Good day ladies and gentlemen and welcome to the Insight Enterprises Second Quarter 2016 Operating Results. At this time all participants are in a listen only mode, later we will conduct a question and answer session and instructions will be given at that time, [Operator Instructions]. As a reminder today's program is being recorded. I would now like to introduce your host for today's program Glynis Bryan, Chief Financial Officer. Please go ahead.

Thank you. Welcome, everyone and thank you for joining the Insight Enterprises conference call. Today we will be discussing the Company's operating results for the quarter ended June 30th, 2016. 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 that was posted this afternoon and filed with the Securities and Exchange Commission on Form 8-K you will find it on our website at Insight.com under the Investor Relations section. Today's call, including the question-and-answer period, is being webcast live and can be accessed by the Investor Relations page of our website at insight.com. An archived copy of the conference call will be available approximately 2 hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contains time-sensitive information that is accurate only as of today, August 3rd, 2016. 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 non-GAAP financial measures as we discuss the second quarter and year to date 2016 financial results. When referring to non-GAAP measures we refer to such measures as adjusted. Adjusted measures discussed today will exclude the gain recorded in the second quarter 2016, on an asset held for sale as well as severance and restructuring expenses recorded in all periods. You will find a reconciliation of these adjusted measures to our actual GAAP results included in the press release issued earlier today. Also please note that unless noted as constant currency all amounts and gross rates are discussed in U.S. 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 in 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 annual report on Form 10-K for the year ended December 31, 2015. With that I will now turn the call over to Ken to give you an overview of our second quarter 2016 operating results. Ken?

Thanks Glynis, hello everyone. Thank for joining us today to discuss our second quarter 2016 operating results. In the second quarter I'm pleased to report that our global team came together exceptionally well to deliver on our financial objectives. Each of our operating segments drove high single digit or better gross profit growth year over year in constant currency while continuing to control discretionary expenses which led to strong earnings growth for the quarter. Consolidated net sales were 1.5 billion up 2% year over year and 3% in constant currency. Solid growth in our North America business was partly offset by lower net sales reported in EMEA and Asia Pacific. We continue to see traditional software licensing sales convert to a cloud based solution which like software maintenance sales recorded net in our financial statements. It is important to know that this shift in consumption of software products in the marketplace has no effect on our profitability. In fact gross profit of 209 million in the second quarter increased 9% year over year and 11% in constant currency. Gross margin increased a 100 basis points year over year to 14.4%. This increase reflects strong sales of software enterprise agreements. Higher services sales. Proceeds from a $2.2 million insurance settlement and the higher mix of software maintenance and cloud sales that I just mentioned. Consolidated sales and administrative expenses were $115 million in the second quarter, up 1% in U.S. dollars and 3% in constant currency. As discusses in our first quarter call we trimmed approximately 20 million of cost from our business in North America in mid second quarter and we began to see the benefits of that in the results. Adjudged earnings from operations increase, 35% year-over-year to $59 million. On a GAAP basis, earnings from operations also increased…

Thank you Ken, overall for the first six months in 2016 we are pleased with our consolidated results across the business. Modest topline growth combined with gross margin expansion across our reduced cost structure led the double digit earnings growth year-over-year in the first half. Consolidated net sales of $2.6 billion in the first half, are down 1% compared to the first half of last year and in constant currency net sales are up 1%. In North America net sales increased 3% year over year in the first half of 2016 with growth reported across large enterprise, SMB and our public sector client groups due to new client wins and growth of existing customers. In EMEA net sales year-to-date are down 6% year-over-year on constant currency as softer market conditions in the UK have resulted in lower hardware sales for the region and reported software sales have declined due to a higher mix of netted software sales. In Asia Pacific net sales are down 5% in constant currency also due to a mix of netted software sales -- a higher mix of netted software sales. As Ken mentioned earlier as clients consume more of their softwares through the cloud we will see our topline results shift to more sales reported net. In the first half of 2016 we saw this across all three of our operating segments in addition to our typical variances in the mix of license versus maintenance sales and we expect that this trend will continue. I do want to point out that while this will have an impact on our reported topline results this accounting does not affect the profitability of our software category. Consolidated gross profits for the first six months of 2016 was $370 million up 5% in U.S. dollars and up 6% in…

Thank you, Glynis. Moving on to our outlook for 2016, we are pleased with our teams execution in the second quarter and believe we’re well position heading to second half to continue to win in the market place to deliver on our commitments to our clients, teammates and shareholders. Giving our first half 2016 financial performance we are maintaining our outlook that net sales in 2016 are expected to grow in the low single digit range year-over-year and we are increasing our adjusted diluted earnings per share outlook for the full year to a range of $2.37 to $2.47. This outlook reflects an effective tax rate approximately 37% to 38%, capital expenditures of $10 million to $15 million to the full year. This outlook excludes severance and restructuring expenses and the gain on building that are recorded during the year. Thank you again for joining us today. I want to thank our teammates, clients and partners for their dedication to Insight. That concludes my comments and we will now open your line up for questions.

[Operator Instructions]. Our first question comes from the line of Matt Sheerin from Stifel, your question please.

A couple of things from me, first of all obviously you had a very strong quarter across the board profitability plus expectations and but if you look at your guidance for the year your taking numbers up five -- at midpoint $0.11 through but you just based on the decencies [ph] by $0.22 So that implies that your operating margins are sort of back below 3% or so for the rest of year and given the trends that you are seeing in terms of the netting of the software revenue, increased services, it seems your gross margin should, shall we say, somewhat elevated. So I’m trying to figure out what you are seeing, does that basically -- would imply that business is going to take a step down or so?

So great question Mack and one we anticipated. So I guess what I'd say starting off is that we don’t give quarterly guidance. So our internal number for this second quarter were higher than the street consensus for the second quarter. Similarly our third quarter is lower than the street consensus for the third quarter. So we gave guidance for the full year and at the time that we gave our guidance for the full year the expectation was that we would be in the middle of that range. When you look and it describes the points in there, at the time that we gave the guidance there was a $2.2 million benefit from a legal settlement that we got that Ken mentioned and at the time we gave guidance we were not aware that that was going to be actually received in the second quarter. And from an accounting perspective we can’t actually record it on to its receipt, so that was an “unexpected benefit” that we had in the second quarter that would not continue. However the second quarter is our largest software quarter in general it's usually our largest quarter, but compared to last year was a little bit light because we didn’t have a great second quarter in 2015. And what drove the results in the second quarter was around software and an over performance significantly with regards to software and the increased profitability that we got from software specifically as it related to cloud fees being netted and the growth that we had in cloud skews. So cloud today represents around 11% of our gross profit and that has an impact ultimately in terms of driving to the improved performance around the cloud in this -- around software in this particular quarter given it’s the largest software quarter. So we're not from our perspective guiding down for the remainder of the year. We're guiding consistent with the outlook that we had at the point in time that we gave guidance. I think we had a conversation then about the second the third quarter being soft unfortunately we weren't clear maybe that was going to be soft from a EFO, from an earnings perspective, I think most people interpreted our comments as a revenue comment. It's true also from a revenue comment, but very specifically on a year over year basis we're anticipating that the third quarter from an earnings perspective will be down at the EFO line year-over-year. North America in Q3 of 2016 --.

Your year-over-year revenue will be down year-over-year in September?

Our revenue will not be down year-over-year in September [multiple speakers], but operating profit will be down in 2015 we had extraordinary results if you remember in North America last year revenue grew 15% and EFO grew 30% and that is not expected to continue to repeat this quarter.

Sure, sure, okay, and the -- you said the addition of a 200 salespeople from one of your suppliers, the call centers I think, was there contributions in revenue in the June quarter, do you anticipate that to increase this quarter and what's the run rate.

Yes, so as we indicated last time that actually just fully came in place and it came in two waves, so the largest wave of those folks actually just joined us a little over two weeks ago. So as we indicated that we expect that to be a second half number, so that there is really no contribution in the June quarter from the teammates that we acquired there. But we do certainly expect that contribution start occurring in Q3, into Q4 and beyond.

But it also sounds like that also could weigh somewhat on SG&A, in margins, the short term as you obviously make those investments right?

Yes, we think that it's as we mentioned last time we believe that these are you know professionally trained salespeople that are already been in place, so we believe as we it’s actually neutral, the GP dollars [ph] will be neutral to the SG&A costs here in the second half of the year, is what we've modeled and we believe we'll perform to that.

Okay, and just lastly from me, back to the software business, it sounds like your margins have been good there on mix and this is the first time in a while you haven't been talking about margins and basically pricing pressure from your biggest software vendor. So maybe talk about that what you're seeing there in terms of the positioning that you have with Microsoft and then also the margin profile of the cloud related business is that a better margin business maybe from an operating margin standpoint, if you could talk about that.

Yes, so there's no question I think it's as you've seen in the channel overall there has been a good acceleration in Q2 and as you particularly mentioned Microsoft it's certainly accelerating strongly in the cloud with both their Office 365 platform and Azure, and as was mentioned of course that comes in as net from a sales point of view. So it's started to contribute meaningfully to our GP dollars the cloud revenue we expect that that trend would certainly continue going forward based upon the knowledge we have. As far as the stability of the programs, since you’ve mentioned they’ve our largest software provider, we would say, yes they look stable from everything that we have here certainly for the foreseeable next 12 month period.

Thank you, our next question comes from the line of Adam Tindle from Raymond James, your question please.

Okay thank you just wanted to specifically drilling to the EFO margin this year kind of building of Matts question, I wanted to understand why the upside in this Q is temporary given the expense trimming is effectively done, why aren’t we seeing a normal EFO margin level here?

You are trying the EFO margin from the guidance that we are giving, is that what -- who should be --.

For the remainder of Q3 and Q4 based on the guidance, it doesn’t look like we are going see a meaningful step up in year-over-year growth, after just growing 100 basis points year-over-year, why is that momentum so temporary in the June quarter and why is it not continuing given the trends in clouds aren’t changing, your expense cutting is done what's hindering us from continuing to expand EFO margins year-over-year at a meaningful pace, throughout the rest of the year?

Okay so I guess its point I would make is that the margin profile that we experienced in Q2, it’s typically the highest margin profile of any one of our quarters, primarily around the impacts of software that it’s historically had. And also this year in particular the impact of the netting that we talked about, specifically as we talked about the cloud, on the growth in cloud SKEWs [ph] on a year-over-year basis. That trend higher netting around cloud SKEWs is going to continue going into Q3. However software as a percentage of our total business in Q3 is not going to be at the same magnitude, it won’t drive the same margin impact on Q3 as it had on Q2. We believe actually that we will see some margin expansion, gross margin and EFO margin expansion in the second half of the year, but not at the 4% range that we saw in Q2. So if you are looking for a 4% numbers to Q3 and Q4 that is not going to be there, but we do anticipate some margin expansion in the second half, not necessarily in Q3 because as I said we anticipate based on the outstanding Q3 that we have in North America in 2015 that we see a little bit degradation in our EFO in 2016 as it relates to North America.

Okay and on the revenue guidance I think you previously talked about low to mid single digit and I think it's now low single digit, wanted to confirm that it is low single digit and why that was down? Was there any impact from Brexit or what as contemplated in that number?

It's really strictly the netting impact that we’re seeing with cloud, where again that comes netted versus gross. That is accelerating, so that’s the only reason that we’re seeing, as you can see hardware grew actually pretty nicely, but I would really focus on the GP dollar a portion of that because that’s where it normalizes itself and I think you are seeing that’s -- those numbers look fine, so that’s completely what it is. In relations to you comment on Brexit, really early to tell on that. I think certainly the quarter performed well, it was too early to have any impact. But as you go forward, the one benefit was the -- UK did address the government very quickly, so I think that added some level of confidence to the government. But we'll start to see it play out into the areas we'll watch most, first will be of course the public sector as you'd expect that to be the most impacted, if there is an impact, and that typically happens in the first quarter of the calendar year, that's the biggest quarter. But no indications of any real pause at this point in time. It’s just -- the confidence levels are something we're watching right now.

Okay, thank you.

So Adam, I would just add to that, on an actual dollar basis the British pound is down quarter-end to quarter-end, 13% or 16% year over year. So it’s not a $1.32 versus $1.43 or $1.44 that it was this time last year. So as we do that conversion that'll have a little bit of an impact also on the revenue line.

Is the low single digit guidance in constant currency or?

No, that's actual dollars.

Okay, alright.

Thank you, [Operator Instructions] and this does conclude the question and answer session of today's program as well as the content. Thank you for your participation, you may now disconnect. Good day.