TEMPE, Ariz.--(BUSINESS WIRE)--Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported financial results for the quarter and full year ended December 31, 2018. Highlights include:
- Gross profit up 9% year over year to $254.2 million for the fourth quarter and up 8% for the full year
- Earnings from operations up 29% to $58.7 million for the fourth quarter and up 30% for the full year
- Diluted earnings per share of $1.31 increased more than 100% for the fourth quarter year over year and record diluted earnings per share of $4.55 increased 82% for the full year
- Cash flows provided by operations of $292.6 million in 2018 compared to cash used in operations of $307.1 million in 2017
In the fourth quarter of 2018, consolidated net sales were $1.75 billion, which was down 2%, year to year, reflecting a decline in software net sales offset by strong growth in services net sales. The decline in software net sales was due primarily to the adoption of ASC 606, which resulted in more software sales being recorded net and a higher mix of cloud and maintenance service offerings which are recorded net in services. Gross profit increased 9%, year over year, with gross margins increasing 140 basis points to 14.5% for the quarter. Earnings from operations grew 29%, year over year.
“Our fourth quarter results reflect a strong close to another great year for our company. We focused on sales in higher margin categories, including cloud subscription, maintenance and professional services offerings, which drove up gross margins 140 basis points and earnings from operations up double digits for the quarter,” stated Ken Lamneck, president and CEO.
For the full year 2018, consolidated net sales were $7.1 billion, up 6% year over year, reflecting strong growth in services including an increase in sales of cloud offerings and software maintenance. Gross profit increased 8%, year over year, with gross margins increasing 30 basis points to 14.0% for the full year. Earnings from operations grew 30%, year over year, with each of our geographic segments generating double digit growth in earnings from operations.
“We are happy to report another year of record results for Insight. Our global team delivered a third consecutive year of double-digit earnings growth while accelerating cash flow generation, expanding our services offerings and integrating strategic acquisitions,” stated Lamneck. ”Our solution area go-to-market strategy, deep technical talent and consistent focus on operational excellence have accelerated our financial performance and uniquely position us to compete in the marketplace in 2019 and beyond,” stated Lamneck.
KEY HIGHLIGHTS
Results for the Quarter:
-
Consolidated net sales of $1.75 billion for the fourth quarter of 2018
decreased 2% year to year when compared to the fourth quarter of 2017.
- Net sales in North America decreased 2% year to year to $1.34 billion;
- Net sales in EMEA increased less than 1% year over year to $368.4 million; and
- Net sales in APAC decreased 7% year to year to $36.3 million.
- Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales for the fourth quarter decreased 1% year to year, with declines in net sales in North America and APAC of 2% each year to year, offset by growth in net sales in EMEA of 4%, year over year.
-
Consolidated gross profit of $254.2 million increased 9% compared to
the fourth quarter of 2017, with consolidated gross margin expanding
140 basis points to 14.5% of net sales.
- Gross profit in North America increased 7% year over year to $187.5 million (13.9% gross margin);
- Gross profit in EMEA increased 12% year over year to $56.2 million (15.3% gross margin); and
- Gross profit in APAC increased 32% year over year to $10.5 million (28.8% gross margin).
- Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit for the fourth quarter increased 10% year over year, with gross profit growth in North America, EMEA and APAC of 8%, 16% and 40%, respectively, year over year.
-
Consolidated earnings from operations of $58.7 million, or 3.4% of net
sales, increased 29% compared to the fourth quarter of 2017.
- Earnings from operations in North America increased 19% year over year to $44.4 million, or 3.3% of net sales;
- Earnings from operations in EMEA increased 54% year over year to $11.0 million, or 3.0% of net sales; and
- Earnings from operations in APAC increased more than 100% year over year to $3.2 million, or 8.9% of net sales.
- Excluding the effects of fluctuating foreign currency exchange rates, for the fourth quarter, consolidated earnings from operations increased 30% year over year, with earnings from operations growth in North America, EMEA and APAC of 20%, 61% and more than 100%, respectively, year over year.
- Adjusted consolidated earnings from operations increased 23% year over year to $59.4 million, or 3.4% of net sales for the fourth quarter of 2018. Adjusted earnings from operations grew in North America, EMEA and APAC by 15%, 40% and more than 100%, respectively, year over year.
- Consolidated net earnings and diluted earnings per share for the fourth quarter of 2018 were $47.0 million and $1.31, respectively, at an effective tax rate of 14.0%.
- Adjusted consolidated net earnings and Adjusted diluted earnings per share for the fourth quarter of 2018 were $47.6 million and $1.32, respectively.
Results for the Year:
-
Consolidated net sales of $7.1 billion for 2018 increased 6% compared
to 2017.
- Net sales in North America increased 3% year over year to $5.4 billion;
- Net sales in EMEA increased 13% year over year to $1.5 billion; and
- Net sales in APAC increased 12% year over year to $186.9 million.
- Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 5% year over year, with growth in net sales in North America, EMEA and APAC of 4%, 9% and 13%, respectively, year over year.
-
Consolidated gross profit of $993.7 million increased 8% compared to
2017, with consolidated gross margin expanding 30 basis points to
14.0% of net sales.
- Gross profit in North America increased 6% year over year to $732.7 million (13.7% gross margin);
- Gross profit in EMEA increased 16% year over year to $221.5 million (14.5% gross margin); and
- Gross profit in APAC increased 8% year over year to $39.6 million (21.2% gross margin).
- Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 7% year over year, with gross profit growth in North America, EMEA and APAC of 6%, 12% and 9%, respectively, year over year.
-
Consolidated earnings from operations increased 30% compared to 2017
to $233.5 million, or 3.3% of net sales.
- Earnings from operations in North America increased 21% year over year to $185.7 million, or 3.5% of net sales;
- Earnings from operations in EMEA increased more than 100% year over year to $37.3 million, or 2.4% of net sales; and
- Earnings from operations in APAC increased 27% year over year to $10.5 million, or 5.6% of net sales.
- Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations also increased 30% year over year, with earnings from operations growth in North America, EMEA and APAC of 21%, more than 100% and 27%, respectively, year over year.
- Adjusted consolidated earnings from operations increased 21% year over year to $237.2 million, or 3.4% of net sales for 2018. Adjusted earnings from operations grew in North America, EMEA and APAC by 17%, 50% and 27%, respectively, year over year.
- Consolidated net earnings and diluted earnings per share for 2018 were $163.7 million and $4.55, respectively, at an effective tax rate of 22.8%.
- Adjusted consolidated net earnings and Adjusted diluted earnings per share for 2018 were $166.6 million and $4.63, respectively.
In discussing financial results for the three and twelve months ended December 31, 2018 and 2017 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.
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 2019, the Company expects to deliver sales growth in the mid-single digit range in U.S. dollar terms and diluted earnings per share is expected to be between $4.75 and $4.85.
This outlook assumes:
- an effective tax rate of 25% to 26% for the full year 2019;
- capital expenditures of $20 to $25 million for the full year; and
- an average share count for the full year of approximately 36.2 million shares.
This outlook does not reflect the repurchase of any shares under the Company’s currently 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.
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 2018 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 listen to the live web cast by telephone, call 1-877-524-8416 if located in the U.S., or 412-902-1028 for international callers, and enter the access code 13687122.
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) loss on sale of the Company’s Russia business in the 2017 period, (iii) certain acquisition-related expenses, and (iv) the tax effects of each of these items, as applicable. 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 free cash flow is the Company’s net cash provided or used by operating activities adjusted for (i) purchases of property and equipment and (ii) the net borrowings or repayments under the inventory financing facility. Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, (ii) loss on sale of the Company’s Russia business in the 2017 period, and (iii) certain acquisition-related expenses.
These non-GAAP measures are used by 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, | ||||||||||||||||||||||||
| 2018 | 2017 | change | 2018 | 2017 | change | ||||||||||||||||||||
| Insight Enterprises, Inc. | |||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||
| Products | $ | 1,525,050 | $ | 1,612,338 | (5 | %) | $ | 6,249,938 | $ | 6,038,744 | 3 | % | |||||||||||||
| Services | $ | 223,996 | $ | 171,737 | 30 | % | $ | 830,198 | $ | 664,879 | 25 | % | |||||||||||||
| Total net sales | $ | 1,749,046 | $ | 1,784,075 | (2 | %) | $ | 7,080,136 | $ | 6,703,623 | 6 | % | |||||||||||||
| Gross profit | $ | 254,164 | $ | 232,883 | 9 | % | $ | 993,718 | $ | 918,570 | 8 | % | |||||||||||||
| Gross margin | 14.5 | % | 13.1 | % | 140 bps | 14.0 | % | 13.7 | % | 30 bps | |||||||||||||||
| Selling and administrative expenses | $ | 194,790 | $ | 184,554 | 6 | % | $ | 756,529 | $ | 723,328 | 5 | % | |||||||||||||
| Severance and restructuring expenses | $ | 715 | $ | 2,791 | (74 | %) | $ | 3,424 | $ | 9,002 | (62 | %) | |||||||||||||
| Loss on sale of foreign entity | $ | — | $ | — | — | $ | — | $ | 3,646 | * | |||||||||||||||
| Acquisition-related expenses | $ | — | $ | — | — | $ | 282 | $ | 3,329 | (92 | %) | ||||||||||||||
| Earnings from operations | $ | 58,659 | $ | 45,538 | 29 | % | $ | 233,483 | $ | 179,265 | 30 | % | |||||||||||||
| Net earnings | $ | 47,041 | $ | 14,168 | > 100% | $ | 163,677 | $ | 90,683 | 80 | % | ||||||||||||||
| Diluted earnings per share | $ | 1.31 | $ | 0.39 | > 100% | $ | 4.55 | $ | 2.50 | 82 | % | ||||||||||||||
| North America | |||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||
| Products | $ | 1,169,924 | $ | 1,249,420 | (6 | %) | $ | 4,723,071 | $ | 4,662,473 | 1 | % | |||||||||||||
| Services | $ | 174,452 | $ | 128,971 | 35 | % | $ | 639,910 | $ | 519,261 | 23 | % | |||||||||||||
| Total net sales | $ | 1,344,376 | $ | 1,378,391 | (2 | %) | $ | 5,362,981 | $ | 5,181,734 | 3 | % | |||||||||||||
| Gross profit | $ | 187,480 | $ | 174,569 | 7 | % | $ | 732,695 | $ | 691,677 | 6 | % | |||||||||||||
| Gross margin | 13.9 | % | 12.7 | % | 120 bps | 13.7 | % | 13.3 | % | 40 bps | |||||||||||||||
| Selling and administrative expenses | $ | 142,453 | $ | 135,369 | 5 | % | $ | 545,091 | $ | 530,792 | 3 | % | |||||||||||||
| Severance and restructuring expenses | $ | 583 | $ | 1,965 | (70 | %) | $ | 1,617 | $ | 4,010 | (60 | %) | |||||||||||||
| Acquisition-related expenses | $ | — | $ | — | — | $ | 282 | $ | 3,223 | (91 | %) | ||||||||||||||
| Earnings from operations | $ | 44,444 | $ | 37,235 | 19 | % | $ | 185,705 | $ | 153,652 | 21 | % | |||||||||||||
| Sales Mix | ** | ** | |||||||||||||||||||||||
| Hardware | 66 | % | 64 | % | 1 | % | 67 | % | 65 | % | 8 | % | |||||||||||||
| Software | 21 | % | 27 | % | (24 | %) | 21 | % | 25 | % | (15 | %) | |||||||||||||
| Services | 13 | % | 9 | % | 35 | % | 12 | % | 10 | % | 23 | % | |||||||||||||
| 100 | % | 100 | % | (2 | %) | 100 | % | 100 | % | 3 | % | ||||||||||||||
| EMEA | |||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||
| Products | $ | 332,244 | $ | 333,540 | — | $ | 1,390,008 | $ | 1,246,952 | 11 | % | ||||||||||||||
| Services | $ | 36,147 | $ | 33,267 | 9 | % | $ | 140,233 | $ | 108,464 | 29 | % | |||||||||||||
| Total net sales | $ | 368,391 | $ | 366,807 | — | $ | 1,530,241 | $ | 1,355,416 | 13 | % | ||||||||||||||
| Gross profit | $ | 56,219 | $ | 50,413 | 12 | % | $ | 221,467 | $ | 190,310 | 16 | % | |||||||||||||
| Gross margin | 15.3 | % | 13.7 | % | 160 bps | 14.5 | % | 14.0 | % | 50 bps | |||||||||||||||
| Selling and administrative expenses | $ | 45,087 | $ | 42,442 | 6 | % | $ | 182,470 | $ | 164,305 | 11 | % | |||||||||||||
| Severance and restructuring expenses | $ | 132 | $ | 826 | (84 | %) | $ | 1,677 | $ | 4,888 | (66 | %) | |||||||||||||
| Loss on sale of foreign entity | $ | — | $ | — | — | $ | — | $ | 3,646 | * | |||||||||||||||
| Acquisition-related expenses | $ | — | $ | — | — | $ | — | $ | 106 | * | |||||||||||||||
| Earnings from operations | $ | 11,000 | $ | 7,145 | 54 | % | $ | 37,320 | $ | 17,365 | > 100% | ||||||||||||||
| Sales Mix | ** | ** | |||||||||||||||||||||||
| Hardware | 40 | % | 37 | % | 8 | % | 43 | % | 40 | % | 22 | % | |||||||||||||
| Software | 50 | % | 54 | % | (6 | %) | 48 | % | 52 | % | 4 | % | |||||||||||||
| Services | 10 | % | 9 | % | 9 | % | 9 | % | 8 | % | 29 | % | |||||||||||||
| 100 | % | 100 | % | — | 100 | % | 100 | % | 13 | % | |||||||||||||||
| * | 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. | |
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FINANCIAL SUMMARY TABLE (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) |
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| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||
| 2018 | 2017 | change | 2018 | 2017 | change | ||||||||||||||||||||
| APAC | |||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||
| Products | $ | 22,882 | $ | 29,378 | (22 | %) | $ | 136,859 | $ | 129,319 | 6 | % | |||||||||||||
| Services | $ | 13,397 | $ | 9,499 | 41 | % | $ | 50,055 | $ | 37,154 | 35 | % | |||||||||||||
| Total net sales | $ | 36,279 | $ | 38,877 | (7 | %) | $ | 186,914 | $ | 166,473 | 12 | % | |||||||||||||
| Gross profit | $ | 10,465 | $ | 7,901 | 32 | % | $ | 39,556 | $ | 36,583 | 8 | % | |||||||||||||
| Gross margin | 28.8 | % | 20.3 | % | 850 bps | 21.2 | % | 22.0 | % | (80 bps) | |||||||||||||||
| Selling and administrative expenses | $ | 7,250 | $ | 6,743 | 8 | % | $ | 28,968 | $ | 28,231 | 3 | % | |||||||||||||
| Severance and restructuring expenses | $ | — | $ | — | — | $ | 130 | $ | 104 | 25 | % | ||||||||||||||
| Earnings from operations | $ | 3,215 | $ | 1,158 | > 100% | $ | 10,458 | $ | 8,248 | 27 | % | ||||||||||||||
| Sales Mix | ** | ** | |||||||||||||||||||||||
| Hardware | 19 | % | 25 | % | (26 | %) | 16 | % | 17 | % | 6 | % | |||||||||||||
| Software | 44 | % | 51 | % | (20 | %) | 57 | % | 61 | % | 6 | % | |||||||||||||
| Services | 37 | % | 24 | % | 41 | % | 27 | % | 22 | % | 35 | % | |||||||||||||
| 100 | % | 100 | % | (7 | %) | 100 | % | 100 | % | 12 | % | ||||||||||||||
| * | 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 2019 financial results, sales growth and diluted earnings per share for the full year 2019, and the assumptions relating thereto, as well as the Company’s anticipated effective tax rate and capital expenditures, expected average share count, and the Company’s expectations regarding cash flow, 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, 2017 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 marketing funds and purchasing incentives, which can change significantly in the amounts made available and the requirements 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;
- legal proceedings and the results of client and public sector audits and failure to comply with laws and regulations;
- 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 key personnel;
- natural disasters or other adverse occurrences;
- 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.
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INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) |
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|
Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net sales: | |||||||||||||||||
| Products | $ | 1,525,050 | $ | 1,612,338 | $ | 6,249,938 | $ | 6,038,744 | |||||||||
| Services | 223,996 | 171,737 | 830,198 | 664,879 | |||||||||||||
| Total net sales | 1,749,046 | 1,784,075 | 7,080,136 | 6,703,623 | |||||||||||||
| Costs of goods sold: | |||||||||||||||||
| Products | 1,392,219 | 1,475,916 | 5,711,400 | 5,512,402 | |||||||||||||
| Services | 102,663 | 75,276 | 375,018 | 272,651 | |||||||||||||
| Total costs of goods sold | 1,494,882 | 1,551,192 | 6,086,418 | 5,785,053 | |||||||||||||
| Gross profit | 254,164 | 232,883 | 993,718 | 918,570 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling and administrative expenses | 194,790 | 184,554 | 756,529 | 723,328 | |||||||||||||
| Severance and restructuring expenses | 715 | 2,791 | 3,424 | 9,002 | |||||||||||||
| Loss on sale of foreign entity | — | — | — | 3,646 | |||||||||||||
| Acquisition-related expenses | — | — | 282 | 3,329 | |||||||||||||
| Earnings from operations | 58,659 | 45,538 | 233,483 | 179,265 | |||||||||||||
| Non-operating (income) expense: | |||||||||||||||||
| Interest income | (422 | ) | (346 | ) | (1,075 | ) | (1,209 | ) | |||||||||
| Interest expense | 5,563 | 5,360 | 22,812 | 19,174 | |||||||||||||
| Net foreign currency exchange (gain) loss | (1,517 | ) | (117 | ) | (1,498 | ) | 855 | ||||||||||
| Other expense, net | 323 | 367 | 1,342 | 1,347 | |||||||||||||
| Earnings before income taxes | 54,712 | 40,274 | 211,902 | 159,098 | |||||||||||||
| Income tax expense | 7,671 | 26,106 | 48,225 | 68,415 | |||||||||||||
| Net earnings | $ | 47,041 | $ | 14,168 | $ | 163,677 | $ | 90,683 | |||||||||
| Net earnings per share: | |||||||||||||||||
| Basic | $ | 1.33 | $ | 0.40 | $ | 4.60 | $ | 2.54 | |||||||||
| Diluted | $ | 1.31 | $ | 0.39 | $ | 4.55 | $ | 2.50 | |||||||||
| Shares used in per share calculations: | |||||||||||||||||
| Basic | 35,480 | 35,809 | 35,586 | 35,741 | |||||||||||||
| Diluted | 35,999 | 36,272 | 36,009 | 36,207 | |||||||||||||
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INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) |
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|
December 31,
2018 |
December 31,
2017 |
||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 142,655 | $ | 105,831 | |||||
| Accounts receivable, net | 1,931,736 | 1,814,560 | |||||||
| Inventories | 148,503 | 194,529 | |||||||
| Inventories not available for sale | — | 36,956 | |||||||
| Other current assets | 115,683 | 152,467 | |||||||
| Total current assets | 2,338,577 | 2,304,343 | |||||||
| Property and equipment, net | 72,954 | 75,252 | |||||||
| Goodwill | 166,841 | 131,431 | |||||||
| Intangible assets, net | 112,179 | 100,778 | |||||||
| Deferred income taxes | 7,967 | 17,064 | |||||||
| Other assets | 77,429 | 56,783 | |||||||
| $ | 2,775,947 | $ | 2,685,651 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable – trade | $ | 978,104 | $ | 899,075 | |||||
| Accounts payable – inventory financing facility | 304,130 | 319,468 | |||||||
| Accrued expenses and other current liabilities | 190,733 | 175,860 | |||||||
| Current portion of long-term debt | 1,395 | 16,592 | |||||||
| Deferred revenue | 62,300 | 88,979 | |||||||
| Total current liabilities | 1,536,662 | 1,499,974 | |||||||
| Long-term debt | 195,525 | 296,576 | |||||||
| Deferred income taxes | 683 | 717 | |||||||
| Other liabilities | 56,088 | 44,915 | |||||||
| 1,788,958 | 1,842,182 | ||||||||
| Stockholders’ equity: | |||||||||
| Preferred stock | — | — | |||||||
| Common stock | 355 | 358 | |||||||
| Additional paid-in capital | 323,622 | 317,155 | |||||||
| Retained earnings | 704,665 | 550,220 | |||||||
|
Accumulated other comprehensive loss – foreign currency
translation adjustments |
(41,653 | ) | (24,264 | ) | |||||
| Total stockholders’ equity | 986,989 | 843,469 | |||||||
| $ | 2,775,947 | $ | 2,685,651 | ||||||
|
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) |
|||||||||
|
Twelve Months Ended
December 31, |
|||||||||
| 2018 | 2017 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net earnings | $ | 163,677 | $ | 90,683 | |||||
|
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities: |
|||||||||
| Depreciation and amortization of property and equipment | 21,721 | 25,787 | |||||||
| Amortization of intangible assets | 15,737 | 16,812 | |||||||
| Provision for losses on accounts receivable | 4,776 | 5,245 | |||||||
| Write-downs of inventories | 2,912 | 2,776 | |||||||
| Write-off of property and equipment | 393 | 418 | |||||||
| Non-cash stock-based compensation | 15,355 | 12,826 | |||||||
| Deferred income taxes | 9,126 | 19,139 | |||||||
| Loss on sale of foreign entity | — | 3,646 | |||||||
| Loss on extinguishment of debt | 624 | — | |||||||
| Changes in assets and liabilities: | |||||||||
| Increase in accounts receivable | (46,883 | ) | (208,065 | ) | |||||
| Decrease (increase) in inventories | 46,534 | (14,046 | ) | ||||||
| Decrease in other assets | 12,424 | 3,342 | |||||||
| Increase (decrease) in accounts payable | 29,844 | (237,457 | ) | ||||||
| Increase (decrease) in deferred revenue | 9,178 | (27,184 | ) | ||||||
| Increase (decrease) in accrued expenses and other liabilities | 7,229 | (988 | ) | ||||||
| Net cash provided by (used in) operating activities | 292,647 | (307,066 | ) | ||||||
| Cash flows from investing activities: | |||||||||
| Acquisitions, net of cash and cash equivalents acquired | (74,938 | ) | (186,932 | ) | |||||
| Purchases of property and equipment | (17,251 | ) | (19,230 | ) | |||||
| Proceeds from sale of foreign entity | 479 | 1,517 | |||||||
| Net cash used in investing activities | (91,710 | ) | (204,645 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Borrowings on senior revolving credit facility | 569,232 | 1,151,216 | |||||||
| Repayments on senior revolving credit facility | (686,732 | ) | (1,033,716 | ) | |||||
| Borrowings on accounts receivable securitization financing facility | 3,357,000 | 3,961,389 | |||||||
| Repayments on accounts receivable securitization financing facility | (3,188,000 | ) | (3,975,889 | ) | |||||
| Borrowings under Term Loan A | — | 175,000 | |||||||
| Repayments under Term Loan A | (166,250 | ) | (8,750 | ) | |||||
| Repayments under other financing agreements | (2,372 | ) | (5,636 | ) | |||||
| Payments on capital lease obligations | (999 | ) | (1,089 | ) | |||||
| Net (repayments) borrowings under inventory financing facility | (15,338 | ) | 141,037 | ||||||
| Payment of debt issuance costs | (270 | ) | (1,123 | ) | |||||
|
Payment of payroll taxes on stock-based compensation through
shares withheld |
(3,230 | ) | (5,318 | ) | |||||
| Repurchases of common stock | (22,069 | ) | — | ||||||
| Net cash (used in) provided by financing activities | (159,028 | ) | 397,121 | ||||||
|
Foreign currency exchange effect on cash, cash equivalents and
restricted cash balances |
(5,061 | ) | 16,089 | ||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 36,848 | (98,501 | ) | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | 107,445 | 205,946 | |||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 144,293 | $ | 107,445 | |||||
|
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, |
||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Adjusted Consolidated Earnings from Operations: | |||||||||||||||||
| GAAP consolidated earnings from operations ("EFO") | $ | 58,659 | $ | 45,538 | $ | 233,483 | $ | 179,265 | |||||||||
| Severance and restructuring expenses | 715 | 2,791 | 3,424 | 9,002 | |||||||||||||
| Loss on sale of foreign entity | — | — | — | 3,646 | |||||||||||||
| Acquisition-related expenses | — | — | 282 | 3,329 | |||||||||||||
| Adjusted non-GAAP consolidated EFO | $ | 59,374 | $ | 48,329 | $ | 237,189 | $ | 195,242 | |||||||||
| Adjusted Consolidated Net Earnings: | |||||||||||||||||
| GAAP consolidated net earnings | $ | 47,041 | $ | 14,168 | $ | 163,677 | $ | 90,683 | |||||||||
| Severance and restructuring expenses | 715 | 2,791 | 3,424 | 9,002 | |||||||||||||
| Loss on sale of foreign entity | — | — | — | 3,646 | |||||||||||||
| Acquisition-related expenses | — | — | 282 | 3,329 | |||||||||||||
| Income taxes on non-GAAP adjustments | (169 | ) | (806 | ) | (756 | ) | (2,552 | ) | |||||||||
|
Tax expense related to U.S. federal tax reform |
— | 13,363 | — | 13,363 | |||||||||||||
| Adjusted non-GAAP consolidated net earnings | $ | 47,587 | $ | 29,516 | $ | 166,627 | $ | 117,471 | |||||||||
| Adjusted Diluted Earnings Per Share: | |||||||||||||||||
| GAAP diluted EPS | $ | 1.31 | $ | 0.39 | $ | 4.55 | $ | 2.50 | |||||||||
| Severance and restructuring expenses | 0.02 | 0.08 | 0.09 | 0.25 | |||||||||||||
| Loss on sale of foreign entity | — | — | — | 0.10 | |||||||||||||
| Acquisition-related expenses | — | — | 0.01 | 0.09 | |||||||||||||
| Income taxes on non-GAAP adjustments | (0.01 | ) | (0.03 | ) | (0.02 | ) | (0.07 | ) | |||||||||
|
Tax expense related to U.S. federal tax reform |
— | 0.37 | — | 0.37 | |||||||||||||
| Adjusted non-GAAP diluted EPS | $ | 1.32 | $ | 0.81 | $ | 4.63 | $ | 3.24 | |||||||||
| Adjusted North America Earnings from Operations: | |||||||||||||||||
| GAAP EFO from North America segment | $ | 44,444 | $ | 37,235 | $ | 185,705 | $ | 153,652 | |||||||||
| Severance and restructuring expenses | 583 | 1,965 | 1,617 | 4,010 | |||||||||||||
| Acquisition-related expenses | — | — | 282 | 3,223 | |||||||||||||
|
Adjusted non-GAAP EFO from North America
segment |
$ | 45,027 | $ | 39,200 | $ | 187,604 | $ | 160,885 | |||||||||
| Adjusted EMEA Earnings from Operations: | |||||||||||||||||
| GAAP EFO from EMEA segment | $ | 11,000 | $ | 7,145 | $ | 37,320 | $ | 17,365 | |||||||||
| Severance and restructuring expenses | 132 | 826 | 1,677 | 4,888 | |||||||||||||
| Loss on sale of foreign entity | — | — | — | 3,646 | |||||||||||||
| Acquisition-related expenses | — | — | — | 106 | |||||||||||||
| Adjusted non-GAAP EFO from EMEA segment | $ | 11,132 | $ | 7,971 | $ | 38,997 | $ | 26,005 | |||||||||
| Adjusted APAC Earnings from Operations: | |||||||||||||||||
| GAAP EFO from APAC segment | $ | 3,215 | $ | 1,158 | $ | 10,458 | $ | 8,248 | |||||||||
| Severance and restructuring expenses | — | — | 130 | 104 | |||||||||||||
| Adjusted non-GAAP EFO from APAC segment | $ | 3,215 | $ | 1,158 | $ | 10,588 | $ | 8,352 | |||||||||
|
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, |
||||||||||
| 2018 | 2017 | |||||||||
| Adjusted free cash flow: | ||||||||||
| Net cash provided by (used in) operating activities | $ | 292,647 | $ | (307,066 | ) | |||||
| Purchases of property and equipment | (17,251 | ) | (19,230 | ) | ||||||
| Net (repayments) borrowings under inventory financing facility | (15,338 | ) | 141,037 | |||||||
| Adjusted non-GAAP free cash flow | $ | 260,058 | $ | (185,259 | ) | |||||
|
Twelve Months Ended
December 31, |
||||||||||
| 2018 | 2017 | |||||||||
| Adjusted return on invested capital: | ||||||||||
| GAAP consolidated EFO | $ | 233,483 | $ | 179,265 | ||||||
| Severance and restructuring expenses | 3,424 | 9,002 | ||||||||
| Loss on sale of foreign entity | — | 3,646 | ||||||||
| Acquisition-related expenses | 282 | 3,329 | ||||||||
| Adjusted non-GAAP consolidated EFO | 237,189 | 195,242 | ||||||||
| Income tax expense* | 66,413 | 72,240 | ||||||||
| Adjusted non-GAAP consolidated EFO, net of tax | $ | 170,776 | $ | 123,002 | ||||||
| Average stockholders’ equity** | $ | 912,111 | $ | 780,624 | ||||||
| Average debt** | 240,504 | 316,050 | ||||||||
| Average cash** | (141,580 | ) | (184,723 | ) | ||||||
| Invested Capital | $ | 1,011,035 | $ | 911,951 | ||||||
| Adjusted non-GAAP ROIC (from GAAP consolidated EFO) *** | 16.63 | % | 12.38 | % | ||||||
| Adjusted non-GAAP ROIC (from non-GAAP consolidated EFO) **** | 16.89 | % | 13.49 | % | ||||||
| * | Assumed tax rate of 28% for 2018 and 37% for 2017. | |
| ** | Average of previous five quarters. | |
| *** | Computed as GAAP consolidated EFO, net of tax of $65,375 and $66,328 for the twelve months ended December 31, 2018 and 2017, respectively, divided by invested capital. | |
| **** | Computed as Adjusted non-GAAP consolidated EFO, net of tax divided by invested capital. |