CDW (CDW) 30 Oct 242024 Q3 Earnings call transcript

Good morning, all, thank you for joining us for the CDW Third Quarter 2024 Earnings Call. My name is [ Karli ], I'll be coordinating your call today. [Operator Instructions] I'd now like to hand over to your host, Steve O'Brien of Investor Relations, to begin. Steve, the floor is yours.

Thank you, Karli. everyone. morning, Good

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

statements and earnings you comments is along Our that supplemental you are during certain follow under of that use slides in distributed to the like Securities materially. considered the this made was risks Act statements this call. presentation with available our Litigation I'd could website, results of release XXXX. number on forward-looking Those that investor.cdw.com, cause subject are a to Reform along can uncertainties morning to to Private remind and actual differ

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

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

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

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

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

for sales team and see pickup for operating flow cash anticipated year corporate X% on of in last sales an strong, billion $XXX $X.XX, we lower X% non-GAAP basis, solutions than of cloud did the this X% million, we solutions hardware demand per footing million. daily year-over-year, delivered $XXX lower device channel share and of net $X.X of under profit While growth, remains margin to pressure gross $X.X Within XX.X%, net environment, a not continue year-over-year. the Adjusted income client remained complex down billion, materialize. of average firmer X.X% and our non-GAAP gross income of down free

shortfall specific in While cash cost-effective as hardware cloud meet in resilient did volume. and our both a volume lower-than-projected success meeting solutions strong results gross dynamics. expectations software as This flow, our and drove solutions a not and led services well margin customer factors to priorities shortfall with CDW external reflects as

Let's at most impacts. actions look future these the in to place of take and a importantly, mitigate each

customers. all spend from end spending election, as commercial well not U.S. And government end has economic which Layered the other of and further limited and challenging. on intensity delays of only complexity project dampened also demand sector environment environment around pricing this led finally, outcome IT the Technology combined and across uncertainty, as public markets. increased cycles. uncertainty persistent macro the the spending top heightened has First, has markets large was remained competition with but geopolitical to extension and sales

toward shifts solutions. And years, and hardware unwavering, boom, cloud have hardware shifts endpoint, is market for private pressure we subsequent continue approach a environment, conviction IT. focus to from how current Service IT past resulted anywhere reflect and conditions volatility of customers pandemic-driven by for unprecedented that in public hybrid driven cloud continues IT impact a consume our to experienced Consumption how digestion. reflect market period supply off-cycle resulted an the demand that contributed shifts the secular on to pay-as-you-go over and from solutions, NetComm work and learn as for Beyond cyclicality. customers while and collaboration several market chain and demand on Cyclicality demand the which pay have a

past All been of impact the the amplified and in these external X quarter over have results by dynamics. has our further The impacted year. clearly factors CDW-specific

relates dynamic long-standing discipline. to first financial our The

highly While when [ in North value to uneconomic customers pursue discipline terms. maintain we competitive our provide our star our ] competitors transactions markets, to at is

and demand While the we to while market even into gross lower sales and this operating quarter margins mixed our growth expect client dissipate to contributed before environment it and third held firm as devices. We've this profit, seen improves. behavior lower-margin

deals. exposure our larger Second, to

decisions any pushed performance is more periods on impact during As full outcome tier deliver of the the results. and full we the ability higher of that drive This can demand. projects broadened size for and capabilities, timing through large stack Sirius, to and expanded. be have has number our strategic our year-over-year dollar reasons. acute of deepened Impact lumpiness can depending including low at addition of Projects that

You expected in business. our SaaS-based or commercial to third this item and specific quarter to the deals federal reduced. And larger close see cloud pertains deferred this and were where

this desire our significantly past the scale portfolio. While during we have years, yet to we not grown several overall we have the business relative achieved

I when near-term the perspective created more CDW-specific the amplify overcome. on These able yet impact not it such, dynamics to results. outsized a hope excuses. low We demand impact own we our helps financial are have been our this As environment. demand that of how growth has and contextualize challenge not hardware market results. softens, for a

solutions always, ongoing. cloud our improvement First, continuous and maximize the sales streamlining recurring seller to to increase scale in additional doing? choice to we effectiveness growth, customers productivity. capabilities professional and our further our X highlight processes is we the highest and sales repeatable As to let's means to turn relevance what's growing inorganically and services are I'd focus like So as-a-service delivering important, in what and areas: and fastest greater to lead deliver reoccurring revenue vectors and greater value organically will in both our software This offerings. are streams. This

and experience Second, are further business. our driving in customer we exceptional core differentiated

solutions, know efforts, implement to noise We underway our informed serve way all multi-branded value These full new customers accelerating unbiased stack our existing but our architect more technology. is a We and And pipeline customers industry with opening agility both progress cut growth the lanes engine point are markets. by need. and enables through and our highly our of and up to expertise point and to and digital end anything, are that we on ramped the we have we and our are new deliver are are our customers, buy, of not aligning ability than they new on plan, the across growth, and which view, enhancing want track. is view manage consume in capabilities deepening intensity. finally, customers we customer building outcomes technical Work

sales on will and speed. remain growth more fairly finding have and time of converting rigor results. immediate the with profitable meantime, produce to take pools In some impact Some and will laser-focused actions we

look results. at a take Now let's quarterly deeper

and high significant remained with posting a to a row, and approvals due increased and double-digit up NetComm services. posted a the than pushed seasonal deals decreased Third cycles client multiple strong refresh in by customers along with strong federal systems profit. K-XX most infrastructure be digested delays Services a care currency. streamlines net double-digit X%. implement with helping second spend for in and upfront and hardware investments above business was customers and and client over large center preservation some device drove quarter NetComm ahead double most other meaningfully. sales top client single lower delivered and digits out growth double and declined X%. and felt their sales up client in profit profit. State servers. sales scrutiny U.K. decreased infrastructure We managed a declined the were gross strong in business adopt local digits, to to cloud cycle digits, project services conditions can systems declined Canada a elongated, which local growth client federal expenses, past Several and was teens government NetComm by and materialization continued and significant X%. corporate growth demand both as the spend. Similar and growth services declines success posting combined further help digits. team's Security team prior strong, spot school servers, threats notably federal impacted double-digit seasonal by X% state storage Health by investments, NetComm X% driven The ASPs with growth. double-digit performance declines. years. given all storage students. Other, cloud health Unlike digits, and posted and sales declined profile increase and all devices Services team's the on by management Solutions and quarter sales and prior priority control increase single from in what in line refresh increased Cloud hardware continued declines success strong the delivered net for was gross declines in priority, acutely Cloud elasticity continued help net quarter, solutions solutions deals as declined low the remained managed higher-end high cloud our continue made storage large as sales both double cutbacks device refresh, flat Canada up was less below solution, to Cloud driving deliver refresh Higher The double professional in deployment, in continue Chromebooks both markets delivering systems and double cash with by strong the was third challenging sales a The continues depressed aging also in for school Small was NetComm with commitment servers for solutions row. top constraints declined down quarter and remained our budget all public managed cloud double results double-digit success low large NetComm to double-digit gross cost performance mode. Security Client in cloud by strong and remain corporate, single digits. Government and adoption moved servers few double delivering channels, and and institutions for refresh Education digits. X%. expectations, better was contributed increased to professional gross digits. services ed's off of agencies line demand, local largely audiovisual bright in U.K. year in and strong, its and growth universities to helping a assets. profit gross sweat double-digit The drive performed year-over-year. driven they Public to declined driven focus XX% double-digit performance to top their in increased the bottom delivered Market high in low life of growth impact Client albeit drive slow in team, services. customers' servers. process, quarter. devices up the Both solutions Both were bounce customers similar and preference data the our cyber high businesses. the increased by Cloud profit. cloud experienced was to digits, by really as configuration, digits. stronger matters, devices. solutions quarter. team amounts at

As see, quarter. performance during mixed market you was end can the

was transactions single-digit High and it ability solution Let's in client by growth reflected performance. services of more increase client decreased take how single-digit X%. software than declines NetComm, this was sales in cloud to more than offset offset growth, how category low by servers. they growth customers double performance digits. Hardware at A look was more device, Portfolio decline. than with solutions hardware and want device storage by decreases and that meet translated a to offset our and where

services healthy gross Cloud growth. double this by was profit. gross important increased of driven and performance, up increased X.X% XX%, in with Services managed digits by warranties. driver an Software profit

the our year. can diversity demand expectations you customers the meet of for completeness see, and to As where how us. And that rest portfolio of they our while us varies, our us and enables need the brings to

Given now we IT not with flat for to the balance conditions, roughly we market to XXXX. current of do year, look anticipate for improve be U.S. the the demand market and

expect of dynamics profit cyclicality to CDW-specific the continue market given gross We challenged market hardware referenced, and our reflect growth pronounced and is with experiencing. to results I the the our mix

in As growth explosion, that do, drive and will are provide to efforts security obsolescence of and up, that growth. will profitably opportunities. meantime, we increased conditions In applications. assistance our tough there call. in to we data are client are we our when we operating we doubling there. denying market demand these The but our next drivers demand and capture AI-powered we threats, And the device adoption always on There's are will picks profitable XXXX no return. confident Workload a expansion view environment, be

their has also ever. challenging adviser, need customers for as us this has now it customers been been While year our more us, for than trusted challenging past

bolstered our to to environment. are customers commitment deliver of value regardless the by relationships Our demand our

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

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

and was margin line offset expectations and gross channels This XXXX client demand was as growth quarter-over-quarter solutions of lower year-over-year across of by XXXX. profit both billion for expectations $X.X in hardware. of single-digit and in and was full devices X.X% below for year cloud Gross original year. versus our prior down quarter Third levels the XX.X% most with low strength broadly flat was our

led Year-over-year XX.X% reported year mix quarter higher profit prior margin came down down as sales once serve again important outpacing and continue with known where our we our XX.X% seen to a most. into Third The teams the an solutions quarterly durable gross basis, us company from a This agent, continues also successfully down represent netting revenues. This our highest net aided by CDW grew category they to where to cloud to business. trend customers a netted was and of we've as X.X% third customers of growth expansion our AXIS as overall and netted met SaaS-based solutions. compared by quarter. revenues sales within needed representing in category on

Higher the in and sequentially X.X% a sequentially basis. quarter the quarter gross Third second international channels profit to a were year-over-year on was quarter. Net in demand of the care sequential second alongside X.X% sales up compared reported up XXXX government health as over well. increase drove growth

spend seasonal at However, second levels where the pushed of of in getting the persist to quarter. at historic third customers this through the solution later below quarter when and out footing did we that firmer expectations is months growth downsized not end space and and experienced our the the deals deliberate both saw on We and as space. primarily the in own the corporate

volatility in and challenging we to in and uncertainty. Overall, outpaced work growth still we're acknowledge focused a profitable we and expect political We conditions the achieving this competing on quarter, growth. low customers face the economic expectations. we to our on market business do own in that environment, have deliver better space international third calibrate U.S. are While as

to to with gross Expenses was second the SG&A efficiency down our non-GAAP million $XXX XX.X% Turning year-over-year. relatively and profit SG&A were year-over-year quarter. ratio in the of expenses down Non-GAAP totaled quarter-over-quarter, of line and for X.X% expectations.

taken up above third quarter to the year-end. look count Coworker the Customer-facing early slightly align was approximately of structure quarter the over second cost slightly fourth at count demand approximately continue was market in conditions. at also coworker to and end quarter and to XX,XXX up modestly XX,XXX. expenses We better the to align with our have actions

and down of prior and quarter. from income volume is goal efficiency exceptional income the operating from cost slightly from X.X% by to in Our leverage X% our experience margin second balance the year year, down lower was X.X% million, but the versus our growth by $XXX shortfall expenses operating customer with year-over-year. prior operations. Non-GAAP Non-GAAP up X.X% in greater driven totaled broader offset

million X.X% was shares in a weighted income $XXX year-over-year of net diluted quarter net the per quarter, non-GAAP diluted non-GAAP $X.XX. average With basis. $XXX.X third share of down million, Our income on

Moving second is roughly debt billion. debt balance net end, year-end from to period decreased was quarter XXXX. $X.X and ahead approximately the the by down million At Net sheet. $XX has since million $XXX

flexibility. of The senior to for combined remains with the senior days end, the redeemed high the of capital, Liquidity days, and the XXXX conversion During and that effective $XXX lower $X.X cash our million of asset XXXX cash of XXXX strong notes. issued senior approximately have management our the fully XX quarter, XXs. We conversion notes. we X-month $X.X will at we and million from of offers and XXXX plus levels. billion general strategic notes maximize average range both of $XXX management XXXX revolver settle Since including X tender corporate issued to was of availability purposes reflects notes of working teens QX our This inventory cycle up prior the year low billion. cash end targeted the

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

conversion within a to $XXX capital guidepost and Year-to-date, non-GAAP rule Adjusted our XX% non-GAAP income our We healthy free best stated our consistent adjusted of for million working thumb XX% cash expectations. of million believe quarter, of was remains range XX% roughly income. flow $XXX flow target longer of net net continue our modeling to was the in free term. with cash the cash

We XXXX our objectives. track meet to are on

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

to consecutive capital X% dividend year of non-GAAP net income of to priority the XXth We're announcing increasing growth. our $X.XX with dividend our is first increase approximate increase our the an Our in line dividend. annually,

We to continue target dividend going non-GAAP payout roughly will respect XX% and to our a income forward. ratio environment manage of the growth net with prudently

to Our of structure the to at have quarter capital targeted leverage second We Xx. the third ended right our X is in X.Xx net priority within place. range

liquidity while our will manage evidenced to We proactively debt flexibility continue financings. maintaining recent by as

authorization priorities third shareholder repurchases address quarter, M&A end drivers continually share of to conditions for and even and moderately We spoke our spending the important and for slow fourth of we still allocation well tough that need share for sentiment about that increasing workload year we landscape -- million repurchases customer to priorities in continued remains XXXX. throughout solutions have $XXX outlook. The XXXX cash the start in expectations have over Last share we've persist and even the worse of That on capital security to was opportunities Finally, case X-part repurchase operated was for our a been leads we than the anticipated and our IT of shared and near complex Year-to-date, remaining into a quarter. than continue accelerate across remain markets. majority as term. the to customer evaluate $XXX weigh strategy have uncertain the technology third aging our on conditions devices, macroeconomic to growth. million such but under XXXX, cloud utilized hardware. demand over of growth, client conditions expected threats And value. our current Customers could compelling under market cautious us persisted below Demand we program. what has and originally uncertain

and XXXX to historical We quarter gross updated similar This our is margin our in to profit expectation single-digit seen is gross below profit expectation fourth implied gross maintain XXXX. the decline. conditions, year-to-date sales. low these for much and like half and second full the we've levels slightly for for a year seasonality Given XXXX net XXXX be

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

leads Moving profit meaningfully prior but lower fourth not from quarter than seasonally and quarter. offset We year, than But of principally the this X strong compared government seasonally to fourth anticipate we the lower also business quarter. XXXX thoughts education Traditionally, being the fourth the first the third gross due first fourth modeling to for do quarters above level. slightly to and quarter mid-single-digit fourth from quarter to worse demand XXXX the small to a margin This decline customers. with low seasonal slightly quarter, demand sequential customers. this gross by corporate is anticipate below

Moving down the P&L.

the on expenses We to to of quarter XXXX operating expect quarter level of be dollar fourth fourth basis. similar a

decline summary. earnings single-digit in we Finally, non-GAAP share financial high the the That expect quarter fourth diluted per range concludes to year-over-year.

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

Adam [Operator from of Our James. first question Raymond comes Instructions] Tindle

just about variable ability past about model I down step and cost I some this kind leverage is the prepared investors And as really rationale of the I taking analyze to quarter, to in understand down the to a the to few a the tough what P&L. to be back, like think volumes. operating wanted Okay. quarters. understand seems volumes, remarks the flex for that but macro we negative predict really CDW of this the up ask I wanted start, pattern

guess twofold. the question would I One Chris. be for So

that of us maybe what on restructuring, the think you secondly, in to I can XXXX? just If it changing and if the so the the drop-through with seen. the size to model count you implement could XX% for then head of XX% that? for does reports Al, on what is it's And the and about we've that help based you restructuring, a like down sounds assess in negative some decided tie is just why you rationale P&L some increasingly to severe could maybe

forward. So to think about OpEx we how moving rightsize just trying should

is Actually, let Adam. the commentary Yes, this a on leverage, I'll will quarter jump of bit in operating give little start I just Chris Al. and to you thereafter. and

first the So variable we to impact our strongly model first, would therein. the to say, on continue cost I just -- quarter, Adam, hold and

SG&A than quarter, we in relative kind about we've would have. the the the non-GAAP call slightly range, actually I'll GP, you is target have higher we of to our came quarter, was It's would expenses that just talked for that For if more expected. maybe GP but being the we that was a, anticipated at look it, of than that at denominator factor XX% which that about lower

So in as would the we we variable the expect. did quarter, get in our movement expenses

That as timing it would that forward, the we certainly we think seeing a of dramatically, know, on we otherwise, what a that cost demand on reduction that did have cost cost to the fixed the that quarter going pretty said, And what they're base. demand with while fourth reduce current have fixed our go matter take is environment in our fixed taken we challenge workforce. and included some actions try base. were has in I cost a as to the align there, Adam, we you fixed just seeing becomes were action base, moved our and in we into

it workforce. Adam, that to was of our X% for you, about Just size

with closely think So need from fixed was cost that perspective. level not base to you quoted more the where certainly, we there, us we align a it that be at but would

that where that just very we business we're we prudent being I add Adam, be areas continue while And growth. Yes. look rightsized we we behind would see to invest the will as pocket of at

teams. the exceptional lot preserving on demand focus also experience delivering customer for and our profitability So environment, a of

Got it.

know a clarify, long Or higher the was pricing is that pricing Just When just higher between about increased amongst competition, OEM you one. the I VARs? a quick vendors? talking competition clarification that is that were competition in since and intensity to

mean, I a of both. It's both. Yes, little a it's little

Our of David next question from Vogt GBS. comes

maybe for to And start. Chris X Great.

little to been thinking a solutions market are of really bit the that know Did where some you're undergrow that up? And Is the tough you challenging hardware your and But along going prepared have the disappointing investors might it. going to of it think been remarks hearing the relative and market like lines, this guidance, where from given just macro continue reflection checks but then year. means you're I our think has backdrop. that's we're hear I those that it flat the of ending is about picking to and sort should I can what think in Chris, that storage even IT I and than you'd Maybe not correctly? little So that differently And looks a networking you're in giving obviously, to bit seeing and outgrow a we XXXX yet forward? to how heard lesser XXXX, in I communicating U.S. be degree, maybe servers little getting are what a maybe we're the a marketplace? are bit you better. what others what up expect confident

Yes.

ample low account looking our Look, at demand continue of market holding quarter, And this into share. start of IT and the feeling growth. to Let the confident this for place, be very inflection premium our our we me ourselves have matter example, that well take customers given areas to software taking we'll and in say that an hardware extremely of the these in for to I'd challenged market help the year with but It's the rate That just beginning when back. mix, question. was will certain services other a will that a service, say positioned been delivering cloud, areas, we're well is point performed view a hardware we've and serve hold and come as as us. And circumstances.

client have But we're we're center quite Data paused, to see means yet servers think have Look, traction the up taking has You area. refresh asked storage, specifically start, to seeing cloud clients the we And area are really time do pick moved decisions. inflection in the networking but wouldn't outperforming data and in That pick spend point, that up. would again. we call are where about storage. I see make once seeing to begin networking muted. been and it to all is what center seeing expect customers one the we're longer we and

the continues focused. all anywhere. there. Digital going before, Explosion catalysts transformation the massive said I As for and bandwidth to more are more networking. need in Security data, isn't get for

So all growth catalysts the for there. are

I uncertainty certainty. to to got just more get side there'll sit. get the be we the a after through certainly, other think of the And we election, we that little

of data I'll maybe just points it's David, add couple a And -- okay.

points Just there. of to add couple data a

mentioned categories, of in obviously, Chris those have the been solutions So softer. all space,

also the with NetComm tough comps. last QX those have We is the a from comps perspective. tough quarter

while we up of on that give overall, quarters easier. at would now not you our demand get hardware. declines from least vantage I we've NetComm, hardware bit the then data comps just just the point, point is And meaningfully other So on seen is a say would picking X

Chris play so a And hardware period will out. again, We've pretty catalysts cyclicality. some ultimately the we of think noted of seen prolonged

a And as follow-up. Great. just quick

maybe looking around about a a leading give edge know some I are you heading recovery the leading potential for about coming customer not and about some changes of outlook. increased thinking you're confidence sort recovery of the the your of you're giving in 'XX degree else election level of the recovery, kind XXXX.? maybe into the hopefully, at in gives of thinking 'XX? you indicator think or milestones we that is when maybe Anything conversations I or terms that up, timing that at conversations. that a you're you're at obviously, what that So the of high know what looking But

Yes.

things or not and creating the that change. think about those are the current environment I whether

X the forefront across of to how at -- geopolitical will have election very frankly, economic the at our how be going outcomes the an to most be are in doing that is different. look environment be we the are have volatility going most That impact. election the economy it's impact policy the world closely. doing, around uncertainty and and of are to future the are Obviously, the likely. So doing things will Those things the that mind, perceived an the

anywhere. going not Now the complexity in IT is

now business of these is leaders complex and requirement for have decision longer larger more It's our to in norm kind involved projects. new the cycles IT So decision-making.

we're so away what used soon. anytime see don't that And on. that, to focus we but That's getting we going

next Our Erik comes Woodring from Morgan of question Stanley.

go as you maybe because are CDW's nearly in this some you're the is deals this seeing? are I'd declining markets infrastructure customers X as from referencing market, understanding market? Great. they Obviously, of maybe away comments end end just lower across have profitability I a to with therefore kind much some underperforming sure understand, at is get you broader of about better just of Chris, you are aren't follow-up. specific I love walking well. simply broader your we seeing product commentary and make those want the view And of to that I Or or market view? a NetComm, and rates servers could if reflective challenges declines are storage. those in of those declines demand. I if the of then have just declines you're as lots and many to on double-digit just back solutions,

view tempered protect is are broader from deals. Yes. It's market not keep because cetera. Sure. CDW say by bit to would a to racing bottom important possibly economic we profitability, I away et the the walking it

are and would also is we I the both. would say I bit market, of bottom. to racing it's with not So say a it consistent but market

and remember encountered history peers in to challenging and environments highlighting elaborate be which And years. manage can't still you're And the you market the the over if competition, those That's before. just market right. on All maybe materially company competition several outperform Okay. of second comments on have I love fair, the you bit market necessarily I'd citing helpful. a you to could because competitive question, then explicitly guys maybe

my maybe competitive intensity changed is demand? in just so a period is And with ever new? question away go what has And of even stronger that would really, why that competition

do Yes, great it's reflect that. question, and a we on

quarter -- past and used to are in this years that low competitive pricing. in margin, was how we're time in not model. I cetera, low know irrational I intensity quarters, the couple of feeling the the to compete we highly We are would business ago. And right just and pricing seeing a we this at say deals our like but What market, saw is the margin, particular, is last et environment. now I and

couple and more So good unique quarters, the very been over around our it of a we're little last financials. with has discipline bit

last really over holding little we're the a the That's firm. it It's unique here. we've seen So answer quarters, and couple of tick really up.

clarify, distis rational or ] VARs, And from both? a from just is [ that from to pricing

it's the down up chain. say value and would I

distributors, competitor spending, in on, as are sales perceive now competitors, cycle, different behaviors make up The value-added going to them the is agreements the are deferrals, market That go reductions, that I wouldn't saving deferred that who that direct dynamic the The in the feeling right feeling. money or is want chain the is competitors everybody much. resellers, at chunking they ROI. every So short-term to elongation smaller. a ways

question Instructions] [Operator Daryanani of from comes Amit Our Evercore. next

are finally perhaps happening? the And now why you're at to volatility that I profit changed macros talking you've And ]? but guess, multiple about, I well. in getting feels X frame. this CDW do I to gross years the before? CDW, declines, discussion historically, of which back uncertainty, haven't it that company. or think you the macro you ] have than as profit if [ the or has had X X I worse you all like is X just you way you've And go have of what's something a Chris, track consecutive yet continue what been that's [ to company had start understand seen on at ] think it's this folks declines time I gross seen or even you had, [ years haven't X X

we're transformation, fair a several been I'll a years now. and we question. company transformation tell Yes, in for you in have

about think on when amplified the real results, the you mentioned, So CDW I impact hardware unit by environment. demand having specific have been they factors a

which investing SaaS business and X third business, if behind mentioned, been just last one the growing think cloud So that years. we and the about is our we've I incredibly rapidly over the

to All full want that of the have, to relative scale Nonetheless, had not hook portfolio. we we services full acquisitions to a be attained yet have them. the we portfolio at our have that the cloud given

has is that, towards movement So of more now impact very outsized of but high we it the a growing have an even because secular hardware. muted, we're hardware of cloud. still mix when And

they are behavior the is in incredibly seeing much can the where commercial get behavior going seeing the investments These financial impact thing full couple it quarter. And the other and year of a quarters prior stack, size have that now are forward, that's saw those projects which continue and can about as that can strategic discipline full depending change strategic We they margin fruitful used therefore, with all very made, contracts deeper just that on hit is was we're to it maintain a our question, move projects. The broader can that we've extreme kind we so are developing big discipline. lumpier capabilities when made decisions we're The we've over our around, of I federal to this dollar deliver that gross what outcomes We're pricing tier and to we deferred, and been higher the extreme. is is time. and larger, deals levels, we one the can results. lumpy. move talked federal our about talk the and last become this in And

that confident where of vis-a-vis say [indiscernible] areas. be on fast-growing In high -- to customer is a the been around. Go a to double whammy It's the investments and combination environment I working a turns our are So in value I'm an growth relevance But ahead, incredibly it and for persistent Amit. a continues well I'd just in basis. muted bit has hardware of strategic us.

as Chris, it you be the should then we've That to Microsoft, back a about bigger driver increase to for way as it. fair XXXX. think that gross be to on the worked you was see fair And strategy my in be, they're going changing to from channel clarification profit of channel say, you especially say year and next a sales to 'XX, it. how your piece of pricing going of being resumes beyond? does presumably your see for it growth business the way that maybe dollars think to I about and Asian vendors, start some into the normally would the that growth, you and bit Cisco would a was Do

Yes.

delivering transaction-based the we our flywheel seamless experience delivering As a about the are the they the are what vendors cloud. with to where higher we I services doing that, consumption services investing services cloud trying and Ciscos managed I aligned what to the that's the professional managed customers, with our but about really, changes, think think are around and to by world our CSPs, of and And aligned value they're behind from what to want. cloud exactly precisely business -- incenting

well as with And with stickier drives and it because for and it, our customers. we frankly, relationship our into it for we we're can XXXX better deliver to that be the our a benefit think that positioned it we and the drives So economics customer. value -- us beyond around wrap positive because services move of CDW aligns strategy a and will with

Matt Stifel. Our of next Sheerin question comes from

Yes.

the comments question on regarding device Just client growth. another

but talked more another mid-single-digit we're then growth, it AI you Is like public and you why kind the said about is push so Corporate that Corporate of any reason out? skewed towards there? versus that are not macro, that you expectation in And And in much growth the think I seeing PCs? SMB was seeing markets enterprise sounds SMB. for

for thanks Matt, the Yes, question.

a business mode markets. growth saw end in we we're Corporate. -- nice seeing seeing all of pickup across clients growth client and where is side, kind almost a in are so customers was really markets. have It's in our the seen But seeing pushing we all we're small client the almost off preservation end of -- we the cash On Corporate actually the across device.

that's been positive. So

of AI I'll way way and refresh Matt, what less fleets add in it the has aging activity. get PCs. this And of been It's with more been drivers XX customers Yes. in -- driving been to less has of in the and just on need for the

next board, be refresh. come another year, AI for will as do that accelerant So on PCs nice PC's

you're gross margin a last or expecting sort Okay. and year-over-year, solutions, are year. behind down carries which percentage your is relative services? the to big of of because out bump advanced Great. which that? a other And reasons a margins for you higher that on then Is the lower What guidance QX, had hardware

tick we at client Yes. Great solutions see continue that to would not along. that versus was the client that quarter. expect our pickup more It down question, year get moderately higher in Matt. move fourth to just way, to I'll the It comes the side of in versus the on we quite at a because we'll bit netted then note QX in down revenues continue it continue And which would anticipates netted of outsized gross along, softness maybe delta in end would the of revenues the than margins. that business, will the pick that there modest little assumes but typical last year. outsized XXXX is an

of Research. Keith from comes Northcoast question next Our Housum

But providing how competition and much Two the out losing much transactional break like questions of way. us that and for business really with company, people hearing where a the Perhaps of if always about are reconcile versus for is the more by your transactional, well, has being that provide. its relationship-driven something just we're as you how Chris, deals value going I you here. price relationship CDW can customers. value [indiscernible] trying driven is could. it business lowest just to

those that with look the our with me we which is those agility to bring buy that The what that every the full that business. That we spectrum from tell meet of the to say our over relationships them. deliver. they can of we the customers portfolio, with CDW when ease you with the you and customers, to which they value do says would bear, access the when would portfolio at customer I I XX% deliver, relationships and because of our expertise

economics in the ones have those Regarding transaction -- and don't purchases, less are typically And where times pricing that when value we example, there lower. just and gets and the pursuing. lower rollouts, for and the are are that the those large issues, there are lower interested the are around, transaction wrapped

it. grow the to talked go you then as move relatively the as infancy [ going but about I Appreciate from like that, as-a-service we still here. Okay. think to model. still I guess about it's And ],

So how just I headwind hardware to much at about present guess, a or we the a of, future? sales as kind challenge of think

I'm question, whole sorry. the hear didn't I

think it, I got Keith. I

Think what Obviously, counteracting about kind seen cyclicality be would a pretty our I say. down spend. an in Here's that of kind increase we've including that pronounced typically seen from that we've cloud. perspective. and would SaaS significant hardware, a netted in What and upfront in of revenues, as some customer's CapEx is respects

making has a that business business of spend therefore, I Now Keith, and that more business last be where judgments X, upfront. over over us. that time they and on what say consuming or cloud, for recognizing that historically, both seeing to would a lot to year they're shows is the moving on they go. recurring customers And up would want been more what but are it upfront nature, But that where as that of that are we would call recurring we

as on of report Certainly, split in to kind that on hardware details wouldn't business it of material more grow in would but calculus this call more as kind continue sector recurring. have versus a dollar category, is of to And part pocket that and of reoccurring that pronounced that say I growing. with the starts of point, at respect that I we'll the we Now business air amount we to you is go. that when cyclicality come therefore,

Our Samik JPMorgan. next from Chatterjee of comes question

projects I of have that taking mentioned you projects, or remarks the the are you right capabilities to cost still and years. that, you're But your of balancing as on transactions mean exposure if that look start in the in mix front? I drives have large prepared guess can you larger and really business some as a just well. that the -- outlined on in large margin the you've The back structure the for still side. you do account have to terms that or you in at I side portfolio out lumpiness contemplating in do follow-up. projects in over the that's market sort the responses you're one. as invested exposure I you between of believe there any business the versus and or with of And to the to wait that balance some Chris, come on changes on actions

yes. been at a buy do important of that actions to I'd years. want done foundational an would in and way that for recommendations need we we really assets. of plan on to example, opportunity to them, answer work looking digital of quarter In how our means as this the go one and we're But kind in words, work. have The for people parts lot deliver several yes of consume our XXXX be digital, aligning their manage faster. Look, And We've question underway. our just Yes. working we've other personalized our most accelerate digital strategy and capabilities that and that match is customers to

will, to if deals available that self-serve, that being about account while highest smaller sell terms of to experience and customers velocity our be sales so et digital for working deliver chain we like, the up and both and seamless together. chain how professionals in and of value you think this they flywheel digital at learn value perhaps the an point and deals and with a sales tools like served, a a value can intersection managers So cetera, our flywheel serve customers, our professionals as enabled digital moving of large creating by in to

is So that's high-value tier our velocity high to to drive where in engagements while all X at intention build levels. at we -- levels area continue sizes, lower deals we as example an

Quickly outcomes. up any happening had know we've well. sort sector spend on mean uncertainty post as Are election the the of public Got in and flush my seen of a Have Okay. I question. quarter. the for clarification past federal election-related in the the budget some I in it. you well. slower scenarios like as mentioned that side there at end instances? scenarios getting the indications which any any fourth you or you looking of Are you do elections

election wouldn't would it. there's tell. say -- cycle, say this hard I nothing normal Yes, I to I about would really

mean, is budget government with effects And -- we I they're the what's got tell. of we've because Department to the Defense, we're strong while we've the seeing saw hoped from to waiting spending now, previously. knock-on right see in got hard priorities federal we'd the delayed happening So are. than less now what administration's

some So clarity more we -- would we'll post the One comes right Congress we to government now, from then down and President see budget the getting a hope federal but paused. cask. timing just the election, have

any the the could Samik, play outlooks. scenarios different at just Obviously, how end and would on that certainly, when the of look out the talked I'll about, And of add would has on outlook we Maybe appropriate political external we all factors, QX say there. specifics. include back level things based our that into CDW uncertainty. we play baked all caution factors the quarterly it I the

currently questions. no We further have

like Chris for closing Leahy, to back So I'd to CEO, and hand Chair remarks.

Okay. Thank operator. you,

thank your privilege coworkers their around you commitment our listening customers incredible long to talking time you in next and customers us me and XX,XXX the recognizing quarter. of CDW. for Al to to challenging that to those you the makes to our opportunity by the and achieve dedication continued interest over Let term. our Thank ongoing to hard globe. this successful I close your in forward environment look the and help goals, for you and It's work

As joining. like to we would for we conclude call, today's everyone thank

disconnect your lines. may You now