October 28, 2015

Insight Enterprises, Inc. Reports Third Quarter 2015 Results

TEMPE, Ariz., Oct. 28, 2015 (GLOBE NEWSWIRE) -- Insight Enterprises, Inc. (Nasdaq:NSIT) (the "Company") today reported results of operations for the quarter ended September 30, 2015

  • Consolidated net sales of $1.34 billion for the third quarter of 2015 increased 8% compared to the third quarter of 2014, up 13% year over year excluding the effects of foreign currency movements.
    • Net sales in North America of $1.0 billion increased 15%;
    • Net sales in EMEA of $293.6 million decreased 6%, but increased 6% excluding the effects of foreign currency movements; and
    • Net sales in APAC of $26.1 million decreased 20%, down 7% excluding the effects of foreign currency movements.
       
  • Consolidated gross profit of $182.3 million increased 6% compared to the third quarter of 2014, up 11% year over year excluding the effects of foreign currency movements.  Consolidated gross margin decreased approximately 30 basis points to 13.6% of net sales.
    • Gross profit in North America of $136.0 million (13.3% gross margin) increased 13% year over year;
    • Gross profit in EMEA of $40.9 million (13.9% gross margin) was down 9% year to year, but increased 3% year over year excluding the effects of foreign currency movements; and
    • Gross profit in APAC of $5.3 million (20.3% gross margin) was down 21% year to year, down 5% excluding the effects of foreign currency movements.
       
  • Consolidated earnings from operations increased 15% compared to the third quarter of 2014 to $32.6 million, or 2.4% of net sales.  Excluding the effects of foreign currency movements, the increase in consolidated earnings from operations was 17% year over year.
    • Earnings from operations in North America increased 23% year over year to $31.6 million, or 3.1% of net sales;
    • Earnings from operations in EMEA decreased 49% year to year to $1.0 million, or 0.4% of net sales, down 46% excluding the effects of foreign currency movements; and
    • Earnings from operations in APAC decreased 97% year to year to $22,000, or 0.1% of net sales.  Excluding the effects of foreign currency movements, the decrease in APAC's earnings from operations was 96% year to year.
       
  • Non-GAAP consolidated earnings from operations for the third quarter of 2015, which exclude severance and restructuring expenses in both periods and a non-cash real estate impairment charge of $800,000 in the 2015 period, increased 19% year over year to $34.3 million, or 2.6% of net sales.*
     
  • Consolidated net earnings and diluted earnings per share for the third quarter of 2015 were $20.8 million and $0.56, respectively, at an effective tax rate of 35.0%.
     
  • Non-GAAP consolidated net earnings and diluted earnings per share for the third quarter of 2015, which exclude severance and restructuring expenses and a non-cash real estate impairment charge and the tax effect of these charges, were $21.9 million and $0.59, respectively.*
     
  • During the three months ended September 30, 2015, the Company repurchased approximately 194,000 shares of its common stock, which represented the remaining $5.9 million authorized under previously approved repurchase programs.

"In the third quarter, our team delivered double digit sales and gross profit growth in constant currency and controlled discretionary expenses, which resulted in strong earnings growth year over year," stated Ken Lamneck, President and Chief Executive Officer.  "We are pleased with our sales and operational execution in the first nine months of 2015.  Despite currency headwinds, we have delivered solid financial results this year while growing our sales force globally, and most recently we enhanced our services expertise with the acquisition of BlueMetal on October 1st.  We believe our actions so far this year will serve us well as we close out 2015 and head into 2016," added Lamneck. 

The Company refers to changes in net sales, gross profit and earnings from operations on a consolidated basis and in EMEA and APAC excluding the effects of foreign currency movements.  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.

Net of tax 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.

* A tabular reconciliation of financial measures prepared in accordance with United States generally accepted accounting principles ("GAAP") to non-GAAP financial measures is included at the end of this press release.

GUIDANCE

For the full year 2015, the Company continues to expect top line growth in the low single digits in U.S. dollar terms.  In the fourth quarter, the Company expects diluted earnings per share to be between $0.56 and $0.61 and, for the full year, diluted earnings per share is expected to be between $2.10 and $2.15.

This outlook reflects:

  • the adverse effect on gross profit of previously announced partner program changes in the software category, which the Company expects to be approximately $8 million for the full year 2015;
  • an effective tax rate of 38% for the fourth quarter; and
  • average common shares outstanding of approximately 38.3 million for the full year 2015.

This outlook excludes severance and restructuring expenses incurred during the year and the non-cash real estate impairment charge recorded in the third quarter.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 5:00 p.m. ET to discuss third quarter 2015 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 61039037. NSIT-F

USE OF NON-GAAP FINANCIAL MEASURES 

The non-GAAP financial measures exclude severance and restructuring expenses, non-cash real estate impairment and accelerated depreciation charges and the tax effect of these charges.  The Company excludes these charges 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 September 30  Nine Months Ended September 30
Insight Enterprises, Inc.   2015      2014     change     2015      2014     change 
Net sales$1,342,195 $1,237,668   8%$3,985,905 $3,870,095  3%
Gross profit$182,251 $171,820  6%$535,479 $530,164  1%
Gross margin 13.6% 13.9%(30 bps) 13.4% 13.7%(30 bps)
Selling and administrative expenses$148,796 $143,134  4%$437,596 $433,373  1%
Severance and restructuring expenses$817 $308  165%$1,912 $955  100%
Earnings from operations$32,638 $28,378  15%$95,971 $95,836  - 
Net earnings$20,825 $17,402  20%$57,275 $56,201  2%
Diluted earnings per share$0.56 $0.42  33%$1.49 $1.36  10%
       
North America      
Net sales$1,022,432 $891,345  15%$2,823,791 $2,561,279  10%
Gross profit$ 135,998 $120,214  13%$375,730 $352,665  7%
Gross margin 13.3% 13.5%(20 bps) 13.3% 13.8%(50 bps)
Selling and administrative expenses$103,793 $94,382  10%$295,228 $278,121   6%
Severance and restructuring expenses$618 $102  506%$873 $165  429%
Earnings from operations$31,587 $25,730  23%$79,629 $74,379  7%
       
EMEA       
Net sales$293,635 $313,644  (6%)$1,029,103 $1,148,444  (10%)
Gross profit$40,949 $44,895  (9%)$138,575 $150,302   (8%)
Gross margin 13.9% 14.3%(40 bps) 13.5% 13.1%40 bps
Selling and administrative expenses$39,721 $42,684  (7%)$125,232 $135,819  (8%)
Severance and restructuring expenses$199 $209  (5%)$1,039 $684  52%
Earnings from operations$1,029 $2,002  (49%)$12,304 $13,799  (11%)
       
APAC      
Net sales$26,128 $32,679  (20%)$133,011 $160,372  (17%)
Gross profit$ 5,304 $6,711  (21%)$21,174 $27,197  (22%)
Gross margin 20.3% 20.5%(20 bps) 15.9% 17.0%(110 bps)
Selling and administrative expenses$5,282 $6,068  (13%)$17,136 $19,433  (12%)
Severance and restructuring expenses$- $(3)**$- $106 **
Earnings from operations$22 $646  (97%)$4,038 $7,658  (47%)


    
   North America  EMEA  APAC
     Three Months Ended
    September 30
    Three Months Ended
    September 30
    Three Months Ended
    September 30
 

Sales Mix
  

2015 
  

2014 
 
%
change*
 

2015   
  

2014   
 
%
change*
 

2015 
  

2014 
 
%
change*
Hardware 63% 63% 14% 46% 45% (5%) 13% 10% 11%
Software 30% 31% 15% 51% 52% (8%) 82% 86% (24%)
Services 7% 6% 24% 3% 3% 1% 5% 4% (10%)
  100% 100% 15% 100% 100% (6%) 100% 100% (20%)
           

* Represents growth/decline in category net sales on a U.S. dollar basis and does not exclude the effects of foreign currency movements.

** Percentage change not considered meaningful.  

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 fourth quarter and full year 2015 financial results, including top line growth rates and diluted earnings per share, and the assumptions relating thereto, including the effect on gross profit of partner program changes, the Company's effective tax rate, the expected average outstanding share count for 2015 and trends and opportunities relating to the IT industry, 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, 2014:

  • the Company's reliance on partners for product availability and competitive products to sell as well as the Company's competition with its partners;
  • the Company's reliance on partners for marketing funds and purchasing incentives;
  • changes in the IT industry and/or rapid changes in technology;
  • actions of the Company's competitors, including manufacturers and publishers of products the Company sells;
  • failure to comply with the terms and conditions of the Company's commercial and public sector contracts;
  • disruptions in the Company's IT systems and voice and data networks;
  • the security of the Company's electronic and other confidential information;
  • general economic conditions;
  • the Company's reliance on commercial delivery services;
  • the Company's dependence on certain personnel;
  • the variability of the Company's net sales and gross profit;
  • the risks associated with the Company's international operations;
  • exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations; and
  • intellectual property infringement claims and challenges to the Company's registered trademarks and trade names.

Additionally, there may be other risks that are otherwise described from time to time in the reports that the Company files with the Securities and Exchange Commission.  Any forward-looking statements in this release should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others.  The Company assumes no obligation to update, and, except as may be required by law, does not intend to update, any forward-looking statements.  The Company does not endorse any projections regarding future performance that may be made by third parties.   

 
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
   
 Three Months Ended
  September 30
Nine Months Ended
  September 30
    2015       2014      2015       2014   
Net sales$1,342,195 $1,237,668 $3,985,905 $3,870,095 
Costs of goods sold   1,159,944    1,065,848    3,450,426    3,339,931 
Gross profit. 182,251    171,820  535,479    530,164 
Operating expenses:    
Selling and administrative expenses 148,796  143,134  437,596  433,373 
Severance and restructuring expenses   817    308    1,912    955 
Earnings from operations 32,638  28,378  95,971  95,836 
Non-operating (income) expense:    
Interest income (265) (229) (611) (811)
Interest expense 2,062  1,594  5,518  4,553 
Net foreign currency exchange (gain) loss (1,561) 238  (928) 1,195 
Other expense, net.   357    369    969    1,061 
Earnings before income taxes 32,045  26,406  91,023  89,838 
Income tax expense   11,220    9,004    33,748    33,637 
Net earnings$  20,825 $  17,402 $  57,275 $  56,201 
     
     
Net earnings per share:    
Basic$  0.56 $  0.42 $  1.50 $  1.36 
Diluted$  0.56 $  0.42 $  1.49 $  1.36 
     
     
Shares used in per share calculations:    
Basic   37,095    40,972    38,279    41,185 
Diluted   37,351    41,270    38,557    41,472 


 
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
   
  September 30,
  2015 
December 31,
  2014 
ASSETS  
Current assets:  
Cash and cash equivalents$148,134 $164,524 
Accounts receivable, net 1,106,231  1,309,209 
Inventories 131,459  122,573 
Inventories not available for sale 46,180  45,261 
Deferred income taxes 12,134  13,385 
Other current assets   58,359    62,920 
Total current assets 1,502,497  1,717,872 
   
Property and equipment, net 92,864  104,181 
Goodwill 26,257  26,257 
Intangible assets, net 15,073  23,567 
Deferred income taxes 57,141  58,620 
Other assets   22,764    17,626 
 $  1,716,596 $  1,948,123 
   
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable - trade$587,130 $819,916 
Accounts payable - inventory financing facility 176,489  122,781 
Accrued expenses and other current liabilities 122,049  144,561 
Current portion of long-term debt 1,534  766 
Deferred revenue   46,555    50,904 
Total current liabilities 933,757  1,138,928 
   
Long-term debt 85,057  62,535 
Deferred income taxes 592  940 
Other liabilities   27,906    24,489 
    1,047,312    1,226,892 
Stockholders' equity:  
Preferred stock -  - 
Common stock 371  401 
Additional paid-in capital 314,533  337,167 
Retained earnings 390,145  396,992 
Accumulated other comprehensive loss - foreign currency translation adjustments  (35,765)   (13,329)
Total stockholders' equity   669,284    721,231 
 $  1,716,596 $  1,948,123 


  
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(IN THOUSANDS)
(UNAUDITED)
  
 Nine Months Ended September 30,
     2015      2014   
Cash flows from operating activities:  
Net earnings$57,275  $56,201 
Adjustments to reconcile net earnings to net cash provided by operating activities:  
Depreciation and amortization 28,426  30,648 
Non-cash real estate impairment 800  4,558 
Provision for losses on accounts receivable 4,139  3,235 
Write-downs of inventories 2,834  2,028 
Write-off of property and equipment 72  531 
Non-cash stock-based compensation 6,685  5,861 
Excess tax benefit from employee gains on stock-based compensation (544) (438)
Deferred income taxes 2,463  447 
Changes in assets and liabilities:  
Decrease in accounts receivable 168,781  201,258 
Increase in inventories (13,508) (34,628)
Decrease (increase) in other current assets 2,354  (9,056)
(Increase) decrease in other assets (5,431) 3,203 
Decrease in accounts payable (212,289) (177,627)
(Decrease) increase in deferred revenue (4,181) 8,986 
Decrease in accrued expenses and other liabilities  (13,234) (47,411)
Net cash provided by operating activities 24,642  47,796 
Cash flows from investing activities:  
Purchases of property and equipment  (10,804) (7,983)
Net cash used in investing activities (10,804) (7,983)
Cash flows from financing activities:  
Borrowings on senior revolving credit facility 511,410  399,492 
Repayments on senior revolving credit facility (511,410) (398,992)
Borrowings on accounts receivable securitization financing facility 1,388,100  708,070 
Repayments on accounts receivable securitization financing facility (1,364,100) (723,070)
Borrowings under other financing agreements -  2,002 
Repayments under other financing agreements (543) - 
Payments on capital lease obligation (167) (163)
Net borrowings under inventory financing facility 53,708  10,408 
Payment of deferred financing fees -  (277)
Excess tax benefit from employee gains on stock-based compensation 544  438 
Payment of payroll taxes on stock-based compensation through shares withheld. (2,137) (1,662)
Repurchases of common stock (91,843) (29,652)
Net cash used in financing activities (16,438) (33,406)
Foreign currency exchange effect on cash and cash equivalent balances (13,790) (6,122)
(Decrease) increase in cash and cash equivalents (16,390) 285 
Cash and cash equivalents at beginning of period 164,524  126,817 
Cash and cash equivalents at end of period$148,134 $127,102 


  
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES 
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES  
(IN THOUSANDS, EXCEPT PER SHARE DATA) 
(UNAUDITED) 
  
 Three Months EndedNine Months Ended 
 September 30,September 30, 
  2015  2014  2015  2014  
Consolidated Earnings from Operations:     
GAAP$32,638  $28,378 $95,971 $95,836  
Non-cash real estate impairment and accelerated depreciation 800  -  800  5,178  
Severance and restructuring expenses 817  308  1,912  955  
Non-GAAP$34,255 $28,686 $98,683 $101,969  
       
Consolidated Net Earnings:     
GAAP$ 20,825 $17,402 $57,275 $56,201  
Non-cash real estate impairment and accelerated depreciation, net of tax 499  -  499  3,174  
Severance and restructuring expenses, net of tax 559  195  1,523  598  
Non-GAAP$21,883 $17,597 $59,297 $59,973  
      
Consolidated Diluted EPS:     
GAAP$0.56 $0.42 $1.49 $1.36  
Non-cash real estate impairment and accelerated depreciation, net of tax 0.01  -  0.01  0.08   
Severance and restructuring expenses, net of tax 0.02  0.01  0.04  0.01  
Non-GAAP$0.59 $0.43 $1.54 $1.45  
      
North America Earnings from Operations:     
GAAP$31,587 $25,730 $79,629 $74,379  
Non-cash real estate impairment and accelerated depreciation  800  -  800  5,178  
Severance and restructuring expenses 618  102  873  165  
Non-GAAP$33,005 $25,832 $81,302 $79,722  
      
EMEA Earnings from Operations:     
GAAP$1,029 $2,002 $12,304 $13,799  
Severance and restructuring expenses 199  209  1,039  684  
Non-GAAP$1,228 $2,211 $13,343 $14,483  
      
APAC Earnings from Operations:      
GAAP$22 $646 $4,038 $7,658  
Severance and restructuring expenses -  (3) -  106  
Non-GAAP$22 $643 $4,038 $7,764  
      


 

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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