Insight Enterprises, Inc., (NSIT)
Q2 2010 Earnings Call
August 4, 2010 5:00 p.m. ET
Kenneth Lamneck – Chief Executive Officer, President, Director and Member of Executive Committee
Glynis Bryan – Chief Financial Officer
Stuart Fenton – President, Insight EMEA and APAC
Brian Alexander – Raymond James
Matt Sheerin – Stifel Nicolaus
John Lawrence – Morgan Keegan
Previous Statements by NSIT
» Insight Enterprises, Inc. Q1 2010 Earnings Call Transcript
» Insight Enterprises Q4 2009 Earnings Call Transcript
» Insight Enterprises Inc. Q3 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the Q2 2010 Insight Enterprises Incorporated earnings conference call. (Operator instructions.) I would now like to turn the conference over to your host for today, Ms. Glynis Bryan, CFO. Please proceed.
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 June 30
, 2010. I’m Glynis Bryan, Chief Financial Officer of Insight Enterprises, and joining me is Ken Lamneck, President and Chief Executive Officer.
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, August 4
, 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 under Form 10K for the year ended December 31
With that, I will now turn the call over to Ken to walk you through an overview of our Q2 2010 operating results. Ken?
Thank you, Glynis. Hello, everyone. Thank you for joining us today to discuss our Q2 operating results. I’m happy to report that continued strengthening of IT demand globally coupled with improved execution and operating leverage led to a strong year-to-year growth in both sales and profitability in our business. As we reported earlier today, consolidated net sales increased 23% in the Q2 to $1.3 billion, up from $1 billion last year; and on a constant currency basis, consolidated net sales grew 25%.
Gross profit was $173.8 million, up 18% from last year, and gross margin was 13.6%, down from 14.3% in the Q2 of 2009. Earnings from operations increased 104% to $44.7 million, or 3.5% of net sales compared to $21.8 million, or 2.1% of net sales reported last year. And net earnings and diluted earnings per share were $26.9 million and $0.58 in the Q2 of 2010, compared to net earnings and diluted earnings per share from continued operations reported in the Q2 of 2009 of $12.9 million and $0.28 per share.
We’re certainly pleased with those results and are proud of our team’s execution during the quarter. In North America the sales we made in our Hardware category that we began to see in the Q4 of 2009 continued into this quarter continued into this quarter, with gross margins also improving year-to-year in this category. High volume of sales of Software Products across several key publishers and slightly higher fees from enterprise agreements led to better than expected results in our Software category as well.
Services sales were down year-to-year as expected due to the effect of a large service engagement last year that did not reoccur this year. And these higher sales combined with continued expense management allowed us to more than double the earnings from operations in this segment.
By delivering these good results our North America team is also preparing for the rollout of the new sales engagement model that launched on July 1
. Now about one month after the launch I’m pleased to report there have not been any big surprises. Our planning team did a great job anticipating issues and our implementation team has been working hard to make sure the launch and subsequent milestones are successful. The new recently-focused sales organization is now live, initial training has been completed and the new management system has been adopted. While there’s more work to occur over the balance of the year I’m pleased about what we have accomplished thus far in this key initiative.
In EMEA for the second quarter we saw sales grow in constant currency across all Product categories. Our team there was successful in wining new clients during the quarter, particularly large enterprise space but also in public sector and middle market.
In our Product category we saw increased purchases of PCs and servers and Software Products from multiple publishers, including our largest Software partner. Demand in EMEA is beginning to improve and we are encouraged by the results we achieved in the quarter.
In Asia/Pacific sales increased 25% in US dollars and 14% in constant currency due to continued growth of public sector business and new sales wins in the middle market. I’ll now hand the call back over to Glynis who will discuss the Q2 operating results of our business segments.