(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes ☒ No ☐~~

Indicate by check mark whether the ~~registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required~~registrant has submitted electronically every Interactive Data File required to be ~~submitted and posted pursuant~~submitted pursuant to ~~Rule~~Rule 405 of ~~RegulationS-T~~R (§ egulation S-T (§232.405 of this ~~chapter) during the preceding~~chapter) during the preceding 12 months ~~(or for such shorter period that~~(or for such shorter period that the ~~registrant was required~~ registrant was required to submit ~~and post such files)~~such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

The number of shares outstanding of the issuer’s common stock as of November ~~3, 2017~~2, 2018 was ~~35,792,243.~~35,479,670.

References to “the Company,” “Insight,” “we,” “us,” “our” and other similar words refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context suggests otherwise. Certain statements in this Quarterly Report on Form10-Q, including statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this report, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include: expectations regarding net sales, gross profit, gross margin, operating expenses, earnings from operations,non-operating income and expenses, net earnings orand cash flows, cash uses and needs, the payment of accrued expenses and liabilities, the timing of the inventory shipments; the expected effects of seasonality on our business; our intentions concerning the payment of dividends; our acquisition strategy; projections of capital expenditures; the sufficiency of our capital resources, the availability of financing and our needs orand plans relating thereto; the estimated effect of new accounting principles and expected dates of adoption; expected tax changes; the effect of indemnification obligations; projections about the outcome of ongoing tax audits; expectations regarding future employee termination benefits; estimates regarding future asset-retirement activities; adequate provisions for and our positions and strategies with respect to ongoing and threatened litigation; our ~~intention not to repatriate certain foreign undistributed earnings where management considers those earnings to be reinvested indefinitely and plans relating thereto; our~~ expectations regarding the use of cash flow from operations for working capital, to pay down debt, repurchase shares of our common stock, make capital expenditures and fund acquisitions; our expectations regarding stock-based compensation and future income tax expense; our compliance with leverage ratio requirements; our exposure tooff-balance sheet arrangements; ~~our expectations about Datalink profitability objectives and the future benefits of our acquisitions and our plans related thereto, including potential expansion into wider regions;~~ statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements are identified by such words as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will,” “may” and variations of such words and similar expressions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. There can be no assurances that results described in forward-looking statements will be achieved, and actual results could differ materially from those suggested by the forward-looking statements. Some of the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form10-K for the year ended December 31, ~~2016:~~

our reliance on our partners for product availability, competitive products to sell and ~~related~~ marketing funds and purchasing incentives, which can change significantly in the amounts made available and ~~terms of which can fluctuate significantly~~the requirements year over year;

changes in the information technology (“IT”) industry and/or rapid changes in technology;

risks associated with the integration and operation of acquired businesses;

possible significant fluctuations in our future operating results;

the risks associated with our international operations;

general economic conditions;

increased debt and interest expense and decreased availability of funds under our financing facilities;

the security of our electronic and other confidential ~~information;~~information;

~~disruptions in our IT systems and voice and data networks;~~

INSIGHT ENTERPRISES, INC.

•

disruptions in our IT systems and voice and data networks;

failure to comply with the terms and conditions of our commercial and public sector contracts;

legal proceedings and the results of client and public sector audits and failure to comply with laws and regulations;

accounts receivable risks, including increased credit loss experience or extended payment terms with our clients;

our reliance on independent shipping companies;

our dependence on certain key personnel;

natural disasters or other adverse occurrences;

exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations; and

~~intellectual~~intellectual property infringement claims and challenges to our registered trademarks and trade ~~names; and~~names.

~~legal proceedings and audits and failure to comply with laws and regulations.~~

Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the Securities and Exchange Commission. Any forward-looking statements in this report should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. We assume no obligation to update, and, except as may be required by law, do not intend to update, any forward-looking statements. We do not endorse any projections regarding future performance that may be made by third parties.

PART I - ~~FINANCIAL~~FINANCIAL INFORMATION

Item 1. Financial Statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	236,411		$	202,882		$	111,055		$	105,831
Accounts receivable, net of allowance for doubtful accounts of $9,628 and $9,138, respectively		1,483,234			1,436,742
Accounts receivable, net of allowance for doubtful accounts of $10,135 and $10,158, respectively								1,682,005			1,814,560
Inventories		235,313			148,203			171,197			194,529
Inventories not available for sale		56,322			68,619			648			36,956
Other current assets		151,032			127,159			103,778			152,467

Total current assets		2,162,312			1,983,605			2,068,683			2,304,343
Property and equipment, net of accumulated depreciation and amortization of $330,192 and $308,127, respectively		77,530			70,910
Property and equipment, net of accumulated depreciation and amortization of $331,605 and $335,078, respectively								74,097			75,252
Goodwill		131,552			62,645			167,065			131,431
Intangible assets, net of accumulated amortization of $35,198 and $22,982, respectively		105,140			20,707
Intangible assets, net of accumulated amortization of $48,646 and $37,357, respectively								116,608			100,778
Deferred income taxes		40,175			52,347			13,844			17,064
Other assets		62,583			29,086			70,220			56,783

	$	2,579,292		$	2,219,300
							$	2,510,517		$	2,685,651
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable—trade	$	682,946		$	1,070,259		$	758,035		$	899,075
Accounts payable—inventory financing facility		224,072			154,930			237,556			319,468
Accrued expenses and other current liabilities		151,206			151,895			180,101			175,860
Current portion of long-term debt		15,344			480			17,360			16,592
Deferred revenue		99,338			61,098			63,696			88,979

Total current liabilities		1,172,906			1,438,662			1,256,748			1,499,974
Long-term debt		534,385			40,251			251,334			296,576
Deferred income taxes		915			900			427			717
Other liabilities		44,336			26,044			59,001			44,915
								1,567,510			1,842,182
		1,752,542			1,505,857

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 3,000 shares authorized; no shares issued		—			—			—			—
Common stock, $0.01 par value, 100,000 shares authorized; 35,792 shares at September 30, 2017 and 35,484 shares at December 31, 2016 issued and outstanding		358			355
Common stock, $0.01 par value, 100,000 shares authorized; 35,459 shares at September 30, 2018 and 35,829 shares at December 31, 2017 issued and outstanding								355			358
Additionalpaid-in capital		315,078			309,650			319,065			317,155
Retained earnings		536,052			459,537			657,625			550,220
Accumulated other comprehensive loss – foreign currency translation adjustments		(24,738	)		(56,099	)		(34,038	)		(24,264	)

Total stockholders’ equity		826,750			713,443			943,007			843,469
							$	2,510,517		$	2,685,651
	$	2,579,292		$	2,219,300

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

													Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,						2018			2017			2018			2017
	2017			2016			2017			2016
Net sales	$	1,757,973		$	1,392,716		$	4,919,548		$	4,017,932
Costs of goods sold		1,531,892			1,210,908			4,233,861			3,465,799

Net sales:
Products													$	1,548,273		$	1,598,973		$	4,724,888		$	4,426,406
Services														199,453			159,000			606,202			493,142
Total net sales														1,747,726			1,757,973			5,331,090			4,919,548
Costs of goods sold:
Products														1,415,808			1,463,414			4,319,181			4,036,486
Services														97,004			68,478			272,355			197,375
Total costs of goods sold														1,512,812			1,531,892			4,591,536			4,233,861
Gross profit		226,081			181,808			685,687			552,133			234,914			226,081			739,554			685,687
Operating expenses:
Selling and administrative expenses		180,390			143,872			538,774			440,177			184,095			180,390			561,739			538,774
Severance and restructuring expenses		494			788			6,211			3,053			683			494			2,709			6,211
Loss on sale of foreign entity		3,646			—			3,646			—			—			3,646			—			3,646
Acquisition-related expenses		106			741			3,329			741			188			106			282			3,329

Earnings from operations		41,445			36,407			133,727			108,162			49,948			41,445			174,824			133,727
Non-operating (income) expense:
Interest income		(227	)		(318	)		(863	)		(784	)		(330	)		(227	)		(653	)		(863	)
Interest expense		5,555			2,517			13,814			6,357			6,132			5,555			17,249			13,814
Net foreign currency exchange loss		341		��	579			972			1,042			539			341			19			972
Other expense, net		339			352			980			979			393			339			1,019			980

Earnings before income taxes		35,437			33,277			118,824			100,568			43,214			35,437			157,190			118,824
Income tax expense		13,025			11,642			42,309			36,978			11,060			13,025			40,554			42,309

Net earnings	$	22,412		$	21,635		$	76,515		$	63,590		$	32,154		$	22,412		$	116,636		$	76,515

Net earnings per share:
Basic	$	0.63		$	0.61		$	2.14		$	1.75		$	0.91		$	0.63		$	3.27		$	2.14

Diluted	$	0.62		$	0.60		$	2.11		$	1.74		$	0.89		$	0.62		$	3.24		$	2.11

Shares used in per share calculations:
Basic		35,787			35,474			35,718			36,310			35,468			35,787			35,622			35,718

Diluted		36,203			35,790			36,186			36,596			35,957			36,203			36,012			36,186

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016			2018		2017		2018			2017
Net earnings	$	22,412	$	21,635	$	76,515	$	63,590		$	32,154	$	22,412	$	116,636		$	76,515
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		15,106		169		31,361		(1,669	)		657		15,106		(9,774	)		31,361

Total comprehensive income	$	37,518	$	21,804	$	107,876	$	61,921		$	32,811	$	37,518	$	106,862		$	107,876

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2018			2017
Cash flows from operating activities:
Net earnings	$	76,515		$	63,590		$	116,636		$	76,515
Adjustments to reconcile net earnings to net cash used in operating activities:
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment		19,430			20,785			16,018			19,430
Amortization of intangible assets		12,643			9,312			11,399			12,643
Provision for losses on accounts receivable		3,429			1,401			2,572			3,429
Write-downs of inventories		1,991			2,297			2,410			1,991
Write-off of property and equipment		378			—			367			378
Non-cash stock-based compensation		10,134			8,308			10,764			10,134
Deferred income taxes		(209	)		3,424			2,964			(209	)
Loss on sale of foreign entity		3,646			—			—			3,646
Gain on sale of real estate		—			(338	)
Changes in assets and liabilities, net of acquisitions and sale of foreign entity:
Decrease in accounts receivable		108,284			133,289			222,047			108,284
Increase in inventories		(73,186	)		(59,707	)
Decrease (increase) in other assets		320			(22,713	)
Decrease (increase) in inventories								24,373			(73,186	)
Decrease in other assets								31,555			320
Decrease in accounts payable		(442,328	)		(278,097	)		(201,147	)		(442,328	)
Decrease in deferred revenue		(13,871	)		(6,645	)
(Decrease) increase in accrued expenses and other liabilities		(30,736	)		244

Net cash used in operating activities		(323,560	)		(124,850	)

Increase (decrease) in deferred revenue								11,326			(13,871	)
Decrease in accrued expenses and other liabilities								(4,043	)		(30,736	)
Net cash provided by (used in) operating activities								247,241			(323,560	)
Cash flows from investing activities:
Purchases of property and equipment		(15,906	)		(9,714	)		(13,046	)		(15,906	)
Proceeds from sale of foreign entity		1,517			—			479			1,517
Proceeds from sale of real estate, net		—			1,378
Acquisitions, net of cash and cash equivalents acquired		(186,932	)		(10,297	)		(74,938	)		(186,932	)

Net cash used in investing activities		(201,321	)		(18,633	)		(87,505	)		(201,321	)

Cash flows from financing activities:
Borrowings on senior revolving credit facility		923,216			534,920			569,232			923,216
Repayments on senior revolving credit facility		(707,216	)		(506,420	)		(686,732	)		(707,216	)
Borrowings on accounts receivable securitization financing facility		2,844,389			1,947,000			2,662,000			2,844,389
Repayments on accounts receivable securitization financing facility		(2,723,889	)		(1,822,000	)		(2,576,000	)		(2,723,889	)
Borrowings under Term Loan A		175,000			—			—			175,000
Repayments under Term Loan A		(6,562	)		—			(9,844	)		(6,562	)
Repayments under other financing agreements		(5,176	)		(1,309	)		(2,312	)		(5,176	)
Payments on capital lease obligations		(614	)		(270	)		(1,002	)		(614	)
Net borrowings under inventory financing facility		45,641			29,456
Net (repayments) borrowings under inventory financing facility								(81,911	)		45,641
Payment of debt issuance costs		(1,123	)		(3,360	)		(270	)		(1,123	)
Payment of payroll taxes on stock-based compensation through shares withheld		(4,703	)		(2,159	)		(3,195	)		(4,703	)
Repurchases of common stock		—			(50,000	)		(22,069	)		—

Net cash provided by financing activities		538,963			125,858

Foreign currency exchange effect on cash and cash equivalent balances		19,447			5,342

Increase (decrease) in cash and cash equivalents		33,529			(12,283	)
Cash and cash equivalents at beginning of period		202,882			187,978

Cash and cash equivalents at end of period	$	236,411		$	175,695

Net cash (used in) provided by financing activities								(152,103	)		538,963
Foreign currency exchange effect on cash, cash equivalents and restricted cash balances								(2,434	)		19,635
Increase in cash, cash equivalents and restricted cash								5,199			33,717
Cash, cash equivalents and restricted cash at beginning of period								107,445			205,946
Cash, cash equivalents and restricted cash at end of period							$	112,644		$	239,663

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~1. Basis of Presentation and Recently Issued Accounting Standards~~

1.	Basis of Presentation and Recently Issued Accounting Standards

Today, every business is a technology business. We ~~are a Fortune 500 global IT provider helping businesses~~empower organizations of all sizes ~~– from small and medium sized firms to worldwide enterprises, governments, schools and health care organizations – define, architect, implement and manage~~with Insight Intelligent Technology Solutions^TM~~. We empower our~~ and services to maximize the business value of IT. As a Fortune 500-ranked global provider of digital innovation, cloud/data center transformation, connected workforce, and supply chain optimization solutions and services, we help clients ~~to manage their IT environments so they can drive meaningful business outcomes today~~innovate and ~~transform~~optimize their operations ~~for tomorrow.~~to run smarter. Our company is organized in the following three operating segments, which are primarily defined by their related geographies:


Operating Segment		Geography
North America		United States and Canada
EMEA		Europe, Middle East and Africa
APAC		Asia-Pacific

Our offerings in North America and ~~select~~certain countries in EMEA and APAC include hardware, software and services. Our offerings in the remainder of our EMEA and APAC segments ~~are~~consist of largely software and ~~select~~certain software-related services.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of September 30, ~~2017,~~2018 and our results of operations for the three and nine months ended September 30, 2018 and 2017 and ~~2016 and our~~ cash flows for the nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017. The consolidated balance sheet as of December 31, ~~2016~~2017 was derived from the audited consolidated balance sheet at such date. The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and consequently do not include all of the disclosures normally required by United States generally accepted accounting principles (“GAAP”).

The results of operations for interim periods are not necessarily indicative of results for the full year, due in part to the seasonal nature of our business. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes thereto, in our Annual Report on Form10-K for the year ended December 31, ~~2016.~~2017. Our results of operations include the results of Datalink Corporation (“Datalink”) from its acquisition date of January 6, 2017, Caase Group B.V. ~~(doing business as, and referred~~(referred to herein as, “Caase.com”) from its acquisition date of September 26, 2017 ~~Datalink Corporation~~and Cardinal Solutions Group, Inc. (“~~Datalink”~~Cardinal”) from its acquisition date of ~~January 6, 2017 and Ignia, Pty Ltd (“Ignia”) from its acquisition date of September~~August 1, ~~2016.~~2018. See Note 1012 for further discussion of our ~~acquisitions~~acquisition of ~~Caase.com and Datalink.~~Cardinal.

The consolidated financial statements include the accounts of Insight Enterprises, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Additionally, these estimates and assumptions affect the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to sales recognition, anticipated achievement levels under partner funding programs, assumptions related to stock-based compensation valuation, allowances for doubtful accounts, valuation of inventories, litigation-related obligations, valuation allowances for deferred tax assets and impairment of long-lived assets, including purchased intangibles and goodwill, if indicators of potential impairment exist.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Recently Issued Accounting Standards

~~In March 2016,~~Effective January 1, 2018, we adopted the Financial Accounting Standards ~~Board~~Board’s (“FASB”) ~~issued~~ Accounting ~~Standards~~Standard Update (“ASU”)No. ~~2016-09,~~ ~~“Improvements to Employee Share-Based Payment Accounting.~~2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” ~~This new standard simplifies the accounting for share-based payment transactions, including the income tax consequences, the calculation~~ASU No. 2016-18, “Restricted Cash,” ASU No. 2016-15, “Classification of ~~diluted earnings per share, the treatment~~Certain Cash Receipts and Cash Payments,” and ASU No. 2016-01, “Financial Instruments Overview: Recognition and Measurement of ~~forfeitures, the classification of awards as either equity or liabilities~~Financial Assets and the classification on the statement of cash flows. This new standard increases volatility in the statement of operations by requiring all excess tax benefits and deficiencies to be recognized as income tax benefit or expense in the statement of operations and treated as discrete items in the period in which they occur. We adopted the new standard as of January 1, 2017, and prospectively applied the provisions in this guidance requiring recognition of excess tax benefits and deficits in the statement of operations, which resulted in an income tax benefit of $69,000 and $2,258,000 for the three and nine months ended September 30, 2017, respectively.Financial Liabilities.” The corresponding increase in net earnings had no effect on diluted earnings per share during the three months ended September 30, 2017 and equated to $0.06 per diluted share during the nine months ended September 30, 2017. Also, as a result of the adoption of ~~the~~these new standard, we made an accounting policy election to recognize forfeitures as they occur and no longer estimate expected forfeitures. The provisions in this guidance requiring the use of a modified retrospective transition method would have required us to record a cumulative effect adjustment in retained earnings as of January 1, 2017. We elected not to adjust retained earnings and to record such cumulative effect adjustment as stock-based compensation in the first quarter of 2017 on the basis of immateriality. Lastly, we applied the provisions of this guidance relating to classification on the statement of cash flows retrospectively. As a result, excess tax benefits from employee gains on stock-based compensation of $293,000 were reclassified from cash flows from financing activities to cash flows from operating activities for the nine months ended September 30, 2016 to conform to the current period presentation.

~~In July 2015, the FASB issued ASUNo. 2015-11,~~ “Simplifying the Measurement of Inventory.” This standard changes the measurement from lower of cost or market to lower of cost and net realizable value. We adopted the standard in the first quarter of 2017 and applied the provisions prospectively. The standardstandards did not have a material effect on our consolidated financial statements.

~~On May 28, 2014, the FASB issued~~ Additionally, we adopted ASUNo. 2014-09, “Revenue from Contracts with Customers,” effective January 1, 2018, as discussed in Note 2.

As a result of the adoption of ASU No. 2016-18, we began including amounts generally described as restricted cash or restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows for the nine months ended September 30, 2018. Amounts shown in the consolidated statement of cash flows for the nine months ended September 30, 2017 were reclassified to conform to the current period presentation. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows for the nine months ended September 30, 2018 and 2017 (in thousands):

	September 30, 2018		December 31, 2017
Cash and cash equivalents	$	111,055	$	105,831
Restricted cash included in other current assets		17		46
Restricted cash included in other non-current assets		1,572		1,568
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	112,644	$	107,445

	September 30, 2017		December 31, 2016
Cash and cash equivalents	$	236,411	$	202,882
Restricted cash included in other current assets		80		51
Restricted cash included in other non-current assets		3,172		3,013
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	239,663	$	205,946

Amounts included in restricted cash represent those required to be set aside by a contractual agreement with a lessor related to certain leased office space in foreign jurisdictions. Restricted cash shown in the statement of cash flows for the nine months ended September 30, 2017 also includes funds deposited with a financial institution in Australia to provide a guarantee on our behalf as security for any funds we might draw under our revolving loan facility in China. The deposited funds were restricted in that we could not withdraw them as long as the related loan facility was in place. These amounts were reported in other non-current assets.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” (Topic 842) which ~~amends~~supersedes the existing lease recognition requirements in the current accounting ~~standards~~standard for ~~revenue recognition.~~leases. The core ~~principle~~principal of the ~~guidance~~new standard is that an entity should recognize ~~revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects~~right-of-use (“ROU”) assets and lease liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard is to be ~~entitled in exchange for those goods or services.~~applied using a modified retrospective transition method with the option to elect a number of practical expedients. The new standard ~~as amended,~~ will be effective for ~~the Company~~fiscal years beginning in the first quarter of 2018. The standard permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective transition method) or retrospectively with the cumulative effect adjustment of initially applying the new standard recognized at the date of initial application (the modified retrospective transition method).

~~We will adopt the standard on January 1,~~after December 15, 2018, and expect to utilize the modified retrospective transition method. While we are still finalizing our accounting policies under the new standard and are in the process of quantifying the cumulative effect adjustment from priorincluding interim periods ~~that will be recognized in our consolidated balance sheet as of the date of adoption as an adjustment to retained earnings, to date we have concluded:~~

The accounting for inventories not available for sale related to certain product net sales transactions in which we are warehousing the product and will be deploying the product to our clients’ designated locations subsequent to~~period-end~~ ~~will change~~within such ~~that a portion of revenue under the contracts is generally expected to be recognized at an earlier point in~~

fiscal years.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

time than we are recognizing under current accounting standards. The effect of the change on our financial results will be dependent on the amount of such transactions existing at the end of a given quarter.

~~The accounting for renewals~~In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements.” ASU 2018-11 provides additional guidance to Topic 842 including providing preparers an additional optional retrospective adoption method which allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings. ASU 2018-11 also provides lessors a practical expedient to not separate lease from non-lease components, in certain ~~software term licenses~~situations.

We will ~~change~~adopt the new lease standard as of January 1, 2019 and plan to ~~delay revenue recognition until~~utilize the ~~beginning~~retrospective cumulative effect adjustment transition method with a cumulative effect adjustment being recorded as of the ~~renewal period.~~

~~In sales transactions for~~adoption date. Additionally, we expect to elect certain ~~security software products~~available practical expedients. We have established a cross-functional implementation team and are in the process of determining the scope of arrangements that will be subject to this standard as well as assessing the impact to our systems, processes, and internal controls over financial reporting. While we are ~~sold with accompanying third-party delivered software maintenance,~~still evaluating the impact of adopting ASU No. 2016-02, we ~~believe the updates provided by the publisher are not separately identifiable from the software. We~~anticipate this standard will ~~change~~have a material impact on our other assets and other liabilities balances. The primary impact will be to record ~~both~~ROU assets and lease liabilities for existing operating leases on our consolidated balance sheets. We do not expect the ~~software license and the accompanying software maintenance~~adoption to have a material impact on ~~a net basis, as the agent in the arrangement. Under current guidance, we bifurcate the sale~~our consolidated statements of ~~the software license from the sale~~operations or our consolidated statements of the maintenance contract, record the sale of the software product on a gross basis, as the principal in the arrangement, and record the sale of the software maintenance on a net basis, as an agent in the arrangement.

Sales commissions on contracts with performance periods that exceed one year will be recorded as an asset and amortized to expense over the related contract performance period as opposed to being expensed in the period the transaction is generated.

cash flows. Our analysis and evaluation of the new standard will continue through its effective date in the first quarter of ~~2018. A substantial amount of work has been completed, and findings and progress~~2019, including continuing to ~~date have been reported to management and~~monitor any potential changes in the ~~Audit Committee. Although we do not currently expect~~standard proposed by the ~~changes resulting from the adoption of the new standard to materially affect our results of operations, our conclusions are still being finalized.~~FASB.

There have been no other material changes in or additions to the recently issued accounting standards as previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report onForm 10-K for the year ended December 31, ~~2016~~2017 that affect or may affect our current financial statements.

2.	New Accounting Standard – Sales Recognition

2. We adopted ASU No. 2014-09, “Revenue from Contracts with Customers,” which created FASB Topic 606 (“Topic 606”) with a date of initial application of January 1, 2018. Topic 606 also includes Subtopic 340-40, “Other Assets and Deferred Costs – Contracts with Customers,” which requires the deferral of incremental costs of obtaining a contract with a customer. As a result, we changed our accounting policy for sales recognition and incremental costs of obtaining a contract with a customer as detailed below.

We applied Topic 606 using the modified retrospective transition method. In adopting the new standard, the net cumulative effect from prior periods of applying the guidance in Topic 606 was recognized as a cumulative effect adjustment to the opening balance of retained earnings in our consolidated balance sheet as of January 1, 2018. Additionally, we have elected the option to only account for contracts that remained open as of the January 1, 2018 transition date in accordance with Topic 606. Revenue recognition for contracts for which substantially all of the revenue was recognized in accordance with the revenue guidance in effect before January 1, 2018 has not been changed. The comparative information as of December 31, 2017 and for the years ended December 31, 2017 and 2016 have not been adjusted and continue to be reported under the previously applicable accounting standards. The details of the significant changes and quantitative impact of the changes are set forth below.

For sales transactions for certain security software products that are sold with integral third-party delivered software maintenance, we changed our accounting to record both the software license and the accompanying software maintenance on a net basis, as the agent in the arrangement, given the predominant nature of the goods and services provided to the customer. Under previous guidance, we bifurcated the sale of the software license from the sale of the maintenance contract, recorded the sale of the software product on a gross sales recognition basis and recorded the sale of the software maintenance on a net sales recognition basis. This change has no effect on reported gross profit dollars associated with these transactions.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

•

The accounting for inventories not available for sale, otherwise known as bill and hold arrangements, changed such that a portion of revenue under the contracts is recognized earlier than we were recognizing under previous accounting standards. Bill and hold arrangements are inventory balances owned by our clients that we are warehousing and will be deploying to the clients’ locations in a future period.

The accounting for renewals of certain software term/usage licenses changed to delay or accelerate revenue recognition to the renewal period. Under previous guidance, we recognized revenue as the renewal order was completed.

The accounting for certain contracts with our clients that include payment terms that exceed one year changed such that we recognize revenue at the point in time when control of the product is transferred to the client or over the period of time that the service is provided to the client. To the extent that a significant financing component exists in these arrangements, we will record interest income associated with the financing component of the arrangement over the payment terms of the arrangement. Under previous guidance, we deferred revenue recognition under these contracts until payments became due as a result of the extended payment terms.

The timing of revenue recognition for certain services contracts also changed to align with an appropriate input or output method. For example, the timing of revenue recognition for certain services contracts with stated milestone terms changed to an earlier point in time when control transfers to the customer. Under previous guidance, we recognized revenue based on the milestones stated in the contract with our customer.

The accounting for recording sales returns allowance changed from being recorded against accounts receivable to being recorded as a refund liability. As a result, in our consolidated balance sheets, we reclassified our sales returns allowance balance from accounts receivable, net to accrued expenses and other current liabilities. Under previous guidance, we recorded the sales returns allowance in accounts receivable, net and not as a separately stated liability.

The accounting for sales commissions on contracts with performance periods that exceed one year changed such that we record such sales commissions as an asset and amortize them to expense over the related contract performance period. Under previous guidance, sales commissions were expensed in the period the transaction was generated.

The total cumulative effect adjustment from prior periods that we recognized in our consolidated balance sheet as of January 1, 2018 as an adjustment to retained earnings was $7,176,000.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following tables summarize the effects of adopting Topic 606 on the Company’s consolidated financial statements as of September 30, 2018 and for the three and nine months then ended (in thousands, except for per share data):

BALANCE SHEET AT SEPTEMBER 30, 2018

							Pre-Topic 606
	As Reported			Adjustments			Adoption
Cash and cash equivalents	$	111,055		$	—		$	111,055
Accounts receivable, net		1,682,005			(115,210	)		1,566,795
Inventories		171,197			—			171,197
Inventories not available for sale		648			72,529			73,177
Other current assets		103,778			37,356			141,134
Total current assets		2,068,683			(5,325	)		2,063,358
Property and equipment, net		74,097			—			74,097
Goodwill		167,065			—			167,065
Intangible assets, net		116,608			—			116,608
Deferred income taxes		13,844			—			13,844
Other assets		70,220			(15,793	)		54,427
	$	2,510,517		$	(21,118	)	$	2,489,399
Accounts payable – trade	$	758,035		$	(47,159	)	$	710,876
Accounts payable – inventory financing facility		237,556			—			237,556
Accrued expenses and other current liabilities		180,101			(20,880	)		159,221
Current portion of long-term debt		17,360			—			17,360
Deferred revenue		63,696			67,171			130,867
Total current liabilities		1,256,748			(868	)		1,255,880
Long-term debt		251,334			—			251,334
Deferred income taxes		427			—			427
Other liabilities		59,001			(13,768	)		45,233
		1,567,510			(14,636	)		1,552,874
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		355			—			355
Additional paid-in capital		319,065			—			319,065
Retained earnings		657,625			(6,407	)		651,218
Accumulated other comprehensive loss – foreign currency translation adjustments		(34,038	)		(75	)		(34,113	)
Total stockholders’ equity		943,007			(6,482	)		936,525
	$	2,510,517		$	(21,118	)	$	2,489,399

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

						Pre-Topic 606
	As Reported		Adjustments			Adoption
Net sales:
Products	$	1,548,273	$	56,880		$	1,605,153
Services		199,453		(1,981	)		197,472
Total net sales		1,747,726		54,899			1,802,625
Costs of goods sold:
Products		1,415,808	$	49,985			1,465,793
Services		97,004		1,230			98,234
Total costs of goods sold		1,512,812		51,215			1,564,027
Gross profit		234,914		3,684			238,598
Operating expenses:
Selling and administrative expenses		184,095		28			184,123
Severance and restructuring expenses		683		—			683
Acquisition-related expenses		188		—			188
Earnings from operations		49,948		3,656			53,604
Non-operating expense, net		6,734		—			6,734
Earnings before income taxes		43,214		3,656			46,870
Income tax expense		11,060		887			11,947
Net earnings	$	32,154	$	2,769		$	34,923
Net earnings per share:
Basic	$	0.91	$	0.07		$	0.98
Diluted	$	0.89	$	0.08		$	0.97
Shares used in per share calculations:
Basic		35,468		—			35,468
Diluted		35,957		—			35,957

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

						Pre-Topic 606
	As Reported		Adjustments			Adoption
Net sales:
Products	$	4,724,888	$	85,551		$	4,810,439
Services		606,202		(9,045	)		597,157
Total net sales		5,331,090		76,506			5,407,596
Costs of goods sold:
Products		4,319,181		75,407			4,394,588
Services		272,355		(378	)		271,977
Total costs of goods sold		4,591,536		75,029			4,666,565
Gross profit		739,554		1,477			741,031
Operating expenses:
Selling and administrative expenses		561,739		277			562,016
Severance and restructuring expenses		2,709		—			2,709
Acquisition-related expenses		282		—			282
Earnings from operations		174,824		1,200			176,024
Non-operating expense, net		17,634		—			17,634
Earnings before income taxes		157,190		1,200			158,390
Income tax expense		40,554		430			40,984
Net earnings	$	116,636	$	770		$	117,406
Net earnings per share:
Basic	$	3.27	$	0.03		$	3.30
Diluted	$	3.24	$	0.02		$	3.26
Shares used in per share calculations:
Basic		35,622		—			35,622
Diluted		36,012		—			36,012

STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

The adoption of Topic 606 had no effect on net cash provided by operating activities, net cash used in investing activities or net cash used in financing activities for the nine months ended September 30, 2018. The adjustment to net earnings noted above in reconciling our reported results of operations for the nine months ended September 30, 2018 under Topic 606 to pre-Topic 606 adoption was fully offset by adjustments to the reported changes in asset and liability balances, resulting in no effect on operating cash flows.

Significant Accounting Policy

Revenue is measured based on the consideration specified in a contract with a client, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service to a client.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a client, are excluded from revenue. This is consistent with our accounting treatment prior to the adoption of Topic 606, whereby we reported sales net of any sales-based taxes assessed by governmental authorities that are imposed on and concurrent with sales transactions.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We record the freight we bill to our clients as product net sales and the related freight costs we pay as product costs of goods sold. This is consistent with our accounting treatment prior to the adoption of Topic 606.

Nature of Goods and Services

We sell hardware and software products on both a stand-alone basis without any services and as solutions bundled with services.

When we provide a combination of hardware and software products with the provision of services, we separately identify our performance obligations under our contract with the client as the distinct goods (hardware and/or software products) or services that will be provided. The total transaction price for an arrangement with multiple performance obligations is allocated at contract inception to each distinct performance obligation in proportion to its stand-alone selling price. The stand-alone selling price is the price at which we would sell a promised good or service separately to a client. Observable stand-alone prices are used when they are available. If not available, we estimate the price based on observable inputs, including direct labor hours and allocable costs.

Product Offerings

Hardware

We recognize hardware product revenue at the point in time when a client takes control of the hardware, which typically occurs when title and risk of loss have passed to the client at its destination. Our selling terms and conditions were modified during the fourth quarter of 2017 to specify F.O.B. destination contractual terms such that control is transferred from the Company at the point in time when the product is received by the client. Prior to the adoption of Topic 606, because we either (i) had a general practice of covering client losses while products were in transit despite title and risk of loss contractually transferring at the point of shipment or (ii) had specifically stated F.O.B. destination contractual terms with the client, delivery was not deemed to have occurred until the point in time when the product was received by the client. The transaction price for hardware sales is adjusted for estimated product returns that we expect to occur under our return policy based upon historical return rates.

We leverage drop-shipment arrangements with many of our partners and suppliers to deliver products to our clients without having to physically hold the inventory at our warehouses, thereby increasing efficiency and reducing costs. We recognize revenue for drop-shipment arrangements on a gross basis as the principal in the transaction when the product is received by the client because we control the product prior to transfer to the client. We also assume primary responsibility for fulfillment in the arrangement, we assume inventory risk if the product is returned by the client, we set the price of the product charged to the client and we work closely with our clients to determine their hardware specifications. This is consistent with our accounting treatment prior to the adoption of Topic 606.

Bill and Hold Transactions

We offer a service to our customers whereby clients may purchase product that we procure on their behalf and, at our clients’ direction, store the product in our warehouse for a designated period of time, with the intention of deploying the product to the clients’ designated locations at a later date. These warehousing services are designed to help our clients with inventory management challenges associated with technology roll-outs, product that is moving to end of life, and/or clients needing integrated stock available for immediate deployment. In some circumstances, we may also perform lab integration services on a portion of the product prior to shipment to our clients for a separate fee. The client is invoiced and title transfers to the client upon receipt of the product at our warehouse. These product contracts are non-cancelable with customary credit terms beginning the date the product is received in our warehouse and the warranty periods begin on the date of invoice. Revenue is recognized for the sale of the product to the client upon receipt of the product at our warehouse.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The warehousing services and lab integration fees are considered separate performance obligations. Under previous accounting guidance, prior to the adoption of Topic 606, it was determined that these product sales transactions did not meet the revenue recognition criteria under GAAP. Therefore, we did not record product net sales, and the inventories were classified as inventories not available for sale on our consolidated balance sheets, until the product was delivered to the clients’ designated location. If clients remitted payment before we delivered the product to them, we recorded the payments received as deferred revenue on our consolidated balance sheets until such time as the product was delivered.

Software

We recognize revenue from software sales at the point in time when the client acquires the right to use or copy software under license and control transfers to the client. For renewals, revenue is recognized upon the commencement of the term of the software license agreement or when the renewal term begins, as applicable. This is a change from our accounting treatment prior to the adoption of Topic 606, whereby revenue from renewals of software licenses was recognized when the parties agreed to the renewal or extension, provided that all other revenue recognition criteria had been met.

Although the revenue recognition treatment for term software license renewals has changed as described above, a substantial portion of the software licenses we sell are perpetual software licenses and do not require renewal or extension after their initial purchase by the client. Such perpetual licenses are periodically subject to true-up, whereby additional perpetual licenses are sold under the client’s pre-existing master agreement. Such true-ups are generally sold in arrears, and clients are invoiced for the additional licenses they had already been utilizing. Since the client controlled these additional perpetual licenses prior to the true-up, software revenue related to the underlying additional licenses is recognized when we agree to the true-up with our client and the partner. This is consistent with our accounting treatment prior to the adoption of Topic 606.

Services Offerings

Software Maintenance

Software maintenance agreements provide our clients with the right to obtain any software upgrades, bug fixes and help desk and other support services directly from the software publisher at no additional charge during the term of the software maintenance agreements. We act as the software publisher’s agent in selling these software maintenance agreements and do not assume any performance obligation to the client under the agreements. As a result, we are the agent in these transactions and these sales are recorded on a net sales recognition basis. Under net sales recognition, the cost of the software maintenance agreement is recorded as a reduction to sales, resulting in net sales equal to the gross profit on the transaction, and there are no costs of goods sold. Because we are acting as the software publisher’s agent, revenue is recognized when the parties agree to the initial purchase, renewal or extension as our agency services are then complete. This is consistent with our accounting treatment prior to the adoption of Topic 606. As discussed in Note 11, we report all fees earned from activities reported net within our services net sales category in our consolidated statements of operations.

Cloud / Software-as-a-Service Offerings

Cloud or software-as-a-service subscription products provide our clients with access to software products hosted in the public cloud without the client taking possession of the software. We act as the software publisher’s agent in selling these software-as-a service subscription products and do not host the software products on our servers. We do not take control of the software products or assume any performance obligations to the clients related to the provisioning of the offerings in the cloud. As a result, these sales are recorded on a net sales recognition basis.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

This is consistent with our accounting treatment prior to the adoption of Topic 606. As discussed in Note 11, we report all fees earned from activities reported net within our services net sales category in our consolidated statements of operations.

Insight Delivered Services

We design, procure, deploy, implement and manage solutions that combine hardware, software and services to help businesses run smarter. Such services are provided by us or third-party sub-contract vendors as part of bundled arrangements, or are provided separately on a stand-alone basis as technical, consulting or managed services engagements. If the services are provided as part of a bundled arrangement with hardware and software, the hardware, software and services are generally distinct performance obligations. In general, we recognize revenue from services engagements as we perform the underlying services and satisfy our performance obligations.

We recognize revenue from sales of services by measuring progress toward complete satisfaction of the related service performance obligation. Billings for such services that are made in advance of the related revenue recognized are recorded as a contract liability.

Specific revenue recognition practices for certain of our services offerings are described in further detail below.

Time and Materials Services Contracts

We recognize revenue for professional services engagements that are on a time and materials basis based upon hours incurred for the performance completed to date for which we have the right to consideration, even if such amounts have not yet been invoiced as of period end. This is consistent with our accounting treatment prior to the adoption of Topic 606.

Fixed Fee Services Contracts

We recognize revenue on fixed fee professional services contracts using a proportional performance method of revenue recognition based on the ratio of direct labor and other allocated costs incurred to total estimated direct labor and other allocated costs. This is consistent with our accounting treatment prior to the adoption of Topic 606.

OneCall Support Services Contracts

When we sell certain hardware and/or software products to our clients, we also enter into service contracts with them. These contracts are support service agreements for the hardware and/or software products that were purchased from us. Under certain support services contracts, although we purchase third-party support contracts for maintenance on the specific hardware or software products we have sold, our internal support desk assists the client first by performing an initial technical triage to determine the source of the problem and whether we can direct the client on how to fix the problem. We refer to these services as “OneCall.” We act as the principal in the transaction because we perform the OneCall services over the term of the support service contract and we set the price of the service charged to the client. As a result, we recognize revenue from OneCall extended service contracts on a gross sales recognition basis ratably over the contract term of the stand ready obligation, generally one to three years. This is consistent with our accounting treatment prior to the adoption of Topic 606.

On our consolidated balance sheet, a significant portion of our contract liabilities balance relates to OneCall support services agreements for which clients have paid or have been invoiced but for which we have not yet recognized the applicable services revenue. We also defer incremental direct costs to fulfill our service contracts that we prepay to third parties for direct support of our fulfillment of the service contract to our clients under our contract terms and amortize them into operations over the term of the contracts.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Vendor Direct Support Services Contracts

When we do not provide OneCall services to the client on hardware and/or software products that were purchased, the client may purchase a vendor direct support services contract through us. Under these contracts, our clients call the manufacturer/publisher or its designated service organization directly for both the initial technical triage and any follow-up assistance. We act as the manufacturer/publisher’s agent in selling these support service contracts and do not assume any performance obligation to the client under the arrangements. As a result, these sales are recorded on a net sales recognition basis similar to software maintenance agreements, as discussed above. Because we are acting as the manufacturer/publisher’s agent, revenue is recognized when the parties agree to the purchase of the support services contract as our agency services are then complete. This is consistent with our accounting treatment prior to the adoption of Topic 606.

Third-party Provided Services

A majority of our third-party sub-contractor services contracts are entered into in conjunction with other services contracts under which the services are performed by Insight teammates. We have concluded that we control all services under the contract and can direct the third-party sub-contractor to provide the requested services. As such, we act as the principal in the transaction and record the services under a gross sales recognition basis, with the selling price being recorded in sales and our cost to the third-party service provider being recorded in costs of goods sold. For certain third-party service contracts in which we are not responsible for fulfillment of the services, we have concluded that we are an agent in the transaction and record revenue on a net sales recognition basis. This is consistent with our accounting treatment prior to the adoption of Topic 606.

Disaggregation of Revenue

In the following table, revenue is disaggregated by our reportable operating segments, which are primarily defined by their related geographies, as well as by major product offering, by major client group and by recognition on either a gross basis as a principal in the arrangement, or on a net basis as an agent, for the three and nine months ended September 30, 2018 (in thousands):

	Three Months Ended September 30, 2018
	North America		EMEA		APAC		Consolidated
Major Offerings
Hardware	$	953,431	$	147,497	$	6,041	$	1,106,969
Software		259,602		168,603		13,099		441,304
Services		158,426		29,080		11,947		199,453
	$	1,371,459	$	345,180	$	31,087	$	1,747,726
Major Client Groups
Large Enterprise / Corporate	$	986,665	$	265,430	$	10,715	$	1,262,810
Public Sector		141,895		62,720		6,255		210,870
Small and Medium-Sized Businesses		242,899		17,030		14,117		274,046
	$	1,371,459	$	345,180	$	31,087	$	1,747,726
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)	$	1,322,391	$	326,671	$	26,638	$	1,675,700
Net revenue recognition (Agent)		49,068		18,509		4,449		72,026
	$	1,371,459	$	345,180	$	31,087	$	1,747,726

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

		Nine Months Ended September 30, 2018
		North America		EMEA		APAC		Consolidated
Major Offerings
Hardware		$	2,724,916	$	505,844	$	22,518	$	3,253,278
Software			828,231		551,920		91,459		1,471,610
Services			465,458		104,086		36,658		606,202
		$	4,018,605	$	1,161,850	$	150,635	$	5,331,090
Major Client Groups
Large Enterprise / Corporate		$	2,945,880	$	836,865	$	37,770	$	3,820,515
Public Sector	��		388,109		273,821		67,134		729,064
Small and Medium-Sized Businesses			684,616		51,164		45,731		781,511
		$	4,018,605	$	1,161,850	$	150,635	$	5,331,090
Revenue Recognition based on acting as Principal or Agent in the Transaction
Gross revenue recognition (Principal)		$	3,857,104	$	1,093,110	$	133,542	$	5,083,756
Net revenue recognition (Agent)			161,501		68,740		17,093		247,334
		$	4,018,605	$	1,161,850	$	150,635	$	5,331,090

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities as of September 30, 2018 and January 1, 2018 (in thousands):

	September 30,		January 1,
	2018		2018
Current receivables, which are included in “Accounts receivable, net”	$	1,682,005	$	1,909,074
Non-current receivables, which are included in “Other assets”		31,288		32,227
Contract assets, which are included in “Other current assets”		652		595
Contract liabilities, which are included in “Deferred revenue” and “Other liabilities”		83,339		86,743

Significant changes in the contract assets and the contract liabilities balances during the nine months ended September 30, 2018 are as follows (in thousands):

	Increase (Decrease)
	Contract				Contract
	Assets				Liabilities
Balances at January 1, 2018	$	595			$	86,743
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied		—				(53,022	)
Cash received in advance and not recognized as revenue		—				49,685
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional		(590	)			—
Contract assets recognized, net of reclassification to receivables		647				—
Cumulative catch-up adjustment arising from changes in estimates of transaction price		—		��		(67	)
Balances at September 30, 2018	$	652			$	83,339

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Transaction price allocated to the remaining performance obligations

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2018 that are expected to be recognized in the future (in thousands):

	Products		Services		Total
Remaining three months of 2018	$	3	$	39,990	$	39,993
2019		13		70,061		70,074
2020		5		27,335		27,340
2021		—		9,621		9,621
2022		—		3,877		3,877
2023		—		1,474		1,474
2024 and thereafter		—		221		221
Total remaining performance obligations	$	21	$	152,579	$	152,600

Topic 606 allows for certain practical expedients which we have elected to apply. As a result, we do not disclose information about remaining performance obligations that have original expected durations of one year or less in the table above. Amounts not included in the table above have an average original expected duration of eight months. Additionally, for our time and material services contracts, whereby we have the right to consideration from a client in an amount that corresponds directly with the value to the client of our performance completed to date, we recognized revenue in the amount to which we have a right to invoice as of September 30, 2018 and do not disclose information about related remaining performance obligations in the table above. Our time and material contracts have an average expected duration of 13 months.

The majority of our backlog historically has been and continues to be open cancelable purchase orders. We do not believe that backlog as of any particular date is predictive of future results, therefore we do not include performance obligations under open cancelable purchase orders, which do not qualify for revenue recognition in accordance with Topic 606 as of September 30, 2018, in the table above.

Assets recognized for costs of obtaining a contract with a customer

We believe that the only significant incremental costs incurred to obtain contracts with our clients within the scope of Topic 606 are sales commissions. The majority of our contracts are completed within a one-year performance period, and for contracts with a specified term of one year or less, we have exercised a practical expedient, which allows us to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. Under Topic 606, we record sales commissions on contracts with performance periods that exceed one year as an asset and amortize the asset to expense over the related contract performance period. As of September 30, 2018, the related asset balance was $2,666,000, which we expect to recognize as expense over the next 36 months. Under previous accounting standards, we recognized sales commissions as earned and recorded such amounts within selling and administrative expenses in our statements of operations.

3.	Immaterial Correction of an Error in Prior Periods

We corrected immaterial errors identified in our March 31, 2018 and June 30, 2018 consolidated financial statements in the nine months ended September 30, 2018. The errors primarily relate to the incorrect presentation of certain software revenue transactions. In our consolidated statement of operations for the three months ended March 31, 2018, the effect was to reduce product net sales by $24.4 million, increase services net sales by $4.0 million, reduce product cost of goods sold by $23.7 million and increase services cost of goods sold by $3.0 million. In the three months ended March 31, 2018, gross profit, earnings from operations and net earnings increased by $258,000. Diluted earnings per share for the three months ended March 31, 2018 increased $0.01.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In our consolidated statement of operations for the three months ended June 30, 2018, the effect was to reduce product net sales by $900,000, increase services net sales by $4.9 million, reduce product cost of goods sold by $0.5 million and increase services cost of goods sold by $4.5 million. In our consolidated statement of operations for the six months ended June 30, 2018, the effect was to reduce product net sales by $25.3 million, increase services net sales by $8.9 million, reduce product cost of goods sold by $24.2 million and increase services cost of goods sold by $7.5 million. In the three months ended June 30, 2018, there was no impact to gross profit, earnings from operations or net earnings resulting from the revision. In the six months ended June 30, 2018, gross profit, earnings from operations and net earnings increased by $258,000. There was no impact to diluted earnings per share in either the three or six months ended June 30, 2018.

These revisions are appropriately reflected in the consolidated statement of operations for the nine months ended September 30, 2018. There is no impact to the audited consolidated financial statements for 2017 or any other prior period. We will present our revised historical consolidated statements of operations for the three months ended March 31, 2018 and the three and six months ended June 30, 2018 when the respective statements are presented in future filings.

4.	Net Earnings Per Share (“EPS”)

Basic EPS is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock units (“RSUs”).

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Numerator:
Net earnings	$	22,412	$	21,635	$	76,515	$	63,590	$	32,154	$	22,412	$	116,636	$	76,515

Denominator:
Weighted average shares used to compute basic EPS		35,787		35,474		35,718		36,310		35,468		35,787		35,622		35,718
Dilutive potential common shares due to dilutive RSUs, net of tax effect		416		316		468		286		489		416		390		468

Weighted average shares used to compute diluted EPS		36,203		35,790		36,186		36,596		35,957		36,203		36,012		36,186

Net earnings per share:
Basic	$	0.63	$	0.61	$	2.14	$	1.75	$	0.91	$	0.63	$	3.27	$	2.14

Diluted	$	0.62	$	0.60	$	2.11	$	1.74	$	0.89	$	0.62	$	3.24	$	2.11

For the three and nine months ended September 30, ~~2017, 36,000~~2018, 5,000 and ~~48,000,~~13,000, respectively, of our RSUs were not included in the diluted EPS calculations because their inclusion would have been anti-dilutive. These share-based awards could be dilutive in the future. There were ~~5,000~~36,000 and 48,000 anti-dilutive RSUs for the three and nine months ended September 30, ~~2016,~~2017, respectively.

~~3. Debt, Inventory Financing Facility, Capital Leases and Other Financing Obligations~~18

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5.	Debt, Inventory Financing Facility, Capital Leases and Other Financing Obligations

Debt

Our long-term debt consists of the following (in thousands):


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
Senior revolving credit facility	$	216,000		$	—		$	—		$	117,500
Term Loan A (less unamortized debt issuance costs of $936)		167,502			—
Term Loan A (less unamortized debt issuance costs of $686 and $873, respectively)								155,720		165,377
Accounts receivable securitization financing facility		160,000			39,500			111,000			25,000
Capital leases and other financing obligations		6,227			1,231			1,974			5,291

Total		549,729			40,731			268,694			313,168
Less: current portion of long-term debt		(15,344	)		(480	)		(17,360	)		(16,592	)

Long-term debt	$	534,385		$	40,251		$	251,334		$	296,576

Our senior revolving credit facility (“revolving facility”) has an aggregate U.S. dollar equivalent maximum borrowing amount of $350,000,000, including a maximum borrowing capacity that may be used for borrowing in certain foreign currencies of $50,000,000, and matures on June 23, 2021. OnIn January 6, 2017, we amended our revolving facility to expand the facility by $175,000,000 in the form of an incremental Term Loan A (“TLA”). ~~Pricing and all other general terms and conditions of the TLA are governed by the existing revolving facility.~~ The TLA requires amortization payments of 5%, 7.5%, 10%, 12.5% and 15% of the original principal balance in years one through five, respectively, to be paid quarterly through March 31, 2021, with the remaining balance of $107,187,500 due at maturity on June 23, 2021. The revolving facility and TLA are guaranteed by the Company’s material domestic subsidiaries and are secured by a lien on substantially all of the Company’s and each guarantor’s assets. The interest rates applicable to borrowings under the revolving facility and the TLA are based on the leverage ratio of the Company as set forth on a pricing grid in the amended agreement. Amounts outstanding under the revolving

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~facility and TLA bear interest, payable quarterly, at a floating rate equal to the prime rate plus a predetermined spread of 0.00% to 0.75% or, at our option, a LIBOR rate plus apre-determined~~ spread of 1.25% to 2.25%. The floating interest rate applicable at September 30, 2017 was 2.70% per annum for the revolving facility and 2.74% per annum for the TLA. In addition, we pay a quarterly commitment fee on the unused portion of the revolving facility of 0.25% to 0.45%, and our letter of credit participation fee ranges from 1.25% to 2.25%. As of September 30, 2017, we had $216,000,000 outstanding under our revolving facility and approximately $168,438,000 outstanding under the TLA.

Our accounts receivable securitization financing facility (the “ABS facility”) was amended on June 27, 2018 to, among other things, renew the borrowing program for a three-year term expiring June 23, 2021. The ABS facility has a maximum aggregate borrowing availability of $250,000,000, and matures on June 23, 2019. Interest is payable monthly, and the floating interest rate applicable at September 30, 2017 was 2.14% per annum, including a 0.85% usage fee on any outstanding balances. In addition, we pay a monthly commitment fee on the unused portion of the facility of 0.375%.$250,000,000. While the ABS facility has a stated maximum amount, the actual availability under the ABS facility is limited by the quantity and quality of the underlying accounts receivable. As of September 30, ~~2017,~~2018, qualified receivables were sufficient to permit access to the full $250,000,000 facility amount, of which ~~$160,000,000~~$111,000,000 was outstanding.

Our consolidated debt balance that can be outstanding at the end of any fiscal quarter under our revolving facility, our TLA and our ABS facility is limited by certain financial covenants, particularly a maximum leverage ratio. The maximum leverage ratio is calculated as aggregate debt outstanding divided by the sum of our trailing twelve month net earnings (loss) plus (i) interest expense, excludingnon-cash imputed interest on our inventory financing facility, (ii) income tax expense (benefit), (iii) depreciation and amortization,(iv) non-cash stock-based compensation, (v) extraordinary or~~non-recurringnon-cash~~ non-recurring non-cash losses or expenses and (vi) certain cash restructuring and acquisition-related charges and synergies, not to exceed a specified cap (“adjusted earnings”). The maximum leverage ratio permitted under the facilities ~~was increased to 3.50~~is currently 3.25 times our trailing twelve-month adjusted ~~earnings in conjunction with the acquisition of Datalink effective January 6, 2017.~~earnings. A significant drop in our adjusted earnings would limit the amount of indebtedness that could be outstanding at the end of any fiscal quarter to a level that would be below our consolidated maximum facility amount. Based on our maximum leverage ratio as of September 30, ~~2017,~~2018, our aggregate debt balance that could have been outstanding under our revolving facility, our TLA and our ABS facility was the full amount of the maximum borrowing capacity of ~~$768,438,000, of which $216,000,000 was~~$756,406,000. We had no amounts outstanding under our revolving credit facility ~~$168,438,000 was~~and $156,406,000 and $111,000,000 outstanding under our TLA and ~~$160,000,000 was outstanding under our~~ ABS facility, respectively, at September 30, ~~2017.~~2018.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Inventory Financing Facility

Our inventory financing facility ~~has a maximum borrowing capacity of~~was amended on March 23, 2018 to increase the aggregate availability for vendor purchases under the facility from $325,000,000 to $400,000,000, of which ~~$224,072,000~~$237,556,000 was outstanding at September 30, ~~2017, and~~2018. The inventory financing facility matures on June 23, 2021. In conjunction with the increase in the aggregate availability under the facility, we no longer have the option to request additional increases in the aggregate amount available under the inventory financing facility without amending the facility. If balances are not paid within stated vendor terms, they will accrue interest at prime plus 1.25%. From time to time and at our option, we may request to increase the aggregate amount available under the inventory financing facility by up to an aggregate of $25,000,000, subject to customary conditions. Amounts outstanding under this facility are classified separately as accounts payable -– inventory financing facility in the accompanying consolidated balance sheets. Interest does not accrue on advances paid within vendor terms. The inventory financing facility is guaranteed by the Company and each of its material domestic subsidiaries, and is secured by a lien on substantially all of the Company’s and each guarantor’s assets.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Capital Lease and Other Financing Obligations

~~In March 2016 and May 2017, we entered into capitalized leases with36-month~~ ~~terms for certain IT equipment. Additionally, in August 2017, we entered into two12-month~~ ~~capital leases for certain IT equipment. The capital leases werenon-cash~~ ~~transactions and, accordingly, have been excluded from our consolidated statement of cash flows for the nine months ended September 30, 2017 and 2016.~~ Our capital lease obligations totaled ~~$3,277,000~~$1,517,000 and ~~$1,231,000~~$2,802,000 as of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

In conjunction with our acquisition of Datalink effective January 6, 2017, we acquired certain obligations associated with Datalink’s financing of the equipment that it leased to its clients. These financing obligations totaled ~~$2,950,000~~$457,000 and $2,489,000 as of September 30, ~~2017.~~2018 and December 31, 2017, respectively.

The current and long-term portions of our capital lease and other financing obligations are included in the current and long-term portions of long-term debt in the table above and in our consolidated balance ~~sheet~~sheets as of September 30, 2018 and December 31, 2017.

6.	4. Severance and Restructuring Activities

During the ~~three and~~ nine months ended September 30, ~~2017,~~2018, we recorded severance expense in each of our operating segments. The ~~North America~~ charges ~~for the nine months ended September 30, 2017~~in all three operating segments primarily related to severance actions taken to realign certain roles and responsibilities subsequent to the acquisition of Datalink. The EMEA charges for the nine months ended September 30, 2017 primarily related to headcount reductions in France, Germany and the Netherlands as part of our cost reduction and restructuring initiatives. The APAC charges for the nine months ended September 30, 2017 primarily related to severance actions taken subsequent to the acquisition of Ignia.

responsibilities. The following table details the activity related to these resource actions for the nine months ended September 30, ~~2017~~2018 and the outstanding obligations as of September 30, ~~2017~~2018 (in thousands):

													North America			EMEA			APAC			Consolidated
	North America			EMEA			APAC			Consolidated
Balances at December 31, 2016	$	947		$	1,217		$	—		$	2,164
Balances at December 31, 2017													$	1,631		$	2,994		$	15		$	4,640
Severance costs, net of adjustments		2,045			4,062			104			6,211			1,034			1,545			130			2,709
Cash payments		(2,277	)		(2,716	)		(89	)		(5,082	)		(1,403	)		(3,102	)		(145	)		(4,650	)
Foreign currency translation adjustments		14			435			—			449			(21	)		(12	)		—			(33	)

Balances at September 30, 2017	$	729		$	2,998		$	15		$	3,742

Balances at September 30, 2018													$	1,241		$	1,425		$	—		$	2,666

The remaining outstanding obligations are expected to be paid during the next 12 months and, therefore, are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. 7.Stock-Based Compensation

We recorded the followingpre-tax amounts in selling and administrative expenses for stock-based compensation, by operating segment, in the accompanying consolidated financial statements (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
North America	$	2,589	$	2,220	$	7,716	$	6,108	$	2,837	$	2,589	$	8,172	$	7,716
EMEA		694		681		2,130		1,858		754		694		2,234		2,130
APAC		102		124		288		342		126		102		358		288

Total Consolidated	$	3,385	$	3,025	$	10,134	$	8,308	$	3,717	$	3,385	$	10,764	$	10,134

As of September 30, ~~2017,~~2018, total compensation cost related to nonvested RSUs not yet recognized is ~~$20,543,000,~~$23,929,000, which is expected to be recognized over the next ~~1.29~~1.34 years on a weighted-average basis.

The following table summarizes our RSU activity during the nine months ended September 30, ~~2017:~~2018:

   Number    Weighted Average
Grant Date Fair Value    Fair Value
Nonvested at January 1, 2017
   1,067,557    $ 25.37
Granted(a)
   331,250    44.29
Vested, including shares withheld to
cover taxes
   (413,807 )    24.69    $ 18,258,878 ^(b)


Forfeited
   (58,900 )    30.94



Nonvested at September 30, 2017(a)
   926,100    32.13    $ 42,526,512 ^(c)

	Number			Weighted Average Grant Date Fair Value		Fair Value
Nonvested at January 1, 2018		892,113		$	32.86
Granted^(a)		431,745			37.02
Vested, including shares withheld to cover taxes		(376,319	)		29.74	$	13,962,749	^(b)
Forfeited		(37,469	)		33.87
Nonvested at September 30, 2018^(a)		910,070			36.08	$	49,225,686	^(c)

^(a)

Includes ~~79,118~~113,993 RSUs subject to remaining performance conditions. The number of RSUs subject to performance conditions are based on the Company achieving ~~100%~~97% of its ~~2017~~2018 targeted financial results. The number of RSUs ultimately awarded under the performance-based RSUs varies based on actual achieved financial results for ~~2017.~~2018.

^(b)

⁽^b⁾

The aggregate fair value of vested RSUs represents the totalpre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

^(c)

⁽^c⁾

The aggregate fair value of the nonvested RSUs and the RSUs expected to vest represents the totalpre-tax fair value, based on our closing stock price of ~~$45.92~~$54.09 as of September ~~29, 2017~~28, 2018 (the last trading day of the quarter), which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

8.	6. Income Taxes

Our effective tax rate for the three and nine months ended September 30, 2018 was 25.6% and 25.8%, respectively. For the three and nine months ended September 30, 2018, our effective tax rate was higher than the United States federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit.

Our effective tax rate for the three and nine months ended September 30, 2017 was 36.8% and 35.6%, respectively. For the three months ended September 30, 2017, our effective tax rate was higher than the United States federal statutory rate of 35.0% due primarily to state income taxes, net of federal benefit, and the disallowance of the loss on the sale of a foreign entity. Additionally, the effect of lower taxes on earnings in foreign jurisdictions was offset partially by losses in certain foreign jurisdictions, resulting in an increase in the valuation allowance for

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

deferred tax assets related to these foreign operating losses. For the nine months ended September 30, 2017, our effective tax rate approximated the United States federal statutory rate of 35.0% due primarily to increases in the rate caused by state income taxes, net of federal benefit, and the disallowance of the loss on the sale of a foreign entity offset by the decreases in the rate caused by the recognition of $2,258,000 of tax benefits on the settlement of employee share-based awards during the first nine months of 2017 in accordance with a new accounting standard,

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

which was adopted effective January 1, 2017. ~~See Note 1 for additional information relating to this new accounting standard.~~ Additionally, the effect of lower taxes on earnings in foreign jurisdictions was offset partially by losses in certain foreign jurisdictions, resulting in an increase in the valuation allowance for deferred tax assets related to these foreign operating losses.

~~Our effective~~In December 2017, U.S. federal tax ~~rate for~~reform was enacted as part of the ~~three~~U.S. Tax Cuts and ~~nine months~~Jobs Act. Although we recorded a tax charge in 2017 in connection with the enactment of the U.S. Tax Cuts and Jobs Act, we have not completed our accounting related to all of its provisions. U.S. income taxes attributable to the remeasurement of U.S. deferred income taxes, the mandatory deemed repatriation provision and the state tax effects of these items are provisional amounts. For the quarter ended September 30, 2016 was 35.0% and 36.8%, respectively. For the three months ended September 30, 2016, our effective tax rate was equal to the United States federal statutory rate of 35.0%. The decrease in rates resulting from the recognition of certain tax benefits related to the release of reserves for specific uncertain tax positions during the quarter and lower taxes on earnings in foreign jurisdictions fully offset the increase in rates caused by state income taxes, net of federal benefit. For the nine months ended September 30, 2016, our effective tax rate was higher than the United States federal statutory rate of 35.0% due primarily to state income taxes, net of federal benefit, and losses in certain foreign jurisdictions, resulting in an increase in the valuation allowance for deferred tax assets related2018, we have not made any changes to these ~~foreign operating losses.~~provisional estimates, and we are continuing to analyze and model the impacts of the U.S. federal tax reform and will record said impacts as they become more certain, but no later than December 2018.

As of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, we had approximately ~~$3,877,000~~$4,139,000 and ~~$2,246,000,~~$4,273,000, respectively, of unrecognized tax benefits. Of these amounts, approximately ~~$276,000~~$314,000 and ~~$195,000,~~$287,000, respectively, related to accrued interest. In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate. We do not believe there will be any changes over the next 12 months that would have a material effect on our effective tax rate.

Several of our subsidiaries are currently under audit for tax years 2012 through 2015. Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that the examination phase of these audits may be concluded within the next 12 months, which could ~~significantly~~ increase or decrease the balance of our gross unrecognized tax benefits. However, based on the status of the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible outcomes cannot be made at this time, but the estimated effect on our income tax expense and net earnings is not expected to be significant.

9.	Share Repurchase Program

~~7. Share Repurchase Programs~~

~~We did not~~On February 13, 2018, our Board of Directors authorized the repurchase ~~shares~~of up to $50,000,000 of our common ~~stock during~~stock. Our share repurchases will be made on the open market, subject to Rule 10b-18 or in privately negotiated transactions, through block trades, through 10b5-1 plans or otherwise, at management’s discretion. The amount of shares purchased and the timing of the purchases will be based on market conditions, working capital requirements, general business conditions and other factors. We intend to retire the repurchased shares.

During the nine months ended September 30, 2017 and no share repurchase programs are currently authorized by the Board of Directors. During the comparative nine months ended September 30, 2016, under previously authorized share repurchase programs,2018, we ~~purchased 1,891,564~~repurchased 641,211 shares of our common stock on the open market at a total cost of approximately ~~$50,000,000~~$22,069,000 (an average price of ~~$26.43~~$34.42 per share). All shares repurchased were retired. During the comparative nine months ended September 30, 2017, we did not repurchase any shares of our common stock.

~~8. Commitments and Contingencies~~22

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

10.	Commitments and Contingencies

Contractual

In the ordinary course of business, we issue performance bonds to secure our performance under certain contracts or state tax requirements. As of September 30, ~~2017,~~2018, we had approximately ~~$2,704,000~~$2,075,000 of performance bonds outstanding. These bonds are issued on our behalf by a surety company on an unsecured basis; however, if the surety company is ever required to pay out under the bonds, we have contractually agreed to reimburse the surety company.

Management believes that payments, if any, related to these performance bonds are not probable at September 30, ~~2017.~~2018. Accordingly, we have not accrued any liabilities related to such performance bonds in our consolidated financial statements.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

Employment Contracts and Severance Plans

We have employment contracts with, and severance plans covering, certain officers and management teammates under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested RSUs would accelerate following a change in control. If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from three to twenty-four months of salary.

Indemnifications

From time to time, in the ordinary course of business, we enter into contractual arrangements under which we agree to indemnify either our clients or third-party service providers from certain losses incurred relating to services performed on our behalf or for losses arising from defined events, which may include litigation or claims relating to past performance. These arrangements include, but are not limited to, the indemnification of our clients for certain claims arising out of our performance under our sales contracts, the indemnification of our landlords for certain claims arising from our use of leased facilities and the indemnification of the lenders that provide our credit facilities for certain claims arising from their extension of credit to us. Such indemnification obligations may not be subject to maximum loss clauses.

Management believes that payments, if any, related to these indemnifications are not probable at September 30, ~~2017.~~2018. Accordingly, we have not accrued any liabilities related to such indemnifications in our consolidated financial statements.

We have entered into separate indemnification agreements with certain of our executive officers and with each of our directors. These agreements require us, among other requirements, to indemnify such officers and directors against expenses (including attorneys’ fees), judgments and settlements incurred by such individual in connection with any action arising out of such individual’s status or service as our executive officer or director (subject to exceptions such as where the individual failed to act in good faith or in a manner the individual reasonably believed to be in, or not opposed to, the best interests of the Company) and to advance expenses incurred by such individual with respect to which such individual may be entitled to indemnification by us. There are no pending legal proceedings that involve the indemnification of any of the Company’s directors or officers.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Contingencies Related to Third-Party Review

From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, client and partner audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in the consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.

Legal Proceedings

From time to time, we are party to various legal proceedings arising in the ordinary course of business, including preference payment claims asserted in client bankruptcy proceedings, indemnification claims, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of allegednon-compliance with contract provisions and claims related to alleged violations of laws and regulations. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

The Company is not involved in any pending or threatened legal proceedings that it believes would reasonably be expected to have a material adverse effect on its business, financial condition or results of operations.

11.Segment Information

We operate in three reportable geographic operating segments: North America; EMEA; and APAC. Our offerings in North America and ~~select~~certain countries in EMEA and APAC include IT hardware, software and services. Our offerings in the remainder of our EMEA and APAC segments are largely software and ~~select~~certain software-related services. ~~Net~~

During the year ended December 31, 2017, subsequent to our acquisition of Datalink, our consolidated net sales from the provision of services approximated 10%. As such, beginning with our results of operations for the year ended December 31, 2017, we began reporting net sales from the provision of services and the related costs of goods sold separately from net sales of products and the related costs of goods sold on the face of our consolidated statement of operations. We continued this presentation in the three and nine months ended September 30, 2018, and expect to continue this presentation in future periods. For comparability purposes, net sales and costs of goods sold for the three and nine months ended September 30, 2017 have been expanded to conform to the current year presentation. These changes in presentation had no effect on previously reported total net sales, total costs of goods sold or gross profit amounts.

In conjunction with these changes in presentation, because fees earned from activities reported net are considered services revenues, we reclassified certain revenue streams for which we act as the agent in the transaction to net sales from services. Previously, we included these net revenue streams within our software and, to a lesser extent, hardware sales mix categories based on the type of product being sold (e.g., fees earned for the sale of software maintenance and certain software licenses were included in software sales and fees earned for the sale of certain third-party provided training and warranty services were included in hardware sales when we

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

historically disclosed and analyzed our sales mix). For comparability purposes, our sales mix among our hardware, software and services categories for the three and nine months ended September 30, 2017 have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported total net sales amounts.

The following table summarizes net sales by offering for North America, EMEA and APAC ~~were as follows~~including the effect of the reclassifications on the previously reported net sales by sales mix amounts for the three and nine months ended September 30, 2017 (in thousands):


	North America				EMEA				APAC				North America				EMEA				APAC
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
Sales Mix	2017		2016		2017		2016		2017		2016		2018		2017		2018		2017		2018		2017
															(As Reclassified)				(As Reclassified)				(As Reclassified)
Hardware	$	962,214	$	651,277	$	137,493	$	128,214	$	7,447	$	4,638	$	953,431	$	962,101	$	147,497	$	137,493	$	6,041	$	7,444
Software		342,601		323,436		163,260		174,180		20,153		22,182		259,602		321,074		168,603		153,616		13,099		17,245
Services		106,264		76,620		11,441		9,338		7,100		2,831		158,426		127,904		29,080		21,085		11,947		10,011
													$	1,371,459	$	1,411,079	$	345,180	$	312,194	$	31,087	$	34,700
	$	1,411,079	$	1,051,333	$	312,194	$	311,732	$	34,700	$	29,651


	North America				EMEA				APAC
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
Sales Mix	2017		2016		2017		2016		2017		2016
Hardware	$	2,476,645	$	1,801,941	$	400,362	$	359,597	$	18,449	$	13,728
Software		1,012,725		898,193		552,800		586,332		91,430		106,435
Services		313,973		214,341		35,447		30,871		17,717		6,494

	$	3,803,343	$	2,914,475	$	988,609	$	976,800	$	127,596	$	126,657

	North America				EMEA				APAC
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
Sales Mix	2018		2017		2018		2017		2018		2017
			(As Reclassified)				(As Reclassified)				(As Reclassified)
Hardware	$	2,724,916	$	2,476,353	$	505,844	$	400,362	$	22,518	$	18,440
Software		828,231		936,700		551,920		513,050		91,459		81,501
Services		465,458		390,290		104,086		75,197		36,658		27,655
	$	4,018,605	$	3,803,343	$	1,161,850	$	988,609	$	150,635	$	127,596

Fees earned from activities reported on a net basis in North America, EMEA and APAC, totaling $21,641,000, $9,644,000 and $2,911,000, respectively, in the three months ended September 30, 2017, were reclassified from our software or hardware product categories to our services category to conform to the current year presentation. For the nine months ended September 30, 2017, fees earned from activities reported on a net basis in North America, EMEA and APAC, totaling $76,317,000, $39,750,000 and $9,938,000, respectively, were reclassified from our software or hardware product categories to our services category to conform to the current year presentation.

All significant intercompany transactions are eliminated upon consolidation, and there are no differences between the accounting policies used to measure profit and loss for our segments or on a consolidated basis. Net sales are defined as net sales to external clients. None of our clients exceeded ten percent of consolidated net sales for the three or nine months ended September 30, ~~2017~~2018 or ~~2016.~~2017.

A portion of our operating segments’ selling and administrative expenses arise from shared services and infrastructure that we have historically provided to them in order to realize economies of scale and to use resources efficiently. These expenses, collectively identified as corporate charges, include senior management expenses, internal audit, legal, tax, insurance services, treasury and other corporate infrastructure expenses. Charges are allocated to our operating segments, and the allocations have been determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the operating segments.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following tables present our results of operations by reportable operating segment for the periods indicated (in thousands):

										Three Months Ended September 30, 2018
	Three Months Ended September 30, 2017									North America		EMEA		APAC		Consolidated
	North America		EMEA			APAC		Consolidated
Net sales	$	1,411,079	$	312,194		$	34,700	$	1,757,973
Costs of goods sold		1,235,058		270,576			26,258		1,531,892

Gross profit		176,021		41,618			8,442		226,081
Operating expenses:
Selling and administrative expenses		132,853		39,948			7,589		180,390
Severance and restructuring expenses		398		53			43		494
Loss on sale of foreign entity		—		3,646			—		3,646
Acquisition-related expenses		—		106			—		106

Earnings (loss) from operations	$	42,770	$	(2,135	)	$	810	$	41,445


	Three Months Ended September 30, 2016
	North America		EMEA			APAC		Consolidated
Net sales	$	1,051,333	$	311,732		$	29,651	$	1,392,716
Costs of goods sold		914,515		273,424			22,969		1,210,908

Net sales:
Products										$	1,213,033	$	316,100	$	19,140	$	1,548,273
Services											158,426		29,080		11,947		199,453
Total net sales											1,371,459		345,180		31,087		1,747,726
Costs of goods sold:
Products											1,108,658		290,071		17,079		1,415,808
Services											83,474		7,875		5,655		97,004
Total costs of goods sold											1,192,132		297,946		22,734		1,512,812
Gross profit		136,818		38,308			6,682		181,808		179,327		47,234		8,353		234,914
Operating expenses:
Selling and administrative expenses		99,845		37,893			6,134		143,872		134,792		42,206		7,097		184,095
Severance and restructuring expenses		643		145			—		788		253		430		—		683
Acquisition-related expenses		575		—			166		741		188		—		—		188

Earnings from operations	$	35,755	$	270		$	382	$	36,407	$	44,094	$	4,598	$	1,256	$	49,948


	Nine Months Ended September 30, 2017
	North America		EMEA			APAC		Consolidated
Net sales	$	3,803,343	$	988,609		$	127,596	$	4,919,548
Costs of goods sold		3,286,235		848,712			98,914		4,233,861

Gross profit		517,108		139,897			28,682		685,687
Operating expenses:
Selling and administrative expenses		395,423		121,863			21,488		538,774
Severance and restructuring expenses		2,045		4,062			104		6,211
Loss on sale of foreign entity		—		3,646			—		3,646
Acquisition-related expenses		3,223		106			—		3,329

Earnings from operations	$	116,417	$	10,220		$	7,090	$	133,727


	Nine Months Ended September 30, 2016
	North America		EMEA			APAC		Consolidated
Net sales	$	2,914,475	$	976,800		$	126,657	$	4,017,932
Costs of goods sold		2,522,546		839,990			103,263		3,465,799

Gross profit		391,929		136,810			23,394		552,133
Operating expenses:
Selling and administrative expenses		301,147		121,663			17,367		440,177
Severance and restructuring expenses		2,451		487			115		3,053
Acquisition-related expenses		575		—			166		741

Earnings from operations	$	87,756	$	14,660		$	5,746	$	108,162

	Three Months Ended September 30, 2017
	North America		EMEA			APAC		Consolidated
Net sales:
Products	$	1,283,175	$	291,109		$	24,689	$	1,598,973
Services		127,904		21,085			10,011		159,000
Total net sales		1,411,079		312,194			34,700		1,757,973
Costs of goods sold:
Products		1,175,757		265,588			22,069		1,463,414
Services		59,301		4,988			4,189		68,478
Total costs of goods sold		1,235,058		270,576			26,258		1,531,892
Gross profit		176,021		41,618			8,442		226,081
Operating expenses:
Selling and administrative expenses		132,853		39,948			7,589		180,390
Severance and restructuring expenses		398		53			43		494
Loss on sale of foreign entity		—		3,646			—		3,646
Acquisition-related expenses		—		106			—		106
Earnings (loss) from operations	$	42,770	$	(2,135	)	$	810	$	41,445

	Nine Months Ended September 30, 2018
	North America		EMEA		APAC		Consolidated
Net sales:
Products	$	3,553,147	$	1,057,764	$	113,977	$	4,724,888
Services		465,458		104,086		36,658		606,202
Total net sales		4,018,605		1,161,850		150,635		5,331,090
Costs of goods sold:
Products		3,242,903		971,232		105,046		4,319,181
Services		230,487		25,370		16,498		272,355
Total costs of goods sold		3,473,390		996,602		121,544		4,591,536
Gross profit		545,215		165,248		29,091		739,554
Operating expenses:
Selling and administrative expenses		402,638		137,383		21,718		561,739
Severance and restructuring expenses		1,034		1,545		130		2,709
Acquisition-related expenses		282		—		—		282
Earnings from operations	$	141,261	$	26,320	$	7,243	$	174,824

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

	Nine Months Ended September 30, 2017
	North America		EMEA		APAC		Consolidated
Net sales:
Products	$	3,413,053	$	913,412	$	99,941	$	4,426,406
Services		390,290		75,197		27,655		493,142
Total net sales		3,803,343		988,609		127,596		4,919,548
Costs of goods sold:
Products		3,109,186		835,343		91,957		4,036,486
Services		177,049		13,369		6,957		197,375
Total costs of goods sold		3,286,235		848,712		98,914		4,233,861
Gross profit		517,108		139,897		28,682		685,687
Operating expenses:
Selling and administrative expenses		395,423		121,863		21,488		538,774
Severance and restructuring expenses		2,045		4,062		104		6,211
Loss on sale of foreign entity		—		3,646		—		3,646
Acquisition-related expenses		3,223		106		—		3,329
Earnings from operations	$	116,417	$	10,220	$	7,090	$	133,727

The following is a summary of our total assets by reportable operating segment (in thousands):


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
North America	$	2,291,321		$	2,204,351		$	2,426,570		$	2,337,573
EMEA		512,284			562,293			478,179			530,242
APAC		96,012			119,778			100,295			101,169
Corporate assets and intercompany eliminations, net		(320,325	)		(667,122	)		(494,527	)		(283,333	)

Total assets	$	2,579,292		$	2,219,300		$	2,510,517		$	2,685,651

We recorded the followingpre-tax amounts, by reportable operating segment, for depreciation and amortization in the accompanying consolidated financial statements (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Depreciation and amortization of property and equipment:
North America	$	5,276	$	5,411	$	15,380	$	16,691	$	4,131	$	5,276	$	12,587	$	15,380
EMEA		1,287		1,300		3,662		3,753		1,052		1,287		3,053		3,662
APAC		138		111		388		341		123		138		378		388
										5,306		6,701		16,018		19,430
		6,701		6,822		19,430		20,785

Amortization of intangible assets:
North America		4,012		2,112		12,036		7,007		3,949		4,012		10,670		12,036
EMEA		—		527		12		1,926		71		—		216		12
APAC		198		174		595		379		165		198		513		595
										4,185		4,210		11,399		12,643
		4,210		2,813		12,643		9,312

Total	$	10,911	$	9,635	$	32,073	$	30,097	$	9,491	$	10,911	$	27,417	$	32,073

~~10. Acquisitions~~

~~Caase.com~~

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12.	Acquisition

Effective ~~September 26, 2017,~~August 1, 2018, we acquired ~~Caase.com,~~100 percent of the issued and outstanding shares of Cardinal, a ~~Dutch cloud service~~digital solutions provider based in Cincinnati, Ohio, with offices across the Midwest and Southeast United States, for a cash purchase price, net of cash acquired, of approximately ~~$6,038,000, subject to a~~$79,000,000, including estimates for final working capital ~~adjustment.~~and tax gross up adjustments to be paid in future periods. Cardinal provides technology solutions to digitally transform organizations through their expertise in mobile applications development, Internet of Things and cloud enabled business intelligence. We believe that this acquisition strengthens our ~~ability to deliver Intelligent Technology Solutions~~^TMservices capabilities and will bring value to our clients inwithin our digital innovation services solution offering.

The fair value of net assets acquired was approximately $42,500,000, including $27,540,000 of identifiable intangible assets, consisting primarily of customer relationships that will be amortized using the ~~Netherlands, with a view to expand into~~straight line method over the ~~wider European region in the near future.~~

estimated economic life of ten years. The preliminary purchase price was allocated using the information currently available. Further information obtained upon the finalization of the fair value assumptions for identifiable intangible assets acquired and the ~~evaluation~~finalization of ~~uncertain tax positions~~the fair value of the non-cash working capital could lead to an adjustment of the purchase price allocation. ~~Identified intangible assets and goodwill~~Goodwill acquired approximated ~~$2,232,000 and $4,117,000, respectively,~~$36,500,000 which ~~were~~was recorded in our ~~EMEA~~North America operating segment. ~~None of the~~The goodwill is tax deductible.

We consolidated the results of operations for ~~Caase.com~~Cardinal within our ~~EMEA~~North America operating segment beginning on August 1, 2018, the ~~September 26, 2017~~ effective date of the acquisition. Our historical results would not have been materially affected by the acquisition of ~~Caase.com~~Cardinal and, accordingly, we have not presented pro forma information as if the acquisition had been completed at the beginning of each period presented in our ~~statements~~statement of operations.

INSIGHT ENTERPRISES, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~Datalink~~

On January 6, 2017, we completed our acquisition of Datalink, a leading provider of IT services and enterprise data center solutions based in Eden Prairie, Minnesota, for a cash purchase price of $257,456,000, which included cash and cash equivalents acquired of $76,597,000. We believe that this acquisition strengthened our position as a leading IT solutions provider with deep technical talent delivering data center solutions to clients on premise or in the cloud.

~~The following table summarizes the purchase price and the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):~~

Total purchase price
      $ 257,456
Fair value of net assets acquired:

Current assets
   $ 238,577
Identifiable intangible assets – see description below
   94,500
Property and equipment
   5,843
Other assets
   17,888
Current liabilities
   (129,071 )
Long-term liabilities, including deferred taxes
   (34,421 )



Total fair value of net assets acquired
      193,316


Excess purchase price over fair value of net assets acquired (“goodwill”)
      $ 64,140

Under the acquisition method of accounting, the total purchase price as shown in the table above was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over fair value of net assets acquired was recorded as goodwill.

The estimated fair values of current assets and liabilities (other than deferred revenue and related deferred costs) were based upon their historical costs on the date of acquisition due to their short-term nature. The majority of property and equipment were also estimated based upon historical costs as they approximated fair value. Certain long-term assets, including Datalink’s IT system, were written down to the estimated fair value based on the economic benefit expected to be realized from the assets following the acquisition. Deferred revenue acquired represents monies collected prior to January 6, 2017 related to unearned revenues associated with support services to be performed in the future. The estimated fair value of deferred revenue of $65,500,000, which is included in current and long-term liabilities in the table above, was calculated using the adjusted fulfillment cost method as the present value of the costs expected to be incurred by a third party to perform the support services obligations acquired under various customer contracts, plus a reasonable profit associated with the performance effort. The deferred costs acquired represent monies paid prior to January 6, 2017 to purchase third party customer support contracts from manufacturers. The estimated fair value of the deferred costs of $48,029,000, which is included in current and other assets in the table above, was calculated in conjunction with the valuation of deferred revenue discussed above.

~~Identified intangible assets of $94,500,000 consist primarily of customer relationships, the trade name andnon-compete~~ agreements, which were valued at $92,200,000, $2,200,000 and $100,000, respectively. These values were determined using the multiple-period excess earnings method, the relief from royalty method and the lost income method, respectively.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~The identifiable intangibles resulting from the acquisition are amortized using the straight-line method over the following estimated useful lives:~~


~~Intangible Assets~~		~~Estimated Economic Life~~
~~Customer relationships~~		~~10 Years~~
~~Trade name~~		~~1 Year~~
~~Non-compete~~ ~~agreements~~		~~1 Year~~

~~Amortization expense recognized for the period from the acquisition date through September 30, 2017 was $8,640,000.~~

Goodwill of $64,140,000, which was recorded in our North America operating segment, represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed from Datalink. The goodwill is not amortized and will be tested for impairment annually in the fourth quarter of our fiscal year. The addition of the Datalink technical employees to our team and the opportunity to grow our data center solutions business are the primary factors making up the goodwill recognized as part of the transaction. None of the goodwill is tax deductible.

The preliminary purchase price was allocated using information available at the time. During the second quarter of 2017, upon analysis of additional information affecting our estimate of the fair value of net assets acquired, we adjusted the purchase price allocation and reduced the goodwill balance by $945,000. During the third quarter of 2017, no further adjustments to the purchase price allocation were made. Further information regarding deferred tax amounts could lead to an additional adjustment of the purchase price allocation upon finalization of the fair value assumptions in the fourth quarter of 2017.

We have consolidated the results of operations for Datalink since its acquisition on January 6, 2017. Consolidated net sales and gross profit for the three and nine months ended September 30, 2017 include $134,495,000 and $29,874,000, and $387,218,000 and $89,124,000, respectively, from Datalink. The following table reports pro forma information as if the acquisition of Datalink had been completed at the beginning of the earliest period presented (in thousands, except per share amounts):

      Three Months Ended
September 30,    Nine Months Ended
September 30,
      2017    2016    2017    2016
Net sales
   As reported    $ 1,757,973    $ 1,392,716    $ 4,919,548    $ 4,017,932
   Proforma    $ 1,757,973    $ 1,544,175    $ 4,923,457    $ 4,472,878
Net earnings
   As reported    $ 22,412    $ 21,635    $ 76,515    $ 63,590
   Proforma    $ 22,412    $ 20,721    $ 74,461    $ 63,285
Diluted earnings per share
   As reported    $ 0.62    $ 0.60    $ 2.11    $ 1.74
   Proforma    $ 0.62    $ 0.58    $ 2.06    $ 1.73

~~Changes in Goodwill~~

Other than the goodwill recorded in conjunction with the acquisitions of Datalink and Caase.com, the only other change in consolidated goodwill as of September 30, 2017 compared to the balance as of December 31, 2016 resulted from foreign currency translation adjustments associated with the goodwill balance in our APAC operating segment.

~~INSIGHT ENTERPRISES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~11. Sale of Foreign Entity~~

On July 19, 2017, we concluded the sale of our operations in Russia, formerly a part of our EMEA operating segment, to one of our global partners that is focused in the region. We recorded a loss on the sale of the foreign entity of approximately $3,646,000 during the third quarter of 2017, including a $2,903,000 charge upon the release of our cumulative translation adjustment account balance as of the sale date.

~~INSIGHT ENTERPRISES, INC.~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form10-Q. We refer to our customers as “clients,” our suppliers as “partners” and our employees as “teammates.” ~~Additionally, any references to our “core” business exclude Datalink’s results subsequent to the Datalink acquisition.~~

Quarterly Overview

Today, every business is a technology business. We ~~are a Fortune 500 global IT provider helping businesses~~empower organizations of all sizes ~~– from small and medium sized firms to worldwide enterprises, governments, schools and health care organizations – define, architect, implement and manage Intelligent Technology Solutions~~^TM in North America; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”)~~. We empower our~~ with Insight Intelligent Technology Solutions^TM and services to maximize the business value of IT. As a Fortune 500-ranked global provider of digital innovation, cloud/data center transformation, connected workforce, and supply chain optimization solutions and services, we help clients ~~to manage their IT environments so they can drive meaningful business outcomes today~~innovate and ~~transform~~optimize their operations ~~for tomorrow.~~to run smarter. Our offerings in North America and ~~select~~certain countries in EMEA and APAC include hardware, software and services. Our offerings in the remainder of our EMEA and APAC segments ~~are~~consist of largely software and ~~select~~certain software-related services.

Consolidated net sales of ~~$1.76~~ $1.75 billion in the three months ended September 30, 2018 decreased less than 1% when compared to the three months ended September 30, 2017, reflecting strong growth in our services category, offset by a decrease in software product sales year over year resulting from the effect of the adoption of ASC 606, effective January 1, 2018, whereby more of our software sales are now reported newt and included in services revenue. Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales remained flat in the third quarter of 2018 compared to the third quarter of 2017.

Consolidated gross profit of $234.9 million in the three months ended September 30, 2018 increased ~~26%~~4% compared to the three months ended September 30, ~~2016, reflecting growth of 17% in our core business and the addition of Datalink to our results of operations beginning January 6,~~ 2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated ~~net sales~~gross profit increased ~~25% in the third quarter of 2017 compared to the third quarter of 2016.~~

~~Consolidated gross profit of $226.1 million~~5% in the three months ended September 30, ~~2017 increased 24%~~2018 compared to the three months ended September 30, ~~2016. Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit also~~2017. Gross margin increased ~~24% in the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Gross margin declined~~ approximately 2050 basis points year toover year to ~~12.9%~~13.4%, reflecting ~~lower~~an increase in gross ~~margin generated~~profit from ~~our core business, partially offset by the positive contribution of Datalink’s results subsequent to the Datalink acquisition. The lower gross margin in our core business was driven by lower~~ services net sales, including professional services and ~~lower product margin resulting from~~ a higher mix of sales ~~to large enterprise clients during~~of software maintenance and cloud offerings which are recorded net, as we are the ~~three months ended September 30, 2017.~~agent in these transactions.

Consolidated selling and administrative expenses for the third quarter of ~~2017~~2018 increased ~~$36.5~~$3.7 million, or ~~25%~~ 2% year over year ~~(up 24%~~(up 3% excluding the effects of fluctuating foreign currency exchange rates)~~. The year over year increase reflects an increase of 7% in selling and administrative expenses in our core business, including investments in teammate expenses, and~~ due primarily to the addition of ~~Datalink~~Cardinal Solutions Group, Inc. (“Cardinal”) to our ~~business.~~

~~On July 19, 2017, we concluded the sale of our operations~~business beginning in Russia, formerly a part of our EMEA operating segment, to one of our global partners that is focused in the region. We recorded a loss on the sale of the foreign entity of approximately $3.6 million during the third quarter of 2017, including a $2.9 million charge upon the release of our cumulative translation adjustment account balance as of the sale date. August 2018. Our consolidated results of operations for the third quarter of ~~2017~~2018 also include severance expense, net of adjustments, totaling $683,000 compared to $494,000 during the third quarter of 2017, as well as, $188,000 in transaction expenses related to our acquisition of Cardinal compared to $106,000 in transaction expenses related to ~~the Caase.com~~our acquisition ~~in EMEA and severance expenses, net~~ of ~~adjustments, totaling $494,000. Comparatively,~~Caase Group B.V. (referred to herein as, “Caase.com”) during the third

quarter of 2017. Additionally, in the third quarter of 2017, we sold our operations in Russia, formerly part of our EMEA operating segment, and recorded a loss on the sale of $3.6 million.

20Consolidated earnings from operations grew 21% year over year to $49.9 million in the third quarter of 2018 compared to $41.4 million in the third quarter of 2017.Each of our operating segments contributed positively to these earnings results. Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations also increased 21% year over year.

On a consolidated basis, we reported net earnings of $32.2 million and diluted earnings per share of $0.89 for the third quarter of 2018, which includes a benefit from the lower tax rate due to

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

~~quarter of 2016, we incurred $741,000 in transaction expenses related~~the 2017 U.S. federal tax reform. This compares to ~~the acquisitions of Ignia and Datalink and severance expenses, net of adjustments, of $788,000.~~

Solid growth in net sales and gross profit in our core business combined with a significant contribution from the Datalink business, led to a 14% year over year improvement in consolidated earnings from operations from $36.4 million in the third quarter of 2016 to $41.4 million in the third quarter of 2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated earnings from operations also increased 14% year over year. Datalink’s positive contribution to earnings from operations was in line with our expectations in the first nine months of 2017, and we believe Datalink is on track to meet profitability objectives for the year. On a consolidated basis, we reported net earnings of $22.4 million and diluted earnings per share of $0.62 for the third quarter of 2017. ~~This compares to net earnings of $21.6 million and diluted earnings per share of $0.60 for the third quarter of 2016.~~

Throughout the “Quarterly Overview” and “Results of Operations” sections of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we refer to changes in net sales, gross profit, selling and administrative expenses and earnings from operations on a consolidated basis and in North America, EMEA and APAC excluding the effects of fluctuating foreign currency exchange rates. In computing the changes in amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

Details about segment results of operations can be found in Note 911 to the Consolidated Financial Statements in Part I, Item 1 of this report.

Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our consolidated financial statements, including the changes in certain key items in those consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form10-K for the year ended December 31, ~~2016.~~2017. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

There have been no changes to the items disclosed as critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2017, other than the adoption of ASU No. 2014-09, “Revenue from Contracts with Customers,” effective January 1, 2018, as discussed in Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

~~Item 7 of our Annual Report onForm 10-K~~ for the year ended December 31, 2016. See Note 10 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of fair value estimates in connection with the acquisition of Datalink.

Results of Operations

The following table sets forth certain financial data as a percentage of net sales for the three and nine months ended September 30, ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Costs of goods sold		87.1			86.9			86.1			86.3			86.6			87.1			86.1			86.1

Gross profit		12.9			13.1			13.9			13.7			13.4			12.9			13.9			13.9
Selling and administrative expenses		10.3			10.3			10.9			11.0			10.5			10.3			10.5			10.9
Severance and restructuring expenses, loss on sale of foreign entity and acquisition-related expenses		0.2			0.2			0.3			0.0			—			0.2			0.1			0.3

Earnings from operations		2.4			2.6			2.7			2.7			2.9			2.4			3.3			2.7
Non-operating expense, net		0.4			0.2			0.3			0.2			0.4			0.4			0.3			0.3

Earnings before income taxes		2.0			2.4			2.4			2.5			2.5			2.0			3.0			2.4
Income tax expense		0.7			0.8			0.8			0.9			0.7			0.7			0.8			0.8

Net earnings		1.3	%		1.6	%		1.6	%		1.6	%		1.8	%		1.3	%		2.2	%		1.6	%

We experience some seasonal trends in our sales of IT hardware, software and services. Software sales are typically seasonally higher in our ~~second and fourth quarters, particularly the~~ second quarter. Business clients, particularly larger enterprise businesses in the United States, tend to spend more in our fourth quarter and less in our first quarter. Sales to the federal government in the United States are often stronger in our third quarter, while sales in the state and local government and education markets are stronger in our second quarter. Sales to public sector clients in the United Kingdom are often stronger in our first quarter. These trends create overall seasonality in our consolidated results such that net sales and profitability are expected to be higher in the second and fourth quarters of the year.

During the year ended December 31, 2017, our consolidated net sales from the provision of services approximated 10% of net sales. As such, beginning with our results of operations for the year ended December 31, 2017, we began reporting net sales from the provision of services and the related costs of goods sold separately from net sales of products and the related costs of goods sold on the face of our consolidated statements of operations. We continued this presentation in the three and nine months ended September 30, 2018 included in the Consolidated Financial Statements in Part I, Item 1 of this report. For comparability purposes, net sales and costs of goods sold for the three and nine months ended September 30, 2017 have been expanded to conform to the current year presentation. These changes in presentation had no effect on previously reported total net sales, total costs of goods sold or gross profit amounts.

In conjunction with this change in presentation, because fees earned from activities reported net are considered services revenues, we reclassified certain revenue streams for which we act as the agent in the transaction to net sales from services. Previously, we included these net revenue streams within our software and, to a lesser extent, hardware sales mix categories based on the type of product being sold (e.g., fees earned for the sale of software maintenance and certain software licenses were included in software sales and fees earned for the sale of certain third-party provided training and warranty services were included in hardware sales when we historically disclosed and analyzed our sales mix). For comparability purposes, our sales mix among our hardware, software and services categories for the three and nine months ended September 30, 2017 have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net sales amounts.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Additionally, we corrected immaterial errors identified in our March 31, 2018 and June 30, 2018 consolidated financial statements in the nine months ended September 30, 2018. The adjustments recorded to correct the errors impacted net sales and cost of goods sold with an inconsequential impact on gross profit and net earnings during the first quarter of 2018. As a result of the adjustments, there were no significant impacts to earnings from operations, net earnings, and related per share amounts previously reported in the first or second quarter of 2018. For additional information, see Note 3 to our Consolidated Financial Statements in Part I, Item 1 of this reports.

Our gross profit across the business is, and will continue to be, impacted by partner incentives, which can change significantly in the amounts made available and the related product or services sales being incentivized by the partner. Incentives from our largest partners are significant and changes in the incentives could impact our results of operations to the extent we are unable to remediate and otherwise respond to them.

Net Sales. Net sales for the three months ended September 30, ~~2017 increased 26%~~2018 decreased less than 1% year to year to $1.75 billion compared to the three months ended September 30, ~~2016~~2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales remained flat in the third quarter of 2018 compared to ~~$1.76 billion.~~ the third quarter of 2017. Net sales for the nine months ended September 30, 2018 increased 8% to $5.33 billion compared to the nine months ended September 30, 2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 25% in the third quarter of 2017 compared to the third quarter of 2016. Net sales for the nine months ended September 30, 2017 increased 22% compared to the nine months ended September 30, 2016 to $4.92 billion. Excluding the effects of fluctuating foreign currency exchange rates, consolidated net sales increased 24%6% in the first nine months of ~~2017~~2018 compared to the first nine months of ~~2016.~~ 2017. Our net sales by operating segment were as follows for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 (dollars in thousands):


	Three Months Ended September 30,				%			Nine Months Ended September 30,				%			Three Months Ended September 30,				%			Nine Months Ended September 30,				%
	2017		2016		Change			2017		2016		Change			2018		2017		Change			2018		2017		Change
North America	$	1,411,079	$	1,051,333		34	%	$	3,803,343	$	2,914,475		30	%	$	1,371,459	$	1,411,079		(3	%)	$	4,018,605	$	3,803,343		6	%
EMEA		312,194		311,732		—			988,609		976,800		1	%		345,180		312,194		11	%		1,161,850		988,609		18	%
APAC		34,700		29,651		17	%		127,596		126,657		1	%		31,087		34,700		(10	%)		150,635		127,596		18	%

Consolidated	$	1,757,973	$	1,392,716		26	%	$	4,919,548	$	4,017,932		22	%	$	1,747,726	$	1,757,973		(1	%)	$	5,331,090	$	4,919,548		8	%

22Net sales in North America decreased 3%, or $39.6 million, for the three months ended September 30, 2018 compared to the three months ended September 30, 2017. Net sales of services increased 24%, year over year, while net sales of hardware and software decreased 1% and 19%, respectively, year to year. Services net sales improved year over year due to higher sales of software maintenance and cloud subscription offerings as well as higher Insight delivered services, resulting mainly from our Cardinal acquisition. This increase was offset by lower hardware sales, primarily to enterprise clients, and lower software sales, due to the adoption of ASC 606 whereby more software sales are recorded net, and now included in services revenue, as well as lower volume sales to public sector clients in the quarter. The Company experienced lower than seasonal hardware sales towards the latter part of the quarter.

Net sales in North America increased 6%, or $215.3 million, for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. Net sales of hardware and services increased 10% and 19%, respectively, year over year, partially offset by net sales of software decreasing 12% year to year. By client group, our top line results reflected high single digit growth with large enterprise clients and small and medium businesses while net sales to public sector clients declined during the nine months ended September 30, 2018. The growth in hardware net sales reflects the device refresh cycle discussed in previous quarters. Services net sales improved year over year due to higher sales of hardware warranty and cloud subscription offerings that are reported net, as well as contribution by our Cardinal acquisition, effective August 1, 2018. The decline in software product net sales is primarily due to lower volume with public sector clients. Software product net sales have also been affected by clients migrating software applications to cloud solutions which are now recorded in services and the impact of the adoption of

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

the new revenue recognition standard effective January 1, 2018, that resulted in sales of security software now also being reported net and in services.

Our net sales by offering category for North America for the three and nine months ended September 30, 2018 and the three and nine months ended September 30, 2017 (as reclassified), were as follows (dollars in thousands):

	Three Months Ended September 30,				%
Sales Mix	2018		2017		Change
	(As Reclassified)
Hardware	$	953,431	$	962,101		(1	%)
Software		259,602		321,074		(19	%)
Services		158,426		127,904		24	%
	$	1,371,459	$	1,411,079		(3	%)

	Nine Months Ended September 30,				%
Sales Mix	2018		2017		Change
	(As Reclassified)
Hardware	$	2,724,916	$	2,476,353		10	%
Software		828,231		936,700		(12	%)
Services		465,458		390,290		19	%
	$	4,018,605	$	3,803,343		6	%

In North America, fees earned from activities reported on a net basis of $113,000 and $21.5 million that were previously reported as part of our hardware and software product categories, respectively, in the three months ended September 30, 2017, were reclassified to services to conform to the current period presentation. Fees earned from activities reported on a net basis of $292,000 and $76.0 million that were previously reported as part of our hardware and software product categories, respectively, in the nine months ended September 30, 2017, were reclassified to services to conform to the current period presentation.

Net sales in ~~North America~~EMEA increased ~~34%~~11%, or ~~$359.7~~$33.0 million, for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, 2016. Net sales of hardware, software and services increased 48%, 6% and 39%, respectively, year over year. The growth in hardware net sales reflects higher volume of sales to large enterprise clients and the acquisition of Datalink effective January 6, 2017, which accounted for approximately one quarter of the year over year growth. The increase in hardware net sales included large hardware device refresh transactions as well as higher sales of servers and storage. The increase in software net sales resulted from the acquisition of Datalink, which accounted for the majority of the year over year increase, partially offset by a decline in software net sales to public sector clients during the third quarter of 2017 compared to the third quarter of 2016. Services net sales improved year over year due to the acquisition of Datalink, which accounted for the year over year services revenue growth in North America.

Net sales in North America increased 30%, or $888.9 million, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Net sales of hardware, software and services increased 37%, 13% and 46%, respectively, year over year. The growth in hardware net sales reflects higher volume of sales to large enterprise clients, including the acquisition of Datalink, which accounted for approximately 28% of the year over year growth. The increase in software net sales was also affected by the acquisition of Datalink, which accounted for over three quarters of the year over year increase, as well as increased sales to large enterprise clients during the first nine months of 2017 compared to the first nine months of 2016. Services net sales improved year over year due to the acquisition of Datalink, which accounted for the year over year services revenue growth in North America.

~~Net sales in EMEA remained flat, increasing less than 1% for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.~~2017. Excluding the effects of fluctuating foreign currency exchange rates, net sales ~~decreased 2%~~increased 12% compared to the third quarter of last year. Net sales of hardware, software and services increased 7%, 10% and ~~23%~~38%, respectively, ~~while net sales of software decreased 6%~~ compared to the third quarter of ~~2016. Excluding the effects of fluctuating foreign currency exchange rates,~~2017. The increase in hardware ~~and services~~ net sales ~~increased 7%~~reflects a higher volume of sales of client devices and ~~20%, respectively, while~~networking solutions to enterprise and public sector clients. The increase in software net sales ~~decreased 9% compared to the third quarter of last year. The increase in hardware net sales was due primarily to~~reflects a higher volume of sales ~~of networking solutions~~ to ~~corporate~~enterprise clients. The increase in services net sales ~~was due primarily to increased~~reflects a higher volume of sales of ~~license consulting services~~software maintenance and ~~partner delivered services~~cloud subscription offerings that are reported net, as well as the addition of Dutch cloud service provider, Caase.com, to ~~new and existing clients across the region. The decrease in software net sales was driven by a single significant transaction during the prior year period affecting the year over year comparison.~~our business effective September 26, 2017.

Net sales in EMEA increased 1%18%, or ~~$11.8~~$173.2 million, for the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016.~~2017. Excluding the effects of fluctuating foreign currency exchange rates, net sales increased 6%10% compared to the first nine months of last year. Net sales of hardware, software and services increased ~~11%~~26%, 8% and ~~15%~~38%, respectively, ~~while software net sales decreased 6%~~ compared to the first nine months of 2016. Excluding the effects of fluctuating foreign currency exchange rates, hardware and services net sales increased 19% and 21%, respectively, while software net sales decreased 3% compared to the first nine months of last year.2017. The increase inin hardware net sales ~~was due primarily to~~reflects a higher volume of sales of client devices ~~storage~~ and networking solutions to large enterprise and public sector ~~clients.~~clients. The increase in services net sales was due primarily to increased sales of license consulting services and partner delivered services to new and existing clients across the region. The decrease in software net sales was driven by the negative effect on~~top-line~~ ~~revenues resulting from~~reflects a higher volume of sales of software maintenance and cloud subscription ~~products~~offerings that are ~~recorded on a~~reported net, ~~sales recognition basis, with net sales equal~~as well as the addition of Dutch cloud service provider, Caase.com, to ~~the gross profit on the transaction, and the single significant transaction in the prior year period noted above.~~our business effective September 26, 2017.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Our net sales by offering category for EMEA for the three and nine months ended September 30, 2018 and the three and nine months ended September 30, 2017 (as reclassified), were as follows (dollars in thousands):

	Three Months Ended September 30,				%
Sales Mix	2018		2017		Change
	(As Reclassified)
Hardware	$	147,497	$	137,493		7	%
Software		168,603		153,616		10	%
Services		29,080		21,085		38	%
	$	345,180	$	312,194		11	%

	Nine Months Ended September 30,				%
Sales Mix	2018		2017		Change
	(As Reclassified)
Hardware	$	505,844	$	400,362		26	%
Software		551,920		513,050		8	%
Services		104,086		75,197		38	%
	$	1,161,850	$	988,609		18	%

In EMEA, fees earned from activities reported on a net basis of $9.7 million that were previously reported as part of our software product category in the three months ended September 30, 2017 were reclassified to services to conform to the current period presentation. Fees earned from activities reported on a net basis of $39.8 million that were previously reported as part of our software product category in the nine months ended September 30, 2017 were reclassified to services to conform to the current period presentation.

Net sales in APAC ~~increased 17%~~decreased 10%, or ~~$5.0~~$3.6 million, for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, ~~2016.~~2017. Excluding the effects of fluctuating foreign currency exchange rates, net sales decreased 5% compared to the third quarter of last year. The decrease in net sales reflects a decline in hardware and software net sales of 19% and 24%, respectively, primarily in Australia, our largest APAC market. The decrease in software net sales is primarily due to the effect of clients migrating software applications to cloud solutions which are now recorded in services. This decrease was partially offset by an increase in sales of cloud subscription offerings and consulting services engagements in the services category.

Net sales in APAC increased 18%, or $23.0 million, for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. Excluding the effects of fluctuating foreign currency exchange rates, net sales increased ~~14%~~17% compared to the ~~third quarter~~first nine months of last year. The increase was driven by ~~151%~~ growth ~~in services net sales resulting from Ignia, a business technology consulting~~of 22%, 12% and ~~managed services provider acquired~~33% in the ~~third quarter of last year,~~hardware, software and ~~61%~~services categories, respectively. The growth in hardware net sales ~~year over year.~~

~~Net~~reflects a higher volume of sales in Australia. Software net sales increased due to a single large public sector license renewal recorded in the first quarter of 2018 that historically transacted in the fourth quarter. Services net sales also increased due to an increase in cloud and digital solutions based professional service engagements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Our net sales by offering category for APAC ~~increased 1%~~for the three and nine months ended September 30, 2018 and the three and nine months ended September 30, 2017 (as reclassified), ~~or $939,000, for~~were as follows (dollars in thousands):

	Three Months Ended September 30,				%
Sales Mix	2018		2017		Change
			(As Reclassified)
Hardware	$	6,041	$	7,444		(19	%)
Software		13,099		17,245		(24	%)
Services		11,947		10,011		19	%
	$	31,087	$	34,700		(10	%)

	Nine Months Ended September 30,				%
Sales Mix	2018		2017		Change
			(As Reclassified)
Hardware	$	22,518	$	18,440		22	%
Software		91,459		81,501		12	%
Services		36,658		27,655		33	%
	$	150,635	$	127,596		18	%

In APAC, fees earned from activities reported on a net basis of $3,000 and $2.9 million that were previously reported as part of our hardware and software product categories, respectively, in the three months ended September 30, 2017, were reclassified to services to conform to the current period presentation. Fees earned from activities reported on a net basis of $9,000 and $9.9 million that were previously reported as part of our hardware and software product categories, respectively, in the nine months ended September 30, 2017, ~~compared~~were reclassified to services to conform to the nine months ended September 30, 2016. Excluding the effects of fluctuating foreign currency exchange rates, net sales decreased 1% compared to the first nine months of last year due to the negative effect on~~top-line~~ revenues resulting from a higher volume of sales of software maintenance and cloud subscription products that are recorded on a net sales recognition basis. This decline was almost fully offset by 173% growth in services net sales resulting from Ignia and 34% growth in hardware net sales year over year.current period presentation.

The percentage of net sales by category for North America, EMEA and APAC were as follows for the three and nine months ended September 30, 2018 and the three and nine months ended September 30, 2017 ~~and 2016:~~(as reclassified):


	North America						EMEA						APAC						North America						EMEA						APAC
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,
Sales Mix	2017			2016			2017			2016			2017			2016			2018			2017			2018			2017			2018			2017
Hardware		68	%		62	%		44	%		41	%		21	%		16	%		69	%		68	%		43	%		44	%		20	%		21	%
Software		24	%		31	%		52	%		56	%		58	%		75	%		19	%		23	%		49	%		49	%		42	%		50	%
Services		8	%		7	%		4	%		3	%		21	%		9	%		12	%		9	%		8	%		7	%		38	%		29	%
																				100	%		100	%		100	%		100	%		100	%		100	%
		100	%		100	%		100	%		100	%		100	%		100	%


	North America						EMEA						APAC
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
Sales Mix	2017			2016			2017			2016			2017			2016
Hardware		65	%		62	%		40	%		37	%		14	%		11	%
Software		27	%		31	%		56	%		60	%		72	%		84	%
Services		8	%		7	%		4	%		3	%		14	%		5	%

		100	%		100	%		100	%		100	%		100	%		100	%

	North America						EMEA						APAC
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
Sales Mix	2018			2017			2018			2017			2018			2017
Hardware		68	%		65	%		44	%		40	%		15	%		14	%
Software		21	%		25	%		48	%		52	%		61	%		64	%
Services		11	%		10	%		8	%		8	%		24	%		22	%
		100	%		100	%		100	%		100	%		100	%		100	%

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AND RESULTS OF OPERATIONS (continued)

Gross Profit. Gross profit for the three months ended September 30, ~~2017~~2018 increased ~~24%~~4%, or ~~$44.3~~$8.8 million, compared to the three months ended September 30, ~~2016,~~2017, with gross margin ~~decreasing~~increasing approximately 2050 basis points to 13.4% for the three months ended September 30, 2018 compared to 12.9% for the three months ended September 30, ~~2017 compared to 13.1% for the three months ended September 30, 2016.~~ 2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased ~~24%~~ 5% year over year in the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016.~~2017. Gross profit for the nine months ended September 30, ~~2017~~2018 increased ~~24%~~8%, or ~~$133.6~~$53.9 million, compared to the nine months ended September 30, ~~2016,~~2017, with gross margin ~~increasing approximately 20 basis points to~~remaining flat at 13.9% for the nine months ended September 30, ~~2017~~2018 compared to ~~13.7% for~~ the nine months ended September 30, ~~2016.~~2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated gross profit increased ~~26%~~6% year over year in the first nine months of ~~2017~~2018 compared to the first nine months of ~~2016. We continue to respond to changes in partner funding programs by targeting our sales and marketing activities to maximize our gross profit.~~

2017. Our gross profit and gross profit as a percentage of net sales by operating segment were as follows for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 (dollars in thousands):


	Three Months Ended September 30,										Nine Months Ended September 30,										Three Months Ended September 30,										Nine Months Ended September 30,
	2017		% of Net Sales			2016		% of Net Sales			2017		% of Net Sales			2016		% of Net Sales			2018		% of Net Sales			2017		% of Net Sales			2018		% of Net Sales			2017		% of Net Sales
North America	$	176,021		12.5	%	$	136,818		13.0	%	$	517,108		13.6	%	$	391,929		13.4	%	$	179,327		13.1	%	$	176,021		12.5	%	$	545,215		13.6	%	$	517,108		13.6	%
EMEA		41,618		13.3	%		38,308		12.3	%		139,897		14.2	%		136,810		14.0	%		47,234		13.7	%		41,618		13.3	%		165,248		14.2	%		139,897		14.2	%
APAC		8,442		24.3	%		6,682		22.5	%		28,682		22.5	%		23,394		18.5	%		8,353		26.9	%		8,442		24.3	%		29,091		19.3	%		28,682		22.5	%

Consolidated	$	226,081		12.9	%	$	181,808		13.1	%	$	685,687		13.9	%	$	552,133		13.7	%	$	234,914		13.4	%	$	226,081		12.9	%	$	739,554		13.9	%	$	685,687		13.9	%

North America’s gross profit for the three months ended September 30, ~~2017~~2018 increased ~~29%~~2% compared to the three months ended September 30, ~~2016.~~2017. As a percentage of net sales, gross margin ~~decreased~~increased approximately 5060 basis points to ~~12.5%~~ 13.1% for the third quarter of ~~2017~~2018 from ~~13.0%~~12.5% in the third quarter of ~~2016.~~2017. The year toover year ~~decline~~improvement in gross margin was primarily attributable to a 60 basis point increase generated by higher margin services net sales. The increase in margin generated by services net sales reflects a 12 basis point increase from cloud subscription offerings that are recorded on a net basis, and a 19 basis point increase from software maintenance net sales, also recorded net, during the third quarter of 2018. Insight delivered services, inclusive of our Cardinal acquisition, also generated a margin increase of 14 basis points during the third quarter of 2018.

North America’s gross profit for the nine months ended September 30, 2018 increased 5% compared to the nine months ended September 30, 2017. As a percentage of net sales, gross margin remained flat at 13.6% for the first nine months of 2018 compared to the first nine months of 2017. The change in gross margin was primarily attributable to a 3527 basis point ~~decline in margin generated by reduced sales of professional and consulting services. Additionally, a net~~ decrease in software and hardware product margin, ~~which includes partner funding and freight, of 15~~offset by a 24 basis ~~points and a decrease~~point increase in margin from lower fees from enterprise software agreements of 13 basis points contributed to the lower gross margin during the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016. services margin. The net decrease in product margin was due primarily to ~~higher~~the lower mix of software license sales, as clients are migrating to ~~large enterprise clients, which generally transact at lower margins,~~cloud solutions, during the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016, offset partially by improvements in hardware product margin, including increased sales of higher margin data center products as a result of the acquisition of Datalink. The decline in professional services margin was offset partially by an 18 basis point increase in margin generated by sales of warranty services year over year.

~~North America’s gross profit for~~ the nine months ended September 30, ~~2017 increased 32%~~2018 compared to the nine months ended September 30, ~~2016. As~~2017. This was offset by a ~~percentage of~~24 basis point increase in services net sales ~~gross margin increased approximately 20 basis points to 13.6% for the first nine months of 2017 from 13.4% in the first nine months of 2016. The year over year improvement in gross margin was~~driven by items recorded net, primarily ~~attributable to a~~cloud solutions net increase in product margin, which includes partner funding and freight, of 28 basis points year over year. The net increase in product margin was due primarily to improvements in hardware and software product margin during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The product mix included increased sales, of higher margin data center products as a result of the acquisition of Datalink. Services margin improved 21 basis points year over year, including an increase in margin generated by sales of warranty services of 15 basis points during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. These increases in margin were partially offset by a decrease in ~~margin from lower fees from enterprise software agreements of 29 basis points during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.~~Insight delivered services.

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AND RESULTS OF OPERATIONS (continued)

EMEA’s gross profit increased 9%13% for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, ~~2016.~~2017. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased 6%15% compared to the third quarter of last year. As a percentage of net sales, gross margin increased approximately ~~100~~40 basis points to ~~13.3%~~13.7% for the third quarter of ~~2017~~2018 from ~~12.3%~~13.3% in the third quarter of ~~2016.~~ 2017. The year over year improvement in gross margin was primarily attributable to ~~a net increase in product margin, which includes partner funding and freight, of 50 basis points and~~ an increase in higher margin services net sales, which contributed 4599 basis points of the margin expansion, during the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The improvement in product margin primarily resulted from an increase in hardware product margin due to higher volume and an increase in software product margin due to the mix and size of deals transacted during the quarter ended September 30, 2017 compared to the quarter ended September 30, 2018. The increase in margin from services net sales resulted from a higher volume of higher margin services net sales year over year.

EMEA’s gross profit increased 2% for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased 7% compared to the first nine months of last year. Gross margin improved approximately 20 basis points to 14.2% for the first nine months of 2017 from 14.0% in the first nine months of 2016. The year over year improvement in gross margin was primarily attributable to a 37 basis point increase in gross margin due to higher volume of higher margin services net sales during the first nine months of 2017 compared to the first nine months of 2016. The improvement in gross margin resulting from higher margin services net sales was partially offset by a net decrease in product margin, which includes partner funding and freight, of 63 basis points. The increase in margin from services net sales during the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017 resulted from a higher volume of software maintenance and cloud subscription offerings that are recorded on a net basis, ~~points~~as well as the addition of Dutch cloud service provider, Caase.com, to our business effective September 26, 2017. The decrease in product margin during the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017, primarily resulted from a decrease in hardware and software project margins due to a higher proportion of sales to large enterprise and public sector clients, which generally transact at lower margins.

EMEA’s gross profit increased 18% for the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016. The decline in product margin primarily resulted from lower margins on large enterprise and public sector deals transacted during the first nine months of~~ 2017.

APAC’s gross profit increased 26% for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, with gross margin increasing to 24.3% for the three months ended September 30, 2017 compared to 22.5% for the three months ended September 30, 2016. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased ~~23%~~11% compared to the ~~third quarter~~first nine months of last year. ~~The improvement in~~As a percentage of net sales, gross margin inremained flat at 14.2% for the ~~third quarter~~first nine months of ~~2017~~2018 compared to the ~~third quarter~~first nine months of ~~2016~~2017. The change in gross margin was ~~due~~ primarily attributable to an increase in ~~the mix of~~ higher margin services net sales, which contributed 52 basis points of margin expansion, offset by a net decrease in product margin, which includes partner funding and freight, of 45 basis points during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. The increase in margin from services net sales during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 resulted from a higher volume of software maintenance and cloud subscription offerings that are recorded on a net basis, as well as the addition of Dutch cloud service provider, Caase.com, to our business effective September 26, 2017. The net decrease in product margin reflects higher software sales to large enterprise and public sector clients, which generally transact at lower margins, during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.

APAC’s gross profit decreased 1% for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, ~~2016. Additionally, as we are expanding our offerings across the APAC region, increased hardware sales also contributed to the increase in margin year over year.~~

~~APAC’s gross profit increased 23% for the nine months ended September 30,~~ 2017, ~~compared to the nine months ended September 30, 2016,~~ with gross margin increasing to ~~22.5%~~26.9% for the ~~nine~~three months ended September 30, ~~2017~~2018 compared to ~~18.5%~~24.3% for the ~~nine~~three months ended September 30, ~~2016.~~2017. Excluding the effects of fluctuating foreign currency exchange rates, gross profit increased ~~21%~~5% compared to the third quarter of last year. The increase in gross margin in the third quarter of 2018 compared to the third quarter of 2017 was due to an increase in mix of sales of software maintenance and cloud subscription offerings recorded net and higher gross profits from Insight delivered services.

APAC’s gross profit increased 1% for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017, with gross margin decreasing to 19.3% for the nine months ended September 30, 2018 compared to 22.5% for the nine months ended September 30, 2017. Excluding the effects of fluctuating foreign currency exchange rates, gross profit also increased 1%, compared to the first nine months of last year. The ~~improvement~~decrease in gross margin in the first nine months of ~~2017~~2018 compared to the first nine months of ~~2016~~2017 was due primarily to ~~an increase in the~~a lower mix of ~~higher margin~~ services sales recorded net, primarily cloud subscription offerings and software maintenance sales, ~~the positive effect~~as well as lower fees earned on ~~margin that results from the higher volume~~sales of sales that are recorded on a net sales recognition basis and the margin contribution from increased hardware net sales during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.enterprise agreements.

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AND RESULTS OF OPERATIONS (continued)

Operating Expenses.

~~Operating Expenses.~~

Selling and Administrative Expenses.Selling and administrative expenses increased ~~$36.5~~$3.7 million, or ~~25%~~2%, for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, ~~2016.~~ 2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated selling and administrative expenses increased ~~24%~~3% year over year in the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016.~~ 2017. Selling and administrative expenses increased ~~$98.6~~$23.0 million, or ~~22%~~4%, for the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016.~~ 2017. Excluding the effects of fluctuating foreign currency exchange rates, consolidated selling and administrative expenses increased ~~24%~~3% year over year in the first nine months of ~~2017~~2018 compared to the first nine months of ~~2016.~~ 2017. Our selling and administrative expenses as a percent of net sales by operating segment were as follows for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 (dollars in thousands):


	Three Months Ended September 30,										Nine Months Ended September 30,										Three Months Ended September 30,										Nine Months Ended September 30,
	2017		% of Net Sales			2016		% of Net Sales			2017		% of Net Sales			2016		% of Net Sales			2018		% of Net Sales			2017		% of Net Sales			2018		% of Net Sales			2017		% of Net Sales
North America	$	132,853		9.4	%	$	99,845		9.5	%	$	395,423		10.4	%	$	301,147		10.3	%	$	134,792		9.8	%	$	132,853		9.4	%	$	402,638		10.0	%	$	395,423		10.4	%
EMEA		39,948		12.8	%		37,893		12.2	%		121,863		12.3	%		121,663		12.5	%		42,206		12.2	%		39,948		12.8	%		137,383		11.8	%		121,863		12.3	%
APAC		7,589		21.9	%		6,134		20.7	%		21,488		16.8	%		17,367		13.7	%		7,097		22.8	%		7,589		21.9	%		21,718		14.4	%		21,488		16.8	%

Consolidated	$	180,390		10.3	%	$	143,872		10.3	%	$	538,774		10.9	%	$	440,177		11.0	%	$	184,095		10.5	%	$	180,390		10.3	%	$	561,739		10.5	%	$	538,774		10.9	%

North America’s selling and administrative expenses increased ~~33%~~1%, or ~~$33.0~~$1.9 million, for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and increased approximately 40 basis points year over year as a percentage of net sales to 9.8%. The increase in expenses was primarily driven by a $2.6 million increase in salaries and wages and contract labor due to increases in headcount, including the addition of Cardinal to our business beginning August 1, 2018, and a $1.6 million increase in variable compensation resulting from increased gross profit for the three months ended September 30, ~~2017~~2018. Partially offsetting these increases were decreases in teammate benefits of $1.6 million due to decreased healthcare costs, lower depreciation and amortization expense of $1.2 million and lower professional fees of $1.2 million for the three months ended September 30, 2018 compared to the three months ended September 30, ~~2016~~2017.

North America’s selling and administrative expenses increased 2%, or $7.2 million, for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 and decreased approximately 1040 basis points year to year as a percentage of net sales to ~~9.4%~~10.0%. The increase in expenses was primarily driven by ~~a $17.4~~an $8.0 million increase in salaries and wages and contract labor ~~and teammate benefit expenses and a $7.3~~due to increases in headcount, an $8.1 million increase in variable compensation onresulting from increased net sales and gross profit ~~for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. These increases~~and a $1.9 million increase in ~~teammate expenses primarily resulted from the addition of Datalink to our North America business effective January 6, 2017. Additionally, depreciation~~internal-use maintenance and amortization expense, professional services and travel and entertainment each increased by approximately $2.0 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, due primarily to the addition of Datalink to our business.

~~North America’s selling and administrative expenses increased 31%, or $94.3 million,~~cloud subscription costs for the nine months ended September 30, ~~2017~~2018. Partially offsetting these increases were decreases in teammate benefits of $3.9 million due to decreased healthcare costs, lower depreciation and amortization expense of $4.2 million and lower professional fees of $2.9 million for the nine months ended September 30, 2018 compared to the nine months ended September 30, ~~2016~~2017.

EMEA’s selling and administrative expenses increased 6%, or $2.3 million, for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and decreased approximately 1060 basis points year ~~over~~to year as a percentage of net sales to ~~10.4%~~12.2%. Excluding the effects of fluctuating foreign currency exchange rates, selling and administrative expenses increased 7% compared to the third quarter of last year. The increase in expenses ~~was primarily driven by a $42.4 million~~reflects an increase of approximately $800,000 in ~~salaries and wages, contract labor and~~ teammate ~~benefit~~benefits expenses and ~~a $24.9 million~~an increase in variable compensation on increased sales and gross profit for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. These increases in teammate expenses primarily resulted from the addition of Datalink to our North America business effective January 6, 2017. Additionally, professional services, travel and entertainment and marketing expenses increased by $8.3 million, $5.4 million and $3.1 million, respectively, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, due primarily to the addition of Datalink to our business. Depreciation and amortization expense also increased approximately $4.1 million year over year, as amortization expense of $8.6 million, associated with the intangible assets acquired from Datalink, was offset partially by the year over year effect of intangible assets acquired in previous acquisitions being fully amortized in the third quarter of the prior year.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

$1.2 million in variable compensation resulting from increased sales and gross profit for the three months ended September 30, 2018 compared to the three months ended September 30, 2017.

EMEA’s selling and administrative expenses increased 5%13%, or ~~$2.1~~$15.5 million, for the ~~three~~nine months ended September 30, ~~2017~~2018 compared to the ~~three~~nine months ended September 30, ~~2016~~2017 and ~~increased~~decreased approximately 6050 basis points year ~~over~~to year as a percentage of net sales to ~~12.8%~~11.8%. Excluding the effects of fluctuating foreign currency exchange rates, selling and administrative expenses increased 3%6% compared to the ~~third quarter~~first nine months of last year. The increase in expenses ~~was primarily driven by increased~~reflects an increase of $4.4 million in salaries and wages and $3.0 million in teammate benefits expenses due to increased ~~headcount. This year over year~~headcount and an increase of $4.6 million in variable compensation resulting from increased sales and gross profit for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.

APAC’s selling and administrative expenses ~~was offset partially by a decline in amortization expense during~~decreased 6%, or $492,000, for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, ~~2016, as intangible assets acquired in previous acquisitions were fully amortized in the third quarter of the prior year.~~

~~EMEA’s selling~~2017, and ~~administrative expenses~~ increased ~~less than 1%, or $200,000, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 and decreased~~ approximately 2090 basis points year to year as a percentage of net sales to ~~12.3%~~22.8%. Excluding the effects of fluctuating foreign currency exchange rates, selling and administrative expenses decreased 1% compared to the third quarter of last year. The year to year decrease was primarily driven by a reduction in salaries, wages and teammate benefits expenses associated with lower headcount.

APAC’s selling and administrative expenses increased 1%, or $230,000, for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017, and decreased approximately 240 basis points year to year as a percentage of net sales to 14.4%. Excluding the effects of fluctuating foreign currency exchange rates, selling and administrative expenses increased 5% compared to the first nine months of last year. The increase in expenses was primarily driven by increased salaries and wages and teammate benefits expenses due to increased headcount. This year over year increase in selling and administrative expenses was offset partially by a decline in amortization expense during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, as intangible assets acquired in previous acquisitions were fully amortized in the third quarter of the prior year. The decrease in selling and administrative expenses as a percentage of net sales year to year was the result of our ability to manage selling and administrative costs while growing our~~top-line~~ ~~revenue during the first nine months of 2017 compared to the first nine months of 2016.~~

APAC’s selling and administrative expenses increased 24%, or $1.5 million, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, and increased approximately 120 basis points year over year as a percentage of net sales to 21.9%. Excluding the effects of fluctuating foreign currency exchange rates, selling and administrative expenses increased 19% compared to the third quarter of last year. The year over year increase was primarily driven by increased selling and administrative expenses as a result of the acquisition of Ignia effective September 1, 2016. Excluding Ignia, selling and administrative expenses were relatively flat year over year.

APAC’s selling and administrative expenses increased 24%, or $4.1 million, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, and increased approximately 310 basis points year over year as a percentage of net sales to 16.8%. Excluding the effects of fluctuating foreign currency exchange rates, selling and administrative expenses increased 21%1% compared to the first nine months of last year. The year over year increase was primarily driven by an increase in variable compensation resulting from increased ~~selling~~net sales and ~~administrative expenses as a result of the acquisition of Ignia, effective September 1, 2016. Excluding Ignia, selling and administrative expenses were relatively flat year over year.~~gross profit.

Severance and Restructuring Expenses. During the three months ended September 30, 2018, North America and EMEA recorded severance expense, net of adjustments, of approximately $253,000 and $430,000, respectively. During the nine months ended September 30, 2018, North America, EMEA and APAC recorded severance expense, net of adjustments, of approximately $1.0 million, $1.5 million and $130,000, respectively. The charges in all three operating segments primarily related to a realignment of certain roles and responsibilities. Current period charges were offset by adjustments for changes in estimates of previous accruals as cash payments were made. Comparatively, during the three months ended September 30, 2017, North America, EMEA and APAC recorded severance expense, net of adjustments, of approximately $398,000, $53,000 and $43,000, respectively. ~~During~~For the nine months ended September 30, 2017, North America, EMEA and APAC recorded severance expense, net of adjustments, of approximately $2.0 million, $4.1 million and $104,000, respectively. ~~The North America charges for~~

Acquisition-related Expenses. During the three and nine months ended September 30, ~~2017 primarily~~2018, we incurred $188,000 and $282,000, respectively, in direct third-party transaction costs related ~~to severance actions taken to realign roles and responsibilities subsequent~~ to the acquisition of Datalink. The EMEA charges for the nine months ended September 30, 2017 primarily related to headcount reductions in France, Germany and the Netherlands as part of our cost reduction and restructuring initiatives. The APAC charges for the nine months ended September 30, 2017 primarily related to severance actions taken subsequent to the acquisition of Ignia. Current period charges were offset

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

~~by adjustments for changes in estimates of previous accruals as cash payments were made.~~Cardinal, effective August 1, 2018. Comparatively, during the three months ended September 30, 2016, North America and EMEA recorded severance expense, net of adjustments, of approximately $643,000 and $145,000, respectively. For the nine months ended September 30, 2016, North America, EMEA and APAC recorded severance expense, net of adjustments, of approximately $2.5 million, $487,000 and $115,000, respectively.

~~Loss on Sale of Foreign Entity~~.On July 19, 2017, we concluded the sale of our operations in Russia, formerly a part of our EMEA operating segment. We incurred a loss on the sale of the foreign entity of approximately $3.6 million, including a $2.9 million charge upon the release of our cumulative translation adjustment account balance as of the sale date.

~~Acquisition-related Expenses~~. ~~During~~ the three and nine months ended September 30, 2017, we incurred $106,000 and $3.3 million, respectively, in direct third-party transaction costs related to the acquisitions of Caase.com ~~which was completed on September 26, 2017,~~ and Datalink ~~which was completed on January 6,~~Corporation (“Datalink”) in 2017. Comparatively, during the three and nine months ended September 30, 2016, we incurred $741,000 in direct third-party transaction costs related to the acquisitions of Ignia, which was completed on September 1, 2016, and Datalink. See Note 10 to the Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of the acquisitions.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Non-Operating (Income) Expense.

Interest Income. Interest income for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 was generated from interest earned on cash and cash equivalent bank balances. The ~~increase~~decrease in interest income ~~for the nine months ended September 30, 2017 compared~~year to ~~the nine months ended September 30, 2016~~year was primarily due to ~~higher interest rates earned on such balances and to higher~~lower average interest-bearing cash and cash equivalent balances during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.

Interest Expense. Interest expense primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facility. Interest expense for the three months ended September 30, ~~2017~~2018 increased ~~121%~~10%, or ~~$3.0 million,~~$577,000, compared to the three months ended September 30, ~~2016.~~2017. Interest expense for the nine months ended September 30, ~~2017~~2018 increased ~~117%~~25%, or ~~$7.5~~$3.4 million, compared to the nine months ended September 30, ~~2016.~~2017. These increases were due primarily to higher interest rates partially offset by lower average daily balances on our debt facilities in ~~2017 as a result of our increased borrowings to fund our acquisition of Datalink and to fund working capital needs given the growth in our business year over year.~~2018. Imputed interest under our inventory financing facility was $2.9 million and $7.8 million for the three and nine months ended September 30, 2018, respectively, compared to $1.9 million and $4.7 million for the three and nine months ended September 30, 2017, ~~respectively, compared to $1.1 million and $2.5 million for the three and nine months ended September 30, 2016,~~ respectively. The increases were a result of ~~an increase in usage, the addition~~expanded use of ~~Datalink to~~ the facility and ~~an increase in our~~a higher average incremental borrowing rate used to compute the imputed interest amounts during the ~~2017~~2018 periods. For a description of our various financing facilities, see Note 35 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Net Foreign Currency Exchange Gains/Losses. These gains/losses result from foreign currency transactions, including foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The change in net foreign currency exchange gains/losses is due primarily to the underlying changes in the applicable exchange rates, partially mitigated by our use of foreign exchange forward contracts to offset the effects of fluctuations in foreign currencies on certain of ournon-functional currency assets and liabilities.

Other Expense, Net. Other expense, net, consists primarily of bank fees associated with our cash management activities.

29Income Tax Expense. Our effective tax rate of 25.6% for the three months ended September 30, 2018 was lower than our effective tax rate of 36.8% for the three months ended September 30, 2017. Our effective tax rate of 25.8% for the nine months ended September 30, 2018 was lower than our effective tax rate of 35.6% for the nine months ended September 30, 2017. The decrease in our effective tax rate for the first nine months of 2018 compared to the first nine months of 2017 was due primarily to the reduction in the United States federal statutory rate to 21.0%.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

~~Income Tax Expense.~~ Our effective tax rate of 36.8% for the three months ended September 30, 2017 was higher than our effective tax rate of 35.0% for the three months ended September 30, 2016. Our effective tax rate of 35.6% for the nine months ended September 30, 2017 was lower than our effective tax rate of 36.8% for the nine months ended September 30, 2016. The increase in our effective tax rate for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was due primarily to the loss on the sale of a foreign entity during the three months ended September 30, 2017 being~~non-deductible~~ for tax purposes. The decrease in our effective tax rate for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was due primarily to the recognition of $2.3 million of tax benefits on the settlement of employee share-based awards during the first nine months of 2017 in accordance with a new accounting standard, which was adopted effective January 1, 2017. See further discussion in Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report.

Liquidity and Capital Resources

The following table sets forth certain consolidated cash flow information for the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 (in thousands):

   Nine Months Ended
September 30,
   2017    2016
Net cash used in operating activities
   $ (323,560 )    $ (124,850 )
Net cash used in investing activities
   (201,321 )    (18,633 )
Net cash provided by financing activities
   538,963    125,858
Foreign currency exchange effect on cash and cash equivalent balances
   19,447    5,342




Increase (decrease) in cash and cash equivalents
   33,529    (12,283 )
Cash and cash equivalents at beginning of period
   202,882    187,978




Cash and cash equivalents at end of period
   $ 236,411    $ 175,695

	Nine Months Ended September 30,
	2018			2017
Net cash provided by (used in) operating activities	$	247,241		$	(323,560	)
Net cash used in investing activities		(87,505	)		(201,321	)
Net cash (used in) provided by financing activities		(152,103	)		538,963
Foreign currency exchange effect on cash, cash equivalent and restricted cash balances		(2,434	)		19,635
Increase in cash, cash equivalents and restricted cash		5,199			33,717
Cash, cash equivalents and restricted cash at beginning of period		107,445			205,946
Cash, cash equivalents and restricted cash at end of period	$	112,644		$	239,663

Cash and Cash Flow

Our primary uses of cash during the nine months ended September 30, ~~2017~~2018 were to acquire Cardinal, to pay down our debt balances, to repurchase shares of our common stock and for capital expenditures, as well as funding our working capital requirements. Operating activities provided $247.2 million in cash during the nine months ended September 30, 2018, compared to a use of cash of $323.6 million in operating activities during the nine months ended September 30, 2017. The 2017 results were affected by a significant transaction at the beginning of the prior year period, whereby a single significant payment to a supplier was due and paid in January 2017, but the related receivable was collected from a client in the fourth quarter of 2016, as discussed in more detail below. During the nine months ended September 30, 2018, we acquired Cardinal for approximately $79.0 million, net of cash acquired and including working capital and tax gross up adjustments currently estimated to be $3.9 million. During the nine months ended September 30, 2017, we acquired Datalink and Caase.com for an aggregate of approximately $186.9 million, net of cash and cash equivalents ~~acquired, to fund working capital requirements and for capital expenditures. Operating activities used $323.6~~acquired. We had net repayments under our inventory financing facility of $81.9 million ~~in cash~~ during the nine months ended September 30, ~~2017,~~2018, compared to ~~$124.9~~net borrowings under the facility of $45.6 million of cash used in operating activities during the nine months ended September 30, 2016. Both the 2017 and 2016 results are affected by individually significant transactions at the beginning of each period, whereby a single significant payment to a supplier was due and paid in January, but the related receivable was collected from a client in the fourth quarter of the previous year, as discussed in more detail below. Additionally, higher working capital needs associated with higher sales resulted in a higher use of cash to pay down our accounts payable balances during the nine months ended September 30, 2017. We typically pay our partners on average terms that are shorter than the average terms we grant to our clients in order to take advantage of supplier discounts. Further, the decrease in accounts payable reflected as cash used in operating activities during the nine months ended September 30, 2017 was also affected by the increased use of our inventory financing facility in 2017 to facilitate the purchase of inventory from various suppliers. Increases in accounts payable under this facility are reflected as cash provided by financing activities, as discussed below. During the nine months ended September 30, 2017, we had net borrowings under our inventory financing facility of $45.6 million,

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

~~up from $29.5 million in during the nine months ended September 30, 2016. We~~ also had combined net ~~borrowings~~repayments under our revolving facility and ABS facility that ~~increased~~decreased our outstanding long-term debt by ~~$504.9~~$41.3 million, including ~~the expansion of~~scheduled amortization payments under our ~~revolving facility by $175.0 million in the form of an incremental~~ Term Loan A (“TLA”) ~~to fund, in part, the acquisition of Datalink.~~. Capital expenditures were ~~$15.9~~$13.0 million in the nine months ended September 30, ~~2017, an increase of 64% compared~~2018, down 18% year to ~~the total capital expenditures made~~year. Cash, cash equivalents and restricted cash balances in the ~~prior year period, reflecting planned investments in IT infrastructure upgrades, our global web site and our digital marketing platforms. Cash and cash equivalent~~nine months ended September 30, 2018 were negatively affected by $2.4 million, while the balances in the nine months ended September, 30 2017 ~~and 2016~~ were positively affected by ~~$19.4~~$19.6 million, ~~and $5.3 million, respectively,~~ as a result of foreign currency exchange rates.

We ~~anticipate~~expect that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our presently anticipated cash and working capital requirements for operations as well as other strategic investments over the next 12 months. We currently do not intend nor foresee a need to repatriate any foreign undistributed earnings. We expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating cash activities and cash commitments for investing and financing activities, such as capital expenditures and debt repayments, for at least the next 12 months. See further discussion under the heading “Undistributed Foreign Earnings” later in this section.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Net cash ~~used in~~provided by (used in) operating activities.Cash flows from ~~operations~~operating activities for the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 reflect our net earnings, adjusted fornon-cash items such as depreciation, amortization, stock-based compensation expense and write-offs and write-downs of assets, as well as changes in asset and liability balances. ~~Net earnings for the nine months ended September 30, 2017 was also adjusted for the loss on sale of our Russia business, which included anon-cash~~ ~~charge for the release of our cumulative translation adjustment balance upon sale of the foreign entity.~~ In both periods, exclusive of the acquisition of Datalink’s accounts receivable balances and the assumption of Datalink’s accounts payable balances ~~on January 6,~~during the 2017 period, we anticipated the cash inflows from the decreases in accounts receivable and cash outflows from decreases in accounts payable due to the seasonal changes in net sales from the fourth quarter to the third ~~quarter.~~quarter, which resulted in lower accounts receivable and accounts payable balances as of September 30, compared to December 31. Cash flow from operating activities in the first nine months of 2018 was $247.2 million, a significant increase in cash generation resulting from our focus on optimizing working capital, reducing aged accounts receivables and reducing our investments in inventory. However, the 2017 results ~~are~~were also affected by a single significant payment to a supplier of approximately $160 million that was due and paid in January 2017 for which the related receivable was collected from the client in the fourth quarter of 2016, as noted previously. InThe decrease in inventories for the first ~~quarter~~nine months of ~~2016, we had a similar experience with a payment~~2018 is primarily attributable to ~~a supplier of approximately $60 million that was due and paid in the first quarter of 2016, but the~~completing large shipments to clients related ~~receivable was collected from the client in the fourth quarter of 2015. In addition, the cash outflows from decreases in accounts payable were higher than~~to work on various systems projects. For the prior year period, ~~due to higher working capital needs associated with higher sales during the third quarter of 2017 and the increased use of our inventory financing facility discussed previously. For both periods,~~ the increase in inventories iswas primarily attributable to an increase in inventory levels at September 30, 2017 to support specific large enterprise client engagements and increased hardware sales near period end that ~~are~~were in transit to clients as of September 30, such that delivery was not deemed to have occurred until the product was received by the client in early October.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

The decrease in other assets for the nine months ended September 30, 2018 was a result of the change in accounting under the new revenue recognition standard, which resulted in accelerated recognition for certain contracts with payment terms that exceed one year. As a result, costs deferred under the previous accounting guidance are no longer deferred as of the date of adoption of the new standard.

Our consolidated cash flow operating metrics were as follows:


	Three Months Ended September 30,						Three Months Ended September 30,
	2017			2016			2018			2017
Days sales outstanding in ending accounts receivable (“DSOs”) (a)		78			77			89			78
Days inventory outstanding (“DIOs”) (b)		13			12			10			13
Days purchases outstanding in ending accounts payable (“DPOs”) (c)		(54	)		(57	)		(61	)		(54	)

Cash conversion cycle (days) (d)		37			32			38			37

~~(a)~~

(a)

Calculated as the balance of current accounts receivable, net at the end of the quarter divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days.

~~(b)~~

(b)

Calculated as average inventories (excluding inventories not available for sale) divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the quarter plus inventories at the end of the quarter divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

~~(c)~~

(c)

Calculated as the sum of the balances of accounts payable – trade and accounts payable – inventory financing facility at the end of the quarter divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

~~(d)~~

(d)

Calculated as DSOs plus DIOs, less DPOs.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Our cash conversion cycle was 3738 days in the third quarter of ~~2017,~~2018, up ~~5 days~~one day from the third quarter of ~~2016.~~2017. The increase resulted from the net effect of ~~a one~~an eleven day increase in DSOs, ~~and~~a three day decrease in DIOs due to deploying inventory against client specific engagements and an overall focus on minimizing inventory on hand, as well as a seven day increase in DPOs due to the timing of client receipts and supplier payments during the respective ~~quarters and~~quarters. These operating metrics include the effects of the adoption of the new revenue recognition standard effective January 1, 2018. As a ~~one day increase in DIOs~~result, DSOs for the three months ended September 30, 2018 were higher by approximately nine days, due to ~~investment~~a higher accounts receivable balance and lower net sales being reported under the new accounting guidance, than would have been reported under the previous accounting guidance. This increase was partially offset by an increase of approximately five days in ~~inventory~~DPOs in the three months ended September 30, 2018, resulting from a higher accounts payable balance and lower cost of goods sold being reported under the new accounting guidance. The net impact of the adoption of the new revenue recognition standard to the cash conversion cycle for ~~specific client engagements.~~the three months ended September 30, 2018 is approximately a four day increase.

We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms we grant to our clients in order to take advantage of supplier discounts. We intend to use cash generated in the remainder of ~~2017~~2018 in excess of working capital needs to pay down our debt balances, to repurchase shares of our common stock and to support our capital expenditures for the year. We also may use cash to fund potential acquisitions to add select capabilities within our current geographic operating segments.

Net cash used in investing activities. Capital expenditures were ~~$15.9~~$13.0 million and ~~$9.7~~$15.9 million for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. We expect capital expenditures for the full year ~~2017~~2018 to be between ~~$20.0~~$18.0 million and ~~$22.0~~$20.0 million, primarily for ~~technology and facility related~~technology-related upgrade projects. During the nine months ended September 30, ~~2017,~~2018, we acquired ~~Datalink~~Cardinal in North America ~~and Caase.com in EMEA~~ for ~~an aggregate of~~ approximately ~~$186.9~~$79.0 million, net of cash acquired, and ~~cash equivalents acquired.~~including working capital and tax gross up adjustments currently estimated to be $3.9 million.

Net cash (used in) provided by financing activities. During the nine months ended September 30, 2018, we had net combined repayments under our revolving facility and our ABS facility that decreased our outstanding long-term debt balance by $41.3 million, including scheduled amortization payments under our TLA. We also had net repayments under our inventory financing facility of $81.9 million during the nine months ended September 30, 2018. During the nine months ended September 30, 2018, we repurchased an aggregate of $22.1 million of our common stock under a previously announced repurchase program. Comparatively, during the nine months ended September 30, 2017, we had net combined borrowings on our long-term debt under our revolving facility and our ABS facility that increased our outstanding ~~long-term~~ debt balance by $504.9 million, including the expansion of our revolving facility by $175.0 million in the form of an incremental TLA to fund, in part, the acquisition of ~~Datalink. We also~~Datalink, and had net borrowings under our inventory financing facility of $45.6 ~~million during~~million. During the nine months ended September 30, ~~2017. Comparatively, during the nine months ended September 30, 2016,~~2017, we ~~had net combined borrowings under~~did not repurchase any shares of our ~~revolving facility and our ABS facility that increased our outstanding debt balance by $153.5 million and had net borrowings under our inventory financing facility of $29.5 million.~~common stock.

Financing Facilities

~~Our revolving facility and our ABS facility contain various covenants customary for transactions of this type, including limitations on the payment of dividends and the requirement~~

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

that we comply with maximum leverage and minimum fixed charge ratio requirements, comply with a minimum receivable requirement and meet monthly, quarterly and annual reporting requirements. If we fail to comply with these covenants, the lenders would be able to demand payment within a specified time period. At September 30, 2017, we were in compliance with all such covenants. Further, the terms of the ABS facility identify various circumstances that would result in an “amortization event” under the facility. At September 30, 2017, no such “amortization event” had occurred.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

cash restructuring and acquisition-related charges and synergies, not to exceed a specified ~~caps~~cap (“adjusted earnings”). The maximum leverage ratio permitted under the ~~agreements~~facilities is ~~3.50~~currently 3.25 times our trailing twelve-month adjusted earnings. We anticipate that we will be in compliance with our maximum leverage ratio requirements over the next four quarters. However, a significant drop in the Company’s adjusted earnings would limit the amount of indebtedness that could be outstanding at the end of any fiscal quarter to a level that would be below the Company’s consolidated maximum facility amount. Based on the maximum permitted leverage ratio as of September 30, ~~2017,~~2018, the Company’s debt balance that could have been outstanding under our revolving facility, TLA and ~~our~~ ABS facility was the full amount of the maximum borrowing capacity of ~~$768.4~~$756.4 million, of which ~~$216.0~~$156.4 million was outstanding under our TLA, $111.0 million was outstanding under the ABS facility and no amount was outstanding under our revolving facility ~~$168.4 million~~at September 30, 2018. Additionally, the ABS facility was ~~outstanding under our TLA and $160.0 million was outstanding under~~amended on June 27, 2018 to, among other things, renew the borrowing program for a three-year term expiring June 23, 2021. While our ABS facility athas a stated maximum amount, the actual availability under the ABS facility is limited by the quantity and quality of the underlying accounts receivable. As of September 30, ~~2017.~~ 2018, qualified receivables were sufficient to permit access to the full $250.0 million under the ABS facility.

Our debt balance as of September 30, ~~2017~~2018 was ~~$549.7~~$268.7 million, including our capital lease obligations for certain IT equipment and other financing obligations. As of September 30, ~~2017,~~2018, the current portion of our long-term debt includes ~~$12.0~~$16.4 million in amortization payments due through ~~September~~June 30, ~~2018~~2019 under our TLA. The remaining ~~$3.3~~$1.0 million of current debt relates to our capital leases and our other financing obligations acquired from Datalink. Our objective is to pay our debt balances down while retaining adequate cash balances to meet overall business objectives.

Our revolving facility, our TLA and our ABS facility contain various covenants customary for transactions of this type, including limitations on the payment of dividends and the requirement that we comply with maximum leverage and minimum fixed charge ratio requirements, comply with a minimum receivable requirement and meet monthly, quarterly and annual reporting requirements. If we fail to comply with these covenants, the lenders would be able to demand payment within a specified time period. At September 30, 2018, we were in compliance with all such covenants. Further, the terms of the ABS facility identify various circumstances that would result in an “amortization event” under the facility. At September 30, 2018, no such “amortization event” had occurred.

We also have an agreement with a financial intermediary to facilitate the purchase of inventory from various suppliers under certain terms and conditions. These amounts are classified separately as accounts payable – inventory financing facility in our consolidated balance sheets. Our inventory financing facility was amended on March 23, 2018 to increase the aggregate availability for vendor purchases under our inventory financing facility from $325.0 million to $400.0 million, of which $237.6 million was outstanding at September 30, 2018. In conjunction with the increase in the aggregate availability under the facility, we no longer have the option to request additional increases in the aggregate amount available under the inventory financing facility without amending the facility. The inventory financing facility matures on June 23, 2021 and may be renewed under certain circumstances described in the agreement for successive 12-month periods.

INSIGHT ENTERPRISES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

Undistributed Foreign Earnings

Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation to the United States. ~~We do not provide for~~As a result of the U.S. ~~income taxes on the~~federal tax reform enacted in December 2017, all undistributed ~~earnings of those of our~~ foreign ~~subsidiaries where~~ earnings are ~~reinvested and, in the opinion of management, will continue to be reinvested indefinitely outside of the United States.~~deemed distributed. As of September 30, ~~2017,~~2018, we had approximately ~~$193.4~~$93.8 million in cash and cash equivalents in certain of our foreign ~~subsidiaries where we consider undistributed earnings of these foreign subsidiaries to be indefinitely reinvested.~~subsidiaries. As of September 30, ~~2017,~~2018, the majority of our foreign cash resides in the Netherlands, Canada and Australia. Certain of these cash balances will be remitted to the United States by paying down intercompany payables generated in the ordinary course of ~~business. This repayment would not change our policy to indefinitely reinvest earnings of our foreign subsidiaries. We intend to use undistributed earnings for general~~ business ~~purposes in the foreign jurisdictions as well as to fund our capital expenditures and potential acquisitions.~~or through actual dividend distributions.

~~INSIGHT ENTERPRISES, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

Off-Balance Sheet Arrangements

~~Off-Balance~~ ~~Sheet Arrangements~~

We have entered intooff-balance sheet arrangements, which include indemnifications. The indemnifications are discussed in Note 810 to the Consolidated Financial Statements in Part I, Item 1 of this report and such discussion is incorporated by reference herein. We believe that none of ouroff-balance sheet arrangements have, or are reasonably likely to have, a material current or future effect on our business, financial condition or results of operations.

Recently Issued Accounting Standards

The information contained in ~~Note~~Notes 1 and 2 to the Consolidated Financial Statements in Part I, Item 1 of this report concerning a description of recently issued accounting standards which affect or may affect our financial statements, including our expected dates of adoption and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Contractual Obligations

~~At September 30, 2017,~~

There have been no material changes in our reported contractual obligations, ~~were~~ as ~~follows (in thousands):~~described under “Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2017.

   Payments due by period
      Less than    1-3    3-5    More than
   Total    1 Year    Years    Years    5 Years
Long-term debt^(a)
   $ 544,438    $ 12,031    $ 197,188    $ 335,219    $ —
Capital lease obligations and other financing agreements, including interest payments
   6,227    3,563    2,664    —      —
Inventory financing facility^(b)
   224,072    224,072    —      —      —
Operating lease obligations^(c)
   59,936    16,461    23,570    11,580    8,325
Severance and restructuring obligations^(d)
   3,742    3,742    —      —      —
Other contractual obligations^(e)
   49,440    15,347    23,601    8,364    2,128










Total
   $ 887,855    $ 275,216    $ 247,023    $ 355,163    $ 10,453

~~(a)~~

Reflects the $160.0 million outstanding at September 30, 2017 under our ABS facility as due in June 2019, the date at which the facility matures, $216.0 million outstanding at September 30, 2017 under our revolving facility as due in June 2021, the date at which the facility matures, and $168.4 million outstanding at September 30, 2017 under our TLA. The TLA requires amortization payments of 5%, 7.5%, 10%, 12.5% and 15% of the original principal balance in years one through five, respectively, to be paid quarterly through March 31, 2021, with the remaining balance of $107.2 million due at maturity on June 23, 2021. See further discussion in Note 3 to the Consolidated Financial Statements in Part I, Item 1 of this report.

~~(b)~~

~~As of September 30, 2017, this amount has been included in our contractual obligations table above as being due in less than 1 year due to the30-~~ to~~60-day~~ ~~stated vendor terms. See further discussion in Note 3 to the Consolidated Financial Statements in Part I, Item 1 of this report.~~

~~(c)~~

As there were no material changes in our operating lease obligations during the quarter ended September 30, 2017, amounts included in the table reflect our operating lease obligations as of June 30, 2017 less the estimated payments made in the third quarter of 2017. Amounts in the table above exclude~~non-cancellable~~ ~~rental income of approximately $1.6 million due in less than one year and a total of approximately $2.0 million due in years one through three.~~

INSIGHT ENTERPRISES, INC.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

~~AND RESULTS OF OPERATIONS (continued)~~

~~(d)~~

As a result of approved severance and restructuring plans, we expect future cash expenditures related to employee termination benefits. See further discussion in Note 4 to the Consolidated Financial Statements in Part I, Item 1 of this report.

~~(e)~~

~~The table above includes:~~

Estimated interest payments of $3.4 million during the 12 months ending September 30, 2018 and $2.6 million during the nine months to maturity in 2019, based on the current debt balance at September 30, 2017 of $160.0 million under our ABS facility, multiplied by the weighted average interest rate for the quarter ended September 30, 2017 of 2.14% per annum.

~~II.~~

Estimated interest payments of $5.8 million during the 12 months ending September 30, 2018, 2019 and 2020, and $4.4 million during the nine months to maturity in 2021, based on the current debt balance at September 30, 2017 of $216.0 million under our ABS facility, multiplied by the weighted average interest rate for the quarter ended September 30, 2017 of 2.70% per annum.

~~III.~~

Estimated interest payments of $4.5 million during the 12 months ending September 30, 2018, $4.1 million during the 12 months ending September 30, 2019, $3.6 million during the 12 months ending September 30, 2020 and $2.3 million during the nine months to maturity in 2021, based on the projected average debt balance under our TLA, multiplied by the weighted average interest rate for the quarter ended September 30, 2017 of 2.74% per annum.

~~IV.~~

~~Amounts totaling $261,000 through 2018 for other contractual obligations.~~

~~We estimate that we will owe $6.9 million in future years in connection with the obligations to perform asset-retirement activities that are conditional on a future event as of September 30, 2017.~~

The table above excludes $3.9 million of unrecognized tax benefits, including $276,000 related to accrued interest, as we are unable to reasonably estimate the ultimate amount or timing of settlement. See further discussion in Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report.

~~Although we set purchase targets with our partners tied to the amount of supplier reimbursements we receive, we have no material contractual purchase obligations with our partners.~~

~~INSIGHT ENTERPRISES, INC.~~

Item 3. Quantitative ~~andQualitative~~and Qualitative Disclosures About Market Risk.

There have been no material changes in our reported market risks, as described in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form10-K for the year ended December 31, ~~2016.~~2017.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this report, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined underRules 13a-15(e) ~~and15d-15(e)~~and 15d-15(e) of the Securities Exchange ~~Act)~~Act of 1934, as amended (the “Exchange Act”)) and determined that as of September 30, ~~2017~~2018 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

~~There~~

During our most recent fiscal quarter, management identified and remediated control deficiencies related to the ineffective design of certain process level controls addressing the completeness and accuracy of the financial statement presentation of certain software revenue transactions in accordance with ASC Topic 606. These control deficiencies resulted from ineffective risk assessment and communication of certain criteria applicable to the presentation of software revenue and costs of goods sold. These control deficiencies created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis, and accordingly management assessed these controls deficiencies as a material weakness.

These control deficiencies caused immaterial misstatements affecting net sales and cost of goods sold reported in previously issued unaudited consolidated financial statements in our quarterly reports on Form 10-Q for the quarters March 31, 2018 and June 30, 2018 which are described in note 3 to the unaudited consolidated interim financial statements in this Form 10-Q and have been corrected in the cumulative nine months ended September 30, 2018.

During the reporting period ended September 30, 2018, management remediated the material weakness by implementing and communicating revised processes and controls used to evaluate the financial statement presentation of these software revenue transactions. The Company will continue to monitor these new controls in 2018.

Except for the foregoing, there was no change in ~~our~~the Company’s internal control over financial reporting (as such term is defined inRules 13a-15(f) ~~and15d-15(f)~~and 15d-15(f) under the Exchange Act) ~~during~~in the most recent fiscal quarter ~~ended September 30, 2017~~ that has materially affected, or is reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

Inherent Limitations of Internal Control Over Financial Reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

INSIGHT ENTERPRISES, INC.

Part II – ~~OTHER~~OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see “– Legal Proceedings” in Note 810 to the Consolidated Financial Statements in Part I, Item 1 of this report, which section is incorporated by reference herein.

Item ~~1A.Risk~~1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors”, in our Annual Report on Form10-K for the year ended December 31, ~~2016,~~2017, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.

~~INSIGHT ENTERPRISES, INC.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities during the three months ended September 30, ~~2017.~~2018.

We have never paid a cash dividend on our common stock, and we currently do not intend to pay any cash dividends in the foreseeable future. Our revolving facility, our ABS facility, our TLA and our inventory financing facility contain restrictions on the payment of cash dividends.

Issuer Purchases of Equity Securities

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2018 through July 31, 2018		—	$	—		—	$	27,931,000
August 1, 2018 through August 31, 2018		—		—		—		27,931,000
September 1, 2018 through September 30, 2018		—		—		—		27,931,000
Total		—	$	—		—

On February 14, 2018, we announced that our Board of Directors had authorized the repurchase of up to $50 million of our common stock. We did not repurchase any shares of our common stock during the ~~three months~~quarter ended September 30, ~~2017.~~2018, as reflected in the table above. There is no stated expiration date for our current share repurchase plan. Any share repurchases may be made on the open market, through block trades, through 10b5-1 plans or otherwise. The amount of shares purchased and the timing of the purchases will be based on market conditions, working capital requirements, general business conditions and other factors. We intend to retire the repurchased shares.

INSIGHT ENTERPRISES, INC.

Item 3. Defaults ~~UponSenior~~Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

~~INSIGHT ENTERPRISES, INC.~~

Item 6. Exhibits.

      Incorporated by Reference
Exhibit
Number

Exhibit Description
   Form    File No.    Exhibit
Number    Filing
Date    Filed
Herewith
    3.1    Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.    10-K    000-25092    3.1    February 17, 2006
    3.2    Certificate of Amendment of Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.    8-K    000-25092    3.1    May 21, 2015
    3.3    Amended and Restated Bylaws of Insight Enterprises, Inc.    8-K    000-25092    3.2    May 21, 2015
    4.1    Specimen Common Stock Certificate (P)    S-1    33-86142    4.1    January 20, 1995
  31.1    Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule13a-14                X
  31.2    Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule13a-14                X
  32.1    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                X
101    Interactive data files pursuant to Rule 405 ofRegulation S-T                X

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Number

Filing

Date

Filed

Herewith

3.1

Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.

10-K

000-25092

3.1

February 17, 2006

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation of Insight Enterprises, Inc.

8-K

000-25092

3.1

May 21, 2015

3.3

Amended and Restated Bylaws of Insight Enterprises, Inc.

8-K

000-25092

3.2

May 21, 2015

4.1

Specimen Common Stock Certificate (P)

S-1

33-86142

4.1

January 20, 1995

10.1

Employment Agreement between Insight Enterprises, Inc. and Rachael A. Bertrandt, dated as of September 30, 2018

31.1

Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14

31.2

Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14

32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

Interactive data files pursuant to Rule 405 of Regulation S-T

(P) Paper exhibit.

INSIGHT ENTERPRISES, INC.

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:
~~Date:~~ November 7, ~~2017~~2018		INSIGHT ENTERPRISES, INC.

	By:		/s/ Kenneth T. Lamneck
			Kenneth T. Lamneck
			President and Chief Executive Officer
			(Duly Authorized Officer)

3949


		Page
PART I -		Financial Information


Item 1 –		Financial Statements:

		Consolidated Balance Sheets (unaudited) - September 30, ~~2017~~2018 and December 31, ~~2016~~2017			1

		Consolidated Statements of Operations (unaudited) - Three and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			2

		Consolidated Statements of Comprehensive Income (unaudited) - Three and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			3

		Consolidated Statements of Cash Flows (unaudited) - Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			4

		Notes to Consolidated Financial Statements (unaudited)			5


Item 2 –		Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
	29

Item 3 –		Quantitative and Qualitative Disclosures About Market Risk			36
	46

Item 4 –		Controls and Procedures			36
	46

PART II -		Other Information


Item 1 –		Legal Proceedings			36
	47

Item 1A –		Risk Factors			36
	47

Item 2 –		Unregistered Sales of Equity Securities and Use of Proceeds			37
	47

Item 3 –		Defaults Upon Senior Securities			37
	48

Item 4 –		Mine Safety Disclosures			37
	48

Item 5 –		Other Information			37	48

Item 6 –		Exhibits		48

~~Item 6 – Exhibits~~Signatures					38

~~Signatures~~			39	49


	Number			Weighted Average Grant Date Fair Value		Fair Value
Nonvested at January 1, 2017		1,067,557		$	25.37
Granted(a)		331,250			44.29
Vested, including shares withheld to cover taxes		(413,807	)		24.69	$	18,258,878	^(b)

Forfeited		(58,900	)		30.94

Nonvested at September 30, 2017(a)		926,100			32.13	$	42,526,512	^(c)

/s/ Glynis A. Bryan

Glynis A. Bryan

Chief Financial Officer

(Principal Financial Officer)