UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended: June 30, 2021

March 31, 2022

OR

☐

oTRANSITION 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

nsit-20220331_g1.jpg
INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware

86-0766246

Delaware

86-0766246
(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

6820 South Harl Avenue, Tempe,

2701 E. Insight Way, Chandler, Arizona 85283

85286

(Address of principal executive offices) (Zip Code)

(480) 333-3000

(Registrant’s telephone number, including area code)

6820 South Harl Avenue, Tempe, Arizona 85283

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

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 ☒x

No ☐o

Indicatebycheck markwhether

Indicate by check mark whether theregistrant has submitted electronicallyevery InteractiveDataFilerequired registrant has submitted electronically every Interactive Data File required to besubmitted pursuant submitted pursuant to RuleRule 405 ofRegulation S-T (§ Regulation S-T (§232.405 ofthis chapter)duringtheprecedingchapter) during the preceding 12months (or forsuch shorterperiod that(or for such shorter period that the registrant wasrequired registrant was required to submit such files)such files).

Yes ☒x

No ☐o

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

☒

x

Accelerated filer

☐

o

Non-accelerated filer

☐

o

Smaller reporting company

☐

o

Emerging growth company

☐

o

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. ☐o

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

Yes ☐o

No ☒x

The number of shares outstanding of the issuer’s common stock as of July 30, 2021April 29, 2022 was 34,855,832.

35,074,362.


Table of Contents
INSIGHT ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

Three Months Ended June 30, 2021

March 31, 2022

TABLE OF CONTENTS

Page

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20

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36

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36

42

36

42

37

42

37

43

37

43

Exhibits44

38

39

45


Table of Contents
INSIGHT ENTERPRISES, INC.

Forward-Looking Information

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;constraints including our belief that supply constraints and extended lead times for certain products could impact results into the second half of 2022; our belief that we could continue to see growth in the hardware category of net sales in North America into the second half of 2022; 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 the impact of partner incentives; our expectations about future benefits of our acquisitions and our plans related thereto, including potential expansion into wider regions; 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;systems; our liquidity and 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;stock, make capital expenditures, and fund acquisitions; 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, 2020:

2021:•

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;

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

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;

•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;

•our ability to keep pace with rapidly evolving technological advances and the evolving competitive marketplace
•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;
•general economic conditions, economic uncertainties and changes in geopolitical conditions;

Table of Contents
INSIGHT ENTERPRISES, INC.

•

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

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

supply constraints for hardware including devices;

•supply constraints for hardware, including devices;•

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

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

our reliance on independent shipping companies;

•our reliance on independent shipping companies;•

the risks associated with our international operations;

•the risks associated with our international operations;•

natural disasters or other adverse occurrences;

•natural disasters or other adverse occurrences;•

disruptions in our IT systems and voice and data networks;

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

cyberattacks or breaches of data privacy and security regulations;

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

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

•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;

•legal proceedings, 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;

•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;

•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;

•our potential to draw down a substantial amount of indebtedness;•

the conditional conversion feature of the convertible senior notes (the “Notes”), which has been triggered, may adversely affect the Company’s financial condition and operating results;

•

the accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on•the conditional conversion feature of our convertible senior notes (the “Notes”), which has been triggered, may adversely affect the Company’s reported financial condition and operating 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”•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•possible significant fluctuations in our future operating results as well as seasonality and variability in client demands;

•our dependence on certain key personnel and our ability to attract, train and retain skilled teammates;•

our dependence on certain key personnel;

•

risks associated with the integration and operation of acquired businesses, including PCM and the achievement of expected synergies and benefits; and

•

future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock.

Additionally, there may be other risks that are otherwise described from time to time in the reports that 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.


Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

June 30,

2021

 

 

December 31,

2020

 

March 31,
2022		December 31,
2021

ASSETS

 

 

 

 

 

 

 

 

ASSETS

Current assets:

 

 

 

 

 

 

 

 

Current assets:

Cash and cash equivalents

 

$

107,813

 

 

$

128,313

 

Cash and cash equivalents$114,758 $103,840 

Accounts receivable, net of allowance for doubtful accounts

of $15,716 and $15,106, respectively

 

 

3,045,324

 

 

 

2,685,448

 

Accounts receivable, net of allowance for doubtful accounts of $16,760 and $16,941, respectivelyAccounts receivable, net of allowance for doubtful accounts of $16,760 and $16,941, respectively3,025,699 2,936,732 

Inventories

 

 

214,385

 

 

 

185,650

 

Inventories383,401 328,101 

Other current assets

 

 

187,707

 

 

 

177,039

 

Other current assets244,383 199,638 

Total current assets

 

 

3,555,229

 

 

$

3,176,450

 

Total current assets3,768,241 $3,568,311 

Property and equipment, net of accumulated depreciation and

amortization of $257,398 and $256,065, respectively

 

 

149,979

 

 

 

146,016

 

Property and equipment, net of accumulated depreciation and amortization of $231,333 and $233,786, respectivelyProperty and equipment, net of accumulated depreciation and amortization of $231,333 and $233,786, respectively189,722 176,263 

Goodwill

 

 

430,846

 

 

 

429,368

 

Goodwill429,215 428,346 

Intangible assets, net of accumulated amortization of

$119,337 and $103,483, respectively

 

 

232,487

 

 

 

246,915

 

Intangible assets, net of accumulated amortization of $118,905 and $110,909, respectivelyIntangible assets, net of accumulated amortization of $118,905 and $110,909, respectively207,116 214,788 

Other assets

 

 

298,506

 

 

 

311,983

 

Other assets255,494 301,372 

 

$

4,667,047

 

 

$

4,310,732

 

$4,849,788 $4,689,080 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

 

 

 

 

 

Current liabilities:

Accounts payable—trade

 

$

1,782,131

 

 

$

1,461,312

 

Accounts payable—trade$1,623,651 $1,779,854 

Accounts payable—inventory financing facilities

 

 

309,316

 

 

 

356,930

 

Accounts payable—inventory financing facilities318,433 311,878 

Accrued expenses and other current liabilities

 

 

391,557

 

 

 

408,117

 

Accrued expenses and other current liabilities390,703 423,489 

Current portion of long-term debt

 

 

650

 

 

 

1,105

 

Current portion of long-term debt344,903 36 

Total current liabilities

 

 

2,483,654

 

 

 

2,227,464

 

Total current liabilities2,677,690 2,515,257 

Long-term debt

 

 

483,252

 

 

 

437,581

 

Long-term debt373,018 361,570 

Deferred income taxes

 

 

35,268

 

 

 

33,209

 

Deferred income taxes36,631 47,073 

Other liabilities

 

 

263,046

 

 

 

270,049

 

Other liabilities223,258 255,953 

 

 

3,265,220

 

 

 

2,968,303

 

3,310,597 3,179,853 

Commitments and contingencies

 

 

 

 

 

 

 

 

Commitments and contingencies00

Stockholders’ equity:

 

 

 

 

 

 

 

 

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;

34,845 shares at June 30, 2021 and 35,103 shares at

December 31, 2020 issued and outstanding

 

 

348

 

 

 

351

 

Preferred stock, $0.01 par value, 3,000 shares authorized; no shares issuedPreferred stock, $0.01 par value, 3,000 shares authorized; no shares issued— — 
Common stock, $0.01 par value, 100,000 shares authorized; 35,072 shares at March 31, 2022 and 34,897 shares at December 31, 2021 issued and outstandingCommon stock, $0.01 par value, 100,000 shares authorized; 35,072 shares at March 31, 2022 and 34,897 shares at December 31, 2021 issued and outstanding351 349 

Additional paid-in capital

 

 

361,412

 

 

 

364,288

 

Additional paid-in capital321,959 368,282 

Retained earnings

 

 

1,050,074

 

 

 

993,245

 

Retained earnings1,242,110 1,167,690 

Accumulated other comprehensive loss – foreign currency

translation adjustments

 

 

(10,007

)

 

 

(15,455

)

Accumulated other comprehensive loss – foreign currency translation adjustments(25,229)(27,094)

Total stockholders’ equity

 

 

1,401,827

 

 

 

1,342,429

 

Total stockholders’ equity1,539,191 1,509,227 

 

$

4,667,047

 

 

$

4,310,732

 

$4,849,788 $4,689,080 

See accompanying notes to consolidated financial statements.


1

Table of Contents
INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
March 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

20222021

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

Products

 

$

1,889,178

 

 

$

1,672,933

 

 

$

3,782,198

 

 

$

3,521,249

 

Products$2,310,287 $1,893,020 

Services

 

 

340,323

 

 

 

295,802

 

 

 

640,371

 

 

 

591,537

 

Services340,563 300,048 

Total net sales

 

 

2,229,501

 

 

 

1,968,735

 

 

 

4,422,569

 

 

 

4,112,786

 

Total net sales2,650,850 2,193,068 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold:

Products

 

 

1,715,729

 

 

 

1,517,947

 

 

 

3,436,987

 

 

 

3,188,185

 

Products2,107,209 1,721,258 

Services

 

 

147,089

 

 

 

126,399

 

 

 

287,425

 

 

 

274,876

 

Services164,780 140,336 

Total costs of goods sold

 

 

1,862,818

 

 

 

1,644,346

 

 

 

3,724,412

 

 

 

3,463,061

 

Total costs of goods sold2,271,989 1,861,594 

Gross profit

 

 

366,683

 

 

 

324,389

 

 

 

698,157

 

 

 

649,725

 

Gross profit378,861 331,474 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

Selling and administrative expenses

 

 

277,087

 

 

 

242,580

 

 

 

548,277

 

 

 

511,443

 

Selling and administrative expenses297,640 271,190 

Severance and restructuring expenses, net

 

 

1,127

 

 

 

7,010

 

 

 

(5,613

)

 

 

9,154

 

Severance and restructuring expenses, net1,372 (6,740)

Acquisition and integration related expenses

 

 

—

 

 

 

611

 

 

 

—

 

 

 

2,077

 

Earnings from operations

 

 

88,469

 

 

 

74,188

 

 

 

155,493

 

 

 

127,051

 

Earnings from operations79,849 67,024 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

Interest expense, net

 

 

9,583

 

 

 

10,219

 

 

 

19,552

 

 

 

22,045

 

Interest expense, net8,068 9,969 

Other expense (income), net

 

 

346

 

 

 

1,098

 

 

 

734

 

 

 

(465

)

Other (income) expense, netOther (income) expense, net(2,843)388 

Earnings before income taxes

 

 

78,540

 

 

 

62,871

 

 

 

135,207

 

 

 

105,471

 

Earnings before income taxes74,624 56,667 

Income tax expense

 

 

19,979

 

 

 

16,486

 

 

 

33,478

 

 

 

25,125

 

Income tax expense17,993 13,499 

Net earnings

 

$

58,561

 

 

$

46,385

 

 

$

101,729

 

 

$

80,346

 

Net earnings$56,631 $43,168 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

Basic

 

$

1.67

 

 

$

1.32

 

 

$

2.89

 

 

$

2.29

 

Basic$1.62 $1.23 

Diluted

 

$

1.58

 

 

$

1.32

 

 

$

2.76

 

 

$

2.27

 

Diluted$1.53 $1.18 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

Basic

 

 

35,097

 

 

 

35,060

 

 

 

35,148

 

 

 

35,147

 

Basic34,974 35,199 

Diluted

 

 

37,135

 

 

 

35,260

 

 

 

36,917

 

 

 

35,453

 

Diluted36,981 36,699 

See accompanying notes to consolidated financial statements.



2
Table of Contents
INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
March 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

20222021

Net earnings

 

$

58,561

 

 

$

46,385

 

 

$

101,729

 

 

$

80,346

 

Net earnings$56,631 $43,168 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

 

 

5,528

 

 

 

7,619

 

 

 

5,448

 

 

 

(10,212

)

Foreign currency translation adjustments1,865 (80)

Total comprehensive income

 

$

64,089

 

 

$

54,004

 

 

$

107,177

 

 

$

70,134

 

Total comprehensive income$58,496 $43,088 

See accompanying notes to consolidated financial statements.



3

Table of Contents
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

 

Common StockTreasury StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
Stockholders'
Equity

Balances at March 31, 2020

 

 

35,049

 

 

$

350

 

 

 

—

 

 

$

—

 

 

$

351,648

 

 

$

(55,995

)

 

$

854,566

 

 

$

1,150,569

 

SharesPar ValueSharesAmountAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
Stockholders'
Equity
Balances at December 31, 2021Balances at December 31, 202134,897 $349 — $— 
Cumulative effect of accounting changeCumulative effect of accounting change— — — — (44,731)— 17,789 (26,942)

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

 

 

21

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

(49

)

 

 

—

 

 

 

(1

)

 

 

(49

)

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes175 2 — — (6,599)— — (6,597)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,832

 

 

 

—

 

 

 

—

 

 

 

2,832

 

Stock-based compensation expense— — — — 5,007 — — 5,007 

Foreign currency translation adjustments, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,619

 

 

 

—

 

 

 

7,619

 

Foreign currency translation adjustments, net of tax— — — — — 1,865 — 1,865 

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

46,385

 

 

 

46,385

 

Net earnings— — — — — — 56,631 56,631 

Balances at June 30, 2020

 

 

35,070

 

 

$

351

 

 

 

—

 

 

$

—

 

 

$

354,431

 

 

$

(48,376

)

 

$

900,950

 

 

$

1,207,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2021

 

 

35,320

 

 

$

353

 

 

 

—

 

 

$

—

 

 

$

361,935

 

 

$

(15,535

)

 

$

1,036,413

 

 

$

1,383,166

 

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

 

 

22

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(87

)

 

 

—

 

 

 

—

 

 

 

(87

)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,659

 

 

 

—

 

 

 

—

 

 

 

4,659

 

Repurchase of treasury stock

 

 

—

 

 

 

—

 

 

 

(497

)

 

 

(50,000

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(50,000

)

Retirement of treasury stock

 

 

(497

)

 

 

(5

)

 

 

497

 

 

 

50,000

 

 

 

(5,095

)

 

 

—

 

 

 

(44,900

)

 

 

—

 

Foreign currency translation adjustments, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,528

 

 

 

—

 

 

 

5,528

 

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

58,561

 

 

 

58,561

 

Balances at June 30, 2021

 

 

34,845

 

 

$

348

 

 

 

—

 

 

$

—

 

 

$

361,412

 

 

$

(10,007

)

 

$

1,050,074

 

 

$

1,401,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

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

 

 

252

 

 

 

3

 

 

 

—

 

 

 

—

 

 

 

(5,339

)

 

 

—

 

 

 

(1

)

 

 

(5,337

)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,241

 

 

 

—

 

 

 

—

 

 

 

7,241

 

Repurchase of treasury stock

 

 

—

 

 

 

—

 

 

 

(445

)

 

 

(25,000

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(25,000

)

Retirement of treasury stock

 

 

(445

)

 

 

(5

)

 

 

445

 

 

 

25,000

 

 

 

(4,503

)

 

 

—

 

 

 

(20,492

)

 

 

—

 

Foreign currency translation adjustments, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(10,212

)

 

 

—

 

 

 

(10,212

)

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

80,346

 

 

 

80,346

 

Balances at June 30, 2020

 

 

35,070

 

 

$

351

 

 

 

—

 

 

$

—

 

 

$

354,431

 

 

$

(48,376

)

 

$

900,950

 

 

$

1,207,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2022Balances at March 31, 202235,072 $351 — $— $321,959 $(25,229)$1,242,110 $1,539,191 

Balances at December 31, 2020

 

 

35,103

 

 

$

351

 

 

 

—

 

 

$

—

 

 

$

364,288

 

 

$

(15,455

)

 

$

993,245

 

 

$

1,342,429

 

Balances at December 31, 202035,103 $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

 

 

239

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

(7,156

)

 

 

—

 

 

 

—

 

 

 

(7,154

)

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes217 2 — — (7,069)— — (7,067)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,375

 

 

 

—

 

 

 

—

 

 

 

9,375

 

Stock-based compensation expense— — — — 4,716 — — 4,716 

Repurchase of treasury stock

 

 

—

 

 

 

—

 

 

 

(497

)

 

 

(50,000

)

 

 

—

��

 

 

—

 

 

 

—

 

 

 

(50,000

)

Retirement of treasury stock

 

 

(497

)

 

 

(5

)

 

 

497

 

 

 

50,000

 

 

 

(5,095

)

 

 

—

 

 

 

(44,900

)

 

 

—

 

Foreign currency translation adjustments, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,448

 

 

 

—

 

 

 

5,448

 

Foreign currency translation adjustments, net of tax— — — — — (80)— (80)

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

101,729

 

 

 

101,729

 

Net earnings— — — — — — 43,168 43,168 

Balances at June 30, 2021

 

 

34,845

 

 

$

348

 

 

 

—

 

 

$

—

 

 

$

361,412

 

 

$

(10,007

)

 

$

1,050,074

 

 

$

1,401,827

 

Balances at March 31, 2021Balances at March 31, 202135,320 $353 — $— $361,935 $(15,535)$1,036,413 $1,383,166 

See accompanying notes to consolidated financial statements.


4

Table of Contents
INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Six Months Ended

June 30,

 

Three Months Ended
March 31,

 

2021

 

 

2020

 

20222021

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Cash flows from operating activities:

Net earnings

 

$

101,729

 

 

$

80,346

 

Net earnings$56,631 $43,168 

Adjustments to reconcile net earnings to net cash provided by

operating activities:

 

 

 

 

 

 

 

 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Depreciation and amortization

 

 

28,498

 

 

 

34,623

 

Depreciation and amortization13,314 14,222 

Provision for losses on accounts receivable

 

 

3,838

 

 

 

6,570

 

Provision for losses on accounts receivable1,031 2,178 

Non-cash stock-based compensation

 

 

9,375

 

 

 

7,241

 

Non-cash stock-based compensation5,007 4,716 

Deferred income taxes

 

 

1,815

 

 

 

(1,464

)

Deferred income taxes(1,715)643 

Amortization of debt discount

 

 

8,375

 

 

 

8,002

 

Amortization of debt discount and issuance costsAmortization of debt discount and issuance costs1,623 4,172 

Other adjustments

 

 

(5,308

)

 

 

2,829

 

Other adjustments(106)(7,617)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

Increase in accounts receivable

 

 

(362,109

)

 

 

(182,511

)

(Increase) decrease in accounts receivable(Increase) decrease in accounts receivable(103,326)93,485 

Increase in inventories

 

 

(31,072

)

 

 

(26,647

)

Increase in inventories(57,876)(67,946)

(Increase) decrease in other assets

 

 

(8,282

)

 

 

46,088

 

Increase in accounts payable

 

 

294,860

 

 

 

529,742

 

Decrease in other assetsDecrease in other assets4,111 16,759 
Decrease in accounts payableDecrease in accounts payable(137,144)(25,315)

Decrease in accrued expenses and other liabilities

 

 

(36,532

)

 

 

(7,290

)

Decrease in accrued expenses and other liabilities(65,789)(35,759)

Net cash provided by operating activities

 

 

5,187

 

 

 

497,529

 

Net cash (used in) provided by operating activitiesNet cash (used in) provided by operating activities(284,239)42,706 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Cash flows from investing activities:

Proceeds from sale of assets held for sale

 

 

27,211

 

 

 

14,218

 

Proceeds from sale of assetsProceeds from sale of assets— 27,211 

Purchases of property and equipment

 

 

(16,837

)

 

 

(14,494

)

Purchases of property and equipment(25,745)(7,847)

Acquisitions, net of cash and cash equivalents acquired

 

 

—

 

 

 

(6,406

)

Net cash provided by (used in) investing activities

 

 

10,374

 

 

 

(6,682

)

Net cash (used in) provided by investing activitiesNet cash (used in) provided by investing activities(25,745)19,364 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash flows from financing activities:

Borrowings on ABL revolving credit facility

 

 

1,838,680

 

 

 

1,381,179

 

Borrowings on ABL revolving credit facility1,151,440 897,848 

Repayments on ABL revolving credit facility

 

 

(1,798,680

)

 

 

(1,807,421

)

Repayments on ABL revolving credit facility(831,440)(921,848)

Net (repayments) borrowings under inventory financing facilities

 

 

(17,538

)

 

 

7,457

 

Repurchases of common stock

 

 

(50,000

)

 

 

(25,000

)

Net borrowings (repayments) under inventory financing facilitiesNet borrowings (repayments) under inventory financing facilities6,692 (17,782)

Other payments

 

 

(7,944

)

 

 

(6,791

)

Other payments(6,738)(7,485)

Net cash used in financing activities

 

 

(35,482

)

 

 

(450,576

)

Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities319,954 (49,267)

Foreign currency exchange effect on cash, cash equivalents and

restricted cash balances

 

 

(594

)

 

 

(814

)

Foreign currency exchange effect on cash, cash equivalents and restricted cash balances969 (2,445)

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(20,515

)

 

 

39,457

 

Increase in cash, cash equivalents and restricted cashIncrease in cash, cash equivalents and restricted cash10,939 10,358 

Cash, cash equivalents and restricted cash at beginning of period

 

 

130,582

 

 

 

116,297

 

Cash, cash equivalents and restricted cash at beginning of period105,977 130,582 

Cash, cash equivalents and restricted cash at end of period

 

$

110,067

 

 

$

155,754

 

Cash, cash equivalents and restricted cash at end of period$116,916 $140,940 

See accompanying notes to consolidated financial statements.

5

Table of Contents
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 SolutionsTMtechnology, solutions and services to help our clients maximize the business value of Information Technology (“IT”) today and drive (digital) transformation for tomorrow in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked global technology provider of end-to-end secure digital innovation, cloud/data center transformation solutions and connected workforce solutions, together with our supply chain optimization expertise,services, 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, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related 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 June 30, 2021March 31, 2022 and our results of operations for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 and cash flows for the sixthree months ended June 30, 2021March 31, 2022 and 2020.2021. The consolidated balance sheet as of December 31, 20202021 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, 2020.  

2021.

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.

6

Table of Contents
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.  We adopted the new standard as of January 1, 2021.  The adoption of this new 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 bewas 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 adopted this standard effective January 1, 2022, using the modified retrospective approach. Therefore, financial statements for the three months ended March 31, 2022 are presented under the new standard, while the comparative period is currently evaluatingnot adjusted and is reported in accordance with the impact theCompany's old method of accounting. The adoption of this standard will have on its consolidated financial statements; however, we expectASU 2020-06 significantly impacts our consolidated statements of operations and consolidated balance sheets will be significantly impacted following adoption of this new standard on January 1, 2022, as we will no longer report accreted interest on the Notesconvertible senior notes (the “Notes”) and the full par value of the Notes will beis reflected as debt.

The cumulative effect adjustment from prior periods that we recognized in our consolidated balance sheet as adjustments to reduce additional paid in capital and increase retained earnings were $44,731,000 and $17,789,000, respectively. Had we followed the old method of accounting for the three months ended March 31, 2022 reported basic and diluted Net Earnings Per Share "EPS" would decrease by $0.06 and $0.05, respectively, from $1.62 and $1.53, respectively, to $1.56 and $1.48, respectively.

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, 20202021 that affect or may affect our current financial statements.

2.

Receivables, Contract Liabilities and Performance Obligations

2.    Receivables, Contract Liabilities and Performance Obligations
The following table provides information about receivables and contract liabilities as of June 30, 2021March 31, 2022 and December 31, 20202021 (in thousands):

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Current receivables, which are included in “Accounts

   receivable, net”

 

$

3,045,324

 

 

$

2,685,448

 

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

 

 

146,227

 

 

 

154,662

 

Contract liabilities, which are included in “Accrued expenses

   and other current liabilities” and “Other liabilities”

 

 

105,515

 

 

 

107,158

 

March 31,
2022		December 31,
2021
Current receivables, which are included in “Accounts receivable, net”$3,025,699 $2,936,732 
Non-current receivables, which are included in “Other assets”106,098 147,139 
Contract liabilities, which are included in “Accrued expenses and other current liabilities” and “Other liabilities”120,222 116,067 

Changes

Changes in the contract liabilities balances during the sixthree months ended June 30, 2021March 31, 2022 are as follows (in thousands):
Increase (Decrease)
Contract
Liabilities
Balances at December 31, 2021$116,067 
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied(31,452)
Cash received in advance and not recognized as revenue35,607 
Balances at March 31, 2022$120,222 
7
Table of Contents

 

 

Increase (Decrease)

 

 

 

Contract

 

 

 

Liabilities

 

Balances at December 31, 2020

 

$

107,158

 

Reclassification of the beginning contract liabilities

   to revenue, as the result of performance obligations satisfied

 

 

(53,771

)

Cash received in advance and not recognized as revenue

 

 

52,128

 

Balances at June 30, 2021

 

$

105,515

 

7

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During the sixthree months ended June 30, 2020,March 31, 2021, the Company recognized revenue of $32,682,000$34,418,000 related to its contract liabilities.

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2021March 31, 2022 that are expected to be recognized in the future (in thousands):

 

 

Services

 

Remainder of 2021

 

$

74,988

 

2022

 

 

56,887

 

2023

 

 

26,030

 

2024 and thereafter

 

 

20,528

 

Total remaining performance obligations

 

$

178,433

 

Services
Remainder of 2022$109,420 
202349,669 
202426,963 
2025 and thereafter16,024 
Total remaining performance obligations$202,076 

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, remainingremaining 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 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 June 30, 2021March 31, 2022 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 23 months.

The majority of our backlog historically has been and continues to be open cancelablecancellable 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 cancelablecancellable purchase orders, which do not qualify for revenue recognition, in the table above.

3.

Assets Held for Sale

3.    Assets Held for Sale
During the first half ofthree months ended March 31, 2021, we completed the sale of 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 useused the proceeds from the sales to ready our property in Chandler, Arizona to be used as our global corporate headquarters. During the first half of 2020,three months ended March 31, 2022, we completed the sale of our property in Irvine, Californiahad no assets held for approximately $14,218,000.

8

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

sale.

4.

Net Earnings Per Share (“EPS”)

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”)
8
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
March 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

20222021

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

Net earnings

 

$

58,561

 

 

$

46,385

 

 

$

101,729

 

 

$

80,346

 

Net earnings$56,631 $43,168 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

Weighted average shares used to

compute basic EPS

 

 

35,097

 

 

 

35,060

 

 

 

35,148

 

 

 

35,147

 

Weighted average shares used to compute basic EPS34,974 35,199 

Dilutive potential common shares due to

dilutive RSUs, net of tax effect

 

 

378

 

 

 

200

 

 

 

420

 

 

 

306

 

Dilutive potential common shares due to dilutive RSUs, net of tax effect330 461 

Dilutive potential common shares due to

the Notes

 

 

1,660

 

 

 

—

 

 

 

1,349

 

 

 

—

 

Dilutive potential common shares due to the Notes1,677 1,039 

Weighted average shares used to compute

diluted EPS

 

 

37,135

 

 

 

35,260

 

 

 

36,917

 

 

 

35,453

 

Weighted average shares used to compute diluted EPS36,981 36,699 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

Basic

 

$

1.67

 

 

$

1.32

 

 

$

2.89

 

 

$

2.29

 

Basic$1.62 $1.23 

Diluted

 

$

1.58

 

 

$

1.32

 

 

$

2.76

 

 

$

2.27

 

Diluted$1.53 $1.18 

For the three and six months ended June 30, 2021, 200 and 100, respectively,March 31, 2022, 13,000 of our RSUs were excluded from the diluted EPS calculations.calculations because their inclusion would have been anti-dilutive. 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. For the three and six months ended June 30, 2020, 400,000 and 243,000, respectively,March 31, 2021, none of our RSUs were excluded from the diluted EPS calculations 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.

5.

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

5.    Debt,

Inventory Financing Facilities, Finance Leases and Other Financing Obligations

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

 

June 30,

2021

 

 

December 31,

2020

 

March 31,
2022		December 31,
2021

ABL revolving credit facility

 

$

180,000

 

 

$

140,000

 

ABL revolving credit facility$373,000 $53,000 

Convertible senior notes due 2025

 

 

302,415

 

 

 

296,419

 

Convertible senior notes due 2025344,858 308,543 

Finance leases and other financing obligations

 

 

1,487

 

 

 

2,267

 

Finance leases and other financing obligations63 63 

Total

 

 

483,902

 

 

 

438,686

 

Total717,921 361,606 

Less: current portion of long-term debt

 

 

(650

)

 

 

(1,105

)

Less: current portion of long-term debt(344,903)(36)

Long-term debt

 

$

483,252

 

 

$

437,581

 

Long-term debt$373,018 $361,570 

9

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our senior secured revolving credit facility (the “ABL facility”), 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. 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. 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 June 30, 2021,March 31, 2022, eligible
9
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
accounts receivable and inventory were sufficient to permit access to the full $1,200,000,000 facility amount, of which $180,000,000$373,000,000 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

In August 2019, we issued $350,000,000 aggregate principal amount of Notes that mature on February 15, 2025. The Notes bear interest at an annual rate of 0.75% payable semiannually, in arrears, on February 15th and August 15th of each year. The 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.

Holders of the 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, 20192020 (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 (the “market price trigger”); (2) during the five business day period after any 5five day consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last 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 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.

The Notes exceeded the market price trigger of $88.82 in the first quarter of 2022 making the Notes convertible at the option of the holders through June 30, 2022. All of the Notes remain outstanding at March 31, 2022. The Notes are convertible at the option of the holders at March 31, 2022 and, if exercised, we are required to settle the principal amount of the Notes in cash. As such, the Notes balance net of unamortized debt issuance costs are classified as current. If the Notes continue to exceed the market price trigger in future periods, they will remain convertible at the option of the holders, and the principal amount will continue to be classified as current.
Upon conversion, we will pay or deliver cash equal to the principal amount of the Notes, plus cash or 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.for any additional amounts due. The conversion rate will initially be 14.6376 shares of common stock per $1,000 principal amount of 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

10

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

increase for a holder who elects to convert their Notes in connection with those events or during the related redemption period in certain circumstances.

Our convertible notes exceeded the market price trigger of $88.82 in the second quarter of 2021 making the notes convertible at the option of the holders at any time through the maturity date.  NaNne of the note holders have exercised their rights at this time.

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
10
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of June 30, 2021,March 31, 2022, 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.

The Notes are subject to certain customary events of default and acceleration clauses. As of June 30, 2021,March 31, 2022, no such events have occurred.

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

 

June 30,

2021

 

 

December 31,

2020

 

March 31,
2022		December 31,
2021

Liability:

 

 

 

 

 

 

 

 

Liability:

Principal

 

$

350,000

 

 

$

350,000

 

Principal$350,000 $350,000 

Less: debt discount and issuance costs, net of accumulated accretion

 

 

(47,585

)

 

 

(53,581

)

Less: debt discount and issuance costs, net of accumulated accretion(5,142)(41,457)

Net carrying amount

 

$

302,415

 

 

$

296,419

 

Net carrying amount$344,858 $308,543 

 

 

 

 

 

 

 

 

Equity, net of deferred tax

 

$

44,731

 

 

$

44,731

 

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


As a result of our adoption of ASU 2020-06, effective January 1, 2022, we no longer reflect any debt discount on the Notes in our consolidated balance sheet, nor do we recognize amortization of debt discount within our consolidated statement of operations. Also in January 2022, we filed an irrevocable settlement election notice with the note holders to inform them of our election to settle the principal amount of the Notes in cash. As a result of this election, at period ends where the market price, or other conversion triggers are met, the Notes will be classified in our consolidated balance sheet as current.

The remaining life of the debt discount and issuance cost accretion is approximately 3.6252.87 years. The effective interest rate on the liability componentprincipal of the Notes is 4.325%0.750%.

Interest expense resulting from the Notes reported within the consolidated statement of operations for the three and six months ended June 30,March 31, 2022 is made up of contractual coupon interest and amortization of debt issuance costs. Interest expense resulting from the Notes reported within the consolidated statement of operations for the three months ended 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, we entered into the Call Spread Transactions with respect to the Company’s common stock.

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. 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.

11

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INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

Inventory Financing Facilities

On June 28, 2021, we entered into

We have an unsecured inventory financing facility in Canada (the “Canada facility”with MUFG Bank Ltd (“MUFG”) with afor $280,000,000. During the first quarter of 2022, we increased our maximum borrowing capacity of $25,000,000.  This facility will stay in effect until it is terminated by any of the parties.  If balances are not paid within stated vendor terms, they will accrue interest at Canadian Dollar Offered Rate plus 4.50%.  Amounts outstandingavailability under this facility will be classified as accounts payable – inventory financing facilities in the accompanying balance sheets.

Additionally, we have a $250,000,000our unsecured inventory financing facility with each of MUFG Bank Ltd (“MUFG”) and PNC Bank, N.A. (“PNC”) and a $40,000,000from $300,000,000 to $375,000,000, including the $25,000,000 facility in Canada (the "Canada facility"). We also increased our unsecured inventory financing facility with Wells Fargo in EMEA.  As of June 30, 2021, our combined inventory financing facilities had a total maximum capacity of $565,000,000, of which $309,316,000 was outstanding.EMEA (the "EMEA facility") to $50,000,000. 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%, on the MUFG facility, Canadian Dollar Offered Rate plus 4.50% on the Canada facility and LIBOR, EURIBOR, or SONIA, as applicable, plus 4.50% and 0.25% on the MUFG, PNC (other than the Canada facility) and 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 consolidated balance sheets and within cash flows from financing activities in the accompanying consolidated statements of cash flows.

6.

Income Taxes

As of March 31, 2022, our combined inventory financing facilities had a total maximum capacity of $705,000,000, of which $318,433,000 was outstanding.

6.    Income Taxes
Our effective tax raterates for the three and six months ended June 30, 2021 was 25.4% and 24.8%, respectively.  For the three months ended June 30,March 31, 2022 and 2021 ourwere 24.1% and 23.8%, respectively. Our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by tax benefits related to research and development activities.  For the six months ended June 30, 2021, our effective tax rate wasrates were higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by excess tax benefits on the settlement of employee share basedshare-based compensation and tax benefits related to research and development activities.

Our effective tax rate for the three and six months ended June 30, 2020 was 26.2% and 23.8%, respectively. For the three months ended June 30, 2020, our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by tax benefits related to research and development activities.  For the six months ended June 30, 2020, our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by the remeasurement of acquired net operating losses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the recognition of tax benefits related to research and development activities.

As of June 30, 2021,March 31, 2022 and December 31, 2020,2021, we had approximately $11,486,000$13,347,000 and $10,546,000,$12,664,000, respectively, of unrecognized tax benefits. Of these amounts, approximately $870,000$1,385,000 and $749,000,$1,250,000, 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.

12

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We are currently under audit in various jurisdictions for tax years 20132015 through 2018.2019. 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.

7.Share Repurchase Program

On February 26, 2020, we announced that our Board of Directors had authorized the repurchase of up to $50,000,000 of our common stock. On May 6, 2021, we announced that our Board of Directors had authorized the repurchase of up to $125,000,000 of our common stock, including the $25,000,000$25,000,000 that remained available from the February 2020 authorization. As of March 31, 2022, approximately $75,000,000 remained available for repurchases under this share repurchase plan. 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
12
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 sixthree months ended June 30,March 31, 2022 and 2021, we repurchased 497,243did not repurchase any shares of our common stock on the open market at a total cost of $49,999,979 (an average price of $100.55 per share).  During the six months ended June 30, 2020, we repurchased 444,813 shares of our common stock on the open market at a total cost of $24,999,996 (an average price of $56.20 per share).  All shares repurchased during the six months ended June 30, 2021stock.
8.    Commitments and 2020 were retired.

Contingencies

8.

Commitments and Contingencies

Contractual

Contractual

In the ordinary course of business, we issue performance bonds to secure our performance under certain contracts or state tax requirements. As of March 31, 2022, we had approximately $27,348,000 of performance bonds outstanding. 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 June 30, 2021.March 31, 2022. 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

13

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 June 30, 2021.March 31, 2022. 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. There are no pending legal proceedings that involve the indemnification of any of the Company’s directors or officers.

13
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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

14

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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.

9.Segment Information

We operate in 3 reportable geographic operating segments: North America; EMEA; and APAC. Our offerings in North America and certain countries in EMEA and APAC include IT hardware, software and services, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related services and cloud solutions.

14
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
In the following table, 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 basis as an agent, for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (in thousands):

 

Three Months Ended June 30, 2021

 

Three Months Ended March 31, 2022

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Offerings

Hardware

 

$

1,168,770

 

 

$

170,406

 

 

$

11,768

 

 

$

1,350,944

 

Hardware$1,451,319 $210,623 $11,646 $1,673,588 

Software

 

 

331,809

 

 

 

184,986

 

 

 

21,439

 

 

$

538,234

 

Software341,547 272,402 22,750 636,699

Services

 

 

259,050

 

 

 

61,982

 

 

 

19,291

 

 

$

340,323

 

Services271,639 48,408 20,516 340,563

 

$

1,759,629

 

 

$

417,374

 

 

$

52,498

 

 

$

2,229,501

 

$2,064,505 $531,433 $54,912 $2,650,850 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Client Groups

Large Enterprise / Corporate

 

$

1,219,953

 

 

$

297,677

 

 

$

25,663

 

 

$

1,543,293

 

Large Enterprise / Corporate$1,438,729 $353,904 $21,429 $1,814,062 

Commercial

 

 

362,744

 

 

 

17,166

 

 

 

16,110

 

 

 

396,020

 

Commercial441,159 18,421 14,659 474,239 

Public Sector

 

 

176,932

 

 

 

102,531

 

 

 

10,725

 

 

 

290,188

 

Public Sector184,617 159,108 18,824 362,549 

 

$

1,759,629

 

 

$

417,374

 

 

$

52,498

 

 

$

2,229,501

 

$2,064,505 $531,433 $54,912 $2,650,850 

Revenue Recognition based on acting as

Principal or Agent in the Transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Gross revenue recognition (Principal)

 

$

1,661,386

 

 

$

380,325

 

 

$

44,835

 

 

$

2,086,546

 

Gross revenue recognition (Principal)$1,970,921 $506,862 $47,018 $2,524,801 

Net revenue recognition (Agent)

 

 

98,243

 

 

 

37,049

 

 

 

7,663

 

 

 

142,955

 

Net revenue recognition (Agent)93,584 24,571 7,894 126,049 

 

$

1,759,629

 

 

$

417,374

 

 

$

52,498

 

 

$

2,229,501

 

$2,064,505 $531,433 $54,912 $2,650,850 

15

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

Three Months Ended June 30, 2020

 

Three Months Ended March 31, 2021

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Offerings

Hardware

 

$

1,023,970

 

 

$

153,255

 

 

$

6,834

 

 

$

1,184,059

 

Hardware$1,109,489 $195,971 $9,565 $1,315,025 

Software

 

 

286,202

 

 

 

186,781

 

 

 

15,891

 

 

 

488,874

 

Software308,738 234,423 34,834 577,995 

Services

 

 

228,975

 

 

 

51,981

 

 

 

14,846

 

 

 

295,802

 

Services236,554 48,442 15,052 300,048 

 

$

1,539,147

 

 

$

392,017

 

 

$

37,571

 

 

$

1,968,735

 

$1,654,781 $478,836 $59,451 $2,193,068 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Client Groups

Large Enterprise / Corporate

 

$

1,023,562

 

 

$

273,147

 

 

$

16,102

 

 

$

1,312,811

 

Large Enterprise / Corporate$1,171,428 $309,075 $19,076 $1,499,579 

Commercial

 

 

332,384

 

 

 

13,178

 

 

 

15,562

 

 

 

361,124

 

Commercial344,045 20,533 12,667 377,245 

Public Sector

 

 

183,201

 

 

 

105,692

 

 

 

5,907

 

 

 

294,800

 

Public Sector139,308 149,228 27,708 316,244 

 

$

1,539,147

 

 

$

392,017

 

 

$

37,571

 

 

$

1,968,735

 

$1,654,781 $478,836 $59,451 $2,193,068 

Revenue Recognition based on acting as

Principal or Agent in the Transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Gross revenue recognition (Principal)

 

$

1,451,922

 

 

$

359,206

 

 

$

31,063

 

 

$

1,842,191

 

Gross revenue recognition (Principal)$1,569,641 $450,977 $52,863 $2,073,481 

Net revenue recognition (Agent)

 

 

87,225

 

 

 

32,811

 

 

 

6,508

 

 

 

126,544

 

Net revenue recognition (Agent)85,140 27,859 6,588 119,587 

 

$

1,539,147

 

 

$

392,017

 

 

$

37,571

 

 

$

1,968,735

 

$1,654,781 $478,836 $59,451 $2,193,068 

 

 

Six Months Ended June 30, 2021

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware

 

$

2,278,259

 

 

$

366,377

 

 

$

21,333

 

 

$

2,665,969

 

Software

 

 

640,547

 

 

 

419,409

 

 

 

56,273

 

 

$

1,116,229

 

Services

 

 

495,604

 

 

 

110,424

 

 

 

34,343

 

 

$

640,371

 

 

 

$

3,414,410

 

 

$

896,210

 

 

$

111,949

 

 

$

4,422,569

 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large Enterprise / Corporate

 

$

2,391,381

 

 

$

606,752

 

 

$

44,739

 

 

$

3,042,872

 

Commercial

 

 

706,789

 

 

 

37,699

 

 

 

28,777

 

 

 

773,265

 

Public Sector

 

 

316,240

 

 

 

251,759

 

 

 

38,433

 

 

 

606,432

 

 

 

$

3,414,410

 

 

$

896,210

 

 

$

111,949

 

 

$

4,422,569

 

Revenue Recognition based on acting as

   Principal or Agent in the Transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross revenue recognition (Principal)

 

$

3,231,027

 

 

$

831,302

 

 

$

97,698

 

 

$

4,160,027

 

Net revenue recognition (Agent)

 

 

183,383

 

 

 

64,908

 

 

 

14,251

 

 

 

262,542

 

 

 

$

3,414,410

 

 

$

896,210

 

 

$

111,949

 

 

$

4,422,569

 

16

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

 

Six Months Ended June 30, 2020

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware

 

$

2,152,456

 

 

$

328,224

 

 

$

14,580

 

 

$

2,495,260

 

Software

 

 

591,365

 

 

 

387,863

 

 

 

46,761

 

 

 

1,025,989

 

Services

 

 

469,707

 

 

 

94,816

 

 

 

27,014

 

 

 

591,537

 

 

 

$

3,213,528

 

 

$

810,903

 

 

$

88,355

 

 

$

4,112,786

 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large Enterprise / Corporate

 

$

2,184,310

 

 

$

565,435

 

 

$

29,127

 

 

$

2,778,872

 

Commercial

 

 

718,460

 

 

 

30,920

 

 

 

29,216

 

 

 

778,596

 

Public Sector

 

 

310,758

 

 

 

214,548

 

 

 

30,012

 

 

 

555,318

 

 

 

$

3,213,528

 

 

$

810,903

 

 

$

88,355

 

 

$

4,112,786

 

Revenue Recognition based on acting as

   Principal or Agent in the Transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross revenue recognition (Principal)

 

$

3,052,436

 

 

$

751,465

 

 

$

76,817

 

 

$

3,880,718

 

Net revenue recognition (Agent)

 

 

161,092

 

 

 

59,438

 

 

 

11,538

 

 

 

232,068

 

 

 

$

3,213,528

 

 

$

810,903

 

 

$

88,355

 

 

$

4,112,786

 

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

15
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
of our clients exceeded ten percent of consolidated net sales for the three and six months ended June 30, 2021March 31, 2022 or 2020.

2021.

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

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

 

Three Months Ended June 30, 2021

 

Three Months Ended March 31, 2022

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

Products

 

$

1,500,579

 

 

$

355,392

 

 

$

33,207

 

 

$

1,889,178

 

Products$1,792,866 $483,025 $34,396 $2,310,287 

Services

 

 

259,050

 

 

 

61,982

 

 

 

19,291

 

 

 

340,323

 

Services271,639 48,408 20,516 340,563 

Total net sales

 

 

1,759,629

 

 

 

417,374

 

 

 

52,498

 

 

 

2,229,501

 

Total net sales2,064,505 531,433 54,912 2,650,850 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold:

Products

 

 

1,358,357

 

 

 

327,550

 

 

 

29,822

 

 

 

1,715,729

 

Products1,625,775 449,632 31,802 2,107,209 

Services

 

 

122,375

 

 

 

16,295

 

 

 

8,419

 

 

 

147,089

 

Services138,646 17,031 9,103 164,780 

Total costs of goods sold

 

 

1,480,732

 

 

 

343,845

 

 

 

38,241

 

 

 

1,862,818

 

Total costs of goods sold1,764,421 466,663 40,905 2,271,989 

Gross profit

 

 

278,897

 

 

 

73,529

 

 

 

14,257

 

 

 

366,683

 

Gross profit300,084 64,770 14,007 378,861 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

Selling and administrative expenses

 

 

213,900

 

 

 

53,957

 

 

 

9,230

 

 

 

277,087

 

Selling and administrative expenses235,220 52,326 10,094 297,640 

Severance and restructuring expenses

 

 

878

 

 

 

240

 

 

 

9

 

 

 

1,127

 

Severance and restructuring expenses304 1,068 — 1,372 

Earnings from operations

 

$

64,119

 

 

$

19,332

 

 

$

5,018

 

 

$

88,469

 

Earnings from operations$64,560 $11,376 $3,913 $79,849 

17

Three Months Ended March 31, 2021
North AmericaEMEAAPACConsolidated
Net sales:
Products$1,418,227 $430,394 $44,399 $1,893,020 
Services236,554 48,442 15,052 300,048 
Total net sales1,654,781 478,836 59,451 2,193,068 
Costs of goods sold:
Products1,283,876 396,184 41,198 1,721,258 
Services117,416 16,617 6,303 140,336 
Total costs of goods sold1,401,292 412,801 47,501 1,861,594 
Gross profit253,489 66,035 11,950 331,474 
Operating expenses:
Selling and administrative expenses206,806 55,447 8,937 271,190 
Severance and restructuring expenses(7,238)498 — (6,740)
Earnings from operations$53,921 $10,090 $3,013 $67,024 

16

Table of Contents
INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

 

Three Months Ended June 30, 2020

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

1,310,172

 

 

$

340,036

 

 

$

22,725

 

 

$

1,672,933

 

Services

 

 

228,975

 

 

 

51,981

 

 

 

14,846

 

 

 

295,802

 

Total net sales

 

 

1,539,147

 

 

 

392,017

 

 

 

37,571

 

 

 

1,968,735

 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

1,187,178

 

 

 

310,279

 

 

 

20,490

 

 

 

1,517,947

 

Services

 

 

107,073

 

 

 

13,558

 

 

 

5,768

 

 

 

126,399

 

Total costs of goods sold

 

 

1,294,251

 

 

 

323,837

 

 

 

26,258

 

 

 

1,644,346

 

Gross profit

 

 

244,896

 

 

 

68,180

 

 

 

11,313

 

 

 

324,389

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

 

187,313

 

 

 

48,177

 

 

 

7,090

 

 

 

242,580

 

Severance and restructuring expenses

 

 

4,904

 

 

 

2,093

 

 

 

13

 

 

 

7,010

 

Acquisition and integration related expenses

 

 

611

 

 

 

—

 

 

 

—

 

 

 

611

 

Earnings from operations

 

$

52,068

 

 

$

17,910

 

 

$

4,210

 

 

$

74,188

 

 

 

Six Months Ended June 30, 2021

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

2,918,806

 

 

$

785,786

 

 

$

77,606

 

 

$

3,782,198

 

Services

 

 

495,604

 

 

 

110,424

 

 

 

34,343

 

 

 

640,371

 

Total net sales

 

 

3,414,410

 

 

 

896,210

 

 

 

111,949

 

 

 

4,422,569

 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

2,642,233

 

 

 

723,734

 

 

 

71,020

 

 

 

3,436,987

 

Services

 

 

239,791

 

 

 

32,912

 

 

 

14,722

 

 

 

287,425

 

Total costs of goods sold

 

 

2,882,024

 

 

 

756,646

 

 

 

85,742

 

 

 

3,724,412

 

Gross profit

 

 

532,386

 

 

 

139,564

 

 

 

26,207

 

 

 

698,157

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

 

420,706

 

 

 

109,404

 

 

 

18,167

 

 

 

548,277

 

Severance and restructuring expenses

 

 

(6,360

)

 

 

738

 

 

 

9

 

 

 

(5,613

)

Earnings from operations

 

$

118,040

 

 

$

29,422

 

 

$

8,031

 

 

$

155,493

 

 

 

Six Months Ended June 30, 2020

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

2,743,821

 

 

$

716,087

 

 

$

61,341

 

 

$

3,521,249

 

Services

 

 

469,707

 

 

 

94,816

 

 

 

27,014

 

 

 

591,537

 

Total net sales

 

 

3,213,528

 

 

 

810,903

 

 

 

88,355

 

 

 

4,112,786

 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

2,475,375

 

 

 

656,028

 

 

 

56,782

 

 

 

3,188,185

 

Services

 

 

236,329

 

 

 

27,921

 

 

 

10,626

 

 

 

274,876

 

Total costs of goods sold

 

 

2,711,704

 

 

 

683,949

 

 

 

67,408

 

 

 

3,463,061

 

Gross profit

 

 

501,824

 

 

 

126,954

 

 

 

20,947

 

 

 

649,725

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

 

398,516

 

 

 

98,421

 

 

 

14,506

 

 

 

511,443

 

Severance and restructuring expenses

 

 

7,026

 

 

 

2,099

 

 

 

29

 

 

 

9,154

 

Acquisition-related expenses

 

 

1,873

 

 

 

204

 

 

 

—

 

 

 

2,077

 

Earnings from operations

 

$

94,409

 

 

$

26,230

 

 

$

6,412

 

 

$

127,051

 

18

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

 

June 30,

2021

 

 

December 31,

2020

 

March 31,
2022		December 31,
2021

North America

 

$

4,786,742

 

 

$

4,837,155

 

North America$4,825,025 $4,920,220 

EMEA

 

 

975,626

 

 

 

735,771

 

EMEA815,338 828,456 

APAC

 

 

163,587

 

 

 

155,761

 

APAC139,850 148,737 

Corporate assets and intercompany eliminations, net

 

 

(1,258,908

)

 

 

(1,417,955

)

Corporate assets and intercompany eliminations, net(930,425)(1,208,333)

Total assets

 

$

4,667,047

 

 

$

4,310,732

 

Total assets$4,849,788 $4,689,080 

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

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
March 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

20222021

Depreciation and amortization of property and

equipment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment:

North America

 

$

4,864

 

 

$

5,826

 

 

$

9,671

 

 

$

11,652

 

North America$4,420 $4,807 

EMEA

 

 

1,202

 

 

 

1,249

 

 

 

2,434

 

 

 

2,577

 

EMEA807 1,232 

APAC

 

 

142

 

 

 

137

 

 

 

284

 

 

 

272

 

APAC162 142 

 

 

6,208

 

 

 

7,212

 

 

 

12,389

 

 

 

14,501

 

5,389 6,181 

Amortization of intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets:

North America

 

 

7,440

 

 

 

9,371

 

 

 

14,857

 

 

 

18,864

 

North America7,348 7,417 

EMEA

 

 

501

 

 

 

534

 

 

 

997

 

 

 

1,040

 

EMEA457 496 

APAC

 

 

127

 

 

 

109

 

 

 

255

 

 

 

218

 

APAC120 128 

 

 

8,068

 

 

 

10,014

 

 

 

16,109

 

 

 

20,122

 

7,925 8,041 

Total

 

$

14,276

 

 

$

17,226

 

 

$

28,498

 

 

$

34,623

 

Total$13,314 $14,222 

19

17

Table of Contents
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 isneeds to be a technology business. We empower organizations of all sizes with Insight Intelligent Technology SolutionsTMtechnology, solutions and services to help our clients maximize the business value of information technology (“IT”) and drive (digital) transformation for tomorrow in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked global technology provider of end-to-end secure digital innovation, cloud/data center transformation solutions and connected workforce solutions, together with our supply chain optimization expertise,services, 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, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related services and cloud solutions.

On

On a consolidated basis, for the three months ended June 30, 2021:

•

Net sales of $2.2 billion increased 13% compared to the three months ended June 30, 2020.  The increase in net sales reflects a double digit increase in all major offering categories of net sales.  Excluding the effects of fluctuating foreign currency exchange rates, net sales increased 10% compared to the second quarter of 2020.

March 31, 2022:

•Net sales of $2.7 billion increased 21% compared to the three months ended March 31, 2021. The increase in net sales reflects a double digit increase in all categories of net sales. Excluding the effects of fluctuating foreign currency exchange rates, net sales increased 22% compared to the first quarter of 2021.

•

Gross profit of $378.9 million increased 14% compared to the three months ended March 31, 2021. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased 16% compared to the first quarter of 2021.

•Compared to the three months ended March 31, 2021, gross margin contracted approximately 80 basis points to 14.3% of $366.7 million increased 13% compared to the three months ended June 30, 2020.  Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased 9% compared to the second quarter of 2020.

•

Compared to the three months ended June 30, 2020, gross margin contracted approximately 10 basis points to 16.4% of net sales in the three months ended June 30, 2021. This 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 compared to the same period in the prior year.

•

Earnings from operations increased 19%, year over year, to $88.5 million in the second quarter of 2021 compared to $74.2 million in the second quarter of 2020.  The increase was primarily due to increased gross profit, a reduction in severance and restructuring expenses and no acquisition and integration related expenses in the current quarter. Excluding the effects of fluctuating foreign currency exchange rates, earnings from operations increased 15% year over year.

•

Net earnings and diluted earnings per share were $58.6 million and $1.58, respectively, for the second quarter of 2021.  This compares to net earnings of $46.4 million and diluted earnings per share of $1.32 for the second quarter of 2020.

20

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

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

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.  The pandemic has negatively impacted the global economy, disrupted global supply chains and reduced workforce participation.  While we did not see a significant impact of COVID-19 on our second quarter 2021 financial results, continued supply constraints stemming from shortages of chips and displays resulted in sustained elevated bookings as we entered the third quarter. We currently expect these supply constraints and extended lead times for certain products will begin to ease by the end of 2021 and expect growth in net sales in the second halfthree months ended March 31, 2022. This decline primarily reflects an increase in hardware net sales at lower margins and a change in the mix of 2021services net sales compared to the same period in the prior year.

The ultimate extent of the impact of the COVID-19 pandemic on our business

•Earnings from operations financial performance, and results of operations, including our abilityincreased 19%, year over year, to execute our business strategies and initiatives$79.8 million in the expected time frame, is currently unknownfirst quarter of 2022 compared to $67.0 million in the first quarter of 2021. The increase was primarily due to increased gross profit in the current quarter, partially offset by an increase in selling and will depend on future developments, which are highly uncertain, continuously evolvingadministrative expenses and cannot be predicted.severance and restructuring expenses. Excluding the effects of fluctuating foreign currency exchange rates, earnings from operations increased 20% year over year.
•Net earnings and diluted earnings per share were $56.6 million and $1.53, respectively, for the first quarter of 2022. This includes, but is not limitedcompares to net earnings of $43.2 million and diluted earnings per share of $1.18 for the first quarter of 2021. Of the $0.35 year over year increase in diluted earnings per share, $0.05 was due to the duration and spreadchange in method 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 resultsaccounting for the remainder of 2021.  Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends.  

Notes beginning in January 2022.

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
18
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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 9 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.

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INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

COVID-19 and Supply Chain Constraints Update

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has negatively impacted the global economy, disrupted global supply chains and reduced workforce participation. While we saw minimal negative impact of COVID-19 on our first quarter 2022 financial results, prolonged supply constraints resulted in sustained elevated backlog as we exited the quarter. We currently believe these supply constraints and extended lead times for certain products could impact results into the second half of 2022 and we expect growth in net sales in 2022 compared to 2021.

More recently, new variants of COVID-19, such as the Omicron variants, that are significantly more contagious than previous strains, have emerged. The spread of these new strains initially caused many government authorities and businesses to reimplement prior restrictions in an effort to lessen the spread of COVID-19 and its variants; however, some of these restrictions are now being lifted. 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 and its severity; the emergence and severity of its variants; the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) 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; general economic factors, such as increased inflation; supply chain constraints; labor supply issues; 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 in 2022 and beyond. Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends.

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, 2020.2021. 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,
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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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, 2020.  

2021.

Results of Operations

The COVID-19 pandemic negatively impacted the global economy and disrupted global supply chains and workforce participation.  While we did not observe significant impacts on our second quarter financial results, 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 sixnine months ended June 30, 2021March 31, 2022 and 2020:

2021:

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
March 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

20222021

Net sales

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Net sales100.0 %100.0 %

Costs of goods sold

 

 

83.6

 

 

 

83.5

 

 

 

84.2

 

 

 

84.2

 

Costs of goods sold85.7 84.9 

Gross profit

 

 

16.4

 

 

 

16.5

 

 

 

15.8

 

 

 

15.8

 

Gross profit14.3 15.1 

Selling and administrative expenses

 

 

12.4

 

 

 

12.3

 

 

 

12.4

 

 

 

12.4

 

Selling and administrative expenses11.2 12.3 

Severance and restructuring expenses and

acquisition and integration related expenses

 

 

—

 

 

 

0.4

 

 

 

(0.1

)

 

 

0.3

 

Severance and restructuring expenses and acquisition and integration related expenses0.1 (0.3)

Earnings from operations

 

 

4.0

 

 

 

3.8

 

 

 

3.5

 

 

 

3.1

 

Earnings from operations3.0 3.1 

Non-operating expense, net

 

 

0.5

 

 

 

0.6

 

 

 

0.5

 

 

 

0.5

 

Non-operating expense, net0.2 0.5 

Earnings before income taxes

 

 

3.5

 

 

 

3.2

 

 

 

3.0

 

 

 

2.6

 

Earnings before income taxes2.8 2.6 

Income tax expense

 

 

0.9

 

 

 

0.8

 

 

 

0.7

 

 

 

0.6

 

Income tax expense0.7 0.6 

Net earnings

 

 

2.6

%

 

 

2.4

%

 

 

2.3

%

 

 

2.0

%

Net earnings2.1 %2.0 %

We generally experience some seasonal trends in our sales of IT hardware, software and services. Software sales are typically seasonally higher in our second and fourth quarter, particularly the 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 areoften stronger in our third quarter, while sales in the state and local government and education

22

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 related to product versus services sales are, 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 incentive requirements, which occur regularly, could impact our results of operations to the extent we are unable to adaptshift our sales strategiesfocus and respond to optimize performance under the revised programs.   

them.

Net Sales. Net sales for the three months ended June 30, 2021March 31, 2022 increased 13%21%, year over year, to $2.2$2.7 billion compared to the three months ended June 30, 2020.March 31, 2021. This increase reflects increases in allour North America and EMEA segments, partially offset by a decrease in
20
Table of our operating segments.Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Net sales for the six months ended June 30, 2021 increased 8% year over year to $4.4 billion compared to the six months ended June 30, 2020.APAC. Our net sales by operating segment were as follows for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended March 31,%
Change

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

20222021

North America

 

$

1,759,629

 

 

$

1,539,147

 

 

 

14

%

 

$

3,414,410

 

 

$

3,213,528

 

 

 

6

%

North America$2,064,505 $1,654,781 25 %

EMEA

 

 

417,374

 

 

 

392,017

 

 

 

6

%

 

 

896,210

 

 

 

810,903

 

 

 

11

%

EMEA531,433 478,836 11 %

APAC

 

 

52,498

 

 

 

37,571

 

 

 

40

%

 

 

111,949

 

 

 

88,355

 

 

 

27

%

APAC54,912 59,451 (8)%

Consolidated

 

$

2,229,501

 

 

$

1,968,735

 

 

 

13

%

 

$

4,422,569

 

 

$

4,112,786

 

 

 

8

%

Consolidated$2,650,850 $2,193,068 21 %

Our net sales by offering category for North America for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 were as follows (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended March 31,%
Change

Sales Mix

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Sales Mix20222021

Hardware

 

$

1,168,770

 

 

$

1,023,970

 

 

 

14

%

 

$

2,278,259

 

 

$

2,152,456

 

 

 

6

%

Hardware$1,451,319 $1,109,489 31 %

Software

 

 

331,809

 

 

 

286,202

 

 

 

16

%

 

 

640,547

 

 

 

591,365

 

 

 

8

%

Software341,547 308,738 11 %

Services

 

 

259,050

 

 

 

228,975

 

 

 

13

%

 

 

495,604

 

 

 

469,707

 

 

 

6

%

Services271,639 236,554 15 %

 

$

1,759,629

 

 

$

1,539,147

 

 

 

14

%

 

$

3,414,410

 

 

$

3,213,528

 

 

 

6

%

$2,064,505 $1,654,781 25 %

Net sales in North America increased 14%,25% or $220.5$409.7 million, for the three months ended June 30, 2021March 31, 2022 compared to the three months ended June 30, 2020,March 31, 2021, primarily driven by increases in hardware net sales. Net sales of hardware, software and services increased 14%31%, 16%11% and 13%15%, respectively, year over year. The changesincreases for the three months ended June 30, 2021March 31, 2022 were the result of the following:

•

The increase in hardware net sales was due to higher volume of sales to large enterprise and corporate clients of devices and networking and storage products. The increase in volume of sales compared to the same period in the prior year was largely due to the impacts of COVID-19 experienced in the prior year.

•

The increase in software net sales was primarily due to higher volume of software licensing, partially offset by the continued migration of on-premise software to cloud solutions, reported net in services net sales.

•

The increase in services net sales was primarily due to an increase in net sales associated with cloud solution offerings and higher sales of Insight delivered services.

23

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Net sales in North America increased 6%, or $200.9 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by increases in hardware net sales was due to higher volume of sales to large enterprise and corporate clients primarily of devices. This growth in hardware net sales was higher than expected and we believe we could continue to see growth in this category into the second half of 2022.

•The increase in services net sales was primarily due to an increase in Insight delivered services and higher sales of software maintenance.
•The increase in software net sales.  Net sales was primarily due to higher volume of hardware, software andlicensing, partially offset by the continued migration of on-premise software to cloud solutions, reported net in services increased 6%, 8% and 6%, respectively, year over year.  The increase for the first half of 2021 was the result of the following:

net sales.•

The increase in hardware net sales was due to higher volume of sales to large enterprise and corporate clients.  

•

The increase in software net sales wasprimarily 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.

•

The increase in services net sales was primarily due to an increase in net sales associated with cloud solution offerings.

Our net sales by offering category for EMEA for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 were as follows (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended March 31,%
Change

Sales Mix

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Sales Mix20222021

Hardware

 

$

170,406

 

 

$

153,255

 

 

 

11

%

 

$

366,377

 

 

$

328,224

 

 

 

12

%

Hardware$210,623 $195,971 7 %

Software

 

 

184,986

 

 

 

186,781

 

 

 

(1

%)

 

 

419,409

 

 

 

387,863

 

 

 

8

%

Software272,402 234,423 16 %

Services

 

 

61,982

 

 

 

51,981

 

 

 

19

%

 

 

110,424

 

 

 

94,816

 

 

 

16

%

Services48,408 48,442 — %

 

$

417,374

 

 

$

392,017

 

 

 

6

%

 

$

896,210

 

 

$

810,903

 

 

 

11

%

$531,433 $478,836 11 %

Net sales in EMEA increased 6%,11% or $25.4$52.6 million, for the three months ended June 30, 2021March 31, 2022 compared to the three months ended June 30, 2020.  Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA decreased 4%, year to year.  Net sales of hardware and services increased 11% and 19%, respectively, year over year.  Net sales of software decreased 1%, year to year.  The net changes for the three months ended June 30, 2021 were the result of the following:

•

The increase in hardware net sales was due primarily to higher volumes of devices and networking products to corporate clients, partially offset by a lower volume of sales 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.

•

The slight decrease in software net sales was primarily due to continued migration of on-premise software to cloud solutions, partially offset by higher volume of sales to public sector clients.

Net sales in EMEA increased 11%, or $85.3 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.March 31, 2021. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA increased 1%17%, year over year.

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Net sales of hardware and software and services increased 12%, 8%7% and 16%, respectively, year over year. The net changesincreases for the first half of 2021three months ended March 31, 2022 were the result of the following:

•

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

•The increase in software net sales was primarily due to higher volume of sales to enterprise and public sector clients.•

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.

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INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

•The increase in hardware net sales was primarily due to higher volumes of sales to enterprise, corporate and 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.

•Services net sales were flat year over year due primarily to higher volume of sales of Insight delivered services offset by decreases in fees for cloud solutions and lower volume of software maintenance.
Our net sales by offering category for APAC for the three months ended June 30,March 31, 2022 and 2021 and 2020 were as follows (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended March 31,%
Change

Sales Mix

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Sales Mix20222021

Hardware

 

$

11,768

 

 

$

6,834

 

 

 

72

%

 

$

21,333

 

 

$

14,580

 

 

 

46

%

Hardware$11,646 $9,565 22 %

Software

 

 

21,439

 

 

 

15,891

 

 

 

35

%

 

 

56,273

 

 

 

46,761

 

 

 

20

%

Software22,750 34,834 (35 %)

Services

 

 

19,291

 

 

 

14,846

 

 

 

30

%

 

 

34,343

 

 

 

27,014

 

 

 

27

%

Services20,516 15,052 36 %

 

$

52,498

 

 

$

37,571

 

 

 

40

%

 

$

111,949

 

 

$

88,355

 

 

 

27

%

 $54,912 $59,451 (8)%

Net sales in APAC increased 40%,decreased 8% or $14.9$4.5 million, for the three months ended June 30, 2021March 31, 2022 compared to the three months ended June 30, 2020.March 31, 2021. Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC decreased 3%, year to year. Net sales of hardware and services increased 24%by 22% and 36%, respectively, year over year. Net sales of hardware, software and services increaseddecreased by 72%35%, 35% and 30%, respectively, year overto year. The net changes for the three months ended June 30, 2021March 31, 2022 were the result of the following:

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

•

The increase in software net sales was primarily due to an increase in sales to corporate and public sector clients.

•

The increase in hardware net sales was primarily the result of large transactions with corporate and enterprise clients combined with a return to sales volumes experienced before COVID-19.

•

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

Net sales in APAC increased 27%, or $23.6 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.  Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC increased 11%, year over year.  Net sales of hardware, software and services increased by 46%, 20% and 27%, respectively, year over year.  The net changes for the first half of 2020 were the result of the following:

•

The increase in software net sales was primarily due to an increase in net sales to corporate and public sectorhigher volume of sales to enterprise and commercial clients.

•

The increase in services•The decrease in software net sales was primarily due to continued migration of on-premise software to higher sales of Insight delivered services and cloud solutions.

•

The increase in hardware net sales was primarily the result of large transactions with corporate and enterprise clients combined with a return to sales volumes experienced before COVID-19.

25

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 six months ended June 30, 2021March 31, 2022 and 2020:

2021:

 

North America

 

 

EMEA

 

 

APAC

 

 

Three Months Ended

June 30,

 

 

Three Months Ended

June 30,

 

 

Three Months Ended

June 30,

 

North America
Three Months Ended
March 31,		EMEA
Three Months Ended
March 31,		APAC
Three Months Ended
March 31,

Sales Mix

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Sales Mix202220212022202120222021

Hardware

 

 

66

%

 

 

66

%

 

 

41

%

 

 

39

%

 

 

22

%

 

 

18

%

Hardware70 %67 %40 %41 %21 %16 %

Software

 

 

19

%

 

 

19

%

 

 

44

%

 

 

48

%

 

 

41

%

 

 

42

%

Software17 %19 %51 %49 %42 %59 %

Services

 

 

15

%

 

 

15

%

 

 

15

%

 

 

13

%

 

 

37

%

 

 

40

%

Services13 %14 %9 %10 %37 %25 %

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

100 %100 %100 %100 %100 %100 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

EMEA

 

 

APAC

 

 

Six Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Sales Mix

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Hardware

 

 

67

%

 

 

67

%

 

 

41

%

 

 

40

%

 

 

19

%

 

 

16

%

Software

 

 

19

%

 

 

18

%

 

 

47

%

 

 

48

%

 

 

50

%

 

 

53

%

Services

 

 

14

%

 

 

15

%

 

 

12

%

 

 

12

%

 

 

31

%

 

 

31

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Gross Profit. Gross profit increased 13%14%, or $42.3$47.4 million, for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020,March 31, 2021, with gross margin contracting approximately 1080 basis points to 16.4%14.3% for the three months ended June 30, 2021March 31, 2022 compared to 16.5%15.1% for the three months ended June 30, 2020.  March 31, 2021.
22
Gross profit increased 7%, or $48.4 million, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, with gross margin remaining flat at 15.8% for the first halfTable of 2021 compared to the first half of 2020.Contents

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Our gross profit and gross profit as a percentage of net sales by operating segment were as follows for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (dollars in thousands):

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Three Months Ended March 31,

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

2022% of
Net Sales		2021% of
Net Sales

North America

 

$

278,897

 

 

 

15.8

%

 

$

244,896

 

 

 

15.9

%

 

$

532,386

 

 

 

15.6

%

 

$

501,824

 

 

 

15.6

%

North America$300,084 14.5 %$253,489 15.3 %

EMEA

 

 

73,529

 

 

 

17.6

%

 

 

68,180

 

 

 

17.4

%

 

 

139,564

 

 

 

15.6

%

 

 

126,954

 

 

 

15.7

%

EMEA64,770 12.2 %66,035 13.8 %

APAC

 

 

14,257

 

 

 

27.2

%

 

 

11,313

 

 

 

30.1

%

 

 

26,207

 

 

 

23.4

%

 

 

20,947

 

 

 

23.7

%

APAC14,007 25.5 %11,950 20.1 %

Consolidated

 

$

366,683

 

 

 

16.4

%

 

$

324,389

 

 

 

16.5

%

 

$

698,157

 

 

 

15.8

%

 

$

649,725

 

 

 

15.8

%

Consolidated$378,861 14.3 %$331,474 15.1 %

North America’s gross profit for the three months ended June 30, 2021March 31, 2022 increased 14%18%, or $34.0$46.6 million, compared to the three months ended June 30, 2020.March 31, 2021. As a percentage of net sales, gross margin contracted 10approximately 80 basis points to 15.8% 14.5% for the secondfirst quarter of 2021.2022. The year over year changesyear-to-year declines in gross margin were primarily attributable to the following:
•

•

There was a decrease in margin from services net sales of 15There was a decrease in margin from services net sales of 74 basis points and a decrease in margin from product net sales, which includes partner funding and freight, of 4 basis points partially offset by an increase in product margin, which includes partner funding and freight, of 9 basis points compared to the same period in the prior year.

•

The decrease in margin from services net sales during the current quarter reflects a contraction in margin from Insight delivered services and a reduction of referral fees.

•

The increase in product margin is primarily the result of sales of hardware and software at higher margins than in the same period in the prior year.

26

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

North America’s gross profit for the six months ended June 30, 2021 increased 6%, or $30.6 million, compared to the three months ended June 30, 2020.  As a percentage ofsame period in the prior year.

•The decrease in margin from services net sales grossduring the current quarter reflects a contraction in margin was flat at 15.6% from warranty net sales, Insight delivered services and various other services recognized on a net basis.
•forThe decrease in product margin is primarily the first halfresult of 2021.  The year over year net changeshigher sales of lower margin products, including devices, than in gross margin were primarily attributable to the following:same period in the prior year.

•

There was a decrease in product margin, which includes partner funding and freight, of 25 basis points offset by an increase in margin from services net sales of 23 basis points compared to the same period in the prior year.  

•

The decrease in product margin is primarily the result of sales of hardware and software at 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 increase in margin from cloud solutions and other services that are recorded net.

EMEA’s gross profit for the three months ended June 30, 2021 increased $5.3March 31, 2022 decreased $1.3 million, or 8%2%, year overto year (decreasing(increasing 3% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020.March 31, 2021. As a percentage of net sales, gross margin increasedcontracted approximately 20160 basis points, year overto year. The year overto year net increasedecline in gross margin was primarily attributable to an increasea decrease in higherproduct margin, including partner funding and freight, of 86 basis points and a decrease in margin on services net sales, including cloud solutions and Insight delivered services, of 11574 basis points, partially offset by a points. The decrease in product margin which includes partner funding and freight,is primarily the result of 92 basis points.

EMEA’s gross profit forsales of hardware at lower margins than in the six months ended June 30, 2021, increased $12.6 million, or 10% (flat when excludingsame period in the effectsprior year. The decrease in services margin is primarily the result of fluctuating foreign currency exchange rates), compared to the first half of 2020.  As a percentage oflower net sales gross margin contracted approximately 10of cloud solutions, software maintenance and other services recognized on a net basis points, year to year.  The year to year decline in gross margin was primarily attributable to a decrease in product margin, which includes partner funding and freight, of 48 basis points, partially offset by a net increase in servicesexpanded margin including cloud solutions andon Insight delivered services, of 40 basis points.

services.

APAC’s gross profit for the three months ended June 30, 2021March 31, 2022 increased $2.9$2.1 million, or 26%17%, compared to the three months ended June 30, 2020March 31, 2021 (increasing 11%23% when excluding fluctuating foreign currency exchange rates). As a percentage of net sales, gross margin contractedexpanded approximately 290540 basis points, year toover year. The decreaseincrease in gross margin in the secondfirst quarter of 2022 compared to the first quarter of 2021 compared to the second quarter of 2020 was due toa decrease in gross margin on services net sales of 345 basis points.  This was primarily due to changes in sales mix including from Insight delivered services.  The decline was partially offset by an increase in gross margin on services net sales of 607 basis points. This expansion was partially offset by a decrease in gross margin on product net sales, which includes partner funding and freight, of 5066 basis points.

APAC’s gross profit for the first half of 2021 increased $5.3 million, or 25% compared to the first half of 2020 (increasing 10% excluding fluctuating foreign currency exchange rates).  As a percentage of net sales, gross The expanded margin contracted approximately 30 basis points, year to year.  The decrease in gross margin in the first six months of 2021 compared to the first six months of 2020 was primarily due to a decline in gross margins from services net sales was driven by increased margins on Insight delivered services and higher volume of 102 basis points, partially offset by an increase in gross margincloud solutions recognized on producta net sales, which includes partner funding and freight, of 72 basis points.

27

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

basis.

Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $34.5$26.5 million, or 14%10% (increasing 11% when excluding fluctuating foreign currency exchange rates), for the three months ended June 30, 2021March 31, 2022 compared to the three months ended March 31, 2021.
23
June 30, 2020Table of Contents.  
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Selling and administrative expenses increased $36.8 million, or 7% (increasing 2% when excluding fluctuating foreign currency exchange rates), for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Selling and administrative expenses increaseddecreased approximately 10110 basis points as a percentage of net sales in the secondfirst quarter of 20212022 compared to the secondfirst quarter of 2020.2021. The overall net increase in selling and administrative expenses reflects a $36.3$16.5 million net increase in personnel costs, including teammate benefits expenses primarily related to increases in overall teammate headcount and increases in variable compensation in the current year. This increase wasThere were also increases in professional fees of $7.5 million, including fees incurred for special projects, other expenses of $1.7 million and travel and entertainment costs of $1.6 million, year over year. These increases were partially offset by decreasesa decrease in depreciation and amortization and other expensesexpense of $3.1$0.7 million, and $2.4 million respectively, year to year.

Selling and administrative expenses remained flat as a percentage of net sales in the first half of 2021 compared to the first half of 2020.  The overall net increase in selling and administrative expenses reflects a $55.2 million increase in personnel costs, including teammate benefits expenses primarily due to increased headcount and increases in variable compensation in the current year. This increase was partially offset by decreases in depreciation and amortization, travel and entertainment costs and other expenses of $7.1 million, $5.4 million and $5.1 million, respectively, year to year.  The decreases in travel and entertainment costs reflect cost control measures taken in response to COVID-19 in the prior year that have been maintained in the current year.

Severance and Restructuring Expenses, Net. During the three months ended June 30, 2021,March 31, 2022, we recorded severance and restructuring expense, net of adjustments, of approximately $1.1$1.4 million. Comparatively, during the three months ended June 30, 2020,March 31, 2021, we recorded severance and restructuring expense, net of adjustments, of approximately $7.0$1.3 million. The charges primarily related to a realignment of certain roles and responsibilities and for North America and EMEA in the prior yearresponsibilities. Prior period due to the acquisition of PCM.  

During the six months ended June 30, 2021, we recorded severance expense, net of adjustments, of approximately $2.4 million. Comparatively, during the six months ended June 30, 2020, we recorded severance expense, net of adjustments, of approximately $9.2 million.  The charges primarily related to a realignment of certain roles and responsibilities and for North America and EMEA in the prior year period due to the acquisition of PCM.  In the six months ended June 30, 2021, severance charges were offset by gains on sale of properties of $8.0 million.

28

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Earnings from Operations. Earnings from operations increased 19%, or $14.3$12.8 million, for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020.  Earnings from operations increased 22%, or $28.4 million, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.March 31, 2021. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (dollars in thousands):

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Three Months Ended March 31,

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

2022% of
Net Sales		2021% of
Net Sales

North America

 

$

64,119

 

 

 

3.6

%

 

$

52,068

 

 

 

3.4

%

 

$

118,040

 

 

 

3.5

%

 

$

94,409

 

 

 

2.9

%

North America$64,560 3.1 %$53,921 3.3 %

EMEA

 

 

19,332

 

 

 

4.6

%

 

 

17,910

 

 

 

4.6

%

 

 

29,422

 

 

 

3.3

%

 

 

26,230

 

 

 

3.2

%

EMEA11,376 2.1 %10,090 2.1 %

APAC

 

 

5,018

 

 

 

9.6

%

 

 

4,210

 

 

 

11.2

%

 

 

8,031

 

 

 

7.2

%

 

 

6,412

 

 

 

7.3

%

APAC3,913 7.1 %3,013 5.1 %

Consolidated

 

$

88,469

 

 

 

4.0

%

 

$

74,188

 

 

 

3.8

%

 

$

155,493

 

 

 

3.5

%

 

$

127,051

 

 

 

3.1

%

Consolidated$79,849 3.0 %$67,024 3.1 %

North America’s earnings from operations for the three months ended June 30, 2021March 31, 2022 increased $12.1$10.6 million, or 23%20%, compared to the three months ended June 30, 2020.March 31, 2021. As a percentage of net sales, earnings from operations increaseddecreased by approximately 20 basis points to 3.6%3.1%. The increase in earnings from operations was primarily driven by an increase in gross profit, a decrease in severance and restructuring expenses and no acquisition and integration related expenses in the current period, partially offset by a net increase in selling and administrative expenses when compared to the three months ended June 30, 2020.

North America’sMarch 31, 2021. Earnings from operations decreased as a percentage of net sales primarily due to gross profit increasing at a slower rate than net sales.

EMEA’s earnings from operations for the sixthree months ended June 30, 2021March 31, 2022 increased $23.6$1.3 million, or 25%13% (increasing 17% when excluding the effects of fluctuating foreign currency exchange rates), compared to the sixthree months ended June 30, 2020.March 31, 2021. As a percentage of net sales, earnings from operations was flat at 2.1% as a result of declines in gross profit offset by decrease in selling and administrative expenses.
APAC’s earnings from operations for the three months ended March 31, 2022 increased $900,000, or 30% (increasing 34% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2021. As a percentage of net sales, earnings from operations increased by approximately 60200 basis points to 3.5%7.1%. The increase in earnings from operations was primarily driven by an increase in gross profit, a decrease in severance and restructuring expenses (including gains recognized on sale of properties) and no acquisition and integration related expenses in the current period, partially offset by an increase in selling and administrative expenses when compared to the six months ended June 30, 2020.

EMEA’s earnings from operations for the three months ended June 30, 2021 increased $1.4 million, or 8% (decreasing 1% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020.  Asas a percentage of net sales earnings from operations was flat with prior year at 4.6%.  The increase in earnings from operations was primarily driven by an increase in gross profit and a decrease in severance and restructuring expenses, partially offset by an increase in selling and administrative expenses compared to the three months ended June 30, 2020.

EMEA’s earnings from operations for the six months ended June 30, 2021 increased $3.2 million, or 12% (increasing 2% when excluding the effects of fluctuating foreign currency exchange rates), compared to the six months ended June 30, 2020.  As a percentage of net sales, earnings from operations increased by approximately 10 basis points to 3.3%.  The increase in earnings from operations was primarily driven by an increase in gross profit and a decrease in severance and restructuring expenses, partially offset by an increase in selling and administrative expenses compared to the six months ended June 30, 2020.

APAC’s earnings from operations for the three months ended June 30, 2021 increased $800,000, or 19% (increasing 6% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020.  As a percentage of net sales, earnings from operations decreased by approximately 160 basis points to 9.6%.  The increase in earnings from operations was primarily driven by an increase in gross profit, partially offset by an increase in selling and administrative expenses compared to the three months ended June 30, 2020.March 31, 2021.

24
Table of Contents

29

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

APAC’s earnings from operations for the six months ended June 30, 2021 increased $1.6 million, or 25% (increasing 12% when excluding the effects of fluctuating foreign currency exchange rates),compared to the six months ended June 30, 2020.  As a percentage of net sales, earnings from operations decreased by approximately 10 basis points to 7.2%.  Earnings from operations reflects an increase in gross profit partially offset by an increase in selling and administrative expenses when compared to the six months ended June 30, 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 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 June 30, 2021March 31, 2022 decreased 6%19%, or $636,000,$1.9 million, compared to the three months ended June 30, 2020. Interest expense, net forMarch 31, 2021. The decrease was due to no imputed interest under the sixNotes in the three months ended June 30, 2021 decreased 11%, or $2.5 million, compared to the six months ended June 30, 2020.  The decreases were due primarily to lowerMarch 31, 2022, partially offset by higher average daily balances and lower borrowinghigher interest rates under our ABL facility, which was partially offset byas well as increased imputed interest under our inventory financing facilities and the Notes.facilities.

Imputed

There was no imputed interest under the Notes was $2.7 million and $5.3for the three months ended March 31, 2022, following our adoption of ASU 2020-06 effective January 1, 2022, compared to $2.6 million for the three and six months ended June 30, 2021, respectively compared to $2.5 million and $5.0 million for the three and six months ended June 20, 2020, respectively.March 31, 2021. Imputed interest under our inventory financing facilities was $3.1 million and $6.7$4.3 million for the three and six months ended June 30, 2021, respectively,March 31, 2022 compared to $2.8 million and $5.6$3.6 million for the three and six months ended June 30, 2020, respectively.March 31, 2021. The increase in imputed interest under our inventory financing facilities was a result of expanded use of the facilities, in part as a result of expanded payment terms during the current period.facilities. For a 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 25.4%24.1% for the three months ended June 30, 2021 was lower than our effective tax rate of 26.2% for the three months ended June 30, 2020.  The decrease in our effective tax rate was due primarily to the remeasurement of deferred tax balances from the enactment of foreign tax rate changes and from excess tax benefits on settlement of employee share-based awards, offset in part by an increase in the state income tax base.

Our effective tax rate of 24.8% for the six months ended June 30, 2021March 31, 2022 was higher than our effective tax rate of 23.8% for the sixthree months ended June 30, 2020.March 31, 2021. The increase in our effective tax rate for the first half of 2021 compared to the first half of 2020 was due primarily to the rate impact of tax benefits associated with the CARES Act which did not recur in 2021, partially offset by an increasea reduction in excess tax benefits on the settlement of employee share-based compensation.

compensation, partially offset by a decrease in the valuation allowance recorded against certain tax attributes.


30

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 sixthree months ended June 30,March 31, 2022 and 2021 and 2020 (in thousands):

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

Net cash provided by operating activities

 

$

5,187

 

 

$

497,529

 

Net cash provided by (used in) investing activities

 

 

10,374

 

 

 

(6,682

)

Net cash used in financing activities

 

 

(35,482

)

 

 

(450,576

)

Foreign currency exchange effect on cash, cash equivalent

   and restricted cash balances

 

 

(594

)

 

 

(814

)

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(20,515

)

 

 

39,457

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

130,582

 

 

 

116,297

 

Cash, cash equivalents and restricted cash at end of period

 

$

110,067

 

 

$

155,754

 

Three Months Ended March 31,
20222021
Net cash (used in) provided by operating activities$(284,239)$42,706 
Net cash (used in) provided by investing activities(25,745)19,364 
Net cash provided by (used in) financing activities319,954 (49,267)
Foreign currency exchange effect on cash, cash equivalent
and restricted cash balances
969 (2,445)
Increase in cash, cash equivalents and restricted cash10,939 10,358 
Cash, cash equivalents and restricted cash at beginning of period105,977 130,582 
Cash, cash equivalents and restricted cash at end of period$116,916 $140,940 

Cash and Cash Flow

•

Our primary uses of cash during the six months ended June 30, 2021 were to fund our working capital requirements, to repurchase shares of our common stock and to pay down our inventory financing facilities.  

•Our primary uses of cash during the three months ended March 31, 2022 were to fund our working capital requirements.•

Operating activities provided $5.2 million in cash during the six months ended June 30, 2021, compared to $497.5 million during the six months ended June 30, 2020.

•Operating activities used $284.2 million in cash during the three months ended March 31, 2022, compared to cash provided by operating activities of $42.7 million during the three months ended March 31, 2021.•

We received proceeds from the sale of our properties held for sale of $27.2 million in the six months ended June 30, 2021 compared to proceeds of $14.2 million in the six months ended June 30, 2020.

25

Capital expenditures were $16.8 million and $14.5 million for the six months ended June 30, 2021 and 2020, respectively.

•

During the six months ended June 30, 2021, we repurchased an aggregate of $50.0 million of our common stock, pursuant to a repurchase program approved in February 2020, which was subsequently increased in May 2021.  During the six months ended June 30, 2020, we repurchased an aggregate of $25.0 million of our common stock, pursuant to the repurchase program approved in February 2020.

INSIGHT ENTERPRISES, INC.

•

Net borrowings under our ABL facility during the six months ended June 30, 2021 were $40.0 million compared to net repayments of $426.2 million during the six months ended June 30, 2020.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

••

We had net repayments under our inventory financing facilities of $17.5 million during the six months ended June 30, 2021, compared to net borrowings of $7.5 million during the six months ended June 30, 2020.  

We expectreceived proceeds from the sale of assets, including our properties held for sale, of $27.2 million in the three months ended March 31, 2021 with no comparable proceeds in the three months ended March 31, 2022.

•Capital expenditures were $25.7 million and $7.8 million for the three months ended March 31, 2022 and 2021, respectively.
•During the three months ended March 31, 2022 and 2021 we did not repurchase any of our common stock.
•Net borrowings under our ABL facility during the three months ended March 31, 2022 were $320.0 million compared to net repayments of $24.0 million during the three months ended March 31, 2021.
•We had net borrowings under our inventory financing facilities of $6.7 million during the three months ended March 31, 2022 compared to net repayments of $17.8 million during the three months ended March 31, 2021.
We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our presently anticipatedexpected cash and working capital requirements for operations as well as other strategic investments over the next 12 months. We believeexpect existing cash and cash flows from operations to continue to be sufficient to fund our operating cash activities and cash commitments for investing and financing activities, such as capital expenditures, strategic acquisitions, repurchases of our common stock, debt repayments and repayment of our inventory financing facilities. We currently expect to fund known cash commitments beyond the next twelve months through operating cash activities or other available financing resources.
Net cash (used in) provided by operating activities
•Cash flow used in operating activities in the first three months of 2022 was $284.2 million compared to cash provided by operating activities of $42.7 million in the first three months of 2021.
•The decrease in cash flow from operating activities was primarily driven by growth in hardware net sales and changes in partner mix, including increased volume with distributors with early payment terms.

Our consolidated cash flow operating metrics were as follows:
Three Months Ended
March 31,
20222021
Days sales outstanding in ending accounts receivable (“DSOs”) (a)
103 106 
Days inventory outstanding (“DIOs”) (b)
15 13 
Days purchases outstanding in ending accounts payable (“DPOs”) (c)
(77)(86)
Cash conversion cycle (days) (d)
41 33 
(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 90 days.
(b)Calculated as the balance of inventories 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 90 days.
(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 90 days.
(d)Calculated as DSOs plus DIOs, less DPOs.
26
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
•Our cash conversion cycle was 41 days in the first quarter of 2022, up 8 days from the first quarter of 2021.
•The net changes were a result of a 9 day decrease in DPOs and a 2 day increase in DIOs partially offset by a three day decrease in DSOs. The decrease in DPOs was primarily due to change in partner mix, including increased volume with distributors with early payment terms, partially offset by increases in balances on our inventory financing facilities.
•We expect that cash flow from operations will be used, at least partially, to fund working capital as we have a strong balance sheet and healthy liquidity position. The Company had capacitytypically pay our partners on average terms that are shorter than the average terms we grant to our clients to take advantage of upsupplier discounts.
•We intend to $1.2 billion under our ABL facility as of June 30, 2021. Foruse cash generated in the remainder of 2021, we plan to be prudent2022 in our useexcess of cash, using available cash to fund business operations andworking capital needs to pay down our ABL facility and inventory financing facilities.

31

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Net cash (used in) provided by operatinginvesting activities

•

Cash flow from operating activities in the first half of 2021 was $5.2 million compared to $497.5 million in the first half of 2020.  

•We received proceeds from the sale of assets, including properties held for sale of $27.2 million for the three months ended March 31, 2021 with no comparable activity in 2022.•

The decrease in cash flow from operating activities was primarily driven by partner payment deferrals and a large customer advance payment in the prior year with no comparable activity in the current year. Changes in partner mix and growth in net sales also contributed to the decrease during the current period.  We deferred, and in some cases reduced, our federal and other taxes paid through COVID-19 relief measures in the first half of 2020.  The discrete items described above combined with the change in partner mix and impact of growth on our inverted cash cycle resulted in lower cash from operations generated in the first half of 2021 compared to the first half of 2020.  

Our consolidated cash flow operating metrics

•Capital expenditures were as follows:

 

 

Three Months Ended

June 30,

 

 

 

2021

 

 

2020

 

Days sales outstanding in ending accounts receivable (“DSOs”) (a)

 

 

124

 

 

 

124

 

Days inventory outstanding (“DIOs”) (b)

 

 

11

 

 

 

12

 

Days purchases outstanding in ending accounts payable (“DPOs”) (c)

 

 

(101

)

 

 

(114

)

Cash conversion cycle (days) (d)

 

 

34

 

 

 

22

 

(a)$25.7 million and $7.8 million for the three months ended March 31, 2022 and 2021, respectively.

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 91 days.

(b)•We expect capital expenditures for the full year 2022 to be in a range of $65.0 to $70.0 million, including the final completion of our global corporate headquarters.

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 91 days.

(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 91 days.

(d)

Calculated as DSOs plus DIOs, less DPOs.

•

Our cash conversion cycle was 34 days in the second quarter of 2021, up 12 days from the second quarter of 2020.  

•

The net changes were a result of a 13 day decrease in DPOs partially offset by a one day decrease in DIOs. The decrease in DPOs was primarily due to change in partner mix and growth in the current year, partially offset by increases in balances on our inventory financing 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 2021 in excess of working capital needs, to pay down our ABL facility and inventory financing facilities.  

Net cash provided by (used in) investingfinancing activities

•During the three months ended March 31, 2022, we had net borrowings under our ABL facility that increased our outstanding long-term debt balance by $320.0 million.
•During the three months ended March 31, 2021, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by $24.0 million.
•We had net borrowings

under our inventory financing facilities of $6.7 million during the three months ended March 31, 2022 compared to net repayments of $17.8 million during the three months ended March 31, 2021.•

We received proceeds from the sale of properties held for sale of $27.2 million and $14.2 million for the six months ended June 30, 2021 and 2020, respectively.

•During the three months ended March 31, 2022 and 2021, we did not repurchase any of our common stock.•

Capital expenditures were $16.8million and $14.5 million for the six months ended June 30, 2021 and 2020, respectively.

32

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

•

We expect capital expenditures for the full year 2021 to be in a range of $65.0 million to $75.0 million, the majority of which will be used to ready our global corporate headquarters and to fund technology-related projects.   

Net cash used in financing activities

•

During the six months ended June 30, 2021, we had net borrowings under our ABL facility that increased our outstanding long-term debt balance by $40.0 million.  


•

During the six months ended June 30, 2020, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by $426.2 million.  

•

We had net repaymentsunder our inventory financing facilities of $17.5 million during the six months ended June 30, 2021 compared to net borrowings of $7.5 million during the six months ended June 30, 2020.  

•

During the six months ended June 30, 2021 and 2020, we repurchased an aggregate of $50.0 million and $25.0 million of our common stock, respectively, pursuant to our repurchase program approved in February 2020 and subsequently increased in May 2021.  

Financing Facilities

Our debt balance as of June 30, 2021March 31, 2022 was $483.9$717.9 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 objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.•

The Notes are subject to certain events of default and certain acceleration clauses.  As of June 30, 2021, no such events have occurred.

•The Notes are subject to certain events of default and certain acceleration clauses. As of March 31, 2022, 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 June 30, 2021, we were in compliance with all such covenants.

•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 March 31, 2022, we were in compliance with all such covenants.
27
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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.  

•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 $565.0 million, of which $309.3million was outstanding at June 30, 2021.  

•Our inventory financing facilities have an aggregate availability for vendor purchases of $705.0 million, of which $318.4 million was outstanding at March 31, 2022.
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 June 30, 2021,March 31, 2022, we had approximately $76.1$82.8 million in cash and cash equivalents in certain of our foreign subsidiaries, primarily residing in Australia, Canada, the Netherlands and the Netherlands.New Zealand. 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.

33

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 8 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“Cash Requirements From 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, 2020.

34

2021.
28

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, 2020.

2021.

Although our Notes are based on a fixed rate, changes in interest rates could impact the fair market value of such Notes. As of June 30, 2021,March 31, 2022, the fair market value of our Notes was $537$575 million. For additional information about our 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 June 30, 2021March 31, 2022 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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40

INSIGHT ENTERPRISES, INC.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see “– Legal Proceedings” in Note 8 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, 20202021 (the “Annual Report”), which could materially affect our business, financial condition or future results. The risks described in our Annual Report 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.

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

There were no unregistered sales of equity securities during the three months ended June 30, 2021.

March 31, 2022.

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.

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

 

April 1, 2021 through April 30, 2021

 

 

—

 

 

$

—

 

 

 

—

 

 

$

25,032,004

 

May 1, 2021 through May 31, 2021

 

 

497,243

 

 

 

100.55

 

 

 

497,243

 

 

 

75,032,025

 

June 1, 2021 through June 30, 2021

 

 

—

 

 

 

—

 

 

 

—

 

 

 

75,032,025

 

Total

 

 

497,243

 

 

 

 

 

 

 

497,243

 

 

 

 

 

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, 2022 through January 31, 2022— $— — $75,032,025 
February 1, 2022 through February 28, 2022— — — 75,032,025 
March 1, 2022 through March 31, 2022— — — 75,032,025 
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. 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. As of June 30, 2021,March 31, 2022, approximately $75 million remained available for repurchases under this share repurchase plan.

In accordance with the share repurchase plan, 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 number 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.

36

INSIGHT ENTERPRISES, INC.

Repurchases during the quarter ended June 30, 2021 are reflected in the table above and were made pursuant to our share repurchase plans.  All shares repurchased during the three months ended June 30, 2021 were retired.

Item 3. Defaults Upon Senior Securities.

Not applicable.

42
INSIGHT ENTERPRISES, INC.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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Table of Contents
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 Management Separation Plan

 

10-Q

 

000-25092

 

10.1

 

May 6, 2021

 

 

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

 

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

 

 

 

 

 

 

 

 

 

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 DescriptionFormFile No.
Exhibit
Number
Filing
Date
Filed/Furnished
Herewith
3.110-K000-250923.1February 17, 2006
3.28-K000-250923.1May 21, 2015
3.38-K000-250923.2May 21, 2015
4.1Specimen Common Stock Certificate (P)S-133-861424.1January 20, 1995
10.1X
31.1X
31.2X
32.1X
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)X

(P)

(p)Paper exhibit.

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44

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:

August

Date:May 5, 2021

2022

INSIGHT ENTERPRISES, INC.

By:

By:

/s/ Kenneth T. Lamneck

Joyce A. Mullen

Kenneth T. Lamneck

Joyce A. Mullen

President and Chief Executive Officer

(Duly Authorized Officer)

By:

By:/s/ Glynis A. Bryan

Glynis A. Bryan

Chief Financial Officer

(Principal Financial Officer)

By:

By:/s/ Rachael A. Crump

Rachael A. Crump

Global Corporate Controller

(Principal Accounting Officer)

39

45