CDW (CDW) 7 Feb 242023 Q4 Earnings call transcript

[Audio Gap] we posted to our website later today. I want to remind you that this conference call is the property of CDW and may not be recorded or rebroadcast without specific written permission from the company. With that, let me turn the call over to Chris.

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

$X plenty top per quarter year-over-year, prepared line impact profits, quickly non-GAAP share as always margins X% were have through year-over-year. of delivered net we and Fourth X% questions. our we income remarks lower X.X% of of Strong of move income year gross million, of $X.XX, $XXX up XXXX. profit for We'll ensure performance on operating time operating below growth below billion, sales to X% and the income $X.XX net billion, prior and non-GAAP mitigated

the the when to throughout approach to is that value quarter life years year XXXX. ability $XX continue is elasticity, combined XXXX. drive with as was X our by our of across ratable financial life increasingly full strategy. strong dampened strong what over uneven by solutions, full our of our commonly drove results stack, to to full business XXXX net solutions. our on experienced execution fourth our not than model. Results customers. That the categories behavior. Customer including increase gross deprioritization outcomes pivot delivered which by quarter. Market pressure with hardware for ongoing line, muted to net strategy less international down cautious increase non-GAAP by we our execution driven margins. that strategic $X rigor reflect commercial fourth underpinned that our top power cycle, further resilient The the we happens, and deliver sales in net services And the and with this across tested sales truly quarter, delivered this When non-GAAP was solutions a and Notwithstanding of priorities team, in phenomenon net action. our we a our exemplary solutions and preference under and our by the results, focused sales. pressure market outcomes categories meaningfully operating and an our portfolio impact as-a-service and execution saw solutions and hardware team, income, priorities were the balanced X the down billion billion billion, this go-to-market dynamics of breadth were cloud example solutions softness performance investments unique services flat The full deliver This we consumption-based very There of portfolio main strong per in product stack. markets, share conditions, like cash growth end met over these this resulted growth. relentless of ability and free well have efficiency X% strategy income X-part of adjusted and for past as customer remained to of made $X.X of flow on SaaS in drivers the revenue laser operating combined customer success, address excellent drove on net net strong nascent basis. The traditional consistent cycle team's Our expense full to on-premise priorities

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

macroeconomic customer also headwinds geographies segmented teams education. is Canadian a health know, of we which channels: Each differently each are X.X As to government operations, together Within and Small including Corporate, or its billion. Often, have own. billion-plus end is and -- our sales care, meaningful given customer you on $X meaningfully delivered USD U.S. our channel or sales markets and business focus X verticals, markets, channel, industry-specific tailwinds. have further we business, U.K. performed end on

one This a increasing markets. net different, end customer experienced all quarter, customer across all very end gross decline profit market but with in margin story sales. was The

look how projects priorities each as with puts of experiences. The hardware drove to the the Momentum to end net the continued and cloud down X client the focused line quarters. declines of increasing reflect team's netting device impact ratable X%. meet in solutions take double-digit on demand for productivity remained projects a coworker Top market decreased Let's both the enhanced customer takes ability and of strong performance. performance as-a-service at digits quarter. Corporate performed down as on pressure. declines well sales Year-over-year to customer first compared for and moderated mid-single and focused these

cloud projects first For and customer Netcom, Priorities on normalization the investments X focused top to cost priority, sales year-over-year. Small with behavior network years, a past made backlog consistent the mid-single-digit software the digesting protect enabling new Business increase and cloud-based delivered customers team the solutions. year-over-year a year, and The over while projects across done. especially delivered the more deliver on of stayed offerings. conditions hardware, a Market helping single their expected offset remains on net continued double-digit strong performance. Similar other a by implement and to and XX%. with that The to squarely were declined net remained strong The help existing needs quarters drove small efforts modernization as and up end excuse me. public team's management as state constrained than of well data. net quarter, declines remain security a our team few as performance team mid-single-digit leading success success continued excellent in with efficient NetCom increase This declines. Public investment delivered focused corporate, solutions cautious. in sales declined a they team services to increase need long paused. Customer federal prior solutions, performance double budget total double-digit agencies digits. The more drove business the environments across increase. cities excellent sales local the compared device demand our launched, declines triple-digit return performance to digits again, its in decreased portfolio manage that top shorter-term cloud markets. X as in quarters to security broad was Once optimize software, Security were client total their down projects remain and moderated cloud -- sales priority, get government's high and agencies sales X% cloud for delivered

customers. and the by needs, cost talent X%. quarter projects row, For sales the decreased care increase significant success performance, team which cloud our devices. Healthcare driven for areas modernizing team second deep The efficiency proprietary health net all growth delivered growth helping focus adopt Augmenting centers, a drove in includes driving savings solutions. client portfolio, a remain systems cloud in in their sales data by

the address broad ed with Our by heightened net Education cybersecurity helped and posting as down also K-XX XX%, customers mid-teens. portfolio growth needs. sales a of security team contributed higher to solutions decreased decline mid-single-digit

were For net transformation double-digit cloud. Client impact devices NetComm to offset encouraging helping declined team's Other, more helping K-XX, Hyatt services several gains of years. This schools their sustain to decline a continued posting team in comp and services The stability. that success and in by process growth cloud, gains U.K. technology sales. to efforts over both our device delivered showed decline the were this in and gains, These by client by business address than trends success and combined declines low their universities combined Canada the contributed single-digit efforts XX%. excellent double-digit and in offset business quarter. in growth double-digit the past

in sales digits and While our end an well, environment. expected. the Canada uneven the in uncertain market by and again, teams to continue were And decreased both currency. Once our execute diverse performance as U.K. local contributed to amid conditions markets double

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

take and as decline. growth. stabilization hardware single-digit The single each low a NetComm driven in look Let's declined year-over-year the the backlog by by was net our year-over-year high of performance a experience normalization sequentially we not with of category adversely device in portfolio improved double-digit did how sales Client impacted expected digits. This primarily declines hardware at market performed.

digits. Service, spend software important strong enhance a period. cyber to help single Security IT half environment. driver and of customers. Infrastructure spend remained and Growth productivity workloads their with remains was we Customer security, emerge, data, spend increased given the significant customers security X from as Software nets of suites. sales contributor and across single our for to customer were virtualization commercial and increase down, top an productivity digits net the low increased profit. across across meaningful business by the the threats evolve as increased category that particularly was customers markets manage secure declined. Strength continue of across performance gross the to a of broad-based Cloud mind as during by customer continue end cloud high all but portion was application and spend roughly top and

services continue managed Integral teams to of vulnerability leverage help today's CDW was a teams Getty to continue and their capabilities category extension as to solutions, access and manage implement their with deployments double-digit management Our own an services. conduct provide our application and increases by in security. Services strategies. part professional technology period customers cloud and to to endpoint and into customers complex as training standout of our lean solutions and enhance this assessments,

strategy our of relentless our objectives our are performance of to services Core and our portfolio quarter, growth third Our the growth enhance driver leads solutions to our strategy. capabilities. results and to this expand execution

acquisitions and X enhanced engineering, expertise U.S. stack Over and grown outcomes that support cloud-based automation, that and cloud like Canada. in in nonorganic, go-to-market these and development, services expertise organic areas and areas cycle, migration robust stack, across investments, consulting the high-growth full investments X complex XX resources years, life have have full have footprint and expanded like and key cloud-native full our software capabilities both workflow including to and resources that our DevOps cybersecurity our our capabilities full the past bolstered approach. Investments have

AI strategy is our evolve fortify are while see, like with to customers we intelligence. the opportunities to and some vendor choice. Evolving AI that high ensure to constantly relevance and a As With artificial made position to underpin purposeful technologies help. furthers with in as are you new the capability seeking and market, trusted there increasingly can adviser investment are use for are objectives. extremely its a that our come of market cycle, most strategy, our customers phase, achieve we our already our we new discovery And customers partner to as leading and delivers and customers ensure their our technologies each with adopting short our designed today capabilities specific

property strategy quickly, made to intellectual the a domain-specific internal of designed nature highest use example. customer-centric and high-performance range our ever in included and a usage of engagement and Here's software cases. The their for handoff for industry-leading a the software the training compute further customer a data-intensive level generative storage it's relevance company's designs less expansion and designer of infrastructure has large a infrastructure team support the installation a the services CDW with best-in-class underlying cases use The company and AI. hardware highly development in language An dollar new workloads parallel and to customers a to CDW The platform supercomputer to proprietary and architecture, solutions. have team evaluate semiconductor custom growing optimal. The storage Clearly, needed great inference and growth to and file cloud-based resulted with hyperscaler engaged support resources a both both hybrid and build use system investments worked existing customer been. that LLM the which and XX-node training of and solution. to supports multimillion our successful opportunity. With model elevated

of of outlook. some on low the market single strategy uneven a hardware. for a including geopolitical decisions deliberate leads U.S. vital around elections recent and expectation XXXX execution complex market our we short-term focused continues backdrop, experienced in conditions customer that remain wildcards, to XXXX currently XXXX our require customer including grow upcoming the restrained with to issues. pursuit priorities a potential whether and of partner, continued start transactional of our spend basis, or us incorporates make throughout view solutions. And into a we digits to scrutiny ROIs Our With technology particularly by IT that and have persisted disciplined look us hesitancy project enabling slow buying impact the of and this year, the Customer high to XXXX. that The ongoing

and For outpaces CDW, these conditions set that outlook XXXX, up of looks thematically customer our year assumes our like sales a growth. the growth net spend much

and hardware customers broad and portfolio expanding Our services, the and priorities wherever solutions today we and needs. data customers tomorrow, promise With there they ever-expanding face are our potential proliferating face workloads of for exciting cybersecurity our their obsolescence They and technologies. of deep and lie. and face new

customers growth We are U.S. them XXX navigate continue from solutions our our as-a-service trusted for comes hardware XXX record to growth complex points. help or their track outpacing are consumption-based there we from adviser sales, increasingly to basis as market or well by IT technologies. Whether to of profitably positioned

we provide competition. always updated refine we'll of will leverage advantages we the perspective do, competitive best, on what the the conditions move through our we view business out-execute update In an as As -- our do the do meantime, an market we year. continue to and and

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

impact full with fourth allocation discipline results, quarterly on margins year daily execution sales very billion, of market were SaaS-based team's meaningful share fourth basis. We and operating on detail $X Thank solutions which and a end quarter both profit net sales on markets. Fourth of Fourth on basis. dampening and priorities average X.X% providing quarter, net gross quarter year, expected, enhanced which net and that consolidated historically, success our $X.X you, customer cloud earnings and year-over-year uneven growth. lack a a finish reflected and performance, billion, sequential versus was down outlook. growth capital a sales daily third net with to sales net good margin streams generally XX% touch and throughout spend profit with The our basis, we I'll once net then recovery, these lower XXXX XXXX fourth and sales conditions strong Chris, hardware down XXXX and into was below solutions remarks reported sales increasing revenues, points again impacting of strong everyone. XXXX. On while the economic a decline by profits outpaced sales one performance my impact net while of ongoing conditions and down higher drove this fourth into quarter quarter SaaS-based gross shift sales significant experienced per that and diluted XX.X%, move our the also the financial prepared sales a driven gross netted decreased mix gross our than briefly quarter factor, on revenue morning, offsetting quarter the continued achieved international prior quarter mix spending lower are basis XXX margin volume. sequential reflecting softer our results net more than continued that in delivered start margin. Cloud Gross and of we partially our average X.X% overall was growth

third and to the our quarter, the XX.X% quarter's prior For represented category from of high this compared the XX.X% profit fourth level. gross XX.X% year quarter a also in up was

within with long-term to important product we and that may mix business, be While fluctuate this down important customer our to netted demand. priorities trend recognize durable the expect of revenues an mix is it

for on profitability fourth and year-over-year. was spending the Coworker XXXX. and from to quarter XX,XXX, year-end IT at flat diligent of of the Prudent fourth $XXX million, SG&A amidst challenging count helped the discretionary overall third the up base fixed the management and X.X% environment. our approximately Turning relative line quarter. hold cost the slightly end quarter expenses to totaled to expenses Non-GAAP down

our efficiency to leverage operations. our concurrently while expand continue We solutions services broader capabilities cost from and driving and

reached up helped up operating prior on the our on XX.X%, basis X.X%. to flexible income X.X% $XXX Following year model line. points the basis Non-GAAP down from million prior Slide X, operating the non-GAAP XX financial business from income XX discipline year margin our top last contraction and along points despite and versus of deliver year's

per in reevaluation XX% gross reflected up million, net stability investments, of impact quarter to both exemplifies on the on was mix, in matter to year-over-year. non-GAAP the with gears diluted X.X% full income effective of briefly last Uncertainty over Shifting optimization year gross pivot average the X.X% and and the our margin combined and year LA tech basis. Despite full net reported customers XXXX. cost income similarly no team's up marked results. We non-GAAP full spending basis. the Slide of sales us line profit approximately profit XX, strategy led shift in on non-GAAP for With non-GAAP customers challenging in and cause spending, dollars combined moving shares net customers profit where for our million average flat, a a their fourth $XXX share This Slide a resulted As persistently in gross $XXX Enhanced environment. year-over-year down the quarter, our year-over-year. diluted weighted our was was income X.X% decline, both decline approximately top of to need XX operating to review sales margin of year. with just a organic with X.X% experienced controls to environment operating ability a inorganic which X underpinning the our years with X.X% the down year

Moving down the P&L.

Our interest below expense our cash net earned by driven balances. on higher interest was year full our expectations, income slightly

expected our tax was rate Our range. within

the shown diluted non-GAAP and prior $X.XX, Slide non-GAAP net income per up net year. $X.X billion, share XX, As up income X.X% on was was X.X% our from

by of $X.X position during with from to revolver billion. availability increased repayment ahead million Moving modest end, strong period Liquidity the net $XXX billion. debt plus cash our XX. Net third At $X.X Slide cash debt quarter. declined approximately reflecting the debt approximately was quarter, and remains

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

levels. our particularly our reflects working of capital management Our with respect effective inventory cash conversion to

the working given As influence market can in we year. mentioned past, dynamics capital and timing quarter in have or any

believe effective drove Strong continue capital net range record on net guidepost sales. of free and of target XX, management best income modeling well X.X% rule on year conversion term. thumb for We representing adjusted non-GAAP working working cash to a of billion our longer stated the Slide $X.X shown at cash above of flow remains profits XXX% capital full and our

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

and $XXX a cash to free was adjusted For repurchases, million the and share shareholders $XXX range updated due to full this Slide dividends initial flow. This XX% target our in or That to me to million the stronger-than-expected XX. $XXX of for the approximately in translated year, year million within return quarter. combined fourth our below capital slightly priorities flow range on cash allocation brings in our

beyond, Our line line $X.XX capital to income. Last our of target dividend. XXXX dividend X% the in priority and ratio with net will tenth is annually, non-GAAP dividend year with continue In our announced earnings. dividend first increase target XX% a increasing growing we we increase the to a to the November, of consecutive in

have second from down range capital Xx. Our place in with ended structure of our targeted X the to ensure leverage the within to targeted X.Xx at X.Xx end priority net at ratio. We right XXXX of we is and XXXX

processes proactively in liquidity rigorous maintaining have flexibility. manage We while place to

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

year repurchase announced returning outlook Board's XXXX. And market authorization lockstep operated this to we new in with we authorization, prior to will to profitably start of scenario current In spend have in XXXX, approximately into spending a customer persisted for of our dividends suggest this early as address cautious full currently XXXX, expect to compelling the XXXX. our data repurchases. we've availability single-digit $XXX a XXX prudent. Combining low And billion XX. under with to XX% start program a have adjusted authorization uncertain program. we target we indicators a share security on while and million free and $X.X cash remains conditions range. With additionally The repurchase slow share XXXX customer basis gain leads growth sentiment IT for our flow the the Slide to and eventual additional and as need to baseline, threats year rising that we investors our XXX obsolescence, workload share this, XX% client of share for points through in to For increase under and growth, device expectations our

XXXX, in in on As we solutions, know, down you full a basis. volume when growth net when hardware sales is in these profit, for as netted was and the sales accounted stronger muted is are gross but products gross our strong we growth. net and in our is mix accounting impact it as our saw reflected Conversely, fully XXXX

a of sales business net different impact the our priorities shifting has that mix, on barometer from for believe and the that gauging customer accounting profit become gross differences Given growth our inherent effective we result expectations. more

to forward, and will on XXXX go mix to sales. align of growth. gross margin a with for low and of relative our with our net XXXX gross profit modestly beginning our is rates portfolio, on year in flat view current XXXX. This such, a As higher to we Based for margin lieu our profit outlook assumes expectation full mid-single-digit view gross across

expect full we year on full non-GAAP we ourselves share accountable digits to delivering hold per that constant earnings up remember year basis. year-over-year. for outlook be our currency Please a financial diluted Finally, our mid-single

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

anticipate first leading and basis. thoughts quarter. on comparable to Moving a margin profit modeling QX single-digit for We low albeit growth level to than to the lower year-over-year XXXX's gross gross

P&L. the down Moving

higher seasonal along that expenses as reset of XXXX be operating XXXX with muted was expect begin to to of QX more other expense workforce the for compared at accrue We to expenses. a we compensation end

progresses expenses out. year We as to improve as of and even expense expect percentage operating leverage gross profit gradually a the

first to range non-GAAP we the expect mid-single-digit to per be diluted share low in earnings quarter Finally, year-over-year.

relationship free income a consistent flow impact also our of cash to outlook on non-GAAP flow. Again, new net more start variability provide we adjusted the As believe net between given will approach sales, free we the going are year, for on adjusting adjusted metric the the of and corresponding the forward. we mix cash business

flow to to our It did continue in our be income. cash we XXXX. as deliver free XXXX, in stakeholders we just we and remain we in of expect For and confident adjusted flow while our ability net range in margins a to the cautious uncertain that profitability of operate XX% non-GAAP note to to to XX% cash is environment, important

That financial concludes the summary.

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

Thank you.

Our question of first Matt from Stifel. Instructions] [Operator comes Sheerin

is down. customers weakness My NetComm to strong first pick your and might going comments products, a digestion on with Yes. get long first when from you it's X question just backlog regarding in infrastructure terms sense quarters how take a after very of of in products Do again? that that period particularly up

compares and the XX%. underlying on we XXXX but think Yes, hit solid some comp you back is growth net it say, with in right The just few between the significantly strength pockets would the I'd some the when XX% be this bigger I say look headwinds is Al. expect was strong. first -- Matt, would really in there I you Netcom in demand the headwind front. quarters, would first and not some particularly

growth expect of type So few at we would XXXX, see next declines, least that with for we'd from those quarters. the numbers

devices, will, optimistic of doesn't are worse, or and What sound you It upgrades? the much demand year-over-year decline looked at like super device client client in QX. least PC like expectations if then less the your And in on it half. for first you're was terms Okay. better the

the there? what's outlook So

well, that Sure. take as I'll Matt.

right. I think that's

what and when, from is calling few last down quarters And recovery cloud just including half, quarters netted -- it outlook the modest few the that on we're trends half still impetus matter in And in to basically For PCs that and revenues, strength strength is the to we for seen hardware a if, would is the believe at our a we and see is while not we return, we're PCs. What that PCs. continued calls that. there first side, add catalyst off the least a look, for includes what similar you've for SaaS. becomes think of in back just not I'll specifically

question James. comes from Raymond of Our Tindle next Adam

perspective, double-digit I an a Okay. from investor we us compounder algorithm of get that some Chris with as a lot as answer. of want to you think this Al CDW top generally or kind could earnings growth just kind have question, leverage, capital a start of thought allocation, this experiences maybe mid-single-digit at earnings about of of high-level But double-digit some an growth. line, to

the You this I growth. year just mid-single-digit finished earnings is earnings XXXX, with initial guidance think, flattish for And then year, your growth.

more reset at about revisit why Why level wondering think if and think algorithm. At I'm compounder mid-single-digit sort as this how earnings this So just or and expectations and investors should not? that of you of CDW's our a could this of size point? scale, we should

with This been with Al. do customers through Adam. I this in extremity on Thanks, and periods the transitory cetera. of will create cost, their to believe said, decided the ROI, the greatest optimize cycles hardware that things their to side items ration of being have as That all essentially kind they spend Look, is Sure. significant. there's gone returns we're et period, were things Obviously, right? and that some that We've are as think eased in include have a we've period. I on significant there balance that bit just will this, that are side. post-pandemic the the shift mix period, return transitory right? out to strength not seeing continue would believe beginning, the a to hardware call or the a return quite and backside of and XXXX of we the We demand digestion pandemic of catalysts growth on their to do

of So some is outlook when you what believe on and something in catalysts side, significant. think our and the we beyond transitory think are what returns look from that like I we a the you're we period. And more other that saw seeing XXXX look the will

expanding our proliferating Yes. They're threats, obsolescence, cyber Al, doing thanks. technologies. a what Adam, new of take hardware if are just ever you back, facing? big data. facing customers incredible would workloads, the step add, I promise expanding They're

the and going they're single is life so every nature of landscape essential technology not facing And of the away. to that walk

think -- So these catalysts once to continues evolution process, back uncertainty continue customers when investment et as on that going That's Security That's and modernization and be coming just devices threats Windows continuous years process, are exclamation old, be abates. and sunsetting. greater we've their Network we the they're forward XXXX. pre-pandemic X the even paused to XX transformation. about to a gets and many of for mentioned, cetera. kind in need top really there's durable and are through to digital trend Client got going then greater of to point. have sophisticated mind. And aging come Al grow, data, to digestion on more that traffic devices only look and then and a handle it's network

coming got proven we're So case the things execution those not out incredibly catalysts around just going opportunities and down but of is you've use the that that pike exciting yet, quite those. innings, services are early see adoption all to AI, we're seeing still then for and add of

technology the think generally. be excited industry we about I So couldn't more

a a M&A business. net That's that's leverage Cash the to quick Okay. of Obviously, authorization since Maybe the repurchase a sort more for certainly flow today, from follow-up, optimal CDW, core levels. wanted bright at a understand strategic competency ask of standpoint but I say. been would is spot helpful. has been I just Chris. about I share

expanding or moving on As some there's think from from map you the ago. about with road areas. how after M&A in thinking into past, years forward an strong were been I internationally we've talked hand, around some moves basis, more such On perhaps acquisition the you a obviously, Kelway strategic Wondered more cloud-based one some competitors success about evaluating the think strategic you perspective.

hand, capabilities direction. other be the On obviously, expanding strategic would another

how Just about here? map you're strategic thinking from road

over acquisitions capabilities No Thanks larger And with driving just customers. vectors the a M&A tuck-ins, look, expansion, which been The you've terms about whether strategic Adam. the And past would be X and it, and our growth to in thinking hit problem, do been would those how valuable question. seen we're us years. And I we've our value Yes. value reiterate, bolster have very is consistent doing. acquisitions for geographic XX of our of still you to strategy. driver prop

as growth in high a areas that high So like capabilities capabilities, where relevance we AI. that think services could solutions we about our and focus areas there's of cloud and and and are plethora driving and security including we efforts, focus,

on the in pressure able bringing to our would think at opportunistic. in we've one also pipeline, we about number hardware before, then look, got say, And that the the when looking. is to just I the highly evolving say, success it business targets happening and be I day, we and deliver other a year we're due of that's with the them. be our profitability Adam, market dynamics highly to relevant The are it so capabilities end did has this thing that executing would in of always to the the identified you said but against And strategic,

think business look area business investments, it compound I X has that addition our at cloud we maiden a I grown by when and in back on So another that basis on versus did XX%, and in are to XXXX. doubled growth security, again focused has internal very years. we annual years in X acquisition now,

we're a really result. capabilities, the great are investing So most behind we results important and seeing as

me let And element. just one add Adam,

a In front of on been ability in take in, We compound it the focus hunkering end. hit we've about kind down, our pride on environment You margins, focus noted the bit there's of flow. you free cash and to on flow. cash a

our we've horizon what's of we have optionality M&A. us, that excited in and position. note cash cash think on we a the capital about You'll include would perspective certainly about from front increased the when that We're

Citigroup. from question Next Asiya comes of Merchant

do How metric, the confidence back a in the think rightful the that's rate gross you Maybe guys gains driving profit ramp linearity as digits the through in environment? Great. improving walk you little And a growth us what's from I and about you on year through bit share market and profit confidence start going to the year? gross a single if low looks metric. it the key the of be like at if can read peel and could maybe you could current the

deliver track confident gain I'll have growth. to market a gain. for XXX XXXX, points share are accountable did we the we in to Thanks on above XXX just question. we consistently hold record Yes. Look, ourselves of rate that, start we And market of doing basis and IT that share.

If you about versus look customers we're at net what that delta significantly, and points basis sales our spend CDW, with talked widening now. we've

market we've value the that's environment. stack excellent cycle our taken in even life cautious team's and uneven we're So portfolio. execution, this full of share to And and the confident very full that very

the to for it gross I'll Now profit turn question. you

Yes.

is the environment, significant. in on been yes, between spread Chris profit a and spend there gross that sales spend front, customer obviously, and thinking like said, So net has about focus customer this

of We be continued margin an bolster the revenues, such half outs kick of of pacing seasonality and confident the a in. historical in items think trend we what about bit that on which to of trends. in as as gross we There seasonal evening seen GP dissimilar think the mix also would may to considered, hardware see netted feel start down additional But front will you've gross I things not all back the the margin. be

Okay.

recovery through sequentially in gross on second on kind to year And the some backdrop, about perhaps you And the about devices. improving sequentially year? just on you still progress are recap, client you guys as of guys that thinking are half -- so thinking against a modest profit

terms that correct back of I the the year? is front through in with the the would And that, Yes, accelerate modest half. our in mix on think broadly GP recovery

Evercore of comes question from Amit ISI. next Our Daryanani

guess, I'm customers, to well. to from as And sure with, spend to perspective talk Chris, I'd 'XX? just calendar X and the start what you I understand, are is have as an in maybe engage top priorities IT I a love AI some do incremental very be are IT i.e., the to will they you is I'd the dollars but for or budgets? part cannibalistic AI, net hot that investments for that, bucket, to coming the other think the topic, from are love understand

they're Yes, that remarks. getting optimization, customers transformation, revolve things hyper in commercial with consistent on which what digital employee still that. There's the in a in space, focus. I as particular, terms obviously, on and focus around it's well. cost the a AI, are security experience and AI, you're we've said customer mean to of focused prepared is heavy priorities, where in

it I we've that it's think the and I can't as a call, we we say because we up. have we in several talking you services, industry-specific when CW deepened a I'm would deep last say, that conversation as AI capabilities. mentioned scaled IGNW had family. very and demand years. And into burgeoning it with And data And for currently, been technical Sirius AI I'd the brought consultative particularly for practice, the And without practice customer coming exciting particular. well capabilities

helping to what a number them got quite be and we've then are those. I helping we're and capabilities, interesting tell them seeing we're would And who some of through piloting the cases through really efficiencies practice use of are customers so we're And you are experiences. had. at customers our momentum And there. What work actually that in of their the front bit is a end

HR, finance, business transformation. there be are Organizations seeing. are functional nearly of because not budget thinking that the budgets from organization, and to elsewhere AI like seeing budgets not We're IT. What using like marketing, like hearing allocate they're innovation through the a improvements that organization. we is coming are are we're to what it as improved AI, going Here's to in the areas out shift seeing literally across about

not So seen that we're we it We're though. the lie opportunities a happen. to ahead, very frankly, about excited that expecting haven't shifted,

about Perfect. points. in I question, a guess, gross basis Al, ask I margins And if could 'XX are up XXX you

always like from if CDW? the maybe performance, 'XX how you But about of And right is this margin guess they're normalized for look at gross margin? expansion extent as 'XX, versus to north parse 'XX, out, I you gross margin $XXX this gross think once I think you secular on get time to do go for what [ range I million. up the a I range ] a cyclical? the you much to to can is think is there question

most hardware hardware from of -- perspective. And and 'XX product note before, and us particularly the to That Number cloud. I X was were and be significant down overall mix was pickup therefore, firm noted we've mix and softer. in revenues then mix peel this the three, margins if XXXX. component. Look, that that would would back particularly benefited And less SaaS PCs be and shift a

the And so that contributor positive a was story. to gross margin

question the I for, that think scroll So it. is if I which logical on

first is out recovery and back we strength we then We half, balancing expecting know front, expect some a hardware. Number durable And we with that you'll PCs. would half will are continue. on the the revenue in two, the trend hardware, net in including and down hardware particularly, expect on modest get the

be and moving up margin product that product a would be the we mentioned this on somewhat. point this a shift firm. And call of we candid, perspective. gross that on of and that at So but will believe effect from that study right, the then there's not finally, assessment significantly calling I've any front, would pricing persist. before, have like front, the really this margin of, And customers but we reflection And but would diluting though, then the both do a that's modest margins. our closely environment we're product competitive and To environment rational trend richer are what I'll that, holding don't move margin think configurations chain. it, I value feel trend is And the a and margins

really, rationale a for and XXXX, that's the substantially so up. to our maybe And overall gross similar being outlook margins tick

Keith comes Housum Northcoast from Research question next of yours. Our

Great.

that? the How of years? Is it's should software for still CDW. over a about consulting more we of the about hardware very And several this a evolve or next that guys you for or or the understand AI, I think how and As a industry. solutions nascent think we does opportunity rest

great say, figure test the would a is and because right cases. now complexity trying burgeoning the currently, and and opportunity And question. demand to it's out Nathan, I Yes, the the of use speed in

So we for are the our and seeing activity services. us consulting advisory in most of

-- the cycle action and we're us moving a -- stack we enhancements talking momentum the about you up front our life the been the deep end -- is that customers. And that's the think I over been years, we've and positions need with chain. the into has and provider full well full used the full significant. think example at moving But consultant vertical been about the is play, term, just strategy consulting why think end longer burgeoning. a CDW stack, to center technically this scaled, help have I strategy as when day, the stack. closer as of industry word ensure to and AI that we not given a each down It's of consumption But CDW's is the and you know, seeing. expertise, our but power data the for in value we're great capabilities is that growth to of momentum

revolutionary accelerate So technology. hard out in We're say years, just as we like it's months. next of over when terms components XX one to kind quickly next an play will business several the our across seeing It's various of will the -- fairly the the exactly timing of have that and any stack think in AI

on the bit quarter, but during as some charges the optimization little a here, And EPS. you Great. follow-up, within a touch maybe announced guys maybe to

Al, genesis you perhaps, on the perhaps can what those items were? of So touch

more I'm you sorry, can say time? that one

Yes.

that see were just can charges those you when up made there. of? you or Just in some items we EPS, your we restructuring non-GAAP highlight Perhaps look at charges what had amortization

sure. Yes Yes.

to category we of fixed with the and cost events really and coworker our base optimization, coworker business know, components seeing. you that. that about XXXX, activity base as really level We workforce was count X a during So of aligning the did our and were have, some

nature. one, that's onetime that more So call really

the would you will, continue our where you're within look we and The our that you of estate, are at our if as we hard take sure making constantly in portfolio hybrid a seeing more real expect, and that estate workforce to be estate broadly, portfolio. phase, would rationalize element we and other real are real category

so charges through front. coming that are some And there that are

of comes JPMorgan. question from rate next Our Samik

the asked. -- of these your with first one, one solution the and in AI your think future towards follow consulting question in up or Amit envision when about could in days comments But the the sort a sort of the AI stack just full being for on the of of overall customers maybe -- early I you pull of out customers. And netted-down heavy playing question really I mix We take the stack of And revenue mix down solution full a sort terms increasing I out. and balancing see or Just hardware it the back how as the about of bring when does deploy, software of of sort more road business revenue in mix the you so curious does you if discussions have sort -- understand -- sales? further a you netted-down really of quick back follow-up. it

in. then can start Al and jump I'll Yes,

to would say I tool a think I at about think say it's when as productivity to AI this and we What results. is increase point. hard

the Just like central from on core. embedded competitive and to proposition everything every to winning delivering that is intelligence their is component is be we AI edge going to going to organization, essential every because that of be to and the in we and being every component mission. say, sell technology artificial

deliver that be out how however our so and terms able the across it consume customers of full consume, them. to And plays how in it, how they we to they will purchase stack

in -- specifically, revenue going looks you play what how of on hard as to have I really netted again, terms down out to that don't crystal regard. In like a that ball that. Al, to to it's have know in thoughts if hard

that's evolves. said, this stack is which At see is look, exactly this -- hardware. it how right. you we like ultimately opportunity a us, a would bit include think is And will this I point, full Yes, certainly not that for and -- Samik,

will meaningful. So that be we think

that component, with As would I associated in would contemplate the netted spend up SaaS. cloud out and likely show

customers track, would the of kind see if they and through, we just come will, of So and when ultimately AI. is certainly. that It you deploy it and for how matter pacing a that becomes conceivable

around are the the about preparing pricing. change a we've more backdrop think pricing -- How And in been the pricing? mean, their in of sort that follow-up, we've to for for regime years? couple sort just given discussions curious, I my had you Or side inflation they of last relation of here different in

Sure, have the the pricing start add may that's to or ASPs front Samik. Chris margin want firm. then held and I'll largely on irrational environment

looking So -- point, up see we're activities sharp this we that from at down. see We're wouldn't changing. any to or not suggest we that that forward movements or partners seeing would any customers drastic going

would our presumption the here. So be that based firm on outlook largely is

from comes question Erik Woodring Morgan of next Stanley. Our

a been that Maybe, come where Chris, And spending challenging. some in perhaps was. to cases, clear you hasn't off. been some hardware that the few in the through environment start quarters now of It's way you've is that it thought spend

look take you you hearing at you unlock that a now. are have what As the here that follow-up. your gives right that you customers that pipeline, What in catalyst recovery or is I And view second the talk sit we are to your or what half you as confidence? today? will What you then seeing allows to

At question one a Eric, at there it's Yes, is what springs? do say, the One, demand. point, I'd Here's things. face when we loosen C&W. great definitely here pent-up first and X we actually

of action plans year. in for to the customers to putting rest confident the are the X, ready start they're be looking Our in more expectations

and those for projects is we're just and some in mean frankly, hate commercial period elevated waiting those confident for time. some demand have moving is. rates the get inflation around of space to get on have elevated projects. more the desire deferred it simple, where to in the they're it merely currently the to more moving on still that that of indicators going. the but interest our I'm So delayed been I positive and also equally economy, I pent-up But customers while have there make and about talking they particular, we but feel economy confident

think think could flow you'd Okay we anything that should really been puts it's X -- cash for be call to out conversion changes, XX%. takes there That's free to But that XX% a cash if we over than working term, is XX% conversion the X, year it we capital about how when a this either this again, -- me. just realized, that's And the of comes line? helpful. years, specifically of But last for that rule of bit XX%, you should we would down thinking years address if thumb lower just is be and X year. flow it to longer that should

Sure. Thanks, we Eric. of that rule At thumb this is XX% XX the to would juncture, give you.

will EBIT, you growth recall you As [Audio Gap] as right, softened if will.

is So the -- pacing and I look exactly play I how what year out the XXXX, would the know that like. would the business for other we say will Eric, don't of would add element

give And space of so to of working bit try little use for we a capital.

DIO at just that low is very levels, balance a both look can and inventory you and basis. at on inventory Our dollar

year you update gates want active users deploy finally priority and we'll take and as be cash in so just our we it a prudent we is for profits it. optionality to working have capital a will capital. here certainly, the continue And of of that I to more And just say to out And look, just high that decisions convert us continue may view progresses. the would drive the to be of flow, ultimately

that, With to Chris Lay, -- go back hand please ahead. I'll end. begin to to CEO, Chris,

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

Ladies joining. today's you gentlemen, Thank and call. for concludes this

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