NSIT - Earnings call transcript Q1 2019 | Insight Enterprises, Inc.

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Operator

Greetings, and welcome to the Insight Enterprises First Quarter 2019 Operating Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Glynis Bryan, Chief Financial Officer. you. Thank

begin. may You

Glynis Bryan

XX, everyone Ken conference you be call results Officer. and ended company's Welcome Financial Bryan, Insight of President Officer discussing joining and Enterprises operating Insight March quarter the earnings today. me for I'm and you. Glynis for Chief is thank joining the the XXXX. Lamneck, Thank Today, Executive we'll Chief

adjusted at and call that adjusted invested non-GAAP In Any Exchange a discuss of earnings conference on be is limited insight.com, archived without call we and was to conference not will insight.com. section. on as operations, information the free only XXXX. the we conference retransmission call our today and measures you Insight call include today's the will have copy XXXX written adjusted. as consent results. approximately measures, of the financial website available with measures express today's to per of for the capital cash this diluted will discussed earnings from live as measures An a is time. question-and-answer of the the rebroadcast such Relations redistribution, non-GAAP earnings quarter on adjusted Enterprises. filed prohibited. be in do flow. can is property share, call, call, via website adjusted Enterprises Today's May you the Securities be copy that referring to this will posted accessed under X-K, hours This being release or on our return Commission financial strictly call When in first of and Investor refer to morning associated form X, of Non-GAAP Form the accurate Relations it is any time-sensitive will refer webcast Insight and of This we after If the two including remain period, our webcast find completion contain Investor and our at website page call of

a release that find rates slide currency, and to measures dollar highlighted adjusted today. note and all terms. please as GAAP U.S. the accompanying press in amounts presentation constant discussed are You'll these results issued Also reconciliation unless included earlier of the actual in growth

statements begin are Finally, recently will let press about filed made that me will our in release are differ forward-looking are be uncertainties today's on the we and cause greater X. could I Ken? this the along to call With subsequently remind in detail and over All call discussed conference you today's in will the forward-looking slide call. that now actual made that to Ken. And to results These with reports risks during the risks and that materially. XX-K subject if our Form following you're most turn SEC. presentation, slide with Annual and filed Report periodic statements on

Ken Lamneck

earnings results. performance us report Hello, today started the discuss first strong with Year we everyone, first operating New have pleased in thank you XXXX quarter to joining and our a I'm the quarter. to

a the helping of each and another our first growth quarter led in which services of our first in the strong cloud, with quarter these our to top-line clients decreased our expenses contributing business double-digit margin to profitable tough quarter which the controlled earnings in allowed on year growing against gross Our focused we sales last to expansion results results. migrate quarter. where comparison operating to segments four us time, we Same the deliver

and constant X% $XXX first record million year-over-year America. down in to up X% for increase gross largely to and These up enterprise the million expenses year-over-year dollars Consolidated hardware constant year-over-year year-over-year in Consolidated currency. primarily X% was XX% to The Specifically profit and up in Cardinal. of a clients $XXX selling sales were currency. year. administrative the growth Gross for XX the quarter This the the company. up large last XX.X%, net consolidated X% U.S. were first first down to quarter lower decline reported of XXXX, sales of in and X% of due new year-over-year currency. North billion constant quarter X% basis margin points is reflects results in in expanded compare acquisition $X.XX

earnings expenses adjusted basis, gross XX of on a the GAAP earnings GAAP profit compared share up earnings XXX year, administrative operations $X.XX. up sales. from gross and margin to $X.XX diluted operations XX% profit X.X% earnings And Adjusted to XX% XX% up to basis diluted period per a from operations was benefits same adjusted and down our increases. On expanded per year-over-year. of selling from was structure share last earnings year-over-year, were were as $XX points the However, percentage reflecting with basis points were year-over-year cost a of and scalable million basis

Our with our see very earnings well to and all to and financial quarter. operational in goals quarter results were line pleased internal the our coming of expectations in year we're meet into for the execute the our segments

to Moving X. slide

and leveraging year-over-year mix results optimize gross high dollars Each globally. four to margins to Our our first our to year-over-year. gross gross product profit the improving offerings quarter addition to in single-digits by margin solution improve reflect currency, our expand our mid grew services efforts region constant profile areas in

up profits trailing new for continued adjusted Gross in year the adjusted of our us to And evaluate discipline first cloud Gross XX% technologies. was for compared of year from prior We to XX% XX-months. prior a also net efforts quarter X.X% new cloud strategic as our clients expense implement in quarter. the drove XX% with the consolidated earnings excess XX-months, to of help combined sales. record at margin and expansion -- from EFO was solutions margin trailing operations quarter profit compared earned continued our gross

basis XX.X%. cash million operations on capital of $XXX generated points we increased return to flow adjusted and addition, year-over-year from In XXX investment

X, remainder slide to look the is growing. believe we as the to market we IT of XXXX, healthy and Moving

we segments, our To drive four continuing future. for leverage areas market our IT will on value strategic the so operating Our relationships, our to to clients' aligning and do solution XXXX target business businesses growth own today, organizing they their efficiently our driving empower our meaningful their opportunity. can by to plans needs, to and areas around outcomes for this, more key environments world, of resources our manage clients partnership the for are enhance to across to utilizing our transform our offerings proposition focused clients

we supply our attract on help focuses As of improve and improving million end improving we optimize through cost a are: chain our in acquisition in that early driving two. up excellence to reminder, addition to to of our uncover talent clients efficiency; space. to the to operational the several which second, and which synergies we businesses. retain our XXXX. four recent in overall transformation reach skills the Workforce, XXXX, worker infrastructure solution million optimization, and solution years, within $XX In productivity; our to the to on end first, areas. I'm increase enablement revenue workplace center third, acquisitions business improve of focuses and areas costs of lastly, deepen to In business and center environment agility innovative their and cloud our innovation, the cloud clients' $XX we report streams to business which delivery and Datalink delivered strengthen data to exceeded in comfortably transformation, estimates data estimated time, performance improve year applications leverages completed a digital expand cost data speed security; the January our their technical and strategic presence cloud At center helps and have client have clients by migrate made which optimize of and pleased new for enhance that Connected approximately in savings

schemes, talent within data first structures Similarly, August enhancements accelerated we're across activity, helped sales and to that integrated fully sales on growth As expand the the sales important seen back talent a our we have early look compensation space. innovation our agile teams planned, Cardinal innovation key business. XXXX, Solutions and center-related accelerate digital first and cross-sell end, we're lever leadership Since synergies. acquire existing financial made is the our quarter. success to and Headed have to We've within their we teams. also integrated digital strong of which we and and while Cardinal ours. XXXX, delivery completed To closing, scalable adding the in the also strategically as now team to and integrated successfully double-digit and drive into systems M&A cross-sell core in sales seeing acquired globally. recently offices we in more and four retaining organizational exceeding optimizing clients capabilities in the back-office between us, months our closing, to stronger business and the systems year, to opportunity our bringing the technical goals focused the were platform integration, for traction and

has a of combine ensuring we and that integration We the diligence proven the playbook on successful have opportunity due realize robust businesses.

and forward, look into acquisitions the hybrid in similar digital to innovation the acquisition to And XXXX in markets, new our to to practices, Australia portfolio. in XXXX. build key As cloud we'll consider EMEA and North out we tuck-in expand clients opportunities in and capabilities add Caase to we'll move continue acquisition America, Ignia in Netherlands the APAC in and our for

solve of they supply center clients expertise performance modernization, digital our our chain, to platform challenges to each the for other from have growth, breadth for in opportunity while solution IT provide transformation, and to optimize world. While to relevant leverage connected a each areas business our and most their the workforce data

incident highlight technology of to building's clients Glynis, LED with slide Moving that to first public platform of with and threatened area. our impacted clearly help We how Houston, IoT Azure a The City system. sensors safety better created real-time an solution back call addresses while I be platforms team nature IoT-enabled ActiveShield integrates solution before utilizes first implement the power Safe real-time people vicinity Microsoft during responders in emergency of of recently events, achieve Things-enabled during to innovation public an in hand safety want redefines areas spaces called the mechanisms partnered to critical our example Spaces is the to The color the our sound the an Insight's I running the facilitate sharing to leveraging the the through of communication information order and safe safety. business information digital we're more sharing to outcomes. crisis. like and to the conveys safety X, response lighting challenges of by Internet

The application market. performance. While is as more that ActiveShield broader cost-effective Glynis win, a deeply integrated of safety district our and on service Corporation’s the this announced the to main helped provide recently comprehensive International over focus I'll Buildings Houston endeavor to the in software for of solution deployments, this technology offers now Data details Smart our call provide financial hand the the City to smart Award. back the

Glynis Bryan

Thank you, Ken.

quarter. our first noted earlier, global Ken execution we're As the in team's pleased with

on net lower in sales in start compared of Let in an XX% XX% XX% to solutions, last slide client. Cardinal. declined year. as by as the $X.X hardware quarter, year Insight-delivered this with quarter, were Hardware of in higher compared services increase year-over-year, primarily acquisition North growth is well by reported me XXXX. year-over-year In of enterprise in in This due the X% the a quarter the produced including very billion increased increase large to sales to North sales, first America QX America, of first down sales XX. sales business first cloud decline Services the spending double-digit strong

to acquisition. the of X% mix basis expenses and sales in in growth large due XX.X%, addition, cloud services increased administrative reflecting was to primarily year-over-year Cardinal strong year-over-year, in enterprise and margin Gross America points expanded sales North and software the In up increased the clients. business. gross to XX% selling profit selected North America's XXX increased due

gross administrative dollars profit decreased a decreased of and selling -- points -- expenses year-over-year. basis percentage XX increased However, as

increased operations for X% As to the $XX a million result, year-over-year, from earnings adjusted quarter.

engagements. XX% in to on currency, and driven EMEA, on year-over-year maintenance, of net in sales solutions services primarily $XXX cloud to slide volume quarter Moving and XX, X% software professional increased from in higher million, first grew sales by that EMEA constant the services

Our and team and in margin grew profit XX X% currency, constant focused XX.X%. gross points by expanded gross dollars basis profitability to on

reduced earnings last team dollars year. same In gross addition percentage to basis a by improving the to margins, of XXX gross points, expenses from up this and period XX% drove as operations compared profit the adjusted

in highlighted in sales. X% prior adjusted XXX year X% slide high-margin control the quarter reduced in basis prior as as higher on sales APAC in Gross constant to XX, region, the earnings currency dollars on services gross to by in gross and grew year-over-year. expended percent the quarter, also currency a from was while Expense to sales, year selling constant due the and profit margin team combined grew million. Moving of -- control, net the administrative the cloud from points. $XX mix effective of margin profit first XX% an of with improvement the growth The resulted quarter expenses operations APAC cost gross in

focus Our solutions solution that our refined areas and on innovative clients' best our needs. services strategy has meet

of gross to year-over-year was driver a of As a XXXX, XX.X%. the margin of main growth result, our our record the first services new expansion quarter in

Diluted with expectations per quarter expectations The and partly the for by were interest the facilities, lower quarter. As for interest came rates. above share Ken to to slightly lower relates expense average in noted, lower taxes. first for our quarter, borrowings earnings interest offset expense financing consolidated consistent under the results our due higher

Our was tax effective lower The benefit XX.X%, due awards, tax compared from and primarily rate research effective rate related activities. year to development XX.X% benefits quarter increase first in of prior tax a an the to share-based settlement quarter. tax in and as employee the is to for

on cash compared cash our $XXX year. XXXX, flow slide of $XXX performance in to million million quarter of to the first last our Turning generated operations XX, of cash,

our general year client-specific accounts reducing Our inventory solid continues cash and on aged investments. minimizing reflect focus, and flow receivables, to this enhanced

the full expect range, be between of operations in For our cash from will normalized million. and million of we XXXX, to continue flow annual year $XXX $XXX

receipts DSO, down quarter from one-day, year due conversion the Our inventory the to minimizing days and cash in of DPO, The decrease effect resulted first focus XXXX, the due increase to the hand. on client payments DIO the prior days cycle relative six-day overall was one-day the some a increase net in due quarters. XX timing of respective in decreased in from to six a also on quarter.

arrangements, balance Just one that committed Effective new back implemented XXXX, more capitalization call a certain we update lease before that of requires the Ken. X I historically accounting off to sheet. give standard, January were

accrued first The million back between did not in affect quarter, The consolidated net the had $XX our I'll a use balances. to liabilities this result and million and Ken prepaid now strategic earnings lease assets cash operating reflect adoption call and lease and recorded and of XXXX the standard impact right net As rent of the to no quarter. flow outlook. first of to we priorities review in liabilities respectively. $XX lease difference turn assets and the our existing

Ken Lamneck

Thank you, Glynis.

XX. slide to on Moving

to turn I of year for like our you priorities. strategic our Before to full outlook XXXX, the I'd remind

growth solution First, each drive optimizing gross market on profitable four to we're of focused in with margins opportunity our year. higher and the our areas, services ahead leading

and information-based culture metric the embracing disciplined cost our that remain drives and structure. guides on will we leverage Second, our investments

strategic to of and our and organic opportunities global in Finally, capital growth investing footprint our shareholders. to pursuing expand by our to and offerings M&A we optimize return then plan cash use

XX. slide to on Moving

Our well strategic in the areas compete us positioned investments markets to serve. solution have our we in

purchase XX% the global Our range earnings This deep of resources our across assumes for adjusted many technical and sales scale. XXXX. low to you year not million for diluted year of We full for program and reflect XX.X that to clients today of and XX% full your and great share and offerings my joining the across does That concludes XX, all you acquisition-related expect with comments capital for on for XXXX. XXXX of expenditures an to full serve current expenses XXXX. all a our and for deliver to outlook shares slide market-leading services the partners repurchase verticals knowledge allow $X.XX the per to by the between globe made for any our do share strengthened start the now our in respect year, of an the average our sizes XXXX. now again to balance questions. line us for up differentiated assumes of thank Thank tax We outlook restructuring and and $XX under of or us share effective million outlook $XX compared we'll to open for rate your million to This growth severance $X.XX. single-digit count be full a in year, shares. expect no occur maybe year and teammates the approximately On

Operator

Tindle state first be comes we will question-and-answer Adam with Our session question [Operator Please question. conducting Raymond At this from time, James. your Instructions]

Adam Tindle

good revenue just XXXX that just wanted to growth I Thanks out. you guidance laid the Ken, Okay. on morning. start and maybe for

I the you you tough and growth better quarter I it think mid-single-digit started down than us that comparison, but know range in a of revenue first were in growth previously had thinking. most the expected was of on off

optimizing the improve. mentioned growing cross-selling the sales synergies You only remarks healthy prepared market you're is and in should and

I could digit would like color of Looks the on why low be main if there in slowing is back about past right QX intention push talking So helpful. Is any single downtick so your on that below just days? to now, over one customer seasonal Thanks. the growth. XX competitors purchasing maybe

Ken Lamneck

look we three increase we year in you expect of that we'll a mean, Thanks QX then and go obviously as and for obviously look for single-digit the X% point that the the the a minus math, when following question, from I view for quarters. probably decline finish for Adam. account just Yeah, the as as we at for year do through us low

see we definitely growth. So,

improving for that trend keep our business As going. to focused you enhancing and margin on profile opportunities can see, we're pretty

a the concern as think far see what it's certainly in we're being continued to market. as nice just seeing So market do occurring not but balancing the as we I signal that, a growth

Glynis Bryan

just Adam. to on And that, maybe to add

I be that from would growth think another QX QX of going soft is in anticipate with order get revenue to starts going coming-in kind it – that a revenue half perspective. that low-single-digit. to second into we on that And a out evening to the quarter in

is we're that basis be strong in given a had So QX XXXX. of we up to on QX that the growth envisioning going not year-over-year

Adam Tindle

helpful. That's

Glynis Bryan

for you how numbers the get to full That's year. the

Adam Tindle

basis If seasonal is it going on guidance you that Right. near EFO QX that full the maybe margin into back in I about low mid-X%. margin, for And then the also ballpark. were talking quarter just at a typically, and EFO you're implies your to year be

So maybe headwind there EFO investments not materialize year OpEx just from Is a on gross the leverage weighing this? the touch What margin Are vendor there on line. as cause change? would progresses? a to margin

Glynis Bryan

There I investments are in that investments or do that anticipate we full for somewhere range. and wouldn't those X.X% along we in the I think it's have come the business we're the to partner will we're making in that to some program that we lines. making necessarily say changes business. related year anything

Adam Tindle

Okay. just And clarify. maybe to

said weighting. XX-XX XXXX? is half EPS Can you second think like half a You've about how weighting historically for can for first of kind help we that us

Glynis Bryan

biggest little second is somewhat first say not half. from bit and would going little a half in the to bigger in we be QX It's it higher be than to your a the in that range. our of our first be perspective than still perspective. bit the the the typically had half quarter from that expected in going is A versus I because to higher QX half going second

Adam Tindle

it. Got

very you Thank Okay. much.

Glynis Bryan

of that year. in tax for a tax It to to the expect anticipating normalize range. the forward. will XX% we XX% not XX% normalize We're going And remainder the rate will

Adam Tindle

helpful. That's it. Got

Operator

you. Thank

question. next Stifel. your question with comes Sheerin from Please state Our Mark

Matt Sheerin

Matt Stifel. Hi. Sheerin It's Yes. from

follow-ups Just a of Adam. couple from

the hardware cycle on through that Ken. regarding demand the Just environment, refresh we've been just

gone go You here like both as now? did cycle through talk sounds some obviously year tough they've it thoughts customers What's on slower. about we the PCs? enterprise comps, were that your but that because Yes. servers and Is through

Ken Lamneck

Yes.

degree lot is that did large-scale We Matt again, refresh seeing I front, a tend really they're in you're we've it sort think, course year. pretty to a through over we But a there On we clients it had do calling And we're cycle cycle the of that some of of it the go a to of going clients it not every same a or normalcy? is just period. doing to see four-year consistency more discussed correct. PC

you still have And Win pretty big XX in opportunities occur. so we momentum We We're last as There's lots saw that regard. upticks migrations year of optimistic. that to of for space. still a there's some lot in that still think

-- normalcy a that think I next be forward years. think we it'll more going So over will the of few

healthy situations there. pretty seeing So,

you we we're center cross-selling. the and some continuing part have On good to there focused know been as be the data cloud side, very really data center with we're that seeing and transformation

But So, cloud lot we course clients of of as the to migrate there's course, of as center lot a and in opportunities, well. private a still there's cloud. data going help on public of private activity activity

in that I think a bit softer for overall market So little space. the

I of in pick we're business, specific focused that it. think be up we continuing on part that of and part did to the share

Matt Sheerin

the a from other supply slowdown Okay. where of And and read U.K. in we're I of chain concerns Any the thoughts parts and in there? know uncertainties. have you Brexit because some of some the on of -- lot in competitors any hearing exposure, Europe specifically U.K.

Ken Lamneck

Yes.

a very little the thought. U.K. to a I March think know And good is any think, the government the bit you actually of scheme you us it. side. last month quarter better first Matt. slowdown this question things of have much big think in as in for in There's the held government no We we've up been it's the really a more of sort when about on years on in question would I much, than start did space. typical typically the of of couple see

strength But little a So, a saw slowdown business, issues. of things continued bit there out. no little to in as the so we consternation figure there, they try commercial

execute U.K. and the to our ahead plans forge to in continue we'll So

Matt Sheerin

I business there's there in significantly. grew Okay. I'm that seasonality. -- deals handle on mean, software agreements or kind know a that, of that engagements get of your but boosted business I and to sort one-off part number? or the to trying of some trying North acquisition And America Were

Ken Lamneck

really part -- the Cardinal I'd acquisition on was more say was was services it that really that related.

Glynis Bryan

Services.

Ken Lamneck

up have that So software on line. shown wouldn't

was for it Datalink helping us with good think that's the continued on execution the and us. having I on -- part opportunities we're and the that acquisition focused So continue the cross-sell very of business that grow

Matt Sheerin

-- And up, about And okay. down that for do you is true revenue software? when talk both hardware you year-over-year -- and or not at least be that would

Ken Lamneck

of I scenario us. it's would more say hardware a for

Matt Sheerin

Okay.

Okay. me. it for That’s

Ken Lamneck

We expect in growth, as as services nice growth software well in in XXXX.

Matt Sheerin

Got it.

lot. a Thanks Okay.

Operator

next from with Please [Operator Marc Wiesenberger question. your Instructions] FBR. comes Our Riley state B. question

Marc Wiesenberger

Yes, and expectations cadence potential shutdown Good Can around government your about of opportunities? morning. maybe capturing effects any thank talk you the the lost you. the for

Ken Lamneck

obviously question brought with keeps government slowdown we Good year, the there up. That certainly the shutdowns. Yes. see getting Marc. did Certainly, early of the a in part

signs across of seeing seeing very and fact expected from board was I we you're certainly in say wasn't or a QX, slowdown would we're as acceleration experienced as point well. we're early QX that seeing we from So would view pick Federal have not the that there that the into robust up a as that QX.

at pointing to but still this stage. recovery full we the in there's fact left QX, signs that lots a will in didn't obviously So be aren't QX the from capture that time of what

-- heavily. Federal of isn't we're up bit very the government the little focused government that there's concern certainly, that a But yet. now on isn't right So opening

Marc Wiesenberger

then some customers around And maybe impact you're and of what tariffs Understood. commentary Sure. the from forward. expectations hearing around going and

Ken Lamneck

almost year by second of been the It's last really means. of any has been since year on a discussion -- of or last as tariffs business end usual. lot half There

So it's sort of normalized.

you systems our pretty of As processes and course on to with our know efficiently. that's clients passed

heard we So it. clients discuss haven't

really partners as haven't heard from point this discussing our at We either. well that much

Marc Wiesenberger

me. Sure. final And one one for

a bit going talked bit for reorganization, about a you force. some how little then maybe don't a incentives little Can the more sales re-tinkering about enhance I -- that? that sales talk of you but see I expect think you to forward? And

Ken Lamneck

we're very was around had it around clients some those acceleration into valuable as and resources we're those success, get the into that that but we Datalink wanted. and data use transformation specifically -- the trying Insight where center first Yes. to cross-sell business clients traditional specifically cloud Marc to our trying year the we not

is where sides program enhanced implemented equation compensation additional help the that So seeing that that. both ensure we've there created signs And only it's for we've incentives to are of a to early we having efficient way us. much for very to impact a on so certainly it's a try increased good higher-margin of view cost us, a us business And drive from point revenues. that's for to

Marc Wiesenberger

you thank very me. much. That’s it for Great,

Operator

appears This Have no be additional disconnect. [Operator Instructions] today's There day. All to may conference. for questions. Thank a parties great request concludes you.

Insight Enterprises (NSIT) 6 May 192019 Q1 Earnings call transcript