Insight Enterprises, Inc. reports 31.2% EBITDA growth in 2018 and 0.80 pp EBITDA Margin growth from 3.3% to 4.1%
02/14/2019 • About Insight Enterprises, Inc. (
$NSIT) • By InTwits
Insight Enterprises, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is relatively stable: 4.1% in 2018 vs. 3.3% in 2017 vs. 3.2% in 2014
- Insight Enterprises, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.2%.
- In the last 5 years the company invested considerably less than D&A: $72m vs. $197m. In 2018 this situation was still the same: CAPEX was 17 while D&A was 37
- The company has highly profitable business model: ROIC is 20.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.2x while industry average is 0.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 5.6%. Revenue growth showed slowdown in 18Q4 - it was -2.0% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 0.80 pp from 3.3% to 4.1% in 2018.
Gross Margin showed almost no change in 2018. Gross Margin followed a growing trend at 0.16 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue was relatively stable in the last 5 years.
Net Income margin increased slightly on 0.96 pp from 1.4% to 2.3% in 2018. The efficient tax rate was 22.8% in 2018 while the average for the last five years was 34.9%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.24% in 2018. Insight Enterprises, Inc.'s CAPEX/Revenue showed almost no change from 2015 to 2018. Average CAPEX/Revenue for the last three years was 0.25%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Inventories as a % of Revenue decreased slightly on 1.4 pp from 3.5% to 2.1% in 2018. Accounts payable as a % of Revenue increased slightly on 0.53 pp from 15.5% to 16.1% in 2018.
Insight Enterprises, Inc. has spent
$74m on M&A in 2018 which accounts for 1.1% of revenue.
Return on investment
The company operates at good ROIC (20.0%) and ROE (17.9%). ROIC increased slightly on 0.72 pp from 19.3% to 20.0% in 2018. ROE increased on 6.2 pp from 11.6% to 17.9% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.2x and Debt / EBITDA is 0.7x. Net Debt / EBITDA dropped on 0.7x from 0.9x to 0.2x in 2018. Debt dropped on 37.1% while cash surged on 34.8%.
Insight Enterprises, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 11.1x. Insight Enterprises, Inc. has no short term refinancing risk: cash is higher than short term debt (10,226.2%).
Average interest expence paid by the company was 11.6% in 2018.
Valuation and dividends
Insight Enterprises, Inc.'s trades at EV/EBITDA 7.0x and P/E 12.2x.
Management team
Insight Enterprises, Inc.'s CEO Kenneth T Lamneck "Ken" is a founder and has spent 9 years with the company. CEO total compensation was
$4,968,504 in 2018 which included
$870,000 salary. Insight Enterprises, Inc.'s CFO Glynis A Bryan has spent 11 years with the company.
2.0% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 7,420 employees. The number of employees jumped on 10.8%. Average revenue per employee in 2018 was
$954,196 and it decreased on 4.7%.
Financial and operational results
FY ended 12/31/2018
Insight Enterprises, Inc. ($NSIT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 5,316 | 5,373 | 5,486 | 6,704 | 7,080 | 5.6% |
| Gross Profit | 712 | 716 | 743 | 919 | 994 | 8.2% |
| SG&A | 577 | 585 | 585 | 723 | 757 | 4.6% |
| EBITDA | 172 | 164 | 187 | 222 | 291 | 31.2% |
| EBIT | 131 | 127 | 149 | 179 | 254 | 41.5% |
| Interest expence | 6 | 7 | 9 | 19 | 23 | 19.0% |
| Tax | 49 | 43 | 55 | 68 | 48 | -29.5% |
| Net Income | 76 | 76 | 85 | 91 | 164 | 80.5% |
| Stock Based Compensation | 7 | 8 | 11 | 13 | 15 | 19.7% |
Balance Sheet
|
|---|
| Cash | 165 | 188 | 203 | 106 | 143 | 34.8% |
| Accounts Receivable | 1,309 | 1,315 | 1,437 | 1,815 | 1,932 | 6.5% |
| Inventory | 168 | 172 | 217 | 231 | 149 | -35.8% |
| Accounts Payable | 820 | 905 | 1,070 | 899 | 978 | 8.8% |
| Short Term Debt | 1 | 2 | 0 | 17 | 1 | -91.6% |
| Long Term Debt | 63 | 89 | 40 | 297 | 196 | -34.1% |
Cash flow
|
|---|
| Capex | 10 | 13 | 12 | 19 | 17 | -10.3% |
| Acquisitions | | 44 | 10 | 185 | 74 | -59.8% |
Ratios
|
|---|
| Revenue growth | 3.3% | 1.1% | 2.1% | 22.2% | 5.6% | |
| EBITDA growth | 5.4% | -4.1% | 13.7% | 18.7% | 31.2% | |
|
|---|
| Gross Margin | 13.4% | 13.3% | 13.5% | 13.7% | 14.0% | 0.3% |
| EBITDA Margin | 3.2% | 3.1% | 3.4% | 3.3% | 4.1% | 0.8% |
| EBIT Margin | 2.5% | 2.4% | 2.7% | 2.7% | 3.6% | 0.9% |
| SG&A, % of revenue | 10.9% | 10.9% | 10.7% | 10.8% | 10.7% | -0.1% |
| SBC, % of revenue | 0.1% | 0.2% | 0.2% | 0.2% | 0.2% | 0.0% |
| Net Income Margin | 1.4% | 1.4% | 1.5% | 1.4% | 2.3% | 1.0% |
| CAPEX, % of revenue | 0.2% | 0.2% | 0.2% | 0.3% | 0.2% | -0.0% |
|
|---|
| ROIC | 17.0% | 17.4% | 20.7% | 19.3% | 20.0% | 0.7% |
| ROE | 10.5% | 10.8% | 12.1% | 11.6% | 17.9% | 6.2% |
| Net Debt/EBITDA | -0.6x | -0.6x | -0.9x | 0.9x | 0.2x | -0.7x |
| Interest expence / Average debt | 9.5% | 9.4% | 13.1% | 10.8% | 11.6% | 0.7% |
People
|
|---|
| Insider ownership | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 0.0% |
| Employees | 5,406 | 5,761 | 5,930 | 6,697 | 7,420 | 10.8% |
| Revenue/Employee, th. $ | 983 | 933 | 925 | 1,001 | 954 | -4.7% |
Insight Enterprises, Inc. ($NSIT) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,742 | 1,837 | 1,748 | 1,749 | | 17.9% | 9.1% | -0.6% | -2.0% |
| EBITDA | 59 | 83 | 59 | 69 | | 74.9% | 4.9% | 13.5% | 22.5% |
| Net Income | 33 | 51 | 32 | 47 | | 138.3% | 27.9% | 43.5% | 232.0% |
Balance Sheet
|
|---|
| Cash | 100 | 248 | 111 | 143 | | -45.4% | 27.4% | -53.0% | 34.8% |
| Short Term Debt | 16 | 17 | 17 | 1 | | 8.0% | 15.6% | 13.1% | -91.6% |
| Long Term Debt | 246 | 145 | 251 | 196 | | -31.9% | -49.4% | -53.0% | -34.1% |
Ratios
|
|---|
| Gross Margin | 13.8% | 14.4% | 13.4% | 14.5% | | -0.3% | -0.5% | 0.6% | 1.5% |
| EBITDA Margin | 3.4% | 4.5% | 3.4% | 3.9% | | 1.1% | -0.2% | 0.4% | 0.8% |
| Net Income Margin | 1.9% | 2.8% | 1.8% | 2.7% | | 1.0% | 0.4% | 0.6% | 1.9% |
Peers in Technology Distributors
Below we provide Insight Enterprises, Inc. benchmarking against other companies in Technology Distributors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Tech Data Corporation ($TECD) | | 3.2% | -4.7% | -8.3% | 38.9% |
| EACO Corp ($EACO) | | 4.1% | 5.9% | 5.7% | 23.1% |
| Richardson Electronics, Ltd. ($RELL) | | -0.7% | 3.7% | -3.6% | 19.2% |
| Synnex Corporation ($SNX) | | -3.6% | 5.4% | 21.2% | 17.6% |
| Wayside Technology Group, Inc. ($WSTG) | | 12.1% | 9.4% | -61.6% | 13.0% |
| |
|---|
| Median (16 companies) | | 4.5% | 5.3% | 4.2% | 8.9% |
|---|
| Insight Enterprises, Inc. ($NSIT) | | 1.1% | 2.1% | 22.2% | 5.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | 25.4% | 31.1% | -10.8% | 39.4% | 44.0% |
| Richardson Electronics, Ltd. ($RELL) | 29.7% | 30.0% | 31.6% | 32.1% | 33.7% |
| EACO Corp ($EACO) | 27.5% | 29.3% | 29.3% | 28.5% | 28.5% |
| Surge Components Inc ($SPRS) | 24.5% | 25.0% | 25.2% | 25.2% | 25.6% |
| ADDvantage Technologies Group, Inc. ($AEY) | 32.3% | 35.0% | 32.2% | 30.4% | 23.7% |
| |
|---|
| Median (16 companies) | 15.9% | 16.3% | 14.2% | 16.9% | 16.3% |
|---|
| Insight Enterprises, Inc. ($NSIT) | 13.4% | 13.3% | 13.5% | 13.7% | 14.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | -8.6% | -3.2% | -39.0% | 13.0% | 19.2% |
| CDW Corporation ($CDW) | 7.3% | 7.5% | 7.7% | 7.6% | 7.7% |
| ePlus inc. ($PLUS) | 7.3% | 7.5% | 7.6% | 7.3% | 7.1% |
| EACO Corp ($EACO) | 4.0% | 4.5% | 4.7% | 4.5% | 5.9% |
| Surge Components Inc ($SPRS) | 2.8% | 3.8% | -1.5% | 1.2% | 4.8% |
| |
|---|
| Median (16 companies) | 3.2% | 3.5% | 3.6% | 3.8% | 4.0% |
|---|
| Insight Enterprises, Inc. ($NSIT) | 3.2% | 3.1% | 3.4% | 3.3% | 4.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Richardson Electronics, Ltd. ($RELL) | 2.0% | 3.5% | 3.4% | 3.8% | 3.2% |
| ePlus inc. ($PLUS) | 0.9% | 1.0% | 2.1% | 1.5% | 1.0% |
| EACO Corp ($EACO) | 0.6% | 0.4% | 0.3% | 5.5% | 0.8% |
| Avnet, Inc. ($AVT) | 0.4% | 0.6% | 0.8% | 0.7% | 0.8% |
| PC Connection, Inc. ($CNXN) | 0.3% | 0.5% | 0.4% | 0.4% | 0.8% |
| |
|---|
| Median (16 companies) | 0.5% | 0.6% | 0.4% | 0.5% | 0.5% |
|---|
| Insight Enterprises, Inc. ($NSIT) | 0.2% | 0.2% | 0.2% | 0.3% | 0.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Surge Components Inc ($SPRS) | 6.7% | 9.5% | -4.0% | 3.9% | 24.6% |
| CDW Corporation ($CDW) | 16.5% | 17.3% | 18.8% | 20.1% | 23.1% |
| EACO Corp ($EACO) | 19.6% | 21.8% | 22.2% | 16.1% | 21.2% |
| ePlus inc. ($PLUS) | 20.1% | 21.0% | 21.5% | 22.8% | 20.8% |
| PC Connection, Inc. ($CNXN) | 20.1% | 19.9% | 18.6% | 16.6% | 17.0% |
| |
|---|
| Median (17 companies) | 11.9% | 11.9% | 12.1% | 9.9% | 11.2% |
|---|
| Insight Enterprises, Inc. ($NSIT) | 17.0% | 17.4% | 20.7% | 19.3% | 20.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Synnex Corporation ($SNX) | 2.0x | 0.9x | 1.2x | 2.1x | 3.9x |
| Anixter International Inc. ($AXE) | 3.2x | 4.7x | 3.6x | 3.0x | 3.1x |
| ScanSource, Inc. ($SCSC) | -1.4x | -0.9x | 0.2x | 0.6x | 2.5x |
| CDW Corporation ($CDW) | 3.2x | 3.3x | 2.8x | 2.7x | 2.4x |
| Arrow Electronics, Inc. ($ARW) | 1.8x | 2.2x | 2.2x | 2.3x | 2.2x |
| |
|---|
| Median (15 companies) | 0.1x | -0.2x | 0.7x | 1.2x | 1.2x |
|---|
| Insight Enterprises, Inc. ($NSIT) | -0.6x | -0.6x | -0.9x | 0.9x | 0.2x |
