Insight Increases Sales Staff, Posts Double-Digit Profit Growth

Insight Enterprises notched a strong third-quarter performance across all product segments, growing its North American sales staff by nearly 12 percent in 2014.

The Tempe, Ariz.-based solution provider, No. 14 on the CRN SP 500, reported a 16 percent jump in earnings for the quarter ended Sept. 30 from $15 million to $17.4 million, or 42 cents per share. This beat analysts' estimates of 39 cents per share.

Sales soared by 8 percent on a year-over-year basis from $1.15 billion to $1.24 billion, surpassing projections of $1.2 billion.

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The company is growing in North America, adding more than 150 salespeople to fully capitalize on specific vertical and cloud opportunities, said President and CEO Ken Lamneck during the earnings call. That brings Insight's total North American salesforce up to 1,300, according to Glynis Bryan, the solution provider's chief financial officer.

Europe, the Middle East and Asia (EMEA) enjoyed the greatest success, with sales rising 19 percent to $313.6 million after factoring in foreign currency exchange rates.

Large public sector clients in EMEA drove 19 percent growth in software sales, while strong notebook, desktop, tablet and server sales in the United Kingdom resulted in a 10 percent jump in hardware sales, Bryan said.
Italy and Spain enjoyed the strongest revenue growth of any EMEA nations, Lamneck said.

North America saw more modest sales growth of 4 percent to $891.3 million, which Lamneck said was fueled by success in the large enterprise, mid-market and federal government sectors.

Business productivity offerings fueled 5 percent growth in the region's software sales, Lamneck said, while notebook and desktop successes -- particularly in the K-12 vertical -- led to 3 percent growth in North American hardware sales.

An increase in multi-site deployments and consulting arrangements resulted in services-side growth for North America as well, Lamneck said.

Sales in Asia-Pacific increased 10 percent on a constant currency basis to $32.7 million.

Gross margins, though, fell from 21.6 percent to 20.5 percent due to a downturn in the region's software business transactions, Bryan said.

North American margins, though, fell from 14.7 percent to 13.9 percent due to the increase in headcount and a $1.5 million to $2 million sequential increase in health care costs. Bryan said she expects these expenses to continue to rise.

Also negatively affecting margins globally was lower funding from a couple of vendors due to changes in partner programs, which can be adjusted either quarterly or semi-annually.

"I think we could have executed a little better (in this area)," Lamneck said.

Going forward, Lamneck said Insight will review rebates on a weekly basis and tweak its investments based on where the most lucrative vendor incentives are.

Insight remains committed to investing earnings to drive revenue growth, Bryan said, meaning investors shouldn't necessarily expect to see significant margin expansion in future quarters.

Clouds also remain on the horizon.

Insight has scaled back its full-year earnings projections from $2.02 to $2.10 per share to $1.99 to $2.05 per share. The solution provider expects fourth-quarter earnings to come in between 54 cents and 60 cents per share.

Insight's stock price remained unchanged at $25.33 per share in after-hours trading to a market value of $1.04 billion. Earnings were released after the market closed Wednesday.

PUBLISHED OCT. 29, 2014