Insight Enterprises(NSIT) - 2023 Q1 - Quarterly Report

PART I - Financial Information Item 1 – Financial Statements This section presents the unaudited consolidated financial statements for Q1 2023, including balance sheets, statements of operations, cash flows, and accompanying notes Consolidated Balance Sheets The Consolidated Balance Sheet as of March 31, 2023, shows a decrease in total assets to $4.96 billion from $5.11 billion at year-end 2022, primarily driven by a decrease in accounts receivable Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $3,745,816 | $3,900,668 | | Total assets | $4,960,528 | $5,112,581 | | Total current liabilities | $2,884,195 | $2,866,407 | | Total liabilities | $3,386,930 | $3,474,513 | | Total stockholders' equity | $1,573,598 | $1,638,068 | Consolidated Statements of Operations For Q1 2023, total net sales decreased by 12% year-over-year to $2.32 billion, while gross profit increased by 3% to $391.3 million, but net earnings fell to $50.0 million Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total net sales | $2,323,947 | $2,650,850 | | Gross profit | $391,315 | $378,861 | | Earnings from operations | $77,461 | $79,849 | | Net earnings | $49,972 | $56,631 | | Diluted EPS | $1.34 | $1.53 | Consolidated Statements of Cash Flows In Q1 2023, the company generated $160.2 million in cash from operating activities, a significant improvement from the prior year, resulting in a net increase in cash of $12.1 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $160,160 | $(284,239) | | Net cash used in investing activities | $(9,106) | $(25,745) | | Net cash (used in) provided by financing activities | $(140,654) | $319,954 | | Increase in cash, cash equivalents and restricted cash | $12,052 | $10,939 | Notes to Consolidated Financial Statements Detailed notes support the financial statements, covering segment information, debt facilities, share repurchases, and income taxes - The company operates in three geographic segments: North America, EMEA, and APAC, offering hardware, software, and services, including cloud solutions[28] - The company's 0.75% Convertible Senior Notes due 2025 became convertible at the option of the holders during Q1 2023 because the market price trigger was met, classifying the principal amount as a current liability[44] - During Q1 2023, the company repurchased 913,445 shares of its common stock for a total cost of $117.1 million, with no shares repurchased in Q1 2022[60] Net Sales by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | North America | $1,833,964 | $2,064,505 | | EMEA | $427,004 | $531,433 | | APAC | $62,979 | $54,912 | | Consolidated | $2,323,947 | $2,650,850 | Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2023 financial performance, highlighting decreased net sales, improved gross profit from service mix, and liquidity Quarterly Overview In Q1 2023, net sales decreased 12% to $2.3 billion, while gross profit grew 3% to $391.3 million, and diluted EPS was $1.34 Q1 2023 Financial Highlights vs. Q1 2022 | Metric | Q1 2023 | Change vs. Q1 2022 | | :--- | :--- | :--- | | Net Sales | $2.3 billion | -12% | | Gross Profit | $391.3 million | +3% | | Gross Margin | 16.8% | +250 bps | | Earnings from Operations | $77.5 million | -3% | | Diluted EPS | $1.34 | -12% | Results of Operations Consolidated net sales decreased 12% due to lower hardware sales, offset by service growth, leading to gross margin expansion to 16.8% Net Sales by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | North America | $1,833,964 | $2,064,505 | (11)% | | EMEA | $427,004 | $531,433 | (20)% | | APAC | $62,979 | $54,912 | 15% | | Consolidated | $2,323,947 | $2,650,850 | (12)% | - The decrease in hardware net sales in North America was due to lower volume of sales to large enterprise and corporate clients, primarily in devices, consistent with industry-wide declines[100] - Consolidated gross margin expanded by approximately 250 basis points to 16.8%, primarily due to a mix shift towards higher-margin services and cloud solutions[103] - Selling and administrative expenses increased by $12.4 million (4%), driven by higher personnel costs from increased headcount and increased service agreement fees[108][109] Liquidity and Capital Resources The company's liquidity improved with $160.2 million cash from operations in Q1 2023, a decrease of 8 days in the cash conversion cycle, and sufficient financing for future needs Cash Conversion Cycle (in days) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | DSOs | 120 | 103 | | DIOs | 12 | 15 | | DPOs | (99) | (77) | | Cash conversion cycle | 33 | 41 | - The improvement in cash flow from operations was primarily driven by the decline in hardware net sales in the current year period and changes in partner mix[126] - Primary uses of cash in Q1 2023 included $117.1 million for common stock repurchases and net repayments of $123.8 million on the ABL facility[122] - The company increased its ABL facility borrowing capacity from $1.2 billion to $1.8 billion in July 2022[131] Item 3 – Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were reported since the 2022 Annual Report, except for the impact of interest rate changes on the fair market value of Convertible Senior Notes - The fair market value of the company's fixed-rate Convertible Senior Notes was $732 million as of March 31, 2023, which could be impacted by changes in interest rates[140] Item 4 – Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[141] - No changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[142] PART II - Other Information Item 1 – Legal Proceedings The company is involved in various legal proceedings but management does not anticipate any material adverse effects on its business or financial condition - The company is not involved in any pending or threatened legal proceedings that it believes would reasonably be expected to have a material adverse effect on its business, financial condition, or results of operations[69][144] Item 1A – Risk Factors This section refers to the risk factors detailed in the company's 2022 Annual Report on Form 10-K, with no new or materially changed risks disclosed in this quarterly report - The report directs investors to review the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[145] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 913,445 shares during Q1 2023, with approximately $99.96 million remaining available for future repurchases under its authorized plan Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2023 | 201,747 | $104.08 | | February 2023 | 119,677 | $130.32 | | March 2023 | 592,021 | $136.03 | | Total | 913,445 | N/A | - As of March 31, 2023, approximately $99,958,155 remained available for repurchases under the company's share repurchase plan[147] Item 6 – Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements, CEO and CFO certifications, and Inline XBRL documents