Hello, ladies and gentlemen and welcome to Insight Enterprises Fourth Quarter 2016 Operating Results Conference Call. 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, this conference is being recorded. I would now like to turn the conference over to Chief Financial Officer Ms. Glynis Bryan. 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 and full year ended December 31, 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 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 the 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, February 08, 2017. This call is a property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed 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 first quarter and the full year 2016 financial results. When referring to non-GAAP measures, we will refer to such measures as adjusted. Adjusted measures discussed today will exclude the gain recorded in the second quarter of 2016 on an asset held for sale, severance and restructuring expenses recorded in all periods, and acquisition related expenses recorded in 2016 as well as the tax effects on these items. 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 highlighted as constant currency, all amounts and growth rates are discussed in U.S. dollar terms. And please note that the results today do not include the results of Datalink Corporation as that acquisition closed on January 6, 2017. 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 the actual results to differ materially. These risks are discussed in today's press release and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2016 and other reports we filed with the SEC. With that, I will now turn the call over to Ken. Ken?

Hello everyone, thank you for joining us today to discuss our fourth quarter and full year 2016 operating results. I am pleased to report that our global team closed the year strong with solid top and bottom line results reported by each of our operating segments. For the fourth quarter of 2016 consolidated net sales were 1.5 billion up 6% year-over-year and up 8% in constant currency with constant currency growth in each region. Gross profit was 191 million in the fourth quarter up 6% year-over-year and up 9% constant currency with gross margins steady year-to-year at 13.0%. Consolidated selling and administrative expenses were $145 million in the fourth quarter, down 2% year-over-year and up 1% in constant currency reflecting modest investment across the business. Adjusted earnings from operations increased 37% to 45.9 million or 3.1% of sales. On a GAAP basis, earnings from operations increased 33% to 40.7 million. And diluted earnings per share were $0.72, on a GAAP basis, diluted earnings per share was $0.59. Within these results the North American business reported 6% top line growth and the hardware category sales increased 8% driven by strong server and storage sales as well as growth from networking and device solutions. In the software category sales increased 1% year-over-year in the quarter reflecting a higher mix of software sales reported on a net basis. And in the service category the acquisition of BlueMetal hit its one year anniversary on October 1st while the team delivered 7% year-over-year organic growth for the quarter. By client group our top line growth was driven by increased volume with large enterprise and SMB clients while sales to public sector clients softened particularly in the states and local space. Gross profit in North America in the fourth quarter grew 6% and when combined with…

Thank you, Ken. For the full year 2016 consolidated net sales were $5.5 billion, an increase of 2% year-over-year in U.S. dollars and 4% in constant currency. North American net sales increased 4% to just under $4 billion reflecting 5% growth in hardware sales and 10% growth in services sales while software sales were flat year-over-year. In EMEA net sales decreased 2% year-over-year to $1.3 billion dollars in U.S. dollars and constant currency net sales increased by 4%. Hardware and software sales in EMEA grew 1% and 6% respectively, our services sales grew nicely at 22% all in constant currency. In Asia Pacific net sales of 175 million were down 2% year-over-year in U.S. dollars and flat year-over-year in constant currency. Our top line results in 2016 were negatively impacted by a higher mix in sales recorded on a net basis primarily driven by the adoption of cloud offerings by our clients. Please recall that cloud and software maintenance sales are recorded net in our financial statements where gross profit earned on the transaction equals the sales amount. This treatments effect reported top line results but has no impact on profitability. Despite the impact on the top line we're pleased with the growth we are seeing in our cloud business which now makes up approximately 13% of our gross profit. Full year 2016 consolidated gross profit was $543 million up 4% in U.S. dollars and up 6% in constant currency. Gross margin in 2016 was 13.5% up 20 basis points year-over-year. This increase was primarily driven by increase in consolidated [ph] sales which are transacted at higher gross profit than our corporate average and a higher mix of software account sales reported on a net basis in our financial statement. Selling and administrative expenses for the full year of 2016…

Thank you, Glynis. Moving now to our 2017 operating plans. Across the markets where we do business industry analysts expect flat to low single-digit growth in hardware sales in 2017 and mid single-digit growth in software and services sales. Our plans for 2017 are focused on driving growth in excess of the market across our operating segments. Where we’re given continued weakness and major global currencies against U.S. dollar we expect that our reported growth in U.S. dollars will be in the low to mid single-digit range before giving effect to the addition of Datalink to our business. As previously discussed we expect Datalink will add an additional 600 million in net sales in 2017. The IT industry is stable and yet constantly changing which provides opportunity for Insight to continue to bring value to our clients, partners, teammates, and shareholders. We believe that the investments we made organically and through recent acquisitions combined with our global scale, strong data center, software and services capabilities position us well to compete the marketplace in 2017. Our operating priorities in 2017 are clear. In North America our core business is helping in growing the 2017. We will focus on accelerating that momentum getting to 2016. We’ll continue to invest and leverage our best in class digital marketing platforms and field sales engagement models or a new enterprise clients and more business with existing clients with our competencies around supply chain, software, cloud, and to bring additional value to our technical and consulting services capabilities. Our strategy includes the development of more mature offerings around work play services, hybrid cloud, internet of things, cloud, and acts as a service for both domestic and global clients. In addition we will continue our initiatives to improve and scale our Insight’s sales business. In the back…

Thank you. [Operator Instructions]. And I am showing we have a question or comment coming from the line of Adam Tindle with Raymond James. Your line is now open.

Okay, thank you and good evening. Congrats on 2016 particularly in EFO dollar growth line. Wanted to ask in particular on the operating margin in Europe that was probably the biggest surprise in the quarter for me. It was at multi-year highs. Can you talk about some of the drivers underlying this performance, do you think this is a region that can operate above 2% in 2017 on the EFO line?

In the fourth quarter Adam we have one very large significant transaction that drove that outstanding performance that we had in EMEA and that is not expected to be duplicated in 2017. So as a significant transaction it was very profitable, it drove that bottom line in EMEA. I think we have an expectation that EMEA business will over time get to greater than at 2% likely not in 2017.

Got it, okay. Well maybe digging a little bit more into the 2017 guidance on the gross margin line, I think the inclusion of Datalink should lift gross margin above 14% and I was hoping to confirm that. Are you anticipating any partner program change headwinds like we've seen in the past?

I think you're correct on the -- Adam on the margin front and yes, we will exceed the 14%. So we're excited about that. On the partner program changes there's no indications that we will have any changes coming into this year. Of course that's to the partners discretion to do that but there's been no indications to that. So we feel pretty good about that at this stage.

Okay and then I think if I run that through I think that it's implying that EFO margins might just see flattish to modest growth year-over-year in 2017. So was hoping that you could maybe talk about the puts and takes particularly on EFO margins in 2017 given it seems like gross profit dollars will be growing?

Yes, so when you look at the EFO, you are correct it is going to be modest growth in EFO margin expansion in 2017. We would anticipate a little bit greater margin expansion in 2018 as we get to the full run rate of synergies around the Datalink acquisition. So when you look at 2017 we have $12 million of incremental intangible assets, intangible amortization associated with Datalink. We just have or getting maybe 50% of the expense synergies associated with the Datalink acquisition and despite the growth in margins we are not seeing all of that flow through to the bottom line. In our North America business we are seeing some margin expansion but we're also investing in seasonal capability to drive our SMB -- some growth in our SMB businesses for the Conway operation as well as our Insight sales. So we have some strategies that we're making investments in such that in 2017 we don't anticipate that we'll see significant margin expansion at the EFO line.

Okay and you bring up the digital capabilities in the SMB business, I think that’s an interesting point because your main competitors is also re-shifting lets go to market and investing in digital and e-commerce tools which I think is something that you guys have been doing for a couple quarters now. I was hoping that maybe you could talk about why you think this is becoming more of a focus now across the industry, is your competitive set changing, are you running into more of the Amazon’s of the world in this space?

No it is a -- Adam it really is just -- it's the way to really prove return on investments that we make. Digital marketing is incredibly measurable, it's very targeted. So I don't think it has anything to do with the likes of any of the e-commerce sort of providers out there. It is just a journey that we've been on for actually last two years plus and it's starting to gain some really nice traction and we're able to see the results. And our partners they’re certainly moving this way as well. So they're encouraging us to continue to lead in this fashion. But it's all about really been able to target the message very specifically to individual clients and to be able to track them and measure that through the entire system from the point we generated a lead all the way through the actual closure. So it gives us really good feedback as to exactly what mechanisms are working the best and, how we continue to invest in those areas so that's really what is continuing to drive it. The consumer side has been doing this probably ahead of the B2B side for a while and I think it's to the B2B community just adopting these trends again that are very targeted.

Okay, it makes sense.

And I think our partners would say that they think that we have a best in class platform that shows them quite clearly the returns that we’re getting for the dollars they are putting in.

Yes, the key to that Adam really is twofold and we know this from our personal lives when we go on site. And the fact that first and foremost you have to have a really outstanding content that clients obviously want to consume. And the second part is you really have to have very sophisticated systems and tools. It's a combination of a multitude of different tools sets that we use in order to be able to provide this information to our sales teams in a very timely fashion and to be able to apply the measure. And things now are done in seconds not in days so, if you don't have both of those great content and really sophisticated e-commerce platform with all the associated tools you can't really deliver on the digital marketing promise.

Okay, that's helpful. Thanks and best of luck.

Thank you.

[Operator Instructions]. We have a question from the line of Matt Sheerin with Stifel. Your line is now open.

Yes thanks. I actually jumped on the call a little late so you may have talked about this already but for your revenue growth assumption for first 2017, what's the assumption for Datalink. I know you've talked about 600 plus revenue I think when you announced the closing of the deal, is that there's still the assumption in terms of your growth outlook for the year?

Well, first if we took -- we will do it in two pieces Matt, for Datalink we’re assuming a $600 million revenue, just around $600 million for 2017. We're looking at somewhere between a 21% to 22% gross margin assumption against that. In general the SG&A at around 20% that would include the intangible amortization of the $12 million that we discussed. It would exclude any acquisition related costs that are still to be incurred or that we incurred in the first quarter. And then when you look at our core business, when you look at the core business what we anticipate in the core business that's going to be low single-digit growth in actual dollars and mid single-digit -- mid to high single digit in constant currency. That’s because we have an impact associated with Euro and the GDP primarily that's about 8% headwind in 2017. Given what the average exchange rates were in 2016 well let’s say to the forecast out there currently for the exchange rates are going to be for 2017. So those two pieces impact the revenue growth line and then we talk about the fact that our margins will get a bump ultimately from the combination with Datalink since they've higher average margins than we would have. Adam in his question mentioned somewhere in the 14% range and that we would be making certain investments as you heard towards the end probably in digital marketing, our website and some sales headcount to drive our SMB lines of business by Insight sales. So the bottom line for Insight in total will get EFO dollar expansion but EFO margin will be nominal.

Got you, that's very helpful, and in terms of the synergies that you talked about, that incremental 12 million -- no, I'm sorry there was an incremental number for next year that’s 10 million and part of that is integrating the IT systems. Can you just walk me through some of the heavy lifting that used to take place between now and the end of year before you start to realize some of those savings next year?

So the critical piece ultimately will be the systems integration. So we're working -- we've been working on that with the Datalink team, our IT team, we have a whole integration team that is focused around the systems integration, getting the marketing tools, the services tool, and all the other aspects that Datalink uses to actually run the business understanding that how we integrate with tools that we have here currently. Our current expectation is that we will migrate Datalink onto our SAP system in the first half of the year. So, probably Mayish ultimately because we don't like to do things in June and the last month of the quarter. So we say in the first half of year it will likely be sometime in the May timeframe. And from there we start getting a lot of the synergies and expectations that we have around synergies, specific hedge related to the back office and expense takeout facilities with redundant functions that go away once we are all on the same platform. That's a big part of it. Immediately we're getting the benefits from and the SEC cost, CEO, CFO not duplicating those functions. We get those cost immediately and then as we go throughout the year we anticipate that we will consolidate facilities and pick up some cost there as well throughout the rest of this year. And then we’re still on track ultimately to get into the $20 million run rate as we see it now with regard to 2018. When we exit 2018 we have that $20 million run rate expense synergy takeout.

Okay, got it and thank you. And then just jumping around on your North America business, you continued to have pretty strong growth in hardware which is countered with some other companies the channel have been seeing. Maybe talk about the mix there and demand maybe by product and if you look at this year there are resellers and distributors are basically talking about a little bit more optimism particularly from North America customers in terms of potential pick up in IT spending, I know your overall growth assumptions are relatively soft partly because of the FX issues. But what is your outlook Ken in terms of North America outlook, are you starting to see your customers a little bit more optimistic about spending as well as other companies are?

Yes, so just the first question, the growth in Q4 was very nice in the hardware front as we indicated. Not that it came from really data centers. So we're very focused on the data centers you know. In fact that was one of the prime reasons for the Datalink acquisition because that's their sole purpose. So they're going to really add even more skills to that as we see most of our clients really going to hybrid cloud. So the private data centers and converged and hyper converged infrastructure we see a nice release trajectory in growth. So we have substantial growth in server storage in Q4. As far as the to address the question, next year we actually feel that the guidance that we're giving certainly is above market growth. What's muting it just a little bit is as you indicated really was the impact that currency is having there. So we're actually pretty optimistic with where the market is. We don't see a softening. We see the market continue to be pretty stable and continue to grow and our expectation is that we’ll continue to slightly outperform that market from a share point of view.

Okay. That’s it for me. Thanks very much.

Thank you. And I am showing no further questions at this time. So with that said, I would like to thank everyone for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.