CDW (CDW) 2 Aug 232023 Q2 Earnings call transcript

Good morning. Thank you for attending today's CDW Second Quarter 2023 Earnings Call. My name is Megan and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

I would now like to pass the conference over to Steve O'Brien with CDW. ahead. go please Steve,

Good Megan. morning, you, everyone. Thank

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

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

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

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

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

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

today recorded or may period the be you conference from Replay call this Please not to rebroadcast growth is all written that later to our the to of website webcast remind also property CDW I will our amounts, and this want today. without in of versus rates company. references the permission or in changes remarks XXXX, note, unless indicated. are comparable dollar otherwise be posted specific

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

our morning, our year. our overview our usual capital priorities the half views Good our performance, provide on everyone. strategic and allocation results, the begin I'll Thank as brief and today's of will detail of with outlook. on second additional progress Al a you, call Steve.

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

challenges. a extremely market well team facing in executed Our persistent

remained line to returned more under pressure and top normal expected, seasonality. As commercial public

U.S. the X% of constant delivered quarter, in currency. dollars, down net down X% the sales in For team $X.X billion,

income of when up high continuum solutions. demonstrate and X%. and up with of X% our to ability growth team business of deep made economic model earnings our our IT period of to address solutions operating results Non-GAAP was strategic portfolio have the and broad customers across In high an to per $XXX and reflects power $X.XX of resilient share impact our we us coupled million entire enabled that of where pivot was These non-GAAP ongoing drive uncertainty, and priorities most. An the investments outcomes relevance customer services. need ability our the enhance to the technology

to delivered remained While transactional in margin profitability. with expansion. ongoing Margin together strong solutions meaningful that under expansion expense pressure, increases discipline, business contributed

look quarter's a take Let's drivers. key at performance this

focus on portfolio of sales customer Within of over education our business sales healthcare, segmented Each meaningful customer annual business, from to First, end XXXX are markets. on each government verticals to and $XX markets, further our is geography, teams own, with balanced five its billion channel, and small billion. channels, $X.X including ranging end corporate, a size.

cyclically impact segmented each. These and similarly sales. markets unique which XXXX customer are billion US$X.X macroeconomic Teams in act often our factors that Canadian together external UK and delivered in counter end the operations, given different

commercial sales this. drove smaller Our cautious uncertainty that customer elongated both Economic reflected projects. on second to and business results an our again corporate quarter provide mission of behavior, market once sizes and critical cycles, and focus the deal continued results weigh greater ongoing caution small on excellent example

double and digit business cloud short-term posting with on corporate small ROI Caution spend. that also drove in customer increases focus both

improved. the quarter. critical and slowly spending For sequentially ticked Mission move to commercial continue corporate XX%. throughout projects overall sales up forward customer declined Large

its of upgrades value, of demand cautious utilization indication mix client client decline volume quarters on providing ASP's stability. product Corporate Notably, postponement the outlook past higher in into we some delivered device by in held four in Well, for sequential existing and buoyed functionality devices. remain double a client resulted first of devices. digit units. increase Continued the higher

customers. around on and double Small projects increased enhanced pending decline, of Momentum greater projects continued and that employment. with of caution and the the productivity coworker hold business Client customer ongoing Netcom drove impact Implementation network reflecting in cloud to modernization clarity economically growth. XX%, and excellent growth by declined on focused economy upgrades delivered experiences spend. sensitive devices digit around

spend and in efficiency around year-over-year was education. security Focus quarter government, X% market performance an customer first both mitigated pressure commercial critical on cloud Public healthcare the and seasonally performance with digit than in drove increased higher in partially another performance upturn double mission strong quarter. increases stable in priorities of software. Sales and and

opportunities. and protect increased to implement Government infrastructure quarter, by the digit the largely to delivered This ability help in cloud efforts to data. target continued XX% complex Federal hybrid double net agencies delivered efficient solutions performance. and strategic team's storage manage benefit and excellent to services growth enabled more driven from common

well helping adoption significant relationships and address Cloud services. talent and Excellent services state through software The and state strong to enhanced Sirius growth. drove security digit growth professional local performance engagement. the services delivered double as training reflected in team's performance. gaps local Legacy team as contributed also success, municipalities

given performance leveraged center on dissipate projects continued under and deliver investment. Customer cloud Healthcare quarter. customer Talent that complex return mission relatively was challenges. short-term around increased focus areas address projects needs adoption critical industry remained devices technology as the meaningfully to to remained hesitancy increasingly flat. pressure customers on ongoing data in focus Client and

and netcom, on drove was double year-over-year in campus experiences. significantly higher to performance decreased across security, the still software security. drove dorm enrollment increase KXX emphasis overall but education, growth well ongoing institutions Higher as team's storage, enhanced student lower offset solutions ability deliver and investments digit The sales improved, digit room by connectivity as these In double cloud, Ed in in education and X%.

flat the decline were volume higher was strong into by units offset devices drove value which as Client ASP performance. mix

excellent and in delivered the on KXX, and their For netcom opportunities growth continued team infrastructure services executing storage. success

This quarter, sequential a client devices. team delivered the improvement also in

know, the the this our campus. in the KXX of significant anticipated represents XX devices devices back end, the students hit aging experienced June occasionally driving refresh breakage you buying. than summer more historical quarter sales summer height rates given second half a sequential see quarter with quarter. Refresh With As the we end their season of anticipated by off take driven and improvement. higher We

sustained posted digit a declined challenging under what continued decline improvements UK low in team U.S., Other, the X%. to currency, our to seeing conditions. Canada UK heard single and quarter caution combined each in low Similar growing by both Canada business while well local declined and and double execute commercial UK similar We're to the Canada, customers a ago. U.S. from we digits. profitability customer

growth customers portfolio and performance can pivot end of quarter wherever of benefit second broad market which solutions, markets. the of the portfolio customer deep team enables see, of end the and As diversity of demonstrates our needed. performance of the to you support benefit products the Category our driver our and this first demonstrates performance, balanced our driver,

solutions. continued to Ongoing and the have transactions an on commercial in space economic outsized both impact uncertainty

transactions were decline While the digits. down of double rate moderated,

mid-single with versus improved growth in quarter. flat performance Solutions digit first performance the

major to were three with continued Client performance software significantly Hardware hardware and the in corporate lower projects of services our and year-on-year. in impacted by and solutions. commercial XX% hardware, quarter, portfolio have first all Similar of decreased performance impacted impact. pressure in commercial deferral to services greatest resulting category hardware volumes the device space the categories,

solutions Services customer markets. to improvements relatively increases widely year-on-year. Netcom had to an Growth projects. This and strength in hardware. end on transactional specific driven exceptional network all flat varied was customer's with posting quarter, largely continued modernization performance attached services strong offset across customer by meaningful work priorities, tied channel supply were by and

services services extended activity were while managed revenue streams, net solid, on solid given sales Professional minimal. and ratable was the cycles was impact sales and

software-as-a-service. driven to in by mid-single by Software rate. and tied and in software mid-single stack digit database digits network net software management declines at increases by continued employment increased full levels and decreased a mix offset categories into sales Double span projects were customer digit software

in of workloads for included management an was performance and the and infrastructure-as-a-service a endpoint security. business e-mail gross identity driver across Security the and in spend business our key cloud increases customer customers gross meaningfully area customer Productivity, categories Once single and three of cloud, with security, spend profit. physical up Security contributing security, Top digits. growth posted top digit associated important were expansion again, double Each with challenged. the growth focus end markets remained profit. quarter. remained security

that capabilities made the customers stakeholders. to first to our we've Profitable driver, was capabilities enable is final quarter, our acquire and capabilities for and enabled over second deliver our customers the the performance organic to that that the XX both and strategic capture past share, years, services growth investments expand in cloud which and new us our And three-part capabilities. this our solutions enhance for by acquired our third in growth leads strategy

our design, and and the orchestrate solutions need our want crucial is Each manage today customers to future. and ability pillar to profitably in the technology advise, integrated

a three is many data of analytics great pillars. analytics Like value this across data strategic in investment and our all of action. Our delivers investments, example strategy

average have about and earned by relationships long knowledge knowledge capabilities Our range we on underpinned lasting deep over XX years. analytics data which are the intimate our through customers,

are that and that customer outreach verticals. data comprehensive knowledge missions. their They drive achieve analytics that information This and also identify across and our by buying products broad powers industries models and strategies historical customers about patterns accelerate product portfolio, customer tailored services, and create data-driven needs solutions product and extensive targeted solutions, provides our and underpinned models, robust personalized predictive create which helps our proprietary their and help to

training, areas in have services our learning We delivers investments conversion of of machine practice. AI tangible and delivering other data utilizing are server, including produced analytics the in across bolsters continue lift for sales also customers. experience, They innovation, advanced agility and consultative in model and ICARE to our our market that techniques relevancy. in expertise consulting significant Today in our expertise delivering expertise have capabilities database, that data for Clearly the CDW. these and our and invest particularly and breadth models professional framework, are performance analytics analytics we construction outcomes

we Customers and like AI, transformative our much very have to feels our choice other incredible complexity of we will and our we evolutionary adoption value help advisor. strategically to invest and choice, AI trusted to customers ready the past, AI how that ensure investments, yet just future. in a past. they have their technologies continue the excellent face we and the investments the the and today lead maximize of strengths as made to necessary on recognize as ready the And for market make and example CDW, ready, For are plays partner proposition and to benefits another the complexity of return

the for And that me the year. the to balance of leads expectations

last a our back conference our To U.S. moderate the a year on half to post our to space. and call, date, in IT the improvement XXXX. in You'll we return the public environment of consistent recall high quarter's with in of environment assumed the the expectations shared IT the unchanged. seasonality view the single expectations market in digits demand commercial market a This remains decline and of U.S. been normal for has

the continue And we of we remain business points provide always as macro on the for market tightening basis. potential U.S. disruptions. we'll federal budget through we an by this the perspective as move year. organic and constant currency conditions outperforming government XXX XXX updated do, basis credit environment, on further environment, the Within an to Wildcards IT to target

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

of outcomes remain strategy enables we well when strategy a We to they flows are profitably the continue continue us can confronted macro this performance that tell market in place, from customers future. to hope my customers a us specific have to critical the and partner their today end a reinforced right ensure challenges, mission our importantly, cash also market. you most invest choice designed that and strategy judiciously that to we strategy to or deliver quarter's our can there excellent serves ensure outgrow with in for I our the we confidence comments achieve and will so that

let more our With performance. me share financial Al? will who over Al, that, to it details on turn

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

basis. on down a were Turning second quarter daily to consolidated on billion, X, reported X.X% average our net sales P&L and Slide sales $X.X

public net environment of quarter commercial anticipated quarter first as Broadly increase. we held outlook return up some exceeded sequential results which early and expected coming on to seasonal versus to average mid-single client segment macro in our and solutions a with moderately uncertain speaking, device were expectation persist sales sales by the our Public and driven KXX, would across XXXX. channels our Second ahead this a XX.X% digit the had performance strongest and impact growth reported daily were QX the in refresh anticipated the since while of growth volume basis, shipping quarter's year-over-year performance expectations. leading that of our for strength first the

with products remaining the line the solutions declined the normal solutions supply while our our continued performance. ease quarter. chain of the side, more and first times and with ended which lead transactional On to stronger challenges relative Backlogs supply backlog essentially product levels, to quarter quarter, to the in in contributed dollar historical value associated netcom

pockets We anticipate continue out the time. to of remaining to over weather backlog

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

Our year-to-date shortly, discuss this which flow free cash discipline. reflects we will performance,

and year-over-year remain driving of XX% was Our quarter, transactional to quarter. year-over-year $X.X X.X%. billion, margins a up XXX quarter compared team year-over-year in margin impact Gross strong profitability volume net mild delivered increase Record gross increase a was in on second despite first basis margins strong a product gross profit of the lower had but overall the profit points sales. increase

this two moderate. margin principally factors; driven When product mix into mix gross lower quarters complex solutions from into has in been transactional record expect recent products, we benefiting margins by of for we the mix reminder, benefit first, and a both transactional a As products. to back performance would

QX greater business. netted down XX% XX% trend into XX% to double Netted growing down in second to our to category driven by a in digit XXXX, prior gross the growth. XXXX Second, revenues, sales compared important continues QX quarter. This primarily net again the compared overall of sales, our an software-as-a-service mix year profit represented be within outpaced

can expenses approximately on structure XX,XXX, account non-GAAP quarter, for the in first the growth efforts with of quarter three-part flat prior was with level associated key of customers. services profitability to achievement payroll to prior our quarter. $XXX second discretionary as catalyst while the align the the year was quarter, remain expenses count and to X, quarter increased our non-GAAP Strategic to business and to by managed at Turning Relative the higher due the quarter. Slide during our management the end strategy the demand, and our from to million our of cost principally continuing provide value the SG&A offset prioritize to expense SG&A Coworker modestly solutions prudent co-worker for our totaled the was investments areas where for important margin we capabilities of goals. most down

or operating year. result than The X.X% quarter the detailed workplace in between charge delivering on up leverage slides and GAAP operating the million market conditions. a non-GAAP $XX our Non-GAAP We GAAP gross income was record remain was quarter the larger on XX:XX. second focused was million. for income despite which up X versus the difference to and and operating of income prior usual, compared the record profit $XXX primarily up million, points Non-GAAP margin $XXX optimization income of laser year the is XXX the first XX growth reached basis on operating basis points challenging X.X%, quarter. from our quarter prior

year approximately was flat expense interest $XX the in our X, with prior and expectations. relatively Slide to line to million, Moving

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

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

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

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

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

consistent During our maintain relatively to strong plus debt with range flat, the of Liquidity the of approximately X plan ratio remained X net our within with revolver $X.X availability quarter, was billion. cash leverage to times. net

to XX, cash our the teens down of high Moving average targeted and three-month prior first days low to slide second from XX XXs. cycle conversion quarter the days, was days below from range quarter, four five the year's

cash continued reflects respect management Our conversion our inventory. of working to with particularly diligent capital,

timing market unfavorably we've and quarter. or As in past, working given in favorably dynamics any capital can influence mentioned the

remains continue future range working to for the target capital. We modeling believe best guidepost our

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

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

to me our allocations brings Slide That on capital XX.

remained consistent communicated the Our we year. of with updated the the start at objectives execution

increase Last $X.XX with as increased income. November to dividend the net always, dividend line we in XX% non-GAAP First, the annually.

forward a target will to Going XX% we ratio. payout continue

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

proactively into have to flow convert rigorous process place while cash flexibility. continue cash manage maintaining profits our to We and liquidity in

repurchases priorities third allocation our M&A shareholder remain and drivers Finally, important capital value. share of of and fourth

repurchases. investors XX% free through to to XX% For and we cash dividends of XXXX, share target continue to flow returning

Moving to XX. on the Slide outlook for XXXX

see in in market of and customers. the prudence We caution and the our continue sentiment to

high contract at will this, that change digits. the IT previously upper to no is our there expectation of end market single the Given shared

incorporates XXXX. in of recovery Our baseline modest half a the second view

commercial seen on suggest otherwise. not that major a our indications would have turnaround channels We

our than range we categories. outgrow the market on points and and lower of end and mind basis as netted solution and be this in softness, to tends will products scenario revenues over continue by hardware Keep XXX performance XXX maintain vice expectation that this of faster our the down our With to to other baseline, grow times in versa. anticipate

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

year reflects non-GAAP expect modest strong range continue margin better X%. Moving margin quarterly following full continued also supported in expectation of our align down margin expenses. is the This gross to margin profit Operating P&L, we operating records. income to of the straight our three actions softening be to our with by gross

our full from non-GAAP range be expectation we ourselves results. our currency quarter increase of our the that than earnings financial basis. outlook reflective expected better constant of second year-over-year year reflects and for This in our Finally, delivering an constant year full expect in we Please to currency. a flat accountable hold remember prior

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

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

driven both be slightly gross share mix below anticipate margins non-GAAP and be profit we per earnings down to noted, flat year-over-year. expect diluted As to to quarter And third [indiscernible] we by quarter rate elements. second and levels,

of sales, full rule the thumb X.X% our net expect reflecting the generation range we year. XXXX, X% approximately our first be above to cash in free cash of of to year X% of and half In strong flow

operate to continue confident to cautious flow stakeholders. profitability, ability remain a and cash to our margins and in market, in deliver we uncertain we While our

financial the summary. concludes That

our on the As provided on business always, calls. updated earnings we've and macro our future environment views

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

you. question line Asiya Citigroup. from comes first Merchant Thank [Operator Instructions] of the Our with

open. now is line Your

questions the on very congratulations Great. taking for much Thank and the results. you

the on fourth I If look you you quarter devices as environment and for to know quarter lot of for just incline growth shift whether result and about generally the into in a a quarter, on it's caution spend, seasonal the given a client of debate second devices there's below seasonality, third the a the the cautious little that's towards on whether pull on guys side compute second you guided or hardware for the lot could just bit AI. other just storage is in, talk and side, going have spending half,

seeing So then in that if you be and your end the could provide me would customers great. you're channels what

free just you acquisition to and this year. like it's then have It's this flow rates well. How looking we about And on Thank you're you. think have a pretty boost as growth outlined that up I cash -- strong a the potential follow for should for year? guys

Asiya. to It's have good line. morning, the you Well good on

regard forward, public let me market pressures over for and groups. as education played some quarter commercial to by half this with somewhat the we say expectations to the and year look of caution pull sentiment and government with still feeling last and So due with concept to seasonality much our the returning just anticipated market delivery of very out

Look our at returning by I notwithstanding the by by international customers a their as second in the compared activity commercial second more I'm step the to and progress I'm about that QX this, feels both half, maintained quarter for encouraged end up that to team the pre-COVID with that if sentiment. versus they're I fact much tick just seasonality sales am that and first we decline saw encouraged of the I that -- say me normalized the public to encouraged think profitability example. regard let back making. take

It's kind but worse. better, getting the hovering worse. frankly it's that getting is business like of I'm any it's not feels bottom, it not getting encouraged not small around any

impressed environments always encourage with So that there through team are frankly. the me. this They in again. tough a of it lot execution of things they pull and I'm did

And back felt back to where recovery that about month I we're an we're believe a into still cautious would still that. to cautious the end are we got we quarter and we're All will to what we is, firm uptick, in end. see holding we we a starting the that the one and are continue cautious, say said, so and mild-to-moderate

mentioned second anything we be anticipated, phenomenon, a the I that little a quarters. that's half the had straddling might we're going quarter but any is KXX us. to our we in and seeing that feels different technologists we're causing suggesting us bit a getting just than pretty and like time not have plus a in professionals to outlook and from than with we're pull our And to just more is XX,XXX sales That's believe folks second real it outlook. sales customers this solid in market, we're getting and

just look I And maybe just commercial would QX essentially channels peak QX like the technical would across from seasonal, for we kind component allocation for the add is kind And just QX. out, this of of delivery QX to look you channels, experienced and Asiya, would out. the we'd it's put the seasonal our the would give that with what maybe play obviously expect public, much and is that

recovery, when So of few think that softer probably more last modest in the segments towards a those weighted pickup have bit about quarters. QX in we been little activity, that

a on Asiya, flow? free had And cash follow-up, you

to. flow. use anticipated than it's had obviously guys cash the of just what we trending the guided think or Yes, about on here? free should Yes, previously cash you How higher

Yes, great question.

environment look, profits, by capital, by challenging. component four to we the I an that's look, also there's quarters in cash you'd will flow basis, cash of an plus had on a look, And but Asiya, judicious this. a strong diligent on good free capital but side. certainly, countercyclical And working pretty we've So management -- driven say had be that of run continue expect about been generation to we've working evergreen

as that so environment a been regard. has tighter we've been the And softer, bit in

you'll look And particularly side. believe half. a we much half from be second come the a the in and up, pull pick on transactional there'd second favorability bit conversion capital of the we that the see it's reasonable that more cash to look our in of and working inventory notably, on side, that to has our As to

just So half. working thumb of bit little our That X refreshed out a we second gave see we're it rule being otherwise, supporting trying full expectation our will X.X, utilize on for X. where to to your space both value but for for more capital year, said, year in of relative is. we're a objectives, point and and then an going the M&A a full pulling you the strategic where we to we the expect look, best, the latter best to at come And make of on capital also

thank Great, you.

Thank you.

from Our Adam the next of question Raymond comes line with Tindle James.

Your line open. is now

of Okay, thanks. Good CDW it terms relative expect morning. start, to I just like is over-delivering to old this the of looks kind and in come know wanted to expectation we've that back quarter.

moving plan investors over-deliverance just that in we curious what kind the had the were old that from QX. back I or either So would CDW QX is for very at that wondering can forward? process changed what a in this that enabled are confidence and two high level, guidance to a from different quarter, quarters Chris, get we of prior QX be

on think in particular, number oversized whole first you the of business, the when good and one, The that, say a a significant Well, the Look, say that. I'd larger couple impact commercial an would on environment QX of macro Adam, in about I QX, QX. and to of things. challenges driver. end was And appreciate our had morning impact the have the well, really front which QX customers, I

really to we Al as weren't in education those space anticipating were mentioned. we for return know, is you quarter, summertime the the the a and third government the second The and -- seasonality as are space, fourth but

a our our public had we QX, sector couldn't make up. in it sat we as large So commercial and economic impacting customers just quite tough environment

end seeing the really our counter-cyclicality of the now difference the of play. What into full is you're and markets benefit diversity and coming

and was question would of it use extent some to seeing we this I'll a and a the stability. that call little I I'd the stability. of bit it environment. So timing somewhat macro say, are Adam, also

but first That's in down, quarter a of the uptick I starting had particular, the us in still to commercial, quarter. increase is giving some commercial we're nicely down, devices K-XX in are delivered in sentiment. still And mentioned client of very a this change see bit on on the as happening given executes you just then little customers like been And advantages. competitive in team side, but our else. long very optimism. of spending and after well. And know off we're And seeing team, the back to execution for have it the in holding going market we're you This time. leveraging seasonality, nobody sequential

as they reins start there, we for we'll So been little the be there a bit, to them. loosen have and

And for it. on in-the-weeds maybe Al here. a a follow-up more question bit just little Got guidance, just

Your I guidance, I if back said. you think you sequentially which said per historically, seasonal, like that's digits look kind QX of day, mid-single

about you I public but a sector typically As QX. QX, had think particularly big government sector, also public result a strong during that's quarter, very

I based pull-in QX the QX public would mid-single on that Thanks. why wasn't during strong what or So in sector QX that question seasonal digits guess there you gives guide confidence result. that be in and

Yes, Thanks, Adam, for sure. the question.

really You're and in strong segment. right, public particularly is QX

that summer well typically the continued kind QX. in K-XX performance some Adam, straddle say, activity, call which we of in of All I'll government there. pickup mentioned, strength pipeline suggest of We over the had of end evaluate which see kind side I'd And some, we as might the higher strong quarter. had to notably, in it, the seasonal that data that that and really ongoing there's in we see would

overall. we showed a in feel there's comfortable bit expectation seasonal modest but in that up QX, that uptick probably of the of holding to little So public enough

results. helpful. Thanks the on That’s and congrats

Adam. Thanks,

you. Thank

Matt Our next from of line with Stifel. comes question the Sheerin

is line now Your open.

commentary based terms in hearing you're will pushed about where of PC get done? do the getting solutions seeing a recovery is QX, modest from any out or sort side in commercial that your infrastructure markets And on in see and you. Thank the what you at Yes. on customers, Chris, refresh projects more least

are that, and I time, They're all We've that has the of growth being ourselves to of when employment. for it's not related we their relentlessly, and They're to Matt, to back this a is our the open PC coffer, to farm that kind to market and asking start Yes. been question. long within ready really great tied initiatives our been come spending. going scrutinizing as know, and are all yet projects is incredibly judicious organizations frankly. think customers And footing so look, think still to the cleared yet on in they're don't solid speak. I the a

hearing focused solutions more is now. around and right we're what I'll call oriented more so mission critical, endeavors that And

PC to gauge the refresh come when start to hard it's see and it we'll So on back.

productivity what They're all look, tool, know said, to people right? the the That connect the PCs are applications. we that

think all that. agree we on I

breakage devices is We two old, And times also know got We years that frankly. about XX Win sitting the higher corner. are the that as right three to K-XX five an around example, it we've old pre-pandemic, in system. talked was than

Now you higher devices heard and about those us customers higher buying devices. are functionality, be would talk Win ASPs that of productivity, XX kind

that's set little than to XX, Win tailwind. So this explore we that's and longer in going a it will feels XXXX, QX, benefits see nice and QX, going customers to be term year. the to a do Whether be starting some it at point, of

move playing cloud you you. benefit would also of now. companies refresh Okay, side, model. that thank better & you. any a out? Advanced concern Infrastructure many those backlog Solutions And across some product much seeing seeing guess the is maybe I of as any And to then component because availability of But availability, that we're guess there's customers signs come on down servers, are they I things

Yes.

networking we the network modernization this projects. customer of that and continuation segments, backlog we of across side, and on growth So would all healthy flush was quarter, to had that and saw our largely say due flush a I double-digit certainly

high buying. support What and say to on of it's In my of AI, I And cloud I look, of our would conversation investments this terms a prepared lot whatever well the would they're topic position said of are made solutions well us Matt drive? in that the look, portfolio and a I particular, used benefit the is, just as just and areas as a I've of questions movement as customers but before, lot the are and word IT services remarks, complexity. we've out to they there. broad frenzy it a wherever growth of say, there's will spectrum in what across conversation. capabilities type the is topic There the

case, benefiting any do So them our the see in capabilities. with really customer benefit and CDW decisions we'll I portfolio because the

very you much. thank Okay,

you. Thank

question comes Our next Evercore ISI. Amit from the Daryanani with line of

Your line is now open.

seeing, Thanks quarter you kind guide, full that not folks and back guess, upside June I the but not are Chris, I congrats to you're -- raising this want of the guess. on still a question go nice you're year I sprint really to around here.

and back upside So to guide back to least seeing in at just love June. what are refrains from go that perhaps you this in taking full the the design up reflect I'd year the half you maybe to understand

it what pull raising guide? the I'd Is full of a refrains in? to a you was year love from big in understand the it conservative? June, So Just given bit beat

Yes. question. Amit, thanks the for

now. what it early too taking say. quarter-by-quarter call. Here's I'd right say I'd too We're

side, that's in sitting On as notwithstanding, of no get the quarter. end we prudence. the I the as the commercial said, there's still there's market, doubt There's to still slight caution, still uptick

couple a month doesn't yet. trend a ground quarter make, going to of of but So create say not -- solid really weeks, does was it a

a some not little to we call. but more to see indicators, time. have it good the So just enough give they're make I

So moderate major us turnaround. feels better to than

very public side, year. work On the and both in is education the look, track way that government early the we

the we're coming quarter, tracking projects first the in that in. are So

the generally June quarter seasonality. So come a refresh, we second ago we our talked uptick in has very and that couple drive K-XX some in, well of how to worried that a happen breakage going to not of going needs. delivering. years strong what's we're visibility because refresh quarter, Having are been good actually in is. third and the rates versus to was strong, about seasonality have in it's We real and seeing during it

very public the us. very, on side, it's normal And to looking

don't as of it kind public. quarter. calling skis or We're on just we the of out we either rounded want So commercial ahead get our to we see as it

anything? that's know if So don't you I to Al, I'd say. want what add

I seasonal, just now had recovery pickup. looks the at the modest say, effectively last a and come Chris' we time. in and in seasonal on saying QX look we comments above just a Amit information that look, Yes. quarter ultimately of echo called based QX there versus for on had would We're bit QX that, stronger. did that a expectation

could we're of is are this there and that. puts more kind the plenty churn what and to pickup of that certainly question, be we but That with evaluate. so than data but all at it's wouldn't that that And still overall call into takes appropriate, seeing point much we're a comfortable that of expect going of

to you structural basis a Al, things do you. think I thank on are about in gross maybe XXX in you guess, might be how margins there, you go about ask that touched could forward that And then PCs And talk question. much Perfect, nicely, fact from couple Thank the margin of year nature. think here? love as rate year. in this down nature maybe more up of half of first the an you I a things helping just can are you you. I'd I versus uplift bit think, Gross this you you cyclical fairly how the but do of if lot versus are points that run a understand last is

Yes, Amit. sure,

and levels, gross I netted combination of of there. were I'll components shy to growth there, we're if continued new kind XX%, it's a had call So of of, year-over-year parse and it which Amit, just right? Look, we it, both you're think of margins revenue XXXX, kind right. ended of up down I that thematic record from XXXX with

So in will. focused security, cloud, you SaaS, particularly if

driven rate. by mix there So are and themes But we do have there. durable both think there also been factors

into obviously, margin. So at more side, environment mix shifted services, and has spend come solutions, come customer at tough the which which on higher the

when So moderation that, and good could And time. client reason could/would with some out balance particularly to have see we you that over believe on does that there. it,

look, a quarters some I've going in the of from on environment, held but market continue just of then a to rate up up, margins of indications a and all and firm couple also, quarter, by it's of that say theme And now customers they've firm about up of driven hold supply been is, chain. I'd product this even durable bit think, substantially being side, kind more in terms and really I a talked products,

takes. So and there are some of the puts

year, X% on gross bit here but good feel holding that [ph] overall. So margin look, it's to We're our reasonable to soften a we NUI you of the expect full for margin. could

you. Thank

Stanley. Our Erik from Morgan question next the line Woodring comes with of

line Your open. is now

Chris, guys. to pricing the some pulling the the I you back was you. on Thank are where that share quarter. incremental responding any Good any Thank elaborate be you into on pricing are broadly, second color are pricing do just in you market would morning on if seeing could conversely, if you Awesome. the you. meaning on so, of expect wondering discounts half? How accelerating? discounting? Congrats today, Just How could you maybe are helpful. customers changes? And trend any dynamics to

Yes.

familiar aside for go me the let with passing that the So but that we're that prices, model, plus up, you're right? set a that to the Erik, that usually on customer, you start, If me know with OEM prices Let second. price model. a we're

as intensely characterize is the say I Let to the and team me would follows. is to is give fairly I reflecting I'd -- market. pricing competitive that holding an value And that that firm that CDW the say the would customer it delivering. in credit

getting ASPs there's about lot CDW terms of I pretty right scrutiny said, the will But a think we're of for all of intensely also wrap really out. it and And about to we've talked robustly, what expect that example, things when firm acknowledge in with more firm. resonates and and I happens client when pretty ASPs to processes in that That environment. would holding back you the competitive. hold a value now, they remain in purchasing that levels But would the second customers, are competitive darn for very half, we, devices the I would around expect us I market expect come that the

with love you. follow helpful. I'd again Awesome. And is up to then That super

or a would out contrasting anything what the them, hearing that similarities slightly the that and comparing Thank or super bit be SMBs, existing helpful. nuances the Corporate but of just you're from any [ph] from the maybe MedLar some could smaller nuance, versus hearing on you're call clients you differences Just you.

Yes. No problem, Erik.

except that hold for highly the of related, I business. because small are around little They're economy growth -- right? we're And particular, a kind those for purchases. fog talking the that of businesses again, position potential hasn't without more sensitive acting would clarity what they're a in Here's bit are cost versus large most hiring, like the in are now, to security say, economy and and right Without a the small cleared. are hardware cloud about and that hiring, even lower frankly, related, projects productivity mission-critical so

uptick being was the the to quarter the actually do see started Interest that larger customers quarter difference really we're in. drag, we've customer terms commercial rates you of Those are kind we've The first I to access what of there talked look customers bottom, the the first customers, that. real commercial now, that at of we when about to in on impacted think seeing group overall results. stabilized and have large said. at will, as the we if I capital,

delay. in That's client of think on were where projects, the So some last the about movement the quarter, seeing starting to and we're sequential back devices. that month increase see stability to actually mission-critical things

input that of entities is the So that's help? back a what's giving Those that's Does major small we and in the back the of buying back to starting larger get end kind to to get little -- inch be longer going have businesses, the they're are -- to one the year. us in the difference on confidence page.

helpful. Thanks That's super much and guys. -- congrats again. you Thank so yes, that's

thanks Yes, Erik.

Thank you.

Samik line Chatterjee of Our next comes from JPMorgan. with the question

Your now line is open.

from And what you With questions. of providing sort supply and guess, planning, compressed I is about the more? or taking up of that my What Chris, hearing to improving, in generally bit to extent, thanks heads some customers. are question heads-up in around have come a projects that Hi, you starting you. I front? are a Thank the visibility here like that Erik's terms they're customers seeing get following you're for on is that up follow-up. even on maybe

But CRM mean, Samik, our what the coming We drives is and writings. all inform We we it. I and about about, We right? quoting. about obviously, be is -- activity, invoicing those customer coming we of the kind our track would of think think some pipeline about system. think We think in is activity what we Yes. with activities to think the that what of analysis down pipe.

So means back are critical, to around writing up, see to full we which loosen those those stack across those slightly kind to the of related for some of mission example. are starting solutions, ticking up

triangulate So about the the It's yes. with the we're answer activity we is, the that and customers conversations having.

to to to you has continued have ask got growth, And of I did specifically an backlog. just if you mention down NetComm, that area Okay, be can that but work continued more it.

normalized sustainable one think more you backlog sort headwind going drawn down Or is, spending once pickup in I we normalized, expecting thoughts NetComm a pipeline gets can to in and level? a of the relation be growth to I mean, any recovers are similar backlog how is be the around once of growth? the that? in get a questions often to

a It's Yes. question. fair

customer and end frankly, network back to a lot if means improved. you all it's their cases, It's any advising requirements. has about work, about network that Here's the how network or to that you're that When leveling has or customers work of a network consulting and you you AI requirements. major tickle around AI, upgrade, basically modernization kind use into thinking will, hybrid as if think about continuous a students, it's willing of I driving for is be think which experience, need There about which modernization. means higher has is all modernization. about Take segments network markets,

we think pike, that's coming going As upgrade about to down have requirements. the a refresh

focused are definitely Our modernization. classrooms on

near-term the dramatically the needs. given was to that don't the this modernization helpful results I quarter, to So network while expect in quite see we're slowdown going backlog

And Samik, this is Al.

in we quarter pretty one orderly. backlog the add with maybe would NetComm experienced call to with thing. What we the Just was what

down, way we We that would saying and its been have expected work did. backlog it

to for underneath Chris So there's it still the suggested. demand, continued written certainly NetComm, contributed there, as while performance

thank you. okay, it, Got

you. Thank

the next Credit of with comes Suisse. question Our line Shannon from Cross

Your now is line open.

Thank your ahead? discussions you you developing, very are groups? a what people segments, first solutions? on about And state much. many deploying in position having a and with you you discussions? any of have is, customer that of kind AI of know within so And because curious -- where what I about speak bit you're I if maybe there AI? I'm that you. see they're with about how But be. the unique doubt generative sort don't their you Chris, in how various is can some talk Where AI local are it such these various Thank would thinking customers customer

morning Sure, Yes, about Shannon. guess two two when good sides. we think parts, very simply Yes. AI, we I think

our call our hands it way and I'll It mean, cases, our capabilities. capabilities putting tip. the might allows sound is about think that help customers really those expand base using internal And value the First for full hands -- own is it's customers coworkers coworkers the from taking stack the the customers tools chain buckets. tell evolve approach into we us and I to catalyst the simplistic, out across CDW it the in transaction obviously. customers. you very help fall accelerate does work to of services of use opportunity what to two and And but and to our entire of CDW's then and the evolve an I'll

AI tools, assessment, and do So are use the on of basically think Do and on services, want its how think required use use I having essentially say, the all AI to or it's computing maturity, data And it's models? that's [indiscernible], conversations, think you to a instances? run level, private some applications, advisory we do would How data of right? think modeling advisory structure And you basics. that. I

and tools AI infrastructure then and required that then cases. are around those helping in benefits use they to it's the embedded and level, that understand tools obviously, accrue use tools the the modeling and ensuring there benefits and create customers Application and or them coming the consume can

including say services, industries. you activity about there. contact huge particular case I'd use transformation. of was We've asked You Look, Then cetera. center of in number industries, about fast retail, a seen marketing things like et and a a lot a think it is financial pickup

You about think talking Those customer of really and now with knowledge types right like actively use assistance. we're about and things assistance industry. that that's cases across the customers are

food, customer think think think retail, think assistance, assistance, cetera. think knowledge financial So services, et

conversations But those their to monetize, are conversations ways to more really that or say customers the their I organization. to specific would they with we're industry what buckets starting can in proprietary to specific that have addition about about

what right ahead, lot lot Shannon. now. -- a that's seeing So of a Go go discussion, There's of we're ahead.

expenditures to may be like I investment was year's IT say, above going now it's customers I you cycle the in but trends? so because next that is AI growing early you. so Got hearing right much might they trend budgets theory? in are down, finding their and just they're from from that see know expand benefit the

Yes.

solutions, some, say about would end as continue our have centers to this that with customers a I said, they're benefits. contact reaping implemented in certainly number what I of the Here's I'd we've that. the think front discussion. We already at where are and

prepared what now, in to Do XX of helping the as tremendous think like. six of XXXX AI a because really plan we're the to their the not to the what months, budgets next increase middle the last, are year customers over midst think the their going -- them for XXXX result of yet given the looks understand we're I in, I over right are planning customers benefit? environment in

to call one of a going going will technologies there, in what to the be looks like see our longer fruition. absolutely it to It it's and and -- to I that understand that when there. massively they and wait It But view. operate transformative. will to to is it little going come I bit how have really be benefits opportunity But change companies It's those we're is think evolutionary evolutional. accrue.

much. so you Thank Great.

Thank you.

Our line Coast of Keith with will the go question Housum to Research. last North

now is line Your open.

Good morning guys.

Just broader M&A a terms question of bit in the strategy. little

real at forward? But this that CDW how of going it of, Enquizit. acquisitions can to Locus two this perhaps on know what made makes those you year you guys least touch quick guys better year acquisitions You just Recruiting we add and both and

sure. Yes,

write-down financials, in So small, a would our say, spot. strategically the the acquisitions both I fairway -- have of would material impact but be didn't were relatively on the sweet I

Locus, which what So we that think thinking is company, you're our in orchestration they're is the one call that first consulting I of and space. talent a

us basically so period our and managed to engineers technical professional a And it, help across call our a have model So I'll they technology talent they flexible way burstable resources. to provide expand of to services base it's kind end.

out more very and business quickly Locus cloud the really areas Locus because of actually actually needs delighted talent in even customers doubled important fell able and talent bat size security. of all where swoop, the fill the success, and that of like right orchestration significant to one we've we've with been networking we're needs around with seen almost

government other not service migration. also space. profit the cloud Enquizit AWS Premier the velocity digital Cloud, Enquizit services they is one, as application Think our They're complement team. and and education we what for of in around exciting. And provider modernization a recently, acquisition and made does the professional existing very

automate And helps IP, they tool with also professional migration which combines that a the have services process. proprietary

and So it's so Enquizit a of our space. gained federal that's in very lot far, to unique traction

were So, and we paying that family bring two the to into great delighted acquisitions already dividends.

Thank you. Great.

you. conclude will Thank the That session. question-and-answer

back now closing the pass will I CDW for over to remarks. conference So

want around serving our our coworkers globe recognize I to of Thank the before all you. our and extraordinary stakeholders. close customers, their and dedication partners we CDW And incredible commitment the

you the privilege in to support show to to this CDW. our I of call, talking and [indiscernible] excellence customers you your Al and interest look year. appreciate the thank and for investors our we in every from off serve of You way. power every analysts and you and and you next opportunity in day to execution again with Signing participating continued forward and And

I CDW Earnings wonderful you day. rest of That a Second Thank Call. XXXX concludes your participation. hope you your the have Quarter for