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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 0-25092
nsit-20220930_g1.jpg
INSIGHT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware86-0766246
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
2701 E. Insight Way, Chandler, Arizona 85286
(Address of principal executive offices) (Zip Code)
(480) 333-3000
(Registrant’s telephone number, including area code)
__________________________________________________________________
Not Applicable
_________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.01NSITThe NASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filero
Non-accelerated filer oSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
No x
The number of shares outstanding of the issuer’s common stock as of October 28, 2022 was 34,831,155.


INSIGHT ENTERPRISES, INC.
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended September 30, 2022
TABLE OF CONTENTS
Page


INSIGHT ENTERPRISES, INC.
FORWARD-LOOKING INFORMATION

References to “the Company,” “Insight,” “we,” “us,” “our” and other similar words refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context suggests otherwise. Certain statements in this Quarterly Report on Form 10-Q, including statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this report, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include: projections of, and matters that affect, net sales, gross profit, gross margin, operating expenses, earnings from operations, non-operating income and expenses, net earnings or cash flows, cash needs and the payment of accrued expenses and liabilities; our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company; our expectations regarding current supply constraints, including our belief that supply constraints and extended lead times for certain products could impact results into the fourth quarter of 2022 and into 2023; our belief that we may experience growth in networking and infrastructure products as we progress through the last quarter of the year; the expected effects of seasonality on our business; expectations of further consolidation and trends in the Information Technology (“IT”) industry; our business strategy and our strategic initiatives, including our efforts to grow our core business in the current environment, develop and grow our global cloud business and build scalable solutions; expectations regarding the impact of partner incentives; our expectations about future benefits of our acquisitions and our plans related thereto, including potential expansion into wider regions; the increasing demand for big data solutions; the availability of competitive sources of products for our purchase and resale; our intentions concerning the payment of dividends; our acquisition strategy; our ability to offset the effects of inflation and manage any increase in interest rates; projections of capital expenditures; our plans to continue to evolve our IT systems; our liquidity and the sufficiency of our capital resources, the availability of financing and our needs or plans relating thereto; the effects of new accounting principles and expected dates of adoption; the effect of indemnification obligations; projections about the outcome of ongoing tax audits; our expectations regarding future tax rates; adequate provisions for and our positions and strategies with respect to ongoing and threatened litigation and expected outcomes; our ability to expand our client relationships; our expectations that pricing pressures in the IT industry will continue; our plans to use cash flow from operations for working capital, to pay down debt, repurchase shares of our common stock, make capital expenditures, and fund acquisitions; our belief that our office facilities are adequate and that we will be able to extend our current leases or locate substitute facilities on satisfactory terms; our belief that we have adequate provisions for losses; our expectation that we will not incur interest payments under our inventory financing facilities; our expectations that future income will be sufficient to fully recover deferred tax assets; our exposure to off-balance sheet arrangements; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements are identified by such words as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will,” “may” and variations of such words and similar expressions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. There can be no assurances that results described in forward-looking statements will be achieved, and actual results could differ materially from those suggested by the forward-looking statements. Some of the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and in “Risk Factors” in Part II, Item 1A of this report:

actions of our competitors, including manufacturers and publishers of products we sell;
our reliance 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 in the requirements year over year;
our ability to keep pace with rapidly evolving technological advances and the evolving competitive marketplace
the duration and severity of the COVID-19 pandemic and its effects on our business, results of operations and financial condition, as well as the widespread outbreak of any other illnesses or communicable diseases;


INSIGHT ENTERPRISES, INC.
general economic conditions, economic uncertainties and changes in geopolitical conditions including the possibility of a recession or as a result of Russia’s invasion of Ukraine;
changes in the IT industry and/or rapid changes in technology;
supply constraints for hardware, including devices, and the potential impact on our inventory management and warehouse operations relating to the easing of these constraints;
accounts receivable risks, including increased credit loss experience or extended payment terms with our clients;
our reliance on independent shipping companies;
the risks associated with our international operations;
natural disasters or other adverse occurrences;
disruptions in our IT systems and voice and data networks;
cyberattacks or breaches of data privacy and security regulations;
intellectual property infringement claims and challenges to our registered trademarks and trade names;
legal proceedings, client audits and failure to comply with laws and regulations;
failure to comply with the terms and conditions of our commercial and public sector contracts;
exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;
our potential to draw down a substantial amount of indebtedness;
the conditional conversion feature of our convertible senior notes (the “Notes”), which has historically been triggered, may adversely affect the Company’s financial condition and operating results;
the Company is subject to counterparty risk with respect to certain hedge and warrant transactions entered into in connection with the issuance of the notes (the "Call Spread Transactions");
risks associated with the discontinuation of LIBOR as a benchmark rate;
increased debt and interest expense and the possibility of decreased availability of funds under our financing facilities;
possible significant fluctuations in our future operating results as well as seasonality and variability in client demands;
our dependence on certain key personnel and our ability to attract, train and retain skilled teammates;
risks associated with the integration and operation of acquired businesses, including achievement of expected synergies and benefits; and
future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock.
Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the Securities and Exchange Commission (the “SEC”). Any forward-looking statements in this report are made as of the date of this filing and should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. We assume no obligation to update, and, except as may be required by law, do not intend to update, any forward-looking statements. We do not endorse any projections regarding future performance that may be made by third parties.


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INSIGHT ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$136,653 $103,840 
Accounts receivable, net of allowance for doubtful accounts of $15,221 and $16,941, respectively
3,047,739 2,936,732 
Inventories367,913 328,101 
Other current assets232,355 199,638 
Total current assets3,784,660 3,568,311 
Property and equipment, net of accumulated depreciation and amortization of $213,557 and $233,786, respectively
201,269 176,263 
Goodwill493,618 428,346 
Intangible assets, net of accumulated amortization of $133,623 and $110,909, respectively
211,806 214,788 
Other assets306,361 301,372 
$4,997,714 $4,689,080 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable—trade$1,525,638 $1,779,854 
Accounts payable—inventory financing facilities331,982 311,878 
Accrued expenses and other current liabilities414,822 423,489 
Current portion of long-term debt594 36 
Total current liabilities2,273,036 2,515,257 
Long-term debt783,723 361,570 
Deferred income taxes36,723 47,073 
Other liabilities283,441 255,953 
3,376,923 3,179,853 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 3,000 shares authorized; no shares issued
  
Common stock, $0.01 par value, 100,000 shares authorized; 34,828 shares at September 30, 2022 and 34,897 shares at December 31, 2021 issued and outstanding
348 349 
Additional paid-in capital330,726 368,282 
Retained earnings1,366,124 1,167,690 
Accumulated other comprehensive loss – foreign currency translation adjustments(76,407)(27,094)
Total stockholders’ equity1,620,791 1,509,227 
$4,997,714 $4,689,080 
See accompanying notes to consolidated financial statements.
1

INSIGHT ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net sales:
Products$2,169,197 $2,124,239 $6,828,726 $5,906,437 
Services365,157 323,282 1,099,855 963,653 
Total net sales2,534,354 2,447,521 7,928,581 6,870,090 
Costs of goods sold:
Products1,956,679 1,930,096 6,199,783 5,367,083 
Services178,417 152,880 512,790 440,305 
Total costs of goods sold2,135,096 2,082,976 6,712,573 5,807,388 
Gross profit:
Products212,518 194,143 628,943 539,354 
Services186,740 170,402 587,065 523,348 
Gross profit399,258 364,545 1,216,008 1,062,702 
Operating expenses:
Selling and administrative expenses308,253 278,998 911,894 827,275 
Severance and restructuring expenses, net720 2,396 2,784 (3,217)
Acquisition and integration related expenses6  1,646  
Earnings from operations90,279 83,151 299,684 238,644 
Non-operating (income) expense:
Interest expense, net11,713 10,332 29,164 29,884 
Other expense (income), net1,790 (1,589)(741)(855)
Earnings before income taxes76,776 74,408 271,261 209,615 
Income tax expense19,460 18,925 68,130 52,403 
Net earnings$57,316 $55,483 $203,131 $157,212 
Net earnings per share:
Basic$1.64 $1.59 $5.80 $4.49 
Diluted$1.58 $1.51 $5.53 $4.27 
Shares used in per share calculations:
Basic34,952 34,855 35,003 35,050 
Diluted36,340 36,745 36,714 36,860 
See accompanying notes to consolidated financial statements.
2


INSIGHT ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net earnings$57,316 $55,483 $203,131 $157,212 
Other comprehensive loss, net of tax:
Foreign currency translation adjustments(30,577)(11,676)(49,313)(6,228)
Total comprehensive income$26,739 $43,807 $153,818 $150,984 
See accompanying notes to consolidated financial statements.
3

INSIGHT ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Common Stock Treasury Stock Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders'
Equity
Shares Par Value Shares Amount
Balances at June 30, 202235,093 $351  $ $327,282 $(45,830)$1,331,294 $1,613,097 
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes5  — — (127)— — (127)
Stock-based compensation expense— — — — 6,090 — — 6,090 
Repurchase of treasury stock— — (270)(25,008)— — — (25,008)
Retirement of treasury stock(270)(3)270 25,008 (2,519)— (22,486) 
Foreign currency translation adjustments, net of tax— — — — — (30,577)— (30,577)
Net earnings— — — — — — 57,316 57,316 
Balances at September 30, 202234,828 $348  $ $330,726 $(76,407)$1,366,124 $1,620,791 
Balances at June 30, 202134,845 $348  $ $361,412 $(10,007)$1,050,074 $1,401,827 
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes40 1 — — (1,288)— — (1,287)
Stock-based compensation expense— — — — 4,575 — — 4,575 
Foreign currency translation adjustments, net of tax— — — — — (11,676)— (11,676)
Net earnings— — — — — — 55,483 55,483 
Balances at September 30, 202134,885 $349  $ $364,699 $(21,683)$1,105,557 $1,448,922 
Balances at December 31, 202134,897 $349  $ $368,282 $(27,094)$1,167,690 $1,509,227 
Cumulative effect of accounting change— — — — (44,731)— 17,789 (26,942)
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes201 2 — — (6,830)— — (6,828)
Stock-based compensation expense— — — — 16,524 — — 16,524 
Repurchase of treasury stock— — (270)(25,008)— — — (25,008)
Retirement of treasury stock(270)(3)270 25,008 (2,519)— (22,486) 
Foreign currency translation adjustments, net of tax— — — — — (49,313)— (49,313)
Net earnings— — — — — — 203,131 203,131 
Balances at September 30, 202234,828 $348  $ $330,726 $(76,407)$1,366,124 $1,620,791 
Balances at December 31, 202035,103 $351  $ $364,288 $(15,455)$993,245 $1,342,429 
Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes279 3 — — (8,444)— — (8,441)
Stock-based compensation expense— — — — 13,950 — — 13,950 
Cumulative effect of accounting change— —  
Repurchase of treasury stock— — (497)(50,000)— — — (50,000)
Retirement of treasury stock(497)(5)497 50,000 (5,095)— (44,900) 
Foreign currency translation adjustments, net of tax— — — — — (6,228)— (6,228)
Net earnings— — — — — — 157,212 157,212 
Balances at September 30, 202134,885 $349  $ $364,699 $(21,683)$1,105,557 $1,448,922 
See accompanying notes to consolidated financial statements.
4

INSIGHT ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities:
Net earnings$203,131 $157,212 
Adjustments to reconcile net earnings to net cash (used in) operating activities:
Depreciation and amortization42,204 42,151 
Provision for losses on accounts receivable4,295 5,781 
Non-cash stock-based compensation16,524 13,950 
Deferred income taxes(5,554)3,374 
Amortization of debt discount and issuance costs4,894 12,615 
Other adjustments933 (4,753)
Changes in assets and liabilities:
Increase in accounts receivable(230,049)(85,853)
Increase in inventories(51,526)(88,119)
Increase in other assets(14,926)(20,844)
Decrease in accounts payable(171,257)(119,525)
Decrease in accrued expenses and other liabilities(4,554)(33,777)
Net cash (used in) operating activities:(205,885)(117,788)
Cash flows from investing activities:
Proceeds from sale of assets1,318 29,221 
Purchases of property and equipment(59,270)(28,011)
Acquisitions, net of cash and cash equivalents acquired(68,248) 
Net cash (used in) provided by investing activities:(126,200)1,210 
Cash flows from financing activities:
Borrowings on ABL revolving credit facility3,825,923 3,167,044 
Repayments on ABL revolving credit facility(3,433,629)(3,085,044)
Net borrowings under inventory financing facilities23,017 76,422 
Repurchases of common stock(25,008)(50,000)
Other payments(12,798)(9,330)
Net cash provided by financing activities:377,505 99,092 
Foreign currency exchange effect on cash, cash equivalents and restricted cash balances(12,710)(3,601)
Increase (decrease) in cash, cash equivalents and restricted cash32,710 (21,087)
Cash, cash equivalents and restricted cash at beginning of period105,977 130,582 
Cash, cash equivalents and restricted cash at end of period$138,687 $109,495 
See accompanying notes to consolidated financial statements.
5

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.    Basis of Presentation and Recently Issued Accounting Standards
We empower organizations with technology, solutions and services to help our clients maximize the value of Information Technology (“IT”) today and drive (digital) transformation for tomorrow in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”). As a Fortune 500-ranked global technology provider of end-to-end secure digital transformation solutions and services, we help clients innovate and optimize their operations to run smarter. Our company is organized in the following three operating segments, which are primarily defined by their related geographies:
Operating SegmentGeography
North AmericaUnited States and Canada
EMEAEurope, Middle East and Africa
APACAsia-Pacific
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 are largely software and certain software-related services and cloud solutions.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of September 30, 2022 and our results of operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021. The consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated balance sheet at such date. The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with the rules and regulations promulgated by the SEC and consequently do not include all of the disclosures normally required by United States generally accepted accounting principles (“GAAP”).
The results of operations for interim periods are not necessarily indicative of results for the full year, due in part to the seasonal nature of our business. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes thereto, in our Annual Report on Form 10-K for the year ended December 31, 2021.
The consolidated financial statements include the accounts of Insight Enterprises, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Additionally, these estimates and assumptions affect the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to sales recognition, anticipated achievement levels under partner funding programs, assumptions related to stock-based compensation valuation, allowances for doubtful accounts, valuation of inventories, litigation-related obligations, valuation allowances for deferred tax assets and impairment of long-lived assets, including purchased intangibles and goodwill, if indicators of potential impairment exist.
6

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. The new guidance is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity. The guidance removed certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be wholly accounted for as debt. The guidance also expanded disclosure requirements for convertible instruments and simplified areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method. The guidance was effective for fiscal years beginning after December 15, 2021, and could have been adopted on either a fully retrospective or modified retrospective basis.
The Company adopted this standard effective January 1, 2022, using the modified retrospective approach. Therefore, financial statements for the three and nine months ended September 30, 2022 are presented under the new standard, while the comparative period is not adjusted and is reported in accordance with the Company's old method of accounting. The adoption of ASU 2020-06 significantly impacts our consolidated statements of operations and consolidated balance sheets as we no longer report accreted interest on the Notes and the full par value of the Notes is reflected as debt. The cumulative effect adjustment from prior periods that we recognized in our consolidated balance sheet as adjustments to reduce additional paid in capital and increase retained earnings were $44,731,000 and $17,789,000, respectively. Had we followed the prior method of accounting for the three months ended September 30, 2022, both reported basic and diluted net earnings per share ("EPS") would decrease by $0.06, from $1.64 and $1.58, respectively, to $1.58 and $1.52, respectively. For the nine months ended September 30, 2022, both reported basic and diluted EPS would decrease by $0.17, from $5.80 and $5.53, respectively, to $5.63 and $5.36, respectively.
There have been no other material changes in or additions to the recently issued accounting standards as previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021 that affect or may affect our current financial statements.
2.    Receivables, Contract Liabilities and Performance Obligations
The following table provides information about receivables and contract liabilities as of September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022
December 31,
2021
Current receivables, which are included in “Accounts receivable, net”$3,047,739 $2,936,732 
Non-current receivables, which are included in “Other assets”154,137 147,139 
Contract liabilities, which are included in “Accrued expenses and other current liabilities” and “Other liabilities”110,906 116,067 
7

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Changes in the contract liabilities balances during the nine months ended September 30, 2022 are as follows (in thousands):
Increase (Decrease)
Contract
Liabilities
Balances at December 31, 2021
$116,067 
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied(67,984)
Cash received in advance and not recognized as revenue62,823 
Balances at September 30, 2022
$110,906 
During the nine months ended September 30, 2021, the Company recognized revenue of $67,166,000 related to its contract liabilities.
The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2022 that are expected to be recognized in the future (in thousands):
Services
Remainder of 2022$57,389 
202379,361 
202429,001 
2025 and thereafter18,477 
Total remaining performance obligations$184,228 
With the exception of remaining performance obligations associated with our OneCall Support Services contracts which are included in the table above regardless of original duration, remaining performance obligations that have original expected durations of one year or less are not included in the table above.  Amounts not included in the table above have an average original expected duration of nine months. Additionally, for our time and material services contracts, whereby we have the right to consideration from a client in an amount that corresponds directly with the value to the client of our performance completed to date, we recognized revenue in the amount to which we have a right to invoice as of September 30, 2022 and do not disclose information about related remaining performance obligations in the table above. Our time and material contracts have an average expected duration of 19 months.
The majority of our backlog historically has been and continues to be open cancellable purchase orders. We do not believe that backlog as of any particular date is predictive of future results, therefore we do not include performance obligations under open cancellable purchase orders, which do not qualify for revenue recognition, in the table above.
3.    Assets Held for Sale
During the nine months ended September 30, 2021, we completed the sale of our three properties in Tempe, Arizona and the sale of our property in Woodbridge, Illinois for total net proceeds of approximately $27,211,000. We used the proceeds from the sales to ready our property in Chandler, Arizona to be used as our global corporate headquarters.
4.    Net Earnings Per Share
Basic EPS is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is
8

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock units (“RSUs”) and certain shares underlying the Notes. A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share data):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Numerator:
Net earnings$57,316 $55,483 $203,131 $157,212 
Denominator:
Weighted average shares used to compute basic EPS34,952 34,855 35,003 35,050 
Dilutive potential common shares due to dilutive RSUs, net of tax effect201 381 243 407 
Dilutive potential common shares due to the Notes1,187 1,509 1,468 1,403 
Weighted average shares used to compute diluted EPS36,340 36,745 36,714 36,860 
Net earnings per share:
Basic$1.64 $1.59 $5.80 $4.49 
Diluted$1.58 $1.51 $5.53 $4.27 
For the three and nine months ended September 30, 2022, 67,000 and 39,000, respectively, of our RSUs were excluded from the diluted EPS calculations and certain potential outstanding shares from the warrants relating to the Call Spread Transactions were excluded from the diluted EPS calculations because their inclusion would have been anti-dilutive. For the three and nine months ended September 30, 2021, 900 and 400, respectively, of our RSUs were excluded from the diluted EPS calculations and certain potential outstanding shares from the warrants related to the Call Spread Transactions were excluded from the diluted EPS calculations because their inclusion would have been anti-dilutive.
5.    Debt, Inventory Financing Facilities, Finance Leases and Other Financing Obligations
Debt
Our long-term debt consists of the following (in thousands):
September 30,
2022
December 31,
2021
ABL revolving credit facility$437,885 $53,000 
Convertible senior notes due 2025
345,752 308,543 
Finance leases and other financing obligations680 63 
Total784,317 361,606 
Less: current portion of long-term debt(594)(36)
Long-term debt$783,723 $361,570 
On July 22, 2022, we entered into the Third Amendment to the Credit Agreement (as amended, the "credit agreement") to modify our senior secured revolving credit facility (the “ABL facility”), increasing the maximum borrowing amount from $1,200,000,000 to $1,800,000,000,
9

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
including a maximum borrowing capacity that could be used for borrowing in certain foreign currencies of $350,000,000 and extending the maturity date. From time to time and at our option, we may request to increase the aggregate amount available for borrowing under the ABL facility by up to an aggregate of the U.S. dollar equivalent of $750,000,000, subject to customary conditions, including receipt of commitments from lenders. The ABL facility is guaranteed by certain of our material subsidiaries and is secured by a lien on certain of our assets and certain of each other borrower’s and each guarantor’s assets. The ABL facility now provides for an uncommitted first-in, last-out revolving facility in an aggregate amount of up to $100,000,000. The interest rates applicable to borrowings under the ABL facility are based on the average aggregate excess availability under the ABL facility as set forth on a pricing grid in the credit agreement. The ABL facility now matures on July 22, 2027. As of September 30, 2022, eligible accounts receivable and inventory were sufficient to permit access to the full $1,800,000,000 facility amount, of which $437,885,000 was outstanding.
The ABL facility contains customary affirmative and negative covenants and events of default. If a default occurs (subject to customary grace periods and materiality thresholds) under the credit agreement, certain actions may be taken, including, but not limited to, possible termination of commitments and required payment of all outstanding principal amounts plus accrued interest and fees payable under the credit agreement.
Convertible Senior Notes due 2025
In August 2019, we issued $350,000,000 aggregate principal amount of Notes that mature on February 15, 2025. The Notes bear interest at an annual rate of 0.75% payable semiannually, in arrears, on February 15th and August 15th of each year. The Notes are general unsecured obligations of Insight and are guaranteed on a senior unsecured basis by Insight Direct USA, Inc., a wholly owned subsidiary of Insight.
Holders of the Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding June 15, 2024, under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day (the “market price trigger”); (2) during the five business day period after any five day consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (3) if we call any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after June 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, the holders may convert their notes at any time, regardless of the foregoing circumstances.
The Notes did not exceed the market price trigger of $88.82 in the third quarter of 2022 and as such, the Notes are not convertible at the option of the holders through December 31, 2022. All of the Notes remain outstanding at September 30, 2022. If the Notes exceed the market price trigger in future periods, they will become convertible at the option of the holders, and the principal amount will be classified as current.
Upon conversion, we will pay or deliver cash equal to the principal amount of the Notes, plus shares of our common stock for any additional amounts due. The conversion rate will initially be 14.6376 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $68.32 per share of common stock). The
10

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
conversion rate is subject to change in certain circumstances and will not be adjusted for any accrued and unpaid interest. In addition, following certain events that occur prior to the maturity date or following our issuance of a notice of redemption, the conversion rate is subject to an increase for a holder who elects to convert their Notes in connection with those events or during the related redemption period in certain circumstances.
If we undergo a fundamental change, the holders may require us to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As of September 30, 2022, none of the criteria for a fundamental change or a conversion rate adjustment had been met.
The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 6,788,208.
The Notes are subject to certain customary events of default and acceleration clauses. As of September 30, 2022, no such events have occurred.
The Notes consist of the following balances reported within the consolidated balance sheets (in thousands):
September 30,
2022
December 31,
2021
Liability:
Principal$350,000 $350,000 
Less: debt discount and issuance costs, net of accumulated accretion(4,248)(41,457)
Net carrying amount$345,752 $308,543 
Equity, net of deferred tax$ $44,731 

As a result of our adoption of ASU 2020-06, effective January 1, 2022, we no longer reflect any debt discount on the Notes in our consolidated balance sheet, nor do we recognize amortization of debt discount within our consolidated statement of operations. Also in January 2022, we filed an irrevocable settlement election notice with the note holders to inform them of our election to settle the principal amount of the Notes in cash. As a result of this election, at period ends where the market price, or other conversion triggers are met, the Notes will be classified in our consolidated balance sheet as current.

The remaining life of the debt issuance cost accretion is approximately 2.37 years. The effective interest rate on the principal of the Notes is 0.750%.
Interest expense resulting from the Notes reported within the consolidated statement of operations for the three and nine months ended September 30, 2022 is made up of contractual coupon interest and amortization of debt issuance costs. Interest expense resulting from the Notes reported within the consolidated statement of operations for the three and nine months ended September 30, 2021 is made up of contractual coupon interest, amortization of debt discount and amortization of debt issuance costs.
Convertible Note Hedge and Warrant Transaction
In connection with the issuance of the Notes, we entered into the Call Spread Transactions with respect to the Company’s common stock.
The convertible note hedge consists of an option to purchase up to 5,123,160 common stock shares at a price of $68.32 per share. The hedge expires on February 15, 2025 and can
11

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
only be concurrently executed upon the conversion of the Notes. We paid approximately $66,325,000 for the convertible note hedge transaction.
Additionally, we sold warrants to purchase 5,123,160 shares of common stock at a price of $103.12 per share. The warrants expire on May 15, 2025 and can only be exercised at maturity. The Company received aggregate proceeds of approximately $34,440,000 for the sale of the warrants.
The Call Spread Transactions have no effect on the terms of the Notes and reduce potential dilution by effectively increasing the initial conversion price of the Notes to $103.12 per share of the Company’s common stock.
Inventory Financing Facilities
We have an unsecured inventory financing facility with MUFG Bank Ltd (“MUFG”) for $280,000,000. During the first quarter of 2022, we increased our maximum availability under our unsecured inventory financing facility with PNC Bank, N.A. (“PNC”) from $300,000,000 to $375,000,000, including the $25,000,000 facility in Canada (the "Canada facility"). We also increased our unsecured inventory financing facility with Wells Fargo in EMEA (the "EMEA facility") to $50,000,000. The inventory financing facilities will remain in effect until they are terminated by any of the parties. If balances are not paid within stated vendor terms, they will accrue interest at prime plus 2.00% on the MUFG facility, Canadian Dollar Offered Rate plus 4.50% on the Canada facility and LIBOR, EURIBOR, or SONIA, as applicable, plus 4.50% and 0.25% on the PNC (other than the Canada facility) and EMEA facilities, respectively. The PNC facility allows for an alternative rate to be identified if LIBOR is no longer available. Amounts outstanding under these facilities are classified separately as accounts payable – inventory financing facilities in the accompanying consolidated balance sheets and within cash flows from financing activities in the accompanying consolidated statements of cash flows.
As of September 30, 2022, our combined inventory financing facilities had a total maximum capacity of $705,000,000, of which $331,982,000 was outstanding.
6.    Income Taxes
Our effective tax rates for the three and nine months ended September 30, 2022 were 25.3% and 25.1%, respectively. Our effective tax rates were higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by tax benefits related to research and development activities.
Our effective tax rates for the three and nine months ended September 30, 2021 were 25.4% and 25.0%, respectively. For the three months ended September 30, 2021, our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by tax benefits related to research and development activities. For the nine months ended September 30, 2021 our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by excess tax benefits on the settlement of employee share based compensation and tax benefits related to research and development activities.
As of September 30, 2022 and December 31, 2021, we had approximately $14,520,000 and $12,664,000, respectively, of unrecognized tax benefits. Of these amounts, approximately $1,588,000 and $1,250,000, respectively, related to accrued interest. In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate. We do not believe there will be any changes to our unrecognized tax benefits over the next 12 months that would have a material effect on our effective tax rate.
12

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
We are currently under audit in various jurisdictions for tax years 2015 through 2020. Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that the examination phase of these audits may be concluded within the next 12 months, which could increase or decrease the balance of our gross unrecognized tax benefits. However, based on the status of the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible outcomes cannot be made at this time, but the estimated effect on our income tax expense and net earnings is not expected to be significant.
7.    Share Repurchase Program
On May 6, 2021, we announced that our Board of Directors had authorized the repurchase of up to $125,000,000 of our common stock. On September 19, 2022, we announced that our Board of Directors had authorized the repurchase of up to $300,000,000 of our common stock, including $50,000,000 that remained available from our prior authorization. As of September 30, 2022, approximately $300,000,000 remained available for repurchases under this share repurchase plan. Our share repurchases may be made on the open market, subject to Rule 10b-18 or in privately negotiated transactions, through block trades, through 10b5-1 plans or otherwise, at management’s discretion. The amount of shares purchased and the timing of the purchases will be based on market conditions, working capital requirements, general business conditions and other factors. We intend to retire the repurchased shares.
During the nine months ended September 30, 2022, we repurchased 270,080 shares of our common stock on the open market at a total cost of $25,008,025 (an average price of $92.59 per share). During the nine months ended September 30, 2021, we repurchased 497,243 shares of our common stock on the open market at a total cost of $49,999,979 (an average price of $100.55 per share).
8.    Commitments and Contingencies
Contractual
In the ordinary course of business, we issue performance bonds to secure our performance under certain contracts or state tax requirements. As of September 30, 2022, we had approximately $27,743,000 of performance bonds outstanding. These bonds are issued on our behalf by a surety company on an unsecured basis; however, if the surety company is ever required to pay out under the bonds, we have contractually agreed to reimburse the surety company.
Management believes that payments, if any, related to these performance bonds are not probable at September 30, 2022. Accordingly, we have not accrued any liabilities related to such performance bonds in our consolidated financial statements.
Employment Contracts and Severance Plans
We have employment contracts with, and severance plans covering, certain officers and management teammates under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested RSUs would accelerate following a change in control. If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from three to twenty-four months of salary.
Indemnifications
From time to time, in the ordinary course of business, we enter into contractual arrangements under which we agree to indemnify either our clients or third-party service providers from certain losses incurred relating to services performed on our behalf or for losses
13

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
arising from defined events, which may include litigation or claims relating to past performance. These arrangements include, but are not limited to, the indemnification of our clients for certain claims arising out of our performance under our sales contracts, the indemnification of our landlords for certain claims arising from our use of leased facilities and the indemnification of the lenders that provide our credit facilities for certain claims arising from their extension of credit to us. Such indemnification obligations may not be subject to maximum loss clauses.
Management believes that payments, if any, related to these indemnifications are not probable at September 30, 2022. Accordingly, we have not accrued any liabilities related to such indemnifications in our consolidated financial statements.
We have entered into separate indemnification agreements with certain of our executive officers and with each of our directors. These agreements require us, among other requirements, to indemnify such officers and directors against expenses (including attorneys’ fees), judgments and settlements incurred by such individual in connection with any action arising out of such individual’s status or service as our executive officer or director (subject to exceptions such as where the individual failed to act in good faith or in a manner the individual reasonably believed to be in, or not opposed to, the best interests of the Company) and to advance expenses incurred by such individual with respect to which such individual may be entitled to indemnification by us. There are no pending legal proceedings that involve the indemnification of any of the Company’s directors or officers.
Contingencies Related to Third-Party Review
From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, client and partner audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in the consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.
Legal Proceedings
From time to time, we are party to various legal proceedings incidental to the business, including preference payment claims asserted in client bankruptcy proceedings, indemnification claims, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, employment claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are required. If accruals are not required, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made. Although litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the work required pursuant to any legal proceedings or the resolution of any legal proceedings during such period. Legal expenses related to defense of any legal proceeding or the negotiations, settlements, rulings and advice of outside legal counsel in connection with any legal proceedings are expensed as incurred.
In connection with the acquisition of PCM, the Company has effectively assumed responsibility for PCM litigation matters, including various disputes related to PCM’s acquisition of certain assets of En Pointe Technologies in 2015. The seller of En Pointe Technologies and related entities providing various post-closing support functions to PCM have asserted claims regarding the sufficiency of earnout payments paid by PCM under the asset purchase agreement and the unwinding of the support functions post-closing. PCM has rejected and vigorously responded to those claims and is pursuing various counterclaims. The disputes are being heard
14

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
by multiple courts and arbitrators in several different jurisdictions including California, Delaware and Pakistan. The Company cannot determine with certainty the costs or outcome of these matters. However, the Company is not involved in any pending or threatened legal proceedings, including the PCM litigation matters, that it believes would reasonably be expected to have a material adverse effect on its business, financial condition or results of operations.
9.    Segment Information
We operate in three reportable geographic operating segments: North America; EMEA; and APAC. Our offerings in North America and certain countries in EMEA and APAC include IT hardware, software and services, including cloud solutions. Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related services and cloud solutions.
In the following table, revenue is disaggregated by our reportable operating segments, which are primarily defined by their related geographies, as well as by major product offering, by major client group and by recognition on either a gross basis as a principal in the arrangement, or on a net basis as an agent, for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30, 2022
North AmericaEMEAAPACConsolidated
Major Offerings
Hardware$1,404,207 $151,505 $16,563 $1,572,275 
Software396,921 184,361 15,640 596,922
Services298,709 43,708 22,740 365,157
$2,099,837 $379,574 $54,943 $2,534,354 
Major Client Groups
Large Enterprise / Corporate$1,473,014 $295,565 $25,075 $1,793,654 
Commercial424,600 11,898 18,048 454,546 
Public Sector202,223 72,111 11,820 286,154 
$2,099,837 $379,574 $54,943 $2,534,354 
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)$1,990,277 $358,697 $46,763 $2,395,737 
Net revenue recognition (Agent)109,560 20,877 8,180 138,617 
$2,099,837 $379,574 $54,943 $2,534,354 
15

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Three Months Ended September 30, 2021
North AmericaEMEAAPACConsolidated
Major Offerings
Hardware$1,418,335 $160,645 $13,515 $1,592,495 
Software338,440 178,868 14,436 531,744 
Services263,101 41,935 18,246 323,282 
$2,019,876 $381,448 $46,197 $2,447,521 
Major Client Groups
Large Enterprise / Corporate$1,447,246 $276,292 $21,947 $1,745,485 
Commercial384,458 13,209 17,277 414,944 
Public Sector188,172 91,947 6,973 287,092