Insight Enterprises, Inc.
(Nasdaq:NSIT) (the “Company”) today reported results of operations
for the quarter ended March 31, 2017.
- Net sales up 26% to $1.48 billion.
- Gross profit up 29% to $208.2 million.
- Earnings from operations up 68% to $23.0 million.
- Diluted earnings per share of $0.38, up 111% year over
year.
In the first quarter of 2017, consolidated net sales were $1.48
billion, up 26% year over year. This improvement reflects
both strong organic growth and the acquisition of Datalink on
January 6, 2017.
Consolidated earnings from operations in the first quarter of
2017 increased 68% year over year to $23.0 million and diluted
earnings per share increased to $0.38 compared to $0.18 for the
first quarter of 2016. Adjusted diluted earnings per share
was $0.56 in the first quarter of 2017 compared to $0.21 reported
in the first quarter of last year.*
“In the first quarter, our team delivered double digit organic
sales and gross profit growth across our largely fixed expense base
which drove Adjusted earnings from operations up more than 100%
year over year. Through new client wins and new projects with
existing clients in the first quarter, we gained market share in
the data center and software categories while holding our own with
devices,” stated Ken Lamneck, President and Chief Executive
Officer. “In addition, we closed the acquisition of Datalink
early in the first quarter which added about $130 million to our
top line and was a small positive contributor to Adjusted earnings
from operations for the quarter. Integration efforts are
underway and we remain excited about the long-term opportunities
for the combined business,” stated Lamneck.
KEY HIGHLIGHTS
• Consolidated net sales of $1.48 billion for the
first quarter of 2017 increased 26% compared to the first quarter
of 2016.
- Net sales in North America of $1.1 billion were up 34% year
over year;
- Net sales in EMEA of $330.4 million increased 9% year over
year; and
- Net sales in APAC of $36.2 million decreased 6% year to
year.
• Excluding the effects of fluctuating foreign
currency exchange rates, consolidated net sales increased 29% year
over year, with net sales growth in North America and EMEA of 34%
and 20%, respectively, and a decline in APAC of 9% year over
year.
• Consolidated gross profit of $208.2 million
increased 29% compared to the first quarter of 2016, with
consolidated gross margin increasing to 14.1% of net sales.
- Gross profit in North America of $158.3 million (14.2% gross
margin) increased 42% year over year;
- Gross profit in EMEA of $42.5 million (12.9% gross margin)
decreased 2% year to year; and
- Gross profit in APAC of $7.4 million (20.4% gross margin)
increased 24% year over year.
• Excluding the effects of fluctuating foreign
currency exchange rates, consolidated gross profit increased 32%
year over year, and gross profit in North America, EMEA and APAC
increased 41%, 8% and 21%, respectively, year over year.
•
Consolidated earnings from operations increased 68%
compared to the first quarter of 2016 to $23.0 million, or 1.6% of
net sales.
- Earnings from operations in North America increased 122% year
over year to $23.2 million, or 2.1% of net sales;
- EMEA reported a loss from operations of $1.1 million in the
first quarter of 2017 compared to earnings from operations of $2.7
million in the first quarter of 2016; and
- Earnings from operations in APAC increased 98% year over year
to $840,000, or 2.3% of net sales.
• Excluding the effects of fluctuating foreign
currency exchange rates, consolidated earnings from operations
increased 74% year over year, and earnings from operations in North
America and APAC increased 120% and 116%, respectively, year over
year. •
Adjusted consolidated earnings from operations
increased 104% year over year to $30.6 million, or 2.1% of net
sales, for the first quarter of
2017.* •
Consolidated net earnings and diluted earnings per
share for the first quarter of 2017 were $13.8 million and $0.38,
respectively, at an effective tax rate of 26.2%, which includes $2
million of tax benefits recognized on the settlement of employee
share-based awards in accordance with a new accounting standard,
which was adopted effective January 1, 2017.
• Adjusted consolidated net earnings and Adjusted
diluted earnings per share for the first quarter of 2017 were $20.2
million and $0.56, respectively.*
* In discussing financial results for the three months ended
March 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.” Adjusted measures
exclude (i) severance and restructuring expenses, (ii) certain
acquisition-related expenses and (iii) the tax effects of these
items. 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.
GUIDANCE
For the full year 2017, the Company now expects its business to
deliver sales growth of 15% to 18% compared to 2016. The
Company is also increasing its Adjusted diluted earnings per share
outlook for the full year 2017 to $3.03 to $3.13.
This outlook assumes an effective tax rate of approximately 38%
for the balance of 2017.
This outlook also excludes severance and restructuring and
acquisition-related expenses incurred during the first quarter of
2017 and those that may be incurred during the balance of
2017. 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 future
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 2017 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 first quarter 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 4635722.
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 and (iii) the tax effects of these
items. 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 March
31, |
|
|
2017 |
|
|
2016 |
|
change |
Insight Enterprises, Inc. |
Net sales |
$ |
1,477,543 |
|
$ |
1,168,982 |
|
26% |
Gross profit |
$ |
208,227 |
|
$ |
161,108 |
|
29% |
Gross margin |
|
14.1 |
% |
|
13.8 |
% |
30 bps |
Selling and administrative expenses |
$ |
177,632 |
|
$ |
146,119 |
|
22% |
Severance and restructuring expenses |
$ |
4,695 |
|
$ |
1,356 |
|
246% |
Acquisition-related expenses |
$ |
2,947 |
|
$ |
- |
|
* |
Earnings from operations |
$ |
22,953 |
|
$ |
13,633 |
|
68% |
Net earnings |
$ |
13,848 |
|
$ |
6,888 |
|
101% |
Diluted earnings per share |
$ |
0.38 |
|
$ |
0.18 |
|
111% |
|
|
|
|
North America |
Net sales |
$ |
1,110,952 |
|
$ |
826,888 |
|
34% |
Gross profit |
$ |
158,301 |
|
$ |
111,743 |
|
42% |
Gross margin |
|
14.2 |
% |
|
13.5 |
% |
70 bps |
Selling and administrative expenses |
$ |
131,010 |
|
$ |
100,041 |
|
31% |
Severance and restructuring expenses |
$ |
1,104 |
|
$ |
1,217 |
|
(9%) |
Acquisition-related expenses |
$ |
2,947 |
|
$ |
- |
|
* |
Earnings from operations |
$ |
23,240 |
|
$ |
10,485 |
|
122% |
|
|
|
|
Sales Mix |
|
|
** |
Hardware |
|
64 |
% |
|
63 |
% |
37% |
Software |
|
27 |
% |
|
29 |
% |
22% |
Services |
|
9 |
% |
|
8 |
% |
59% |
|
|
100 |
% |
|
100 |
% |
34% |
|
|
|
|
EMEA |
Net sales |
$ |
330,355 |
|
$ |
303,360 |
|
9% |
Gross profit |
$ |
42,546 |
|
$ |
43,426 |
|
(2%) |
Gross margin |
|
12.9 |
% |
|
14.3 |
% |
(140 bps) |
Selling and administrative expenses |
$ |
40,143 |
|
$ |
40,679 |
|
(1%) |
Severance and restructuring expenses |
$ |
3,530 |
|
$ |
24 |
|
* |
(Loss) income from operations |
$ |
(1,127 |
) |
$ |
2,723 |
|
* |
|
|
|
|
Sales Mix |
|
|
** |
Hardware |
|
42 |
% |
|
40 |
% |
16% |
Software |
|
55 |
% |
|
57 |
% |
4% |
Services |
|
3 |
% |
|
3 |
% |
22% |
|
|
100 |
% |
|
100 |
% |
9% |
* 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 March
31, |
|
|
2017 |
|
|
2016 |
|
change |
APAC |
Net sales |
$ |
36,236 |
|
$ |
38,734 |
|
(6 |
%) |
Gross profit |
$ |
7,380 |
|
$ |
5,939 |
|
24 |
% |
Gross margin |
|
20.4 |
% |
|
15.3 |
% |
510 bps |
Selling and administrative expenses |
$ |
6,479 |
|
$ |
5,399 |
|
20 |
% |
Severance and restructuring expenses |
$ |
61 |
|
$ |
115 |
|
(47 |
%) |
Earnings from operations |
$ |
840 |
|
$ |
425 |
|
98 |
% |
|
|
|
|
Sales Mix |
|
|
** |
Hardware |
|
11 |
% |
|
9 |
% |
11 |
% |
Software |
|
75 |
% |
|
87 |
% |
(19 |
%) |
Services |
|
14 |
% |
|
4 |
% |
234 |
% |
|
|
100 |
% |
|
100 |
% |
(6 |
%) |
** 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 2017 financial results, including sales growth rates and
Adjusted diluted earnings per share, and the assumptions relating
thereto, including the Company’s effective tax rate for 2017 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 filings
with the Securities and Exchange Commission:
- actions 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;
- 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 lower availability
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;
- 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.
INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIES |
Consolidated Statements of
Operations |
(In thousands, except per share
data) |
(Unaudited) |
|
|
Three Months Ended March
31, |
|
2017 |
|
|
2016 |
|
Net sales |
$ |
1,477,543 |
|
|
$ |
1,168,982 |
|
Costs of goods
sold |
|
1,269,316 |
|
|
|
1,007,874 |
|
Gross
profit |
|
208,227 |
|
|
|
161,108 |
|
Operating
expenses: |
|
|
Selling and
administrative expenses |
|
177,632 |
|
|
|
146,119 |
|
Severance and
restructuring expenses |
|
4,695 |
|
|
|
1,356 |
|
Acquisition-related expenses |
|
2,947 |
|
|
|
- |
|
Earnings
from operations |
|
22,953 |
|
|
|
13,633 |
|
Non-operating (income)
expense: |
|
|
Interest
income |
|
(431 |
) |
|
|
(250 |
) |
Interest
expense |
|
3,933 |
|
|
|
1,848 |
|
Net foreign
currency exchange loss |
|
380 |
|
|
|
616 |
|
Other expense,
net |
|
315 |
|
|
|
268 |
|
Earnings
before income taxes |
|
18,756 |
|
|
|
11,151 |
|
Income tax expense |
|
4,908 |
|
|
|
4,263 |
|
Net earnings |
$ |
13,848 |
|
|
$ |
6,888 |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share: |
|
|
Basic |
$ |
0.39 |
|
|
$ |
0.19 |
|
Diluted |
$ |
0.38 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculations: |
|
|
Basic |
|
35,602 |
|
|
|
37,075 |
|
Diluted |
|
36,185 |
|
|
|
37,386 |
|
INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIES |
Reconciliation of GAAP to Non-GAAP Financial
Measures |
(In thousands, except per share
data) |
(unaudited) |
|
|
Three Months
Ended March 31, |
|
|
2017 |
|
|
2016 |
|
Adjusted Consolidated Earnings from
Operations: |
|
|
GAAP consolidated EFO |
$ |
22,953 |
|
$ |
13,633 |
|
Severance and restructuring expenses |
|
4,695 |
|
|
1,356 |
|
Acquisition-related expenses |
|
2,947 |
|
|
- |
|
Adjusted non-GAAP EFO |
$ |
30,595 |
|
$ |
14,989 |
|
|
|
|
Adjusted Consolidated Net Earnings: |
|
|
GAAP consolidated net earnings |
$ |
13,848 |
|
$ |
6,888 |
|
Severance and restructuring expenses |
|
4,695 |
|
|
1,356 |
|
Acquisition-related expenses |
|
2,947 |
|
|
- |
|
Income taxes on non-GAAP adjustments |
|
(1,287 |
) |
|
(502 |
) |
Adjusted non-GAAP net earnings |
$ |
20,203 |
|
$ |
7,742 |
|
|
|
|
Adjusted Consolidated Diluted EPS: |
|
|
GAAP consolidated diluted EPS |
$ |
0.38 |
|
$ |
0.18 |
|
Severance and restructuring expenses |
|
0.13 |
|
|
0.04 |
|
Acquisition-related expenses |
|
0.08 |
|
|
- |
|
Income taxes on non-GAAP adjustments |
|
(0.03 |
) |
|
(0.01 |
) |
Adjusted non-GAAP consolidated diluted EPS |
$ |
0.56 |
|
$ |
0.21 |
|
|
|
|
Adjusted North America Earnings from
Operations: |
|
|
GAAP EFO for North America segment |
$ |
23,240 |
|
$ |
10,485 |
|
Severance and restructuring expenses |
|
1,104 |
|
|
1,217 |
|
Acquisition-related expenses |
|
2,947 |
|
|
- |
|
Adjusted non-GAAP EFO for North America segment. |
$ |
27,291 |
|
$ |
11,702 |
|
|
|
|
Adjusted EMEA Earnings from Operations: |
|
|
GAAP EFO from EMEA segment |
$ |
(1,127 |
) |
$ |
2,723 |
|
Severance and restructuring expenses |
|
3,530 |
|
|
24 |
|
Adjusted non-GAAP EFO from EMEA segment |
$ |
2,403 |
|
$ |
2,747 |
|
|
|
|
Adjusted APAC Earnings from Operations: |
|
|
GAAP EFO from APAC segment |
$ |
840 |
|
$ |
425 |
|
Severance and restructuring expenses |
|
61 |
|
|
115 |
|
Adjusted non-GAAP EFO from APAC segment. |
$ |
901 |
|
$ |
540 |
|
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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