# Insight Enterprises Inc: Form 10-Q for the period ended Mar 31, 2024

- Company: [Insight Enterprises Inc](/companies/nsit.md) (CIK 932696)
- Form: 10-Q
- Filed: 2024-05-02
- Accepted by EDGAR: May 2, 2024, 17:20 ET
- Period: 2024-03-31
- Accession: 0001628280-24-020070
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/932696/000162828024020070/nsit-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/932696/000162828024020070/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $2.38bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $1.94bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $440.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $337.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $100.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $12.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $21.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $67.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $2.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 38,435,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $247.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $6.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $35.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $379.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $4.44bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $6.57bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $3.50bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $4.81bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $1.76bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,497 characters.

*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 help our clients accelerate their digital journey to modernize their businesses and maximize the value of technology. We serve these clients in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked solutions integrator, we enable secure, end-to-end digital transformation and meet the needs of our clients through a comprehensive portfolio of solutions, far-reaching partnerships and 36 years of broad IT expertise. We amplify our solutions and services with global scale, local expertise and our e-commerce experience, enabling our clients to realize their digital ambitions in multiple ways. 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 consist largely of software and certain software-related services and cloud solutions.

On a consolidated basis, for the three months ended March 31, 2024:

- Net sales of $2.4 billion increased 2% compared to the three months ended March 31, 2023. The increase in net sales reflects increases in software and services net sales, partially offset by a decrease in hardware net sales. Excluding the effects of fluctuating foreign currency exchange rates, net sales also increased 2% compared to the first quarter of 2023.
- Gross profit of $440.9 million increased 13% compared to the three months ended March 31, 2023. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased 12% compared to the first quarter of 2023.
- Compared to the three months ended March 31, 2023, gross margin expanded approximately 170 basis points to 18.5% of net sales in the three months ended March 31, 2024. This expansion primarily reflects an increase in higher margin services net sales compared to the same period in the prior year.
- Earnings from operations increased 29%, year over year, to $100.0 million in the first quarter of 2024 compared to $77.5 million in the first quarter of 2023. The increase was primarily due to an increase in gross profit partially offset by an increase in selling and administrative expenses in the current quarter. Excluding the effects of fluctuating foreign currency exchange rates, earnings from operations increased 28% year over year.
- Net earnings and diluted earnings per share were $67.0 million and $1.74, respectively, for the first quarter of 2024. This compares to net earnings of $50.0 million and diluted earnings per share of $1.34 for the first quarter of 2023. Diluted earnings per share increased 30% year over year, and excluding the effects of fluctuating foreign currency exchange rates, increased 29% 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 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 8 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.

#### Supply Chain Constraints and Inflation Update

Supply constraints that have had an industry-wide impact since the beginning of 2020 eased in the second half of 2023. We believe that the remaining supply constraints and extended lead times for certain infrastructure, including networking products, have now normalized back to near historic levels. Despite the easing supply constraints, we continue to see a general slowdown in our clients' decision making, which we believe will continue in the short term.

Inflation resulted in continued higher interest rates on all of our variable rate facilities and we expect these higher rates may continue into the second half of 2024. We are actively monitoring changes to the global macroeconomic environment, including those impacting our supply chain and interest rates, and assessing the potential impacts these challenges may have on our current results, financial condition and liquidity. We are also mindful of the potential impact these conditions could have on our clients, partners and prospects for the remainder of 2024 and beyond.

### 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, 2023. 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, 2023.

### Results of Operations

The following table sets forth certain financial data as a percentage of net sales for the three months ended March 31, 2024 and 2023:

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net sales | 100.0% | 100.0% |
| Costs of goods sold | 81.5 | 83.2 |
| Gross profit | 18.5 | 16.8 |
| Selling and administrative expenses | 14.2 | 13.3 |
| Severance and restructuring expenses and acquisition and integration related expenses | 0.1 | 0.2 |
| Earnings from operations | 4.2 | 3.3 |
| Non-operating expense, net | 0.5 | 0.4 |
| Earnings before income taxes | 3.7 | 2.9 |
| Income tax expense | 0.9 | 0.7 |
| Net earnings | 2.8% | 2.2% |

We generally experience some seasonal trends in our sales of IT hardware, software and services. Software and certain cloud net sales are typically seasonally higher in our second and fourth quarters. 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 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. Historically we have experienced higher net sales in our second quarter, however, with the addition of SADA, we now believe our second and fourth quarters may be equally strong.

Our gross profit across the business and related to product versus services sales are, and will continue to be, impacted by partner incentives, which can and do 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 shift our focus and respond to them. For a discussion of risks associated with our reliance on partners, see “Risk Factors – Risks related to Our Business, Operations and Industry – We rely 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 the requirements year over year,” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

***Net Sales.*** Net sales of $2.4 billion for the three months ended March 31, 2024 increased 2%, year over year, compared to the three months ended March 31, 2023, reflecting an increase in our North America segment, partially offset by decreases in our EMEA and APAC operating segments.

Our net sales by operating segment were as follows for the three months ended March 31, 2024 and 2023 (dollars in thousands):

|  | Three Months Ended March 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| North America | $1,904,822 | $1,833,964 | 4% |
| EMEA | 412,841 | 427,004 | (3)% |
| APAC | 61,822 | 62,979 | (2)% |
| Consolidated | $2,379,485 | $2,323,947 | 2% |

Our net sales by offering category for North America for the three months ended March 31, 2024 and 2023 were as follows (dollars in thousands):

| Sales Mix | Three Months Ended March 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Hardware | $991,066 | $1,155,639 | (14)% |
| Software | 595,240 | 394,797 | 51% |
| Services | 318,516 | 283,528 | 12% |
|  | $1,904,822 | $1,833,964 | 4% |

Net sales in North America increased 4%, or $70.9 million, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by increases in software and services net sales, partially offset by a decrease in hardware net sales. Software and services net sales increased 51% and 12%, year over year, respectively. These increases were partially offset by a decrease in hardware net sales of 14%, year to year. The net changes for the three months ended March 31, 2024 were the result of the following:

- The increase in software net sales was primarily due to a significant multiyear transaction and 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 higher sales of cloud solution offerings, including from SADA, and an increase in Insight Delivered services net sales.
- The decrease in hardware net sales was due to lower volume of sales primarily to large enterprise and corporate clients driven by declines in sales of infrastructure products.

Our net sales by offering category for EMEA for the three months ended March 31, 2024 and 2023 were as follows (dollars in thousands):

| Sales Mix | Three Months Ended March 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Hardware | $136,314 | $162,890 | (16)% |
| Software | 203,252 | 214,561 | (5)% |
| Services | 73,275 | 49,553 | 48% |
|  | $412,841 | $427,004 | (3)% |

Net sales in EMEA decreased 3%, or $14.2 million, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Excluding the effects of fluctuating foreign currency exchange rates, net sales in EMEA decreased 6%, year to year. Net sales of hardware and software decreased by 16% and 5%, respectively, year to year, partially offset by an increase in services net sales of 48%, year over year. The net changes for the three months ended March 31, 2024 were the result of the following:

- The decrease in hardware net sales was primarily due to lower volume of sales to large enterprise, corporate and public sector clients.
- The decrease in software net sales was primarily due to continued migration of on-premise software to cloud solutions, reported net in services net sales and lower sales to public sector clients, partially offset by higher sales to large enterprise and corporate clients.
- The increase in services net sales was primarily due to increases in Insight Delivered services net sales, including from Amdaris, which we acquired on August 17, 2023, and in fees for cloud solutions.

Our net sales by offering category for APAC for the three months ended March 31, 2024 and 2023 were as follows (dollars in thousands):

| Sales Mix | Three Months Ended March 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Hardware | $7,347 | $10,316 | (29)% |
| Software | 30,736 | 29,442 | 4% |
| Services | 23,739 | 23,221 | 2% |
|  | $61,822 | $62,979 | (2)% |

Net sales in APAC decreased 2%, or $1.2 million, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Excluding the effects of fluctuating foreign currency exchange rates, net sales in APAC increased 1%, year over year. Net sales of hardware decreased by 29%, year to year. This decrease was partially offset by increases in software and services net sales of 4% and 2%, respectively, year over year. The net changes for the three months ended March 31, 2024 were the result of the following:

- The decrease in hardware net sales was primarily the result of lower volume of sales to clients across all sectors.
- The increase in software net sales was due to higher volume of sales to large enterprise and corporate clients, partially offset by 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 higher volume sales of Insight Delivered services and increase in fees for cloud solutions.

The percentage of net sales by category for North America, EMEA and APAC were as follows for the three months ended March 31, 2024 and 2023:

| Sales Mix | North America Three Months Ended March 31, 2024 | 2023 | EMEA Three Months Ended March 31, 2024 | 2023 | APAC Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Hardware | 52% | 63% | 33% | 38% | 12% | 16% |
| Software | 31% | 22% | 49% | 50% | 50% | 47% |
| Services | 17% | 15% | 18% | 12% | 38% | 37% |
|  | 100% | 100% | 100% | 100% | 100% | 100% |

***Gross Profit.*** Gross profit increased 13%, or $49.6 million, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, with gross margin expanding approximately 170 basis points to 18.5% for the three months ended March 31, 2024 compared to 16.8% for the three months ended March 31, 2023.

Our gross profit and gross profit as a percentage of net sales by operating segment were as follows for the three months ended March 31, 2024 and 2023 (dollars in thousands):

|  | Three Months Ended March 31, 2024 | % of Net Sales | 2023 | % of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| North America | $349,843 | 18.4% | $315,144 | 17.2% |
| EMEA | 75,033 | 18.2% | 60,888 | 14.3% |
| APAC | 16,052 | 26.0% | 15,283 | 24.3% |
| Consolidated | $440,928 | 18.5% | $391,315 | 16.8% |

North America's gross profit for the three months ended March 31, 2024 increased $34.7 million, compared to the three months ended March 31, 2023. As a percentage of net sales, gross margin expanded approximately 120 basis points to 18.4% for the first quarter of 2024. The year over year net expansion in gross margin was primarily attributable to the following:

- An increase in services margin of 166 basis points partially offset by a contraction in product margin of 48 basis points compared to the same period in the prior year.
- The increase in services margin reflects an increase in fees for cloud solutions, including from SADA, an increase in margin contribution from Insight Core services (consisting of Insight Delivered and managed services) and an increase in product warranty.
- The decrease in product margin reflects a decrease in margin contribution from hardware net sales partially offset by an increase in margin from software net sales.

EMEA's gross profit for the three months ended March 31, 2024 increased 23%, or $14.1 million, year over year (increasing 20% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2023. As a percentage of net sales, gross margin expanded 390 basis points, year over year. The year over year net expansion in gross margin was attributable to the following:

- A net increase in product margin of 16 basis points and an increase from services margin of 375 basis points.
- The increase in services margin is primarily the result of increased fees for cloud solutions and increased margin contribution on Insight Core Services, including from Amdaris.
- 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.

APAC's gross profit for the three months ended March 31, 2024 increased 5%, or $0.8 million, year over year (increasing 8% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2023. As a percentage of net sales, gross margin expanded approximately 170 basis points, year over year. The year over year net expansion in gross margin was primarily attributable to the following:

- A net increase in product margin of 108 basis points and an increase from services margin of 62 basis points.
- The expansion in product margin was driven by sales of software and hardware to enterprise and corporate clients at higher margins than in the same period in the prior year.
- The expansion in services margin was driven by higher margins on Insight Core services and increased fees for cloud solutions.

### Operating Expenses.

***Selling and Administrative Expenses.*** Selling and administrative expenses for the three months ended March 31, 2024 increased 9%, or $27.4 million compared to the three months ended March 31, 2023 (also increasing 9% when excluding fluctuating foreign currency exchange rates).

Selling and administrative expenses increased approximately 90 basis points as a percentage of net sales in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The overall net increase in selling and administrative expenses primarily reflects increases in personnel costs, including teammate benefits and depreciation and amortization expenses of $14.6 million and $8.0 million, respectively, year over year. The increase in personnel costs reflects an increase in overall teammate headcount from our SADA and Amdaris acquisitions and the impact of merit increases. The increase in depreciation and amortization expenses reflects higher amortization of intangible assets associated with the SADA and Amdaris acquisitions. We incurred transformation costs in the current and prior year periods of $2.3 million and $4.0 million, respectively, however, these costs are unique in nature and are not expected to recur in the longer term.

***Severance and Restructuring Expenses.*** During the three months ended March 31, 2024, we recorded severance and restructuring expenses of approximately $2.2 million. Comparatively, during the three months ended March 31, 2023, we recorded severance and restructuring expenses of approximately $3.8 million. The charges in both periods primarily related to a realignment of certain roles and responsibilities.

***Acquisition and Integration Related Expenses.*** During the three months ended March 31, 2024, we recorded acquisition and integration related expenses of approximately $1.3 million. During the three months ended March 31, 2023, we had no significant comparable activity. As the Company executes its acquisition strategy, we expect to incur additional acquisition and integration related expenses.

***Earnings from Operations.*** Earnings from operations increased 29%, or $22.5 million, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Our earnings from operations and earnings from operations as a percentage of net sales by operating segment were as follows for the three March 31, 2024 and 2023 (dollars in thousands):

|  | Three Months Ended March 31, 2024 | % of Net Sales | 2023 | % of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| North America | $84,023 | 4.4% | $63,186 | 3.4% |
| EMEA | 11,190 | 2.7% | 10,281 | 2.4% |
| APAC | 4,773 | 7.7% | 3,994 | 6.3% |
| Consolidated | $99,986 | 4.2% | $77,461 | 3.3% |

North America's earnings from operations for the three months ended March 31, 2024 increased $20.8 million, or 33%, compared to the three months ended March 31, 2023. As a percentage of net sales, earnings from operations increased by approximately 100 basis points to 4.4%. The increase in earnings from operations was primarily driven by the increase in gross profit, partially offset by an increase in selling and administrative expenses, when compared to the three months ended March 31, 2023.

EMEA's earnings from operations for the three months ended March 31, 2024 increased $0.9 million, or 9% (increasing 5% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2023. As a percentage of net sales, earnings from operations increased by approximately 30 basis points to 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, when compared to the three months ended March 31, 2023.

APAC's earnings from operations for the three months ended March 31, 2024 increased $0.8 million, or 20% (increasing 22% when excluding the effects of fluctuating foreign currency exchange rates), compared to the three months ended March 31, 2023. As a percentage of net sales, earnings from operations increased by approximately 140 basis points to 7.7%. The increase in earnings from operations was primarily driven by an increase gross profit compared to the three months ended March 31, 2023.

### Non-Operating (Income) Expense.

***Interest Expense, Net.*** Interest expense, net primarily relates to borrowings under our financing facilities and the Notes and imputed interest under our inventory financing facilities, partially offset by interest income generated from interest earned on cash and cash equivalent bank balances. Interest expense, net for the three months ended March 31, 2024 increased 21%, or $2.2 million, compared to the three months ended March 31, 2023. This was primarily due to higher loan balances and interest rates under our ABL facility partially offset by increased interest income and decreased imputed interest under our inventory financing facilities.

Imputed interest under our inventory financing facilities was $2.5 million for the three months ended March 31, 2024, compared to $4.0 million for the three months ended March 31, 2023. The decrease in imputed interest under our inventory financing facilities was a result of lower average daily balances under the facilities during the period. For a description of our various financing facilities, see Note 4 to our Consolidated Financial Statements in Part I, Item 1 of this report.

***Income Tax Expense.*** Our effective tax rate of 24.0% for the three months ended March 31, 2024 was lower than our effective tax rate of 24.7% for the three months ended March 31, 2023. The decrease in the effective tax rate for the three months ended March 31, 2024 was primarily due to an increase in excess tax benefits on the settlement of employee share-based compensation and reduced expense related to uncertain tax positions.

The Organization for Economic Cooperation and Development’s (OECD) Pillar II Initiative introduced a 15% global minimum tax for certain multinational groups exceeding minimum annual global revenue thresholds. Several countries in which Insight operates have enacted legislation adopting the minimum tax effective January 1, 2024. The minimum tax did not have a material impact on our effective tax rate as of March 31, 2024, nor do we expect it to have a material impact on our 2024 annual effective tax rate. We will continue to monitor any future impact as additional countries enact legislation to adopt this tax.

### Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for the three months ended March 31, 2024 and 2023 (in thousands):

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $247,179 | $160,160 |
| Net cash used in investing activities | (6,482) | (9,106) |
| Net cash used in financing activities | (125,267) | (140,654) |
| Foreign currency exchange effect on cash, cash equivalent and restricted cash balances | (5,074) | 1,652 |
| Increase in cash, cash equivalents and restricted cash | 110,356 | 12,052 |
| Cash, cash equivalents and restricted cash at beginning of period | 270,785 | 165,718 |
| Cash, cash equivalents and restricted cash at end of period | $381,141 | $177,770 |

### Cash and Cash Flow

- Our primary uses of cash during the three months ended March 31, 2024 were to repay debt, including principal upon conversion of a portion of the Notes, fund repurchases of our common stock and to pay earnouts and other acquisition related payments.
- Operating activities provided $247.2 million in cash during the three months ended March 31, 2024, compared to cash provided by operating activities of $160.2 million during the three months ended March 31, 2023.
- Capital expenditures were $6.5 million and $9.1 million for the three months ended March 31, 2024 and 2023, respectively.
- During the three months ended March 31, 2024, we repurchased $35.0 million of our common stock compared to $117.1 million of repurchases during the three months ended March 31, 2023.
- Net repayments under our ABL facility during the three months ended March 31, 2024 were $42.2 million compared to net repayments of $123.8 million during the three months ended March 31, 2023.
- We had net repayments under our inventory financing facilities of $4.5 million during the three months ended March 31, 2024 compared to net borrowings of $108.3 million during the three months ended March 31, 2023.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our expected cash and working capital requirements for operations as well as other strategic investments over the next 12 months and beyond. We expect 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, principal payment on the Notes that mature in February 2025 and are freely convertible at the option of the Note holders, debt repayments and repayment of our inventory financing facilities for the next 12 months. We currently expect to fund known cash commitments beyond the next 12 months through operating cash activities or other available financing resources.

### Net cash provided by operating activities

- Our cash conversion cycle is inverted, meaning on average we pay our partners on terms shorter than we receive payments from our clients. This means we generate more cash in our operations in periods of sequential decline in sales and particularly in hardware net sales.
- Cash flow provided by operating activities in the first three months of 2024 was $247.2 million compared to cash provided by operating activities of $160.2 million in the first three months of 2023.
- The increase in cash flow from operating activities was primarily driven by timing of receipts compared to partner payments as well as deferral of certain operating payments at March 31, 2024.

Our consolidated cash flow operating metrics were as follows:

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Days sales outstanding in ending accounts receivable (“DSOs”) (a) | 137 | 120 |
| Days inventory outstanding (“DIOs”) (b) | 8 | 12 |
| Days purchases outstanding in ending accounts payable (“DPOs”) (c) | (125) | (99) |
| Cash conversion cycle (days) (d) | 20 | 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 and 90 days in 2024 and 2023, respectively.

(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 and 90 days in 2024 and 2023, respectively.

(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 and 90 days in 2024 and 2023, respectively.

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

- Our cash conversion cycle was 20 days in the first quarter of 2024, down 13 days from the first quarter of 2023.
- The net changes were a result of a 26 day increase in DPOs and a 4 day decrease in DIOs, partially offset by a 17 day increase in DSOs.
- The net decrease in our cash conversion cycle year over year were primarily the result of:
- the impact to DPOs of the SADA and Amdaris acquisitions, changes in vendor mix and deferral of certain operating payments;
- the benefit to DIOs of the reduction in hardware sales and changes in our operating strategy; and
- the impact to DSOs of the SADA and Amdaris acquisitions combined with an increase in other receivables including multi-year transactions, partially offset by timing of sales within the quarter.
- Our cash conversion cycle is impacted by netted costs that we apply to our services net sales to appropriately record net sales that we earn as an agent. These netted costs, while excluded from both net sales and cost of goods sold, are processed and applied to accounts receivable and accounts payable in each reporting period. As a result, our DSO and DPO calculated on the basis of unadjusted net sales and unadjusted cost of goods sold are inherently inflated. Netted costs were $2.0 billion

and $1.7 billion in the first quarter of 2024 and 2023, respectively. Adjusting our cash conversion cycle calculation by adding netted costs to both daily net sales and daily cost of goods sold results in a reduction to our cash conversion cycle from 20 days down to 17 days in the first quarter of 2024 and from 33 days down to 23 days in the first quarter of 2023, which we believe provides a more accurate reflection of our cash flow operating metrics.

- 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 2024 in excess of working capital needs to pay down our ABL facility and inventory financing facilities and for strategic acquisitions.

### Net cash used in investing activities

- Capital expenditures were $6.5 million and $9.1 million for the three months ended March 31, 2024 and 2023, respectively.
- We expect capital expenditures for the full year 2024 to be in a range of $50.0 to $55.0 million.

### Net cash used in financing activities

- During the three months ended March 31, 2024, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by $42.2 million.
- During the three months ended March 31, 2023, we had net repayments under our ABL facility that decreased our outstanding long-term debt balance by $123.8 million.
- We had net repayments under our inventory financing facilities of $4.5 million during the three months ended March 31, 2024 compared to net borrowings of $108.3 million during the three months ended March 31, 2023.
- We repaid approximately $16.9 million principal upon conversion of a portion of the Notes in the three months ended March 31, 2024, with no comparable activity in the prior year period.
- During the three months ended March 31, 2024, we made earnout and acquisition related payments of $18.3 million associated with our Amdaris and Hanu acquisitions, with no comparable activity in the prior year period.
- During the three months ended March 31, 2024, we repurchased $35.0 million of our common stock.
- During the three months ended March 31, 2023, we repurchased $117.1 million of our common stock.

### Financing Facilities

Our debt balance as of March 31, 2024 was $881.6 million. As of March 31, 2024, the current portion of our long-term debt primarily relates to the Notes.

- 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 March 31, 2024, 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 March 31, 2024, we were in compliance with all such covenants.
- While the ABL facility has a stated maximum amount, the actual availability under the ABL facility is limited by a minimum accounts receivable and inventory requirement. As of March 31, 2024, eligible accounts receivable and inventory were sufficient to permit access to $1.4 billion of the $1.8 billion under the ABL facility of which $550.0 million was outstanding.

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 $705.0 million, of which $227.1 million was outstanding at March 31, 2024.

### 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 March 31, 2024, we had approximately $203.0 million in cash and cash equivalents in certain of our foreign subsidiaries, primarily residing in 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 7 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

Other than as described in Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this report, there have been no material changes in our reported contractual obligations, as described under “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, 2023.

## Market risk

As filed, 591 characters.

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, 2023.

Although our Notes are based on a fixed rate, changes in interest rates could impact the fair market value of such Notes. As of March 31, 2024, the fair market value of our Notes was $950.2 million. For additional information about our Notes, see Note 5 to our Consolidated Financial Statements in Part I, Item 1 of this report.

## Controls and procedures

As filed, 1,669 characters.

### Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer 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 March 31, 2024 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.

### Changes 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 three months ended March 31, 2024 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.

## Risk factors

As filed, 599 characters.

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, 2023, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K 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.

Filed May 2, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-020070. Last ingested by Listed: Oct 24, 2026, 15:01 ET. No prices; not investment advice.