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

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-20220630_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)

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, 202129, 2022 was 34,855,832.

35,094,892.


Table of Contents
INSIGHT ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

Three Months Ended June 30, 2021

2022

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40

Exhibits41

38

39

42


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 and into 2023; our expectations of growth in net sales in 2022 compared to 2021; our anticipation that we may experience growth in networking and infrastructure products as we progress through the second half of the year but that overall hardware growth could slow in the second half of 2022 in North America; 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 and in “Risk Factors” in Part II, Item 1A of this report:•

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

Table of Contents
INSIGHT ENTERPRISES, INC.

•

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

•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;•

supply constraints for hardware including devices;

•general economic conditions, economic uncertainties and changes in geopolitical conditions including the possibility of a recession or as a result of Russia’s invasion of Ukraine;•

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

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

our reliance on independent shipping companies;

•supply constraints for hardware, including devices, and the potential impact on our inventory management and warehouse operations of the easing of these constraints;•

the risks associated with our international operations;

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

natural disasters or other adverse occurrences;

•our reliance on independent shipping companies;•

disruptions in our IT systems and voice and data networks;

•the risks associated with our international operations;•

cyberattacks or breaches of data privacy and security regulations;

•natural disasters or other adverse occurrences;•

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

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

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

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

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

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

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

•legal proceedings, client audits and failure to comply with laws and regulations;•

our potential to draw down a substantial amount of indebtedness;

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

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;

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

the accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on the Company’s reported financial results;

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

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

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

•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");•

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

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

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

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

our dependence on certain key personnel;

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

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

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

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.

•risks associated with the integration and operation of acquired businesses, including 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

 

June 30,
2022		December 31,
2021

ASSETS

 

 

 

 

 

 

 

 

ASSETS

Current assets:

 

 

 

 

 

 

 

 

Current assets:

Cash and cash equivalents

 

$

107,813

 

 

$

128,313

 

Cash and cash equivalents$137,529 $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 $15,463 and $16,941, respectivelyAccounts receivable, net of allowance for doubtful accounts of $15,463 and $16,941, respectively3,610,449 2,936,732 

Inventories

 

 

214,385

 

 

 

185,650

 

Inventories377,059 328,101 

Other current assets

 

 

187,707

 

 

 

177,039

 

Other current assets275,967 199,638 

Total current assets

 

 

3,555,229

 

 

$

3,176,450

 

Total current assets4,401,004 $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 $223,218 and $233,786, respectivelyProperty and equipment, net of accumulated depreciation and amortization of $223,218 and $233,786, respectively199,617 176,263 

Goodwill

 

 

430,846

 

 

 

429,368

 

Goodwill495,457 428,346 

Intangible assets, net of accumulated amortization of

$119,337 and $103,483, respectively

 

 

232,487

 

 

 

246,915

 

Intangible assets, net of accumulated amortization of $125,902 and $110,909, respectivelyIntangible assets, net of accumulated amortization of $125,902 and $110,909, respectively224,926 214,788 

Other assets

 

 

298,506

 

 

 

311,983

 

Other assets283,319 301,372 

 

$

4,667,047

 

 

$

4,310,732

 

$5,604,323 $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$1,945,260 $1,779,854 

Accounts payable—inventory financing facilities

 

 

309,316

 

 

 

356,930

 

Accounts payable—inventory financing facilities248,315 311,878 

Accrued expenses and other current liabilities

 

 

391,557

 

 

 

408,117

 

Accrued expenses and other current liabilities429,395 423,489 

Current portion of long-term debt

 

 

650

 

 

 

1,105

 

Current portion of long-term debt345,945 36 

Total current liabilities

 

 

2,483,654

 

 

 

2,227,464

 

Total current liabilities2,968,915 2,515,257 

Long-term debt

 

 

483,252

 

 

 

437,581

 

Long-term debt718,708 361,570 

Deferred income taxes

 

 

35,268

 

 

 

33,209

 

Deferred income taxes39,479 47,073 

Other liabilities

 

 

263,046

 

 

 

270,049

 

Other liabilities264,124 255,953 

 

 

3,265,220

 

 

 

2,968,303

 

3,991,226 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; 35,093 shares at June 30, 2022 and 34,897 shares at December 31, 2021 issued and outstandingCommon stock, $0.01 par value, 100,000 shares authorized; 35,093 shares at June 30, 2022 and 34,897 shares at December 31, 2021 issued and outstanding351 349 

Additional paid-in capital

 

 

361,412

 

 

 

364,288

 

Additional paid-in capital327,282 368,282 

Retained earnings

 

 

1,050,074

 

 

 

993,245

 

Retained earnings1,331,294 1,167,690 

Accumulated other comprehensive loss – foreign currency

translation adjustments

 

 

(10,007

)

 

 

(15,455

)

Accumulated other comprehensive loss – foreign currency translation adjustments(45,830)(27,094)

Total stockholders’ equity

 

 

1,401,827

 

 

 

1,342,429

 

Total stockholders’ equity1,613,097 1,509,227 

 

$

4,667,047

 

 

$

4,310,732

 

$5,604,323 $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
June 30,		Six Months Ended
June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022202120222021

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

Products

 

$

1,889,178

 

 

$

1,672,933

 

 

$

3,782,198

 

 

$

3,521,249

 

Products$2,349,242 $1,889,178 $4,659,529 $3,782,198 

Services

 

 

340,323

 

 

 

295,802

 

 

 

640,371

 

 

 

591,537

 

Services394,135 340,323 734,698 640,371 

Total net sales

 

 

2,229,501

 

 

 

1,968,735

 

 

 

4,422,569

 

 

 

4,112,786

 

Total net sales2,743,377 2,229,501 5,394,227 4,422,569 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold:

Products

 

 

1,715,729

 

 

 

1,517,947

 

 

 

3,436,987

 

 

 

3,188,185

 

Products2,135,895 1,715,729 4,243,104 3,436,987 

Services

 

 

147,089

 

 

 

126,399

 

 

 

287,425

 

 

 

274,876

 

Services169,593 147,089 334,373 287,425 

Total costs of goods sold

 

 

1,862,818

 

 

 

1,644,346

 

 

 

3,724,412

 

 

 

3,463,061

 

Total costs of goods sold2,305,488 1,862,818 4,577,477 3,724,412 
Gross profit:Gross profit:
ProductsProducts213,347 173,449 416,425 345,211 
ServicesServices224,542 193,234 400,325 352,946 

Gross profit

 

 

366,683

 

 

 

324,389

 

 

 

698,157

 

 

 

649,725

 

Gross profit437,889 366,683 816,750 698,157 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

Selling and administrative expenses

 

 

277,087

 

 

 

242,580

 

 

 

548,277

 

 

 

511,443

 

Selling and administrative expenses306,001 277,087 603,641 548,277 

Severance and restructuring expenses, net

 

 

1,127

 

 

 

7,010

 

 

 

(5,613

)

 

 

9,154

 

Severance and restructuring expenses, net692 1,127 2,064 (5,613)

Acquisition and integration related expenses

 

 

—

 

 

 

611

 

 

 

—

 

 

 

2,077

 

Acquisition and integration related expenses1,640 — 1,640 — 

Earnings from operations

 

 

88,469

 

 

 

74,188

 

 

 

155,493

 

 

 

127,051

 

Earnings from operations129,556 88,469 209,405 155,493 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

Interest expense, net

 

 

9,583

 

 

 

10,219

 

 

 

19,552

 

 

 

22,045

 

Interest expense, net9,383 9,583 17,451 19,552 

Other expense (income), net

 

 

346

 

 

 

1,098

 

 

 

734

 

 

 

(465

)

Other expense (income), net312 346 (2,531)734 

Earnings before income taxes

 

 

78,540

 

 

 

62,871

 

 

 

135,207

 

 

 

105,471

 

Earnings before income taxes119,861 78,540 194,485 135,207 

Income tax expense

 

 

19,979

 

 

 

16,486

 

 

 

33,478

 

 

 

25,125

 

Income tax expense30,677 19,979 48,670 33,478 

Net earnings

 

$

58,561

 

 

$

46,385

 

 

$

101,729

 

 

$

80,346

 

Net earnings$89,184 $58,561 $145,815 $101,729 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

Basic

 

$

1.67

 

 

$

1.32

 

 

$

2.89

 

 

$

2.29

 

Basic$2.54 $1.67 $4.16 $2.89 

Diluted

 

$

1.58

 

 

$

1.32

 

 

$

2.76

 

 

$

2.27

 

Diluted$2.42 $1.58 $3.95 $2.76 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

Basic

 

 

35,097

 

 

 

35,060

 

 

 

35,148

 

 

 

35,147

 

Basic35,083 35,097 35,028 35,148 

Diluted

 

 

37,135

 

 

 

35,260

 

 

 

36,917

 

 

 

35,453

 

Diluted36,821 37,135 36,901 36,917 

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
June 30,		Six Months Ended
June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022202120222021

Net earnings

 

$

58,561

 

 

$

46,385

 

 

$

101,729

 

 

$

80,346

 

Net earnings$89,184 $58,561 $145,815 $101,729 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax:Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

 

 

5,528

 

 

 

7,619

 

 

 

5,448

 

 

 

(10,212

)

Foreign currency translation adjustments(20,601)5,528 (18,736)5,448 

Total comprehensive income

 

$

64,089

 

 

$

54,004

 

 

$

107,177

 

 

$

70,134

 

Total comprehensive income$68,583 $64,089 $127,079 $107,177 

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 March 31, 2022Balances at March 31, 202235,072 $351 — $— 

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 taxes21 — — — (104)— — (104)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,832

 

 

 

—

 

 

 

—

 

 

 

2,832

 

Stock-based compensation expense— — — — 5,427 — — 5,427 

Foreign currency translation adjustments, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,619

 

 

 

—

 

 

 

7,619

 

Foreign currency translation adjustments, net of tax— — — — — (20,601)— (20,601)

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

46,385

 

 

 

46,385

 

Net earnings— — — — — — 89,184 89,184 

Balances at June 30, 2020

 

 

35,070

 

 

$

351

 

 

 

—

 

 

$

—

 

 

$

354,431

 

 

$

(48,376

)

 

$

900,950

 

 

$

1,207,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2022Balances at June 30, 202235,093 $351 — $— $327,282 $(45,830)$1,331,294 $1,613,097 

Balances at March 31, 2021

 

 

35,320

 

 

$

353

 

 

 

—

 

 

$

—

 

 

$

361,935

 

 

$

(15,535

)

 

$

1,036,413

 

 

$

1,383,166

 

Balances at March 31, 202135,320 $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

)

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes22 — — — (87)— — (87)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,659

 

 

 

—

 

 

 

—

 

 

 

4,659

 

Stock-based compensation expense— — — — 4,659 — — 4,659 

Repurchase of treasury stock

 

 

—

 

 

 

—

 

 

 

(497

)

 

 

(50,000

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(50,000

)

Repurchase of treasury stock— — (497)(50,000)— — — (50,000)

Retirement of treasury stock

 

 

(497

)

 

 

(5

)

 

 

497

 

 

 

50,000

 

 

 

(5,095

)

 

 

—

 

 

 

(44,900

)

 

 

—

 

Retirement of treasury stock(497)(5)497 50,000 (5,095)— (44,900)— 

Foreign currency translation adjustments, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,528

 

 

 

—

 

 

 

5,528

 

Foreign currency translation adjustments, net of tax— — — — — 5,528 — 5,528 

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

58,561

 

 

 

58,561

 

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 June 30, 202134,845 $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

 

Balances at December 31, 2021Balances at December 31, 202134,897 $349 — $— $368,282 $(27,094)$1,167,690 $1,509,227 
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

 

 

252

 

 

 

3

 

 

 

—

 

 

 

—

 

 

 

(5,339

)

 

 

—

 

 

 

(1

)

 

 

(5,337

)

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes196 2 — — (6,703)— — (6,701)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,241

 

 

 

—

 

 

 

—

 

 

 

7,241

 

Stock-based compensation expense— — — — 10,434 — — 10,434 

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

)

Foreign currency translation adjustments, net of tax— — — — — (18,736)— (18,736)

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

80,346

 

 

 

80,346

 

Net earnings— — — — — — 145,815 145,815 

Balances at June 30, 2020

 

 

35,070

 

 

$

351

 

 

 

—

 

 

$

—

 

 

$

354,431

 

 

$

(48,376

)

 

$

900,950

 

 

$

1,207,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2022Balances at June 30, 202235,093 $351 — $— $327,282 $(45,830)$1,331,294 $1,613,097 

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 taxes239 2 — — (7,156)— — (7,154)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,375

 

 

 

—

 

 

 

—

 

 

 

9,375

 

Stock-based compensation expense— — — — 9,375 — — 9,375 
Cumulative effect of accounting changeCumulative effect of accounting change— — 00— 

Repurchase of treasury stock

 

 

—

 

 

 

—

 

 

 

(497

)

 

 

(50,000

)

 

 

—

��

 

 

—

 

 

 

—

 

 

 

(50,000

)

Repurchase of treasury stock— — (497)(50,000)— — — (50,000)

Retirement of treasury stock

 

 

(497

)

 

 

(5

)

 

 

497

 

 

 

50,000

 

 

 

(5,095

)

 

 

—

 

 

 

(44,900

)

 

 

—

 

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— — — — — 5,448 — 5,448 

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

101,729

 

 

 

101,729

 

Net earnings— — — — — — 101,729 101,729 

Balances at June 30, 2021

 

 

34,845

 

 

$

348

 

 

 

—

 

 

$

—

 

 

$

361,412

 

 

$

(10,007

)

 

$

1,050,074

 

 

$

1,401,827

 

Balances at June 30, 202134,845 $348 — $— $361,412 $(10,007)$1,050,074 $1,401,827 

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,

 

Six Months Ended
June 30,

 

2021

 

 

2020

 

20222021

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Cash flows from operating activities:

Net earnings

 

$

101,729

 

 

$

80,346

 

Net earnings$145,815 $101,729 

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 amortization26,769 28,498 

Provision for losses on accounts receivable

 

 

3,838

 

 

 

6,570

 

Provision for losses on accounts receivable2,743 3,838 

Non-cash stock-based compensation

 

 

9,375

 

 

 

7,241

 

Non-cash stock-based compensation10,434 9,375 

Deferred income taxes

 

 

1,815

 

 

 

(1,464

)

Deferred income taxes(575)1,815 

Amortization of debt discount

 

 

8,375

 

 

 

8,002

 

Amortization of debt discount and issuance costsAmortization of debt discount and issuance costs3,268 8,375 

Other adjustments

 

 

(5,308

)

 

 

2,829

 

Other adjustments1,810 (5,308)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

Increase in accounts receivable

 

 

(362,109

)

 

 

(182,511

)

Increase in accounts receivable(734,971)(362,109)

Increase in inventories

 

 

(31,072

)

 

 

(26,647

)

Increase in inventories(56,811)(31,072)

(Increase) decrease in other assets

 

 

(8,282

)

 

 

46,088

 

Increase in other assetsIncrease in other assets(53,802)(8,282)

Increase in accounts payable

 

 

294,860

 

 

 

529,742

 

Increase in accounts payable223,198 294,860 

Decrease in accrued expenses and other liabilities

 

 

(36,532

)

 

 

(7,290

)

Decrease in accrued expenses and other liabilities(9,875)(36,532)

Net cash provided by operating activities

 

 

5,187

 

 

 

497,529

 

Net cash (used in) provided by operating activities:Net cash (used in) provided by operating activities:(441,997)5,187 

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 assets1,350 27,211 

Purchases of property and equipment

 

 

(16,837

)

 

 

(14,494

)

Purchases of property and equipment(47,256)(16,837)

Acquisitions, net of cash and cash equivalents acquired

 

 

—

 

 

 

(6,406

)

Acquisitions, net of cash and cash equivalents acquired(68,248)— 

Net cash provided by (used in) investing activities

 

 

10,374

 

 

 

(6,682

)

Net cash (used in) provided by investing activities:Net cash (used in) provided by investing activities:(114,154)10,374 

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 facility2,592,440 1,838,680 

Repayments on ABL revolving credit facility

 

 

(1,798,680

)

 

 

(1,807,421

)

Repayments on ABL revolving credit facility(1,924,965)(1,798,680)

Net (repayments) borrowings under inventory financing facilities

 

 

(17,538

)

 

 

7,457

 

Net repayments under inventory financing facilitiesNet repayments under inventory financing facilities(62,119)(17,538)

Repurchases of common stock

 

 

(50,000

)

 

 

(25,000

)

Repurchases of common stock— (50,000)

Other payments

 

 

(7,944

)

 

 

(6,791

)

Other payments(6,938)(7,944)

Net cash used in financing activities

 

 

(35,482

)

 

 

(450,576

)

Net cash provided by (used in) financing activities:Net cash provided by (used in) financing activities:598,418 (35,482)

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 balances(8,606)(594)

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

 

 

(20,515

)

 

 

39,457

 

Increase (decrease) in cash, cash equivalents and restricted cashIncrease (decrease) in cash, cash equivalents and restricted cash33,661 (20,515)

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$139,638 $110,067 

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, 20212022 and our results of operations for the three and six months ended June 30, 20212022 and 20202021 and cash flows for the six months ended June 30, 20212022 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 and six months ended June 30, 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 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 June 30, 2022, reported basic and diluted net earnings per share "EPS" would decrease by $0.06 and $0.05, respectively, from $2.54 and $2.42, respectively, to $2.48 and $2.37, respectively. For the six months ended June 30, 2022, both reported basic and diluted EPS would decrease by $0.11, respectively, from $4.16 and $3.95, respectively, to $4.05 and $3.84, 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, 20212022 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

 

June 30,
2022		December 31,
2021
Current receivables, which are included in “Accounts receivable, net”$3,610,449 $2,936,732 
Non-current receivables, which are included in “Other assets”138,391 147,139 
Contract liabilities, which are included in “Accrued expenses and other current liabilities” and “Other liabilities”110,841 116,067 

C

7
hangesTable of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Changes in the contract liabilities balances during the six months ended June 30, 20212022 are as follows (in thousands):

 

 

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

 

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(55,380)
Cash received in advance and not recognized as revenue50,154 
Balances at June 30, 2022$110,841 

7

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During the six months ended June 30, 2020,2021, the Company recognized revenue of $32,682,000$53,771,000 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, 20212022 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$89,639 
202363,203 
202429,558 
2025 and thereafter18,655 
Total remaining performance obligations$201,055 

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, 20212022 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 2322 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 ofsix months ended June 30, 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, we completed the sale of our property in Irvine, California for approximately $14,218,000.

8

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

4.

Net Earnings Per Share (“EPS”)

4.    Net Earnings Per Share
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
8
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock units (“RSUs”) and certain shares underlying the Notes. A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share data):

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
June 30,		Six Months Ended
June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022202120222021

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

Net earnings

 

$

58,561

 

 

$

46,385

 

 

$

101,729

 

 

$

80,346

 

Net earnings$89,184 $58,561 $145,815 $101,729 

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 EPS35,083 35,097 35,028 35,148 

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 effect199 378 265 420 

Dilutive potential common shares due to

the Notes

 

 

1,660

 

 

 

—

 

 

 

1,349

 

 

 

—

 

Dilutive potential common shares due to the Notes1,539 1,660 1,608 1,349 

Weighted average shares used to compute

diluted EPS

 

 

37,135

 

 

 

35,260

 

 

 

36,917

 

 

 

35,453

 

Weighted average shares used to compute diluted EPS36,821 37,135 36,901 36,917 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

Basic

 

$

1.67

 

 

$

1.32

 

 

$

2.89

 

 

$

2.29

 

Basic$2.54 $1.67 $4.16 $2.89 

Diluted

 

$

1.58

 

 

$

1.32

 

 

$

2.76

 

 

$

2.27

 

Diluted$2.42 $1.58 $3.95 $2.76 

For the three and six months ended June 30, 2021, 2002022, 38,000 and 100,26,000, respectively,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, 400,0002021, 200 and 243,000,100, respectively, 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

 

June 30,
2022		December 31,
2021

ABL revolving credit facility

 

$

180,000

 

 

$

140,000

 

ABL revolving credit facility$718,225 $53,000 

Convertible senior notes due 2025

 

 

302,415

 

 

 

296,419

 

Convertible senior notes due 2025345,305 308,543 

Finance leases and other financing obligations

 

 

1,487

 

 

 

2,267

 

Finance leases and other financing obligations1,123 63 

Total

 

 

483,902

 

 

 

438,686

 

Total1,064,653 361,606 

Less: current portion of long-term debt

 

 

(650

)

 

 

(1,105

)

Less: current portion of long-term debt(345,945)(36)

Long-term debt

 

$

483,252

 

 

$

437,581

 

Long-term debt$718,708 $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
9
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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, 2021,2022, eligible accounts receivable and inventory were sufficient to permit access to the full $1,200,000,000 facility amount, of which $180,000,000$718,225,000 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.

On July 22, 2022 we entered into an amendment to the ABL facility to expand the facility and extend the maturity date as disclosed in footnote 11.
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 second quarter of 2022 making the Notes convertible at the option of the holders through September 30, 2022. All of the Notes remain outstanding at June 30, 2022. The Notes are convertible at the option of the holders at June 30, 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 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
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 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, 2021,2022, 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, 2021,2022, 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

 

June 30,
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(4,695)(41,457)

Net carrying amount

 

$

302,415

 

 

$

296,419

 

Net carrying amount$345,305 $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 3.6252.62 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, 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 and six months ended June 30, 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.

11
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The convertible note hedge consists of an option to purchase up to 5,123,160 common stock shares at a price of $68.32 per share. The hedge expires on February 15, 2025 and can only be concurrently executed upon the conversion of the Notes. 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

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 June 30, 2022, our combined inventory financing facilities had a total maximum capacity of $705,000,000, of which $248,315,000 was outstanding.

6.    Income Taxes
Our effective tax rates for the three and six months ended June 30, 2022 were 25.6% and 25.0%, respectively. Our effective tax rates 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 tax benefits related to research and development activities.
Our effective tax rates for the three and six months ended June 30, 2021 waswere 25.4% and 24.8%, respectively. For the three months ended June 30, 2021, 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 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 excess tax benefits on the settlement of employee share 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, 2021,2022 and December 31, 2020,2021, we had approximately $11,486,000$14,412,000 and $10,546,000,$12,664,000, respectively, of unrecognized tax benefits. Of these amounts, approximately $870,000$1,559,000 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.
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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 June 30, 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 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 six months ended June 30, 2022, we did not repurchase any shares of our common stock. During the six months ended June 30, 2021, we repurchased 497,243 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, 2021
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 June 30, 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, 2021.2022. 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.

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INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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, 2021.2022. 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.

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

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, 20212022 and 20202021 (in thousands):

 

Three Months Ended June 30, 2021

 

Three Months Ended June 30, 2022

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Offerings

Hardware

 

$

1,168,770

 

 

$

170,406

 

 

$

11,768

 

 

$

1,350,944

 

Hardware$1,559,474 $155,384 $16,258 $1,731,116 

Software

 

 

331,809

 

 

 

184,986

 

 

 

21,439

 

 

$

538,234

 

Software377,007 212,997 28,122 618,126

Services

 

 

259,050

 

 

 

61,982

 

 

 

19,291

 

 

$

340,323

 

Services310,963 57,950 25,222 394,135

 

$

1,759,629

 

 

$

417,374

 

 

$

52,498

 

 

$

2,229,501

 

$2,247,444 $426,331 $69,602 $2,743,377 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Client Groups

Large Enterprise / Corporate

 

$

1,219,953

 

 

$

297,677

 

 

$

25,663

 

 

$

1,543,293

 

Large Enterprise / Corporate$1,597,988 $306,389 $31,430 $1,935,807 

Commercial

 

 

362,744

 

 

 

17,166

 

 

 

16,110

 

 

 

396,020

 

Commercial448,974 19,312 17,452 485,738 

Public Sector

 

 

176,932

 

 

 

102,531

 

 

 

10,725

 

 

 

290,188

 

Public Sector200,482 100,630 20,720 321,832 

 

$

1,759,629

 

 

$

417,374

 

 

$

52,498

 

 

$

2,229,501

 

$2,247,444 $426,331 $69,602 $2,743,377 

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)$2,126,656 $389,421 $58,927 $2,575,004 

Net revenue recognition (Agent)

 

 

98,243

 

 

 

37,049

 

 

 

7,663

 

 

 

142,955

 

Net revenue recognition (Agent)120,788 36,910 10,675 168,373 

 

$

1,759,629

 

 

$

417,374

 

 

$

52,498

 

 

$

2,229,501

 

$2,247,444 $426,331 $69,602 $2,743,377 

15

Table of Contents
INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

Three Months Ended June 30, 2020

 

Three Months Ended June 30, 2021

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Offerings

Hardware

 

$

1,023,970

 

 

$

153,255

 

 

$

6,834

 

 

$

1,184,059

 

Hardware$1,168,770 $170,406 $11,768 $1,350,944 

Software

 

 

286,202

 

 

 

186,781

 

 

 

15,891

 

 

 

488,874

 

Software331,809 184,986 21,439 538,234 

Services

 

 

228,975

 

 

 

51,981

 

 

 

14,846

 

 

 

295,802

 

Services259,050 61,982 19,291 340,323 

 

$

1,539,147

 

 

$

392,017

 

 

$

37,571

 

 

$

1,968,735

 

$1,759,629 $417,374 $52,498 $2,229,501 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Client Groups

Large Enterprise / Corporate

 

$

1,023,562

 

 

$

273,147

 

 

$

16,102

 

 

$

1,312,811

 

Large Enterprise / Corporate$1,219,953 $297,677 $25,663 $1,543,293 

Commercial

 

 

332,384

 

 

 

13,178

 

 

 

15,562

 

 

 

361,124

 

Commercial362,744 17,166 16,110 396,020 

Public Sector

 

 

183,201

 

 

 

105,692

 

 

 

5,907

 

 

 

294,800

 

Public Sector176,932 102,531 10,725 290,188 

 

$

1,539,147

 

 

$

392,017

 

 

$

37,571

 

 

$

1,968,735

 

$1,759,629 $417,374 $52,498 $2,229,501 

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)$1,661,386 $380,325 $44,835 $2,086,546 

Net revenue recognition (Agent)

 

 

87,225

 

 

 

32,811

 

 

 

6,508

 

 

 

126,544

 

Net revenue recognition (Agent)98,243 37,049 7,663 142,955 

 

$

1,539,147

 

 

$

392,017

 

 

$

37,571

 

 

$

1,968,735

 

$1,759,629 $417,374 $52,498 $2,229,501 

 

Six Months Ended June 30, 2021

 

Six Months Ended June 30, 2022

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Offerings

Hardware

 

$

2,278,259

 

 

$

366,377

 

 

$

21,333

 

 

$

2,665,969

 

Hardware$3,010,793 $366,007 $27,904 $3,404,704 

Software

 

 

640,547

 

 

 

419,409

 

 

 

56,273

 

 

$

1,116,229

 

Software718,554 485,399 50,872 $1,254,825 

Services

 

 

495,604

 

 

 

110,424

 

 

 

34,343

 

 

$

640,371

 

Services582,602 106,358 45,738 $734,698 

 

$

3,414,410

 

 

$

896,210

 

 

$

111,949

 

 

$

4,422,569

 

$4,311,949 $957,764 $124,514 $5,394,227 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Client Groups

Large Enterprise / Corporate

 

$

2,391,381

 

 

$

606,752

 

 

$

44,739

 

 

$

3,042,872

 

Large Enterprise / Corporate$3,036,717 $660,293 $52,859 $3,749,869 

Commercial

 

 

706,789

 

 

 

37,699

 

 

 

28,777

 

 

 

773,265

 

Commercial890,133 37,733 32,111 959,977 

Public Sector

 

 

316,240

 

 

 

251,759

 

 

 

38,433

 

 

 

606,432

 

Public Sector385,099 259,738 39,544 684,381 

 

$

3,414,410

 

 

$

896,210

 

 

$

111,949

 

 

$

4,422,569

 

$4,311,949 $957,764 $124,514 $5,394,227 

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)

 

$

3,231,027

 

 

$

831,302

 

 

$

97,698

 

 

$

4,160,027

 

Gross revenue recognition (Principal)$4,097,577 $896,283 $105,945 $5,099,805 

Net revenue recognition (Agent)

 

 

183,383

 

 

 

64,908

 

 

 

14,251

 

 

 

262,542

 

Net revenue recognition (Agent)214,372 61,481 18,569 294,422 

 

$

3,414,410

 

 

$

896,210

 

 

$

111,949

 

 

$

4,422,569

 

$4,311,949 $957,764 $124,514 $5,394,227 

16

Table of Contents
INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

Six Months Ended June 30, 2020

 

Six Months Ended June 30, 2021

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Major Offerings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Offerings

Hardware

 

$

2,152,456

 

 

$

328,224

 

 

$

14,580

 

 

$

2,495,260

 

Hardware$2,278,259 $366,377 $21,333 $2,665,969 

Software

 

 

591,365

 

 

 

387,863

 

 

 

46,761

 

 

 

1,025,989

 

Software640,547 419,409 56,273 1,116,229 

Services

 

 

469,707

 

 

 

94,816

 

 

 

27,014

 

 

 

591,537

 

Services495,604 110,424 34,343 640,371 

 

$

3,213,528

 

 

$

810,903

 

 

$

88,355

 

 

$

4,112,786

 

$3,414,410 $896,210 $111,949 $4,422,569 

Major Client Groups

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Client Groups

Large Enterprise / Corporate

 

$

2,184,310

 

 

$

565,435

 

 

$

29,127

 

 

$

2,778,872

 

Large Enterprise / Corporate$2,391,381 $606,752 $44,739 $3,042,872 

Commercial

 

 

718,460

 

 

 

30,920

 

 

 

29,216

 

 

 

778,596

 

Commercial706,789 37,699 28,777 773,265 

Public Sector

 

 

310,758

 

 

 

214,548

 

 

 

30,012

 

 

 

555,318

 

Public Sector316,240 251,759 38,433 606,432 

 

$

3,213,528

 

 

$

810,903

 

 

$

88,355

 

 

$

4,112,786

 

$3,414,410 $896,210 $111,949 $4,422,569 

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)

 

$

3,052,436

 

 

$

751,465

 

 

$

76,817

 

 

$

3,880,718

 

Gross revenue recognition (Principal)$3,231,027 $831,302 $97,698 $4,160,027 

Net revenue recognition (Agent)

 

 

161,092

 

 

 

59,438

 

 

 

11,538

 

 

 

232,068

 

Net revenue recognition (Agent)183,383 64,908 14,251 262,542 

 

$

3,213,528

 

 

$

810,903

 

 

$

88,355

 

 

$

4,112,786

 

$3,414,410 $896,210 $111,949 $4,422,569 

All significant intercompany transactions are eliminated upon consolidation, and there are no differences between the accounting policies used to measure profit and loss for our segments or on a consolidated basis. Net sales are defined as net sales to external clients. None of our clients exceeded ten percent of consolidated net sales for the three andor six months ended June 30, 20212022 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.

17
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables present our results of operations by reportable operating segment for the periods indicated (in thousands):

 

Three Months Ended June 30, 2021

 

Three Months Ended June 30, 2022

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

Products

 

$

1,500,579

 

 

$

355,392

 

 

$

33,207

 

 

$

1,889,178

 

Products$1,936,481 $368,381 $44,380 $2,349,242 

Services

 

 

259,050

 

 

 

61,982

 

 

 

19,291

 

 

 

340,323

 

Services310,963 57,950 25,222 394,135 

Total net sales

 

 

1,759,629

 

 

 

417,374

 

 

 

52,498

 

 

 

2,229,501

 

Total net sales2,247,444 426,331 69,602 2,743,377 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold:

Products

 

 

1,358,357

 

 

 

327,550

 

 

 

29,822

 

 

 

1,715,729

 

Products1,754,799 340,177 40,919 2,135,895 

Services

 

 

122,375

 

 

 

16,295

 

 

 

8,419

 

 

 

147,089

 

Services142,379 16,607 10,607 169,593 

Total costs of goods sold

 

 

1,480,732

 

 

 

343,845

 

 

 

38,241

 

 

 

1,862,818

 

Total costs of goods sold1,897,178 356,784 51,526 2,305,488 

Gross profit

 

 

278,897

 

 

 

73,529

 

 

 

14,257

 

 

 

366,683

 

Gross profit350,266 69,547 18,076 437,889 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

Selling and administrative expenses

 

 

213,900

 

 

 

53,957

 

 

 

9,230

 

 

 

277,087

 

Selling and administrative expenses243,868 51,372 10,761 306,001 

Severance and restructuring expenses

 

 

878

 

 

 

240

 

 

 

9

 

 

 

1,127

 

Severance and restructuring expenses485 207 — 692 
Acquisition and integration related expensesAcquisition and integration related expenses1,640 — — 1,640 

Earnings from operations

 

$

64,119

 

 

$

19,332

 

 

$

5,018

 

 

$

88,469

 

Earnings from operations$104,273 $17,968 $7,315 $129,556 

17

Three Months Ended June 30, 2021
North AmericaEMEAAPACConsolidated
Net sales:
Products$1,500,579 $355,392 $33,207 $1,889,178 
Services259,050 61,982 19,291 340,323 
Total net sales1,759,629 417,374 52,498 2,229,501 
Costs of goods sold:
Products1,358,357 327,550 29,822 1,715,729 
Services122,375 16,295 8,419 147,089 
Total costs of goods sold1,480,732 343,845 38,241 1,862,818 
Gross profit278,897 73,529 14,257 366,683 
Operating expenses:
Selling and administrative expenses213,900 53,957 9,230 277,087 
Severance and restructuring expenses878 240 9 1,127 
Earnings from operations$64,119 $19,332 $5,018 $88,469 
18

Table of Contents
INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

Three Months Ended June 30, 2020

 

Six Months Ended June 30, 2022

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

Products

 

$

1,310,172

 

 

$

340,036

 

 

$

22,725

 

 

$

1,672,933

 

Products$3,729,347 $851,406 $78,776 $4,659,529 

Services

 

 

228,975

 

 

 

51,981

 

 

 

14,846

 

 

 

295,802

 

Services582,602 106,358 45,738 734,698 

Total net sales

 

 

1,539,147

 

 

 

392,017

 

 

 

37,571

 

 

 

1,968,735

 

Total net sales4,311,949 957,764 124,514 5,394,227 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold:

Products

 

 

1,187,178

 

 

 

310,279

 

 

 

20,490

 

 

 

1,517,947

 

Products3,380,574 789,809 72,721 4,243,104 

Services

 

 

107,073

 

 

 

13,558

 

 

 

5,768

 

 

 

126,399

 

Services281,025 33,638 19,710 334,373 

Total costs of goods sold

 

 

1,294,251

 

 

 

323,837

 

 

 

26,258

 

 

 

1,644,346

 

Total costs of goods sold3,661,599 823,447 92,431 4,577,477 

Gross profit

 

 

244,896

 

 

 

68,180

 

 

 

11,313

 

 

 

324,389

 

Gross profit650,350 134,317 32,083 816,750 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

Selling and administrative expenses

 

 

187,313

 

 

 

48,177

 

 

 

7,090

 

 

 

242,580

 

Selling and administrative expenses$479,088 $103,698 $20,855 $603,641 

Severance and restructuring expenses

 

 

4,904

 

 

 

2,093

 

 

 

13

 

 

 

7,010

 

Severance and restructuring expenses789 1,275 — 2,064 

Acquisition and integration related expenses

 

 

611

 

 

 

—

 

 

 

—

 

 

 

611

 

Acquisition and integration related expenses1,640 — — 1,640 

Earnings from operations

 

$

52,068

 

 

$

17,910

 

 

$

4,210

 

 

$

74,188

 

Earnings from operations$168,833 $29,344 $11,228 $209,405 

 

 

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

 

Six Months Ended June 30, 2021

 

North America

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

North AmericaEMEAAPACConsolidated

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

Products

 

$

2,743,821

 

 

$

716,087

 

 

$

61,341

 

 

$

3,521,249

 

Products$2,918,806 $785,786 $77,606 $3,782,198 

Services

 

 

469,707

 

 

 

94,816

 

 

 

27,014

 

 

 

591,537

 

Services495,604 110,424 34,343 640,371 

Total net sales

 

 

3,213,528

 

 

 

810,903

 

 

 

88,355

 

 

 

4,112,786

 

Total net sales3,414,410 896,210 111,949 4,422,569 

Costs of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of goods sold:

Products

 

 

2,475,375

 

 

 

656,028

 

 

 

56,782

 

 

 

3,188,185

 

Products2,642,233 723,734 71,020 3,436,987 

Services

 

 

236,329

 

 

 

27,921

 

 

 

10,626

 

 

 

274,876

 

Services239,791 32,912 14,722 287,425 

Total costs of goods sold

 

 

2,711,704

 

 

 

683,949

 

 

 

67,408

 

 

 

3,463,061

 

Total costs of goods sold2,882,024 756,646 85,742 3,724,412 

Gross profit

 

 

501,824

 

 

 

126,954

 

 

 

20,947

 

 

 

649,725

 

Gross profit532,386 139,564 26,207 698,157 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

Selling and administrative expenses

 

 

398,516

 

 

 

98,421

 

 

 

14,506

 

 

 

511,443

 

Selling and administrative expenses420,706 109,404 18,167 548,277 

Severance and restructuring expenses

 

 

7,026

 

 

 

2,099

 

 

 

29

 

 

 

9,154

 

Severance and restructuring expenses(6,360)738 9 (5,613)

Acquisition-related expenses

 

 

1,873

 

 

 

204

 

 

 

—

 

 

 

2,077

 

Earnings from operations

 

$

94,409

 

 

$

26,230

 

 

$

6,412

 

 

$

127,051

 

Earnings from operations$118,040 $29,422 $8,031 $155,493 

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

 

June 30,
2022		December 31,
2021

North America

 

$

4,786,742

 

 

$

4,837,155

 

North America$5,170,317 $4,920,220 

EMEA

 

 

975,626

 

 

 

735,771

 

EMEA1,099,627 828,456 

APAC

 

 

163,587

 

 

 

155,761

 

APAC200,223 148,737 

Corporate assets and intercompany eliminations, net

 

 

(1,258,908

)

 

 

(1,417,955

)

Corporate assets and intercompany eliminations, net(865,844)(1,208,333)

Total assets

 

$

4,667,047

 

 

$

4,310,732

 

Total assets$5,604,323 $4,689,080 

19
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We recorded the following pre-tax amounts, by reportable operating segment, for depreciation and amortization in the accompanying consolidated financial statements (in thousands):

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
June 30,		Six Months Ended
June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022202120222021

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$4,729 $4,864 $9,149 $9,671 

EMEA

 

 

1,202

 

 

 

1,249

 

 

 

2,434

 

 

 

2,577

 

EMEA668 1,202 1,475 2,434 

APAC

 

 

142

 

 

 

137

 

 

 

284

 

 

 

272

 

APAC154 142 316 284 

 

 

6,208

 

 

 

7,212

 

 

 

12,389

 

 

 

14,501

 

5,551 6,208 10,940 12,389 

Amortization of intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets:

North America

 

 

7,440

 

 

 

9,371

 

 

 

14,857

 

 

 

18,864

 

North America7,356 7,440 14,704 14,857 

EMEA

 

 

501

 

 

 

534

 

 

 

997

 

 

 

1,040

 

EMEA430 501 887 997 

APAC

 

 

127

 

 

 

109

 

 

 

255

 

 

 

218

 

APAC118 127 238 255 

 

 

8,068

 

 

 

10,014

 

 

 

16,109

 

 

 

20,122

 

7,904 8,068 15,829 16,109 

Total

 

$

14,276

 

 

$

17,226

 

 

$

28,498

 

 

$

34,623

 

Total$13,455 $14,276 $26,769 $28,498 

19



10.    Acquisition

Effective June 1, 2022, we acquired 100 percent of the issued and outstanding shares of Hanu Software Solutions, Inc. and Hanu Software Solutions (India) Private Ltd. (collectively, “Hanu”) for a preliminary cash purchase price, net of cash and cash equivalents acquired, of approximately $68,248,000, excluding the estimated fair value of an earn out with a maximum value of $20,000,000, hold backs for representations and warranties of approximately $8,564,000 and estimates for the final working capital adjustments to be paid in future periods. Hanu, a global leading cloud technology services and solutions provider, provides cloud solutions in the areas of applications and infrastructure, data and artificial intelligence, and cloud security, to hundreds of enterprise clients. Hanu is recognized as one of Microsoft’s top public cloud service partners globally. We believe this acquisition strengthens our service capabilities as a cloud solutions provider and is also a strategic investment in expanding our presence in India.

The preliminary fair value of net assets acquired was approximately $25,425,000, including $26,800,000 of identifiable intangible assets, consisting primarily of customer relationships that will be amortized using the straight line method over the estimated economic life of ten years. The preliminary purchase price was allocated using the information currently available. Further information obtained upon the finalization of the fair value assumptions for identifiable intangible assets acquired and the finalization of the fair value of the non-cash working capital could lead to an adjustment of the purchase price allocation. Goodwill acquired approximated $69,387,000which was recorded in our North America operating segment.

We consolidated the results of operations for Hanu within our North America operating segment beginning on June 1, 2022, the effective date of the acquisition. Our historical results would not have been materially affected by the acquisition of Hanu and, accordingly, we have not presented pro forma information as if the acquisition had been completed at the beginning of each period presented in our consolidated statement of operations.


20

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INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
11.    Subsequent Events

On July 22, 2022, we entered into the Third Amendment to Credit Agreement (the “Amendment”) governing the ABL facility. The Amendment, among other things, (i) increases the ABL facility from the U.S. dollar equivalent of $1,200,000,000 to the U.S. dollar equivalent $1,800,000,000, (ii) extends the maturity of the ABL Facility to July 22, 2027, (iii) includes certain Australian subsidiaries of Insight as borrowers and guarantors under the ABL facility, (iv) increases our ability to request increases in the aggregate amount available for borrowing under the ABL facility from up to an aggregate of the U.S. dollar equivalent of $500,000,000 to the U.S. dollar equivalent of $750,000,000 and (v) provides for an uncommitted first-in, last-out revolving facility in an aggregate amount of up to $100,000,000.
21
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.

2022:

•Net sales of $2.7 billion increased 23% compared to the three months ended June 30, 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 26% compared to the second quarter of 2021.•

Gross profit 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.

•Gross profit of $437.9 million increased 19% compared to the three months ended June 30, 2021. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased 21% compared to the second quarter of 2021.•

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•Compared to the three months ended June 30, 2021, gross margin contracted approximately 40 basis points to 16.0% of net sales in the three months ended June 30, 2022. This decline primarily reflects an increase in hardware net sales at lower margins and a change in the mix of services net sales compared to the same period in the prior year.

•Earnings from operations increased 46%, year over year, to $129.6 million in the second quarter of 2022 compared to $88.5 million in the second quarter of 2021. The increase was primarily due to increased gross profit in the current quarter, partially offset by an increase in selling and administrative expenses and acquisition and integration related expenses. Excluding the effects of fluctuating foreign currency exchange rates, earnings from operations increased 51% 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

•Net earnings and diluted earnings per share were $89.2 million and $2.42, respectively, for the second quarter of 2022. This compares to net earnings of $58.6 million and diluted earnings per share of $1.58 for the second quarter of 2021. Of the $0.84 year over year increase in diluted earnings per share, $0.05 was due to the change in method of accounting for the Notes beginning in January 2022. Excluding the effects of fluctuating foreign currency exchange rates, diluted earnings per share increased 59% year over year.
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
22

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INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Recent Developments – Impact

fluctuating foreign currency exchange rates. In computing the changes in amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.
Details about segment results of operations can be found in Note 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.
COVID-19 and Supply Chain Constraints on Our BusinessUpdate

On March 11, 2020, the World Health Organization declared

The 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 significantsaw minimal negative impact of COVID-19 on our second quarter 20212022 financial results, continuedprolonged supply constraints stemming from shortages of chips and displays resulted in sustained elevated bookingsbacklog as we enteredexited the thirdquarter when compared to the prior year quarter. We currently expectbelieve these supply constraints and extended lead times for certain products will begin to ease bycould impact results into the endsecond half of 20212022 and into 2023, and we expect growth in net sales in the second half of 20212022 compared to 2021.

More recently, new variants of COVID-19, such as the same periodOmicron 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 prior year.

spread of COVID-19 and its variants; however, while many of these restrictions have been lifted, uncertainty remains as to whether additional restrictions may be initiated or again reimplemented in responses to surges in COVID-19 cases. 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,severity; the emergence and severity of its variants,variants; the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them,them; other protective actions taken to contain the virus or treat its impact, such as restrictions on travel and transportation,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 for the remainder of 2021.in 2022 and beyond. Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends.

Throughout the “Quarterly Overview” and “Results of Operations” sections of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to changes in net sales, gross profit, selling and administrative expenses and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates.  In computing the changes in amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

Details about segment results of operations can be found in Note 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.

21

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)


Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.2021. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the
23
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

There have been no changes to the items disclosed as critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 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 six months ended June 30, 20212022 and 2020:

2021:

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Three Months Ended
June 30,		Six Months Ended
June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022202120222021

Net sales

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Net sales100.0 %100.0 %100.0 %100.0 %

Costs of goods sold

 

 

83.6

 

 

 

83.5

 

 

 

84.2

 

 

 

84.2

 

Costs of goods sold84.0 83.6 84.9 84.2 

Gross profit

 

 

16.4

 

 

 

16.5

 

 

 

15.8

 

 

 

15.8

 

Gross profit16.0 16.4 15.1 15.8 

Selling and administrative expenses

 

 

12.4

 

 

 

12.3

 

 

 

12.4

 

 

 

12.4

 

Selling and administrative expenses11.2 12.4 11.1 12.4 

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 — 0.1 (0.1)

Earnings from operations

 

 

4.0

 

 

 

3.8

 

 

 

3.5

 

 

 

3.1

 

Earnings from operations4.7 4.0 3.9 3.5 

Non-operating expense, net

 

 

0.5

 

 

 

0.6

 

 

 

0.5

 

 

 

0.5

 

Non-operating expense, net0.3 0.5 0.3 0.5 

Earnings before income taxes

 

 

3.5

 

 

 

3.2

 

 

 

3.0

 

 

 

2.6

 

Earnings before income taxes4.4 3.5 3.6 3.0 

Income tax expense

 

 

0.9

 

 

 

0.8

 

 

 

0.7

 

 

 

0.6

 

Income tax expense1.1 0.9 0.9 0.7 

Net earnings

 

 

2.6

%

 

 

2.4

%

 

 

2.3

%

 

 

2.0

%

Net earnings3.3 %2.6 %2.7 %2.3 %

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, 20212022 increased 13%23%, year over year, to $2.2$2.7 billion compared to the three months ended June 30, 2020.2021. This increase reflects increases in alleach of our operating segments.Net sales for the six months ended June 30, 20212022 increased 8%22%, year over year, to $4.4$5.4 billion compared to the six months ended June 30, 2020.  2021.
24
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Our net sales by operating segment were as follows for the three and six months ended June 30, 20212022 and 20202021 (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended
June 30,		%
Change		Six Months Ended
June 30,		%
Change

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

2022202120222021

North America

 

$

1,759,629

 

 

$

1,539,147

 

 

 

14

%

 

$

3,414,410

 

 

$

3,213,528

 

 

 

6

%

North America$2,247,444 $1,759,629 28 %$4,311,949 $3,414,410 26 %

EMEA

 

 

417,374

 

 

 

392,017

 

 

 

6

%

 

 

896,210

 

 

 

810,903

 

 

 

11

%

EMEA426,331 417,374 2 %957,764 896,210 7 %

APAC

 

 

52,498

 

 

 

37,571

 

 

 

40

%

 

 

111,949

 

 

 

88,355

 

 

 

27

%

APAC69,602 52,498 33 %124,514 111,949 11 %

Consolidated

 

$

2,229,501

 

 

$

1,968,735

 

 

 

13

%

 

$

4,422,569

 

 

$

4,112,786

 

 

 

8

%

Consolidated$2,743,377 $2,229,501 23 %$5,394,227 $4,422,569 22 %

Our net sales by offering category for North America for the three and six months ended June 30, 20212022 and 20202021 were as follows (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended
June 30,		%
Change		Six Months Ended
June 30,		%
Change

Sales Mix

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Sales Mix2022202120222021

Hardware

 

$

1,168,770

 

 

$

1,023,970

 

 

 

14

%

 

$

2,278,259

 

 

$

2,152,456

 

 

 

6

%

Hardware$1,559,474 $1,168,770 33 %$3,010,793 $2,278,259 32 %

Software

 

 

331,809

 

 

 

286,202

 

 

 

16

%

 

 

640,547

 

 

 

591,365

 

 

 

8

%

Software377,007 331,809 14 %718,554 640,547 12 %

Services

 

 

259,050

 

 

 

228,975

 

 

 

13

%

 

 

495,604

 

 

 

469,707

 

 

 

6

%

Services310,963 259,050 20 %582,602 495,604 18 %

 

$

1,759,629

 

 

$

1,539,147

 

 

 

14

%

 

$

3,414,410

 

 

$

3,213,528

 

 

 

6

%

$2,247,444 $1,759,629 28 %$4,311,949 $3,414,410 26 %

Net sales in North America increased 14%28%, or $220.5$487.8 million, for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020,2021, primarily driven by increases in hardware net sales. Net sales of hardware, software and services increased 14%33%, 16%14% and 13%20%, respectively, year over year. The changesincreases for the three months ended June 30, 20212022 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 hardware net sales was due to higher volume of sales to large enterprise and corporate clients. This growth in hardware net sales, primarily attributable to devices, was higher than expected and reflects elevated backlog starting to clear. We still exited the quarter with elevated backlog when compared to the prior year quarter and anticipate we may experience growth in networking and infrastructure products as we progress through the second half of the year. However, we believe overall hardware growth could slow in the second half of 2022.•

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 Insight core services (previously referred to as Insight delivered services), an increase in fees for cloud solutions and higher sales of software maintenance.•

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)

•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.
Net sales in North America increased 6%26%, or $200.9$897.5 million, for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020,2021, primarily driven by increases in hardware and software net sales. Net sales of hardware, software and services increased 6%32%, 8%12% and 6%18%, respectively, year over year. The increaseincreases for the first half of 2021 wassix months ended June 30, 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.  

•The increase in hardware net sales was due to higher volume of sales to large enterprise and corporate clients, primarily of devices. As discussed above, we believe that overall hardware growth could slow in the second half of 2022 but•

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.

25
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
anticipate that we may experience growth in networking and infrastructure products as we progress through the second half of the year.
•The increase in services net sales was primarily due to an increase in Insight core services, an increase in fees for cloud solutions and higher sales of software maintenance.
•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.

Our net sales by offering category for EMEA for the three and six months ended June 30, 20212022 and 20202021 were as follows (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended
June 30,		%
Change		Six Months Ended
June 30,		%
Change

Sales Mix

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Sales Mix2022202120222021

Hardware

 

$

170,406

 

 

$

153,255

 

 

 

11

%

 

$

366,377

 

 

$

328,224

 

 

 

12

%

Hardware$155,384 $170,406 (9)%$366,007 $366,377 — %

Software

 

 

184,986

 

 

 

186,781

 

 

 

(1

%)

 

 

419,409

 

 

 

387,863

 

 

 

8

%

Software212,997 184,986 15 %485,399 419,409 16 %

Services

 

 

61,982

 

 

 

51,981

 

 

 

19

%

 

 

110,424

 

 

 

94,816

 

 

 

16

%

Services57,950 61,982 (7)%106,358 110,424 (4)%

 

$

417,374

 

 

$

392,017

 

 

 

6

%

 

$

896,210

 

 

$

810,903

 

 

 

11

%

$426,331 $417,374 2 %$957,764 $896,210 7 %

Net sales in EMEA increased 6%2%, or $25.4$9.0 million for the three months ended June 30, 20212022 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, 2020.2021. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA increased 1%14%, year over year. Net sales of software increased 15% year over year, partially offset by decreases in hardware software and services increased 12%, 8%net sales of 9% and 16%7%, respectively, year overto year. The net changes for the first half of 2021three months ended June 30, 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, corporate 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.

24

•The decrease in hardware net sales was primarily due to lower volumes of sales to public sector and commercial clients.
•The decrease in services net sales was primarily due to lower volume of sales of Insight core services.
Net sales in EMEA increased 7%, or $61.6 million, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA increased 16%, year over year. Net sales of software increased 16% year over year partially offset by a decrease in services net sales of 4% year to year. The net changes for the six months ended June 30, 2022 were the result of the following:
•The increase in software net sales was primarily due to higher volume of sales to enterprise and public sector clients.
•Hardware net sales were flat year over year primarily due to higher volume of sales to enterprise, corporate and public sector clients offset by lower volume of sales to commercial clients.
•The decrease in services net sales year to year was primarily due to decreases in fees for cloud solutions and lower volume of software maintenance.
26

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INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

•

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

Our net sales by offering category for APAC for the three and six months ended June 30, 20212022 and 20202021 were as follows (dollars in thousands):

 

Three Months Ended

June 30,

 

 

%

 

 

Six Months Ended

June 30,

 

 

%

 

Three Months Ended
June 30,		%
Change		Six Months Ended
June 30,		%
Change

Sales Mix

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Sales Mix2022202120222021

Hardware

 

$

11,768

 

 

$

6,834

 

 

 

72

%

 

$

21,333

 

 

$

14,580

 

 

 

46

%

Hardware$16,258 $11,768 38 %$27,904 $21,333 31 %

Software

 

 

21,439

 

 

 

15,891

 

 

 

35

%

 

 

56,273

 

 

 

46,761

 

 

 

20

%

Software28,122 21,439 31 %50,872 56,273 (10 %)

Services

 

 

19,291

 

 

 

14,846

 

 

 

30

%

 

 

34,343

 

 

 

27,014

 

 

 

27

%

Services25,222 19,291 31 %45,738 34,343 33 %

 

$

52,498

 

 

$

37,571

 

 

 

40

%

 

$

111,949

 

 

$

88,355

 

 

 

27

%

 $69,602 $52,498 33 %$124,514 $111,949 11 %

Net sales in APAC increased 40%33%, or $14.9$17.1 million, for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020.2021. Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC increased 24%41%, year over year. Net sales of hardware, software and services increased by 72%38%, 35%31% and 30%31%, respectively, year over year. The changesincreases for the three months ended June 30, 20212022 were the result of the following:

•

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

•The increase in software net sales was due to higher volume of sales to public sector and enterprise clients partially offset by continued migration of on-premise software to 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.

•

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

•The increase in hardware net sales was primarily the result of higher volume of sales to enterprise and commercial clients.
Net sales in APAC increased 27%11%, or $23.6$12.6 million, for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020.2021. Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC increased 11%17%, year over year. Net sales of hardware software and services increased by 46%, 20%31% and 27%33%, respectively, year over year. Net sales of software decreased by 10%, year to year. The net changes for the first half of 2020six months ended June 30, 2022 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 sector clients.

•

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

•The increase in hardware net sales was primarily the result of higher volume of sales to enterprise and commercial 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.

25

•The decrease in software net sales was due to continued migration of on-premise software to cloud solutions.
27

Table of Contents
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, 20212022 and 2020:

2021:

 

North America

 

 

EMEA

 

 

APAC

 

North AmericaEMEAAPAC

 

Three Months Ended

June 30,

 

 

Three Months Ended

June 30,

 

 

Three Months Ended

June 30,

 

Three Months Ended
June 30,		Three Months Ended
June 30,		Three Months Ended
June 30,

Sales Mix

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Sales Mix202220212022202120222021

Hardware

 

 

66

%

 

 

66

%

 

 

41

%

 

 

39

%

 

 

22

%

 

 

18

%

Hardware69 %66 %36 %41 %23 %22 %

Software

 

 

19

%

 

 

19

%

 

 

44

%

 

 

48

%

 

 

41

%

 

 

42

%

Software17 %19 %50 %44 %41 %41 %

Services

 

 

15

%

 

 

15

%

 

 

15

%

 

 

13

%

 

 

37

%

 

 

40

%

Services14 %15 %14 %15 %36 %37 %

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

100 %100 %100 %100 %`100 %100 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

EMEA

 

 

APAC

 

North AmericaEMEAAPAC

 

Six Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

Six Months Ended
June 30,		Six Months Ended
June 30,		Six Months Ended
June 30,

Sales Mix

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Sales Mix202220212022202120222021

Hardware

 

 

67

%

 

 

67

%

 

 

41

%

 

 

40

%

 

 

19

%

 

 

16

%

Hardware69 %67 %38 %41 %22 %19 %

Software

 

 

19

%

 

 

18

%

 

 

47

%

 

 

48

%

 

 

50

%

 

 

53

%

Software17 %19 %51 %47 %41 %50 %

Services

 

 

14

%

 

 

15

%

 

 

12

%

 

 

12

%

 

 

31

%

 

 

31

%

Services14 %14 %11 %12 %37 %31 %

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

100 %100 %100 %100 %100 %100 %

Gross Profit. Gross profit increased 13%19%, or $42.3$71.2 million, for the three months ended June 30, 2021,2022 compared to the three months ended June 30, 2020,2021, with gross margin contracting approximately 1040 basis points to 16.0% for the three months ended June 30, 2022 compared to 16.4% for the three months ended June 30, 2021 compared to 16.5% for the three months ended June 30, 2020.  2021. Gross profit increased 7%17%, or $48.4$118.6 million, infor the six months ended June 30, 20212022 compared to the six months ended June 30, 2020,2021, with gross margin remaining flat atcontracting approximately 70 basis points to 15.1% for the six months ended June 30, 2022 compared to 15.8% for the first half of 2021 compared to the first half of 2020.six months ended June 30, 2021.

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, 20212022 and 20202021 (dollars in thousands):

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Three Months Ended June 30,Six Months Ended June 30,

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

2022% of Net Sales2021% of Net Sales2022% of Net Sales2021% of Net Sales

North America

 

$

278,897

 

 

 

15.8

%

 

$

244,896

 

 

 

15.9

%

 

$

532,386

 

 

 

15.6

%

 

$

501,824

 

 

 

15.6

%

North America$350,266 15.6 %$278,897 15.8 %$650,350 15.1 %$532,386 15.6 %

EMEA

 

 

73,529

 

 

 

17.6

%

 

 

68,180

 

 

 

17.4

%

 

 

139,564

 

 

 

15.6

%

 

 

126,954

 

 

 

15.7

%

EMEA69,547 16.3 %73,529 17.6 %134,317 14.0 %139,564 15.6 %

APAC

 

 

14,257

 

 

 

27.2

%

 

 

11,313

 

 

 

30.1

%

 

 

26,207

 

 

 

23.4

%

 

 

20,947

 

 

 

23.7

%

APAC18,076 26.0 %14,257 27.2 %32,083 25.8 %26,207 23.4 %

Consolidated

 

$

366,683

 

 

 

16.4

%

 

$

324,389

 

 

 

16.5

%

 

$

698,157

 

 

 

15.8

%

 

$

649,725

 

 

 

15.8

%

Consolidated$437,889 16.0 %$366,683 16.4 %$816,750 15.1 %$698,157 15.8 %

North America’sAmerica's gross profit for the three months ended June 30, 20212022 increased 14%26%, or $34.0$71.4 million, compared to the three months ended June 30, 2020.2021. As a percentage of net sales, gross margin contracted 10 basis points to 15.8% for the second quarter
28
Table of 2021.  The year over year changes in gross margin were primarily attributable to the following:Contents

•

There was a decrease in margin from services net sales of 15 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 of net

sales, gross margin was flat atcontracted approximately 20 basis points to 15.6% for the first halfsecond quarter of 2021.2022. The year over year net changes in gross margin were primarily attributable to the following:

•

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.  

•There was a decrease in margin from services net sales of 27 basis points compared to the same period in the prior year. Margin from product net sales, including partner funding and freight was flat, year over 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 decrease in margin from services net sales during the current quarter reflects a contraction in margin contribution from various services recognized on a net basis, including declines in partner funding.•

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

North America's gross profit for the six months ended June 30, 2022 increased 22%, or $118.0 million, compared to the six months ended June 30, 2021. As a percentage of net sales, gross margin contracted approximately 50 basis points to 15.1% for the six months ended June 30, 2022. The year to year declines in gross margin were primarily attributable to the following:
•There was a decrease in margin from services net sales of 50 basis points compared to the same period in the prior year. Margin from product net sales, which includes partner funding and freight, was flat 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 contribution from warranty net sales, partner funding, Insight core services and various other services recognized on a net basis.

EMEA's gross profit for the three months ended June 30, 2021 increased $5.32022 decreased 5%, or $4.0 million, or 8%, year overto year (decreasing 3%(increasing 6% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020.2021. As a percentage of net sales, gross margin increased approximately 20contracted 130 basis points, year overto year. The year overto year net increasedecline in gross margin was primarily attributable to an increasethe following:

•There was a decrease in higher margin on services net sales including cloud solutions and Insight delivered services, of 115125 basis points, partially offset by a points.
•The decrease in productservices margin which includes partner funding and freight,is primarily the result of 92 basis pointslower margins on Insight core services.
.

EMEA’sEMEA's gross profit for the six months ended June 30, 2021, increased $12.62022 decreased 4%, or $5.2 million, or 10% (flatyear to year (increasing 4% when excluding the effects of fluctuating foreign currency exchange rates), compared to the first half of 2020.six months ended June 30, 2021. As a percentage of net sales, gross margin contracted approximately 10160 basis points, year to year. The year to year net decline in gross margin was primarily attributable to the following:

•There was a decrease in margin on services net sales, including Insight core services, of 106 basis points and a decrease in product margin, which includesincluding partner funding and freight, of 4849 basis points, partially offset by a net increasepoints.
•The decrease in services margin includingis primarily the result of lower net sales of cloud solutions, software maintenance and other services recognized on a net basis and a decline in margin on Insight delivered services,core services.
•The decrease in product margin is primarily the result of 40 basis points.sales of hardware at lower margins than in the same period in the prior year.

APAC’s

APAC's gross profit for the three months ended June 30, 20212022 increased $2.927%, or $3.8 million, or 26%year over year (increasing 35% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020 (increasing 11% when excluding fluctuating foreign currency exchange rates).2021. As a percentage of net sales, gross margin contracted approximately 290120 basis points, year to year. The decreaseyear to year net decline in gross margin in the second quarter of 2021 comparedwas primarily attributable to the second quarterfollowing:
29
Table of 2020Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
•There was due to a 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 product net sales, which includes partner funding and freight, of 50147 basis points partially offset by an expansion in gross margin on services net sales of 29 basis points.

APAC’s•The decline in margin on product net sales was due to higher volume of software net sales at lower margins.
•The expanded margin in services net sales was driven by higher volume of cloud solutions recognized on a net basis and an increase in partner funding.

APAC's gross profit for the first halfsix months ended June 30, 2022 increased 22%, or $5.9 million, year over year (increasing 29% when excluding the effects of 2021 increased $5.3 million, or 25% compared to the first half of 2020 (increasing 10% excluding fluctuating foreign currency exchange rates)., compared to the six months ended June 30, 2021. As a percentage of net sales, gross margin contracted approximately 30expanded 240 basis points, year toover year.The decreaseyear over year increase in gross margin in the first six months of 2021 comparedwas primarily attributable to the first six months of 2020following:

•There was primarily due to a decline in gross margins from services net sales of 102 basis points, partially offset by an increase in gross margin on services net sales of 338 basis points. This expansion was partially offset by a decrease in gross margin on product net sales, which includes partner funding and freight, of 72102 basis points.

27

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

•The expanded margin in services net sales was driven by higher margins on Insight core services, higher volume of cloud solutions recognized on a net basis and an increase in partner funding.
•The decline in margin on product net sales was due to changes in product mix to lower margin products.
Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $34.5$28.9 million, or 14%10% (increasing 11%12% when excluding fluctuating foreign currency exchange rates), for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020.2021. Selling and administrative expenses increased $36.8$55.4 million, or 7%10% (increasing 2%14% when excluding fluctuating foreign currency exchange rates), for the six months ended June 30, 20212022 compared to the six months ended June 30, 20202021..

Selling and administrative expenses increaseddecreased approximately 10120 basis points as a percentage of net sales in the second quarter of 2021three months ended June 30, 2022 compared to the second quarter of 2020.three months ended June 30, 2021. The overall net increase in selling and administrative expenses reflects a $36.3$26.1 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 other expenses of $4.2 million and travel and entertainment costs of $2.9 million, year over year, in part due to returns to normal spend levels following cost control measures taken in response to COVID-19 in the prior year. These increases were partially offset by decreasesa decrease in depreciation and amortization and other expensesprofessional fees of $3.1$5.6 million, and $2.4 million respectively, year to year.

Selling and administrative expenses remained flatdecreased approximately 130 basis points as a percentage of net sales in the first half of 2021six months ended June 30, 2022 compared to the first half of 2020.six months ended June 30, 2021. The overall net increase in selling and administrative expenses reflects a $55.2$42.0 million increase in personnel costs, including teammate benefits expenses primarily duerelated to increasedincreases in overall teammate headcount and increases in variable compensation in the current year. This increase was partially offset by decreasesThere were also increases in depreciationother expenses of $6.0 million and amortization, travel and entertainment costs and other expenses of $7.1$4.5 million, $5.4 million and $5.1 million, respectively, year over year, primarily due to year.  The decreases in travel and entertainment costs reflectreturns to normal spend levels following 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, 2022, we recorded severance and restructuring expense, net of adjustments, of approximately $0.7 million. Comparatively, during the three months ended June 30, 2021, we recorded severance and restructuring expense, net of adjustments, of approximately $1.1 million. Comparatively, during the three months ended June 30, 2020, we recorded severance expense, net of adjustments, of approximately $7.0 million. The charges primarily related to a realignment of certain roles and responsibilitiesresponsibilities.
30
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
During the six months ended June 30, 2022, we recorded severance and for North America and EMEA in the prior year period due to the acquisitionrestructuring expense, net of PCM.  

Duringadjustments, of approximately $2.1 million. Comparatively, during the six months ended June 30, 2021, we recorded severance and restructuring 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 yearresponsibilities. Prior 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%46%, or $14.3$41.1 million, for the three months ended June 30, 2021,2022 compared to the three months ended June 30, 2020.2021. Earnings from operations increased 22%35%, or $28.4$53.9 million, for the six months ended June 30, 2021,2022 compared to the six months ended June 30, 2020.2021. 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, 20212022 and 20202021 (dollars in thousands):

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Three Months Ended June 30,Six Months Ended June 30,

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

 

2021

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

2022% of
Net Sales		2021% 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$104,273 4.6 %$64,119 3.6 %$168,833 3.9 %$118,040 3.5 %

EMEA

 

 

19,332

 

 

 

4.6

%

 

 

17,910

 

 

 

4.6

%

 

 

29,422

 

 

 

3.3

%

 

 

26,230

 

 

 

3.2

%

EMEA17,968 4.2 %19,332 4.6 %29,344 3.1 %29,422 3.3 %

APAC

 

 

5,018

 

 

 

9.6

%

 

 

4,210

 

 

 

11.2

%

 

 

8,031

 

 

 

7.2

%

 

 

6,412

 

 

 

7.3

%

APAC7,315 10.5 %5,018 9.6 %11,228 9.0 %8,031 7.2 %

Consolidated

 

$

88,469

 

 

 

4.0

%

 

$

74,188

 

 

 

3.8

%

 

$

155,493

 

 

 

3.5

%

 

$

127,051

 

 

 

3.1

%

Consolidated$129,556 4.7 %$88,469 4.0 %$209,405 3.9 %$155,493 3.5 %

North America’sAmerica's earnings from operations for the three months ended June 30, 20212022 increased $12.1$40.2 million, or 23%63%, compared to the three months ended June 30, 2020.2021. As a percentage of net sales, earnings from operations increased by approximately 20100 basis points to 3.6%4.6%. 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.

2021.

North America’sAmerica's earnings from operations for the six months ended June 30, 20212022 increased $23.6$50.8 million, or 25%43%, compared to the six months ended June 30, 2020.2021. As a percentage of net sales, earnings from operations increased by approximately 6040 basis points to 3.5%3.9%. 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 ana net increase in selling and administrative expenses when compared toand the gain on sale of properties in the six months ended June 30, 2020.

EMEA’s2021 with no comparative in the current year.

EMEA's earnings from operations for the three months ended June 30, 2021 increased2022 decreased $1.4 million, or 8% (decreasing 1%7% (increasing 4% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020.2021. As a percentage of net sales, earnings from operations was flat with prior year at 4.6%decreased by approximately 40 basis points to 4.2%. The increasedecrease in earnings from operations was primarily driven by an increasethe decrease in gross profit, and a decrease in severance and restructuring expenses, partially offset by an increasea decrease in selling and administrative expenses compared to the three months ended June 30, 2020.

EMEA’s2021.

EMEA's earnings from operations for the six months ended June 30, 2021 increased $3.2 million, or 12% (increasing 2%2022 were flat (increasing 8% when excluding the effects of fluctuating foreign currency exchange rates), compared to the six months ended June 30, 2020.2021. As a percentage of net sales, earnings from operations increaseddecreased by approximately 1020 basis points to 3.3%3.1%. The increasedecrease in earnings from operations was primarily driven by an increasethe decrease in gross profit and a decreaseincrease in severance and restructuring expenses, partially offset by an increasea decrease in selling and administrative expenses compared to the six months ended June 30, 2020.2021.
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APAC’s

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
APAC's earnings from operations for the three months ended June 30, 20212022 increased $800,000,$2.3 million, or 19% (increasing 6%46% (increasing 55% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended June 30, 2020.2021. As a percentage of net sales, earnings from operations decreasedincreased by approximately 16090 basis points to 9.6%10.5%. The increase in earnings from operations was primarily driven by anthe increase in gross profit, partially offset by an increase in selling and administrative expenses compared to the three months ended June 30, 2020.

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INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

APAC’s2021.

APAC's earnings from operations for the six months ended June 30, 20212022 increased $1.6$3.2 million, or 25% (increasing 12%40% (increasing 47% when excluding the effects of fluctuating foreign currency exchange rates),compared to the six months ended June 30, 2020.2021. As a percentage of net sales, earnings from operations decreased increased by approximately 10180 basis points to 7.2%9.0%. EarningsThe increase in earnings from operations reflects anwas driven by the increase in gross profit, partially offset by an increase in sellingselling and administrative expenses when compared to the six months ended June 30, 2020.

2021.

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, 20212022 decreased 6%2%, or $636,000,$0.2 million, compared to the three months ended June 30, 2020.2021. Interest expense, net for the six months ended June 30, 20212022 decreased 11%, or $2.5$2.1 million, compared to the six months ended June 30, 2020.2021. The decreases were due primarily to lowerno imputed interest under the Notes 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 wasfor the three and six months ended June 30, 2022, following our adoption of ASU 2020-06 effective January 1, 2022, compared to $2.7 million and $5.3 million for the three and six months ended June 30, 2021, respectively compared to $2.52021. Imputed interest under our inventory financing facilities was$3.8 million and $5.0$8.2 million for the three and six months ended June 20, 2020, respectively. Imputed interest under our inventory financing facilities was30, 2022 compared to $3.1 million and $6.7 million for the three and six months ended June 30, 2021, respectively, compared to $2.8 million and $5.6 million for the three and six months ended June 30, 2020, respectively.2021. The increase in imputed interest under our inventory financing facilities was a result of expanded use ofhigher average daily balances under the facilities in part as a result of expanded payment terms during the current period. 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 25.6% for the three months ended June 30, 2022 was higher than our effective tax rate of 25.4% for the three months ended June 30, 2021 was lower than our2021. Our effective tax rate of 26.2%25.0% for the threesix months ended June 30, 2020.  The decrease in2022 was higher than 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, 2021 was higher than our2021. The effective tax rate of 23.8%for the three months ended June 30, 2022 was relatively flat compared to the three months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2020.2022 was also relatively flat compared to the six months ended June 30, 2021. The marginal increase in ourthe effective tax rate for the first half of 2021six months ended June 30, 2022 compared to the first half of 2020six months ended June 30, 2021, was primarily 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 in the current year period.


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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 six months ended June 30, 20212022 and 20202021 (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

 

Six Months Ended
June 30,
20222021
Net cash (used in) provided by operating activities$(441,997)$5,187 
Net cash (used in) provided by investing activities(114,154)10,374 
Net cash provided by (used in) financing activities598,418 (35,482)
Foreign currency exchange effect on cash, cash equivalent
and restricted cash balances
(8,606)(594)
Increase (decrease) in cash, cash equivalents and restricted cash33,661 (20,515)
Cash, cash equivalents and restricted cash at beginning of period105,977 130,582 
Cash, cash equivalents and restricted cash at end of period$139,638 $110,067 

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 six months ended June 30, 2022 were to fund our working capital requirements and for strategic acquisitions.•

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 $442.0 million in cash during the six months ended June 30, 2022, compared to cash provided by operating activities of $5.2 million during the six months ended June 30, 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.

•We acquired Hanu for approximately $68.2 million, net of cash and cash equivalents acquired and excluding earn outs and hold backs, in the six months ended June 30, 2022.•

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

•We received proceeds from the sale of assets, including our properties held for sale, of $1.4 million in the six months ended June 30, 2022, compared to $27.2 million in the six months ended June 30, 2021.•

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.

•Capital expenditures were $47.3 million and $16.8 million for the six months ended June 30, 2022 and 2021, respectively.•

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.

•During the six months ended June 30, 2022 we did not repurchase any of our common stock.

•Net borrowings under our ABL facility during the six months ended June 30, 2022 were $667.5 million compared to net borrowings of $40.0 million during the six months ended June 30, 2021.
••

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 expecthad net repayments under our inventory financing facilities of $62.1 million during the six months ended June 30, 2022 compared to net repayments of $17.5 million during the six months ended June 30, 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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Net cash (used in) provided by operating activities
•Cash flow used in operating activities in the first half of 2022 was $442.0 million compared to cash provided by operating activities of $5.2 million in the first half of 2021.
•The decrease in cash flow from operating activities was primarily driven by growth in hardware net sales, strategic investments in inventory and changes in partner mix, including increased volume with distributors with early payment terms.
•Our cash conversion cycle is inverted, meaning we pay our partners on terms shorter than we receive payments from our clients. This means we use more cash in our operations in periods of sequential growth and particularly in hardware net sales.

Our consolidated cash flow operating metrics were as follows:
Three Months Ended
June 30,
20222021
Days sales outstanding in ending accounts receivable (“DSOs”) (a)
120 124 
Days inventory outstanding (“DIOs”) (b)
15 10 
Days purchases outstanding in ending accounts payable (“DPOs”) (c)
(87)(101)
Cash conversion cycle (days) (d)
48 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 91 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 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 48 days in the second quarter of 2022, up 15 days from the second quarter of 2021.
•The net changes were a result of a 14 day decrease in DPOs and a 5 day increase in DIOs partially offset by a 4 day decrease in DSOs. Excluding the impacts of netting, the decrease in DPOs was primarily due to change in partner mix, including increased volume with distributors with early payment terms and decreases in balances on our inventory financing facilities compared to the prior year period.
•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.

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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.  

•

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•We acquired Hanu for approximately $68.2 million, 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 metricsand cash equivalents acquired and excluding earn outs and hold backs in the six months ended June 30, 2022.

•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)$47.3 million and $16.8 million for the six months ended June 30, 2022 and 2021, respectively. The majority of the capital expenditures in the first half of 2022 were used for our global corporate headquarters and to fund technology related projects.

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 received proceeds from the sale of assets, including our properties held for sale, of $1.4 million in the six months ended June 30, 2022, compared to $27.2 million in the six months ended June 30, 2021.

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

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 six months ended June 30, 2022, we had net borrowings under our ABL facility that increased our outstanding long-term debt balance by $667.5 million.
•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.
•We had net repayments

under our inventory financing facilities of $62.1 million during the six months ended June 30, 2022 compared to net repayments of $17.5 million during the six months ended June 30, 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 six months ended June 30, 2022, 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.

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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, 2021, we repurchased $50.0 million of our common stock.•

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, 20212022 was $483.9 million,$1.1 billion, 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 June 30, 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 June 30, 2022, we were in compliance with all such covenants.
We also have agreements with financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions.

•

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

•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 $248.3 million was outstanding at June 30, 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, 2021,2022, we had
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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
approximately $76.1$115.1 million in cash and cash equivalents in certain of our foreign subsidiaries, primarily residing in Australia Canada and the Netherlands.Canada. 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.

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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.

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2021.
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INSIGHT ENTERPRISES, INC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Except as described below, there have been no material changes in our reported market risks, as described in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 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, 2021,2022, the fair market value of our Notes was $537$473 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, 20212022 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

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

Inherent Limitations of Internal Control Over Financial Reporting

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

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INSIGHT ENTERPRISES, INC.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see “– Legal Proceedings” in Note 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”Report,”), and the risk factors described below, which could materially affect our business, financial condition or future results. The risks described in our Annual Report and below are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.

Risks Related to Our Business, Operations and Industry

General economic and political conditions, including unfavorable conditions in a particular region, business or industry sector, may lead our clients to delay or forgo investments in IT hardware, software and services. Weak economic conditions generally or any broad-based reduction in IT spending, including as a result of the COVID-19 pandemic, adversely affects our business, operating results and financial condition. A prolonged slowdown in the global economy, including the possibility of recession or financial market instability or similar crisis, or in a particular region or business or industry sector, or tightening of credit markets, could cause our clients to have difficulty accessing capital and credit sources, delay contractual payments, or delay or forgo decisions to upgrade or add to their existing IT environments, license new software or purchase products or services (particularly with respect to discretionary spending for hardware, software and services). Such events could have a material adverse effect on our business, financial condition and results of operations. Economic or industry downturns could result in longer payment cycles, increased collection costs and defaults in excess of our expectations. A significant deterioration in our ability to collect on accounts receivable could also impact the cost or availability of financing under our accounts receivable securitization program.

Our sales to public sector clients are also impacted by government spending policies, government shutdowns, budget priorities and revenue levels. An adverse change in government spending policies (including budget cuts at the federal, state and local level), budget priorities or revenue levels could cause our public sector clients to reduce their purchases or to terminate or not renew their contracts with us. These possible actions or the adoption of new or modified procurement regulations or practices could have a material adverse effect on our business, financial position and results of operations.

Worldwide economic conditions and market volatility as a result of political leadership in certain countries and other disruptions to global and regional economies and markets, including continuing increases in inflation and interest rates, including the possibility of recession or financial market instability, may impact future business activities. External factors, such as potential terrorist attacks, acts of war, geopolitical and social turmoil or epidemics and other similar outbreaks in many parts of the world, could prevent or hinder our ability to do business, increase our costs and negatively affect our stock price. More generally, these geopolitical, social and economic conditions could result in increased volatility in the United States and worldwide financial markets and economy, as well as other adverse impacts. For example, on February 24, 2022, Russian forces launched significant military actions against Ukraine, and sustained conflict and disruption in the region remains ongoing. Potential impacts related to the conflict include further market disruptions, including significant volatility in commodity prices, credit and capital markets, supply chain and logistics disruptions, adverse global economic conditions resulting from escalating geopolitical tensions, volatility and fluctuations in foreign currency exchange rates and interest rates, inflationary pressures on raw materials and heightened cybersecurity threats, all of which could adversely impact our business, particularly our European operations.
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Political developments, economic instability or natural disasters impacting international trade, including continued uncertainty surrounding the Referendum on the United Kingdom’s Membership in the European Union (“EU”) (referred to as “Brexit”) and, trade disputes and increased tariffs, particularly between the United States and China, may also negatively impact markets and cause weaker macroeconomic conditions or drive sentiment that weakens demand for our products and services. Potential adverse consequences of Brexit such as global market uncertainty and increased regulatory complexities could have a negative impact on our business, financial condition and results of operations.
There are risks associated with our international operations that are different than the risks associated with our operations in the United States, and our exposure to the risks of a global market could hinder our ability to maintain and expand international operations. Outside of the United States, we have operation centers in Australia, Canada, France, Germany, India, the Philippines and the United Kingdom, as well as sales offices throughout EMEA and APAC. In the regions in which we do not currently have a physical presence, we serve our clients through strategic relationships. In implementing our international strategy, we may face barriers to entry and competition from local companies and other companies that already have established global businesses, as well as the risks generally associated with conducting business internationally. The success and profitability of international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as:
•political or economic instability, including the possibility of recession or financial market instability, or acts of war, such as the recent Russian invasion of Ukraine and its regional and global ramifications discussed above;
•changes in governmental regulation or taxation (foreign and domestic);
•currency exchange fluctuations;
•changes in import/export laws, regulations and customs and duties and tariffs (foreign and domestic);
•trade restrictions (foreign and domestic);
•difficulties of conducting business, managing operations, and costs of staffing in certain foreign countries;
•work stoppages or other changes in labor conditions;
•taxes and other restrictions on repatriating foreign profits back to the United States;
•extended payment terms;
•seasonal reductions in business activity in some parts of the world; and
•natural disasters, terrorism, civil unrest, public health concerns (including health epidemics or outbreaks of communicable diseases such as the COVID-19 pandemic) and other geopolitical uncertainties.

In addition, changes in policies and/or laws of the United States or foreign governments, including data privacy restrictions such as the General Data Protection Regulation (“GDPR”) resulting in, among other changes, higher taxation, tariffs or similar protectionist laws, currency conversion limitations, limitations on business operations, or the nationalization of private enterprises could reduce the anticipated benefits of international operations and could have a material adverse effect on our business, financial condition and results of operations.

We have currency exposure arising from both sales and purchases denominated in foreign currencies, including intercompany transactions outside the United States, and we currently conduct limited hedging activities. In addition, some currencies may be subject to limitations on conversion into other currencies, which can limit the ability to otherwise react to rapid foreign currency devaluations. We cannot predict with precision the effect of future exchange-rate fluctuations, and significant rate fluctuations could have a material adverse effect on our business, financial condition and results of operations.

International operations also expose us to currency fluctuations as we translate the financial statements of our foreign operations to U.S. dollars. For example, recent fluctuations in foreign currency exchange rates, including the increased strength of the U.S. dollar against
39
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INSIGHT ENTERPRISES, INC.
certain foreign currencies, has adversely impacted our results of operations and cash flows from our operations in EMEA and APAC.

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.

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
April 1, 2022 through April 30, 2022— $— — $75,032,025 
May 1, 2022 through May 31, 2022— — — 75,032,025 
June 1, 2022 through June 30, 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, 2021,2022, 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.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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INSIGHT ENTERPRISES, INC.

Item 6. Exhibits.

 

 

 

 

Incorporated by Reference

 

 

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

Number

 

Filing

Date

 

Filed/Furnished

Herewith

3.1

 

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

 

10-K

 

000-25092

 

3.1

 

February 17, 2006

 

 

3.2

 

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

 

8-K

 

000-25092

 

3.1

 

May 21, 2015

 

 

3.3

 

Amended and Restated Bylaws of Insight Enterprises, Inc.

 

8-K

 

000-25092

 

3.2

 

May 21, 2015

 

 

4.1

 

Specimen Common Stock Certificate (P)

 

S-1

 

33-86142

 

4.1

 

January 20, 1995

 

 

10.1

 

Executive 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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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:

Date:August 5, 2021

4, 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)

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