CHANDLER, Ariz.–(BUSINESS WIRE)–Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported financial results for the quarter ended March 31, 2022. Highlights include:

  • Net sales increased 21% year over year to a record $2.65 billion
  • Gross profit increased 14% year over year to $378.9 million
  • Earnings from operations increased 19% year over year to $79.8 million
  • Adjusted earnings from operations increased 31% year over year to $89.6 million
  • Diluted earnings per share of $1.53 increased 30% year over year
  • Adjusted diluted earnings per share of $1.81 increased 39% year over year

In the first quarter of 2022, net sales increased 21%, year over year. Gross profit increased 14% while gross margin contracted 80 basis points to 14.3% compared to the first quarter of 2021. Earnings from operations of $79.8 million increased 19% compared to $67.0 million in the first quarter of 2021. Adjusted earnings from operations of $89.6 million increased 31% compared to $68.3 million in the first quarter of 2021. Diluted earnings per share for the quarter was $1.53, up 30%, year over year, and Adjusted diluted earnings per share was $1.81, up 39% year over year.

“I am very pleased with our performance in the quarter as we delivered a record Q1 for revenue, gross profit and Adjusted diluted earnings per share,” stated Joyce Mullen, President and Chief Executive Officer. “With supply constraints somewhat easing for devices, we recorded higher than expected hardware net sales and product demand remained healthy,” stated Mullen.

KEY HIGHLIGHTS

Results for the Quarter:

  • Consolidated net sales for the first quarter of 2022 of $2.65 billion increased 21%, year over year, when compared to the first quarter of 2021. Product net sales increased 22% year over year and services net sales increased 14%, year over year.

    • Net sales in North America increased 25%, year over year, to $2.06 billion;

      • Product net sales increased 26%, year over year, to $1.79 billion;
      • Services net sales increased 15%, year over year, to $271.6 million;
    • Net sales in EMEA increased 11%, year over year, to $531.4 million; and
    • Net sales in APAC decreased 8%, year to year, to $54.9 million.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales were up 22%, year over year, with growth in net sales in North America and EMEA of 25% and 17%, respectively, year over year, offset by a decline in APAC of 3%, year to year.
  • Consolidated gross profit increased to $378.9 million, an increase of 14% compared to the first quarter of 2021, with consolidated gross margin contracting 80 basis points to 14.3% of net sales. Product gross profit increased 18%, year over year and services gross profit increased 10%, year over year.

    • Gross profit in North America increased 18%, year over year, to $300.1 million (14.5% gross margin);
    • Gross profit in EMEA decreased 2%, year to year, to $64.8 million (12.2% gross margin); and
    • Gross profit in APAC increased 17%, year over year, to $14.0 million (25.5% gross margin).
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit was up 16%, year over year, with gross profit growth in North America, EMEA and APAC of 18%, 3% and 23%, respectively, year over year.
  • Consolidated earnings from operations increased 19% compared to the first quarter of 2021 to $79.8 million, or 3.0% of net sales.

    • Earnings from operations in North America increased 20%, year over year, to $64.6 million, or 3.1% of net sales;
    • Earnings from operations in EMEA increased 13%, year over year, to $11.4 million, or 2.1% of net sales; and
    • Earnings from operations in APAC increased 30%, year over year, to $3.9 million, or 7.1% of net sales.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations were up 20%, year over year, with increased earnings from operations in North America, EMEA and APAC of 20%, 17% and 34%, respectively, year over year.
  • Adjusted earnings from operations increased 31% compared to the first quarter of 2021 to $89.6 million, or 3.4% of net sales.

    • Adjusted earnings from operations in North America increased 34%, year over year, to $72.6 million, or 3.5% of net sales;
    • Adjusted earnings from operations in EMEA increased 16%, year over year, to $12.9 million, or 2.4% of net sales; and
    • Adjusted earnings from operations in APAC increased 28%, year over year, to $4.0 million, or 7.3% of net sales.
  • Consolidated net earnings and diluted earnings per share for the first quarter of 2022 were $56.6 million and $1.53, respectively, at an effective tax rate of 24.1%.
  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for the first quarter of 2022 were $63.9 million and $1.81, respectively.

In discussing financial results for the three months ended March 31, 2022 and 2021 in this press release, the Company refers to certain financial measures that are adjusted from the financial results prepared in accordance with United States generally accepted accounting principles (“GAAP”). When referring to non-GAAP measures, the Company refers to them as “Adjusted.” See “Use of Non-GAAP Financial Measures” for additional information. A tabular reconciliation of financial measures prepared in accordance with GAAP to the non-GAAP financial measures is included at the end of this press release.

In some instances, the Company refers to changes in net sales, gross profit and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates. In computing these changes and percentages, the Company compares the current year amount as translated into U.S. dollars under the applicable accounting standards to the prior year amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

The tax effect of Adjusted amounts referenced herein were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

GUIDANCE

For the full year 2022, the Company expects to deliver low double digit net sales growth and Adjusted diluted earnings per share is expected to be between $7.95 and $8.15.

This outlook assumes

  • interest expense between $30 and $35 million;
  • an effective tax rate of 24% to 25% for the full year 2022;
  • capital expenditures of $65 to $70 million including final completion of our new corporate headquarters; and
  • an average share count for the full year of 35.6 million shares.

This outlook excludes acquisition-related intangibles amortization expense of approximately $31 million, assumes no acquisition-related or severance and restructuring expenses, and no significant change in our debt instruments or the macro economic outlook. Due to the inherent difficulty of forecasting some of these types of expenses, which impact net earnings, diluted earnings per share and selling and administrative expenses, the Company is unable to reasonably estimate the impact of such expenses, if any, to net earnings, diluted earnings per share and selling and administrative expenses. Accordingly, the Company is unable to provide a reconciliation of GAAP to non-GAAP diluted earnings per share for the full year 2022 forecast.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 9:00 a.m. ET to discuss first quarter 2022 results of operations. A live web cast of the conference call (in listen-only mode) will be available on the Company’s web site at http://investor.insight.com/, and a replay of the web cast will be available on the Company’s web site for a limited time following the call. To access the live conference call, please register in advance using this event link. Upon registering, participants will receive dial-in information via email, as well as a unique registrant ID, event passcode, and detailed instructions regarding how to join the call.

USE OF NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures are referred to as “Adjusted”. Adjusted earnings from operations, Adjusted net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, (iii) amortization of intangible assets, and (iv) the tax effects of each of these items, as applicable. Adjusted net earnings and Adjusted diluted earnings per share for the three months ended March 31, 2021 also exclude amortization of debt discount and issuance costs associated with the issuance of the Company’s convertible senior notes due 2025. Effective January 1, 2022, the Company adopted ASU 2020-06 and no longer records amortization of debt discount associated with the convertible senior notes. The Company excludes these items when internally evaluating earnings from operations, tax expense, net earnings and diluted earnings per share for the Company and earnings from operations for each of the Company’s operating segments. Adjusted diluted earnings per share also includes the impact of the benefit from the note hedge where the Company’s average stock price for the first quarter of 2022 was in excess of $68.32, which is the initial conversion price of the convertible senior notes. Adjusted EBITDA includes (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization of property and equipment, (iv) amortization of intangibles, (v) non-cash stock based compensation, (vi) severance and restructuring expenses and (vii) certain executive recruitment and hiring related expenses. Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, (ii) certain executive recruitment and hiring related expenses, and (iii) the tax effects of each of these items, as applicable. Adjusted ROIC for the three months ended March 31, 2021 also excludes (i) certain acquisition and integration related expenses, (ii) impairment of construction in progress, (iii) loss on sale of property, (iv) litigation settlement proceeds, and (v) the tax effects of each of these items, as applicable.

These non-GAAP measures are used by the Company and its management to evaluate financial performance against budgeted amounts, to calculate incentive compensation, to assist in forecasting future performance and to compare the Company’s results to those of the Company’s competitors. The Company believes that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and the Company’s competitors’ results and assist in forecasting performance for future periods. These non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

FINANCIAL SUMMARY TABLE

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

 

Three Months Ended March 31,

 

 

2022

 

2021

 

change

Insight Enterprises, Inc.

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

Products

 

$

2,310,287

 

 

$

1,893,020

 

 

22

%

Services

 

$

340,563

 

 

$

300,048

 

 

14

%

Total net sales

 

$

2,650,850

 

 

$

2,193,068

 

 

21

%

Gross profit

 

$

378,861

 

 

$

331,474

 

 

14

%

Gross margin

 

 

14.3

%

 

 

15.1

%

 

(80 bps)

Selling and administrative expenses

 

$

297,640

 

 

$

271,190

 

 

10

%

Severance and restructuring expenses

 

$

1,372

 

 

$

(6,740

)

 

> 100%

Earnings from operations

 

$

79,849

 

 

$

67,024

 

 

19

%

Net earnings

 

$

56,631

 

 

$

43,168

 

 

31

%

Diluted earnings per share

 

$

1.53

 

 

$

1.18

 

 

30

%

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

Products

 

$

1,792,866

 

 

$

1,418,227

 

 

26

%

Services

 

$

271,639

 

 

$

236,554

 

 

15

%

Total net sales

 

$

2,064,505

 

 

$

1,654,781

 

 

25

%

Gross profit

 

$

300,084

 

 

$

253,489

 

 

18

%

Gross margin

 

 

14.5

%

 

 

15.3

%

 

(80 bps)

Selling and administrative expenses

 

$

235,220

 

 

$

206,806

 

 

14

%

Severance and restructuring expenses

 

$

304

 

 

$

(7,238

)

 

> 100%

Earnings from operations

 

$

64,560

 

 

$

53,921

 

 

20

%

 

 

 

 

 

 

 

Sales Mix

 

 

 

 

 

**

Hardware

 

 

70

%

 

 

67

%

 

31

%

Software

 

 

17

%

 

 

19

%

 

11

%

Services

 

 

13

%

 

 

14

%

 

15

%

 

 

 

100

%

 

 

100

%

 

25

%

 

 

 

 

 

 

 

EMEA

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

Products

 

$

483,025

 

 

$

430,394

 

 

12

%

Services

 

$

48,408

 

 

$

48,442

 

 

 

Total net sales

 

$

531,433

 

 

$

478,836

 

 

11

%

Gross profit

 

$

64,770

 

 

$

66,035

 

 

(2

%)

Gross margin

 

 

12.2

%

 

 

13.8

%

 

(160 bps)

Selling and administrative expenses

 

$

52,326

 

 

$

55,447

 

 

(6

%)

Severance and restructuring expenses

 

$

1,068

 

 

$

498

 

 

> 100%

Earnings from operations

 

$

11,376

 

 

$

10,090

 

 

13

%

 

 

 

 

 

 

 

Sales Mix

 

 

 

 

 

**

Hardware

 

 

40

%

 

 

41

%

 

7

%

Software

 

 

51

%

 

 

49

%

 

16

%

Services

 

 

9

%

 

 

10

%

 

 

 

 

 

100

%

 

 

100

%

 

11

%

APAC

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

Products

 

$

34,396

 

 

$

44,399

 

 

(23

)%

Services

 

$

20,516

 

 

$

15,052

 

 

36

%

Total net sales

 

$

54,912

 

 

$

59,451

 

 

(8

)%

Gross profit

 

$

14,007

 

 

$

11,950

 

 

17

%

Gross margin

 

 

25.5

%

 

 

20.1

%

 

540 bps

Selling and administrative expenses

 

$

10,094

 

 

$

8,937

 

 

13

%

Severance and restructuring expenses

 

$

 

 

$

 

 

 

Earnings from operations

 

$

3,913

 

 

$

3,013

 

 

30

%

 

 

 

 

 

 

 

Sales Mix

 

 

 

 

 

**

Hardware

 

 

21

%

 

 

16

%

 

22

%

Software

 

 

42

%

 

 

59

%

 

(35

)%

Services

 

 

37

%

 

 

25

%

 

36

%

 

 

 

100

%

 

 

100

%

 

(8

)%

**

Change in sales mix represents growth/decline in category net sales on a U.S. dollar basis and does not exclude the effects of fluctuating foreign currency exchange rates

.

FORWARD-LOOKING INFORMATION

Certain statements in this release and the related conference call, web cast and presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including those related to the Company’s future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on the Company, the Company’s future financial performance and results of operations, including net sales growth, Adjusted diluted earnings per share, Adjusted selling and administrative expenses, the Company’s anticipated effective tax rate, capital expenditures, expected average share count, the Company’s expectations that note holders will not convert the Company’s convertible senior notes in the near term, the Company’s expectations regarding cash flow, the Company’s expectations regarding current supply constraints pipeline, and shipment of backlog, future trends in the IT market, the Company’s business strategy and strategic initiatives are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. There can be no assurances that the results discussed by the forward-looking statements will be achieved, and actual results may differ materially from those set forth in the forward-looking statements. Some of the important factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following, which are discussed in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021:

  • actions of the Company’s competitors, including manufacturers and publishers of products the Company sells;
  • the Company’s reliance on its partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and in the requirements year over year;
  • the Company’s ability to keep pace with rapidly evolving technological advances and the evolving competitive marketplace;
  • the duration and severity of the COVID-19 pandemic and its effects on the Company’s business, results of operations and financial condition, as well as the widespread outbreak of any other illnesses or communicable diseases;
  • general economic conditions, economic uncertainties and changes in geopolitical conditions;
  • changes in the IT industry and/or rapid changes in technology;
  • supply constraints for hardware, including devices;
  • accounts receivable risks, including increased credit loss experience or extended payment terms with the Company’s clients;
  • the Company’s reliance on independent shipping companies;
  • the risks associated with the Company’s international operations;
  • natural disasters or other adverse occurrences;
  • disruptions in the Company’s IT systems and voice and data networks;
  • cyberattacks or breaches of data privacy and security regulations;
  • intellectual property infringement claims and challenges to the Company’s registered trademarks and trade names;
  • legal proceedings, client audits and failure to comply with laws and regulations;
  • failure to comply with the terms and conditions of the Company’s commercial and public sector contracts;
  • exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;
  • the Company’s potential to draw down a substantial amount of indebtedness;
  • the conditional conversion feature of the Company’s convertible senior notes, which has been triggered, may adversely affect the Company’s financial condition and operating results;
  • the Company is subject to counterparty risk with respect to certain hedge and warrant transactions entered into in connection with the issuance of the convertible senior notes;
  • risks associated with the discontinuation of LIBOR as a benchmark rate;
  • increased debt and interest expense and decreased availability of funds under the Company’s financing facilities;
  • possible significant fluctuations in the Company’s future operating results as well as seasonality and variability in client demands;
  • the Company’s dependence on certain key personnel and the Company’s ability to attract, train and retain skilled teammates;
  • risks associated with the integration and operation of acquired businesses, including the achievement of expected synergies and benefits; and
  • future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock.

Additionally, there may be other risks that are otherwise described from time to time in the reports that the Company files with the SEC. Any forward-looking statements in this release, the related conference call, webcast and presentation speak only as of the date on which they are made and should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. The Company assumes no obligation to update, and, except as may be required by law, does not intend to update, any forward-looking statements. The Company does not endorse any projections regarding future performance that may be made by third parties. NSIT-F

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

Three Months Ended

March 31,

 

2022

 

2021

Net sales:

 

 

 

Products

$

2,310,287

 

 

$

1,893,020

 

Services

 

340,563

 

 

 

300,048

 

Total net sales

 

2,650,850

 

 

 

2,193,068

 

Costs of goods sold:

 

 

 

Products

 

2,107,209

 

 

 

1,721,258

 

Services

 

164,780

 

 

 

140,336

 

Total costs of goods sold

 

2,271,989

 

 

 

1,861,594

 

Gross profit

 

378,861

 

 

 

331,474

 

Operating expenses:

 

 

 

Selling and administrative expenses

 

297,640

 

 

 

271,190

 

Severance and restructuring expenses, net

 

1,372

 

 

 

(6,740

)

Earnings from operations

 

79,849

 

 

 

67,024

 

Non-operating (income) expense:

 

 

 

Interest expense, net

 

8,068

 

 

 

9,969

 

Other (income) expense, net

 

(2,843

)

 

 

388

 

Earnings before income taxes

 

74,624

 

 

 

56,667

 

Income tax expense

 

17,993

 

 

 

13,499

 

Net earnings

$

56,631

 

 

$

43,168

 

 

 

 

 

Net earnings per share:

 

 

 

Basic

$

1.62

 

 

$

1.23

 

Diluted

$

1.53

 

 

$

1.18

 

 

 

 

 

Shares used in per share calculations:

 

 

 

Basic

 

34,974

 

 

 

35,199

 

Diluted

 

36,981

 

 

 

36,699

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In THOUSANDS)

(UNAUDITED)

 

March 31,

2022

 

December

31, 2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

114,758

 

 

$

103,840

 

Accounts receivable, net

 

3,025,699

 

 

 

2,936,732

 

Inventories

 

383,401

 

 

 

328,101

 

Other current assets

 

244,383

 

 

 

199,638

 

Total current assets

$

3,768,241

 

 

$

3,568,311

 

 

 

 

 

Property and equipment, net

 

189,722

 

 

 

176,263

 

Goodwill

 

429,215

 

 

 

428,346

 

Intangible assets, net

 

207,116

 

 

 

214,788

 

Other assets

 

255,494

 

 

 

301,372

 

 

$

4,849,788

 

 

$

4,689,080

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable – trade

$

1,623,651

 

 

$

1,779,854

 

Accounts payable – inventory financing facilities

 

318,433

 

 

 

311,878

 

Accrued expenses and other current liabilities

 

390,703

 

 

 

423,489

 

Current portion of long-term debt

 

344,903

 

 

 

36

 

Total current liabilities

 

2,677,690

 

 

 

2,515,257

 

 

 

 

 

Long-term debt

 

373,018

 

 

 

361,570

 

Deferred income taxes

 

36,631

 

 

 

47,073

 

Other liabilities

 

223,258

 

 

 

255,953

 

 

 

3,310,597

 

 

 

3,179,853

 

Stockholders’ equity:

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

351

 

 

 

349

 

Additional paid-in capital

 

321,959

 

 

 

368,282

 

Retained earnings

 

1,242,110

 

 

 

1,167,690

 

Accumulated other comprehensive loss – foreign currency translation adjustments

 

(25,229

)

 

 

(27,094

)

Total stockholders’ equity

 

1,539,191

 

 

 

1,509,227

 

 

$

4,849,788

 

 

$

4,689,080

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

 

Three Months Ended

March 31,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net earnings

$

56,631

 

 

$

43,168

 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

 

 

 

Depreciation and amortization

 

13,314

 

 

 

14,222

 

Provision for losses on accounts receivable

 

1,031

 

 

 

2,178

 

Non-cash stock-based compensation

 

5,007

 

 

 

4,716

 

Deferred income taxes

 

(1,715

)

 

 

643

 

Amortization of debt discount and issuance costs

 

1,623

 

 

 

4,172

 

Other adjustments

 

(106

)

 

 

(7,617

)

Changes in assets and liabilities:

 

 

 

(Increase) decrease in accounts receivable

 

(103,326

)

 

 

93,485

 

Increase in inventories

 

(57,876

)

 

 

(67,946

)

Decrease in other assets

 

4,111

 

 

 

16,759

 

Decrease in accounts payable

 

(137,144

)

 

 

(25,315

)

Decrease in accrued expenses and other liabilities

 

(65,789

)

 

 

(35,759

)

Net cash (used in) provided by operating activities

 

(284,239

)

 

 

42,706

 

Cash flows from investing activities:

 

 

 

Proceeds from sale of assets

 

 

 

 

27,211

 

Purchases of property and equipment

 

(25,745

)

 

 

(7,847

)

Net cash (used in) provided by investing activities

 

(25,745

)

 

 

19,364

 

Cash flows from financing activities:

 

 

 

Borrowings on ABL revolving credit facility

 

1,151,440

 

 

 

897,848

 

Repayments on ABL revolving credit facility

 

(831,440

)

 

 

(921,848

)

Net borrowings (repayments) under inventory financing facilities

 

6,692

 

 

 

(17,782

)

Other payments

 

(6,738

)

 

 

(7,485

)

Net cash provided by (used in) financing activities

 

319,954

 

 

 

(49,267

)

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

 

969

 

 

 

(2,445

)

Increase in cash, cash equivalents and restricted cash

 

10,939

 

 

 

10,358

 

Cash, cash equivalents and restricted cash at beginning of period

 

105,977

 

 

 

130,582

 

Cash, cash equivalents and restricted cash at end of period

$

116,916

 

 

$

140,940

 

Contacts

GLYNIS BRYAN
CHIEF FINANCIAL OFFICER

TEL. 480.333.3390

EMAIL glynis.bryan@insight.com

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