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Insight Enterprises, Inc. Reports Fourth Quarter and Record Full Year 2019 Results

02/12/2020

TEMPE, Ariz.--(BUSINESS WIRE)-- Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported financial results for the quarter and full year ended December 31, 2019. Highlights include:

  • Net sales increased 31% year over year to $2.3 billion for the fourth quarter and 9% year over year to $7.7 billion for the full year
  • Gross profit increased 33% year over year to $338.0 million for the fourth quarter and 15% year over year to $1.1 billion for the full year
  • Diluted earnings per share of $1.20 decreased 8% for the fourth quarter year to year and diluted earnings per share of $4.43 decreased 3% for the full year compared to the prior year
  • Adjusted diluted earnings per share of $1.57 increased 11% year over year for the fourth quarter and Adjusted diluted earnings per share of $5.42 increased 9% for the full year compared to the prior year

In the fourth quarter of 2019, net sales increased 31%, gross profit increased 33% and gross margin increased 20 basis points compared to the fourth quarter of 2018. The increases are primarily the result of our acquisition of PCM, Inc. (“PCM”) on August 30, 2019. Earnings from operations increased 14% and diluted earnings per share decreased 8%, year to year, primarily as a result of acquisition-related and severance and restructuring expenses incurred in the fourth quarter of 2019 while Adjusted diluted earnings per share increased 11% compared to the same period in the prior year.

“Our fourth quarter results reflect the scale and momentum in our business leading to another record year for our company,” stated Ken Lamneck, President and Chief Executive Officer. “In the fourth quarter of 2019 we continued to execute against our strategy to deliver IT solutions to our clients globally, leading with services and solutions that drive business outcomes for our clients. In addition, we focused on bringing PCM teammates into the Insight organization and executed against our integration plans while delivering solid financial results,” stated Lamneck.

For the full year 2019, consolidated net sales were $7.7 billion, up 9% year over year, reflecting strong growth in services, including higher volume net sales of cloud solutions offerings and software maintenance, and the addition of PCM. Gross profit increased 15%, year over year, with gross margins increasing 70 basis points to 14.7% for the full year. Earnings from operations grew 3%, year over year to $240.6 million.

“The team’s focus on improving product mix and expanding our services offerings drove gross profit growth faster than sales, year over year, and improved gross margin to 14.7%, a new record for the company,” stated Lamneck. ”Top line growth and gross margin expansion combined with continued expense discipline drove a fourth consecutive year of double-digit growth in adjusted earnings from operations,” stated Lamneck.

KEY HIGHLIGHTS

Results for the Quarter:

  • Consolidated net sales for the fourth quarter of 2019 of $2.3 billion increased 31% year over year compared to the fourth quarter of 2018, primarily as a result of our acquisition of PCM.
    • Net sales in North America increased 38% year over year to $1.9 billion;
    • Net sales in EMEA increased 9% year over year to $401.6 million; and
    • Net sales in APAC decreased 5% year to year to $34.4 million.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 32% year over year, with an increase in net sales in North America and EMEA of 38% and 11%, respectively, year over year, partially offset by a decrease in net sales in APAC of 2%, year to year.
  • Consolidated gross profit increased 33% to $338.0 million compared to the fourth quarter of 2018, with consolidated gross margin expanding 20 basis points to 14.7% of net sales.
    • Gross profit in North America increased 44% year over year to $270.8 million (14.6% gross margin);
    • Gross profit in EMEA increased 3% year over year to $57.8 million (14.4% gross margin); and
    • Gross profit in APAC decreased 10% year to year to $9.4 million (27.4% gross margin).
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 34%, year over year, with gross profit growth in North America and EMEA of 44% and 4%, respectively, year over year, partially offset by a decrease in gross profit in APAC of 7%, year to year.
  • Consolidated earnings from operations increased 14% compared to the fourth quarter of 2018 to $67.0 million, or 2.9% of net sales.
    • Earnings from operations in North America increased 24% year over year to $54.9 million, or 2.9% of net sales;
    • Earnings from operations in EMEA decreased 8% year over year to $10.2 million, or 2.5% of net sales; and
    • Earnings from operations in APAC decreased 39% year to year to $2.0 million, or 5.7% of net sales.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations increased 15% year over year, with an increase in earnings from operations in North America of 23%, year over year, partially offset by a decline in earnings from operations in EMEA and APAC of 7% and 38%, respectively, year to year.
  • Consolidated net earnings and diluted earnings per share for the fourth quarter of 2019 were $43.0 million and $1.20, respectively, at an effective tax rate of 22.7%.
  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for the fourth quarter of 2019 were $56.2 million and $1.57, respectively.

Results for the Year:

  • Consolidated net sales of $7.7 billion for 2019 increased 9% compared to 2018.
    • Net sales in North America increased 12% year over year to $6.0 billion;
    • Net sales in EMEA remained flat at $1.5 billion; and
    • Net sales in APAC decreased 4% year to year to $180.2 million.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 11% year over year, with growth in net sales in North America, EMEA and APAC of 12%, 5% and 2%, respectively, year over year.
  • Consolidated gross profit of $1.1 billion increased 15% compared to 2018, with consolidated gross margin expanding 70 basis points to 14.7% of net sales.
    • Gross profit in North America increased 19% year over year to $871.1 million (14.5% gross margin);
    • Gross profit in EMEA increased 3% year over year to $227.1 million (14.9% gross margin); and
    • Gross profit in APAC increased 1% year over year to $39.9 million (22.1% gross margin).
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 16% year over year, with gross profit growth in North America, EMEA and APAC of 19%, 8% and 6%, respectively, year over year.
  • Consolidated earnings from operations increased 3% compared to 2018 to $240.6 million, or 3.1% of net sales.
    • Earnings from operations in North America increased 3% year over year to $190.5 million, or 3.2% of net sales;
    • Earnings from operations in EMEA increased 7% year over year to $39.8 million, or 2.6% of net sales; and
    • Earnings from operations in APAC decreased 1% year to year to $10.4 million, or 5.7% of net sales.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations also increased 4% year over year, with earnings from operations growth in North America, EMEA and APAC of 3%, 11% and 3%, respectively, year over year.
  • Adjusted consolidated earnings from operations increased 11% year over year to $281.8 million, or 3.6% of net sales for 2019. Adjusted earnings from operations grew in North America and EMEA by 14% and 4%, respectively, year over year. Adjusted earnings from operations declined in APAC by 3%, year to year.
  • Consolidated net earnings and diluted earnings per share for 2019 were $159.4 million and $4.43, respectively, at an effective tax rate of 24.7%.
  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for 2019 were $194.8 million and $5.42, respectively.

In discussing financial results for the three and twelve months ended December 31, 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 2020, the Company expects to deliver sales growth in the 20 to 25% range, including the results of PCM, and Adjusted diluted earnings per share is expected to be between $6.55 and $6.65.

This outlook assumes:

  • interest expense between $35 million and $40 million;
  • an effective tax rate of 25% to 26%;
  • capital expenditures of $55 million to $60 million, including approximately $35 million for the build out of our corporate headquarters; and
  • an average share count of approximately 36.0 million shares.

This outlook does not reflect the repurchase of any shares of the Company’s common stock, excludes acquisition-related expenses, excludes severance and restructuring expenses incurred, excludes amortization of intangible assets of approximately $37 million, and excludes amortization of convertible debt discount and issuance costs of approximately $12 million. Due to the inherent difficulty of forecasting some of these types of expenses, which impact net earnings and diluted earnings per share, the Company is unable to reasonably estimate the impact of such expenses, if any, to net earnings and diluted earnings per share. Accordingly, the Company is unable to provide a reconciliation of GAAP to non-GAAP diluted earnings per share for the full year 2020 forecast.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 9:00 a.m. ET to discuss fourth quarter and full year 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 13698319.

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, (iv) impairment of property and equipment, and (v) 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, (iii) impairment of construction in progress, and (iv) 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.

Financial Summary Table

(dollars in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

 

2019

 

 

2018

 

 

change

 

 

2019

 

 

2018

 

 

change

Insight Enterprises, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

2,002,234

 

 

$

1,525,050

 

 

31%

 

 

$

6,732,121

 

 

$

6,249,938

 

 

8%

Services

 

$

294,922

 

 

$

223,996

 

 

32%

 

 

$

999,069

 

 

$

830,198

 

 

20%

Total net sales

 

$

2,297,156

 

 

$

1,749,046

 

 

31%

 

 

$

7,731,190

 

 

$

7,080,136

 

 

9%

Gross profit

 

$

337,982

 

 

$

254,164

 

 

33%

 

 

$

1,138,098

 

 

$

993,718

 

 

15%

Gross margin

 

 

14.7

%

 

 

14.5

%

 

20 bps

 

 

 

14.7

%

 

 

14.0

%

 

70 bps

Selling and administrative expenses

 

$

266,970

 

 

$

194,790

 

 

37%

 

 

$

880,737

 

 

$

756,529

 

 

16%

Severance and restructuring expenses

 

$

1,713

 

 

$

715

 

 

> 100%

 

 

$

5,425

 

 

$

3,424

 

 

58%

Acquisition-related expenses

 

$

2,283

 

 

$

 

 

> 100%

 

 

$

11,342

 

 

$

282

 

 

> 100%

Earnings from operations

 

$

67,016

 

 

$

58,659

 

 

14%

 

 

$

240,594

 

 

$

233,483

 

 

3%

Net earnings

 

$

42,950

 

 

$

47,041

 

 

(9%)

 

 

$

159,407

 

 

$

163,677

 

 

(3%)

Diluted earnings per share

 

$

1.20

 

 

$

1.31

 

 

(8%)

 

 

$

4.43

 

 

$

4.55

 

 

(3%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

1,615,595

 

 

$

1,169,924

 

 

38%

 

 

$

5,227,490

 

 

$

4,723,071

 

 

11%

Services

 

$

245,600

 

 

$

174,452

 

 

41%

 

 

$

796,815

 

 

$

639,910

 

 

25%

Total net sales

 

$

1,861,195

 

 

$

1,344,376

 

 

38%

 

 

$

6,024,305

 

 

$

5,362,981

 

 

12%

Gross profit

 

$

270,804

 

 

$

187,480

 

 

44%

 

 

$

871,114

 

 

$

732,695

 

 

19%

Gross margin

 

 

14.6

%

 

 

13.9

%

 

70 bps

 

 

 

14.5

%

 

 

13.7

%

 

80 bps

Selling and administrative expenses

 

$

211,933

 

 

$

142,453

 

 

49%

 

 

$

664,374

 

 

$

545,091

 

 

22%

Severance and restructuring expenses

 

$

1,686

 

 

$

583

 

 

> 100%

 

 

$

4,946

 

 

$

1,617

 

 

> 100%

Acquisition-related expenses

 

$

2,283

 

 

$

 

 

> 100%

 

 

$

11,342

 

 

$

282

 

 

> 100%

Earnings from operations

 

$

54,902

 

 

$

44,444

 

 

24%

 

 

$

190,452

 

 

$

185,705

 

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Mix

 

 

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

 

**

Hardware

 

 

67

%

 

 

66

%

 

42%

 

 

 

66

%

 

 

67

%

 

10%

Software

 

 

20

%

 

 

21

%

 

27%

 

 

 

21

%

 

 

21

%

 

14%

Services

 

 

13

%

 

 

13

%

 

41%

 

 

 

13

%

 

 

12

%

 

25%

 

 

 

100

%

 

 

100

%

 

38%

 

 

 

100

%

 

 

100

%

 

12%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

364,713

 

 

$

332,244

 

 

10%

 

 

$

1,376,678

 

 

$

1,390,008

 

 

(1%)

Services

 

$

36,874

 

 

$

36,147

 

 

2%

 

 

$

149,966

 

 

$

140,233

 

 

7%

Total net sales

 

$

401,587

 

 

$

368,391

 

 

9%

 

 

$

1,526,644

 

 

$

1,530,241

 

 

Gross profit

 

$

57,759

 

 

$

56,219

 

 

3%

 

 

$

227,083

 

 

$

221,467

 

 

3%

Gross margin

 

 

14.4

%

 

 

15.3

%

 

(90 bps)

 

 

 

14.9

%

 

 

14.5

%

 

40 bps

Selling and administrative expenses

 

$

47,592

 

 

$

45,087

 

 

6%

 

 

$

186,957

 

 

$

182,470

 

 

2%

Severance and restructuring expenses

 

$

6

 

 

$

132

 

 

(95%)

 

 

$

334

 

 

$

1,677

 

 

(80%)

Earnings from operations

 

$

10,161

 

 

$

11,000

 

 

(8%)

 

 

$

39,792

 

 

$

37,320

 

 

7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Mix

 

 

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

 

**

Hardware

 

 

43

%

 

 

40

%

 

16%

 

 

 

41

%

 

 

43

%

 

(5%)

Software

 

 

48

%

 

 

50

%

 

5%

 

 

 

49

%

 

 

48

%

 

2%

Services

 

 

9

%

 

 

10

%

 

2%

 

 

 

10

%

 

 

9

%

 

7%

 

 

 

100

%

 

 

100

%

 

9%

 

 

 

100

%

 

 

100

%

 

**

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.

Financial Summary Table (continued)

(dollars in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

 

2019

 

 

2018

 

 

change

 

 

2019

 

 

2018

 

 

change

APAC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

21,926

 

 

$

22,882

 

 

(4%)

 

 

$

127,953

 

 

$

136,859

 

 

(7%)

Services

 

$

12,448

 

 

$

13,397

 

 

(7%)

 

 

$

52,288

 

 

$

50,055

 

 

4%

Total net sales

 

$

34,374

 

 

$

36,279

 

 

(5%)

 

 

$

180,241

 

 

$

186,914

 

 

(4%)

Gross profit

 

$

9,419

 

 

$

10,465

 

 

(10%)

 

 

$

39,901

 

 

$

39,556

 

 

1%

Gross margin

 

 

27.4

%

 

 

28.8

%

 

(140 bps)

 

 

 

22.1

%

 

 

21.2

%

 

90 bps

Selling and administrative expenses

 

$

7,445

 

 

$

7,250

 

 

3%

 

 

$

29,406

 

 

$

28,968

 

 

2%

Severance and restructuring expenses

 

$

21

 

 

$

 

 

> 100%

 

 

$

145

 

 

$

130

 

 

12%

Earnings from operations

 

$

1,953

 

 

$

3,215

 

 

(39%)

 

 

$

10,350

 

 

$

10,458

 

 

(1%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Mix

 

 

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

 

**

Hardware

 

 

27

%

 

 

19

%

 

32%

 

 

 

19

%

 

 

16

%

 

19%

Software

 

 

37

%

 

 

44

%

 

(20%)

 

 

 

52

%

 

 

57

%

 

(13%)

Services

 

 

36

%

 

 

37

%

 

(7%)

 

 

 

29

%

 

 

27

%

 

4%

 

 

 

100

%

 

 

100

%

 

(5%)

 

 

 

100

%

 

 

100

%

 

(4%)

**

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.

FORWARD-LOOKING INFORMATION

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 2020 financial results, sales growth and Adjusted diluted earnings per share for the full year 2020, and the assumptions relating thereto, as well as the Company’s anticipated effective tax rate, capital expenditures, expected average share count, the Company’s expectations regarding cash flow, and the Company’s expectations about future benefits relating to the PCM integration, 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 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 indebtedness;
  • 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
  • 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.

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

December 31,

 

 

Twelve Months Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

2,002,234

 

 

$

1,525,050

 

 

$

6,732,121

 

 

$

6,249,938

 

Services

 

 

294,922

 

 

 

223,996

 

 

 

999,069

 

 

 

830,198

 

Total net sales

 

 

2,297,156

 

 

 

1,749,046

 

 

 

7,731,190

 

 

 

7,080,136

 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

1,809,896

 

 

 

1,392,219

 

 

 

6,125,360

 

 

 

5,711,400

 

Services

 

 

149,278

 

 

 

102,663

 

 

 

467,732

 

 

 

375,018

 

Total costs of goods sold

 

 

1,959,174

 

 

 

1,494,882

 

 

 

6,593,092

 

 

 

6,086,418

 

Gross profit

 

 

337,982

 

 

 

254,164

 

 

 

1,138,098

 

 

 

993,718

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

 

266,970

 

 

 

194,790

 

 

 

880,737

 

 

 

756,529

 

Severance and restructuring expenses, net

 

 

1,713

 

 

 

715

 

 

 

5,425

 

 

 

3,424

 

Acquisition-related expenses

 

 

2,283

 

 

 

 

 

 

11,342

 

 

 

282

 

Earnings from operations

 

 

67,016

 

 

 

58,659

 

 

 

240,594

 

 

 

233,483

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

11,897

 

 

 

5,141

 

 

 

28,478

 

 

 

21,737

 

Other (income) expense, net

 

 

(458

)

 

 

(1,194

)

 

 

400

 

 

 

(156

)

Earnings before income taxes

 

 

55,577

 

 

 

54,712

 

 

 

211,716

 

 

 

211,902

 

Income tax expense

 

 

12,627

 

 

 

7,671

 

 

 

52,309

 

 

 

48,225

 

Net earnings

 

$

42,950

 

 

$

47,041

 

 

$

159,407

 

 

$

163,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.22

 

 

$

1.33

 

 

$

4.49

 

 

$

4.60

 

Diluted

 

$

1.20

 

 

$

1.31

 

 

$

4.43

 

 

$

4.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,259

 

 

 

35,480

 

 

 

35,538

 

 

 

35,586

 

Diluted

 

 

35,755

 

 

 

35,999

 

 

 

35,959

 

 

 

36,009

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

December 31,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

114,668

 

 

$

142,655

 

Accounts receivable, net

 

 

2,511,383

 

 

 

1,931,736

 

Inventories

 

 

190,833

 

 

 

148,503

 

Other current assets

 

 

231,148

 

 

 

115,683

 

Total current assets

 

 

3,048,032

 

 

 

2,338,577

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

130,907

 

 

 

72,954

 

Goodwill

 

 

415,149

 

 

 

166,841

 

Intangible assets, net

 

 

278,584

 

 

 

112,179

 

Other assets

 

 

305,507

 

 

 

85,396

 

 

 

$

4,178,179

 

 

$

2,775,947

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable – trade

 

$

1,275,957

 

 

$

978,104

 

Accounts payable – inventory financing facilities

 

 

253,676

 

 

 

304,130

 

Accrued expenses and other current liabilities

 

 

352,204

 

 

 

253,033

 

Current portion of long-term debt

 

 

1,691

 

 

 

1,395

 

Total current liabilities

 

 

1,883,528

 

 

 

1,536,662

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

857,673

 

 

 

195,525

 

Deferred income taxes

 

 

44,633

 

 

 

683

 

Other liabilities

 

 

232,027

 

 

 

56,088

 

 

 

 

3,017,861

 

 

 

1,788,958

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

353

 

 

 

355

 

Additional paid-in capital

 

 

357,032

 

 

 

323,622

 

Retained earnings

 

 

841,097

 

 

 

704,665

 

Accumulated other comprehensive loss – foreign currency translation adjustments

 

 

(38,164

)

 

 

(41,653

)

Total stockholders’ equity

 

 

1,160,318

 

 

 

986,989

 

 

 

$

4,178,179

 

 

$

2,775,947

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Twelve Months Ended

December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

159,407

 

 

$

163,677

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

46,209

 

 

 

37,458

 

Provision for losses on accounts receivable

 

 

5,079

 

 

 

4,776

 

Non-cash stock-based compensation

 

 

16,011

 

 

 

15,355

 

Deferred income taxes

 

 

7,418

 

 

 

9,126

 

Other adjustments

 

 

11,546

 

 

 

3,929

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(118,971

)

 

 

(46,883

)

Decrease in inventories

 

 

11,944

 

 

 

46,534

 

(Increase) decrease in other assets

 

 

(129,745

)

 

 

12,424

 

(Decrease) increase in accounts payable

 

 

(612

)

 

 

29,844

 

Increase in accrued expenses and other liabilities

 

 

119,590

 

 

 

16,407

 

Net cash provided by operating activities

 

 

127,876

 

 

 

292,647

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisitions, net of cash and cash equivalents acquired

 

 

(664,287

)

 

 

(74,938

)

Purchases of property and equipment

 

 

(69,086

)

 

 

(17,251

)

Proceeds from sale of foreign entity

 

 

 

 

 

479

 

Net cash used in investing activities

 

 

(733,373

)

 

 

(91,710

)

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

 

 

1,680,515

 

 

 

 

Repayments on ABL revolving credit facility

 

 

(1,130,544

)

 

 

 

Borrowings on accounts receivable securitization financing facility

 

 

2,364,500

 

 

 

3,357,000

 

Repayments on accounts receivable securitization financing facility

 

 

(2,558,500

)

 

 

(3,188,000

)

Repayments under Term Loan A

 

 

 

 

 

(166,250

)

Net repayments under inventory financing facilities

 

 

(50,454

)

 

 

(15,338

)

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

)

 

 

 

Repurchases of treasury stock

 

 

(27,899

)

 

 

(22,069

)

Other payments

 

 

(9,396

)

 

 

(6,871

)

Net cash provided by (used in) financing activities

 

 

577,587

 

 

 

(159,028

)

Foreign currency exchange effect on cash, cash equivalents and restricted cash balances

 

 

(86

)

 

 

(5,061

)

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(27,996

)

 

 

36,848

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

144,293

 

 

 

107,445

 

Cash, cash equivalents and restricted cash at end of period

 

$

116,297

 

 

$

144,293

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Reconciliation of GAAP to non-GAAP Financial Measures

(In thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

December 31,

 

 

Twelve Months Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Adjusted Consolidated Earnings from

Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP consolidated EFO

 

$

67,016

 

 

$

58,659

 

 

$

240,594

 

 

$

233,483

 

Severance and restructuring expenses

 

 

1,713

 

 

 

715

 

 

 

5,425

 

 

 

3,424

 

Acquisition-related expenses

 

 

2,283

 

 

 

 

 

 

11,342

 

 

 

282

 

Amortization of intangible assets

 

 

9,395

 

 

 

4,338

 

 

 

22,985

 

 

 

15,737

 

Impairment of property and equipment

 

 

1,501

 

 

 

 

 

 

1,501

 

 

 

 

Adjusted non-GAAP consolidated EFO

 

$

81,908

 

 

$

63,712

 

 

$

281,847

 

 

$

252,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Consolidated Net Earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP consolidated net earnings

 

$

42,950

 

 

$

47,041

 

 

$

159,407

 

 

$

163,677

 

Severance and restructuring expenses

 

 

1,713

 

 

 

715

 

 

 

5,425

 

 

 

3,424

 

Acquisition-related expenses

 

 

2,283

 

 

 

 

 

 

11,342

 

 

 

282

 

Amortization of intangible assets

 

 

9,395

 

 

 

4,338

 

 

 

22,985

 

 

 

15,737

 

Impairment of property and equipment

 

 

1,501

 

 

 

 

 

 

1,501

 

 

 

 

Amortization of debt discount and issuance costs

 

 

2,825

 

 

 

 

 

 

4,223

 

 

 

 

Income taxes on non-GAAP adjustments

 

 

(4,485

)

 

 

(1,277

)

 

 

(10,073

)

 

 

(4,767

)

Adjusted non-GAAP consolidated net earnings

 

$

56,182

 

 

$

50,817

 

 

$

194,810

 

 

$

178,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS

 

$

1.20

 

 

$

1.31

 

 

$

4.43

 

 

$

4.55

 

Severance and restructuring expenses

 

 

0.05

 

 

 

0.02

 

 

 

0.15

 

 

 

0.09

 

Acquisition-related expenses

 

 

0.06

 

 

 

 

 

 

0.32

 

 

 

0.01

 

Amortization of intangible assets

 

 

0.27

 

 

 

0.12

 

 

 

0.64

 

 

 

0.43

 

Impairment of property and equipment

 

 

0.04

 

 

 

 

 

 

0.04

 

 

 

 

Amortization of debt discount and issuance costs

 

 

0.08

 

 

 

 

 

 

0.12

 

 

 

 

Income taxes on non-GAAP adjustments

 

 

(0.13

)

 

 

(0.04

)

 

 

(0.28

)

 

 

(0.13

)

Adjusted non-GAAP diluted EPS

 

$

1.57

 

 

$

1.41

 

 

$

5.42

 

 

$

4.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted North America Earnings from

Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EFO from North America segment

 

$

54,902

 

 

$

44,444

 

 

$

190,452

 

 

$

185,705

 

Severance and restructuring expenses

 

 

1,686

 

 

 

583

 

 

 

4,946

 

 

 

1,617

 

Acquisition-related expenses

 

 

2,283

 

 

 

 

 

 

11,342

 

 

 

282

 

Amortization of intangible assets

 

 

8,659

 

 

 

4,121

 

 

 

21,696

 

 

 

14,791

 

Impairment of property and equipment

 

 

1,501

 

 

 

 

 

 

1,501

 

 

 

 

Adjusted non-GAAP EFO from North America

segment

 

$

69,031

 

 

$

49,148

 

 

$

229,937

 

 

$

202,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EMEA Earnings from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EFO from EMEA segment

 

$

10,161

 

 

$

11,000

 

 

$

39,792

 

 

$

37,320

 

Severance and restructuring expenses

 

 

6

 

 

 

132

 

 

 

334

 

 

 

1,677

 

Amortization of intangible assets

 

 

623

 

 

 

69

 

 

 

828

 

 

 

285

 

Adjusted non-GAAP EFO from EMEA segment

 

$

10,790

 

 

$

11,201

 

 

$

40,954

 

 

$

39,282

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

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

(In thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

Adjusted APAC Earnings from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EFO from APAC segment

 

$

1,953

 

 

$

3,215

 

 

$

10,350

 

 

$

10,458

 

Severance and restructuring expenses

 

 

21

 

 

 

 

 

 

145

 

 

 

130

 

Amortization of intangible assets

 

 

113

 

 

 

148

 

 

 

461

 

 

 

661

 

Adjusted non-GAAP EFO from APAC segment

 

$

2,087

 

 

$

3,363

 

 

$

10,956

 

 

$

11,249

 

 

 

Twelve Months Ended

December 31,

 

 

 

2019

 

 

2018

 

Adjusted return on invested capital:

 

 

 

 

 

 

 

 

GAAP consolidated EFO

 

$

240,594

 

 

$

233,483

 

Severance and restructuring expenses

 

 

5,425

 

 

 

3,424

 

Acquisition-related expenses

 

 

11,342

 

 

 

282

 

Impairment of construction in progress

 

 

1,501

 

 

 

 

Adjusted non-GAAP consolidated EFO *

 

 

258,862

 

 

 

237,189

 

Income tax expense**

 

 

71,187

 

 

 

65,227

 

Adjusted non-GAAP consolidated EFO, net of tax

 

$

187,675

 

 

$

171,962

 

Average stockholders’ equity***

 

$

1,071,346

 

 

$

912,111

 

Average debt***

 

 

410,976

 

 

 

240,504

 

Average cash***

 

 

(126,956

)

 

 

(141,580

)

Invested Capital

 

$

1,355,366

 

 

$

1,011,035

 

 

 

 

 

 

 

 

 

 

Adjusted non-GAAP ROIC (from GAAP consolidated EFO) ****

 

 

12.87

%

 

 

16.74

%

Adjusted non-GAAP ROIC (from non-GAAP consolidated EFO) *****

 

 

13.85

%

 

 

17.01

%

*

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 $66,163 and $64,208 for the twelve months ended December 31, 2019 and 2018, respectively, divided by invested capital.

*****

Computed as Adjusted non-GAAP consolidated EFO, net of tax, divided by invested capital.

 

Glynis Bryan
Chief Financial Officer
Tel. 480.333.3390
Email glynis.bryan@insight.com

Helen Johnson
Senior VP, Finance
Tel. 480.333.3234
Email helen.johnson@insight.com

Source: Insight Enterprises Inc.

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Michelle Clemente
Investor Relations
480-687-6611
michelle.clemente@insight.com

Rosalind Berkley
Investor Relations
480.333.3420
Rosalind.Berkley@insight.com

Scott Walters
Media Relations
480.889.9798
scott.walters@insight.com

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