For a comparison of our results of operations for the fiscal years ended December 31, 2022 and 2021, see “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 fiscal year ended December 31, 2022 filed with the SEC on February 16, 2023.

Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for 2023 and 2022 (in thousands):

Cash and Cash Flow

•Our primary uses of cash during 2023 were to fund the strategic acquisitions of SADA and Amdaris, to repurchase shares of our common stock, to repay our inventory financing facilities and to purchase property and equipment.

•Operating activities generated $619.5 million in cash in 2023, compared to $98.1 million in 2022.

•We received proceeds from the sale of assets, including our properties held for sale, of $15.5 million in 2023, compared to $1.3 million in 2022.

•We had net repayments under our inventory financing facilities of $70.4 million in 2023 compared to net repayments of $8.3 million in 2022.

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•Net borrowings under our ABL facility were $299.6 million in 2023. Net borrowings under our ABL facility were $244.7 million in 2022.

•Capital expenditures were $39.3 million in 2023 compared to $70.9 million in 2022.

•During 2023, we repurchased an aggregate of $217.1 million of our common stock compared to an aggregate of $107.9 million repurchased during 2022.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our cash and working capital requirements for operations as well as other strategic investments 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, debt repayments, including conversion of the Notes, and repayment of our inventory financing facilities for the next 12 months. While we expect the majority of holders of the Notes will not opt to convert their Notes early, the Notes become freely convertible at the option of the holders beginning in June 2024. We believe we have sufficient funds available from capacity under our ABL facility as well as cash we expect to generate from operations, to fund any early conversions that may occur. We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities or other available financing resources.

Net cash provided by operating activities.

•Cash flow from operating activities in 2023 was $619.5 million, a significant increase in cash generation compared to 2022. The increase in cash flow from operating activities was primarily driven by the decline in devices net sales experienced throughout 2023 when compared to 2022. 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, and particularly of devices, we typically generate increased cash from operations.

Our consolidated cash flow operating metrics for the quarters ended December 31, 2023 and 2022 were as follows:

(a)Calculated as the balance of accounts receivable, net at the end of the period divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days.

(b)Calculated as average inventories divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the period plus inventories at the end of the period divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(c)Calculated as the sum of the balances of accounts payable – trade and accounts payable – inventory financing facilities at the end of the period divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(d)Calculated as DSOs plus DIOs, less DPOs.

•Our cash conversion cycle was 29 days in the quarter ended December 31, 2023, a decrease of 11 days when compared to the fourth quarter of 2022.

•The changes in our cash conversion cycle compared to the same period in the prior year resulted from the net effect of a 35 day increase in DPOs and a 3 day decrease in DIOs partially offset by a 27 day increase in DSOs.

•The changes in our cash conversion cycle year over year were primarily the result of:

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•the impact to DPOs of the SADA and Amdaris acquisitions combined with changes in vendor mix away from discount vendors;

•the benefit to DIOs of the easing of supply constraints; and

•the impact to DSOs of the SADA and Amdaris acquisitions combined with an increase in other receivables including multi-year transactions.

•Our cash conversion cycle is 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 both net sales and cost of goods sold, are processed and applied to accounts receivable and accounts payable in each reporting period. As a result, our DSO and DPO calculated on the basis of unadjusted net sales and unadjusted cost of goods sold are inherently inflated. Netted costs were $1.8 billion and $1.6 billion in the fourth quarter of 2023 and 2022, respectively. Adjusting our cash conversion cycle calculation by adding netted costs to both daily net sales and daily costs of goods sold results in a reduction to our cash conversion cycle from 29 days to 22 days in the fourth quarter of 2023 and from 40 days to 28 days in the fourth quarter of 2022, which we believe provides a more accurate reflection of our cash flow operating metrics.

•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 2024, in excess of working capital needs, to pay down our ABL facility and our inventory financing facilities as well as to fund strategic acquisitions.

Net cash used in investing activities.

•We acquired SADA and Amdaris for approximately $398.6 million and $82.9 million, respectively, net of cash and cash equivalents acquired and excluding earn outs and hold backs in 2023.

•We received proceeds from the sale of assets, including our properties held for sale, of $15.5 million and $1.3 million in 2023 and 2022, respectively.

•Capital expenditures were $39.3 million and $70.9 million in 2023 and 2022, respectively. The majority of the capital expenditures in 2023 was used to fund technology related projects.

•We expect total capital expenditures in 2024 to be in the range of $50.0 to $55.0 million.

Net cash (used in) provided by financing activities.

•During 2023, we had net borrowings on our long-term debt under our ABL facility of $299.6 million and had net repayments under our inventory financing facilities of $70.4 million.

•During 2022, we had net borrowings on our long-term debt under our ABL facility of $244.7 million and had net repayments under our inventory financing facilities of $8.3 million.

•In 2023, we made earn out and acquisition related payments associated with our Hanu acquisition of $15.6 million in the aggregate, with the earnout finalized in November 2023.

•In 2023, we also funded $217.1 million of repurchases of our common stock, compared to $107.9 million purchased during 2022.

•We expect to repurchase shares of our common stock in 2024 under our share repurchase plan to cover the dilutive impact of stock-based awards vesting.

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2022 Compared to 2021

For a comparison of our cash flows for the fiscal years ended December 31, 2022 and 2021, see “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 fiscal year ended December 31, 2022 filed with the SEC on February 16, 2023.

Financing Facilities

As of December 31, 2023, our long-term debt balance includes $591.5 million outstanding under our $1.8 billion ABL facility. As of December 31, 2023, the current portion of our long-term debt relates to the Notes and other financing obligations.

•Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

•Our Notes are subject to certain events of default and certain acceleration clauses. As of December 31, 2023, 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 December 31, 2023, 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 December 31, 2023, eligible accounts receivables and inventory were sufficient to permit access to $1.7 billion of the full $1.8 billion under the ABL facility.

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.

Notes 7 and 8 to the Consolidated Financial Statements in Part II, Item 8 of this report also include: a description of our financing facilities; amounts outstanding; amounts available and weighted average borrowings and interest rates during the year.

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Cash Requirements From Contractual Obligations

At December 31, 2023, our contractual obligations for continuing operations primarily consist of:

•$231.9 million under our inventory financing facilities due in 2024;

•$102.4 million under operating leases, the majority of which are due from 2024 through 2027;

•contingent consideration (earnout payments) associated with our acquisition of SADA, up to a maximum of $390.0 million, payable upon certain defined contingencies being met from 2024 through 2027;

•contingent consideration (earnout payments) associated with our acquisition of Amdaris, up to a maximum of $54.4 million, payable upon certain defined contingencies being met from 2024 through 2026;

•a purchase commitment related to cloud services of $95.8 million that must be met by September 2029;

•a purchase commitment related to software as a service of $33.9 million that must be met by November 2026;

•$591.5 million outstanding under our ABL facility maturing in 2027; and

•$350.0 million principal amount due on the Notes maturing in 2025.

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries may be subject to U.S. income taxation upon repatriation to the United States. Certain of our foreign earnings were deemed distributed as a result of the Tax Cuts and Jobs Act of 2017; however, for years subsequent to 2017, we continue to assert indefinite reinvestment of foreign earnings for certain of our foreign subsidiaries. As of December 31, 2023, we had approximately $209.1 million in cash and cash equivalents in our foreign subsidiaries, the majority of which reside in Canada, The Netherlands, New Zealand and Australia. Certain of these cash balances will be remitted to the U.S. by paying down intercompany payables generated in the ordinary course of business or through dividend distributions.

Off-Balance Sheet Arrangements

We have entered into off-balance sheet arrangements, which include guarantees and indemnifications. These arrangements are discussed in Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this report. 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.

Acquisitions

Our strategy includes the possible acquisition of, or investments in, other businesses to expand or complement our operations or to add certain services capabilities. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions. Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the three. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisitions of SADA in December 2023, Amdaris in August 2023 and Hanu in June 2022.

Inflation

We have historically not been adversely affected by inflation, as technological advances and competition within the IT industry have generally caused the prices of the products we sell to decline and product life cycles tend to be short. This requires our growth in unit sales to exceed

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the decline in prices in order to increase our net sales. We believe that most price increases could be passed on to our clients, as prices charged by us are not set by long-term contracts; however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our clients.

Critical Accounting Estimates

General

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 this report. 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 our estimates. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

We consider the following to be our critical accounting estimates used in the preparation of our consolidated financial statements:

Sales Recognition

Description

For each of our product and services offerings, the determination needs to be made as to whether we are the principal or the agent in the transaction. This determination leads to how the revenue for each offering is recognized, either gross, where we are the principal in the transaction, or net, where we are the agent in the transaction. This determination is made by assessing whether or not we control the product or service prior to delivery to the client.

Judgments and Uncertainties

If we take control of the product or service prior to delivery to the client, then we are the principal in the transaction. If we do not take control of the product or service prior to delivery to the client, we are the agent in the transaction. The determination of whether we take control of products or services prior to delivery to the client can be judgmental and depends upon the specific facts and circumstances for each transaction. Key assumptions used in our estimates for transactions where we have determined we are the agent are the consistency of transactions with multiple performance obligations and consistency of transactions involving security software. Based on our current methodology to recognize net sales, the amount of reported net sales is not highly sensitive to changes in these key assumptions. For example, a 5% change in one of our key assumptions would not materially affect our reported net sales.

Effect if actual results differ from assumptions

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize net sales. However, if actual results are not consistent with our estimates or assumptions, it could have a material effect on our reported net sales, timing of revenue recognition and our results of operations. We have not made any material changes in accounting methodology or key assumptions used to recognize net sales during the past three fiscal years. We have not made any material adjustments to our financial statements as a result of actual results not being consistent with our estimates in the past three fiscal years.

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See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to sales recognition and for a detailed description of our product and services offerings.

Partner Funding

Description

We receive payments and credits from partners, including consideration pursuant to volume sales incentive programs, volume purchase incentive programs and shared marketing expense programs. Partner funding received pursuant to volume sales incentive programs is recognized as it is earned as a reduction to costs of goods sold. Partner funding received pursuant to volume purchase incentive programs is allocated as a reduction to inventories based on the applicable incentives earned from each partner and is recorded in costs of goods sold as the related inventory is sold. Partner funding received pursuant to shared marketing expense programs is recorded as it is earned as a reduction of the related selling and administrative expenses in the period the program takes place if the consideration represents a reimbursement of specific, incremental, identifiable costs. Partner funding received pursuant to certain services delivered is recorded as services net sales. Consideration that exceeds the specific, incremental, identifiable costs is classified as a reduction of costs of goods sold.

Judgments and Uncertainties

We make period-end estimates about the anticipated achievement levels under the various partner programs in order to accrue amounts earned. These estimates and assumptions primarily include whether we have met key net sales targets under the various partner programs. Based on our current methodology to recognize partner funding, the amount of reported net sales and gross profit is not highly sensitive to changes in key assumptions around achievement levels. For example, a revised assessment of the achievement level for any individual partner program would not materially affect our reported net sales or gross profit.

Effect if actual results differ from assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate estimates of anticipated achievement levels under individual partner programs during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize partner funding. However, if our actual results are not consistent with our assumptions it could have a material effect on our results of operations and our cash flows. We have not made any material adjustments to our financial statements as a result of actual results for partner funding not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to partner funding.

Goodwill

Description

We perform an annual review of our goodwill in the fourth quarter of every year. We continually assess if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value and assess whether any indicators of impairment exist. Events or circumstances that could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, significant declines in our stock price for a sustained period or significant underperformance relative to expected historical or projected future cash flows or results of operations. Any adverse change in these

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factors, among others, could have a significant effect on the recoverability of goodwill and could have a material effect on our consolidated financial statements.

Judgments and Uncertainties

We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform a quantitative goodwill impairment test. Otherwise, the goodwill impairment test is not required. In completing a quantitative test for a potential impairment of goodwill, we compare the estimated fair value of each reporting unit in which the goodwill resides to its book value, including goodwill. Our reporting units are our operating segments.

Management must apply judgment in determining the reporting units and in estimating the fair value of our reporting units. Multiple valuation techniques can be used to assess the fair value of the reporting unit, including the market and income approaches. All of these techniques include the use of estimates and assumptions that are inherently uncertain. Changes in these estimates and assumptions could materially impact the determination of fair value or goodwill impairment, or both. These estimates and assumptions primarily include, but are not limited to, an appropriate control premium in excess of the market capitalization of the Company, future market growth, forecasted sales and costs and appropriate discount rates. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

Management evaluates the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If the carrying amount of the reporting unit exceeds its fair value, then an impairment charge is recognized for the amount by which the carrying value exceeds the fair value. To ensure the reasonableness of the estimated fair values of our reporting units, we perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units. Based on qualitative assessments performed in most recent years a quantitative assessment has not been determined to be necessary for any of our reporting units. As such, the amount of reported goodwill is not sensitive to changes in key assumptions.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate impairment of goodwill during the past three fiscal years. Our assessments in the past three fiscal years have been qualitative assessments and no quantitative assessments have been deemed necessary. Additionally, during the three years ended December 31, 2023, 2022 and 2021 we analyzed each of our reporting units and determined that no impairment charge was necessary.

Acquisition Accounting/Business Combinations

Description

We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, all of the assets acquired and liabilities assumed, be recorded at the date of acquisition at their respective fair values, or other basis as applicable. The excess purchase price over the estimated fair value of net assets acquired is recorded as goodwill.

We use various models to determine the value of assets acquired and liabilities assumed such as the cost method, market method, relief from royalty method, multi-period excess earnings and discounted cash flow methods. We engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets. We may adjust the preliminary purchase price

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allocation, after the acquisition closing date and through the end of the measurement period of one year or less, as we finalize the valuation of acquired assets and liabilities.

Judgments and Uncertainties

Significant judgment is often required in estimating the fair value of assets acquired (particularly intangible assets), liabilities assumed, and contingent consideration. We make estimates and assumptions about projected future cash flows including net sales, gross margin, attrition rates, growth rates, and discount rates based on historical results, business plans, expected synergies, if any, perceived risk and marketplace data considering the perspective of marketplace participants. Based on our current methodology to estimate the fair value of assets acquired and liabilities assumed, the amount of intangible assets recognized in each business combination is not highly sensitive to changes in these key assumptions. For example, with the exception of the discount rate, a 5% change in one of our key assumptions would not materially affect our reported intangible assets balance.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate the fair value of assets acquired and liabilities assumed during the past three fiscal years. While management believes the expectations and assumptions used in valuing assets acquired and liabilities assumed are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could then result in subsequent impairment. Any such impairment charges could have a material effect on our results of operations. We completed two business combinations in fiscal 2023 and one business combination in fiscal 2022. We have not made any material adjustments to our financial statements as a result of business combination key assumptions not being consistent with our estimates in the past three fiscal years.

See Notes 1 and 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to acquisition accounting and recent acquisitions.

Recently Issued Accounting Standards

The information contained in Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report concerning a description of recent accounting pronouncements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this report. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including those discussed in “Risk Factors” in Part I, Item 1A and elsewhere in this report.

Overview

Today, every business needs to be a technology business. We help our clients accelerate their digital journey to modernize their business 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 transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 34 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 at every opportunity. 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.

Full year 2022 financial and operational highlights included the following:

•We generated growth in earnings from operations of 25% on a consolidated basis with growth in our North America and APAC reporting segments.

•We grew our services net sales by 13% on a consolidated basis with growth in our North America and APAC reporting segments.

•We generated cash flows from operations of $98.1 million.

•In June 2022 we acquired Hanu primarily to support our North America service offerings and to expand our center of excellence presence in India.

•In January 2022 our global team completed the onboarding of EMEA clients, partners and teammates onto Insight common core IT systems, tools and processes.

On a consolidated basis, for the year ended December 31, 2022:

•Net sales of $10.4 billion increased 11% compared to 2021.

•Gross profit of $1.6 billion increased 13% compared to 2021, also up 16% year over year excluding the effects of fluctuating foreign currency exchange rates.

•Consolidated gross margin increased approximately 40 basis points to a record 15.7% of net sales in 2022. This increase reflects higher services net sales at higher margins than in the prior year and an expansion in product margin for software.

•Earnings from operations increased to $413.7 million in 2022, up 25% compared to the prior year, which represented 4.0% of net sales.

•Our effective tax rate in 2022 was 25.1%, which compares to our effective tax rate of 25.0% in 2021.

•Net earnings and diluted net earnings per share were $280.6 million and $7.66, respectively, in 2022. In 2021, we reported net earnings of $219.3 million and diluted net earnings per share of $5.95.

The results of operations for 2022 include the following items:

•severance expenses of $4.2 million, $3.2 million net of tax; and

•the repurchase of approximately 1,109,000 shares of the Company’s common stock for an aggregate of $107.9 million.

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The results of operations for 2021 include the following items:

•severance expenses of $6.4 million, $5.0 million net of tax;

•a restructuring gain from the sale of properties of $8.0 million, $6.0 million net of tax; and

•the repurchase of approximately 497,000 shares of the Company’s common stock for an aggregate of $50.0 million.

Throughout the “Overview” and “Results of Operations” sections of “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. In computing these 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.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

During 2022, we generated $98.1 million of cash from operating activities and primarily utilized cash to purchase property and equipment, including the finalization of our corporate headquarters in Chandler, AZ. We had net borrowings of $244.7 million under our senior secured revolving credit facility (the “ABL facility”). We ended the year with $163.6 million of cash and cash equivalents and $637.9 million of debt outstanding under our long-term debt facilities, including $346.2 million related to the Notes that are classified as a current liability at December 31, 2022.

Details about segment results of operations can be found in Note 19 to the Consolidated Financial Statements in Part II, Item 8 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 year to year and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

COVID-19 and Supply Chain Constraints Update

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has negatively impacted the global economy, disrupted global supply chains and reduced workforce participation. While we have experienced minimal negative impact of COVID-19 on our 2021 and 2022 financial results, prolonged supply constraints stemming from shortages of chips and displays resulted in sustained elevated bookings coming into and throughout the first half of 2022. While supply constraints for certain products, such as devices, have eased limitations on other products, such as data center and infrastructure products continue to result in elevated backlog. We expect our elevated backlog for data center and infrastructure products may benefit our results in the first half of 2023.

Since the initial outbreak, new variants of COVID-19 that are significantly more contagious than previous strains, have emerged. The spread of these new strains initially caused many government authorities and businesses to reimplement prior restrictions in an effort to lessen the spread of COVID-19 and its variants; however, while many of these restrictions have been lifted, uncertainty remains as to whether additional restrictions may be initiated or again reimplemented in responses to surges in COVID-19 cases. The ultimate extent of the impact of the COVID-19 pandemic on our business operations, financial performance, and results of operations, including our ability to execute our business strategies and initiatives in the expected time frame, is currently unknown and will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic and its severity; the emergence and severity of its

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variants; the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them; the reduction in travel and increase in teammates working from remote locations and other protective actions taken to contain the virus or treat its impact; general economic factors, such as increased inflation; supply chain constraints; labor supply issues; and how quickly and to what extent normal economic and operating conditions can resume.

We will continue to actively monitor the situation and anticipate taking further actions as may be required by government authorities or that we determine are in the best interests of our teammates, clients and partners. It is not clear what the potential effects of any such alterations or modifications may have on our business, including the effects on our clients, teammates, and prospects, or on our financial results in 2023 and beyond. Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends. See "Risk Factors" in Part I, Item 1A of this report for additional risks we face due to the COVID-19 pandemic.

RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of net sales for the years ended December 31, 2022 and 2021:

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 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 shift our focus and 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 change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of this report.

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2022 Compared to 2021

Net Sales. Net sales increased 11%, or $1.0 billion, in 2022 compared to 2021. Net sales of products (hardware and software) and net sales of services increased 10% and 13%, respectively, in 2022 compared to 2021. Our net sales by operating segment for 2022 and 2021 were as follows (dollars in thousands):

Our net sales by offering category for North America for 2022 and 2021 were as follows (dollars in thousands):

Net sales in North America increased 13%, or $964.1 million, in 2022 compared to 2021. This increase reflects increases in all sales categories. Net sales of hardware, software and services increased 11%, 18% and 15%, respectively, year over year. The increases year over year were primarily the result of the following:

•The increase in hardware net sales was due to higher volume of sales to large enterprise and corporate clients. This increase reflects higher sales of devices in the first half of 2022 as supply constraints for devices eased and higher sales of data center and infrastructure products in the latter part of 2022.

•The increase in software net sales was primarily due to higher volume of software licensing. This increase was partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The increase in services net sales was primarily due to higher volume of sales of Insight Delivered services and the continued trend toward higher sales of cloud solution offerings.

Our net sales by offering category for EMEA for 2022 and 2021, were as follows (dollars in thousands):

Net sales in EMEA was relatively flat (increased 12% excluding the effects of fluctuating foreign currency exchange rates), or $8.5 million, in 2022 compared to 2021. Net sales of

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software was up 4%, year over year, offset by decreases in hardware and services net sales of 3% and 1%, respectively, year to year. The changes were primarily the result of the following:

•The increase in software net sales was due to higher volume of software net sales, partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The decrease in hardware net sales was primarily due to fluctuations in foreign currency exchange rates compared to the prior year.

•The decrease in services net sales was primarily due to fluctuations in foreign currency exchange rates compared to the prior year, partially offset by higher volume of sales of Insight Delivered services and higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

Our net sales by offering category for APAC for 2022 and 2021, were as follows (dollars in thousands):

Net sales in APAC increased 11% (increased 18% excluding the effects of fluctuating foreign currency rates), or $22.5 million, in 2022 compared to 2021. Net sales of hardware and services increased 17% and 24%, respectively, year over year, partially offset by a decrease in software net sales of 4 %, year to year. The changes were primarily the result of the following:

•The increase in services net sales was due to higher volume of Insight Delivered services and higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The increase in hardware net sales was due to higher volume of net sales to enterprise and commercial clients.

•The decrease in software net sales was primarily due to the impact of fluctuating foreign currency exchange rates compared to the prior year combined with the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

Net sales by category for North America, EMEA and APAC were as follows for 2022 and 2021:

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Gross Profit. Gross profit increased 13%, or $189.0 million, in 2022 compared to 2021, with gross margin increasing approximately 40 basis points to 15.7% of net sales. Our gross profit and gross profit as a percent of net sales by operating segment for 2022 and 2021 were as follows (dollars in thousands):

North America’s gross profit increased 17% in 2022 compared to 2021. As a percentage of net sales, gross margin expanded by approximately 60 basis points year over year. The year over year net increase in gross margin was primarily attributable to the following:

•A net increase in product margin, which includes partner funding and freight, of 31 basis points year over year. This increase was primarily due to higher margins on both hardware and software net sales compared to prior year. The expanded margins on hardware are due in part to a shift away from devices towards higher margin infrastructure sales in the latter part of 2022.

•An expansion in services margin year over year of 24 basis points was due to higher margins generated from increased cloud solution offerings, software maintenance and on Insight Core services, (consisting of Insight Delivered and managed services), partially offset by a decline in margins from hardware warranty.

EMEA’s gross profit decreased 4% (increased 6% excluding the effects of fluctuating foreign currency exchange rates), in 2022 compared to 2021. As a percentage of net sales, gross margin decreased 80 basis points to 14.4%, reflecting a 38 basis point reduction in product margin and a 37 basis point decline in services margin. The decrease in gross profit is primarily due to fluctuations in foreign currency exchange rates compared to the prior year, particularly in the Great British Pound and Euro compared to the U.S. Dollar.

APAC’s gross profit increased 14% (increased 22% excluding the effects of fluctuating foreign currency exchange rates), in 2022 compared to 2021. As a percentage of net sales, gross margin increased by approximately 90 basis points year over year. The expanded gross margin for APAC in 2022 compared to 2021 was due primarily to changes in sales mix to services net sales with higher margins than product net sales.

Our overall gross margins expanded in 2022 compared to 2021, as expected. We believe this trend could continue into future periods as we focus on selling solutions and increasing our services net sales.

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Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $99.5 million in 2022 compared to 2021. Selling and administrative expenses decreased approximately 10 basis points as a percentage of net sales in 2022 compared to 2021. The overall net increase in expenses reflects a $68.4 million increase in personnel costs, including teammate benefits expenses primarily related to increases in overall teammate headcount and increases in variable compensation in the current year. Travel and entertainment costs increased $6.7 million as previous responses to COVID-19 were relaxed and other expenses, including service contract related costs increased $24.9 million, year over year. The increase in other expenses is primarily due to transformation costs incurred and paid to third parties in 2022 with no comparable activity in 2021. Transformation costs are costs we are incurring to transform our business to help us achieve our strategic objectives, including becoming a leading solutions integrator. We expect to continue to incur further transformation costs in 2023; however, these costs are unique in nature and are not expected to recur in the longer term.

Severance and Restructuring Expenses. During 2022, we recorded severance expense, net of adjustments, totaling $4.2 million. During 2021, we recorded gains on sale of properties due to restructuring of $8.0 million. These gains were partially offset in 2021, as we recorded severance expense, net of adjustments, totaling $6.4 million.

Acquisition-related Expenses. During 2022, we incurred $2.0 million in direct third-party costs primarily related to the acquisition of Hanu. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our Hanu acquisition. During 2021, we did not incur any acquisition-related expenses.

Earnings from Operations. Earnings from operations increased 25%, or $81.6 million, year over year, in 2022 compared to 2021. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for 2022 and 2021 (dollars in thousands):

North America’s earnings from operations increased 30%, or $81.6 million, year over year, in 2022 compared to 2021. As a percentage of net sales, earnings from operations increased by approximately 50 basis points to 4.1%. The increase in earnings from operations was primarily driven by an increase in gross profit in excess of increases in selling and administrative expenses and severance and restructuring expenses.

EMEA’s earnings from operations decreased 6% (increased 4% excluding the effects of fluctuating foreign currency exchange rates), or $2.7 million, year to year, in 2022 compared to 2021. As a percentage of net sales, earnings from operations decreased by approximately 20 basis points to 2.6%. The decrease in earnings from operations was primarily driven by fluctuations in foreign currency exchange rates compared to the prior year, particularly in the Great British Pound and Euro compared to the U.S. Dollar.

APAC’s earnings from operations increased 16% (increased 24% excluding the effects of fluctuating foreign currency exchange rates), or $2.7 million, year over year, in 2022 compared to 2021. As a percentage of net sales, earnings from operations increased by approximately 40 basis points to 8.1%. The increase in earnings from operations reflects an increase in gross profit, partially offset by an increase in selling and administrative expenses in 2022 compared to 2021.

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Non-Operating (Income) Expense.

Interest Expense, net. Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities and the Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense decreased 3%, or $1.0 million, in 2022 compared to 2021 primarily due to having no imputed interest in 2022 under the Notes and higher interest income earned in 2022. This was partially offset by the higher interest rates and higher average daily balances under our ABL facility and increased imputed interest under our inventory financing facilities. There was no imputed interest under the Notes in 2022 compared $10.7 million in 2021. Imputed interest under our inventory financing facilities increased $0.2 million due to higher average daily balances in 2022 compared to 2021. The increases were a result of expanded use of the inventory financing facilities. For a description of our various financing facilities, see Notes 7 and 8 to our Consolidated Financial Statements in Part II, Item 8 of this report.

Other (Income) Expense, Net. Other (income) expense, net, consists primarily of foreign currency exchange gains and losses. Foreign currency exchange gains and losses result from foreign currency transactions, including foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The change in net foreign currency exchange gains/losses is due primarily to the underlying changes in the applicable exchange rates, partially mitigated by our use of foreign exchange forward contracts to offset the effects of fluctuations in foreign currencies on certain of our non-functional currency assets and liabilities.

Income Tax Expense. Our effective tax rate for 2022 was 25.1% compared to 25.0% in 2021. The marginal increase in the tax rate was primarily due to reduced tax benefits on share-based compensation in 2022 as compared to 2021, as well as nonrecurring benefits in 2021 related to tax credits. These increases were partially offset by the one-time solar tax credit claimed in 2022 on our recently completed headquarters and an increase in the deduction for foreign derived intangible income.

The effective tax rate in 2022 was higher than the federal statutory rate of 21.0% primarily due to state income taxes and higher taxes on earnings in foreign jurisdictions. These increases were offset partially by tax credits and the foreign derived intangible income deduction. See Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of income tax expense.

2021 Compared to 2020

For a comparison of our results of operations for the fiscal years ended December 31, 2021 and 2020, see “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 fiscal year ended December 31, 2021 filed with the SEC on February 18, 2022.

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Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for 2022 and 2021 (in thousands):

Cash and Cash Flow

•Our primary uses of cash during 2022 were to fund working capital requirements, to repurchase shares of our common stock, to acquire Hanu and to purchase property and equipment, including for the final build out of our corporate headquarters.

•Operating activities generated $98.1 million in cash in 2022, compared to $163.7 million in 2021.

•We received proceeds from the sale of assets, including our properties held for sale, of $1.3 million in 2022, compared to $31.0 million in 2021.

•We had net repayments under our inventory financing facilities of $8.3 million in 2022 compared to net repayments of $14.4 million in 2021.

•Net borrowings under our ABL facility were $244.7 million in 2022. Net repayments under our ABL facility were $87.0 million in 2021.

•Capital expenditures were $70.9 million in 2022 compared to $52.1 million in 2021.

•During 2022, we repurchased an aggregate of $107.9 million of our common stock, pursuant to a repurchase program approved in May 2021 and subsequently increased in September 2022. This compares to $50.0 million repurchased during 2021.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our cash and working capital requirements for operations as well as other strategic investments 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, debt repayments and repayment of our inventory financing facilities for the next 12 months. We do not expect holders of the Notes will convert their Notes in the near term. We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities or other available financing resources.

Net cash provided by operating activities.

•Cash flow from operating activities in 2022 was $98.1 million, a decrease in cash generation compared to 2021. The decrease in cash flow from operating activities was primarily driven by the lower increase in accounts payable and higher increase in accounts receivable in 2022 compared to 2021, partially offset by a decrease in inventory in 2022 compared to the prior year. The relatively lower increase in accounts payable compared to the prior year is due to the impact of our ability to delay payments to certain vendors in 2021 combined with growth in the fourth quarter

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of 2021 when compared to the same period in 2020, with no growth in the fourth quarter of 2022.

Our consolidated cash flow operating metrics for the quarters ended December 31, 2022 and 2021 were as follows:

(a)Calculated as the balance of accounts receivable, net at the end of the period divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days.

(b)Calculated as average inventories divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the period plus inventories at the end of the period divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(c)Calculated as the sum of the balances of accounts payable – trade and accounts payable – inventory financing facilities at the end of the period divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(d)Calculated as DSOs plus DIOs, less DPOs.

•Our cash conversion cycle was 40 days in the quarter ended December 31, 2022, an increase of 9 days when compared to the fourth quarter of 2021.

•The changes in our cash conversion cycle compared to the same period in the prior year resulted from the net effect of a fifteen day increase in DSOs partially offset by a four day increase in DPOs and a two day decrease in DIOs.

•The changes in our cash conversion cycle year over year were primarily the result of:

•the impact to DSOs of an increase in other receivables including multi year transactions and changes in client mix (e.g., clients with longer payment terms);

•the benefit to DPOs of changes in vendor mix partially offset by deferral of payments in the prior year; and

•the benefit to DIOs of the impact of easing supply constraints.

•Our cash conversion cycle is 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 both net sales and cost of goods sold, are processed and applied to accounts receivable and accounts payable in each reporting period. As a result, our DSO and DPO calculated on the basis of unadjusted net sales and unadjusted cost of goods sold are inherently inflated. Netted costs were $1.6 billion and $1.4 billion in the fourth quarter of 2022 and 2021, respectively. Adjusting our cash conversion cycle calculation by adding netted costs to both daily net sales and daily costs of goods sold results in a reduction to our cash conversion cycle from 40 days to 28 days in the fourth quarter of 2022 and no change in the fourth quarter of 2021, which we believe provides a more accurate reflection of our cash flow operating metrics.

•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 2023 in excess of working capital needs, given current market conditions, to pay down our ABL facility and our inventory financing facilities.

•We expect that in 2023 our cash flows from operations will continue to normalize as we anticipate sequential growth and given the fact that our business mix has returned to previous levels.

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Net cash used in investing activities.

•We acquired Hanu for approximately $68.2 million, net of cash and cash equivalents acquired and excluding earn outs and hold backs in 2022.

•We received proceeds from the sale of assets, including our properties held for sale, of $1.3 million and $31.0 million in 2022 and 2021, respectively.

•Capital expenditures were $70.9 million and $52.1 million in 2022 and 2021, respectively. The majority of the capital expenditures in 2022 and 2021 were used for our global corporate headquarters and to fund technology related projects.

•We expect total capital expenditures in 2023 to be in the range of $55.0 to $60.0 million.

Net cash provided by (used in) financing activities.

•During 2022, we had net borrowings on our long-term debt under our ABL facility of $244.7 million and had net repayments under our inventory financing facilities of $8.3 million.

•During 2021, we had net repayments on our long-term debt under our ABL facility of $87.0 million and had net repayments under our inventory financing facilities of $14.4 million.

•In 2022, we also funded $107.9 million of repurchases of our common stock, compared to $50.0 million purchased during 2021.

2021 Compared to 2020

For a comparison of our cash flows for the fiscal years ended December 31, 2021 and 2020, see “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 fiscal year ended December 31, 2021 filed with the SEC on February 18, 2022.

Financing Facilities

As of December 31, 2022, our long-term debt balance includes $291.6 million outstanding under our $1.8 billion ABL facility. As of December 31, 2022, the current portion of our long-term debt relates to the Notes, our finance leases and other financing obligations.

•Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

•Our convertible senior notes are subject to certain events of default and certain acceleration clauses. As of December 31, 2022, 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 December 31, 2022, 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 December 31, 2022, eligible accounts receivables and inventory were sufficient to permit access to the full $1.8 billion under the ABL facility.

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.

Notes 7 and 8 to the Consolidated Financial Statements in Part II, Item 8 of this report also include: a description of our financing facilities; amounts outstanding; amounts available and weighted average borrowings and interest rates during the year.

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Cash Requirements From Contractual Obligations

At December 31, 2022, our contractual obligations for continuing operations primarily consist of $301.3 million under our inventory financing facilities due in 2023 and payments of $91.4 million under operating leases primarily due in 2023 through 2026. Our ABL facility matures in 2027 and the $350.0 million principal amount due on the Notes mature in 2025.

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries may be subject to U.S. income taxation upon repatriation to the United States. Certain of our foreign earnings were deemed distributed as a result of the Tax Cuts and Jobs Act of 2017; however, for years subsequent to 2017, we continue to assert indefinite reinvestment of foreign earnings for certain of our foreign subsidiaries. As of December 31, 2022, we had approximately $138.2 million in cash and cash equivalents in our foreign subsidiaries, the majority of which reside in Canada and the Netherlands. Certain of these cash balances will be remitted to the U.S. by paying down intercompany payables generated in the ordinary course of business or through dividend distributions.

Off-Balance Sheet Arrangements

We have entered into off-balance sheet arrangements, which include guarantees and indemnifications. These arrangements are discussed in Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this report. 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.

Acquisitions

Our strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations or to add certain services capabilities. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions. Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the three. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisition of Hanu on June 1, 2022.

Inflation

We have historically not been adversely affected by inflation, as technological advances and competition within the IT industry have generally caused the prices of the products we sell to decline and product life cycles tend to be short. This requires our growth in unit sales to exceed the decline in prices in order to increase our net sales. We believe that most price increases could be passed on to our clients, as prices charged by us are not set by long-term contracts; however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our clients.

Critical Accounting Estimates

General

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 this report. 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

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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 our estimates. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

We consider the following to be our critical accounting estimates used in the preparation of our consolidated financial statements:

Sales Recognition

Description

For each of our product and services offerings, the determination needs to be made as to whether we are the principal or the agent in the transaction. This determination leads to how the revenue for each offering is recognized, either gross, where we are the principal in the transaction, or net, where we are the agent in the transaction. This determination is made by assessing whether or not we control the product or service prior to delivery to the client.

Judgments and Uncertainties

If we take control of the product or service prior to delivery to the client, then we are the principal in the transaction. If we do not take control of the product or service prior to delivery to the client, we are the agent in the transaction. The determination of whether we take control of products or services prior to delivery to the client can be judgmental and depends upon the specific facts and circumstances for each transaction. Key assumptions used in our estimates for transactions where we have determined we are the agent are the consistency of transactions with multiple performance obligations and consistency of transactions involving security software. Based on our current methodology to recognize net sales, the amount of reported net sales is not highly sensitive to changes in these key assumptions. For example, a 5% change in one of our key assumptions would not materially affect our reported net sales.

Effect if actual results differ from assumptions

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize net sales. However, if actual results are not consistent with our estimates or assumptions, it could have a material effect on our reported net sales, timing of revenue recognition and our results of operations. We have not made any material changes in accounting methodology or key assumptions used to recognize net sales during the past three fiscal years. We have not made any material adjustments to our financial statements as a result of actual results not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to sales recognition and for a detailed description of our product and services offerings.

Partner Funding

Description

We receive payments and credits from partners, including consideration pursuant to volume sales incentive programs, volume purchase incentive programs and shared marketing expense programs. Partner funding received pursuant to volume sales incentive programs is recognized as it is earned as a reduction to costs of goods sold. Partner funding received pursuant to volume purchase incentive programs is allocated as a reduction to inventories based on the applicable incentives earned from each partner and is recorded in costs of goods sold as the related inventory is sold. Partner funding received pursuant to shared marketing expense programs is recorded as it is earned as a reduction of the related selling and administrative expenses in the period the program takes place if the consideration represents a reimbursement of

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specific, incremental, identifiable costs. Partner funding received pursuant to certain services delivered is recorded as services net sales. Consideration that exceeds the specific, incremental, identifiable costs is classified as a reduction of costs of goods sold.

Judgements and Uncertainties

We make period-end estimates about the anticipated achievement levels under the various partner programs in order to accrue amounts earned. These estimates and assumptions primarily include whether we have met key net sales targets under the various partner programs. Based on our current methodology to recognize partner funding, the amount of reported net sales and gross profit is not highly sensitive to changes in key assumptions around achievement levels. For example, a revised assessment of the achievement level for any individual partner program would not materially affect our reported net sales or gross profit.

Effect if actual results differ from assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate estimates of anticipated achievement levels under individual partner programs during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize partner funding. However, if our actual results are not consistent with our assumptions it could have a material effect on our results of operations and our cash flows. We have not made any material adjustments to our financial statements as a result of actual results for partner funding not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to partner funding.

Goodwill

Description

We perform an annual review of our goodwill in the fourth quarter of every year. We continually assess if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value and assess whether any indicators of impairment exist. Events or circumstances that could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, significant declines in our stock price for a sustained period or significant underperformance relative to expected historical or projected future cash flows or results of operations. Any adverse change in these factors, among others, could have a significant effect on the recoverability of goodwill and could have a material effect on our consolidated financial statements.

Judgements and Uncertainties

We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform a quantitative goodwill impairment test. Otherwise, the goodwill impairment test is not required. In completing a quantitative test for a potential impairment of goodwill, we compare the estimated fair value of each reporting unit in which the goodwill resides to its book value, including goodwill. Our reporting units are our operating segments. Management must apply judgment in determining the reporting units and in estimating the fair value of our reporting units. Multiple valuation techniques can be used to assess the fair value of the reporting unit, including the market and income approaches. All of these techniques include the use of estimates and assumptions that are inherently uncertain. Changes in these estimates and assumptions could materially impact the determination of fair value or goodwill impairment, or both. These estimates and assumptions primarily include, but are not limited to, an appropriate control premium in excess of the market capitalization of the Company, future market

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growth, forecasted sales and costs and appropriate discount rates. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. Management evaluates the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If the carrying amount of the reporting unit exceeds its fair value, then an impairment charge is recognized for the amount by which the carrying value exceeds the fair value. To ensure the reasonableness of the estimated fair values of our reporting units, we perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units. Based on qualitative assessments performed in most recent years a quantitative assessment has not been determined to be necessary for any of our reporting units. As such, the amount of reported goodwill is not sensitive to changes in key assumptions.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate impairment of goodwill during the past three fiscal years. Our assessments in the past three fiscal years have been qualitative assessments and no quantitative assessments have been deemed necessary. Additionally, during the three years ended December 31, 2022, 2021 and 2020 we analyzed each of our reporting units and determined that no impairment charge was necessary.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to goodwill.

Income Taxes

Description

We record a provision for income taxes which reflects a mix of earnings in the jurisdictions in which we operate. Our provision for income taxes primarily reflects a combination of income earned and taxed in the various US federal and state, as well as foreign, jurisdictions. Our annual effective tax rate is based on our income, the jurisdiction(s) in which the income is earned and subjected to taxation, the tax laws in those various jurisdictions and any tax law changes which may occur, increases or decreases in permanent differences between book and tax items, and accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If we were to determine that it is more likely than not that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made.

We record liabilities for potentially unfavorable outcomes associated with uncertain tax positions taken on specific tax matters using a two-step process, which include recognition and measurement. These liabilities are based on management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. There may be differences between the anticipated and actual outcomes of these matters that may result in subsequent recognition or derecognition of a tax position based on all the available information at the time. If material adjustments are warranted, it could affect our effective tax rate.

Judgements and Uncertainties

The determination of our provision and evaluation of our tax positions requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. Changes in tax laws and rates could affect recorded assets and liabilities in the future. Changes in projected earnings could affect the recorded valuation allowances in the future. Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in

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the application of complex tax regulations across the tax jurisdictions where we operate. Our analysis of unrecognized tax benefits contains uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds. Based on our current methodology to record valuation allowances and reserve for uncertain tax positions, the amount of reported income tax expense is not sensitive to changes in any individual key assumption.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in accounting methodology or key assumptions used to recognize income taxes and related reserves during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. However, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters for which unrecognized tax benefit liabilities have been established or are required to pay amounts in excess of recorded unrecognized tax benefit liabilities, our effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require use of our cash and generally result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would generally be recognized as a reduction in our effective tax rate in the period of resolution.

Additional information about the valuation allowance and uncertain tax positions can be found in Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report.

Recently Issued Accounting Standards

The information contained in Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report concerning a description of recent accounting pronouncements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Part II, Item 8 of this report. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including those discussed in “Risk Factors” in Part I, Item 1A and elsewhere in this report.

Overview

Today, every business needs to be a technology business. We empower organizations with technology, solutions and services to help our clients maximize the value of their information technology (“IT”) today and drive (digital) transformation for tomorrow in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked global technology provider of end-to-end secure digital transformation solutions and services, we help clients innovate and optimize their operations to run smarter. 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 are largely software and certain software-related services and cloud solutions.

Full year 2021 financial and operational highlights included the following:

•We generated growth in earnings from operations of 22% on a consolidated basis with growth in each of our reporting segments.

•We grew our services net sales by 13% on a consolidated basis with growth in each of our reporting segments.

•We generated cash flows from operations of $163.7 million.

•In January 2022 our global team completed the onboarding of EMEA clients, partners and teammates onto Insight common core IT systems, tools and processes.

On a consolidated basis, for the year ended December 31, 2021:

•Net sales of $9.4 billion increased 13% compared to 2020.

•Gross profit of $1.4 billion increased 11% compared to 2020, also up 10% year over year excluding the effects of fluctuating foreign currency exchange rates.

•Consolidated gross margin declined approximately 30 basis points to 15.3% of net sales in 2021. This decrease primarily reflects higher product net sales at lower margins.

•Earnings from operations increased to $332.1 million in 2021, up 22% compared to the prior year, which represented 3.5% of net sales.

•Our effective tax rate in 2021 was 25.0%, which compares to our effective tax rate of 24.4% in 2020.

•Net earnings and diluted net earnings per share were $219.3 million and $5.95, respectively, in 2021. In 2020, we reported net earnings of $172.6 million and diluted net earnings per share of $4.87.

The results of operations for 2021 include the following items:

•severance expenses of $6.4 million, $5.0 million net of tax;

•a restructuring gain from the sale of properties of $8.0 million, $6.0 million net of tax;

•the repurchase of approximately 497,000 shares of the Company’s common stock for an aggregate of $50.0 million.

The results of operations for 2020 include the following items:

•the results of the acquisition of PCM for the full year in 2020;

•the results of the acquisition of vNext, effective February 28, 2020;

•transaction costs totaling $2.2 million and $1.6 million net of tax, associated with the acquisition of PCM and vNext;

•severance and restructuring expenses of $12.4 million, $9.3 million net of tax;

•the repurchase of approximately 445,000 shares of the Company’s common stock for an aggregate of $25.0 million.

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Throughout the “Overview” and “Results of Operations” sections of “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. In computing these 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.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

During 2021, we generated $163.7 million of cash from operating activities and primarily utilized cash to repay our debt and repurchase our stock. We made net repayments of $87.0 million under our senior secured revolving credit facility (the “ABL facility”). We ended the year with $103.8 million of cash and cash equivalents and $361.5 million of debt outstanding under our long-term debt facilities.

Details about segment results of operations can be found in Note 19 to the Consolidated Financial Statements in Part II, Item 8 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 year to year and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

COVID-19 and Supply Chain Constraints Update

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has negatively impacted the global economy, disrupted global supply chains and reduced workforce participation. While we saw minimal negative impact of COVID-19 on our 2021 financial results, prolonged supply constraints stemming from shortages of chips and displays resulted in sustained elevated bookings as we exited the fourth quarter. We currently expect these supply constraints and extended lead times for certain products will benefit the first half of 2022 and we expect growth in net sales in 2022 compared to 2021.

More recently, new variants of COVID-19, such as the Delta and Omicron variants, that are significantly more contagious than previous strains, have emerged. The spread of these new strains is causing many government authorities and businesses to reimplement prior restrictions in an effort to lessen the spread of COVID-19 and its variants. The ultimate extent of the impact of the COVID-19 pandemic on our business operations, financial performance, and results of operations, including our ability to execute our business strategies and initiatives in the expected time frame, is currently unknown and will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic and its severity; the emergence and severity of its variants; the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them; other protective actions taken to contain the virus or treat its impact, such as restrictions on travel and transportation; general economic factors, such as increased inflation; supply chain constraints; labor supply issues; and how quickly and to what extent normal economic and operating conditions can resume.

We will continue to actively monitor the situation and anticipate taking further actions as may be required by government authorities or that we determine are in the best interests of our teammates, clients and partners. It is not clear what the potential effects of any such alterations or modifications may have on our business, including the effects on our clients, teammates, and prospects, or on our financial results in 2022 and beyond. Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends. See "Risk Factors" in Part I, Item 1A of this report for additional risks we face due to the COVID-19 pandemic.

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RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of net sales for the years ended December 31, 2021 and 2020:

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 change significantly in the amounts made available and the related product or services sales being incentivized by the partner. These changes could impact our results of operations to the extent we are unable to shift our focus and 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 change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of this report.

2021 Compared to 2020

Net Sales. Net sales increased 13%, or $1.1 billion, in 2021 compared to 2020. Net sales of products (hardware and software) and net sales of services both increased 13% in 2021 compared to 2020. Our net sales by operating segment for 2021 and 2020 were as follows (dollars in thousands):

Our net sales by offering category for North America for 2021 and 2020 were as follows (dollars in thousands):

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Net sales in North America increased 14%, or $905.3 million, in 2021 compared to 2020. This increase reflects increases in all sales categories including increases in hardware net sales that were negatively impacted by COVID-19 in the prior year. Net sales of hardware, software and services increased 17%, 4% and 11%, respectively, year over year. The increases year over year were primarily the result of the following:

•The increase in hardware net sales was due to higher volume of sales to large enterprise and corporate clients. This was partially driven by the negative impacts of COVID-19 on client demand experienced in the prior year.

•The increase in services net sales was primarily due to higher volume of sales of Insight delivered services and the continued trend toward higher sales of cloud solution offerings.

•The increase in software net sales was primarily due to a single transaction with a large enterprise client in the current year combined with higher volume of software net sales. The increase was partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

Our net sales by offering category for EMEA for 2021 and 2020, were as follows (dollars in thousands):

Net sales in EMEA increased 10% (increased 4% excluding the effects of fluctuating foreign currency exchange rates), or $148.8 million, in 2021 compared to 2020. Net sales of hardware, software and services were up 10%, 9% and 14%, respectively, year over year. The changes were primarily the result of the following:

•The increase in software net sales was due to higher volume of software net sales to public sector and corporate clients, partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The increase in hardware net sales was due primarily to higher volumes of sales to enterprise and corporate clients.

•The increase in services net sales was due to higher volume of Insight delivered services and net sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

Our net sales by offering category for APAC for 2021 and 2020, were as follows (dollars in thousands):

Net sales in APAC increased 24% (increased 15% excluding the effects of fluctuating foreign currency rates), or $41.4 million, in 2021 compared to 2020. Net sales of hardware, software and services increased 55%, 9% and 30%, respectively, year over year. The changes were primarily the result of the following:

•The increase in hardware net sales was due to higher volume of net sales to enterprise and commercial clients.

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•The increase in services net sales was due to higher volume of Insight delivered services and higher volume of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

•The increase in software net sales was primarily due to the benefits of foreign currency rate movements in 2021. This was partially offset by the continued trend toward higher sales of cloud solution offerings that are recorded on a net sales recognition basis in the services net sales category.

Net sales by category for North America, EMEA and APAC were as follows for 2021 and 2020:

Gross Profit. Gross profit increased 11%, or $147.6 million, in 2021 compared to 2020, with gross margin decreasing approximately 30 basis points to 15.3% of net sales. Our gross profit and gross profit as a percent of net sales by operating segment for 2021 and 2020 were as follows (dollars in thousands):

North America’s gross profit increased 11% in 2021 compared to 2020. As a percentage of net sales, gross margin declined by approximately 30 basis points year to year. The year to year net decrease in gross margin was primarily attributable to the following:

•A net decrease in product margin, which includes partner funding and freight, of 25 basis points year to year. This decrease was primarily due to higher mix of hardware net sales at lower margins than in the prior year.

•A decline in services margin year to year of 9 basis points was due to lower margins on Insight delivered services of 37 basis points partially offset by gross margin generated from increased cloud solution offerings and software maintenance.

EMEA’s gross profit increased 10% (increased 4% excluding the effects of fluctuating foreign currency exchange rates), in 2021 compared to 2020. As a percentage of net sales, gross margin remained flat at 15.2%, reflecting a 38 basis point reduction in product margin offset by a 39 basis point increase in services margin.

APAC’s gross profit increased 25% (increased 17% excluding the effects of fluctuating foreign currency exchange rates), in 2021 compared to 2020. As a percentage of net sales, gross margin increased by approximately 10 basis points year over year. The slightly expanded gross margin for APAC in 2021 compared to 2020 was due primarily to changes in sales mix to services net sales with higher margins than product net sales.

Our overall gross margins contracted in 2021 compared to 2020, as expected, as our product mix returned to previous levels, including a higher mix of hardware sales with our large enterprise clients which typically carry lower margins. We expect this trend may continue into future periods.

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Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $103.4 million in 2021 compared to 2020. Selling and administrative expenses decreased approximately 30 basis points as a percentage of net sales in 2021 compared to 2020. The overall net increase in expenses reflects a $113.8 million increase in personnel costs, including teammate benefits expenses primarily related to increases in overall teammate headcount and increases in variable compensation in the current year. Professional fees incurred for one-time projects also increased by $5.7 million, year over year. These increases were partially offset by decreases in depreciation and amortization, travel and entertainment costs, marketing and facility expenses of $10.1 million, $2.8 million, $2.1 million and $1.9 million, respectively, year to year. The decreases in depreciation and amortization expense were driven by intangible assets that were fully amortized in 2021. The decreases in travel and entertainment and marketing costs reflect cost control measures taken in response to COVID-19 part way through 2020 that were largely maintained in 2021.

Severance and Restructuring Expenses. During 2021, we recorded gains on sale of properties due to restructuring of $8.0 million. These gains were partially offset in 2021, as we recorded severance expense, net of adjustments, totaling $6.4 million. During 2020, we recorded severance expense, net of adjustments, totaling $12.4 million. The charges in all three operating segments primarily related to a realignment of certain roles and responsibilities and for North America and EMEA in the prior year due to the acquisition of PCM.

Acquisition-related Expenses. During 2021, we did not incur any acquisition-related expenses. In 2020 we incurred $2.2 million in direct third-party costs related to the acquisitions of PCM and vNext. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our PCM acquisition.

Earnings from Operations. Earnings from operations increased 22%, or $60.5 million, year over year, in 2021 compared to 2020. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for 2021 and 2020 (dollars in thousands):

North America’s earnings from operations increased 23%, or $49.6 million, year over year, in 2021 compared to 2020. As a percentage of net sales, earnings from operations increased by approximately 30 basis points to 3.6%. The increase in earnings from operations was primarily driven by an increase in gross profit in excess of increases in selling and administrative expenses and severance and restructuring expenses. There were also no acquisition-related expenses in 2021 compared to $2.0 million in 2020.

EMEA’s earnings from operations increased 16% (increased 10% excluding the effects of fluctuating foreign currency exchange rates) or $6.6 million, year over year, in 2021 compared to 2020. As a percentage of net sales, earnings from operations increased by approximately 20 basis points to 2.8%. The increase in earnings from operations was primarily driven by an increase in gross profit, partially offset by the increase in selling and administrative expenses and severance and restructuring expenses in 2021 compared to 2020.

APAC’s earnings from operations increased 36% (increased 27% excluding the effects of fluctuating foreign currency exchange rates) or $4.3 million, year over year, in 2021 compared to 2020. As a percentage of net sales, earnings from operations increased by approximately 60 basis points to 7.7%. The increase in earnings from operations reflects an increase in gross profit, partially offset by an increase in selling and administrative expenses in 2021 compared to 2020.

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Non-Operating (Income) Expense.

Interest Expense, net. Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities and the Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense decreased 3%, or $1.1 million, in 2021 compared to 2020 due primarily to lower average daily balances under our ABL facility during the first half of the year and lower borrowing rates under our ABL facility. This was partially offset by increased imputed interest under our inventory financing facilities and the Notes. Imputed interest under the Notes was $10.7 million in 2021 compared to $10.2 million in 2020. Imputed interest under our inventory financing facilities increased $2.2 million due to higher average daily balances in 2021 compared to 2020. The increases were a result of expanded use of the inventory financing facilities. For a description of our various financing facilities, see Notes 7 and 8 to our Consolidated Financial Statements in Part II, Item 8 of this report.

Other (Income) Expense, Net. Other (income) expense, net, consists primarily of foreign currency exchange gains and losses. Foreign currency exchange gains and losses result from foreign currency transactions, including foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The change in net foreign currency exchange gains/losses is due primarily to the underlying changes in the applicable exchange rates, partially mitigated by our use of foreign exchange forward contracts to offset the effects of fluctuations in foreign currencies on certain of our non-functional currency assets and liabilities.

Income Tax Expense. Our effective tax rate for 2021 was 25.0% compared to 24.4% in 2020. The increase in the tax rate from 2020 to 2021 was primarily due to nonrecurring benefits in 2020 related to the remeasurement of certain state deferred tax liabilities as well as acquired net operating losses to be carried back to higher tax rate years under the Coronavirus Aid, Relief, and Economic Security Act, partially offset by increased research and development tax credit benefits. The effective tax rate in 2021 was higher than the federal statutory rate of 21.0% primarily due to state income taxes and higher taxes on earnings in foreign jurisdictions. These increases to the federal statutory rate in 2021 were offset partially by the recognition of tax benefits, net of reserves, related to research and development activities. See Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of income tax expense.

2020 Compared to 2019

For a comparison of our results of operations for the fiscal years ended December 31, 2020 and 2019, see “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 fiscal year ended December 31, 2020 filed with the SEC on February 17, 2021.

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Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for 2021 and 2020(in thousands):

Cash and Cash Flow

•Our primary uses of cash during 2021 were to pay down our debt balance, to repurchase shares of our common stock and to purchase property and equipment.

•Operating activities generated $163.7 million in cash in 2021, compared to $355.6 million in 2020.

•We received proceeds from the sale of assets, including our properties held for sale, of $31.0 million in 2021.

•We had net repayments under our inventory financing facilities of $14.4 million in 2021 compared to net borrowings of $103.3 million in 2020.

•Net repayments under our ABL facility were $87.0 million in 2021. Net repayments under our ABL facility were $431.4 million in 2020.

•Capital expenditures were $52.1 million in 2021 compared to $24.2 million in 2020.

•During 2021, we repurchased an aggregate of $50.0 million of our common stock, pursuant to a repurchase program approved in February 2020 which was subsequently increased in May 2021. This compares to $25.0 million repurchased during 2020.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our cash and working capital requirements for operations as well as other strategic investments 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, debt repayments and repayment of our inventory financing facilities. We currently expect to fund known cash commitments beyond the next twelve months through operating cash activities or other available financing resources.

Net cash provided by operating activities.

•Cash flow from operating activities in 2021 was $163.7 million, a significant decrease in cash generation compared to 2020. The decrease in cash flow from operating activities was primarily driven by increases in accounts receivable and inventory, partially offset by an increase in accounts payable compared to prior year. These changes reflect strategic responses to supply constraints.

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Our consolidated cash flow operating metrics for the quarters ended December 31, 2021 and 2020 were as follows:

(a)Calculated as the balance of accounts receivable, net at the end of the period divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days.

(b)Calculated as average inventories divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the period plus inventories at the end of the period divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(c)Calculated as the sum of the balances of accounts payable – trade and accounts payable – inventory financing facilities at the end of the period divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(d)Calculated as DSOs plus DIOs, less DPOs.

•Our cash conversion cycle was 30 days in the quarter ended December 31, 2021, flat when compared to the fourth quarter of 2020.

•The changes in our cash conversion cycle compared to the same period in the prior year resulted from the net effect of a three day decrease in DSOs combined with a two day increase in DPOs offset by a five day increase in DIOs.

•The changes in our cash conversion cycle year over year were primarily the result of:

•the benefit to DSOs of improved collections;

•the benefit to DPOs of our ability to defer payments to certain vendors; and

•the impact to DIOs of our strategic responses to supply constraints.

•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 2022 in excess of working capital needs, given current market conditions, to pay down our ABL facility and our inventory financing facilities.

•We expect that in 2022 our cash flows from operations will continue to normalize as we anticipate sequential growth and given the fact that our business mix has returned to previous levels.

Net cash (used in) provided by investing activities.

•We received proceeds from the sale of assets, including our properties held for sale, of $31.0 million and $40.3 million in 2021 and 2020, respectively.

•Capital expenditures of $52.1 million in 2021 were used primarily for the buildout of our new global corporate headquarters and for technology-related upgrade projects. Capital expenditures of $24.2 million in 2020, were used primarily for technology-related upgrade projects.

•We expect total capital expenditures in 2022 to be in the range of $75.0 to $80.0 million, including final completion of our global corporate headquarters.

Net cash (used in) provided by financing activities.

•During 2021, we had net repayments on our long-term debt under our ABL facility of $87.0 million and had net repayments under our inventory financing facilities of $14.4 million.

•In 2021, we also funded $50.0 million of repurchases of our common stock, compared to $25.0 million purchased during 2020.

•During 2020, we had net repayments on our long-term debt under our ABL facility of $431.4 million and had net borrowings under our inventory financing facilities of $103.3 million.

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2020 Compared to 2019

For a comparison of our cash flows for the fiscal years ended December 31, 2020 and 2019, see “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 fiscal year ended December 31, 2020 filed with the SEC on February 17, 2021.

Financing Facilities

As of December 31, 2021, our long-term debt balance includes $53.0 million outstanding under our $1.2 billion ABL facility. As of December 31, 2021, the current portion of our long-term debt relates to our finance leases and other financing obligations.

•Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

•Our convertible senior notes are subject to certain events of default and certain acceleration clauses. As of December 31, 2021, 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 December 31, 2021, 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 December 31, 2021, eligible accounts receivables and inventory were sufficient to permit access to the full $1.2 billion under the ABL facility.

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.

Notes 7 and 8 to the Consolidated Financial Statements in Part II, Item 8 of this report also include: a description of our financing facilities; amounts outstanding; amounts available and weighted average borrowings and interest rates during the year.

Cash Requirements From Contractual Obligations

At December 31, 2021, our contractual obligations for continuing operations primarily consist of $311.9 million under our inventory financing facilities due in 2022 and payments of $86.7 million under operating leases primarily due in 2022 through 2024. Our ABL facility matures in 2024 and the $350.0 million principal amount due on the Notes mature in 2025.

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries may be subject to U.S. income taxation upon repatriation to the United States. Certain of our foreign earnings were deemed distributed as a result of the Tax Cuts and Jobs Act of 2017; however, for years subsequent to 2017, we continue to assert indefinite reinvestment of foreign earnings for certain of our foreign subsidiaries. As of December 31, 2021, we had approximately $83.5 million in cash and cash equivalents in our foreign subsidiaries, the majority of which reside in Canada, the Netherlands and Australia. Certain of these cash balances will be remitted to the U.S. 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 guarantees and indemnifications. These arrangements are discussed in Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this report. 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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Acquisitions

Our strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations or to add certain services capabilities. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions. Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the three. See Note 20 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisition of PCM on August 30, 2019.

Inflation

We have historically not been adversely affected by inflation, as technological advances and competition within the IT industry have generally caused the prices of the products we sell to decline and product life cycles tend to be short. This requires our growth in unit sales to exceed the decline in prices in order to increase our net sales. We believe that most price increases could be passed on to our clients, as prices charged by us are not set by long-term contracts; however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our clients.

Critical Accounting Estimates

General

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 this report. 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 our estimates. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

We consider the following to be our critical accounting estimates used in the preparation of our consolidated financial statements:

Sales Recognition

Description

For each of our product and services offerings, the determination needs to be made as to whether we are the principal or the agent in the transaction. This determination leads to how the revenue for each offering is recognized, either gross, where we are the principal in the transaction, or net, where we are the agent in the transaction. This determination is made by assessing whether or not we control the product or service prior to delivery to the client.

Judgments and Uncertainties

If we take control of the product or service prior to delivery to the client, then we are the principal in the transaction. If we do not take control of the product or service prior to delivery to the client, we are the agent in the transaction. The determination of whether we take control of products or services prior to delivery to the client can be judgmental and depends upon the specific facts and circumstances for each transaction. Key assumptions used in our estimates for transactions where we have determined we are the agent are the consistency of transactions with multiple performance obligations and consistency of transactions involving security software. Based on our current methodology to recognize net sales, the amount of reported net sales is not highly sensitive to changes in these key assumptions. For example, a 5% change in one of our key assumptions would not materially affect our reported net sales.

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AND RESULTS OF OPERATIONS (continued)

Effect if actual results differ from assumptions

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize net sales. However, if actual results are not consistent with our estimates or assumptions, it could have a material effect on our reported net sales, timing of revenue recognition and our results of operations. We have not made any material changes in accounting methodology or key assumptions used to recognize net sales during the past three fiscal years. We have not made any material adjustments to our financial statements as a result of actual results not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to sales recognition and for a detailed description of our product and services offerings.

Partner Funding

Description

We receive payments and credits from partners, including consideration pursuant to volume sales incentive programs, volume purchase incentive programs and shared marketing expense programs. Partner funding received pursuant to volume sales incentive programs is recognized as it is earned as a reduction to costs of goods sold. Partner funding received pursuant to volume purchase incentive programs is allocated as a reduction to inventories based on the applicable incentives earned from each partner and is recorded in costs of goods sold as the related inventory is sold. Partner funding received pursuant to shared marketing expense programs is recorded as it is earned as a reduction of the related selling and administrative expenses in the period the program takes place if the consideration represents a reimbursement of specific, incremental, identifiable costs. Partner funding received pursuant to certain services delivered is recorded as services net sales. Consideration that exceeds the specific, incremental, identifiable costs is classified as a reduction of costs of goods sold.

Judgements and Uncertainties

We make period-end estimates about the anticipated achievement levels under the various partner programs in order to accrue amounts earned. These estimates and assumptions primarily include whether we have met key net sales targets under the various partner programs. Based on our current methodology to recognize partner funding, the amount of reported net sales and gross profit is not highly sensitive to changes in key assumptions around achievement levels. For example, a revised assessment of the achievement level for any individual partner program would not materially affect our reported net sales or gross profit.

Effect if actual results differ from assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate estimates of anticipated achievement levels under individual partner programs during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize partner funding. However, if our actual results are not consistent with our assumptions it could have a material effect on our results of operations and our cash flows. We have not made any material adjustments to our financial statements as a result of actual results for partner funding not being consistent with our estimates in the past three fiscal years.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to partner funding.

Goodwill

Description

We perform an annual review of our goodwill in the fourth quarter of every year. We continually assess if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value and assess whether any indicators of impairment exist. Events or circumstances that could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends,

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AND RESULTS OF OPERATIONS (continued)

significant declines in our stock price for a sustained period or significant underperformance relative to expected historical or projected future cash flows or results of operations. Any adverse change in these factors, among others, could have a significant effect on the recoverability of goodwill and could have a material effect on our consolidated financial statements.

Judgements and Uncertainties

We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform a quantitative goodwill impairment test. Otherwise, the goodwill impairment test is not required. In completing a quantitative test for a potential impairment of goodwill, we compare the estimated fair value of each reporting unit in which the goodwill resides to its book value, including goodwill. Our reporting units are our operating segments. Management must apply judgment in determining the reporting units and in estimating the fair value of our reporting units. Multiple valuation techniques can be used to assess the fair value of the reporting unit, including the market and income approaches. All of these techniques include the use of estimates and assumptions that are inherently uncertain. Changes in these estimates and assumptions could materially impact the determination of fair value or goodwill impairment, or both. These estimates and assumptions primarily include, but are not limited to, an appropriate control premium in excess of the market capitalization of the Company, future market growth, forecasted sales and costs and appropriate discount rates. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. Management evaluates the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If the carrying amount of the reporting unit exceeds its fair value, then an impairment charge is recognized for the amount by which the carrying value exceeds the fair value. To ensure the reasonableness of the estimated fair values of our reporting units, we perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units. Based on qualitative assessments performed in most recent years a quantitative assessment has not been determined to be necessary for any of our reporting units. As such, the amount of reported goodwill is not sensitive to changes in key assumptions.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in the methodology or key assumptions used to evaluate impairment of goodwill during the past three fiscal years. Our assessments in the past three fiscal years have been qualitative assessments and no quantitative assessments have been deemed necessary. Additionally, during the three years ended December 31, 2021, 2020 and 2019 we analyzed each of our reporting units and determined that no impairment charge was necessary.

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our accounting policies related to goodwill.

Income Taxes

Description

We record a provision for income taxes which reflects a mix of earnings in the jurisdictions in which we operate. Our provision for income taxes primarily reflects a combination of income earned and taxed in the various US federal and state, as well as foreign, jurisdictions. Our annual effective tax rate is based on our income, the jurisdiction(s) in which the income is earned and subjected to taxation, the tax laws in those various jurisdictions and any tax law changes which may occur, increases or decreases in permanent differences between book and tax items, and accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If we were to determine that it is more likely than not that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made.

We record liabilities for potentially unfavorable outcomes associated with uncertain tax positions taken on specific tax matters using a two-step process, which include recognition and measurement. These liabilities are based on management’s assessment of whether a tax benefit is more likely than not to be

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AND RESULTS OF OPERATIONS (continued)

sustained upon examination by tax authorities. There may be differences between the anticipated and actual outcomes of these matters that may result in subsequent recognition or derecognition of a tax position based on all the available information at the time. If material adjustments are warranted, it could affect our effective tax rate.

Judgements and Uncertainties

The determination of our provision and evaluation of our tax positions requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. Changes in tax laws and rates could affect recorded assets and liabilities in the future. Changes in projected earnings could affect the recorded valuation allowances in the future. Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in the application of complex tax regulations across the tax jurisdictions where we operate. Our analysis of unrecognized tax benefits contains uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds. Based on our current methodology to record valuation allowances and reserve for uncertain tax positions, the amount of reported income tax expense is not sensitive to changes in any individual key assumption.

Effect if Actual Results Differ from Assumptions

We have not made any material changes in accounting methodology or key assumptions used to recognize income taxes and related reserves during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. However, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters for which unrecognized tax benefit liabilities have been established or are required to pay amounts in excess of recorded unrecognized tax benefit liabilities, our effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require use of our cash and generally result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would generally be recognized as a reduction in our effective tax rate in the period of resolution.

Additional information about the valuation allowance and uncertain tax positions can be found in Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this report.

Recently Issued Accounting Standards

The information contained in Note 1 to the Consolidated Financial Statements in Part II, Item 8 of this report concerning a description of recent accounting pronouncements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.