UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
INSIGHT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant's telephone number, including area code:
(
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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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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 |
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Trading Symbol |
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Name of each exchange on which registered |
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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 6, 2019, Insight Enterprises, Inc. announced by press release its results of operations for the third quarter ended September 30, 2019. 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 Number |
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Description |
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99.1 |
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99.2 |
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Investor presentation of Insight Enterprises, Inc. dated November 6, 2019. |
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104 |
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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.
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Insight Enterprises, Inc. |
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Date: November 6, 2019 |
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By: |
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/s/ Glynis A. Bryan |
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Glynis A. Bryan |
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Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE |
Nasdaq: NSIT |
Insight Enterprises, Inc. Reports thirD QUARTER 2019 Results
TEMPE, AZ – November 6, 2019 – Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported financial results for the quarter ended September 30, 2019 and compared the results to the quarter ended September 30, 2018:
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Net sales increased 9% to $1.91 billion |
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Gross profit increased 18% to $276.2 million |
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Gross margin increased 100 basis points to 14.4% |
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Earnings from operations decreased 11% to $44.4 million |
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Adjusted earnings from operations increased 7% to $58.9 million |
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Diluted earnings per share of $0.76 decreased 15% year to year |
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Adjusted diluted earnings per share of $1.10 increased 10% year over year |
In the third quarter of 2019, net sales increased 9%, gross profit increased 18% and gross margin increased 100 basis points compared to the third quarter of 2018. The increase in net sales is primarily the result of our acquisition of PCM, Inc. (“PCM”) on August 30, 2019. The increase in gross profit and gross margin primarily reflects an increase in higher margin services net sales, including cloud solutions, reported in the Company’s legacy business and higher margins from PCM net sales. Earnings from operations decreased 11% and diluted earnings per share decreased 15%, year to year, as a result of acquisition-related and restructuring expenses incurred in the quarter compared to the same period in the prior year.
“Our third quarter results reflect our strategy to leverage our four solution areas to optimize our business mix in higher margin categories, including cloud solutions and services, which led to a 100 basis point improvement in gross margin in the quarter. We also closed the PCM acquisition on August 30th which expands our reach into higher margin end markets which we expect will provide opportunity to scale our business and drive additional margin improvement in the future,” stated Ken Lamneck, President and Chief Executive Officer. “Our differentiated solutions and disciplined operating model combined with PCM’s reach into the middle market will position us well to drive growth and deliver on our financial commitments as we head into 2020,” stated Lamneck.
KEY HIGHLIGHTS
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Consolidated net sales for the third quarter of 2019 of $1.91 billion increased 9% year over year compared to the third quarter of 2018, primarily as a result of our acquisition of PCM. |
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Net sales in North America increased 10% year over year to $1.52 billion; |
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Net sales in EMEA increased 3% year over year to $355.7 million; and |
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Net sales in APAC increased 34% year over year to $41.7 million. |
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Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 11% year over year, with an increase in net sales in North America, EMEA and APAC of 11%, 9% and 40%, respectively, year over year. |
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Consolidated gross profit increased 18% to $276.2 million compared to the third quarter of 2018, with consolidated gross margin expanding 100 basis points to 14.4% of net sales. |
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Gross profit in North America increased 22% year over year to $218.6 million (14.4% gross margin); |
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Gross profit in EMEA increased 1% year over year to $47.9 million (13.5% gross margin); and |
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Gross profit in APAC increased 16% year over year to $9.7 million (23.2% gross margin). |
- MORE -
Insight Enterprises, Inc. |
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6820 South Harl Avenue |
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Tempe, Arizona 85283 |
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800.467.4448 |
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FAX 480.760.8958 |
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Consolidated earnings from operations decreased 11% compared to the third quarter of 2018 to $44.4 million, or 2.3% of net sales. |
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Earnings from operations in North America decreased 11% year to year to $39.3 million, or 2.6% of net sales, primarily as a result of acquisition-related and restructuring expenses incurred in the quarter; |
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Earnings from operations in EMEA decreased 32% year to year to $3.1 million, or 0.9% of net sales; and |
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Earnings from operations in APAC increased 60% year over year to $2.0 million, or 4.8% of net sales. |
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Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations decreased 10% year to year, with a decline in earnings from operations in North America and EMEA of 11% and 28%, respectively, year to year, partially offset by earnings from operations growth in APAC of 64% year over year. |
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Consolidated net earnings and diluted earnings per share for the third quarter of 2019 were $27.1 million and $0.76, respectively, at an effective tax rate of 27.2%. |
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Adjusted consolidated net earnings and Adjusted diluted earnings per share for the third quarter of 2019 were $39.6 million and $1.10, respectively. |
In discussing financial results for the three months ended September 30, 2019 and 2018 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 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
For the full year 2019, the Company expects to deliver net sales growth between 9% and 11% compared to 2018, reflecting the acquisition of PCM for the last four months of the year. The Company’s Adjusted diluted earnings per share outlook for the full year of 2019 is between $5.45 and $5.50.
This outlook assumes:
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an effective tax rate of 25% to 26% for Q4 2019; |
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capital expenditures of $70 to $75 million for the full year, including the planned purchase of real estate in the fourth quarter of approximately $48 million; and |
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an average share count for the full year of approximately 36.0 million shares. |
This outlook does not reflect the repurchase of any further shares of the Company’s common stock, 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 2019 and those that may be incurred during the balance of 2019. 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 2019 forecast.
- MORE -
Insight Enterprises, Inc. |
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6820 South Harl Avenue |
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Tempe, Arizona 85283 |
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800.467.4448 |
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FAX 480.760.8958 |
The Company will host a conference call and live web cast today at 9:00 a.m. ET to discuss third quarter 2019 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 listen to the live web cast by telephone, call 1-877-524-8416 if located in the U.S., 412-902-1028 for international callers, and enter the access code 13695651.
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-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 or used 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-related expenses, and (iii) the tax effects of each of these items, as applicable.
Insight has incurred amortization of intangible assets, included in its GAAP financial statements, related to various acquisitions Insight has made. The amount of an acquisition’s purchase price allocated to intangible assets and term of its related amortization can vary significantly and are unique to each acquisition; therefore Insight is excluding amortization of acquired intangible assets from its non-GAAP financial measures, as indicated above, to provide investors with a more consistent basis for comparing pre- and post-acquisition operating results.
These non-GAAP measures are used 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. |
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6820 South Harl Avenue |
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Tempe, Arizona 85283 |
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800.467.4448 |
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FAX 480.760.8958 |
(dollars in thousands, except per share data)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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change |
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2019 |
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2018 |
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change |
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Insight Enterprises, Inc. |
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Net sales: |
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Products |
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$ |
1,668,880 |
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$ |
1,548,273 |
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8% |
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$ |
4,729,887 |
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$ |
4,724,888 |
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— |
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Services |
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$ |
243,667 |
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$ |
199,453 |
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22% |
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$ |
704,147 |
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$ |
606,202 |
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16% |
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Total net sales |
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$ |
1,912,547 |
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$ |
1,747,726 |
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9% |
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$ |
5,434,034 |
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$ |
5,331,090 |
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2% |
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Gross profit |
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$ |
276,195 |
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$ |
234,914 |
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18% |
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$ |
800,116 |
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$ |
739,554 |
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8% |
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Gross margin |
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14.4 |
% |
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13.4 |
% |
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100 bps |
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14.7 |
% |
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13.9 |
% |
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80 bps |
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Selling and administrative expenses |
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$ |
223,215 |
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$ |
184,095 |
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21% |
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$ |
613,767 |
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$ |
561,739 |
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9% |
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Severance and restructuring expenses |
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$ |
2,662 |
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$ |
683 |
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> 100% |
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$ |
3,712 |
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$ |
2,709 |
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37% |
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Acquisition-related expenses |
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$ |
5,896 |
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$ |
188 |
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> 100% |
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$ |
9,059 |
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$ |
282 |
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> 100% |
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Earnings from operations |
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$ |
44,422 |
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$ |
49,948 |
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(11%) |
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$ |
173,578 |
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$ |
174,824 |
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(1%) |
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Net earnings |
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$ |
27,132 |
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$ |
32,154 |
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(16%) |
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$ |
116,457 |
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$ |
116,636 |
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— |
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Diluted earnings per share |
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$ |
0.76 |
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$ |
0.89 |
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(15%) |
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$ |
3.23 |
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$ |
3.24 |
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— |
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North America |
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Net sales: |
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Products |
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$ |
1,315,813 |
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$ |
1,213,033 |
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8% |
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$ |
3,611,895 |
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$ |
3,553,147 |
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2% |
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Services |
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$ |
199,349 |
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$ |
158,426 |
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26% |
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$ |
551,215 |
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$ |
465,458 |
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18% |
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Total net sales |
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$ |
1,515,162 |
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$ |
1,371,459 |
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10% |
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$ |
4,163,110 |
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$ |
4,018,605 |
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4% |
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Gross profit |
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$ |
218,644 |
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$ |
179,327 |
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22% |
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$ |
600,310 |
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$ |
545,215 |
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10% |
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Gross margin |
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14.4 |
% |
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13.1 |
% |
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130 bps |
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14.4 |
% |
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13.6 |
% |
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80 bps |
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Selling and administrative expenses |
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$ |
170,993 |
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$ |
134,792 |
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27% |
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$ |
452,441 |
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$ |
402,638 |
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12% |
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Severance and restructuring expenses |
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$ |
2,449 |
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$ |
253 |
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> 100% |
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$ |
3,260 |
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$ |
1,034 |
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> 100% |
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Acquisition-related expenses |
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$ |
5,896 |
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$ |
188 |
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> 100% |
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$ |
9,059 |
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$ |
282 |
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> 100% |
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Earnings from operations |
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$ |
39,306 |
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$ |
44,094 |
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(11%) |
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$ |
135,550 |
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$ |
141,261 |
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(4%) |
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Sales Mix |
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** |
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** |
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Hardware |
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67 |
% |
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69 |
% |
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7% |
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65 |
% |
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68 |
% |
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(1%) |
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Software |
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20 |
% |
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19 |
% |
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14% |
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|
22 |
% |
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|
21 |
% |
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10% |
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Services |
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13 |
% |
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|
12 |
% |
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26% |
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|
13 |
% |
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|
11 |
% |
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18% |
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||
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|
100 |
% |
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|
100 |
% |
|
10% |
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|
100 |
% |
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|
100 |
% |
|
4% |
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||
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EMEA |
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Net sales: |
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|
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Products |
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$ |
324,255 |
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|
$ |
316,100 |
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|
3% |
|
|
$ |
1,011,965 |
|
|
$ |
1,057,764 |
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|
(4%) |
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||
Services |
|
$ |
31,453 |
|
|
$ |
29,080 |
|
|
8% |
|
|
$ |
113,092 |
|
|
$ |
104,086 |
|
|
9% |
|
||
Total net sales |
|
$ |
355,708 |
|
|
$ |
345,180 |
|
|
3% |
|
|
$ |
1,125,057 |
|
|
$ |
1,161,850 |
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|
(3%) |
|
||
Gross profit |
|
$ |
47,891 |
|
|
$ |
47,234 |
|
|
1% |
|
|
$ |
169,324 |
|
|
$ |
165,248 |
|
|
2% |
|
||
Gross margin |
|
|
13.5 |
% |
|
|
13.7 |
% |
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(20 bps) |
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|
|
15.1 |
% |
|
|
14.2 |
% |
|
90 bps |
|
||
Selling and administrative expenses |
|
$ |
44,568 |
|
|
$ |
42,206 |
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|
6% |
|
|
$ |
139,365 |
|
|
$ |
137,383 |
|
|
1% |
|
||
Severance and restructuring expenses |
|
$ |
213 |
|
|
$ |
430 |
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|
(50%) |
|
|
$ |
328 |
|
|
$ |
1,545 |
|
|
(79%) |
|
||
Earnings from operations |
|
$ |
3,110 |
|
|
$ |
4,598 |
|
|
(32%) |
|
|
$ |
29,631 |
|
|
$ |
26,320 |
|
|
13% |
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||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Mix |
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
** |
|
||
Hardware |
|
|
39 |
% |
|
|
43 |
% |
|
(7%) |
|
|
|
40 |
% |
|
|
44 |
% |
|
(11%) |
|
||
Software |
|
|
52 |
% |
|
|
49 |
% |
|
11% |
|
|
|
50 |
% |
|
|
48 |
% |
|
1% |
|
||
Services |
|
|
9 |
% |
|
|
8 |
% |
|
8% |
|
|
|
10 |
% |
|
|
8 |
% |
|
9% |
|
||
|
|
|
100 |
% |
|
|
100 |
% |
|
3% |
|
|
|
100 |
% |
|
|
100 |
% |
|
(3%) |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
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 |
Financial Summary Table (continued)
(dollars in thousands, except per share data)
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
change |
|
|
2019 |
|
|
2018 |
|
|
change |
|
||||||
APAC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
28,812 |
|
|
$ |
19,140 |
|
|
51% |
|
|
$ |
106,027 |
|
|
$ |
113,977 |
|
|
(7%) |
|
||
Services |
|
$ |
12,865 |
|
|
$ |
11,947 |
|
|
8% |
|
|
$ |
39,840 |
|
|
$ |
36,658 |
|
|
9% |
|
||
Total net sales |
|
$ |
41,677 |
|
|
$ |
31,087 |
|
|
34% |
|
|
$ |
145,867 |
|
|
$ |
150,635 |
|
|
(3%) |
|
||
Gross profit |
|
$ |
9,660 |
|
|
$ |
8,353 |
|
|
16% |
|
|
$ |
30,482 |
|
|
$ |
29,091 |
|
|
5% |
|
||
Gross margin |
|
|
23.2 |
% |
|
|
26.9 |
% |
|
(370 bps) |
|
|
|
20.9 |
% |
|
|
19.3 |
% |
|
160 bps |
|
||
Selling and administrative expenses |
|
$ |
7,654 |
|
|
$ |
7,097 |
|
|
8% |
|
|
$ |
21,961 |
|
|
$ |
21,718 |
|
|
1% |
|
||
Severance and restructuring expenses |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
124 |
|
|
$ |
130 |
|
|
(5%) |
|
|
Earnings from operations |
|
$ |
2,006 |
|
|
$ |
1,256 |
|
|
60% |
|
|
$ |
8,397 |
|
|
$ |
7,243 |
|
|
16% |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Mix |
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
** |
|
||
Hardware |
|
|
22 |
% |
|
|
20 |
% |
|
53% |
|
|
|
18 |
% |
|
|
15 |
% |
|
14% |
|
||
Software |
|
|
47 |
% |
|
|
42 |
% |
|
49% |
|
|
|
55 |
% |
|
|
61 |
% |
|
(12%) |
|
||
Services |
|
|
31 |
% |
|
|
38 |
% |
|
8% |
|
|
|
27 |
% |
|
|
24 |
% |
|
9% |
|
||
|
|
|
100 |
% |
|
|
100 |
% |
|
34% |
|
|
|
100 |
% |
|
|
100 |
% |
|
(3%) |
|
** |
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 |
Certain statements in this release and the related conference call and web cast are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including the Company’s expected 2019 financial results, sales growth and Adjusted diluted earnings per share for the full year 2019, and the assumptions relating thereto, as well as the Company’s anticipated effective tax rate, capital expenditures and plans concerning repurchases of the Company’s common stock, the Company’s expectations regarding cash flow, and the Company’s expectations about future benefits relating to the PCM acquisition, 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, 2018, in “Cautionary Note Regarding Forward-looking Statements” in the Company’s Current Report on Form 8-K filed on June 24, 2019, and in the Company’s subsequent filings with the Securities and Exchange Commission:
|
• |
actions of our competitors, including manufacturers and publishers of products we sell; |
|
• |
our reliance on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and 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; |
|
• |
possible significant fluctuations in our future operating results as well as seasonality and variability of customer demands; |
|
• |
the risks associated with our international operations; |
|
• |
general economic conditions, economic uncertainties and changes in geopolitical conditions; |
|
• |
increased debt and interest expense and decreased availability of funds under our financing facilities; |
|
• |
the security of our electronic and other confidential information; |
|
• |
disruptions in our IT systems and voice and data networks; |
|
• |
failure to comply with the terms and conditions of our commercial and public sector contracts; |
|
• |
legal proceedings, including PCM related litigation, client audits and failure to comply with laws and regulations; |
|
• |
accounts receivable risks, including increased credit loss experience or extended payment terms with our clients; |
|
• |
our reliance on independent shipping companies; |
|
• |
our dependence on certain key personnel; |
|
• |
natural disasters or other adverse occurrences; |
|
• |
exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations; |
|
• |
intellectual property infringement claims and challenges to our registered trademarks and trade names; |
|
• |
unexpected costs or liabilities in connection with the acquisition of PCM; |
|
• |
the Company’s inability to achieve expected synergies and operating efficiencies as a result of the acquisition of PCM, whether within the expected time frames, without undue difficulty, cost or expense, or at all; |
|
• |
the Company’s ability to successfully integrate PCM’s operations into its own, whether within expected time frames, without undue difficulty, cost or expense, or at all; |
|
• |
the level of revenues following the acquisition of PCM, which may be lower than expected; |
|
• |
operating costs, customer loss and business disruptions arising from the acquisition of PCM (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers), which may be greater than expected; |
|
• |
cyber attacks or breaches of data privacy and security regulations; |
|
• |
uncertainties surrounding the acquisition of PCM; |
|
• |
the outcome of any legal proceedings related to the acquisition of PCM; |
|
• |
other adverse economic, business, and/or competitive factors; |
|
• |
risks that the acquisition of PCM distracts management of the Company or PCM or disrupts current plans and operations; |
|
• |
the Company’s ability to retain key PCM and Company employees; |
- MORE -
Insight Enterprises, Inc. |
|
6820 South Harl Avenue |
|
Tempe, Arizona 85283 |
|
800.467.4448 |
|
FAX 480.760.8958 |
|
• |
the debt may restrict the Company’s future operations and impair its ability to meet business obligations under the notes; |
|
• |
the conditional conversion feature of the notes, 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 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 and adversely impact the trading price of the notes; and |
|
• |
the Company is subject to counterparty risk with respect to the convertible note hedge transactions. |
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 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 ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
1,668,880 |
|
|
$ |
1,548,273 |
|
|
$ |
4,729,887 |
|
|
$ |
4,724,888 |
|
Services |
|
|
243,667 |
|
|
|
199,453 |
|
|
|
704,147 |
|
|
|
606,202 |
|
Total net sales |
|
|
1,912,547 |
|
|
|
1,747,726 |
|
|
|
5,434,034 |
|
|
|
5,331,090 |
|
Costs of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,519,240 |
|
|
|
1,415,808 |
|
|
|
4,315,464 |
|
|
|
4,319,181 |
|
Services |
|
|
117,112 |
|
|
|
97,004 |
|
|
|
318,454 |
|
|
|
272,355 |
|
Total costs of goods sold |
|
|
1,636,352 |
|
|
|
1,512,812 |
|
|
|
4,633,918 |
|
|
|
4,591,536 |
|
Gross profit |
|
|
276,195 |
|
|
|
234,914 |
|
|
|
800,116 |
|
|
|
739,554 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
|
223,215 |
|
|
|
184,095 |
|
|
|
613,767 |
|
|
|
561,739 |
|
Severance and restructuring expenses, net |
|
|
2,662 |
|
|
|
683 |
|
|
|
3,712 |
|
|
|
2,709 |
|
Acquisition-related expenses |
|
|
5,896 |
|
|
|
188 |
|
|
|
9,059 |
|
|
|
282 |
|
Earnings from operations |
|
|
44,422 |
|
|
|
49,948 |
|
|
|
173,578 |
|
|
|
174,824 |
|
Non-operating (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
(393 |
) |
|
|
(330 |
) |
|
|
(930 |
) |
|
|
(653 |
) |
Interest expense |
|
|
8,087 |
|
|
|
6,132 |
|
|
|
17,511 |
|
|
|
17,249 |
|
Net foreign currency exchange (gain) loss |
|
|
(391 |
) |
|
|
539 |
|
|
|
(10 |
) |
|
|
19 |
|
Other (income) expense, net |
|
|
(147 |
) |
|
|
393 |
|
|
|
868 |
|
|
|
1,019 |
|
Earnings before income taxes |
|
|
37,266 |
|
|
|
43,214 |
|
|
|
156,139 |
|
|
|
157,190 |
|
Income tax expense |
|
|
10,134 |
|
|
|
11,060 |
|
|
|
39,682 |
|
|
|
40,554 |
|
Net earnings |
|
$ |
27,132 |
|
|
$ |
32,154 |
|
|
$ |
116,457 |
|
|
$ |
116,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.76 |
|
|
$ |
0.91 |
|
|
$ |
3.27 |
|
|
$ |
3.27 |
|
Diluted |
|
$ |
0.76 |
|
|
$ |
0.89 |
|
|
$ |
3.23 |
|
|
$ |
3.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
35,512 |
|
|
|
35,468 |
|
|
|
35,631 |
|
|
|
35,622 |
|
Diluted |
|
|
35,868 |
|
|
|
35,957 |
|
|
|
36,027 |
|
|
|
36,012 |
|
- MORE -
Insight Enterprises, Inc. |
|
6820 South Harl Avenue |
|
Tempe, Arizona 85283 |
|
800.467.4448 |
|
FAX 480.760.8958 |
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
140,549 |
|
|
$ |
142,655 |
|
Accounts receivable, net |
|
|
2,320,681 |
|
|
|
1,931,736 |
|
Inventories |
|
|
219,932 |
|
|
|
148,503 |
|
Other current assets |
|
|
120,972 |
|
|
|
115,683 |
|
Total current assets |
|
|
2,802,134 |
|
|
|
2,338,577 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
169,996 |
|
|
|
72,954 |
|
Goodwill |
|
|
358,384 |
|
|
|
166,841 |
|
Intangible assets, net |
|
|
350,342 |
|
|
|
112,179 |
|
Deferred income taxes |
|
|
3,027 |
|
|
|
7,967 |
|
Other assets |
|
|
298,477 |
|
|
|
77,429 |
|
|
|
$ |
3,982,360 |
|
|
$ |
2,775,947 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable – trade |
|
$ |
1,220,678 |
|
|
$ |
978,104 |
|
Accounts payable – inventory financing facilities |
|
|
207,658 |
|
|
|
304,130 |
|
Accrued expenses and other current liabilities |
|
|
254,677 |
|
|
|
190,733 |
|
Current portion of long-term debt |
|
|
1,142 |
|
|
|
1,395 |
|
Deferred revenue |
|
|
67,819 |
|
|
|
62,300 |
|
Total current liabilities |
|
|
1,751,974 |
|
|
|
1,536,662 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
835,714 |
|
|
|
195,525 |
|
Deferred income taxes |
|
|
58,665 |
|
|
|
683 |
|
Other liabilities |
|
|
233,369 |
|
|
|
56,088 |
|
|
|
|
2,879,722 |
|
|
|
1,788,958 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock |
|
|
— |
|
|
|
— |
|
Common stock |
|
|
353 |
|
|
|
355 |
|
Additional paid-in capital |
|
|
353,069 |
|
|
|
323,622 |
|
Retained earnings |
|
|
798,147 |
|
|
|
704,665 |
|
Accumulated other comprehensive loss – foreign currency translation adjustments |
|
|
(48,931 |
) |
|
|
(41,653 |
) |
Total stockholders’ equity |
|
|
1,102,638 |
|
|
|
986,989 |
|
|
|
$ |
3,982,360 |
|
|
$ |
2,775,947 |
|
- MORE -
Insight Enterprises, Inc. |
|
6820 South Harl Avenue |
|
Tempe, Arizona 85283 |
|
800.467.4448 |
|
FAX 480.760.8958 |
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
116,457 |
|
|
$ |
116,636 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization of property and equipment |
|
|
15,506 |
|
|
|
16,018 |
|
Amortization of intangible assets |
|
|
13,590 |
|
|
|
11,399 |
|
Provision for losses on accounts receivable |
|
|
2,695 |
|
|
|
2,572 |
|
Amortization of debt discount and issuance costs |
|
|
2,322 |
|
|
|
— |
|
Loss on extinguishment of debt |
|
|
352 |
|
|
|
— |
|
Write-downs of inventories |
|
|
3,281 |
|
|
|
2,410 |
|
Write-off of property and equipment |
|
|
— |
|
|
|
367 |
|
Non-cash stock-based compensation |
|
|
11,895 |
|
|
|
10,764 |
|
Deferred income taxes |
|
|
2,501 |
|
|
|
2,964 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in accounts receivable |
|
|
68,057 |
|
|
|
222,047 |
|
(Increase) decrease in inventories |
|
|
(17,946 |
) |
|
|
24,373 |
|
(Increase) decrease in other assets |
|
|
(99,681 |
) |
|
|
31,555 |
|
Decrease in accounts payable |
|
|
(39,191 |
) |
|
|
(201,147 |
) |
(Decrease) increase in deferred revenue |
|
|
(1,148 |
) |
|
|
11,326 |
|
Increase (decrease) in accrued expenses and other liabilities |
|
|
89,905 |
|
|
|
(4,043 |
) |
Net cash provided by operating activities |
|
|
168,595 |
|
|
|
247,241 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(16,922 |
) |
|
|
(13,046 |
) |
Proceeds from sale of foreign entity |
|
|
— |
|
|
|
479 |
|
Acquisitions, net of cash and cash equivalents acquired |
|
|
(664,287 |
) |
|
|
(74,938 |
) |
Net cash used in investing activities |
|
|
(681,209 |
) |
|
|
(87,505 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings on senior revolving credit facility |
|
|
242,936 |
|
|
|
569,232 |
|
Repayments on senior revolving credit facility |
|
|
(242,936 |
) |
|
|
(686,732 |
) |
Borrowings on ABL revolving credit facility |
|
|
986,754 |
|
|
|
— |
|
Repayments on ABL revolving credit facility |
|
|
(454,544 |
) |
|
|
— |
|
Borrowings on accounts receivable securitization financing facility |
|
|
2,364,500 |
|
|
|
2,662,000 |
|
Repayments on accounts receivable securitization financing facility |
|
|
(2,558,500 |
) |
|
|
(2,576,000 |
) |
Repayments under Term Loan A |
|
|
— |
|
|
|
(9,844 |
) |
Repayments under other financing agreements |
|
|
(183 |
) |
|
|
(2,312 |
) |
Payments on finance lease obligations |
|
|
(980 |
) |
|
|
(1,002 |
) |
Net repayments under inventory financing facilities |
|
|
(96,472 |
) |
|
|
(81,911 |
) |
Proceeds from issuance of convertible senior notes |
|
|
341,250 |
|
|
|
— |
|
Proceeds from issuance of warrants |
|
|
34,440 |
|
|
|
— |
|
Purchase of hedge related to convertible senior notes |
|
|
(66,325 |
) |
|
|
— |
|
Payment of debt issuance costs |
|
|
(1,180 |
) |
|
|
(270 |
) |
Payment of payroll taxes on stock-based compensation through shares withheld |
|
|
(6,419 |
) |
|
|
(3,195 |
) |
Repurchases of common stock |
|
|
(27,899 |
) |
|
|
(22,069 |
) |
Net cash provided by (used in) financing activities |
|
|
514,442 |
|
|
|
(152,103 |
) |
Foreign currency exchange effect on cash, cash equivalents and restricted cash balances |
|
|
(3,960 |
) |
|
|
(2,434 |
) |
(Decrease) increase in cash, cash equivalents and restricted cash |
|
|
(2,132 |
) |
|
|
5,199 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
144,293 |
|
|
|
107,445 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
142,161 |
|
|
$ |
112,644 |
|
- MORE -
Insight Enterprises, Inc. |
|
6820 South Harl Avenue |
|
Tempe, Arizona 85283 |
|
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Adjusted Consolidated Earnings from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP consolidated EFO |
|
$ |
44,422 |
|
|
$ |
49,948 |
|
|
$ |
173,578 |
|
|
$ |
174,824 |
|
Severance and restructuring expenses |
|
|
2,662 |
|
|
|
683 |
|
|
|
3,712 |
|
|
|
2,709 |
|
Acquisition-related expenses |
|
|
5,896 |
|
|
|
188 |
|
|
|
9,059 |
|
|
|
282 |
|
Amortization of intangible assets |
|
|
5,946 |
|
|
|
4,185 |
|
|
|
13,590 |
|
|
|
11,399 |
|
Adjusted non-GAAP consolidated EFO |
|
$ |
58,926 |
|
|
$ |
55,004 |
|
|
$ |
199,939 |
|
|
$ |
189,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated Net Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP consolidated net earnings |
|
$ |
27,132 |
|
|
$ |
32,154 |
|
|
$ |
116,457 |
|
|
$ |
116,636 |
|
Severance and restructuring expenses |
|
|
2,662 |
|
|
|
683 |
|
|
|
3,712 |
|
|
|
2,709 |
|
Acquisition-related expenses |
|
|
5,896 |
|
|
|
188 |
|
|
|
9,059 |
|
|
|
282 |
|
Amortization of intangible assets |
|
|
5,946 |
|
|
|
4,185 |
|
|
|
13,590 |
|
|
|
11,399 |
|
Amortization of debt discount and issuance costs |
|
|
1,398 |
|
|
|
— |
|
|
|
1,398 |
|
|
|
— |
|
Income taxes on non-GAAP adjustments |
|
|
(3,414 |
) |
|
|
(1,250 |
) |
|
|
(5,588 |
) |
|
|
(3,506 |
) |
Adjusted non-GAAP consolidated net earnings |
|
$ |
39,620 |
|
|
$ |
35,960 |
|
|
$ |
138,628 |
|
|
$ |
127,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted EPS |
|
$ |
0.76 |
|
|
$ |
0.89 |
|
|
$ |
3.23 |
|
|
$ |
3.24 |
|
Severance and restructuring expenses |
|
|
0.07 |
|
|
|
0.02 |
|
|
|
0.10 |
|
|
|
0.08 |
|
Acquisition-related expenses |
|
|
0.16 |
|
|
|
0.01 |
|
|
|
0.25 |
|
|
|
0.01 |
|
Amortization of intangible assets |
|
|
0.16 |
|
|
|
0.12 |
|
|
|
0.38 |
|
|
|
0.31 |
|
Amortization of debt discount and issuance costs |
|
|
0.04 |
|
|
|
— |
|
|
|
0.04 |
|
|
|
— |
|
Income taxes on non-GAAP adjustments |
|
|
(0.09 |
) |
|
|
(0.04 |
) |
|
|
(0.15 |
) |
|
|
(0.10 |
) |
Adjusted non-GAAP diluted EPS |
|
$ |
1.10 |
|
|
$ |
1.00 |
|
|
$ |
3.85 |
|
|
$ |
3.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted North America Earnings from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP EFO from North America segment |
|
$ |
39,306 |
|
|
$ |
44,094 |
|
|
$ |
135,550 |
|
|
$ |
141,261 |
|
Severance and restructuring expenses |
|
|
2,449 |
|
|
|
253 |
|
|
|
3,260 |
|
|
|
1,034 |
|
Acquisition-related expenses |
|
|
5,896 |
|
|
|
188 |
|
|
|
9,059 |
|
|
|
282 |
|
Amortization of intangible assets |
|
|
5,765 |
|
|
|
3,949 |
|
|
|
13,037 |
|
|
|
10,670 |
|
Adjusted non-GAAP EFO from North America segment |
|
$ |
53,416 |
|
|
$ |
48,484 |
|
|
$ |
160,906 |
|
|
$ |
153,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EMEA Earnings from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP EFO from EMEA segment |
|
$ |
3,110 |
|
|
$ |
4,598 |
|
|
$ |
29,631 |
|
|
$ |
26,320 |
|
Severance and restructuring expenses |
|
|
213 |
|
|
|
430 |
|
|
|
328 |
|
|
|
1,545 |
|
Amortization of intangible assets |
|
|
67 |
|
|
|
71 |
|
|
|
205 |
|
|
|
216 |
|
Adjusted non-GAAP EFO from EMEA segment |
|
$ |
3,390 |
|
|
$ |
5,099 |
|
|
$ |
30,164 |
|
|
$ |
28,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted APAC Earnings from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP EFO from APAC segment |
|
$ |
2,006 |
|
|
$ |
1,256 |
|
|
$ |
8,397 |
|
|
$ |
7,243 |
|
Severance and restructuring expenses |
|
|
— |
|
|
|
— |
|
|
|
124 |
|
|
|
130 |
|
Amortization of intangible assets |
|
|
114 |
|
|
|
165 |
|
|
|
348 |
|
|
|
513 |
|
Adjusted non-GAAP EFO from APAC segment |
|
$ |
2,120 |
|
|
$ |
1,421 |
|
|
$ |
8,869 |
|
|
$ |
7,886 |
|
- MORE -
Insight Enterprises, Inc. |
|
6820 South Harl Avenue |
|
Tempe, Arizona 85283 |
|
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)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Adjusted free cash flow: |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
168,595 |
|
|
$ |
247,241 |
|
Purchases of property and equipment |
|
|
(16,922 |
) |
|
|
(13,046 |
) |
Net repayments under inventory financing facilities |
|
|
(96,472 |
) |
|
|
(81,911 |
) |
Adjusted non-GAAP free cash flow |
|
$ |
55,201 |
|
|
$ |
152,284 |
|
|
|
Twelve Months Ended September 30, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Adjusted return on invested capital: |
|
|
|
|
|
|
|
|
GAAP consolidated EFO |
|
$ |
232,237 |
|
|
$ |
220,362 |
|
Severance and restructuring expenses |
|
|
4,427 |
|
|
|
5,500 |
|
Acquisition-related expenses |
|
|
9,059 |
|
|
|
282 |
|
Adjusted non-GAAP consolidated EFO * |
|
|
245,723 |
|
|
|
226,144 |
|
Income tax expense** |
|
|
67,574 |
|
|
|
62,190 |
|
Adjusted non-GAAP consolidated EFO, net of tax |
|
$ |
178,149 |
|
|
$ |
163,954 |
|
Average stockholders’ equity*** |
|
$ |
1,027,884 |
|
|
$ |
880,167 |
|
Average debt*** |
|
|
292,842 |
|
|
|
311,066 |
|
Average cash*** |
|
|
(126,233 |
) |
|
|
(160,331 |
) |
Invested Capital |
|
$ |
1,194,493 |
|
|
$ |
1,030,902 |
|
|
|
|
|
|
|
|
|
|
Adjusted non-GAAP ROIC (from GAAP consolidated EFO) **** |
|
|
14.10 |
% |
|
|
15.50 |
% |
Adjusted non-GAAP ROIC (from non-GAAP consolidated EFO) ***** |
|
|
14.91 |
% |
|
|
15.90 |
% |
* |
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 27.5% for 2019 and 2018. |
*** |
Average of previous five quarters. |
**** |
Computed as GAAP consolidated EFO, net of tax of $63,865 and $60,600 for the twelve months ended September 30, 2019 and 2018, 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 |
Insight Enterprises Third Quarter 2019 Earnings Conference Call Exhibit 99.2
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 statements about future 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.
Agenda Opening Comments Highlights Third quarter 2019 consolidated results PCM integration update Case study Strategic assets & priorities Business Review Third quarter 2019 financial results by region Taxes and cash flow Capital allocation priorities Closing Comments & 2019 Guidance
Q3 2019 Year over Year Results * Please see reconciliation of adjusted measures to GAAP in the Appendix of this presentation Amounts are for three months ended 9/30 GAAP Earnings from operations $44.4M GAAP Diluted EPS $0.76 Net Sales Gross Profit Gross Margin +9% YoY +18% YoY +100 bps YoY SG&A % of Net Sales Adj EFO* Adj Diluted EPS* +120 bps YoY 7% YoY +10% YoY $1.91B 2018 2019 $276M 2018 2019 $58.9M 2018 2019 11.7% 2018 2019 14.4% 2018 2019 $1.10 2018 2019
System integration plan Leadership team Client / partner/ teammate communications Day 120 + Day 1 - 30 Day 31-120 Integration complete $70 million of expected run rate cost synergies by 2021 Brand migration Team alignment Market engagement IT systems onboard Common service delivery platforms Ecommerce integration Real Estate consolidation PCM Integration Timeline
Solving Client Challenges through Digital Innovation The challenge Translating financial services offerings into rich and engaging solutions Attract and appeal to millennial generation The solution Single back-end, multichannel conversational experience delivered via chatbot Integrates with social media platforms and various devices The outcome Multichannel customer engagement 24-hour live chat support 72% increase in new millennial accounts
Our Strategic Assets Support Continued Growth Grow with solutions that drive business outcomes for clients Continue to Innovate to capture share in high growth areas Expand and Scale in strategic clients and end markets Continue to Optimize client experience and execution through operational excellence Strategic Priorities Innovation Led | Solution Area Expertise Culture, People and Leadership Global Reach and Scale Diverse and Loyal Client and Partner relationships Operational Rigor and Financial Health • • • • Strategic Assets
5.0% – 5.5% Expand EBITDA Margin 19% – 21% Optimize Return on Invested Capital 50% – 52% Grow Services Gross Profit as % of Total GP Value Creation for Insight Shareholders, Clients, Partners and Teammates 8% – 10% (CAGR) Grow Sales Faster than the Market Key Imperatives to Deliver Value
Business Review
Change in methodology for Adjusted items Previous Methodology New Methodology
Q3 2019 North America | Financial Results * Please see reconciliation of adjusted measures to GAAP in the Appendix of this presentation Amounts are for three months ended 9/30 GAAP Earnings from operations $39.3M
Q3 2019 EMEA | Financial Results * Please see reconciliation of adjusted measures to GAAP in the Appendix of this presentation ** Reference “Constant currency” section on slide 2 of this presentation Amounts are for three months ended 9/30 GAAP Earnings from operations $3.1M Net Sales Gross Profit Gross Margin +9% YoY in constant $** +7% YoY in constant $** -20 bps YoY SG&A % of Net Sales Adj EFO* Sales Mix -30 bps YoY -29% YoY in constant $** $356M 2018 2019 $47.9M 2018 2019 $3.4M 2018 2019 12.5% 2018 2019 13.5% 2018 2019 39% 52% 9% Hardware Software Services
Q3 2019 APAC | Financial Results * Please see reconciliation of adjusted measures to GAAP in the Appendix of this presentation ** Reference “Constant currency” section on slide 2 of this presentation Amounts are for three months ended 9/30 GAAP Earnings from operations $2.0M Net Sales Gross Profit Gross Margin +40% YoY in constant $** +21% YoY in constant $** -370 bps YoY SG&A % of Net Sales Adj EFO* Sales Mix -440 bps YoY +53% YoY in constant $** $41.7M 2018 2019 $9.7M 2018 2019 $2.1M 2018 2019 18.4% 2018 2019 23.2% 2018 2019 22% 47% 31% Hardware Software Services
Cash Flows and Cash Conversion Cycle * Adjusted free cash flow excludes purchases of property and equipment and net repayments under inventory financing facility Net cash from operations Adj Free Cash Flow* Cash Conversion Cycle On track with expectations On track with expectations +4 days YoY Days sales outstanding Days inventory outstanding Days purchases outstanding +22 days YoY +1 days YoY +19 days YoY $169M 2018 2019 $55M 2018 2019 11 2018 2019 111 2018 2019 42 2018 2019 80 2018 2019
Disciplined Capital Allocation Aligned with Shareholder Interests 1 Pay down debt Invest organically 2 4 Return excess cash to shareholders Scalable IT and service delivery platforms Digital Marketing and client facing tools Technical and sales talent Cultural / strategic / financial / integration Accretive within the first full fiscal year following acquisition ROIC at 300 bps above WACC by end of year three Return excess cash to shareholders after meeting other priorities Pursue strategic M&A Maintain modest leverage 3
Closing Comments & 2019 Guidance
2019 Guidance 2019 sales expected to grow between 9% and 11%, including PCM Adjusted diluted earnings per share expected to be between $5.45 and $5.50 per share for the full year 2019 Effective tax rate expected to be between 25% and 26% for Q4 2019 Capital expenditures of $70 to $75 million for the full year 2019 Includes $48 million for purchase of new corporate HQ An average share count for the full year 2019 of approximately 36.0 million shares
Appendix
Reconciliation of GAAP to Adjusted Non-GAAP Financial Measures
Reconciliation of GAAP to Adjusted Non-GAAP Financial Measures
Reconciliation of GAAP to Adjusted Non-GAAP Financial Measures
Reconciliation of GAAP to Adjusted Non-GAAP Financial Measures *The adjusted non-GAAP consolidated EFO amount used for the ROIC calculation does not exclude amortization of intangibles. This calculation remains consistent with the metric utilized in management’s compensation plan. **Assumed tax rate of 27.5% for 2019 and 2018. ***Average of previous five quarters. ****Computed as GAAP consolidated EFO, net of tax of $63,865 and $60,600 for the twelve months ended September 30, 2019 and 2018, respectively, divided by invested capital. *****Computed as Adjusted consolidated EFO, net of tax, divided by invested capital.
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