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Insight Enterprises, Inc. Reports Fourth Quarter and Record Results for the Full Year 2020

Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported financial results for the quarter and full year ended December 31, 2020. Highlights include:

  • Net sales increased 8% to $8.3 billion for the full year
  • Gross profit increased 14% to $1.3 billion with gross margin expanding 90 basis points to 15.6% for the full year
  • Earnings from operations increased 13% to $271.6 million and Adjusted earnings from operations increased 14% to $322.4 million for the full year
  • Diluted earnings per share increased 10% to $4.87 and Adjusted diluted earnings per share increased 14% to $6.19 for the full year
  • Cash flow provided by operations was $355.6 million for the full year 2020 compared to $127.9 million for the full year 2019

In the fourth quarter of 2020, net sales were flat, year to year, while gross profit increased 1% and gross margin expanded 30 basis points compared to the fourth quarter of 2019. The increase in gross profit and gross margin reflects our continued emphasis on growing our higher margin cloud and services businesses. Diluted earnings per share for the quarter was $1.50, up 25%, year over year, and adjusted diluted earnings per share was $1.76, up 12%, year over year.

“During the fourth quarter, we drove double digit growth in cloud and warranty solutions, which pushed gross margins to 15%,” stated Ken Lamneck, President and Chief Executive Officer. “And, when combined with the positive effect of the acceleration of our PCM integration, including cost synergies, this helped us achieve adjusted earnings from operations growth of 12% year over year,” stated Lamneck.

For the full year 2020, consolidated net sales were $8.3 billion, up 8% year over year. The benefit from including PCM in the full year results was partially offset by a decline in overall client demand and certain supply challenges as a result of the COVID-19 global pandemic. Gross profit increased 14%, year over year, with gross margins increasing 90 basis points to 15.6% for the full year. Earnings from operations grew 13%, year over year, to $271.6 million. Cash flow from operations was strong at $355.6 million.

“As we look back at our business for the full year in 2020, we are pleased with all we accomplished under trying circumstances, being responsive to the difficult demand landscape, and proactive in our approach. We are positioned well to help our clients solve complex IT challenges,” stated Ken Lamneck, President and Chief Executive Officer. “We believe that the strategic investments we made in our go-to-market solution areas over the last several years, as well as the investments in our sales and technical talent in 2020 have positioned us well to execute our business goals in the new year,” stated Lamneck.

KEY HIGHLIGHTS

  • The Company continued to support clients with their changing needs in response to the COVID-19 global pandemic. The demand environment continued to be challenged but the Company focused on answering its clients’ most pressing IT needs while helping many to plan for the investments required to support their businesses as the economy recovers.
  • The Company has exited the year with approximately $70 million in annualized run-rate cost savings in connection with the PCM acquisition, ahead of expectations. The Company previously disclosed that the total two-year commitment in annualized run-rate cost savings related to the PCM acquisition was expected to be approximately $70 million.

Results for the Quarter:

  • Consolidated net sales for the fourth quarter of 2020 of $2.29 billion were flat, year to year, when compared to the fourth quarter of 2019.
    • Net sales in North America decreased 1%, year to year, to $1.84 billion;
    • Net sales in EMEA were flat, year over year, to $403.0 million; and
    • Net sales in APAC increased 31%, year over year, to $44.9 million.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales decreased 1%, year to year, with a decline in net sales in North America and EMEA of 1% and 5%, respectively, year to year, partially offset by growth in APAC of 24%, year over year.
  • Consolidated gross profit increased to $342.7 million, an increase of 1% compared to the fourth quarter of 2019, with consolidated gross margin expanding 30 basis points to 15.0% of net sales.
    • Gross profit in North America increased 1%, year over year, to $272.4 million (14.8% gross margin);
    • Gross profit in EMEA increased 2%, year over year, to $58.8 million (14.6% gross margin); and
    • Gross profit in APAC increased 22%, year over year, to $11.5 million (25.5% gross margin).
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit was flat, increasing less than 1%, year over year, with gross profit growth in North America and APAC of 1% and 16%, respectively, year over year, partially offset by a decline in EMEA of 3%, year to year.
  • Consolidated earnings from operations increased 24% compared to the fourth quarter of 2019 to $83.0 million, or 3.6% of net sales.
    • Earnings from operations in North America increased 28%, year over year, to $70.5 million, or 3.8% of net sales;
    • Earnings from operations in EMEA decreased 9%, year to year, to $9.3 million, or 2.3% of net sales; and
    • Earnings from operations in APAC increased 64%, year over year, to $3.2 million, or 7.1% of net sales.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations increased 23%, year over year, with increased earnings from operations in North America and APAC of 28% and 59%, respectively, year over year, partially offset by a decline in EMEA of 13%, year to year.
  • Adjusted earnings from operations increased 12% compared to the fourth quarter of 2019 to $92.1 million, or 4.0% of net sales.
    • Adjusted earnings from operations in North America increased 13%, year over year, to $78.1 million, or 4.2% of net sales;
    • Adjusted earnings from operations in EMEA decreased 1%, year to year, to $10.6 million, or 2.6% of net sales; and
    • Adjusted earnings from operations in APAC increased 63%, year over year, to $3.4 million, or 7.6% of net sales.
  • Consolidated net earnings and diluted earnings per share for the fourth quarter of 2020 were $53.4 million and $1.50, respectively, at an effective tax rate of 25.8%.
  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for the fourth quarter of 2020 were $62.4 million and $1.76, respectively.

Results for the Year:

  • Consolidated net sales of $8.3 billion for 2020 increased 8%, year over year, when compared to 2019.
    • Net sales in North America increased 10%, year over year, to $6.6 billion;
    • Net sales in EMEA increased 2%, year over year, to $1.6 billion; and
    • Net sales in APAC decreased 6%, year to year, to $170.3 million.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 8%, year over year, with growth in net sales in North America and EMEA of 10% and 1%, year over year, partially offset by a decline in APAC of 4%, year to year.
  • Consolidated gross profit of $1.3 billion increased 14% compared to 2019, with consolidated gross margin expanding 90 basis points to 15.6% of net sales.
    • Gross profit in North America increased 17%, year over year, to $1.0 billion (15.4% gross margin);
    • Gross profit in EMEA increased 4%, year over year, to $236.0 million (15.2% gross margin); and
    • Gross profit in APAC increased 7%, year over year, to $42.5 million (25.0% gross margin).
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 14%, year over year, with gross profit growth in North America, EMEA and APAC of 17%, 3% and 8%, respectively, year over year.
  • Consolidated earnings from operations increased 13%, compared to 2019, to $271.6 million, or 3.3% of net sales.
    • Earnings from operations in North America increased 15%, year over year, to $219.2 million, or 3.3% of net sales;
    • Earnings from operations in EMEA increased 1%, year over year, to $40.4 million, or 2.6% of net sales; and
    • Earnings from operations in APAC increased 16%, year over year, to $12.0 million, or 7.1% of net sales.
  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations increased 13%, year over year, with increased earnings from operations in North America, EMEA and APAC of 15%, 1% and 18%, respectively, year over year.
  • Adjusted earnings from operations increased 14%, compared to 2019, to $322.4 million, or 3.9% of net sales.
    • Adjusted earnings from operations in North America increased 15%, year over year, to $264.1 million, or 4.0% of net sales;
    • Adjusted earnings from operations in EMEA increased 11%, year over year, to $45.6 million, or 2.9% of net sales; and
    • Adjusted earnings from operations in APAC increased 15%, year over year, to $12.6 million, or 7.4% of net sales.
  • Consolidated net earnings and diluted earnings per share for 2020 were $172.6 million and $4.87, respectively, at an effective tax rate of 24.4%.
  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for 2020 were $219.4 million and $6.19, respectively.

In discussing financial results for the three and twelve months ended December 31, 2020 and 2019 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 2021, the Company expects to deliver net sales growth in the 4% to 8% range and Adjusted diluted earnings per share is expected to be between $6.60 and $6.80.

This outlook assumes

  • interest expense between $25 million and $28 million;
  • an effective tax rate of 25% to 26% for the full year 2021;
  • capital expenditures of $75 to $85 million, including approximately $60 million for the build out of our new corporate headquarters; and
  • an average share count for the full year of approximately 36 million shares.

This outlook excludes acquisition-related intangibles amortization expense of approximately $32 million and the non-cash convertible debt discount and issuance costs, reported as part of interest expense, of approximately $12 million and assumes no acquisition-related or severance and restructuring expenses. 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 2021 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 2020 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 consolidated earnings from operations, Adjusted consolidated net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain acquisition and integration related expenses, (iii) impairment of property and equipment, (iv) amortization of intangible assets, 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 EBITDA adds back (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, (vii) certain acquisition and integration related expenses and (viii) impairment of property and equipment. Adjusted free cash flow is the Company’s net cash provided 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 and integration related expenses, (iii) impairment of construction in progress, (iv) loss on sale of property, (v) litigation settlement proceeds, and (vi) 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 December 31,

Twelve Months Ended December 31,

2020

2019

change

2020

2019

change

Insight Enterprises, Inc.

Net sales:

Products

$

1,989,338

$

2,002,234

(1%)

$

7,172,155

$

6,732,121

7%

Services

$

301,977

$

294,922

2%

$

1,168,424

$

999,069

17%

Total net sales

$

2,291,315

$

2,297,156

$

8,340,579

$

7,731,190

8%

Gross profit

$

342,654

$

337,982

1%

$

1,299,942

$

1,138,098

14%

Gross margin

15.0

%

14.7

%

30 bps

15.6

%

14.7

%

90 bps

Selling and administrative expenses

$

257,167

$

266,970

(4%)

$

1,013,765

$

880,737

15%

Severance and restructuring expenses

$

2,432

$

1,713

42%

$

12,394

$

5,425

> 100%

Acquisition and integration related expenses

$

13

$

2,283

(99%)

$

2,208

$

11,342

(81%)

Earnings from operations

$

83,042

$

67,016

24%

$

271,575

$

240,594

13%

Net earnings

$

53,388

$

42,950

24%

$

172,640

$

159,407

8%

Diluted earnings per share

$

1.50

$

1.20

25%

$

4.87

$

4.43

10%

North America

Net sales:

Products

$

1,600,261

$

1,615,595

(1%)

$

5,679,052

$

5,227,490

9%

Services

$

243,075

$

245,600

(1%)

$

935,980

$

796,815

17%

Total net sales

$

1,843,336

$

1,861,195

(1%)

$

6,615,032

$

6,024,305

10%

Gross profit

$

272,396

$

270,804

1%

$

1,021,388

$

871,114

17%

Gross margin

14.8

%

14.6

%

20 bps

15.4

%

14.5

%

90 bps

Selling and administrative expenses

$

200,364

$

211,933

(5%)

$

790,913

$

664,374

19%

Severance and restructuring expenses

$

1,474

$

1,686

(13%)

$

9,273

$

4,946

87%

Acquisition and integration related expenses

$

13

$

2,283

(99%)

$

2,004

$

11,342

(82%)

Earnings from operations

$

70,545

$

54,902

28%

$

219,198

$

190,452

15%

Sales Mix

**

**

Hardware

67

%

67

%

(1%)

67

%

66

%

12%

Software

20

%

20

%

19

%

21

%

(1%)

Services

13

%

13

%

(1%)

14

%

13

%

17%

100

%

100

%

(1%)

100

%

100

%

10%

EMEA

Net sales:

Products

$

358,314

$

364,713

(2%)

$

1,378,387

$

1,376,678

Services

$

44,728

$

36,874

21%

$

176,838

$

149,966

18%

Total net sales

$

403,042

$

401,587

$

1,555,225

$

1,526,644

2%

Gross profit

$

58,792

$

57,759

2%

$

236,046

$

227,083

4%

Gross margin

14.6

%

14.4

%

20 bps

15.2

%

14.9

%

30 bps

Selling and administrative expenses

$

48,626

$

47,592

2%

$

192,485

$

186,957

3%

Severance and restructuring expenses

$

871

$

6

> 100%

$

2,989

$

334

> 100%

Acquisition and integration related expenses

$

$

$

204

$

*

Earnings from operations

$

9,295

$

10,161

(9%)

$

40,368

$

39,792

1%

Sales Mix

**

**

Hardware

37

%

43

%

(12%)

40

%

41

%

(1%)

Software

52

%

48

%

7%

49

%

49

%

1%

Services

11

%

9

%

21%

11

%

10

%

18%

100

%

100

%

100

%

100

%

2%

*

Percentage change not considered meaningful.

**

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,

2020

2019

change

2020

2019

change

APAC

Net sales:

Products

$

30,763

$

21,926

40%

$

114,716

$

127,953

(10%)

Services

$

14,174

$

12,448

14%

$

55,606

$

52,288

6%

Total net sales

$

44,937

$

34,374

31%

$

170,322

$

180,241

(6%)

Gross profit

$

11,466

$

9,419

22%

$

42,508

$

39,901

7%

Gross margin

25.5

%

27.4

%

(190 bps)

25.0

%

22.1

%

290 bps

Selling and administrative expenses

$

8,177

$

7,445

10%

$

30,367

$

29,406

3%

Severance and restructuring expenses

$

87

$

21

> 100%

$

132

$

145

(9%)

Earnings from operations

$

3,202

$

1,953

64%

$

12,009

$

10,350

16%

Sales Mix

**

**

Hardware

24

%

27

%

19%

19

%

19

%

(9%)

Software

44

%

37

%

56%

48

%

52

%

(11%)

Services

32

%

36

%

14%

33

%

29

%

6%

100

%

100

%

31%

100

%

100

%

(6%)

*

Percentage change not considered meaningful.

**

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 our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company, the Company’s future financial performance and results of operations, the Company’s anticipated effective tax rate, capital expenditures, expected average share count, the Company’s expectations regarding cash flow, the Company’s expectations about future benefits relating to the PCM integration, including expected synergies, future trends in the IT market, including due to COVID-19, and our business strategy and our 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, 2020 to be filed with the SEC:

  • actions of the Company’scompetitors, 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 in the requirements year over year;
  • 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 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, including PCM related litigation, 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 substantial amount of indebtedness;
  • the conditional conversion feature of the convertible notes, which if triggered, may adversely affect the Company’s financial condition and operating results;
  • the accounting method for convertible debt securities that may be settled in cash, such as the convertible notes, could have a material effect on the Company’s reported financial results;
  • the Company is subject to counterparty risk with respect to the convertible note hedge transactions;
  • risks associated with the discontinuation of LIBOR as a benchmark rate;
  • increased debt and interest expense and 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 customer demands;
  • the Company’s dependence on certain key personnel;
  • 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.

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,

2020

2019

2020

2019

Net sales:

Products

$

1,989,338

$

2,002,234

$

7,172,155

$

6,732,121

Services

301,977

294,922

1,168,424

999,069

Total net sales

2,291,315

2,297,156

8,340,579

7,731,190

Costs of goods sold:

Products

1,808,504

1,809,896

6,497,001

6,125,360

Services

140,157

149,278

543,636

467,732

Total costs of goods sold

1,948,661

1,959,174

7,040,637

6,593,092

Gross profit

342,654

337,982

1,299,942

1,138,098

Operating expenses:

Selling and administrative expenses

257,167

266,970

1,013,765

880,737

Severance and restructuring expenses, net

2,432

1,713

12,394

5,425

Acquisition and integration related expenses

13

2,283

2,208

11,342

Earnings from operations

83,042

67,016

271,575

240,594

Non-operating (income) expense:

Interest expense, net

10,434

11,897

41,594

28,478

Other (income) expense, net

693

(458

)

1,529

400

Earnings before income taxes

71,915

55,577

228,452

211,716

Income tax expense

18,527

12,627

55,812

52,309

Net earnings

$

53,388

$

42,950

$

172,640

$

159,407

Net earnings per share:

Basic

$

1.52

$

1.22

$

4.92

$

4.49

Diluted

$

1.50

$

1.20

$

4.87

$

4.43

Shares used in per share calculations:

Basic

35,098

35,259

35,117

35,538

Diluted

35,523

35,755

35,444

35,959

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

2020

December 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$

128,313

$

114,668

Accounts receivable, net

2,685,448

2,511,383

Inventories

185,650

190,833

Other current assets

177,039

231,148

Total current assets

3,176,450

3,048,032

Property and equipment, net

146,016

130,907

Goodwill

429,368

415,149

Intangible assets, net

246,915

278,584

Other assets

311,984

305,507

$

4,310,733

$

4,178,179

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable – trade

$

1,461,312

$

1,275,957

Accounts payable – inventory financing facilities

356,930

253,676

Accrued expenses and other current liabilities

408,117

352,204

Current portion of long-term debt

1,105

1,691

Total current liabilities

2,227,464

1,883,528

Long-term debt

437,581

857,673

Deferred income taxes

33,209

44,633

Other liabilities

270,049

232,027

2,968,303

3,017,861

Stockholders’ equity:

Preferred stock

Common stock

351

353

Additional paid-in capital

364,288

357,032

Retained earnings

993,245

841,097

Accumulated other comprehensive loss – foreign currency

translation adjustments

(15,454

)

(38,164

)

Total stockholders’ equity

1,342,430

1,160,318

$

4,310,733

$

4,178,179

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Twelve Months Ended

December 31,

2020

2019

Cash flows from operating activities:

Net earnings

$

172,640

$

159,407

Adjustments to reconcile net earnings to net cash provided by

operating activities:

Depreciation and amortization

65,560

46,209

Provision for losses on accounts receivable

10,163

5,079

Non-cash stock-based compensation

17,727

16,011

Deferred income taxes

(13,246

)

7,418

Amortization of debt discount and issuance costs

16,217

4,223

Other adjustments

6,272

7,323

Changes in assets and liabilities:

Increase in accounts receivable

(132,598

)

(118,971

)

Decrease in inventories

1,029

11,944

Decrease (increase) in other assets

7,367

(129,745

)

Increase (decrease) in accounts payable

152,235

(612

)

Increase in accrued expenses and other liabilities

52,216

119,590

Net cash provided by operating activities

355,582

127,876

Cash flows from investing activities:

Proceeds from sale of assets held for sale

40,295

Purchases of property and equipment

(24,184

)

(69,086

)

Acquisitions, net of cash and cash equivalents acquired

(6,405

)

(664,287

)

Net cash provided by (used in) investing activities

9,706

(733,373

)

Cash flows from financing activities:

Borrowings on senior revolving credit facility

242,936

Repayments on senior revolving credit facility

(242,936

)

Borrowings on ABL revolving credit facility

3,030,679

1,680,515

Repayments on ABL revolving credit facility

(3,462,063

)

(1,130,544

)

Borrowings on accounts receivable securitization financing facility

2,364,500

Repayments on accounts receivable securitization financing facility

(2,558,500

)

Net borrowings (repayments) under inventory financing facilities

103,254

(50,454

)

Proceeds from issuance of convertible senior notes

341,250

Proceeds from issuance of warrants

34,440

Purchase of note hedge related to convertible senior notes

(66,325

)

Repurchases of treasury stock

(25,000

)

(27,899

)

Other payments

(8,661

)

(9,396

)

Net cash (used in) provided by financing activities

(361,791

)

577,587

Foreign currency exchange effect on cash, cash equivalents and

restricted cash balances

10,788

(86

)

Increase (decrease) in cash, cash equivalents and restricted cash

14,285

(27,996

)

Cash, cash equivalents and restricted cash at beginning of period

116,297

144,293

Cash, cash equivalents and restricted cash at end of period

$

130,582

$

116,297

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,

2020

2019

2020

2019

Adjusted Consolidated Earnings from

Operations:

GAAP consolidated EFO

$

83,042

$

67,016

$

271,575

$

240,594

Amortization of intangible assets

7,980

9,395

37,535

22,985

Other*

1,121

5,497

13,278

18,268

Adjusted non-GAAP consolidated EFO

$

92,143

$

81,908

$

322,388

$

281,847

Adjusted Consolidated Net Earnings:

GAAP consolidated net earnings

$

53,388

$

42,950

$

172,640

$

159,407

Amortization of intangible assets

7,980

9,395

37,535

22,985

Amortization of debt discount and issuance costs

2,949

2,825

11,585

4,223

Other*

1,121

5,497

13,278

18,268

Income taxes on non-GAAP adjustments

(3,021

)

(4,485

)

(15,583

)

(10,073

)

Adjusted non-GAAP consolidated net earnings

$

62,417

$

56,182

$

219,455

$

194,810

Adjusted Diluted Earnings Per Share:

GAAP diluted EPS

$

1.50

$

1.20

$

4.87

$

4.43

Amortization of intangible assets

0.23

0.27

1.06

0.64

Amortization of debt discount and issuance costs

0.08

0.08

0.33

0.12

Other*

0.03

0.15

0.37

0.51

Income taxes on non-GAAP adjustments

(0.08

)

(0.13

)

(0.44

)

(0.28

)

Adjusted non-GAAP diluted EPS

$

1.76

$

1.57

$

6.19

$

5.42

Adjusted North America Earnings from

Operations:

GAAP EFO from North America segment

$

70,545

$

54,902

$

219,198

$

190,452

Amortization of intangible assets

7,396

8,659

34,990

21,696

Other*

163

5,470

9,953

17,789

Adjusted non-GAAP EFO from North America segment

$

78,104

$

69,031

$

264,141

$

229,937

Adjusted EMEA Earnings from Operations:

GAAP EFO from EMEA segment

$

9,295

$

10,161

$

40,368

$

39,792

Amortization of intangible assets

463

623

2,088

828

Other*

871

6

3,193

334

Adjusted non-GAAP EFO from EMEA segment

$

10,629

$

10,790

$

45,649

$

40,954

*

“Other” includes (i) severance and restructuring expenses, net, (ii) acquisition and integration related expenses, and (iii) impairment of property and equipment, as applicable to the operating segment.

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,

2020

2019

2020

2019

Adjusted APAC Earnings from Operations:

GAAP EFO from APAC segment

$

3,202

$

1,953

$

12,009

$

10,350

Amortization of intangible assets

121

113

457

461

Other*

87

21

132

145

Adjusted non-GAAP EFO from APAC segment

$

3,410

$

2,087

$

12,598

$

10,956

Twelve Months Ended

December 31,

2020

2019

Adjusted EBITDA:

GAAP consolidated net earnings

$

172,640

$

159,407

Interest expense

41,913

29,614

Income tax expense

55,812

52,309

Depreciation and amortization of property and equipment

28,025

23,224

Amortization of intangible assets

37,535

22,985

Non-cash stock-based compensation

17,727

16,011

Other*

13,278

18,268

Adjusted non-GAAP EBITDA

$

366,930

$

321,818

GAAP consolidated net earnings as a percentage of net sales

2.1

%

2.1

%

Adjusted non-GAAP EBITDA as a percentage of net sales

4.4

%

4.2

%

Adjusted free cash flow:

Net cash provided by operating activities

$

355,582

$

127,876

Purchases of property and equipment

(24,184

)

(69,086

)

Net borrowings (repayments) under inventory financing facilities

103,254

(50,454

)

Adjusted non-GAAP free cash flow

$

434,652

$

8,336

*

“Other” includes (i) severance and restructuring expenses, net, (ii) acquisition and integration related expenses, and (iii) impairment of property and equipment, as applicable to the operating segment.

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

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

(In thousands, except per share data)

(unaudited)

Twelve Months Ended

December 31,

2020

2019

Adjusted return on invested capital:

GAAP consolidated EFO

$

271,575

$

240,594

Other

13,278

18,268

Adjusted non-GAAP consolidated EFO *

284,853

258,862

Income tax expense**

74,062

71,187

Adjusted non-GAAP consolidated EFO, net of tax

$

210,791

$

187,675

Average stockholders’ equity***

$

1,224,713

$

1,071,346

Average debt***

556,581

410,976

Average cash***

(106,949

)

(126,956

)

Invested Capital

$

1,674,345

$

1,355,366

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

12.00

%

12.87

%

Adjusted non-GAAP ROIC (from non-GAAP consolidated

EFO) *****

12.59

%

13.85

%

*

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 26.0% and 27.5% for 2020 and 2019, respectively.

***

Average of previous five quarters.

****

Computed as GAAP consolidated EFO, net of tax of $70,610 and $66,163 for the twelve months ended December 31, 2020 and 2019, respectively, divided by invested capital.

*****

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

NSIT-F

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

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