Press Release

Insight Enterprises, Inc. Reports Second Quarter 2019 Results and Increases Full Year 2019 Guidance

August 6, 2019 8:00 AM EDT

Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported financial results for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018.

  • Gross profit increased 4% to $275.4 million
  • Gross margin increased 60 basis points to 15.0%
  • Earnings from operations decreased 3% to $72.1 million
  • Adjusted earnings from operations increased 1% to $76.0 million
  • Diluted earnings per share of $1.38 decreased 4% year to year
  • Adjusted diluted earnings per share of $1.49 increased 3% year over year

In the second quarter of 2019, net sales remained flat, year to year, while gross profit increased 4% and gross margin increased 60 basis points compared to the second quarter of 2018. The increase in gross profit and gross margin primarily reflects an increase in higher margin services net sales, including cloud solutions, and higher margins on hardware net sales. Earnings from operations decreased 3% and diluted earnings per share decreased 4%, year to year, primarily as a result of acquisition-related expenses incurred in the current quarter compared to the same period in the prior year.

“In the second quarter we executed well against our strategy to deliver IT solutions to our clients globally, leading with services and solutions that drive business outcomes for our clients and result in improved profitability for our business. We also announced plans to acquire PCM, Inc. to strategically expand our scale and reach with new clients in North America and EMEA,” stated Ken Lamneck, President and Chief Executive Officer. “Our execution so far in 2019 has driven earnings results ahead of our expectations and our core business is on track to exceed our previously stated financial targets for 2019 while we also work to expeditiously close the acquisition and begin integrating PCM’s business into ours. We are excited about the opportunities to create additional value in our business as we head into the back half of 2019 and beyond,” stated Lamneck.

KEY HIGHLIGHTS

  • Consolidated net sales for the second quarter of 2019 of $1.84 billion remained flat year to year when compared to the second quarter of 2018.
    • Net sales in North America increased 3% year over year to $1.41 billion;
    • Net sales in EMEA decreased 7% year to year to $379.2 million; and
    • Net sales in APAC decreased 18% year to year to $51.3 million.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 1% year over year, with an increase in net sales in North America of 3%, year over year, partially offset by a decline in net sales in EMEA and APAC of 3% and 12%, respectively, year to year.
  • Consolidated gross profit increased 4% compared to the second quarter of 2018 to $275.4 million, with consolidated gross margin expanding 60 basis points to 15.0% of net sales.
    • Gross profit in North America increased 4% year over year to $199.1 million (14.2% gross margin);
    • Gross profit in EMEA increased 4% year over year to $64.5 million (17.0% gross margin); and
    • Gross profit in APAC was relatively flat year over year, increasing less than 1% to $11.9 million (23.3% gross margin).
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 6% year over year, with gross profit growth in North America, EMEA and APAC of 5%, 9% and 7%, respectively, year over year.
  • Consolidated earnings from operations decreased 3% compared to the second quarter of 2018 to $72.1 million, or 3.9% of net sales.
    • Earnings from operations in North America decreased 7% year to year to $50.9 million, or 3.6% of net sales;
    • Earnings from operations in EMEA increased 10% year over year to $16.6 million, or 4.4% of net sales; and
    • Earnings from operations in APAC increased 2% year over year to $4.6 million, or 9.0% of net sales.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations decreased 2% year to year, with a decline in earnings from operations in North America of 7%, year to year, partially offset by earnings from operations growth in EMEA and APAC of 14% and 8%, respectively, year over year.
  • Consolidated net earnings and diluted earnings per share for the second quarter of 2019 were $50.0 million and $1.38, respectively, at an effective tax rate of 25.9%.
  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for the second quarter of 2019 were $53.7 million and $1.49, respectively.

In discussing financial results for the three months ended June 30, 2019 and 2018 in this press release, the Company refers to certain financial measures that are not 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.

RECENT DEVELOPMENTS

On June 23, 2019, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with PCM, Inc., a Delaware corporation (“PCM”), and TROJAN Acquisition Corp., a Delaware corporation and wholly owned subsidiary (“Merger Sub”) of Insight. Pursuant to, and on the terms and subject to the conditions of, the Merger Agreement, Merger Sub will be merged with and into PCM (the “Merger”), with PCM continuing as the surviving corporation in the Merger.

On the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.001, of PCM issued and outstanding (with certain exceptions) immediately prior to the effective time will be converted into the right to receive $35.00 in cash, without interest. The Company will fund the Merger through cash on hand and borrowings under a new asset-based loan revolving credit facility.

PCM is a provider of multi-vendor technology offerings, including hardware, software and services to small, mid-sized and corporate/enterprise commercial clients, state, local and federal governments and educational institutions across the United States, Canada and the United Kingdom. Based in El Segundo, California, PCM has 40 office locations globally and more than 4,000 teammates. The Company believes that this acquisition allows them to help existing PCM clients in positioning their businesses for future growth, transforming and securing their data platforms, creating modern and mobile experiences for their workforce and optimizing the procurement of technology. The addition of PCM complements the Company’s Supply Chain Optimization solution offering, adding scale and clients in the mid-market and corporate space in North America.

The transaction is still subject to certain customary closing conditions, including regulatory approvals and approval by PCM’s shareholders, and is expected to close by the end of the third quarter of 2019.

GUIDANCE

For the full year 2019, excluding the pending acquisition of PCM, the Company expects to deliver sales growth in the low single digit range compared to 2018. The Company also expects Adjusted diluted earnings per share for the full year of 2019 to be between $4.85 and $4.95.

This outlook assumes:

  • an effective tax rate of 25% to 26% for the balance of 2019;
  • capital expenditures of $20 to $25 million for the full year; and
  • an average share count for the full year of approximately 36.2 million shares.

This outlook does not reflect the repurchase of any shares under the Company’s currently authorized share repurchase program, excludes acquisition-related expenses and excludes severance and restructuring expenses incurred during the first half of 2019 and those that may be incurred during the balance of 2019. Due to the inherent difficulty of forecasting these types of expenses, which impact net earnings and diluted earnings per share, the Company is unable to reasonably estimate the related 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.

CONFERENCE CALL AND WEB CAST

The Company will host a conference call and live web cast today at 9:00 a.m. ET to discuss second 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 13693006.

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, and (iii) the tax effects of each of these items, as applicable. 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 facility. Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, (ii) certain acquisition-related expenses, (iii) loss on sale of the Company’s Russia business, and (iv) the tax effects of each of these items, as applicable.

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 June 30,

 

Six Months Ended June 30,

   

2019

 

2018

 

change

 

2019

 

2018

 

change

Insight Enterprises, Inc.                                        
Net sales:                                        
Products  

$

1,594,335

   

$

1,618,823

   

-2%

 

$

3,061,007

   

$

3,176,615

   

-4%

Services  

$

241,686

   

$

222,047

   

9%

 

$

460,480

   

$

406,749

   

13%

Total net sales  

$

1,836,021

   

$

1,840,870

   

 

$

3,521,487

   

$

3,583,364

   

-2%

Gross profit  

$

275,449

   

$

264,377

   

4%

 

$

523,921

   

$

504,640

   

4%

Gross margin    

15

%

   

14.4

%

 

60 bps

   

14.9

%

   

14.1

%

 

80 bps

Selling and administrative expenses  

$

199,489

   

$

189,464

   

5%

 

$

390,552

   

$

377,644

   

3%

Severance and restructuring expenses  

$

680

   

$

382

   

78%

 

$

1,050

   

$

2,026

   

-48%

Acquisition-related expenses  

$

3,163

   

$

94

   

> 100%

 

$

3,163

   

$

94

   

> 100%

Earnings from operations  

$

72,117

   

$

74,437

   

-3%

 

$

129,156

   

$

124,876

   

3%

Net earnings  

$

49,998

   

$

51,479

   

-3%

 

$

89,325

   

$

84,482

   

6%

Diluted earnings per share  

$

1.38

   

$

1.44

   

-4%

 

$

2.47

   

$

2.34

   

6%

                   

 

                 

 

North America                  

 

                 

 

Net sales:                  

 

                 

 

Products  

$

1,225,666

   

$

1,205,713

   

2%

 

$

2,296,082

   

$

2,340,114

   

-2%

Services  

$

179,841

   

$

163,053

   

10%

 

$

351,866

   

$

307,032

   

15%

Total net sales  

$

1,405,507

   

$

1,368,766

   

3%

 

$

2,647,948

   

$

2,647,146

   

Gross profit  

$

199,059

   

$

190,517

   

4%

 

$

381,666

   

$

365,888

   

4%

Gross margin    

14.2

%

   

13.9

%

 

30 bps

   

14.4

%

   

13.8

%

 

60 bps

Selling and administrative expenses  

$

144,498

   

$

135,206

   

7%

 

$

281,448

   

$

267,846

   

5%

Severance and restructuring expenses  

$

480

   

$

338

   

42%

 

$

811

   

$

781

   

4%

Acquisition-related expenses  

$

3,163

   

$

94

   

> 100%

 

$

3,163

   

$

94

   

> 100%

Earnings from operations  

$

50,918

   

$

54,879

   

-7%

 

$

96,244

   

$

97,167

   

-1%

                   

 

                 

 

Sales Mix                  

**

                 

**

Hardware    

66

%

   

66

%

 

4%

   

64

%

   

67

%

 

-5%

Software    

21

%

   

22

%

 

-6%

   

23

%

   

21

%

 

8%

Services    

13

%

   

12

%

 

10%

   

13

%

   

12

%

 

15%

     

100

%

   

100

%

 

3%

   

100

%

   

100

%

 

                   

 

                 

 

EMEA                  

 

                 

 

Net sales:                  

 

                 

 

Products  

$

333,037

   

$

364,452

   

-9%

 

$

687,710

   

$

741,664

   

-7%

Services  

$

46,137

   

$

45,084

   

2%

 

$

81,639

   

$

75,006

   

9%

Total net sales  

$

379,174

   

$

409,536

   

-7%

 

$

769,349

   

$

816,670

   

-6%

Gross profit  

$

64,450

   

$

61,964

   

4%

 

$

121,433

   

$

118,014

   

3%

Gross margin    

17

%

   

15.1

%

 

190 bps

   

15.8

%

   

14.5

%

 

130 bps

Selling and administrative expenses  

$

47,652

   

$

46,894

   

2%

 

$

94,797

   

$

95,177

   

Severance and restructuring expenses  

$

200

   

$

41

   

> 100%

 

$

115

   

$

1,115

   

-90%

Earnings from operations  

$

16,598

   

$

15,029

   

10%

 

$

26,521

   

$

21,722

   

22%

                   

 

                 

 

Sales Mix                  

**

                 

**

Hardware    

38

%

   

42

%

 

-17%

   

41

%

   

44

%

 

-12%

Software    

50

%

   

47

%

 

-2%

   

48

%

   

47

%

 

-3%

Services    

12

%

   

11

%

 

2%

   

11

%

   

9

%

 

9%

     

100

%

   

100

%

 

-7%

   

100

%

   

100

%

 

-6%

                   

 

                 

 

APAC                  

 

                 

 

Net sales:                  

 

                 

 

Products  

$

35,632

   

$

48,658

   

-27%

 

$

77,215

   

$

94,837

   

-19%

Services  

$

15,708

   

$

13,910

   

13%

 

$

26,975

   

$

24,711

   

9%

Total net sales  

$

51,340

   

$

62,568

   

-18%

 

$

104,190

   

$

119,548

   

-13%

Gross profit  

$

11,940

   

$

11,896

   

 

$

20,822

   

$

20,738

   

Gross margin    

23.3

%

   

19

%

 

430 bps

   

20

%

   

17.3

%

 

270 bps

Selling and administrative expenses  

$

7,339

   

$

7,364

   

 

$

14,307

   

$

14,621

   

-2%

Severance and restructuring expenses  

$

   

$

3

   

*

 

$

124

   

$

130

   

-5%

Earnings from operations  

$

4,601

   

$

4,529

   

2%

 

$

6,391

   

$

5,987

   

7%

                   

 

                 

 

Sales Mix                  

**

                 

**

Hardware    

19

%

   

15

%

 

7%

   

16

%

   

14

%

 

Software    

50

%

   

63

%

 

-35%

   

58

%

   

65

%

 

-23%

Services    

31

%

   

22

%

 

13%

   

26

%

   

21

%

 

9%

     

100

%

   

100

%

 

-18%

   

100

%

   

100

%

 

-13%

**

 

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 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 under the Company’s currently authorized share repurchase program, the Company’s expectations regarding cash flow, and the Company’s expectations about future benefits and timing 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 the Company’s competitors, including manufacturers and publishers of products the Company sells;
  • the Company’s reliance on partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and the requirements year over year;
  • changes in the information technology (“IT”) industry and/or rapid changes in technology;
  • risks associated with the integration and operation of acquired businesses;
  • possible significant fluctuations in the Company’s future operating results;
  • the risks associated with the Company’s international operations;
  • general economic conditions;
  • increased debt and interest expense and decreased availability of funds under the Company’s financing facilities;
  • the security of the Company’s electronic and other confidential information;
  • disruptions in the Company’s IT systems and voice and data networks;
  • failure to comply with the terms and conditions of the Company’s commercial and public sector contracts;
  • legal proceedings and the results of client and public sector audits and failure to comply with laws and regulations;
  • accounts receivable risks, including increased credit loss experience or extended payment terms with the Company’s clients;
  • the Company’s reliance on independent shipping companies;
  • the Company’s dependence on certain key personnel;
  • natural disasters or other adverse occurrences;
  • exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;
  • intellectual property infringement claims and challenges to the Company’s registered trademarks and trade names;
  • the Company’s failure to obtain the financing anticipated to consummate the pending merger with PCM;
  • the Company’s failure to consummate or delays in the consummation of the pending merger with PCM for other reasons;
  • timing to consummate the PCM merger;
  • risk that a condition to the PCM merger, including the receipt of any required regulatory approvals, may not be satisfied or waived;
  • failure of PCM’s stockholders to approve the merger;
  • unexpected costs or liabilities in connection with the consummation of the merger;
  • the Company’s inability to achieve expected synergies and operating efficiencies as a result of the merger with 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 transaction, which may be lower than expected;
  • operating costs, customer loss and business disruptions arising from the PCM merger and the pendency or consummation thereof (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers), which may be greater than expected;
  • uncertainties surrounding the transaction;
  • the outcome of any legal proceedings related to the transaction;
  • other adverse economic, business, and/or competitive factors;
  • risks that the pending merger with 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; and
  • other risks to consummation of the transaction, including circumstances that could give rise to the termination of the merger agreement and the risk that the transaction will not be consummated within the expected time period, without undue delay, cost or expense, or at all.

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

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

1,594,335

 

 

$

1,618,823

 

 

$

3,061,007

 

 

$

3,176,615

 

Services

 

 

241,686

 

 

 

222,047

 

 

 

460,480

 

 

 

406,749

 

Total net sales

 

 

1,836,021

 

 

 

1,840,870

 

 

 

3,521,487

 

 

 

3,583,364

 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

1,458,916

 

 

 

1,488,387

 

 

 

2,796,224

 

 

 

2,903,373

 

Services

 

 

101,656

 

 

 

88,106

 

 

 

201,342

 

 

 

175,351

 

Total costs of goods sold

 

 

1,560,572

 

 

 

1,576,493

 

 

 

2,997,566

 

 

 

3,078,724

 

Gross profit

 

 

275,449

 

 

 

264,377

 

 

 

523,921

 

 

 

504,640

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

 

199,489

 

 

 

189,464

 

 

 

390,552

 

 

 

377,644

 

Severance and restructuring expenses

 

 

680

 

 

 

382

 

 

 

1,050

 

 

 

2,026

 

Acquisition-related expenses

 

 

3,163

 

 

 

94

 

 

 

3,163

 

 

 

94

 

Earnings from operations

 

 

72,117

 

 

 

74,437

 

 

 

129,156

 

 

 

124,876

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(266

)

 

 

(170

)

 

 

(537

)

 

 

(323

)

Interest expense

 

 

4,601

 

 

 

5,102

 

 

 

9,424

 

 

 

11,117

 

Net foreign currency exchange (gain) loss

 

 

(330

)

 

 

(275

)

 

 

381

 

 

 

(520

)

Other expense, net

 

 

676

 

 

 

324

 

 

 

1,015

 

 

 

626

 

Earnings before income taxes

 

 

67,436

 

 

 

69,456

 

 

 

118,873

 

 

 

113,976

 

Income tax expense

 

 

17,438

 

 

 

17,977

 

 

 

29,548

 

 

 

29,494

 

Net earnings

 

$

49,998

 

 

$

51,479

 

 

$

89,325

 

 

$

84,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.40

 

 

$

1.45

 

 

$

2.50

 

 

$

2.37

 

Diluted

 

$

1.38

 

 

$

1.44

 

 

$

2.47

 

 

$

2.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,772

 

 

 

35,483

 

 

 

35,691

 

 

 

35,698

 

Diluted

 

 

36,111

 

 

 

35,815

 

 

 

36,107

 

 

 

36,039

 

                                 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

             

 

 

June 30,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,077

 

 

$

142,655

 

Accounts receivable, net

 

 

2,284,922

 

 

 

1,931,736

 

Inventories

 

 

179,577

 

 

 

148,503

 

Other current assets

 

 

110,850

 

 

 

115,683

 

Total current assets

 

 

2,687,426

 

 

 

2,338,577

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

73,766

 

 

 

72,954

 

Goodwill

 

 

166,392

 

 

 

166,841

 

Intangible assets, net

 

 

104,859

 

 

 

112,179

 

Deferred income taxes

 

 

6,638

 

 

 

7,967

 

Other assets

 

 

246,916

 

 

 

77,429

 

 

 

$

3,285,997

 

 

$

2,775,947

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable – trade

 

$

1,426,158

 

 

$

978,104

 

Accounts payable – inventory financing facility

 

 

260,890

 

 

 

304,130

 

Accrued expenses and other current liabilities

 

 

190,474

 

 

 

190,733

 

Current portion of long-term debt

 

 

1,421

 

 

 

1,395

 

Deferred revenue

 

 

70,019

 

 

 

62,300

 

Total current liabilities

 

 

1,948,962

 

 

 

1,536,662

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

45,930

 

 

 

195,525

 

Deferred income taxes

 

 

524

 

 

 

683

 

Other liabilities

 

 

210,998

 

 

 

56,088

 

 

 

 

2,206,414

 

 

 

1,788,958

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

358

 

 

 

355

 

Additional paid-in capital

 

 

325,263

 

 

 

323,622

 

Retained earnings

 

 

793,990

 

 

 

704,665

 

Accumulated other comprehensive loss – foreign currency translation adjustments

 

 

(40,028

)

 

 

(41,653

)

Total stockholders’ equity

 

 

1,079,583

 

 

 

986,989

 

 

 

$

3,285,997

 

 

$

2,775,947

 

                 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

       

 

 

Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

89,325

 

 

$

84,482

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

9,982

 

 

 

10,712

 

Amortization of intangible assets

 

 

7,644

 

 

 

7,214

 

Provision for losses on accounts receivable

 

 

2,346

 

 

 

1,336

 

Write-downs of inventories

 

 

2,350

 

 

 

1,396

 

Write-off of property and equipment

 

 

 

 

 

309

 

Non-cash stock-based compensation

 

 

7,797

 

 

 

7,047

 

Deferred income taxes

 

 

1,180

 

 

 

2,020

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(354,717

)

 

 

(287,191

)

(Increase) decrease in inventories

 

 

(33,359

)

 

 

18,281

 

(Increase) decrease in other assets

 

 

(93,714

)

 

 

16,717

 

Increase in accounts payable

 

 

448,682

 

 

 

450,471

 

Increase in deferred revenue

 

 

8,153

 

 

 

13,733

 

Increase in accrued expenses and other liabilities

 

 

86,869

 

 

 

24,428

 

Net cash provided by operating activities

 

 

182,538

 

 

 

350,955

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(10,584

)

 

 

(10,644

)

Acquisitions, net of cash and cash equivalents acquired

 

 

(3,362

)

 

 

 

Net cash used in investing activities

 

 

(13,946

)

 

 

(10,644

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings on senior revolving credit facility

 

 

89,936

 

 

 

280,184

 

Repayments on senior revolving credit facility

 

 

(89,936

)

 

 

(397,684

)

Borrowings on accounts receivable securitization financing facility

 

 

1,919,500

 

 

 

1,696,500

 

Repayments on accounts receivable securitization financing facility

 

 

(2,068,500

)

 

 

(1,721,500

)

Repayments under Term Loan A

 

 

 

 

 

(6,563

)

Repayments under other financing agreements

 

 

 

 

 

(1,835

)

Payments on finance lease obligations

 

 

(603

)

 

 

(580

)

Net repayments under inventory financing facility

 

 

(43,240

)

 

 

(15,766

)

Payment of debt issuance costs

 

 

 

 

 

(270

)

Payment of payroll taxes on stock-based compensation through shares withheld

 

 

(6,154

)

 

 

(2,925

)

Repurchases of common stock

 

 

 

 

 

(22,069

)

Net cash used in financing activities

 

 

(198,997

)

 

 

(192,508

)

Foreign currency exchange effect on cash, cash equivalents and

restricted cash balances

 

 

(183

)

 

 

(5,541

)

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

 

 

(30,588

)

 

 

142,262

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

144,293

 

 

 

107,445

 

Cash, cash equivalents and restricted cash at end of period

 

$

113,705

 

 

$

249,707

 

                 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(unaudited)

             

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Adjusted Consolidated Earnings from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP consolidated EFO

 

$

72,117

 

 

$

74,437

 

 

$

129,156

 

 

$

124,876

 

Severance and restructuring expenses

 

 

680

 

 

 

382

 

 

 

1,050

 

 

 

2,026

 

Acquisition-related expenses

 

$

3,163

 

 

 

94

 

 

$

3,163

 

 

 

94

 

Adjusted non-GAAP consolidated EFO

 

$

75,960

 

 

$

74,913

 

 

$

133,369

 

 

$

126,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Consolidated Net Earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP consolidated net earnings

 

$

49,998

 

 

$

51,479

 

 

$

89,325

 

 

$

84,482

 

Severance and restructuring expenses

 

 

680

 

 

 

382

 

 

 

1,050

 

 

 

2,026

 

Acquisition-related expenses

 

 

3,163

 

 

 

94

 

 

 

3,163

 

 

 

94

 

Income taxes on non-GAAP adjustments

 

 

(124

)

 

 

(117

)

 

 

(210

)

 

 

(408

)

Adjusted non-GAAP consolidated net earnings

 

$

53,717

 

 

$

51,838

 

 

$

93,328

 

 

$

86,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS

 

$

1.38

 

 

$

1.44

 

 

$

2.47

 

 

$

2.34

 

Severance and restructuring expenses

 

 

0.02

 

 

 

0.01

 

 

 

0.03

 

 

 

0.05

 

Acquisition-related expenses

 

 

0.09

 

 

 

 

 

 

0.09

 

 

 

 

Income taxes on non-GAAP adjustments

 

 

 

 

 

 

 

 

(0.01

)

 

 

(0.01

)

Adjusted non-GAAP diluted EPS

 

$

1.49

 

 

$

1.45

 

 

$

2.58

 

 

$

2.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted North America Earnings from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EFO from North America segment

 

$

50,918

 

 

$

54,879

 

 

$

96,244

 

 

$

97,167

 

Severance and restructuring expenses

 

 

480

 

 

 

338

 

 

 

811

 

 

 

781

 

Acquisition-related expenses

 

 

3,163

 

 

 

94

 

 

 

3,163

 

 

 

94

 

Adjusted non-GAAP EFO from North America segment

 

$

54,561

 

 

$

55,311

 

 

$

100,218

 

 

$

98,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EMEA Earnings from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EFO from EMEA segment

 

$

16,598

 

 

$

15,029

 

 

$

26,521

 

 

$

21,722

 

Severance and restructuring expenses

 

 

200

 

 

 

41

 

 

 

115

 

 

 

1,115

 

Adjusted non-GAAP EFO from EMEA segment

 

$

16,798

 

 

$

15,070

 

 

$

26,636

 

 

$

22,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted APAC Earnings from Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EFO from APAC segment

 

$

4,601

 

 

$

4,529

 

 

$

6,391

 

 

$

5,987

 

Severance and restructuring expenses

 

 

 

 

 

3

 

 

 

124

 

 

 

130

 

Adjusted non-GAAP EFO from APAC segment

 

$

4,601

   

$

4,532

   

$

6,515

   

$

6,117

 

                                 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

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

(In thousands, except per share data)

(unaudited)

       
   

Six Months Ended

 

June 30,

   

2019

 

 

2018

 
Adjusted free cash flow:                
Net cash provided by operating activities  

$

182,538

   

$

350,955

 
Purchases of property and equipment    

(10,584

)

   

(10,644

)

Net repayments under inventory financing facility    

(43,240

)

   

(15,766

)

Adjusted non-GAAP free cash flow  

$

128,714

   

$

324,545

 
                 
   

Twelve Months Ended

 

June 30,

   

2019

 

 

2018

 
Adjusted return on invested capital:                
GAAP consolidated EFO  

$

237,762

   

$

211,859

 
     

 

     

 

 
Loss on sale of foreign entity          

3,646

 
Acquisition-related expenses    

3,351

     

200

 
Adjusted non-GAAP consolidated EFO    

243,561

     

221,016

 
Income tax expense*    

66,979

     

60,779

 
Adjusted non-GAAP consolidated EFO, net of tax  

$

176,582

   

$

160,237

 
Average stockholders’ equity**  

$

988,509

   

$

848,766

 
Average debt**    

157,833

     

317,500

 
Average cash**    

(147,748

)

   

(177,077

)

Invested Capital  

$

998,594

   

$

989,189

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

17.26

%

   

15.53

%

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

17.68

%

   

16.2

%

*

 

Assumed tax rate of 27.5% for 2019 and 2018.

**

 

Average of previous five quarters.

***

 

Computed as GAAP consolidated EFO, net of tax of $65,384 and $58,261 for the twelve months ended June 30, 2019 and 2018, respectively, divided by invested capital.

****

 

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

Contacts

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