Equibles

8-K

INSIGHT ENTERPRISES INC (NSIT)

8-K 2020-11-03 For: 2020-11-03
View Original
Added on April 04, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  November 3, 2020

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware 0-25092 86-0766246
(State or other jurisdiction<br><br><br>of incorporation) (Commission<br><br><br>File Number) (I.R.S. Employer<br><br><br>Identification No.)
6820 South Harl Avenue, Tempe, Arizona 85283
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:

(480) 333-3000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Common stock, par value $0.01 NSIT The NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company           ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.          ☐

Item 2.02. Results of Operations and Financial Condition.

On November 3, 2020, Insight Enterprises, Inc. announced by press release its results of operations for the third quarter ended September 30, 2020. A copy of the press release and accompanying investor presentation are attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated by reference herein.  The information disclosed under this Item 2.02, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits.

Exhibit<br><br><br>Number Description
99.1 Press release dated November 3, 2020.
99.2 Investor presentation of Insight Enterprises, Inc. dated November 3, 2020.
104 Cover Page Interactive Data File (formatted as Inline XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Insight Enterprises, Inc.
Date:   November 3, 2020 By: /s/ Glynis A. Bryan
Glynis A. Bryan
Chief Financial Officer

nsit-ex991_7.htm

Insight Q3 2020 Results, Page 1 November 3, 2020

Exhibit 99.1

FOR IMMEDIATE RELEASE Nasdaq: NSIT

Insight Enterprises, Inc. Reports THIRD QUARTER

2020 Results

TEMPE, AZ – November 3, 2020 – Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported financial results for the quarter ended September 30, 2020.  Highlights include:

• 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
--- ---

In the third quarter of 2020, net sales increased 1%, year over year, while gross profit increased 11% and gross margin increased 150 basis points compared to the third quarter of 2019.  The increase in gross profit and gross margin reflects our continued emphasis on growing our higher margin cloud and services business and an increase in margins on hardware.  Diluted earnings per share for the quarter was $1.10, up 45%, year over year, and adjusted diluted earnings per share was $1.38, up 25%, year over year.  Cash flow from operations was strong at $462.1 million.

“I am pleased to report that because of our dedicated team, resilient business model and the PCM acquisition, we delivered another quarter of double digit Adjusted earnings growth year over year in the third quarter,” stated Ken Lamneck, President and Chief Executive Officer.  “During the third quarter, we drove double digit growth in services and cloud solutions, which pushed gross margins to a new third quarter record,” stated Lamneck.

KEY HIGHLIGHTS

• 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.
--- ---
  • MORE -
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.
--- ---

In discussing financial results for the three and nine months ended September 30, 2020 and 2019 in this press release, the Company refers to certain financial measures that are adjusted from the financial results prepared in accordance with United States generally accepted accounting principles (“GAAP”).  When referring to non-GAAP measures, the Company refers to such measures as “Adjusted.”  See “Use of Non-GAAP Financial Measures” for additional information.  A tabular reconciliation of financial measures prepared in accordance with GAAP to the non-GAAP financial measures is included at the end of this press release.

In some instances, the Company refers to changes in net sales, gross profit and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates.  In computing these changes and percentages, the Company compares the current year

  • MORE -
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
--- ---

amount as translated into U.S. dollars under the applicable accounting standards to the prior year amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

The tax effect of Adjusted amounts referenced herein 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.

guidance AND ANTICIPATED COVID-19 IMPACT

When reporting its first quarter financial results, the Company withdrew its 2020 guidance for net sales and Adjusted diluted earnings per share due to the high level of economic uncertainty and disruption caused by COVID-19. The Company continued to observe the pronounced impact of COVID-19 on third quarter financial results compared to internal budgets and anticipates demand for products and services will continue to impact our results in the fourth quarter of 2020, as clients continue to evaluate the impact of COVID-19 on their businesses, their profitability and their liquidity.  For the full year 2020, the Company expects to deliver net sales between $8.1 billion and $8.2 billion.  The Company’s Adjusted diluted earnings per share outlook for the full year of 2020 is between $5.88 and $5.98.  This outlook assumes a tax rate of 25.5% for the fourth quarter.

This outlook excludes acquisition-related expenses, excludes severance and restructuring expenses incurred, excludes amortization of intangible assets, and excludes amortization of convertible debt discount and issuance costs during the first nine months of 2020 and those that may be incurred during the balance of 2020.  Due to the inherent difficulty of forecasting all of these types of expenses, which impact net earnings and diluted earnings per share, the Company is unable to reasonably estimate the impact of such expenses, if any, to net earnings and diluted earnings per share.  Accordingly, the Company is unable to provide a reconciliation of GAAP to non-GAAP diluted earnings per share for the full year 2020 forecast.

Conference Call and Webcast

The Company will host a conference call and live web cast today at 9:00 a.m. ET to discuss third quarter 2020 results of operations.  A live web cast of the conference call (in listen-only mode) will be available on the Company’s web site at http://investor.insight.com/, and a replay of the web cast will be available on the Company’s web site for a limited time following the call.  To access the live conference call, please register in advance using this event link.  Upon registering, participants will receive dial-in information via email, as well as a unique registrant ID, event passcode, and detailed instructions regarding how to join the call.

Use of NON-GAAP Financial Measures

The non-GAAP financial measures are referred to as “Adjusted”.  Adjusted consolidated earnings from operations, Adjusted consolidated net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain acquisition and integration related expenses, (iii) amortization of intangible assets, and (iv) the tax effects of each of these items, as applicable. Adjusted consolidated net earnings and Adjusted diluted earnings per share also exclude amortization of debt discount and issuance costs associated with the issuance of the Company’s convertible senior notes due 2025. The Company excludes these items when internally evaluating earnings from operations, tax expense, net earnings and diluted earnings per share for the Company and earnings from operations for each of the Company’s operating segments.  Adjusted free cash flow is the Company’s net cash provided by operating activities adjusted for (i) purchases of property and equipment and (ii) the net borrowings or repayments under the inventory financing facilities.  Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, (ii) certain acquisition and integration related expenses, (iii) impairment of construction in progress, and (iv) the tax effects of each of these items, as applicable.

These non-GAAP measures are 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.  The Company believes that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and the Company’s competitors’ results and assist in forecasting performance for future periods.  These non-GAAP financial measures are 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.

  • MORE -
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
--- ---

Financial Summary Table

(dollars in thousands, except per share data)

(Unaudited)

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.
--- ---
  • MORE -
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
--- ---

Financial Summary Table (continued)

(dollars in thousands, except per share data)

(Unaudited)

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.
--- ---
  • MORE -
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
--- ---

Forward-Looking Information

Certain statements in this release and the related conference call, web cast and presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements, including those related to our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company, the Company’s future financial performance and results of operations, the Company’s anticipated effective tax rate, capital expenditures, expected average share count, the Company’s expectations regarding cash flow, the Company’s expectations about future benefits relating to the PCM integration, including expected synergies, future trends in the IT market, including due to COVID-19, our business strategy and our strategic initiatives, and the completion of the sale of certain real estate, are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.  Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.  There can be no assurances that the results discussed by the forward-looking statements will be achieved, and actual results may differ materially from those set forth in the forward-looking statements.  Some of the important factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statements, include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, and in “Risk Factors” in Part II, Item 1A of the Company’s Quarterly Report on form 10-Q for the quarter ended September 30, 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.
--- ---

Additionally, there may be other risks that are otherwise described from time to time in the reports that the Company files with the Securities and Exchange Commission.  Any forward-looking statements in this release,

  • MORE -
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
--- ---

the related conference call and webcast speak only as of the date on which they are made and should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others.  The Company assumes no obligation to update, and, except as may be required by law, does not intend to update, any forward-looking statements.  The Company does not endorse any projections regarding future performance that may be made by third parties.

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
  • MORE -
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
--- ---

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended<br><br><br>September 30, Nine Months Ended<br><br><br>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
  • MORE -
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
--- ---

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 30,<br><br><br>2020 December 31,<br><br><br>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<br><br><br>translation adjustments (35,884 ) (38,164 )
Total stockholders’ equity 1,262,891 1,160,318
$ 3,827,310 $ 4,178,179
  • MORE -
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
--- ---

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine Months Ended<br><br><br>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<br><br><br>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<br><br><br>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
  • MORE -
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
--- ---

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Reconciliation of GAAP to non-GAAP Financial Measures

(In thousands, except per share data)

(unaudited)

Three Months Ended<br><br><br>September 30, Nine Months Ended<br><br><br>September 30,
2020 2019 2020 2019
Adjusted Consolidated Earnings from<br><br><br>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
Adjusted North America Earnings from<br><br><br>Operations:
GAAP EFO from North America segment $ 54,244 $ 39,306 $ 148,653 $ 135,550
Severance and restructuring expenses 773 2,449 7,799 3,260
Acquisition and integration related expenses 118 5,896 1,991 9,059
Amortization of intangible assets 8,730 5,765 27,594 13,037
Adjusted non-GAAP EFO from North America<br><br><br>segment $ 63,865 $ 53,416 $ 186,037 $ 160,906
Adjusted EMEA Earnings from Operations:
GAAP EFO from EMEA segment $ 4,843 $ 3,110 $ 31,073 $ 29,631
Severance and restructuring expenses 19 213 2,118 328
Acquisition and integration related expenses — — 204 —
Amortization of intangible assets 585 67 1,625 205
Adjusted non-GAAP EFO from EMEA segment $ 5,447 $ 3,390 $ 35,020 $ 30,164
  • MORE -
Insight Enterprises, Inc. 6820 South Harl Avenue Tempe, Arizona 85283 800.467.4448 FAX 480.760.8958
Insight Q3 2020 Results, Page 12 November 3, 2020
--- ---

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Reconciliation of GAAP to NON-GAAP Financial Measures (Continued)

(In thousands, except per share data)

(unaudited)

Three Months Ended<br><br><br>September 30, Nine Months Ended<br><br><br>September 30,
2020 2019 2020 2019
Adjusted APAC Earnings from Operations:
GAAP EFO from APAC segment $ 2,395 $ 2,006 $ 8,807 $ 8,397
Severance and restructuring expenses 16 — 45 124
Amortization of intangible assets 118 114 336 348
Adjusted non-GAAP EFO from APAC segment $ 2,529 $ 2,120 $ 9,188 $ 8,869
Nine Months Ended<br><br><br>September 30,
--- --- --- --- --- --- ---
2020 2019
Adjusted free cash flow:
Net cash provided by operating activities $ 462,094 $ 168,595
Purchases of property and equipment (20,688 ) (16,922 )
Net repayments under inventory financing facilities 114,321 (96,472 )
Adjusted non-GAAP free cash flow $ 555,727 $ 55,201
Twelve Months Ended<br><br><br>September 30,
--- --- --- --- --- --- ---
2020 2019
Adjusted return on invested capital:
GAAP consolidated EFO $ 255,549 $ 232,237
Severance and restructuring expenses 11,675 4,427
Acquisition and integration related expenses 4,478 9,059
Impairment of construction in progress 1,501 —
Adjusted non-GAAP consolidated EFO * 273,203 245,723
Income tax expense** 71,033 67,574
Adjusted non-GAAP consolidated EFO, net of tax $ 202,170 $ 178,149
Average stockholders’ equity*** $ 1,176,754 $ 1,027,884
Average debt*** 636,215 292,842
Average cash*** (109,396 ) (126,233 )
Invested Capital $ 1,703,573 $ 1,194,493
Adjusted non-GAAP ROIC (from GAAP consolidated EFO) **** 11.10 % 14.10 %
Adjusted non-GAAP ROIC (from non-GAAP consolidated<br><br><br>EFO) ***** 11.87 % 14.91 %
* The adjusted non-GAAP consolidated EFO amount used for the Adjusted non-GAAP ROIC calculation does not exclude amortization of intangible assets.  This calculation remains consistent with the metric utilized in management’s compensation plan.
--- ---
** Assumed tax rate of 26.0% and 27.5% for 2020 and 2019, respectively.
--- ---
*** Average of previous five quarters.
--- ---
**** Computed as GAAP consolidated EFO, net of tax of $66,443 and $63,865 for the twelve months ended September 30, 2020 and 2019, respectively, divided by invested capital.
--- ---
***** Computed as Adjusted non-GAAP consolidated EFO, net of tax, divided by invested capital.
--- ---

  • -

Insight Enterprises, Inc. 6820 South Harl Avenue Tempe, Arizona 85283 800.467.4448 FAX 480.760.8958

nsit-ex992_6.pptx.htm

Slide 1

Insight Enterprises, Inc. Third Quarter 2020 Earnings Conference Call and Webcast Exhibit 99.2

Slide 2

Agenda Disclosures CEO Commentary Financial Highlights and Results Operating Highlights Current Environment CFO Commentary Year to Date Highlights Cashflow and Debt Covenants Financial Results by Region Taxes and Cash Flow Closing Comments

Slide 3

Disclosures Safe harbor statement This presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 related to Insight’s plans and expectations. Statements that are not historical facts, including those related to Coronavirus strain (“COVID-19”), our future responses to and the impact of COVID-19 on our Company, our expectations about future benefits relating to the PCM integration, future expected trends in the IT market and our opportunities for growth, are forward-looking statements. These forward-looking statements are subject to assumptions, risks and uncertainties which could cause actual results or future events to differ materially from such statements. The Company undertakes no obligation to update publicly or revise any of the forward-looking statements, except as otherwise required by law. More detailed information about risk factors is included in today’s press release and discussed in the Company’s most recently filed periodic reports and subsequent filings with the Securities and Exchange Commission. Non-GAAP measures This presentation will reference certain non-GAAP financial information as ‘Adjusted’. A reconciliation of non-GAAP financial measures presented in this document to our actual GAAP results is attached to the back of this presentation and included in the press release issued today, which you may find on the Investor Relations section of our website at investor.insight.com. Constant currency In some instances the Company refers to changes in net sales, gross profit and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates. In computing these changes and percentages, the Company compares the current year amount as translated into U.S. dollars under the applicable accounting standards to the prior year amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

Slide 4

Q3 2020 Financial Highlights Resilient business model, strong execution, delivered on financial commitments +38% - GAAP Earnings from operations growth (YOY) +22% - Adjusted Earnings from operations growth* (YOY) 15.9% - Third quarter record gross margins +45% - GAAP Diluted Earnings per Share growth (YOY) +25% - Adjusted Diluted Earnings per Share growth* (YOY) $462M– Record-level Cash Flow from Operations YTD * Adjusted Non-GAAP excludes severance and restructuring expense and other unique items as well as Amortization expense related to acquired intangibles and non-cash imputed interest on convertible notes. See appendix for reconciliation of GAAP to Non-GAAP financial measures.

Slide 5

Q3 2020 Year over Year Results GAAP Earnings from operations $61M GAAP Diluted EPS $1.10 * Adjusted Non-GAAP excludes severance and restructuring expense and other unique items as well as Amortization expense related to acquired intangibles and non-cash imputed interest on convertible notes. Net Sales Gross Profit Gross Margin +1% YoY +11% YoY +150 bps YoY SG&A % of Net Sales Adj EFO* Adj Diluted EPS* +100 bps YoY +22% YoY +25% YoY $1.94B 2019 2020 $0.31B 2019 2020 $72M 2019 2020 12.7% 2019 2020 15.9% 2019 2020 $1.38 2019 2020

Slide 6

Third Quarter Operating Highlights PCM Integration ahead of plan - Expect ~$60-$65 million in annualized run-rate cost savings by year end Investing in sales and technical talent Organizational updates North America hardware booking trends improved double digits sequentially in the third quarter Elevated backlog heading into fourth quarter Fourth quarter hardware bookings trending positive year over year Software-as-a-service and cloud solutions growing * * Reported in Services Net Sales

Slide 7

Current Environment Markets open in limited capacity across geos Demand for solutions as economy recovers Solution Areas Partner Recognition NetApp 2020 Cloud Innovation Partner of the Year Dell Technologies 2019 Transformation Partner of the Year Named to Forbes World’s Best Employers 2020

Slide 8

CFO Commentary Year to Date Highlights Cashflow and Debt Covenants Q3-2020 Financial Results by Region Taxes and Cash Flow

Slide 9

Nine months ended September 30, 2020 | Highlights PCM Integration ahead of Plan – Synergies of $60-$65M annual run rate by year end Gross Margins up more than 100 basis points year over year Cost reduction initiatives and integration plans Adjusted earnings from operations growth of 15% year over year Record level cash flow from operations of $462M ABL Facility paid off in Q3

Slide 10

Liquidity and Debt Covenants Tax Expense plus Interest Expense less non-cash imputed interest under the Inventory Financing Facility and the Company’s Convertible Notes as discussed in Management’s Discussion and Analysis – Interest Expense, Net US Dollar in $000s 2020 2019 Adjusted Consolidated EBITDA: Net Income 162,202 $ 163,498 $ Interest Expense 43,469 23,074 Taxes 49,912 47,353 Depreciation 28,852 21,209 Amortization 39,636 17,928 Extraordinary Non-cash and Non-recurring - - Non-cash Charges - FASB 123(R) 15,870 16,486 Cash Acquisition Charges 4,478 9,059 Severance and restructuring expenses 11,675 4,427 Adjusted Consolidated EBITDA 356,094 $ 303,034 $ Less Capital Expenditures (72,852) (21,127) $ Adjusted Consolidated EBITDA for FCCR Ratio 283,242 $ 281,907 $ Taxes and interest * 70,934 $ 57,602 $ Fixed Charge Coverage Ratio 4.0 4.9 Twelve Months Ended Sep 30, Total Leverage Ratio 296,144 356,094 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 Consolidated Funded Indebtedness Adjusted Consolidated EBITDA 0.83x

Slide 11

* Adjusted Non-GAAP excludes severance and restructuring expense and other unique items Q3 2020 North America | Financial Results GAAP Earnings from operations $54M Net Sales Gross Profit Gross Margin +3% YoY +13% YoY +150 bps YoY SG&A % of Net Sales Adj EFO* Sales Mix +100 bps YoY +20% YoY 66% 20% 14% Hardware Software Services $1.56B 2019 2020 $247M 2019 2020 15.9% 2019 2020 $64M 2019 2020 12.3% 2019 2020

Slide 12

* Adjusted Non-GAAP excludes severance and restructuring expense and other unique items ** Reference “Constant currency” section on slide 3 of this presentation Q3 2020 EMEA | Financial Results (in constant $**) (in constant $**) GAAP Earnings from Operations $5M (in constant $**) Net Sales Gross Profit Gross Margin -8% YoY +0% YoY +120 bps YoY SG&A % of Net Sales Adj EFO* Sales Mix +80 bps YoY +53% YoY 41% 48% 11% Hardware Software Services $0.34B 2019 2020 $50M 2019 2020 14.7% 2019 2020 $5M 2019 2020 13.3% 2019 2020

Slide 13

* Adjusted Non-GAAP excludes severance and restructuring expense and other unique items ** Reference “Constant currency” section on slide 3 of this presentation Q3 2020 APAC | Financial Results (in constant $**) (in constant $**) GAAP Earnings from Operations $2M (in constant $**) Net Sales Gross Profit Gross Margin -13% YoY +2% YoY +410 bps YoY SG&A % of Net Sales Adj EFO* Sales Mix +240 bps YoY +19% YoY $37M 2019 2020 $10M 2019 2020 27.3% 2019 2020 $3M 2019 2020 20.8% 2019 2020 17% 44% 39% Hardware Software Services

Slide 14

* Adjusted Non-GAAP excludes severance and restructuring expense and other unique items Q3 2020 | Cash Flows and Cash Cycle Net cash from operations Adj Free Cash Flow* Cash Conversion Cycle -17 days YoY Days sales outstanding Days inventory outstanding Days purchases outstanding -3 days YoY -1 days YoY +13 days YoY $169 $462M 2019 2020 $55 $556M 2019 2020 42 25 2019 2020 111 108 2019 2020 11 10 2019 2020 80 93 2019 2020

Slide 15

Q4 and Full Year 2020 Outlook Fourth quarter 2020 net sales are expected to be between $2.1 and $2.2 billion and Adjusted diluted earnings per share are expected to be between $1.45 and $1.55. Full year 2020 net sales are expected to be between $8.1 and $8.2 billion and Adjusted diluted earnings per share are expected to be between $5.88 and $5.98. * Adjusted results exclude severance and restructuring expense and other unique items as well as Amortization expense related to acquired intangibles and non-cash imputed interest on convertible notes.

Slide 16

Closing Commentary Product-focused Suppliers Outcome-based Clients Supply Chain Optimization Connected Workforce Cloud + Data Center Transformation Digital Innovation CapEx OpEx Manage Today Transform Tomorrow

Slide 17

Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures

Slide 18

Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures (continued)

Slide 19

Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures (continued)   * The adjusted non-GAAP consolidated EFO amount used for the Adjusted non-GAAP ROIC calculation does not exclude amortization of intangible assets. This calculation remains consistent with the metric utilized in management’s compensation plan. ** Assumed tax rate of 26.0% and 27.5% for 2020 and 2019, respectively. *** Average of previous five quarters. **** Computed as GAAP consolidated EFO, net of tax of $66,443 and $63,865 for the twelve months ended September 30, 2020 and 2019, respectively, divided by invested capital. ***** Computed as Adjusted non-GAAP consolidated EFO, net of tax, divided by invested capital. US Dollar in $000s 2020 2019 Net cash provided by operating activities 462,094 $ 168,595 $ Purchases of property and equipment (20,688) (16,922) Net repayments under inventory financing facility 114,321 (96,472) Adjusted non-GAAP free cash flow 555,727 $ 55,201 $ US Dollar in $000s 2020 2019 GAAP consolidated EFO $ 255,549 $ 232,237 Severance and restructuring expenses 11,675 4,427 Acquisition and integration related expenses 4,478 9,059 Impairment of construction in progress 1,501 - Adjusted non-GAAP consolidated EFO* 273,203 245,723 Income tax expense** 71,033 67,574 Adjusted non-GAAP consolidated EFO, net of tax $ 202,170 $ 178,149 Average stockholders’ equity*** $ 1,176,754 $ 1,027,884 Average debt*** 636,215 292,842 Average cash*** (109,396) (126,233) Invested Capital $ 1,703,573 $ 1,194,493 ROIC (from GAAP consolidated EFO)**** 11.10% 14.10% ROIC (from Adjusted non-GAAP consolidated EFO)***** 11.87% 14.91% Adjusted Free Cash Flow: Twelve Months Ended Sep 30, Adjusted Return on Invested Capital: Nine Months Ended Sep 30,

Report a Problem

Category
Description
Email (optional, for follow-up)