Ingram Micro Holding Corporation (INGM) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: while there is a record revenue growth of 16.2% and positive advancements in server and networking, the guidance for the next quarter is moderate at 3-5%. The Q&A highlights uncertainties in government subsidies and AI revenue impact, and management's evasive answers create some uncertainty. The positive financial performance is offset by cautious guidance and unclear responses, suggesting a neutral stock price reaction.
Key Financial Performance
Net Sales $12.79 billion, up 10.9% year-over-year in U.S. dollars and 10.2% on an FX-neutral basis. Growth driven by client and endpoint solutions (nearly 14% growth on an FX-neutral basis), servers, storage, cybersecurity, and GPUs for AI solutions.
Gross Profit $839 million or 6.56% of net sales. Declined year-over-year due to mix shift towards lower-margin businesses and an 8 basis point onetime impact from held-for-sale accounting for a divestiture.
Operating Expenses $696 million or 5.44% of net sales, down from 5.61% last year. Includes a $32.8 million write-down related to divestitures. Improvement reflects cost actions, Xvantage platform efficiencies, and lower cost-to-serve sales.
Adjusted EBITDA $294 million, up nearly 6% in U.S. dollars and 5% in constant currency. Growth driven by cost efficiencies and platform productivity gains.
Non-GAAP Net Income $142 million, up over 18% year-over-year in U.S. dollars and more than 17% in constant currency. Benefited from a $14 million decrease in net interest expense due to debt repayments.
Non-GAAP Diluted EPS $0.61, up 12% from the prior year. Includes a $0.02 impact from a higher tax rate due to U.S. withholding taxes on Latin America export sales.
Adjusted Free Cash Flow Outflow of $263 million, reflecting investments in working capital and strategic inventory buy-ins to mitigate potential tariffs.
Regional Net Sales North America: $4.98 billion, up 13.8% year-over-year. EMEA: $3.48 billion, up 4.8% in U.S. dollars but flat on an FX-neutral basis. Asia Pacific: $3.48 billion, up 16.2% in U.S. dollars and 17.3% FX-neutral. Latin America: $853 million, up 0.8% in U.S. dollars and 6.4% FX-neutral.
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Operating Highlights
Xvantage Platform: The platform is central to the company's evolution into a platform company. It is designed to streamline operations, leverage AI for demand optimization, and match supply and demand intelligently. The platform has shown significant growth in self-service orders (200% YoY) and quotes created (nearly doubled YoY).
Intelligent Digital Assistant (IDA): IDA uses AI and machine learning to analyze data and prioritize sales opportunities. It brought in tens of thousands of opportunities valued at hundreds of millions of dollars in Q2, up nearly 50% sequentially.
Geographic Sales Growth: Double-digit net sales growth in North America and Asia Pacific, single-digit growth in EMEA, and a return to growth in Latin America. India showed improvement despite competitive pressures.
Customer Categories: Growth across all customer categories, with enterprise outperforming and SMB showing modest growth.
Ransomware Incident Response: The company quickly restored secure operations within days of the attack, minimizing disruption. The incident highlighted the importance of the Xvantage platform's architecture.
Cost Efficiencies: Operational efficiencies and automation from the Xvantage platform, along with cost reduction actions, improved operating expense leverage.
Divestitures: The company divested two non-core business units, including CloudBlue, to focus on core strengths and operational effectiveness.
Cloud Strategy: Unified cloud marketplaces within the Xvantage platform to provide a single pane of glass for hardware, software, cloud, and service solutions.
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Risk or Challenges
Ransomware Attack: The company experienced a ransomware attack in early July, which led to certain data being exfiltrated and systems being taken offline temporarily. While operations were restored quickly, there remains uncertainty about the potential impact on future business results, including possible loss of business opportunities during the downtime.
Competitive Market in India: The heightened competitive market in India continues to impact gross margins, creating challenges in maintaining profitability in this region.
SMB Market Challenges: The small and medium-sized business (SMB) customer category remains muted due to near-term macroeconomic uncertainty and inflationary trends, which are affecting higher-margin sales.
Divestiture of Noncore Operations: The company is divesting underperforming noncore operations, including assets in North America and CloudBlue. These divestitures involve write-downs and could impact short-term financial performance.
Margin Pressure: Gross margins have declined year-over-year due to a mix shift towards lower-margin businesses, competitive pressures, and regional dynamics, particularly in Asia Pacific and India.
Ransomware Incident Financial Impact: The ransomware incident may have caused a loss of business opportunities, including bids or quotes the company was unable to participate in during the downtime. This has introduced conservatism in Q3 guidance.
Inventory Investments: Strategic buy-ins of inventory to get ahead of potential tariffs have led to higher working capital requirements and free cash flow outflows, which could strain liquidity.
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Guidance & Outlook
Revenue Expectations: Guidance for Q3 net sales is projected to be between $11.88 billion and $12.38 billion, representing year-over-year growth of more than 3% at the midpoint.
Gross Profit Projections: Q3 gross profit is expected to range from $815 million to $875 million, with gross margins just below 7% at the midpoint.
Earnings Per Share (EPS) Guidance: Non-GAAP diluted EPS for Q3 is projected to be between $0.61 and $0.73 per share, including a potential $0.02 to $0.04 impact related to the ransomware incident.
Market Trends and Business Segment Performance: Continued year-over-year top line growth is expected, driven by strong execution across core businesses. Growth in Client and Endpoint Solutions is expected to temper, while Advanced Solutions and Cloud businesses are anticipated to show improving growth rates. SMB customer category is also expected to improve.
Ransomware Incident Impact: Guidance reflects conservatism to account for potential loss of business due to the ransomware incident, including missed bids or quotes during system downtime. The impact is estimated to be $0.02 to $0.04 on EPS.
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Shareholder Return Plan
Dividends Paid in Q2: $23.5 million
Increase in Quarterly Dividend: 2.6% increase to be paid in Q3
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Key Q&A
Q:What are the expectations for revenue growth in the third quarter, particularly for endpoint and advanced solutions?
A:The midpoint of the guidance is at about 3% growth, with the top end at about 5% growth year-over-year. The growth is tempered in Client and Endpoint, with mid-single digits at the high end of the guide. Advanced solutions are expected to grow low to mid-single digits, with stronger growth in servers and storage, modest growth in networking, and higher single digits in cloud.
Q:How much of the strength in mobility in China was driven by government subsidies, and is this a key driver of deceleration in top-line growth for the next quarter?
A:It is hard to gauge the exact impact of government subsidies, but there is likely some pull-forward effect due to stimulus plans and potential tariffs. Growth in China was more geared towards the smartphone category and high-end GPUs.
Q:Are you seeing any demand pull-forward in North America across hardware products, and can you bifurcate that between devices and infrastructure?
A:There was no meaningful pull-forward in all categories. There may have been a little around desktop notebook refresh, but nothing material was built into Q2 or the Q3 guide.
Q:Are there any customer discussions about the implications of the 'Big Beautiful Bill' passed recently?
A:Most impacts of the bill are expected to be around federal-led areas, which are not a material part of the business. There are conversations happening, but it is not a meaningful part of the business. Favorability on CapEx treatment may benefit some companies, and the company is poised to capture demand pull-forward if it occurs.
Q:Where do you see the market for major products like storage, servers, net comm, PCs, and smartphones in the cycle?
A:Networking is starting to see single-digit growth after being down double digits for several quarters. Server, storage, and networking all had double-digit growth, with server being the biggest growth area. The company believes they are mid-cycle for these products.
Q:What drove the sequential growth in OpEx in Q2, and is it related to higher revenue or investments?
A:$32.7 million of the sequential growth in OpEx was due to a one-time charge. Sequential growth is also tied to higher revenue, annual merit increases, and some pull-forward investments, particularly in Xvantage.
Q:Why is gross margin expected to increase in Q3 despite a sequential revenue decline?
A:The increase in gross margin is due to a lower mix of client devices, normalization of mix between Client and Endpoint and Advanced Solutions, and higher growth in cloud. Competitive pricing in India has returned to more normal levels, and there is no significant deterioration in pricing or margins.
Q:Are you seeing AI-driven hardware purchases, and what percent of revenues are AI-driven?
A:AI-driven hardware purchases are still in early stages. Most PC refreshes are not AI-driven but are due to aging systems and Windows end-of-life. There are opportunities in GPUs for AI capabilities, particularly in North America and Asia Pacific. The percentage of AI-driven revenues is not disclosed.
Q:How is Xvantage contributing to growth, particularly in the SMB market?
A:Xvantage is helping drive growth by enabling self-service, shortening sales cycles, and reactivating dormant customers. Metrics like quotes created and self-service orders have significantly increased. SMB growth is partly attributed to Xvantage's capabilities.
Q:What is the outlook for cash flow given the year-to-date cash use?
A:Q3 is expected to be neutral to slightly negative in cash flow due to inventory investments. Q4 is expected to generate positive cash flow as inventory converts to receivables. Year-to-date cash use is driven by higher sales growth and opportunistic inventory buys.
Q:What is driving growth in server, storage, and networking, and how is cybersecurity performing?
A:Server, storage, and networking all had double-digit growth, with server being the strongest. Cybersecurity also showed strong growth but is a smaller portion of the Advanced Solutions business.
Q:How does the sale of CloudBlue impact Xvantage and the shift towards services?
A:The sale of CloudBlue does not materially impact Xvantage, as the relevant IP and capabilities were retained. Xvantage continues to be the platform for delivering services and solutions.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to the question about the exact impact of government subsidies on mobility growth in China, stating it is hard to gauge. Similarly, they did not provide a clear percentage of revenues driven by AI or specific details on customer segments for AI-related products.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI customer
AI demand
AI factory
AI machine
Ackerman BNP
Bay
CloudBlue
Group
IDA
Inc Research
Mcmanmon Vice
President Investor
Research Division
Sanjib
Vice President
Zilis
asset
attack response
capability
challenge
digit sale
divestiture
evolution
example
incident system
investigation
journey
market customer
pane glass
phase
platform architecture
platform ecosystem
quote
solution provider
strength
support
INGM Transcript
Ingram Micro Holding Corporation (INGM) Q3 2025 Earnings Call Transcript
Unknown10-31
The earnings call reveals mixed financial performance: strong revenue growth but declining margins and adjusted free cash flow outflow. While the company maintains a positive outlook, the ransomware incident and uncertainties in AI impact create caution. Q&A insights suggest stable margins and solid cash flow expectations, but management's lack of clarity on AI and cash flow guidance tempers optimism. Overall, the sentiment is neutral, balancing positive growth and operational performance with concerns over margins and guidance clarity.
Ingram Micro Holding Corporation (INGM) Q2 2025 Earnings Call Transcript
Unknown8-7
The earnings call presents a mixed picture: while there is a record revenue growth of 16.2% and positive advancements in server and networking, the guidance for the next quarter is moderate at 3-5%. The Q&A highlights uncertainties in government subsidies and AI revenue impact, and management's evasive answers create some uncertainty. The positive financial performance is offset by cautious guidance and unclear responses, suggesting a neutral stock price reaction.
Ingram Micro Holding Corporation (NYSE:INGM) Q4 2024 Earnings Call Transcript
Positive3-5
The earnings call summary shows strong performance in key areas like Asia Pacific and Latin America, and a robust product performance in cloud and endpoint solutions. The Q&A highlights confidence in 2025 growth and a $200 million share repurchase program, which are positive signals. However, risks like macroeconomic challenges and competitive pricing in India are noted, but the overall outlook remains positive due to strong financial metrics and optimistic guidance.
Earnings call transcript: Ingram Micro Q4 2024 earnings beat expectations
Unknown3-4
The earnings call presents mixed signals. While there are strong investments in cloud and digital transformation, financials show flat net sales and declining margins, which are concerning. The Q&A reveals some uncertainties, particularly around tariffs and SMB market weakness. However, optimistic guidance for 2025 and shareholder returns through dividends and buybacks balance these negatives. With no market cap provided, a neutral sentiment is suggested as the stock may not react strongly in either direction.
INGM Slides
Frequently Asked Questions
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