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Dynamic quotes 
OFFON

INSIGHT ENTERPRISES, INC.

(NSIT)
  Report
Delayed Quote. Delayed Nasdaq - 01/14 04:00:01 pm
102.77 USD   -0.24%
01/05Insight to Present at 24th Annual Needham Virtual Growth Conference
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01/04INSIGHT ENTERPRISES INC : Other Events (form 8-K)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

11/04/2021 | 11:25am EST
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 is a technology business. We empower organizations of all
sizes with Insight Intelligent Technology SolutionsTM and services to maximize
the business value of information technology ("IT") in North America; Europe,
the Middle East and Africa ("EMEA"); and Asia-Pacific ("APAC"). As a Fortune
500-ranked global provider of digital innovation, cloud/data center
transformation, and connected workforce solutions, together with our supply
chain optimization expertise, 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 a consolidated basis, for the three months ended September 30, 2021:




      •  Net sales of $2.4 billion increased 26% compared to the three months
         ended September 30, 2020. The increase in net sales reflects a double
         digit increase in both hardware and services net sales. Excluding the
         effects of fluctuating foreign currency exchange rates, net sales
         increased 25% compared to the third quarter of 2020.

• Gross profit of $364.5 million increased 19% compared to the three months

ended September 30, 2020. Excluding the effects of fluctuating foreign

currency exchange rates, gross profit increased 17% compared to the third

quarter of 2020.

• Compared to the three months ended September 30, 2020, gross margin

contracted approximately 100 basis points to 14.9% of net sales in the

three months ended September 30, 2021. This decline primarily reflects an

         increase in product 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 35%, year over year, to $83.2 million

in the third quarter of 2021 compared to $61.5 million in the third

quarter of 2020. The increase was primarily due to increased gross profit

in the current quarter, partially offset by an increase in selling and

administrative expenses and severance and restructuring

expenses. Excluding the effects of fluctuating foreign currency exchange

         rates, earnings from operations increased 33% year over year.

• Net earnings and diluted earnings per share were $55.5 million and $1.51,

         respectively, for the third quarter of 2021. This compares to net
         earnings of $38.9 million and diluted earnings per share of $1.10 for the
         third quarter of 2020.


                                       20


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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)


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




On March 11, 2020, the World Health Organization declared COVID-19 a
pandemic. The pandemic has negatively impacted the global economy, disrupted
global supply chains and reduced workforce participation. While we did not see a
significant impact of COVID-19 on our third quarter 2021 financial results,
prolonged supply constraints stemming from shortages of chips and displays
resulted in sustained elevated bookings as we entered the fourth quarter. We
currently expect these supply constraints and extended lead times for certain
products will begin to ease in 2022 and expect growth in net sales in the fourth
quarter of 2021 compared to the same period in the prior year.



More recently, new variants of COVID-19, such as the Delta variant, that are
significantly more contagious than previous strains, have emerged. The spread of
these new strains is causing many government authorities and businesses to
reimplement prior restrictions in an effort to lessen the spread of COVID-19 and
its variants. The ultimate extent of the impact of the COVID-19 pandemic on our
business operations, financial performance, and results of operations, including
our ability to execute our business strategies and initiatives in the expected
time frame, is currently unknown and will depend on future developments, which
are highly uncertain, continuously evolving and cannot be predicted. This
includes, but is not limited to, the duration and spread of the COVID-19
pandemic and its severity; the emergence and severity of its variants; the
availability and efficacy of vaccines (particularly with respect to emerging
strains of the virus) and potential hesitancy to utilize them; other protective
actions taken to contain the virus or treat its impact, such as restrictions on
travel and transportation; general economic factors, such as increased
inflation; supply chain constraints; labor supply issues; and how quickly and to
what extent normal economic and operating conditions can resume.



We will continue to actively monitor the situation and anticipate taking further
actions as may be required by government authorities or that we determine are in
the best interests of our teammates, clients and partners. It is not clear what
the potential effects of any such alterations or modifications may have on our
business, including the effects on our clients, teammates, and prospects, or on
our financial results for the remainder of 2021 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.



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                           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. The preparation of these consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, net sales and expenses. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results, 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.





                             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 third 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. See "-Quarterly
Overview-Recent Developments - Impact of COVID-19 and Supply Constraints on Our
Business" for additional information.

The following table sets forth certain financial data as a percentage of net sales for the three and nine months ended September 30, 2021 and 2020:



                                           Three Months Ended              Nine Months Ended
                                              September 30,                  September 30,
                                          2021             2020           2021            2020
Net sales                                    100.0 %         100.0 %         100.0 %        100.0 %
Costs of goods sold                           85.1            84.1            84.5           84.2
Gross profit                                  14.9            15.9            15.5           15.8
Selling and administrative expenses           11.4            12.7            12.1           12.5
Severance and restructuring expenses
and
   acquisition and integration
related expenses                               0.1             0.1            (0.1 )          0.2
Earnings from operations                       3.4             3.1             3.5            3.1
Non-operating expense, net                     0.4             0.5             0.4            0.5
Earnings before income taxes                   3.0             2.6             3.1            2.6
Income tax expense                             0.7             0.6             0.8            0.6
Net earnings                                   2.3 %           2.0 %           2.3 %          2.0 %




We generally experience some seasonal trends in our sales of IT hardware,
software and services. Software sales are typically seasonally higher in our
second 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 are

                                       22



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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)



often stronger in our third quarter, while sales in the state and local
government and education 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 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 adapt our sales strategies to optimize
performance under the revised programs.

Net Sales. Net sales for the three months ended September 30, 2021 increased
26%, year over year, to $2.4 billion compared to the three months ended
September 30, 2020. This increase reflects increases in all of our operating
segments. Net sales for the nine months ended September 30, 2021 increased 14%
year over year to $6.9 billion compared to the nine months ended September 30,
2020. Our net sales by operating segment were as follows for the three and nine
months ended September 30, 2021 and 2020 (dollars in thousands):



                    Three Months Ended                           Nine Months Ended
                       September 30,               %               September 30,               %
                   2021            2020         Change         2021            2020         Change
North America   $ 2,019,876$ 1,558,168          30 %   $ 5,434,286$ 4,771,696          14 %
EMEA                381,448         341,280          12 %     1,277,658       1,152,183          11 %
APAC                 46,197          37,030          25 %       158,146         125,385          26 %
Consolidated    $ 2,447,521$ 1,936,478          26 %   $ 6,870,090$ 6,049,264          14 %




Our net sales by offering category for North America for the three and nine
months ended September 30, 2021 and 2020 were as follows (dollars in thousands):



                Three Months Ended                           Nine Months Ended
                   September 30,               %               September 30,               %
Sales Mix      2021            2020         Change         2021            2020         Change
Hardware    $ 1,418,335$ 1,028,045          38 %   $ 3,696,594$ 3,180,501          16 %
Software        338,440         306,925          10 %       978,987         898,290           9 %
Services        263,101         223,198          18 %       758,705         692,905           9 %
            $ 2,019,876$ 1,558,168          30 %   $ 5,434,286$ 4,771,696          14 %




Net sales in North America increased 30%, or $461.7 million, for the three
months ended September 30, 2021 compared to the three months ended September 30,
2020, primarily driven by increases in hardware net sales. Net sales of
hardware, software and services increased 38%, 10% and 18%, respectively, year
over year. The increases for the three months ended September 30, 2021 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,

networking and

             storage products. The increase in volume of sales compared to the
             same period in the prior year was largely due to the impacts of
             COVID-19 experienced in the prior year.

• The increase in software net sales was primarily due to higher volume

             of software licensing, partially offset by the continued 

migration of

             on-premise software to cloud solutions, reported net in
services net
             sales.


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




Net sales in North America increased 14%, or $662.6 million, for the nine months
ended September 30, 2021 compared to the nine months ended September 30, 2020,
primarily driven by increases in hardware net sales. Net sales of hardware,
software and services increased 16%, 9% and 9%, respectively, year over
year. The increases for the first nine months of 2021 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 software net sales was primarily due to a single
             significant transaction with a large enterprise client in the current
             period, partially offset by the continued migration of on-premise
             software to cloud solutions, reported net in services net sales.


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



Our net sales by offering category for EMEA for the three and nine months ended September 30, 2021 and 2020 were as follows (dollars in thousands):




              Three Months Ended                         Nine Months Ended
                 September 30,             %               September 30,               %
Sales Mix     2021          2020        Change         2021            2020         Change
Hardware    $ 160,645$ 138,685          16 %   $   527,022$   466,909          13 %
Software      178,868       165,301           8 %       598,277         553,164           8 %
Services       41,935        37,294          12 %       152,359         132,110          15 %
            $ 381,448$ 341,280          12 %   $ 1,277,658$ 1,152,183          11 %




Net sales in EMEA increased 12%, or $40.2 million, for the three months ended
September 30, 2021 compared to the three months ended September 30,
2020. Excluding the effects of fluctuating foreign currency exchange rates, net
sales in EMEA increased 7%, year over year. Net sales of hardware, software and
services increased 16%, 8% and 12%, respectively, year over year. The increases
for the three months ended September 30, 2021 were the result of the following:



          •  The increase in hardware net sales was due primarily to higher
             volumes of sales to corporate clients, partially offset by lower
             volumes of sales to public sector clients.

• The increase in software net sales was primarily due to higher volume

             of sales to corporate and public sector clients, partially offset by
             continued migration of on-premise software to cloud solutions.

• The increase in services net sales was due primarily to higher volume

             of Insight delivered services and higher sales of cloud solutions.




Net sales in EMEA increased 11%, or $125.5 million, for the nine months ended
September 30, 2021 compared to the nine months ended September 30,
2020. Excluding the effects of fluctuating foreign currency exchange rates, net
sales in EMEA increased 3%, year over year. Net sales of hardware, software and
services increased 13%, 8% and 15%, respectively, year over year. The increases
for the first nine months of 2021 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.


                                       24


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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)



          •  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.

• 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 nine months ended September 30, 2021 and 2020 were as follows (dollars in thousands):




              Three Months Ended                         Nine Months Ended
                 September 30,             %               September 30,             %
Sales Mix      2021          2020        Change         2021          2020        Change
Hardware    $   13,515$  6,421          110 %    $  34,848$  21,001          66 %
Software        14,436       16,191          (11 %)      70,709        62,952          12 %
Services        18,246       14,418           27 %       52,589        41,432          27 %
            $   46,197$ 37,030           25 %    $ 158,146$ 125,385          26 %




Net sales in APAC increased 25%, or $9.2 million, for the three months ended
September 30, 2021 compared to the three months ended September 30,
2020. Excluding the effects of fluctuating foreign currency exchange rates, net
sales in APAC increased 21%, year over year. Net sales of hardware and services
increased by 110% and 27%, respectively, year over year. Net sales of software
decreased by 11%, year to year. The net changes for the three months ended
September 30, 2021 were the result of the following:



• The increase in hardware net sales was primarily the result of large

             transactions with corporate and enterprise clients.


• The increase in services net sales was primarily due to higher sales

             of Insight delivered services.


• The decrease in software net sales was primarily due to migration of

             on-premise software to cloud solutions.




Net sales in APAC increased 26%, or $32.8 million, for the nine months ended
September 30, 2021 compared to the nine months ended September 30,
2020. Excluding the effects of fluctuating foreign currency exchange rates, net
sales in APAC increased 14%, year over year. Net sales of hardware, software and
services increased by 66%, 12% and 27%, respectively, year over year. The
increases for the first nine months of 2021 were the result of the following:



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

• The increase in services net sales was primarily due to higher sales

             of Insight delivered services and cloud solutions.


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




                                       25


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                           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 nine months ended September 30, 2021 and 2020:



                 North America                    EMEA                          APAC
              Three Months Ended           Three Months Ended           

Three Months Ended

                 September 30,                September 30,                 September 30,
Sales Mix      2021           2020        2021            2020          2021            2020
Hardware            70 %         66 %          42 %            41 %          29 %            17 %
Software            17 %         20 %          47 %            48 %          31 %            44 %
Services            13 %         14 %          11 %            11 %          40 %            39 %
                   100 %        100 %         100 %           100 %         100 %           100 %

                 North America                    EMEA                          APAC
               Nine Months Ended            Nine Months Ended            

Nine Months Ended

                 September 30,                September 30,                 September 30,
Sales Mix      2021           2020        2021            2020          2021            2020
Hardware            68 %         67 %          41 %            41 %          22 %            17 %
Software            18 %         19 %          47 %            48 %          45 %            50 %
Services            14 %         14 %          12 %            11 %          33 %            33 %
                   100 %        100 %         100 %           100 %         100 %           100 %




Gross Profit. Gross profit increased 19%, or $57.0 million, for the three months
ended September 30, 2021, compared to the three months ended September 30, 2020,
with gross margin contracting approximately 100 basis points to 14.9% for the
three months ended September 30, 2021 compared to 15.9% for the three months
ended September 30, 2020. Gross profit increased 11%, or $105.4 million, in the
nine months ended September 30, 2021 compared to the nine months ended September
30, 2020, with gross margin contracting 30 basis points to 15.5% for the first
nine months of 2021 compared to the first nine months of 2020.



Our gross profit and gross profit as a percentage of net sales by operating segment were as follows for the three and nine months ended September 30, 2021 and 2020 (dollars in thousands):




                                    Three Months Ended September 30,                              Nine Months Ended September 30,
                                         % of                           % of                            % of                           % of
                          2021         Net Sales         2020         Net Sales         2021          Net Sales         2020         Net Sales
North America           $ 295,982            14.7 %    $ 247,168            15.9 %   $   828,368            15.2 %    $ 748,992            15.7 %
EMEA                       55,447            14.5 %       50,300            14.7 %       195,011            15.3 %      177,254            15.4 %
APAC                       13,116            28.4 %       10,095            27.3 %        39,323            24.9 %       31,042            24.8 %
Consolidated            $ 364,545            14.9 %    $ 307,563            15.9 %   $ 1,062,702            15.5 %    $ 957,288            15.8 %




North America's gross profit for the three months ended September 30, 2021
increased 20%, or $48.8 million, compared to the three months ended September
30, 2020. As a percentage of net sales, gross margin contracted approximately
120 basis points to 14.7% for the third quarter of 2021. 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 72 basis
            points and a decrease in margin from product net sales, which includes
            partner funding and freight, of 49 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 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.




                                       26


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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)





North America's gross profit for the nine months ended September 30, 2021
increased 11%, or $79.4 million, compared to the three months ended September
30, 2020. As a percentage of net sales, gross margin contracted approximately 50
basis points to 15.2% for the first nine months of 2021. The year-to-year
declines in gross margin were primarily attributable to the following:



• There was a decrease in product margin, which includes partner funding

            and freight, of 34 basis points and a decrease in margin from services
            net sales of 12 basis points compared to the same period in the prior
            year.


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

• The decrease in margin from services net sales during the current

            quarter reflects a decrease in margin from Insight delivered 

services

            and a reduction in referral fees partially offset by an

increase in

            margin from cloud solutions and other services that are
recorded net.




EMEA's gross profit for the three months ended September 30, 2021 increased $5.1
million, or 10%, year over year (increasing 6% when excluding the effects of
fluctuating foreign currency exchange rates), compared to the three months ended
September 30, 2020. As a percentage of net sales, gross margin contracted
approximately 20 basis points, year to year. The year to year net decrease in
gross margin was primarily attributable to a decrease in product margin,
including partner funding and freight, of 23 basis points, partially offset by
an increase in higher margin services net sales, including cloud solutions and
Insight delivered services, of 2 basis points.



EMEA's gross profit for the nine months ended September 30, 2021, increased
$17.8 million, or 10% (increasing 2% when excluding the effects of fluctuating
foreign currency exchange rates), compared to the first nine months of 2020. As
a percentage of net sales, gross margin contracted approximately 10 basis
points, year to year. The year to year decline in gross margin was primarily
attributable to a decrease in product margin, which includes partner funding and
freight, of 40 basis points, partially offset by a net increase in services
margin, including cloud solutions and Insight delivered services, of 28 basis
points.



APAC's gross profit for the three months ended September 30, 2021 increased $3.0
million, or 30%, compared to the three months ended September 30, 2020
(increasing 26% when excluding fluctuating foreign currency exchange rates). As
a percentage of net sales, gross margin expanded approximately 110 basis points,
year over year. The increase in gross margin in the third quarter of 2021
compared to the third quarter of 2020 was due to an increase in gross margin on
product net sales, which includes partner funding and freight, of 152 basis
points. The expansion was partially offset by a decrease in gross margin on
services net sales of 39 basis points.



APAC's gross profit for the first nine months of 2021 increased $8.3 million, or
27% compared to the first nine months of 2020 (increasing 15% excluding
fluctuating foreign currency exchange rates). As a percentage of net sales,
gross margin expanded approximately 10 basis points, year over year. The
increase in gross margin in the first nine months of 2021 compared to the first
nine months of 2020 was primarily due to an increase in gross margin on product
net sales, which includes partner funding and freight, of 95 basis points,
partially offset by a decline in gross margins from services net sales of 85
basis points.



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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)





Operating Expenses.



Selling and Administrative Expenses. Selling and administrative expenses increased $33.8 million, or 14% (increasing 13% when excluding fluctuating foreign currency exchange rates), for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Selling and administrative expenses increased $70.7 million, or 9% (increasing 7% when excluding fluctuating foreign currency exchange rates), for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.




Selling and administrative expenses decreased approximately 130 basis points as
a percentage of net sales in the third quarter of 2021 compared to the third
quarter of 2020. The overall net increase in selling and administrative expenses
reflects a $34.3 million 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. There were also
increases in professional fees incurred for special projects and travel and
entertainment costs of $1.7 million and $1.3 million respectively, year over
year. These increases were partially offset by a decrease in depreciation and
amortization expense of $2.4 million, year to year.



Selling and administrative expenses decreased approximately 40 basis points as a
percentage of net sales in the first nine months of 2021 compared to the first
nine months of 2020. The overall net increase in selling and administrative
expenses reflects an $89.5 million increase in personnel costs, including
teammate benefits expenses primarily due to increased headcount and increases in
variable compensation in the current year. Professional fees incurred for
special projects also increased by $4.6 million year over year. These increases
were partially offset by decreases in depreciation and amortization, other
expenses and travel and entertainment costs of $9.5 million, $5.7 million and
$4.0 million, respectively, year to year.



Severance and Restructuring Expenses, Net. During the three months ended September 30, 2021, we recorded severance expense, net of adjustments, of approximately $2.4 million. Comparatively, during the three months ended September 30, 2020, we recorded severance expense, net of adjustments, of approximately $808,000. The charges primarily related to a realignment of certain roles and responsibilities and for North America and EMEA in the prior year period due to the acquisition of PCM.




During the nine months ended September 30, 2021, we recorded severance expense,
net of adjustments, of approximately $4.8 million. Comparatively, during the
nine months ended September 30, 2020, we recorded severance expense, net of
adjustments, of approximately $10.0 million. The charges primarily related to a
realignment of certain roles and responsibilities and for North America and EMEA
in the prior year period due to the acquisition of PCM. For the nine months
ended September 30, 2021, severance charges were offset by gains on sale of
properties of $8.0 million.



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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)





Earnings from Operations. Earnings from operations increased 35%, or $21.7
million, for the three months ended September 30, 2021, compared to the three
months ended September 30, 2020. Earnings from operations increased 27%, or
$50.1 million, for the nine months ended September 30, 2021, compared to the
nine months ended September 30, 2020. Our earnings from operations and earnings
from operations as a percentage of net sales by operating segment were as
follows for the three and nine months ended September 30, 2021 and 2020 (dollars
in thousands):



                               Three Months Ended September 30,                                Nine Months Ended September 30,
                                      % of                           % of                           % of                           % of
                     2021           Net Sales         2020         Net Sales         2021         Net Sales         2020         Net Sales
North America     $   74,269               3.7 %    $  54,244             3.5 %   $  192,309             3.5 %    $ 148,653             3.1 %
EMEA                   4,988               1.3 %        4,843             1.4 %       34,410             2.7 %       31,073             2.7 %
APAC                   3,894               8.4 %        2,395             6.5 %       11,925             7.5 %        8,807             7.0 %
Consolidated      $   83,151               3.4 %    $  61,482             3.1 %   $  238,644             3.5 %    $ 188,533             3.1 %




North America's earnings from operations for the three months ended September
30, 2021 increased $20.0 million, or 37%, compared to the three months ended
September 30, 2020. As a percentage of net sales, earnings from operations
increased by approximately 20 basis points to 3.7%. The increase in earnings
from operations was primarily driven by an increase in gross profit, partially
offset by a net increase in selling and administrative expenses and an increase
in severance and restructuring expenses when compared to the three months ended
September 30, 2020. Earnings from operations increased as a percentage of net
sales primarily due to gross profit increasing at a faster rate than selling and
administrative expenses.



North America's earnings from operations for the nine months ended September 30,
2021 increased $43.7 million, or 29%, compared to the nine months ended
September 30, 2020. As a percentage of net sales, earnings from operations
increased by approximately 40 basis points to 3.5%. The increase in earnings
from operations was primarily driven by an increase in gross profit, a decrease
in severance and restructuring expenses (including gains recognized on sale of
properties) and no acquisition and integration related expenses in the current
period, partially offset by an increase in selling and administrative expenses
when compared to the nine months ended September 30, 2020. Earnings from
operations increased as a percentage of net sales primarily due to gross profit
increasing at a faster rate than selling and administrative expenses.



EMEA's earnings from operations for the three months ended September 30, 2021
increased $145,000, or 3% (decreasing 2% when excluding the effects of
fluctuating foreign currency exchange rates), compared to the three months ended
September 30, 2020. As a percentage of net sales, earnings from operations
decreased 10 basis points to 1.3%. The increase in earnings from operations was
primarily driven by an increase in gross profit, partially offset by an increase
in selling and administrative expenses and an increase in severance and
restructuring expenses compared to the three months ended September 30, 2020.



EMEA's earnings from operations for the nine months ended September 30, 2021
increased $3.3 million, or 11% (increasing 2% when excluding the effects of
fluctuating foreign currency exchange rates), compared to the nine months ended
September 30, 2020. As a percentage of net sales, earnings from operations
remained flat at 2.7%. The increase in earnings from operations was primarily
driven by an increase in gross profit, partially offset by an increase in
selling and administrative expenses compared to the nine months ended September
30, 2020.



APAC's earnings from operations for the three months ended September 30, 2021
increased $1.5 million, or 63% (increasing 56% when excluding the effects of
fluctuating foreign currency exchange rates), compared to the three months ended
September 30, 2020. As a percentage of net sales, earnings from operations
increased by approximately 190 basis points to 8.4%. The increase in earnings
from operations was primarily driven by an increase in gross profit, partially
offset by an

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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)


increase in selling and administrative expenses compared to the three months ended September 30, 2020.




APAC's earnings from operations for the nine months ended September 30, 2021
increased $3.1 million, or 35% (increasing 23% when excluding the effects of
fluctuating foreign currency exchange rates), compared to the nine months ended
September 30, 2020. As a percentage of net sales, earnings from operations
increased by approximately 50 basis points to 7.5%. Earnings from operations
reflects an increase in gross profit partially offset by an increase in selling
and administrative expenses when compared to the nine months ended September 30,
2020.


Non-Operating (Income) Expense.




Interest Expense, Net. Interest expense, net primarily relates to borrowings
under our financing facilities and imputed interest under our inventory
financing facilities and the Notes, partially offset by interest income
generated from interest earned on cash and cash equivalent bank balances.
Interest expense, net for the three months ended September 30, 2021 increased
13%, or $1.2 million, compared to the three months ended September 30, 2020. The
increase was due primarily to higher average daily balances under our ABL
facility, as well as increased imputed interest under our inventory financing
facilities and the Notes. Interest expense, net for the nine months ended
September 30, 2021 decreased 4%, or $1.3 million, compared to the nine months
ended September 30, 2020. The decrease was due primarily to lower average daily
balances under our ABL facility during the first half of the year and lower
borrowing rates under our ABL facility, which was partially offset by increased
imputed interest under our inventory financing facilities and the Notes.



Imputed interest under the Notes was $2.7 million and $8.0 million for the three
and nine months ended September 30, 2021, respectively compared to $2.6 million
and $7.6 million for the three and nine months ended September 20, 2020,
respectively. Imputed interest under our inventory financing facilities was $3.9
million and $10.7 million for the three and nine months ended September 30,
2021, respectively, compared to $3.2 million and $8.8 million for the three and
nine months ended September 30, 2020, respectively. The increase in imputed
interest under our inventory financing facilities was a result of expanded use
of the facilities. For a description of our various financing facilities, see
Note 5 to our Consolidated Financial Statements in Part I, Item 1 of this
report.



Income Tax Expense. Our effective tax rate of 25.4% for the three months ended
September 30, 2021 was higher than our effective tax rate of 23.8% for the three
months ended September 30, 2020. The increase in our effective tax rate was due
primarily to the beneficial rate impact of certain income tax regulations issued
during the prior year that did not recur in 2021, partially offset by an
increase in excess tax benefits on the settlement of employee share-based
compensation.



Our effective tax rate of 25.0% for the nine months ended September 30, 2021 was
higher than our effective tax rate of 23.8% for the nine months ended September
30, 2020. The increase in our effective tax rate for the first nine months of
2021 compared to the first nine months of 2020 was due primarily to the rate
impact of tax benefits associated with the CARES Act which did not recur in
2021, partially offset by an increase in excess tax benefits on the settlement
of employee share-based compensation.


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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 nine months ended September 30, 2021 and 2020 (in thousands):



                                                              Nine Months Ended
                                                                September 30,
                                                            2021             2020

Net cash (used in) provided by operating activities $ (117,788 ) $

462,094

Net cash provided by (used in) investing activities            1,210          (12,875 )
Net cash provided by (used in) financing activities           99,092         (489,087 )
Foreign currency exchange effect on cash, cash
equivalent
  and restricted cash balances                                (3,601 )      

718

Decrease in cash, cash equivalents and restricted
cash                                                         (21,087 )        (39,150 )
Cash, cash equivalents and restricted cash at
beginning of period                                          130,582        

116,297

Cash, cash equivalents and restricted cash at end of
period                                                  $    109,495$     77,147




Cash and Cash Flow


• Our primary uses of cash during the nine months ended September 30, 2021

were to fund our working capital requirements and to repurchase shares of

our common stock.

• Operating activities used $117.8 million in cash during the nine months

ended September 30, 2021, compared to cash provided by operating activities

of $462.1 million during the nine months ended September 30, 2020.

• We received proceeds from the sale of assets, including our properties held

for sale, of $29.2 million in the nine months ended September 30, 2021

compared to proceeds of $14.2 million in the nine months ended September 30,

2020.

• Capital expenditures were $28.0 million and $20.7 million for the nine

months ended September 30, 2021 and 2020, respectively.

• During the nine months ended September 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 nine months ended September 30, 2020, we repurchased an

aggregate of $25.0 million of our common stock, pursuant to the repurchase

program approved in February 2020.

• Net borrowings under our ABL facility during the nine months ended September

30, 2021 were $82.0 million compared to net repayments of $570.9 million

during the nine months ended September 30, 2020.

• We had net borrowings under our inventory financing facilities of $76.4

      million during the nine months ended September 30, 2021 compared to net
      borrowings of $114.3 million during the nine months ended September 30,
      2020.






We expect that cash flows from operations, together with the funds available
under our financing facilities, will be adequate to support our anticipated cash
and working capital requirements for operations over the next 12 months. We
believe that we have a strong balance sheet and healthy liquidity position. The
Company had capacity of up to $1.2 billion under our ABL facility as of
September 30, 2021. For the remainder of 2021, we plan to be prudent in our use
of cash, using available cash to fund business operations and 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 operating activities




         •  Cash flow used in operating activities in the first nine months of
            2021 was $117.8 million compared to cash provided by operating
            activities of $462.1 million in the first nine months of 2020.


         •  The decrease in cash flow from operating activities was primarily
            driven by growth in hardware net sales and changes in partner mix,
            including increased volume with distributors with early payment terms.
            A significant partner payment deferral and a customer advance payment
            in the prior year with no comparable activity in the current year also
            contributed to the decrease. We deferred, and in some cases reduced,
            our federal and other taxes paid through COVID-19 relief

measures in

            the first nine months 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 the changes in cash used in

operations

            in the first nine months of 2021 compared to cash generated in the
            first nine months of 2020.

Our consolidated cash flow operating metrics were as follows:



                                                               Three Months Ended
                                                                  September 30,
                                                            2021                2020

Days sales outstanding in ending accounts receivable ("DSOs") (a)

                                                      104       

108

Days inventory outstanding ("DIOs") (b)                            10                  10

Days purchases outstanding in ending accounts payable ("DPOs") (c)

                                                      (78 )               (93 )
Cash conversion cycle (days) (d)                                   36                  25



(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 92 days.


   (b) 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 92 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 92 days.



  (d) Calculated as DSOs plus DIOs, less DPOs.




         •  Our cash conversion cycle was 36 days in the third quarter of 2021, up
            11 days from the third quarter of 2020.


• The net changes were a result of a 15 day decrease in DPOs partially

            offset by a four day decrease in DSOs. The decrease in DPOs was
            primarily due to growth in the current year and change in

partner mix,

            including increased volume with distributors with early payment terms,
            partially offset by increases in balances on our inventory financing
            facilities.

         •  We expect that cash flow from operations will be used, at least
            partially, to fund working capital as we 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.




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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)




Net cash provided by (used in) investing activities




         •  We received proceeds from the sale of assets, including properties
            held for sale, of $29.2 million and $14.2 million for the nine months
            ended September 30, 2021 and 2020, respectively.

• Capital expenditures were $28.0 million and $20.7 million for the nine

            months ended September 30, 2021 and 2020, respectively.


         •  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 provided by (used in) financing activities




         •  During the nine months ended September 30, 2021, we had net borrowings
            under our ABL facility that increased our outstanding long-term debt
            balance by $82.0 million.


         •  During the nine months ended September 30, 2020, we had net repayments
            under our ABL facility that decreased our outstanding long-term debt
            balance by $570.9 million.

• We had net borrowings under our inventory financing facilities of

            $76.4 million during the nine months ended September 30, 2021

compared

            to net borrowings of $114.3 million during the nine months ended
            September 30, 2020.


         •  During the nine months ended September 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 September 30, 2021 was $527.5 million, including our finance lease obligations for certain IT equipment and other financing obligations.

• Our objective is to pay our debt balances down while retaining

            adequate cash balances to meet overall business objectives.


         •  The Notes are subject to certain events of default and certain
            acceleration clauses. As of September 30, 2021, 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 September
            30, 2021, 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.

• Our inventory financing facilities have an aggregate availability for

            vendor purchases of $620.0 million, of which $403.1 million was
            outstanding at September 30, 2021.




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                           INSIGHT ENTERPRISES, INC.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                     AND RESULTS OF OPERATIONS (continued)




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 September 30,
2021, we had approximately $91.4 million in cash and cash equivalents in certain
of our foreign subsidiaries, primarily residing in Australia, Canada and the
Netherlands. 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.



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 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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                           INSIGHT ENTERPRISES, INC.

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