Insight Enterprises CEO Discusses Q3 2010 - Earnings Call Transcript
Insight Enterprises, (
)
Q3 2010 Earnings Call
November 3, 2010 05:00 pm ET
Executives
Kenneth Lamneck – Chief Executive Officer, President, Director and Member of Executive Committee
Helen Johnson – Senior Vice President, Treasurer
Stuart Fenton – President, Insight EMEA and APAC
Analysts
Matt Sheerin – Stifel Nicolaus
John Lawrence – Morgan Keegan
Brian Alexander – Raymond James
Presentation
Operator
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Insight Enterprises Inc. Q3 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the Q3 2010 Insight Enterprises Incorporated earnings conference call. (Operator instructions.) I would now like to turn the conference over to your host for today, Ms. Helen Johnson, Senior Vice President and Treasurer. Please proceed.
Helen Johnson
Thank you. Welcome everyone, and thank you for joining the Insight Enterprises conference call. Today we will be discussing the company’s operating results for the quarter ended September 30
th
, 2010. I’m Helen Johnson, Senior Vice President and Treasurer of Insight, and joining me is Ken Lamneck, President and Chief Executive Officer. I’m sitting in for Glynis today, who is home fighting the flu. She’ll be back in the office very soon.
If you do not have a copy of the earnings release that was posted this afternoon and filed with the Securities and Exchange Commission on Form 8K, you will find it on our website at
under our Investor Relations section. Today’s call including the question-and-answer period is being webcast live and can be accessed by the Investor Relations page of our website at
. An archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time.
This conference call and the associated webcasts contain time-sensitive information that is accurate only as of today, November 3, 2010. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Insight Enterprises is strictly prohibited.
Finally, let me remind you about forward looking statements that will be made on today’s call. All forward looking statements that are made in this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today’s press release and in greater detail in our annual report on Form 10K for the year ended December 31
st
, 2009.
With that, I will now turn the call over to Ken to walk you through an overview of our Q3 2010 operating results. Ken?
Kenneth Lamneck
Hello everyone. Thank you for joining us today to discuss our Q3 operating results. Today we report another quarter of healthy year to year growth driven by continued strong demand for IT products, improved execution, and operating leverage. Consolidated net sales increased 21% in Q3 to $1.2 billion, up from $969.9 million last year. On a constant currency basis, consolidate net sales grew 23%. Gross profit was $154.6 million, up 16% from last year, and gross margin was 13.2%, down from 13.8% in Q3 2009.
Earnings from operations increased 109% to $24.8 million, or 2.1% of net sales, compared to $11.9 million or 1.2% of net sales reported last year. Net earnings and diluted earnings per share were $14.4 million and $0.31 in Q3 2010 compared to net earnings and diluted earnings per share from continued operations reported Q3 2009 of $7.3 million and $0.16.
Within these results, our North American operating segment reported 34% growth in the hardware category and 25% growth in the software business. Hardware growth in North America continues to be driven by increased demand for notebooks, desktops, and accessories as well at networking and communicating products. Software growth was driven by increased volume across multiple publishers, including our largest software partner.
The shift in sales mix from higher hardware and software sales but lower services sales resulted in overall gross margin, this year compared to last year. We continue to be pleased with the leverage we are getting on a cost structure that resulted in a significant improvement in earnings from operations year to year, excluding the severance and unique items recorded in both periods.
In EMEA we saw double digit sales growth and constant currency, including positive growth across all product categories. Growth in Q3 was driven by higher volume of hardware sales, particularly notebooks and desktops, as well as software sales, primarily in the large enterprise and middle market client groups. Also in EMEA, we continue to make progress on the development of our new IT system for the region, but have concluded that we need some more time to get this system right for implementation.
Thus, we have decided to defer the first country launch until mid next year. The new system is important to our long term strategy to deliver hardware in key markets, and believe this delay is necessary for a smooth transition. In Asia/Pacific, sales declined 13% in constant currency, but our team there grew gross profit year to year to higher fees from enterprise agreements.
The overall market continues to improve and we believe we are making progress on our internal initiatives to improve our operational discipline and sales execution. In addition, we have been working to strategically add to management team here at Insight, and I am pleased to report that Mike Gugum(sp) has joined the company just this week as our new Chief Information Officer. Mike brings a wealth of IT and business transformation experience to Insight. Prior to joining our team, Mike held various IT leadership roles over a 15 year period at Motorola, including his most recent position, as Corporate Vice President, Information Technology. In his new role, Mike will oversee the development integration of our global IT infrastructure, including the current project ongoing in EMEA, and longer term plans to integrate our multiple systems here in North America.
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