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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Insight Enterprises Inc | NASDAQ:NSIT | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.32 | 0.16% | 195.50 | 123.98 | 311.85 | 196.04 | 193.91 | 195.07 | 213,713 | 01:00:00 |
Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported financial results for the quarter ended March 31, 2024. Highlights include:
In the first quarter of 2024, net sales increased 2%, year over year, and we achieved record gross profit of $440.9 million, an increase of 13%, year over year. Gross margin expanded 170 basis points compared to the first quarter of 2023, to a first quarter record of 18.5%. Earnings from operations of $100.0 million increased 29% compared to $77.5 million in the first quarter of 2023. Adjusted earnings from operations of $121.8 million increased 30% compared to $94.0 million in the first quarter of 2023. Consolidated net earnings were $67.0 million, or 2.8% of net sales, in the first quarter of 2024, and Adjusted consolidated net earnings were $83.4 million, or 3.5% of net sales. Diluted earnings per share for the quarter was $1.74, up 30%, year over year, and Adjusted diluted earnings per share was another first quarter record of $2.37, up 33%, year over year.
“We are pleased to announce another record setting first quarter with very strong performance in our key strategic areas of cloud and Insight Core services, fortified by continued operating expense discipline,” stated Joyce Mullen, President and Chief Executive Officer. “We also achieved several first quarter records including gross profit, gross margin and Adjusted diluted earnings per share, demonstrating we are executing well against our strategic objective of becoming the leading solutions integrator,” Mullen stated.
KEY HIGHLIGHTS
Results for the Quarter:
In discussing financial results for the three months ended March 31, 2024 and 2023 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, earnings from operations and Adjusted earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates. In addition, the Company refers to changes in Adjusted diluted earnings per share on a consolidated basis 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 2024, the Company now expects Adjusted diluted earnings per share to be between $10.60 and $10.90. We expect to deliver gross profit growth in the mid to high teens and expect that our gross margin will be approximately 19%.
This outlook assumes:
This outlook excludes acquisition-related intangibles amortization expense of approximately $60 million, assumes no acquisition or integration related expenses, transformation or severance and restructuring expenses, net and no significant change in our debt instruments or the macroeconomic environment. 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 2024 forecast.
CONFERENCE CALL AND WEBCAST
The Company will host a conference call and live webcast today at 9:00 a.m. ET to discuss first quarter 2024 results of operations. A live webcast 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 webcast 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 the event link on the Company's web site. 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, net, (ii) certain executive recruitment and hiring related expenses, (iii) amortization of intangible assets, (iv) transformation costs, (v) certain acquisition and integration related expenses, (vi) gains and losses from revaluation of acquisition related earnout liabilities, and (vii) the tax effects of each of these items, as applicable. Transformation costs represent costs we are incurring to transform our business, to help us achieve our strategic objectives, including becoming a leading solutions integrator. 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 2024 was in excess of $68.32, which is the initial conversion price of the convertible senior notes. Adjusted EBITDA excludes (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization of property and equipment, (iv) amortization of intangible assets, (v) severance and restructuring expenses, net, (vi) certain executive recruitment and hiring related expenses, (vii) transformation costs, (viii) certain acquisition and integration related expenses, (ix) certain third-party data center service outage related expenses and recoveries, and (x) gains and losses from revaluation of acquisition related earnout liabilities. Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, net, (ii) certain executive recruitment and hiring related expenses, (iii) amortization of intangible assets, (iv) transformation costs, (v) certain acquisition and integration related expenses, (vi) certain third-party data center service outage related expenses and recoveries, (vii) gains and losses from revaluation of acquisition related earnout liabilities, and (viii) 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,
2024
2023
change
Insight Enterprises, Inc.
Net sales:
Products
$
1,963,955
$
1,967,645
—%
Services
$
415,530
$
356,302
17%
Total net sales
$
2,379,485
$
2,323,947
2%
Gross profit
$
440,928
$
391,315
13%
Gross margin
18.5
%
16.8
%
170 bps
Selling and administrative expenses
$
337,434
$
310,001
9%
Severance and restructuring expenses
$
2,227
$
3,802
(41%)
Acquisition and integration related expenses
$
1,281
$
51
> 100%
Earnings from operations
$
99,986
$
77,461
29%
Net earnings
$
67,027
$
49,972
34%
Diluted earnings per share
$
1.74
$
1.34
30%
Sales Mix
**
Hardware
48
%
57
%
(15%)
Software
35
%
28
%
30%
Services
17
%
15
%
17%
100
%
100
%
2%
North America
Net sales:
Products
$
1,586,306
$
1,550,436
2%
Services
$
318,516
$
283,528
12%
Total net sales
$
1,904,822
$
1,833,964
4%
Gross profit
$
349,843
$
315,144
11%
Gross margin
18.4
%
17.2
%
120 bps
Selling and administrative expenses
$
262,920
$
248,820
6%
Severance and restructuring expenses
$
1,619
$
3,087
(48%)
Acquisition and integration related expenses
$
1,281
$
51
> 100%
Earnings from operations
$
84,023
$
63,186
33%
Sales Mix
**
Hardware
52
%
63
%
(14%)
Software
31
%
22
%
51%
Services
17
%
15
%
12%
100
%
100
%
4%
EMEA
Net sales:
Products
$
339,566
$
377,451
(10%)
Services
$
73,275
$
49,553
48%
Total net sales
$
412,841
$
427,004
(3%)
Gross profit
$
75,033
$
60,888
23%
Gross margin
18.2
%
14.3
%
390 bps
Selling and administrative expenses
$
63,305
$
49,905
27%
Severance and restructuring expenses
$
538
$
702
(23%)
Earnings from operations
$
11,190
$
10,281
9%
Sales Mix
**
Hardware
33
%
38
%
(16%)
Software
49
%
50
%
(5%)
Services
18
%
12
%
48%
100
%
100
%
(3%)
APAC
Net sales:
Products
$
38,083
$
39,758
(4%)
Services
$
23,739
$
23,221
2%
Total net sales
$
61,822
$
62,979
(2%)
Gross profit
$
16,052
$
15,283
5%
Gross margin
26.0
%
24.3
%
170 bps
Selling and administrative expenses
$
11,209
$
11,276
(1)%
Severance and restructuring expenses
$
70
$
13
> 100%
Earnings from operations
$
4,773
$
3,994
20%
Sales Mix
**
Hardware
12
%
16
%
(29%)
Software
50
%
47
%
4%
Services
38
%
37
%
2%
100
%
100
%
(2%)
**
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, webcast 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 impact of inflation and higher interest rates, the Company’s future financial performance and results of operations, including gross profit growth, Adjusted diluted earnings per share, and Adjusted selling and administrative expenses, as well as the Company’s other key performance indicators, the Company’s anticipated effective tax rate, capital expenditures, and expected average share count, the Company’s expectation that the majority of holders of our convertible senior notes (the “Notes”) will not opt to convert their Notes early, the Company’s expectations regarding cash flow, the Company’s expectations regarding supply constraints and shipment of backlog, future trends in the IT market, the Company’s business strategy and strategic initiatives, which 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 the “Risk Factors” sections of the Company’s most recently filed periodic report on Form 10-K and subsequent filings with the SEC:
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.
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended March 31,
2024
2023
Net sales:
Products
$
1,963,955
$
1,967,645
Services
415,530
356,302
Total net sales
2,379,485
2,323,947
Costs of goods sold:
Products
1,771,584
1,772,729
Services
166,973
159,903
Total costs of goods sold
1,938,557
1,932,632
Gross profit
440,928
391,315
Operating expenses:
Selling and administrative expenses
337,434
310,001
Severance and restructuring expenses
2,227
3,802
Acquisition and integration related expenses
1,281
51
Earnings from operations
99,986
77,461
Non-operating expense (income):
Interest expense, net
12,557
10,348
Other (income) expense, net
(763
)
752
Earnings before income taxes
88,192
66,361
Income tax expense
21,165
16,389
Net earnings
$
67,027
$
49,972
Net earnings per share:
Basic
$
2.06
$
1.48
Diluted
$
1.74
$
1.34
Shares used in per share calculations:
Basic
32,596
33,706
Diluted
38,435
37,207
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In THOUSANDS)
(UNAUDITED)
March 31, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
379,111
$
268,730
Accounts receivable, net
3,573,253
3,568,290
Inventories
169,457
184,605
Contract assets, net
100,648
120,518
Other current assets
218,882
189,158
Total current assets
4,441,351
4,331,301
Long-term contract assets, net
121,994
132,780
Property and equipment, net
208,365
210,061
Goodwill
680,876
684,345
Intangible assets, net
354,146
369,687
Long-term accounts receivable
618,672
412,666
Other assets
141,835
145,510
$
6,567,239
$
6,286,350
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable – trade
$
2,422,632
$
2,255,183
Accounts payable – inventory financing facilities
227,062
231,850
Accrued expenses and other current liabilities
517,707
538,346
Current portion of long-term debt
331,566
348,004
Total current liabilities
3,498,967
3,373,383
Long-term debt
550,006
592,517
Deferred income taxes
23,306
27,588
Long-term accounts payable
566,233
353,794
Other liabilities
173,236
203,335
4,811,748
4,550,617
Stockholders’ equity:
Preferred stock
—
—
Common stock
325
326
Additional paid-in capital
326,539
328,607
Retained earnings
1,482,330
1,448,412
Accumulated other comprehensive loss – foreign currency translation adjustments
(53,703
)
(41,612
)
Total stockholders’ equity
1,755,491
1,735,733
$
6,567,239
$
6,286,350
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended March 31,
2024
2023
Cash flows from operating activities:
Net earnings
$
67,027
$
49,972
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
21,886
14,663
Provision for losses on accounts receivable
3,246
1,484
Non-cash stock-based compensation
8,043
6,896
Deferred income taxes
(4,423
)
(4,284
)
Amortization of debt issuance costs
1,224
1,213
Other adjustments
2,471
2,122
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(25,294
)
197,918
Decrease (increase) in inventories
12,115
(1,146
)
Decrease in contract assets
32,142
45
Increase in long-term accounts receivable
(206,154
)
(14,434
)
Increase in other assets
(26,821
)
(8,405
)
Increase (decrease) in accounts payable
184,511
(76,783
)
Increase in long-term accounts payable
212,577
18,568
Decrease in accrued expenses and other liabilities
(35,371
)
(27,669
)
Net cash provided by operating activities:
247,179
160,160
Cash flows from investing activities:
Purchases of property and equipment
(6,482
)
(9,106
)
Net cash used in investing activities:
(6,482
)
(9,106
)
Cash flows from financing activities:
Borrowings on ABL revolving credit facility
1,144,826
1,016,980
Repayments on ABL revolving credit facility
(1,186,997
)
(1,140,774
)
Net (repayments) borrowings under inventory financing facilities
(4,545
)
108,257
Repurchases of common stock
(35,000
)
(117,129
)
Repayment of principal on the Notes
(16,895
)
—
Earnout and acquisition related payments
(18,296
)
—
Other payments
(8,360
)
(7,988
)
Net cash used in financing activities:
(125,267
)
(140,654
)
Foreign currency exchange effect on cash, cash equivalents and restricted cash balances
(5,074
)
1,652
Increase in cash, cash equivalents and restricted cash
110,356
12,052
Cash, cash equivalents and restricted cash at beginning of period
270,785
165,718
Cash, cash equivalents and restricted cash at end of period
$
381,141
$
177,770
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended March 31,
2024
2023
Adjusted Consolidated Earnings from Operations:
GAAP consolidated EFO
$
99,986
$
77,461
Amortization of intangible assets
14,925
8,310
Other*
6,839
8,186
Adjusted non-GAAP consolidated EFO
$
121,750
$
93,957
GAAP EFO as a percentage of net sales
4.2
%
3.3
%
Adjusted non-GAAP EFO as a percentage of net sales
5.1
%
4.0
%
Adjusted Consolidated Net Earnings:
GAAP consolidated net earnings
$
67,027
$
49,972
Amortization of intangible assets
14,925
8,310
Other*
6,839
8,186
Income taxes on non-GAAP adjustments
(5,439
)
(4,201
)
Adjusted non-GAAP consolidated net earnings
$
83,352
$
62,267
GAAP net earnings as a percentage of net sales
2.8
%
2.2
%
Adjusted non-GAAP net earnings as a percentage of net sales
3.5
%
2.7
%
Adjusted Diluted Earnings Per Share:
GAAP diluted EPS
$
1.74
$
1.34
Amortization of intangible assets
0.39
0.22
Other
0.18
0.22
Income taxes on non-GAAP adjustments
(0.14
)
(0.11
)
Impact of benefit from note hedge
0.20
0.11
Adjusted non-GAAP diluted EPS
$
2.37
$
1.78
Shares used in diluted EPS calculation
38,435
37,207
Impact of benefit from Note hedge
(3,228
)
(2,310
)
Shares used in Adjusted non-GAAP diluted EPS calculation
35,207
34,897
Adjusted North America Earnings from Operations:
GAAP EFO from North America segment
$
84,023
$
63,186
Amortization of intangible assets
13,146
7,785
Other*
5,615
7,337
Adjusted non-GAAP EFO from North America segment
$
102,784
$
78,308
GAAP EFO as a percentage of net sales
4.4
%
3.4
%
Adjusted non-GAAP EFO as a percentage of net sales
5.4
%
4.3
%
Adjusted EMEA Earnings from Operations:
GAAP EFO from EMEA segment
$
11,190
$
10,281
Amortization of intangible assets
1,670
412
Other
1,154
836
Adjusted non-GAAP EFO from EMEA segment
$
14,014
$
11,529
GAAP EFO as a percentage of net sales
2.7
%
2.4
%
Adjusted non-GAAP EFO as a percentage of net sales
3.4
%
2.7
%
Adjusted APAC Earnings from Operations:
GAAP EFO from APAC segment
$
4,773
$
3,994
Amortization of intangible assets
109
113
Other
70
13
Adjusted non-GAAP EFO from APAC segment
$
4,952
$
4,120
GAAP EFO as a percentage of net sales
7.7
%
6.3
%
Adjusted non-GAAP EFO as a percentage of net sales
8.0
%
6.5
%
Adjusted EBITDA:
GAAP consolidated net earnings
$
67,027
$
49,972
Interest expense
15,269
11,688
Income tax expense
21,165
16,389
Depreciation and amortization of property and equipment
6,961
6,353
Amortization of intangible assets
14,925
8,310
Other*
6,839
8,186
Adjusted non-GAAP EBITDA
$
132,186
$
100,898
GAAP consolidated net earnings as a percentage of net sales
2.8
%
2.2
%
Adjusted non-GAAP EBITDA as a percentage of net sales
5.6
%
4.3
%
*
Includes transformation costs of $2.3 million and $4.0 million for the three months ended March 31, 2024 and 2023, respectively.
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Twelve Months Ended March 31,
2024
2023
Adjusted return on invested capital:
GAAP consolidated EFO
$
442,320
$
411,312
Amortization of intangible assets
42,846
33,277
Other5
34,754
26,421
Adjusted non-GAAP consolidated EFO
519,920
471,010
Income tax expense1
135,179
122,463
Adjusted non-GAAP consolidated EFO, net of tax
$
384,741
$
348,547
Average stockholders’ equity2
$
1,651,965
$
1,596,949
Average debt2
739,136
744,068
Average cash2
(252,769
)
(145,661
)
Invested Capital
$
2,138,332
$
2,195,356
Adjusted non-GAAP ROIC (from GAAP consolidated EFO)3
15.31
%
13.86
%
Adjusted non-GAAP ROIC (from non-GAAP consolidated EFO)4
17.99
%
15.88
%
1
Assumed tax rate of 26.0%.
2
Average of previous five quarters.
3
Computed as GAAP consolidated EFO, net of tax of $115,003 and $106,941 for the twelve months ended March 31, 2024 and 2023, respectively, divided by invested capital.
4
Computed as Adjusted non-GAAP consolidated EFO, net of tax, divided by invested capital.
5
Includes transformation costs of $14.8 million and $16.4 million for the twelve months ended March 31, 2024 and 2023, respectively. Includes certain third-party data center service outage related expenses, net of recoveries of $5.0 million for the twelve months ended March 31, 2024.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240502929174/en/
GLYNIS BRYAN CHIEF FINANCIAL OFFICER TEL. 480.333.3390 EMAIL glynis.bryan@insight.com
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