CDW (CDW) 2 Nov 222022 Q3 Earnings call transcript

Hello, everyone, and welcome to the CDW Third Quarter 2022 Earnings Call. My name is Seb, and I will be the operator for the call today. There will be an opportunity for Q&A. [Operator Instructions].

I will now hand the floor over to Steve O'Brien to begin the call. ahead. go Please

Good Seb. Thank morning, you, everyone.

today results quarter me Al our our Executive third Chris Leahy, Miralles, Officer. Financial review are Chief our and Joining Officer; to President Chief and

website, distributed quarter third and on supplemental to can earnings that was follow the investor.cdw.com, Our this along with along during release is morning available you use slides our call.

Act statements under certain presentation are I'd subject this the Securities number like and in Private to of Those to comments uncertainties cause remind made materially. of Litigation to a that Reform you are actual forward-looking statements XXXX. differ that risks considered results could

company's Additional information SEC. CDW filings no earnings we the X-K, with obligation concerning in assumes which information the to webcast. risks the these furnished this to is today presented other contained and SEC during Form uncertainties the release the update and in and

earnings income SEC measures most non-GAAP GAAP also net income presentation operating non-GAAP in directly Our income, non-GAAP share. certain including includes margin, with to accordance the non-GAAP measures, measures been reconciled financial per All operating rules. comparable non-GAAP and have non-GAAP

to find SEC in the slides furnished our earnings for today. You'll release and reconciliation X-K we webcast and Form today's charts in the

our growth today rates not sales illustrative the results today note, our software in the been versus hardware, the our December for only presented. is sales acquisition for U.S. of unless do that indicative Sirius. comparable Canada. and References results otherwise are had for include from is Sirius acquisition and of not Solutions, including results herein and historic results include Please They period to achieved of periods in Sirius. products financial at our specific which services References U.S. beginning and today indicated. would and XXXX, the and purposes of references remarks The represent include have only dollar to net net exclude necessarily security changes CDW information or solutions, amount from all today combined Computer X, on CDW to closed growth discussed growth the cloud rates or rates represent only Sirius and occurred U.K. XXXX,

today. Replay posted to rebroadcast from call of may of or that the CDW want website permission you remind is later this will not conference also be this the to written I our without be property webcast company. and specific recorded

me With the call to that, turn over Chris. let

you, brief an Al additional of summary Steve. our everyone. our then a and a our details provide our then And outlook morning, and your the provide overview progress Thank right results will priorities. we'll outlook. begin update capital-allocation Good to on today's well I'll and with call move questions. on of strategic as as financials

across outstanding Net This $X.X an up non-GAAP XX%, investment sales, XX% the solutions a performance of our a and markets and strategy, exceptional priorities address a underpins of full in cycle $X.XX, year. was than had were per full strategy our disciplined year-over-year. third operating our to last Non-GAAP broad execution share with we all-time higher result is relentless of quarter. sales IT. and that stack and delivered life net record up Once across We margins. was profits customer again, XX% ability customer-centric array income billion, $XXX end million, income

the that technology the complexity customers integrated seen maximize never impact The of technology, of delivers complexity vital mission-critical outcomes. has levels help and We need for and interconnected created through before. solutions cut

environment helps priorities, trusted advancing digital partner, look distributed enhancing hybrid and provide most with CDW delivering in modern optimize infrastructure like tackle that environment of today's and and are and everywhere. and driving IT. their investments deliver billing stakeholder operating flexibility like new to multi-cloud partner live In them experiences, a of pressing along leaning increasingly entire and elasticity and learn spectrum innovation their advice burstable to trusted efficiency exceptional us customers and as agility. unbiased today's expert and pressing to expense of our they environments security transformation, work, across collaboration uncertainty, A Priorities persistent and who supporting on priorities the technology

drove to enable ability all these diverse solutions support of Our in and balanced performance. priorities broad-based

There of end services and relentless main of of our drivers our balanced customer X-part the breadth product were X strategy. of and execution solutions portfolio results: our portfolio markets, our

markets. end First, the breadth our diversity of and customer

from focus As over XX and on ranging sales are further Each you business; corporate; small markets, over to with each customer channels: Within know, billion segmented annual months. its X including channel own geographies and education. health care; billion a to $XX end business on U.S. we government; last channel, $X is sales have meaningful the verticals. teams

have operations, delivered also and which our billion. We of sales U.K. X.X together Canadian USD

IT best enables and step approach customers journeys. portfolio to there Our to our opportunity of pockets us their along every to toggle the for of be

Our this exceptional job collective an did quarter. team

modernization stellar quarter a net translated increase. continued Results growth broad-based. Enterprise outcomes The balanced digital infrastructure delivered Storage on another team with automation. process transformation to excellent solutions ability corporate Cloud. team's Our NetComm, these XX% and deliver focus through were Customers and sales and led to by to

their employee the to augmenting professional environment priorities The their technologists. IT double-digit achieve capabilities helped customer Both by modernize collaboration continues workspaces need focus dedicated experience. services customers continued team managed as with and technology to and posted continued on work with across thrive hybrid increases their

of projects that all last today's and cautious growth quarter, The accomplish of continued and and technology business customers growth. double-digit environment enhance critical X% Small business across a business performance top drove the of straight for outcomes. This on to across into the help aspects business small mission and sustain security delivered software, increase team cloud. year's their XX% seventh navigate impact

which investments full solutions towards prior performance to life enables Our maximize support customers, us double-digit nimbly full in to for stack, that cycle led shift services.

ability of help robust another care health costs. up growth, Once by were technology harness environment productivity quarter organizations increase strong an in again, a excellent to the health XX% team The posted of rising care results Public this quarter. XX%. drive to team's delivered driven

and talent to guide move dynamics, of organizations relying to they orchestration Our resources. data customers projects modernization CDW collaboration but are and business on implementations mission-critical care committed to health and care forward. complex face Health continues are their for center increasingly cloud

Government posted and government, state Within XX% growth. substantial local a posted increase. double-digit

security under to Our transactional collaboration funding evolving driving excellent threats. collaboration delivered and their opportunities as capture product with center cyber data bearing continues phrasing. categories. team various with customers help priority, top beginning enhance identify and state across local performance The to multiyear emerging projects and a excellent fruit they and software Remote municipalities results is against defenses advance as

priorities, federal compared year. fiscal resumed upgrades and normalized year-end As activity uptick. with to helps address infrastructure. spending earnest. The expected, patterns management data Seasonal their This collaboration all in strong top last the customers spending drove categories growth nearly to including September in team

than to For decline connectivity growth. and student was promote more offset the client education, drive These institutions. higher-ed enrollment K-XX decreased growth and devices continued by sales to and through in success ed and deliver overall NetComm and campus improved sales higher comprehensive The solutions programs safety programs expected team X.X%. endpoint

And team strong threats high, Today, Security systems and driven that basis, by and safety. prior through client IT as same device maintain to well how remains but digital on driven time, ransomware obscured customers to helping solutions K-XX innovative this learning as strong an and opportunities determine performance remains demands initiatives. sustain the the is spaces performance equity the success -- continues the quarter. campus very enhanced implement in At security CDW-delivered by industry-leading the absolute audio-visual team's was learning investments hacking XXXX. provided during team the by help school were security connective drove enhancements. security exceptional addressed

complex Both delivered U.K.'s Canada a performance balanced excellent local also reported services. to broad-based shift and and solutions showed XX% Canada's the environment. was balanced resolved customer performance broad-based as basis. and U.K. our combined amid was regions priorities U.S. a into The market increased our in with Other, and resiliency similar team and continued on results growth. a

excellent in, end-market teams another the of All delivered quarter performance.

of our differentiated a performance. and end diverse key advantage strategic markets are a Our both driver

of portfolio and portfolio. was our of our performance driver second our The -- deep broad

As and integrated a require become their vital technology customers interconnected part services. of has solutions strategies, more comprehensive, and

the growth our portfolio. these IT across solutions address to across double-digit entire ability Our continuum delivered priorities

hardware Storage and Enterprise steady was of top growth. [Technical and hardware double-digit in on drove Video XX%. quarter U.S. Difficulty] increases and Network performance increased single-digit modernization NetComm. servers XXXX rates. double-digit This healthy audio and upgrades increased

strong the K-XX backlog areas. was on of we to Despite relative performance our the Relative PC across conditions so quarter, the supply market. Commercial these transactional improved exclude from more remains environment, improvements and year-over-year even during overall the when elevated. several growth a impact basis

Cloud we secure with was and application options Complexity coming and management. of customer Once changed area cloud was continue again, help continue an cloud environment between performance double-digit a driver We across the to and meaningful customer both multiple double a IT to expect important enhance with feather digits. has double remains U.S. of quarters. in increased as suites surrounding gross to the digits. Strength manage focus. software navigating and not by productivity major contributor business. customers profitability was profit management, spend up storage the increases over broad-based backlog out to strong database their data,

emerge, customers the Infrastructure continue for cloud as as evolve were of and our remains during Security a key Service, delivery increase. threats top period. application and workloads productivity, to security, connectivity mind cyber

cohesive a of security strong spend. to Our data threats. frameworks teams to improve drove customers This to growth through and increasing assessment, mitigation strategy security threat respond and in continue customer guide protection their double-digit

are and to own their of CDW and leveraging roughly are by value produced in total this services are and a leaning XXXX. their services key continued extensions go-to-market of year's Services our broad-based U.S. from teams proposition. twice our balanced X% CDW part sales services, represented Customers enabler last performance net advance warranties. Services driven professional managed fundamental services as levels quarter. and strategies. X% sales, approach up were and of This as to into growth of

past and To we investments the been support in those years and several market. gained services traction this, the inorganic in quickly investments over making have organic

quarter, to of leads our our that growth performance driver X-part of And the this execution third strategy. relentless

three, customers line both are X-part our This strategy, new targeted by strategy and one, areas; delivers capabilities. our and acquire share services to on and top investments two, which to performance. customers; our our expand to to is: capabilities Our drives high-growth and bottom-line guided commitments enhance solutions in capture

we X digital us and and customers cloud-native internationally. physical, in adviser the years, Over necessary across their customers to and ensure best transformations. past cybersecurity. cloud-based as to capabilities, in digital accelerate our that U.S. enable they to we serve and by Capabilities Capabilities enhanced trusted DevOps our customers deepening have broadening the and to the including our remain automation, relevance environments

staff. we solution are services A value hospital to the facilities, clinics great investments sustainable and disaster-recovery understanding system how customers' we challenged and to a to XX hospitals technical a with hardware strengthen of deliver train medium-sized both the delivering re-architect primary example was providing a level a X environment. Having and approximately care them, relationships worked previously solutions of customers find, to With their and retain had professional services urgent our deepen system. our we solution, deep regional of and is

storage, to the We of and technical design, depth services offering, the Windows accelerated the made and made our and to an of our of mastery we've have leverages services including over end-to-end the we routing, solution new for identity-management construct and the Linux customer's portfolio a run broad recovery, and tools, and with backup mastery A orchestration build, possible technologies breadth coupled capabilities. of services by databases, cloud-based become and us over extension solution access that CDW managed talent services investments spectrum this services enabled the productivity years, customer recent virtualization, switching, full team. us support, servers, network enabled needed

$XX under We contract recently of in value our our total investment live of and A lean thousands hundreds with further how customers into contract recurring over great and monthly CDW. example to to deliver million. a went and the cause services a revenue X-year value them

for us brings foundational to IT year. our to profitably in our U.S. are outgrow rest expectations and our the the of the market. growth And customer-centric consistently to strategy that ability Investments

performance, focus high and of customers expect out-performance quarter execution U.S. market our outlook. our range. relentless now points at baseline our XXX XXX the current the we to with on significant IT terrific fourth the outperform basis to expectations XXXX When end to team's combined Our delivered for

IT market X%. remains U.S. in of estimate XXXX Our growth

a actual its of instead results. though X. January X.XX% the as basis, this was The growth reported together, of of XXXX to calculated Taken On to the of is on December over year-over-year increase of the Sirius of X, a constant-currency constant-currency acquisition applied the at equates range to this acquired end combined high date range. to X.XX% XXXX, CDW $XX.X XXXX high end billion, XX.X% equates revenues

baseline weighted items. to continues outlook netted-down expectations Our heavily reflect that remain will to mix our more our

growth growth, our to future. invest profit continue thoughtfully We in while expect this drive faster sales we than to

are current environment, and future to stakeholder the We for customer diminished. and cognizant the but external innovate demand has to of not the date, urgency internal

the Of a eye course, geopolitical watchful other we economic, will we of wildcards, variable and and nature supply mindful of factors. keep potential remain on and including the these chain,

we As will outlook updated an we always on view and call. conditions annual business our provide do, next on our

meantime, do competition. we the and out-execute what leverage do the will our to we competitive continue In best, advantages

now strategic trusted well. important to proven accelerated success business ever. pace flexible The makes of customers, formula model and our Our role serve to more than continue a us change our for partner as will

Al, Now Al? provide more who let it to our and over will detail me on outlook. turn financials

and morning, I'll quarter, prepared to then third priorities Thank with everyone. up outlook. start detail my additional finish our on good Chris, XXXX capital you, and the allocation move remarks with

Turning a basis, and reported consolidated to sales On increased an P&L net basis. average X. were second net a the Consolidated quarter average Slide XX.X%. our XX.X% sales constant-currency $X.X up sales grew on versus daily-sales X.X% billion, Sequentially, on daily-sales quarter. third

balanced line broad-based were growth quarter in and sales our with reflecting portfolio. expectations, our Third across

side, in improved reduction an the our On some supply the quarter, backlog. conditions in overall resulting during

elevated. in pressure devices categories backlog While improved, our very client lead indeed remain, of and remains especially pockets supply times and have of solution

shared, ease our backlog to previously product feather be expect likely offerings. we to conditions symmetrical this time supply will would can and as over we've begin not out As across

about advantages capital. strong still We working team on inventory uncertain and is did continue ensure to the strategically competitive environment, to to CDW's our manage who support great job supply a customers returns leveraging

points a $X.X XX.X%. the by XX.X%, XXX We driven billion, year. once up again in Gross was margin an profitability increase profit year-over-year was quarter. gross profit basis excellent factors. had record margin last of The in expansion a Gross profit was several versus

second overall as the Software as primarily grew a the by revenues. for in category expected fast netted-down year, the nearly net we half Service. as greater sales, twice First, of driven mix a The as

our mix as Second, product XX% third, certain recent high-margin margins a result for were demand both strong, driven acquisitions. and hardware from services, by sales net year-over-year and contribution products; increased which of

due ability of The count. million X. year-over-year $XXX count SG&A to SG&A non-GAAP the Turning Investments higher the consisting higher nearly payroll our Slide well high-growth and third in our in and totaled XX,XXX, the profit our solutions digital are on to XXX support transformation. Non-GAAP SG&A increase Coworker in for the to with market primarily quarter was up end investments attainment approximately was coworkers that the quarter. reflecting and services as strategy and from gross coworker higher at in integral outgrow own coworkers as our to prior sustainably. quarter, profitably

dividends. our record and is that on This disciplined balanced evidenced We will in the sales period. profitability pay investments focused are and by

XX.X% million, prior XX the margin income operating million, X.X%, operating $XXX points compared points to XX was year and from up income Non-GAAP income Non-GAAP GAAP prior to up $XXX year. the basis was basis XX.X%. a quarter. was second up the compared operating record

mix favorable outcome, including within a Overall, while with moderate expectations factors and to product margins, gross margin, this it expect of QX. of and a we're pleased by we'd our confluence which was driven very in above rate

last debt. of senior our as This expense prior interest fund the level for higher expense as to the the Slide rates acquisition interest on was line with notes to quarter. driven our expense of year to Interest of was Sirius $XX the Moving floating well effect in Higher expectation million. XX. was primarily the interest rate year issued by compared

We approximately changed million have full not $XXX year. the our expectation for of

we consistent XX, shown Our add-backs, in was GAAP To $XXX This tax quarter on a expense effective effective our tax income adjust rate, Slide net Slide XX. to rate, of as tax shown taxes non-GAAP on non-GAAP resulted million. get with XX.X%. third

in of tax increase quarter, a taxes. expenses basis an up our effective rate as and the was year's last For XX result rate nondeductible non-GAAP versus XX.X%, points state

As was per you quarter diluted XX, average million, shares GAAP see can of diluted share $X.XX. outstanding Slide the income third weighted $XXX on net

Our $X.XX, net on up year-over-year Non-GAAP was quarter, the share net in XX% up a XX%. non-GAAP income was income diluted million basis. $XXX per

Year-to-date results XX. can XX be found through on Slides

Moving ahead to and Slide debt million equivalents and billion. was XX. At cash period $X.X end, were cash $XXX net

with approximately $X.X $XXX a by our consistent to we revolver unsecured the senior borrowings of During availability leverage. under plan reduce million, cash billion. strong loan quarter, Liquidity reduced with remains plus term

down cycle range Moving the to X end The last management days diligent conversion and was working reflecting XXs, of quarter and days, year's average teens low at continued to of cash our targeted of XX Slide XX. Sirius the X-month capital. our low of from impact third high

capital growth also working excellent XX. drove strong year-to-date free flow of on in Slide effective Our as billion, cash management, shown $X along over with the business

utilized including in our repayment, $XXX For million allocation brings objectives, debt returning dividends to we to quarter, capital capital-allocation cash shareholders with $XX me consistent through our which XXXX on the XX. Slide million in the to addition

we Our last consistent what with objectives shared remain quarter.

flow the increases offering business income year XX-month net increase public through dividend represents the with September. the our demonstrates including approximately dividend and our The today's per non-GAAP dividend in in earnings of share. initial XX% to consecutive XX% the The from increase increased $X power marks non-GAAP annual First, $X.XX XXXX QX of to line dividend net confidence a XXXX. income, cash ninth in and generation in the trailing since

Our its annual level. of compound growth grown a at rate from dividend initial has XX%

in a the target earnings. payout to line continue dividend ratio, Going with forward, XX% will we growing

X.X quarter the of a at capital strong the the the X.Xx from targeted leverage structure growth in at Xx. ratio X.Xx, We XXXX, demonstrating have and right place third to excellent generation. down ended of cash business in with we Second, end

range, balancing our of While rating range. agency we're call us capital expectations, to our towards be would middle leverage of for net bottom are at the we the targeted which

targeted in we when Sirius. financed of prioritize until acquisition continue made to are firmly and satisfy delevering our net such, we can more the will we commitments As range we the leverage

by expect XXXX. the to achieve this to of continue We end

to these our while firmly a of capital-allocation getting priority we objectives repurchases, on back to we share the to M&A fourth and lower are put finally, continue And path temporarily third and priorities. on

Moving to Slide XX. the outlook XXXX for on

as in our While forward, and potential execute, to opportunities we confident ability of to broader we we're the market cognizant remain outperform look variables pivot growth market.

We will continue margins, fourth treatment to the is neutral higher profit a in dollars in absolute thus greater and for dampening reflect gross sales expect a quarter gross accounting mix as revenues. netted-down the Recall else revenues our that to effect on results netted-down all dollars but net the equal.

expect in market Recall, be mind, of premium XXXX, point expect Sirius. a been shared, basis constraints, to XXX be streams, of $X.XX end the higher to market $XX.X supply U.S. the a including at billion be at this to XXX elevated have from revenue mix to we end the we net combined range expect we CDW's would of billion mid- to in to would previously supply With more now of if into X% if combined sales range basis, out-performance end On on expect or basis. currency, of at range. Conversely, would premium experience constant improves. continue we in and lower our levels upper netted-down we of growth our CDW our

change initial be XX.X% to basis, to rates in currency the is headwind in currency. net and our quarter. constant expected approximately in outlook exchange fourth The of from a $X.XX million our outlook This Canadian for full million $XXX growth On original year a sales the in equates the year. reported assumes full rate pound British and $XXX sales fourth to $X.XX for an quarter the exchange to dollar of net now the

P&L. the down Moving

range. be on diluted to consecutive XX.X% growth quarter growth. non-GAAP in a share full We year approximately XX% implies full a earnings growth roughly in fourth non-GAAP or operating higher basis. margin the per constant continue be equates be the income the combined We in low expect This operating This of X% to to constant to basis. fourth on expect year full will quarter currency XX% year profit currency now reported

reported to been currency I year $X.XX to Sirius. The which EPS the combined X $X.XX would XXXX outlook full exchange year only outlook have ourselves month be share, delivering full hold our is of in a that financial per per basis in our fourth remind of a we original basis. the change and included share a you year. would on rates accountable quarter compared -- on now for to from our Please expected headwind $X.XX constant-currency remember, for $X.XX full of

Additional non-GAAP be amortization, on the found modeling thoughts expense XX. for can Slide tax interest annual depreciation, and effective rate

the in a per both, reflecting to grow average to the we basis. to year-over-year single-digit gross quarter, to margin and at for equates to QX. non-GAAP continued XX.XX% to Moving We fourth we daily from rate for decline quarter the year-to-date on or year-over-year modeling what in reported moderation range XX.XX% And average experienced fourth some quarter strong sales for a of profit This in XX.XX% growth margin anticipate earnings expect expect sales, we NGOI sequential levels share thoughts the diluted X low QX. and QX net fourth to related reported from above X.XX% fourth quarter.

expect cash of cash free exceeding the now X.XX% net top sales. long-term we of X% of of flow to thumb year flow end Finally, to of rule be full free net X.XX% sales, approximately our

you on cash As flow years. free quarter may across and ebb by meaningful a it know, has timing and impact and flow,

out balance be cash free rule net cash X.X% flow XXXX years. flow In the over our X of our and XXXX recall, sales. thumb of we free cash aggregate, flow was XXXX you expect and free within If to

That concludes the financial summary.

the environment on provide we earnings business As and calls. views on updated future our macro will always,

brief to up X And of follow-up. limit questions operator open it for your with the you. that, to I'll questions. you each a We with to Thank ask ask would

Instructions]. [Operator

from Cross at Shannon Credit is Our Suisse. question first

larger was netted-down about quarter, EBIT, wondering the a the this very more strong you margin as was wondering I strong. total over think becomes if and it time model we in should from progression be revenue place? higher seems -- was was than talk it contribution. of it gross realize, bit maybe percentage obviously, obviously, lower-client how a might a I that I'm of could some guidance And the the bit guess and probably about But EBIT I towards

is Yes. Al. Shannon, this

So happy to that. address

So as margin. NGOI the I driven result gross mentioned, dollar largely strong and margin was by

So components seen I if of margin gross for accretive note just would the quarter, the we year. effect take from we've a first, Sirius few benefit that things, and Shannon, all the obviously, which

the two, cloud, as Service. of driven a revenues, component view netted-down pretty that as structural. We effect focus largely Number would security, right, by on Software

Next, I services. from a space. contributions investments Again, lot we've of made that in would say,

structural. the be margin, mix rate that favorable, component had Shannon, then would both as largely really variable the potentially we've side. we And talked moderate. that could our last the would product year would gross and through So side. that we the on be the product view on we've see X of And And about that

environment, seen rates. mix over customers also bit led so and to And a obviously, favor this supply our in a favorable And more price. that's strong speed we've

for we're as that's bit obviously, that ease you see and what QX. so supply here, we And could to towards tending start see a moderate,

there education thinking any that? if Just But they're need your we terms indication what And in talk that maybe then Chromebooks client. know give about can hearing be are of look in a can to placed you more perhaps available talk from remarks. you're comments you about are any customers what great. PC that if of I just the could during dollars that you bit for provided Okay. forward, some would purchases as the color more Or some will be XXXX there is refreshed? any were you

said, it's are Chris. trends But bit XXXX. in on the environment has growth PC markets you we're some as device robust end And a that moderated not expected, color overall synchronized. maybe the versus seeing. overall, the I'll give client our Shannon, PC

the So government both customers channels, state demand in and for and example, looking at we client-device across growth with our helped local. in pent-up segment federal

our was along was the meaning Commercial higher-value with helps higher-ed right collaboration but refresh that broad and upgrade saw experience, experience. down other with expected, Healthcare, K-XX Obviously, experience, upgrading not what tools segments, as they but PCs now channels, automation of that a

can't we of to picking up I but tell I What are would are start say see you devices client their continuing criticality soon, Difficulty]. to [Technical which channels devices exactly client the is, going

And of -- so and some employee so number When you value at moving PC XX, and the to productivity, updates. continue for example, opportunity. moving XX, PC customers compelling the already seeing day, several for product We're also Windows cycle. security a are a to PC use commercial end Windows cases who profitably customers about particularly things as like of for outperform deliver there's market one, we'll before, Number to said reasons. we've very the the PCs think

aging natural refresh. We've refreshes we'll and from start And talked those 'XX, about to XXXX, of lot the kick in. then 'XX, a the devices see

very Sirius that market The and opportunities attractive us, the CDW around There cross-selling we about are about our other market available addressable customers. think customers our international. to are massive wraps think services is thing PCs, to which when opportunity also to

say are I any partners the to is the them when CDW remember, us got PC which to past. our that CDW to help arena, look market And that. muscle finally best to then significantly the looking has do move needle in they in And outperform the thing has the absolute infrastructure, allowed in

fundamentally the are the of but to a still customers bit, moderated critical are solution PCs confident very future, looking for. part So

they couple so last the of say priority priority not would on and things in the their PCs right invested of prioritizing, cloud, lower that security, years, I and terms infrastructure, had is What a little largely that now, like our in things into customers are the leaning are list. over infrastructure,

Evercore next question Amit Our ISI. from from Daryanani comes

of to one, curious, revenues talk Chris, much the spend structural in revenues more bit premium about a at netted-down upside Maybe very guess favorable. to sense, more it to about about versus a of is start the profit some point, grow revenue mix IT first revenue I'm a that shift And we consensus. really gross talking the that to making about does profit map, sizable dollars your dollars going at despite IT towards talk ability versus you how to spends? I have netted-down to the talk obviously perhaps at think line gross premium with

is this Amit, Al. Yes.

my would the say tick down contributions mix similar product what there, that margin to the Shannon component, list, revenue, to be response in from but you from the structural. product going a gross the given on from I would for in side. And a Sirius structural a kind the priority So netted if to bit sure, vary services contributed more perspective, again, margin, any order netted-down of really, depending there's then and you're contributions both of and on period. Certainly, the services deemed down

that's And so what been we've seeing.

profit, something, To gross your that talk about. we certainly on that's Amit, question on guiding

means and any need. remember Just deep given up what of time, broad customers at portfolio to our things beauty our going of puts and terms in takes where you're and have show

that's sales well. on change, about as and from time and be of those really profit conditions the certainly, we perspective. see that is how gross particularly stronger supply of of And the so there's as goes where where periods types more and talk are outlook to refreshes kind an we discussed the things. But of net by, and what some we'll as contribution is think about there focusing important And we there certainly going hardware contribution

But that and know the up, tell such to indicator Got kind really leading a Or growth net deviation with I we're about the not X would this about why is of if a the And help bucket driving you or maybe I deviation, any corporate. in count big trend on. so way there's notable follow then we it? helpful. versus are seeing more divergence? Just then the just of not? that SMB seeing out commentary And what's be it. I on is just on think talked think,

literally all now, navigate what's it's on become be arena, team small in cloud environment the of just right Amit, helping execution impacts really a It's aspect our from it's led. start priorities. sure, of but technology the of cautious the the tends software, across and small-business business, like that there's mission-critical would On ubiquitous business. customers every And customers I focus been their is team. security interesting. And to for with a Chris.

add with CDW, to, to cycle that segment, that for years we've investments separated quarters, really ago, support recall past built been solutions and stack, the within able mix nimbly bring the prior about we towards several it life over there. And we've the the shift you'll the full so full out And services capabilities their X, customers. maximize X we

and the So us. in solution infrastructure look, where and behind that leverage execution their is pivot now continue need in business, portfolio broad-solution ability our confident small momentum to the customers to see and networks. optimizing really modernizing and we and right strategic we're our And securing

there. I also has critical say more business become businesses. no notion the really in What to is strategy would is It's difference technology same small this that

technology investments. on for their customers priority. are sure, prudent, much very getting is budgets are prioritizing customers And there's So while technology thematically, a and being pressure

and just of strong the customers we're mind. them to now, very close our right in what's staying of is So pulse top pretty

from Our comes Stanley. next question at Erik Morgan Woodring

I'll each have one you. of Maybe for

that either customer just or call follow-up. then And you. Chris, were out the positive in XQ we your days start ago, change of understand maybe can XX us to it's with call a if either have since on is what you your terms your of you'd discussions help I end-market or been has that all negative? biggest notable kind Maybe changes, I So anything outlook

Erik. Sure, Yes.

say calls. I pressure what our seeing on budgets I'd And happens, That there's customers. generally Look, out there's when notwithstanding what between consistently And customers are more that I'd added the certainly, used we before, there. pressure. that words is say, persistent prudent where it's uncertainty the for are scrutiny. just being and there's incrementally Here's said, X just

risk reframed mitigation is prioritized and resilience of cost experience. asset from cost enabler and to because center Technology efficiency agility and an innovation, being an it's a and of

scarcity advantage technology So with of Further, continuing our see to and touches risks technology essentially a continue customers. that market, to coupled heightened the everything talent we the complexity in competitive security brings drives for are explode. that

all a pressured budget happening have environment. that more of you in So

those is customers lean for CDW into even environments, our good more The news in CDW.

never strengthened with been unbiased make over It's them more say best executing way. particularly I services It's and us relevant. in stronger. never portfolio, has can so strategy decisions been outcome-based value the with years, our the to our discipline an really prop. to has customers and of value never the resonant more we've few been and would that And look help our they -- been has the last proposition created broad-based solutions

is CDW need drives guess now, the more but the point right that for I persistent pressure more. uncertainty, even So actually

Perfect. And a do for the December Historically, a then, follow-up gross you. maybe in quarter. helpful. margins sequential really That's Al, expansion you of see

some You XQ. moderating comments about from made margin rates

just help could me. that's the think might and/or gross think understand, side, what about So normal for so again, of what it us XQ -- maybe seasonality some could historically that's on about growth margins, that like? looked moving as versus you we pieces whether operating we just mean if has for And the seasonality

sure. Yes, Thanks, Erik.

would I look, to margin of that was I NGOI. which I've of QX, called out reflection we've and margins, the So really margins what side. say be particularly year-to-date, been QX really think, seen gross going both some decent the And exceptional. a drove areas product think is on that, has I strong

of you see bit start what course the So the it's of to moderation stay that, I margin see we pretty feathering again, on out for it's would notwithstanding say supply, on a as seen par conceivable we've side. the could much year, with this a product

gross be year-to-date on So low margin what is seen may NGOI Xs on and margin slightly been XXs low that's better. basically you've

at Our Keith Research. next question from comes Housum Northcoast

that price you of has a we've vendors seen changed past Question the of environment? buying increases for you customers price moderation decisions seen those on? year. from increases based how your those the most over And as ability a the on those Have current result pass as recently on guys guys and to your

say the industry. price Yes, on Keith, of the first increases, would I it's Chris. all, the ubiquitous across

them seen haven't We really. abate

soon able and might holding taking given okay see that pass prioritization see along. for And to because We we're of customers We the in right supply expecting have anytime are XXXX. start not been But to sometime on. those they're abate the now, continued strong. technology, those right to constraints now, them

should and you contribute Great. And your say growth -- top-line what this of quarter? to that how kind actually

Yes, Keith, I'll take that.

So I had would net by -- obviously it there by ASP. we've unit And Certainly, varies where sales pockets very bolstered in and some by solid products. cases varies is are then more growth. where channel

channel going and And product. by to so that's by vary

point, just change, say, maybe quarter what Chris' prudent supply a side. I cognizant we're behaviors that's the on to be ASPs that, firm. back little bit of why and would for the some of to certainly we're could you as bit a continue now, customer see that easing But we But potentially and product see margin being changes,

from question Bhattacharya next of Ruplu is from America Lynch. Our Bank Merrill

on X revenue have on margin I and question X expansion. growth

hear can't we Ruplu, you.

you Can me? hear

Not quite.

me? Can you hear

Yes. you. Perfect. Thank

Okay. Great.

Sorry about question on X on X had expansion. and that. I revenue growth margin

So at indicate end-market prepared maybe we commentary yet, deceleration Chris. ongoing you, the And year-on-year one revenue seems second you growth half strong high to first half. seeing some growth the when I'll that look in versus the on remarks, in to first level, there's first demand. are At it a

full growing your first like second growth on mid-teens versus year-on-year half. XX% So half the in year year-on-year based guidance the low is

growth, is still decel. a That's it strong but

a end it items So are in of and all deceleration change question mix? matter you my demand markets? Or is, is any in seeing more a just netted-down any end-market

before, than that we Ruplu, mix have as into expected, that moderated, really what little deceleration said. PCs there's and And the really, the we and it a driver generated. a otherwise, mixed result. more main heavily have more you bit Really, Yes, even perspective, -- demand pretty from But seeing is tell we I as on netted-down a consider pressure is had as expected, I the top would more pressure. we're we that's robust than items, line. like I demand of performance said would

for Al. margin that. I'll question Thanks Maybe the to ask Okay.

guide good And beyond performance margin, can margin U.S. talk So operating like that? X% expansion is low you that the But to year and a us have can margins a a more mean are what you your be a environment, still protracted do even think expand compared growth about to peers. full mix or if do to margin would go expand have drive a recessionary my factors levers the for recession, that's slower beyond standpoint? can question to into a were in that to you margin? are there revenue in standpoint either demand you So environment you from there this? I factors, that need or really

Al. the is really security, categories. This starting are to more the but my time, we kind and in my that. on components more comments margin gross Software there comments deem take that I'll also Ruplu. Sure, cloud, with as environment. important certainly structural. a thematically Remember, fact Service netted-down just would as of And Back the over this

do got think productivity, on I do we the talking cloud, are customers of If how lot about You that a I to focused right? how how you what drive get there, about we're reduce do my costs.

structurally, durability thematically, there. So think we there's

times bolstered our customers also so Now this, to But is us, significant where investments in look assistance right? made we've services, with services. and we've on ever. more like thing than Same need this they

gross both the our just over time. of important how And spend, profile the really like to the then So what's the investments margin, down margin about and and pulse the making our of always happening that we customers our that and try sure customers, top are for kind margin those we and are criticality that's timing, -- diligent we, really, of manage look components it's of beyond and size and manage the mind, the remain us thoughtful on NGOI just our to important. very to

hopefully, helpful. So that's

from next is Samik Our JPMorgan Chase. question from Chatterjee

seen of at the sort it this they've back on think pulled a hear to of more or markets, I first sort customer pressure But guess particularly also enterprise pressure bit relation in suppliers a other to to surprising point. budgets I a for as the international when that's of bit already. comes few we've one, report EMEA. indicated a not And

there terms markets? that of I in a a for budgets was thinking a on terms I next And customers with international U.S. your versus seeing just a markets? pullback follow-up. I Is mean, will the have about front of help. bit international of in pushback Maybe or year in is in insights the more you're Chris, a wondering, the there difference engagement in

What there now I complex say pretty that environment U.K., sure. right it's all we reasons would focus on the know. I'd one on in of things. for Yes, say And is couple a I the a

the of market similar services solutions capabilities. in is very We've U.S. most CDW First broad-based the our got portfolio all, of position to and

of things: transformation, the have focusing same criticality of cloud, obviously U.K. technology the the over to digital organizations security, central and We in on companies types cetera. customers is And et collaboration, also

is tougher it environment. That said, a

never adviser return and can advice impact the so on investment. customers, rule, that perform very in. team quarter, I been provide on I a I close and to and that It's dynamic, ability technology we for say would was market say. customers end to ensure as the know professional the their services to is would well the front in as at trusted highest which their in that their to access, and really of just need execution the that the supply ability counseling performance have results our underestimate attribute you exceptional And this And stay what has particular, to

expect we continue them So perform to the well to despite external factors.

the time on about out-performance on to your know start your sort update we your at to business? And year? sort an how the to seeing rate Sirius having the get hiring sort ability think at particularly that are you you you about it seeing thinking be it. next trying follow-up, a at mentioned around could growth, or constraints of trajectory challenges as growth might talent of what is What and and same scale underlying Got customers, industry of you're Sirius Okay. if I you're growth I accretive but of sort to

Yes, sure.

great the tightness I pleased or been the place for as in position the a to list. Part pretty have work very talent length to very fill development our of in with it's look, And On a seen work, place the our believe, long diminish bring best the of of talent I not quality because technical side, but solid talent. is to all. would top markets, is everybody labor we particular, has at that, our time. been ability to feeling say, We've is in but equally,

if services, increased you the in particularly this dramatically, of security So certifications has cloud for number year around even look at example, services.

result, to CDW -- been technologist a And a as able to bodes you're a we've if place So performance. is and market. obviously, reflected that well be the the in it's in

have they to a a As fast very where at engagements customers able scarcity services with help talent our talent been to we've result, pace. and staff been orchestration we've able professional

is look, a tough, by which -- now, it right market, we're So great. it's it's inhibited tough aren't but we

Our next James. at from question comes Mark Cash Raymond

to Mark XQ. the you impact think and help like see and is very hyperscaler cloud slowing security keep that, on on earnings assuming from demand some out It up This that by strong insulated of like SaaS for customer digital the Are things the transformation Or But any just sounds starting I base, the of for Adam. pipeline? about down. and that you somewhat? are there's to doing well you broad

are the seeing actually. We're are look, to who to to regard cloud I just slowdown some you And short answer. to accelerate. we it take journey why No, I all be need No, customers aren't could think seeing our with that the that's customers, for don't continue cloud. But happening. got a through -- reasons starting the we've

are journey. the Some on

to trying the optimize Some are cloud.

a not it on-prem. to moving opportunity optimized down. just of slow are start we in this seeing certainly are cloud customers But there's support to journey. And lot and Some

I then a of you're seeing you Also backlog Okay. follow-up. if a can update update wonder slowdown appreciate double around potential and you the guys the to the on just on provided. backlog. risk Perfect. ordering and cancellations what And

Mark. Sure, Yes.

double ordering not to continue or We of see any evidence canceling.

the products So I clarity been the the say delivering and commitment of originally pretty seamless. want what to we're and solid, pretty has our that they would just customers

So no concerns there.

James Suva then question next from comes at Citigroup. Our

notice of the cost sold clients built-in? of thing it? that And creating are for then higher on about cost rates, kind anything just higher on of about just and kind your merit like see challenging Great. living things more year, can kind wages line is as labor well customers this us increases bit of remind And of we it as you and end the like a Do little your OpEx both or I annual and that? it buying goods approach customers? regarding all like question or a as calendar had of the your OpEx line. those Or adjustments

to compensation and it's Yes, a to a regard pretty good remember folks, question a performance. about compensation organization are With variable own significant amount labor market. our dynamic that with geared highly we of because fluid

upside as cost is the doesn't So there's that positive with kind at much put a of pressure on because raising opportunity level the thing, performance. it on and really baseline

got getting the to professional example, contracts customers bring stake line for a it's not at we and regard when place. a you with technology customers pressure, for your With pay in bit, like up, just the little industry rest and in critical you're the those at that right. when services, in inflation. a do far, so expertise there's But they lot up of lags It's you And fees for to project, look, critical do -- that again, and willing the because you've go-to got there's a back advisers it right, because, trusted it's bring need.

next that, when raises, year, year. we're we're know the terms we'll we get of In next raises performance in evaluating into going of our and middle what doing to

the further no on have questions call. We

So will Leahy to back I to conclude. hand Chris

thank Okay. Well, Seb. you,

to and Their achieve time Thank you nearly close to our incredible with quarter. to you interest your opportunity listening us CDW. makes continued commitment and our around work goals dedication coworkers in the I those by and serving customers to of our forward customers XX,XXX me successful. for look the to Al and ongoing recognizing for thank Let hard what and talking help the privilege globe. you your is you next

call. all you conference today's Thank concludes for This dialing in.

now You disconnect your may lines.