UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September 30, 2020~~March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-25092

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware

86-0766246

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

6820 South Harl Avenue, Tempe, Arizona 85283

(Address of principal executive offices) (Zip Code)

(480) 333-3000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common stock, par value $0.01		NSIT		The NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

The number of shares outstanding of the issuer’s common stock as of ~~October~~April 30, ~~2020~~2021 was ~~35,097,785.~~

35,321,102.

INSIGHT ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

Three Months Ended ~~September 30, 2020~~March 31, 2021

TABLE OF CONTENTS

		Page
PART I -	Financial Information

Item 1 –	Financial Statements:

	Consolidated Balance Sheets (unaudited) – ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	1

	Consolidated Statements of Operations (unaudited) – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	2

	Consolidated Statements of Comprehensive Income (unaudited) – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	3

	Consolidated Statements of Stockholders’ Equity (unaudited) – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

	Consolidated Statements of Cash Flows (unaudited) – ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	65

	Notes to Consolidated Financial Statements (unaudited)	76

Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2618

Item 3 –	Quantitative and Qualitative Disclosures About Market Risk	4230

Item 4 –	Controls and Procedures	4230

PART II -	Other Information	4331

Item 1 –	Legal Proceedings	4331

Item 1A –	Risk Factors	4331

Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	4431

Item 3 –	Defaults Upon Senior Securities	4532

Item 4 –	Mine Safety Disclosures	4532

Item 5 –	Other Information	4532

Item 6 –	Exhibits	4633

Signatures		4734

INSIGHT ENTERPRISES, INC.

Forward-Looking Information

References to “the Company,” “Insight,” “we,” “us,” “our” and other similar words refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context suggests otherwise. Certain statements in this Quarterly Report on Form 10-Q, including statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this report, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include: projections of, and matters that affect, net sales, gross profit, gross margin, operating expenses, earnings from operations, non-operating income and expenses, net earnings or cash flows, cash needs and the payment of accrued expenses and liabilities; our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company; our expectations regarding current supply constraints; the expected effects of seasonality on our business; expectations of further consolidation and trends in the Information Technology (“IT”) industry; our business strategy and our strategic initiatives, including our efforts to grow our core business in the current environment, develop and grow our global cloud business and build scalable solutions; expectations regarding partner incentives; our expectations about future benefits of our acquisitions and our plans related thereto, including potential expansion into wider regions; ~~our expectations regarding the PCM integration, including expected synergies;~~ the increasing demand for big data solutions; the availability of competitive sources of products for our purchase and resale; our intentions concerning the payment of dividends; our acquisition strategy; our ability to offset the effects of inflation and manage any increase in interest rates; projections of capital expenditures; our plans to continue to evolve our IT systems, including migration of EMEA’s current system; the sufficiency of our capital resources, the availability of financing and our needs or plans relating thereto; the effects of new accounting principles and expected dates of adoption; the effect of indemnification obligations; projections about the outcome of ongoing tax audits; our expectations regarding future tax rates; adequate provisions for and our positions and strategies with respect to ongoing and threatened litigation and expected outcomes; our ability to expand our client relationships; our expectations that pricing pressures in the IT industry will continue; our plans to use cash flow from operations for working capital, to pay down debt, make capital expenditures, fund acquisitions, and repurchase shares of our common ~~stock, make capital expenditures, and fund acquisitions;~~stock; our belief that our office facilities are adequate and that we will be able to extend our current leases or locate substitute facilities on satisfactory terms; our belief that we have adequate provisions for losses; our expectation that we will not incur interest payments under our inventory financing facilities; our expectations that future income will be sufficient to fully recover deferred tax assets; our exposure to off-balance sheet arrangements; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements are identified by such words as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will,” “may” and variations of such words and similar expressions and 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 results described in forward-looking statements will be achieved, and actual results could differ materially from those suggested by the forward-looking statements. Some of the important factors that could cause our 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, ~~2019 and in “Risk Factors” in Part II, Item 1A of this report:~~2020:

•

the duration and severity of the COVID-19 pandemic and its effects on our business, results of operations and financial condition, as well as the widespread outbreak of any other illnesses or communicable diseases;

•

actions of our competitors, including manufacturers and publishers of products we sell;

•

our reliance on our 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;

•

general economic conditions, economic uncertainties and changes in geopolitical conditions;

INSIGHT ENTERPRISES, INC.

•

changes in the IT industry and/or rapid changes in technology;

~~INSIGHT ENTERPRISES, INC.~~

•

supply constraints for devices;

•

accounts receivable risks, ~~associated~~including increased credit loss experience or extended payment terms with ~~the integration and operation of acquired businesses, including PCM and the achievement of expected synergies and benefits;~~our clients;

•

our reliance on independent shipping companies;

•

the risks associated with our international operations;

•

natural disasters or other adverse occurrences;

•

disruptions in our IT systems and voice and data networks;

•

cyberattacks or breaches of data privacy and security regulations;

•

intellectual property infringement claims and challenges to our 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 our commercial and public sector contracts;

•

exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;

•

our potential to draw down a substantial amount of indebtedness;

•

the conditional conversion feature of the convertible senior notes (the “Notes”), which if 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 Notes, could have a material effect on the Company’s reported financial results;

•

the Company is subject to counterparty risk with respect to certain hedge and warrant transactions entered into in connection with the issuance of the Notes (the “Call Spread Transactions”);

•

risks associated with the discontinuation of LIBOR as a benchmark rate;

•

increased debt and interest expense and decreased availability of funds under our financing facilities;

•

possible significant fluctuations in our future operating results as well as seasonality and variability in customer demands;

•

~~the risks associated with our international operations;~~

•

~~general economic conditions, economic uncertainties, the timing of the economic recovery and changes in geopolitical conditions;~~

•

~~increased debt and interest expense and decreased availability of funds under our financing facilities;~~

•

~~cyberattacks or breaches of data privacy and security regulations;~~

•

~~disruptions in our IT systems and voice and data networks;~~

•

~~failure to comply with the terms and conditions of our commercial and public sector contracts;~~

•

~~legal proceedings, including PCM related litigation, client audits and failure to comply with laws and regulations;~~

•

~~accounts receivable risks, including increased credit loss experience or extended payment terms with our clients;~~

•

~~our reliance on independent shipping companies;~~

•

our dependence on certain key personnel;

•

~~natural disasters or other adverse occurrences;~~risks associated with the integration and operation of acquired businesses, including PCM and the achievement of expected synergies and benefits; and

•

~~exposure to changes in, interpretations of, or~~ ~~enforcement trends related to tax rules and regulations;~~

•

~~intellectual property infringement claims and challenges to our registered trademarks and trade names;~~

•

~~the conditional conversion feature of the convertible notes, which if 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;~~

•

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;~~

•

~~the Company is subject to counterparty risk with respect to the convertible note hedge transactions; and~~

•

~~risks associated with the discontinuation of LIBOR as a benchmark rate.~~stock.

Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the Securities and Exchange Commission (the “SEC”). Any forward-looking statements in this report are made as of the date of this filing and should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. We assume no obligation to update, and, except as may be required by law, do not intend to update, any forward-looking statements. We do not endorse any projections regarding future performance that may be made by third parties.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	75,237		$	114,668		$	138,753		$	128,313
Accounts receivable, net of allowance for doubtful accounts of $15,406 and $10,762, respectively		2,267,718			2,511,383
Accounts receivable, net of allowance for doubtful accounts of $15,664 and $15,106, respectively								2,583,716			2,685,448
Inventories		158,400			190,833			253,297			185,650
Other current assets		225,052			231,148			177,927			177,039
Total current assets		2,726,407			3,048,032			3,153,693		$	3,176,450
Property and equipment, net of accumulated depreciation and amortization of $250,205 and $236,330, respectively		127,580			130,907
Property and equipment, net of accumulated depreciation and amortization of $254,747 and $256,065, respectively								148,531			146,016
Goodwill		425,800			415,149			429,757			429,368
Intangible assets, net of accumulated amortization of $103,102 and $73,492, respectively		253,078			278,584
Intangible assets, net of accumulated amortization of $111,245 and $103,483, respectively								239,833			246,915
Other assets		294,445			305,507			282,793			311,983
	$	3,827,310		$	4,178,179		$	4,254,607		$	4,310,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable—trade	$	1,275,187		$	1,275,957		$	1,460,172		$	1,461,312
Accounts payable—inventory financing facilities		367,997			253,676			309,075			356,930
Accrued expenses and other current liabilities		319,397			352,204			404,995			408,117
Current portion of long-term debt		1,422			1,691			830			1,105
Total current liabilities		1,964,003			1,883,528			2,175,072			2,227,464
Long-term debt		294,722			857,673			416,401			437,581
Deferred income taxes		40,572			44,633			33,963			33,209
Other liabilities		265,122			232,027			246,005			270,049
		2,564,419			3,017,861			2,871,441			2,968,303
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 3,000 shares authorized; 0 shares issued		—			—			—			—
Common stock, $0.01 par value, 100,000 shares authorized; 35,090 shares at September 30, 2020 and 35,263 shares at December 31, 2019 issued and outstanding		351			353
Common stock, $0.01 par value, 100,000 shares authorized; 35,320 shares at March 31, 2021 and 35,103 shares at December 31, 2020 issued and outstanding								353			351
Additional paid-in capital		358,567			357,032			361,935			364,288
Retained earnings		939,857			841,097			1,036,413			993,245
Accumulated other comprehensive loss – foreign currency translation adjustments		(35,884	)		(38,164	)		(15,535	)		(15,455	)
Total stockholders’ equity		1,262,891			1,160,318			1,383,166			1,342,429
	$	3,827,310		$	4,178,179		$	4,254,607		$	4,310,732

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019			2020		2019		2021			2020
Net sales:
Products	$	1,661,568	$	1,668,880		$	5,182,817	$	4,729,887	$	1,893,020		$	1,848,316
Services		274,910		243,667			866,447		704,147		300,048			295,735
Total net sales		1,936,478		1,912,547			6,049,264		5,434,034		2,193,068			2,144,051
Costs of goods sold:
Products		1,500,312		1,519,240			4,688,497		4,315,464		1,721,258			1,670,238
Services		128,603		117,112			403,479		318,454		140,336			148,477
Total costs of goods sold		1,628,915		1,636,352			5,091,976		4,633,918		1,861,594			1,818,715
Gross profit		307,563		276,195			957,288		800,116		331,474			325,336
Operating expenses:
Selling and administrative expenses		245,155		223,215			756,598		613,767		271,190			268,863
Severance and restructuring expenses		808		2,662			9,962		3,712
Severance and restructuring expenses, net											(6,740	)		2,144
Acquisition and integration related expenses		118		5,896			2,195		9,059		—			1,466
Earnings from operations		61,482		44,422			188,533		173,578		67,024			52,863
Non-operating (income) expense:
Interest expense, net		9,115		7,694			31,160		16,581		9,969			11,826
Other (income) expense, net		1,301		(538	)		836		858
Other expense (income), net											388			(1,563	)
Earnings before income taxes		51,066		37,266			156,537		156,139		56,667			42,600
Income tax expense		12,160		10,134			37,285		39,682		13,499			8,639
Net earnings	$	38,906	$	27,132		$	119,252	$	116,457	$	43,168		$	33,961
Net earnings per share:
Basic	$	1.11	$	0.76		$	3.40	$	3.27	$	1.23		$	0.96
Diluted	$	1.10	$	0.76		$	3.37	$	3.23	$	1.18		$	0.95
Shares used in per share calculations:
Basic		35,077		35,512			35,123		35,631		35,199			35,233
Diluted		35,348		35,868			35,418		36,027		36,699			35,646

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended March 31,
	2020		2019			2020		2019			2021			2020
Net earnings	$	38,906	$	27,132		$	119,252	$	116,457		$	43,168		$	33,961
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		12,492		(8,903	)		2,280		(7,278	)		(80	)		(17,831	)
Total comprehensive income	$	51,398	$	18,229		$	121,532	$	109,179		$	43,088		$	16,130

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

Common Stock

Treasury Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Retained

Total
Stockholders'

Shares

Par Value

Shares

Amount

Capital

Loss

Earnings

Equity

Balances at June 30, 2019

35,781

$
358

—

$
—

$
325,263

$
(40,028
)

$
793,990

$
1,079,583

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes

11

—

—

—

(266
)

—

—

(266
)
Stock-based compensation expense

—

—

—

—

4,098

—

—

4,098

Equity component of convertible senior notes, net of deferred tax of $14,819 and issuance costs of $1,700

—

—

—

—

44,731

—

—

44,731

Issuance of warrants related to convertible senior notes

—

—

—

—

34,440

—

—

34,440

Purchase of note hedge related to convertible senior notes, net of deferred tax of $16,047

—

—

—

—

(50,278
)

—

—

(50,278
)
Repurchase of treasury stock

—

—

(541
)

(27,899
)

—

—

—

(27,899
)
Retirement of treasury stock

(541
)

(5
)

541

27,899

(4,919
)

—

(22,975
)

—

Foreign currency translation adjustments, net of tax

—

—

—

—

—

(8,903
)

—

(8,903
)
Net earnings

—

—

—

—

—

—

27,132

27,132

Balances at September 30, 2019

35,251

$
353

—

$
—

$
353,069

$
(48,931
)

$
798,147

$
1,102,638

Balances at June 30, 2020

35,070

$
351

—

$
—

$
354,431

$
(48,376
)

$
900,950

$
1,207,356

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes

20

—

—

—

(377
)

—

1

(376
)
Stock-based compensation expense

—

—

—

—

4,513

—

—

4,513

Foreign currency translation adjustments, net of tax

—

—

—

—

—

12,492

—

12,492

Net earnings

—

—

—

—

—

—

38,906

38,906

Balances at September 30, 2020

35,090

$
351

—

$
—

$
358,567

$
(35,884
)

$
939,857

$
1,262,891

	Common Stock				Treasury Stock				Additional Paid-in			Accumulated Other Comprehensive			Retained		Total Stockholders'
	Shares		Par Value		Shares		Amount		Capital			Loss			Earnings		Equity
Balances at December 31, 2020		35,103	$	351		—	$	—	$	364,288		$	(15,455	)	$	993,245	$	1,342,429
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes		217		2		—		—		(7,069	)		—			—		(7,067	)
Stock-based compensation expense		—		—		—		—		4,716			—			—		4,716
Foreign currency translation adjustments, net of tax		—		—		—		—		—			(80	)		—		(80	)
Net earnings		—		—		—		—		—			—			43,168		43,168
Balances at March 31, 2021		35,320	$	353		—	$	—	$	361,935		$	(15,535	)	$	1,036,413	$	1,383,166

	Common Stock						Treasury Stock						Additional Paid-in			Accumulated Other Comprehensive			Retained			Total Stockholders'			Common Stock						Treasury Stock						Additional Paid-in			Accumulated Other Comprehensive			Retained			Total Stockholders'
	Shares			Par Value			Shares			Amount			Capital			Loss			Earnings			Equity			Shares			Par Value			Shares			Amount			Capital			Loss			Earnings			Equity
Balances at December 31, 2018		35,482		$	355			—		$	—		$	323,622		$	(41,653	)	$	704,665		$	986,989
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes		310			3			—			—			(6,422	)		—			—			(6,419	)
Stock-based compensation expense		—			—			—			—			11,895			—			—			11,895
Equity component of convertible senior notes, net of deferred tax of $14,819 and issuance costs of $1,700		—			—			—			—			44,731			—			—			44,731
Issuance of warrants related to convertible senior notes		—			—			—			—			34,440			—			—			34,440
Purchase of note hedge related to convertible senior notes, net of deferred tax of $16,047		—			—			—			—			(50,278	)		—			—			(50,278	)
Repurchase of treasury stock		—			—			(541	)		(27,899	)		—			—			—			(27,899	)
Retirement of treasury stock		(541	)		(5	)		541			27,899			(4,919	)		—			(22,975	)		—
Foreign currency translation adjustments, net of tax		—			—			—			—			—			(7,278	)		—			(7,278	)
Net earnings		—			—			—			—			—			—			116,457			116,457
Balances at September 30, 2019		35,251		$	353			—		$	—		$	353,069		$	(48,931	)	$	798,147		$	1,102,638
Balances at December 31, 2019		35,263		$	353			—		$	—		$	357,032		$	(38,164	)	$	841,097		$	1,160,318			35,263		$	353		—			$ —			$	357,032		$	(38,164	)	$	841,097		$	1,160,318
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes		272			2			—			—			(5,715	)		—			—			(5,713	)		231			2		—			—				(5,289	)	—				(1	)		(5,288	)
Stock-based compensation expense		—			—			—			—			11,754			—			—			11,754			—			—			—			—			4,409			—			—			4,409
Repurchase of treasury stock		—			—			(445	)		(25,000	)		—			—			—			(25,000	)	—			—				(445	)		(25,000	)	—						—				(25,000	)
Retirement of treasury stock		(445	)		(4	)		445			25,000			(4,504	)		—			(20,492	)		—			(445	)		(5	)		445			25,000			(4,504	)	—				(20,491	)		—
Foreign currency translation adjustments, net of tax		—			—			—			—			—			2,280			—			2,280		—			—			—			—			—				(17,831	)	—				(17,831	)
Net earnings		—			—			—			—			—			—			119,252			119,252		—			—			—			—			—			—				33,961			33,961
Balances at September 30, 2020		35,090		$	351			—		$	—		$	358,567		$	(35,884	)	$	939,857		$	1,262,891
Balances at March 31, 2020																										35,049		$	350			—		$	—		$	351,648		$	(55,995	)	$	854,566		$	1,150,569

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net earnings	$	119,252		$	116,457		$	43,168		$	33,961
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		51,375			29,096			14,222			17,397
Provision for losses on accounts receivable		8,093			2,695			2,178			3,136
Non-cash stock-based compensation		11,754			11,895			4,716			4,409
Deferred income taxes		(2,883	)		2,501			643			(509	)
Amortization of debt discount		12,091			2,322			4,172			3,965
Other adjustments		4,087			3,633			(7,617	)		1,297
Changes in assets and liabilities:
Decrease in accounts receivable		247,659			68,057			93,485			22,648
Decrease (increase) in inventories		28,002			(17,946	)
Decrease (increase) in other assets		19,643			(99,681	)
Decrease in accounts payable		(4,842	)		(39,191	)
(Decrease) increase in accrued expenses and other liabilities		(32,137	)		88,757
Increase in inventories								(67,946	)		(48,332	)
Decrease in other assets								16,759			57,241
(Decrease) increase in accounts payable								(25,315	)		23,277
Decrease in accrued expenses and other liabilities								(35,759	)		(25,364	)
Net cash provided by operating activities		462,094			168,595			42,706			93,126
Cash flows from investing activities:
Proceeds from sale of assets held for sale		14,218			—			27,211			14,218
Purchases of property and equipment		(20,688	)		(16,922	)		(7,847	)		(7,382	)
Acquisitions, net of cash and cash equivalents acquired		(6,405	)		(664,287	)		—			(6,406	)
Net cash used in investing activities		(12,875	)		(681,209	)
Net cash provided by investing activities								19,364			430
Cash flows from financing activities:
Borrowings on senior revolving credit facility		—			242,936
Repayments on senior revolving credit facility		—			(242,936	)
Borrowings on ABL revolving credit facility, net of initial lender fees		2,111,674			986,754
Borrowings on ABL revolving credit facility								897,848			678,197
Repayments on ABL revolving credit facility		(2,682,562	)		(454,544	)		(921,848	)		(788,443	)
Borrowings on accounts receivable securitization financing facility	—				2,364,500
Repayments on accounts receivable securitization financing facility	—				(2,558,500	)
Net borrowings (repayments) under inventory financing facilities		114,321			(96,472	)
Proceeds from issuance of convertible senior notes	—				341,250
Proceeds from issuance of warrants	—				34,440
Purchase of note hedge related to convertible senior notes	—				(66,325	)
Net repayments under inventory financing facilities								(17,782	)		(764	)
Repurchases of common stock		(25,000	)		(27,899	)		—			(25,000	)
Other payments		(7,520	)		(8,762	)		(7,485	)		(5,756	)
Net cash (used in) provided by financing activities		(489,087	)		514,442
Net cash used in financing activities								(49,267	)		(141,766	)
Foreign currency exchange effect on cash, cash equivalents and restricted cash balances		718			(3,960	)		(2,445	)		(3,615	)
Decrease in cash, cash equivalents and restricted cash		(39,150	)		(2,132	)
Increase (decrease) in cash, cash equivalents and restricted cash								10,358			(51,825	)
Cash, cash equivalents and restricted cash at beginning of period		116,297			144,293			130,582			116,297
Cash, cash equivalents and restricted cash at end of period	$	77,147		$	142,161		$	140,940		$	64,472

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.Basis of Presentation and Recently Issued Accounting Standards

We empower organizations of all sizes with Insight Intelligent Technology Solutions^TM and services to maximize the business value of Information Technology (“IT”) in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked global provider of digital innovation, cloud/data center transformation, and connected workforce ~~and~~solutions, together with our supply chain optimization ~~solutions,~~expertise, we help clients innovate and optimize their operations to run smarter. Our company is organized in the following 3 operating segments, which are primarily defined by their related geographies:

Operating Segment	Geography
North America	United States and Canada
EMEA	Europe, Middle East and Africa
APAC	Asia-Pacific

Our offerings in North America and certain countries in EMEA and APAC include hardware, software and ~~services.~~services, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments consist of largely software and certain software-related ~~services.~~services and cloud solutions.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of ~~September 30, 2020~~March 31, 2021 and our results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ and cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The consolidated balance sheet as of December 31, ~~2019~~2020 was derived from the audited consolidated balance sheet at such date. The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with the rules and regulations promulgated by the SEC and consequently do not include all of the disclosures normally required by United States generally accepted accounting principles (“GAAP”).

The results of operations for interim periods are not necessarily indicative of results for the full year, due in part to the seasonal nature of our business. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes thereto, in our Annual Report on Form 10-K for the year ended December 31, ~~2019. Our results of operations include the results of PCM, Inc. (“PCM”) from its acquisition date of August 30, 2019 and vNext from its acquisition date of February 28,~~ 2020.

The consolidated financial statements include the accounts of Insight Enterprises, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Additionally, these estimates and assumptions affect the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to sales recognition, anticipated achievement levels under partner funding programs, assumptions related to stock-based compensation valuation, allowances for doubtful accounts, valuation of inventories, litigation-related obligations, valuation allowances for deferred tax assets and impairment of long-lived assets, including purchased intangibles and goodwill, if indicators of potential impairment exist.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes.” The new standard is intended to simplify various aspects of accounting for income taxes by removing specific exceptions and amending certain requirements. ~~The~~We adopted the new standard is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted. We do not expect this new standard to have a material effect on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses.” The new standard is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held at each reporting date. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The new standard update provides changes for how a company considers expected recoveries and contractual extensions or renewal options when estimating expected credit losses. In November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” The new standard update provides amendments to the reporting of expected recoveries. We adopted these new standards as of January 1, ~~2020.~~2021. The adoption of ~~these~~this new ~~standards~~standard did not have a material effect on our consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. The new guidance is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be wholly accounted for as debt. The guidance also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method. The guidance will be effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements; however, we expect our consolidated statements of operations and consolidated balance sheets will be significantly impacted following adoption of this new standard as we will no longer report accreted interest on the Notes and the full par value of the Notes will be reflected as debt.

There have been no other material changes in or additions to the recently issued accounting standards as previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 that affect or may affect our current financial statements.

2.	Sales Recognition

~~In the~~

The following table ~~revenue is disaggregated by our reportable operating segments, which are primarily defined bytheir related geographies,~~provides information about receivables and contract liabilities as ~~well as by major product offering, by major client group~~of March 31, 2021 and ~~by recognition on either a gross basis as a principal in the arrangement, or on a net basis as an agent, for the three and nine months ended September 30,~~December 31, 2020 ~~and 2019~~ (in thousands):

Three Months Ended September 30, 2020

North America

EMEA

APAC

Consolidated

Major Offerings

Hardware

$
1,028,045

$
138,685

$
6,421

$
1,173,151

Software

306,925

165,301

16,191

488,417

Services

223,198

37,294

14,418

274,910

$
1,558,168

$
341,280

$
37,030

$
1,936,478

Major Client Groups

Large Enterprise / Corporate

$
1,043,303

$
242,925

$
15,416

$
1,301,644

Small and Medium-Sized Businesses

312,080

13,647

16,197

341,924

Public Sector

202,785

84,708

5,417

292,910

$
1,558,168

$
341,280

$
37,030

$
1,936,478

Revenue Recognition based on acting as
Principal or Agent in the Transaction

Gross revenue recognition (Principal)

$
1,477,716

$
320,445

$
31,256

$
1,829,417

Net revenue recognition (Agent)

80,452

20,835

5,774

107,061

$
1,558,168

$
341,280

$
37,030

$
1,936,478

	March 31,		December 31,
	2021		2020
Current receivables, which are included in “Accounts receivable, net”	$	2,583,716	$	2,685,448
Non-current receivables, which are included in “Other assets”		124,670		154,662
Contract liabilities, which are included in “Accrued expenses and other current liabilities” and “Other liabilities”		103,468		107,158

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Three Months Ended September 30, 2019

North America

EMEA

APAC

Consolidated

Major Offerings

Hardware

$
1,020,083

$
137,416

$
9,243

$
1,166,742

Software

295,730

186,839

19,569

502,138

Services

199,349

31,453

12,865

243,667

$
1,515,162

$
355,708

$
41,677

$
1,912,547

Major Client Groups

Large Enterprise / Corporate

$
1,110,817

$
277,536

$
17,811

$
1,406,164

Small and Medium-Sized Businesses

239,260

18,998

17,688

275,946

Public Sector

165,085

59,174

6,178

230,437

$
1,515,162

$
355,708

$
41,677

$
1,912,547

Revenue Recognition based on acting as
Principal or Agent in the Transaction

Gross revenue recognition (Principal)

$
1,448,385

$
336,600

$
35,979

$
1,820,964

Net revenue recognition (Agent)

66,777

19,108

5,698

91,583

$
1,515,162

$
355,708

$
41,677

$
1,912,547

Nine Months Ended September 30, 2020

North America

EMEA

APAC

Consolidated

Major Offerings

Hardware

$
3,180,501

$
466,909

$
21,001

$
3,668,411

Software

898,290

553,164

62,952

1,514,406

Services

692,905

132,110

41,432

866,447

$
4,771,696

$
1,152,183

$
125,385

$
6,049,264

Major Client Groups

Large Enterprise / Corporate

$
3,227,613

$
808,360

$
44,543

$
4,080,516

Small and Medium-Sized Businesses

1,030,540

44,567

45,413

1,120,520

Public Sector

513,543

299,256

35,429

848,228

$
4,771,696

$
1,152,183

$
125,385

$
6,049,264

Revenue Recognition based on acting as
Principal or Agent in the Transaction

Gross revenue recognition (Principal)

$
4,530,152

$
1,071,910

$
108,073

$
5,710,135

Net revenue recognition (Agent)

241,544

80,273

17,312

339,129

$
4,771,696

$
1,152,183

$
125,385

$
6,049,264

Nine Months Ended September 30, 2019

North America

EMEA

APAC

Consolidated

Major Offerings

Hardware

$
2,704,212

$
451,892

$
25,740

$
3,181,844

Software

907,683

560,073

80,287

1,548,043

Services

551,215

113,092

39,840

704,147

$
4,163,110

$
1,125,057

$
145,867

$
5,434,034

Major Client Groups

Large Enterprise / Corporate

$
3,159,269

$
819,156

$
47,903

$
4,026,328

Small and Medium-Sized Businesses

585,258

59,318

50,536

695,112

Public Sector

418,583

246,583

47,428

712,594

$
4,163,110

$
1,125,057

$
145,867

$
5,434,034

Revenue Recognition based on acting as
Principal or Agent in the Transaction

Gross revenue recognition (Principal)

$
3,969,411

$
1,051,101

$
127,129

$
5,147,641

Net revenue recognition (Agent)

193,699

73,956

18,738

286,393

$
4,163,110

$
1,125,057

$
145,867

$
5,434,034

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

~~The following table provides information about receivables and contract liabilities as of September 30, 2020 and December 31, 2019 (in thousands):~~

September 30,

December 31,

2020

2019

Current receivables, which are included in “Accounts
receivable, net”

$
2,267,718

$
2,511,383

Non-current receivables, which are included in “Other assets”

137,431

154,417

Contract liabilities, which are included in “Accrued expenses
and other current liabilities” and “Other liabilities”

80,734

84,814

Changes in the contract liabilities balances during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 are as follows (in thousands):

	Increase (Decrease)			Increase (Decrease)
	Contract			Contract
	Liabilities			Liabilities
Balances at December 31, 2019	$	84,814
Balances at December 31, 2020				$	107,158
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied		(53,454	)		(34,418	)
Cash received in advance and not recognized as revenue		49,374			30,728
Balances at September 30, 2020	$	80,734
Balances at March 31, 2021				$	103,468

During the three months ended March 31, 2020, the Company recognized revenue of $19,000,000 related to its contract liabilities.

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of ~~September 30, 2020~~March 31, 2021 that are expected to be recognized in the future (in thousands):

Services

Remainder of 2020

$
54,939

2021

64,346

2022

25,076

2023 and thereafter

16,763

Total remaining performance obligations

$
161,124

	Services
Remainder of 2021	$	100,218
2022		39,638
2023		17,094
2024 and thereafter		9,434
Total remaining performance obligations	$	166,384

With the exception of remaining performance obligations associated with our OneCall Support Services contracts which are included in the table above regardless of original duration, remaining performance obligations that have original expected durations of one year or less are not included in the table above. Amounts not included in the table above have an average original expected duration of ~~nine~~eight months. Additionally, for our time and material services contracts, whereby we have the right to consideration from a client in an amount that corresponds directly with the value to the client of our performance completed to date, we recognized revenue in the amount to which we have a right to invoice as of ~~September 30, 2020~~March 31, 2021 and do not disclose information about related remaining performance obligations in the table above. Our time and material contracts have an average expected duration of 2023 months.

The majority of our backlog historically has been and continues to be open cancelable purchase orders. We do not believe that backlog as of any particular date is predictive of future results, therefore we do not include performance obligations under open cancelable purchase orders, which do not qualify for revenue recognition, in the table above.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

3.	Assets Held for Sale

During ~~2019,~~the first quarter of 2021, we completed the ~~purchase~~sale of ~~real estate~~our 3 properties in Tempe, Arizona and the sale of our property in Woodbridge, Illinois for total net proceeds of approximately $27,211,000. We intend to use the proceeds from the sales to ready our property in Chandler, Arizona ~~that we intend~~ to ~~use~~be used as our global corporate headquarters. During the fourth quarter of 2019, properties in Tempe, Arizona, El Segundo and Santa Monica, California and Woodbridge, Illinois were classified as held for sale, for approximately $68,916,000, which is included in other current assets in the accompanying consolidated balance sheet as of September 30, 2020, as we look to sell current properties in preparation for our move to Chandler. During the first quarter of 2020, we completed the sale of our property in Irvine, California for approximately $14,218,000.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

4.	Net Earnings Per Share (“EPS”)

Basic EPS is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock units (“RSUs”). and certain shares underlying the Notes. A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Numerator:
Net earnings	$	38,906	$	27,132	$	119,252	$	116,457	$	43,168	$	33,961
Denominator:
Weighted average shares used to compute basic EPS		35,077		35,512		35,123		35,631		35,199		35,233
Dilutive potential common shares due to dilutive RSUs, net of tax effect		271		356		295		396		461		413
Dilutive potential common shares due to the Notes										1,039		—
Weighted average shares used to compute diluted EPS		35,348		35,868		35,418		36,027		36,699		35,646
Net earnings per share:
Basic	$	1.11	$	0.76	$	3.40	$	3.27	$	1.23	$	0.96
Diluted	$	1.10	$	0.76	$	3.37	$	3.23	$	1.18	$	0.95

For the three ~~and nine~~ months ended ~~September 30, 2020, 3,000 and 163,000, respectively,~~March 31, 2021, 0ne of our RSUs were ~~not included in~~excluded from the diluted EPS calculations. Certain potential outstanding shares from the warrants relating to the Call Spread Transactions were excluded from the diluted EPS calculations because their inclusion would have been anti-dilutive. ~~These share-based awards could be dilutive in the future. There were 3,000 and 56,000 anti-dilutive RSUs for~~For the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~ March 31, 2020, 86,000 of our RSUs and certain potential outstanding shares from the Notes and warrants were excluded from the diluted EPS calculations because their inclusion would have been anti-dilutive.

119

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5.	Debt, Inventory Financing Facilities, Finance Leases and Other Financing Obligations

Debt

Our long-term debt consists of the following (in thousands):

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
ABL revolving credit facility	$	—		$	570,706		$	116,000		$	140,000
Convertible senior notes due 2025		293,469			284,836			299,402			296,419
Finance leases and other financing obligations		2,675			3,822			1,829			2,267
Total		296,144			859,364			417,231			438,686
Less: current portion of long-term debt		(1,422	)		(1,691	)		(830	)		(1,105	)
Long-term debt	$	294,722		$	857,673		$	416,401		$	437,581

~~On August 30, 2019, we entered into a credit agreement (the “credit agreement”) providing for a~~Our senior secured revolving credit facility (the “ABL facility”), ~~which~~ has an aggregate U.S. dollar equivalent maximum borrowing amount of $1,200,000,000, including a maximum borrowing capacity that could be used for borrowing in certain foreign currencies of $150,000,000. While the ABL facility has a stated maximum amount, the actual availability under the ABL facility is limited by specified percentages of eligible accounts receivable and certain eligible inventory, in each case as set forth in the credit agreement. From time to time and at our option, we may request to increase the aggregate amount available for borrowing under the ABL facility by up to an aggregate of the U.S. dollar equivalent of $500,000,000, subject to customary conditions, including receipt of commitments from lenders. On July 31, 2020, we entered into the First Amendment to Credit Agreement (the “Amendment”) to the ABL facility. The Amendment, among other things, amends the credit agreement to provide additional flexibility for certain asset sale transactions by the Company and its subsidiaries. The ABL facility is guaranteed by certain of our material subsidiaries and is secured by a lien on certain of our assets and certain of each other borrower’s and each guarantor’s assets. The interest rates applicable to borrowings under the ABL facility are based on the average aggregate excess availability under the ABL facility as set forth on a pricing grid in the credit agreement. The ABL facility matures on August 30, 2024. As of ~~September 30, 2020,~~March 31, 2021, eligible accounts receivable and inventory were sufficient to permit access to the full $1,200,000,000 facility amount, ~~NaN~~ of which $116,000,000 was outstanding.

The ABL facility contains customary affirmative and negative covenants and events of default. If a default occurs (subject to customary grace periods and materiality thresholds) under the credit agreement, certain actions may be taken, including, but not limited to, possible termination of commitments and required payment of all outstanding principal amounts plus accrued interest and fees payable under the credit agreement.

Convertible Senior Notes due 2025

OnIn August ~~15,~~ 2019, we issued ~~$300,000,000~~$350,000,000 aggregate principal amount of ~~convertible senior notes (the “notes”)~~Notes that mature on February 15, 2025. On August 23, 2019, we issued an additional $50,000,000 aggregate principal amount of the notes pursuant to the exercise in full by the initial purchasers of the notes of their option to purchase additional notes. The ~~notes~~Notes bear interest at an annual rate of 0.75% payable semiannually, in arrears, on February 15^th and August 15^th of each year. The ~~notes~~Notes are general unsecured obligations of Insight and are guaranteed on a senior unsecured basis by Insight Direct USA, Inc., a wholly owned subsidiary of Insight.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Holders of the ~~notes~~Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding June 15, 2024, under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any 5 consecutive trading day period (the “measurement period”) in which the trading price ~~of our common stock~~ per $1,000 principal amount of ~~notes~~Notes for each trading day of the measurement period was less than 98% of the product of the last

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

reported sale price of our common stock and the conversion rate on each such trading day; (3) if we call any or all of the ~~notes~~Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after June 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, the holders may convert their notes at any time, regardless of the foregoing circumstances.

Upon conversion, we will pay or deliver cash, shares of our common stock or a combination of the two, at our discretion. We have made a policy election to settle the par value of the Notes in cash with only the conversion spread being settled in shares of our common stock. The conversion rate will initially be 14.6376 shares of common stock per $1,000 principal amount of ~~notes~~the Notes (equivalent to an initial conversion price of approximately $68.32 per share of common stock). The conversion rate is subject to change in certain circumstances and will not be adjusted for any accrued and unpaid interest. In addition, following certain events that occur prior to the maturity date or following our issuance of a notice of redemption, the conversion rate is subject to an increase for a holder who elects to convert their ~~notes~~Notes in connection with those events or during the related redemption period in certain circumstances.

If we undergo a fundamental change, the holders may require us to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the ~~notes~~Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of ~~September 30, 2020,~~March 31, 2021, none of the criteria for a fundamental change or a conversion rate adjustment had been met.

The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 6,788,208.

We may redeem for cash all or any portion of the notes, at our option, on or after August 20, 2022 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the then outstanding principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes.

The ~~notes~~Notes are subject to certain customary events of default and acceleration clauses. As of ~~September 30, 2020,~~March 31, 2021, no such events have occurred.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The ~~notes~~Notes consist of the following balances reported within the consolidated balance sheets (in thousands):

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Liability:
Principal	$	350,000		$	350,000		$	350,000		$	350,000
Less: debt discount and issuance costs, net of accumulated accretion		(56,531	)		(65,164	)		(50,598	)		(53,581	)
Net carrying amount	$	293,469		$	284,836		$	299,402		$	296,419

Equity, net of deferred tax	$	44,731		$	44,731		$	44,731		$	44,731

The remaining life of the debt discount and issuance cost accretion is approximately ~~4.375 years.~~3.875 years. The effective interest rate on the liability component of the ~~notes~~Notes is 4.325%.

I~~nterest~~Interest expense resulting from the ~~notes~~Notes reported within the consolidated statement of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 is made up of contractual coupon interest, amortization of debt discount and amortization of debt issuance costs.

Convertible Note Hedge and Warrant Transaction

In connection with the issuance of the ~~notes,~~Notes, we entered into ~~certain convertible note hedge and warrant transactions (the “Call~~the Call Spread ~~Transactions”)~~Transactions with respect to the Company’s common stock.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The convertible note hedge consists of an option to purchase up to 5,123,160 common stock shares at a price of $68.32 per share. The hedge expires on February 15, 2025 and can only be concurrently executed upon the conversion of the ~~notes.~~Notes. We paid approximately $66,325,000 for the convertible note hedge transaction.

Additionally, we sold warrants to purchase 5,123,160 shares of common stock at a price of $103.12 per share. The warrants expire on May 15, 2025 and can only be exercised at maturity. The Company received aggregate proceeds of approximately $34,440,000 for the sale of the warrants.

The Call Spread Transactions have no effect on the terms of the ~~notes~~Notes and reduce potential dilution by effectively increasing the initial conversion price of the ~~notes~~Notes to $103.12 per share of the Company’s common stock.

Inventory Financing Facilities

~~During 2020,~~On March 31, 2021, we ~~increased our~~entered into an unsecured inventory financing facility in EMEA (the “EMEA facility”) with a maximum ~~availability for~~borrowing capacity of $40,000,000. This facility will stay in effect until it is terminated by any of the parties. If balances are not paid within stated vendor ~~purchases~~terms, they will accrue interest at 0.25%, subject to adjustments upward depending on LIBOR movements, plus late charges of 1.00% per month. Amounts outstanding under ~~our~~this facility will be classified as accounts payable – inventory financing facility in the accompanying balance sheets.

Additionally, we have a $250,000,000 unsecured inventory financing facility with each of MUFG Bank Ltd (“MUFG”) ~~from $200,000,000 to $250,000,000. On July 6, 2020, we entered into a new unsecured inventory financing facility with a subsidiary of~~and PNC Bank, N.A. (“PNC”)~~, which replaced our previous facility with Wells Fargo Capital Finance, LLC. The aggregate availability for vendor purchases under the PNC facility is $250,000,000.~~. As of ~~September 30, 2020,~~March 31, 2021, our combined inventory financing facilities had a total maximum capacity of ~~$500,000,000,~~$540,000,000, of which $~~367,997,000~~309,075,000 was outstanding. The inventory financing facilities will remain in effect until they are terminated by any of the parties. If balances are not paid within stated vendor terms, they will accrue interest at prime plus 2.00% ~~and~~, LIBOR plus 4.50% and 0.25% on the MUFG, PNC and ~~PNC~~EMEA facilities, respectively. The PNC facility allows for an alternative rate to be identified if LIBOR is no longer available. Amounts outstanding under these facilities are classified separately as accounts payable – inventory financing facilities in the accompanying

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

consolidated balance sheets and within cash flows from financing activities in the accompanying consolidated statements of cash flows.

~~Finance Lease~~ ~~and Other Financing~~ ~~Obligations~~

~~From time to time, we enter into finance leases and other financing agreements with financial intermediaries to facilitate the purchase of products from certain vendors~~.

The current and long-term portions of our finance leases and other financing obligations are included in the current and long-term portions of long-term debt in the table above and in our consolidated balance sheets as of September 30, 2020 and December 31, 2019. See Note 6 for additional information.

6.	~~Leases~~

We lease office space, distribution centers, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

~~Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to~~ ~~five years~~ ~~or more.~~ ~~The exercise of lease renewal options is at our sole discretion.~~ Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

~~Certain of our lease agreements include rental payments adjusted periodically for inflation.~~ ~~Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.~~

The following table provides information about the financial statement classification of our lease balances reported within the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (in thousands):

Leases
Classification

September 30,
2020

December 31, 2019

Assets

Operating lease assets
Other assets

$
81,481

$
74,684

Finance lease assets
Property and equipment^(a)

2,326

3,297

Total lease assets

$
83,807

$
77,981

Liabilities

Current

   Operating lease liabilities
Accrued expenses and other current liabilities

$
20,556

$
19,648

   Finance lease liabilities
Current portion of long-term debt

1,422

1,691

Non-current

   Operating lease liabilities
Other liabilities

67,421

60,285

   Finance lease liabilities
Long-term debt

1,253

2,131

Total lease liabilities

$
90,652

$
83,755

~~(a)~~

~~Recorded net of accumulated amortization of $1,833,000 and $861,000 as of September 30, 2020 and December 31, 2019, respectively.~~

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The following table provides information about the financial statement classification of our lease expenses reported within the consolidated statement of operations for the three and nine months ended September 30, 2020 (in thousands):

Lease cost
Classification

Three Months Ended
September 30, 2020

Nine Months Ended
September 30, 2020

Operating lease cost ^{(a) (b)}
Selling and administrative expenses

$
6,460

$
19,412

Finance lease cost

   Amortization of leased
     assets
Selling and administrative expenses

324

972

   Interest on lease liabilities
Interest expense, net

24

84

Total lease cost

$
6,808

$
20,468

~~(a)~~

~~Includes immaterial amounts recorded to cost of goods sold.~~

~~(b)~~

~~Excludes short-term and variable lease costs, which are immaterial.~~

~~Future minimum lease payments under non-cancelable leases as of September 30, 2020 are as follows (in thousands):~~

Operating leases

Finance leases

Total

Remainder of 2020

$
6,021

$
564

$
6,585

2021

22,194

1,077

23,271

2022

19,099

645

19,744

2023

13,477

449

13,926

2024

8,430

45

8,475

After 2024

28,999

—

28,999

Total lease payments

98,220

2,780

101,000

Less: Interest

(10,243
)

(105
)

(10,348
)
Present value of lease liabilities

$
87,977

$
2,675

$
90,652

~~Operating lease payments include $13.4 million related to options to extend lease terms that are reasonably certain of being exercised.~~

~~The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2020:~~

September 30,
2020

September 30,
2019

Weighted average remaining lease term (years)

   Operating leases

6.13

6.19

   Finance leases

2.45

1.69

Weighted average discount rate (%)

   Operating leases

3.43

3.65

   Finance leases

3.46

4.85

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~The following table provides other information related to leases for the three and nine months ended September 30, 2020 (in thousands):~~

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Cash paid for amounts included in the measurement of lease
liabilities:

Operating cash flows from operating leases

$
6,360

$
19,444

Leased assets obtained in exchange for new operating lease liabilities

$
577

$
23,178

7.~~Stock-Based Compensation~~

We recorded the following pre-tax amounts in selling and administrative expenses for stock-based compensation, by operating segment, in the accompanying consolidated financial statements (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

North America

$
3,347

$
3,102

$
8,732

$
8,965

EMEA

$
1,006

860

2,588

2,544

APAC

$
160

136

434

386

Total Consolidated

$
4,513

$
4,098

$
11,754

$
11,895

~~As of September 30, 2020, total compensation cost related to nonvested RSUs not yet recognized is $25,871,000, which is expected to be recognized over the next 1.33 years on a weighted-average basis.~~

~~The following table summarizes our RSU activity during the nine months ended September 30, 2020:~~

Number

Weighted
Average
Grant Date
Fair Value

Fair Value

Nonvested at January 1, 2020

923,400

$
45.58

Granted^(a)

322,506

57.78

Vested, including shares withheld to cover taxes

(368,377
)

42.54

$
15,670,905

^(b)
Forfeited

(73,284
)

51.66

Nonvested at September 30, 2020 (a)

804,245

51.31

$
45,504,182

^(c)

^(a)

Includes 83,661 RSUs subject to remaining performance conditions. The number of RSUs subject to performance conditions are based on the Company achieving 100% of its 2020 targeted financial results. We currently estimate that these RSUs will be awarded at 90% this annual period based on achievement towards the 2020 performance targets.

⁽^b⁾

The aggregate fair value of vested RSUs represents the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

⁽^c⁾

The aggregate fair value of the nonvested RSUs and the RSUs expected to vest represents the total pre-tax fair value, based on our closing stock price of $56.58 as of September 30, 2020, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

8.	Income Taxes

Our effective tax rate ~~was 23.8%~~ for ~~the three and nine months ended September 30, 2020. For~~ the three months ended ~~September 30, 2020, our~~March 31, 2021 was 23.8%. Our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit, and higher taxes on earnings in foreign jurisdictions, partially offset by excess tax benefits on the ~~recognition~~settlement of employee share-based compensation and tax benefits related to research and development ~~activities and~~activities.

Our effective tax rate for the ~~beneficial impact of certain income tax regulations issued during the quarter. For the nine~~three months ended ~~September 30,~~March 31, 2020 ~~our~~was 20.3%. Our effective tax rate was ~~higher~~lower than the United States federal statutory rate of 21.0% due primarily to the remeasurement of acquired net operating losses to be carried back to higher tax rate years under the CARES Act, excess tax benefits on the settlement of share-based compensation and tax benefits related to research and development activities. These benefits were partially offset by state income taxes, net of federal benefit and higher taxes on earnings in foreign ~~jurisdictions, partially offset by the remeasurement of acquired net operating losses under the CARES Act, and the recognition of tax benefits related to research and development activities.~~

Our effective tax rate for the three and nine months ended September 30, 2019 was 27.2% and 25.4%, respectively. For the three months ended September 30, 2019, our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit, higher taxes on earnings in foreign jurisdictions, and the effect of non-deductible acquisition-related expenses partially offset by the recognition of tax benefits related to research and development activities. For the nine months ended September 30, 2019, our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit, and higher taxes on earnings in foreign jurisdictions partially offset by tax benefits on the settlement of employee share-based awards and the recognition of tax benefits related to research and development activities.jurisdictions.

As of ~~September 30, 2020,~~March 31, 2021, and December 31, ~~2019,~~2020, we had approximately ~~$10,659,000~~$10,890,000 and ~~$9,736,000,~~$10,546,000, respectively, of unrecognized tax benefits. Of these amounts, approximately ~~$610,000~~$817,000 and ~~$442,000,~~$749,000, respectively, related to accrued interest. In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate. We do not believe there will be any changes to our unrecognized tax benefits over the next 12 months that would have a material effect on our effective tax rate.

~~Several of our subsidiaries~~12

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We are currently under audit in various jurisdictions for tax years 2013 through 2018. Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that the examination phase of these audits may be concluded within the next 12 months, which could increase or decrease the balance of our gross unrecognized tax benefits. However, based on the status of the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible outcomes cannot be made at this time, but the estimated effect on our income tax expense and net earnings is not expected to be significant.

9.	~~Share Repurchase Program~~

On February 26, 2020, our Board of Directors authorized the repurchase of up to $50,000,000 of our common stock. Our share repurchases may be made on the open market, subject to Rule 10b-18 or in privately negotiated transactions, through block trades, through 10b5-1 plans or otherwise, at management’s discretion. The amount of shares purchased and the timing of the purchases will be based on market conditions, working capital requirements, general business conditions and other factors. We intend to retire the repurchased shares.

~~During the nine months ended September 30, 2020, we~~ ~~repurchased 444,813 shares of our common stock on the open market at a total cost of approximately $24,999,996 (an average price of $56.20 per share). All shares repurchased were retired.~~ ~~During the comparative nine months ended September 30, 2019, we repurchased~~ ~~541,117~~ ~~shares of our common stock on the open market at a total cost of approximately $27,899,000 (an average price of $51.56 per share). All shares repurchased were retired~~.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~10.~~7.

Commitments and Contingencies

Contractual

In the ordinary course of business, we issue performance bonds to secure our performance under certain contracts or state tax requirements. These bonds are issued on our behalf by a surety company on an unsecured basis; however, if the surety company is ever required to pay out under the bonds, we have contractually agreed to reimburse the surety company.

Management believes that payments, if any, related to these performance bonds are not probable at ~~September 30, 2020.~~March 31, 2021. Accordingly, we have not accrued any liabilities related to such performance bonds in our consolidated financial statements.

Employment Contracts and Severance Plans

We have employment contracts with, and severance plans covering, certain officers and management teammates under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested RSUs would accelerate following a change in control. If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from three to twenty-four months of salary.

Indemnifications

From time to time, in the ordinary course of business, we enter into contractual arrangements under which we agree to indemnify either our clients or third-party service providers from certain losses incurred relating to services performed on our behalf or for losses arising from defined events, which may include litigation or claims relating to past performance. These arrangements include, but are not limited to, the indemnification of our clients for certain claims arising out of our performance under our sales contracts, the indemnification of our landlords for certain claims arising from our use of leased facilities and the indemnification of the lenders that provide our credit facilities for certain claims arising from their extension of credit to us. Such indemnification obligations may not be subject to maximum loss clauses.

Management believes that payments, if any, related to these indemnifications are not probable at ~~September 30, 2020.~~March 31, 2021. Accordingly, we have not accrued any liabilities related to such indemnifications in our consolidated financial statements.

We have entered into separate indemnification agreements with certain of our executive officers and with each of our directors. These agreements require us, among other requirements, to indemnify such officers and directors against expenses (including attorneys’ fees), judgments and settlements incurred by such individual in connection with any action arising out of such individual’s status or service as our executive officer or director (subject to exceptions such as where the individual failed to act in good faith or in a manner the individual reasonably believed to be in, or not opposed to, the best interests of the Company) and to advance expenses incurred by such individual with respect to which such individual may be entitled to indemnification by us.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

There are no pending legal proceedings that involve the indemnification of any of the Company’s directors or officers.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Contingencies Related to Third-Party Review

From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, client and partner audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in the consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.

Legal Proceedings

From time to time, we are party to various legal proceedings incidental to the business, including preference payment claims asserted in client bankruptcy proceedings, indemnification claims, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, employment claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are required. If accruals are not required, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made. Although litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the work required pursuant to any legal proceedings or the resolution of any legal proceedings during such period. Legal expenses related to defense of any legal proceeding or the negotiations, settlements, rulings and advice of outside legal counsel in connection with any legal proceedings are expensed as incurred.

In connection with the acquisition of PCM, the Company has effectively assumed responsibility for PCM litigation matters, including various disputes related to PCM’s acquisition of certain assets of En Pointe Technologies in 2015. The seller of En Pointe Technologies and related entities providing various post-closing support functions to PCM have asserted claims regarding the sufficiency of earnout payments paid by PCM under the asset purchase agreement and the unwinding of the support functions post-closing. PCM has rejected and vigorously responded to those claims and is pursuing various counterclaims. The disputes are being heard by multiple courts and arbitrators in several different jurisdictions including California, Delaware and Pakistan. The Company cannot determine with certainty the costs or outcome of these matters. However, the Company is not involved in any pending or threatened legal proceedings, including the PCM litigation matters, that it believes would reasonably be expected to have a material adverse effect on its business, financial condition or results of operations.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~11.~~8.Segment Information

We operate in 3 reportable geographic operating segments: North America; EMEA; and ~~APAC with PCM being included in our North America and EMEA segments for the three and nine months ended September 30, 2020.~~APAC. Our offerings in North America and certain countries in EMEA and APAC include IT hardware, software and services. Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related services.

~~The~~14

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In the following table, ~~summarizes~~revenue is disaggregated by our reportable operating segments, which are primarily defined by their related geographies, as well as by major product offering, by major client group and by recognition on either a gross basis as a principal in the arrangement, or on a net ~~sales by offering for North America, EMEA and APAC~~basis as an agent, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):

	North America				EMEA				APAC				Three Months Ended March 31, 2021
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				North America		EMEA		APAC		Consolidated
Sales Mix	2020		2019		2020		2019		2020		2019

Major Offerings
Hardware	$	1,028,045	$	1,020,083	$	138,685	$	137,416	$	6,421	$	9,243	$	1,109,489	$	195,971	$	9,565	$	1,315,025
Software		306,925		295,730		165,301		186,839		16,191		19,569		308,738		234,423		34,834		577,995
Services		223,198		199,349		37,294		31,453		14,418		12,865		236,554		48,442		15,052		300,048
	$	1,558,168	$	1,515,162	$	341,280	$	355,708	$	37,030	$	41,677	$	1,654,781	$	478,836	$	59,451	$	2,193,068
Major Client Groups
Large Enterprise / Corporate													$	1,171,428	$	309,075	$	19,076	$	1,499,579
Commercial														344,045		20,533		12,667		377,245
Public Sector														139,308		149,228		27,708		316,244
													$	1,654,781	$	478,836	$	59,451	$	2,193,068
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)													$	1,569,641	$	450,977	$	52,863	$	2,073,481
Net revenue recognition (Agent)														85,140		27,859		6,588		119,587
	North America				EMEA				APAC				$	1,654,781	$	478,836	$	59,451	$	2,193,068
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
Sales Mix	2020		2019		2020		2019		2020		2019

Hardware	$	3,180,501	$	2,704,212	$	466,909	$	451,892	$	21,001	$	25,740
Software		898,290		907,683		553,164		560,073		62,952		80,287
Services		692,905		551,215		132,110		113,092		41,432		39,840
	$	4,771,696	$	4,163,110	$	1,152,183	$	1,125,057	$	125,385	$	145,867

	Three Months Ended March 31, 2020
	North America		EMEA		APAC		Consolidated
Major Offerings
Hardware	$	1,128,486	$	174,969	$	7,746	$	1,311,201
Software		305,163		201,082		30,870		537,115
Services		240,732		42,835		12,168		295,735
	$	1,674,381	$	418,886	$	50,784	$	2,144,051
Major Client Groups
Large Enterprise / Corporate	$	1,160,748	$	292,288	$	13,025	$	1,466,061
Commercial		386,076		17,742		13,654		417,472
Public Sector		127,557		108,856		24,105		260,518
	$	1,674,381	$	418,886	$	50,784	$	2,144,051
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)	$	1,600,514	$	392,259	$	45,754	$	2,038,527
Net revenue recognition (Agent)		73,867		26,627		5,030		105,524
	$	1,674,381	$	418,886	$	50,784	$	2,144,051

All significant intercompany transactions are eliminated upon consolidation, and there are no differences between the accounting policies used to measure profit and loss for our segments or on a consolidated basis. Net sales are defined as net sales to external clients. None of our clients exceeded ten percent of consolidated net sales for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 or ~~2019.~~2020.

A portion of our operating segments’ selling and administrative expenses arise from shared services and infrastructure that we have historically provided to them in order to realize economies of scale and to use resources efficiently. These expenses, collectively identified as corporate charges, include senior management expenses, internal audit, legal, tax, insurance services, treasury and other corporate infrastructure expenses. Charges are allocated to our operating segments, and the allocations have been determined on a basis that we consider to be a

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

reasonable reflection of the utilization of services provided to or benefits received by the operating segments.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

The following tables present our results of operations by reportable operating segment for the periods indicated (in thousands):

	Three Months Ended September 30, 2020								Three Months Ended March 31, 2021
	North America		EMEA		APAC		Consolidated		North America			EMEA		APAC		Consolidated
Net sales:
Products	$	1,334,970	$	303,986	$	22,612	$	1,661,568	$	1,418,227		$	430,394	$	44,399	$	1,893,020
Services		223,198		37,294		14,418		274,910		236,554			48,442		15,052		300,048
Total net sales		1,558,168		341,280		37,030		1,936,478		1,654,781			478,836		59,451		2,193,068
Costs of goods sold:
Products		1,202,743		277,025		20,544		1,500,312		1,283,876			396,184		41,198		1,721,258
Services		108,257		13,955		6,391		128,603		117,416			16,617		6,303		140,336
Total costs of goods sold		1,311,000		290,980		26,935		1,628,915		1,401,292			412,801		47,501		1,861,594
Gross profit		247,168		50,300		10,095		307,563		253,489			66,035		11,950		331,474
Operating expenses:
Selling and administrative expenses		192,033		45,438		7,684		245,155		206,806			55,447		8,937		271,190
Severance and restructuring expenses		773		19		16		808		(7,238	)		498		—		(6,740	)
Acquisition and integration related expenses		118		—		—		118
Earnings from operations	$	54,244	$	4,843	$	2,395	$	61,482	$	53,921		$	10,090	$	3,013	$	67,024

Three Months Ended September 30, 2019

North America

EMEA

APAC

Consolidated

Net sales:

Products

$
1,315,813

$
324,255

$
28,812

$
1,668,880

Services

199,349

31,453

12,865

243,667

Total net sales

1,515,162

355,708

41,677

1,912,547

Costs of goods sold:

Products

1,195,020

297,789

26,431

1,519,240

Services

101,498

10,028

5,586

117,112

Total costs of goods sold

1,296,518

307,817

32,017

1,636,352

Gross profit

218,644

47,891

9,660

276,195

Operating expenses:

Selling and administrative expenses

170,993

44,568

7,654

223,215

Severance and restructuring expenses

2,449

213

—

2,662

Acquisition and integration related expenses

5,896

—

—

5,896

Earnings from operations

$
39,306

$
3,110

$
2,006

$
44,422

Nine Months Ended September 30, 2020

North America

EMEA

APAC

Consolidated

Net sales:

Products

$
4,078,791

$
1,020,073

$
83,953

$
5,182,817

Services

692,905

132,110

41,432

866,447

Total net sales

4,771,696

1,152,183

125,385

6,049,264

Costs of goods sold:

Products

3,678,118

933,053

77,326

4,688,497

Services

344,586

41,876

17,017

403,479

Total costs of goods sold

4,022,704

974,929

94,343

5,091,976

Gross profit

748,992

177,254

31,042

957,288

Operating expenses:

Selling and administrative expenses

590,549

143,859

22,190

756,598

Severance and restructuring expenses

7,799

2,118

45

9,962

Acquisition and integration related expenses

1,991

204

—

2,195

Earnings from operations

$
148,653

$
31,073

$
8,807

$
188,533

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

	Nine Months Ended September 30, 2019								Three Months Ended March 31, 2020
	North America		EMEA		APAC		Consolidated		North America		EMEA		APAC		Consolidated
Net sales:
Products	$	3,611,895	$	1,011,965	$	106,027	$	4,729,887	$	1,433,649	$	376,051	$	38,616	$	1,848,316
Services		551,215		113,092		39,840		704,147		240,732		42,835		12,168		295,735
Total net sales		4,163,110		1,125,057		145,867		5,434,034		1,674,381		418,886		50,784		2,144,051
Costs of goods sold:
Products		3,290,555		926,712		98,197		4,315,464		1,288,197		345,749		36,292		1,670,238
Services		272,245		29,021		17,188		318,454		129,256		14,363		4,858		148,477
Total costs of goods sold		3,562,800		955,733		115,385		4,633,918		1,417,453		360,112		41,150		1,818,715
Gross profit		600,310		169,324		30,482		800,116		256,928		58,774		9,634		325,336
Operating expenses:
Selling and administrative expenses		452,441		139,365		21,961		613,767		211,203		50,244		7,416		268,863
Severance and restructuring expenses		3,260		328		124		3,712		2,122		6		16		2,144
Acquisition-related expenses		9,059		—		—		9,059
Acquisition and integration related expenses										1,262		204		—		1,466
Earnings from operations	$	135,550	$	29,631	$	8,397	$	173,578	$	42,341	$	8,320	$	2,202	$	52,863

The following is a summary of our total assets by reportable operating segment (in thousands):

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
North America	$	4,145,070		$	3,814,408		$	4,662,002		$	4,837,155
EMEA		627,644			699,856			796,315			735,771
APAC		110,561			123,349			206,986			155,761
Corporate assets and intercompany eliminations, net		(1,055,965	)		(459,434	)		(1,410,696	)		(1,417,955	)
Total assets	$	3,827,310		$	4,178,179		$	4,254,607		$	4,310,732

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We recorded the following pre-tax amounts, by reportable operating segment, for depreciation and amortization in the accompanying consolidated financial statements (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Depreciation and amortization of property and equipment:
North America	$	5,907	$	4,371	$	17,559	$	12,114	$	4,807	$	5,826
EMEA		1,269		1,013		3,846		2,980		1,232		1,328
APAC		143		140		415		412		142		135
		7,319		5,524		21,820		15,506		6,181		7,289
Amortization of intangible assets:
North America		8,730		5,765		27,594		13,037		7,417		9,493
EMEA		585		67		1,625		205		496		506
APAC		118		114		336		348		128		109
		9,433		5,946		29,555		13,590		8,041		10,108
Total	$	16,752	$	11,470	$	51,375	$	29,096	$	14,222	$	17,397

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~12.Acquisitions~~

~~PCM~~

On August 30, 2019, we completed our acquisition of PCM, acquiring 100 percent of the issued and outstanding shares of PCM for a cash purchase price of $745,562,000, which included cash and cash equivalents acquired of $84,637,000 and the payment of PCM’s outstanding debt. PCM is a provider of multi-vendor technology offerings, including hardware, software and services to small, mid-sized and corporate/enterprise commercial clients, state, local and federal governments and educational institutions across the United States, Canada and the United Kingdom. Based in El Segundo, California, PCM had 40 office locations globally and more than 4,000 teammates. We believe that this acquisition allows us to help existing PCM clients in positioning their businesses for future growth, transforming and securing their data platforms, creating modern and mobile experiences for their workforce and optimizing the procurement of technology. The addition of PCM complements our supply chain optimization solution offering, adding scale and clients in the mid-market and corporate space primarily in North America.

~~The following table summarizes the purchase price and the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):~~

Purchase price net of cash and cash equivalents acquired

$
660,925

Fair value of net assets acquired:

Current assets

$
531,941

Identifiable intangible assets - see description below

191,370

Property and equipment

91,213

Other assets

32,699

Current liabilities

(369,183
)

Long-term liabilities, including deferred taxes

(71,009
)

Total fair value of net assets acquired

407,031

Excess purchase price over fair value of net assets acquired ("goodwill")

$
253,894

Under the acquisition method of accounting, the total purchase price as shown in the table above was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over fair value of net assets acquired was recorded as goodwill. In the fourth quarter of 2019, an adjustment of $56,700,000 was recorded to goodwill primarily due to a change in the customer relationships valuation based on updated information received for key inputs as well as an associated change in deferred taxes.

The fair values of current assets and liabilities are based upon their historical costs on the date of acquisition due to their short-term nature. The estimated fair values of the majority of property and equipment, excluding acquired real estate, are also based upon historical costs net of depreciation, as they approximated fair value. Certain long-term assets, including PCM’s IT systems, were written down to their estimated fair value.

The estimated fair value of net assets acquired was approximately $407,031,000, including $191,370,000 of identified intangible assets, consisting primarily of customer relationships of $178,900,000. The fair value of the customer relationships were determined using the multiple-period excess earnings method. The identifiable intangible assets resulting from the acquisition are amortized using the straight-line method over the following estimated useful lives: customer relationships – 10-12 years; trade names – 1 year; non-compete agreements – 2-3 years.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Goodwill of $253,894,000, which was recorded in our North America and EMEA operating segments, represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed from PCM. The goodwill is not amortized and will be tested for impairment annually in the fourth quarter of our fiscal year. The addition of the PCM technical employees to our team and the opportunity to grow our business are the primary factors making up the goodwill recognized as part of the transaction. NaNne of the goodwill is tax deductible. The purchase price allocation was finalized during the third quarter of 2020.

~~We have consolidated the results of operations for PCM since its acquisition on August 30, 2019.~~

~~The following table reports pro forma information as if the acquisition of PCM had been completed at the beginning of the earliest period presented (in thousands, except per share amounts):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2019

Net sales
As reported

$
1,912,547

$
5,434,034

Pro forma

$
2,322,828

$
6,910,356

Net earnings
As reported

$
27,132

$
116,457

Pro forma

$
24,678

$
115,321

Diluted earnings per share
As reported

$
0.76

$
3.23

Pro forma

$
0.69

$
3.20

~~Changes in Goodwill and Intangible Assets~~

Other than the goodwill and intangible assets recorded in conjunction with the acquisitions of vNext and PCM, the only other change in consolidated goodwill and intangible assets as of September 30, 2020 compared to the balance as of December 31, 2019 resulted from foreign currency translation adjustments associated with the balances in our North America, EMEA and APAC operating segments.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. We refer to our customers as “clients,” our suppliers as “partners” and our employees as “teammates.”

Quarterly Overview

Today, every business is a technology business. We empower organizations of all sizes with Insight Intelligent Technology Solutions^TM and services to maximize the business value of information technology (“IT”) in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked global provider of digital innovation, cloud/data center transformation, and connected workforce ~~and~~solutions, together with our supply chain optimization ~~solutions,~~expertise, we help clients innovate and optimize their operations to run smarter. Our offerings in North America and certain countries in EMEA and APAC include hardware, software and ~~services.~~services, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related ~~services.~~services and cloud solutions.

On a consolidated basis, for the three months ended ~~September 30, 2020:~~March 31, 2021:

•

Net sales of ~~$1.9~~$2.2 billion increased 1%2% compared to the three months ended September 30, 2019, primarily due to the addition of PCM. Without the addition of PCM, net sales in the core business would have been down compared to the prior year quarter as a result of the negative impact of COVID-19.March 31, 2020. The overall increase in net sales reflects an increase in ~~hardware~~software and services net ~~sales, which was partially offset by a decrease in software net~~ sales.Excluding the effects of fluctuating foreign currency exchange rates, net sales remained flat compared to the ~~third~~first quarter of ~~2019.~~2020.

•

Gross profit of ~~$308~~$331.5 million increased ~~11%~~2% compared to the three months ended ~~September 30, 2019.~~March 31, 2020. Excluding the effects of fluctuating foreign currency exchange rates, gross profit ~~increased 12%~~was flat compared to the ~~third~~first quarter of ~~2019.~~2020.

•

~~Gross~~Compared to the three months ended March 31, 2020, gross margin ~~improved~~contracted approximately ~~150~~10 basis points to ~~15.9%~~15.1% of net sales in the three months ended ~~September 30, 2020.~~March 31, 2021. This ~~increase~~decline reflects a decrease in margins on hardware and software net sales, partially offset by an increase in the mix of higher margin services ~~net sales and an increase in margins on hardware~~ net sales compared to the same period in the prior year.

•

Earnings from operations increased ~~38%~~27%, year over year, to ~~$61.5~~$67.0 million in the ~~third~~first quarter of ~~2020~~2021 compared to ~~$44.4~~$52.9 million in the ~~third~~first quarter of ~~2019,~~2020. The increase was primarily due to increased gross profit and ~~reduction~~reductions in both severance and restructuring and acquisition and integration related expenses, which were incurred in connection with ~~PCM. The increase was partially offset by increased personnel costs, including teammate benefits and variable compensation, and increased amortization of intangible assets, both related to~~ the PCM acquisition. Excluding the effects of fluctuating foreign currency exchange rates, earnings from operations increased ~~42%~~22% year over year.

•

Net earnings and diluted earnings per share were ~~$38.9~~$43.2 million and ~~$1.10,~~$1.18, respectively, for the ~~third~~first quarter of ~~2020.~~2021. This compares to net earnings of ~~$27.1~~$34.0 million and diluted earnings per share of ~~$0.76~~$0.95 for the ~~third~~first quarter of ~~2019.~~2020.

2618

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Recent Developments – Impact of COVID-19 ~~to our~~and Supply Constraints on Our Business

~~In late 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”), which has since spread globally.~~ On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. In an effort to protect the health and safety of our teammates, we took proactive action to adopt social distancing policies at our locations globally, including working from home where possible, limiting the number of teammates attending in-person meetings, reducing the number of people in our locations at any one time, and suspending teammate travel. Governments around the world have also enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. These measures taken by the Company continued to be in effect for the duration of the third quarter of 2020 and remain in place to date.

The ~~COVID-19~~ pandemic has negatively impacted the global economy, disrupted global supply chains and reduced workforce ~~participation, and initially created~~participation. While we did not see a significant ~~volatility and disruption of financial markets.~~ ~~We continued to observe a pronounced~~ impact of COVID-19 on our ~~third~~first quarter 2021 financial results, ~~when compared~~continued supply constraints stemming from shortages of chips and displays resulted in elevated bookings as we exited the first quarter. We currently expect these supply constraints and extended lead times for certain products will begin to ~~internal budgets, and anticipate demand for our products and services will continue to be impacted in~~ease by the ~~fourth quarter as clients continue to evaluate the impact~~end of COVID-19 on their businesses, their profitability and their liquidity. While we did not experience a decline in bookings in October 2020, we anticipate that the declining trend, which began in April 2020, may continue into the fourth quarter of 2020, when compared to the prior year.2021.

In the short run, we took steps to accelerate and complete our integration with PCM and to reduce discretionary operating expenditures, such as certain teammate benefits and variable compensation and travel related expenditures. We have also utilized various partner and government incentives available to us to help offset some of these business impacts. In the third quarter of 2020, we invested in our sales force, adding key technical talent across our solution areas and additional sales coverage to our geographic footprint. We will continue to invest in this area in the fourth quarter to ensure we are positioned well to compete in the marketplace in 2021, when we expect the IT market will start to recover.

We fully paid down all of our debt under our ABL facility during the quarter and believe we have a strong balance sheet and healthy liquidity position. The Company had current capacity of up to $1.2 billion under our ABL facility available as of September 30, 2020.

The ultimate extent of the impact of the COVID-19 pandemic on our business operations, financial performance, and results of operations, including our ability to execute our business strategies and initiatives in the expected time frame, is currently unknown and will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic, its severity, the emergence and severity of its variants, the availability of vaccines and potential hesitancy to utilize them, other protective actions taken to contain the virus or treat its impact, such as restrictions on travel and transportation, and how quickly and to what extent normal economic and operating conditions can resume.

We will continue to actively monitor the situation and anticipate taking further actions as may be required by government authorities or that we determine are in the best interests of our teammates, clients and partners. It is not clear what the potential effects of any such alterations or modifications may have on our business, including the effects on our clients, teammates, and prospects, or on our financial results for the remainder of ~~2020.~~

2021. Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends. ~~See “Risk Factors” in Part II, Item 1A of this report for additional risks we face due to the COVID-19 pandemic.~~

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Throughout the “Quarterly Overview” and “Results of Operations” sections of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to changes in net sales, gross profit, selling and administrative expenses 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 the changes in amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

Details about segment results of operations can be found in Note 118 to the Consolidated Financial Statements in Part I, Item 1 of this report.

Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our consolidated financial statements, including the changes in certain key items in those consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

There have been no changes to the items disclosed as critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Results of Operations

The COVID-19 pandemic ~~has~~ negatively impacted the global economy and ~~has~~ disrupted global supply chains and workforce participation. ~~We continued to~~While we did not observe significant impacts on our ~~third~~first quarter financial results ~~and~~we believe the ultimate extent of the impact of the COVID-19 pandemic on our future business operations, financial performance and results of operations, including our ability to execute our business strategies and initiatives in the expected time frame, is currently unknown and will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted.

The following table sets forth certain financial data as a percentage of net sales for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Costs of goods sold		84.1			85.6			84.2			85.3			84.9			84.8
Gross profit		15.9			14.4			15.8			14.7			15.1			15.2
Selling and administrative expenses		12.7			11.6			12.5			11.3			12.4			12.5
Severance and restructuring expenses and acquisition and integration related expenses		0.1			0.5			0.2			0.3			(0.4	)		0.2
Earnings from operations		3.1			2.3			3.1			3.1			3.1			2.5
Non-operating expense, net		0.5			0.4			0.5			0.3			0.5			0.5
Earnings before income taxes		2.6			1.9			2.6			2.8			2.6			2.0
Income tax expense		0.6			0.5			0.6			0.7			0.6			0.4
Net earnings		2.0	%		1.4	%		2.0	%		2.1	%		2.0	%		1.6	%

We generally experience some seasonal trends in our sales of IT hardware, software and services. Software sales are typically seasonally higher in our second quarter. Business clients, particularly larger enterprise businesses in the United States, tend to spend more in our fourth quarter and less in our first quarter. Sales to the federal government in the United States are often stronger in our third quarter, while sales in the state and local government and education

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

markets are also stronger in our second quarter. Sales to public sector clients in the United Kingdom are often stronger in our first quarter. These trends create overall seasonality in our consolidated results such that net sales and profitability are expected to be higher in the second and fourth quarters of the year.

Our gross profit across the business is, and will continue to be, impacted by partner incentives, which can change significantly in the amounts made available and in the related product or services sales being incentivized by the partner. Incentives from our largest partners are significant and changes in the ~~incentives,~~incentive requirements, which occur regularly, could impact our results of operations to the extent we are unable to adapt our sales strategies to optimize performance under the revised programs.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Net Sales. Net sales for the three months ended ~~September 30, 2020~~March 31, 2021 increased 1%2%, year over year, to ~~$1.9~~$2.2 billion compared to the three months ended ~~September 30, 2019. Without the addition of PCM to~~March 31, 2020. This net increase primarily reflects increases in our ~~core business, net sales~~EMEA and APAC segments, while our North America segment was negatively impacted by supply constraints and extended lead times for ~~the third quarter of 2020 would have been down as a result of the negative impact of COVID-19.~~ certain products.We believe this ~~negative~~ trend in net sales may continue into the ~~fourth quarter~~second and third quarters of ~~2020,~~2021, when compared to the prior year. ~~Net sales for the nine months ended September 30, 2020 increased 11%, year over year, to $6.0 billion compared to the nine months ended September 30, 2019.~~ Our net sales by operating segment were as follows for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in thousands):

	Three Months Ended September 30,				%			Nine Months Ended September 30,				%			Three Months Ended March 31,				%
	2020		2019		Change			2020		2019		Change			2021		2020		Change
North America	$	1,558,168	$	1,515,162		3	%	$	4,771,696	$	4,163,110		15	%	$	1,654,781	$	1,674,381		(1	%)
EMEA		341,280		355,708		(4	%)		1,152,183		1,125,057		2	%		478,836		418,886		14	%
APAC		37,030		41,677		(11	%)		125,385		145,867		(14	%)		59,451		50,784		17	%
Consolidated	$	1,936,478	$	1,912,547		1	%	$	6,049,264	$	5,434,034		11	%	$	2,193,068	$	2,144,051		2	%

Our net sales by offering category for North America for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (dollars in thousands):

	Three Months Ended September 30,				%			Nine Months Ended September 30,				%			Three Months Ended March 31,				%
Sales Mix	2020		2019		Change			2020		2019		Change			2021		2020		Change
Hardware	$	1,028,045	$	1,020,083		1	%	$	3,180,501	$	2,704,212		18	%	$	1,109,489	$	1,128,486		(2	%)
Software		306,925		295,730		4	%		898,290		907,683		(1	%)		308,738		305,163		1	%
Services		223,198		199,349		12	%		692,905		551,215		26	%		236,554		240,732		(2	%)
	$	1,558,168	$	1,515,162		3	%	$	4,771,696	$	4,163,110		15	%	$	1,654,781	$	1,674,381		(1	%)

Net sales in North America ~~increased 3%~~decreased 1%, or ~~$43.0~~$19.6 million, for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019,~~March 31, 2020, primarily driven by the ~~addition of PCM, partially offset by the negative~~continued impact of ~~COVID-19 on demand for hardware~~supply constraints and ~~certain services.~~extended product lead times. Net sales of hardware ~~software~~ and services ~~increased~~both decreased 2%, year to year, partially offset by an increase in software net sales of 1%, ~~4% and 12%, respectively,~~ year over year. The changes for the three months ended ~~September 30, 2020~~March 31, 2021 were the result of the following:

•

The ~~increase~~decrease in hardware net sales was due to ~~the addition of PCM, which was partially offset by~~ lower volume of sales to large enterprise and corporate clients. The decrease in volume of sales was largely due to ~~decreased demand associated with client responses~~impacts of supply constraints and extended product lead times resulting in our inability to ~~COVID-19.~~clear backlog.

•

~~The increase in software net sales was primarily due to the addition of PCM, partially offset by continued migration of software to the cloud, reported net in services net sales.~~

•

The ~~increase~~decrease in services net sales was primarily due to decreases in demand for certain services due to the impact of COVID-19 partially offset by an increase in net sales associated with cloud solution offerings and higher sales of Insight delivered ~~services, including the addition of PCM. These increases were partially offset by decreases in demand for certain services due to the impact of COVID-19.~~

Net sales in North America increased 15%, or $608.6 million, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the addition of PCM, partially offset by the negative impact of COVID-19 on demand for hardware and certain services. Net sales of hardware and services increased 18% and 26%, respectively, year over year. Net sales of software declined 1%, year to year.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

~~The net changes for the first nine months of 2020 were the result of the following:~~

•

The increase in hardware net sales was due to the addition of PCM and higher volume of sales to large enterprise and corporate clients. The net increase in volume of sales was largely due to increases in the first quarter of 2020 due to increased demand for work-from-home and collaboration solutions as companies responded to shelter in place mandates, which was partially offset by decreases in volume of sales in the second and third quarters associated with client responses to COVID-19.

•

The decrease in software net sales was due to a significant transaction in the prior year with no comparable activity in the current year and continued migration of software to the cloud, which was partially offset by the addition of PCM.

•

The increase in services net sales was primarily due to higher sales of Insight delivered services, including the addition of PCM and an increase in net sales associated with cloud solution offerings. These increases were partially offset by decreases in demand for certain services due to the impact of COVID-19.

~~Our net sales by offering category for EMEA for the three and nine months ended September 30, 2020 and 2019 were as follows (dollars in thousands):~~

Three Months Ended
September 30,

%

Nine Months Ended
September 30,

%

Sales Mix

2020

2019

Change

2020

2019

Change

Hardware

$
138,685

$
137,416

1
%

$
466,909

$
451,892

3
%
Software

165,301

186,839

(12
%)

553,164

560,073

(1
%)
Services

37,294

31,453

19
%

132,110

113,092

17
%

$
341,280

$
355,708

(4
%)

$
1,152,183

$
1,125,057

2
%

Net sales in EMEA decreased 4%, or $14.4 million, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA decreased 8%, year to year. Net sales of hardware and services increased 1% and 19%, respectively, year over year. Net sales of software declined 12% year to year. The net changes for the three months ended September 30, 2020 were the result of the following:

•

~~The increase in hardware net sales was due primarily to higher volume sales of devices to public sector clients.~~

•

~~The decrease in software net sales was due to lower volume of sales to large enterprise clients and continued migration of software to the cloud.~~

•

~~The increase in services net sales was due primarily to higher sales of cloud solutions and higher volume sales of Insight delivered~~ services.

~~Net sales in EMEA increased 2%, or $27.1 million, for the first nine months of 2020 compared to the first nine months of 2019.~~ Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA increased 3%, year to year. Net sales of hardware and services increased 3% and 17% year over year, respectively. Net sales of software declined 1%, year to year. The net changes for the first nine months of 2020 were the result of the following:

•

~~The increase in hardware net sales was due primarily to higher volume sales of devices to corporate and public sector clients.~~

•

The decrease in software net sales was due to lower volume of sales to large enterprise and continued migration of software to the cloud, partially offset by higher volume of sales to corporate and public sector clients.

3121

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

•

The increase in software net sales was primarily due to a single significant transaction with a large enterprise client in the current period, partially offset by the continued migration of on-premise software to cloud solutions, reported net in services net sales.

Our net sales by offering category for EMEA for the three months ended March 31, 2021 and 2020 were as follows (dollars in thousands):

	Three Months Ended March 31,				%
Sales Mix	2021		2020		Change
Hardware	$	195,971	$	174,969		12	%
Software		234,423		201,082		17	%
Services		48,442		42,835		13	%
	$	478,836	$	418,886		14	%

Net sales in EMEA increased 14%, or $60.0 million, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA increased 5%, year over year. Net sales of hardware, software and services increased 12%, 17% and 13%, respectively, year over year. The changes for the three months ended March 31, 2021 were the result of the following:

•

The increase in software net sales was due to higher volume of sales to public sector and corporate clients, partially offset by the continued migration of on-premise software to cloud solutions.

•

The increase in hardware net sales was due primarily to higher volume sales of devices and networking to public sector clients.

•

The increase in services net sales was due primarily to higher volume of Insight delivered services and higher sales of cloud ~~solutions, increased software referral fees and higher volume sales of Insight delivered services.~~solutions.

Our net sales by offering category for APAC for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (dollars in thousands):

	Three Months Ended September 30,				%			Nine Months Ended September 30,				%			Three Months Ended March 31,				%
Sales Mix	2020		2019		Change			2020		2019		Change			2021		2020		Change
Hardware	$	6,421	$	9,243		(31	%)	$	21,001	$	25,740		(18	%)	$	9,565	$	7,746		23	%
Software		16,191		19,569		(17	%)		62,952		80,287		(22	%)		34,834		30,870		13	%
Services		14,418		12,865		12	%		41,432		39,840		4	%		15,052		12,168		24	%
	$	37,030	$	41,677		(11	%)	$	125,385	$	145,867		(14	%)	$	59,451	$	50,784		17	%

Net sales in APAC ~~decreased 11%~~increased 17%, or ~~$4.6~~$8.7 million, for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2020. Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC ~~decreased 13%~~increased 2%, year toover year. Net sales of hardware, ~~and~~ software ~~decreased by 31%~~ and ~~17%, respectively, year to year. Net sales of~~ services increased by ~~12%~~23%, 13% and 24%, respectively, year over year. The ~~net~~ changes for the three months ended ~~September 30, 2020~~March 31, 2021 were the result of the following:

•

The ~~decrease~~increase in ~~hardware~~software net sales was primarily ~~the result of lower volume of sales~~ due to ~~decreased demand associated with client responses to COVID-19.~~the positive effects of exchange rates.

•

~~The decrease in software net sales was primarily due to lower volume sales to large enterprise clients.~~

•

The increase in services net sales was primarily due to higher sales of Insight delivered ~~services.~~ services and higher sales of cloud solutions.

~~Net sales in APAC decreased 14%, or $20.5 million, for the first nine months of 2020 compared to the first nine months of 2019.~~ Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC decreased 11%, year to year. Net sales of hardware and software decreased by 18% and 22%, respectively, year to year. Services net sales increased 4% year over year. The net changes for the first nine months of 2020 were the result of the following:

•

The ~~decrease~~increase in hardware net sales was primarily the result of ~~lower volume of sales due to decreased demand associated~~large transactions with ~~client responses to COVID-19.~~

•

~~The decrease in software net sales was primarily due to the loss of a significant public sector client and lower volume sales to large enterprise~~corporate clients.

•

~~The increase in services net sales was primarily due to higher sales of Insight delivered services.~~

3222

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

The percentage of net sales by category for North America, EMEA and APAC were as follows for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	North America						EMEA						APAC						North America						EMEA						APAC
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended March 31,						Three Months Ended March 31,						Three Months Ended March 31,
Sales Mix	2020			2019			2020			2019			2020			2019			2021			2020			2021			2020			2021			2020
Hardware		66	%		67	%		41	%		39	%		17	%		22	%		67	%		68	%		41	%		42	%		16	%		15	%
Software		20	%		20	%		48	%		52	%		44	%		47	%		19	%		18	%		49	%		48	%		59	%		61	%
Services		14	%		13	%		11	%		9	%		39	%		31	%		14	%		14	%		10	%		10	%		25	%		24	%
		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

	North America						EMEA						APAC
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
Sales Mix	2020			2019			2020			2019			2020			2019
Hardware		67	%		65	%		41	%		40	%		17	%		18	%
Software		19	%		22	%		48	%		50	%		50	%		55	%
Services		14	%		13	%		11	%		10	%		33	%		27	%
		100	%		100	%		100	%		100	%		100	%		100	%

Gross Profit. Gross profit increased ~~11%~~2%, or ~~$31.4~~$6.1 million, for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the three months ended ~~September 30, 2019,~~March 31, 2020, with gross margin ~~increasing~~contracting approximately ~~150~~10 basis points to ~~15.9%~~15.1% for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~14.4%~~15.2% for the three months ended ~~September 30, 2019.~~ ~~Gross~~ profit increased 20%, or $157.2 million, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, with gross margin increasing approximately 110 basis points to 15.8% for ~~the first nine months of 2020 compared to 14.7% for the first nine months of 2019.~~ March 31, 2020.

Our gross profit and gross profit as a percentage of net sales by operating segment were as follows for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in thousands):

	Three Months Ended September 30,										Nine Months Ended September 30,										Three Months Ended March 31,
	2020		% of Net Sales			2019		% of Net Sales			2020		% of Net Sales			2019		% of Net Sales			2021		% of Net Sales			2020		% of Net Sales
North America	$	247,168		15.9	%	$	218,644		14.4	%	$	748,992		15.7	%	$	600,310		14.4	%	$	253,489		15.3	%	$	256,928		15.3	%
EMEA		50,300		14.7	%		47,891		13.5	%		177,254		15.4	%		169,324		15.1	%		66,035		13.8	%		58,774		14.0	%
APAC		10,095		27.3	%		9,660		23.2	%		31,042		24.8	%		30,482		20.9	%		11,950		20.1	%		9,634		19.0	%
Consolidated	$	307,563		15.9	%	$	276,195		14.4	%	$	957,288		15.8	%	$	800,116		14.7	%	$	331,474		15.1	%	$	325,336		15.2	%

North America’s gross profit for the three months ended ~~September 30, 2020 increased $28.5~~March 31, 2021 decreased 1%, or $3.4 million, ~~or 13%,~~ compared to the three months ended ~~September 30, 2019.~~March 31, 2020. As a percentage of net sales, gross margin ~~increased approximately 150 basis points to 15.9%~~was flat at 15.3% for the ~~third~~first quarter of ~~2020~~2021. The year ~~over~~to year ~~improvement~~changes in gross margin ~~was~~were primarily attributable to the following:

•

~~An increase~~There was a decrease in product margin, which includes partner funding and freight, of 5155 basis points ~~and~~offset by an increase in margin from services net sales of 9253 basis points compared to the same period in the prior year.

•

The ~~increase~~decrease in product margin is primarily the result of ~~higher volume of hardware sales from the addition of PCM and~~ sales of hardware ~~for the core North America business~~and software at ~~higher~~lower margins than in the same period in the prior year.

•

The increase in margin from services net sales during the current quarter reflects an expansion in margin from cloud solutions and other services that are recorded net.

EMEA’s gross profit for the three months ended March 31, 2021 increased $7.3 million, or 12%, year over year (increasing 3% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2020. As a percentage of net sales, gross margin contracted approximately 20 basis points, year to year. The year to year net decline in gross margin was primarily attributable to a decrease in higher margin services net sales, which represented 15 basis points of the margin compression, together with a net decrease in product margin, which includes partner funding and freight, of 9 basis points.

APAC’s gross profit for the three months ended March 31, 2021 increased $2.3 million, or 24%, compared to the three months ended March 31, 2020 (increasing 10% when excluding fluctuating foreign currency exchange rates). As a percentage of net sales, gross margin increased approximately 110 basis points, year over year. The increase in gross margin in the first quarter of

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

~~North America’s gross~~ ~~profit for~~ the nine months ended September 30, 2020 increased $148.7 million, or 25%, compared to the nine months ended September 30, 2019. As a percentage of net sales, gross margin increased approximately 130 basis points to 15.7% ~~for the first nine months of 2020. The year over year improvement in gross margin was primarily attributable to the following:~~

•

A net increase in product margin, which includes partner funding and freight, of 68 basis points and an increase in margin from services net sales, which contributed 60 basis points of the margin expansion.

•

The increase in product margin is primarily the result of higher volume of hardware sales from the addition of PCM and sales of hardware for the core North America business at higher margins than in the same period in the prior year~~. This increase was partially offset by a contraction in margin on software net sales.~~

•

The increase in margin from services net sales during the first nine months of 2020 resulted from a higher volume of Insight delivered services at higher margins and a higher volume of cloud solutions that are recorded net.

EMEA’s gross profit for the three months ended September 30, 2020 increased $2.4 million, or 5%, year over year (remaining flat when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended September 30, 2019. As a percentage of net sales, gross margin increased approximately 120 basis points, year over year. The year over year net improvement in gross margin was primarily attributable to an increase in higher margin services net sales, which contributed 82 basis points of the margin expansion, together with a net increase in product margin, which includes partner funding and freight, of 46 basis points.

~~EMEA’s gross profit for the nine months ended September 30, 2020 increased $7.9 million, or 5% (also 5% excluding the effects of fluctuating foreign currency exchange rates),~~2021 compared to the first ~~nine months of 2019. As a percentage of net sales, gross margin increased approximately 30 basis points, year over year.~~ ~~The year over year improvement in gross margin was primarily attributable to~~ ~~a net increase in services margin of 35 basis points.~~

APAC’s gross profit for the three months ended September 30, 2020 increased $435,000, or 5%, compared to the three months ended September 30, 2019 (increasing 2% when excluding fluctuating foreign currency exchange rates). As a percentage of net sales, gross margin increased approximately 410 basis points, year over year. The increase in gross margin in the third quarter of 2020 ~~compared to the third quarter of 2019~~ was due to an increase in gross margin on product net sales, which includes partner funding and freight, of 81 basis points and an increase in gross margin onservices net sales, including cloud solutions, ~~and Insight delivered services,~~ of ~~421~~32 basis points.

APAC’s gross profit for the first nine months of 2020 increased $560,000, or 2%, compared to the first half of 2019 (increasing 5% excluding fluctuating foreign currency exchange rates). As a percentage of net sales, gross margin increased approximately 390 basis points, year over year. The increase in gross margin in the first nine months of 2020 compared to the first nine months of 2019 was due to an increase in gross margin on services net sales, including cloud solutions and Insight delivered services, of 394 basis points.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased ~~$21.9~~$2.3 million, or ~~10%~~1%, (decreasing 2% when excluding fluctuating foreign currency exchange rates) for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019~~March 31, 2020. ~~Selling and administration expenses increased $142.8 million, or 23%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.~~ Our selling and administrative expenses by major expense type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Personnel costs, including teammate benefits	$	190,451	$	174,598	$	576,910	$	483,015	$	220,051	$	201,815
Depreciation and amortization		15,506		10,479		49,422		28,105		13,433		17,397
Facility expenses		9,378		7,860		29,769		21,042		9,531		10,978
Legal and professional fees		7,832		4,583		19,665		12,417		4,482		5,825
Travel and entertainment		1,449		7,379		9,957		20,225		1,316		7,165
Marketing		1,835		2,507		7,917		7,786		2,149		3,461
Other		18,704		15,809		62,958		41,177		20,228		22,222
Total	$	245,155	$	223,215	$	756,598	$	613,767	$	271,190	$	268,863

Selling and administrative expenses ~~increased~~decreased approximately ~~100~~10 basis points as a percentage of net sales in the ~~third~~first quarter of ~~2020~~2021 compared to the ~~third~~first quarter of ~~2019.~~2020. The overall net increase in selling and administrative expenses reflects ~~a $15.9~~an $18.2 million net increase in personnel costs, including teammate benefits expenses primarily ~~due~~related to one-time benefits received in the prior year and increased ~~headcount, reflecting~~variable compensation in the ~~acquisition of PCM in August 2019. There~~current year. This increase was also an increase in depreciation and amortization, legal and professional fees, other and facility expenses of $5.0 million, $3.2 million, $2.9 million and $1.5 million, respectively, primarily as a result of PCM. These increased costs were partially offset by ~~decreases~~a decrease in travel and entertainment and marketing costs of ~~$5.9~~$5.8 million and $1.3 million, respectively, reflecting cost control measures taken in response to COVID-19.

~~Selling and administrative expenses increased approximately 120 basis points as a percentage of net sales~~ There were also decreases in the first nine months of 2020 compared to the first nine months of 2019. The overall net increase in selling and administrative expenses reflects a $93.9 million increase in personnel costs, including teammate benefits expenses primarily due to increased headcount, including the acquisition of PCM. There was also an increase in other expenses, depreciation and amortization, other expenses, facility expenses, and legal and professional fees of ~~$21.8~~$4.0 million, ~~$21.3~~$2.0 million, ~~$8.7~~$1.4 million and ~~$7.2~~$1.3 million, respectively, ~~primarily as a result of PCM. These increased costs were partially offset by decreases in travel and entertainment costs of $10.3 million reflecting cost control measures taken in response~~year to ~~COVID-19.~~year.

Severance and Restructuring ~~Expenses.~~Expenses, Net. During the three months ended ~~September 30,~~March 31, 2021, we recorded severance expense, net of adjustments, of approximately $1.3 million. The charges primarily related to a realignment of certain roles and responsibilities. Current period severance charges were offset by gains on sale of properties of $8.0 million. Comparatively, during the three months ended March 31, 2020, we recorded severance expense, net of adjustments, of approximately ~~$808,000. During the nine months ended September 30, 2020, we recorded severance expense, net of adjustments, of approximately $10.0~~$2.1 million. The charges in all three operating segments primarily related to a realignment of certain roles and responsibilities and for North America and EMEA, the acquisition of PCM. Current period charges were partially offset by adjustments for changes in estimates of previous accruals as cash payments were made. Comparatively, during the three months ended September 30, 2019, we recorded severance expense, net of adjustments, of approximately $2.7 million. For the nine months ended September 30, 2019, we recorded severance expense, net of adjustments, of approximately $3.7 million.

3524

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Earnings from Operations. Earnings from operations increased ~~38%~~27%, or ~~$17.1~~$14.2 million, for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the three months ended ~~September 30, 2019. Earnings from operations increased 9%, or $15.0 million, for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019.~~March 31, 2020. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in thousands):

	Three Months Ended September 30,										Nine Months Ended September 30,										Three Months Ended March 31,
	2020		% of Net Sales			2019		% of Net Sales			2020		% of Net Sales			2019		% of Net Sales			2021		% of Net Sales			2020		% of Net Sales
North America	$	54,244		3.5	%	$	39,306		2.6	%	$	148,653		3.1	%	$	135,550		3.3	%	$	53,921		3.3	%	$	42,341		2.5	%
EMEA		4,843		1.4	%		3,110		0.9	%		31,073		2.7	%		29,631		2.6	%		10,090		2.1	%		8,320		2.0	%
APAC		2,395		6.5	%		2,006		4.8	%		8,807		7.0	%		8,397		5.8	%		3,013		5.1	%		2,202		4.3	%
Consolidated	$	61,482		3.2	%	$	44,422		2.3	%	$	188,533		3.1	%	$	173,578		3.2	%	$	67,024		3.1	%	$	52,863		2.5	%

North America’s earnings from operations for the three months ended ~~September 30, 2020~~March 31, 2021 increased ~~$14.9~~$11.6 million, or ~~38%~~27%, compared to the three months ended ~~September 30, 2019.~~March 31, 2020. As a percentage of net sales, earnings from operations increased by approximately 9080 basis points to ~~3.5%~~3.3%. The increase in earnings from operations was primarily driven by ~~an increase~~gains realized on the sale of properties, a net decrease in ~~gross profit~~selling and ~~decrease in~~administrative expenses and no acquisition and integration related expenses ~~partially offset by increases~~ in ~~selling and administrative expenses~~the current period when compared to the three months ended ~~September 30, 2019.~~

~~North America’s earnings from operations~~ for the nine months ended September 30, 2020 increased $13.1 million, or 10%, compared to the nine months ended September 30, 2019. As a percentage of net sales, earnings from operations decreased by approximately 20 basis points to 3.1%. The increase in earnings from operations was primarily driven by an increase in gross profit in excess of increases in selling and administrative expenses and severance and restructuring expenses when compared to the nine months ended September 30, 2019.March 31, 2020.

EMEA’s earnings from operations for the three months ended ~~September 30, 2020~~March 31, 2021 increased ~~$1.7~~$1.8 million, or ~~56%~~21% (increasing 9% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended ~~September 30, 2019.~~March 31, 2020. As a percentage of net sales, earnings from operations increased by approximately 5010 basis points to ~~1.4%~~2.1%. The increase in earnings from operations was primarily driven by an increase in gross profit, partially offset by ~~the~~an increase in selling and administrative expenses compared to the three months ended ~~September 30, 2019.~~March 31, 2020.

~~EMEA’s~~APAC’s earnings from operations for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 increased ~~$1.4 million,~~$811,000, or 5%37% (increasing 23% when excluding the effects of fluctuating foreign currency exchange rates), compared to the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. As a percentage of net sales, earnings from operations increased by approximately 1080 basis points to ~~2.7%~~5.1%. The increase in earnings from operations was primarily driven by an increase in gross profit, partially offset by ~~the~~an increase in selling and administrative expenses compared to the ~~nine months ended September 30, 2019.~~

~~APAC’s earnings from operations~~ ~~for the~~ three months ended September 30, 2020 increased $389,000, or 19%, compared to the three months ended September 30, 2019. As a percentage of net sales, earnings from operations increased by approximately 170 basis points to 6.5%. The increase in earnings from operations was primarily driven by an increase in gross profit when compared to the three months ended September 30, 2019.

~~APAC’s earnings from operations~~ for the nine months ended September 30, 2020 increased $410,000, or 5%, compared to the nine months ended September 30, 2019. As a percentage of net sales, earnings from operations increased by approximately 120 basis points to 7.0%. The increase in earnings from operations reflects an increase in gross profit and reduction in severance and

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

~~restructuring expenses, partially offset by an increase in selling and administrative expenses when compared to the nine months ended September 30, 2019.~~March 31, 2020.

Non-Operating (Income) Expense.

Interest Expense, Net. Interest expense, net primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facilities and ~~our convertible senior notes,~~the Notes, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense, net for the three months ended ~~September 30, 2020 increased 18%~~March 31, 2021 decreased 16%, or ~~$1.4~~$1.9 million, compared to the three months ended ~~September 30, 2019. Interest expense, net for the nine months ended September 30, 2020 increased 88%, or $14.6 million, compared to the nine months ended September 30, 2019.~~March 31, 2020. The ~~increase~~decrease was due primarily to ~~higher~~lower average daily balances and lower borrowing rates under our ABL facility, ~~in comparison to our facilities in the prior year and~~which was partially offset by increased imputed interest under our ~~convertible senior notes. The higher average daily balances under our ABL facility are largely~~inventory financing facilities and the ~~result of the PCM acquisition.~~ Notes.

Imputed interest under ~~our convertible senior notes, which were issued in August 2019,~~the Notes was $2.6 ~~million and $7.6~~ million for the three ~~and nine~~ months ended ~~September 30, 2020, respectively. Imputed interest under our convertible senior notes was $1.2~~March 31, 2021, compared to $2.5 million for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2020. Imputed interest under our inventory financing facilities was ~~$3.2 million and $8.8~~$3.6 million for the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021 compared to ~~$2.7 million and $8.6~~$2.8 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~March 31, 2020. The ~~increases were~~increase in imputed interest under our inventory financing facilities was a result of expanded use of the facilities, ~~including the addition of PCM,~~ in part as a result of ~~extended~~expanded payment terms during the ~~2020 periods.~~current period. For a

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

description of our various financing facilities, see Note 5 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Income Tax Expense. Our effective tax rate of 23.8% for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~lower~~higher than our effective tax rate of ~~27.2%~~20.3% for the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~decrease~~increase in our effective tax rate for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019~~March 31, 2020 was partially due to the rate impact of ~~acquisition-related costs~~tax benefits associated with the CARES Act which did not recur in 2020 and the beneficial impact of certain income tax regulations issued during the current quarter. Our effective tax rate of 23.8% for the nine months ended September 30, 2020 was lower than our effective tax rate of 25.4% for the nine months ended September 30, 2019. The decrease in our effective tax rate for the first nine months of 2020 compared to the first nine months of 2019 was due primarily to the remeasurement of acquired net operating losses to be carried back to higher tax rate years under the CARES Act and the rate impact of acquisition-related costs which did not recur in 2020.2021.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Net cash provided by operating activities	$	462,094		$	168,595		$	42,706		$	93,126
Net cash used in investing activities		(12,875	)		(681,209	)
Net cash (used in) provided by financing activities		(489,087	)		514,442
Net cash provided by investing activities								19,364			430
Net cash used in financing activities								(49,267	)		(141,766	)
Foreign currency exchange effect on cash, cash equivalent and restricted cash balances		718			(3,960	)		(2,445	)		(3,615	)
Decrease in cash, cash equivalents and restricted cash		(39,150	)		(2,132	)
Increase (decrease) in cash, cash equivalents and restricted cash								10,358			(51,825	)
Cash, cash equivalents and restricted cash at beginning of period		116,297			144,293			130,582			116,297
Cash, cash equivalents and restricted cash at end of period	$	77,147		$	142,161		$	140,940		$	64,472

Cash and Cash Flow

•

Our primary uses of cash during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were to pay down our debt balances and to fund our working capital requirements.

•

Operating activities provided ~~$462.1~~$42.7 million in cash during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$168.6~~$93.1 million during the ~~nine~~three months ended ~~September 30, 2019 partially driven by a non-recurring item in the third quarter of~~March 31, 2020. ~~In the fourth quarter of 2020, we expect that this non-recurring item will reverse, and we will use cash from operating activities for the quarter.~~ ~~Our cash cycle is inverted which allows us to generate more cash flows from operating activities in sequential periods of declining sales, particularly of our hardware offerings.~~

•

We had net ~~borrowings~~repayments under our inventory financing facilities of ~~$114.3~~$17.8 million during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to net repayments of ~~$96.5 million~~$764,000 during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

•

Net repayments under our ABL facility during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 were ~~$570.9 million. Net borrowings under our ABL facility and our prior senior revolving credit facility and ABS facility combined during the nine months ended September 30, 2019 were $338.2 million.~~

•

~~Capital expenditures were $20.7~~$24.0 million and ~~$16.9~~$110.2 million, ~~for the nine months ended September 30, 2020 and 2019,~~ respectively.

•

~~We acquired vNext in February~~Capital expenditures were $7.8 million and $7.4 million for the three months ended March 31, 2021 and 2020, ~~for $6.4 million and~~respectively.

•

We received proceeds from the sale of ~~a property~~our properties held for sale of $27.2 million in the three months ended March 31, 2021 compared to proceeds of $14.2 million in the ~~nine~~three months ended ~~September 30,~~March 31, 2020.

•

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, we repurchased an aggregate of $25.0 million of our common stock, pursuant to a repurchase program approved in February 2020. ~~During~~There were no share repurchases in the ~~nine~~three months ended ~~September 30, 2019, we repurchased an aggregate of $27.9 million of our common stock~~ March 31, 2021.

We expect that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our presently anticipated cash and working capital requirements for operations over the next 12 months. We believe that we have a strong balance sheet and healthy liquidity position. The Company had capacity of up to $1.2 billion under our ABL facility as of ~~September 30, 2020.~~March 31, 2021. For the remainder of ~~2020,~~2021, we plan to be prudent in our use of cash, ~~deferring discretionary capital investments and~~ using available cash to fund business operations and to pay down our ABL facility and inventory financing facilities.

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INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Net cash provided by operating activities

•

Cash flow from operating activities in the first ~~nine~~three months of ~~2020~~2021 was ~~$462.1~~$42.7 million compared to ~~$168.6~~$93.1 million in the first ~~nine~~three months of ~~2019.~~2020.

•

The ~~increase~~decrease in cash flow from operating activities was ~~partially~~primarily driven by ~~a non-recurring item~~an increase in working capital needs, including investments in inventory to support specific client programs and additional short-term demand in the ~~third quarter~~first three months of 2021 compared to the first three months of 2020. A payment of $107.0 million that was due to be paid to a partner in the third quarter of 2020 was deferred in response to COVID-19 and will be paid in the fourth quarter of 2020. Our cash cycle is inverted which allows us to generate more cash flows from operating activities in sequential periods of declining sales, particularly of our hardware offerings.

•

The significant decreases in both other assets and accrued expenses and other liabilities for the three months ended September 30, 2020 resulted from a single significant transaction in 2019 with no comparable activity in the current year.

Our consolidated cash flow operating metrics were as follows:

	Three Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Days sales outstanding in ending accounts receivable (“DSOs”) ^(a)		108			111			106			104
Days inventory outstanding (“DIOs”) ^(b)		10			11			11			11
Days purchases outstanding in ending accounts payable (“DPOs”) ^(c)		(93	)		(80	)		(86	)		(77	)
Cash conversion cycle (days) ^(d)		25			42			31			38

(a)

Calculated as the balance of current accounts receivable, net at the end of the quarter divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by ~~92 days.~~90 and 91 days in 2021 and 2020, respectively.

(b)

Calculated as average inventories divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the quarter plus inventories at the end of the quarter divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by ~~92 days.~~90 and 91 days in 2021 and 2020, respectively.

(c)

Calculated as the sum of the balances of accounts payable – trade and accounts payable – inventory financing facilities at the end of the quarter divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by ~~92 days.~~90 and 91 days in 2021 and 2020, respectively.

(d)

Calculated as DSOs plus DIOs, less DPOs.

•

Our cash conversion cycle was 2531 days in the ~~third~~first quarter of ~~2020,~~2021, down 177 days from the ~~third~~first quarter of ~~2019.~~2020.

•

The net changes were a result of a 32 day ~~decrease~~increase in DSOs ~~a 1 day decrease in DIOs~~ and a 139 day increase in DPOs. Excluding the impacts of software netting, ~~the decrease in~~ DSOs ~~was~~decreased due to ~~better collections experience on our accounts receivable. Excluding the impacts~~improvements in aging of ~~software netting, the~~receivables. The increase in DPOs was primarily due to increases in balances in the current period in part due to the extension of terms ~~(certain of which are temporary)~~ on our inventory financing ~~facilities and timing of transactions during the respective quarters, including deferral of payments to certain partners in response to COVID-19.~~facilities.

•

We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms we grant to our clients to take advantage of supplier discounts.

•

We intend to use cash generated in the remainder of ~~2020~~2021 in excess of working capital needs, ~~given current market conditions,~~ to pay down our ABL facility and inventory financing facilities.

39Net cash provided by investing activities

•

We received proceeds from the sale of properties held for sale of $27.2 million in the first three months of 2021 compared to proceeds of $14.2 million in the first three months of 2020.

•

Capital expenditures were $7.8 million and $7.4 million for the three months ended March 31, 2021 and 2020, respectively.

•

We acquired vNext in February 2020 for $6.4 million.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

~~Net cash used in investing activities~~

•

~~Capital expenditures were $20.7 million and $16.9 million for the nine months ended September 30, 2020 and 2019, respectively.~~

•

~~We acquired vNext in February 2020 for $6.4 million and received proceeds from the sale of a property held for sale of $14.2 million in the first nine months of 2020.~~

•

We expect capital expenditures for the full year ~~2020~~2021 to be in a range of up$75.0 million to ~~$25.0~~$85.0 million, the majority of which ~~approximately $1.0 million~~ will be used to ready our global corporate headquarters and ~~the remaining amount will be used primarily for~~to fund technology-related ~~upgrade~~ projects.

•

~~We have decided to defer the buildout of our new global corporate headquarters until early 2021.~~

Net cash ~~(used in) provided by~~used in financing activities

•

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by $24.0 million.

•

During the three months ended March 31, 2020, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by ~~$570.9~~$110.2 million.

•

~~During~~We had net repaymentsunder our inventory financing facilities of $17.8 million during the ~~nine~~three months ended ~~September 30, 2019, we had~~March 31, 2021 compared to net ~~combined borrowings under our ABL facility, our prior senior revolving credit facility and our ABS facility that increased our outstanding long-term debt balance by $338.2 million.~~repayments of $764,000 during the three months ended March 31, 2020.

•

We had net borrowings under our inventory financing facilities of $114.3 million during the nine months ended September 30, 2020 compared to net repayments of $96.5 million during the nine months ended September 30, 2019.

•

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, we repurchased an aggregate of $25.0 million of our common stock, pursuant to a repurchase program approved in February ~~2020. In comparison,~~2020, with no comparable repurchases during the ~~nine~~three months ended ~~September 30, 2019, we repurchased an aggregate of $27.9 million of our common stock.~~March 31, 2021.

Financing Facilities

Our debt balance as of ~~September 30, 2020~~March 31, 2021 was ~~$296.1~~$417.2 million, including our finance lease obligations for certain IT equipment and other financing obligations.

•

Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

•

~~Our convertible senior notes~~The Notes are subject to certain events of default and certain acceleration clauses. As of ~~September 30, 2020,~~March 31, 2021, no such events have occurred.

•

Our ABL facility contains various covenants customary for transactions of this type, including complying with a minimum receivable and inventory requirement and meeting monthly, quarterly and annual reporting requirements. The credit agreement contains customary affirmative and negative covenants and events of default. At ~~September 30, 2020,~~March 31, 2021, we were in compliance with all such covenants.

We also have agreements with financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions.

•

These amounts are classified separately as accounts payable – inventory financing facilities in our consolidated balance sheets.

•

Our inventory financing facilities have an aggregate availability for vendor purchases of ~~$500.0~~$540.0 million, of which ~~$368.0~~$309.1 million was outstanding at ~~September 30, 2020.~~March 31, 2021.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation to the United States. As of ~~September 30, 2020,~~March 31, 2021, we had approximately ~~$56.7~~$118.8 million in cash and cash equivalents in certain of our foreign subsidiaries, primarily residing in Australia, Canada and the Netherlands. Certain of these cash balances will be remitted to the United States by paying down intercompany payables generated in the ordinary course of business or through actual dividend distributions.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Off-Balance Sheet Arrangements

We have entered into off-balance sheet arrangements, which include indemnifications. The indemnifications are discussed in Note 107 to the Consolidated Financial Statements in Part I, Item 1 of this report and such discussion is incorporated by reference herein. We believe that none of our off-balance sheet arrangements have, or are reasonably likely to have, a material current or future effect on our business, financial condition or results of operations.

Recently Issued Accounting Standards

The information contained in Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report concerning a description of recently issued accounting standards which affect or may affect our financial statements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Contractual Obligations

There have been no material changes in our reported contractual obligations, as described under “Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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INSIGHT ENTERPRISES, INC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Except as described below, there have been no material changes in our reported market risks, as described in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Although our ~~convertible senior notes~~Notes are based on a fixed rate, changes in interest rates could impact the fair market value of such ~~notes.~~Notes. As of ~~September 30, 2020,~~March 31, 2021, the fair market value of our ~~convertible senior notes~~Notes was ~~$399~~$513 million. For additional information about our ~~convertible senior notes,~~Notes, see Note 5 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this report, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and determined that as of ~~September 30, 2020~~March 31, 2021 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations of Internal Control Over Financial Reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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INSIGHT ENTERPRISES, INC.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see “– Legal Proceedings” in Note 107 to the Consolidated Financial Statements in Part I, Item 1 of this report, which section is incorporated by reference herein.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the “Annual Report”) ~~and the risks relating to the impact of the COVID-19 pandemic described below.~~, which could materially affect our business, financial condition or future results. The risks described in our Annual Report ~~and below~~ are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.

The recent novel coronavirus (“COVID-19”) global pandemic has adversely affected, and is expected to continue to adversely affect, our business, results of operations and financial condition. The widespread outbreak of any other illnesses or communicable diseases could also adversely affect our business, results of operations and financial condition.

We could be negatively impacted by the widespread outbreak of an illness, any other communicable disease or any other public health crisis that results in economic and trade disruptions, including the disruption of global supply chains. To date, the COVID-19 pandemic has adversely affected, and is expected to continue to adversely affect, our business, results of operations and financial condition.

In late 2019, there was an outbreak of a new strain of coronavirus, COVID-19, which has since spread globally. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. In an effort to protect the health and safety of our teammates, we took proactive action to adopt social distancing policies at our locations globally, including working from home where possible, limiting the number of teammates attending in-person meetings, reducing the number of people in our locations at any one time, and suspending teammate travel.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation, and initially created significant volatility and disruption of financial markets. As a result of the COVID-19 pandemic and the related responses from government authorities, our business operations, financial performance and results of operations have been, and continue to be, adversely impacted. For example, we observed a pronounced impact of COVID-19 on our third quarter financial results when compared to internal budgets, and anticipate demand for our products and services will continue to be impacted in the fourth quarter as clients continue to evaluate the impact of COVID-19 on their businesses, their profitability and liquidity. While we did not experience a decline in booking trends year over year in October 2020 we anticipate that the declining trend, which began in April 2020, may continue into the fourth quarter of 2020. In the short run we took steps to accelerate and complete our integration with PCM and to reduce discretionary operating expenditures, such as certain teammate benefits and variable compensation, and travel related expenditures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quarterly Overview – Recent Developments – Impact of COVID-19 to our Business” for additional information.

~~INSIGHT ENTERPRISES, INC.~~

Additionally, our business operations, financial performance and results of operations have been and could be further adversely impacted in a number of ways, which may include, but is not limited to, the following:

•

disruptions to our operations, including any closures of our offices and facilities; restrictions on our operations and sales, marketing and distribution efforts; and interruptions to our other important business activities;

•

~~further reduced demand for our products and services due to disruptions to the businesses and operations of our clients;~~

•

~~interruptions, availability or delays in global shipping to transport our products;~~

•

~~a slowdown or stoppage in the supply chain for our products;~~

•

limitations on employee resources and availability, including due to sickness, government restrictions, the desire of employees to avoid contact with large groups of people or mass transit disruptions;

•

~~the ability of our clients to pay for our products, services and solutions;~~

•

~~the willingness of clients in the travel, hospitality, retail and other industries significantly impacted by the pandemic to continue with current and expected projects;~~

•

~~a fluctuation in foreign currency exchange rates or interest rates could result from market uncertainties;~~

•

~~an increase in the cost or the difficulty to obtain debt or equity financing could affect our financial condition or our ability to fund operations or future investment opportunities;~~

•

~~changes to the carrying value of our goodwill and intangible assets; and~~

•

an increase in regulatory restrictions or continued market volatility could hinder our ability to execute strategic business activities, including acquisitions, as well as negatively impact our stock price.

The spread of COVID-19 has caused us to modify our business practices (including teammate travel, teammate work locations, and cancellation of physical participation in most meetings, events and conferences), and we anticipate taking further actions as may be required by government authorities or that we determine are in the best interests of our clients, partners and teammates. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed. Further, should any key teammates become ill from COVID-19 and unable to work, the attention of the management team could be diverted.

The potential effects of the COVID-19 pandemic may also impact our other risk factors discussed in in Part I, Item 1A, “Risk Factors”, in our Annual Report. The ultimate extent of the impact of the COVID-19 pandemic on our business operations, financial performance and results of operation, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic, its severity, the actions taken to contain the virus or treat its impact, such as restrictions on travel and transportation, and how quickly and to what extent normal economic and operating conditions can resume.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities during the three months ended ~~September 30, 2020.~~March 31, 2021.

We have never paid a cash dividend on our common stock, and we currently do not intend to pay any cash dividends in the foreseeable future. Our ABL facility contains certain covenants that, if not met, restrict the payment of cash dividends.

~~INSIGHT ENTERPRISES, INC.~~

Issuer Purchases of Equity Securities

Period

(a)
Total
Number
of Shares
Purchased

(b)
Average
Price
Paid per
Share

(c)
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs

(d)
Approximate
Dollar Value
of Shares
that May
Yet Be
Purchased
Under
the Plans or
Programs

July 1, 2020 through July 31, 2020

—

$
—

—

$
25,000,004

August 1, 2020 through August 31, 2020

—

—

—

25,000,004

September 1, 2020 through September 30, 2020

—

—

—

25,000,004

Total

—

$
—

—

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2021 through January 31, 2021		—	$	—		—	$	25,000,004
February 1, 2021 through February 28, 2021		—		—		—		25,000,004
March 1, 2021 through March 31, 2021		—		—		—		25,000,004
Total		—	$	—		—

On February 26, 2020, we announced that our Board of Directors had authorized the repurchase of up to $50 million of our common stock. There is no stated expiration date for this share repurchase plan. As of ~~September 30, 2020,~~March 31, 2021, $25 million remained available for repurchases under this share repurchase plan.

On May 6, 2021, we announced that our Board of Directors had authorized the repurchase of up to $125 million of common stock, including the $25 million that remained available from the February 2020 authorization. There is no stated expiration date for this share repurchase plan.

In accordance with the share repurchase ~~plans,~~plan, share repurchases may be made on the open market, subject to Rule 10b-18 or in privately negotiated transactions, through block trades,

INSIGHT ENTERPRISES, INC.

through 10b5-1 plans or otherwise, at management’s discretion. The amount of shares purchased and the timing of the purchases will be based on market conditions, working capital requirements, general business conditions and other factors. We intend to retire the repurchased shares.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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INSIGHT ENTERPRISES, INC.

Item 6. Exhibits.

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit
Number

Filing
Date

Filed/Furnished
Herewith
3.1

Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.

10-K

000-25092

3.1

February 17, 2006

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.

8-K

000-25092

3.1

May 21, 2015

3.3

Amended and Restated Bylaws of Insight Enterprises, Inc.

8-K

000-25092

3.2

May 21, 2015

4.1

Specimen Common Stock Certificate (P)

S-1

33-86142

4.1

January 20, 1995

10.1

Executive Employment Agreement between Insight Enterprises, Inc. and Joyce Mullen dated as of September 15, 2020

X
10.2

First Amendment to Credit Agreement, dated as of July 31, 2020, by and among Insight Enterprises, Inc., the subsidiaries of Insight Enterprises, Inc. party thereto as borrowers and grantors, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

10-Q

000-25092

10.2

August 6, 2020

31.1

Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14

X
31.2

Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14

X
32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X
101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

X
101.SCH

Inline XBRL Taxonomy Extension Schema Document

X
101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

X
101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

X
101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

X
101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

X
104

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

X

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Number

Filing

Date

Filed/Furnished

Herewith

3.1

Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.

10-K

000-25092

3.1

February 17, 2006

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.

8-K

000-25092

3.1

May 21, 2015

3.3

Amended and Restated Bylaws of Insight Enterprises, Inc.

8-K

000-25092

3.2

May 21, 2015

4.1

Specimen Common Stock Certificate (P)

S-1

33-86142

4.1

January 20, 1995

10.1

Executive Management Separation Plan

10.2

Amendment to the Service Agreement dated October 25, 2013 between Insight Technology Solutions GmbH and Wolfgang Ebermann

8-K

000-25092

10.1

January 6, 2021

31.1

Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14

31.2

Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14

32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

(P) Paper exhibit.

4633

INSIGHT ENTERPRISES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	~~November 3, 2020~~May 6, 2021	INSIGHT ENTERPRISES, INC.

		By:	/s/ Kenneth T. Lamneck
			Kenneth T. Lamneck
			President and Chief Executive Officer
			(Duly Authorized Officer)

		By:	/s/ Glynis A. Bryan
			Glynis A. Bryan
			Chief Financial Officer
			(Principal Financial Officer)

		By:	/s/ Rachael A. ~~Bertrandt~~ Crump
			Rachael A. ~~Bertrandt~~ Crump
			Global Corporate Controller
			(Principal Accounting Officer)

4734

	Three Months Ended September 30, 2020
	North America		EMEA		APAC		Consolidated
Major Offerings
Hardware	$	1,028,045	$	138,685	$	6,421	$	1,173,151
Software		306,925		165,301		16,191		488,417
Services		223,198		37,294		14,418		274,910
	$	1,558,168	$	341,280	$	37,030	$	1,936,478
Major Client Groups
Large Enterprise / Corporate	$	1,043,303	$	242,925	$	15,416	$	1,301,644
Small and Medium-Sized Businesses		312,080		13,647		16,197		341,924
Public Sector		202,785		84,708		5,417		292,910
	$	1,558,168	$	341,280	$	37,030	$	1,936,478
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)	$	1,477,716	$	320,445	$	31,256	$	1,829,417
Net revenue recognition (Agent)		80,452		20,835		5,774		107,061
	$	1,558,168	$	341,280	$	37,030	$	1,936,478

	Three Months Ended September 30, 2019
	North America		EMEA		APAC		Consolidated
Major Offerings
Hardware	$	1,020,083	$	137,416	$	9,243	$	1,166,742
Software		295,730		186,839		19,569		502,138
Services		199,349		31,453		12,865		243,667
	$	1,515,162	$	355,708	$	41,677	$	1,912,547
Major Client Groups
Large Enterprise / Corporate	$	1,110,817	$	277,536	$	17,811	$	1,406,164
Small and Medium-Sized Businesses		239,260		18,998		17,688		275,946
Public Sector		165,085		59,174		6,178		230,437
	$	1,515,162	$	355,708	$	41,677	$	1,912,547
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)	$	1,448,385	$	336,600	$	35,979	$	1,820,964
Net revenue recognition (Agent)		66,777		19,108		5,698		91,583
	$	1,515,162	$	355,708	$	41,677	$	1,912,547

	Nine Months Ended September 30, 2020
	North America		EMEA		APAC		Consolidated
Major Offerings
Hardware	$	3,180,501	$	466,909	$	21,001	$	3,668,411
Software		898,290		553,164		62,952		1,514,406
Services		692,905		132,110		41,432		866,447
	$	4,771,696	$	1,152,183	$	125,385	$	6,049,264
Major Client Groups
Large Enterprise / Corporate	$	3,227,613	$	808,360	$	44,543	$	4,080,516
Small and Medium-Sized Businesses		1,030,540		44,567		45,413		1,120,520
Public Sector		513,543		299,256		35,429		848,228
	$	4,771,696	$	1,152,183	$	125,385	$	6,049,264
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)	$	4,530,152	$	1,071,910	$	108,073	$	5,710,135
Net revenue recognition (Agent)		241,544		80,273		17,312		339,129
	$	4,771,696	$	1,152,183	$	125,385	$	6,049,264

	September 30,		December 31,
	2020		2019
Current receivables, which are included in “Accounts receivable, net”	$	2,267,718	$	2,511,383
Non-current receivables, which are included in “Other assets”		137,431		154,417
Contract liabilities, which are included in “Accrued expenses and other current liabilities” and “Other liabilities”		80,734		84,814

	Services
Remainder of 2020	$	54,939
2021		64,346
2022		25,076
2023 and thereafter		16,763
Total remaining performance obligations	$	161,124

Leases	Classification	September 30, 2020		December 31, 2019
Assets
Operating lease assets	Other assets	$	81,481	$	74,684
Finance lease assets	Property and equipment^(a)		2,326		3,297
Total lease assets		$	83,807	$	77,981
Liabilities
Current
Operating lease liabilities	Accrued expenses and other current liabilities	$	20,556	$	19,648
Finance lease liabilities	Current portion of long-term debt		1,422		1,691
Non-current
Operating lease liabilities	Other liabilities		67,421		60,285
Finance lease liabilities	Long-term debt		1,253		2,131
Total lease liabilities		$	90,652	$	83,755

Lease cost	Classification	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Operating lease cost ^{(a) (b)}	Selling and administrative expenses	$	6,460	$	19,412
Finance lease cost
Amortization of leased assets	Selling and administrative expenses		324		972
Interest on lease liabilities	Interest expense, net		24		84
Total lease cost		$	6,808	$	20,468

	Operating leases			Finance leases			Total
Remainder of 2020	$	6,021		$	564		$	6,585
2021		22,194			1,077			23,271
2022		19,099			645			19,744
2023		13,477			449			13,926
2024		8,430			45			8,475
After 2024		28,999			—			28,999
Total lease payments		98,220			2,780			101,000
Less: Interest		(10,243	)		(105	)		(10,348	)
Present value of lease liabilities	$	87,977		$	2,675		$	90,652

	September 30, 2020		September 30, 2019
Weighted average remaining lease term (years)
Operating leases		6.13		6.19
Finance leases		2.45		1.69
Weighted average discount rate (%)
Operating leases		3.43		3.65
Finance leases		3.46		4.85

	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,360	$	19,444
Leased assets obtained in exchange for new operating lease liabilities	$	577	$	23,178

	Number			Weighted Average Grant Date Fair Value		Fair Value
Nonvested at January 1, 2020		923,400		$	45.58
Granted^(a)		322,506			57.78
Vested, including shares withheld to cover taxes		(368,377	)		42.54	$	15,670,905	^(b)
Forfeited		(73,284	)		51.66
Nonvested at September 30, 2020 (a)		804,245			51.31	$	45,504,182	^(c)

Purchase price net of cash and cash equivalents acquired				$	660,925
Fair value of net assets acquired:
Current assets	$	531,941
Identifiable intangible assets - see description below		191,370
Property and equipment		91,213
Other assets		32,699
Current liabilities		(369,183	)
Long-term liabilities, including deferred taxes		(71,009	)
Total fair value of net assets acquired					407,031
Excess purchase price over fair value of net assets acquired ("goodwill")				$	253,894