Insight’s Joyce Mullen On Supply Chain Issues, Keeping Up With Increased Demand

‘I should note though, when we talk about supply chain constraints, we are shipping more product than we’ve ever shipped before. ... The market is responding. It’s just trying to keep up with the increased demand,’ says Insight President and CEO Joyce Mullen

Supply chain constraints and a shortage of qualified talent will continue to impact the IT environment in 2022, said Insight Enterprises executives during the solution provider’s fiscal fourth quarter and fiscal full year 2021 financial analyst call Thursday.

Glynis Bryan, CFO of Tempe, Ariz.-based Insight, said during her prepared remarks that a big focus for the company has been on ensuring customers get the products they need.

“In the second year of the pandemic, we continued to focus on helping our clients forecast their needs and ensure that they received supply as it became available,” Bryan said. “This led to rapid bookings and backlog levels exiting 2021. For 2022, industry analysts expect low-single-digit growth in hardware. However, in our first quarter, we’re seeing hardware bookings in North America improve double digits year over year, compared to the first quarter of 2021. Also, we exited the fourth quarter 2021 with elevated backlog, primarily in North America.”

[Related: CDW Sees Supply Chain Issues Continuing This Year]

Insight President and CEO Joyce Mullen, in her first fiscal analyst conference call since joining Insight as president and CEO after years as Dell Technologies’ channel chief, responded to an analyst question about prices in the wake of supply constraints, saying the company did see some price increases in the fourth fiscal quarter.

“We were able generally to pass those along to our clients,” Mullen said. “And I think there’s enough clarity around the supply chain constraints that customers are pretty accepting of those price increases.”

However, Mullen said, supply chain issues don’t mean a reduction in product shipments.

“I should note, though, when we talk about supply chain constraints, we are shipping more product than we’ve ever shipped before,” she said. “While the demand is higher than supply, we continue to ship more product than ever before. The market is responding. It’s just trying to keep up with the increased demand.”

When asked which product categories on the hardware side offer the most opportunity for Insight to gain share in the first half of 2022, Mullen said the biggest category is devices.

“We continue to focus on that sort of hybrid work environment and making sure that the productivity solutions that we offer to our clients are effective,” she said. “We have a significant backlog there.”

Networking is another very significant opportunity for Insight, Mullen said.

“And the backlog is definitely record-setting there from a networking gear point of view,” she said. “And so I think there’s a lot of opportunity for us to deploy that gear when we can get it. And that’ll drag a lot of services along with it.”

Mullen said Insight is seeing some improvements in the device lead times.

“That is definitely improving, albeit not quickly and not 100 percent consistently across all the device space, “she said. “We haven‘t seen much improvement in the infrastructure space, though, especially networking. And we don’t expect that to improve until probably, it will be the second half of the year.”

Bryan, responding to an analyst question about possible talent shortages, said the labor market is tight, but there are two ways to look at it. First, she said, is the task of retaining the company’s existing highly talented team.

“And we’re doing a very good job at that, I would say, much better than market, and we expect that to continue,” she said. “We have seen a slight uptick in attrition. But as I said, quite significantly below market.”

The second, Bryan said, is the need to be more competitive than in the past for technical talent, particularly in the cloud and the digital space.

“We are seeing that we have to be more aggressive around offers, and they are more expensive, but they help us build solutions,” she said. “And in most circumstances, we’re able to pass on the increased cost for the labor through our services contracts. And we also find that being flexible about around work from home and hybrid work is really helping with our recruitment, but that’s a lot of hard work. So it’s a combination of retaining our talent and then making sure we have a really, really tremendous opportunity available to the talent we’re trying to attract.”

For its fourth fiscal quarter 2021, which ended Dec. 31, Insight reported total revenue of $2.6 billion, which was up 12 percent from the $2.3 billion the company reported for its fourth fiscal quarter 2020.

That beat analyst expectations by $110 million, according to Seeking Alpha.

The revenue total included product revenue of $2.2 billion, up 11 percent, and services revenue of $352.3 million, up 17 percent.

Total revenue in North America reached $2.1 billion, up 13 percent over last year. In North America, hardware accounted for 70 percent compared with 67 percent last year, software 16 percent compared with last year’s 20 percent, and services 14 percent compared with last year’s 13 percent.

For the quarter, Insight reported GAAP consolidated net earnings of $62.1 million, or $1.69 per share, up from last year’s $53.4 million, or $1.50 per share. On a non-GAAP basis, the company reported consolidated net earnings of $71.5 million, or $2.03 per share, up from last year’s $62.4 million, or $1.76 per share.

Analysts had been expecting non-GAAP net earnings of $1.99 per share, according to Seeking Alpha.

For the entire year, Insight reported total sales of $9.4 billion compared with $8.3 billion for 2020. That included product revenue of $8.1 billion, up from last year’s $7.2 billion, and services revenue of $1.3 billion, up from last year’s $1.2 billion.

The company also reported GAAP consolidated net earnings of $219.3 million, or $5.95 per share, up from last year’s $172.6 million, or $4.87 per share.

On a non-GAAP basis, Insight reported consolidated net earnings of $251.6 million, or $7.10 per share, up from last year’s $219.5 million, or $6.19 per share.

Looking forward, Insight expects to report mid-single-digit growth in net sales for all of fiscal 2022, with non-GAAP earnings per share between $7.65 and $7.85, which is close to the analyst consensus of $7.69 per share, according to Seeking Alpha.