Insight Enterprises Inc.
02/12/2026 | Press release | Distributed by Public on 02/12/2026 12:48
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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. At Insight, we accelerate transformation by unlocking the power of people and technology. We turn complexity into clarity, helping clients achieve meaningful business outcomes and drive real results at scale. 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 deliver secure, end-to-end digital transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 37 years of broad IT expertise. We amplify our solutions and services with global scale, local expertise and our e-commerce experience, enabling our clients to realize their digital ambitions in multiple ways. Our offerings in North America and certain countries in EMEA and APAC include hardware, software and services, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments consist largely of software and certain software-related services and cloud solutions.
Full year 2025 financial and operational highlights included the following:
•We reported gross profit of $1.8 billion and record gross margin of 21.4%, primarily driven by margin expansion in North America and EMEA.
•We generated cash flows from operations of $303.8 million.
•We strengthened our capabilities through two strategic acquisitions: Inspire11, enhancing our AI and data expertise, and Sekuro, expanding cybersecurity and digital resilience across APAC.
On a consolidated basis, for the year ended December 31, 2025:
•Net sales of $8.2 billion decreased 5% compared to 2024.
•Gross profit of $1.8 billion was relatively flat compared to 2024.
•Consolidated gross margin expanded approximately 110 basis points to a record 21.4% of net sales in 2025. This increase reflects expansion in margin from services net sales, primarily from growth in other agency transactions and Insight Core services.
•Earnings from operations decreased to $334.9 million in 2025, a decrease of 14% compared to the prior year, which represented 4.1% of net sales.
•Our effective tax rate in 2025 was 30.3%, compared to our effective tax rate of 25.0% in 2024.
•Net earnings and diluted net earnings per share were $157.3 million and $4.86, respectively, in 2025. In 2024, we reported net earnings of $249.7 million and diluted net earnings per share of $6.55.
The results of operations for 2025 include the following items:
•severance and restructuring expenses, net of $37.1 million, $27.6 million net of tax;
•acquisition and integration related expenses of $3.6 million, $3.0 million net of tax; and
•the repurchase of approximately 1.2 million shares of the Company's common stock for an aggregate cost of $151.1 million.
The results of operations for 2024 include the following items:
•severance and restructuring expenses, net of $31.6 million, $24.2 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.
In discussing financial results for 2025 and 2024, 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.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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,earnings from operations and Adjusted earnings from operations in 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 2025, we generated $303.8 million of cash from operating activities and primarily utilized cash for strategic acquisitions, to repurchase shares of our common stock, to repay debt, to fund the cash settlement of a portion of warrants (the "Warrants") relating to certain hedge and warrant transactions (the "Call Spread Transactions") entered into in connection with the issuance of our convertible senior notes that matured in 2025 (the "Convertible Notes") and for payment of earnouts and other acquisition related payments. We had net borrowings of $818.8 million under our ABL facility. We ended the year with $358.0 million of cash and cash equivalents and $1,361.3 million of debt outstanding under our long-term debt facilities.
Details about segment results of operations can be found in Note 20 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, Demand and Inflation Update
We believe inflation contributed to sustained high interest rates on all of our variable rate borrowing facilities throughout 2025, consistent with the prior year period. While these interest rates are expected to continue to moderately decrease going forward, we continue to anticipate higher than historical rates in 2026. We are actively monitoring changes to the global macroeconomic environment, including those impacting our supply chain, demand for our products whether due to tariffs or otherwise and interest rates, and assessing the potential impacts these challenges may have on our current results, financial condition and liquidity. We are also mindful of the potential effects these conditions could have on our clients, partners and prospects as we enter 2026.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of net sales for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Net sales | 100.0 | % | 100.0 | % | |||||||
| Costs of goods sold | 78.6 | 79.7 | |||||||||
| Gross profit | 21.4 | 20.3 | |||||||||
| Operating expenses: | |||||||||||
| Selling and administrative expenses | 16.8 | 15.4 | |||||||||
| Severance and restructuring expenses and acquisition-related expenses, net | 0.5 | 0.4 | |||||||||
| Earnings from operations | 4.1 | 4.5 | |||||||||
| Non-operating expense, net | 1.4 | 0.6 | |||||||||
| Earnings before income taxes | 2.7 | 3.9 | |||||||||
| Income tax expense | 0.8 | 1.0 | |||||||||
| Net earnings | 1.9 | % | 2.9 | % | |||||||
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 example, recent changes in incentives for certain cloud-based solutions adversely impacted our results of operations in 2025. 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 Infocenter, Inspire11 and Sekuro from their respective acquisition dates.
2025 Compared to 2024
Net Sales.Net sales decreased 5%, or $0.5 billion, in 2025 compared to 2024. Net sales of products (hardware and software) decreased 7%, year to year, while net sales of services increased 2%, year over year, in 2025 compared to 2024. Our net sales by operating segment for 2025 and 2024 were as follows (dollars in thousands):
| 2025 | 2024 | % Change | |||||||||||||||
| North America | $ | 6,654,537 | $ | 7,054,580 | (6 | %) | |||||||||||
| EMEA | 1,355,148 | 1,414,097 | (4 | %) | |||||||||||||
| APAC | 237,495 | 233,021 | 2 | % | |||||||||||||
| Consolidated | $ | 8,247,180 | $ | 8,701,698 | (5 | %) | |||||||||||
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Our net sales by offering category for North America for 2025 and 2024 were as follows (dollars in thousands):
| North America | ||||||||||||||||||||
| Sales Mix | 2025 | 2024 | % Change | |||||||||||||||||
| Hardware | $ | 4,135,116 | $ | 4,038,341 | 2 | % | ||||||||||||||
| Software | 1,256,691 | 1,721,403 | (27 | %) | ||||||||||||||||
| Services | 1,262,730 | 1,294,836 | (2 | %) | ||||||||||||||||
| $ | 6,654,537 | $ | 7,054,580 | (6 | %) | |||||||||||||||
Net sales in North America decreased 6%, or $400.0 million, in 2025 compared to 2024. This net decrease reflects decreases in software and services net sales, partially offset by an increase in hardware net sales. Net sales of hardware increased 2%, year over year. Net sales of software and services decreased 27% and 2%, respectively, year to year. The net changes were primarily the result of the following:
•The decrease in software net sales was primarily due to a significant multiyear transaction in the first quarter of 2024 with no comparable transaction in 2025, changes in certain vendor relationships (shifting us from a principal to an agent role), as well as the continued migration of on-premise software to cloud solutions, reported net in services net sales.
•The decrease in services net sales was primarily due to a decrease in certain fees from cloud solution offerings as a result of partner program changes and a decline in sales of Insight Delivered services from our North America organic business. The decrease in sales of Insight Delivered services from our North America organic business was partially offset by an increase in net sales from Infocenter and Inspire11. Our North America organic business excludes Infocenter, which we acquired on May 1, 2024 and excludes Inspire11, which we acquired on October 1, 2025.
•The increase in hardware net sales was primarily due to higher volume of sales to commercial clients due to higher demand for devices.
Our net sales by offering category for EMEA for 2025 and 2024 were as follows (dollars in thousands):
| EMEA | ||||||||||||||||||||
| Sales Mix | 2025 | 2024 | % Change | |||||||||||||||||
| Hardware | $ | 458,802 | $ | 501,111 | (8 | %) | ||||||||||||||
| Software | 552,421 | 626,372 | (12 | %) | ||||||||||||||||
| Services | 343,925 | 286,614 | 20 | % | ||||||||||||||||
| $ | 1,355,148 | $ | 1,414,097 | (4 | %) | |||||||||||||||
Net sales in EMEA decreased 4% (decreasing 8% when excluding the effects of fluctuating foreign currency exchange rates), or $58.9 million, in 2025 compared to 2024. 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 12% and 8%, respectively, year to year, partially offset by an increase in services net sales of 20%, 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 the continued migration of on-premise software to cloud solutions, reported net in services net sales.
•The decrease in hardware net sales was primarily due to lower volume of sales to large enterprise, corporate and public sector clients due to lower demand.
•The increase in services net sales was primarily due to increased sales of Insight Delivered services and an increase in other agency net sales, partially offset by a net decrease in fees from cloud solution offerings primarily as a result of partner program changes.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Our net sales by offering category for APAC for 2025 and 2024 were as follows (dollars in thousands):
| APAC | ||||||||||||||||||||
| Sales Mix | 2025 | 2024 | % Change | |||||||||||||||||
| Hardware | $ | 36,199 | $ | 35,448 | 2 | % | ||||||||||||||
| Software | 91,779 | 92,965 | (1 | %) | ||||||||||||||||
| Services | 109,517 | 104,608 | 5 | % | ||||||||||||||||
| $ | 237,495 | $ | 233,021 | 2 | % | |||||||||||||||
Net sales in APAC increased 2% (increasing 4% when excluding the effects of fluctuating foreign currency exchange rates), or $4.5 million, in 2025 compared to 2024. Net sales of services and hardware increased 5% and 2%, respectively, year over year, partially offset by a decrease in software net sales of 1% year to year. The net changes were primarily the result of the following:
•The increase in services net sales was due to net sales from Sekuro, partially offset by a decrease in services net sales from the APAC organic business combined with net decrease in certain fees from cloud solution offerings primarily as a result of partner program changes. Our APAC organic business excludes Sekuro, which we acquired on October 31, 2025.
•The slight decrease in software net sales was primarily due to the impact of fluctuating foreign currency rates.
•The slight increase in hardware net sales was due to higher volume of sales to large enterprise and commercial clients.
Net sales by category for North America, EMEA and APAC were as follows for 2025 and 2024:
| North America | EMEA | APAC | ||||||||||||||||||||||||||||||||||||
| Sales Mix | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| Hardware | 62 | % | 57 | % | 34 | % | 36 | % | 15 | % | 15 | % | ||||||||||||||||||||||||||
| Software | 19 | % | 25 | % | 41 | % | 44 | % | 39 | % | 40 | % | ||||||||||||||||||||||||||
| Services | 19 | % | 18 | % | 25 | % | 20 | % | 46 | % | 45 | % | ||||||||||||||||||||||||||
| 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||||
Gross Profit.Gross profit was relatively flat, decreasing $4.6 million in 2025 compared to 2024, with gross margin expanding approximately 110 basis points to 21.4% of net sales. Our gross profit and gross profit as a percentage of net sales by operating segment for 2025 and 2024 were as follows (dollars in thousands):
| 2025 |
% of Net Sales |
2024 |
% of Net Sales |
||||||||||||||||||||
| North America | $ | 1,366,343 | 20.5 | % | $ | 1,401,994 | 19.9 | % | |||||||||||||||
| EMEA | 323,270 | 23.9 | % | 293,188 | 20.7 | % | |||||||||||||||||
| APAC | 71,814 | 30.2 | % | 70,834 | 30.4 | % | |||||||||||||||||
| Consolidated | $ | 1,761,427 | 21.4 | % | $ | 1,766,016 | 20.3 | % | |||||||||||||||
North America's gross profit decreased 3%, or $35.7 million, in 2025 compared to 2024. As a percentage of net sales, gross margin expanded approximately 60 basis points year over year. The year over year net expansion in gross margin was primarily attributable to the following:
•An expansion in services margin year over year of 45 basis points primarily due to margins from increased cloud solution offerings, despite partner program changes as well as margin contributed by increased sales of Insight Delivered services from Infocenter and Inspire11.
•A net increase in product margin of 20 basis points year over year. This increase was primarily due to the decrease in software net sales that typically transact at lower margins than hardware.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
EMEA's gross profit increased 10% (increasing 6% when excluding the effects of fluctuating foreign currency exchange rates), or $30.1 million, in 2025 compared to 2024. As a percentage of net sales, gross margin expanded 320 basis points to 23.9%. The year over year net expansion in gross margin was primarily attributable to the following:
•An expansion in services margin year over year of 424 basis points primarily due to higher margins from increased sales of other agency net sales and Insight Delivered services, partially offset by a net decrease in fees from cloud solution offerings primarily as a result of partner program changes. We acted as a paid pass-through agent in transactions for certain clients and their vendors that expanded into the Middle East beginning in 2025. These transactions are reported net in services net sales as other agency transactions in our consolidated statement of operations.
•A net decrease in product margin of 112 basis points year to year. This decrease was primarily due to lower margins on both hardware and software compared to the prior year.
APAC's gross profit increased 1% (increasing 3% when excluding the effects of fluctuating foreign currency exchange rates), or $1.0 million, in 2025 compared to 2024. As a percentage of net sales, gross margin decreased by approximately 20 basis points year to year. The contracted gross margin for APAC in 2025 compared to 2024 was due to a decrease in services margins from the APAC organic business, partially offset by services margin contributed from Sekuro.
Our overall gross margins expanded in 2025 compared to 2024, as expected. We believe this trend could continue into future periods as we focus on selling solutions and increasing our services net sales.
Operating Expenses.
Selling and Administrative Expenses.Selling and administrative expenses increased $42.7 million in 2025 compared to 2024. Selling and administrative expenses also increased approximately 140 basis points as a percentage of net sales in 2025 compared to 2024. The overall net increase in expenses reflects a net increase of $51.9 million in other expenses and an increase of $8.6 million in depreciation and amortization expenses, partially offset by a decrease of $9.1 million in personnel costs, including teammate benefits, a decrease of $4.0 million in professional fees and a decrease of $3.3 million in facility expenses.
The net increase in other expenses primarily reflects a net loss on revaluation of earnout liabilities in 2025 of approximately $25.3 million compared to a net gain on revaluation of earnout liabilities of approximately $7.8 million in the prior year. We incurred an impairment loss of approximately $12.6 million on a real estate asset that was reclassified to held for sale in April 2025 with no comparable activity in the prior year.
We also incurred transformation costs in 2025 of $13.1 million compared to $18.4 million in 2024. These transformation costs are unique in nature and are not expected to recur in the longer term. There was a net increase in fees for service agreements of approximately $6.8 million compared to the prior year period. In 2025 we recovered approximately $0.2 million in costs we previously incurred related to a third-party data center service outage that occurred in July 2023 compared to net recoveries in 2024 of approximately $2.1 million in excess of such costs previously incurred. 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.
The increase in depreciation and amortization expenses reflects higher amortization of intangible assets associated with the Infocenter, Inspire11 and Sekuro acquisitions. The decrease in personnel costs primarily reflects reductions in teammate headcount throughout 2025 compared to 2024, excluding the acquisitions in the fourth quarter of 2025, as well as a reduction in variable compensation related to performance, partially offset by increases from the acquisitions of Inspire11 and Sekuro. The decrease in professional fees primarily reflects reductions in activity and consulting projects, year over year. The decrease in facility expenses is primarily due to the reduction in leased offices in 2025 compared to 2024.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Severance and Restructuring Expenses, Net.During 2025, we recorded severance and restructuring expenses, net of adjustments, totaling $37.1 million compared to $31.6 million in 2024. The increase was primarily due to strategic changes in our North America operating segment business resulting in the realignment of certain roles and responsibilities and reductions in workforce. Total severance and restructuring expenses of $34.0 million incurred in 2024 were partially offset by net gains on the sale of properties due to restructuring of $2.4 million.
Acquisition and Integration-related Expenses.During 2025, we incurred $3.6 million in direct third-party costs primarily related to the acquisition of Inspire11 and Sekuro. During 2024, we incurred $2.7 million in direct third-party costs primarily related to the acquisition of Infocenter. See Note 21 to the Consolidated Financial Statements in Part II, Item 8 of this report for further discussion of our acquisitions. As we
execute our acquisition strategy, we expect to incur additional acquisition and integration related expenses.
Earnings from Operations. Earnings from operations decreased 14%, or $53.7 million, year to year, in 2025 compared to 2024. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for 2025 and 2024 (dollars in thousands):
| 2025 |
% of Net Sales |
2024 |
% of Net Sales |
||||||||||||||||||||
| North America | $ | 282,272 | 4.2 | % | $ | 319,068 | 4.5 | % | |||||||||||||||
| EMEA | 30,970 | 2.3 | % | 46,218 | 3.3 | % | |||||||||||||||||
| APAC | 21,681 | 9.1 | % | 23,298 | 10.0 | % | |||||||||||||||||
| Consolidated | $ | 334,923 | 4.1 | % | $ | 388,584 | 4.5 | % | |||||||||||||||
North America's earnings from operations decreased 12%, or $36.8 million, year to year, in 2025 compared to 2024. As a percentage of net sales, earnings from operations decreased by approximately 30 basis points to 4.2%. The decrease in earnings from operations was primarily driven by the decrease in gross profit.
EMEA's earnings from operations decreased 33% (decreasing 35% when excluding the effects of fluctuating foreign currency exchange rates), or $15.2 million, year to year, in 2025 compared to 2024. As a percentage of net sales, earnings from operations decreased by approximately 100 basis points to 2.3%. 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.
APAC's earnings from operations decreased 7% (decreasing 5% when excluding the effects of fluctuating foreign currency exchange rates), or $1.6 million, year to year, in 2025 compared to 2024. As a percentage of net sales, earnings from operations decreased by approximately 90 basis points to 9.1%. The decrease in earnings from operations reflects increases in selling and administrative expenses and acquisition and integration related expenses.
Adjusted Earnings from Operations. Adjusted earnings from operations was relatively flat, increasing $1.6 million, year over year, in 2025 compared to 2024. Our Adjusted earnings from operations and Adjusted earnings from operations as a percentage of net sales by operating segment were as follows for 2025 and 2024 (dollars in thousands):
| 2025 |
% of Net Sales |
2024 |
% of Net Sales |
||||||||||||||||||||
| North America | $ | 418,584 | 6.3 | % | $ | 421,977 | 6.0 | % | |||||||||||||||
| EMEA | 61,614 | 4.5 | % | 55,936 | 4.0 | % | |||||||||||||||||
| APAC | 23,790 | 10.0 | % | 24,459 | 10.5 | % | |||||||||||||||||
| Consolidated | $ | 503,988 | 6.1 | % | $ | 502,372 | 5.8 | % | |||||||||||||||
North America's Adjusted earnings from operations decreased 1%, or $3.4 million, year to year, in 2025 compared to 2024. As a percentage of net sales, Adjusted earnings from operations increased by approximately
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
30 basis points to 6.3%. The decrease in Adjusted earnings from operations was primarily driven by a decrease in gross profit, partially offset by a decrease in selling and administrative expenses.
EMEA's Adjusted earnings from operations increased 10% (increasing 7% when excluding the effects of fluctuating foreign currency exchange rates), or $5.7 million, year over year, in 2025 compared to 2024. As a percentage of net sales, Adjusted earnings from operations increased by approximately 50 basis points to 4.5%. The increase in Adjusted earnings from operations was primarily driven by an increase in gross profit, partially offset by a decrease in selling and administrative expenses.
APAC's Adjusted earnings from operations decreased 3% (decreasing 1% when excluding the effects of fluctuating foreign currency exchange rates), or $0.7 million, year to year, in 2025 compared to 2024. As a percentage of net sales, Adjusted earnings from operations decreased by approximately 50 basis points to 10.0%. The decrease in Adjusted earnings from operations reflects an increase in selling and administrative expenses, partially offset by an increase in gross profit.
Non-Operating Expense (Income).
Interest Expense, Net.Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities, the Convertible Notes and the Senior Notes, as applicable, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense net increased 46%, or $26.8 million, in 2025 compared to 2024. This was primarily due to higher loan balances under our ABL facility, primarily resulting from the cash settlement of the Convertible Notes and a portion of the Warrants in 2025, the issuance of the Senior Notes in May 2024, lower interest income earned and increased imputed interest under our inventory financing facilities in 2025. This was partially offset by lower ABL interest rates in 2025 compared to 2024. 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 primarily reflects a net loss on the revaluation of warrant settlement liabilities of $25.1 million recorded in 2025 in connection with the cash settlement of a portion of the Warrants, with no comparable activity in 2024. 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 2025 was 30.3% compared to 25.0% in 2024. The increase in the tax rate in 2025 as compared to 2024 was primarily due to the non-deductibility of net losses related to both the fair value adjustments associated with the warrant settlement liabilities and the revaluation of earnout liabilities. These increases were partially offset by research and other tax credits.
The effective tax rate in 2025 was higher than the federal statutory rate of 21.0% primarily due to state income taxes, higher taxes on earnings in foreign jurisdictions and the non-deductibility of net losses related to both the fair value adjustments associated with the warrant settlement liabilities and the revaluation of earnout liabilities. These increases were partially offset 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.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Use of Non-GAAP Financial Measures
Adjusted non-GAAP earnings from operations (which we also refer to as "Adjusted earnings from operations") excludes (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, (vii) certain third-party data center service outage related expenses and recoveries, and (viii) impairment losses on long lived real estate assets now held for sale, 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.
| 2025 Adjusted Earnings from Operations (in thousands): | North America | EMEA | APAC | Consolidated | |||||||||||||||||||
| GAAP earnings from operations | $ | 282,272 | $ | 30,970 | $ | 21,681 | $ | 334,923 | |||||||||||||||
| Amortization of intangible assets | 69,124 | 7,255 | 389 | 76,768 | |||||||||||||||||||
| Change in fair value of earnout liabilities, net | 19,901 | 5,402 | - | 25,303 | |||||||||||||||||||
| Transformation costs | 7,142 | 5,941 | - | 13,083 | |||||||||||||||||||
| Impairment loss on a long lived real estate asset held for sale | 12,588 | - | - | 12,588 | |||||||||||||||||||
| Severance and restructuring expenses, net | 24,538 | 12,046 | 547 | 37,131 | |||||||||||||||||||
| Acquisition and integration related expenses | 2,394 | - | 1,173 | 3,567 | |||||||||||||||||||
|
Other(a)
|
625 | - | - | 625 | |||||||||||||||||||
| Adjusted non-GAAP earnings from operations | $ | 418,584 | $ | 61,614 | $ | 23,790 | $ | 503,988 | |||||||||||||||
| GAAP EFO as a percentage of net sales | 4.2 | % | 2.3 | % | 9.1 | % | 4.1% | ||||||||||||||||
| Adjusted non-GAAP EFO as a percentage of net sales | 6.3 | % | 4.5 | % | 10.0 | % | 6.1% | ||||||||||||||||
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
| 2024 Adjusted Earnings from Operations (in thousands): | North America | EMEA | APAC | Consolidated | |||||||||||||||||||
| GAAP earnings from operations | $ | 319,068 | $ | 46,218 | $ | 23,298 | $ | 388,584 | |||||||||||||||
| Amortization of intangible assets | 62,377 | 6,912 | 292 | 69,581 | |||||||||||||||||||
| Gain on revaluation of earnout liabilities | (1,419) | (6,430) | - | (7,849) | |||||||||||||||||||
| Transformation costs | 18,355 | - | - | 18,355 | |||||||||||||||||||
| Impairment loss on a long lived real estate asset held for sale | - | - | - | - | |||||||||||||||||||
| Severance and restructuring expenses, net | 23,042 | 7,975 | 588 | 31,605 | |||||||||||||||||||
| Acquisition and integration related expenses | 1,700 | 695 | 281 | 2,676 | |||||||||||||||||||
|
Other(b)
|
(1,146) | 566 | - | (580) | |||||||||||||||||||
| Adjusted non-GAAP earnings from operations | $ | 421,977 | $ | 55,936 | $ | 24,459 | $ | 502,372 | |||||||||||||||
| GAAP EFO as a percentage of net sales | 4.5 | % | 3.3 | % | 10.0 | % | 4.5% | ||||||||||||||||
| Adjusted non-GAAP EFO as a percentage of net sales | 6.0 | % | 4.0 | % | 10.5 | % | 5.8% | ||||||||||||||||
| (a) | In North America, other includes data center service outage recoveries of $0.2 million for the year ended December 31, 2025 | ||||
| (b) | In North America, other includes data center service outage recoveries of $2.1 million for the year ended December 31, 2024 | ||||
2024 Compared to 2023
For a comparison of our results of operations for the fiscal years ended December 31, 2024 and 2023, 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, 2024 filed with the SEC on February 14, 2025.
Liquidity and Capital Resources
The following table sets forth certain consolidated cash flow information for 2025 and 2024 (in thousands):
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 303,827 | $ | 632,845 | |||||||
| Net cash used in investing activities | (309,803) | (303,278) | |||||||||
| Net cash provided by (used in) financing activities | 82,292 | (321,271) | |||||||||
| Foreign currency exchange effect on cash, cash equivalent and restricted cash balances | 22,993 | (17,614) | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 99,309 | (9,318) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 261,467 | 270,785 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 360,776 | $ | 261,467 | |||||||
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Cash and Cash Flow
•Our primary uses of cash during 2025 were to repay the remaining principal balance upon maturity of the Convertible Notes, to fund strategic acquisitions, to fund the cash settlement of a portion of the Warrants, and to repurchase shares of our common stock.
•Operating activities generated $303.8 million in cash in 2025, compared to $632.8 million in 2024.
•We received proceeds from the sale of assets of $13.8 million in 2024 with no comparable activity in 2025.
•We had net borrowings under our inventory financing facilities of $6.4 million in 2025 compared to net repayments of $13.6 million in 2024.
•Net borrowings under our ABL facility were $818.8 million in 2025. Net repayments under our ABL facility were $554.1 million in 2024.
•We repaid approximately $333.1 million of the remaining principal balance upon maturity of the Convertible Notes in 2025.
•Capital expenditures were $24.5 million in 2025 compared to $46.8 million in 2024.
•During 2025, we repurchased an aggregate of $151.1 million of our common stock compared to an aggregate of $200.0 million repurchased during 2024.
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, debt repayments and repayment of our inventory financing facilities for the next 12 months. We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities and/or other available financing resources.
Net cash provided by operating activities.
•We have an inverted cash cycle resulting from typically paying partners on shorter terms than we provide to our clients. This generally means in periods of growing hardware sales, we typically use cash from operations.
•Cash flow provided by operating activities in 2025 was $303.8 million, compared to $632.8 million in 2024. The decrease in cash flow from operating activities was partially driven by a slight increase in hardware net sales.
•The decrease in cash provided by operating activities period over period is primarily due to lower net earnings combined with the impact of higher hardware net sales compared to 2024. In 2024, our cash provided by operations was also more positively impacted by the timing of receipts compared to partner payments.
•We continue to be impacted by netted costs that we apply to our services net sales to appropriately record net sales that we earn as an agent. These netted costs, while excluded from net sales and cost of goods sold, are processed and applied to accounts receivable and accounts payable in each reporting period. As a result, calculation of our unadjusted cash conversion cycle, including days sales outstanding and days payables outstanding, do not provide an accurate reflection of our cash conversion metric, due to the metric components being inherently inflated. For example, netted costs were $4.0 billion and $2.2 billion in the fourth quarter of 2025 and 2024, respectively.
•We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms we grant to our clients in order to take advantage of supplier discounts.
•We intend to use cash generated in 2026 in excess of working capital needs to pay down our ABL facility and inventory financing facilities, to repurchase shares of our common stock and for strategic acquisitions.
Net cash used in investing activities.
•We paid $203.8 million, net of cash and cash equivalents acquired of $1.4 million, to acquire Inspire11 on October 1, 2025. Additionally, on November 3, 2025, we paid $81.5 million, net of cash, cash equivalents and restricted cash acquired of $3.8 million, to acquire Sekuro in our APAC segment.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
•We paid $265.0 million net of cash and cash equivalents acquired of $5.1 million, to acquire Infocenter on May 1, 2024. Additionally, we paid $5.2 million, net of cash and cash equivalents acquired, for NWT in our EMEA segment, on July 1, 2024.
•We received proceeds from the sale of assets, including properties held for sale, of $13.8 million in 2024 with no comparable activity in 2025.
•Capital expenditures were $24.5 million and $46.8 million in 2025 and 2024, respectively. The majority of the capital expenditures in 2025 were used to fund leasehold improvements and for technology related projects.
•We expect total capital expenditures in 2026 to be in the range of $20.0 to $30.0 million.
Net cash used in financing activities.
•In May 2024, we issued $500.0 million aggregate principal amount of Senior Notes, which we used to pay down a portion of our borrowings under our ABL facility.
•During 2025, we had net borrowings on our long-term debt under our ABL facility of $818.8 million, which were primarily used to fund the repayment of the remaining principal balance upon maturity of the Convertible Notes, to fund strategic acquisitions, to settle a portion of the Warrants and to repurchase shares of our common stock.
•During 2024, we had net repayments on our long-term debt under our ABL facility of $554.1 million.
•We had net borrowing under our inventory financing facilities of $6.4 million in 2025 and net repayments of $13.6 million in 2024.
•In 2025, we repaid approximately $333.1 million for the remaining principal balance upon maturity of the Convertible Notes.
•In 2024, we repaid approximately $16.9 million principal upon conversion of a portion of the Convertible Notes.
•In 2025, we paid $222.0 million to settle a portion of the Warrants relating to the Call Spread Transactions associated with the Convertible Notes in cash.
•In 2025, we made earnout and acquisition related payments of $20.2 million primarily associated with our acquisition of Infocenter.
•In 2024, we made earnout and acquisition related payments of $20.3 million associated with our acquisitions of Amdaris and Hanu.
•In 2025, we repurchased $151.1 million of our common stock, compared to $200.0 million repurchased during 2024.
2024 Compared to 2023
For a comparison of our cash flows for the fiscal years ended December 31, 2024 and 2023, 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, 2024 filed with the SEC on February 14, 2025.
Financing Facilities
•Our debt balance as of December 31, 2025 was $1.4 billion.
•Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.
•The Senior Notes are subject to certain events of default and certain acceleration clauses. As of December 31, 2025, no such events have occurred.
•Our ABL facility contains various covenants customary for transactions of this type, including complying with a minimum receivable and inventory requirement and meeting monthly, quarterly and annual reporting requirements.
•The credit agreement contains customary affirmative and negative covenants and events of default.
•At December 31, 2025, we were in compliance with all such covenants.
•While the ABL facility has a stated maximum amount, the actual availability under the ABL facility is limited by a minimum accounts receivable and inventory requirement. As of December 31, 2025, eligible accounts receivable and inventory were sufficient to permit access to the full $2.0 billion under the ABL facility of which $868.2 million was outstanding.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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, 2025, our contractual obligations for continuing operations primarily consist of:
•$225.0 million under our inventory financing facilities due in 2026;
•$91.0 million under operating leases, the majority of which are due from 2026 through 2029;
•remaining contingent consideration (earnout payment) associated with our acquisition of SADA, up to a maximum of $120.0 million, payable upon certain defined contingencies being met for 2026 that would be paid in 2027;
•contingent consideration (earnout payment) associated with our acquisition of Amdaris of approximately $6.8 million for 2025, that will be paid in 2026;
•contingent consideration (earnout payment) associated with our acquisition of Infocenter, up to a maximum of $53.1 million, payable upon certain defined contingencies being met for the 12-month period ended April 30, 2026 that would be paid in 2026;
•contingent consideration (earnout payments) associated with our acquisition of Inspire11, up to a maximum of $66.0 million, payable upon certain defined contingencies being met for the12-month periods ended September 30, 2026 and September 30, 2027 that would be paid in 2026 and 2027, respectively;
•contingent consideration (earnout payments) associated with our acquisition of Sekuro, up to a maximum of AUD 122.5 million, payable upon certain defined contingencies being met for the 12-month periods ended October 31, 2026 and October 31, 2027 that would be paid in 2026 and 2027, respectively;
•a purchase commitment related to cloud services of $59.0 million that must be met by September 2029;
•a purchase commitment related to a service contract of $13.1 million that was paid in January 2026;
•$868.2 million outstanding under our ABL facility maturing in 2030; and
•$493.1 million outstanding under our Senior Notes maturing in 2032.
Undistributed Foreign Earnings
Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation to the United States. As of December 31, 2025, we had approximately $306.6 million in cash and cash equivalents in certain of our foreign subsidiaries, primarily residing in Canada, Australia, the Netherlands and New Zealand. Certain of these cash balances will be remitted to the United States by paying down intercompany payables generated in the ordinary course of business or through actual dividend distributions.
Off-Balance Sheet Arrangements
We have entered into off-balance sheet arrangements, which include guarantees and indemnifications. These arrangements are discussed in Note 17 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,
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
issuance of stock or some combination of the three. See Note 21 to the Consolidated Financial Statements in Part II, Item 8 of this report for a discussion of our acquisitions of Inspire11 and Sekuro in October of 2025 and Infocenter in May 2024.
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
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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.
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.
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, 2025, 2024 and 2023 we analyzed each of our reporting units and determined that no impairment charge was necessary.
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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 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 2025, including an acquisition in APAC, two business combinations in fiscal 2024 and two business combinations in fiscal 2023, including an acquisition in EMEA. 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 21 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.
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