CDW (CDW) 1 May 242024 Q1 Earnings call transcript

Welcome to the CDW First Quarter 2024 Earnings Call. My name is Carla and I'll be coordinating your call today.

[Operator Instructions]

I will now hand you over to your host, Steve O'Brien, of Investor Relations to begin. Steve, please go ahead.

Carla. 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 first and and Chief

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

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

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

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

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

all our find to dollar the in the slides note our earnings XXXX, rates for growth You'll comparable remarks in unless release today and in reconciliation are amount X-K. period Please webcast changes and or Form indicated. today's charts in references versus otherwise

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

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

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

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

macro the caution capital given time, and layer of as economic lengthened landscape. In continued infrastructure customers challenging the particularly market to At tech in on on given spend a on how changes decisions. IT investment both map the heightened the demonstrated decision-making customers to AI when and same weighing in ratchet deliberated the complexities and uncertainty, navigate technology This concern the first of quarter, landscape additional up, to environment. road

was activity pipeline with While reflected gross profit lagged. in out, a deals and sales solid pushed being our

we remain on to do pipeline the we our impacted environment. control, the are low-growth all expect take which these many accelerating beyond were this led decision advantages not channel. our by satisfied. improve Bottom share focused pause And growth cycles in as while a never near federal of Results budget to factors in also to term, using competitive stalemate, federal our we and of in line, are

level and high with implement help a develop projects, of mission-critical evaluate maintained customers teams our prioritize cases. engagement, and quarter, plans the During use out multiyear working prove options, to

services. to strategy to and condition, excellent exceptional our in first resolute gross underlying was ensure market strategies. continue and reinforce in to our solutions value margin, impact invest we record our profitability durability quarter which our on we our we on laser-focused full this the we see and which Whatever of delivering have our together the of are the continue You stack of a flow, the cash integrity ensure to to commitment, this capabilities To deliver deliver remain customers. and

a as drove This optimization, customer interest Broadly cloud included as service demand as client data focus well protection and productivity. priorities workforce on cost in and speaking, and security, AI.

take a priorities these performance. of how at all impacted look Let's

corporate, its care, billion. from sales billion market annual we X customer have markets, with business, Within small sales to meaningful Recall, the health focus on geography are own business $X customer government $X.X performance. XXXX markets, and on each to and First, teams ranging further including end channels: channel, each education a end segmented end verticals.

countercyclical Our ROI with delivered that scrutiny, markets X% unique elongated organized segmented year-over-year. which macroeconomic act way a size each rate given declined focus Teams Corporate given level our USD line in external verticals, often XXXX project geographies, a and and factors are different high X.X interest U.K. expectations. top on These spend. commercial and heightened operations the billion Canadian further Decision-making together customer impact customer around in end of similarly of operations, them. and in are sales.

Cloud notably hardware capacity increases and and categories client and NetComm. transition demand year-over-year prioritization on undergoing in saw to security drive up customer team absorbing in and double servers low the continued Corporate digits. excellent device client declines spend capitalized and were sales

was a driven up and decline, standout efficiency solutions. line as with improvement quarter. sequential but from capture posted improve the workload savings by year-over-year however, Storage, Small data fourth top double versus and newer category business customers digits, growth a X%

Small remained which and drove a to posted accretive customers continued to in with Consistent year-over-year. storage and servers overall spend. increases around NetComm declined software corporate continued increased. team down be yet and to and margins. address The business meaningful mission-critical help Client increase sequential customer security priorities cloud devices productivity

commercial was focus transactional from year. increase the caution prior similar was also customer delivering double-digit cost optimization. and declined. on Public major performance solutions profit. client declined gross in spend positive sales X%, Health increases in Security was to the a care devices, while area, an focus with significant declined with care X% given Health performance

line was third State focus increase a up remained strength quarter and decline total digits. performance solutions by devices was with local mid-teens area government a substantially row, Client declined sales up increased the Public key for transactional security top teens. and with State offset X.X%. and in safety local more a in double and broad-based federal across than categories. high

which congressional to not March. adoption continued resolved was mid-teens until gain impact, by decline was Cloud traction. late driven Federal's budget the

Some activity related device Engagement to spend network paused. mid-teen client strong, and agencies projects increase, able drove we to a continued, pick including remains up center are existing to their expect funds. once and refreshes, data and larger-scale contracts appropriated allocate which

with the strong while cloud. continues ed ongoing to environment increase double-digit It line a doing with and for posted recent focused challenging focus decline. on a institutions across categories top in team on cost quarters, and decline. be to posted Consistent board, the segment a more education a mid-teens the declined higher led XX% less, remain elasticity Hardware

normal high remained digits, decreased budgets digest stimulus mid-single whiteboards device K-XX's continue with by past and digits. Security Client and school posted aged interactive from several several by as solutions top decline systems increased flat years. line to digits. purchases Audiovisual programs. top in sales panels the like funded not single increased line via low Chromebooks, some smart and operating single both schools a top priority a substantial by profit gross refreshing

and Canadian each conditions as operations, and U.K. market mid-single continued experience by to challenging Other Our report declined we digits. international which

our leveraging teams customers. continue to their capabilities for well execute Both outcomes great are and to deliver

declines somewhat Transactional For product the performed solutions the markets. with consistent greater performance fits modestly decision-making. most and and customer part, from portfolio in increased than a end solutions better of posted starts sales was sequentially. decline across year-over-year Both

due hardware portfolio by in top more low the decreased profit increased X%, services offset managed At by software gross though X%. decreased by by sales X% accelerated to driven SaaS tied by was increased hardware performance level, growth slightly licensed as also line to declined software net models. which Even in in transitions Services to teens. line Top year-over-year. weakness than declines services,

a of to at assessment we topic are Right of insights customers attention, AI, and now is for that initial the end-to-end most use to of adopting Let's doing customers process, what data and and practices in best security. stages lot cases our now, are this ensure deliver getting turn developing analyzing the our the governance and space. specifically

do of of our art is We how do of through Essentially, us AI they exciting and we to and are complexity to adopting our of for This strength. possibility this. work exploring The know the the science exactly all bridge the working between the outcomes. transformational plays entire customers. how that investment of AI customers, we are stack, full the positioned the today. need our stack and doing across the technology and drives for with And uniquely across serve the since deploying to technology promise gap points are we entry

of areas as navigate offer broad customers AI our consulting X support To services. adoption, successful we they

call and or approach implementing to connecting including ROI, which MOAT. a second, data and security, AI to AI practical Master outcomes AI which and Operational discovery, call governance First, AI, Transition, we we

are gaining services While still early traction. innings, these

stack example notably productivity, cases; broad end-use vertical high-value is and AI with where last A on broad-scale provide around opportunity and We us solutions; of scoped areas the customers we edge to X workforce great focus: full language and quarter. rely devices; use training of shared assistance solutions. infrastructure full the applications underlying the solution stack domain-specific you model development, large corporate and

are solutions broad-scale Our vertically based.

many the we and care, that faced tailor health these that key opportunities in solutions including and organizations deeply you unique to enables by know, challenges address services pain directly As across and needs have verticals, their many services industry understand points. expertise sectors expertise financial us segments, and in

of couple look Let's the take examples. at a a AI vertical

teachers and K-XX market. exciting improve an done outcomes, must but AI AI empower our be First, the learning for carefully. to presents very opportunity offering it

large offer from is K-XX entire a Our AI custom expertise educational platform education its this that safe embedded generates language relationships content, field in responses team for specifically to not classroom model the has and a Internet. with designed leveraged that

'Next'. The health Room second care CDW a is Patient example solution, proprietary

sustaining medical institutions While manage face breakthroughs, pressure AI holds high the outcomes. to intense addresses levels of solution of costs our the while promise patient

delivery devices AI rooms, experiences. overall combines solution improve care to and health enhance connected and patient transform care Our

the serves annual on an servers, powered HIPAA-compliant builds we platform network opportunity provides to intelligent deliver runs One documentation. GPUs, over CDW. data services this automated for end-to-end The solution from and solution like customers an the that application licensing. cameras, represents in and can you real-time beds and our and is and provide equipment for and value platform see and $X current end-to-end insights for a Add million to XXX by that, connections

are for as on we've helped line, time AI much And leads to there is is very me here we Of similar. ramp shorter across become here customer cloud, to our our cloud. the today our thoughts the for customers will before of and XXXX. And customers future balance been efforts. we our them adoption their that the take to continue as in be embedded know cycle Bottom they set, the hype we adopt that, than entire while have will course,

growth market see recall the will in grow for digits You IT that to quarter's expectations XXX the we slow we call, above shared XXXX conference for last to the potential target year, market start Despite our growth. XXX basis on low our still points single market. U.S. to and

we that for clear of dampening further be solutions but do high not geopolitical of performance. me client as well for worsening investment sustained demand expect potential include Let unusual and device interest refresh capital as see from election rates, year hockey to Wildcards improved do issues stick uncertainty.

will our we through market do, year. serve our their as is of lie. always update the we CDW we of move customers A the wherever to view priorities hallmark As

they full achieve help plans ahead, full our workload aging client as customers address security navigate cycle and expertise, customers manage to change. device and to capture base cloud protect vertical full unprecedented portfolio look an compelling Things their against more one AI unique face aspirations. threats, build successfully All our of is stack, Armed leverage outcomes, we need Data to insights navigate productivity a increasing out prepared with As our and life their period to this no growth,

let it With Al. turn to that, me over

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

towards the greater and Turning to year. high conditions uncertainty even and the scrutiny Caution first cuts rates last same we capital range, ultimately quarter. dampening We that of led timing market on under deals investment. growing of faced the the but rate throughout uneven interest IT began XXXX to pessimism experiencing

them decision-making, with support Customers optimizing financial tech sales cycles. as economic the partner build maps in strategies, road are to And uncertainties their ultimate overhang actively out and elongated deliberation and of delay evaluating, IT spending. exacerbating we while their the to

as to devices During no able on capitalize network the with some of client were quarter, we and for to modernization longer sales refresh activity could digital complex weaker. transformation customers demand were solutions more postpone tied

future improved client both device the and of pipeline. conversion continue for to Notwithstanding, refresh potential we activity our see for solutions solid

results. on the Moving to specific

prior expectations gross First quarter. quarter and down low the profit billion, our growth versus below for $X.X single-digit for original year X.X% was

net increased lower the year impact average net and first with year-over-year was Gross quarter billion basis Consolidated partially our basis. and down a were levels margin sales year roughly XXXX. full record a both first $X.X XXXX sales. for prior quarter broadly daily sales of of XX.X% points XX offset reported in was X.X% versus on of and and Gross line expectations margin

expansion first was and serving customers successful prior margin higher netted-down category outpacing as representing our compared quarter cloud gross grew This with teams growth year First driven X%, overall in of the once mix XX.X% and solutions. revenues. to primarily were by profit by in our XX.X% net again quarter SaaS-based sales

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

a with expectations. even margins mix devices, remained the higher with firm client consistent However, quarter, of in our

First compared daily X.X% first decreased the net sales was quarter basis, fourth sequential X.X%. sales quarter profit a a basis. quarter gross average On to down reported on

we gross and ultimately suggested fourth sales are across categories lower the decline sequential as a quarter, more net early XXXX we modest than typically anticipated profit engagement spending had quarter first customer While balanced experienced. more than

laying was decline corporate the sequential customers. the budget continued this more to in quarter line customers addition federal of spend seasonality, of the with traditional congressional uncertain Instead, impacting conditions in reflecting our spending for

for last $XXX the Non-GAAP first we the million, quarter SG&A the items. profit to and other first our call, were expectation Turning variable higher gross some fourth but X.X% reset due up Expenses efficiency as quarter year-over-year. elevated totaled quarter. on with was quarter. played for ratio expense out the as seasonally year with higher for consistent lower of the production earnings expenses our accrue our expenses than the shared our for further expected, to we This

we As year the and for to growth. both forward, scroll expectations and need we expenses the our prudently and future discretionary balancing against while this manage expand capabilities continue diligently to drive our

approximately to in was was end first quarter, discipline also of which coworker XX,XXX the the relative at down XXXX. Our our reflected year-end and count slightly

count coworker unchanged Customer-facing also XX,XXX. approximately was at

fund our As we are leverage our we operations intended and these expand capabilities, investments. driving solutions cost broader concurrently from services efficiency to and

the XX down income year-over-year. Slide X.X% operating Following prior year X, gross of along our non-GAAP on we income points year. combination delivered shortfall of versus the of was flat $XXX profit by driven from the down margin million, basis prior and expenses Non-GAAP operating X.X%

quarter reflected As average approximately of year-over-year on net $X.XX in on the With $XXX our first income diluted was was per net Slide down million down non-GAAP of million, a quarter, X.X% weighted shares basis. XXX income year-over-year. share non-GAAP diluted X.X% X,

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

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

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

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

flow modeling free We working working remains moderately management conversion our million, Slide profit shown continue to adjusted guidepost range XX. of $XXX capital was cash effective believe Despite expectations, lower our as drove capital that the target best cash term. strong than for on longer

flow of of last thumb XX%. well to above XXX% was our free net the rule cash non-GAAP of XX% Over stated income, adjusted months, XX

will mentioned free outlook As front pleased we'll our in our out. timing throughout past, continue flow plays and year, the performance, impact quarter but the we're adjusted cash on we've with the year as first this update to

flow million returning dividend XX% and to to quarter, objectives, remain return the consistent share target approximately cash of We in XXXX. to including committed to repurchases dividends shareholders to $XX with XX% $XX repurchases. free million our adjusted the share For we our and via allocation XXXX cash capital in shareholders through utilized

to our on XX. capital brings allocation That priorities Slide me

with tenth first increase the announced income. annually, year a line dividend capital increasing of in our Our $X.XX Last priority increase of non-GAAP consecutive we dividend. dividend to to X% is November, net our the

We a growing will target line XXXX the with continue to XX% ratio payout dividend in in earnings.

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

We flexibility. to maintaining while will continue manage liquidity

and priorities program. important XX. and market M&A have to prudent. throughout share persisted shareholder And of of allocation share our leads our that repurchase our XXXX, billion Finally, conditions $X over outlook of repurchases have currently customer fourth remains and under drivers and We sentiment into third uncertain Slide operated availability us we XXXX, capital cautious remain value. under on The

Last for a and quarter, which about to continue in the spending, we has spoke the fruition year likely to will come IT start slow near-term. XXXX

achieve However, aging to and All as workload Things forward, leverage address out customers we Data, devices build cloud look we AI increasing compelling a as to their to growth, plans their security and need our help productivity capture we threats, client insights see aspirations. and continue

similar reflecting view IT upcoming updated XXXX. start single-digit that slower to expectation Our low seasonality. gross gross the unchanged for also the historical an our the in XXXX this will With be We customers comes within budgets the of to spend year year year. for margin their the context profit full but expectation full growth, maintain to is quarters, XXXX

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

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

thoughts be quarter, to comparable gross to profit growth the change expectation compared the will to full second low margin that to our and With for modeling single-digit no prior year XXXX. Moving year. we anticipate XXXX QX gross

is half our for than first to the Our market. second historical in more half/second the keeping split levels with weighted slightly half expectation

quarterly including the However, we compared hold, still to anticipate reasonably quarter to patterns a fourth lower third quarter. seasonal

Moving P&L. down the

second the than a profit experienced gross We higher expect on to QX. of more basis, second expenses operating we relative quarter normalized a but than to ratio XXXX moderately be quarter in reflecting dollar

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

maintaining net XXXX, For free our flow expectation to range our the adjusted to cash support non-GAAP capital income, higher XX% level growth. XX% be we're of assuming a for investments working to of in of

the concludes That financial summary.

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

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

[Operator Instructions]

from Our first question comes from Adam James. Raymond Tindle

I is appreciate season and be But showing AI QX as to decline than CDW solutions the in it's the just weaker the earnings were strong very presumably hard during comments I would reporting. start very, expected with themes in where all a spending and your wanted tech one for a big remarks. of here little not on that dovetail that to AI prepared results bit

organic portions and address if there's AI spending. that you CDW on AI would whether can thesis more not investor or capitalize might that, be participating be out is any of things spending, missing perhaps to to I'd figured throw in What Just that concerns that's inorganic? fair, it there do that that

If into zoom zoom and out let first could, me then back I AI.

complex a certainty would market impacted environment customers couple with pretty fits we the And QX. There that in in me look, factors experienced and complex a both call had have in and who results. start our in we solutions starts visibility. the Let manifested results lack that I dynamic of of a that environment are just and what of

and and and other economic our In of the driver uncertainty. corporate financial first primary the for inflation that take rate environment interest team really words, You the the impact was and drove business And created what similar market small team. XXXX. call to environment, overhang we that the situation in condition in an which saw I'll uneven an our trends the pretty

a prudent, ultimately, remain relentless the the on dampened customers that as ROI optimization as deals space, is cost scrutiny customers period. in particular, They remain focused result, capital board there solutions in cautious. our in on investment and the and And across short-term

inflection implications to means a and We're understanding their added point in what all AI an road critical AI, what business it say it businesses, workforce, for road for the of our what complexity degree, to at picture. and their lesser are. infrastructure also process the as real to the their I'd means enter deliberation maps considerations technology decision with map, a

lesser in just all I I back would impact, other or market landscape result natural during say, was some more had would really in the process. but mechanism. with of couple the collectively, transitioning highlight delayed -- interruption, Fed which just a the a and acceleration and is points to as funding pressure deficits. quarter some consolidation of the had IT education creates a we the that a into then service, normalized to we spend budgets And of customer a changes

is say we continues engagement, help tech to our are normal is strong. and pipeline that that value operating our our pleased the a build What didn't a it environment. translated period, really with complex not would would the seeing as that, portfolio the customers happen and the overall is into then in dynamic as I'm what we engagement invoicing incredibly did translate manage I solid environment in into but solutions

what in that we call ]. was our end overall. the story while it are [ pause need day, lower-friction start at But complex to client some lower results on I'll seen And we that's the that. actually risk, who Now positive impacted customers right, helping solutions, have doing solutions refresh client a the the of signs

question flip Now on if what your to AI, I here's say. I'd

the we're early Look, innings. in

how CDW it's over of most in space ubiquitous take We've this time. the really done of an going uniquely and what to but science and experimentation to opportunity. know full to stack the are before, advanced, are customers advantage We will is stack full and and on stage, take customers the our be and journey. of portfolio. in it positioned got art a Some unfold broad We've new assessment technologies.

help entry point. can we So every customers at

and And the against stack entire cycle. we've the life got across services the part of

ability we've solutions. got integrated deliver the so to And

We also our our customers. customers' our opportunities vertical understand and pain points deep our with intimacy given and expertise

So we can solutions packaged have as created that as quickly customized pretty scale solutions. well

about the So in choice, help we them analysis. for you think maps terms road the identify of it integration best and solution, developing value compatibility, cost and

Now of remarks, that what I'll and where we're areas are emphasize mentioned forward. I'll and those, the seeing there and I the in pick talk going in opportunity, we up about now prepared X anticipate just then

in to here leader deeply partners, and be many chatbots AI and deployed think customers. across like many impact things tools aligned stack regard there assistance. is and broad-scale security vertical horizontal currently. the verticalized with underpin much where of our interest workforce, our productivity solutions. they're personas, and experience, in Think can use We're to workforce infrastructure cases, of the and First, full that multidimensional think horizontally and applications applications customer and High-value the then

start-ups. own past, credibility helps we're whether to leveraging engineering influence the to expanding are bring which deep customer partnering in what partner customers. our We're our use that security or innovative we've understand for certain maps, our done to our we for and road with our our similar market very internal knowledge products it's cloud experience, and AI with operationally developing relationships to services are us Now We're and but suitable capabilities. And builds fit customers. -- to

is now, services Where sit engagement. Adam, a we primarily

that around typically, around through et arc edge the And their we're to Over find would application inference into the activity time, we're that leads I a to X then not services data it that to to engagement governance lot We in providing at have the those expect and cetera. And MOAT is data be. discovery to that and the those layer of AI finding data center. shape that move we from and the that come needs mentioned. customers solutions, of data the and data in security,

it's be to we're journey, the and that -- already and are that going and early And in our our navigate we're through be full positioned the to confident of will a a strength absolutely But capturing certainly play feel We and the the seen strategy this ability we've partnerships going out. it stack to the before play is customers innings. journey.

is That good sense. Complexity Yes. typically makes CDW. for

Just on guidance. where The low follow-up, talked a quick dollar for profit growth. single-digit you QX Al, about year-over-year gross

digits. a the low I last couple sequentially, I if did of sequential more math been on basis, the of X% like to think it's like the X% double And above couple years. it's years, last so

that something help gross weaker-than-expected there sequential that underpins QX that bit in or like growth, QX? a guidance dollar and was little about in how to given pushouts thought situation Just it maybe anything trends wanting QX And QX, maybe you that? just profit maybe us that is with not get into from whether again in

A that. Yes, couple sure, Adam. Happy to things. address of

customer we by we what's pipeline and First, our that that mentioned in look, encouraged have we prepared be perspective. there from a a would kind of I out more in the spend talked of solutions lot about. think remarks, we the category feel And as

would number seasonality of is, Adam, So back more The level. mid-teens you history like seasonality in look, if -- that's over historical look be the one. thinking,

and of the client need devices. take is Chris front the workload security the growth, that we obsolescence data of the upfront, the when so catalysts on and mentioned And that sum

that existing there's also but catalyst We kind think an tangible both of see. there, pipeline we that

of we would and customers you context of have outlook there's historical decent our add seasonality our think QX about was And these QX actually slower think so get and that the know that we that to more spend ultimately, and back in mid-teens, to modestly, knowing there, seasonality you that start, that when a together be pipeline the critical a short items.

have We in get level second from a to seasonality perspective to quarter. ability that in the confidence

Chatterjee from comes question JPMorgan. from next Our Samik

in this seeing some remaining of robust, last when new. I year, of all sort Obviously, challenges I I'm sort of or impacted. what business was customer isn't environment. solutions guess, I sort quite we the curious did more through of appreciate you're terms see and contrast sort your the on of just year. that of Chris, But budgets to was scrutiny about more last a spending the transactional it challenging comments

to transaction So what business of now on solutions be pullback, as in might are business of a starting as solutions of or with transaction sort bit thinking business quick have the read into I the the the that, and any we see Just insights in you -- recovery insights change up well? from a able terms you have the of see open sort follow-up. to curious customer what Or sort in is? from business that

Yes.

on one. me Let start that

we're devices. with kind think of also our if as consideration about are They now added what customers environment pause macro refresh year the you the on now factor, it will. as and and of complexity need faced is we this the added talked I seeing deliberation to AI the that AI are continuing client a to in

on devices new right now. there's the switching to the on to will like like is They the things go -- so any to operating I and a pick to have to as tell budget of They'd over ahead think to can't that budget They'd old need what the start spend sure really devices. demand some to they you hold up devices they want I off And and available get over we're seeing system. make more. are

that's a we behavior think are I seeing. certainly

to we regarding as through outlook trend expectation the year, and the of I'll go Al let the terms the outlook. In speak our

year more now to heightened. look, to cuts And the couple has about and the lot XXXX, I mixed went an economy, we rate later, look, we experienced when persisted, think the market I the extent, number aspects a of a intra-quarter, the a expectation to A you would sure. even there about is and in QX, things of financial parallel would we of mention. that in on When just became story of of caution the concern from a Yes, a few. think but some say, potential

complicated, give continues kind economic financial to if that quite to get of Samik, been environment you and the backdrop, for that more there's just So will, effect is whipsaw sure. the

would really, year customers so significant solutions digestion out those is for and reflects on to market comments the those things. I pipeline got back address a say, those I modernization, would data it will we We've through catalysts network lot have our and the moves about all growth persisting. ultimately, that on element of points workload actions have know uncertainty front to talked and we are and on forward, just it's that we a the in those need longer, that have decision-makers intended get confidence several but is macro customers And act more that right solution to deferring, taking the there. get we're transitions to as front clock is now to that gone notwithstanding of our about, space other is that spend closer categories solutions The add And capacity. closer pretty later, need to that obviously

periods. of be path of further more customers Hopefully, hopefully, would we in the AI. financial this I solutions would more we'll will across believe assist. about And that era see and we'll and down different road that look get their what do transactions. we the thinking balanced get that economic So how IT like clarity both will spending then compare maps Look,

Al, you. for quick follow-up And it. a Got

spend for similar to year. but being it number client X pretty a we should here? year, for think the all as improving you're you full of margin quarters terms of be through as about in gross that progression to Just how the progress a headwind XQ, on Is solutions year, we in guiding devices margin? going maybe Like the see expectations XX.X% sort sort of to through similar you through the get

Sure, Samik.

For we're we the was full XXXX year, our all would it that which similar I margin that would be expectation on to holding in. say, gross gave, to

hold expectations. to we and saw to revenue, think durable our solutions, have is mix, the But say contribution impact margins. would when netted-down to would those that's gross growth which that, you'd helped expect quarter-to-quarter. I those Certainly, given think and but that a there's mix we going has some most client at probably variability would Obviously, be shifted stronger less this we I that we in QX driven bit notably by of think juncture, device hold margin. about some on the

of to we're kind high that holding XXs And margin that of expectation to this similar gross XXXX. so at juncture,

Our next from Evercore. Daryanani Amit question comes from

or historically as a guess, seems I storage talked NetComm it better have, folks see love indicator I was is of is the performance eventually a good. kind to maybe categories, what hardware When a point? a do I'd follow-up one to Or with at servers related of you software NetComm and for stood I'm demand digestion a fairly then the understand not. that, inventory out and well. question is leading really about was you be weak? And speaking, that storage think this curious more is the the from it's things indicator. you like perspective weakness, really to storage

it's Chris. Amit,

with a few over right storage customers the who -- what implementing coming kind X investment, of think what's are I number will. seeing in next things. networking and last confluence of networking the if of had storage years a now One, and investing kind of storage we're you we is are

So we're positive results there. seeing

is customers. new market, some The products to and got exciting other appealing the in that's our always we've out thing

driving that's I So in is period. what really the storage think growth this

you was guess, just leverage in fact flow I capital to How cash allocation, X talk fairly of for the the were then And the about. range is that that it. given Got buybacks quarter folks on how end the Al, for perhaps generation the this or and is next lower Xx the free minimal by have you towards it do we buybacks? year? debt might capital show the paydown use cash think some you for to intent about rest to for buybacks the year? of that early and the end Or year the do you would up of And the

the will allocation I what good a we've think looks and terms the about what's like. what do most for to balancing where and look, in strategic probably guidepost of the to both I do the time, XXXX best look get provide feel on to we any value. done the is at that tactical do we're the front. valuation of And Look, return, think, short-term given all of going strategic -- front, At capital the we continue how elements we going you in elements terms

us the opportunity pretty here cash on consistent the say, we'll be it flow and generation. think to of for record patient in is on $XXX sheet, I million balance continue XXXX cash opportunistic. track of But with I'd

X priorities be create to our of across scheme. feel to the in plenty and opportunity capital allocation We value all able got we've like of optionality

Our Stifel. next question from comes from Matt Sheerin

Chris, in more government I hope on the you elaborate can sectors. seeing what you're

about budget-related talked You pushouts in federal.

quarter. particularly So some seasonality, the -- in know I September obviously and there's

what should of So expect in the terms those markets? seasonality across we

about pretty budget pause. I'd things federal, was then was On to complete X money by much the happen agencies. to tell -- effect once delay, you which making about to trickle-down Yes. its the out creates But implemented, X federal pushes a the starts and the budget that weeks, the way a is

been activity pipeline. take programs ready the little that's a to go, that seen, and strong very through to very a positive have and activity it, while that call were will We and projects and both strong I'll those get in

you of see So about the on it as oftentimes, need say, decision-making, is end Matt, back-end And being you get just year government think quarter more out to get pushed as full federal would by more seasonality year of or back PON the a year. you'd with landing the sometimes we what remember, what when the the a loaded. terms I by so seasonal in to

moving So I orders, we it quite out would been customers, poised that it's knew happens. the and tell it seasonally some the federal coming. sometimes year. the with even was of see feel into year playing around pushed you for January we the I But just is, what working good possible We've following start to

Okay. follow-up, any early? device AI-enabled is to starting demand And client you're on seeing still you up, concerning see a are that traction just Or pick or that then as the PCs interest yet?

Win next And Matt, machines get units ahead really when still to in any XX, I It's would And now, the also minimally AI the generation. They're it's at refresh just threefold. Apple it's And the early. XX PCs. an increasing frankly. of we're impetus Win demand. that selling is and really getting aging say look we interest

We to are it in you got to finding of customers remembering doesn't supply. the sometimes and ahead memories having that the just because stay work time pandemic comes longer when

kind low-friction put machines, together we're it need regrets. signs with move it's you I stable kind starting forward. are and So landscape, seeing. that's I'd also the customers just of purchase positive of aging also been a say, factor Win in look, that for a the it's to mentioned When that before, XX no

The form. going now, customers, personas of AI to around talk talk have is But PCs AI with will in which be best a ample come. a that providing are to lot There what we're used is current are power There's compute lot interest. -- right the our what of they partners for. handle

comes Morgan from Stanley. Our Erik from next question Woodring

we or they any center we have you you're you're And where these behavior can clients, just devices, push And put have your to quarters? say, where notable see example, I'd it as maybe as a I broad cancellations are that up acutely? you unpackage past key modernize follow-up. could in seeing spend? most have the this federal, is where products macro quarter, is maybe you simple then love the when any Are refresh our this than more that factor of maybe Outside of of your infrastructure? for customer speak other quick But can we Or this pushouts. any seeing seeing pipeline if set unlock you clarify to here more. to if anything terms behavior that you Chris, is listen, to some to you bit mentioned comments a the there data here factors side,

the question. sure. Thanks for Yes,

with pause. suggested, about a is ended. seeing bit where just is taking do I unit term? of is process. long really macro you start cycles. And real sales is cancellations. elongated with frankly, the we We're the which extended by as over Let factor the constituents we've the consideration involvement, more thing. predominant a decision-making just and really they're moving progress, the we're AI deliberation me functionality a As I the How and AI into this would time in is know, overhang and seeing It's you the not said, consideration. we're speed not more And and fast as greater that the What more seeing think business say, in

But the than ways similar very it saw created in we Al I And quarter, year. in certain we this that quarters some last feels mentioned, would mean, -- uncertainty as say more I to XXXX.

have Remember, really se. it we call, buying So do have that products dissimilar. complex And not don't customers really per does sets. to I'll it's point solution across what

how the example, refresh, areas are in potentially the very We're where for at would figuring some of year. characterize point trend I last similar and starting customers to to we're cloud. to out need server, just to do just We But refresh. move or seeing to some from it things that

from opportunities Within And on catalysts maybe, that the adding those just perspective. Erik, about We story to together. of to solutions are stitch catalysts. talk and plenty these kind of a

will, is from saw what's perspective caused corner of if phenomenon, more a the what see just that transpire of you around the in deliberation. can and think I corporate this caution kind we kind concern delay as -- heightened you

it's And across Chris' Erik, take environments, just add and what of let's in and had time. end the would is -- be think the was the point, impetus that little then our AI say, complexity going ultimately these and on pickup to a client infrastructure device, literally it for it you to mean there, more a corollary we I And markets. customers' to

customers. of that kind have free it free up, spend up really that some started friction being was that regard catalyst in it for because out held see back and but was before, despite of a that, there, choice a And modest catalyst a we so to catalyst the would call been some it that was said lowest that was

how that's out. the quarter so played And

the add cloud. categories and just security durable the would I are that And we've quarters several seen Yes. over last

Okay, very follow-up to be you just U.S. similar. IT And quick XXXX, clarification, is, least expectations for at then helpful. growth mentioned maybe market a relatively

to to did You quarter. single-digit gross growth low profit last versus low mid-single-digit guide growth

expectation be but guided gross XX margins weak So ago, you for presume reiterated to when similar XXXX. would that margins kind a Al, you would bit of days the gross weaker than

growth can me dollar is profit on for you main And for that gross the that's what factor it is gross So XXXX? dollar? help The guidance the causing profit change in me. just package slight maybe

Yes, Erik, things. a couple of

our from -- from just single spend digits the plus perspective, premium. look, working So we're low typical a from customer for calling

That off is come going we're that make from substantially perspective. probably it the And that's to a start off would category, be bit. experienced if that up. suggesting So We're were coming in in a not a solutions that slow QX. we

way device, So at that comes its the down that's anticipated. earlier works maybe getting off start least of basically the top. kind then to just GP. an client would to And have we than We're first for quarter

volume. P&L margin because from So client the the getting perspective, perspective. from perspective, does right, saw see look for the our that doesn't down think help quarter, gross you're help you'd delta if sales device I more because gross while from profit was on net closer a a it you we And certainly a

a and being some change frankly, stronger little continued are there's takes that. with there the a gross the there So not of -- on solutions margin client being of say, range in lighter, But durability and much revenues, I'd a of we're within puts netted-down little front.

Vogt UBS. Our David next question from from comes

discussion and on a maybe longer-term to of hardware I some AI just want to back come kind categories. your of

maybe out really about year maybe ASPs? your flow sort through with to obviously uplift accelerate And holds 'XX higher of of a as in obviously, are AI considerably guys beyond starts price example, how points. having business? traction AI-enabled true, I servers. configurations, you AI, this in into look lot there's of for that So The discussion think, PC, optimized you the how As thinking same does

this to it but trying think that not just in 'XX? about year So about as thinking business, impacts you're your maybe how

client I the ASP Look, in broadly, device say would I'll firm. pricing David, see What context, going this. extent, including not held seeing Yes, we're TBD, is pretty in how tell I'd prices the you changes. on some to much think to out. I we're current plays right, take way of front,

largely PCs kind the quarter But on So you other buzz fully emerge Certainly, increases. that during we prepared would plenty there see not call we're price and that out is what as that units. to see our like. start to that sure there could AI I'm of growth categories was of AI look

that how terms remember them on a provider, we're the navigate remember we it still ASPs closely margin But we'll kind to customers terms of impacts, for much you landscape, do see to of the may do with how front you for and gross that so to can. largely in in Just continue of but from now, any help lift they there we look, us, a going as extent are that work get our very of also the top cost-plus us perspective. lift movement significant line not may we're in

Got it.

subject So think then the to correct? about it? ASC accounting, revenue, profit dollars just be would gross these the with revenue to way commensurate to wouldn't clarify, up Is obviously, fixed be associated and right grossed the

I and think it As look we understand true. that's generations the like, now, would what new product

back Chris We have over remarks. questions. for no it will and Leahy, final further hand CEO, Chair to I currently

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

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

You may now disconnect your lines.