Insight share price tanks after results miss

Revenue grows largely as a result of PCM's contribution

Insight's share price has fallen more than 10 per cent after its Q4 results fell short of expectations.

Sales for the quarter ending 31 December 2019 rose 31 per cent year on year to $2.3bn (£1.8bn), but largely as a result of the revenue brought in by the acquired PCM business.

Sales in North America, where the vast majority ($1.9bn) of Insight's revenue is drawn from, were up 38 per cent, but down two per cent with PCM taken out of the equation.

Insight said this was a result of lower hardware sales to large enterprise clients.

CEO Ken Lamneck said: "We were pretty flat from a revenue point of view for the year.

"A lot of that, of course, has to do with the netting and we certainly saw that with the gross margin improvement for the business overall which certainly benefited there.

"It had to do primarily with some large hardware clients that we did business with in the prior year that didn't repeat.

"We're pleased with where PCM came in for the quarter; very pleased with where we are from an integration point of view."

Operating income was $81.9bn, equating to three per cent of revenue. In comparison CDW, which released numbers last week, reported an operating profit of six per cent.

Lamneck added that PCM performed "in line with expectations", contributing sales of $560m in the quarter.

The chief exec also said that Insight expects organic growth to rebound over the coming quarters, forecasting mid single-digit growth.

He said he expects Windows 10 refreshes to continue to bring in business, if not as much as over the last few years.

In the datacentre, Insight plans to take the capabilities it obtained through its acquisition of Datalink into its traditional enterprise clients, as well as the mid-market clients of PCM.

Lamneck also said that the reseller will continue to look for acquisition targets, even with the debt taken on for the PCM deal.

Long-term debt increased to $857.6m in Q4, while Insight expects interest payments to be between $35m and $40m in full-year 2020.

"We're certainly going to take our time to make sure we fully digest PCM before we do anything of substantial size, but certainly we always continue to monitor that," he said.

"We think there will be continued consolidation in the industry; that's just the norm, and that will certainly be an area in which we'll participate. But for the foreseeable future, you might see us continue to do more sort of tuck-in acquisitions as we continue to digest PCM and make sure, of course, we start paying the debt down here over the next couple of years."