CDW (CDW) 1 Nov 232023 Q3 Earnings call transcript

Hello, everybody, and welcome to CDW Third Quarter 2023 Earnings Call. My name is Sam, and I'll be coordinating your call today. [Operator Instructions]

I will now hand you over to your host, Steve O'Brien with CDW Investor Relations to begin.

So Steve, over to you.

Sam. you, Thank everyone. Good morning,

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

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

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

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

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

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

our or slides amounts, indicated. will our our XXXX, Replay all today's charts will posted rates later reconciliation webcast to in be for find otherwise today remarks note to the website release versus comparable the Please period growth and webcast earnings and in Form You changes are unless X-K. references in dollar in of this today.

call of over let to is that, from I and Chris. property the company. permission that without not conference turn call the or the also want me rebroadcast be written specific remind this you may CDW to recorded With

capital questions. good time for provide priorities prepared of performance, with and our of outlook. of year. the and move strategic plenty on our morning, progress We'll our allocation will I'll everyone. Thank we call overview have for view through begin our details results, Al to a quickly balance remarks the our and ensure additional brief you, today's Steve,

execute held well international conditions. Commercial to markets remained conditions extremely continued cautious under challenged firm. markets The team Public in and worsened. persistently markets

quarter, lower than last year-over-year underscores that a by model net the share up the of non-GAAP driven $XXX and For operating resilient the of $X.X X% power that deliver when million, team strategy Record sales profitability clear profitability by X% $X.XX, our year-over-year. demonstration is the of delivered underpinned to rigor, per income up year, net non-GAAP of of income and execution record our billion, record financial and value business customers. relentless our we profitability X%

costs. laser priorities priorities. once team focus again, optimizing their address that and portfolio broad our mission-critical to on And and to customers' deep maintain our the Customers pivot solutions enabled

operating efficiencies like environments burstable multi-cloud cloud. provide like that Solutions SaaS solutions usage-based expense and and in private are modern that or elasticity performance and hybrid

deliver. to positioned well are we Solutions,

our investments where closely growth, adviser by a before, environment, who today's Capabilities our technology ever and cut times for customers many In vital partner. the spend, an IT scrutinizing stack made to across the possible cycle, and designs, helps options, as customers their adviser an a is value through trusted adviser are and evaluate integrates than complexity deploys, who customers full made investments life have X-part enable that that manages in the we strategy us made investments us have solution. serve full greater

the investments strategic sales, netted our dampen customer cloud and us these down margin. reflects the consistently both preferences has that gross drive offerings enhancing our line success thus we are and that with spend our our of for top sales Recall in growth solutions. SaaS-based and a As increasing customer that spend significant that while our faster have strategy, dynamic executed customers net grown amount than

services portfolio markets, look deeper at end strategy. our balanced main execution solutions portfolio our ongoing drivers X were of a performance, and of our and of customer quarterly take Let's There breadth X-part results. of

First, and from sales sales meaningful our care, is channels, X small corporate, over to business markets. a business, of $X.X government billion billion. health portfolio annual balanced with education ranging XXXX of $XX Each on our end its own

channel, customer customer end on are in teams sales. different and markets, size. macroeconomic and U.K. further factors X.X given in often Canadian USD which similarly external verticals segmented markets act These to segmented including the that and are each delivered impact each. operations, Within together our focus customer geography, countercyclically, XXXX Teams unique billion end

cautious of this confidence performance benefit customer behavior. quarter drive Commercial the public conditions and again see purchasing weigh declines with our commercial. You portfolio in on partially mitigating to balanced market continue

we experience increasing devices. client on productivity around Instead improvement projects as hardware in of on the well continue to in decreased net and continued experiences. sales XX%. focused as projects Corporate focused expected, we customer coworker enhanced modest pressure, particularly Momentum

our of digits. data? meaningful to yet stages offerings commercialization once with With customer While are CIOs security What questions. into which and and customer not lens, corporate development contributed excellent with net increasingly AI projecting X on in to comp a asked spend, shorter-term and favored performance, you increase again customers ROI in also up double-digit areas early spend focus to enabled network being you by customer how AIN AI spend. solutions remains our of increases Ongoing cloud, led double-digit Security security translating were major contributed are doing in also cloud. double modernization full portfolio

of performance ongoing needs formation. were with declined and the conditions hiring prioritization need to to to management projects Small products were business line that with of and sales Market quarter, reflect utilization conducive cost and than Corporate of more net the that get clarity second postponement done. meaningful year-over-year and continue client consistent XX%. top existing Projects more remained wants Focus rather the declines upgrades products. customers around continued and new see device business for economy on remained cost. conditions

business spend with second performance in software. as while double-digit were declines on transactions increased and continue small drove cloud on quarter. digits, Client low top with the for declined Consistent second line mission-critical digits. up by remain Focus quarter, refresh burner and devices solutions hard priorities the back single to drive on ROI shorter-term double the

increase, continued which education by in government and in rigorous posted with care while federal up proof agencies success investments last Health a exceptional and team historical delivered work implement manage excellent flat digits. helping of X% data. year-over-year. The team strong X% solutions, new a local. cloud agencies concept. server year's efficient and continued near its to Federal's This require line each solutions relatively to growth, optimize also more mid-single-digit existing with cloud performed mid-single-digit decline was performance protect increased offset its double with sales Government deliver The compared to state seasonality, performance growth. XX% Public in and

mid-single The digits local and double-digit growth historical to state X%, averages, sales the sequential well team growth. delivered net year's last but compared above solid up declined

was customer Solid double-digit than spend. delivering by increases strong, growth Solutions a offset decline more was in transactions. adoption in solution Cloud-enabled

cloud talent drove tight needs sales with solutions, cloud industry a spend. net in care Augmenting driving customers. includes With which budgets, operating systems savings X%. increased health proprietary and data modernizing cost projects portfolio, continue areas challenges significant efficiency complex Healthcare armed care our team solutions, cloud-based and to centers to increase the health full and focused remain for turn

disproportionate as in address broad health security that needs, growth percentage Our all help care contributed customers' organizations. they double-digit solutions target by attacks portfolio a of cybersecurity needs increase of spend heightened the ransomware also to driven

increase decline positive the ed over single digits ed. decline solutions education low than high for single sales X Higher For K-XX client was low ongoing declines in in single-digit offset education, largely low increase devices. net by digits, a double-digit quarters. decline quarter increased single transactions, in first by digits offset a growth more in a driven higher in

improve continued to on services these double-digit campus spend. and and growth across solutions It delivered cloud led teens connectivity impactful Institutions experiences. growth continue to The invest to team's software. also delivering security, in low focus student NetComm,

schools helping For improve equity continued in K-XX, achieve delivered services outcomes, efforts NetComm. to digital team learning and the growth and their their excellent which and success

of while grew key reflecting with declined moderation Security a teens, growth device remained spend. Solutions in spend. area customer focus transactions double-digit client meaningfully, ongoing low

below down our expectations, Other, our and mid-teens. business came Canada combined U.K. in

to Canada the by digits market and in teams in U.K. deeper anticipated. currency. than local the conditions we deterioration well, decreased While Canada were double Both and U.K. execute continue in the the

markets both performance key amid a uncertain advantage environment. strategic enable uneven are consistent and and diverse macro an end Our

portfolio, strategic advantage second The enables us customers' was deep pivot our which driver to evolving to and address our and broad of our performance needs.

the Similar quarter's teens. in digits. roughly the line digits, down client to space. the mid-single while performance device with Similar by quarter, sales continued second particularly double increased second transactions second demand, double-digit solutions in depressed performance was to the client pressure, quarter, to Hardware under decline. Overall, remained declined reflect commercial high

spend and customers end half public. half XX% increased total cloud continues Backlog across demand. stable third approximating with digits increases double came historic our and Cloud to is market. out now increased commercial from levels. with spend every feather of Roughly for from NetComm nearly

Security partially spend in success being digits by Increases the and mid-teens virtualization and across employment increased via and with to double a significant management in offset security stack network security by software contributed increase delivered categories projects software. levels. Cloud cloud. and full a and portion were tied declines to

by hardware professional services and services from transactional sales the declined. continued lower to growth net impact services attached solutions more than was managed overall offset of Solid and and drag

customers portfolio. our the power us are they where in It across That and investments and is see, driven you our is varies As strategy. deep performance power significantly can by growth the made meet have portfolio. broad we our the enables it to of

strategy. share leads customers; expand and area; quarter, driver this capabilities of in that third, solutions our high-growth growth enhance first, and guided strategy capabilities. acquire And pillars: performance our services third X relentless by of new capture to second, the execution a

Over X our broadened we capabilities. and deepened the have years, past

our capabilities and management a that deepened trusted integration our life now to our comprehensive fortified management. design, Capabilities have adviser relevance customers. customers Our deliver to deployment, role cycle and as

outcomes the customers of big us investments, digital framework or outcome that to environment favorable for U.S. capabilities upfront uncertain deliver a macro internationally capital Capabilities our with make cost increasingly savings our enable and today's is major that eye and cloud-based advantage. competitive customers. care reluctant drive best the environment, to in across In serve to customers our ability physical,

consultative costs, to solving, our with with move problem the customers lower solutions enable to implement identify approach consumption-based that ahead projects. with mission-critical upfront both Armed teams solutions and

and Solutions deepen that deliver customers value our relationships. customer to

school cloud-ready teacher storage that a the meet and second are an meet investments, environment by to first, solutions district solution end and are none great A enablement manage constraints Many to -- administrator budget. student second, and costs agility deadline; within The life. of of they experience; priorities: customer fixed of had third, reaching X that year in agility end our converged to action migration we these deliver their legacy industry. of to this which services, in Illinois example a school enabled the provided had of is

comprehensive A After cloud outcome customer and range provide, and ultimately and a cost another solution on-premise evaluation ability the future the developing a the deployment cloud private that management team the solutions hyperconverged that great consumption-based modern needed growth, supports adviser, delivered one flexibility approach as hybrid our of applications can would seamlessly that a we the a of for best of wide scale and determined trusted solution. provide for and provides to predictability relationship win-win. deepens

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

This greater shared assumes year. would will First, of U.S. IT of the to You to modest quarter, the decline half recall post expectations high the XXXX. a we commercial market the in in IT for market lead back a market improvement in digits single hardware X clarity things: our in the last

U.K. to public deterioration the in moderate normal a in seasonality Second, space. and return Canada; third, a the and

of We while that did normal a in in return there see down a public IT stable spend. shift seasonality greater net to lieu has hardware and spend been to was commercial solutions

continue. to also a interactions trends international expect Current deeper-than-expected these market lead deterioration. to conditions saw us We customer

complex outperform continue to year's of market growth net IT high XXX solutions decline, when to a profitably that and meaningful single-digit for our the XXX basis remains by expect to estimate shift U.S. down. we XXXX customer spend IT market in Our adjusted in at points U.S. to this

list significant are environment, shutdown. now customers intensifying in includes of space more a cognizant for and grown our We and potential has federal instability the this geopolitical cards market the complex in government that wild

eye business do, on potential watchful always We will and continue keep to a will and factors other these we conditions our an provide next update we on call. as on

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

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

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

execution discipline down on gross This a $X.X record and were sales consolidated per and quarter, an and these records X XXXX delivered share continued basis X% basis. financial which earnings average diluted operating record X.X% a our on in net achieved on reported daily billion, Record notable margin of sales records: basis. on margin, We

economic than Third our international reflected as solutions performance X.X% on conditions profit $X.X sequential of prior that On of daily was lower year net line quarter impact continued outlook, our an down, spend. netted conditions a the gross reflecting providing cloud are higher-than-anticipated and sales sales customer billion, that essentially basis, margin, the well net mix Gross as business. average as record net quarter adversely points increased a results and solutions uneven third which both SaaS-based sales XXX and impact increased flat our drive in year-over-year, basis slightly our lower SaaS-based versus market a the that meaningful offset in basis, impacted cloud success top sales.

net the again by product enhanced Our profit SaaS-based driven netted higher higher a sales net of cloud revenues, factors: of in the have These and also once impact down margin was into dampening streams growth X second, solutions, growth. mix higher First, margin. XX.X% which mix while which margins; revenue outpaced gross sales gross complex

and compared XX% profit to our category this quarter. year prior For gross XX.X% this third in the a record represented quarter,

will to While we in continue eventually, to out both the business, important margin which expect mix experienced balance greater within our anticipate a line this an durable back mix be shift transactional impacts and we've trend top corresponding we XXXX. in growth gross products,

third SG&A was totaled Coworker XX,XXX, quarter, million, approximately For quarter slightly second the X.X% non-GAAP the from down the count up year-over-year. third $XXX in quarter.

our catalysts achievement margin investments continue and in X-part strategy growth, important of We that are profitability prioritize to our for the goals.

to record As versus IT points approach our rationalize margin X.X%, Non-GAAP drive million, and operating their discretionary own up customers of or million reached expenses disciplined $X income basis the up X.X% from operating helped prior a income optimize our year. $XXX prior year. investments, non-GAAP XXX

Moving P&L. the down

Our rate in interest with expectations. line expense our tax remained

average quarter, of net third With income X.X% As was up you on $XXX X.X% income per can see share year-over-year diluted non-GAAP our year-over-year. million an shares on $XXX non-GAAP was in diluted the a Slide net X, basis. up all-time million, quarter $X.XX, weighted also record at

period billion end, Moving to At X.Xx leverage. $X.X Slide net debt net or X. was

net net our range Xx. to consistent modest with performance approximately strong quarter, our repayment debt targeted cash revolver the $X.X continued plus During the billion. and cash of quarter, remains flow debt declined leverage Xx Liquidity with during availability strong of reflect

to Moving the cycle high days to range low days, Slide average targeted XX. and below XXs. our conversion of from The teens down X cash prior X-month was XX year

continued remain our respect the management levels, this inventory at targeted this particularly and to our to end we reflects conversion range with diligent of capital, expect cash year. Our lower of working

in and market in any the longer modeling capital mentioned continue given believe we cash quarter. our influence can we've conversion range the target past, And capital As term. remains dynamics timing best guidepost working for to working

as on shown our our effective billion, percentage management drove free a of flow and working cash rule of sales. Slide profits as $X.X Strong above well strong year-to-date capital adjusted of XX, thumb

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

to our allocation XX. capital priorities us brings This Slide on

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

morning, increasing our the to rate This a of dividend. a we increase increased dividend initial announced at the dividend the grown non-GAAP net annually. from year always, $X.XX line consecutive XX% annual with level. income. dividend is X% tenth our as approximately of This in First, We've compound the

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

net place last of at at a the the end leverage down year our Second, with X.Xx structure ensure in capital from to the range we targeted we Xx. ended within and ratio, right Xx X.Xx, targeted have of quarter

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

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

margins, anticipate For our repurchases, remain flow on flow XX% playbook to laser-focused range predictable economic through returning of strong conditions, dividends investors now uneven our XX% to cash profitability. up adjusted and cash XX% XXXX, we to in ongoing all, of XX%. run and continue free to prior given from share uncertainty and All and we results market

XX. caution we've throughout to And persisting conditions continue customer year lead are outlook that marketing our under prudence. uncertain to leads and operated Slide on the us The and to

Given end albeit a XXX scenario digits. With growth market premium. share IT to will of on the deliver this basis premium XXX net netted down the not to a our high as basis baseline, to masked that impact our upper expect the revenue the as outsized expect this, the contract we point of at of market we evident sales single

Keep demand premium currently in in our significant meaningful premium when like mind XXXX that to We hardware on spend customer a basis. XXXX. a maintain and strong, most is IT the is market

P&L. down Moving the

profit to non-GAAP expect expectations year We income of from as X%. manage of margins, our through the growth, approximately be this up uncertain to continued environment. our in our This full mid-X% expense reflects efficiency low expectation prior range, margin along we strong economic operating with gross

financial our full profitability for quarter. constant on outlook relatively in prior an we quarter basis. remember, we Please the flat delivering to currency. to be fourth for year profitability on per our ourselves our of currency reflects increase year-over-year expectations slightly based flat full up third constant strong year share accountable unchanged our expectation Finally, hold expect This non-GAAP earnings and from a

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

Moving modeling for quarter. thoughts the to fourth

seasonal the current to mid-single-digit daily referenced. we low- basis business conditions QX. reflective fourth average This equates expect than quarter in net to now and and a line for average previously terms QX decline expected mix For daily lower the sales is sales, sales. a a of both previously top sequential on we to mid-single-digit of components year-over-year largely This from decline

quarter diluted strong, also And profit driven quarter non-GAAP digits to operating With low and levels be single earnings to rate mix expect per by third we margins elements. anticipate this, grow and non-GAAP fourth gross similar year-over-year. both share to we

free flow sales, generation be prior of to reflecting in full our year. X% we months rule year adjusted of our the X cash first the range expect strong expectation cash XXXX, above and thumb approximately year our to For of X.X%, of X% net above well of X%

While we flow and in uncertain to to margin we in invest ability stakeholders deliver profitability, cautious and continuing our our behind market, continue a our operate strategy. to cash remain confident while to

summary. That concludes financial the

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

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

Our Chatterjee first today JPMorgan. from Samik comes from question Instructions] [Operator

the we've And spending I'll just has have there the of X by here resilience quick momentum okay. when investor in most broader together, momentum. commercial been think sector. broad much hasn't at that's Chris, of ones, as has the the is sort customers and on held beyond customers been probably seen I'll public in ask in fact, deteriorating you that sector, side. total beyond And a spending from look if public both I that, been concern the

from And beyond of have pipeline public maybe And one, into demand getting we're of mean, from Can obviously, sustainability what of insights the my for just any of commercial you spending. year a into the seeing second accounts. year perspective and there thinking close you're sector? you're sort how I the to here going the end next is dive sort about you

in X We spending. seen of while of declines in significant enterprise sort years consecutive haven't a

of are So from from declines looking a another spending expecting at customers? base? are year at should if lower you higher least for Or looking any level we year thoughts a be where we

of on the all commercial again would the say Samik, let cautious. said, the priority say that's held this in that challenging. frankly, I'll that been Look, all been All in for their pretty year one is thing to has get question been be investments that been throughout as has spending What side. of continue me to has well. first a technology consistent looked has uneven, customers. our the year, just true I like year, environment first It's terms

the clarity, on significant experience, customer like customers consumption-based on focused focused been remained hesitant and operating cloud have upfront they on And solutions and throughout optimization have more experience. say, ratable Commercial much both on make capital heavily. efficiency employee focused given cost much more to year costs to them the managing I'd the that on that would the business year, investments their have give throughout invest to we fact very environment and confidence in continue the more not the

strong. Now some what across been remember, double areas and our we're call has digits, security customers are investing seeing cloud, double I very from up investing they're up how that of securities digits. and mission-critical Clouds where these

Software significantly. up customer the to for forward. this is need drive And is technology reflecting missions their the

a second anticipated look quarter, particular lead hardware, particular, year the the in half to back terms to client That's would commercial, real impact in the budgets in In and modest the loosening in up would at saw say, we bit that a clients. not that, We in hardware of little and I'd device. I of some to true. be recovery, proved in the

in technology in about is climate I bucket is much of very a critical but prudent seeing small not their spend the customers area. seeing as not and net-net, what would clarity say as across spend, But business mission, immediate bucket, Our therefore and business now, more right their in more that investing still more to behind that corporate around technology measured willing and the -- to commercial ratable, cloud-based said. are a I the different still increase

client we look, again or get is in year, see I'd pickup the we're One as through a say half thing views think signs we'll the devices to seeing you about the give of year. year. our were that we last of we pickup about not hoping As next the

So just it. when have we see. yet. that's But there's we where see market, might that And clarity not once those seen to the that, get leave but we'll in happens, I'd signs

got last to couple through I months. get the think of we've

Here's what with. close with stack be I their seeing strategy just investment news, the is life or our sits broad need are and good they The the across to to portfolio, where able help CDW positions cycle. it full which we the when customers offer our behind technology no matter the

Our which good And is activity, say the sales are and really the there. engagement, customers. with ingraining discussion I'm technical with what the teams the those relationships and news with the our pleased we're is depth I'll

So the we come our customers. accelerate curve, feeling of of good out out kind very about when we'll with

that I to seen past, the be You've at expect in it wouldn't and this any different time.

Our question Erik comes from Woodring from Stanley. Morgan next

linearity the your just have give Can just bit a how maybe expectations trends And X for a then And Chris, have you in July out. start well. has influenced into we can detail I from through the that full year? progressed the us quarter? on and and September updated Awesome. October more follow-up. as I how specifically

Yes, Erik. sure,

Here's whole pretty stable it throughout quarter. I'd -- was say just the

across in through of the the business uptick gave confidence level we talked of might the we You'll kind remember, In QX, went an of activity quarter, level same us the QX, more X be climate. we some that about clarity saw that just some months. and as in there

in shift dig sales, as And eventually obviously transactional gross we it of comments about away mix that solutions When We've think are how as complex trends can then, kind into just margin. influence forward, cautioned does margins we several mix have to these what expect drive for on from more together heard Al, -- future. important do see a gross about a to margin will complex I of you've both a you solutions? look coexist an now bit. higher think us more this because shift these kind Or quarters of the that we wanted your a towards mix these I

So strong that just be or for could gross us helpful. transactional see alongside zero-sum if a in this understand would is kind strength what of do that you game help you and complex can margins, solutions would if if

Yes. Thanks.

think I definitely can they coexist.

I think choosing in spend weight netted you of kind environment spend what will and I'll back items of fixing these these and in essentially, towards their if to down we've Erik, more the IT revenue it's that say, clients. particularly seen in on on of streams, commercial holding customers other and some hardware

and expectation pickup an we environment, clients. less that economic in our uncertainty with the our the expectation see But was incremental would side, on hardware in particular

so expectation we our of the durable but outpace netted likely trend persist see would would sales, that the And and pickup also be other would net revenues down in some categories.

cautious the environment, not hold. seeing current environment more So hopefully what future but in I do -- that's in believe that, that exists a we're the would code will

from next UBS. Our Vogt David of comes question

Great.

I if X, may. So

do like backlog versus terms you kind customers bit of of know just much of can out I How normalization that maybe you macro color weakness the think, backlog? well. kind sort you're little little in there, more related, demand a So it's there. the on seeing net signals you from the more as you're hearing? But is of normal continued comp of of bit just want mentioned what with signals hearing some that versus historical back maybe public levels a sounds you're I at touch robustly

from what in, go bit and PC of back a Samik's about it a sense related for a think point, maybe say, let's demand, maybe I'm certainly talking you about XX just to some are to robustly of when Windows calendar then clients. particularly refresh 'XX, And maybe get your companies sounds like timing more a kind disconnect little perspective, in perspective. trying ecosystem the your is

there more any color helpful. would Just incredibly be

start. Al. a just Overall, David, segment. it down I'll I'll sure. kind break it's of Yes, by bit

has we So noted pick things look, driven would we hardware the more in customers really environment with environment kind clarity have seeing a have as have from and Chris That this suggested in seen more sentiment-driven suggested and what would would again, up. economic that we of has bit be played we that PC. IT anticipated might And that were behavior. out, not that buying

on in So small maybe to not first, on with With say the commercial say showing side, pretty of a corporate executed but our respect note kind would exceptionally pickup. would expectations would And that QX, they've behind in anticipated business, demand then few expected just maybe would and business, I the you stable seasonality. well, a call much but U.S. we public than I seen in we've lastly, I what we line say markets, international would moderation for we would the and the see as side it And quarters that's our market expected. QX in some the worse demand in

So in there in puts what of couple demand we terms takes and saw of QX. environment, QX well the a the are as as

our David, to your but we'd on just the getting then, what her nearing normalization. is to we're backlog, Chris networking, as point more close piece remarks, be suggested call backlog And Maybe prepared would in normalization. lagging

as sit no impact now. So here significant we

last in earlier to that the I'd the client they're question you say devices. mentioned business And about once the start we our And of a market. activity of potential place couple seen on we the a kind asked that feeling have that's better again as not PC picking things. up side, I about know, "discipline," spend around customers and

of end certainly is we to would to what the a say the downside I than But are beginning. are closer we

clear. that's So quite

commercial I tends react point that changes market business. is consumer to to earlier make other would than the The

see versus So of a buying. OEMs, doing Part you of in when cetera, are terms what suggesting the is that is a might what et we who of lag see from you bit

is from the inventory of market the end of terms channel of second then flush and of the timing and into the in The the the kind us OEMs distributors market. to

that or So a X for will account of differences. quarter

Our from Daryanani Evercore ahead. next question ISI. comes from Please Amit go

I X have as well.

width went of been the in for potentially? expires fine at federal budget Chris, folks. from -- a to weeks. shutdown are But the sounds of chaos this suppose a relatively It perspective. like federal level believe, XX-day there's You a and quarter from December quarter you the in some you there's that extension just about degree extended couple I thinking September spending How

I'd say through which The a shutdown, look, in year-end, team through Amit, stay flight is manage in-flight do projects knows to good. say that if that at here to past been flight. we're that, Yes. how be looking that's would so we've both we're say projects I I before. have that we uncertainty. in aren't are that the There might already hold. it this some the times XXXX. I'd be manage on really will way, have might guess many And

job many, But of sadly, of terrific a have times, good these that out is do environments in these in the some we team executed and has great environments, but they'll a out I many well. and as this news and regards, time in I confidence guess, have

it's going And your bunch Fair guys in enough. I the And of up. the then follow know, of could if year-over-year points on be margin just on basis 'XX there's the operating XX, side. I operating obviously company the like, maybe in levers December, to don't I of margin XX a here. If over about midpoint based up performance calendar think

you about is is would Some not But how of secular. years? if of say you you how not well is it client perhaps reflect cyclical margins into you the think tailwinds forward? devices 'XX, calendar the of durability these in that out sustained some as go is on operating it what's do And the cyclical doing

question. Thanks Sure, the Amit. for

of So a couple note. things would I

in parse kind but obviously, from, say few function I'd things, basis up we've of the a of X margins a really a operating that profit Number notably I pickup XXX of few gross had things. our most a if benefited we mix points business. And year-over-year. strong think I is is margins,

lot a pickup that gross so into And is our of profit margin operating margins. down dropping

just our and The other would really business efforts lines seeing and those our demand vectors QX, is our in align with we're what piece, the Amit, efforts be expenses along certainly to QX helped. that

kind and about range, of this of the That's this and sweet targeted We operating. kind XX into I've of spot environment. in where before a relative of high expenses GP, to talked that's we're our have XXs

where behind productivity, to of time, drive kind stand. significant we I'll at that strategy, we notwithstanding, have say same we our continue Now with managing the commensurate efforts efficiency, just expenses invest our but to is

major margins. so And they of our driving kind are the components operating are that

have just or we're PC Amit, the terms netted some as the efficiency invest to more the that say in that that down into just dilution effect on while in gross could you start regard. transactional continue would of durability, continue there. we we impacts you expect Certainly, maybe growth going So is products mix I margin. going back, can to come front help to and influence of But to

the moved on have operating we So margin. certainly quickly

see ultimately Some you're to giving see different income going as but could it of plays in statement out. geography our we that back,

comes of question Stifel. Matt next from Our Sheerin

the Chris, international the that on weakness you the hoping, in I'm about markets. comments elaborate can

You're that in Europe. not one first calling specifically the out

over throughout couple So that expect that quarter? is to that mention the that did the you something Al, quarters. saw you softness next of And continue you

you more anything great. would So can add be

is we've U.K. a of in there. we're as and That's would to which and front, the a year. international market last to similar start we call. And across a anticipated And Al on of the the third probably And Canada very, seen terms hadn't behind both mentioned the very is we it front. on what international in of on U.S. in quarter. certainty I the steepness is, continues expectation quarters see the our in the we business, Yes, couple kind QX, throughout and demand the did just that downtick the performance with mentioned, say our in

So that's what seeing. we're

that something another line will just you that PCs, down at suppliers? curing some and catalyst buzz And potentially being folks about all and And excited cycle for get upgrade that from is customers regarding about there's point? are been PCs at AI-enabled the recently

mind. AI great if we're do Yes. And prepared front mentioned customers step and about AI yes, remarks just short my in excited expect get question Matt, we it's your end the think capabilities. support it but integrated full stack. products we're be to across the end-to-end the of I very that all building client back, stack on going going is into we everybody's devices. to development, the AI-enabled quickly. obviously, technology a to a is question. call need would commercialization I It's And I And to think we take answer to the is, is about kind at of going and AI. what full infrastructure our it's optimized way

to going able arrival to It's be to adoption. services move need from to

we around with our are practices much And building very with all fact, partners AI-enabled partners, aligned our so in technology. of

is about will OpEx we have help make have well in to again, complexity more in versus client had where yes, to And the we there's choice customers consumption. then choice, excited. decisions particular, across the years positioned devices. be just so think customers Matt, think the and the them CDW we brand stack And choice, full market. CapEx in thinking technology And back, models. Then It's

intelligence got it's more across of we've the Now stack, getting all complicated. full

That and a customers. experiences within all their efficiency of their and CIOs how our help CTOs of thinking said, for are very can their customers artificial and about there's their that business intelligence high their expectation line drive leaders

an as accelerant. it see we look, So

the fairly I end but still think from quickly, stages. are will a front timing at very it move perspective, we

Barclays. Wang our from question And from next comes George

quick X have ones. I

about especially guys about international just Firstly, can Canada. of geo, talked you by maybe kind U.K., talk weaker share gains, you

industry of can also you weakness of markets. the both shifts? function share in kind a maybe the double overseas it's on in or gains, curious Maybe the Just collect some and share U.S.

think say. by weaker down software outperforming comes gain And would And in that. to the accountable those have and, very which about that look, think back that We we but to was and feel to Yes, the software we're XXXX -- hold over been noted question market other XXXX had we continuing points. the to XXX basis share assurance hardware we netted confident I hardware declines, we XXX things long what solutions, mind. do that. periods I When on when ourselves here's term in like environment environment, in had and that our I'd

the We're look seeing customers growing of X%. a are at delta base, forward faster investing through customer CDW, And fast more what when than we're to at now. we spend, a

and and delta, take that very to so long do So run. our feel over share we in confident across fairly XXXX a the it's we big markets, and we'll continue

Great.

Just a one, quick a follow-up. I can, if as just

tuck-in of just bolt-on any [ Just down accretion FCF better kind given in netted and ] of kind the of guidance. of terms kind margin deals,

want curious, just call tuck-in kind they up to any can continue color on [ in different you segments you of out? so to thoughts any deals Just ] share sort and roll of do

again, organically very our cloud, are vehicle and have the a in as joined that with sides, moving business. strategy. know, team behind for, as the in and value digital, you've say customers you And that security, are investing primarily, of our acquisitions And I seen quickly those creating a and the there investments. you invest market more as And both both strength would M&A kudos I Yes. side, for about both through strength on companies to us for for successfully. related, really we've along think on result been now that on seeing advanced those solutions capabilities things our

if docket. consider the chat market. at But have out a certainly right I'll look always fit, on forward M&A bit of position. to continue we we'll would cash never moving about We're little it's And opportunistically. So the is Alex the

Obviously, where for us add. as balance just M&A to strategically value always as think where well kind And would are opportunities where our priorities, tactic our of we as our center us. front and about the to I are deploy to valuations we're capital best that George, Yes, can add money. and the we is going going

tuned So stay on that.

kind and do variable and a cash place, position You in is it can have of volatile we environment. see that

this our capital So with we certainly optionality in environment. to value respect

going about we where to look the comment of look to George, we'll your ecosystem continue to opportunities. across and expect, we're can across

last in cloud Our that mostly space, was focused federal. acquisition was in Enquizit the

in revenue the of wouldn't I down. those some to going It's imagine of our higher can that's netted concentration se you strategy. So would have capabilities. But about more streams per be a part

come So that front. more to on

from comes Bank And question of Ruplu our America. from Bhattacharya next

about anything items XXXX? Or looks we level in similar more XXXX, look X it And have for into of sense One I to netted guys growth I year? higher? as to of it is or you quantify way year-on-year Al, unique impact mix is for them. a like there XXXX, there this Al, Chris. of makes even one down expect for impact items. on sales we a Because should year-on-year into these shift mean, the

on thoughts your that. just So

Sure, Ruplu.

you we've as few continue we things. we Number our netted expect, one, So sales, said we down will. would before overall say forward, if that a would outpace revenues net to and look

netted look can say, of down you mix our that note the note data X I'll has year sales, metrics will I'd this quarter So X% give that like. couple was our into of number the GP XX.X% sequentially net one, and that million, of just and extreme you at back I point. for more a and down go $XXX what but looked of netted that been

But both say, I'd it's notable versus year. prior sequentially and

And spend this, at it I of kind basis. think, get on to our decline with alluded try more a a than this you sales looked for on that put to suggest basis you would and net you'd pretty even dollars the impact. if considerably up, If in grows those sales less customer is that sense it Chris net

you of So notable look perspective could and couple the impact netted has pretty a at math that would a outsized down growth there this are had show things from year.

me Okay. Chris, ask you let this.

remaining refreshes talked On device the back prepared on about remarks, burner. the you

fundamentals out As data side And I any market, basis PCs couple points XXX like see the the said or spend outperformance end look to center in that is CDW's expect age over the U.S. at of the in IT the the that do XXX to the you've the side. device happens, range. I higher given you think of when either typically, mean, quarters in client of to and next you refreshes

weaker getting that can at end refreshes actually the when is today, is benefit macro I'm should of macro improves get that device be this your range. expect what outperformance the the the though at guess I normal you and of we So even higher added

you thoughts can your us So give that, please? on

part ability Yes, we were you've right, of hardware track is is record part line it I say refreshing Ruplu on that And top that basis. of share. those of that And recognized our is fact net outperformance would our seeing are to the and gain strong. got the

those our tend result we X premium outperform as a so to of And things.

we're looking which to of as what repeat of cycle, the end we the said, I just of opposed terms that a that is is In back downswing feel do will, at I of kind clients, Ruplu, if start of little you the forward, cycle. that

think last sentiment-driven Al market really the kind our point That And confidence level until will data now customers dollars. of right driving a in that mentioned, said, it's center be commercial demand. of invest device we as had a climate, business the and larger more where they refresh client to even start

got -- we're right, cycle. Window got et X-year-old We've a we've you're devices, Now COVID refresh cetera. XX got We've coming.

So in that our client are be I convert, yet. a devices, going that there client convert. And positive. about we're mentioned, devices. AI, not to we they're conversations also again, in in but are be converting be seeing for as would terms tailwind to lot And certainly it's just planning, a of teams ready we'll to just not refresh embedded are ready definitely when with having customers of those all things will add market that the

today Adam James. Tindle And our from from comes last question Raymond

it's last. year, Save reflecting wanted silver for Al, been I to the on XXXX, think by right. best cost lining management. the All I this maybe start

to OpEx makes metric, You've I GP And been optimal. protecting that but earnings sense, which you your all think year now despite very it's volatile revenue. mentioned is

little would it on question forward, more what but is sounds muted. me you're if a for look as wrong, I'm bit be, the So like correct the XXXX, seeing outlook we based

are in for low, not sequentially. I not up so investing headcount, very Inventory revenue up carrying really you're modestly days it's you're see growth.

-- a for GP headwind got You've on dollars. mix shifting as

not? to to fair more be muted So be moving the leverage anticipate would forward? earnings question or protecting in Would moving why about how us operating it think negative environment Why forward? a for more

A of Thanks, call I out. Sure. would question. Great things Adam. couple

First, expenses. how like the we you range think gave about I

sure opportunities. in Not there, keep efficiency. driving engine the fund make but of that within Just underneath range, to there -- driving of that terms appropriately where the where of we're takes we productivity, also and are can investment kind puts are understand kind only we to

continue those you but headcount up. expect I invest. you noted think but we slightly was efficiency can to will our efforts that continue, was And what is will up, it

If gross more you significant, at -- of headcount head if a from you effect will, those gross the look basis. look would that

a So look, it's act. I think balancing

I somewhat cycle talked think, the to would accelerate up the turn we in certainly efforts to side. call start I demand as But start evergreen. ramp continue investment Adam, would we've efficiency areas about, on of some to see we the the and

operating still And operating tell able definitively so within we to a you would going when quarters every leverage that be quarter where not say add some that try be that. be but opportunity. big with up, there show I or strategic balance a going quarter-to-quarter you we we're of we And delever there to I it's of kind was range. great less leverage, could to mentioned remain on have a that if to therefore, top therefore,

can be scary I'd maybe that cyclical returning you us Maybe "gross strip it. historical some for more outcomes give might Got and and the analysis get help I structural and it pretty margin. that, versus gross net of that to can at at revenue understand our levels, out because the traditional levels. But current items gauge some love margin mix. to And we unpack margin." hardware look quick just exclude follow-up on a back it benefiting gross XXX% that of is to outcomes a

of I from mean. reverting that EPS coming get out think over can you buck to the back a

net So be ex and would unpack that cyclical margin if structural, versus could helpful. you revenue what's gross the

Yes, absolutely, Adam.

in and year hardware, expect down that movement would revenues obviously, lieu So to mix the netted these past, Certainly, mix out cetera. in et balance had we've matters, I've over of this particularly extreme we talked about PCs, a pretty time. on

is would that a variable dilute gross so margins. And that

moved would piece, you look And general, the have quite back product actually The X firm. they've other Adam, be over last held up that very margins a if in years, bit.

value premium this persisting, premium resiliency to kind and may And up. an that be level, we're of hold more higher of there been that, what element I though seeing continue there. kind higher product there of of is note that also would in upmarket product. there's So that component that way on you in spend there the bought is

way. you're it to and Now same in kind of of in going that you're to kind continue invest

would this, over component, know that And that, could not note, it's could that Adam, time. last We've we then the of that come I conceivable you some over see seen commoditization. time, and back but

are we components we add could you could Certainly, terms be transitory components bit in somewhat at significant that pretty So time. and see areas, and at in over those a gross up. levels margin that when of referenced components durable some I some that are

no with back to I'd CDW hand remarks. questions, to the for like closing the call And team further

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

today's concludes everyone, Thank This joining. call. for you,

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