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Insight Enterprises, Inc. Reports Record Third Quarter 2017 Results and Confirms 2017 Guidance

Nachrichtenquelle: Marketwired
08.11.2017, 00:03  |  563   |   |   

TEMPE, AZ--(Marketwired - Nov 7, 2017) -  Insight Enterprises, Inc. (NASDAQ: NSIT) (the "Company") today reported results of operations for the quarter ended September 30, 2017. 

  • Net sales up 26% to $1.76 billion
  • Gross profit up 24% to $226.1 million
  • Earnings from operations up 14% to $41.4 million
    • Adjusted earnings from operations up 20%
  • Diluted earnings per share were up 3% to $0.62
    • Adjusted diluted earnings per share were up 16% to $0.73
  • The Company acquired Dutch cloud service provider Caase.com

In the third quarter of 2017, consolidated net sales were up 26% year over year. Strong growth in the core business in North America was complemented by the addition of Datalink, which the Company acquired on January 6, 2017, and double-digit net sales growth in APAC. Gross profit grew 24% year over year, while gross margins contracted 20 basis points in the quarter due to wins in North America with large enterprise clients, which generally transact at lower margins. Selling and administrative expenses increased 25% year over year, including a 7% increase in the core business. As a result, earnings from operations increased 14% year over year and Adjusted earnings from operations increased 20% year over year. 

"Our third quarter results reflect another quarter of solid execution in each of our operating segments. Our core business continued to drive profitable growth and, at the same time, we began to realize the earnings accretion we expected from the Datalink acquisition," stated Ken Lamneck, President and Chief Executive Officer. "Our business is healthy. We have gained market share organically in 2017 and added strategic skills and capabilities to our portfolio with the addition of Datalink that will be critical to our continued success," stated Lamneck.

For the nine months ended September 30, 2017, consolidated net sales were $4.9 billion, up 22% year over year, including growth of 13% in the core business, and the addition of Datalink. Gross profit grew 24% in the first nine months of 2017 reflecting the stronger gross margins of the Datalink business while selling and administrative expenses grew only 3% year over year driven by strong operating leverage in the core business. This combination drove earnings from operations up 24% year over year and Adjusted earnings from operations up more than 30% year over year.

"We are very pleased with our execution globally in the first nine months of 2017. Our strategy and related solutions areas focus on helping clients efficiently manage their IT assets today and transform their business for tomorrow," stated Ken Lamneck. "Amid a stable demand environment, we believe our extensive supply chain, cloud, data center and software capabilities combined with disciplined execution will serve us well in closing out a record year in 2017 and heading into 2018," stated Lamneck. 

KEY HIGHLIGHTS

  • Consolidated net sales of $1.76 billion for the third quarter of 2017 increased 26% compared to the third quarter of 2016.
    • Net sales in North America of $1.4 billion were up 34% year over year;
    • Net sales in EMEA of $312.2 million were flat; and
    • Net sales in APAC of $34.7 million increased 17% year over year.

  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 25% year over year, with net sales growth in North America and APAC of 34% and 14%, respectively, and a decline in EMEA of 2% year to year.

  • Consolidated gross profit of $226.1 million increased 24% compared to the third quarter of 2016, with consolidated gross margin decreasing to 12.9% of net sales.
    • Gross profit in North America of $176.0 million (12.5% gross margin) increased 29% year over year;
    • Gross profit in EMEA of $41.6 million (13.3% gross margin) increased 9% year over year; and
    • Gross profit in APAC of $8.4 million (24.3% gross margin) increased 26% year over year.

  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased 24% year over year, and gross profit in North America, EMEA and APAC increased 28%, 6% and 23%, respectively, year over year.

  • Consolidated earnings from operations increased 14% compared to the third quarter of 2016 to $41.4 million, or 2.4% of net sales. 
    • Earnings from operations in North America increased 20% year over year to $42.8 million, or 3.0% of net sales;
    • As a result of the $3.6 million loss on the sale of the Company's Russia business in the third quarter of 2017, EMEA reported a loss from operations of $2.1 million in the third quarter of 2017 compared to earnings from operations of $270,000 in the third quarter of 2016; and
    • Earnings from operations in APAC increased 112% year over year to $810,000, or 2.3% of net sales.

  • Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations increased 14% year over year, and earnings from operations in North America and APAC increased 19% and 118%, respectively, year over year.

  • Consolidated net earnings and diluted earnings per share for the third quarter of 2017 were $22.4 million and $0.62, respectively, at an effective tax rate of 36.8%.

  • Adjusted consolidated net earnings and Adjusted diluted earnings per share for the third quarter of 2017 were $26.5 million and $0.73, respectively, at an effective tax rate of 33.2%.*

* In discussing financial results for the three and nine months ended September 30, 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, (iii) the loss on sale of the Company's Russia business in the 2017 periods, (iv) a gain on sale of real estate in the nine months ended September 30, 2016 and (v) 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 the business to deliver net sales growth of 20% to 22% compared to 2016. The Company is maintaining its Adjusted diluted earnings per share outlook for the full year 2017 of $3.15 to $3.25. 

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 nine months ended September 30, 2017 and those that may be incurred during the balance of 2017, as well as the $3.6 million loss on the sale of the Company's Russia business in the third quarter of 2017. Due to the inherent difficulty of forecasting severance and restructuring and acquisition-related 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 third 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 7096467.

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, (iii) a loss on sale of the Company's Russia business in the 2017 periods, (iv) a gain on sale of real estate in the nine months ended September 30, 2016 and (v) 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 September 30,     Nine Months Ended September 30,  
    2017     2016     change     2017     2016     change  
Insight Enterprises, Inc.  
Net sales   $ 1,757,973     $ 1,392,716     26 %   $ 4,919,548     $ 4,017,932     22 %
Gross profit   $ 226,081     $ 181,808     24 %   $ 685,687     $ 552,133     24 %
Gross margin     12.9 %     13.1 %   (20 bps )     13.9 %     13.7 %   20 bps  
Selling and administrative expenses   $ 180,390     $ 143,872     25 %   $ 538,774     $ 440,177     22 %
Severance and restructuring expenses   $ 494     $ 788     (37 %)   $ 6,211     $ 3,053     103 %
Loss on sale of foreign entity   $ 3,646     $ -     *     $ 3,646     $ -     *  
Acquisition-related expenses   $ 106     $ 741     (86 %)   $ 3,329     $ 741     349 %
Earnings from operations   $ 41,445     $ 36,407     14 %   $ 133,727     $ 108,162     24 %
Net earnings   $ 22,412     $ 21,635     4 %   $ 76,515     $ 63,590     20 %
Diluted earnings per share   $ 0.62     $ 0.60     3 %   $ 2.11     $ 1.74     21 %
                                             
                                             
North America  
Net sales   $ 1,411,079     $ 1,051,333     34 %   $ 3,803,343     $ 2,914,475     30 %
Gross profit   $ 176,021     $ 136,818     29 %   $ 517,108     $ 391,929     32 %
Gross margin     12.5 %     13.0 %   (50 bps )     13.6 %     13.4 %   20 bps  
Selling and administrative expenses   $ 132,853     $ 99,845     33 %   $ 395,423     $ 301,147     31 %
Severance and restructuring expenses   $ 398     $ 643     (38 %)   $ 2,045     $ 2,451     (17 %)
Acquisition-related expenses   $ -     $ 575     *     $ 3,223     $ 575     461 %
Earnings from operations   $ 42,770     $ 35,755     20 %   $ 116,417     $ 87,756     33 %
                                             
Sales Mix                   **                     **  
Hardware     68 %     62 %   48 %     65 %     62 %   37 %
Software     24 %     31 %   6 %     27 %     31 %   13 %
Services     8 %     7 %   39 %     8 %     7 %   46 %
      100 %     100 %   34 %     100 %     100 %   30 %
                                             
                                             
EMEA  
Net sales   $ 312,194     $ 311,732     -     $ 988,609     $ 976,800     1 %
Gross profit   $ 41,618     $ 38,308     9 %   $ 139,897     $ 136,810     2 %
Gross margin     13.3 %     12.3 %   100 bps       14.2 %     14.0 %   20 bps  
Selling and administrative expenses   $ 39,948     $ 37,893     5 %   $ 121,863     $ 121,663     -  
Severance and restructuring expenses   $ 53     $ 145     (63 %)   $ 4,062     $ 487     734 %
Loss on sale of foreign entity   $ 3,646     $ -     *     $ 3,646     $ -     *  
Acquisition-related expenses   $ 106     $ -     *     $ 106     $ -     *  
(Loss) earnings from operations   $ (2,135 )   $ 270     *     $ 10,220     $ 14,660     (30 %)
                                             
Sales Mix                   **                     **  
Hardware     44 %     41 %   7 %     40 %     37 %   11 %
Software     52 %     56 %   (6 %)     56 %     60 %   (6 %)
Services     4 %     3 %   23 %     4 %     3 %   15 %
      100 %     100 %   -       100 %     100 %   1 %
                                             

* Percentage change not considered meaningful.

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