CDW (CDW) 3 May 232023 Q1 Earnings call transcript

Hello, and welcome to the CDW First Quarter 2023 Earnings Call. My name is Alex. and I will be your coordinator your call today. [Operator Instructions].

I’ll now hand over to your host, Steve O'Brien with Investor Relations. ahead. go Please

Good Alex. Thank morning, you, everyone.

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

are full first XXXX. on that I'd that forward-looking like the Litigation available investor.cdw.com, considered you earnings Our use website. this comments and release distributed made follow and Act our supplemental this the Reform with the you call. to under to certain Private was in along can remind is morning slides presentation statements during quarter along Securities of

Those risks cause are uncertainties materially. actual that statements could subject to differ results to and

today these and -- and in the risks concerning filings is uncertainties in earnings the information company's Form contained the furnished release we other SEC. in SEC the Additional X-K with company's and the to

information CDW during assumes presented this webcast. update obligation to no the

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

all call specific our find to dollar later the indicated. will written in the conference posted property also the the I today. company. slides note, our earnings website XXXX, or rates to CDW Replay rebroadcast for growth want be webcast you and our permission You'll recorded comparable remarks without in unless release this today and in this reconciliation is of to may of remind are amounts, that X-K. period be Please webcast changes from not and or Form today's charts in references versus otherwise

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

you, everyone. morning, Thank Good Steve.

deeper your to capital begin we'll and overview into move to overview our cover questions. an of right view lot our a the allocation Al and with a then priorities, results an will as financials as I'll provide have well We our outlook, of today. and

down marked progressed, business the turbulent shift quarter in lower demand with translating Market a into conditions were volume. as

XX% lower first down For the per quarter, operating Non-GAAP year. X% net was share million, net was X%. last income than non-GAAP income and $X.X billion, were $X.XX, down sales $XXX

clearly reinforce satisfied of our of record durability profitability and results, and cash our excellent While flow our margin the not gross these strategy. underlying with integrity

take of happened at let's quarter. So, a what the in and look puts takes the

anticipated XXXX First, a what in commercial business. sales. than happened? quarter mid-single-digit our we of first demand weaker called short, exited softening When in In for and a in year-over-year was demand forecast moderate XXXX, our IT decline

more confluence quarter the already than weakened a IT and intensified expected of concerns progressed, as demand fears. As events economic heightened recession

day. a were large the slowed, to commercial and most deal shift although and ruled led that justification financial drove returns and behavior, cycles reduction, compressed. written Project not budget our in sizes in scrutiny This notably canceled, sales cost customer productivity, prioritized. Projects customers. rapid were deals elongated, fairly And sales

sales, While value continue all customers into provided the we solutions this translated of grow. of lower to the

of our were with with each end year-over-year the gross customer of see this momentum. our You consistent expansion on last margin markets. quarter meaningful Margins in impact

the our our the not margins unlike sales But net offset did fourth strong fully quarter, magnitude decline. of

XXXX Corporate, Let's business on the $XX end billion from meaningful have own, $X.X a at annual billion. Healthcare, of to customer market. a each ranging takes Small the Education, Recall, sales by and over sales and take quarter five look we Government, channels: its puts with Business,

segmented Within and verticals. customer teams each including to markets, further are end channel, focus on geography the

XXXX customer are around verticals, geographies, together organized sales. US$X.X similarly delivered our Our which segmented and commercial are size. Canadian and in in U.K. operations Teams operations, billion

outsized large the act and devices, steep the in in corporate were each storage. had commercial external case this The results way client Declines as countercyclical These XX% sales year-over-year. different an particularly a servers, and given quarter. down unique was impact shift with on customer macroeconomic factors in impact customer often end behavior markets that

require that under network to double out helping led categories outlays digits. excellent application NetComm hardware modernization and meaningful success performance. capital achieve pressure, The outlays, Three customers and ongoing corporate of team's up favor.

productivity by continued spend. Momentum projects cloud enhancing small customer quarters. priorities productivity, and drove cloud and spend address posted security meaningful and in priorities recent strong pace team customers increases and of in business which software around solutions helping on quarter drove customer experiences, and focusing growth, on increasing growth with software around mission-critical coworkers' The another that driven success

the business ongoing in activity impact overall upgrade margin net declined performance resilience Network continued on drove Strong offset of small for and margins. of be in solutions, gross with than the NetComm to uncertainty solutions to business economic was sales small demand XX%. channel transactions a also by the increase more high single-digit accretive

under Public sales Performance them while and help pressure. their CDW to value healthcare extract of held called XX%. on as remained declined IT footprints in government firm organizations out education more

success Solutions was driven customers adopt over productivity continued from as higher was hesitancy offset materials and excellent, strong, drive waned can Cloud complex helping momentum inflation. deliver. efficiency embraced needs to cloud to technology focused concerns care performance data that health challenges. by and labor an costs healthcare in to Talent using with solutions and increasingly technology industry privacy remain systems address the and customers areas, center speed projects rising

ongoing investment and mission-critical, driving to solutions. in care collaboration patient Patient be experience continue

overall greater focus elongated our flat. in markets However, devices and on cycles client to shorter-term similar tight ROI sales and resulted were replacement commercial budgets

by the more progress a combined sales see. strong. and of The local, mid-single-digit the Federal's a for federal credibility seats Since our doors growth levels year. and a low-teens opened CDW was and in local activity legacy fully Government and state the bit spending, light track state offset now is harder at quarter led were and quarter Sirius teams integrated is of last and decline table. to record both to flat were first and seasonally and to

and data help to The ability Services storage growth which around client, growth, and and civilian solutions. single-digit Federal was and posted diverse performance high team's Underscoring agencies contributed growth to markets, the server their and high-teens by transaction’s audio, solutions spend Cloud achieve end our priorities across remained in strong year-over-year was drove collaboration. value balanced driven categories. and transactions increased strong. federal of management video

and helping team's Double-digit gaps was and spend State Consistent the and customers address reflected client low declines the as client solutions Cloud engagements. single-digit with current fourth success their by device enhanced talent software as both local made with services devices, quarter, growth continued. training do through security upgrades. in well professional customers driven

of experiences programs used enrollment. and declines XX%. track enhanced improving campus These security, which higher-Ed across solid are education, to student software, growth K-XX For focused growth and in overall connectivity, than The enabling NetComm, declined programs, double-digit success was promote dorm offset by drove sustained their cloud, the record sales storage, delivering room year-over-year more on and security. Higher-Ed

K-XX posted another performance. quarter of excellent solutions

with storage, was and Solutions increases data center efforts and driven substantial in double-digit by networking NetComm. servers, mid-teens increase

services ability to applications Our performance. physical and security wrap around drove services excellent

was over continue The by devices ratios K-XX client to Similar team's in schools sales investments digest more performance decline made parity the meaningful student-to-device near and devices reach or client customers lower declined. as overall than year-over-year offset at priority to and a placed several year, on years. solutions past endpoint a last

we for opportunities. Opportunities, even as expertise center networking to have and multiyear horizon customer focused given data generate planning important Instead, serve schools which, more the area on as well in that funding will needs this channel. next the of were this ways -- multi-funding

heightened solutions. the investments Our currency. report as and which the U.S., which other, of customers especially a U.K. gross Similar to impacted U.S., decreased to we the growth in strategic performance continued operations, very digits economic Canada strong value profit impact and mid-single margins prioritize decreased quarter, while local experienced the for top-line reflected local Canadian client device Similar by in markets demand. consistent as currency, well single higher mix. execute both delivering in digits high to by uncertainty U.K.

Now how hardware, look The the across business performance our end in performance at categories: our market all portfolio translated three economic commercial led portfolio the impacted software, into performance. let's and services. that a downshift of to uncertainty take

in deferral delayed, major components implementation provider, full cycle attach hardware stack pushbacks All ROI results often opportunities elected are multiyear compressed as agreements. focus drives deal many life solutions. in-year deals the other sizes and security warranty pending and on may projects customers As Delays the and hardware project. the a dampen of services versus to lower and in the full favor of deliverables of of short-term

the adversely quarter. and as fourth results U.S. First XX%, corporations from commercial slower quarter were further greatest had factors. impact of device customer by impact work cascading the decreased a impacted layoffs. through declines by client down the hiring step portfolio category Large all these hardware

in improvements decreased customer all this services strong impacted NetComm driven hardware This tied hardware, Growth than to quarter by services growth largely was to better across expected. but very and we warranties. was demand performance in X%. strong in markets. also in reflected was particularly end increased supply by weakness U.S.

in was and to and categories sand by remains stack declines projects growth and the grow, Double-digit Services to in delayed were though Momentum was network offset partially continue management full Managed U.S. software impacted professional software levels. growth IT timing employment software services strong. full stack integration. in tied of solid by increases storage

government management, in Security privileged were Significant results by offset was slightly by and sales U.S. security declines intrusion firewall. buying shift remained risk impacted a behavior customers' large in but growth and commercial customers, and for key declined detection, management, focus area the access in year-over-year. identity

category, customers' which or largest refresh of tied of either physical is footprint. Our assets expansion also to

when business. trust shift a gross trust and customer and our when to expertise, the demand today uncertainty serve capabilities remained engagement serves never and double-digit was customers this strong period Overall, economic heightened with very our security us and of coupled and engagement Within demand us and well in with trust led temporal was with well by and performance cloud meaningful and caution, partners that customer again, security, contributor increases deep that platform, and stronger, spend recovers. in will productivity. profit, in Once small engagement

outcomes right of five customer our value. help framework, volumes our our are our components now, to management continues ability especially Although eye care down, drive across the customers drive to cost

Our address need the across ability and continuum our customers outcomes us entire enables priorities IT pivot customer to where to us most. drive

expectations of increased of that in enhance Any are and to Investments exceeding a ability as reflects like made provided high strategic more investments that the contributed Sirius we that customer the investments seats partner. our services, our and trusted maximized at to the an market, that stickiness, differentiation impact our better high-growth have capabilities one-stop and both solutions have acquisition and our -- relevance performance. our in and and evolution table, ability

our fortified the strategic The our actions they trust. contributing outcomes that we've our from technology margin the proposition, of customers can have they than have capabilities value with help also only expansion XXX-basis solutions partner need more can and XXXX. taken achieve points profitability, strengthened they the expertise A not to profit operating and since

and the our combined our ability flexible our enables that balance strategy profitably view with market, us IT when It's XXXX. U.S. and execution our that financial to of the model, rigor leads for to discipline outgrow business

initial you with February growth. U.S. market on shared for XXXX was we flattish forecast our The IT call

our to rate contract at that look quarter, through will conditions year. now quarter the U.S. full business Given for high persist least single-digit the second market we first the for belief at IT

impact to in We to continue outlook anticipates the of economic in IT market XXX-basis that see activity ongoing the uncertainty pickup half assumes outperformance a XXX-basis and will moderate back that customer to we U.S. points. target year This will of continue behavior. the by

conditions, recessionary ceiling-driven tightness, events. heightened Wildcards deeper and include credit liquidity debt

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

operating now. We right are waters choppy in

market. a while capabilities, strategy, the and And manage align to to to to continue have and durable the discipline have cost we profitably We opportunity. process outgrow

we Given discipline profitability. have for our our to market expectation demand, amplified preserve expense

The their all-weather evolving be. for the be and lead CDW and CDW regardless know team, A our wherever hallmark there diminished, in haven't adapting is whenever that to is of outcomes technology and we of an always will them customers market. our delivers customers serve needs to conditions. may market

unmatched relationships leveraged out have our trusted to turbulent and competitive have business the deep come model, markets faced proven in and advantages We stronger. and past

We do again. will so

now Let me Al? over outlook. more turn provide financials who it to detail will on Al the and

I'll with finish priorities everyone. XXXX remarks morning, good in detail and up allocation first Chris, you, quarter. Move capital prepared with the my our outlook. and to start Thank

also and on came an Consolidated Turning $X.X down a anticipated. basis in sales relative more to Solutions X. billion, year-over-year, came basis. in XX.X% Slide net on declined our reported than sales to below resiliency quarter XX.X% daily expectations first our results and lower greater sales on while flat outlook. were expected and Transactions P&L despite average Net than

shift decline Notwithstanding margins. a into the as a specifically shift bolster sales, revenue dampening And but mixing margins, we've netted the benefited has solutions higher of a impact to lower-than-expected and all tends that percentage performance, of net before, total solutions on relative the transactions down of drove shared in gross mix equal. effect

obligor our services of not a these on transactions, much gross recorded several are a partner-delivered as revenue. Cloud, portfolio, and Software our solutions high-value Since including we the on warranties primary is netted profit and where are components security, down important of basis, Service,

the our X.X% basis net represented gross fourth basis. XX% XX% were first overall an continues down first SaaS business. This the X.X% an quarter, compared sales quarter average quarter. these and of sales daily notably and our reported netted In in profit prior-year quarter to be revenues, outgrew and our net Sequential versus fourth and down important in a on on sales to transactions the trend

than the Our unusually better given in the fourth demand seasonality, normal outlook quarter quarter. first soft anticipated

commercial dimensionalize amount roughly expectations, public outlook came remain did growth also relative levels, driven did. in sequential disconnect on both downshift sales which Our and assumed they had a customer historical business our third deliver the from than impact was spend, shortfall It to firm would small better large close transactional across of net assumes The growth, historical commercial To which in results. will business. an and have solutions adverse corporate commercial large our sequential it channels, by not. our activity and customer to two the

dollar And with supply the here the quarter. challenges line our with chain supply lead solutions value product transactional backlog are persisted side, to backlog have essentially times normal change relative the while meaningfully the elevated. of did backlog and fourth the and back levels, in not remains products in On NetComm associated

backlog remaining as this feather anticipate to over continue ease. out supply time We will conditions

out drawn anticipated. more been than has this So,

ensuring manage continue always, our economic strong we As to while capital returns. support to working judiciously our customers

which we'll is emblematic free this of flow Our discipline. performance cash discuss shortly

Our the excellent in team profitability delivered quarter.

double-digit only Gross XXX-basis of quarter. factors record by a profit as a period XX-basis the fourth gross The first billion, prior profit year-over-year decline decrease quarter was was XX.X%, margin was of the and in despite record margin expansion the quarter. points up fourth profit sales. in in similar points down year $X.X X%, versus a The year-over-year only gross driven versus

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

with greater Second, sales Service growing outpaced the as revenues. category we contribution services acquisitions. expected for the to first year, in by quarter in mix third, mix net sales from double-digit prior net as in the growth; driven low digits primarily a netted compared Software contribution a from QX overall The single high-margin recent significant our down QX and

count increase the in structure, fixed our profit This decline expense, SG&A was coworker gross by sales during increased The of Turning our to partially variable to as was year-over-year Non-GAAP totaled attainment. quarter. non-GAAP is year. for offset on payroll SG&A higher a Slide SG&A tied due reflecting primarily component the to compensation which X. principally payroll million in $XXX last

expect SG&A impact the we higher diminish cost fixed We move to the the year. year-over-year of through as

To we efforts focused our productivity and to that operating model end, our and are savings. drive innovate on

added set. opportunity savings overall cost to of our we've level environment, with our Given the count professional to areas we at to to principally count acquisition, initiatives the resources as value our our the pacing This the end business is fourth in customers. up most was services. where in from our to quarter recent provide aligned structure well as and XX,XXX of quarter demand slightly which structural driving the managed the ensure first the due demand can and advanced technical approximately includes the Coworker most coworker

was GAAP down services $XX Strategic year. year. the million investments operating Non-GAAP of million, down compared three-part was $XXX goals. to capabilities in growth, strategy margin $XXX and versus income operating solutions an catalyst our the important prior key our million, remain and income to prior for profitability for our million achievement $XX

the year-over-year up last driven to improvement was our higher a decline of volume ratio strong by sales The as fourth strong points result X.X%, down costs points net lower the record margin operating at Similar reflected year, sequential margin. was quarter. Non-GAAP gross although compared profit. XX-basis income to the XXX-basis fixed this from prior a gross quarter, of and of

Moving driven in with year, rates, expense to interest higher Slide Interest $XX relatively but modestly prior above the million X. quarter. expectation our for line was the by

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

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

our our quarter, tax effective to expected range the within non-GAAP XX.X%. XX.X%, rate XX.X% For was of

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

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

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

debt almost our net the $X.X During our approximately billion. availability our remains strong of plan quarter, reduced by Liquidity million, consistent maintain with cash we overall plus with to leverage. $XXX revolver

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

also cash on Slide excellent $XXX management capital of flow free shown as working year-to-date XX. effective Our drove million,

with our dividends and the to including in and million million repurchases addition For XXXX in allocation capital through objectives, debt the $XXX share $XXX to quarter, cash repayment. million utilized shareholders we consistent $XX in returning

in recruiting Locus of We also closed February. the acquisition

allocations XX. me to brings That Slide on our capital

we updated with Our consistent execution communicated objectives remained last quarter. the

the to in income. $X.XX dividend confidence cash increase demonstrated dividend increased the the our in XX% business. non-GAAP the annually. increase and November, generation Last line with always, earnings power This as we flow of net First,

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

right quarter have at in and within net leverage ratio. times, the we structure fourth ended the to our We the end a X to of flat the ensure capital quarter X.X targeted times new times. first Second, place with range X of

into rigorous convert place manage have maintain generation process flexibility proactively and and We liquidity. in to our a business continue performance to cash

and fourth share value. have our repurchase drivers M&A and allocation third priorities Finally, shareholder is important remained of capital

XX% quarter, returning of investors repurchases. the For XXXX, we'll XX%. we roughly returned and continue first flow to to In to cash XX% free through share target dividends

the reminder, increase on top program $XXX authorized repurchase authorization. the a the company's Board million As dollars the last a quarter from to remaining share prior of

Moving and to caution the overall outlook sentiment XXXX market Slide for prudence XX. IT on current of customers. the reflects The

We in that of half digits. upper near IT year. the conditions with This contract the of recovery continue the to single this expect term in of demand our the modest informs at market a expectation the will high end second

scenario categories. expectation mind we our times as netted end than to versa. the this our product in lower of hardware range that and to faster continue the tends for in With points. revenues market And to baseline, to outgrow by grow maintain on look we vice XXX-basis and our this Keeping long-held other XXX-basis our down overperformance to solution of be softness,

year, neutral the the and half the $X.XX with currency We and an impact the expect dollar. rate exchange to $X.XX continue British for half. of headwinds tailwinds assumes pound the Canadian to This modest second in first full in modest a for

Moving down the P&L.

the within gross reduction of range to our our X%. reflects lower gross with expenses. and the be a and net full-year margins fixed operating sales This balanced higher in income of margin level non-GAAP the expectation profit, expect of We

on non-GAAP our in ourselves decline constant our digits hold outlook remember, year-over-year accountable delivering basis. full-year expect Please earnings single constant a currency. we currency financial for to Finally, full-year low we

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

mid-single-digit We anticipate modeling low thoughts net to reported to QX. QX sales operating margin QX and with a quarter. a quarter. quarter percent Related sales, non-GAAP leverage. digits consistent diluted second the Moving as to And double-digit levels we in decline That second expense for from to the the second mid-single NGOI we quarter expect year-over-year growth average daily profit margin continued equates decline higher second from to per efforts expect earnings strong improve performance year-over-year. with share in gross margin sequential

X% be to working In XXXX, free of net cash we new the on of emphasize a rule as return of continue range expect to X.X% to high sales flow we capital. our at full-year thumb of end

the While have given we concludes stakeholders a come ability controls, are rigor clearly model, flow, to our in and the in our confident profitability to That cautious and financial our the cash uncertain expect. deliver operating margin remain our we environment, resilient of financial summary. business

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

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

[Operator Instructions].

question first Our Amit from Daryanani from comes today for Evercore.

open. go now Your ahead. line is Please

it's morning, thanks saw folks versus Good concerns And month or guess there's think magnified really is March? seeing then that far and any Yes. you April one like than that more may macro impacted specific have the mentioned you of CDW's you these reasons I and what March the think trends start the do Chris, for question. much all I with, the taking of so hear, CDW-specific but you're really you micro I'd are sounds saw love issues maybe the I success, quarter issues. for any how change in in think much rather company versus trend have broader my to to in had a

intensified concern impact driver let of a caution Amit. particularly unpack saw commercial relative large into amongst as demand, morning, Well, overwhelming size sharp commercial through the and the outsized our result. in miss the the the quarter customers that uncertainty commercial and downshift driver, And as and economic the customers our expectation performance Good meaningful bit. an through key business. results our on to it customer translated given uptick you look, we little was in our take with a of that Yes. the me just

they deeper, into focus for customers got If when costs a projects exhibited is which of brought brought that and reductions, what went which sales generally, say would reducing cost scrutiny deferring And and a deals a a brought duration pausing cycles knock-on I cautious concern, and that shorter customers. lot created that didn't of all we saw our on to that. around ROI overarching cancellations, we little greater larger were delays a focus and I see longer in shorter-term decisions of dig and on effects look, playbook contracts. smaller the

a and at impact stack, the about business, just full representing attach of that major and for So a other as large across than full commercial you life more in cycle So, hardware, you you've solutions point have got our provider, top created XX% And if sales. our there's in when right? headwind then of cascading line time. delays software, deals, impact a think less services. services

But I it the particularly rest generally, portfolio did as balanced the you would help. say of Now in market, much softness would end client go of given as customer liked. we have didn't through extreme portfolio, the markets help device as the the

care, the when as So, Ed executed think due might. pressures didn't international thought they perform solutions, but certainly K-XX health executed well, again, have in all area challenges, year-over-year client we but did had high to well well about as in well they some continuing growth you client performed they and quite and government

as line so, result, impacted. And a the was top

a board. strong NetComm you you the portfolio for go The through is bit if across other was just little unpack I the would itself, thing

growth we board. the strategically, strong professional, strong. in across focus Software solid. services where remains Cloud the managed and and Services strong were was areas

look record -- to margins quarter margins flow. and quarter did about the you were the our and we look across magnitude felt we -- impact and little contrary first impact. to have profit, is view, is services up some And But had in shortfall really, weren't a relative had and in warranties We portfolio, of we softer. on good of first record down very free macro enough terms that to a but cash the execution excellent offset QX,

I investments So, a to as the well working margins cash demonstrating are the contributing is And say team is in really environment. would really that profitability. and our strategy performing challenging flow are that enhanced our

it, our our turn the say they and to in strengthen times there turbulent partners in is these challenges. conditions further demand years The us before, know thing We've the temporal we to times of us the be uncertainty, and them, address trust their customers. of the seen I'd on we're that we'll regardless to periods and when you've know for And shift and engagement other our over with for the there when this are been through customers and them. in market, lifts, turn they the

Fair Chris, were enough. you And talking follow which last that can part I on up just about.

higher see positives I happens I share as you these or mean tend for think recession going historically, come next inflection of of what see to out gains or an CDW. you whatever in the six you months,

as you your wondering, do in you with customers? the could do the see given of I'm have on to of acceleration you you think duration you're you an this could path look it, think maybe I engagement And guess, touch out positioned well gain come what So, like? share

Yes. and controlling out times, of we and say And to what staying in We these can Amit, imagine the always would us accelerating front that's of we our that curve do, what the what you really bodes say, playing relationship. customers, would we're what doing, like expect. on well. in control, we I doubling aggressive can down offense, is

fair we I to shifts predict uplift. well timing our client for of share that of will very feel positioned terms any around, we look, devices of be than significantly turning the to But for example. as us, hard more the timing, absolutely In demand do capture of think, the confident that

you. Thank Perfect.

Thank you, Amit.

Chatterjee next from JPMorgan. Our from question Samik comes

is line Your go open. Please ahead. now

should guide just all expectation wondering, for in as we sort a your to But I XQ driving terms the in guiding to growth see to growth taking not remarks. growth of off of Thanks XQ? to of was that's the confidence expect here XQ? my that color thanks for today as sales what's and continue question. Hi, prepared starting used you just now a And the robust what I for of mid-single-digit with -- understand pre-pandemic. into sort

return of expectations? activity start into starting a follow-up. sort quick thinking of what's to And client sort And device Thank how particularly you. of spending in just that the and half, about Is baked second you're then I terms your have customer sort to of improve?

this Samik, is Good Yes. morning, Al.

So, similar an buying regular to that play. customer be softer QX, again, overall would is be from our that, seasonality, that public expectation outlook with behavior we'd and and offset expect business. the with seeing what I think in from would commercial that both you're particularly particularly respect conditions our is, in

the lift with bit that the a there largely seasonality typical muting of given otherwise. conditions our from softer a So, from seasonality from public

to activity. conditions a our this Now half, would we'd would on question higher second with we the your in And seen while similar, half, we got our seasonality in we've the pickup last having second seasonality, QX. anticipate expect and government including normal have so of extreme point, respect quarters, at obviously, we've business public the couple

of pick believe some a see of and exactly of that kind a you'd in Now activity it's And the up, solutions. when the balance clients a say reason in see to half year. TBD will back that of there's we'd that client activity pickup but between little bit

product years. Got to what portfolio seems been color the And you're the the the within continue we -- for parts momentum seeing not just what's in you it's the it. to NetComm. to outlier NetComm double your last Any related customers maybe your of supply if -- Okay. but couple of to can be not ask really -- to click other it's or on demand I on challenge been portfolio. an Obviously, challenge, spend in on if momentum my follow-up, still otherwise even driving can

momentum that driving what's So, there still?

to our cloud think Chris. couple things say heavier relief Obviously, when you're customers about their cloud, customers do are that to and the moving and workloads. demand have seeing we and handle performance it's we larger been modernizing But is who seeing, we've the using And driving Samik, networking you infrastructure momentum. good. which I'd a the of momentum. is supply network the chain. has got some One NetComm backlog, are One in

modernization. mode. work We hard cost office mentioned like do the to and earlier. are corporate see commercial towards customers also reduction fact the that about space, They're think back classroom in these trend large on and customers the you at the K-XX, our When notwithstanding in upgrades I

are networking They and transformation on employees important very networking customers. the as experiences data the coworkers that, drive of center of and digital the and and their to obviously, own their focusing out employees the and to connectivity a is part

devices actually upgrading surprising over years, networking, not and what the amount given ingesting investment it's made that's client been past seeing. requires client So, the we're that's few usually of

you. for my taking Thank Thanks question.

from comes your Our next of open. is Shannon Cross question go Please Credit ahead. Shannon line Suisse. now

customers as investing they're are you to I'm where just Anything going are artificial to be what be Thank I'm thinking journey? and I position, have would are about customer their terms Where to them. they think wondering our helpful. your wondering saying unique pretty talk a give And in you guess, you, ability to And in good much that us AI? your, very they Thank diverse can morning. intelligence. I you. look base they at of and AI

Yes, Shannon, it's a great question.

CDW You're form nobody kind The about moving right. not a And new customers. complex. lot the is for it's good fast, it's can of of of now, be right there around how about to news it. a done AI lot. And support talking work and who's There's talking are it is everybody

CDW around AI AI customers. the design of over are with is that I frankly, system, what because So, having front right on at all need and for this. because means conversations customers we -- pressure We're our general And really our the now. that say we're our says always is they're are the CEO be which saying the to saying which there's good

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end Great. then year. We're Thank And years, flow just past of not two high acquisition. cash -- the about Sirius the at while you're years but you. for quite, the

are coming you still are the see your Are current Or in like? high? or of down over do years this what back acquisitions, and prices are valuations down couple people at coming on a point? what valuations thoughts So, thinking or landscape

say ticked I significantly. valuations not interesting down It's really because have would

the pipeline increased. outreach Although the and has

three look something from tells that landscape So like you now. might to the months four what

of ahead. comes Our line Stanley. Erik now Erik is from open. next go your Please question Woodring Morgan

so for of understand and is into and down weaker kind the And impacting step And you, of maybe to a XQ are you relative rest XXXX? the what by April? And for Thanks. and most? understand reported moving market for exposure for a you Just miss that appreciate Chris, think Thank clearly, about the about kind the incrementally think color much. we product. products which which just pieces. are you February. end of of your then question. you Can I what all the then in guide if or there's responsible how product Good morning, I'll guide and guys. down back ask through guide trying guess we and provided products the how you -- lot I maybe as in guided I to March moved have follow-up. a most

was of me sure. Yes, Good me our because Well, just from the really customers. And impact. morning, Erik. are primarily client and larger the device start hardware with came let largest the devices again, that start the core with -- let impact client commercial

number one, -- the we continue side, extreme softness kind on to got now continues. the of So, an that generally see, and client right is an market has extreme

Okay.

impacting every an And the So even to And client those -- either client purchases. you quarter. things And that reductions down moderating impact. are we across saw had as continue see throughout progress industry. in space the further we staff device

the in in my client category corporate prepared was space. And remarks large shift I customers think I commercial that the the biggest device down mentioned

knock-on hardware, one. paused have if cascading ways things happens And device is a That's delayed effect. at, another storage, source either hardware finding refreshed of being when number customers money. looking shift. client are save effect. and are that got you've what or you to the refreshed So, like down It's Server a not

projects delayed, So, integration services the if implemented product. until of the with aren't obviously the some go them of project the that are

not You to have a be things bigger hardware. like going that impact also warranty are warranty when you're buying to

means one-year extend categories, come a things software, deal. three-year purchase life the because back of for we useful immediately, they When the assets. on purchasing with instead decisions locked of of I starts with all costs don't it reducing want making customers let's which areas let's example, in. a I'd get the if it pausing So, But to their deal on say to They're start we're can large reduce does hardware, hardware.

look, that we delay are And that I would again, for or say, was, would overall, softness very an our of are is very areas of business strategic say really the strategic. effect places then strong services in that projects. deferral us, the larger I where saw in

If strong in professional you footprint. we've take are or the to firewalls, been that the, when weaker strong, services, primarily assets physical managed yet investing which out your extending impacted related areas buying in warranties, in security, heavily geographic services, you're

extremely of mean one customer robust And then every cloud. to across be I our segments. cloud is continuing

of for climate. of little with weeds here but your I'm the climate a starting So, and with mean trying into I I dig it's you, the the hope really getting to and that's containment. I'm heart cost question. the happened, bit to climate starting what

And companies year-over-year, how growth to to of But differently, it single would I growth exactly in was down high market if digit of CDW's understand. a is trend portray be that definition maybe there might revenue about CDW down spending mix my XXXX? No, overall IT that what you netted said customer looking was about then market follow-up. maybe Obviously, in helpful U.S. your lot would of gotten other impact U.S. for. questions is an And versus We've how IT it. think

this down again, I an is there U.S. dampens just think revenue IT that your of because view that impact would growth. be netted market helpful the of

please. unpackage you. So, I Thank want just to that,

Eric, is take that. Yes, let This me Al.

just couple So a things. of

You're revenues definitely right impact with down the and that. from respect to netted

component other a obviously you The is have mix component.

a IT think mix, our you is broader you about if relative If the will. to market there translation,

results. does notably, more in is and considerably the solutions think more and down down not a client I exaggerated create revenues distortion coming create that normalized up. this That significant shifted does most where netted year has mix being years in It like significantly.

think if would you help that IT more what that market, So, to guide a than tell it our Does about we spend be about that is that on with would respect you? full single think if year muted the Obviously, decline, is basis, I you digits decline. high gross

James. question Adam is Raymond Please go now comes ahead. of next Our Tindle line Adam open. from your

I quarter, hockey big a And a details, in And but a above morning. morning. the clear, so quarter. it's half Al, to I the we're your very concerns it all sequential I look here on got causing good if single-digit embedded Fed to more back bigger be in that a slowdown stick ceiling growth. level, again, applied shape is low if that Conversely, implying question a here, guided I it's in last Okay. Thanks, guidance one but hate this of lot but the this QX. was appreciate Fed year, guidance? QX really question you would the debt that imply if QX year that we've of obviously QX to potential getting

So, we a this because might could way in a little bit of back if there's any wondering a fear double-edged that be the not cut. last about half sword. be thinking waiting just the And there's

to that. Happy Sure, Adam. Yes. address

then So, let because it, back me half, call seasonality. say seasonality reasonably that of just QX our the year, seasonality. on a apply QX I'll expectation all, first obviously of look right, the informs the the, the we public our for typical QX normal lot would would like definitely rest reflects,

was tougher the much play. Look, that QX comps, QX felt of the in softening frankly, that first have particularly you QX. effect client. time so, are in And and for the really than we

a I'll the it perspective. from call then client. QX, and comps the particularly lower pickup there, there looks QX education so, And little I more probably that seasonality given with we bit think of saw a more And with normalized

I'll Chris, one. Got ask Okay. higher follow-up, a just it. as And maybe a level

in talked often profitably. ability leads differentiator, particular, and for culture market the story as the your a to about IT outperform the to company. consistently and You CDW

Here count. tough recently, decision to most a coworker you have made reduce

be able wondering thought about quantitatively more would Al, to how preserve you you talk expectations to XXX-basis I'm productivity implement workforce points you're culture. that to that your helpful. to try And to look with post sales So, how and just XXX-basis expectations while in Thank reducing you. by outperform maybe about made decision maintain you the efforts if that market wanted essentially layoffs to like

as care cost -- are can operating you a is discipline that as look, that been respect. And well. something Yes, tell have a question great with -- evergreen. we great is we we discipline Adam, approached I'll decision you, like and imagine, it's And

calling we on focused we've we've operate. very as efficiencies. how been our prudent a really, in pickup It's proactive we economic to just QX, in costs the uncertainty. are the environment, which, productivity calibrating cautious been We I intensity environment. always mentioned finding think got we've as and a of and in and in

so, the high lever cost of went et we into really structure prudence. in with demand pull terms align to gear our And And we've pull seeing. current we that can what I we're is every done And our when say every cetera. adjust current imagine, discretionary staffing our to had spend, was lever, And I locations, hiring, decisions things promotion, you to mean all of staffing, to the demand environment. geographic would one we make the

are it. And of team together and look, decisions. proud they how it really the and these very we everybody how I'm put communicated hard Now was respectful.

future. because We're the right, customers. for heavily focused our Now organization to all the and the really decision was needs -- But you're pivoting that it have the forward said, are business the do. ultimately. on for what looking right that's to customers decision but a the teams tough and

will. I'll a of on you to if and your productivity goals, just comments Adam, hitting questions our add on couple

our count look, and some Obviously, building discretionary we not in hiring pacing So, to Chris' quarter persist. to of had QX, a point, that this in the been coworker a reaction. spend We saw up. and turn our expect we and our was sharp is

amplified just those structural We and had productivity basically to and savings, efforts, drive activities in place we efforts.

and that parse where the at we our softer resources GP be just it and when first demand and the a allocation where stronger for period. like for about coworkers, areas think you where more kind practice this, So, through should of revenue-producing going are allocate could prolonged of demand that something areas let from me more we're vectors we maybe are areas and the a looking

savings and then going also the when of again, from that in drive got calculus so initiatives, but of that. was we productivity, And support part to more infrastructure, going coworker structural And about we the through that the that. layer of kind we're expect think we

And our improve the go customers. through, and efficiency. into ultimately, believe there so, went actions. decision we obviously, add for we'll that these obviously, the And all this are value greatest things to and while difficult,

very Thank Understood. much. you,

Sheerin from comes question now ahead. Stifel. line Matt from go open. your next Please Our Matt is

optimize do to signs continued instead own Are strength refreshing seeing cloud investments. I centers? Thank cloud-related a any workloads those your concerns digesting off-prem looking of that their customers expect that? good revenue, be strong. and continues you their some to investments are you, which are and data elect move Or you have there customers question large morning. on now as to of

that sure, to our customers Matt, We're can and them services seeing for exactly then it's who environment customers this into large our and both going for CDW convert optimization potentially optimizing things forward. opportunity managed do in professional services Chris. to actually. and particularly help I'd of with FINOP reduction that our that offer cost services and are we say

another on-prem, -- workloads arena But whether performance, now moving that cloud best well, equally, for private either kind where so costs, are just as organizations make of we that it's workloads continuing optimizing workloads environment, on towards and multi-cloud not in cloud, the on-prem are to cetera. their public environment but again, moving we're seeing cloud optimizing decisions but cloud, functionality, cloud the for public potentially it's whether one to about public et where are optimized, sit should from

this the said, seeing convert a us and of to for of into I positive And managed opportunity which, some is is All more of we're services, thing this ultimately, managed more CDW to migrations. and requires cloud do customers. health movements from for design to actually a as our services, course, the

had which seen contracts, look -- regarding sweat I cycles, you've for as missing experience your in What's am and maintenance renewals In question I which Thanks appears weak. on different CDW Or something? past my assets maintenance that. And actually increase longer. to this customers comments contracts with Okay. your I down so-called a time? be to an in

not. different different? is extending question. you're see for the we assets, We are no, folks What's periods. they sweating What's No, them do when extending It's question they're a earlier. short asked great warranties are typically,

shorter three-year at coming time at a are example, warranties see for periods. would a a contract, in hardware typically So, renewal you time when with

folks making not some the extend warranties. decision are have who to also We

the seeing So, across board we're there. just softening

hardware the we don't of purchases elsewhere, have new into seeing is elsewhere, warranties purchases offset what we're And software come play.

life So, you'd because their are to assets. muting an those top of warranties the the are useful of it's of line. have The of while uptick people customers expect are warranties, so deals the size a the our it's smaller -- a extending bit impact

of let maybe up just one netted recall just as a down that just Matt, me comments. revenues. Number And couple warranty business shows is add

the recognition upfront. us, For is

muted. And one result into obviously so therefore, if warranty, and four-year we have a typical for obviously, that turns year, the us a the recognition becomes

would I the this are of element financial with somewhat impacts conversations add other customers. will therein -- creating come maybe just and around focus shorter on is more and here some that obvious ROI look, back The the just

of of software assurance and assets, as that renewals -- will and little there's some That that clients, well but expectation duration warranties is the refreshing both bit software of business that, the but back a come in in sweating here. terms shorter a in cases, an around, of infrastructure as, some we're some the seeing

just And what think the that. add point. really I that to The just is I Al deferrals important an said, the would pauses, seeing we're delays, it's

haven't We the seen cancellation.

the this really future. So, all in itself pipeline reflects in of

that's so And positive sign. a

Thank you.

Northcoast Our Keith line now Please next question from comes from Housum ahead. go open. Keith Research. your is

bit. have return know guys devices. assets? last been is quarter, it think would as sweat early years? no a one few about a perhaps little period going about goes guys. changed as devices Any get as for you very you quarters important around can it talking has helpful. a running the I you which of here. client And as there we're client you you forward, few know these in color be you. always I look were process devices, I think thought longer to particular, a was that out out a late, in for I'm that assuming Is And it Thank client

Good morning, it's Chris. Keith,

getting to be kind think around question? was sure make I the just understood was to I when I replaced? assets have I right. that question the want Was your of question

Yes.

and them to was you Is see have you PCs been have same when the have assumption a time anymore. make pressure you and half two, the assuming might devices, are the particularly in been like then or they some the under under process think thought recovery. client And of period second PCs of one forward regardless? year, -- the really no investment can I that that's sweat not that sweated. there longer I'm

Yes.

assets years, sweating customers the are years so, because you a they're PC It's ideal when themselves four going I question. gets to up. because I'd comes not that look be Okay. in say, years. the that really said, the if that five it needs got foru I'd you're if look, say five PCs, number to the over years, last feature five, do question. situation time. financial old refresh are back very But to requirements see PC go long. a of a can All coming four, can years. it functionality good to that to by go that's point X.X in the

add win And to device is that you have to like going I'd add those which more things XX, refreshes. pressure

they're we're whether cycles later, is, it's a rather before, education expect when this do Chromebooks. already. large RFPs it's we mean, refresh seeing a we've to Chromebooks our for sooner know government federal whether of I So, number when said than be students to we related starting buying cycle

later under that. to benefit to our reap year pressure is the when into of So, are begin going expectation the And do, be refreshes XXXX. they in we'll

you. Thank Great.

of from Bank your next is comes open. Our Bhattacharya go question ahead. now America. from Ruplu line Ruplu Please

government later are for year-on-year. have a other and the small year channels. followed those you have end and weakness And in downturn, government concerned at XQ in about typically up follow-up. past, question. the end And business all Revenues any those what a corporate from by thanks factored in seeing in for those sector slightly first, for in Are looks And were markets? markets? you public care and I full Chris, you like taking health my Hi, decline sectors?

Okay. Good morning, Ruplu.

some countercyclicality the bit back and you And federal health space of pointed that, bit. had the terms we In public we're in care, seeing in a federal, our back year. a and that softness in of actually. seeing the run is normal half going of getting say, to, I'd reverse now seasonality activity, we're what the back we're activity as particular, to strong We the stronger into public,

was performance fact, quite In their this across and quarter balanced transactions solutions.

seasonality care of year. a not So, good another well. expect a really been Health back half health issues about pretty space we're balance we're is solutions, care doing concerned the the seeing across one. It's transactions little is and tougher in in that there but any normal the and client

help wage the technology people Given as and inflation on well. experiencing, increases they're costs in they're needing and everything more and help

before, value and Sirius the ways, add you with team robust. Health it opens here. we're the at our actually So, I seeing equally our very care our in gets mix customers doors And more and into accelerate care proposition health feeling seats said table. many as is also

end of into year. the don't we So, of those of going have markets end the concerns either

of would -- add reasonable maybe education, level just at And there is both is there. funding just perspective, just remember, the from the funding. one drivers I'd always And a component one we're Ruplu, government we say, and a big

that for there we catalyst the So, continued there spending. think is certainly and impetus

that if Okay. market And in more year-over-year particular mid-single Thanks Can factors storage, assuming XXXX? mean, even growth the Thank much growth? down PC like have your correct I just for down not bit backlog mean, mid-single give year-on-year, you. I digits a is you center on color digits. growth? revenue digits versus Chris, digits you're details. you products into of server, I data growth little the what of double ask, how networking IT the for for or just why single high U.S. why number could down

maybe just the me Ruplu, backlog. Let start on

our the a not in my So, for expectations in to point. feather taken a contributor backlog, meaningful to sticking but remarks we I NetComm continues the think mentioned expect be contribution prepared out. remainder I meaningful year. longer, that that We would to be of consider not would It's a that

So.

add shape it's and XX,XXX customer-facing we the grounded are of in start IT coworkers our look, -- market, every day. just substantially let Ruplu. I how Yes, view market would with me in who

saying is And one feeling. we analyze customer that that and have pulse so got market and And of there what's -- customers relevant most pulse the doing, consider. the they've factors and look the while in market we going are what on a at the we of number that

mentioned say reflected just at. as the I'd we've are that that the So, QX already least at we're in will concern and then that's year, X thing we And think looking in short run, caution we the about that our we've in continue that outlook. and factoring that,

back recovery the in some then moderation in the back moderating And some end, end. expecting

that we in of And just going combined same right? the QX, what back of, feel terms gone QX. all written already reflection up. in of because frankly, we're as the about of in kind of market, demand, we of It's as -- a triangulate. terms where to things the because the we're that's We've of what activity end all through of that's seeing of order, that seasonality. current So, is said, seeing terms in I

we of bump us little the for And And but the be will when are easier business, is quarter. Al the seasonality also we government lower in there running have you have what in earlier. benefiting education last from overlaps, We'll the third get and our back a example, about year, quarter. think half that compares muted mentioned seasonality, as into

together, just those and we them end -- of where that's that's combined, things all So, up. you put

for details, Thanks Okay. the appreciated.

Thank you.

I'll Thank for you. At team have any hand to CDW back remarks. questions. this time, no further we further the

thank All much. right. you Well, very

seeing Thank And those by forward goals. to thank our and unwavering for resilient team model. privilege you my me CDW And CDW. opportunity close coworkers our the interest business our this in and to time help customers your listening to you the you reemphasizing your Let to quarter. durability commitment to customers. next our achieve for globe strategy in and confidence to and Thank the of for our across look Al your you you continued I in

call. Thank today's you for joining

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