CDW (CDW) 8 Feb 232022 Q4 Earnings call transcript

Hello, and welcome to CDW Fourth Quarter 2022 Earnings Call. My name is Drew, and I will be your operator today. [Operator Instructions].

I would now like to turn the call over to Steve O'Brien, Investor Relations. Please go ahead.

Drew. you, Thank everyone. Good morning,

Financial today XXXX to Chief quarter me our our Officer review are Chris full-year Chief Miralles, results Al and Chair; and Leahy, and Joining and fourth Officer. our Executive President

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

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

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

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

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

to references Please note, unless XXXX, in the amount dollar comparable in remarks changes rates all growth today or our period versus are otherwise indicated.

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

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

everyone. morning, Steve. you, Good Thank

detailed on XXXX. strategic and of our our hand strategy the as who as capital fourth over Then share to take allocation a progress overview and financials our begin some and quarter of more for through I'll full-year you with outlook. I'll will Al, review and it well expectations an performance our thoughts call

for plenty we our remarks We to questions. through time will move of ensure have prepared quickly

In the of customer model we power our of example deep coupled excellent with and an was extraordinary quarter broad delivered when solutions. business shifting of fourth Our an technology period our profitability. of record priorities, portfolio

quarter, operating above For million flat Non-GAAP currency income $XXX $XXX sales below million, income basis. on on were $X.XX, XXXX, year; roughly XX% was constant per constant a billion, and non-GAAP currency a up XX% the year-over-year, and was last share XX% basis. net up net $X.X

software. outcome driven excellent led relevance, These the high This team's over a to years. have to given customer opportunities. that services, solutions past market high and results by of dynamics in ability and the that an performance the profitability pivot drove to and meet priorities and Performance exceptional growth security, and across is several we outcome record were direct services cloud, capture result made investments

full technology ability client devices. stack the outcomes our strong meaningful growth put a notwithstanding across drove full deliver of lifecycle to profit Simply and decline in

This power of when clearly the model. the demonstrates resiliency combined of quarter business with our our strategy

investment, of which was the fourth the device the devices the to happened in roughly than in given the heavy two years and anticipated. driver represented K-XX some primary While certainly half market, what past accessories quarter? magnitude contraction level the expected client client So this was of steeper client The quarter of we devices decline. of decline

We uncertainty economic client also channels in increased. saw a as general across demand device moderation

with returns. and strong course to customer cash this economic on on our always a our our our and discipline we and As do, the discipline quarter's flows value contributed proposition. This focus playbook excellent maintained we stayed

in a sales business of services our In QX, the lower combination mix. and the success to meaningful for delivering team's and on demand solutions transactional customer shift led

for perspective in this put me you. Let

over and netted-down our notably mix the revenue financial solutions You've streams time on about heard of results. us speak impact

grown time, basis down and a over streams sales. nets more spread revenue netted-down points that than wider. our In business client rate fully periods mix has faster grown sales of net will that up into be we consistently have growth few solutions where annual hundred mix spend out we As device in total shows net that customer business

customer took In growth shift gross QX net place. healthy an The margins drove extreme result mix significantly was growth spend profit. gross of that delivery meaningful very and dampened sales

Now of three-part our let's underpinned a results. turn year growth. XXXX progress performance briefly to was for on the full-year strategy financial by

we is do is a acquisitions. of addition to acquire through of pillar strategic One customers. example first capture our existing opportunity share elevated great given The strategy represent of our this customer an The opportunity CDW excellent the base. and and services same Sirius new cross-sell is expanded way providing Sirius the portfolio. broader capabilities At into time, customers Sirius our cross-sell this. excellent

The and is coworker enhance to in growth Strategic second strategy high-growth XXXX, our solutions pillar upgrades. cloud, security network performance capabilities to excellent contributed with investments solutions of in areas. through strong

The to third pillar services our of strategy capabilities. expand is

are go-to-market full to outcomes full fundamental full As stack, our of services proposition, approach. a our lifecycle, key enabler value

engagement problems more have enduring drive customer and delivered acquisitions across business. depth to foundational been doubt, In our XX% growth XXXX, No team Services the have customer solves relationships. the our our accelerated and critical success. services breadth and than services

XXXX Results net each strategic year all and our category by with priorities vital of financial results The sales record exceptional XX% was customers' or profit or currency team growth indeed constant XX% priorities. a technology partner, investment of year us a solutions. strategy, highly have enabled statement that It of three-part of P&L performance made more. was require transactional the delivered up whether across in three growth down complex a performance. investments also ongoing our

performance impact for priorities quarter organizational full customers deliver key shifting design and advise, the outcomes. Outcomes that the lower customer innovation, enhanced mitigation, agility, of five and meet our cost, to and and experiences fourth team on pivoted orchestrate see benefits: risk as these coworkers. You investments

of portfolio, execution end our product a main quarter drivers relentless of There breadth our three-part results: three and our portfolio closer the strategy. markets, of services at fourth Let's take balanced of quarter. look were fourth solutions our customer and

our of portfolio markets. end balanced the customer diverse First,

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

We also have sales Canadian together which operations, delivered of our UK billion. and US$X.X

fraud with of employee Our corporate software quarter customer implementation strong cloud team experiences. enhance tasks, delivered customers and This and another accelerate drove The team to increase. results. X% helps a detect priorities automate excellent security and sales

and to priorities which led network double-digits. and client Our comp application a focused and center excellent consumption-based each up uncertainty net to performance, de-prioritize in resulted ability services address endpoint devices. modernization data customers Economic on in solutions to led decline solutions,

pivoted the address team address IT and cloud, around customers and heightened team maximize Small identify to customers business benefits At help security investments with priorities the urgency. savings opportunities helped advantage to same declined projects. prior both ongoing XX%. to mission-critical and time, of fund The take new the priorities of

public security by employment offset healthcare X% awaiting growth year-over-year. in the decreased devices decline put from decline education and and driven greater K-XX upgrades results and on the Strong the balanced cloud against economy and across government sales hold around were plans. cannot Strong device client clarity dynamics in client customers as

data performance. delivered and increasingly collaboration industry to areas remain services. thought excellent telehealth as The to excellent of another NetComm, center in experience complex Mission-critical key servers projects and quarter challenges. address telesitting with customers up needs drove robust care driving patient healthcare team solutions technology and and excellent focus Talent performance growth, investments This X%. enhance continued

IT Government the local strategies double-digits, as and well grew enhanced sales up driven through increased gaps as Strong and as hybrid engagements. adoption for services cloud, as as well frameworks. continued, Services XX.X%. helps and network state professional Trust address growth modernization customer training team XX%, state municipalities than of Zero local more by talent security

quarter. achieve priorities The also to and around ability drove storage data grow team's the in help to Federal server agencies their continued excellent management performance. fourth

education, sales use their enrollment. ed to sales by student single-digit overall in decreased. and promote implement success offset For programs, more ed higher than K-XX growth declines institutions Higher which was helping success continued high

to NetComm, and security. elements storage, improved well campus Our storm as drove room that experiences security, help drive server, as enhanced double-digit software cloud, across ability program include connectivity growth

quarter of For experienced where device but decline K-XX, expected with a a than sales performance instead more client were third down low-double-digits significant we units XX%. continuation down more

continued ensure K-XX shared focus best future. digesting the for past years' customers several last investments are they and to to quarter, we on the opportunities As the multi-year funding decisions making evaluating

demonstrating ratio, significantly client straightforward. ratios, is awards. per device quarter, schools a and was plans, Today, complex. focus device or there the for was above achieved student need below device ECF demonstrating This X:X on at ratio more heightened per demonstrating student need When reevaluating one-to-one X:X the many was with student as need

a to For run capability new and with takes complicated or greater higher devices is more processor required more applications time complex example, just discussion more provide and approval. why articulating are security

This wave end final which XX, to focus awarded of customers scheduled to ECF, potentially third in and reevaluate defer some December heightened order funding assess, retract commitments under or reapply led the is to and XXXX.

this funding hundred For to dollars several equated pulled awarded back. being CDW, commitments million CDW of

even to profit client opportunities the to infrastructure and dynamic for team help work servers, doing services, the utilize been there delivery. with in the we've challenges outcomes the across funding to as just strong them customers achieve their devices mission-critical cycles variables team that And K-XX with K-XX, mechanisms. through in these gross efficiently on and I successfully available leading should past will executed our be note NetComm arena,

and currency. increased of in These low-double-digits demonstrate teams drive local results in power increased growth these balanced local our UK regions currency. Other, UK results in and the grit our broad-based combined resilience and Canada of to the and local both reflected high-single-digits to in in currency markets. our and investments performance continue Canada

our performance. see, of are advantage markets driver diverse our a a strategic differentiated can you and As key both end

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

upgrades solutions entire priorities Our U.S. Within offset wraparound portfolio. accessories. growth decline hardware, were delivered NetComm. increases in our sales across These ability double-digit excellent devices address client results mid-teens. modernization IT high-single-digit declined not and hardware in across network continuum the the to drove enough to

and continued solutions NetComm. remained the improve solutions while and Once again, notably and elevated tight. transactional times in backlog to and across Supply conditions exited lead extended categories core areas, with quarter an supply we

Strength data help double-digit out was sales continue in IT as suites X%. We and increases software continue environment systems, manage broad-based their we strong to over and productivity application to secure U.S. feather customers data, with this operating increased management. enhance expect time. to backlog

were Once Cloud driver remained profit across profitability. was workloads storage, and meaningful increased a of to period. mobility cloud gross Compute connectivity and contributor again, by database, double-digits. during performance key an important business the the

cyber our of to as top for evolve emerge, threats customers mind remains increase. continue and Security

management access to and as Our teams results and conduct help deployments to enhance cloud vulnerability they customers assessments, identity and manage excellent provide and to solutions training delivered security. continue implement endpoint application our

balanced to as Services again into strategy. services. leverage of up managed and professional extension CDW results are own CDW this technology to complex services stellar were their today's solutions. and XX% quarter, Customers performance lean of an than with continue as Services across teams their integral more part

that highest growth strong strategy contributed to strategy. level our this our customers elevated of Investments has to growth solutions and third execution in quarter. relevance been. driver And ever for Clearly, to performance our relentless the our this of customer-centric three-part the investments profitability in leads it services have quarter, our

technology require Our partner, solutions. to priorities lifecycle we can the rigorous designed full strategic full serve has vital stack, process highly customers ensure complex across or us made whether transactional customers' that a is

And our that to outlook. us XXXX leads

U.S. Our the assumes economic for outlook uncertainty. Consistent both stronger the is of baseline the market and IT forecast, in with in first in second of level growth, flattish economic this the mix half to relative factoring overall growth XXXX view expected half.

to of basis target basis CDW between XXX continue outperformance market points and XXX We points.

greater of market the of the and uncertainty are view we economy. the incorporates it indeed, current potential recent of some recognizes most notably our impact under wildcards operating Our as

customers sellers pulse of thousands with the With day, we every real-time of market. connecting have a

the business will year. do, provide of on our perspective always updated conditions move refine as view through market we we we the and an As

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

live. know Our our will although be outcomes. will customers support with our a wherever place their we fourth will to that now we of sure. portfolio, quarter things agility broadened critical know our results and we cannot Technology their And customers continue there highlight deep priorities; to definitively driver there where two for are priorities be

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

Thank you, good Chris, everyone. and morning,

finish with XXXX and I'll then the start detail fourth up my to outlook. allocation priorities full-year, capital prepared remarks quarter additional on our with and move

net basis. Consolidated Net average X. reported net sales a client in Slide and by constant on P&L quarter. consolidated sales daily sales sales X.X% declined on the were during quarter device sales On fourth $X.X change our to impacted Turning basis, currency average down the a an billion, were significant daily X.X%. demand

With a meaningful the decline products, there to transactional solutions mix services. in and was shift

Before P&L, the gross about customer as meaningful moving to take recorded our I obligor netted-down commission and services solutions sometimes down into is of warranty our refer netted-down gross a are profit record hear spend software solutions on basis. XXX% to not solutions impact want us we as as are aging and primary the assurance items. mixing such margin revenue. we as a these on but solutions, why Since That generate the of fees revenues you to the talk rest Certain moment well results. as on Software-as-a-Service, these

our in see You and certainly this impact margin sales this the both quarter. our net gross of performance

on continue our continue margins. this we revenue will neutral All solutions we scale gross streams. gross and pressure expect and sales dollars equal, execute grow our else growth profit to and to while our expanding strategy to remaining services, mix net As netted-down to dynamic

strategy I've what described display of our of capabilities in The the our a services. client on shift three-part reflection into it this of accounting revenues, treatment, to this was enhance priorities. of full netted-down reflective and out much impact solutions high-growth into as execution experienced of customers' in expand we and devices significant strategy of quarter success mix tied also is share, the capture While is our

aggregate, P&L. the net two-thirds sales relative net versus expectations, To Returning public the versus was above decreased quarter decline demand in shortfall net to In sales our results delivered were our sales sector solution XX.X% by lower for K-XX. exacerbated primarily the categories the quarter. quarter historically third of driven expectations. to Fourth quarter and third related the sales but decreased this client dimensionalize to Sequentially, in devices. the by

shift to signatures of mix increasingly extra coworkers and of evaluation increased the In we Notwithstanding environment, technical sellers behavior, with see did noted customers their to our working are maximize to close investments. customer and customers deeper with staying respect their customer return scrutiny and help required. priorities, projects this on

seen not and we more customer have some re-architecting on solutions we've balance cost hybrid utility. While complex customers and cancellations, seen cloud postponements meaningful as

of improvement especially quarter similar in remaining, space. categories conditions in across the the On side, the saw supply we as solutions third with some pockets but pressure

remains backlog lead historic solutions and still elevated Our are times versus levels extended.

categories. out backlog not We across ease, expect although our to conditions feather product over time as symmetrical supply likely

We as profitable our through in And customers growth continue strategically support enable strong to supply manage is our inventory ensuring seek diligently still working environment, this we returns. team customers uncertain to just like managing capital economic this our while to environment.

profit serious lapping a excellent XXXX. a quarter. delivered one-month Gross quarter of $X.X time year-over-year of in coworkers Our XX.X%, the increase profitability the fourth the contribution was first billion, in for

versus was points in points our basis up XX.X%, margin profit year several expansion driven basis profit record XXX The factors. year gross quarter above record. prior a year-over-year margin last Gross was by XXX and

product of First, we we cloud products. mix into for would to this complex from hybrid into both solutions transactional transactional mix benefit margins products, When moderate. and mix back benefited lower expect

the prior Second, compared in net primarily fourth year in the The Software-as-a-Service. as XX% category QX greater netted-down growing driven quarter, to the we expected overall by sales a outpaced XXXX mix revenues. quarter, for

from quarter high-margin which the significant services, compared our from QX And to acquisitions. third, net contribution sales contribution recent in prior XX% with increased XXXX year

coworker payroll higher The $XXX attainment X. million Non-GAAP SG&A SG&A consistent the in was gross Turning SG&A to quarter. profit count. year-over-year with primarily and increase on higher for non-GAAP Slide higher totaled due to

million variable being $XX reflecting which by the we our third component economic our environment, declined gross to discretionary and of is principally compared of our tied the our pace also to structure, uncertain this quarter, profit compensation In SG&A mindful spending hiring. are of attainment.

our variable quarter expense of cost our model prudent fourth and benefits management. Our expense reflect the both levels

and at since Investments approximately XX,XXX, year strategy the profitably quarter. our continue the nearly and in integral market the end and up the unchanged was sustainably. our fourth X,XXX in last to coworkers ability to Coworker the to third outgrow our in quarter count essentially be of

This are investments in by the value. that We drive and our focused balanced is profitability on period. disciplined record evidenced

was to compared million, income by operating improvement $XXX points confluence from the margin operating was third income basis was up the prior compared year the points and gross this to up quarter. prior XXX margin. million, $XXX X.X%, third XX Similar Non-GAAP GAAP Non-GAAP driven XX.X% to income favorable a of factors operating within the quarter, basis record a year. XX.X%. was up

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

Our Slide in fourth $XX million. expense resulted This GAAP effective XX, tax on quarter rate, shown of tax was XX.X%.

Slide get To non-GAAP consistent non-GAAP adjust rate, add-backs, with net as we effective income XX. our shown to on tax taxes

For basis the XX.X% effective expected our was lower state XX.X%, our non-GAAP range quarter, taxes to XX non-deductible to XX.X% items. due of below rate tax well as points as

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

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

to full-year results Slide Turning XX. on XX through

focus XXXX average a increase mentioned, billion, reflected execution, is and exceptional strategy an of and a $XX.X basis. reported Net working. XX% were performance an on relentless sales that Chris As sales daily

prior our premium well as expectation market due currency sales basis, the the fourth basis, consolidated On X%, sales IT in net contraction currency in growth our in constant combined full-year quarter. a sales On of estimate average moderation we daily grew below to a as a XX.X%. increased constant full-year X.XX%

grew basis up and was $X.X Gross XX.X% up approximately billion, XX.X%, points profit year-over-year. XXX

profit. and and accounted XXXX, In our shift total revenues and the continued solutions investments the XX% software for a netted-down more capabilities are than services growth. in services and Organic driving of gross inorganic in

non-GAAP Operating $X.X XX.X%. income billion up was $X.X was operating billion, income and

billion, $X.X was $X.X income per up XX.X%. Net XX.X%. up billion, was net $X.XX, non-GAAP income net and Non-GAAP was income share

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

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

Moving to last reflecting down cash quarter, management year's within from low-XXs, of high was conversion diligent days teens Slide XX. range fourth to three-month and capital. The cycle days, three XX average our our of working continued

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

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

execution consistent last objectives quarter. Our with remains communicated we

For increased always, demonstrates follows: and the to XXXX, dividend increase non-GAAP objectives dividend cash XX% net business. the $X.XX annually. power as the increase we This in we're in confidence flow earnings first, updating as Last with income. those November, our the line of generation

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

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

near lower expected our targeted to of the the net call, and of had X.Xx end X.Xx third As XXXX leverage communicated we us Xx. during quarter

with proactively provides our commitment is a XXXX with our structure liquidity ratio Xx capital to investment-grade and time. targeted be to leverage over beyond, manage an and flexibility will range to consistent us Xx, that For net

of successfully we acquisition satisfied the when we made have Sirius. financed the we commitments Finally,

allocation of we third reestablished repurchases, capital M&A, XXXX. pleased such, priorities As have to and our and share respectively in are fourth

$XXX XX% the share repurchases. by For cash supported repurchase authorization to XXXX, company's increase investors flow we programs. will target of for to is dividends million returning in and the share XX% a free Board's through This

to outlook Slide for Moving XX. on the XXXX

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

market rate approximately IT netted-down expect mind, revenues growth than been mixed, With we level in the the we faster of market and near-term, to expectation IT other to has While expect this flattish, be the will sentiment in the mix of reflecting overall categories. continue solution and our economic grow product uncertainty.

XXX long-held year. points to per to the our expectation outgrow points by We basis market XXX maintain basis

second of first the Currency rate the to quarter. an modest for is the to dollar half. assumes half the expected the with the full-year, neutral modest first be in British Canadian and $X.XX headwinds tailwinds for in and pound $X.XX This in exchange

down the Moving P&L.

non-GAAP range. X% expect We margin to in income operating mid our the high full-year be to

end diluted currency. mid-single-digit share expect non-GAAP at the of upper to growth per constant range We be full-year earnings a in

our Please basis. remember, financial accountable on full-year we outlook a hold constant ourselves delivering currency for

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

modeling equates to related QX first mid-single-digit This the quarter for the QX. sales thoughts fourth we expect Moving for to net decline year-over-year to sales, from growth reported sequential quarter. percent to low-single-digit daily average a

year-over-year. We continued margin XXXX but the above first gross grow margin from non-GAAP and NGOI in strong quarter expect first QX. for share per full-year reflecting low-single-digits diluted experienced moderation quarter And in we levels to what profit we some earnings the both anticipate

from adjusting line prior of of In we with free full-year we're full-year be priorities, our our XXXX, long-term cash in of capital for range X.XX%. a free of the net Finally, of range to our expect X.XX% sales, within cash flow reevaluation up to to thumb flow. X.X% rule X%

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

calls. earnings follow-up. to for limit always, up to the you. As that, macro each brief will questions open a provide views operator on our your with the our to you questions. We'd we business updated ask ask With one I'll and environment Thank future on of

today's start We'll now Instructions]. you. Thank session. Q&A [Operator

Our first question Stifel. today from Sheerin comes Matt from

open. now is line Your

like being down commercial client on it year? big about regarding side upgrades. particularly and device you, customers talk business morning, you of I in on good the that hoping and everyone. questions this business? on you cautious the commercial What's the surprise cycle ask on side the significantly, a how that It But playing sounds environment. the PC could was Thank just are more the some see take to thought your K-XX. of was out your Not Yes.

good Matt. Yes. It's morning, a question. Good

We have the what customers cycle you're seen and and that. seeing elongate freezes replacement things seeing times. the uncertain given I with hiring we're mean like layoffs

earlier Eventually, security than So replacement with right more cycle, happening now, just the benefit of year. not but from there's the we right the in the had a pause newer seen certainly of and drive enhanced productivity will now uncertainty. it's replacements level

Okay. in year? And for the your that's not contemplated forecast then

A rebound?

of a -- In yes. yes, terms

Yes.

feel like larger mean our pretty temperature. Our to the we've That's in and But expect reflected than now. was it forecast right forecast we contemplates I current current market pre-pandemic. do the PC the environment the what reflects forecast. the environment remain it to feels much now,

other prices pricing with seeing line you are down? ASP declines be memory that business? going And component pressure also also in reflected to in your and or then And come as that, Okay. is

is Matt. morning, Good Yes. This Al.

fourth say seeing ongoing not would and to are -- We be continue really in I ASPs firm. the quarter

that in contemplated our And not is outlook. so

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

is open. now Your line

like that think storage about clear skewed you guided macro the for really sustainability that SMB I are is demand devices bellwether weak we servers versus this half. also thank remain in to it, But prepared half near-term. you of my moderate? of Hi, have the questions. XXXX? devices you remarks, So kind concerned mean remarks, be center economy, think in the weak demand will and that for taking seasonality you the if to from if data prepared more second for year likely can it's the client in for through are advanced or that assumed solutions And Chris, a for and demand the I what the first

what So you be to half XXXX? second in stronger the of are expecting

Ruplu. morning, Good

questions a in of Let out. me are There couple break there. that

fairly small cetera, And on around mind. business. start did the in security primarily just the really say with I'd priorities And as is is team with still customers of by top are we business et executing And I environment. of led networking, a Let me what cloud. mention, helping well course, is small infrastructure, and software cautious

we're and investments. not business a of seeing So what maximize is prior the modernize need infrastructure to in dampening small their the their

say customers cloud So I business emphasis our continued on sure, with for small is demand and from we're seeing would steady again security. -- an what

terms that of half question In And in year, had, had? was to going split, first address another question the think of that another there. was of second Al half let then terms you was there seasonality to in I I'm that you the which the -- there there

and level you it's the a Or do year? in I solutions can the sense do throughout sustainability the at throughout servers mean just think of demand year. that, you for Or and this think that storage half? be better the second

Yes.

say. I'd what Here's

as to we've advantage of we resilient going for become walk it's to challenging into success, economic think et probably every more technology more while environment. life believe has vital competitive now, said cetera. I a be a to And into

ability strength model business space. of level portfolio, is environment a our in But our for to strong. our difficult pretty capture more of in our the given is opportunity resiliency Equally, a the and technology expectation

morning, good And Ruplu.

On the growth the software premise, in based -- of on and on seasonality, just first, overall. outlook strength is question your our see and services continue terms to in look, hardware we so on lower

be below XX, that the expectation With in the that and half second expect first XX, first slope timing maybe half, that's a cetera on of respect you continued the towards with slightly pickup there, that, our to more reflective more be that we'd would half, seasonality the netted-down cloud, to and half, in of typical may first et device. security, revenues see client the

a if top-line so of terms you bit second stronger And half will. in impact,

as add seeing let think cetera. would little scrutiny, we of that have about et and extra more signatures, recently, the add I Yes, Ruplu, me been a it's just talking Chris -- we that. more again. lot behavior customer been have just about a folks

wholesale -- pullback in We haven't a is projects. pullback been seeing

a to Again, In base. we talked fact, essential forefront. coming the to of bit are to about delayed those infrastructure had the actually being technology our customer that being back projects little all

as So are seeing well. we that resiliency

percent that Can Got the a a on did there. items was for call, XQ? it. but like be sounded you're mean as was netted-down original to the for of what I follow-up? was And details year high-X% quarter, fiscal to I gross percent your ask mention but unusually below may have guide you this Thanks Al, guiding higher profit that, to high in versus missed for that next operating the I in this, X%. and your you it expect moderate for at guide the margin, year mid

I you are guess percent you factors you question margin would of What items help in parse operating the the And be increase? some assuming a of headwinds profit netted-down XXXX? are that that us general, of out driving for can So my in year-on-year gross are what And are as year-on-year? to the improvement? what some

Sure.

me the let So just start operating margin. with

saw continue would point in certainly in on gross QX, be that operating somewhat would not expect gross margins match what I would most So I we XXXX notably versus would to to was those really higher extraordinary. expectation margin margin, we which XXXX. that

with there. gross from start higher expectation margins will just leverage have some somewhat would I XXXX that drive coupled that margin, certainly our But NGOI in we'd operating square

To your for you're quarter, original revenues the question on right. netted-down

that the to fourth grew XX% a prepared year-over-year. quarter, noted so XX% remarks On basis, in GP that of percentage strong. be Our was netted-down revenues really Ruplu, continue

comes Morgan. go Samik from Chatterjee J.P. Please ahead. from question next Our

remarks, are guess for capital color and the looking sort how more look you areas, are get first the pipeline in about at particularly pipeline thanks taking M&A my prepared are allocation priorities can a thinking you're the of for you we are company? for sort as one, of referenced Yes. of changing the please. the of M&A a and focus And where mix And about about questions. bit what focus in sort Hi, have the follow-up, that maybe the here? you I the spend? of I what sort customers areas How your thinking to

from start, just can perspective. then an Chris M&A on me Let and add

both I and expect of think XX%, would to that, M&A XX% free And range reopened share to spoke return our flow know, cash you as the about as to that repurchase. So priorities way capital shareholders. of that I our would we

like. the tackle maximize because can as take that would So in view including near-term. shareholder for range the going range if return look going we longest strategic to to the There get a M&A as you more as what's there you optionality that sense value, what drive us really what's to a dividend, is well for between

the and options share are to but path is so those as look, repurchases, horizon of back We're of us. certainly And on M&A of array well. also on both options available

we think a capabilities faster pace, successful just for in would global Sirius, incredibly we're having market. add add, high I an never But -- say, a always looking I practice broadened did And in can we're geography add an Yes. to high-growth, can if add heavy which areas organizations scale that areas is our capabilities, pretty we've out and about and presence. that integrating should at relevance year also in the scale we and market. We of have those built the impact and

good So us. have integration it's a solid to we're year behind the looking, and always Sirius of

Got side, expected of of sort again, better devices talking it. Got is client sort mentioned I it. which, than mixed tracked we expected. follow-up, enterprise about spending. you my get I But all you're think on also the the about to counter being know solutions impressions And than softer for much flip

run -- really that of better up are seeing easing dynamic than give see supply that doing So faster? to macro continue on more the sort of to from customers? sort your interest from terms front strong deals upsized is can trying backdrop have. supply orders that Just customers? that sort expected maybe a of of rate is Or Or you continued if -- of we you the a us on you solutions more out backdrop it really of a that bit is of parse color where in

this it a question. it's characterize I would way. very No, Yes. fair And

moderated in seeing in device space, the strong in mean, carrying client had backlog, heavy it's is we're And still feather some out, on pockets some NetComm. solutions the particularly solutions demand where supply We space. while are but we've really I

that through it's not So just of performance that, reflected demand, a it's in seeing is our you're the flow backlog. demand

Our next Daryanani comes question today Evercore. Amit from from

now open. is Your line

you When have spend I all IDC, to about your question. my two are they're X%. taking spend being flat some guess, for in with, Gartner, talking peers, I Thanks IT of well. XXXX. being as I folks to start Chris, IT maybe listen about about even talking up X%,

where have? And that maybe think where the how peers that revenue netted-down what your perhaps talking you're what are of delta much and biggest versus color you're IDC saying? the perspective, delta your you conservatism is and Gartner can here then do seeing you you from impact versus So versus is about the

there. the that Good morning, is could really but I out what I wish feeling. it that Amit. do, that's Well, temperature say we're felt I stronger look, not

build the just to at flattish. we're coming to and advisers basis of commit our partner to that that XXX got the by And listening We've we we data, pulse always us would points our be feeling that's going and out And back of thousands XXX and expectations it's that. customers. basis be So industry technical looking it's sellers then to of to on premium top points there.

right sales the terms in our But calculate can that's this course, got we as explained, mix, spend we've that we net got, meaningful don't an more you've feeling our than case, is kind reflects. customer But you versus you've when muted more and said, solutions of spend mix, say what more are the in guess now customer sales In netted-down in expect I heavily example. line as would of net of I flattish. hardware environment, in

of we we year, now. move as you that's the but kind update feel through where we'll course, Of right

profit dollars you NetComm always up. on day. to given I discussion the gross going Got for mix guide start premium IT different seems versus market. a growing the to it. spend do you But at want It be a is that revenues the follow-up a ask way folks to may a That

that as I'd sense, or get to the over a in are I side, about And into seeing love you this about XXXX then in up on NetComm NetComm deferrals environment? it how spend especially to think improve, flat You December business. think there? you talked quarter; was cancellations happening do you IT see starting supply

Good morning, Amit.

not reported level any We're NetComm, from seeing not still you results, cancellation times or can help of postponements there. on lead are really, getting is see a really and of Extended The strong. We lot supply a from our demand there. perspective, honestly.

has there in that's is on -- -- demand. written side, but the there's Chris backlog still strong substantially Our our really supply notwithstanding really moved backlog has suggested, as client, friction NetComm still moved not more

next Morgan comes today Our from question from Woodring Erik Stanley.

line Your now open. is

Good have a of deals has of a transformational is of been of what And appetite then Sirius you guys maybe greater have high-level Thank Great. a one you're and going a get would being you. want you. under morning, for lower forward? Chris, how because done guys. you than of doing deals? your And has belt, a transformational the just larger acquisitions do that the the more that tuck-in about it flexibility pretty that for types communicated does year question and seem larger you today -- want last forward deals now Sirius CDW follow-up. of then you deals Yes, do think significant thinking be that's And success I handful for because sense that in kind to How about kind deals? targets I your does years. those rather leverage of you going like to

it's really obviously, fit pretty of look, I'll along We're with outstanding. And check, at complement the They've Erik, tell and we've but that culture. over -- supply scale No, check. and check, demand, you, our the done them, terms organizations matter financial in a and the return, it's question, eight quarters particular all been in great right? a all suite really looking of capabilities Yes. and/or of

said, and there there other of that matter return. debt provide them deal transformational tackle we and some a to reflecting finding and sure to ratio, are question be that did you consider. a out would of you something always the fit certainly larger and we'd think companies want that? financial Now the it's on making they're asked But though, And Al, on going

Sure.

leverage new that to Erik, noted Xx I obviously, So and within we're our is stated range range, our Xx.

say free net certainly, we smaller And leverage we've with certainly, as we can room about that cash plenty existing do as So in our certainly done and capacity. have of. think We M&A, I flow that regard. would bolt-on with

that have taking there period, will that just look agencies, As our other capital, stay I larger debt into that capital time do beyond going and more we M&A room of we're what's range. on while get think could to the if investment-grade if note that about the we rating will, use from you obviously, is things at bigger, include goal our go could you best structure. which a some and within get avenues. to you that, you Certainly, that have grace back you you and include then

calculus So that about think we contemplated be deals. as all of our in would

the suggest opposite Chris, take versus level enterprise hearing market understand. results versus one. this somewhat down the business wants who sure in the then, small of not And your Totally would business corporate we've with been think I large generally, But Okay. to the SMBs, I'm weakness kind more at up.

discussed you are maybe I terms seeing any And you corporate pricing deal any business, differences extra just trends business SMB? about asked this SMB the difference between downsizing, signatures or in high-level on earlier for talk the there? if can And it me. that some versus in we how differs so thing. corporate know of call, about between you that's And again, Thanks. versus pricing same of but

for and and muscle. Okay. with cost evaluation would to in deal of I as a Erik, the the and larger us we're process. for -- how a dealing that with look, that say SMB we The muscle frankly, smaller muscle, know partner. terms yes, to so this enterprise differences have the turn enterprises between trusted business,

play with we role ways, out, make you is you your effectiveness. so them, achieve the in technology actually which where cost figure this avid some do in to roadmap adjustments And how

they're analysis itself, behavior and cautious. So in terms in Enterprises businesses I'd their of small say the kind kicked have the doing that do. are they muscle being of medium-sized and

devices. successful of we've to modernization, all our was We're demand. now. all demand with It's client we still is across that to that about, strong Demand continue the do in support them said, the Even the a feel segments. the network that right dynamic quarter. K-XX have with talked very all real But of things that okay

Our Suisse. Credit Cross next from question from Shannon comes

open. is line now Your

down I target Thank a talk even quarter-over-quarter shortfall was your you capital much. PCs raised more I can and as wondering, requirements cash for working netted-down? about know very bit levels you you've this turns your and free more came with to the inventory in flow. model

So follow-up. how And over balance morphing and you. do then sheet just cash I a flow Thank time? have you your see

Shannon. morning, Good

I an reflection effectively -- few of a talked a things. for our we and One, flow, and by thumb effect our supported free somewhat raised would cash of working we of managing countercyclical continued on and the progress really nature capital rule and business. our say that about So that's or of also a the improvement

helps this from kind a as environment a flow bit, economic cash actually obviously, it perspective. moderates So of

in of kind So both of those things play.

that is in we're revenues, about our good mathematical collecting net, recall Your or dollars. actually they net our comment gross question bit netted-down show up It sales one. with about a of just netted-down a while netted-down exercise. But a is

what to denominators does conversion a has from the and actually perspective, given that it cycle increase tendency cash DSO, numerator. increase the DPO So the the

is that on can that think really to within conversion. cash band teens, on continue of low-XXs progress net we way And about we high make a basis. the So

the factors inventory we investments business, takes all consider how of well those in as we managing and AP. relative AR our including and we're as So the puts as manage to

capital, and all that's really working front. making part operating model around progress So on that dynamic really good of a we're

hearing for more then standpoint an some market; Infrastructure-as-a-Service? pay you. in can end maybe enterprise to seems from a just bit challenged both as And a I'm as what Great. about gaining Device-as-a-Service, traction. like you're ratably ability seeing well demand you're curious maybe would Thank It talk Thank be you. the SMB. you as But

take that. Yes, I'll Shannon,

On the picking that is Infrastructure-as-a-Service, up.

Our OEMs than customers where that and little small demand a say, stronger I say to learn an hit time. enterprise, And have eager in invest primarily the capability inflection business. point been would over I'd are seen we've more building is we've that

more an it's a type more that's more solution. because on either Device-as-a-Service interest On of one complicated or than that. hand, little complicated it's if obvious the It's lease a complicated it's while

would in And hasn't extent future. taken the the one but may so it think, off that to

Jim Our from from Suva comes next question Citigroup.

Your is now line open.

you you Thank a accelerations embrace a slowdowns so been how been was so of or develop; there's Thank on, question of you've those like government stimulus I rollout them seeing much. taper potential have I wondering lot in programs. any that? red much.

frankly. thanks if But will. out And funds. time red been Jim with and customers' kind of rolling that the is Well, mean think you and us, figure tape that, funds more that they know say is operating where vis-à-vis taking the with a daunting they're procedure, say. includes what that it's that sometimes, we for not to Infrastructure standard can or dealing government. the think about was you that our go federal us Act And bit little question. expect as benefit can we there's can budget I nothing I'd concerns used do? typically more I -- all we that's out technology that's The where when is seriously, find the passed, nothing to pretty that little a I things we're

more higher-end meaning versus to more years hardware of you service of security have had, also have like kind finding lot new as today a X on you've and or more cloud programs solutions And solutions? been kind plug-and-play opposed XX Okay. and offerings that ago, product systems and say, software of been those a

through Yes. The there. tends example. at that is all mechanisms a point. solutions to great for merely one client more devices, point. funding that for ability demand that's advanced Security, versus There's this for that absolutely the access -- point. to you That's good funding a another That's thread more of

the And answer yes. So yes, point. that's a is good

is next Research. Housum Northcoast from Keith Our question from

line now Your open. is

guys X,XXX guys people you weakening the of did thoughts through guess quarter? your what guys opportunity. quarter. One, the kind you first people in then in to flat then perhaps of things. morning. year, year needs? the the market, obviously, that two testament Appreciate quarters were looking I fourth kind as the you hiring through the here at on to a that and is Chris, went you three the were Good during over overall your fourth hiring just the And meet order

good morning. Keith, Yes.

capability. hiring As doing couple few over was the targeting high we've demand, It high a been last years, areas. been really in we've the our of

and where practice think That's organization, is the of would So what about our about own about focusing. been technologists specialists spaces evolution really the and we've that with targeting think digital and security like for the areas. talked specialists technical those and software, I areas we've really cloud, Along our say sales business.

management as we the come year, back business. of the of consider terms disciplined into the that In of half just

As as we the what's that just economy, the that half hiring we're in way we you'll at out And happening, we're the see very back being approaching management. year. of the look in cost in our disciplined own our in tempering see some

at bit appreciate little trying it. then unpack I more, Great. to it. And looking guide a your

are flat for your of about you a assumptions what are GDP? you rates like kind expecting macro As think you as guys the guide? are -- about environment, you making interest you think And roughly where

you say will. would down, just slightly I in Keith. I'd macro flat, morning, GDP, terms broad Good if of Yes. say yes, maybe

mix from that all IT with get our market and well. of about, an And both uncertainty so components you perspective the talked your we translation as

sure on do that's capital rate our of We the look, a Certainly, largely if formal we know that rate. loan, have have that's do market I -- posture structure component against term a fixed of our we is rates have but protecting that. structure Interest that. don't a make capital adjustable we view debt

that pay effective the is see that bit faster. way risk is debt down most there's that to the we manage there think about might where a we our risk so we interest rate And way

You operate about saw capital quarter, And continue we'll that of we overall in fourth our construct in regard. obviously, think that in that and the to priorities. the

Our from next Raymond question is from Adam James. Tindle

is now line Your open.

X% Okay. I Thanks to wanted on me XXXX revenue ask squeezing X%. growth guidance for of in. to

distributor largest recall can a point in no I rate market to split many lower I just know your you're growth says growth, but years. overall global assumption double the the than the I starting that it's describing. is think guided

we So shifting premium opine as Maybe mean share that is in this you from which on and that that this observations Thanks. transactional market your notable for into a we're effectively is to a in towards QX. premium tie from and take share mix PCs. away during from as to saw environment move away gain perspective, your piece could, you Chris, lowering inherently investors guidance, solutions that different

Thanks, Adam.

versus Let me some month came when ago. about observations the talked more into guide pivot started about out guide, market a and in outlook start just is other November -- we to And December. the our dramatically X.X when of the let end of me for we've see that coming the or months our with QX,

So that the might discrepancies hearing. on how on -- be having an impact that you're

question I points, our XXX XXX that basis were and the In basis the we terms go points validity to think the of one of the basis to points XXX still XXX get. basis view was target as asking, that points you

greater that in than number. It more As and our that But think for gave be That and continuing I hardware will number, we've underneath. stronger you into greater the dynamics might about X.X% does mean we of spend a muted we this fourth in seen XXXX, more the security think meaningfully be cloud the quarter sales. will customer mentioned, XXXX, be Adam, meaningfully mentioned, that than Software-as-a-Service you're figure. and as us, getting and what growth XXXX and we as namely

points So XXX we to I could basis would way. look at that that if it outperformance as XXX basis plus, points put

about to years to low-single-digit follow-up, maybe quick being of Today would just flat growth X% And down. it CDW sequentially. think enterprise the more on there, with you're guiding the past, even given In about the talk Okay. And the QX focus. business, X%, mix a would think in down would high-single-digits I sequentially, I as QX Sirius be Al, seasonal guidance. seasonal being

help So to you. Thank change seasonality understand historically. me versus now maybe the just

QX I very thing is period. just Sure. was most extreme a the would Thanks, Look, say notable the Adam.

as first the you lower take so be there as you're we'd this again, what seasonally, would typically we And of with growth we while transactional, not and then should saw expect terms into the on at expect QX, to from some guess right, top-line And QX that we'd that little QX. in look would of we that And I thematically, what extreme therefore, the a mix out, netted-down contraction maybe more in say we'd still as modest a gross quarter. have margin. in and balancing modest is,

we kind a of of of bit just a that saw dampening QX. So really extremity in effect the

are no questions at CDW time. There to you will this over now remarks. I further for hand back closing

Thank incredible by the you, dedication coworkers our around of the me let recognizing and hard globe. Drew. And close work XX,XXX

in and thank to customers interest you to talk privilege commitment to ongoing serving look successful. Your quarter. achieve listening forward customers next Al you for is and your thank to opportunity continued help our our and your the time And and to those to you for CDW. goals, makes what us I you

XXXX fourth earnings call. CDW joining quarter for you Thank

You may lines. your disconnect