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Insight Enterprises Inc (NSIT) Q2 2021 Earnings Call Transcript

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NSIT earnings call for the period ending June 30, 2021.

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Insight Enterprises Inc (NSIT -0.94%)
Q2 2021 Earnings Call
Aug 6, 2021, 2:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Insight Enterprises, Inc. Second Quarter 2021 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ms. Glynis Bryan, Chief Financial Officer. Please go ahead.

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Glynis Bryan -- Chief Financial Officer

Thank you, Pasha. Welcome, everyone, and thank you for joining the Insight Enterprises Earnings Conference Call. Today, we will be discussing the company's operating results for the quarter ended June 30, 2021. I'm 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 and the accompanying slide presentation that were posted this morning and filed with the Securities and Exchange Commission on Form 8-K, you will find them on our website at insight.com under our 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 5, 2021. 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 be referring to non-GAAP financial measures as we discuss the second quarter 2021 financial results. When referring to non-GAAP measures, we will refer to such measures as adjusted.

Non-GAAP measures to be discussed in today's call include adjusted selling and administrative expenses, also referred to as adjusted SG&A adjusted earnings from operations; adjusted earnings before interest, taxes, depreciation and amortization, also referred to as adjusted EBITDA; adjusted diluted earnings per share, including the benefit of the note hedge on our convertible debt; and also adjusted return on invested capital. You will find a reconciliation of these adjusted measures to our GAAP -- to our actual GAAP results included in either the press release or the accompanying slide presentation issued earlier today.

Also, please note that unless highlighted as constant currency, all amounts and growth rates are discussed in U.S. dollar terms. As a reminder, all forward-looking statements that are mentioned on 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, on our most recently filed periodic reports and subsequent filings with the SEC.

With that, I will now turn the call over to Ken. And if you're following along with the slide presentation, we will begin on slide four. Ken?

Ken Lamneck -- President And Chief Executive Officer

Thank you, Glynis. Good morning, and thank you for joining us today to discuss our second quarter 2021 operating results. I want to start off by thanking our teammates for the Harmony and Heart and most notably, the Hunger they've shown through the first half of the year. Through these values, we are executing on the strategies that will help us and our clients accelerate into technologies of tomorrow. While supply constraints continue to be a challenge during the quarter, we remain focused on executing on our financial and operating priorities for the year and supporting our clients' inventory needs.

During the second quarter, I'm pleased to report that our business saw double-digit top line growth across all major categories of net sales. Gross margin was 16.4%, a strong performance given compression on margins due to increased hardware net sales. Adjusted earnings from operations increased 6% and drove adjusted return on invested capital to 13.6%, up from 12.1% in the second quarter last year. Hardware booking trends continued strong throughout the second quarter.

Given the ongoing supply constraints and longer lead times required for hardware orders, we're supporting our clients by helping them forecast their inventory needs, ensuring they're well positioned in the queue for fulfillment in amounts necessary to meet those needs. As a result, we exited the second quarter with further elevated backlog from levels at the start of the quarter. We expect about 50% of this backlog will ship in Q3. We're pleased to see the pipeline for future sales build at healthy levels for the second half of the year and into 2022.

Clients continue to focus on business agility continuity by leveraging cloud solutions. Our clear strategy and deep expertise in delivering digital solutions allowed us to grow cloud sales of SaaS and Infrastructure-as-a-Service high double digits in the quarter. This drove cloud gross profit to 22%, up more than 300 basis points year-over-year for the trailing 12 months. We're happy with our team's continued operational execution in the second quarter, and our visibility to the second half gives us confidence in guiding net sales at the high end of our range as well as increasing our EPS guidance.

As we help companies shift to cloud-based solutions and modernize their infrastructure, we're also engaged in discussions around finding solutions that help clients incorporate emerging technology into the business operations. We believe these companies that maximize the value of IT and data will emerge as the new leaders.

As the business and technology landscapes have drastically changed over the past 15 months, we've been well positioned to address the greatest needs of organizations and to help them make sense of operations such as accelerating the intelligent edge and using artificial intelligence or AI and the Internet of Things to scale and leverage data to drive real-time decision-making, which is essential to achieving growth, cost savings and market differentiation. Recently, we were named NVIDIA's 2020 Software Partner of the Year.

As an advanced technology partner, we use their technology to support organizations and utilizing deep learning to gain a competitive advantage. Our technical consultants and engineers help clients modernize their infrastructure to support cutting-edge AI, machine learning and deep learning solutions tailored to individual client needs. One example of the type of AI that allows computers to understand and label images is computer vision. Computer vision uses advanced analytics to analyze, understand and respond to digital images.

Each solution is tested and validated at our in-house AI proof-of-concept lab, utilizing the client's data sets on the latest generation of AI-ready platforms, including the NVIDIA DGX System to reduce risk and ensure smooth deployments. If you recall, we were recognized in Q4 2020 as the Forrester New Wave for computer vision consultancies as a strong performer, highlighting our expertise in computer vision solutions. As companies move to a more digital way of life, we've established the expertise and improvement strategies to guide organizations through digital-first business practices.

As technology has the potential to radically transform industries, we know it's important to better understand the awareness, adoption and perceptions of these new technologies. This drove us to commission IDG to conduct a survey of business and IT leaders on their perceptions of computer vision. Survey results indicated that the overwhelming majority of respondents agree that computer vision has incredible potential to transform key areas of business.

This technology uses predictive analytics to improve security and employee safety, to detect defects during production and manufacturing and improve customer experiences. For example, we recently worked with the printer ink manufacturer who used computer vision to count pallets with a quick snap of photos, enabling people, including those with disabilities, to take on any warehouse responsibilities while creating more accurate inventory counts.

Similarly, we've helped a steel company through computer vision identify hazardous materials before they inadvertently land in the smelter to be recycled. I've discussed before, the pandemic accelerated technology and our ability to pivot and meet clients where they are today, while helping them prepare for tomorrow has been instrumental in making us the technology partner of choice for our clients. Our success is rooted in differentiation from our competition for our company values, industry expertise, diverse solution offerings and our ability to create meaningful connections.

It is in these connections where we showcase our ability to meet clients' needs through the use of multiple solutions. For example, our technical consultants designed a greenfield data center to support our client's current infrastructure. During the evaluation process, our consultants identified opportunities for the clients to modernize their out-of-date applications by utilizing our digital technology experts. Working for our client, our architecture team developed solutions that fit the environment.

The data center solution includes a new hyperconverged infrastructure, Dell core switches, VMware rightsizing the Microsoft licensing and network and infrastructure deployment services through the data center architecture team. The client will also benefit from Insight-managed OneCall support services. What started off as a single solution ended up as a multiphase approach with us providing services across our solution areas. Additionally, the client requested that we evaluate their security strategy.

We believe the strategic investments we made in our go-to-market solution areas over the last several years position us well to execute our business goals. Our solution teams are key to achieving our long-term priorities and driving value for our shareholders. Given our strong execution, bringing cloud and digital solutions to our clients, we're proud to announce we improved 49 spots on Fortune's 2021 ranking, 500 -- Fortune 500 rankings, currently at number 360.

We were only one of 11 providers globally to be recognized in the Gartner Magic Quadrant for software asset management services, and we earned four of Microsoft's most prestigious awards after a record-setting year. Before I turn the call over to Glynis, I would like to acknowledge our teammates, who were recently recognized as top leaders in their respective fields.

Glynis was recognized among the Top 100 Women Leaders in Technology in 2021 by Women We Admire and also honored as one of Phoenix Business Journal's Most Admired Leaders. Our Chief Information Officer, Jeff Shumway, was named Global CIO of the Year by ArizonaCIO. And 16 teammates were recognized with CRN Women in the Channel Awards, and four of those have been named as CRN's Power 60 Solution Providers.

At Insight, we're proud of our commitment to embrace diverse backgrounds, appreciate diverse skill sets and the respect additional viewpoints. Bracing diversity is important to our corporate culture, and our focus in this area was recognized in Forbes 2021 America's Best Employers for Diversity. We have so much to be proud of at insight, proud of our brand, our culture and our values and especially our teammates.

I'll now hand the call over to Glynis to review the details of our financial performance.

Glynis Bryan -- Chief Financial Officer

Thank you, Ken. In the second quarter of 2021, we executed well against our strategic and financial priorities, posting continued growth across our business, one year out from our lowest point of the pandemic in Q2 2020. We accomplished this while continuing to invest in strategic areas to scale and support our future growth. Moving on to slides 12 and 13 for our consolidated results. Our net sales in the second quarter were $2.2 billion, up 13% in U.S. dollars and 10% in constant currency compared to the second quarter of 2020 across all categories.

Gross margin was 16.4%. In light of increased hardware net sales, which compressed our margins, we saw only a 10 basis point contraction year-to-year. SG&A expenses were up 10.5% year-over-year in constant currency and 14.2% in U.S. dollars. As a percentage of net sales, adjusted SG&A was 12.1%, up 30 basis points year-over-year, but in line with our expectations for the quarter. As a percentage of net sales, SG&A on a GAAP basis was 12.4%, up 10 basis points year-over-year. For the full year, we continue to expect adjusted SG&A as a percentage of net sales will be 11.7%.

Adjusted earnings from operations was $97.7 million, up 6% year-over-year compared to a 19% increase on a GAAP basis. And adjusted diluted earnings per share was $1.91 and $1.58 per share on a GAAP basis. Results for each of our operating segments were as follows. Let's start with North America operating results on slide 14. Net sales were $1.8 billion in the second quarter, up 14% year-over-year due to increase in software licensing sales; hardware sales driven by devices, networking and storage solutions; and services driven by cloud solutions.

Similar to last quarter, as a result of supply constraints and extended product lead times, we're entering the third quarter with higher backlog. Gross profit of $279 million in North America was up 14% year-over-year, and gross margin was 15.8% compared to 15.9% in the prior year. North America's adjusted SG&A increased 16% year-over-year to 11.7% of net sales driven by increases in overall teammate headcount and variable compensation due to higher gross profit attainment and also new variable compensation plans implemented January 1.

SG&A as a percentage of net sales on a GAAP basis was 12.2% in the second quarter. For the full year of 2021, we continue to expect adjusted SG&A as a percent of sales will be 11.3%. Adjusted earnings from operations increased 8% year-over-year to $72 million for the quarter. On a GAAP basis, earnings from operations increased 23% year-over-year to $64 million. Moving on to EMEA on slide 15. Net sales in the second quarter decreased 4% year-over-year in constant currency to $417 million, while gross profit decreased 3% year-over-year, also in constant currency.

These results were against a strong compare in the prior year, where EMEA saw growth in both net sales and gross profit year-over-year. When combined with operating leverage from lower SG&A, this led to adjusted earnings from operations of $20 million in the current quarter, a decrease of $2.4 million in constant currency. Moving on to APAC on slide 16. Net sales of $52.5 million and gross profit of $14.3 million in the second quarter increased 24% and 11%, respectively, year-over-year in constant currency due to higher sales across all categories.

We made investments in the business, resulting in a 14% increase in constant currency and SG&A and this led to adjusted earnings from operations of $5 million in the quarter, up 6% in constant currency. Moving on to our tax rate. Our effective tax rate for the second quarter of 2021 was 25.4% compared to 26.2% in the prior year quarter. The lower effective tax rate was primarily due to foreign rate adjustments, offset in part by an increase in the state income tax base. Turning to the details of our second quarter cash flow performance on slide 17.

Year-to-date through the second quarter of 2021, we primarily invested in our operations, generating cash flow of $5 million compared to $498 million during the same period last year. This decrease year-to-year is due to changes in partner mix and net sales growth with our inverted cash cycle, which resulted in lower cash from operations generated in the first half of 2021 compared to the first half of 2020. In addition, there were discrete items in 2020 that contributed the majority of the variance, approximately $280 million. This consisted of partner payment deferrals and a large customer advance payment in the prior year with no comparable activity in the current year and deferred and in some cases, reduced federal and other taxes to COVID-19 release measures in the first half of 2020. We previously disclosed an expectation that cash flow from operations would normalize in 2021 as our business grows.

We now expect cash flow from operations will range between $125 million and $175 million as a result of double-digit hardware growth experienced in Q2 and expected to continue in the second half of 2021, higher inventory to support client deployments as well as changes to the partner mix in our -- with our inverted cash cycle. In the first half of 2021, we invested approximately $17 million in capital expenditures, mainly related to technology and facility investments. We also received $27 million in net proceeds from the sale of three buildings in Tempe, Arizona and our property in Woodridge, Illinois.

Lastly, we used $50 million to repurchase shares of our common stock. We now have remaining authorization of $75 million. The guidance we're providing does not include the impact of any additional repurchases. As of June 30, 2021, we had over $1 billion available under our ABL facility, and we have a capacity to fund future growth. At the end of the second quarter, we had a cash balance of $108 million, of which $76 million was resident in our foreign subsidiaries.

We had $484 million of outstanding debt, including our senior convertible notes at the end of the quarter compared to prior year cash balance of $154 million and total debt of $437 million. Moving on to liquidity on slide 18. We're exiting the quarter with a leverage position of 1.3 times debt to cash flow or EBITDA, which was well within our comfort level. Under our ABL agreement, our primary compliance covenant is a fixed charge coverage ratio, which includes trailing 12-month EBITDA coverage over capital expenditures, taxes and cash interest.

As of June 30, we are at 4.5 times the minimum requirement of one times, and we're confident we can support our capital requirements and liquidity needs. Moving on to our full year cash -- full year guidance on slide 19. Today, we're increasing our previously issued guidance for 2021. We expect to deliver net sales growth at the high end of our previously stated guidance, which is between 4% to 8% over the prior year. We now expect adjusted diluted earnings per share for the full year of 2021 to be between $6.75 and $6.90, which includes an expected $0.06 impact of the share repurchase already completed.

What this outlook assumes, interest expense between $25 million to $28 million; an effective tax rate of $25 million to $26 million for the full year; capital expenditures of $65 million to $75 million, including the build-out of our new corporate headquarters; and an average share count for the full year of 35.5 million shares. This outlook excludes the following: acquisition-related intangibles, amortization expense of $32 million; the noncash convertible debt discount and issuance costs reported as part of interest expense of approximately $12 million; and assumes no acquisition-related or severance and restructuring expenses.

I will now turn the call back to Ken.

Ken Lamneck -- President And Chief Executive Officer

Thank you, Glynis. I want to thank our teammates across the world for not -- making Insight one of the best places to work, but also making us the technology partner of choice for our clients, helping them maximize the value of technology today and accelerating for tomorrow. Currently, industry analysts expect high single-digit growth across hardware, software and services sales, where it remains unclear how the COVID variants could impact the year, we believe we are well positioned to compete in the areas our clients need most, including improving the workforce experience, modernizing their data centers, securing their critical platforms and realizing their opportunity to go digital.

In closing, I announced my retirement from my last call. The Board continues to make progress in the evaluation of internal and external candidates in the search from my replacement. This is a very critical search for Insight, and I will continue to work with the Board to identify the new CEO. I remain committed to leading this team until the right successor is appointed. That concludes my comments. Thank you again for joining us today.

And now I'll open up your line for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question is from the line of Catherine Huntley with Raymond James.

Adam -- Raymond James -- Analyst

This is Catherine on for Adam [Phonetic]. Can you please talk about PC demand specifically digging into notebooks? Are there any signs of supply catching up with demand? We have started to hear that Chromebooks specifically has been slightly related in supply. I'm just wondering if you heard the same.

Ken Lamneck -- President And Chief Executive Officer

Yes. Thanks, Catherine. Yes, definitely, on the Chromebook front, there's no question that supply has caught up pretty significantly there from where it was a quarter ago. Expectations are, of course, they'll still be -- with the new infrastructure bills coming, still increased spending and demand. But we do believe it will go more toward a normal cycle in the education market for Chromebooks. But no question that there's significant more availability for Chromebooks, not the same situation on the Windows platforms.

Those still continue to be more in tighter supply. But I'd say it's not a panic situation, by any means. I think it's been well managed by the suppliers in regards to the IC shortages. We're seeing certainly slight increases in ASPs because of that as well. And of course, we're very much encouraging our clients to give us more advanced lead times and bookings for that. So we're seeing that come into play. So it's certainly tight. I think it's going to be, as you've seen, tight for the next four quarters in that regard. But I think it's been, I'd say, manageable at this stage.

Adam -- Raymond James -- Analyst

Okay. And then you also highlighted cloud, but can you highlight other areas of consumer spending and how they're changing as the year progresses?

Ken Lamneck -- President And Chief Executive Officer

Yes. I would say that, certainly, cloud has continued to accelerate as we've all seen in many, many areas. And we're pleased that, as we mentioned, this now represents 22% of our gross profit dollars coming from these infrastructure and SaaS, cloud solutions in the market. So that continues to be an area of focus and services solutions for us. So no question that's continued to accelerate. And you've already touched upon, of course, the notebook migration, that continues to move very, very fast as well.

And we're seeing the infrastructure spend start to increase as well as people are starting to invest into the data centers and into the private infrastructure. And then, of course, security is continuing to be very, very robust with all the things that we're seeing with the continuation of cyberattacks and so forth. So those are key areas. And then as I mentioned in my script notes, of course, all companies really becoming more digital. So we see continued acceleration there, very, very high demand on all of our 1,500 software solution, architect solutions, very, very high demand on their skills and what they're doing to really help clients modernize.

Operator

Thank you. Next question is from the line of Matt Sheerin with Stifel.

Matt Sheeran -- Stifel -- Analyst

Yes. Ken, I wanted to follow up on the last question regarding -- particularly on the hardware side, the demand situation, both from -- you talked about backlog being up, bookings being up, how much of that is related to the client devices like notebooks versus infrastructure, servers, storage, networking?

Ken Lamneck -- President And Chief Executive Officer

Yes. Certainly, what you'll see, if you look at NPD data, what they'll show is -- Matt, is that all the categories were up substantially in the second quarter. The only one that declined really was desktops. And of course, as you know, that's been migrating more toward notebooks. But when you look at the notebook acceleration, that more than covered any of the decline that we saw in desktops overall. So good to see.

That's been going on, the notebook migration and volumes have been going up dramatically over the last year. But it was good to see the infrastructure type of spending to -- also start to increase from a revenue point of view as well as very much from a bookings point of view. And of course, we're talking networking storage as well as servers. So that was positive to see that continue to trend and the current booking rates are continuing in that same gain here as we look at Q3.

Matt Sheeran -- Stifel -- Analyst

Are you seeing supply issues on the infrastructure side of things as well?

Ken Lamneck -- President And Chief Executive Officer

Yes, not nearly to the same degree as we're seeing certainly in the notebook side of the equation, but definitely starting to see constraints there, Matt, as it goes through the system. So there's no question that, that's, again, encouraging our clients to give us more advanced booking rates in regards to that. But yes, that's definitely starting to impact some of that as well.

Matt Sheeran -- Stifel -- Analyst

Okay. And then on ASPs, you talked about, I think, notebook ASPs, but are you seeing ASPs increase in other areas? And is that changing the thought process for our customers in terms of configuration, expanding their budgets, that sort of thing?

Ken Lamneck -- President And Chief Executive Officer

Yeah. Thanks for asking. Answer my questions, nice product and in what areas of the business are you experiencing the most total wallet share games? I play as far as we're seeing the share gains, again, in the areas that are that we're very focused on is in the area of helping our clients Dibley transform. So all aspects of that were really and again, our competition there primarily, really as the extensors of the world.

Matt Sheeran -- Stifel -- Analyst

Okay. All right. Thanks very much.

Operator

Your next question is from the line of Vincent Colicchio with Barrington Research.

Vincent Colicchio -- Barrington Research -- Analyst

Yes. A nice quarter, Ken. And what areas of the business are you experiencing the most wallet share gains?

Ken Lamneck -- President And Chief Executive Officer

I'd say as far as where we're seeing the share gains, again, in the areas that are -- that we're very focused on is in the area of helping our clients steadily transform. So all aspects of that were really -- and again, our competition there, primarily, really, is the Accentures of the world. That area is -- those are really our primary competitors in that space. Cap Gemini, those type of -- not our traditional competitors that you're used to. So that area continues to certainly accelerate.

Associated with that, as we're helping our clients in that space, of course, is leading to cloud transformation with our clients as we help them modernize. So that, again, continues to grow very nicely, as I mentioned. Now it's 22% of our gross profit dollars coming from the cloud. So that along with the associated services are very, very big. And then I'd say the security aspects, as I mentioned earlier, continuing to accelerate. So those are the very key areas for us to grow.

Vincent Colicchio -- Barrington Research -- Analyst

And where do you think we are in the public sector and education cycle? It's been strong for quite some time. Is this -- do you think it's going to -- it will wind down at some point in the near future?

Ken Lamneck -- President And Chief Executive Officer

Yes. I mean there's no question. You saw the robustness of Chromebooks. And just by looking at the amount of supply that has caught up, I think would indicate that there will be, I think, more of a moderation. And I think you'll get to more of a normal sort of cyclical pattern here as the past year, there's -- there were amazing amounts of Chromebooks sold into the education market. So I would definitely expect that, that would start to cool off to some degree. But you will see that we'll operate from a new base level of Chromebooks than we did before. But certainly, I wouldn't expect the kind of acceleration we've seen over the last three quarters there on the Chromebook side.

Operator

[Operator Instructions] Your next question is from the line of Anthony Lebiedzinski with Sidoti & Company.

Anthony Lebiedzinski -- Sidoti & Company. -- Analyst

I joined the call pretty late, so I apologize if I ask questions that you may have already answered. But looking at the back half of the year, just how should we think about the gross margins? Just wanted to get a better sense as to how should I think about that.

Ken Lamneck -- President And Chief Executive Officer

Yes. Glynis will touch on that.

Glynis Bryan -- Chief Financial Officer

Yes. So Anthony, we said at the start of the year that we anticipated that our gross margins would be flat to slightly down as hardware grows. Hardware is going to be continuing to grow in the second half of the year. We were at 16.4%, and that was down 10 basis points versus prior year in Q2, which did also include some hardware growth. So I would say we're still on track to kind of end up flattish to slightly down from a gross margin perspective for the full year.

Anthony Lebiedzinski -- Sidoti & Company. -- Analyst

Okay. And then I was just wondering, have you seen any changes lately in terms of your customer buying patterns given the Delta variants that are out there and whether that could impact as far as -- it seems like some companies, at least, have talked about the delay when people get back into the offices. And so as that happens, just wondering, how should we think about the potential impact on your business?

Ken Lamneck -- President And Chief Executive Officer

Yes. So the Delta variant -- and of course, there will be other variants coming, I'm sure, as well. We haven't seen the impact. I think people have really become pretty resilient in adjusting to this new situation. So we haven't really seen that. Certainly, the U.S. is in far better shape than other parts of the world. But when we look at our business in APAC, which, of course, is under a little bit more severe lockdowns, when you look at Australia and New Zealand as they try to get to higher vaccination rates, we really haven't seen that business decline at all. They had a very, very solid quarter, as you saw in our results in APAC.

Europe, again, closer to where the U.S. is, but still having some issues on the variant, but the markets are open. But we definitely haven't seen any kind of change or a pullback in that regard. I think as we know, most of the governments are trying to keep businesses open a lot more than they did certainly last year at this time. So, so far, so good, Anthony, but we're watching that closely.

Anthony Lebiedzinski -- Sidoti & Company. -- Analyst

Got it. Okay. And can you just also talk about -- broadly about performance of your different vertical markets? I know you touched a little bit on education, but anything else as far as what you're seeing in terms of the other vertical markets?

Ken Lamneck -- President And Chief Executive Officer

Yes. I think when you look at -- healthcare is starting to certainly rebound from some pretty depressed levels last year. I would say that the hospitality industry, including hotels, airlines, cruise lines, starting to certainly repair, but certainly not back to where we'd see in 2019. But certainly up from where they were last year as there's hope and expectations for many of them that people will start cruising again and -- but that, I think, is increasing, but not nearly to the level of 2019.

But everything we hear and as we discuss with these clients that they do anticipate that to improve certainly significantly over the next couple of quarters. When you look at the manufacturing sector, I think you see what's occurring there. That's been pretty well on good footing. So we see consistent growth there. Finance vertical, which is a big vertical, of course, for IT, continues to do well. I think they're -- they've navigated pretty well throughout the pandemic and we start to see that start to more open up.

But I think there's no question as people get back more into offices, which the expectation was that would start to occur here in the early part of the fall, and now it looks like that could be pushed out a little bit. I think that will also lead to some acceleration once that gets on better footing. But overall, I'd say -- as Glynis has commented in her notes there, was the fact that we certainly do expect to be at the higher range of our guidance of 4% to 8% growth for the year.

Operator

[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Glynis Bryan -- Chief Financial Officer

Ken Lamneck -- President And Chief Executive Officer

Adam -- Raymond James -- Analyst

Matt Sheeran -- Stifel -- Analyst

Vincent Colicchio -- Barrington Research -- Analyst

Anthony Lebiedzinski -- Sidoti & Company. -- Analyst

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