CDW - Earnings call transcript Q4 2024

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Operator

Good morning, all. Thank you for joining us for the CDW Fourth Quarter 2024 Earnings Call. My name is Karleen, I'll be coordinating your call today. [Operator Instructions]. I'd like to over to your host, Steve O'Brien, from Investor Relations. yours. is floor The

Steven O'Brien

Good Karleen. morning, you, everyone. Thank

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

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

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

also financial presentation earnings certain non-GAAP non-GAAP share. income and non-GAAP income operating measures, margin, includes operating per non-GAAP non-GAAP net Our income including

been to All have GAAP SEC rules. reconciled accordance measures the comparable most measures non-GAAP in directly with

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

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

Christine Leahy

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

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

team Gross fourth on share the non-GAAP an level of billion, sales profit delivered exceptional or $X.XX the million, and operating $X.X reported quarter, above on on -- daily of commitment an up continued per billion, Non-GAAP of of sales $XXX its sales X% For net average net down daily customer X% nearly income $X.XX, $X.XX an basis. average flat of and XXXX as XXXX below income daily basis. year-over-year basis average X% X%. and

quarter year. The finish delivered a fourth to solid challenging a

we expense continually as on with and services and priorities a and in consultative order have service solutions ratable all remains as seen efficiency elasticity quarter, optimize the laser-focused year, minimize capital During and spend cloud and operating expenditures. customer like met SaaS to and

in in fact, our strong shift level XXXX. demand clear hardware time, same Despite its durable projects on investment. uptick led to short-term and margin reached and drove gross and mix, highest in the This returns mission-critical across resuming interest this priorities customer in At on held quarterly our with stable in an must-do focus several categories.

top impact full by X%, per non-GAAP X% our exceptional delivered we Looking on service offerings to back year, deliver partially our declined XXXX service the service on helped roughly the had support team's consolidated X% gross line, and non-GAAP hardware share growth ability deprioritization slight declined a which below as the to profit full deliver resources the year offset X%, and and net operating needed to drove and future respectively. both by XXXX. expense deleverage customers and Sustaining income in income

record our on of and XXXX than Although with capital We to our P&L the billion repurchases. once commitment flow. adjusted allocation performance, not again and dividends share shareholders and cash stayed generated $X shareholders course free more we $XXX to were million via priorities of results consistent returned

A million. was to with repurchase share of commitment increase Board Directors' action authorization by today's our reinforced that $XXX

Now closer look fourth quarter let's take a at performance. our

and balanced always, X-part services there of of are product results: our main As drivers X markets; our our solutions; of breadth growth. for strategy and our end customer portfolio of execution portfolio relentless

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

and channel, Corporate; Small year know, verticals. teams per you meaningful U.S. including As on own. is Within to have on segmented customer further X government; a markets, are Education. channel end focus Each business; we channels: and $X-billion-plus business sales Healthcare; a its geographies

We benefit of also quarter USD showed Commercial The the was Canadian markets our billion. of operations, fourth U.K. and together our of growth. stability which quarter. X.X markets the during sales to have and end signs clear in returned diverse delivered

cautious some customers remained behavior see flush, budgets. their and we traditional willingness greater by customer spend While to experience year-end did we did remaining not budget

Business X%. top by Small both strong up Education International increased and was public standout declines and Education high government. up continue driven increased or their X% performance, Within and XX%. end influence performance in by to unique as by X% declined by increased more than factors Healthcare's Corporate ed offset K-XX. other X% line, public market

any from the as driven where performance. end stimulus-based we priorities uncertainty decline federal impact administration, market a K-XX full around spending of quarter awaited funding by period the varied was agencies experienced government incoming market end programs. market clearly, clarity Government's the expected, of without saw As first the pauses

driver this storage in normal refresh better and line Hardware of performance NetComm with mid-single primarily was X%, deep second by our units. driven was aging devices, client increasing Devices and growth digits services. Client U.S. top or all our quarter solutions the broad of by and The portfolio increased of

to Customer transition were gross double-digit and licenses. the be up from Software net both continued digits. sales and impacted X% mid-single robust by SaaS market increased IAS away spend growth profit as

Security line again single-digit Cloud was strategies CDW meaningful their a and was software results XX%. to growth. top and and Cloud than business and more our delivered Services a cloud as leverage services profit. gross part contributor Overall and Managed once growth. to increased Customers profit mid-teens. of remained important increased delivered top continue increased of profit driver the high top by growing performance services an contributor line across XX%. double-digit capabilities to services profit

strategy. you relentless As and results, can of address solutions enable see, to our deep and most to priorities, driver our our broad team third leads the pressing to portfolio of customers' growth commitment that

During XXXX, we and fortitude patients. strategic our maintained

architect productivity further deepening industry our are expertise. and We way and One anything strengthen implement is customer's strengthening of cuts unbiased, enables full which A point address continue the build upon multi-branded solutions, We needs. view. customers customers, and of and our relevance stack highly our more that efficiency each technical know unique value that ability noise by deliver to that informed to coworkers and and partners. we view our our our work through to than point relevance outcomes and our differentiating

at Sitting industry expertise Healthcare our side-by-side solutions have decision the with These the matter us the C-suite to add dozen only X process experts in experienced former and industry-specific with portfolio CTOs offerings crucial launching more expertise, extensive up capabilities. very executives. subject deep move industry table, value CDW been and our include possible practitioners stack. and than and by experts showcase combining developing former Healthcare deeply the this CDW CIOs,

develop room innovative patient organizations and transformation transformation are solution proprietary test latest strategies our like the U.S. located centers technology Healthcare content, collaborative equipped AI across centers next and explore experts with new and and staffed can Healthcare IoT-based solutions. spaces by Healthcare the customized Solutions where

rates, measurable to deliver clinical they real-time reduced access outcomes. centers One is enhanced advanced center scalable can higher with Solutions like providers data center that evolving patient complete deliver a and tools older. care across enhancing intervene exploring readmitted, X,XXX capable stand-alone identify patient with and These engagement readmission of patients greater is and center technologies another are the and for outcomes care of before combined and and focused lab, on streamlined a running data mobile continuum. patient and XX driving scores. is analytics, quality those life solutions like where Outcomes communication at-risk improve aged clinical and satisfaction, and for so bed care simulation hospital workflows approval isolated coordinations, patient transformation where

expertise vectors. software possible strategic Outcomes on our made in and focus by capabilities our the cloud our and enhancing all highest relevance growth, fastest

include XX, maintained right, we a and the When consulting -- stance patient a offerings. XXXX, and cloud in leveraged as we our and have software recent Cloud cloud migration. November Services to premier development, closed and of towards we and capabilities strong full During cloud-based partner Investments engineering, expertise acquisition was adoption that services position Mission workflow driving robust made we capital and complements investment. flow. our resources. stack and timing and service automation in on AWS DevOps leader a and cloud-native drive opportunistic migration, and And cash greater the free cash Mission scale investments our target

be expands know AWS Marketplace, service allowing powerful commits. delivers through cloud Mission how can their a Connect purchased down our be. that to compelling this opportunities offering AWS managed customers and burn can We

challenging professional and and the services efficiency experiences solution with find customer share help we today's improve AI. me an managed Connect AWS cost of in of customers' and an that a how savings Let example a and It's combined drive example outcomes environment.

AI-driven a an upgrade. with custom implementation thousand to After and on-premise and cloud-based evaluation, analytics A investment and database The business that understanding. customer. language initial flexible customer CDW and began improved that contact provided that dollar a financial delivered designed solution project compute intelligence service The strong multi-hundred ROI company's streamlined in needed technical careful solutions CDW the both team services uses natural center includes solution operations. the

CDW significant maintenance from for This and customer performance performance, improve commitment a customer monthly The high innovative solutions continuous reduces enables data-driven services customer managed agent spend experience represents solution to integrated services Solution customer agent data for hardware, access software to and and service monitoring. service scalability, insight. a costs, cloud-based

with cloud and and portfolio It's of example our power of an services AI offerings. integrating of full the managed excellent professional

made compelling family. Solutions in more the even with mission

us high-growth for basis outpace to our XXX market in years growth relevance, high do look IT past positioned grow our the for U.S. value to have we to While however have XXXX customers, customer need to well That market XXXX. in by us more the us a on digits points. investments spend X XXX leads and deliver over low to We for us. single currently areas to to view they our basis by

expected public increased and particularly uncertainty political as market as intensified driven operations, change. Canadian factors Education expected the impact their unique face pressure given and outlook on and in market U.K. factors in This macro for our federal well dynamics from by spending side,

customers project are base are of us plans seeing pursuit As deliberate public short-term always, the now, what Right commercial and with about view ongoing our their we telling XXXX. we and buying for project our our continued remain growth large and what priorities ROI scrutiny, in decisions hesitancy. market and and of customers' IT

While view other and the potential meaningful it the our heavily. market for impact too the these impact exogenous factors demand, tariffs to weigh recognizes level wildcards inflation, not policy uncertainty, of disruptors, does including potential

are For now, prudent we comfortable outlook. our with

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

and needs. cybersecurity hardware face customers ever-expanding Our and They obsolescence. workloads face data expanding proliferating

adviser, At technologies. tomorrow, capabilities, the customers With there wherever solutions priorities exciting potential for and our lie. portfolio our face as promise other their same and of will and AI today innovative and and deep broad we be trusted they of time, and their services the

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

Albert Miralles

the with fourth billion Thank morning, XXXX summary, roughly in allocation our day. and prior of was everyone. year-over-year, with of on fourth will original performance. up year brief a quarter-over-quarter compared flat but achieved outlook. quarter X% as profit move Fourth gross declines remarks then I quarter line above my Chris, $X.X less XX was to the This provide In you, year prepared gross priorities the record XXXX expectation X capital to good low expectations, full finish to start of XXXX. of with factoring year basis but and on details demand XX% and the the margin XX.X% basis, our highest our hardware for of cloud, up teams points of below quarter security was our captured in a level mid-single-digit margin services increased certain quarter products. our

a and desktop XX.X% due gross year our across represented profit was down categories. year, Netted higher contribution from XX.X% prior prior in margin and of compared a gross the rate few decline contraction sales fourth revenues in to margin to Compared the notebook in the strong a product quarter. a modest to

customers most. meet us and trend represents they solutions category need within We down durable continue important business. an our to where The netted of

While netted some as portfolio strong SaaS consistently categories, warranties the and in revenue of may the down rest driven from growth of see expect including outgrow software the growth we by this down streams over to variance netted assurance we cloud other time, quarter. we did and

I made lack flush reflecting to of quick for driven daily budget growth space. International sales international environment. X quarter first On volatility our investments margins. the We performer achieved for expect historical these political less growth sequential growth and but gross teams review quarter above a seasonal business, and a challenging standout historical top Healthcare its activity. as years, by decline. Moving sales was quarter. remained alongside And volume our strategic of fourth end in ongoing Overall, commercial face a line as sequential firm to a expectations for market, regions the average quarter, outperformed basis, our our still the for team In than the Education we've was net in economic in the the space, time channels a this in tough public will behind the an end to while markets due delivering this was the credit government challenged, rates decline product customers uncertainty. sequential in levels. in want roughly grew

to in increase The flat of was expenses for quarter. roughly higher achievement. of X.X% expectation the ratio due Coworker end up the to SG&A $XXX gross million, approximately year-over-year. the at XX.X%. efficiency was fourth mostly Turning Compared SG&A profit our to to Non-GAAP totaled profit prior to non-GAAP was year-over-year. be year This XX,XXX. count gross SG&A

coworkers Mission market Cloud count quarter align to These and from year. both both XX,XXX, quarter approximately to our XXX and actions in to down fourth coworker While conditions. consideration of was taken the expenses into last take customer-facing flat acquisition the third numbers Services our the

exceptional cost of and customer to and goal growth, Our balance operations. with expansion our from is capabilities experience leverage greater broader efficiency

year-over-year Non-GAAP down from XX.X% operating operating combined $XXX the X.X% approximately prior prior higher driven X.X% expenses. Non-GAAP was gross million, the with margin year, versus income down record income in lower of was by margins year. the

was following million impacted modestly X.X% debt slightly Our the in down $XXX non-GAAP due a income on interest lower income net our and quarter, year-over-year by basis, higher to rates. expense lower interest refinancing

net gears fourth cautious average X.X% briefly results. decision-making decline decline in year the environment. Demand in initially share anticipated second and was gross X.X% per this net and throughout a sales below With led what year. $X.XX, $XXX.X and was was to profit. deliberation customer Shifting more consecutive challenging year we we weighted year and non-GAAP sales X.X% sentiment quarter cycles. diluted Net-net, with elongated diluted a versus was income of the million, to a full XXXX prior down experienced the review shares

gross year-over-year at even when declines, that held and client hardware stronger, our devices is XX.X%, versus these margins remain weaker, Despite are margins resilient. XX.X% firm solution showing

well Our are Cloud should strategy which acquisition of us Investments investments the the working. like which in Services growth future. brings recent capabilities for position Mission

net customers to no fixed year-over-year we meet they base P&L, This in made support income non-GAAP and our expenses share, and environment X.X% our and of to where to respectively. judicious X.X%, net environment. year-over-year and matter Down per income non-GAAP pivoted our income demand the the to we of strategy. always, to X.X% non-GAAP cost to will non-GAAP led uneven we operating higher continue adjust diluted decline As pivot need of align investments as an us, saw

up $X.X the notably acquisition use Mission Services. end, fund during of Cloud from XXXX. sheet. net of billion, $XX our of since revolver $XXX quarter the At was to to cash balance billion. period remains by Liquidity quarter, and debt our Moving $X.X approximately availability cash with was This plus million approximately driven roughly the strong roughly third million year-end

days, to conversion This end inventory management cash low range working proactive reflects conversion cash management levels. average at cycle was of the our of targeted low capital, and of of effective XXs. X-month our X day the teens prior year from The XX up including our high

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

capital cash flow We expectations. was cash consistent continue with to -- cash our longer believe remains target term. our for modeling million best working free the in guidepost range flow $XXX Adjusted conversion the quarter,

XX% adjusted net cash of and non-GAAP healthy non-GAAP For to our income. XX% billion of XXXX, of total, stated net free flow XX% income, our was of thumb a $X.X in achieving rule

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

$XXX XX%. For exceeded we returning to our million the with to XX% $XXX the cash approximately at flow year and finishing shareholders repurchases, year adjusted million target of free XX% of dividends of of share

brings allocation me capital to That our priorities.

increasing increase is consecutive on Our growth. annually, with capital We earnings our last first to to XXth priority our our $X.XX income dividend our X% of dividend net dividend. increase in non-GAAP in the call, year announced an the line approximately

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

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

debt as and liquidity to continue evidenced XXXX manage flexibility redemption proactively actions. while maintaining We will by refinancing our

for could that allocation Services. and Mission of and important continually by shareholder third of strategy remain repurchases evaluate our drivers acquisition as shown of capital our We accelerate fourth Cloud recent our M&A opportunities share growth Finally, priorities X-part M&A value.

adjusted to dividend XX% flow return cash to our Likewise, via we our remain to shareholders repurchases. of committed free and share to XX% target the

repurchase On approximately we and to sentiment of Board million leads us And that such, are remaining remains Directors. across our million the program As beyond. by announce Customer to pleased top under $XXX additional outlook. $XXX authorization an our authorization share program end of our XXXX for current approved of cautious markets.

We to XX cycle. cautiously are near persist point expect about the as for but inflection in conditions the an demand optimistic term these

technology customer to in workload that address conditions Customers and saw still products, landscape, leveling client product compelling demand as increasing devices. may to uncertain rates a continue a threats we aging such macroeconomic compares. while And priorities security complex by growth have NetComm depressed need demand growth, XXXX, weigh on after including areas anticipate and hardware, for tough like digestion for these XXXX solutions in driven lapping and

low XXXX of these year factors XXX single and XXX on Based outperformance points full is mix We customer With spend gross a basis to for basis. mind, target in we profit market the on expect grow market IT low single-digit of the expectation our growth. digits. solutions, products anticipated to

We within continue in balancing of also solutions expect and stable and services businesses, hardware. growth the of cloud, the return up relatively margin a while XXXX gross to SaaS levels range prospect to to remain we scale as our

gross first XX%. the splits to historical versus We of half, seasonal half be our line profit expect reasonably slightly with in lower than second XX%

as be profitable year for exceptional basis. full priorities. digits grow effective headwind and year. that per Finally, currency ourselves year non-GAAP capital allocation our growth, on growth low we to on diluted share currency an expect year-over-year our execution a expect the financial to outcomes a hold full accountable we constant earnings customer we our outlook of On focus single slight to reported we throughout remember, Please delivering note,

thoughts for modeling quarter. first the Moving to

gross We historical line decline year-over-year we similar single-digit growth, levels. margin relatively sequentially to leading gross XXXX to low and overall and to mid-single-digit be profit in with expect anticipate levels,

the down Moving P&L.

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

profit few highest SG&A As years, non-GAAP percentage last will the we've the seen this result in of quarter of for in year. being as the the gross a first level

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

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

to that, I open for with it And Thank Instructions]. you. operator questions. [Operator ask will the

Operator

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

Amit Daryanani

the of just Chris, thinking I profile? the And kind playing guess on that calendar how 'XX impact I just Dodge, when are term? you near vertical see about would given the CDW do guess, to with guide that really, the start think I how in focus out about kind on public growth really different be stack for having and That of to of efficiencies you parts provided, the folks the medium helpful.

Christine Leahy

Yes.

can side, that terms being in our of taken that consideration seasonality cetera. typical end the those the factors we're into public that funding sector Education areas On the cycle, of in and we the facing at of some we've unique et large

look, But out. these fast. very here's it's They're say. of early got lot tell what Things too to I things coming of moving a where would say, all fluid. We've clarity. are I'd lack are

And would to so and through go, when I going we're are basically year. and taking it puts we'll and analyzing comes the go we to there as dose, as takes. it be say update we that

tends Any side, that efficiency is in slow long and have that the the reduce space, down other workforce we technology the run. in. things time over positive factored you government on for driving anything But to

well have you to cautious we all to the assess continue knowing in clarity tried prudent don't year. our and that full we've federal approach update just through to be we're go we going as So the and and

getting day Education On single side. the Education, every around we're news

We're going And stay tuned, to so We're we're to just going the measured. aware. continue going policy assess overly board. but sources reactive changes and to funding we're stay be going across very be and to not to

realignment, and a we've very be And strong a where state As we federal, out our going it there a reductions, business. risks got are figure going to job have you'll I you'll -- to also the opportunities and but puts be takes. will and strong and to -- and said, got There's local have be are. Education

us customers. and their now. of that understand the There's the changes, middle and discussion a right where with really way right years you're and are daily a think our customers through we XX turning the federal are as we're lot technology on to have some actually landscape. doing that over things figure understand the be lot to finding going out. pockets work of Education run, longer across going funds to of Certainly, I people a term. There's is in to But We think basis analysis. a of air They long winner and see helping and

Amit Daryanani

Got really dollar up. If spend single-digit the to just I guide gross be think you're I it. somewhat that That's helpful. follow that. could the When year, low line for profit and top IT about better see expecting than this the broader

So should more muted Or single-digit it there driving low what's growth, Just be are factors if about? about gross aware that some kind of we bit dollar a growth help other think profit Is you profit would us dollar make? be that helpful. mix?

Albert Miralles

rates all EPS. say, as the down down Al. gross look, think would way profit significant. those variance customer items not actual about spend, to line outlook you and It's our from the the The growth I between are the P&L, variance in

that's So number one.

mix. So there's meaningful nothing of little report a of to there beyond shifting a maybe bit too

mix. with some as leverage So of down pressure maybe bit that EPS. income probably -- get a operating sales but further would on continue you pick gross profit. would lean a up of continued to the non-GAAP would then will line just depress note little bolster a in you that expense into down, net see into which as netted to bit bit, compression shifting a continue lead in and I that little in we We

categories, those the overall. So meaningful variance not too between

Operator

Chatterjee next Our from JPMorgan. of comes question Samik

Samik Chatterjee

basis. sort that it XQ day of you that or I be a you think, it lot and seemed guess Healthcare like particularly strong start adjusted up, but to maybe close year, follow-up. through strong quick drove that off on verticals was I had have results, called within a also that? you strong, end what anything the the to go of to on that transaction just Can a the drove XX% I out, a of number else any business sort to Was

Christine Leahy

net reflected at Look, of really value success sure. of performing very But the a how the is now. that and reflection the standout Healthcare several saw number for balanced last a and of to bring has over Yes, number strategy there. The quarters nice with we Healthcare was our Healthcare, been quarters mix been sales our day, a a it's customers. which we end the couple

expertise. to cloud, that behind teams around enable portfolio, real we and capabilities Healthcare couple and be journeys. a The on deep of help in and Healthcare And our when trusted you cloud our frankly, technologies Those fruits. We've partners, the broadened investments that with made the customers that just to Healthcare particularly bear. partners their Healthcare number bring is bearing

Now say very of I a difficult couple that are overlapping would we years.

are bringing journey very, does to them help right and Healthcare So along Healthcare at the day, of seem their in that really on the proud that number, end way. we're the bear for the it there But they're of organizations very to earlier high. the team and cloud, the focus execution and

Albert Miralles

And add the comps. about I'll maybe, just on that. point Samik, Chris'

a some comps behind transactions. about it that we've on think the client built overcoming nice be we as As invested adds a base, larger including regard. also It big would Netcomm, business, one in that has Healthcare

the really So somewhat is just there and the the Education. while that we pleased is outcomes are in note, business offset declines the government be of finally, while not there, recurring. from of I then strong an definitely tended to some Healthcare, execution there . And element fully transactions it may with that would

of out sector. public that be that So kind round overall would

Samik Chatterjee

for follow-up the probably And one, you. this it. Got is

Just question. on my last following up

You of cloud like from side. on subscriptions. your some in remarks which the practices you mentioned the on of the to, on Microsoft prepared is sort referred the referring And the sales net change mix I you're think what the in subscription

of through and a think sort like of of changes and those investors are exposure policies how these sort looks you're sort some of companies. magnitude of of navigating from I that curious cloud what lot

Albert Miralles

Samik. Sure,

one I incentive was that partners and last we a to think mentioned program question some of This we call very Look, got telegraphed changes while. that. see we with from on or commonly. the the changes respect change quite for Microsoft

'XX seeing to opportunities our we had . And overall were so that both other is And We contemplating results. partners. pivoting from impact growth that the are the other to material coming. been usual, as We for not with also on but Microsoft that. with

Operator

from of [Operator question Reid comes Instructions] Our Redburn. next Harry

Unknown Analyst

why checking clients comment in threat is essentially any just AWS. marketplace that there's our there run a the their reseller some [indiscernible] some very about nature made would I'm of of and software? [ for of up value-added annual on Just if that thinking on and from moat the AWS comments moats business wouldn't helping commit directly protecting the ] of be the service the disintermediation clients helpful. down procure Just

Christine Leahy

Yes, to I all have market wrap services we around has you would that CDW great way, is the place of characterize purchases. the that the this it's on. moat it

of Year. us to In complexity, named Partner fact, were chain. we AWS procurement in because will, the just turn marketplace is our if another Marketplace really you the And customers

And input that the CDW decisions. brings to bear make all and good customers expertise

growing multi-cloud to hybrid cloud, our are The on-prem quickly. meaning squarely remember and while other cloud really very and obviously that is thing clients is

efficiency the want back to many have advances reasons have customers We they models, to in and including and stay around who that et on premise, are AI cetera. some repatriating of on-premise also particular

how entire the around. hybrid things customers' knowledge like who interconnectivity could us ones across do and together. that estate important have are the folks the critically their our work who that customers full is have understand So infrastructure only to And

us So well. pleased -- behind continue that. example a Cloud we is investment part build great family strategic to taken they've of our of to differentiation Mission they're joined the we're and to a and and off have as them are investing

Operator

Next Bhattacharya America. Bank of Ruplu question comes of from

Ruplu Bhattacharya

has past, a been segment looks the revenues market change bellwether in In and essentially that this about X quarter Chris. in year-on-year. for like end for SMB one weakness. demand. a It that's First years grew after of X%

should was there positive do think year-on-year? have market a segment Chris, you So overall onetime And now I in And for indication for And think that that, follow-up this any we Al. quarter? as a this demand? grow can

Christine Leahy

business small that we've bumping corporate before stabilization both I showed QX, would little of our the saw past in and look, stabilization. kind business bottom small a Yes. bit signs quarter. And say, now this of businesses and along said of we

I are business, -- business. the rhythm the clear less what seeing of the in We We're that of et I business. I be the unevenness, cetera. to activities rhythm stability is when more seeing stabilization, the say the want mean in

that we encouraging. So really find

At outlook what's out cautious. with time, and Ruplu, that that taking been happen is that's think say add just good we've I'd It's the efficiency uncertainty we cautious inflation. happening to there news environment. -- prudent, subscription and the we're just are customers issue being and and cost our Clearly, remain same about is, think cautious. And and into account an uncertainty, impact and then rates with the everything impact interest going going unclear we and downstream for small be and continue the particularly they're they're using But in ratable as significantly is to helping all I policy them offerings. businesses to cost see optimizing very cloud

but business, small with yet just rebound cautiously a it optimistic. call we are wouldn't I So

Ruplu Bhattacharya

I margins. looks like netted fiscal ask if can core at Al, question margin you a overall ex if down business, XX.X%. specifically, the in came items, 'XX gross the the of look at we on Okay.

So you an end in some in should core I it was market the came -- grew down improvement see products fiscal PCs. so year-on-year. think, The bps But that quarter, fourth sequentially. my question question device end or business the is like about X.X%, margins XX 'XX to

are trending So how thinking in 'XX? you fiscal margins core about business

Albert Miralles

I of Ruplu. Sure. couple Thanks, A things note. would

You are right.

up margin sequentially XX.X%. year, basis down down full was points, non-netted but XX I our for was the about think about have quarter, and might you was it points. down mentioned the that. That basis year-over-year, For XX

I optimistic say We of as hold We reasonably about And that as expect down on. while net-net, be to think you wouldn't As move Ruplu And are see cautiously along will would margin back a that comes but also services for that reason been we margins. it's significant margin the would aid continue think modest would that XXXX, expect will which growth will client acceleration, we hardware along to firm. would more aid well. pad, move certainly path. which that then attached, expect we expect those solutions, we non-netted the will

expect to during margin considered, we would pretty 'XX. firm hold So all that non-main things

Operator

Our next Keith Northcoast question comes Housum Research. from of

Keith Housum

that to more of mean the business. integrated Mission job you investment in require significant it on guys kind Services provides explaining of But can a in you more terms I into statements. you margins the of the do little good gross context to guys type CDW Cloud little -- of Chris, just is about make Perhaps it a a have? product guys bit what the accretive to of bit your you terms line? it do bottom a acquisition. a And financial provide you

Christine Leahy

Keith. Sure, Yes.

Mission hand start market. to about the excited there customer to a brings It me then profitable expertise really Al. Cloud. mode. our that bring we're excited business. reputation AWS it to incredible Let really We're in a It's and And over in fast-growth and across I'll It's base.

focused which for rest extensible business, us, As a on know, mid-market our spot they and but the you are is into segments. small sweet of

the going and to price the we this a our growth have accretive, we year do result, to because big That Cloud going bottom on of forward. rates to we not And won't significant line see impact. of we're as paid strategy expect the Mission terms addition and In foregone said, see a a impact interest. profitability much

Albert Miralles

thing Thanks, Yes. growth mode, a would is that add look, notably The is company Keith. in but profitable. is, only Mission is I

to interest to think would the formative the line you when point, we and high-quality in so pretty much flat we EPS as So be gross and deem asset, of are substantial profit deemed materiality not integration, down it Chris' income. the operating really non-GAAP the but about and then a at stages it the income in 'XX,

the we we integrate are vast And accretion upside Mission hit as possibilities We again, open Chris this, customer 'XX, aperture in in base. think our for to and the the fully significant. really

Keith Housum

want Great. I continue correctly. sure markets. margin in some going little that what's appreciate of pressure And gross end I you mentioned And earlier two, make would the expectation from I it. that to understood on, bit price just the then a forward?

Albert Miralles

product Sure, margin components compression, was and puts the house. of Keith. Yes, things a like-for-like, bit in kind saw of walk one the side the and the of in I of gross takes, of we mentioned that particularly a the

just recall, margins product holding Keith, of really, I had up several now Now years we've really that strong.

impression. we've And some saw And in at what out you see bit material. the saw as an I clients. called would a compression probably that quarter was I we think we little where not the area point, note of could most notable

So all little would a we've Certainly, contributor. margin we space when for on we but call for not in outsized an front compression, that XXXX, made of the the elements some factor

Operator

Our Woodring question next Morgan of comes from Stanley. Erik

Erik Woodring

your did and XXXX, Chris, decade with . the if XXXX in over guiding line I that of largely referenced, as EPS growth, you plus, outpace And kind your as earnings the back growth look growth. was to look revenue it, last call revenue growth. not first are gross I year Al profit

-- And leverage And different CDW? so about when seeing market. leverage we're look help I follow-up. a you've a in as maybe there I'm truly just I materialize. even or take have much as that's back, that wondering And then environment why maybe aren't we us understand past step this why not uncertainty just is than quick was where historically, periods maybe past the that model macro we at dynamic the seeing anything I'm you unique seen a including Can

Christine Leahy

with current the when broad years, way. results. that been but doing aren't our is we've the I'd Erik, positioned base an And of But business growth our and this over balance that environment of kind this going the it significant to investments demand, for in investments as in you good environment -- we we a forward. several to And we've number for made across deleverage. of also, very we've are And sure. Yes, that where they've rightsize characterize growth at goal measures, We're one producing been the know, look we ensure growing. the exacerbates efficiency taken our capabilities ensure last is operations. you for the

I We've investing think we've been been investing deliberately. very judiciously. very

in is strategy a great high relevance. think are of example areas seeing pay high I off. that growth, And that Healthcare And

factors, SaaS of I'd the great is on is confluence efficiency of that and environment cloud off. our but deleveraging say, strategy low growth. to initiatives while in has that those security are which productivity with examples no business to for do an in growth, growth Our we've business and going investing the got paying

are come mean Eric, leverage obviously, we back forward the that. as we to is our as provided that beyond. expect, environment move next goal over an that for well, in that we I and said, operating that do supports year

Erik Woodring

leaning a the and maybe, might where the is, M&A more there. given see could about just workloads environment in And probably change Okay. I in impact sorry you off for your you quick case administration that cutting CDW. by Chris, how the into for comments follow-up make clients shifting this historical

when Is are a back CDW we address X last, over are you today your it, appetite to to believe gaps fragmented just critical for higher M&A most specific for than the product where consolidating the today? besides years? look And X call market,

Christine Leahy

a large it's always appetite really say Erik, Yes, have question. What is we a would for I interesting M&A.

growth. and We scale been are in that driving in do today foundation areas a those different because we have position we've

about those scale. good capabilities, over really security capabilities. and have think our data We a capabilities. about about So we of now growing think We've when cloud X we years think base been

a that to a in technology. identifying us position industry tuck-ins specific could those and emerging to puts might more them at particular opportunistic add be fortify be to that to time the while specific think I or really capabilities that same an

or have Our around M&A would we a focal at an are dramatically adding say lens areas, specifically. frankly, perspective. from But not capabilities at I changed that industry all

Education, work see bit. federal. very good been buy we us quite companies to This a has specific that seen to a us, strategy for specific You've and

to So just patient. and done, more do But we for all said are us I'd of look that.

are and opportunistic, for we We assets. look great

Albert Miralles

of example Look, we allocation a did capital maybe, And think just array Erik, where is priorities. great I XXXX I'd the full bring add.

looking a in we to compounding attractive levels. share behind So more at repurchases, fuel would could tough and stock acquisition the opportunity our what is be of during really We earnings. did next at where the operating that income more actively period lean to but our scenes, deemed have

our fulfill earnings opportunities capability that that to and at continue will continue So but look needs, also power. drumbeat with drive we

Operator

comes of Barclays. Wang next Our from question George .

Dong Wang

of mid-single in the about talked to can storage of fourth -- underlying guys impact hardware, NetComm Maybe and the maybe just if prepared up digit. you remarks, including kind you kind quarter

impacted guys are upfront? channel, of also, can by green despite care on from the whether comp. terms And outlook can net the seeing like that's in the all or you if It give health SMB driven you more and curious whether color the some seems year you some full shoots. Just corporate

just of the particularly the we are Just expect curious side, probably inflection sort NetComm digestion [ some if of ]. we on some testing should consider

Albert Miralles

take just a at that George, was Okay. lot. a that, crack

the with So on market starting the first, side. quarter, end just

that think and be as our commercial line expectations would the most saw side. element of on exceeded the would business. small punch on stabilization corporate significant suggested, we be I the Chris And signs

if would really driven That a was then is and of you the area. That in by mid-single-digit across what health out, side, care, George, on end reasonably from to we growth that our array elements continue. investing And in perspective talked of balanced, point that is an markets and behind the growth. performance the reflection it categories what in a is saw look some expect we again, 'XX, good I'd exceptional about of different better experienced that QX. client as in other will, strategy. of or we categories category of we've out George, we

path XXXX. have we the QX. on think that contribution And going other been reasonable. and be but have for NetComm. for realm, way, quite And the that in could think servers will hardware. a we're is glide strong the us then Where demand there, challenging. We was modest Storage continued expectation NetComm think, some solutions quarter. saw growth X%, We in in performer reasonable on a Probably from? we from some in again, X% that's I then cautious there come And a

that continue And in so space. we cautious may are that

round hardware it of the would on would be out how category that side things. product So

Dong Wang

Okay, a quarter, increased talked and in great. completely the to going of the want the December I just can away of some quarter competition/pricing sure of nature kind follow-up. Last I pressure. guys went If on you squeeze forward. briefly make transitory in slight

rearview So seeing some that maybe or of you really competition was can increased address if completing you the mirror? still are guys sort

Albert Miralles

that. take I'll George. Sure,

First, in. specific been were in comments I on to last competition, It We've that years X fierce. we've the range the those quite of a just of was been the tough And would broader hardware. QX. really environment a reflection cycle with not down challenged say and

that in the continue margins That's versus that to margins, came continued. competition I that and in well to talk differently good our in George, we regard. our I we wouldn't point regard. fight QX, when about quite in impact the would out fight anything And out regard. expectations that not is on think having we I meaningful point any

Operator

back Thank you like very to At time, to I'd much. call hand CDW closing this the for remarks.

Christine Leahy

Okay. Thank you, Karleen. I appreciate that.

privilege goals. I you listening globe of customers, around Thank successful. and for time Let serving me your to to . Al by next quarter. and it's And work ongoing forward customers to in dedication you recognizing us your what our look CDW. to our coworkers for opportunity the continued talking commitment you and achieve the their and you thank interest incredible makes our to those help to the hard close

Operator

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

now may your disconnect You lines.

CDW (CDW) 5 Feb 252024 Q4 Earnings call transcript