Good. Thank you. Hi, thank you all for joining. I'm Maggie Nolan. I'm the IT Services Analyst here at William Blair, and I cover a number of stocks, including Ingram Micro. I'm required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com. We are excited to have Ingram Micro with us today and to have the CFO, Mike Zilis. Thank you for joining us. He's going to run through the presentation so you can learn a little bit more about the company. They are a provider of complex solutions and value-add services. With that, I will turn it over to Mike. After the presentation, we will go upstairs and we will break out for Q&A in room Jenny A. Thanks, Mike.
Awesome.
Thank you, Maggie. Good to see everybody. I guess this is the late afternoon on day two. Thanks for keeping your eyes open. I'm sure it's a little bit tiring. I know this is a mix probably of folks, some of whom know our story, some of whom this is a little bit new. I'm going to try and give a little bit of rundown on what we do, some history and some background. I promise there's some good nuggets for those who do know the story here. That'll be also interesting to keep you awake. What is Ingram Micro? Legacy-wise, we started really as a tech distribution company. That's our core of what we did.
What I will share with you over the course of the 28, 29 minutes here is how we have evolved quite a bit to be a service provider and ultimately moving towards being more of a platform company, which is the direction we're taking ourselves in in the last couple of years here. Everything is centered around technology and the technology ecosystem and the services and enablement that comes with that and how we better enable and drive a different customer experience from the overall perspective in what is largely a channel kind of environment where tech is distributed. This is a snapshot. Just hits on a few things. One, we're very large, $48 billion in revenues. We have presence in 57 countries around the world that allow us to touch 90% of the world's population.
We deliver the products and services of more than 1,500 different vendors, OEMs, software providers, service providers around the world in the tech space, and ultimately feed that out to more than 160,000 different customers around the globe. We've also advanced quite a bit via acquisition and organic into the cloud space. I'll elaborate a little bit more on that journey in a couple of slides. You see on the bottom right corner what we call Xvantage. That's more the digital platform, which I'll close on the evolution side of the equation before I get into a little bit more financial information to, again, give you a little bit of a perspective on how we've really continued to evolve the business. It is about scale, certainly.
That helps quite a bit in our business, especially with the large global OEMs that are looking to serve the market, especially as you think about serving the long tail of the small and medium-sized business, because that's where the OEMs, the vendors are not looking to necessarily build out their own sales force and attack that. The channel becomes the extension of that sales force effectively. A couple of things that kind of hit on some key points of the evolution. Again, started as mainly just distribution at our core and logistics services sort of followed from that. Over time, we've increased our scope and reach to the 90% of the world that we can cover today via in-country presence and export models around the world. We've really advanced our investment into more advanced technologies.
I'll explain a little more what we mean by that. You can think about the very simple, well, not simply, the OEMs in this space, maybe I do not think of it this way, but more simple technology. Think PCs and desktops, think print supply, those sorts of things. We still deal in all of those areas. Then you get into more of the enterprise computing, data center, so networking, server storage, cybersecurity, far more complex areas that require engineering skill sets to truly deploy a solution. I'll give you a little bit of lay of the land on how that looks as well. We've expanded our offerings, but then on top of that, we've grown into cloud and then ultimately this digital marketplace, which, again, I'll cover on in a slide or two. Quick snapshot of Q1. Praise be, we see growth back in the technology space.
It's been a little bit soft for a number of years. We first saw growth in our Q4 exiting last year, but it was very modest. You can see here on an FX neutral basis, nearly 11% growth in our Q1. A lot of that being driven by a pent-up demand around PC desktop refresh that truly we see happening. A lot of mobility sales, but also a lot of growth in areas like cybersecurity, servers, and anything cloud, anything as a service, seeing strong, robust growth for actually multiple years in those areas. More importantly, if you look to the scan to the top right, we continue to drive strong, profitable growth too. From an EPS perspective, we landed at the top end of our range for Q1, our guidance range. Revenues were well over that top end of the guidance range.
I'll give a little bit of the dynamic of the mix that drives margin and profitability also in a minute to give you some perspective on how that evolves with our business. This is a little bit of a traditional look at our business. You can see across the top a number of vendors, probably mostly brands you would recognize. Those are the vendors, the OEMs and the service providers and software providers that we sell the products of. We sit entrenched in the middle of that selling into the channel. It is a two-tier model in every sense of the word where we're selling into anything from a very large national service provider, think CDW or Insight as an example, into, on the right, retailers. Although retail used to be a far bigger piece of our business, we really do not do as much of that anymore.
It tends to be a little bit more centered in parts of Europe and a little bit of some of our Asia-Pacific markets. You have the traditional resellers, which is really the long tail that I was talking about. This is where the majority of our profits are derived in how we deliver value, especially into the SMB space, where there is just inherently a bigger need for the channel. Think of a very small business that does not have an IT function. That tier of resellers that are right under the Ingram Micro logo would be the outsourced CIO of that small business. We partner with that reseller to fulfill what that customer needs. We bring the breadth, the services that supplement what that reseller may do themselves to ultimately deliver a solution to the end user.
You can see along the bottom, our end users range anywhere from very large Fortune 100, government, although government is a single-digit share. We get a lot of questions around Fed's sled in this environment in the U.S. It is a single-digit share, so it's not very impactful, but Fed is down in this environment, as you would expect. As I mentioned, a little bit of consumer and retail, but it's that far left, that SMB space, which maybe does not account for the Fortune 100 or the large enterprise account for the largest share of our revenues. As I said earlier, the SMB space accounts for the larger share of our profits because it's just simply a higher margin, more entanglement and fulfillment that's associated with that to those end users.
This next slide gives you a little bit of the lay of the land on the product sets we distribute. On the left, client and endpoint solutions, this is going to be more again the notebook and desktop category, smartphones, accessories, peripherals, print and supplies, things that tend to be sold on a volume level. It is sold typically in our capital. I will get into a little bit more of that dynamics on the subsequent slide. This is a bigger share of our revenues, but again, a lower percentage when you get down to gross profit and even more so when you get down to operating profit as far as the share that this represents in our business. In the middle, you have advanced solutions and cloud. I talk to those actually together to a large degree because they work very hand in hand.
Advanced solutions would be more of the enterprise-grade hardware and software. Think about servers, storage, networking, cybersecurity. We have a number of other defined communications, data capture, point of sale devices, barcode scanners, and the like. That would all fit in advanced solutions. Cloud is everything as a service, whether you're thinking about something as simple as an O365 license ranging all the way up to infrastructure as a service. Think about Azure, AWS, Google Cloud, those kinds of players, which we're selling all of those and everything in the middle. The reason they go together is an advanced solution is more than a single product. Tends to be on average six or more products or solutions that make up that products or services, I should say, that make up that end solution to the end user.
That is important because that is, again, where there is a value prop of the channel. A customer can acquire all of those from one place along with the services to deploy, the services to support and train, and all of those things, which are all things that we have developed much more over time to become core to our business and drive that value prop. The margins are much higher here. It is a little bit more project-oriented, but it is a critical part of our business that has been growing faster over time than the rest of our business. Cloud often works with that. If it is a simple license sale, that could be a one-off. If you are selling infrastructure as a service, by and large, that is usually accompanied with a larger solution that that infrastructure is needed for. All of our selling solutions, this is a SKU-based categorization.
Our selling motion is uniform to the customer regardless of what products we're selling. It's a one-stop, single pane of glass sort of mentality as far as that goes. Last but not least, we have a small other category. This tends to be fee-for-service business. It is nice high margins. It is reverse logistics and repair, especially around mobility and other tech devices, and then IT asset disposition. Think what happens at the end of life of an IT product. Does it get disposed? Do you have clean and secure data wipe? Does it get repurposed and refurbished for resale? Or is it, again, disposed of in a clean and eco-friendly manner? We run those services around the globe as well. The next slide is going to be starting on the evolution that I have further down the line of the evolution I have talked about.
I'm not going to hit on this whole slide, but this gives a picture of the different services and offerings we've done. We layer on the bottom a number of acquisitions that have been key to this. We've done more than 40 acquisitions for about $2 billion in purchase price over the last 12, 14 years to really grow out a lot of this business. A lot of those, a lot of these that are listed here, are actually somewhat specialty areas, things like very centered around cybersecurity, very centered around cloud, all centered around some level of service versus just simply acquiring authorizations to distribute a vendor's product. On top of that, we couple along the right, just to list a few professional services I've kind of hit on. Think about things like break fix, deployment and support, warranty services, elements like that.
We've built a number of significant cash flow solutions because everybody is looking to move to more of an OpEx model than a CapEx model. How do you do that on hardware? It's not easy with the vendors, but we bring a series of bespoke finance solutions, not using our balance sheet, using a number of customized funders around the world. We have more than 100 globally that we use to bring financing solutions to the core of our customers who need that support from a financial perspective. Training is another big element.
We have thousands of certifications around the world in various technologies, and we'll drive the training for the end user or for the customer, the reseller, how to learn more about that product, especially as products are always advancing from a technology perspective regularly throughout the year and trying to drive that currency within the customer base. I have touched on cloud. Over more than 10 years, we've invested about $600 million. Some of it was with the acquisition, so it's part of that $2 billion I referenced earlier. Some of it's inorganic, and a bunch of it is organic to build out a cloud marketplace to where we have it today.
You think about how you drive the go-to-market initiatives, a cloud marketplace where anybody can procure anything as a service, and all the technology to deliver that from an e-commerce single pane of glass perspective. That's been a significant investment for us starting in probably say roughly 2009 timeframe when cloud was really becoming somewhat of a reality. At that point, it was literally more about education on what is cloud, how should I be thinking about it at the reseller level to what it is today, which is a multi-trillion dollar business when you think about all of the technology that's delivered as a service around the globe. We also offer to a lesser degree white label marketplace and other factors around cloud. You take sort of the next evolution.
Building off of that investment and the cloud marketplace, we began about two and a half years ago with the hiring of our, who was then our Chief Digital Officer. Now he's our CIO, Chief Technical Officer, and the President of our digital business, Sanjib Sahoo is his name, to develop, take that baseline of that cloud marketplace and develop what we call Xvantage. Think about this again in that single pane of glass mode, but now not just selling cloud, but selling anything that we sell. Customer can go to us for that one spot. We've enabled that, as you can read on the bottom. There's now four petabytes of data that are running through this system, 32 million lines of code and counting. I think it's probably even higher as I speak today. More than 300 AI and machine learning modules.
Very AI empowered to deliver a service experience like nobody else is providing, truly end to end, regardless of what that customer is looking for. A couple of areas that I'll just call out around Xvantage that are interesting. One, as we deployed this around the world, there's sort of a three-legged stool to Xvantage. There's Xvantage for our team members or associates, Xvantage for the customer, think e-commerce in that case, and Xvantage for our vendors. For our associates, we've enabled them with the selling tools and intelligence to be smarter and more proactive in how we sell. I'll elaborate on that in a little bit. For the customers, it's that e-commerce one-stop shop, but also enables them to be smarter on how they're selling to their end users and more efficient.
For the vendors, it's about hooking in APIs to the complexity of a vendor who may have a lot of different—all of them have very many different and diverse programs, rebate structures, incentives, and other things that flow through the channel and trying to bring all of that into pricing. If I take a step back then, the initial rollout of Xvantage was really more focused on operating efficiencies. How do we automate things that used to take people time? A very simple and somewhat rote example is that in the U.S. alone, we traditionally took more than 2.5 million sales order status calls a year. Somebody calling up to say, "Where's my order?" Think about a B2C experience.
You go order something on Amazon, you can tell when it's on the truck and it's going to arrive within somewhere like an hour. I don't know how accurate it is, but you at least know where your product is. You can tell the status. The APIs just to handle that alone, especially if you're dealing with six or more products coming from different vendors, different carriers that are bringing that product to the end user or to the customer, trying to bring all of that together. We have brought that together into a single pane of glass for that customer to be able to see that. A more complex example is around config to order. There is high complexity in how we build out our solutions, especially again, if you're talking about multiple vendors. How do you build that configuration?
How do you drive the right dynamic pricing of what's going into that configuration, all the technical needs, the right product, the subscriptions and warranties and other things that might need to come along with that purchase? Again, making that seamless and bringing what used to be weeks or months on a project basis to build out a solution that can now be done in minutes or hours. It's removing friction from the system and bringing this more seamless customer experience. That's really the name of the game of what we're building. I could go on literally for hours around other functionality here, but this is what we are most excited about. This is a platform that is now launched in 20 of our 57 countries with significant functionality. Every country has some functionality, especially around the associate modules of CRM and other things like that.
Ultimately, all countries will have it. The 20 out of 57 that do have it are a majority of our revenues. It has already allowed us to remove quite a bit of operating expense from our system. We have removed more than $200 million of annualized OpEx over the last nine quarters. That does not need to come back because people are not any longer checking order status checks, spending that time on config to order. More importantly, it is allowing us to be more proactive and allowing our customers to be more proactive into their end user customers in selling, building attach, building new solutions, and working again in a non-reactive manner, which was a lot more than we cared to admit in previous years because of that manual nature. A couple of data points we are really happy to call out. These are Q1 of 2025.
More than 12 million independent searches happened on the Xvantage platform globally. More than a tripling of truly self-service touchless orders, meaning the customer went in, did not need any interaction of a person. That, again, allows us to then use the human side of our business to outreach to that customer and help them if they need more assistance on the implementation or more attach opportunities or things like that and be more proactive to continue to sell wherever we have the opportunity. Another one is dormant customers. We define a dormant customer as somebody who has not traded with us for more than a year. We now have a five-quarter run rate of a 2,000 CAGR dormant customer revival run rate. That was a lot of mouthful there. But 2,000 per quarter of new customers that had not traded with us for more than a year that started to trade.
By the way, started to trade at higher volumes than they did when they were previously active. If you think about that, that's 10,000 in a five-quarter window with a 160,000 roughly customer base. That's a meaningful percentage increase of newly active customers coming back into the fold. We're really excited about this. This is the way of the future. I think right now, as I said, we've already garnered a lot of OpEx savings out of this, but it's now moving more into the opportunity to grow above market and to grow more profitable business in a more meaningful way because of that proactive selling motion that we can now embark on. That's coming through in our Q1 results. Again, 11% growth is above when you talk about the market basket of what we deliver, that is above market by any definition you would probably find.
We're seeing that now come into that phase of the Xvantage story where we're delivering a better mousetrap, where our customers are having a better experience, and we're winning because of that. Ultimately, this can be more of a marketplace that could be seamlessly bringing together supply and demand, could be asset light, could be more of that marketplace motion. That is maybe further down the road, but the opportunity is there as we evolve further to be more of a platform company than what was a legacy distribution company. I know that was a quick history of about 15 years to cover in very quick order, but just to give you a perspective of how things have evolved. Obviously, if you come up to the Q&A session, I can certainly elaborate on some of those things.
From a financial perspective, I already hit on a few of these things. Q1 was a pretty very solid quarter for us. Very good top-line growth, but it's a market that was dominated by a lot of desktop notebook refresh cycle, strong double-digit growth in that category. A high volume of smartphone sales, high double-digit growth in that category as well, although centered while client and endpoint, which is mainly, again, the desktop and notebook piece, that was growth globally. I think there's been a pent-up demand around refresh. There is probably a little bit of pull forward in there, a couple points of pull forward trying to get ahead of tariffs. I can't believe I made it 24 minutes without mentioning tariffs. It is a factor in our business.
It is causing probably a little bit more overhang, especially in that important SMB space that's a little bit more susceptible to inflationary environments and making more crucial buying decisions and prioritizations in this environment. The bigger growth we've been seeing has been from large customers. Think those NSPs like CDW, Insight, SHI, and others that I mentioned earlier on that earlier slide. SMB, in some markets, actually is growing marginally. Others, it's flat or even down a bit still as we have a little bit of a wait-and-see attitude. Honestly, pull forward, the only place we see that happening is in that desktop notebook category. Very little evidence of it anywhere else across any of the other hardware categories. It is something that's a bit of an overhang and again, causing a bit of a softer demand in the SMB.
That'll be important as I get into the margin story. Before I get to that, we've had strong working capital and balance sheet management. We've repaid another $125 million of our debt, bringing debt repayments to more than nearly $1.7 billion over the last couple of years. Our leverage ratio, if you think about coming, especially as a PE firm, now newly public as of October of last year, getting to a 2.0 net debt to EBITDA leverage is not an easy thing, but we've gotten there. I've talked already about the digital platform, and I'll touch a little bit on guidance for Q2. I know I'm getting a little towards the end of my time, so I'm going to move a little quickly, but I already gave you a picture of these different categories.
I just want to pause here because this plays to the margin story and the mix story in our business. Client and endpoint solutions represents north of 60% of our revenues. It is low to mid-single digits. This is again that PC desktop, notebook, smartphone, those kinds of categories. Low to mid-single digit margins because it is largely fulfillment kind of sales. Product moves pretty fast. Twenty-four days of working capital, and it is low cost to serve, even lower cost to serve now because of Xvantage and the reasons I mentioned earlier. Advanced solutions and cloud represent north, more than 1/3 of our business, upwards depending on the quarter, even getting north of 40% of our business. Advanced solutions, if I were just selling a networking device, nothing else attached with it, probably mid-single digit margins, gross margins.
When you bundle it, that six or more products or services, and then you're coupling it with our own services that we bring to the fore, margins can go well into the double digits on this business. It is more working capital intensive because it's project-based, so it tends to be about twice as many working capital days as client and endpoint. It is a higher labor mix, but the profit margin of advanced solutions is higher than client and endpoint, despite that higher cost to serve and the working capital investment. Cloud is sort of the Nirvana space. It is only 1% of our revenues, but that's partly because of accounting convention. Revenues are accounted for net there. I like to put it in this way. Cloud has now grown to be 15% of our gross profit in Q1.
Meaningful, and that's up from 13% in the prior year because cloud is growing high single digits or double digits in almost every quarter as more and more moves to as a service. No working capital, or it's basically flat working capital because there's no inventory, and it's low cost to serve. The reason this is important is when you see more client and endpoint, that's lower margin, and that's what we're seeing. High growth in that client and endpoint category, which dilutes our margin, but again, creates a better OpEx leverage because it's low cost to serve. There's a geographic aspect here too. This gives you a perspective. The outer ring is our most recent Q1. The inner ring is Q1 of last year. We've seen double-digit growth every quarter since Q1 of last year in our Asia-Pacific region.
FX-neutral 23% growth in Asia-Pacific in Q1 of this year. That is becoming a bigger share. Why is that important from a margin perspective? Especially in places like India or China, margins are lower, but it is also lower cost to serve. Again, dilutes the margin, but it creates a better OpEx leverage. The last piece I already touched on, large customers tend to be more fulfillment, also lower cost to serve. You are getting a theme here. Mixed factors, nothing more than that, have diluted our margins. Our margins were down year over year by about 60 basis points. If you look category by category or customer by customer, despite a difficult macro, we are not seeing massive deterioration in margins or ASPs. It is just simply mix.
As we see advanced solutions start to return to more robust growth, especially categories like networking, which finally got to modest growth in Q1, that is a big catalyst to drive margins up and to the right. I will not spend much time on this. I have already hit on sort of the profitability metric. Free cash flow, we are a countercyclical business. When we are growing and when we are growing 11% like we are in Q1, you have to invest in working capital. Working capital dollars represented an outflow. Working capital days, however, on that 11% growth, days were actually four days lower in Q1 than they were in Q1 of last year. Sorry. We are investing wisely and capturing growth. I have talked about leverage. We have plenty of working capital, plenty of capital availability with our ABL structure, and maturities are going out to 2029 and beyond.
No issues there. From a capital allocation perspective, we're going to continue to invest in the business, but right out of the gate as a public company, we also have a dividend in place so we can return to our shareholders. We actually increased that dividend in Q2 by 2.7%. Guidance, we're still seeing growth. Roughly 4% growth in Q2 at the midpoint, taking a little bit more tempered view on maybe what happens in the PC notebook category, but still growth. All four of our categories, we expect growth in Q2, but more importantly, the EPS that you see on the bottom is representing nearly double the growth of revenue. Leverage also coming through in this model. Lastly, we're going to continue to invest, expand in high-margin complex solutions.
That's what we've been doing, the advanced solutions and cloud I've talked about while we continue to optimize and become a leader in digital and move to be a platform company. We are already in the process via investment and upscaling our existing workforce to really building that team of the future around all of this. We are really excited about the story where we are in this evolution. A half hour is a really quick time to tell that whole story. Hopefully, this was helpful for the uninitiated. I think we are out of time. I will stop there, and we are happy to answer questions upstairs. All right? Thanks.
Thank you, Mike.