8-K
INSIGHT ENTERPRISES INC (NSIT)
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): May 5, 2022
INSIGHT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
_____________________________
| Delaware | 0-25092 | 86-0766246 | |
|---|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) | |
| 2701 East Insight Way, | |||
| Chandler, | Arizona | 85286 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code:
(480) 333-3000
6820 S. Harl Avenue, Tempe, Arizona 85283
(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 May 5, 2022, Insight Enterprises, Inc. announced by press release its results of operations for the first quarter ended March 31, 2022. 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>Number | Description |
|---|---|
| 99.1 | Press release datedMay5, 2022. |
| 99.2 | Investor presentation of Insight Enterprises, Inc. datedMay5, 2022. |
| 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: | May 5, 2022 | By: | /s/ Glynis A. Bryan |
| Glynis A. Bryan | |||
| Chief Financial Officer |
Document
EXHIBIT 99.1
| FOR IMMEDIATE RELEASE | NASDAQ: NSIT |
|---|
INSIGHT ENTERPRISES, INC. REPORTS
RECORD FIRST QUARTER 2022 RESULTS
CHANDLER, AZ – May 5, 2022 – Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported financial results for the quarter ended March 31, 2022. Highlights include:
•Net sales increased 21% year over year to a record $2.65 billion
•Gross profit increased 14% year over year to $378.9 million
•Earnings from operations increased 19% year over year to $79.8 million
•Adjusted earnings from operations increased 31% year over year to $89.6 million
•Diluted earnings per share of $1.53 increased 30% year over year
•Adjusted diluted earnings per share of $1.81 increased 39% year over year
In the first quarter of 2022, net sales increased 21%, year over year. Gross profit increased 14% while gross margin contracted 80 basis points to 14.3% compared to the first quarter of 2021. Earnings from operations of $79.8 million increased 19% compared to $67.0 million in the first quarter of 2021. Adjusted earnings from operations of $89.6 million increased 31% compared to $68.3 million in the first quarter of 2021. Diluted earnings per share for the quarter was $1.53, up 30%, year over year, and Adjusted diluted earnings per share was $1.81, up 39% year over year.
“I am very pleased with our performance in the quarter as we delivered a record Q1 for revenue, gross profit and Adjusted diluted earnings per share,” stated Joyce Mullen, President and Chief Executive Officer. “With supply constraints somewhat easing for devices, we recorded higher than expected hardware net sales and product demand remained healthy,” stated Mullen.
KEY HIGHLIGHTS
Results for the Quarter:
•Consolidated net sales for the first quarter of 2022 of $2.65 billion increased 21%, year over year, when compared to the first quarter of 2021. Product net sales increased 22% year over year and services net sales increased 14%, year over year.
•Net sales in North America increased 25%, year over year, to $2.06 billion;
◦Product net sales increased 26%, year over year, to $1.79 billion;
◦Services net sales increased 15%, year over year, to $271.6 million;
•Net sales in EMEA increased 11%, year over year, to $531.4 million; and
•Net sales in APAC decreased 8%, year to year, to $54.9 million.
•Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales were up 22%, year over year, with growth in net sales in North America and EMEA of 25% and 17%, respectively, year over year, offset by a decline in APAC of 3%, year to year.
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
•Consolidated gross profit increased to $378.9 million, an increase of 14% compared to the first quarter of 2021, with consolidated gross margin contracting 80 basis points to 14.3% of net sales. Product gross profit increased 18%, year over year and services gross profit increased 10%, year over year.
•Gross profit in North America increased 18%, year over year, to $300.1 million (14.5% gross margin);
•Gross profit in EMEA decreased 2%, year to year, to $64.8 million (12.2% gross margin); and
•Gross profit in APAC increased 17%, year over year, to $14.0 million (25.5% gross margin).
•Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit was up 16%, year over year, with gross profit growth in North America, EMEA and APAC of 18%, 3% and 23%, respectively, year over year.
•Consolidated earnings from operations increased 19% compared to the first quarter of 2021 to $79.8 million, or 3.0% of net sales.
•Earnings from operations in North America increased 20%, year over year, to $64.6 million, or 3.1% of net sales;
•Earnings from operations in EMEA increased 13%, year over year, to $11.4 million, or 2.1% of net sales; and
•Earnings from operations in APAC increased 30%, year over year, to $3.9 million, or 7.1% of net sales.
•Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations were up 20%, year over year, with increased earnings from operations in North America, EMEA and APAC of 20%, 17% and 34%, respectively, year over year.
•Adjusted earnings from operations increased 31% compared to the first quarter of 2021 to $89.6 million, or 3.4% of net sales.
•Adjusted earnings from operations in North America increased 34%, year over year, to $72.6 million, or 3.5% of net sales;
•Adjusted earnings from operations in EMEA increased 16%, year over year, to $12.9 million, or 2.4% of net sales; and
•Adjusted earnings from operations in APAC increased 28%, year over year, to $4.0 million, or 7.3% of net sales.
•Consolidated net earnings and diluted earnings per share for the first quarter of 2022 were $56.6 million and $1.53, respectively, at an effective tax rate of 24.1%.
•Adjusted consolidated net earnings and Adjusted diluted earnings per share for the first quarter of 2022 were $63.9 million and $1.81, respectively.
In discussing financial results for the three months ended March 31, 2022 and 2021 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 them 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 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.
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
GUIDANCE
For the full year 2022, the Company expects to deliver low double digit net sales growth and Adjusted diluted earnings per share is expected to be between $7.95 and $8.15.
This outlook assumes
•interest expense between $30 and $35 million;
•an effective tax rate of 24% to 25% for the full year 2022;
•capital expenditures of $65 to $70 million including final completion of our new corporate headquarters; and
•an average share count for the full year of 35.6 million shares.
This outlook excludes acquisition-related intangibles amortization expense of approximately $31 million, assumes no acquisition-related or severance and restructuring expenses, and no significant change in our debt instruments or the macro economic outlook. Due to the inherent difficulty of forecasting some of these types of expenses, which impact net earnings, diluted earnings per share and selling and administrative expenses, the Company is unable to reasonably estimate the impact of such expenses, if any, to net earnings, diluted earnings per share and selling and administrative expenses. Accordingly, the Company is unable to provide a reconciliation of GAAP to non-GAAP diluted earnings per share for the full year 2022 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 first quarter 2022 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 earnings from operations, Adjusted net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, (iii) amortization of intangible assets, and (iv) the tax effects of each of these items, as applicable. Adjusted net earnings and Adjusted diluted earnings per share for the three months ended March 31, 2021 also exclude amortization of debt discount and issuance costs associated with the issuance of the Company’s convertible senior notes due 2025. Effective January 1, 2022, the Company adopted ASU 2020-06 and no longer records amortization of debt discount associated with the convertible senior notes. 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 diluted earnings per share also includes the impact of the benefit from the note hedge where the Company’s average stock price for the first quarter of 2022 was in excess of $68.32, which is the initial conversion price of the convertible senior notes. Adjusted EBITDA includes (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization of property and equipment, (iv) amortization of intangibles, (v) non-cash stock based compensation, (vi) severance and restructuring expenses and (vii) certain executive recruitment and hiring related expenses. Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, and (iii) the tax effects of each of these items, as applicable. Adjusted ROIC for the three months ended March 31, 2021 also excludes (i) certain acquisition and integration related expenses, (ii) impairment of construction in progress, (iii) loss on sale of property, (iv) litigation settlement proceeds, and (v) 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.
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
FINANCIAL SUMMARY TABLE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended March 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | change | ||||||||||||
| Insight Enterprises, Inc. | ||||||||||||||
| Net sales: | ||||||||||||||
| Products | $ | 2,310,287 | $ | 1,893,020 | 22% | |||||||||
| Services | $ | 340,563 | $ | 300,048 | 14% | |||||||||
| Total net sales | $ | 2,650,850 | $ | 2,193,068 | 21% | |||||||||
| Gross profit | $ | 378,861 | $ | 331,474 | 14% | |||||||||
| Gross margin | 14.3% | 15.1% | (80 bps) | |||||||||||
| Selling and administrative expenses | $ | 297,640 | $ | 271,190 | 10% | |||||||||
| Severance and restructuring expenses | $ | 1,372 | $ | (6,740) | > 100% | |||||||||
| Earnings from operations | $ | 79,849 | $ | 67,024 | 19% | |||||||||
| Net earnings | $ | 56,631 | $ | 43,168 | 31% | |||||||||
| Diluted earnings per share | $ | 1.53 | $ | 1.18 | 30% | |||||||||
| North America | ||||||||||||||
| Net sales: | ||||||||||||||
| Products | $ | 1,792,866 | $ | 1,418,227 | 26% | |||||||||
| Services | $ | 271,639 | $ | 236,554 | 15% | |||||||||
| Total net sales | $ | 2,064,505 | $ | 1,654,781 | 25% | |||||||||
| Gross profit | $ | 300,084 | $ | 253,489 | 18% | |||||||||
| Gross margin | 14.5% | 15.3% | (80 bps) | |||||||||||
| Selling and administrative expenses | $ | 235,220 | $ | 206,806 | 14% | |||||||||
| Severance and restructuring expenses | $ | 304 | $ | (7,238) | > 100% | |||||||||
| Earnings from operations | $ | 64,560 | $ | 53,921 | 20% | |||||||||
| Sales Mix | ** | |||||||||||||
| Hardware | 70 | % | 67 | % | 31% | |||||||||
| Software | 17 | % | 19 | % | 11% | |||||||||
| Services | 13 | % | 14 | % | 15% | |||||||||
| 100 | % | 100 | % | 25% | ||||||||||
| EMEA | ||||||||||||||
| Net sales: | ||||||||||||||
| Products | $ | 483,025 | $ | 430,394 | 12% | |||||||||
| Services | $ | 48,408 | $ | 48,442 | — | |||||||||
| Total net sales | $ | 531,433 | $ | 478,836 | 11% | |||||||||
| Gross profit | $ | 64,770 | $ | 66,035 | (2%) | |||||||||
| Gross margin | 12.2% | 13.8% | (160 bps) | |||||||||||
| Selling and administrative expenses | $ | 52,326 | $ | 55,447 | (6%) | |||||||||
| Severance and restructuring expenses | $ | 1,068 | $ | 498 | > 100% | |||||||||
| Earnings from operations | $ | 11,376 | $ | 10,090 | 13% | |||||||||
| Sales Mix | ** | |||||||||||||
| Hardware | 40 | % | 41 | % | 7% | |||||||||
| Software | 51 | % | 49 | % | 16% | |||||||||
| Services | 9 | % | 10 | % | — | |||||||||
| 100 | % | 100 | % | 11% | - MORE - | |||||||||
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
FINANCIAL SUMMARY TABLE (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | change | ||||||
| APAC | ||||||||
| Net sales: | ||||||||
| Products | $ | 34,396 | $ | 44,399 | (23)% | |||
| Services | $ | 20,516 | $ | 15,052 | 36% | |||
| Total net sales | $ | 54,912 | $ | 59,451 | (8)% | |||
| Gross profit | $ | 14,007 | $ | 11,950 | 17% | |||
| Gross margin | 25.5% | 20.1% | 540 bps | |||||
| Selling and administrative expenses | $ | 10,094 | $ | 8,937 | 13% | |||
| Severance and restructuring expenses | $ | — | $ | — | — | |||
| Earnings from operations | $ | 3,913 | $ | 3,013 | 30% | |||
| Sales Mix | ** | |||||||
| Hardware | 21 | % | 16 | % | 22% | |||
| Software | 42 | % | 59 | % | (35)% | |||
| Services | 37 | % | 25 | % | 36% | |||
| 100 | % | 100 | % | (8)% |
** 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.
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
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 the Company’s future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on the Company, the Company’s future financial performance and results of operations, including net sales growth, Adjusted diluted earnings per share, Adjusted selling and administrative expenses, the Company’s anticipated effective tax rate, capital expenditures, expected average share count, the Company’s expectations that note holders will not convert the Company’s convertible senior notes in the near term, the Company’s expectations regarding cash flow, the Company’s expectations regarding current supply constraints pipeline, and shipment of backlog, future trends in the IT market, the Company’s business strategy and strategic initiatives 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 the Company’s filings with the Securities and Exchange Commission (the “SEC”), including in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021:
•actions of the Company’s competitors, including manufacturers and publishers of products the Company sells;
•the Company’s reliance on its 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;
•the Company’s ability to keep pace with rapidly evolving technological advances and the evolving competitive marketplace;
•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;
•general economic conditions, economic uncertainties and changes in geopolitical conditions;
•changes in the IT industry and/or rapid changes in technology;
•supply constraints for hardware, including devices;
•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 risks associated with the Company’s international operations;
•natural disasters or other adverse occurrences;
•disruptions in the Company’s IT systems and voice and data networks;
•cyberattacks or breaches of data privacy and security regulations;
•intellectual property infringement claims and challenges to the Company’s registered trademarks and trade names;
•legal proceedings, client audits and failure to comply with laws and regulations;
•failure to comply with the terms and conditions of the Company’s commercial and public sector contracts;
•exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;
•the Company’s potential to draw down a substantial amount of indebtedness;
•the conditional conversion feature of the Company’s convertible senior notes, which has been triggered, may adversely affect the Company’s financial condition and operating results;
•the Company is subject to counterparty risk with respect to certain hedge and warrant transactions entered into in connection with the issuance of the convertible senior notes;
•risks associated with the discontinuation of LIBOR as a benchmark rate;
•increased debt and interest expense and decreased availability of funds under the Company’s financing facilities;
•possible significant fluctuations in the Company’s future operating results as well as seasonality and variability in client demands;
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
•the Company’s dependence on certain key personnel and the Company’s ability to attract, train and retain skilled teammates;
•risks associated with the integration and operation of acquired businesses, including the achievement of expected synergies and benefits; and
•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.
Additionally, there may be other risks that are otherwise described from time to time in the reports that the Company files with the SEC. Any forward-looking statements in this release, the related conference call, webcast and presentation 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.
| CONTACT: | GLYNIS BRYAN | ||||||
|---|---|---|---|---|---|---|---|
| CHIEF FINANCIAL OFFICER | |||||||
| TEL. 480.333.3390 | |||||||
| EMAIL glynis.bryan@insight.com | - MORE - | ||||||
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended<br>March 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||||
| Net sales: | ||||||||||
| Products | $ | 2,310,287 | $ | 1,893,020 | ||||||
| Services | 340,563 | 300,048 | ||||||||
| Total net sales | 2,650,850 | 2,193,068 | ||||||||
| Costs of goods sold: | ||||||||||
| Products | 2,107,209 | 1,721,258 | ||||||||
| Services | 164,780 | 140,336 | ||||||||
| Total costs of goods sold | 2,271,989 | 1,861,594 | ||||||||
| Gross profit | 378,861 | 331,474 | ||||||||
| Operating expenses: | ||||||||||
| Selling and administrative expenses | 297,640 | 271,190 | ||||||||
| Severance and restructuring expenses, net | 1,372 | (6,740) | ||||||||
| Earnings from operations | 79,849 | 67,024 | ||||||||
| Non-operating (income) expense: | ||||||||||
| Interest expense, net | 8,068 | 9,969 | ||||||||
| Other (income) expense, net | (2,843) | 388 | ||||||||
| Earnings before income taxes | 74,624 | 56,667 | ||||||||
| Income tax expense | 17,993 | 13,499 | ||||||||
| Net earnings | $ | 56,631 | $ | 43,168 | ||||||
| Net earnings per share: | ||||||||||
| Basic | $ | 1.62 | $ | 1.23 | ||||||
| Diluted | $ | 1.53 | $ | 1.18 | ||||||
| Shares used in per share calculations: | ||||||||||
| Basic | 34,974 | 35,199 | ||||||||
| Diluted | 36,981 | 36,699 | - MORE - | |||||||
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| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In THOUSANDS)
(UNAUDITED)
| March 31, 2022 | December 31, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 114,758 | $ | 103,840 | ||||||
| Accounts receivable, net | 3,025,699 | 2,936,732 | ||||||||
| Inventories | 383,401 | 328,101 | ||||||||
| Other current assets | 244,383 | 199,638 | ||||||||
| Total current assets | $ | 3,768,241 | $ | 3,568,311 | ||||||
| Property and equipment, net | 189,722 | 176,263 | ||||||||
| Goodwill | 429,215 | 428,346 | ||||||||
| Intangible assets, net | 207,116 | 214,788 | ||||||||
| Other assets | 255,494 | 301,372 | ||||||||
| $ | 4,849,788 | $ | 4,689,080 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable – trade | $ | 1,623,651 | $ | 1,779,854 | ||||||
| Accounts payable – inventory financing facilities | 318,433 | 311,878 | ||||||||
| Accrued expenses and other current liabilities | 390,703 | 423,489 | ||||||||
| Current portion of long-term debt | 344,903 | 36 | ||||||||
| Total current liabilities | 2,677,690 | 2,515,257 | ||||||||
| Long-term debt | 373,018 | 361,570 | ||||||||
| Deferred income taxes | 36,631 | 47,073 | ||||||||
| Other liabilities | 223,258 | 255,953 | ||||||||
| 3,310,597 | 3,179,853 | |||||||||
| Stockholders’ equity: | ||||||||||
| Preferred stock | — | — | ||||||||
| Common stock | 351 | 349 | ||||||||
| Additional paid-in capital | 321,959 | 368,282 | ||||||||
| Retained earnings | 1,242,110 | 1,167,690 | ||||||||
| Accumulated other comprehensive loss – foreign currency translation adjustments | (25,229) | (27,094) | ||||||||
| Total stockholders’ equity | 1,539,191 | 1,509,227 | ||||||||
| $ | 4,849,788 | $ | 4,689,080 | - MORE - | ||||||
| --- | --- | --- | --- | --- | ||||||
| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
| Three Months Ended<br>March 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net earnings | $ | 56,631 | $ | 43,168 | ||||||
| Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: | ||||||||||
| Depreciation and amortization | 13,314 | 14,222 | ||||||||
| Provision for losses on accounts receivable | 1,031 | 2,178 | ||||||||
| Non-cash stock-based compensation | 5,007 | 4,716 | ||||||||
| Deferred income taxes | (1,715) | 643 | ||||||||
| Amortization of debt discount and issuance costs | 1,623 | 4,172 | ||||||||
| Other adjustments | (106) | (7,617) | ||||||||
| Changes in assets and liabilities: | ||||||||||
| (Increase) decrease in accounts receivable | (103,326) | 93,485 | ||||||||
| Increase in inventories | (57,876) | (67,946) | ||||||||
| Decrease in other assets | 4,111 | 16,759 | ||||||||
| Decrease in accounts payable | (137,144) | (25,315) | ||||||||
| Decrease in accrued expenses and other liabilities | (65,789) | (35,759) | ||||||||
| Net cash (used in) provided by operating activities | (284,239) | 42,706 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Proceeds from sale of assets | — | 27,211 | ||||||||
| Purchases of property and equipment | (25,745) | (7,847) | ||||||||
| Net cash (used in) provided by investing activities | (25,745) | 19,364 | ||||||||
| Cash flows from financing activities: | ||||||||||
| Borrowings on ABL revolving credit facility | 1,151,440 | 897,848 | ||||||||
| Repayments on ABL revolving credit facility | (831,440) | (921,848) | ||||||||
| Net borrowings (repayments) under inventory financing facilities | 6,692 | (17,782) | ||||||||
| Other payments | (6,738) | (7,485) | ||||||||
| Net cash provided by (used in) financing activities | 319,954 | (49,267) | ||||||||
| Foreign currency exchange effect on cash, cash equivalents and restricted cash balances | 969 | (2,445) | ||||||||
| Increase in cash, cash equivalents and restricted cash | 10,939 | 10,358 | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 105,977 | 130,582 | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 116,916 | $ | 140,940 | - MORE - | |||||
| --- | --- | --- | --- | --- | ||||||
| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
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>March 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||||||
| Adjusted Consolidated Earnings from Operations: | ||||||||||||
| GAAP consolidated EFO | $ | 79,849 | $ | 67,024 | ||||||||
| Amortization of intangible assets | 7,925 | 8,041 | ||||||||||
| Other | 1,783 | (6,740) | ||||||||||
| Adjusted non-GAAP consolidated EFO | $ | 89,557 | $ | 68,325 | ||||||||
| GAAP EFO as a percentage of net sales | 3.0% | 3.1% | ||||||||||
| Adjusted non-GAAP EFO as a percentage of net sales | 3.4% | 3.1% | ||||||||||
| Adjusted Consolidated Net Earnings: | ||||||||||||
| GAAP consolidated net earnings | $ | 56,631 | $ | 43,168 | ||||||||
| Amortization of intangible assets | 7,925 | 8,041 | ||||||||||
| Amortization of debt discount and issuance costs | — | 2,983 | ||||||||||
| Other | 1,783 | (6,740) | ||||||||||
| Income taxes on non-GAAP adjustments | (2,400) | (919) | ||||||||||
| Adjusted non-GAAP consolidated net earnings | $ | 63,939 | $ | 46,533 | ||||||||
| Adjusted Diluted Earnings Per Share: | ||||||||||||
| GAAP diluted EPS | $ | 1.53 | $ | 1.18 | ||||||||
| Amortization of intangible assets | 0.21 | 0.22 | ||||||||||
| Amortization of debt discount and issuance costs | — | 0.08 | ||||||||||
| Other | 0.05 | (0.18) | ||||||||||
| Income taxes on non-GAAP adjustments | (0.06) | (0.03) | ||||||||||
| Impact of benefit from note hedge | 0.08 | 0.03 | ||||||||||
| Adjusted non-GAAP diluted EPS | $ | 1.81 | $ | 1.30 | ||||||||
| Shares used in diluted EPS calculation | 36,981 | 36,699 | ||||||||||
| Impact of benefit from note hedge | (1,677) | (1,039) | ||||||||||
| Shares used in Adjusted non-GAAP diluted EPS calculation | 35,304 | 35,660 | ||||||||||
| Adjusted North America Earnings from Operations: | ||||||||||||
| GAAP EFO from North America segment | $ | 64,560 | $ | 53,921 | ||||||||
| Amortization of intangible assets | 7,348 | 7,417 | ||||||||||
| Other | 715 | (7,238) | ||||||||||
| Adjusted non-GAAP EFO from North America segment | $ | 72,623 | $ | 54,100 | ||||||||
| GAAP EFO as a percentage of net sales | 3.1 | % | 3.3 | % | ||||||||
| Adjusted non-GAAP EFO as a percentage of net sales | 3.5 | % | 3.3 | % | - MORE - | |||||||
| --- | --- | --- | --- | --- | ||||||||
| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
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>March 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||||||
| Adjusted EMEA Earnings from Operations: | ||||||||||||
| GAAP EFO from EMEA segment | $ | 11,376 | $ | 10,090 | ||||||||
| Amortization of intangible assets | 457 | 496 | ||||||||||
| Other | 1,068 | 498 | ||||||||||
| Adjusted non-GAAP EFO from EMEA segment | $ | 12,901 | $ | 11,084 | ||||||||
| GAAP EFO as a percentage of net sales | 2.1 | % | 2.1 | % | ||||||||
| Adjusted non-GAAP EFO as a percentage of net sales | 2.4 | % | 2.3 | % | ||||||||
| Adjusted APAC Earnings from Operations: | ||||||||||||
| GAAP EFO from APAC segment | $ | 3,913 | $ | 3,013 | ||||||||
| Amortization of intangible assets | 120 | 128 | ||||||||||
| Adjusted non-GAAP EFO from APAC segment | $ | 4,033 | $ | 3,141 | ||||||||
| GAAP EFO as a percentage of net sales | 7.1 | % | 5.1 | % | ||||||||
| Adjusted non-GAAP EFO as a percentage of net sales | 7.3 | % | 5.3 | % | ||||||||
| Adjusted EBITDA: | ||||||||||||
| GAAP consolidated net earnings | $ | 56,631 | $ | 43,168 | ||||||||
| Interest expense | 8,348 | 10,086 | ||||||||||
| Income tax expense | 17,993 | 13,499 | ||||||||||
| Depreciation and amortization of property and equipment | 5,389 | 6,181 | ||||||||||
| Amortization of intangible assets | 7,925 | 8,041 | ||||||||||
| Non-cash stock-based compensation | 5,007 | 4,716 | ||||||||||
| Other | 1,783 | (6,740) | ||||||||||
| Adjusted non-GAAP EBITDA | $ | 103,076 | $ | 78,951 | ||||||||
| GAAP consolidated net earnings as a percentage of net sales | 2.1% | 2.0% | ||||||||||
| Adjusted non-GAAP EBITDA as a percentage of net sales | 3.9% | 3.6% | - MORE - | |||||||||
| --- | --- | --- | --- | --- | ||||||||
| Insight Enterprises, Inc. | 2701 E. Insight Way | Chandler, Arizona 85286 | 800.467.4448 | FAX 480.760.8958 |
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Twelve Months Ended<br><br>March 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Adjusted return on invested capital: | ||||||
| GAAP consolidated EFO | $ | 344,886 | $ | 285,736 | ||
| Other | 6,889 | 2,928 | ||||
| Adjusted non-GAAP consolidated EFO* | 351,775 | 288,664 | ||||
| Income tax expense** | 91,462 | 75,053 | ||||
| Adjusted non-GAAP consolidated EFO, net of tax | $ | 260,313 | $ | 213,611 | ||
| Average stockholders’ equity*** | $ | 1,456,467 | $ | 1,269,282 | ||
| Average debt*** | 501,639 | 468,330 | ||||
| Average cash*** | (114,503) | (111,766) | ||||
| Invested Capital | $ | 1,843,603 | $ | 1,625,846 | ||
| Adjusted non-GAAP ROIC (from GAAP consolidated EFO) **** | 13.84 | % | 13.01 | % | ||
| Adjusted non-GAAP ROIC (from non-GAAP consolidated EFO) ***** | 14.12 | % | 13.14 | % |
*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%.
*** Average of previous five quarters.
**** Computed as GAAP consolidated EFO, net of tax of $89,670 and $74,291 for the twelve months ended March 31, 2022 and 2021, respectively, divided by invested capital.
***** Computed as Adjusted non-GAAP consolidated EFO, net of tax, divided by invested capital.
q12022-earningspresentat
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 1 Insight Enterprises, Inc. First Quarter 2022 Earnings Conference Call and Webcast Exhibit 99.2
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 2 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 (“COVID-19”), our future responses to and the impact of COVID-19 on our Company, our expectations about future financial results, our expectations regarding current supply constraints, our expectations regarding backlog shipments, 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 forward-looking statements and 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. 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. • 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.
3Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. Agenda Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2021 Insight Direct USA, Inc. All Rights Reserved. • Disclosures • CEO Commentary ◦ Areas of Expertise ◦ Solutions at Work • CFO Commentary ◦ First Quarter 2022 Financial Highlights ◦ Cashflow and Debt Covenants ◦ 2022 Outlook • Closing Comments
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 4 Well Positioned to Help Organizations
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 5 Retailer Improves Security with Improved Cloud Ops & Modern IT • Streamline and secure back- end operations • Modernize global e-commerce experience • Modern Infrastructure • Cybersecurity • Consulting and Security Services • Strategy Long-standing fashion retailer operating in over 30 countries • Client passed 44 controls for regulatory compliance • Tripled identity secure score (Azure metric) • Improved overall efficiency and user experience • Insight continues to help with ongoing global digital transformation Client Client Objectives Outcomes Solution and Services
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 6 Travel Leader Meets Market Challenges with Managed Services Travel leader with over 18,000 teammates and operations spanning 150 countries • Fluctuating customer demands introduced need for flexibility and scalability • 250TB of data under Managed Services • ~12 servers migrated to NetApp Keystone and Pure as-a-Service • Reduced support costs • Improved efficiency and security • Modern Infrastructure • Professional Services • Managed Services Client Client Objectives Outcomes Solution and Services
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 7Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. CFO Commentary • First Quarter 2022 Financial Highlights • Cashflow and Debt Covenants • 2022 Outlook
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 8 First Quarter 2022 Highlights • Record first quarter for revenue, gross profit and adjusted diluted earnings per share • Net sales of $2.7 billion • Gross profit of $379 million • 18.1% - Cloud as a percent of total gross profit compared to 17.9% prior year* • Gross margin 14.3% • SG&A up 10% in US dollars, up 11% year over year in constant currency** • 11.2% - GAAP SG&A as a percent of net sales, down -110 bps YoY • 10.9% - Adjusted SG&A as a percent of net sales***, down -110 bps YoY • GAAP EFO of $80 million • Adjusted EFO*** of $90 million • GAAP Diluted Earnings Per Share $1.53 • Adjusted Diluted Earnings Per Share*** $1.81 * For the twelve months ended March 31, 2022 and March 31, 2021 ** Reference “Constant currency” section on slide 2 of this presentation *** See Appendix for reconciliation of non-GAAP measures
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 9 Q1 2022 Year over Year Results * See Appendix for reconciliation of non-GAAP measures ** Reference “Constant currency” section on slide 2 of this presentation 21% YoY 22% YoY (in constant $**) 14% YoY -80 bps YoY 31% YoY GAAP Earnings from operations $80M GAAP Diluted EPS $1.53 -110 bps YoY -110 bps YoY 39% YoY
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 10 * See Appendix for reconciliation of non-GAAP measures Q1 2022 North America | Financial Results 25% YoY 18% YoY -80 bps YoY 34% YoY GAAP Earnings from operations $65M -110 bps YoY -100 bps YoY
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 11 Q1 2022 EMEA | Financial Results 17% YoY (in constant $**) 3% YoY (in constant $**) -160 bps YoY 21% YoY (in constant $**) GAAP Earnings from operations $11M -170 bps YoY -170 bps YoY * See Appendix for reconciliation of non-GAAP measures ** Reference “Constant currency” section on slide 2 of this presentation
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 12 Q1 2022 APAC | Financial Results -3% YoY (in constant $**) 23% YoY (in constant $**) 540 bps YoY 33% YoY (in constant $**) GAAP Earnings from operations $4M 330 bps YoY 330 bps YoY * See Appendix for reconciliation of non-GAAP measures ** Reference “Constant currency” section on slide 2 of this presentation
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 13 Q1 2022 | Cash Flows and Cash Cycle 8 days YoY -3 days YoY 2 days YoY -9 days YoY
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 14 Liquidity and Debt Covenants ** Tax Expense plus Interest Expense less non-cash imputed interest under the Company’s inventory financing facilities and the Company’s convertible notes. * “Other” includes (i) severance and restructuring expenses, net, (ii) acquisition and integration related expenses, and (iii) impairment of property and equipment, as applicable. Twelve Months Ended March 31, US Dollar in $000s 2022 2021 Adjusted Consolidated EBITDA Net income $ 232,808 $ 181,847 Interest expense 39,460 40,081 Taxes 77,706 60,672 Depreciation and amortization of property and equipment 22,584 26,917 Amortization of intangible assets 31,929 35,468 Non-cash stock-based compensation 18,492 18,034 Other 6,889 2,928 Adjusted consolidated EBITDA $ 429,868 $ 365,947 Less: Capital expenditures (69,977) (24,649) Adjusted consolidated EBITDA for FCCR Ratio $ 359,891 $ 341,298 Taxes and interest** $ 91,593 $ 75,054 Fixed Charge Coverage Ratio 3.9 4.5 3.93x 1.67x
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 15 Full Year 2022 Outlook Other Assumptions and Exclusions: • No significant change in our debt instruments or the macro economic outlook • Excludes acquisition related intangibles amortization expense of approximately $31 million (posted on website) • Excludes acquisition-related or severance and restructuring expenses • Adjusted diluted earnings per share excludes severance and restructuring expense and other unique items as well as amortization expense related to acquired intangibles. Due to the inherent difficulty of forecasting some 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 2022 forecast. Assumptions: As of May 5, 2022 As of February 10, 2022 Full year net sales growth % over prior year Low double digit Mid-single digit Interest expense $30 - $35 million $30 - $35 million Effective tax rate 24% - 25% 25% - 26% Adjusted diluted EPS $7.95 - $8.15 $7.65 - $7.85 Average share count 35.6 million 35.6 million Capital expenditures $65 - $70 million $75 - $80 million
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 16 Appendix
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 17 Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures* Three Months Ended March 31, US Dollars in $000s, except per share data 2022 2021 Adjusted Consolidated Earnings from Operations: GAAP consolidated EFO $ 79,849 $ 67,024 Amortization of intangible assets 7,925 8,041 Other 1,783 (6,740) Adjusted non-GAAP consolidated EFO $ 89,557 $ 68,325 GAAP EFO as a percentage of net sales 3.0 % 3.1 % Adjusted non-GAAP EFO as a percentage of net sales 3.4 % 3.1 % Adjusted Consolidated Net Earnings: GAAP consolidated net earnings $ 56,631 $ 43,168 Amortization of intangible assets 7,925 8,041 Amortization of debt discount and issuance costs — 2,983 Other 1,783 (6,740) Income taxes on non-GAAP adjustments (2,400) (919) Adjusted non-GAAP consolidated net earnings $ 63,939 $ 46,533 Adjusted Diluted Earnings Per Share: GAAP diluted EPS $ 1.53 $ 1.18 Amortization of intangible assets 0.21 0.22 Amortization of debt discount and issuance costs — 0.08 Other 0.05 (0.18) Income taxes on non-GAAP adjustments (0.06) (0.03) Impact of benefit from note hedge 0.08 0.03 Adjusted non-GAAP diluted EPS $ 1.81 $ 1.30 Shares used in diluted EPS calculation 36,981 36,699 Impact of benefit from note hedge (1,677) (1,039) Shares used in Adjusted non-GAAP diluted EPS calculation 35,304 35,660 * Adjusted consolidated earnings from operations, Adjusted consolidated net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, (iii) certain acquisition and integration related expenses, (iv) amortization of intangible assets, (v) amortization of debt discount and issuance costs, and (vi) the tax effects of each of these items, as applicable.
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 18 Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures* (continued) Three Months Ended March 31, US Dollar in $000s 2022 2021 Adjusted North America Earnings from Operations: GAAP EFO from North America segment $ 64,560 $ 53,921 Amortization of intangible assets 7,348 7,417 Other 715 (7,238) Adjusted non-GAAP EFO from North America segment $ 72,623 $ 54,100 Adjusted EMEA Earnings from Operations: GAAP EFO from EMEA segment $ 11,376 $ 10,090 Amortization of intangible assets 457 496 Other 1,068 498 Adjusted non-GAAP EFO from EMEA segment $ 12,901 $ 11,084 Adjusted APAC Earnings from Operations: GAAP EFO from APAC segment $ 3,913 $ 3,013 Amortization of intangible assets 120 128 Other — — Adjusted non-GAAP EFO from APAC segment $ 4,033 $ 3,141 * Adjusted consolidated earnings from operations, Adjusted consolidated net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, (iii) certain acquisition and integration related expenses, (iv) amortization of intangible assets, (v) amortization of debt discount and issuance costs, and (vi) the tax effects of each of these items, as applicable.
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 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%. *** Average of previous five quarters. **** Computed as GAAP consolidated EFO, net of tax of $89,670 and $74,291 for the twelve months ended March 31, 2022, and 2021, respectively, divided by invested capital. ***** Computed as Adjusted non-GAAP consolidated EFO, net of tax, divided by invested capital. Twelve Months Ended March 31, US Dollar in $000s 2022 2021 Return on invested capital: GAAP consolidated EFO $ 344,886 $ 285,736 Other 6,889 2,928 Adjusted non-GAAP consolidated EFO * 351,775 288,664 Income tax expense** 91,462 75,053 Adjusted non-GAAP consolidated EFO, net of tax $ 260,313 $ 213,611 Average stockholders’ equity*** $ 1,456,467 $ 1,269,282 Average debt*** 501,639 468,330 Average cash*** (114,503) (111,766) Invested Capital 1,843,603 1,625,846 Adjusted non-GAAP ROIC (from GAAP consolidated EFO) **** 13.84 % 13.01 % Adjusted non-GAAP ROIC (from non-GAAP consolidated EFO) ***** 14.12 % 13.14 % * Adjusted consolidated earnings from operations, Adjusted consolidated net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, (iii) certain acquisition and integration related expenses, (iv) amortization of intangible assets, (v) amortization of debt discount and issuance costs, and (vi) the tax effects of each of these items, as applicable.
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 20 Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures (continued) Three Months Ended March 31, US Dollar in $000s 2022 2021 Adjusted Consolidated Selling and Administrative Expenses: GAAP selling and administrative expenses $ 297,640 $ 271,190 Less: Other* 8,336 8,041 Adjusted non-GAAP selling and administrative expenses $ 289,304 $ 263,149 GAAP selling and adminstrative expenses 11.2 % 12.4 % Adjusted non-GAAP selling and administrative expenses 10.9 % 12.0 % Adjusted North America Selling and Administrative Expenses: GAAP selling and administrative expenses $ 235,220 $ 206,806 Less: Other* 7,759 7,417 Adjusted non-GAAP selling and administrative expenses 227,461 199,389 GAAP selling and adminstrative expenses 11.4 % 12.5 % Adjusted non-GAAP selling and administrative expenses 11.0 % 12.0 % * “Other” includes amortization of intangible assets and certain executive recruitment and hiring related expenses.
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 21 Appendix – Reconciliation of GAAP to Non-GAAP Financial Measures (continued) Three Months Ended March 31, US Dollar in $000s 2022 2021 Adjusted EMEA Selling and Administrative Expenses: GAAP selling and administrative expenses $ 52,326 $ 55,447 Less: Other* 457 496 Adjusted non-GAAP selling and administrative expenses $ 51,869 $ 54,951 GAAP selling and adminstrative expenses 9.8 % 11.6 % Adjusted non-GAAP selling and administrative expenses 9.8 % 11.5 % Adjusted APAC Selling and Administrative Expenses: GAAP selling and administrative expenses $ 10,094 $ 8,937 Less: Other* 120 128 Adjusted non-GAAP selling and administrative expenses 9,974 8,809 GAAP selling and adminstrative expenses 18.4 % 15.0 % Adjusted non-GAAP selling and administrative expenses 18.2 % 14.8 % * “Other” includes amortization of intangible assets.
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 22 Appendix - Convertible Senior Notes Insight is required to settle the convertible notes principal/par value in cash with the excess being settled in shares resulting in dilution in GAAP reported Diluted Earnings Per Share (“DEPS”). The DEPS incremental shares for GAAP reporting purposes are not issued at the time of reporting and are a non-GAAP exclusion for the Company (up to the strike price of the warrants of $103.12). The bond hedge effectively raises the potential dilution point of the convertible notes and call spread from $68.32 up to $103.12, as illustrated below: Diluted Earnings Per Share (DEPS) incremental number of shares for various NSIT stock price examples:
Insight Proprietary & Confidential. Do Not Copy or Distribute. © 2022 Insight Direct USA, Inc. All Rights Reserved. 23 Appendix - Convertible Senior Notes * No automatic redemption trigger, expect convertible notes will remain outstanding for foreseeable future. GAAP diluted earnings per share (DEPS) are for reporting purposes only, no incremental shares were actually issued. ** Principal amount would be settled in cash and only premium above $103.12 would result in actual shares being issued. Insight Convertible Senior Notes - $350 Million Relevant NSIT stock prices: • Price at issuance - $51.56 • Conversion ratio price equivalent - $68.32 • Sales price conversion trigger - $88.82 • Bond hedge strike price - $68.32 • Warrants strike price - $103.12 Potential dilution to existing shareholders** Triggered potential additional shares in GAAP DEPS*