Insight Enterprises, Inc.
(Nasdaq:NSIT) (the
“Company”) today reported results of operations for the quarter and
full year ended December 31, 2017.
- Net sales up 22% year over year to $1.8 billion for the fourth
quarter and also up 22% for the full year
- Net sales up 30% year over year in North America for the fourth
quarter and full year
- Gross profit up 22% year over year to $232.9 million for the
fourth quarter and up 24% for the full year
- Earnings from operations up 12% year over year to $45.5 million
for the fourth quarter and up 20% for the full year
- Adjusted earnings from operations up 5% year over year for the
fourth quarter and up 24% for the full year
In the fourth quarter of 2017, consolidated net sales increased
22% year over year, reflecting growth in the Company’s core
business of 12% and the addition of Datalink, which the Company
acquired in January 2017. Gross profit also grew 22% year
over year, with gross margins increasing 10 basis points in the
quarter. Selling and administrative expenses increased 27%
year over year, primarily related to the addition of
Datalink. Overall, earnings from operations increased 12%
year over year and Adjusted earnings from operations increased 5%
year over year.
The Company’s fourth quarter results reflect additional income
tax expense of $13.4 million recognized as a result of the U.S. Tax
Cuts and Jobs Act that was enacted in December 2017. The
incremental income tax expense primarily relates to the
remeasurement of the Company’s deferred tax asset balances and
withholding taxes. The Company expects its effective tax rate
will be between 27% and 28% for the full year 2018, primarily
related to a 14% decrease in the U.S. federal income tax rate as a
result of the U.S. Tax Cuts and Jobs Act.
“Our fourth quarter results reflect a strong close to a very
good year,” stated Ken Lamneck, President and Chief Executive
Officer. “We reported strong organic growth in our core
business in 2017 and gained market share from competitors in North
America, according to third party data, reflecting growth in data
center solutions as well as devices. Our acquisition of
Datalink in January 2017 complemented the growth in our core
business. We realized expense synergies ahead of our
expectations and are pleased with the overall financial results of
the Datalink business in its first year as part of Insight. I
am pleased to report that gross profit growing faster than sales
and tight cost management across the business in 2017 produced an
impressive increase in earnings from operations year over year,”
stated Lamneck.
For the full year 2017, consolidated net sales were $6.7
billion, up 22% year over year, reflecting strong growth in the
Company’s core business and the addition of Datalink. Gross
profit was $918.6 million in 2017, and grew faster than net sales
at 24% year over year. That increase drove margins up 20
basis points to 13.7% for the full year 2017. Selling and
administrative expenses increased 24% year over year, primarily
related to the addition of Datalink. Selling and
administrative expenses in the Company’s core business increased 5%
year over year. Overall, earnings from operations increased
20% year over year and Adjusted earnings from operations increased
24% year over year.
“Our plans for 2018 are focused on driving growth in excess of
the market across our operating segments,” stated Lamneck.
“The IT industry is healthy and growing. More than ever,
clients are challenged to efficiently manage their day-to-day IT
operations while they leverage technology to transform their
business to bring value to their own customers. We have a
full suite of solutions that we developed over time and have
acquired through recent acquisitions, which position us to provide
value to our clients throughout their technology journey and
provide a strong foundation for us to compete in the marketplace in
2018,” stated Lamneck.
KEY HIGHLIGHTS
Results for the Quarter:
- Consolidated net sales of $1.8 billion for the fourth quarter
of 2017 increased 22% compared to the fourth quarter of 2016.
- Net sales in North America of $1.4 billion were up 30% year
over year;
- Net sales in EMEA of $366.8 million increased 1% year over
year; and
- Net sales in APAC of $38.9 million were down 20% year to
year.
- Excluding the effects of fluctuating foreign currency exchange
rates, consolidated net sales increased 19% year over year, with
net sales growth in North America of 30% year over year and a
decline in net sales in EMEA and APAC of 6% and 22%, respectively,
year to year.
- Consolidated gross profit of $232.9 million increased 22%
compared to the fourth quarter of 2016, with consolidated gross
margin increasing 10 basis points to 13.1% of net sales.
- Gross profit in North America of $174.6 million (12.7% gross
margin) increased 31% year over year;
- Gross profit in EMEA of $50.4 million (13.7% gross margin)
increased 3% year over year; and
- Gross profit in APAC of $7.9 million (20.3% gross margin)
decreased 7% year to year, with margin expansion of 270 basis
points.
- Excluding the effects of fluctuating foreign currency exchange
rates, consolidated gross profit increased 19% year over year, and
gross profit in North America increased 30% year over year, while
gross profit in EMEA and APAC decreased 5% and 10%, respectively,
year to year.
- Consolidated earnings from operations increased 12% compared to
the fourth quarter of 2016 to $45.5 million, or 2.6% of net
sales.
- Earnings from operations in North America increased 28% year
over year to $37.2 million, or 2.7% of net sales;
- Earnings from operations in EMEA decreased 23% year to year to
$7.1 million, or 1.9% of net sales; and
- Earnings from operations in APAC decreased 48% year to year to
$1.2 million, or 3.0% of net sales.
- Excluding the effects of fluctuating foreign currency exchange
rates, consolidated earnings from operations increased 9% year over
year, and earnings from operations in North America increased 27%
year over year while earnings from operations decreased in EMEA and
APAC by 30% and 50%, respectively, year to year.
- Adjusted consolidated earnings from operations increased 5%
year over year to $48.3 million, or 2.7% of net sales for the
fourth quarter of 2017.
- Consolidated net earnings and diluted earnings per share for
the fourth quarter of 2017 were $14.2 million and $0.39,
respectively, at an effective tax rate of 64.8%, which includes
income tax expense of $13.4 million recognized during the quarter
as a result of U.S. federal tax reform enacted in December
2017.
- Adjusted consolidated net earnings and Adjusted diluted
earnings per share for the fourth quarter of 2017 were $29.5
million and $0.81, respectively.
Results for the Year:
- Consolidated net sales of $6.7 billion for 2017 increased 22%
compared to 2016.
- Net sales in North America of $5.2 billion were up 30% year
over year;
- Net sales in EMEA of $1.4 billion increased 1% year over year;
and
- Net sales in APAC of $166.5 million decreased 5% year to
year.
- Excluding the effects of fluctuating foreign currency exchange
rates, consolidated net sales increased 22% year over year, with
net sales growth in North America and EMEA of 30% and 2%,
respectively, year over year, while net sales in APAC decreased 7%
year to year.
- Consolidated gross profit of $918.6 million increased 24%
compared to 2016, with consolidated gross margin increasing
approximately 20 basis points to 13.7% of net sales.
- Gross profit in North America of $691.7 million (13.3% gross
margin) increased 32% year over year;
- Gross profit in EMEA of $190.3 million (14.0% gross margin)
increased 2% year over year; and
- Gross profit in APAC of $36.6 million (22.0% gross margin)
increased 15% year over year.
- Excluding the effects of fluctuating foreign currency exchange
rates, consolidated gross profit increased 24% year over year, and
gross profit in North America, EMEA and APAC increased 31%, 4% and
13%, respectively, year over year.
- Consolidated earnings from operations increased 20% compared to
2016 to $179.3 million, or 2.7% of net sales.
- Earnings from operations in North America increased 31% year
over year to $153.7 million, or 3.0% of net sales;
- Earnings from operations in EMEA decreased 27% year to year to
$17.4 million, or 1.3% of net sales; and
- Earnings from operations in APAC increased 3% year over year to
$8.2 million, or 5.0% of net sales.
- Excluding the effects of fluctuating foreign currency exchange
rates, consolidated earnings from operations increased 20% year
over year, and earnings from operations in North America and APAC
increased 31% and 2%, respectively, year over year, while earnings
from operations in EMEA declined 27% year to year.
- Adjusted consolidated earnings from operations increased 24%
year over year to $195.2 million, or 2.9% of net sales, for
2017.
- Consolidated net earnings and diluted earnings per share for
2017 were $90.7 million and $2.50, respectively, at an effective
tax rate of 43.0%, which reflects the income tax expense recorded
in the fourth quarter of 2017 as a result of U.S. federal tax
reform, noted previously, and non-deductible acquisition-related
expenses incurred during the year.
- Adjusted consolidated net earnings and Adjusted diluted
earnings per share for 2017 were $117.5 million and $3.24,
respectively.
As services have become a larger portion of the Company’s
consolidated net sales, for the year ended December 31, 2017, the
Company began reporting net sales from the provision of services
and the related costs of goods sold separately from net sales of
products and the related costs of goods. For comparability
purposes, net sales and costs of goods sold for the 2016 periods
have been expanded to conform to the current year
presentation. These changes in presentation had no effect on
previously reported total net sales, total costs of goods sold or
gross profit amounts.
In conjunction with these changes in presentation, because fees
earned from activities reported net are considered services
revenues, the Company reclassified certain revenue streams for
which the Company acts as the agent in the transaction to net sales
from services. Previously, the Company included these net
revenue streams within its software and, to a lesser extent,
hardware sales mix categories based on the type of product being
sold (e.g., fees earned for the sale of software maintenance and
certain software licenses were included in software sales and fees
earned for the sale of certain third-party provided training and
warranty services were included in hardware sales when the Company
historically disclosed and analyzed its sales mix). For
comparability purposes, the Company’s sales mix among its hardware,
software and services categories for the three months and year
ended December 31, 2016, as presented in the Financial Summary
Table in this press release, has been reclassified to conform to
the current year presentation. These reclassifications had no
effect on previously reported total net sales amounts.
In discussing financial results for the three months and years
ended December 31, 2017 and 2016 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.
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.
STOCK REPURCHASE PROGRAM
On February 13, 2018, the Company’s Board of Directors
authorized the repurchase of up to $50 million of the
Company’s common stock. The Company’s share repurchases will
be made on the open market, subject to Rule 10b-18 or in privately
negotiated transactions, through block trades, through 10b5-1 plans
or otherwise, at management’s discretion. The amount of
shares purchased and the timing of the purchases will be based on
market conditions, working capital requirements, general business
conditions and other factors. The Company intends to retire
the repurchased shares.
GUIDANCE
For the full year 2018, the Company expects to deliver net sales
growth in the low single digit range compared to 2017. The
Company also expects Adjusted diluted earnings per share for the
full year 2018 to be between $3.90 and $4.00.
This outlook assumes:
- the effects of the Company’s adoption of the new revenue
recognition standard effective January 1, 2018;
- an effective tax rate between 27% and 28%; and
- capital expenditures of $15 to $20 million.
This outlook does not include the completion of the Company’s
recently authorized share repurchase program and assumes no
severance and restructuring or acquisition-related expenses.
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 2018 forecast.
CONFERENCE CALL AND WEBCAST
The Company will host a conference call and live web cast today
at 5:00 p.m. ET to discuss fourth quarter and full year 2017
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://nsit.client.shareholder.com/events.cfm, 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 1-877-402-8904 if located in the U.S.,
678-809-1029 for international callers, and enter the access code
2789109. NSIT-F
USE OF NON-GAAP FINANCIAL
MEASURES
The non-GAAP financial measures (referred to as Adjusted
consolidated earnings from operations, Adjusted consolidated net
earnings and Adjusted diluted earnings per share) exclude (i)
severance and restructuring expenses, (ii) certain
acquisition-related expenses, (iii) a loss on the sale of the
Company’s Russia business in the year ended December 31, 2017, (iv)
a gain on the sale of real estate in the year ended December 31,
2016 and (v) the tax effects of each of these items as well as
income tax expense recognized as a result of U.S. federal tax
reform laws enacted in December 2017. 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. These non-GAAP measures are used to
evaluate financial performance against budgeted amounts, to
calculate incentive compensation, to assist in forecasting future
performance and to compare the Company’s results to those of the
Company’s competitors. The Company believes that these
non-GAAP financial measures are useful to investors because they
allow for greater transparency, facilitate comparisons to prior
periods and the Company’s competitors’ results and assist in
forecasting performance for future periods. These non-GAAP
financial measures are not prepared in accordance with GAAP and may
be different from non-GAAP financial measures presented by other
companies. Non-GAAP financial measures should not be
considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP.
Financial Summary
Table(dollars in thousands, except per share
data)(Unaudited)
|
Three Months Ended December
31, |
Years Ended December 31, |
|
|
2017 |
|
|
|
2016 |
|
|
change |
|
|
2017 |
|
|
|
2016 |
|
|
change |
Insight Enterprises, Inc. |
Net sales: |
|
|
|
|
|
|
Products |
$ |
1,612,338 |
|
|
$ |
1,344,024 |
|
|
20 |
% |
|
|
$ |
6,038,744 |
|
|
$ |
4,997,263 |
|
|
21 |
% |
Services |
$ |
171,737 |
|
|
$ |
123,559 |
|
|
39 |
% |
|
|
$ |
664,879 |
|
|
$ |
488,252 |
|
|
36 |
% |
Total net sales |
$ |
1,784,075 |
|
|
$ |
1,467,583 |
|
|
22 |
% |
|
|
$ |
6,703,623 |
|
|
$ |
5,485,515 |
|
|
22 |
% |
Gross profit |
$ |
232,883 |
|
|
$ |
190,969 |
|
|
22 |
% |
|
|
$ |
918,570 |
|
|
$ |
743,102 |
|
|
24 |
% |
Gross margin |
|
13.1 |
% |
|
|
13.0 |
% |
|
10 bps |
|
|
|
|
13.7 |
% |
|
|
13.5 |
% |
|
20 bps |
|
Selling and administrative expenses |
$ |
184,554 |
|
|
$ |
145,066 |
|
|
27 |
% |
|
|
$ |
723,328 |
|
|
$ |
585,243 |
|
|
24 |
% |
Severance and restructuring expenses |
$ |
2,791 |
|
|
$ |
1,527 |
|
|
83 |
% |
|
|
$ |
9,002 |
|
|
$ |
4,580 |
|
|
97 |
% |
Loss on sale of foreign entity |
$ |
- |
|
|
$ |
- |
|
|
- |
|
|
|
$ |
3,646 |
|
|
$ |
- |
|
|
* |
|
Acquisition-related expenses |
$ |
- |
|
|
$ |
3,706 |
|
|
* |
|
|
|
$ |
3,329 |
|
|
$ |
4,447 |
|
|
(25 |
%) |
Earnings from operations |
$ |
45,538 |
|
|
$ |
40,670 |
|
|
12 |
% |
|
|
$ |
179,265 |
|
|
$ |
148,832 |
|
|
20 |
% |
Net earnings |
$ |
14,168 |
|
|
$ |
21,100 |
|
|
(33 |
%) |
|
|
$ |
90,683 |
|
|
$ |
84,690 |
|
|
7 |
% |
Diluted earnings per share |
$ |
0.39 |
|
|
$ |
0.59 |
|
|
(34 |
%) |
|
|
$ |
2.50 |
|
|
$ |
2.32 |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
Net sales: |
|
|
|
|
|
|
Products |
$ |
1,249,420 |
|
|
$ |
969,487 |
|
|
29 |
% |
|
|
$ |
4,662,473 |
|
|
$ |
3,601,697 |
|
|
29 |
% |
Services |
$ |
128,971 |
|
|
$ |
87,866 |
|
|
47 |
% |
|
|
$ |
519,261 |
|
|
$ |
370,131 |
|
|
40 |
% |
Total net sales |
$ |
1,378,391 |
|
|
$ |
1,057,353 |
|
|
30 |
% |
|
|
$ |
5,181,734 |
|
|
$ |
3,971,828 |
|
|
30 |
% |
Gross profit |
$ |
174,569 |
|
|
$ |
133,552 |
|
|
31 |
% |
|
|
$ |
691,677 |
|
|
$ |
525,481 |
|
|
32 |
% |
Gross margin |
|
12.7 |
% |
|
|
12.6 |
% |
|
10 bps |
|
|
|
|
13.3 |
% |
|
|
13.2 |
% |
|
10 bps |
|
Selling and administrative expenses |
$ |
135,369 |
|
|
$ |
100,169 |
|
|
35 |
% |
|
|
$ |
530,792 |
|
|
$ |
401,316 |
|
|
32 |
% |
Severance and restructuring expenses |
$ |
1,965 |
|
|
$ |
515 |
|
|
282 |
% |
|
|
$ |
4,010 |
|
|
$ |
2,966 |
|
|
35 |
% |
Acquisition-related expenses |
$ |
- |
|
|
$ |
3,703 |
|
|
* |
|
|
|
$ |
3,223 |
|
|
$ |
4,278 |
|
|
(25 |
%) |
Earnings from operations |
$ |
37,235 |
|
|
$ |
29,165 |
|
|
28 |
% |
|
|
$ |
153,652 |
|
|
$ |
116,921 |
|
|
31 |
% |
|
|
|
|
|
|
|
Sales Mix |
|
|
** |
|
|
|
|
** |
|
Hardware |
|
64 |
% |
|
|
62 |
% |
|
34 |
% |
|
|
|
65 |
% |
|
|
62 |
% |
|
37 |
% |
Software |
|
27 |
% |
|
|
30 |
% |
|
18 |
% |
|
|
|
25 |
% |
|
|
29 |
% |
|
14 |
% |
Services |
|
9 |
% |
|
|
8 |
% |
|
47 |
% |
|
|
|
10 |
% |
|
|
9 |
% |
|
40 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
30 |
% |
|
|
|
100 |
% |
|
|
100 |
% |
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA |
Net sales: |
|
|
|
|
|
|
Products |
$ |
333,540 |
|
|
$ |
335,149 |
|
|
(1 |
%) |
|
|
$ |
1,246,952 |
|
|
$ |
1,243,932 |
|
|
- |
|
Services |
$ |
33,267 |
|
|
$ |
26,611 |
|
|
25 |
% |
|
|
$ |
108,464 |
|
|
$ |
94,628 |
|
|
15 |
% |
Total net sales |
$ |
366,807 |
|
|
$ |
361,760 |
|
|
1 |
% |
|
|
$ |
1,355,416 |
|
|
$ |
1,338,560 |
|
|
1 |
% |
Gross profit |
$ |
50,413 |
|
|
$ |
48,877 |
|
|
3 |
% |
|
|
$ |
190,310 |
|
|
$ |
185,687 |
|
|
2 |
% |
Gross margin |
|
13.7 |
% |
|
|
13.5 |
% |
|
20 bps |
|
|
|
|
14.0 |
% |
|
|
13.9 |
% |
|
10 bps |
|
Selling and administrative expenses |
$ |
42,442 |
|
|
$ |
38,606 |
|
|
10 |
% |
|
|
$ |
164,305 |
|
|
$ |
160,269 |
|
|
3 |
% |
Severance and restructuring expenses |
$ |
826 |
|
|
$ |
1,009 |
|
|
(18 |
%) |
|
|
$ |
4,888 |
|
|
$ |
1,496 |
|
|
227 |
% |
Loss on sale of foreign entity |
$ |
- |
|
|
$ |
- |
|
|
- |
|
|
|
$ |
3,646 |
|
|
$ |
- |
|
|
* |
|
Acquisition-related expenses |
$ |
- |
|
|
$ |
- |
|
|
- |
|
|
|
$ |
106 |
|
|
$ |
- |
|
|
* |
|
Earnings from operations |
$ |
7,145 |
|
|
$ |
9,262 |
|
|
(23 |
%) |
|
|
$ |
17,365 |
|
|
$ |
23,922 |
|
|
(27 |
%) |
|
|
|
|
|
|
|
Sales Mix |
|
|
** |
|
|
|
|
** |
|
Hardware |
|
37 |
% |
|
|
34 |
% |
|
12 |
% |
|
|
|
40 |
% |
|
|
36 |
% |
|
11 |
% |
Software |
|
54 |
% |
|
|
59 |
% |
|
(7 |
%) |
|
|
|
52 |
% |
|
|
57 |
% |
|
(7 |
%) |
Services |
|
9 |
% |
|
|
7 |
% |
|
25 |
% |
|
|
|
8 |
% |
|
|
7 |
% |
|
15 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
1 |
% |
|
|
|
100 |
% |
|
|
100 |
% |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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, |
Years Ended December 31, |
|
|
2017 |
|
|
|
2016 |
|
|
change |
|
|
2017 |
|
|
|
2016 |
|
|
change |
APAC |
Net sales: |
|
|
|
|
|
|
Products |
$ |
29,378 |
|
|
$ |
39,388 |
|
|
(25 |
%) |
|
|
$ |
129,319 |
|
|
$ |
151,634 |
|
|
(15 |
%) |
Services |
$ |
9,499 |
|
|
$ |
9,082 |
|
|
5 |
% |
|
|
$ |
37,154 |
|
|
$ |
23,493 |
|
|
58 |
% |
Total net sales |
$ |
38,877 |
|
|
$ |
48,470 |
|
|
(20 |
%) |
|
|
$ |
166,473 |
|
|
$ |
175,127 |
|
|
(5 |
%) |
Gross profit |
$ |
7,901 |
|
|
$ |
8,540 |
|
|
(7 |
%) |
|
|
$ |
36,583 |
|
|
$ |
31,934 |
|
|
15 |
% |
Gross margin |
|
20.3 |
% |
|
|
17.6 |
% |
|
270 bps |
|
|
|
|
22.0 |
% |
|
|
18.2 |
% |
|
380 bps |
|
Selling and administrative expenses |
$ |
6,743 |
|
|
$ |
6,291 |
|
|
7 |
% |
|
|
$ |
28,231 |
|
|
$ |
23,658 |
|
|
19 |
% |
Severance and restructuring expenses |
$ |
- |
|
|
$ |
3 |
|
|
* |
|
|
|
$ |
104 |
|
|
$ |
118 |
|
|
(12 |
%) |
Acquisition-related expenses |
$ |
- |
|
|
$ |
3 |
|
|
* |
|
|
|
$ |
- |
|
|
$ |
169 |
|
|
* |
|
Earnings from operations |
$ |
1,158 |
|
|
$ |
2,243 |
|
|
(48 |
%) |
|
|
$ |
8,248 |
|
|
$ |
7,989 |
|
|
3 |
% |
|
|
|
|
|
|
|
Sales Mix |
|
|
** |
|
|
|
|
** |
|
Hardware |
|
25 |
% |
|
|
11 |
% |
|
82 |
% |
|
|
|
17 |
% |
|
|
11 |
% |
|
48 |
% |
Software |
|
51 |
% |
|
|
70 |
% |
|
(42 |
%) |
|
|
|
61 |
% |
|
|
76 |
% |
|
(24 |
%) |
Services |
|
24 |
% |
|
|
19 |
% |
|
5 |
% |
|
|
|
22 |
% |
|
|
13 |
% |
|
58 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
(20 |
%) |
|
|
|
100 |
% |
|
|
100 |
% |
|
(5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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 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 2018 financial results, including sales growth rates and
Adjusted diluted earnings per share for the full year 2018, and the
assumptions relating thereto, including the Company’s anticipated
effective tax rate and capital expenditures for 2018, the Company’s
plans for driving growth and the strength of its position to
compete in the marketplace in 2018, the Company’s plans to leverage
its four solutions areas strategy, focus on profitability and
invest in digital marketing, cloud and ecommerce platforms, the
Company’s expected working capital trends, gross margin and APAC
growth trends and the Company’s plans concerning its recently
authorized share repurchase program, 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, 2016 and
in other of 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 related marketing funds and
purchasing incentives, the amounts and terms of which can fluctuate
significantly 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;
- 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 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; and
- legal proceedings and audits and failure to comply with laws
and regulations.
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.
Contacts: |
Glynis
Bryan |
Helen
Johnson |
|
Chief Financial
Officer |
Senior VP, Finance |
|
Tel.
480.333.3390 |
Tel.
480.333.3234 |
|
Email
glynis.bryan@insight.com |
Email
helen.johnson@insight.com |
INSIGHT ENTERPRISES, INC.
AND SUBSIDIARIESConsolidated Statements of
Operations(In thousands, except per share
data)(Unaudited)
|
|
Three Months Ended December
31, |
|
|
|
Years Ended December
31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Net sales: |
|
|
|
|
Products |
$ |
1,612,338 |
|
|
$ |
1,344,024 |
|
|
$ |
6,038,744 |
|
|
$ |
4,997,263 |
|
Services |
|
171,737 |
|
|
|
123,559 |
|
|
|
664,879 |
|
|
|
488,252 |
|
Total net
sales |
|
1,784,075 |
|
|
|
1,467,583 |
|
|
|
6,703,623 |
|
|
|
5,485,515 |
|
Costs of goods
sold: |
|
|
|
|
Products |
|
1,475,916 |
|
|
|
1,234,039 |
|
|
|
5,512,402 |
|
|
|
4,571,462 |
|
Services |
|
75,276 |
|
|
|
42,575 |
|
|
|
272,651 |
|
|
|
170,951 |
|
Total
costs of goods sold |
|
1,551,192 |
|
|
|
1,276,614 |
|
|
|
5,785,053 |
|
|
|
4,742,413 |
|
Gross
profit |
|
232,883 |
|
|
|
190,969 |
|
|
|
918,570 |
|
|
|
743,102 |
|
Operating
expenses: |
|
|
|
|
Selling and
administrative expenses |
|
184,554 |
|
|
|
145,066 |
|
|
|
723,328 |
|
|
|
585,243 |
|
Severance and
restructuring expenses |
|
2,791 |
|
|
|
1,527 |
|
|
|
9,002 |
|
|
|
4,580 |
|
Loss on sale of
foreign entity |
|
- |
|
|
|
- |
|
|
|
3,646 |
|
|
|
- |
|
Acquisition-related expenses |
|
- |
|
|
|
3,706 |
|
|
|
3,329 |
|
|
|
4,447 |
|
Earnings
from operations |
|
45,538 |
|
|
|
40,670 |
|
|
|
179,265 |
|
|
|
148,832 |
|
Non-operating (income)
expense: |
|
|
|
|
Interest
income |
|
(346 |
) |
|
|
(282 |
) |
|
|
(1,209 |
) |
|
|
(1,066 |
) |
Interest
expense |
|
5,360 |
|
|
|
2,271 |
|
|
|
19,174 |
|
|
|
8,628 |
|
Net foreign
currency exchange (gain) loss |
|
(117 |
) |
|
|
(520 |
) |
|
|
855 |
|
|
|
522 |
|
Other expense,
net |
|
367 |
|
|
|
311 |
|
|
|
1,347 |
|
|
|
1,290 |
|
Earnings
before income taxes |
|
40,274 |
|
|
|
38,890 |
|
|
|
159,098 |
|
|
|
139,458 |
|
Income tax expense |
|
26,106 |
|
|
|
17,790 |
|
|
|
68,415 |
|
|
|
54,768 |
|
Net earnings |
$ |
14,168 |
|
|
$ |
21,100 |
|
|
$ |
90,683 |
|
|
$ |
84,690 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share: |
|
|
|
|
Basic |
$ |
0.40 |
|
|
$ |
0.59 |
|
|
$ |
2.54 |
|
|
$ |
2.35 |
|
Diluted |
$ |
0.39 |
|
|
$ |
0.59 |
|
|
$ |
2.50 |
|
|
$ |
2.32 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations: |
|
|
|
|
Basic |
|
35,809 |
|
|
|
35,479 |
|
|
|
35,741 |
|
|
|
36,102 |
|
Diluted |
|
36,272 |
|
|
|
35,963 |
|
|
|
36,207 |
|
|
|
36,438 |
|
INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIESConsolidated Balance
Sheets(In
thousands)(Unaudited)
|
|
December 31, |
|
|
|
2017 |
|
|
|
2016 |
|
ASSETS |
|
|
Current
assets: |
|
|
Cash and
cash equivalents |
$ |
105,831 |
|
|
$ |
202,882 |
|
Accounts
receivable, net |
|
1,814,560 |
|
|
|
1,436,742 |
|
Inventories |
|
194,529 |
|
|
|
148,203 |
|
Inventories not available for sale |
|
36,956 |
|
|
|
68,619 |
|
Other
current assets |
|
152,467 |
|
|
|
127,159 |
|
Total current assets |
|
2,304,343 |
|
|
|
1,983,605 |
|
|
|
|
Property and equipment,
net |
|
75,252 |
|
|
|
70,910 |
|
Goodwill |
|
131,431 |
|
|
|
62,645 |
|
Intangible assets,
net |
|
100,778 |
|
|
|
20,707 |
|
Deferred income
taxes |
|
17,064 |
|
|
|
52,347 |
|
Other assets |
|
56,783 |
|
|
|
29,086 |
|
|
$ |
2,685,651 |
|
|
$ |
2,219,300 |
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
Current
liabilities: |
|
|
Accounts
payable – trade |
$ |
899,075 |
|
|
$ |
1,070,259 |
|
Accounts
payable – inventory financing facility |
|
319,468 |
|
|
|
154,930 |
|
Accrued
expenses and other current liabilities |
|
175,860 |
|
|
|
151,895 |
|
Current
portion of long-term debt |
|
16,592 |
|
|
|
480 |
|
Deferred
revenue |
|
88,979 |
|
|
|
61,098 |
|
Total current liabilities |
|
1,499,974 |
|
|
|
1,438,662 |
|
|
|
|
Long-term debt |
|
296,576 |
|
|
|
40,251 |
|
Deferred income
taxes |
|
717 |
|
|
|
900 |
|
Other liabilities |
|
44,915 |
|
|
|
26,044 |
|
|
|
1,842,182 |
|
|
|
1,505,857 |
|
Stockholders’
equity: |
|
|
Preferred
stock |
|
- |
|
|
|
- |
|
Common
stock |
|
358 |
|
|
|
355 |
|
Additional paid-in capital |
|
317,155 |
|
|
|
309,650 |
|
Retained
earnings |
|
550,220 |
|
|
|
459,537 |
|
Accumulated other comprehensive loss – foreign currency translation
adjustments |
|
(24,264 |
) |
|
|
(56,099 |
) |
Total stockholders’ equity |
|
843,469 |
|
|
|
713,443 |
|
|
$ |
2,685,651 |
|
|
$ |
2,219,300 |
|
INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIESConsolidated Statements of Cash
Flows (In
thousands)(Unaudited)
|
|
Years Ended December 31, |
|
|
|
2017 |
|
|
|
2016 |
|
Cash flows from
operating activities: |
|
|
Net
earnings |
$ |
90,683 |
|
|
$ |
84,690 |
|
Adjustments to
reconcile net earnings to net cash (used in) provided by operating
activities: |
|
|
Depreciation and amortization of property and equipment |
|
25,787 |
|
|
|
27,493 |
|
Amortization of intangible assets |
|
16,812 |
|
|
|
10,637 |
|
Provision for losses on accounts receivable |
|
5,245 |
|
|
|
2,452 |
|
Write-downs of inventories |
|
2,776 |
|
|
|
2,934 |
|
Write-off of property and equipment |
|
418 |
|
|
|
- |
|
Non-cash stock-based compensation |
|
12,826 |
|
|
|
11,058 |
|
Deferred income taxes |
|
19,139 |
|
|
|
10,517 |
|
Loss on sale of foreign entity |
|
3,646 |
|
|
|
- |
|
Gain on sale of real estate |
|
- |
|
|
|
(338 |
) |
Changes in
assets and liabilities: |
|
|
Increase in accounts receivable |
|
(208,065 |
) |
|
|
(168,966 |
) |
Increase in inventories |
|
(14,046 |
) |
|
|
(50,712 |
) |
Decrease (increase) in other assets |
|
4,982 |
|
|
|
(50,130 |
) |
(Decrease) increase in accounts payable |
|
(237,457 |
) |
|
|
193,582 |
|
(Decrease) increase in deferred revenue |
|
(27,184 |
) |
|
|
10,633 |
|
(Decrease) increase in accrued expenses and other
liabilities |
|
(988 |
) |
|
|
12,278 |
|
Net cash (used in) provided by operating
activities |
|
(305,426 |
) |
|
|
96,128 |
|
Cash flows from
investing activities: |
|
|
Acquisitions, net of cash and cash equivalents acquired |
|
(186,932 |
) |
|
|
(10,297 |
) |
Purchases
of property and equipment |
|
(19,230 |
) |
|
|
(12,266 |
) |
Proceeds
from sale of foreign entity |
|
1,517 |
|
|
|
- |
|
Proceeds
from sale of real estate, net |
|
- |
|
|
|
1,378 |
|
Net cash used in investing activities |
|
(204,645 |
) |
|
|
(21,185 |
) |
Cash flows from
financing activities: |
|
|
Borrowings on senior revolving credit facility |
|
1,151,216 |
|
|
|
772,218 |
|
Repayments on senior revolving credit facility |
|
(1,033,716 |
) |
|
|
(772,218 |
) |
Borrowings on accounts receivable securitization financing
facility |
|
3,961,389 |
|
|
|
2,802,000 |
|
Repayments on accounts receivable securitization financing
facility |
|
(3,975,889 |
) |
|
|
(2,851,500 |
) |
Borrowings under Term Loan A |
|
175,000 |
|
|
|
- |
|
Repayments under Term Loan A |
|
(8,750 |
) |
|
|
- |
|
Repayments under other financing agreements |
|
(5,636 |
) |
|
|
(1,309 |
) |
Payments
on capital lease obligations |
|
(1,089 |
) |
|
|
(445 |
) |
Net
borrowings (repayments) under inventory financing facility |
|
141,037 |
|
|
|
48,603 |
|
Payment
of debt issuance costs |
|
(1,123 |
) |
|
|
(3,360 |
) |
Payment
of payroll taxes on stock-based compensation through shares
withheld |
|
(5,318 |
) |
|
|
(2,219 |
) |
Repurchases of common stock |
|
- |
|
|
|
(50,000 |
) |
Net cash provided by (used in) financing
activities |
|
397,121 |
|
|
|
(58,230 |
) |
Foreign currency
exchange effect on cash and cash equivalent balances |
|
15,899 |
|
|
|
(1,809 |
) |
(Decrease) increase in
cash and cash equivalents |
|
(97,051 |
) |
|
|
14,904 |
|
Cash and cash
equivalents at beginning of year |
|
202,882 |
|
|
|
187,978 |
|
Cash and cash
equivalents at end of year |
$ |
105,831 |
|
|
$ |
202,882 |
|
INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIESReconciliation of GAAP to Non-GAAP
Financial Measures (In thousands, except per share
data)(unaudited)
|
Three Months
Ended December 31, |
Years Ended December
31, |
|
|
2017 |
|
|
|
2016 |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Adjusted Consolidated Earnings from
Operations: |
GAAP consolidated EFO |
$ |
45,538 |
|
|
$ |
40,670 |
|
|
|
$ |
179,265 |
|
|
$ |
148,832 |
|
|
Severance and restructuring expenses |
|
2,791 |
|
|
|
1,527 |
|
|
|
|
9,002 |
|
|
|
4,580 |
|
|
Loss on sale of foreign entity |
|
- |
|
|
|
- |
|
|
|
|
3,646 |
|
|
|
- |
|
|
Gain on sale of real estate for which a non-cash impairment charge
was previously reported |
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(338 |
) |
|
Acquisition-related expenses |
|
- |
|
|
|
3,706 |
|
|
|
|
3,329 |
|
|
|
4,447 |
|
|
Adjusted non-GAAP consolidated EFO |
$ |
48,329 |
|
|
$ |
45,903 |
|
|
|
$ |
195,242 |
|
|
$ |
157,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated Net
Earnings: |
GAAP consolidated net earnings |
$ |
14,168 |
|
|
$ |
21,100 |
|
|
|
$ |
90,683 |
|
|
$ |
84,690 |
|
|
Severance and restructuring expenses |
|
2,791 |
|
|
|
1,527 |
|
|
|
|
9,002 |
|
|
|
4,580 |
|
|
Loss on sale of foreign entity |
|
- |
|
|
|
- |
|
|
|
|
3,646 |
|
|
|
- |
|
|
Gain on sale of real estate for which a non-cash impairment charge
was previously reported |
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(338 |
) |
|
Acquisition-related expenses |
|
- |
|
|
|
3,706 |
|
|
|
|
3,329 |
|
|
|
4,447 |
|
|
Income taxes on non-GAAP adjustments |
|
(806 |
) |
|
|
(331 |
) |
|
|
|
(2,552 |
) |
|
|
(1,414 |
) |
|
Tax expense related to U.S. federal tax reform |
|
13,363 |
|
|
|
- |
|
|
|
|
13,363 |
|
|
|
- |
|
|
Adjusted non-GAAP consolidated net earnings |
$ |
29,516 |
|
|
$ |
26,002 |
|
|
|
$ |
117,471 |
|
|
$ |
91,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated Diluted
EPS: |
GAAP consolidated diluted EPS |
$ |
0.39 |
|
|
$ |
0.59 |
|
|
|
$ |
2.50 |
|
|
$ |
2.32 |
|
|
Severance and restructuring expenses |
|
0.08 |
|
|
|
0.04 |
|
|
|
|
0.25 |
|
|
|
0.13 |
|
|
Loss on sale of foreign entity |
|
- |
|
|
|
- |
|
|
|
|
0.10 |
|
|
|
- |
|
|
Gain on sale of real estate for which a non-cash impairment charge
was previously reported |
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(0.01 |
) |
|
Acquisition-related expenses |
|
- |
|
|
|
0.10 |
|
|
|
|
0.09 |
|
|
|
0.12 |
|
|
Income taxes on non-GAAP adjustments |
|
(0.03 |
) |
|
|
(0.01 |
) |
|
|
|
(0.07 |
) |
|
|
(0.04 |
) |
|
Tax expense related to U.S. federal tax reform |
|
0.37 |
|
|
|
- |
|
|
|
|
0.37 |
|
|
|
- |
|
|
Adjusted non-GAAP consolidated diluted EPS |
$ |
0.81 |
|
|
$ |
0.72 |
|
|
|
$ |
3.24 |
|
|
$ |
2.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted North America Earnings from
Operations: |
GAAP EFO from North America segment |
$ |
37,235 |
|
|
$ |
29,165 |
|
|
|
$ |
153,652 |
|
|
$ |
116,921 |
|
|
Severance and restructuring expenses |
|
1,965 |
|
|
|
515 |
|
|
|
|
4,010 |
|
|
|
2,966 |
|
|
Gain on sale of real estate for which a non-cash impairment charge
was previously reported |
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(338 |
) |
|
Acquisition-related expenses |
|
- |
|
|
|
3,703 |
|
|
|
|
3,223 |
|
|
|
4,278 |
|
|
Adjusted non-GAAP EFO from North America segment |
$ |
39,200 |
|
|
$ |
33,383 |
|
|
|
$ |
160,885 |
|
|
$ |
123,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EMEA Earnings from
Operations: |
GAAP EFO from EMEA segment |
$ |
7,145 |
|
|
$ |
9,262 |
|
|
|
$ |
17,365 |
|
|
$ |
23,922 |
|
|
Severance and restructuring expenses |
|
826 |
|
|
|
1,009 |
|
|
|
|
4,888 |
|
|
|
1,496 |
|
|
Loss on sale of foreign entity |
|
- |
|
|
|
- |
|
|
|
|
3,646 |
|
|
|
- |
|
|
Acquisition-related expenses |
|
- |
|
|
|
- |
|
|
|
|
106 |
|
|
|
- |
|
|
Adjusted non-GAAP EFO from EMEA segment |
$ |
7,971 |
|
|
$ |
10,271 |
|
|
|
$ |
26,005 |
|
|
$ |
25,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIESReconciliation of GAAP to Non-GAAP
Financial Measures (Continued)(In thousands,
except per share data)(unaudited)
|
Three Months
Ended December 31, |
Years Ended December
31, |
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
Adjusted APAC Earnings from
Operations: |
GAAP EFO from APAC segment |
$ |
1,158 |
|
$ |
2,243 |
|
|
$ |
8,248 |
|
$ |
7,989 |
|
Severance and restructuring expenses |
|
- |
|
|
3 |
|
|
|
104 |
|
|
118 |
|
Acquisition-related expenses |
|
- |
|
|
3 |
|
|
|
- |
|
|
169 |
|
Adjusted non-GAAP EFO from APAC segment |
$ |
1,158 |
|
$ |
2,249 |
|
|
$ |
8,352 |
|
$ |
8,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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