Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported financial results for the quarter ended June 30, 2021. Highlights include:

• Net sales increased 13% year over year to $2.23 billion
• Gross profit increased 13% year over year to $366.7 million
• Earnings from operations increased 19% to $88.5 million and was 4.0% of net sales
• Adjusted earnings from operations increased 6% to $97.7 million and was 4.4% of net sales
• Diluted earnings per share of $1.58 increased 20% year over year
• Adjusted diluted earnings per share of $1.91 increased 9% year over year
• Increased full year 2021 guidance for Adjusted diluted earnings per share

In the second quarter of 2021, net sales increased 13%, year over year. Gross profit also increased 13% while gross margin contracted 10 basis points compared to the second quarter of 2020. Earnings from operations of $88.5 million increased 19% compared to $74.2 million in the second quarter of 2020. Adjusted earnings from operations of $97.7 million increased 6% compared to $91.8 million in the second quarter of 2020. Diluted earnings per share for the quarter were $1.58, up 20%, year over year, and adjusted diluted earnings per share were $1.91, up 9% year over year.

“I’m pleased to report that our business saw double digit top line growth across all major categories of net sales. Gross margin was 16.4%, strong performance given compression on margins due to increased hardware net sales,” stated Ken Lamneck, President and Chief Executive Officer. “Given the ongoing supply chain constraints and longer lead times required for hardware orders, we are working to ensure our clients are well positioned in the queue for fulfillment. We are pleased to see the pipeline for future sales build to healthy levels for the second half of the year and into 2022,” stated Lamneck.

KEY HIGHLIGHTS

• Consolidated net sales for the second quarter of 2021 of $2.23 billion increased 13%, year over year, when compared to the second quarter of 2020.
  • Net sales in North America increased 14%, year over year, to $1.76 billion;
  • Net sales in EMEA increased 6%, year over year, to $417.4 million; and
  • Net sales in APAC increased 40%, year over year, to $52.5 million.
• Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales were up 10%, year over year, with growth in net sales in North America and APAC of 13% and 24%, respectively, year over year, partially offset by a decline in EMEA of 4%, year to year.
• Consolidated gross profit increased to $366.7 million, an increase of 13% compared to the second quarter of 2020, with consolidated gross margin contracting 10 basis points to 16.4% of net sales.
  • Gross profit in North America increased 14%, year over year, to $278.9 million (15.8% gross margin);
  • Gross profit in EMEA increased 8%, year over year, to $73.5 million (17.6% gross margin); and
  • Gross profit in APAC increased 26%, year over year, to $14.3 million (27.2% gross margin).
• Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit was up 9%, year over year, with gross profit growth in North America and APAC of 11% each, year over year, partially offset by a decline in EMEA of 3%, year to year.
• Consolidated earnings from operations increased 19% compared to the second quarter of 2020 to $88.5 million, or 4.0% of net sales.
  • Earnings from operations in North America increased 23%, year over year, to $64.1 million, or 3.6% of net sales;
  • Earnings from operations in EMEA increased 8%, year over year, to $19.3 million, or 4.6% of net sales; and
  • Earnings from operations in APAC increased 19%, year over year, to $5.0 million, or 9.6% of net sales.
• Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations were up 15%, year over year, with increased earnings from operations in North America and APAC of 21% and 6%, respectively, year over year, partially offset by a decline in EMEA of 1%, year to year.
• Adjusted earnings from operations increased 6% compared to the second quarter of 2020 to $97.7 million, or 4.4% of net sales.
  • Adjusted earnings from operations in North America increased 8%, year over year, to $72.4 million, or 4.1% of net sales;
  • Adjusted earnings from operations in EMEA decreased 2%, year to year, to $20.1 million, or 4.8% of net sales; and
  • Adjusted earnings from operations in APAC increased 16%, year over year, to $5.2 million, or 9.8% of net sales.
• Consolidated net earnings and diluted earnings per share for the second quarter of 2021 were $58.6 million and $1.58, respectively, at an effective tax rate of 25.4%.
• Adjusted consolidated net earnings and Adjusted diluted earnings per share for the second quarter of 2021 were $67.7 million and $1.91, respectively.

In discussing financial results for the three and six months ended June 30, 2021 and 2020 in this press release, the Company refers to certain financial measures that are adjusted from the financial results prepared in accordance with United States generally accepted accounting principles (“GAAP”). When referring to non-GAAP measures, the Company refers to such measures as “Adjusted.” See “Use of Non-GAAP Financial Measures” for additional information. A tabular reconciliation of financial measures prepared in accordance with GAAP to the non-GAAP financial measures is included at the end of this press release.

In some instances, the Company refers to changes in net sales, gross profit and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates. In computing these changes and percentages, the Company compares the current year amount as translated into U.S. dollars under the applicable accounting standards to the prior year amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

The tax effect of Adjusted amounts referenced herein were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

GUIDANCE

For the full year 2021, the Company now expects to deliver net sales growth at the high-end of the previously stated guidance, which was between 4% and 8% over the prior year, and Adjusted diluted earnings per share is now expected to be between $6.75 and $6.90.

This outlook assumes

• interest expense between $25 million and $28 million;
• an effective tax rate of 25% to 26% for the full year 2021;
• capital expenditures of $65 to $75 million, including the build out of our new corporate headquarters; and
• an average share count for the full year of 35.5 million shares.

This outlook excludes acquisition-related intangibles amortization expense of approximately $32 million and the non-cash convertible debt discount and issuance costs, reported as part of interest expense, of approximately $12 million and assumes no acquisition-related or severance and restructuring expenses. Due to the inherent difficulty of forecasting some of these types of expenses, which impact net earnings and diluted earnings per share, the Company is unable to reasonably estimate the impact of such expenses, if any, to net earnings and diluted earnings per share. Accordingly, the Company is unable to provide a reconciliation of GAAP to non-GAAP diluted earnings per share for the full year 2021 forecast.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 9:00 a.m. ET to discuss second quarter 2021 results of operations. A live web cast of the conference call (in listen-only mode) will be available on the Company’s web site at http://investor.insight.com/, and a replay of the web cast will be available on the Company’s web site for a limited time following the call. To access the live conference call, please register in advance using this event link. Upon registering, participants will receive dial-in information via email, as well as a unique registrant ID, event passcode, and detailed instructions regarding how to join the call.

USE OF NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures are referred to as “Adjusted”. Adjusted consolidated earnings from operations, Adjusted consolidated net earnings and Adjusted diluted earnings per share exclude (i) severance and restructuring expenses, (ii) certain acquisition and integration related expenses, (iii) amortization of intangible assets, and (iv) the tax effects of each of these items, as applicable. Adjusted consolidated net earnings and Adjusted diluted earnings per share also exclude amortization of debt discount and issuance costs associated with the issuance of the Company’s convertible senior notes due 2025. The Company excludes these items when internally evaluating earnings from operations, tax expense, net earnings and diluted earnings per share for the Company and earnings from operations for each of the Company’s operating segments. Adjusted diluted earnings per share also includes the impact of the benefit from the note hedge where the Company’s average stock price for the second quarter of 2021 was in excess of $68.32, which is the initial conversion price of the convertible senior notes. Adjusted EBITDA adds back (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization of property and equipment, (iv) amortization of intangibles, (v) non-cash stock based compensation (vi) severance and restructuring expenses and (vii) certain acquisition and integration related expenses. Adjusted return on invested capital (“ROIC”) excludes (i) severance and restructuring expenses, (ii) certain acquisition and integration related expenses, (iii) impairment of construction in progress, (iv) loss on sale of property, (v) litigation settlement proceeds, and (vi) the tax effects of each of these items, as applicable.

These non-GAAP measures are used by the Company and its management to evaluate financial performance against budgeted amounts, to calculate incentive compensation, to assist in forecasting future performance and to compare the Company’s results to those of the Company’s competitors. The Company believes that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and the Company’s competitors’ results and assist in forecasting performance for future periods. These non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

* 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.

* Percentage change not considered meaningful.

** Change in sales mix represents growth/decline in category net sales on a U.S. dollar basis and does not exclude the effects of fluctuating foreign currency exchange rates.

FORWARD-LOOKING INFORMATION

Certain statements in this release and the related conference call, web cast and presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including those related to our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company, the Company’s future financial performance and results of operations, including Adjusted selling and administrative expenses*, the Company’s anticipated effective tax rate, capital expenditures, expected average share count, the Company’s expectations regarding cash flow, the Company’s expectations regarding current supply constraints, future trends in the IT market, including due to COVID-19, our business strategy and our strategic initiatives, are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. There can be no assurances that the results discussed by the forward-looking statements will be achieved, and actual results may differ materially from those set forth in the forward-looking statements. Some of the important factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statements, include, but are not limited to, the following, which are discussed in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020:

• 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 in the requirements year over year;
• the duration and severity of the COVID-19 pandemic and its effects on the Company’s business, results of operations and financial condition, as well as the widespread outbreak of any other illnesses or communicable diseases;
• general economic conditions, economic uncertainties and changes in geopolitical conditions;
• changes in the IT industry and/or rapid changes in technology;
• supply constraints for hardware including devices;
• accounts receivable risks, including increased credit loss experience or extended payment terms with the Company’s clients;
• the Company’s reliance on independent shipping companies;
• the risks associated with the Company’s international operations;
• natural disasters or other adverse occurrences;
• disruptions in the Company’s IT systems and voice and data networks;
• cyberattacks or breaches of data privacy and security regulations;
• intellectual property infringement claims and challenges to the Company’s registered trademarks and trade names;
• legal proceedings, including PCM related litigation, client audits and failure to comply with laws and regulations;
• failure to comply with the terms and conditions of the Company’s commercial and public sector contracts;
• exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;
• the Company’s potential to draw down a substantial amount of indebtedness;
• the conditional conversion feature of the convertible notes, which has been triggered, may adversely affect the Company’s financial condition and operating results;
• the accounting method for convertible debt securities that may be settled in cash, such as the convertible notes, could have a material effect on the Company’s reported financial results;
• the Company is subject to counterparty risk with respect to the convertible note hedge transactions;
• risks associated with the discontinuation of LIBOR as a benchmark rate;
• increased debt and interest expense and availability of funds under the Company’s financing facilities;
• possible significant fluctuations in the Company’s future operating results as well as seasonality and variability in customer demands;
• the Company’s dependence on certain key personnel;
• risks associated with the integration and operation of acquired businesses, including the achievement of expected synergies and benefits; and
• future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock.

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

* Due to the inherent difficulty of forecasting these types of expenses, the Company is unable to provide a reconciliation of GAAP to non-GAAP selling and administrative expenses for the full year 2021 forecast. NSIT-F