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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number:  0-25092

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

86-0766246

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

6820 South Harl Avenue, Tempe, Arizona 85283

(Address of principal executive offices) (Zip Code)

(480) 333-3000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes     

 

No     

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes     

 

No     

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer            

 

 

Smaller reporting company

 

 

 

 

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.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes     

 

No     

 

The number of shares outstanding of the issuer’s common stock as of May 1, 2020 was 35,050,629.

 

 

 

 


 

INSIGHT ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

Three Months Ended March 31, 2020

 

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I -

 

Financial Information

 

 

 

 

 

 

 

Item 1 –

 

Financial Statements:

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (unaudited) – March 31, 2020 and December 31, 2019

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited) – Three Months Ended March 31, 2020 and 2019

 

2

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (unaudited) – Three Months Ended March 31, 2020 and 2019

 

3

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) – Three Months Ended March 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) – Three Months Ended March 31, 2020 and 2019

 

5

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

6

 

 

 

 

 

Item 2 –

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

 

 

 

 

 

Item 3 –

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

 

 

 

 

 

Item 4 –

 

Controls and Procedures

 

35

 

 

 

 

 

PART II -

 

Other Information

 

 

 

 

 

 

 

Item 1 –

 

Legal Proceedings

 

36

 

 

 

 

 

Item 1A –

 

Risk Factors

 

36

 

 

 

 

 

Item 2 –

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

 

 

 

 

 

Item 3 –

 

Defaults Upon Senior Securities

 

38

 

 

 

 

 

Item 4 –

 

Mine Safety Disclosures

 

38

 

 

 

 

 

Item 5 –

 

Other Information

 

38

 

 

 

 

 

Item 6 –

 

Exhibits

 

39

 

 

 

 

 

Signatures

 

40

 

 

 

 


INSIGHT ENTERPRISES, INC.

 

Forward-Looking Information

References to “the Company,” “Insight,” “we,” “us,” “our” and other similar words refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context suggests otherwise.  Certain statements in this Quarterly Report on Form 10-Q, including statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this report, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may include: projections of, and matters that affect, net sales, gross profit, gross margin, operating expenses, earnings from operations, non-operating income and expenses, net earnings or cash flows, cash needs and the payment of accrued expenses and liabilities; our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company; the expected effects of seasonality on our business; expectations of further consolidation and trends in the Information Technology (“IT”) industry; our business strategy and our strategic initiatives, including our efforts to grow our core business, including due to COVID-19, develop and grow our global cloud business and build scalable solutions; expectations regarding partner incentives; our expectations about future benefits of our acquisitions and our plans related thereto, including potential expansion into wider regions; our expectations regarding completion of the PCM integration; the increasing demand for big data solutions; the availability of competitive sources of products for our purchase and resale; our intentions concerning the payment of dividends; our acquisition strategy; our ability to offset the effects of inflation and manage any increase in interest rates; projections of capital expenditures; our plans to continue to evolve our IT systems, including migration of EMEA’s current system; the sufficiency of our capital resources, the availability of financing and our needs or plans relating thereto; the effects of new accounting principles and expected dates of adoption; the effect of indemnification obligations; projections about the outcome of ongoing tax audits; our expectations regarding future tax rates; adequate provisions for and our positions and strategies with respect to ongoing and threatened litigation and expected outcomes; our ability to expand our client relationships; our expectations that pricing pressures in the IT industry will continue; our plans to use cash flow from operations for working capital, to pay down debt, repurchase shares of our common stock, make capital expenditures, and fund acquisitions; our belief that our office facilities are adequate and that we will be able to extend our current leases or locate substitute facilities on satisfactory terms; our belief that we have adequate provisions for losses; our expectation that we will not incur interest payments under our inventory financing facilities; our expectations that future income will be sufficient to fully recover deferred tax assets; our exposure to off-balance sheet arrangements; statements of belief; and statements of assumptions underlying any of the foregoing.  Forward-looking statements are identified by such words as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will,” “may” and variations of such words and similar expressions and 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 results described in forward-looking statements will be achieved, and actual results could differ materially from those suggested by the forward-looking statements.  Some of the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in “Risk Factors” in Part II, Item 1A of this report:

 

 

the widespread outbreak of an illness or other communicable disease such as COVID-19, which could result in significant disruptions of global supply chains and demand for our products and services;

 

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

 

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

 

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

 

 


INSIGHT ENTERPRISES, INC.

 

 

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

 

possible significant fluctuations in our future operating results as well as seasonality and variability in customer demands;

 

the risks associated with our international operations;

 

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

 

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

 

cyberattacks or breaches of data privacy and security regulations;

 

disruptions in our IT systems and voice and data networks;

 

failure to comply with the terms and conditions of our commercial and public sector contracts;

 

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

 

accounts receivable risks, including increased credit loss experience or extended payment terms with our clients;

 

our reliance on independent shipping companies;

 

our dependence on certain key personnel;

 

natural disasters or other adverse occurrences;

 

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

 

intellectual property infringement claims and challenges to our registered trademarks and trade names;

 

our substantial amount of indebtedness;

 

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

 

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

 

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

 

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

 

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

 

Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the Securities and Exchange Commission (the “SEC”).  Any forward-looking statements in this report are made as of the date of this filing and should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others.  We assume no obligation to update, and, except as may be required by law, do not intend to update, any forward-looking statements.  We do not endorse any projections regarding future performance that may be made by third parties.

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

 

 

March 31,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,660

 

 

$

114,668

 

Accounts receivable, net of allowance for doubtful accounts

   of $12,610 and $10,762, respectively

 

 

2,464,377

 

 

 

2,511,383

 

Inventories

 

 

236,414

 

 

 

190,833

 

Other current assets

 

 

202,706

 

 

 

231,148

 

Total current assets

 

 

2,966,157

 

 

 

3,048,032

 

Property and equipment, net of accumulated depreciation and

   amortization of $238,766 and $236,330, respectively

 

 

128,689

 

 

 

130,907

 

Goodwill

 

 

413,665

 

 

 

415,149

 

Intangible assets, net of accumulated amortization of

   $83,187 and $73,492, respectively

 

 

271,533

 

 

 

278,584

 

Other assets

 

 

276,974

 

 

 

305,507

 

 

 

$

4,057,018

 

 

$

4,178,179

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable—trade

 

$

1,283,801

 

 

$

1,275,957

 

Accounts payable—inventory financing facilities

 

 

252,912

 

 

 

253,676

 

Accrued expenses and other current liabilities

 

 

358,182

 

 

 

352,204

 

Current portion of long-term debt

 

 

1,700

 

 

 

1,691

 

Total current liabilities

 

 

1,896,595

 

 

 

1,883,528

 

Long-term debt

 

 

749,547

 

 

 

857,673

 

Deferred income taxes

 

 

44,489

 

 

 

44,633

 

Other liabilities

 

 

215,818

 

 

 

232,027

 

 

 

 

2,906,449

 

 

 

3,017,861

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 3,000 shares authorized;

   no shares issued

 

 

 

 

 

 

Common stock, $0.01 par value, 100,000 shares authorized;

   35,049 shares at March 31, 2020 and 35,263 shares at

   December 31, 2019 issued and outstanding

 

 

350

 

 

 

353

 

Additional paid-in capital

 

 

351,648

 

 

 

357,032

 

Retained earnings

 

 

854,566

 

 

 

841,097

 

Accumulated other comprehensive loss – foreign currency

   translation adjustments

 

 

(55,995

)

 

 

(38,164

)

Total stockholders’ equity

 

 

1,150,569

 

 

 

1,160,318

 

 

 

$

4,057,018

 

 

$

4,178,179

 

 

See accompanying notes to consolidated financial statements.

1


 

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net sales:

 

 

 

 

 

 

 

 

Products

 

$

1,848,316

 

 

$

1,466,672

 

Services

 

 

295,735

 

 

 

218,794

 

Total net sales

 

 

2,144,051

 

 

 

1,685,466

 

Costs of goods sold:

 

 

 

 

 

 

 

 

Products

 

 

1,670,238

 

 

 

1,337,308

 

Services

 

 

148,477

 

 

 

99,686

 

Total costs of goods sold

 

 

1,818,715

 

 

 

1,436,994

 

Gross profit

 

 

325,336

 

 

 

248,472

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

 

268,863

 

 

 

191,063

 

Severance and restructuring expenses, net

 

 

2,144

 

 

 

370

 

Acquisition and integration related expenses

 

 

1,466

 

 

 

 

Earnings from operations

 

 

52,863

 

 

 

57,039

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

11,826

 

 

 

4,552

 

Other (income) expense, net

 

 

(1,563

)

 

 

1,050

 

Earnings before income taxes

 

 

42,600

 

 

 

51,437

 

Income tax expense

 

 

8,639

 

 

 

12,110

 

Net earnings

 

$

33,961

 

 

$

39,327

 

Net earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.96

 

 

$

1.10

 

Diluted

 

$

0.95

 

 

$

1.09

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

Basic

 

 

35,233

 

 

 

35,609

 

Diluted

 

 

35,646

 

 

 

36,103

 

 

See accompanying notes to consolidated financial statements.

2

 


 

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net earnings

 

$

33,961

 

 

$

39,327

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(17,831

)

 

 

1,915

 

Total comprehensive income

 

$

16,130

 

 

$

41,242

 

 

See accompanying notes to consolidated financial statements.

 


3

 


 

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Equity

 

Balances at December 31, 2019

 

 

35,263

 

 

$

353

 

 

 

 

 

$

 

 

$

357,032

 

 

$

(38,164

)

 

$

841,097

 

 

$

1,160,318

 

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes

 

 

231

 

 

 

2

 

 

 

 

 

 

 

 

 

(5,289

)

 

 

 

 

 

(1

)

 

 

(5,288

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,409

 

 

 

 

 

 

 

 

 

4,409

 

Repurchase of treasury stock

 

 

 

 

 

 

 

 

(445

)

 

 

(25,000

)

 

 

 

 

 

 

 

 

 

 

 

 

(25,000

)

Retirement of treasury stock

 

 

(445

)

 

 

(5

)

 

 

445

 

 

 

25,000

 

 

 

(4,504

)

 

 

 

 

 

(20,491

)

 

 

 

Foreign currency translation adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,831

)

 

 

 

 

 

(17,831

)

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,961

 

 

 

33,961

 

Balances at March 31, 2020

 

 

35,049

 

 

$

350

 

 

 

 

 

$

 

 

$

351,648

 

 

$

(55,995

)

 

$

854,566

 

 

$

1,150,569

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Equity

 

Balances at December 31, 2018

 

 

35,482

 

 

$

355

 

 

 

 

 

$

 

 

$

323,622

 

 

$

(41,653

)

 

$

704,665

 

 

$

986,989

 

Issuance of common stock under employee stock plans, net of shares withheld for payroll   taxes

 

 

279

 

 

 

3

 

 

 

 

 

 

 

 

 

(6,131

)

 

 

 

 

 

 

 

 

(6,128

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,115

 

 

 

 

 

 

 

 

 

4,115

 

Foreign currency translation adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,915

 

 

 

 

 

 

1,915

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,327

 

 

 

39,327

 

Balances at March 31, 2019

 

 

35,761

 

 

$

358

 

 

 

 

 

$

 

 

$

321,606

 

 

$

(39,738

)

 

$

743,992

 

 

$

1,026,218

 

 

See accompanying notes to consolidated financial statements.

4

 


 

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

33,961

 

 

$

39,327

 

Adjustments to reconcile net earnings to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

17,397

 

 

 

8,867

 

Provision for losses on accounts receivable

 

 

3,136

 

 

 

1,413

 

Non-cash stock-based compensation

 

 

4,409

 

 

 

4,115

 

Deferred income taxes

 

 

(509

)

 

 

547

 

Other adjustments

 

 

5,262

 

 

 

1,408

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

22,648

 

 

 

210,691

 

Increase in inventories

 

 

(48,332

)

 

 

(39,658

)

Decrease (increase) in other assets

 

 

57,241

 

 

 

(107,314

)

Increase (decrease) in accounts payable

 

 

23,277

 

 

 

(82,246

)

(Decrease) increase in accrued expenses and other liabilities

 

 

(25,364

)

 

 

84,763

 

Net cash provided by operating activities

 

 

93,126

 

 

 

121,913

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of assets held for sale

 

 

14,218

 

 

 

 

Purchases of property and equipment

 

 

(7,382

)

 

 

(5,352

)

Acquisitions, net of cash and cash equivalents acquired

 

 

(6,406

)

 

 

(762

)

Net cash provided by (used in) investing activities

 

 

430

 

 

 

(6,114

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings on senior revolving credit facility

 

 

 

 

 

49,936

 

Repayments on senior revolving credit facility

 

 

 

 

 

(49,936

)

Borrowings on ABL revolving credit facility, net of initial lender fees

 

 

678,197

 

 

 

 

Repayments on ABL revolving credit facility

 

 

(788,443

)

 

 

 

Borrowings on accounts receivable securitization financing facility

 

 

 

 

 

1,010,500

 

Repayments on accounts receivable securitization financing facility

 

 

 

 

 

(1,092,500

)

Net repayments under inventory financing facilities

 

 

(764

)

 

 

(43,970

)

Repurchases of common stock

 

 

(25,000

)

 

 

 

Other payments

 

 

(5,756

)

 

 

(6,670

)

Net cash used in financing activities

 

 

(141,766

)

 

 

(132,640

)

Foreign currency exchange effect on cash, cash equivalents and

   restricted cash balances

 

 

(3,615

)

 

 

(986

)

Decrease in cash, cash equivalents and restricted cash

 

 

(51,825

)

 

 

(17,827

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

116,297

 

 

 

144,293

 

Cash, cash equivalents and restricted cash at end of period

 

$

64,472

 

 

$

126,466

 

 

See accompanying notes to consolidated financial statements.

 

5

 


INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1.Basis of Presentation and Recently Issued Accounting Standards

We empower organizations of all sizes with Intelligent Technology SolutionsTM and services to maximize the business value of Information Technology (“IT”) in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”).  As a Fortune 500-ranked global provider of digital innovation, cloud/data center transformation, connected workforce, and supply chain optimization solutions, we help clients innovate and optimize their operations to run smarter.  Our company is organized in the following three operating segments, which are primarily defined by their related geographies:

 

Operating Segment

Geography

North America

United States and Canada

EMEA

Europe, Middle East and Africa

APAC

Asia-Pacific

 

Our offerings in North America and certain countries in EMEA and APAC include hardware, software and services.  Our offerings in the remainder of our EMEA and APAC segments consist of largely software and certain software-related services.  

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of March 31, 2020 and our results of operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019.  The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated balance sheet at such date.  The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with the rules and regulations promulgated by the SEC and consequently do not include all of the disclosures normally required by United States generally accepted accounting principles (“GAAP”).  

The results of operations for interim periods are not necessarily indicative of results for the full year, due in part to the seasonal nature of our business.  These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes thereto, in our Annual Report on Form 10-K for the year ended December 31, 2019.  Our results of operations include the results of PCM, Inc. (“PCM”) from its acquisition date of August 30, 2019 and vNext from its acquisition date of February 28, 2020.  

The consolidated financial statements include the accounts of Insight Enterprises, Inc. and its wholly owned subsidiaries.  All significant intercompany balances and transactions have been eliminated in consolidation.  

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.  Additionally, these estimates and assumptions affect the reported amounts of net sales and expenses during the reporting period.  Actual results could differ from those estimates.  On an ongoing basis, we evaluate our estimates, including those related to sales recognition, anticipated achievement levels under partner funding programs, assumptions related to stock-based compensation valuation, allowances for doubtful accounts, valuation of inventories, litigation-related obligations, valuation allowances for deferred tax assets and impairment of long-lived assets, including purchased intangibles and goodwill, if indicators of potential impairment exist.

6


INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board’s (“FASB”) issued Accounting Standard Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes.”  The new standard is intended to simplify various aspects of accounting for income taxes by removing specific exceptions and amending certain requirements.  The new standard is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted.  We do not expect this new standard to have a material effect on our consolidated financial statements.    

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses.”  The new standard is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held at each reporting date.  The new standard is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted.  We adopted the new standard as of January 1, 2020. The adoption of this new standard did not have a material effect on our consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.”  The new standard provides amendments to the reporting of expected recoveries.  The new standard is effective with the adoption of ASU No. 2016-13.  We adopted the new standard as of January 1, 2020. The adoption of this new standard did not have a material effect on our consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.”  The new standard provides changes for how a company considers expected recoveries and contractual extensions or renewal options when estimating expected credit losses.  The new standard is effective with the adoption of ASU No. 2016-13.  We adopted the new standard as of January 1, 2020. The adoption of this new standard did not have a material effect on our consolidated financial statements.

There have been no other material changes in or additions to the recently issued accounting standards as previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019 that affect or may affect our current financial statements.

7

 


INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

2.

Sales Recognition

In the following table, revenue is disaggregated by our reportable operating segments, which are primarily defined by their related geographies, as well as by major product offering, by major client group and by recognition on either a gross basis as a principal in the arrangement, or on a net basis as an agent, for the three months ended March 31, 2020 and 2019 (in thousands):

 

 

 

Three Months Ended March 31, 2020

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware

 

$

1,128,486

 

 

$

174,969

 

 

$

7,746

 

 

$

1,311,201

 

Software

 

 

305,163

 

 

 

201,082

 

 

 

30,870

 

 

 

537,115

 

Services

 

 

240,732

 

 

 

42,835

 

 

 

12,168

 

 

 

295,735

 

 

 

$

1,674,381

 

 

$

418,886

 

 

$

50,784

 

 

$

2,144,051

 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large Enterprise / Corporate

 

$

1,160,748

 

 

$

292,288

 

 

$

13,025

 

 

$

1,466,061

 

Small and Medium-Sized Businesses

 

 

386,076

 

 

 

17,742

 

 

 

13,654

 

 

 

417,472

 

Public Sector

 

 

127,557

 

 

 

108,856

 

 

 

24,105

 

 

 

260,518

 

 

 

$

1,674,381

 

 

$

418,886

 

 

$

50,784

 

 

$

2,144,051

 

Revenue Recognition based on acting as

   Principal or Agent in the Transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross revenue recognition (Principal)

 

$

1,600,514

 

 

$

392,259

 

 

$

45,754

 

 

$

2,038,527

 

Net revenue recognition (Agent)

 

 

73,867

 

 

 

26,627

 

 

 

5,030

 

 

 

105,524

 

 

 

$

1,674,381

 

 

$

418,886

 

 

$

50,784

 

 

$

2,144,051

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated