Ingram Micro Holding Corporation Price & Performance (INGM)

Despite the macroeconomic challenges we saw throughout 2024, we exited Q4 with a return to year over year top line growth of nearly 3.5% on an FX neutral basis. Within our guidance range.

We saw particular strength in Asia Pacific and Latin America both up over 7% on an FX neutral basis and I'm excited that North America returned to year over year growth. From a mix perspective, we continue to see robust performance in cloud and in client and endpoint solutions. Which both grew over year over year and quarter over quarter. Advanced Solutions was impacted by slowness in networking, but server and storage were each up double digits versus the prior year and sequentially. In terms of the customer category, we saw strength in sales, to large and enterprise customers, while small and medium sized businesses along with public sector remain softer. Considering these dynamic We believe the return to top line growth we saw in Q4 will sustain in 2025. Client and endpoint solution sales improved consistent with the growth we are now We also expect to see networking continue to rebound from the challenging year over year comparisons that continued throughout 2024. Evolving automation use cases, including the use of AI where we are helping our customers and partners navigate a rapid changing IT landscape. We will continue to forge the path with AI and automation. And we look forward to sharing the data with you in the coming quarters that demonstrates our progress as we come increasingly digital. 2024 was a pivotal year for Inger Microm.

We celebrated our return to the public markets in October, but more importantly, we do so with a different company than we were when we went private. In 2016. Since that time, we have made strong progress on our cloud and digital strategy And since the divestiture of our commerce and lifecycle business in 2022, we are even more focused on technology solutions and related value added services. Since our founding forty five years ago, Inger Micro has created a technology infrastructure that enables our over 1,500 vendor partners in more than 160,000 customers across 57 countries to connect, communicate and grow. Today, we have taken this foundational infrastructure and digitized it with the goal of becoming a leading business to business platform for the global technology ecosystem. To do this, we have invested more than $600,000,000 over roughly a decade in building our capabilities and technologies in cloud. This was the foundation for our AI driven digital experience platform Xfantage, where we have now been investing for the last two years Xfantage is built upon more than 29,000,000 lines of code 20 intelligent engines, all surrounded by more than 30 patents pending. We have rolled out Xfinity the Xfinity platform in 16 countries [indiscernible] In addition to enabling real time interaction, frictionless quoting and data insights into a single platform, Xpandaig allows for more seamless provisioning of Ingram Micro's own more profit as a result of bringing together a complete solution including hardware, software services and cloud.

X Vantage creates value for both our customers and our vendor partner. One example with a large customer of ours is in the transformation we have enabled with a leading cybersecurity vendor. Using Xtantix, the technology solutions provider was able to reduce its operational cycle time by over 80%. Decreasing the average time required to create a ready to order complex cybersecurity quote from more than two hours down to ten minutes or less. They were able to redeploy half of the team dedicated to those cybersecurity solutions to proactive sales, activities including cross and upselling, as well as renewal and growth initiatives related to subscriptions and licenses. Inger Micro is also empowering small and medium businesses such as a managed service provider or MSP that is using our platform to adopt self serve quoting and ordering to help transform their decades old sales processes and better manage their opportunity pipeline. Time savings and ease of use we provide through improved service level agreements with their Henk users and provided the MSP with the ability to shift resources to proactive sales and business development activities. With the help of our platform, the customer is able to separate sales and operation percent increase in sales activity without hiring additional resources.

Industry analysts are also noticing the value of being MicroXVantage platform. In a recent article, IDC's Vice President for Channels and Alliances summarized what works and what doesn't in partner programs. The article describes Inger Micro's ability to help IT providers stand out from the crowd. Noting that vendors that figure out how to personalize their portals and content [indiscernible] Will have a distinct advantage In 2024, we won over 100 industry awards including AWS Global Partner of the Year and AWS Innovation Partner of the Year for the LatAm region. For helping empower thousands of channel partners to create more value on AWS, We were also named HPE's Global Distributed of the Year, which for the second year in a row. During 2024, we also saw continued success with our global sustainability efforts ranking in the top 1% for sustainability Faeco bought us for the second year in a row. These external recognitions underscore our commitment to optimize into human touch while we become increasingly digital. Turning to 2025. Aligning the company around continued progress on four guiding principles, Let me walk you through each one briefly. The first is to be a leader in digital, which has been the center of our ongoing transformation.

Internally with our vendor partners and our customers, we are standardizing and modernizing modernizing the way we all work, serve and support the industry through improved and human enabled processes. With the Xtendage platform driving innovation and our supply chain backbone providing strength and stability. Second, is accelerating the growth in the high margin and more complex solutions that sit in our advanced solutions and cloud businesses. Along with expanding recurring revenue. The past two success here is growing profitable operating income, through sales focus and execution. Third, driving operational excellence to create efficiencies through targeted investments in automation, the simplification and modernization of our internal go to market and business processes, operations and supply chain solutions and digital technologies to create a high performing global platform operating model. And fourth, building the anchor micro team in the future by developing in our current talent pool providing associates with the path to expand their skill sets and provide the best solutions, user experience and return on investment to our partners and our customers. Entering 2025, these four guiding principles are driving continued innovation and differentiation on the platform. Looking to the year, we are excited about the return to growth on the top line we believe is sustainable in 2025.

We are confident we are taking the right and necessary steps address the challenges in India that Mike will discuss here shortly. At the global level, the technology and operational investments we have made position us and our customer and vendor partners to gain efficiencies and drive growth as well as we continue to roll out Xfinity globally. And as always, we remain committed to driving quality of revenue optimizing working capital and free cash flow and achieving operational efficiencies during the year. There's a lot to look forward to this year. With that, I'll turn the call over to Mike. Mike, Thank you, Paul, and thanks to everyone on the call. Like to reiterate how pleased we are at our return to growth to close the year. Now let me touch on a few fiscal twenty twenty four highlights with a bit deeper dive on the fourth quarter and then I will provide our guidance for the first quarter of twenty twenty five. Note that I will be focusing primarily on our non GAAP numbers in this overview. Fiscal year twenty twenty four net sales were $48,000,000,000 roughly flat versus 2023 and up 0.3% on an FX neutral basis.

As discussed, 2024 was impacted by macro headwinds which we believe are beginning to shift as we look to 2025. Full year 2024 gross profit came in at $3,440,000,000 or 7.18% of net sales down 20 basis points from the same period last year due primarily to line of business [indiscernible] and geographic mix along with a stronger competitive environment in general. Full year operating expense were $2,450,000,000 or 5.1% of net sales essentially flat from 2023. However, these OpEx levels continue to contain an elevated level of OpEx associated primarily with our investments in digital that Paul just discussed. These heightened expenses totaled $114,900,000 or 24 basis points of net sales in 2024 compared to $69,800,000 or 15 basis points of net sales in 2023.

While we expect in 2025 to incur a relatively consistent level of investment in 2024 these costs will reduce over time as we complete our wider deployment of Xvantage and move to a steady state. Thus, on a longer term basis, we expect our annual run rate of OpEx as percent of net sales will land below 5%. As we not only move to a more steady state as I just noted, but also increasingly benefit from efficiencies from X Vantage, restructuring initiatives we've taken in the past year plus Continued focus on operational improvements in business processes and operations any mix shift towards cloud and advanced solutions products During fiscal year twenty twenty four, we also recorded versus four basis points impact of restructuring charges in fiscal twenty twenty The 2024 actions reflect our efforts to enhance organization And they include organizational changes and headcount reductions reported during our first and fourth quarters of twenty twenty four. Collectively, the 2024 restructuring in the range of $85,000,000 to $95,000,000 although the impact of actions taken in the first quarter of fiscal twenty twenty four which represent approximately half of the range of annual run rate savings I just noted, have largely already been achieved beginning in the third quarter of fiscal year twenty twenty.

Our fiscal year twenty twenty four results also include $34,100,000 of expense or seven basis points of net sales representing the value of restricted stock units that immediately left in connection with our IPO in October. Non GAAP net income for the year was hundred and $27,900,000 and non GAAP diluted EPS was $2.79 Adjusted EBITDA in 2024 was $1,320,000,000 compared to $1,350,000,000 in 2023. Moving to the fourth quarter, net sales were $13,340,000,000 up 2.5% year over year in U. S. Dollars and up 3.3% on an FX neutral basis. Driven primarily by strength across geographies in client and endpoint solutions, which saw sequential growth for the past three quarters. This was offset by weakness in Advanced Solutions where we had solid momentum in server and storage, but another soft quarter in networking. On a more positive note, networking is gradually improving from a low in the first quarter of twenty twenty four. As a reminder, CEF has a lower profit margin than Advanced Solutions, which contributed in part to lower overall gross margins in the fourth quarter of 7.01% down 51 basis points versus prior year. Also contributing to this year over year margin trend are a higher mix of sales, particularly in The U. S. Towards enterprise customers where we don't provide as much attached value added services as we do, for instance, in SMB.

Demand remains more muted. A final contributing factor is a higher growth rate in our lower margin lower cost to serve Asia Pacific region. While we expect our long term product mix will skew more toward higher margin advanced solutions and cloud products, the anticipated growth from the PC refresh driving CES sales may impact margins in the short term depending on the solutions and geographical mix within a given quarter and region. We remain committed to above market growth and higher margin advanced solutions and cloud, while we also hold our associates accountable for quality of revenues accretive return to shareholders across the whole of the business. From a regional perspective, in the fourth quarter, North America net sales were $4,767,000,000 up 3% in U. S. Dollars and up 3.3% on an FX neutral basis. Versus the prior year fourth quarter. Driven by strength across all lines of business, but particular strength as I noted earlier in sales to enterprise customers. EMEA net sales of $4,070,000,000 were down 1.5% year over year and down 1.3% on an FX neutral basis. Primarily due to weakness in Advanced Solutions versus prior year. Demand levels in general have remained more muted to particularly in Western European market.

Net sales in Asia Pacific were $3,600,000,000 up 7.8% over the same quarter in 2023 in U. S. Dollars and up 7.7% an FX neutral basis. Driven by strength in CES sales, offset partially by weakness in Advanced Solutions. Certain countries within APAC were strong, we are seeing a very competitive market in India impacting both sales and margin as we are remaining appropriately selective on the business we pursue there. This is a trend that continues into the early part of twenty twenty five as well. Finally, net sales in Latin America were $1,010,000,000 down 0.9% in U. S. Dollars but up 7.5% constant currency as most local currencies weakened notably since 2023 The stronger FX neutral sales in LatAm reflected solid trends across all product categories. Fourth quarter gross profit came in at $936,100,000 or 7.01% of net sales 51 basis points from the same period last year. The year over year decrease in gross margin was driven primarily by the mix factors I've already noted but also reflective of a heightened competitive environment across most markets and particularly in India as I just mentioned. Q4 operating expense were $630,800,000 or 4.73% of net sales compared to 4.65% in the same period last year.

In Q4, we had discrete charges that related to our previously disclosed fraud matter in our India operation. These charges impacted gross profit and operating expenses as well as related margins. The first charge impacting gross profit related to inventory write offs associated with the professional services business totaling $9,100,000 or seven basis points of net sales. The second charge impacted operating expenses and related to goods and services tax or GST and professional fees associated with the completion of our investigation into this matter. Specifically, the GST charges connected to true ups related to adjustments we recorded earlier in 2024 on this matter as we filed GST returns at the end of the calendar year. And the professional costs relate to our pursuit of settlements and recovery efforts with the parties involved in this matter. Operating expense impacts totaled $11,200,000 or eight basis points of net sales. Our Q4 twenty twenty four results also include the impact of $34,100,000 or 26 basis points of net sales related to the stock based compensation charge in connection with our IPO in October. The combined impact of the discrete charges in India and the stock compensation charge is $54,400,000 or 41 basis points of net sales in the fourth quarter of twenty twenty four.

During the quarter, adjusted income from operations, which included the aforementioned charges, totaled $305,200,000 adjusted income from operations margin came in at 2.29% compared to 2.86% the same period last year. Our non GAAP net income for the quarter was hundred and $13,100,000 compared to $220,900,000 in the comparable period last year. Fourth quarter non GAAP diluted EPS was $0.92 excluding the two discrete items in India that I just noted, our non GAAP diluted EPS in the fourth quarter would have been $0.99 above the high end of our guidance range. Fourth quarter adjusted EBITDA was four [indiscernible] Turning to our balance sheet. At the end of Q4, net working capital was $4,100,000,000 compared to $4,400,000,000 to close the same period last year. We maintain a strong focus on working capital management to maximize returns on investment and cash provided by operations to improve our debt levels. This discipline allowed us to improve our year our annual net debt to adjusted EBITDA leverage ratio by more than 0.4 times since our third quarter. Adjusted free cash flow was strong in the quarter at $337,200,000 Our adjusted free cash flow for the full year was $443,300,000 As I've noted before, our free cash flow is seasonally driven.

Our goal over time is to drop 30% or more of EBITDA annually to free cash flow. But this will not necessarily be the case in each quarter due to this seasonality as well as the timely investments we make in opportunities for profitable growth. As anticipated, our Board of Directors has approved a quarterly cash dividend in the first quarter of twenty twenty five, of $0.074 per share or $17,500,000 which will be payable on March 25, to shareholders of record on March 11, 2025. Our Board of Directors also approved a one year share repurchase plan through which the company can purchase up to $75,000,000 of the company's common stock in connection with one or more secondary offerings by our controlling stockholder when an independent committee of our Board deems repurchases to be an appropriate use of our capital. During 2024, we paid down $483,000,000 of our term loan balance, bringing our total repayment on term loans to $1,560,000,000 since the beginning of 2022. With the cash flow generation I just mentioned, I am also pleased to note that we will repay an incremental $125,000,000 of our term loan later this month, During 2024, our interest expense was lower by $41,800,000 year over year primarily as a result of our debt paydowns over the past couple of years.

Last quarter, we noted our belief that fourth quarter would demonstrate a gradual improvement in the demand environment and we are pleased that this is what has happened. As Paul said, we believe the return to year over year growth is sustainable though we expect quarterly volatility. That said, as I now turn to guidance for the first quarter of twenty twenty five, we forecast net sales in the range of $11,430,000,000 to $11,830,000,000 representing year over year growth of 2.620.6% at the midpoint. As I mentioned, as CES improves, it may have short term negative impact on gross margin but we remain focused on quality of revenue and outsized growth in advanced solutions and cloud over time. Thus, we expect gross margins to expand over time as the mix changes. For the first quarter of twenty twenty five, we expect gross profit to be in the range of $785,000,000 to $835,000,000 This guidance assumes we continue to see competitive and mix factors on gross margin consistent with what we've discussed today for Q4 of twenty twenty four. But particularly in our India business where we see some irrational competitive pricing pressures mainly on the bidding process on large contracts.

As we see extremely aggressive pricing behaviors from global, subregional and local players in that market we expect our own gross margin in India will be temporarily impacted. We have invested in India for more than two decades and remain very committed to the range of $1.55 to $1.55 to $1.55 to $1.55 to $1.55 to $1.55 to $1.55 to $1.55 per share, which is in line with our expectations. We expect non GAAP diluted EPS to be in the range of $0.51 to $0.61 per diluted share which is based on weighted average shares outstanding of approximately dollars Our non GAAP tax rate is expected to be approximately 30%. As I close out my comments, we are quite proud of our finished to fiscal twenty twenty four as we saw growth in the top line, but also a solid profit result despite some unique P and L hits we incurred in India. But we did so with strong management of the balance sheet as well, generating solid cash flow that allowed us to repay debt and bring our net debt to EBITDA leverage south of two times to close the quarter.

This gives us a nice momentum in Q1 of twenty twenty five where we expect the second quarter of year over year growth despite some of the headwinds we've discussed in parts of EMEA and in India. We see a more solid environment in North America, and Latin America while we continue to optimize our business and drive leverage over time in our operating And we are balancing the use of cash generated from operations with another repay and we are balancing the use of cash generated from operations with another repayment of debt in March while also commencing a return to shareholders in the form of a dividend in our first full quarter as a publicly traded company. With that operator, we are ready for the question and answer session.

Thank you. Sorry for that technical difficulty. Our next question is from Michael Ng with Goldman Sachs. Please proceed.

Hey, good afternoon. Thank you for the question.

I wanted to ask about the large enterprise momentum, which seemed like it was largely focused in North America. Could you talk a little bit about why large enterprise is outperforming? Are you seeing any success ahead of tariffs, is there a bit of a pull forward? And any comments on where you feel like we are on a PC cycle Are you seeing green shoots on the refresh?

Yes, Michael, this is Paul. Good afternoon. So I would tell you that the purchasing when we mentioned large enterprise business was actually across the board and across all of the regions.

So it wasn't just North America. North America was one of those that experienced that also. One of the things we did see actually in North America was actually growth in all three areas to client endpoint solutions, advanced solution and cloud. But the large customer comment was up across the board and across all of the four regions. As it relates to your question around the refresh, we have continued to see momentum around the notebook desktop refresh primarily around Windows refresh and age systems. To a little bit of an extent, some AIPCs, but really just being driven by the refresh coming up. So again, large customer enterprise, bigger customers across the board, globally and also refresh starting from a notebook desktop [indiscernible] Our next question is from Eric Woodring with Morgan Stanley. Please proceed.

Awesome. Thanks so much for taking my questions. Paul, maybe if I just start your comments on relative areas of spending strength versus weakness aligned with a lot of what we're hearing in the market more broadly. And my question really is the world is uncertain, volatile, today. And just what are you hearing from your customers? And what do you see in your pipeline that gives you enough confidence to say you can return to top line growth in 2025? And then I have a follow-up. Thanks. So thank you for the question. So we seen if you look at kind of how we exited the year and talking about the momentum we had, specifically around endpoint client point solutions. I just mentioned, we continue to see strength there. If we look at advanced solutions, one of the areas that we've focused on that we've had challenges through 2024 was around the networking business. So that was down in Q4 and full year by double digit. And the expectation that that comes back. So as we see slowly getting better throughout 2024, As I mentioned, it was still down for full year 2024. If you look at IDC 2025 base case They say that it's going to be up 8%.

Coming off of a negative 6% in 2024.

And I would also tell you that our leading indicators we're seeing from our large And then continued strength around cloud and other areas that we saw good strength around server storage and again cybersecurity one of those also. So that's what gives us the confidence that going to continue to see growth. And again, for the first time in many quarters, we finally got to talk about the North America momentum that we saw exiting the year. And really continuing beginning parts of this year. Okay.

That's helpful. Thank you, Paul.

And then maybe my follow-up.

Mike, can you help me just understand if there are any one time costs embedded in your 1Q profitability guide? Because I believe you kind of back into EPS and net income, it implies both our [indiscernible] really just trying to understand what some of the cost headwinds are? I know you mentioned India, and mix shift, but outside of that, what the cost headwinds would be in 1Q?

And how kind of one time versus sustainable they might be as we think about the remainder of 2020 Thanks so much. Yes. So the guide, there's not anything notable one offs. It's It's mainly more of the margin factors. So we talked about India and Paul can elaborate on this for sure if you like. But those competitive factors are driving notable drops in margin. But we're seeing a heightened competitive environment, I guess, really almost everywhere in the world. It's not probably uncommon when you have more of a down cycle. But again, nothing notable other than margin and really driven by mix and then heightened a little bit in the India market by some of the factors there. [indiscernible] just one thing to add to that. I mean, I think the only thing I would add to that is we're still seeing continued momentum as we continue to optimize costs and we have a wraparound impact of further reduction We announced in early December as well for instance that really aren't taking hold entirely even in Q1. So that will will give a little bit more momentum on the cost side as well as we go through the year.

Our next question question is from Sameik Chatterjee with JPMorgan Chase. Please proceed.

Yes. Thank you. Thanks for taking my questions. Maybe first first one, Paul, just more directly at the tariff question, wondering what you're hearing from your North America customer on that front in terms of how should we think about and if obviously you've been through many cycles here including previous tariffs like what how are you thinking about and how are customers sort of relaying [indiscernible] probably changed in terms of demand, if tariffs were to sort of and I guess tariffs are not implemented. So how are you thinking about sort of changes in demand profile between the product categories and how would typically you how comfortable you feel passing through some of those sort of increased cost to your customers And I have a quick follow-up after that. Yes. Samik, so this fall, So the tariff situation to state the obvious is very fluid. As you pointed out, we're well versed in operating in a tariff environment. We typically pass through those tariffs and we don't bear those costs. I think the one thing will be is what's the impact potentially on the overall demand side. So really that's going to depend on, I'll call it, the price elasticity and the end consumption, the end businesses having the tolerance to absorb those tariff impacts.

Again, it's too early right now to say what the impacts will be. We're less impacted again because we're not manufacturing products. But with that said, a couple of recent comments. So some of our vendors continue to focus on making their supply chain networks more resilient and creating mitigation plans. And some that I was talking with middle of last year already working for some time to diversify where their products are being manufactured to minimize the impacts Specifically, I would say there's some comments around that for The U. S. And how some of our large manufacturers are moving around the world to try and offset that. I would also say, this is a pretty recent comment, I was at a customer event with our TrustDesk community, which is our powerful global community of some of our top strategic customers. And I actually asked them for real time feedback kind of how they're looking at tariffs with their end businesses that they're serving every day. And one of the comments was that one of our customers is actually seeing deals and that they're moving deals from maybe cash or shorter term cycles to financing deals through our Inter MicroFinancial Services he believes that if the end business is if it becomes too much of a price increase and there's going to be an opportunity have to look at how they can finance to really solve that business outcome.

So again, that's how we're kind of looking at tariffs right now. And as you mentioned, it is a a fluid situation and a bit uncertain on where we're going to land on this. Could there be to your point, could there be a potential pocket price benefit for the inventory that we carry on a global basis, yes, there could be.

And so we're looking at strategic opportunities that we looked at in Q4 to make sure that we have the right amount of inventory help service our 161,000 customers on a global basis. That will be a point in time. I think we'll have to wait see kind of where the water level sets in a little bit longer term. Over the coming weeks and days.

Great, got it. Interesting. Thank you. Thanks for the insight.

Maybe for my follow-up for Mike.

Mike, you're guiding the 1Q EPS to be a year over year decline despite the growth in revenue because of the competitive market environment that you are perceiving in 1Q. You look through the sort of exiting the year or sort of the opportunity to get EPS back to a growth trajectory as well. Seems like there's some sort of level somewhat of lever on the OpEx to pull the remainder of the year, but how are you thinking about the option to get EAS back to growth or what are the other additional levels you can think of that would be available to the company to get EPS back to growth here?

Yes, it's a good question. There's a couple of points I would make. And this would just build off of what you just repeated back. I mean, it is really a margin story more than anything. And it's a mix factor. I guess if I look at a couple of different mix factors that really drive rates as we talked about in our prepared remarks. One you have mix more towards client and endpoint solutions and specifically seeing some strength not only in just PC and desktop, but also in mobility devices. And those do tend to be lower margin. They're also lower costs to serve and the product moves fast. So it's a nice turning environment from a working capital perspective, but it will dilute margins. And if we see that strength, our PC notebook refresh continue for a handful of quarters that is going to have a dilutive impact on at least the gross margins. Then you have customer mix. And as we talked about also in our prepared remarks, and some of the follow-up here, seeing a predominance more towards the large enterprise or large customers. And if you think about it, that is a lower value add kind of relationship for us where we make more margin is where we have more value add in the form of services, value add pre engineering and post engineering support, deployment skills as well as just the complexity of the products when we're selling more into SMB as an example.

And as we talked about, SMB has remained a little bit softer But we're seeing signs where that would start to improve as long as we start to see the market stabilize a little bit in the form of inflation, and in interest rate environment And then lastly, you have the geographic mix. We've talked about this before where we're looking at north of 7% in our Asia Pac region to close out the year. And that is a lower margin, lower cost to serve business, a couple of our largest markets there.

Have a more predominance of client and endpoint solutions business in their own right. And so that too has a dilutive margin impact. So as long as we now start to see more traction in North America, we see continued traction in in LatAm, which has been solid and is one of our most profitable And then we also start to see perhaps some of the economic headwinds that exist today in Europe and particularly Western European markets start to subside all of those things are going to have the impact of driving an upward trend generally speaking on gross margins. In the meantime, OpEx does remain optimized as I responded to Eric a minute ago. I think we are seeing still wraparound impact of some of the cost reduction efforts, but we do still have some of the high investment in our OpEx associated with our digital deployment X Manage still rolling out in various ways. 2025 and even into the early part of next year that causes some heightened OpEx. So we said in our prepared remarks, we do see line of sight where we would be bringing OpEx south of 5%.

I think that's probably as we get into next year. That's 5% on net sales leverage perspective. And I think we're optimizing that quite well. We continue to capitalize on that.

Great. Thank you. Thanks for taking my questions.

We ask that you please limit as in consideration of time. Our next question is from Bhattacharya with Bank of America. Please proceed. Hi. Thanks for taking my questions. Paul and Mike, in your opinion, at what rate is the overall IT distribution market growing And did Ingram lose or gain share in the December? Know you talked about a tough pricing environment in India.

Is that the only region? And what is your strategy to deal with this? Is price only lever? Or can this impact working capital in terms of you having to extend more credit if you can just talk about the market and what your strategy is to deal with this environment?

Yes, that's Paul. So I'll start for Ruplu. Thank you. So I'll just touch again. North America is definitely stabilizing and we're As we mentioned, we saw growth in all three lines of business.

Our client endpoint solutions, advanced solutions and cloud in Q4 and and we expect to continue to see that momentum. In Europe, I would say performing relatively well based off the expectations, the broader macroeconomic economic environment, given us a little bit of headwinds there. But we're focused as we talk about quality of earnings and growth of what we're looking at. And we've had a little bit of headwinds specifically as you've heard Mike and I talk about Asia Pacific which is still strong. Particularly in client and endpoint solutions business, but definitely a competitive environment that we haven't seen for quite some time in that market specifically. There are deals that we actually walked away from that did meet our profitability and ROI expectations. That would have been in a profit loss. So heard me and Mike again say that we're focused on quality of revenue and I think you show up see that show up in our earnings. So what are we doing? We're focused on as we came out of some of the challenges for the back half of the year and the fraud that Mike talked about in the prepared remarks. We're rebuilding the right teams making sure we're operating with the right level of integrity and controls.

Hiring the appropriate talent. We're getting back to folks seen on the customer. I think some of that challenges that we had starting in Q2 with the fraud and the investigation we are a bit internally focused and now we're focused on the customers and vendors. Also put some controls around kind of the marginal and transaction negative margin impact. I'll go back to this is one of our largest countries as you know. And we've been doing business and we're getting a team focus. We've been doing business in India. For the past two decades and being a leader there. So we're going to get back to what we know how to do. Grow and continue to be a leader in that. Business. If you look at Latin America, we continue to execute very well in Latin America. Because of our reach and our depth that we have and the investment we've made throughout the years in that region. And so we expect to continue to see momentum there.

That would be kind of the overall environment where we see The only thing I would add to that is as you've heard pretty clearly, India is probably where we're seeing more irrationality right now as far as pricing. But it is a competitive market everywhere. To your question on balance sheet, yes, we are seeing at times a lengthening of terms being granted. Although I don't think it's as notable of a factor. We're seeing a bit of that and we need to make sure as we elect what deals we're going to participate in, that it is with an appropriate return on invested capital and return to shareholders. So but I'm not as concerned about the balance sheet side of the equation. It's more just making sure we're taking the deals that make sense. And then overall continuing to grow as we've always said as our strategy growing advanced solutions and cloud above market and over time we've demonstrated that we've been doing that and growing client and endpoint where you tend to have a little bit more of that turf war from a margin perspective can get a little bit more exacerbated growing that with market and being selective as to the nature of business we want to pursue.

Hey, Ruffla, the only last thing I would say real quick is if you look at X bandage and the investments we've made, And as we've talked about over the last nine quarters, we've taken out upwards of $200,000,000 worth of OpEx. Which we've reinvested some of that back into X Vantage, but it's been enabled internal efficiencies and the benefit we have is we're showing up to provide our customers a singular experience around hardware, software services and cloud. One area that they can transact with the needs of doing business. Ultimately for those end businesses, the millions that they're serving each and every day.

Our next question is from Surinder Singh with Jefferies. Please proceed.

About the SMB market and what you're seeing there at this point?

Is it fair to characterize that it's a bit weaker at this point in the cycle than you're anticipating?

Just any color around that would be helpful. And maybe your expectations as the year progresses? Sure. No, this is Paul. So thank you for the question. Yes, SMB was down as I mentioned double digit for most quarters that actually the year in Q4. Early indications are that we believe that is going to come back and we're seeing early signs of that. Part of that I believe too is tied to the advanced solutions and the opportunity we have is as areas like networking continue to or continue to make progress towards not having declines in 2024 going into 2025. So wrapping our advanced solutions, our cloud and the end point solutions together, we think that there'll be some strength coming back into SMB. Maybe not as much in Q1, but the conversation we're having with customers as they see a pretty good back half of the year as building out their pipelines. Relative to the end businesses they're serving today.

Our next question is from Matt Nknam with Deutsche Bank. Please proceed.

Matt, are you there?

Hey, guys.

Now we can hear you.

Okay, awesome. So two follow ups. First on public sector, you referenced some softness. I'm just wondering, is that U. S. Related? Is that related to the election and hence more transitory in nature? Or is this expected to continue? And then just on working cap and OCF Mike, maybe if we can how you're thinking about working cap and operating cash flow in 1Q with the implied seasonal sales dip maybe more of a mix shift towards client and endpoint?

So this is Paul. I'll answer the public sector. Yes, the the significant piece was from a North America perspective, but I would also say the other regions also were down too. So it's kind of a global public sector environment and the expectation was prior to some of the decisions that were made here recently over the last twenty four hours is that we would see some return to growth. In public sector depending on which season it is. Whether it's Fed, SLED or education, but there may actually be some opportunity now too, I would say in the European markets as there's potentially some more preparing to they're going to move forward. So there may be some public sector opportunities there too. But expectation is that, yes, it would start to come back this year. Because it was down by double digits on a global basis for us. In Q4. So then just to tack on on the working capital question, Yes, I'll just remind everybody, we have a decent amount of seasonality to our business. Where we invest in the second half of the year for the peak of sales going into Q4. Those sales were higher as we talked about.

We saw nice growth in Q4. And therefore, we're more in collection mode on the receivables that came out of Q4 as we get into Q1. But I would also point out, we did have a very strong free cash flow fourth quarter and some of that was not only sell through very successfully of inventory levels, and translating that into sales, but also some strategic work with our vendors and payables to extend that. And obviously, you can only do that so much on an ongoing basis. So we're more in collection mode as we go into Q1. On the receivables, but we also see a typically a little bit more of a seasonal lull in Q1 and Q2 as you would see in our normal sales cycle. So, what I would just say is over time, and I made this remark in my prepared remarks We expect to generate consistent free cash flow over the annual periods. As long as we bear through those seasonality factors and see some of that bear out throughout the year.

And it's our goal that on a consistent basis, we're driving 30% or more of our EBITDA through to free cash flow. If we start to see as we usually do with the countercyclicality of the business, quite a bit of growth opportunity that requires investment in working capital. And then endpoint solutions requires less than advanced solutions does. So if we start to see network rebound and Advanced Solutions return to more significant growth given the project based nature of that business. That might require some investment in working capital, but rest assured, where we look at that, is with an eye absolutely towards shareholder return and making sure we're balancing that with the profitability of the deals we're pursuing.

Thank you. Operating income dollars are kind of a good proxy that neutralizes for all the mix and impacts and trying to figure out what's going on with PCs versus infrastructure. Now if I look at that metric, it was down almost 20% year over year in the quarter. Understand tough macro in India and some of those other factors going on. But your main competitor, I think on that metric was down about 1% and your main customers, whether it's the CDW, etcetera, were kind of flattish on that metric. So I guess relative to the competitor competitors and your customers, it's just a big delta on the operating income dollar I'm trying to figure out how to reconcile what's going on there And then for Mike, if you could just expand on your Q1 guidance. It's on gross profit dollars and EPS, but we don't have the OI dollars. Hard to model the below the line items, but I think I'm getting to around $2.10 on EBIT dollars. If you could maybe just help us a little bit on what's implied for Q1 on the operating income dollar line, that'd be helpful. You, Gus. So let me hit on the trend in Q4 first.

I'll just remind you, not only do we have the India charges, which were about $20,300,000 but we also have the stock based comp charge that goes through OpEx and operating income. We add that back when you get down into adjusted EBITDA and non GAAP net income. But it is not added back into adjusted operating income. So that's $50,400,000 it's 41 basis point the bulk of what you're talking about relative to what you would see perhaps in some other markets on the operating income line item. And then on top of that, as I've said a couple of times here, I think we continue to find ways where we can optimize sales. And also as we see X Vantage driving of the benefits we've talked about in previous discussions as well as today. As we return to growth, we have the opportunity to grow without having to add back as much operating more automated than we were a year ago, two years ago, etcetera. So those are really the more optimal benefits there. Could you I'm sorry, could you just repeat your second part of your question? Though you were asking more on EBITDA, I think?

Yes. I was mainly trying to get into Q1 to make sure we don't miss model this in Q1 again because it was such a big deviation in Q4 on the operating income dollar line. And I think you're implying just over $200,000,000 of EBIT on the Q1 line, but any color you can give us in terms of modeling and we could take it offline need to, but Yes. I can definitely get back to you with more specifics when we have some follow ons. But I think generally speaking, I think you're about right as far as what we would see as far as trending. We're seeing a little bit of on the operating income non GAAP line again because we have some of that heightened investment in on a year over year basis in Xvantage and so forth, you're seeing a little bit more muted on a year over year basis, but But directionally, you're not too far off the EBIT, I believe. Okay. That clarification is helpful. Thanks, Mike.

Our next question is from David Page with RBC Capital Capital Markets. Please proceed.

Hi. Thank you for taking my question.

Wondering if you could just give some maybe qualitative thoughts around how you're leveraging the X Vantage platform into 2025, in particular respect to hyperscalers, I think on the 3Q call, you had mentioned some momentum with AWS. So I was wondering how that was going. And then then hyperscale demand in general? Thank you.

Yes. So thank you, David. So let me give you a couple of thoughts on how we're maybe some of the platform metrics. So as it relates to the hyperscalers, yes, we have actually created some integrations and ease of use on how technology wants to be deployed. Specifically with AWS. They mentioned that they're reinventing conference and you probably saw a press release on us of what we're doing to integrate seamlessly with our marketplace and we will continue to integrate and move forward with all the hyperscalers from a customer and really an ease of use standpoint. But let me give you a couple of thoughts that we have. These are year end, full year kind of metrics that we look at. There's really three different ways that we look at the metrics with regard to the business. So the first one is we would talk about end user engagement. And how we're moving forward with end user engagement. That would be things like searches and active users. That was up over 50% year over year. The full year of 2024.

The second one as we call it is customer. And as we look at the customer, one of the metrics that we use is dormant customers and a dormant customer is us.

Us, as somebody that hasn't transacted with us, twelve months or more, we have reactivated over 8,000 and those 8,000 new Doorman customers that have been working with have actually started to deliver meaningful revenue.

For those net new customers, I'll call.

The last one is financial and operational. One of the metrics that we use there is self-service orders and those have more than doubled [indiscernible] helps demonstrate if you're doing self-service orders at Punchless and it demonstrates ease of use and much more less touch and friction in the business. So are a couple of different ways we're looking at user engagement, financial and operational and customer And I just gave you one metric that we use amongst many that we have. So we're seeing good progress on our XVantage adoption and ease of doing business is what we've expected We feel good about where we're at right now.

Great. Thank you.

Our next question is from Darian Anei with Evercore ISI. Please proceed. Thanks a lot. I guess was hoping you could talk a little bit about in December and March quarter, you're looking at about mid 2%, 2.5% top line growth. As you go through calendar '25, just qualitatively, do you folks expect that growth to accelerate as the year progresses, especially given some of the comments you made on networking Ingram curve based on the endpoint here. I'm trying to understand, think this growth accelerates or what are the cross currents we should be thinking about as it comes to 2025 growth? And then if you could just quantify how big is India for you folks right now, that would be helpful. Thank you. So we don't give guidance for the year from a revenue standpoint. I think there's a couple of variables. We're seeing the notebook desktop refresh. I think that's going to depend it's going to be dependent on how quickly that happens. Again, we're seeing nice momentum. Exiting the year and really going into the first part of Q1 So we're pleased with the momentum that we're seeing around that. Again, that's coming out of the Windows refresh and just age systems in general, people looking for new technology, to refresh the business.

And again, if IDC is correct and kind of their thoughts and the business moving on networking from negative 6% last year to somewhere high single digits, they called 8%. Will definitely impact as networking is one of our larger pieces of business within our Advanced Solutions business. And continued momentum in cloud. So that's kind of how we see makeup of where we're going to continue to invest. [indiscernible] kind of the size of it is one of our largest businesses that we have.

From a company perspective. So within Asia Pacific, it's a very large piece of the overall business. Thank you.

And our final question will be Maggie Nolan with William Blair. Please proceed with your question. Thank you.

Is there a change in the expectation for the year of how you're going to drive operating leverage just given some of the dynamics with pricing and advanced solutions are you going to need to be looking at more cost solutions and efficiencies and anything beyond this year as well? You would want to comment on is welcome Yes, Maggie, this is Paul. So as we went through the budgeting process and looking at kind of what could be some of the headwinds or challenges. I think we saw maybe some of the potential headwinds in Europe as a potential and how do we look at protecting that on a go forward basis. As we mentioned exiting the year, which was late in the year, we announced we're taking out 3.5% of OpEx on a global basis. The expectation was that we'll continue to get the efficiencies as you heard me talk about in Expantage. So how do we give a better experience more touchless, stated another way at lower OpEx.

And so that's what we're really focused on is making sure we're benefiting out of the investments we've made in those 16 countries where we have the Xvantage platform. And so we continue to build additional competencies and capabilities that we're offering each of the countries and one of the benefits we have as we've mentioned before, which we think is a significant differentiator is that because the way we've set up our architecture around X Vantage that when we do development and create code around it, it goes to all six countries.

So you look the way we like to say it is we create the data once and we get to use it multiple times. It allows us to scale at a much lower cost in terms of innovation. So we're going to continue to focus on that for the first half of the year.

And again, we were planning for kind of downside scenarios where we thought exiting the year and going into the first half of twenty twenty five.

Thank you. We have reached the end of our question and answer session. I would like to turn the call back over to Paul Bey for closing remarks.

Thank you, everyone, for today's call. Thank you to our 24,000 team members for their commitment to innovation and to our vendor partners and customers. For continued to evolve alongside us. We hope to see many of you at the Morgan Stanley TMT at conference tomorrow as well as many of the other conferences in the coming months. Thanks for your interest and have a great rest of the day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.