Insight Q3 2020 Results, Page 1

November 3, 2020

FOR IMMEDIATE RELEASE

Nasdaq: NSIT

•

Gross profit increased 11% to $307.6 million

•

Gross margin expanded 150 basis points to 15.9%

•

Earnings from operations increased 38% to $61.5 million

•

Adjusted earnings from operations increased 22% to $71.8 million

•

Diluted earnings per share increased 45% to $1.10

•

Adjusted diluted earnings per share increased 25% to $1.38

•

Cash flow provided by operations in the first nine months of 2020 was $462.1 million compared to $168.6 million in the first nine months of 2019

•

The Company continued to support clients with their changing needs in response to the COVID-19 global pandemic.  The demand environment continued to be challenged but the Company focused on answering its clients’ most pressing IT needs while helping many to plan for investments needed to support their businesses as the economy recovers.

•

The Company completed the integration of the PCM business, including onboarding PCM clients to its systems.  The Company has aligned its go-to-market structure in North America and EMEA and believes it is well positioned to compete as a single brand in the marketplace.  The Company also began to realize some benefits of its real estate consolidation efforts.  As a result, the Company now expects to exit the year with approximately $60-$65 million in annualized run-rate cost savings in connection with the PCM acquisition, ahead of first-year expectations. The Company previously disclosed that the total two-year commitment in annualized run-rate cost savings related to the PCM acquisition was expected to be approximately $70 million.

•

Cash flow from operations for the first nine months of 2020 of $462.1 million increased more than 100%, year over year, when compared to the first nine months of 2019.

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 2

November 3, 2020

•

The Company fully paid down the debt outstanding under its ABL facility during the quarter and it believes that it has a strong balance sheet and healthy liquidity position. The Company has current capacity of up to $1.2 billion under the ABL facility as of September 30, 2020.

•

Consolidated net sales for the third quarter of 2020 of $1.94 billion increased 1%, year over year, when compared to the third quarter of 2019.

•

Net sales in North America increased 3%, year over year, to $1.56 billion;

•

Net sales in EMEA decreased 4%, year to year, to $341.3 million; and

•

Net sales in APAC decreased 11%, year to year, to $37.0 million.

•

Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales were flat, increasing less than 1%, year over year, with growth in net sales in North America of 3%, year over year, partially offset by a decline in EMEA and APAC of 8% and 13%, respectively, year to year.

•

Consolidated gross profit increased to $307.6 million, an increase of 11% compared to the third quarter of 2019, with consolidated gross margin expanding 150 basis points to 15.9% of net sales.

•

Gross profit in North America increased 13%, year over year, to $247.2 million (15.9% gross margin);

•

Gross profit in EMEA increased 5%, year over year, to $50.3 million (14.7% gross margin); and

•

Gross profit in APAC increased 5%, year over year, to $10.1 million (27.3% gross margin).

•

Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 12%, year over year, with gross profit growth in North America and APAC of 15% and 2%, respectively, year over year.  Gross profit in EMEA was flat, increasing less than 1%, year over year.

•

Consolidated earnings from operations increased 38% compared to the third quarter of 2019 to $61.5 million, or 3.2% of net sales.  

•

Earnings from operations in North America increased 38%, year over year, to $54.2 million, or 3.5% of net sales;

•

Earnings from operations in EMEA increased 56%, year over year, to $4.8 million, or 1.4% of net sales; and

•

Earnings from operations in APAC increased 19%, year over year, to $2.4 million, or 6.5% of net sales.

•

Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations increased 42%, year over year, with increased earnings from operations in North America, EMEA and APAC of 44%, 48% and 20%, respectively, year over year.

•

Adjusted earnings from operations increased 22% compared to the third quarter of 2019 to $71.8 million, or 3.7% of net sales.  

•

Adjusted earnings from operations in North America increased 20%, year over year, to $63.9 million, or 4.1% of net sales;

•

Adjusted earnings from operations in EMEA increased 61%, year over year, to $5.4 million, or 1.6% of net sales; and

•

Adjusted earnings from operations in APAC increased 19%, year over year, to $2.5 million, or 6.8% of net sales.

•

Consolidated net earnings and diluted earnings per share for the third quarter of 2020 were $38.9 million and $1.10, respectively, at an effective tax rate of 23.8%.

•

Adjusted consolidated net earnings and Adjusted diluted earnings per share for the third quarter of 2020 were $48.8 million and $1.38, respectively.

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 3

November 3, 2020

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 4

November 3, 2020

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

change

2020

2019

change

Insight Enterprises, Inc.

Net sales:

Products

$

1,661,568

$

1,668,880

—

$

5,182,817

$

4,729,887

10%

Services

$

274,910

$

243,667

13%

$

866,447

$

704,147

23%

Total net sales

$

1,936,478

$

1,912,547

1%

$

6,049,264

$

5,434,034

11%

Gross profit

$

307,563

$

276,195

11%

$

957,288

$

800,116

20%

Gross margin

15.9

%

14.4

%

150 bps

15.8

%

14.7

%

110 bps

Selling and administrative expenses

$

245,155

$

223,215

10%

$

756,598

$

613,767

23%

Severance and restructuring expenses

$

808

$

2,662

(70%)

$

9,962

$

3,712

> 100%

Acquisition and integration related expenses

$

118

$

5,896

(98%)

$

2,195

$

9,059

(76%)

Earnings from operations

$

61,482

$

44,422

38%

$

188,533

$

173,578

9%

Net earnings

$

38,906

$

27,132

43%

$

119,252

$

116,457

2%

Diluted earnings per share

$

1.10

$

0.76

45%

$

3.37

$

3.23

4%

North America

Net sales:

Products

$

1,334,970

$

1,315,813

1%

$

4,078,791

$

3,611,895

13%

Services

$

223,198

$

199,349

12%

$

692,905

$

551,215

26%

Total net sales

$

1,558,168

$

1,515,162

3%

$

4,771,696

$

4,163,110

15%

Gross profit

$

247,168

$

218,644

13%

$

748,992

$

600,310

25%

Gross margin

15.9

%

14.4

%

150 bps

15.7

%

14.4

%

130 bps

Selling and administrative expenses

$

192,033

$

170,993

12%

$

590,549

$

452,441

31%

Severance and restructuring expenses

$

773

$

2,449

(68%)

$

7,799

$

3,260

> 100%

Acquisition and integration related expenses

$

118

$

5,896

(98%)

$

1,991

$

9,059

(78%)

Earnings from operations

$

54,244

$

39,306

38%

$

148,653

$

135,550

10%

Sales Mix

**

**

Hardware

66

%

67

%

(4%)

67

%

65

%

16%

Software

20

%

20

%

19%

19

%

22

%

4%

Services

14

%

13

%

12%

14

%

13

%

26%

100

%

100

%

3%

100

%

100

%

15%

EMEA

Net sales:

Products

$

303,986

$

324,255

(6%)

$

1,020,073

$

1,011,965

1%

Services

$

37,294

$

31,453

19%

$

132,110

$

113,092

17%

Total net sales

$

341,280

$

355,708

(4%)

$

1,152,183

$

1,125,057

2%

Gross profit

$

50,300

$

47,891

5%

$

177,254

$

169,324

5%

Gross margin

14.7

%

13.5

%

120 bps

15.4

%

15.1

%

30 bps

Selling and administrative expenses

$

45,438

$

44,568

2%

$

143,859

$

139,365

3%

Severance and restructuring expenses

$

19

$

213

(91%)

$

2,118

$

328

> 100%

Acquisition and integration related expenses

$

—

$

—

—

$

204

$

—

*

Earnings from operations

$

4,843

$

3,110

56%

$

31,073

$

29,631

5%

Sales Mix

**

**

Hardware

41

%

39

%

1%

41

%

40

%

3%

Software

48

%

52

%

(12%)

48

%

50

%

(1%)

Services

11

%

9

%

19%

11

%

10

%

17%

100

%

100

%

(4%)

100

%

100

%

2%

*

Percentage change not considered meaningful.

**

Change in sales mix represents growth/decline in category net sales on a U.S. dollar basis and does not exclude the effects of fluctuating foreign currency exchange rates.  

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 5

November 3, 2020

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

change

2020

2019

change

APAC

Net sales:

Products

$

22,612

$

28,812

(22%)

$

83,953

$

106,027

(21%)

Services

$

14,418

$

12,865

12%

$

41,432

$

39,840

4%

Total net sales

$

37,030

$

41,677

(11%)

$

125,385

$

145,867

(14%)

Gross profit

$

10,095

$

9,660

5%

$

31,042

$

30,482

2%

Gross margin

27.3

%

23.2

%

410 bps

24.8

%

20.9

%

390 bps

Selling and administrative expenses

$

7,684

$

7,654

—

$

22,190

$

21,961

1%

Severance and restructuring expenses

$

16

$

—

*

$

45

$

124

(64%)

Earnings from operations

$

2,395

$

2,006

19%

$

8,807

$

8,397

5%

Sales Mix

**

**

Hardware

17

%

22

%

(31%)

17

%

18

%

(18%)

Software

44

%

47

%

(17%)

50

%

55

%

(22%)

Services

39

%

31

%

12%

33

%

27

%

4%

100

%

100

%

(11%)

100

%

100

%

(14%)

*

Percentage change not considered meaningful.

**

Change in sales mix represents growth/decline in category net sales on a U.S. dollar basis and does not exclude the effects of fluctuating foreign currency exchange rates.  

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 6

November 3, 2020

•

the duration and severity of the COVID-19 pandemic and its effects on the Company’s business, results of operations and financial condition, as well as the widespread outbreak of any other illnesses or communicable diseases;

•

actions of the Company’s competitors, including manufacturers and publishers of products they sell;

•

the Company’s reliance on partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and in the requirements year over year;

•

changes in the IT industry and/or rapid changes in technology;

•

risks associated with the integration and operation of acquired businesses, including PCM and the achievement of expected synergies and benefits;

•

possible significant fluctuations in the Company’s future operating results as well as seasonality and variability in customer demands;

•

the risks associated with the Company’s international operations;

•

general economic conditions, economic uncertainties and changes in geopolitical conditions;

•

increased debt and interest expense and decreased availability of funds under the Company’s financing facilities;

•

cyberattacks or breaches of data privacy and security regulations;

•

disruptions in the Company’s IT systems and voice and data networks;

•

failure to comply with the terms and conditions of the Company’s commercial and public sector contracts;

•

legal proceedings, including PCM related litigation, client audits and failure to comply with laws and regulations;

•

accounts receivable risks, including increased credit loss experience or extended payment terms with the Company’s clients;

•

the Company’s reliance on independent shipping companies;

•

the Company’s dependence on certain key personnel;

•

natural disasters or other adverse occurrences;

•

exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;

•

intellectual property infringement claims and challenges to the Company’s registered trademarks and trade names;

•

the conditional conversion feature of the convertible notes, which if triggered, may adversely affect the Company’s financial condition and operating results;

•

the accounting method for convertible debt securities that may be settled in cash, such as the convertible notes, could have a material effect on the Company’s reported financial results;

•

future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock;

•

the Company is subject to counterparty risk with respect to the convertible note hedge transactions; and

•

risks associated with the discontinuation of LIBOR as a benchmark rate.

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 7

November 3, 2020

Contacts:

Glynis Bryan

Helen Johnson

Chief Financial Officer

Senior VP, Finance

Tel.  480.333.3390

Tel.  480.333.3234

Email glynis.bryan@insight.com

Email helen.johnson@insight.com

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 8

November 3, 2020

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

Net sales:

Products

$

1,661,568

$

1,668,880

$

5,182,817

$

4,729,887

Services

274,910

243,667

866,447

704,147

Total net sales

1,936,478

1,912,547

6,049,264

5,434,034

Costs of goods sold:

Products

1,500,312

1,519,240

4,688,497

4,315,464

Services

128,603

117,112

403,479

318,454

Total costs of goods sold

1,628,915

1,636,352

5,091,976

4,633,918

Gross profit

307,563

276,195

957,288

800,116

Operating expenses:

Selling and administrative expenses

245,155

223,215

756,598

613,767

Severance and restructuring expenses, net

808

2,662

9,962

3,712

Acquisition and integration related expenses

118

5,896

2,195

9,059

Earnings from operations

61,482

44,422

188,533

173,578

Non-operating (income) expense:

Interest expense, net

9,115

7,694

31,160

16,581

Other (income) expense, net

1,301

(538

)

836

858

Earnings before income taxes

51,066

37,266

156,537

156,139

Income tax expense

12,160

10,134

37,285

39,682

Net earnings

$

38,906

$

27,132

$

119,252

$

116,457

Net earnings per share:

Basic

$

1.11

$

0.76

$

3.40

$

3.27

Diluted

$

1.10

$

0.76

$

3.37

$

3.23

Shares used in per share calculations:

Basic

35,077

35,512

35,123

35,631

Diluted

35,348

35,868

35,418

36,027

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 9

November 3, 2020

September 30,

2020

December 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$

75,237

$

114,668

Accounts receivable, net

2,267,718

2,511,383

Inventories

158,400

190,833

Other current assets

225,052

231,148

Total current assets

2,726,407

3,048,032

Property and equipment, net

127,580

130,907

Goodwill

425,800

415,149

Intangible assets, net

253,078

278,584

Other assets

294,445

305,507

$

3,827,310

$

4,178,179

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable – trade

$

1,275,187

$

1,275,957

Accounts payable – inventory financing facilities

367,997

253,676

Accrued expenses and other current liabilities

319,397

352,204

Current portion of long-term debt

1,422

1,691

Total current liabilities

1,964,003

1,883,528

Long-term debt

294,722

857,673

Deferred income taxes

40,572

44,633

Other liabilities

265,122

232,027

2,564,419

3,017,861

Stockholders’ equity:

Preferred stock

—

—

Common stock

351

353

Additional paid-in capital

358,567

357,032

Retained earnings

939,857

841,097

Accumulated other comprehensive loss – foreign currency

   translation adjustments

(35,884

)

(38,164

)

Total stockholders’ equity

1,262,891

1,160,318

$

3,827,310

$

4,178,179

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 10

November 3, 2020

Nine Months Ended

September 30,

2020

2019

Cash flows from operating activities:

Net earnings

$

119,252

$

116,457

Adjustments to reconcile net earnings to net cash provided by

   operating activities:

Depreciation and amortization

51,375

29,096

Provision for losses on accounts receivable

8,093

2,695

Non-cash stock-based compensation

11,754

11,895

Deferred income taxes

(2,883

)

2,501

Amortization of debt discount and issuance costs

12,091

2,322

Other adjustments

4,087

3,633

Changes in assets and liabilities:

Decrease in accounts receivable

247,659

68,057

Decrease (increase) in inventories

28,002

(17,946

)

Decrease (increase) in other assets

19,643

(99,681

)

Decrease in accounts payable

(4,842

)

(39,191

)

(Decrease) increase in accrued expenses and other liabilities

(32,137

)

88,757

Net cash provided by operating activities

462,094

168,595

Cash flows from investing activities:

Proceeds from sale of assets held for sale

14,218

—

Purchases of property and equipment

(20,688

)

(16,922

)

Acquisitions, net of cash and cash equivalents acquired

(6,405

)

(664,287

)

Net cash used in investing activities

(12,875

)

(681,209

)

Cash flows from financing activities:

Borrowings on senior revolving credit facility

—

242,936

Repayments on senior revolving credit facility

—

(242,936

)

Borrowings on ABL revolving credit facility

2,111,674

986,754

Repayments on ABL revolving credit facility

(2,682,562

)

(454,544

)

Borrowings on accounts receivable securitization financing facility

—

2,364,500

Repayments on accounts receivable securitization financing facility

—

(2,558,500

)

Net borrowings (repayments) under inventory financing facilities

114,321

(96,472

)

Proceeds from issuance of convertible senior notes

—

341,250

Proceeds from issuance of warrants

—

34,440

Purchase of note hedge related to convertible senior notes

—

(66,325

)

Repurchases of treasury stock

(25,000

)

(27,899

)

Other payments

(7,520

)

(8,762

)

Net cash (used in) provided by financing activities

(489,087

)

514,442

Foreign currency exchange effect on cash, cash equivalents and

   restricted cash balances

718

(3,960

)

Decrease in cash, cash equivalents and restricted cash

(39,150

)

(2,132

)

Cash, cash equivalents and restricted cash at beginning of period

116,297

144,293

Cash, cash equivalents and restricted cash at end of period

$

77,147

$

142,161

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q3 2020 Results, Page 11

November 3, 2020

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

Adjusted Consolidated Earnings from

   Operations:

GAAP consolidated EFO

$

61,482

$

44,422

$

188,533

$

173,578

Severance and restructuring expenses

808

2,662

9,962

3,712

Acquisition and integration related expenses

118

5,896

2,195

9,059

Amortization of intangible assets

9,433

5,946

29,555

13,590

Adjusted non-GAAP consolidated EFO

$

71,841

$

58,926

$

230,245

$

199,939

Adjusted Consolidated Net Earnings:

GAAP consolidated net earnings

$

38,906

$

27,132

$

119,252

$

116,457

Severance and restructuring expenses

808

2,662

9,962

3,712

Acquisition and integration related expenses

118

5,896

2,195

9,059

Amortization of intangible assets

9,433

5,946

29,555

13,590

Amortization of debt discount and issuance costs

2,919

1,398

8,636

1,398

Income taxes on non-GAAP adjustments

(3,335

)

(3,414

)

(12,562

)

(5,588

)

Adjusted non-GAAP consolidated net earnings

$

48,849

$

39,620

$

157,038

$

138,628

Adjusted Diluted Earnings Per Share:

GAAP diluted EPS

$

1.10

$

0.76

$

3.37

$

3.23

Severance and restructuring expenses

0.02

0.07

0.28

0.10

Acquisition and integration related expenses

—

0.16

0.06

0.25

Amortization of intangible assets

0.27

0.16

0.83

0.38

Amortization of debt discount and issuance costs

0.08

0.04

0.24

0.04

Income taxes on non-GAAP adjustments

(0.09

)

(0.09

)

(0.35

)

(0.15

)

Adjusted non-GAAP diluted EPS

$

1.38

$

1.10

$

4.43

$

3.85