Insight Q2 2020 Results, Page 1

August 6, 2020

FOR IMMEDIATE RELEASE

Nasdaq: NSIT

•

Record cash flows from operating activities

•

Net sales increased 7% year over year to $1.97 billion

•

Gross profit increased 18% year over year to $324.4 million

•

Earnings from operations increased 3% to $74.2 million

•

Adjusted earnings from operations increased 15% to $91.8 million

•

Diluted earnings per share of $1.32 decreased 5% year to year

•

Adjusted diluted earnings per share of $1.75 increased 11% year over year

•

We continued to support clients with their changing needs in response to the COVID-19 global pandemic.  Through our four solution areas, we have accelerated the use of digital marketing platforms to bring relevant solutions to our clients through webinars, ecommerce demonstrations and market intelligence and research.

•

We maintained our focus on successfully integrating the PCM business and are nearing completion with the onboarding of almost all PCM clients to our systems.  We aligned our go-to-market structure in North America and EMEA and believe we are well positioned to compete as a single brand in the marketplace.  We are currently ahead of our first-year expectations in annualized run-rate cost savings based on our previously disclosed total commitment of $70 million over two years.

•

Cash flow from operations for the first half of 2020 of $497.5 million increased more than 100% year over year when compared to the first half of 2019.

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 2

August 6, 2020

•

We believe that we have a strong balance sheet and healthy liquidity position, including amounts available under our ABL facility with current capacity of up to $1.2 billion, of which $144.0 million in loans were outstanding at June 30, 2020.

•

Consolidated net sales for the second quarter of 2020 of $1.97 billion increased 7% year over year when compared to the second quarter of 2019.

•

Net sales in North America increased 10% year over year to $1.54 billion;

•

Net sales in EMEA increased 3% year over year to $392.0 million; and

•

Net sales in APAC decreased 27% year to year to $37.6 million.

•

Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 8% year over year, with growth in net sales in North America and EMEA of 10% and 6%, respectively, year over year partially offset by a decline in APAC of 23%, year to year.

•

Consolidated gross profit increased to $324.4 million, an increase of 18% compared to the second quarter of 2019, with consolidated gross margin expanding 150 basis points to 16.5% of net sales.

•

Gross profit in North America increased 23% year over year to $244.9 million (15.9% gross margin);

•

Gross profit in EMEA increased 6% year over year to $68.2 million (17.4% gross margin); and

•

Gross profit in APAC decreased 5% year to year to $11.3 million (30.1% gross margin).

•

Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 19% year over year, with gross profit growth in North America and EMEA of 23% and 8%, respectively, year over year.  Gross profit in APAC was flat year over year.

•

Consolidated earnings from operations increased 3% compared to the second quarter of 2019 to $74.2 million, or 3.8% of net sales.  

•

Earnings from operations in North America increased 2% year over year to $52.1 million, or 3.4% of net sales;

•

Earnings from operations in EMEA increased 8% year over year to $17.9 million, or 4.6% of net sales; and

•

Earnings from operations in APAC decreased 8% year to year to $4.2 million, or 11.2% of net sales.

•

Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations increased 4% year over year, with increased earnings from operations in North America and EMEA of 3% and 10%, respectively, year over year, partially offset by decreased earnings from operations in APAC of 4%, year to year.

•

Adjusted earnings from operations increased 15% compared to the second quarter of 2019 to $91.8 million, or 4.7% of net sales.  

•

Adjusted earnings from operations in North America increased 15% year over year to $67.0 million, or 4.4% of net sales;

•

Adjusted earnings from operations in EMEA increased 22% year over year to $20.5 million, or 5.2% of net sales; and

•

Adjusted earnings from operations in APAC decreased 8% year to year to $4.3 million, or 11.5% of net sales.

•

Consolidated net earnings and diluted earnings per share for the second quarter of 2020 were $46.4 million and $1.32, respectively, at an effective tax rate of 26.2%.

•

Adjusted consolidated net earnings and Adjusted diluted earnings per share for the second quarter of 2020 were $61.8 million and $1.75, respectively.

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 3

August 6, 2020

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 4

August 6, 2020

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

change

2020

2019

change

Insight Enterprises, Inc.

Net sales:

Products

$

1,672,933

$

1,594,335

5%

$

3,521,249

$

3,061,007

15%

Services

$

295,802

$

241,686

22%

$

591,537

$

460,480

28%

Total net sales

$

1,968,735

$

1,836,021

7%

$

4,112,786

$

3,521,487

17%

Gross profit

$

324,389

$

275,449

18%

$

649,725

$

523,921

24%

Gross margin

16.5

%

15.0

%

150 bps

15.8

%

14.9

%

90 bps

Selling and administrative expenses

$

242,580

$

199,489

22%

$

511,443

$

390,552

31%

Severance and restructuring expenses

$

7,010

$

680

> 100%

$

9,154

$

1,050

> 100%

Acquisition and integration related expenses

$

611

$

3,163

(81%)

$

2,077

$

3,163

(34%)

Earnings from operations

$

74,188

$

72,117

3%

$

127,051

$

129,156

(2%)

Net earnings

$

46,385

$

49,998

(7%)

$

80,346

$

89,325

(10%)

Diluted earnings per share

$

1.32

$

1.38

(5%)

$

2.27

$

2.47

(8%)

North America

Net sales:

Products

$

1,310,172

$

1,225,666

7%

$

2,743,821

$

2,296,082

20%

Services

$

228,975

$

179,841

27%

$

469,707

$

351,866

33%

Total net sales

$

1,539,147

$

1,405,507

10%

$

3,213,528

$

2,647,948

21%

Gross profit

$

244,896

$

199,059

23%

$

501,824

$

381,666

31%

Gross margin

15.9

%

14.2

%

170 bps

15.6

%

14.4

%

120 bps

Selling and administrative expenses

$

187,313

$

144,498

30%

$

398,516

$

281,448

42%

Severance and restructuring expenses

$

4,904

$

480

> 100%

$

7,026

$

811

> 100%

Acquisition and integration related expenses

$

611

$

3,163

(81%)

$

1,873

$

3,163

(41%)

Earnings from operations

$

52,068

$

50,918

2%

$

94,409

$

96,244

(2%)

Sales Mix

**

**

Hardware

66

%

67

%

9%

67

%

64

%

28%

Software

19

%

20

%

(1%)

18

%

23

%

(3%)

Services

15

%

13

%

27%

15

%

13

%

33%

100

%

100

%

10%

100

%

100

%

21%

EMEA

Net sales:

Products

$

340,036

$

333,037

2%

$

716,087

$

687,710

4%

Services

$

51,981

$

46,137

13%

$

94,816

$

81,639

16%

Total net sales

$

392,017

$

379,174

3%

$

810,903

$

769,349

5%

Gross profit

$

68,180

$

64,450

6%

$

126,954

$

121,433

5%

Gross margin

17.4

%

17.0

%

40 bps

15.7

%

15.8

%

(10 bps)

Selling and administrative expenses

$

48,177

$

47,652

1%

$

98,421

$

94,797

4%

Severance and restructuring expenses

$

2,093

$

200

> 100%

$

2,099

$

115

> 100%

Acquisition and integration related expenses

$

—

$

—

—

$

204

$

—

*

Earnings from operations

$

17,910

$

16,598

8%

$

26,230

$

26,521

(1%)

Sales Mix

**

**

Hardware

39

%

38

%

7%

40

%

41

%

4%

Software

48

%

50

%

(2%)

48

%

48

%

4%

Services

13

%

12

%

13%

12

%

11

%

16%

100

%

100

%

3%

100

%

100

%

5%

*

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 Q2 2020 Results, Page 5

August 6, 2020

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

change

2020

2019

change

APAC

Net sales:

Products

$

22,725

$

35,632

(36%)

$

61,341

$

77,215

(21%)

Services

$

14,846

$

15,708

(5%)

$

27,014

$

26,975

—

Total net sales

$

37,571

$

51,340

(27%)

$

88,355

$

104,190

(15%)

Gross profit

$

11,313

$

11,940

(5%)

$

20,947

$

20,822

1%

Gross margin

30.1

%

23.3

%

680 bps

23.7

%

20.0

%

370 bps

Selling and administrative expenses

$

7,090

$

7,339

(3%)

$

14,506

$

14,307

1%

Severance and restructuring expenses

$

13

$

—

*

$

29

$

124

(77%)

Earnings from operations

$

4,210

$

4,601

(8%)

$

6,412

$

6,391

—

Sales Mix

**

**

Hardware

18

%

19

%

(32%)

16

%

16

%

(12%)

Software

42

%

50

%

(38%)

53

%

58

%

(23%)

Services

40

%

31

%

(5%)

31

%

26

%

—

100

%

100

%

(27%)

100

%

100

%

(15%)

*

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 Q2 2020 Results, Page 6

August 6, 2020

•

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

•

actions of our competitors, including manufacturers and publishers of products we sell;

•

our reliance on our 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 our future operating results as well as seasonality and variability in customer demands;

•

the risks associated with our international operations;

•

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

•

increased debt and interest expense and decreased availability of funds under our financing facilities;

•

cyberattacks or breaches of data privacy and security regulations;

•

disruptions in our IT systems and voice and data networks;

•

failure to comply with the terms and conditions of our 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 our clients;

•

our reliance on independent shipping companies;

•

our 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 our registered trademarks and trade names;

•

our substantial indebtedness;

•

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 Q2 2020 Results, Page 7

August 6, 2020

Contacts:

Glynis Bryan

Helen Johnson

Chief Financial Officer

Senior VP, Finance

Tel.  480.333.3390

Tel.  480.333.3234

Email [email protected]

Email [email protected]

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 8

August 6, 2020

Three Months Ended

June 30,

Six Months Ended

June 30,

2020

2019

2020

2019

Net sales:

Products

$

1,672,933

$

1,594,335

$

3,521,249

$

3,061,007

Services

295,802

241,686

591,537

460,480

Total net sales

1,968,735

1,836,021

4,112,786

3,521,487

Costs of goods sold:

Products

1,517,947

1,458,916

3,188,185

2,796,224

Services

126,399

101,656

274,876

201,342

Total costs of goods sold

1,644,346

1,560,572

3,463,061

2,997,566

Gross profit

324,389

275,449

649,725

523,921

Operating expenses:

Selling and administrative expenses

242,580

199,489

511,443

390,552

Severance and restructuring expenses, net

7,010

680

9,154

1,050

Acquisition and integration related expenses

611

3,163

2,077

3,163

Earnings from operations

74,188

72,117

127,051

129,156

Non-operating (income) expense:

Interest expense, net

10,219

4,335

22,045

8,887

Other (income) expense, net

1,098

346

(465

)

1,396

Earnings before income taxes

62,871

67,436

105,471

118,873

Income tax expense

16,486

17,438

25,125

29,548

Net earnings

$

46,385

$

49,998

$

80,346

$

89,325

Net earnings per share:

Basic

$

1.32

$

1.40

$

2.29

$

2.50

Diluted

$

1.32

$

1.38

$

2.27

$

2.47

Shares used in per share calculations:

Basic

35,060

35,772

35,147

35,691

Diluted

35,260

36,111

35,453

36,107

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 9

August 6, 2020

June 30,

2020

December 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$

153,866

$

114,668

Accounts receivable, net

2,677,564

2,511,383

Inventories

212,980

190,833

Other current assets

220,080

231,148

Total current assets

3,264,490

3,048,032

Property and equipment, net

127,490

130,907

Goodwill

415,897

415,149

Intangible assets, net

261,254

278,584

Other assets

272,347

305,507

$

4,341,478

$

4,178,179

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable – trade

$

1,796,918

$

1,275,957

Accounts payable – inventory financing facilities

261,133

253,676

Accrued expenses and other current liabilities

371,401

352,204

Current portion of long-term debt

1,509

1,691

Total current liabilities

2,430,961

1,883,528

Long-term debt

435,955

857,673

Deferred income taxes

43,880

44,633

Other liabilities

223,326

232,027

3,134,122

3,017,861

Stockholders’ equity:

Preferred stock

—

—

Common stock

351

353

Additional paid-in capital

354,431

357,032

Retained earnings

900,950

841,097

Accumulated other comprehensive loss – foreign currency

   translation adjustments

(48,376

)

(38,164

)

Total stockholders’ equity

1,207,356

1,160,318

$

4,341,478

$

4,178,179

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 10

August 6, 2020

Six Months Ended

June 30,

2020

2019

Cash flows from operating activities:

Net earnings

$

80,346

$

89,325

Adjustments to reconcile net earnings to net cash provided by

   operating activities:

Depreciation and amortization

34,623

17,626

Provision for losses on accounts receivable

6,570

2,346

Non-cash stock-based compensation

7,241

7,797

Deferred income taxes

(1,464

)

1,180

Amortization of debt discount and issuance costs

8,002

—

Other adjustments

2,829

2,350

Changes in assets and liabilities:

Increase in accounts receivable

(182,511

)

(354,717

)

Increase in inventories

(26,647

)

(33,359

)

Decrease (increase) in other assets

46,088

(93,714

)

Increase in accounts payable

529,742

448,682

(Decrease) increase in accrued expenses and other liabilities

(7,290

)

95,022

Net cash provided by operating activities

497,529

182,538

Cash flows from investing activities:

Proceeds from sale of assets held for sale

14,218

—

Purchases of property and equipment

(14,494

)

(10,584

)

Acquisitions, net of cash and cash equivalents acquired

(6,406

)

(3,362

)

Net cash used in investing activities

(6,682

)

(13,946

)

Cash flows from financing activities:

Borrowings on senior revolving credit facility

—

89,936

Repayments on senior revolving credit facility

—

(89,936

)

Borrowings on ABL revolving credit facility

1,381,179

—

Repayments on ABL revolving credit facility

(1,807,421

)

—

Borrowings on accounts receivable securitization financing facility

—

1,919,500

Repayments on accounts receivable securitization financing facility

—

(2,068,500

)

Net borrowings (repayments) under inventory financing facilities

7,457

(43,240

)

Repurchases of treasury stock

(25,000

)

—

Other payments

(6,791

)

(6,757

)

Net cash used in financing activities

(450,576

)

(198,997

)

Foreign currency exchange effect on cash, cash equivalents and

   restricted cash balances

(814

)

(183

)

Increase (decrease) in cash, cash equivalents and restricted cash

39,457

(30,588

)

Cash, cash equivalents and restricted cash at beginning of period

116,297

144,293

Cash, cash equivalents and restricted cash at end of period

$

155,754

$

113,705

Insight Enterprises, Inc.

6820 South Harl Avenue

Tempe, Arizona 85283

800.467.4448

FAX 480.760.8958

Insight Q2 2020 Results, Page 11

August 6, 2020

Three Months Ended

June 30,

Six Months Ended

June 30,

2020

2019

2020

2019

Adjusted Consolidated Earnings from

   Operations:

GAAP consolidated EFO

$

74,188

$

72,117

$

127,051

$

129,156

Severance and restructuring expenses

7,010

680

9,154

1,050

Acquisition and integration related expenses

611

3,163

2,077

3,163

Amortization of intangible assets

10,014

3,821

20,122

7,644

Adjusted non-GAAP consolidated EFO

$

91,823

$

79,781

$

158,404

$

141,013

Adjusted Consolidated Net Earnings:

GAAP consolidated net earnings

$

46,385

$

49,998

$

80,346

$

89,325

Severance and restructuring expenses

7,010

680

9,154

1,050

Acquisition and integration related expenses

611

3,163

2,077

3,163

Amortization of intangible assets

10,014

3,821

20,122

7,644

Amortization of debt discount and issuance costs

2,886

—

5,717

—

Income taxes on non-GAAP adjustments

(5,067

)

(1,098

)

(9,227

)

(2,146

)

Adjusted non-GAAP consolidated net earnings

$

61,839

$

56,564

$

108,189

$

99,036

Adjusted Diluted Earnings Per Share:

GAAP diluted EPS

$

1.32

$

1.38

$

2.27

$

2.47