NSIT - Earnings call transcript Q2 2019 | Insight Enterprises, Inc.

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Operator

Greetings and welcome to Insight Enterprises' Second Quarter 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] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host Ms. Officer. Financial Chief Bryan, Glynis Thank you, may begin. you

Glynis Bryan

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

the morning website Securities it the If Exchange you earnings of and do filed section. posted was on under copy Form with not on Relations release this and find Commission X-K, at have that will Investor a you insight.com our

Today's call limited call copy and conference after website call Investor being the Relations the live including page approximately our for completion a will of of be of and the available at is two archived webcast can our hours will be An via question-and-answer the on accessed website time. remain period insight.com.

accurate information of and This the the call call is consent redistribution, call Insight This Xth, property is without conference of retransmission, prohibited. contain of is strictly of form express Enterprises. the associated time-sensitive today, in rebroadcast Enterprises this XXXX. Any written August that only Insight or webcast any as

we to refer In second as measures, certain we referring to today's quarter When adjusted. certain discuss such as XXXX will conference will call non-GAAP we non-GAAP refer to our -- measures non-financial financial measures financial results.

on include capital, discussed call earnings adjusted in adjusted be cash share, adjusted to today's free flow. and per invested from measures return earnings diluted Non-GAAP EBITDA, adjusted adjusted operations,

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

in that recently to and me are call. release, forward-looking materially. during to annual with conference most risks could forward-looking be reports remind on today's call our this report you discussed risks statements today's filed subject are greater All These on differ and results are let in filed that cause subsequently about uncertainties press our will SEC. the XX-K made that actual detail, and statements in made Finally, Form

the you're will along turn with to Ken. will And Ken? that, we With call on slide presentation I over slide now following if the begin X.

Ken Lamneck

services against drive today Hello quarter clients our us IT XXXX and our everyone business second business. thank that results. to to with improved deliver the joining to for In well for solutions and second our in outcomes for our you solutions operating and quarter, we discuss our clients strategy leading globally executed profitability result

We to America also North expand to reach and with our clients plans strategically PCM new EMEA. acquire in and scale announced

and on of for XXXX. expectations Our results disciplined driven in our an earnings track XXXX execution ahead our has exceed stated core previously our business to is far so financial targets

the At working to to value into back the same XXXX our our in half We're we're excited ours. the and and continue business momentum time, integrate PCM we as PCM's beyond. the into acquisition opportunities and create business to about of expeditiously head close

and results year-over-year a consistent constant you're $X.XX were a up We points diluted basis X% in GAAP X. for services which U.S. diluted year-over-year company. the and second the business to quarter, And XX% per was $X.XX, record in per in year-over-year to earnings seeing on solutions turning share in and the new second up was on mix $X.XX. Now, drove basis, X% quarter our gross Slide focused margins up earnings quarter sales net billion our growing second dollars Consolidated on currency. XX adjusted share

profit higher margin our results driven margins of our four our solution dollars grew cloud by mix our areas high to and mid These margins reflect results higher gross to to year-over-year their gross were business improved including on quarter constant and mix optimize currency Each sales leveraging profit improve second year-over-year. services gross Our solutions. strategy by single-digits region categories. from

cloud from compared as to X% for XX X% The drove constant profits of our was gross operations and the last profit from trailing improved profit the offerings performance XX% Gross consolidated XX% period earnings same earned adjusted in year-over-year gross QX in months year. currency. for up

second million flow. the of the we capital increased in adjusted the the million return for And to points from on XX.X% total of to basis year operating at half the generated XXX flow end first addition of $XX bringing cash quarter. operations In invested cash $XXX year-over-year

key connected be four continues navigating our solution our the technologies. center as positioned and help We of and supply next-generation complexity we markets clients that compete both where optimization, our in future have transformation, areas; investments in Demand solid and workforce, across cloud digital needs to chain to well increasingly need compete believe the data the and of us innovation address current clients. marketplace

want recently facilities to I move highlight a to Europe improve and experience. network how help we're and America you areas in with our better to North achieve hospitals partnered overall of outcomes. end patient to that business example of X, We slide clients leveraging operational As to solution efficiency the an our with

and data we construct During needed became production phase, from the conform host dozens to and assessment systems. data of platform a secure it unified to that clear robust

control combined a access at and Azure-native analytics. role-based delivered solution, leveraging provide security business data team level real-time utilizing Innovation cloud-enabled the encryption to and compliance Microsoft every Digital Our HIPAA

optimize adapt greatest to Innovation developed gaps Digital typically team model levels, for health length expenses our identify patient patient solution, in address the able the centers. and to of stay care, reduce time crucial the was staffing client Using one of and

solution, clients stay of areas saving better and per a prediction the up accurate week expenses just patient realized patient our staffing drive helping the a result many dollars per outcomes. how millions This length including our hospital of are is the XX% of one requirements; several of of year. reduced capacity operational business of predictability examples to reduced solution a by client improved benefits, days; As time; X.X at of

our Software The Providers. On for and future buyers slide Forrester in Wave: guide is by providers. Wave evidenced agile the report our respected Service is inclusion further recent Development trusted positioning Midsize a for considering highly the Forrester X, service Agile

many on strong Companies as area we criteria are announce Insight among across showcases placed our the this distinct XX which provides This and performer, over our a a to presence. offerings providers current clients, this pleased market strategy recognition competitors. believe expertise advantage XX We're in evaluated category. for of our distinguished in

the Glynis, into to a I shareholders. acquire second regulators PCM. the PCM and agreement PCM. X, we to slide to before on Late acquisition of approval XXXX, acquisition I definitive The subject entered to our in back Turning of call hand you to update is over want by quarter

businesses these bring Our team more could excited about together. the opportunity not be to two

Insight for a price times, multiple which ratio of the has in of as synergies. $XX purchase XX-month, $XX X.X enterprise PCM acquire agreed an of value value share, transaction the last a million of including implies calculated $XXX EBITDA, PCM's enterprise and to million adjusted

and sales we sales and Strategically our complementary service service in teammates, strengthen with expand client-facing mid-market, adding through services acquisition, coverage $XXX strategic robust reach more technical annually Insight's particularly the in offerings engineers in X,XXX platform; North million than our X,XXX architects, our further technical including to increase and our will this more and partners. America and relationship business; delivery than teammates to globally

that logistics systems, procurement all of platform by scalable Operationally, Insight digital and marketing e-commerce processes transformation and a continuous includes backed automation. robust a IT culture process smart has capabilities and and

business the that XX%. we When PCM we we add and the operational of more quickly delivery in along and cost top Financially, will synergies expect than PCM's PCM gross Philippines, combined with can than believe the unique billion model more our of integrate $X for out allow based line margins way.

synergies to results integration XXXX. expect And $X.XX EPS our to the annualized rate run in XXXX, adjusted expense. we add deal-related $XX more expenses of intangible million by excluding end to achieve consolidated in We the and amortization than transaction and expect of

Since to third and synergies expect realizing transaction returns the approval. and we'll planning, teammates, our close long-term, our We of the shareholders. have shareholder the integration to in we end towards currently quarter announcement and clearance by launched this clients remain committed regulatory work for detailed

our over detail to I'll the Glynis on QX. in to performance call now back financial turn provide more

Glynis Bryan

Ken. you, Thank

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

I'll to XX% X% compared XX. $X.X In were slide in increased sales America, this quarter on the were reported X% year-over-year up America billion with net in year North up growth second X% North the sequentially. Hardware start and second sales XXXX. quarter, of

sales second Services year-over-year, while XX% of cloud as in of year-over-year migration sales well decreased to higher cloud X% as solutions alternatives. the Cardinal; licenses of on-prem sales reflecting including software quarter, continued acquisition increased the

services administrative and basis XX year-over-year reflecting year-over-year, to Gross the and increased America primarily gross XX.X%, profit cloud America in Cardinal up North in improved in X% the selling and North acquisition. points to the the business. increase was margin due expenses sales

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

The hardware Moving engagement. XX, cloud in higher by on enterprise large on the as public offset maintenance declined the as in increase $XXX clients net currency subscription an to services EMEA mostly higher of hardware sales in well X% in decrease volume and EMEA professional products to sales constant software with of category. in reflecting partially sales quarter in was second and due million, services lower slide to sector

than currency drove X% gross points basis XXX focus constant to gross team's of more services Our and and sales on cloud by expanded profit margins growth XX%. in

expenses, new also same We basis constant XX% X.X%, compared for year earnings from a up up margin to record which adjusted currency the adjusted to is period the drove year-over-year region. and XX last which control points EFO operations in and

in on the Moving APAC declined APAC business due shift second on $XX maintenance in sales, are which a sales currency XX% to million. is mix cloud in reported software and decrease to This that constant to quarter in services. in slide more and net net included XX,

grew regional with team's reported profit top constant declines, and gross As X% significantly. earnings X% line despite results, expanded our margins. Adjusted a operations particularly from gross APAC on pleased focus currency also in result, constant currency. margin in the improving in We're year-over-year, grew gross

that our services and solutions and areas strategy improve our our solution refined Our potential. to has earnings on clients value deliver focus

As hit of quarter XX%. margin in the expanded of a result, our second and year-over-year new a gross XXXX record

taxes. Moving on to

year quarter which as XX.X%, rate flat was compared XXXX tax the for effective second of prior was Our to the quarter. year-over-year,

through line Year-to-date operations performance our the Turning for the XX. with $XXX compared to slide second to year and on flow our first XXXX cash half. million last generated cash of million $XXX quarter of expectations our in

a as the focus reducing receivable reflect enhanced aged performance, results seasonality balances. year flow our prior for benefit Our of on cash higher-than-normal well as

typical as the in cash fourth a in third Our quarter quarter are with second seasonality. year-to-date generate results more operations the reminder, of XXXX use in and our the cash for And line quarter. historically,

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

In did the approximately flat buy but we year, was expenditures, the We XXXX, of back stock million any in first $XX half repurchase not year. half million this invested to in first did of we $XX shares use capital last which year-over-year.

led $XXX of outstanding our $XX a this end quarter. correct at of capital quarter, prior cash credit million, million resident the compares of lease million revolving to year of and $XX was outstanding to credit foreign of $XX of under of million I outstanding $XXX cash million at subsidiaries. revolving second end which the And arrangements. balance in All million and debt under the our arrangement. million lease and our $XX that, $XXX the had will This capital we

quarter six resulted result from the and differences. a cycle and second days by XXXX, quarter cash flat DIOs primarily XX year-over-year. the -- from other of Our six-day timing relative driven sales-related respective second timing DPO in of was increase the The this the were of days during sales XXXX. conversion DSOs, increase in up quarter

to on XX. Moving slide

wanted the color call give provide to I PCM some our I Ken, XXXX. results for how the on Before think to connection back about with business in to

we not for wanted date your for relevant provide While do have to modeling. certain we assumptions closing a the transaction, definitive

contribute intangible could end $XXX $X costs. close estimated date quarter, from million and by approximately million $XXX deal-related approximately operations the million in believe the we $X a but the the including severance to third Assuming restructuring adjusted and million earnings sales expenses in on excluding amortization, net business and fourth of to quarter,

the cash ABL and interest fund we fourth new a expect expect to borrow in $XXX on $XX As use million the approximately of hand and approximately under facility million. transaction incremental to previously quarter expense announced,

certainty the around purchase accounting third published included by assuming in Because work lack quarter. the approximately guidance expense have we While today. outlook of estimating $X not we're is we a PCM intangible pending, our in million QX, of currently end a we the amortization close close again date, for the

call, occurs for beforehand. will guidance our our assuming conference on QX We update expectations closing

Ken? will I it now to our Ken to review outlook. back XXXX turn

Ken Lamneck

you, Thank Glynis.

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

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

remain footprint, embracing and culture that of in pursuing shareholders. our strategic leverage global to goal guides our disciplined opportunities and our plan growth, offerings with we then and to M&A investments driving Second, our we cash optimize information-based organic cost returning a of on metric investing use our structure to capital by and the expand

to on slide Moving XX.

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

and allow and resources offerings, clients across all many scale. global serve a on our service to of knowledge and market-leading deep Our us by differentiated verticals partners, strengthened sizes technical

On outlook to diluted full earnings slide our core sales in We're year the continue for share full year increasing adjusted of to business XXXX. outlook single-digit between be to to we now EPS and XXXX With per for our low XX. $X.XX respect deliver our XXXX $X.XX. range and in compared expect to adjusted growth the expect

the This of balance an assumes to acquisition-related PCM restructuring is expected expenses the $XX end for the for of XX.X approximately that XXXX, average expenditures does repurchase the outlook quarter to of the of close of may tax outlook an share for of our year year, acquisition and program million shares. count that current share incurred $XX any XX% the the to results This and million of year full rate the XXXX. effective full capital of shares in or million XX% the under reflect by not made third severance be repurchase

comments all you open Thank you now up teammates concludes thank for quarter. your line for globe for the and joining second for That our us performance my the today their and across in questions. your we'll

Operator

Instructions] of Tindle you. Thank Please Adam Raymond from question first Our coming ahead. James. [Operator is go

Adam Tindle

to morning. would been I Okay. it's imagine the announced since to wanted to intent talk good PCM. just a Thanks acquire also vendor about and just month this. Ken you've you partners to I over customers start and able been

and the to acquire since general hoping just response you sense can a the maybe I'm from So vendor you partners announced give us intent of customers PCM?

Ken Lamneck

a partner view Yes. very positive. Thanks, point Adam. From of base

we very align partner to As community. same closely you course, know of the

we discussed really so all And there's the like of partners we've advantage both takes feel additional combination capabilities leverage. what have. The

very in So to a it's partner been all respects. positive

On it's at still know the stage. Obviously, this client you front, competitors a we're difficult. as little

that certainly due So brought deal any that only it positive the we're this our period. of in very have have up comment brought quiet really we in don't clients. but being the Clients have vein, nature up with communication we careful stage this in a it at on to

Adam Tindle

outlined for well. financials of maybe to wants just you as touch that Glynis And on QX, don't the know if Okay. and this kind into maybe digging I

is amortization, would I intangible I QX mid-X% pretty here that back in when if add that typically QX EFO range the think think implied good get is and you margin like is is leverage I the so that attractive. end budget maybe PCM. is just flush that there distorting touch year why margin Is business why asset that with that on and I'm for And missing? low anything for number

Glynis Bryan

low being quarter the in in -- say of I don't for margin post-closing. of synergies QX wouldn't we don't general. terms necessarily reflection Once the the the the that is in the first -- have it I business realistically

EPS actually terms the $XX the have coming business two-year up our -- getting belt about So our run to synergies of in ramping out EPS and are adjusted the we million. anticipate XXXX indicated we've when in getting under of rate of $X.XX that we to

the their regard to-date. I cetera. talk PCM at process you close to the think historically et lower sales as to when to just historically we expectations with timing the it's So margins their and a results go with regard look have than organization been margins gross close have issue timing of noise we QX the that And through

reflected our also we've in So that numbers.

Adam Tindle

a then the And It of one in on last commentary maybe community has one partner Okay. near-term lot like vendor -- a slowing suggested seems trends. has environment. just

example. year guidance our NetApp organically. seen broader probably the for year accelerate hasn't on You your suggests actually of that it pre-announcement, of the But dollar really saw to basis half this fiscal is growth year-over-year a channel and profit back in going

disconnect robust. back pretty your is on we're can So touch some you. seeing. partners you Thank some yet guidance the slowing vendor the just still on maybe half of that vendor what seeing The hoping

Ken Lamneck

bit little key regards that. a more really of on what there a the in -- front NetApp stated a storage ours. basically just is in of is as seen been which some It's on we've And making mixed to course, the little Yes. maybe you Adam partner of slowness decisions

haven't with We decisions. business this the slower seen NetApp just loss maybe bit a make to example little of

center overall when and strong. in data good inventory good But very the quarter. was actually business, was us the it -- at There actually Network I then our in strong. data business growth center look cloud very for is

a dependent mixed situation. think So the I it's little upon bit

in still forward some no stand as To-date may market. the we've go we have see from tariffs fact that What is impact everything might in seen but back half second the into good that that, on pretty the in we we the So half. can see or impact stability really the still by may -- we question. do could

Adam Tindle

much. Okay. That’s helpful. Thank very you

Operator

you. Thank

go Matt coming Sheerin Stifel. Please ahead. of Our next question is from

Matt Sheerin

Yes. Good morning. Thanks.

a know hit you be a quarter margin seems was strong in you like quarter to be EPS that reason, if XX% first Because that sort particular like particularly into a margin which year from here. margin is EMEA gross the Just seems of it the there regarding the quarter Is guide for back in looks Europe. not or your one-off? revenue strong I and for a historically there. improving time that June will the your gross think margin it I

there So on North could America? the us mix color just more EMEA both and give you Ken

Glynis Bryan

get? I Should

Ken Lamneck

I'll touch have first. you on Glynis it

Glynis Bryan

Okay.

So Microsoft heavily in software-related it our the is second weighted specifically. specifically cloud is EMEA software towards EMEA the in business -- products, is event. or more And quarter the

sales about top-line as cloud when said sales. we product that we more to the solution and talked results the notice related in opposed You'll software decline primarily EMEA to

So what's cloud that as to they're solutions selling more margin the software of is there. as higher on-prem resulting a gross that happening actually the conversion well cloud, in EMEA that's you're in seeing

-- performance XX% no quarter highest is second the year. going in typically not gross the typically our know quarter that margin -- and anticipate but that consistent the our always is not So, always, I of wouldn't performance. be rest to for I XX% margin Europe the It's highest the

they But operationally market. European through are solutions the driven they on have in had outstanding that the an Microsoft all quarter focus that in and demand

Matt Sheerin

it. Got

would so a I particularly that you obviously then expansion say with in not are like mean that improvement tech margin plays that, And the you part Microsoft data because of -- business? it seems North but the America of gross is solutions seeing margin

Glynis Bryan

America business. seeing North are in solutions because margin expansion We the of

you about America at as that in North fees, kind And report rate our a grew XX% services it of Insight-delivered think than an our example. services. if we So overall we grew faster way want services said to agency

that to attributable flow acquisition. services Do rate -- the success component want you we are component, sales having a areas number a to with the cross-sell Datalink the into the little through that services is to we're add? at solution of see and that our and that solution starting from that Insight-delivered grew the bit our Within faster

Ken Lamneck

business the The say t business the center to I'd did as in you're Matt, and well very that in was And Datalink strong. cloud regards in correct actually Yes. quarter data well.

success gross good there. you And seeing certainly we're know design-oriented more at a higher as So comes margin.

Matt Sheerin

Could obviously in on coming side sector is of what Got you're would And America and cycle. that that and sales, very commercial side? about you public strong up I and think the hardware the PC North some seeing from both the it. refresh this talk sequentially

Ken Lamneck

Yes.

in -- the we're side, we're more skewed towards software. space sector public Fed the On

don't public have seen competitors space in like So that we This with the of software-oriented, there. didn't produce of full really good our quarters. same the last sector take so we quarter more advantage some benefit we've hardware we're some pretty

would through some bit issues. a But little for issue quarter. of that I part we'll a with that still say get most We backlog think the processor by there's this

on that On a the with device side one little is bit. performance side our the manufacturer device certainly muting

that data will itself quarter. We hardware towards very focused was But center. most growth heavily think again this of the resolve our

with continuing room coming So there of so years grow the see pleased we investments that there's and device with many business side to that really think business. nicely. supporting Again, We device that end We we've course side that Windows that think life. growth we're made X will continue for the is that of to now the of obviously the course in the still performance the of we've grow of the for area. seen more to continuing

Matt Sheerin

Do a Ken your to not of systems have by customers operating you of the and sense are be compliance to percentage January? newer what get

Ken Lamneck

for there's on It's stay X. course to a They'll many get continue Windows of mean won't really to that. migrate even that hard clients I to that. sense

what those a a to XX% bit, heard left. still numbers for little so number sense they're there's a sorts get of all to varying through because quote halfway we're XX% percentages about because are hate hard to that So I've to I'd another

real that hard is. number really what So determine to

Glynis Bryan

to I thing typically their without to up a that to come that Insight, rely XX handle enterprise necessarily cycles IT would later, any because is Microsoft other we have Matt Microsoft. ultimately our infrastructure that needs having change our historically refresh they can seen at an clients -- large The happened such on like afford Win add have related

nine to take But months Windows because a our life, see little that back bit before marketplace to than expect half the into the transactions in increase standard of remember six to of internal pull and XP terms in XXXX evaluation you of would the that if the they going some clients we later from just our their trigger. end second So devices' about sales refresh. impacts going our do own longer came

Matt Sheerin

Got Okay. Thank you. it.

Operator

[Operator Instructions] everyone time, would At their to Thank for I like you. this thank participation.

time at a your disconnect lines may day. have You and this wonderful

Insight Enterprises (NSIT) 8 Aug 192019 Q2 Earnings call transcript