Ladies and gentlemen, thank you for standing by, and welcome to the Insight Enterprises Second Quarter 2020 Operating Results Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Glynis Bryan, Chief Financial Officer. Please go ahead, ma'am.

Thank you. Welcome everyone and thank you for joining the Insight Enterprises earnings conference call today. Today, we will be discussing the Company's operating results for the quarter ended June 30, 2020. I am Glynis Bryan, Chief Financial Officer of Insight, and joining me is Ken Lamneck, President and Chief Executive Officer. If you do not have a copy of the earnings release that was posted this morning and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under Investor Relations section. Today's call, including the question-and-answer period is being webcast live and can be accessed via the Investor Relations page of our website at insight.com. An archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, August 6, 2020. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Insight Enterprises is strictly prohibited. In today's conference call, we will refer to certain non-GAAP financial measures as we discuss the second quarter 2020 financial results. When referring to non-GAAP measures in today's call, we will refer to adjusted earnings from operations, adjusted diluted earnings per share and return on invested capital. You will find a reconciliation of these non-GAAP measures to actual GAAP results included in the press release and the accompanying slide presentation issued earlier today. Also, please note, that unless highlighted as constant currency all amounts and growth rates are discussed in US dollar terms. Finally, let me remind you about forward-looking statements that will be made on today's call. All forward-looking statements that are made during this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today's press release and in greater detail in our most recently filed Annual Report on Form 10-K and periodic reports subsequently filed with the SEC. With that, I will now turn the call over to Ken, and if you're following along on slide presentation, we will begin on Slide 4. Ken?

Hello, everyone, and thank you for joining us today to discuss our second quarter 2020 operating results. I'm pleased to report that through our dedicated team, resilient business model and the PCM acquisition, we delivered double-digit adjusted earnings growth year-over-year in the second quarter. Given the challenging demand environment in the second quarter, our operating priorities for the quarter were clear. First, we tightened the health and safety standards in our warehouse and mobilized most of our teammates to work from home, which allowed us to continue to support our client's most pressing IT needs. Second, we focused on reducing our cost to align with the current demand environment reducing operating expenses by $26 million sequentially. Third, we focused on cash flow generation delivering very strong cash flow from operations in the quarter. And finally, we focused on optimizing our earnings results in this tough climate. Now turning to the second quarter results on Slide 5. Consolidated net sales in the Second quarter were $1.97 billion, up 7% year-over-year due to the acquisition of PCM. We focused on growing our services and solutions business mix, which helped drive gross margins up 150 basis points year-over-year to 16.5% in the second quarter, a new record for our company and adjusted diluted earnings per share was $1.75, up 11% year-over-year on a GAAP basis diluted earnings per was $1.32. Within these results, gross profit generated from cloud solutions increased 90% of our consolidated gross profit over the past 12 months, now a meaningful component of our profitability. Given our strong execution bringing cloud digital solutions to clients, we are proud to announce that Microsoft made Insight their 2020 U.S. Partner of the Year, as well as their Worldwide Customer Experience Partner of the Year. Moving to Slide 6. During the second quarter,…

Thank you, Ken. I would also like to thank our global teammates for their dedication and resilience during these last several months. I'm going to start on Slide 10. Last quarter, we identified key initiatives to help protect our profitability during these uncertain economic times. As Ken noted, we decreased our operating expenses by $26 million in the second quarter compared to Q1 of 2020. About half came from lower salaries, the majority of which was due to fewer headcount for planned integration actions and the rightsizing of certain support functions for current demand trends. The balance of the decreased split fairly evenly between lower travel and other discretionary expenses and lower variable compensation on our budget attainments in the first half of the year. As you move on to Slide 11, in addition to the cost savings initiatives and the enhanced credit review procedures, we made debt reduction of hiring fees with available cash. In the second quarter, we generated strong cash flow and reduced debt by $313 million ending the quarter with approximately $435 million of debt outstanding under revolving ABL facility and our convertible note. At the end of the quarter, we had $164 million in cash on hand. We also ended the second quarter with eligible accounts receivable to support access to the maximum availability on our $1.2 billion ABL facility. Exiting the quarter, we are comfortable with our current leverage position of less than 1.5x debt to cash flows or EBITDA Under our ABL agreement, our primary compliance covenant is a fixed charge coverage ratio, which includes trailing 12-month EBITDA over capital expenditures, taxes, and interest expense. As of June 30, we were at 4x against the minimum requirement of 1x and are very confident that we can support our capital requirements and liquidity. As…

Thank you, Glynis. Slide 16. We remain committed to our long-term priorities discussed at our Analyst Day last fall, which include continuing to innovate in order to capture share in high-growth areas, such as cloud and the intelligent edge. Developing delivery solutions to drive better business outcomes for our clients, expanding the scale in our business and strategic clients and end markets, and lastly, continue to optimize client experience in our execution through relentless focus on operational excellence. Through the remainder of 2020, we believe the overall IT market will be challenging given the COVID crisis, and its adverse impact on the global economy. We have taken the appropriate steps to reduce our discretionary spending and ensure we have access to capital to support our short-term operating plans, and are confident we will weather this tough economic environment and emerge healthy on the other side. Thank you again for joining us today. And thank you for all our teammates across the globe for their support of our company, our partners and our clients. Be safe and we look forward to talking with you again later in the fall. That concludes my comments and we'll now open up the lines for questions.

[Operator Instructions] And your first question comes from Adam Tindle with Raymond James.

Hi, Adam. Before you ask your question, can I just make one correction?

Yes.

When I was talking about cash flow and I talked about the activity that was timing differences in the quarter, I said $2 million, that should have been $200 million. Just to be clear.

I think I was able to back into that. But that's just perfect.

Just to clarify for everybody listening in. But go ahead with your question now. Thank you.

So I'm going to start with Ken. In the press release, you talked about a pronounced impact in Q2 compared to internal budgets. And when I hear that, I would usually, expect to see a disruption in operations and cash flow, but operating margin was up year-over-year and Glynis just covered on cash flow was very strong. So I guess the question would be maybe color on internal budget and the biggest areas of variance and why we didn't see that show up in operating metric issues this quarter.

So internally, we had a higher growth expectation around the combination of Insight and PCM in our business. That's really the biggest driver in terms of…

Aggressive targets.

Yes, we had aggressive targets on the acquisition and given this environment, we grew, but we didn't grow as much as our internal budgets we have predicated.

Okay. But you could – you were able to achieve – yes, but it seems like you were able to manage some costs and the operational aspect to volume negative…

Yes, we've been very aggressive about managing the operational cost, and then in the quarter, we had some help sided from PCM on gross margin lines, but it's also the decline in hardware relative to the increase in our services and the mix of the services business with cloud that's driving the gross margin improvement across all jurisdiction.

Okay, thanks. And Ken, I just wanted to ask you, it was helpful when you talked about the July trend line for North America hardware declines at down 10%. Could you maybe just give us some context to compare that to either like May or June to give us a sense of the cadence of that, how does that compare to what you've been experiencing. And secondly, when you look at your forward indicators, your backlog, does that down 10% year-over-year in July start to improve in August and September?

As you may recall in our last earnings call, we talked about, actually, that – what we received projected wise is actually a 20% sort of bookings decline going into the quarter. So certainly, that is an improvement, we're seeing down 10%. Still down, but certainly, an improvement from what we saw in the – which did play out certainly across the board for the quarter we just announced. So yes, I think you could say – you could extract from that, but the trend line certainly seems to be improving in regards to the negativity of the booking trends. And to your other question, in regards to that, it's hard for us to predict August, September what that's going to look like. But what we saw from the trends just in July, of course, that was what we experienced.

Okay. And I guess, bigger picture, you talked about kind of suppressed IT spending through the remainder of the year as you're talking to customers, and your sales team is talking to customers, do you get a sense of IT budgets on a go-forward basis? It seems like you obviously have a pause and a freeze right now as customers are normalizing and reevaluating. I guess, what do you think happens to budgets in IT spending? Is there a case that we're going to have a longer period of pressure or do you think we're going to have a surge in projects returning and go back to a 3% trend line? I know that's a hard question, just any kind of color what you're getting from sales force to your customers.

Yes, I would say that certainly a lot of it is obviously is dependent upon the COVID-19 and when people start to come back to offices. I think that will certainly have an impact on the actual spending, and certainly the infrastructure side of it. As I think certainly, clients are sweating those assets probably longer than they normally would. But as they start coming back to offices, I think that will certainly start to open up and that will start to start to improve. The device side, I think, continue to see pretty strong. Certainly, the second half, we'll see a pretty robust increase in Chromebooks as education. And starts to certainly realize this is when it becomes much more the norm going forward. So I think there is certainly a huge increase in Chrome products being sold into the K-12 market. I think that's going to certainly bolster in the second half the – sort of the device spending category for that point of view. But I think from the infrastructure side, that's probably going to be pretty much the same for the second half of the year. And then of course, as we indicated software certainly much more resilient cloud, which again is 90% of our GP, much more resilient. And then certainly, what we're seeing in hardware.

Okay. That's helpful. Thank you very much.

And your next question comes from the line of Matt Sheerin with Stifel.

Yes, thanks. Good morning. I just wanted to ask about the strong gross margin in the quarter and your guide for it to be down roughly 150 basis points sequentially. I imagine that's the mix issue. But you also talk Canada continued weakness in infrastructure hardware and other hardware products. So you would think that mix would continue to favor you. So could you talk about that dynamic?

Yes, I think on the gross margin side – I'll let Glynis chime in as well. I think certainly it is a mix issue. Second quarter is our largest quarter, it's Microsoft's year-end. So there is a big acceleration that occurs in there and of course, a lot of that comes in and it's netted, so that certainly has a big impact and always historically has had a bigger impact on our gross margin for the second quarter. And to comment around hardware, yes, there's no question that certainly software carries a higher gross margin for us overall in services than hardware does. On the infrastructure side, a lot of that of course will tend to be pretty decent gross margin overall. The devices tends to be certainly much more competitive in that regard, because in the infrastructure side, you do get the ability of course to get the registration on a lot of the projects and so forth, which carry a pretty good gross margin, but devices certainly doesn't carry that same gross margin level. But Glynis, I'll let you add as well.

Yes, I think historically, Matt, we've seen usually about 100 basis points decline in gross margin between Q2 to Q3. Q2 is our largest quarter. In this Q2 in particular, our margin was helped by the fact that there was a lower percentage of hardware in our gross margin and a higher percentage of services and specifically [TOD] related services that are 100% margin that drove that higher gross profit. We're anticipating that hardware is going to be a bigger component of our overall gross profit in Q3, relative to the 10% decline versus the 20% that we talked about at the beginning of Q2, so that will have a bigger impact on overall gross margin in Q3 relative to what we saw in Q2.

Okay, thank you. That's helpful. And Ken, just on the cloud revenue, the SaaS products that you're selling, could you be more specific about where clients are investing and you see those trends continuing through at the end of the year?

Yes, I think certainly in the COVID crisis and everybody was certainly going from home and then clients took the perspective of how do they get their organization in a very secure way up and running in the remote fashion? So the cloud became a very good solution when you looked at no VDI and so forth providing us our security. It was very simple, easy-to-use and easy to get running. So I think you saw a tremendous impact there certainly, so that certainly has shown a pretty robust increase from that perspective. Another is a portion of it's easier for them to get up and running to go to a public cloud and it's a situation we're trying to look at their cost structures as well and rather had it sort of as an operational expense versus a capital expense at this stage, where there is so much uncertainty. So I think that's continuing and of course from a cloud point of view, we're all just seeing the dramatic increase in tools such as Microsoft Teams and Cisco Webex and so forth, which of course draw a significant cloud consumption as well for all of our clients. So I think that's going to certainly play out and continue and certainly a lot of that will be sort of permanent structures in place for clients as well. I think as they start looking, we know some clients that look towards VDI realize that that might be more temporary do that in a public cloud setting as it is quite expensive. So I think clients will start relooking at that as they start to come back more into an office study.

Yes, and relative to that, are you seeing issues with customers basically not being on premise? Some of those integration and projects that you do particularly the data link business that you have, are you seeing some issues there and as companies open up again, do you think some of those projects will be reinstated?

Exactly. That's exactly what we expect to happen. I mean there certainly certain key projects still going on, but as we know which we experienced in prior downturns and going back to 2008-2009, there is usually a robust increase here once we do come out of this where you can't delay those projects forever. We can only put them on hold and pause so we do believe that there will be a significant resurgence there once the market does turn around and clients do have to put those projects in a much more active category.

Okay. And my last question for Glynis are relative to the balance sheet, your cash position was up, you've taken down some debt. Could you tell us about the strategy in terms of what you expect the debt reduction to be this year and also interest expense estimate for Q3?

I think that what I would say is that we talked about the $200 million timing difference that. Most of that come back in Q3, so you should anticipate that that will be an increase in our debt usage in Q3. When you look through our the back-end cash flows. Generally we use cash in third quarter and we generate a little cash in Q4, such that we're relatively flat from where we are at the end of Q2 and that should help you as you think through what debt would be at the end of the year and hence the associated interest expense. Just as a reminder, our convert has a cash coupon of 0.75 basis points – up 75 basis points, and our revolver debt is at a125% over LIBOR. Sorry; our ABL debt is at 125%, over 25 basis points over LIBOR.

Okay, great. Thank you.

And your next question comes from the line of Pat Chung with JPMorgan.

Hi, it's Paul Coster here. Can you hear me? Hi, Ken, thanks for taking the question. Well, let me start with free cash flow. It sounds like you're looking for an increase in the free cash flow for the full year, the $200 million having worked through the system. That's an excess of what you previously were forecasting and it sounds like you're going to use it to pay down maybe some more debt and I don't think anyone is going to complain about that, it makes sense, I will because why not buy back some shares? The stock looks really inexpensive at the moment. Why not use some of that excess to focus on equity ahead of debt?

We agree with you that the stock looks cheap right now. So I think that until we feel a little bit more certainty about what's happening in the environment and the economic environment and when the recovery is actually going to occur. I think we're just being prudent and conservative with regards to our use of cash. There are other opportunities in the marketplace that we'd want to take advantage of if it they came to fruition. So I think we just want to make sure that we are as best-positioned as possible to take advantage of that. We do have $25 million still outstanding under our authorization from the Board for share repurchase. But as of right now we don't have a plan to implement that.

Okay. Well, I think you know my opinion. The other thing, Ken, I was really fascinated by the success you're having in going to market through the internet, through in a digital way and it feels to me like you're developing your competitive advantage is certainly relative to the very fragmented sort of smaller [indiscernible] market, but maybe even relative to some of the bigger players out there. Can you talk just a little bit about that and what do you think that might mean in terms of operating margins over the longer term?

Yes. Thanks, Paul, for the question there. We've been investing as we indicated for the last, pretty much five years on building up that platform and it's an extensive array of IT systems and SaaS solutions that come together to really deliver that experience. So we viewed it certainly as a differentiator, because it's only a few units in our space that could really have the wherewithal on the economics to really drive that kind of a platform. So we've started to view that certainly to be a long-term competitive advantage. Smaller players would be challenged to make those kind of investments longer-term, and as we know these clients look to obtain more and more information. We know that most clients now are going to the Internet for their source of information to be important for our sales rep. So it's prudent as it's critical for us to make sure we're part of that conversation, that dialog in order to obtain that connection to our clients. So that's been the journey that we've been on and we're seeing in a significant results from that. When we look at our lead flow and our ability to really cater our clients' needs and really understand them and to nurture them along their buying journey has become a significant advantage and one that certainly our partners recognize and that's pretty heavily with us on going forward. So hard to exactly quantify it, but I think we'd all agree that that's really a key part of the future. It's sort of that companion for sales is they've got to have a strong digital marketing capability for the sales organization in long-term or you're not going to have the same relevancy because the phone being an important tool is very much a little bit outdated in regards to trying to obtain that first connection to clients. As we all know, none of us answer our phones today, so very, very difficult. Still an important way to communicate, but it's certainly not what it was five or 10 years ago.

Got you. And if I can sneak in one last question, the cloud, you're having some success with sort of a two part question – first, how much of that is Microsoft? And the other part of the question is, in the past, we've seen some companies sort of struggle with that transition to cloud because of the netting out of the revenues. The revenue line doesn't look so good but margins look great. It doesn't seem to be impacting you at the aggregate level. I'm just wondering if you can comment on those two questions.

So you're right, it's netted and it does actually produce higher gross margin. I would say that's how it has impacted us, is that if you look at kind of customer-generated revenue, you would see growth in software in many quarters where we report no growth flat or slightly negative growth on a net basis. And that is in times of more business moving from on-prem to off-prem. We saw that in Q2 and its impacted overall software growth for us. It's at the top line, but it helps us ultimately at the gross margin when in terms of the 16.5% gross margin that we reported. So because we have a complement of hardware and services, maybe we don't see the reduction in our revenue that much, but we internally look at that growth versus net around software, want to track the conversions to the cloud and what business that's generating, but also, so that we can understand the productivity of our sales force in terms of how they are selling to the end client. But that trend is something that we expect will continue because over the course of the next decade – I don't how long it will take – most of that unplanned software is going to convert to some kind of cloud subscription-based solutions.

And when becomes important to us for the longer term is the net services that that would drive, which of course is a recurring revenue stream for us and that's where most focused on that because I think the cloud consumptions will become competitive going forward and the real key for us will be how we attach ourselves providing this managed service capability to our clients globally, so that there that we're investing in has continued to build out.

And a recurring revenue stream that we'd like to capture.

Right.

And Microsoft?

Well, with Microsoft, if you think about what Microsoft's percentage of the total software publisher ecosystem, I would say it's possible in terms of composition of our portfolio. We clearly do other vendors as well. It's not just Microsoft, but they are behemoths in the industry so there is a behemoth in our cloud results as well.

Okay, got you. Thanks.

I don't have the specific percentage point for you.

And your next question comes from Marc Wiesenberger with B. Riley.

Thank you. Good morning. In the current environment, can you talk about the opportunities to expand wallet share with your customers and which opportunities may be more durable relative to others? And then the potential impact on the P&L?

Yes, I think it's certainly been an area, Marc, of always focus for us. Of course it's how do we obtain more of our clients' business through and that's what we really want to our four solution areas because we believe our clientele buy these four solution, supply chain optimization, Connected Workforce, now which is about the modern workplace experience; it got us in the transformation and digital innovation. So the ability to sell all of our clients through SMB all the way through public sector, rolled buying in those areas. So having the levels of expertise becomes critical as we all know the fastest way to expand is sell more to your current client set. So that's an area that we continue to be very, very focused on in delivering certainly more value to our clients.

Understood. Also with budgets across all organizations being stretched as well as the duration of work we're in from home kind of continually evolving, has the current situation provided and impetus or opportunity to accelerate the device or the service offering?

Yes, and I would say it certainly has. That's all in what we call Connected Workforce. We sort of start with that endgame and say, hey, we can provide to buy some service but what we find depends on where we have to meet the client where they're at because a lot of clients aren't completely ready for their environment to do that. What we'll do is we say, we think that's the ultimate end game for you, but we can help you along this journey. But for some large clients that may take them actually couple of years before they can actually get there due to their internal workings in their structure. But we actually map out for them what it would take and then we'll meet them where they're at, and then actually migrate them towards on that end game, towards that. The other part of your question was, I think, around what areas of technology received very resilient sort of in this environment? It's certainly there is a few that are very, very key. At the top of the list of course is security. The cyber-attacks continue as we know at an accelerated basis. So we see all clients no matter how distressed their environments are, continuing to invest in securities. So that's certainly one of the top areas that we're focused on as well. Collaborative environments, of course as we all know we discussed with things like Teams and Webex and so forth, they're critical for clients. More robust devices for their teammates to work-from-home, it's certainly becoming very, very key. Things like in the networking space SD-WAN, it's getting lots and lots of attention for clients. It's a very, very cost effective solution for them to network their devices together. So those are certainly some of the key areas and of course as we talked about everything, cloud is accelerating dramatically. You see the growth rates, plus 45% for the likes of Google and Amazon and Azure. So that's certainly very, very substantial growth rates that we're certainly participating in. Those would be certainly some of the highlighted areas that we're focused on because our clients are still so focused in those areas.

Understood. And then just two more from me, can you talk about the reception in the market you're seeing to the connected platform for detection and prevention? And maybe what the margin profile for those types of engagements, looks like.

Yes, good question. And Marc [indiscernible] connected platform is basically Insights IP where we provide basically a single pane of glass and this is all around IoT. So we think the ability to take all this tremendous amounts of data and turn that into very useful information for our clients who disconnect their platform, it basically takes these devices at the edge in this case around COVID of course, it's around thermal imaging, which obviously helps with all the temperature testing and then the optical cameras to do basically – as for social distancing as the people are wearing masks, it can actually do contact tracing as well. So all those pieces, we've got quite a few clients very interested. We're obviously using that in our facilities and automate our major facilities. We use that technology that we've developed and we certainly have quite a few clients right now are very actively looking at that. Some very large theme park type companies are looking at how they bring back the public to their environments and so forth. So there's a lot of really strong interest in that area and certainly we've had some good success in delivering that solution. And the key is, it's really just around IoT and in this case COVID just happens to be one of the solutions to that, but it's a robust platform that works and works in all IoT environments. We've deployed it in a lot of major restaurants who were worried about food safety and how they actually can measure their ovens and their refrigeration units and provide all the sensing information they need there to operating rooms that are concerned about bacteria and how do they measure precisely temperature humidity. So the connected platform is a really broad platform that actually helps in the IoT world and as we keep talking, the biggest cause that's on the horizon is being intelligent edge and that is all about IoT. So that's an area that we think is a very, very promising future and one that we're certainly very heavily invested in. So that's a long, long winded answer to your question, but yes, lots of good interest in the connected platform, but certainly around the intelligent edge.

That's helpful, thanks. And then just a final one, in the release this morning, you talked about the core business being down. Could you quantify that in the quarter?

Yes, I mean basically what we indicated was that the booking rates in July has indicated to us that they're down 10%. We of course did say that we would have growth in Q3, but certainly a lot of that due to the fact we have two more months of PCM in the numbers. So we will have top line growth in the quarter, but overall when we look at the trending information, the booking rates are down to like about 10% whereas last quarter, actually the trending was down 20%, improving, but still a negative number.

Marc, anything I would maybe like to add to that is, we don't have a pure view as to the core business being down. What we do know is that the combination of Insight and PCM as reported last year, on a year-over-year basis, we know that that combination is down. And it's down consistent with the 28% booking trends that we talked about at the beginning of the first quarter – at the beginning of the second quarter, sorry.

Got it. Thank you. Very helpful.

Okay, thank you.

And your next question comes from the line of Anthony Lebiedzinski with Sidoti.

Yes, good morning and thank you for taking the question. So I just wanted to get a little bit more color about the third quarter to date trends, so an you perhaps give us a sense as to the performance from the different vertical markets, different end markets, how those are performing?

Yes, thanks for the question, Anthony. Certainly, the education market is doing very well. The K through 12-market has – even this already becomes more of the norms with big investments there. Google Chrome is by anybody's statistics, 75% to 85% of that market. So very robust success going on in K through 12 markets for devices there, I think when you look at the federal government spending, as a lot of those dollars around COVID start to get spent, we're seeing certainly some increases at the state and local level as well as in the federal government. So this will be a key period for that for the government spending in this quarter. So we're anxious to see how – if that really comes to fruition. When you look at the sort of corporate account, certainly, I think we all recognize that the lower end of the SMB space has probably been the most challenged in this environment. How that sort of starts to bounce back and I think it's anybody's guess, but certainly, I would expect that to be an improvement in Q3, at this stage. And then I think it depends upon the – when you talk about corporate accounts in specific verticals, it depends on health care for us overall is – depends on the sector that you're in, is actually very challenged, as that hospitals, of course, make most of the money sort of on elective surgeries and they have been certainly sort of on and off. So hospitals dependent upon what aspect you're calling on, certainly their IT spend has been challenged, but we would expect that would start to bounce back once more of a norm of elective surgeries is on the scene on a more consistent basis. The hospitality industry, of course, it's very, very challenged. Airline industry challenged. Anything associated in that space should expect, but we do see that there's – we have a lots of businesses example with the cruise lines. Obviously, not a lot happened in that space. So their spend is down considerably, but there is focus towards the future and what's going to happen there and there will be a bounce back for that business. Certainly not this calendar year, but certainly as we look into next year. So I think you have to – we have to be very granular in looking at specifically on the verticals when we talk about the corporate accounts base. So, it's a little bit of certainly – a little bit more of a mixed bag in that regard.

Got it. That's very helpful, and so you touched on the SMB clientele. So with that in mind, how should we think about the bad debt expense for the rest of the year?

I think to-date we've had a pretty good handle on our bad debt expense. We've had a couple of bankruptcies associated which we've been able to cover in the normal course of our business, we have a process around our SMB clients with regard to how we've reviewed individual clients, we've had that, we have an industry focus with regard to which industries are at high risk, etcetera, and we're very judicious with regards to being on top of that segment of the market. And I would say that we're not seeing bad debt or bankruptcies so much in that segment. What we're seeing a lot on is deferred, delayed payment and request for extended payment term. Typically, for short duration "as they get back on their feet." We're also seeing our large enterprise clients as well. Everybody is – some taking advantage and some legitimately asking for relief. And for our large customers, we are providing that and we have a process that we go through to scrutinize the request, and then we grant it as necessary. But part of it is making sure that we support our clients during this downturn, being judicious about the credit that we extend on a go forward basis and looking through at the history of their performance with us to make a determination about how much are we willing to put at risk with them going forward, and it's a very measured risks and we believe we have that well enhanced through the tea – through our team.

All right. Well, thank you very much and best of luck.

Thank you.

Thank you.

And welcome to your first conference call at Insight.

Thank you.

[Operator Instructions] We have no other callers in queue at this time.

That concludes our conference call for today. Thank you very much for your participation and we will be talking to you in the future. Thank you.

Ladies and gentlemen, you may now disconnect from the conference call. Thank you for participation.