Insight Enterprises, Inc. Reports Strong First Quarter 2019 Results

TEMPE, Ariz.–(BUSINESS WIRE)–Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today
reported financial results for the quarter ended March 31, 2019 compared
to the quarter ended March 31, 2018.

• Gross profit increased 3% to $248.5 million
• Gross margin increased 90 basis points to 14.7%
• Earnings from operations increased 13% to $57.0 million
• Diluted earnings per share of $1.09 increased 20% year over year

In the first quarter of 2019, net sales decreased by 3%, year to year,
while gross profit increased 3%, year over year and gross margin
increased 90 basis points compared to the first quarter of 2018. The
increase in gross profit and gross margin reflects a higher mix of cloud
solutions reported net and higher margin Insight delivered services.
Earnings from operations grew 13%, year over year, with each of our
geographic segments generating growth.

“I am pleased to report we have started the new year with strong
earnings performance in the first quarter,” stated Ken Lamneck,
President and Chief Executive Officer. “Our top line results decreased
in the first quarter against a tough comparison last year, but we
focused on profitable business, growing our services sales and helping
our clients migrate to the cloud, which led to strong gross margin
expansion in the quarter. At the same time we controlled our expenses,
which allowed us to deliver another quarter of double digit earnings
growth year over year, with each of our operating segments contributing
to these results,” stated Lamneck.

KEY HIGHLIGHTS

• Consolidated net sales for the first quarter of 2019 of $1.69 billion
  decreased 3% year to year when compared to the first quarter of 2018.
  • Net sales in North America decreased 3% year to year to $1.24
    billion;
  • Net sales in EMEA decreased 4% year to year to $390.2 million; and
  • Net sales in APAC decreased 7% year to year to $52.9 million.
• Excluding the effects of fluctuating foreign currency exchange rates,
  consolidated net sales decreased 1% year to year, with a decline in
  net sales in North America of 3%, year to year, partially offset by
  growth in net sales in EMEA and APAC of 2% and 1%, respectively, year
  over year.
• Consolidated gross profit increased 3% compared to the first quarter
  of 2018 to $248.5 million, with consolidated gross margin expanding 90
  basis points to 14.7% of net sales.
  • Gross profit in North America increased 4% year over year to
    $182.6 million (14.7% gross margin);
  • Gross profit in EMEA increased 2% year over year to $57.0 million
    (14.6% gross margin); and
  • Gross profit in APAC was relatively flat year over year,
    increasing less than 1% to $8.9 million (16.8% gross margin).
• Excluding the effects of fluctuating foreign currency exchange rates,
  consolidated gross profit increased 6% year over year, with gross
  profit growth in North America, EMEA and APAC of 4%, 9% and 9%,
  respectively, year over year.
• Consolidated earnings from operations increased 13% compared to the
  first quarter of 2018 to $57.0 million, or 3.4% of net sales.
  • Earnings from operations in North America increased 7% year over
    year to $45.3 million, or 3.6% of net sales;
  • Earnings from operations in EMEA increased 48% year over year to
    $9.9 million, or 2.5% of net sales; and
  • Earnings from operations in APAC increased 23% year over year to
    $1.8 million, or 3.4% of net sales.
• Excluding the effects of fluctuating foreign currency exchange rates,
  consolidated earnings from operations increased 14% year over year,
  with earnings from operations growth in North America, EMEA and APAC
  of 8%, 53% and 31%, respectively, year over year.
• Consolidated net earnings and diluted earnings per share for the first
  quarter of 2019 were $39.3 million and $1.09, respectively, at an
  effective tax rate of 23.5%.
• Adjusted consolidated net earnings and Adjusted diluted earnings per
  share for the first quarter of 2019 were $39.6 million and $1.10,
  respectively.

In discussing financial results for the three months ended March 31,
2019 and 2018 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 low single digit range compared to 2018. The Company also expects
Adjusted diluted earnings per share for the full year of 2019 to be
between $4.75 and $4.85.

This outlook assumes:

• an effective tax rate of 25% to 26% for the balance of 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, assumes no
current year acquisition-related expenses and excludes severance and
restructuring expenses incurred during the first quarter of 2019 and
those that may be incurred during the balance of 2019. Due to the
inherent difficulty of forecasting these types of expenses, which impact
net earnings and diluted earnings per share, the Company is unable to
reasonably estimate the related impact of such expenses, if any, to net
earnings and diluted earnings per share. Accordingly, the Company is
unable to provide a reconciliation of GAAP to non-GAAP diluted earnings
per share for the full year 2019 forecast.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 8:00
a.m. ET to discuss first quarter 2019 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., 412-902-1028 for
international callers, and enter the access code 13689759.

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 and (ii) the tax effects of severance and
restructuring expenses. 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) acquisition related expenses, (iii) loss on sale of the
Company’s Russia business, and (iv) the tax effects of each of these
items, as applicable.

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.

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 Adjusted diluted earnings per share for the full year
2019, and the assumptions relating thereto, as well as the Company’s
anticipated effective tax rate, capital expenditures and plans
concerning repurchases under the Company’s currently authorized share
repurchase program, 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, 2018 and in 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.

Contacts

Glynis Bryan
Chief Financial Officer
480-333-3390
glynis.bryan@insight.com

Helen Johnson
Senior VP, Finance
480-333-3234
helen.johnson@insight.com