CDW Corporation
Q2 2016 Earnings Call Transcript

Published: 3 Aug 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the CDW's Second Quarter Earnings Call. At this time, all participant lines are in a listen-only mode to reduce background noise. But, later, we'll be holding a question-and-answer session after the prepared remarks and instructions will follow at that time. I would now like to introduce your first speaker for today, Tom Richards, Chairman and Chief Executive Officer. You have the floor, sir.

[Thomas E. Richards:]

Thanks, Andrew. Good morning, everyone. It's a pleasure to be with you. Joining me in the room today are Ann Ziegler, our Chief Financial Officer; Chris Leahy, our General Counsel; and Sari Macrie, our VP, Investor Relations. I'll begin with a high level overview of our second quarter performance and outlook. Then, Ann will take you through a more detailed result review and share more on our capital priorities and medium-term targets. We'll move quickly through our prepared remarks to ensure you have plenty of time for Q&A. But before we begin, Sari will present the company's Safe Harbor disclosure statement.

[Sari L. Macrie:]

Thank you, Tom. Good morning, everyone. Our second quarter earnings release was distributed this morning and is available on our website, investor.cdw.com, along with supplemental slides that you can use to follow along with us during the call. I'd like to remind you that certain comments made in this presentation are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Those statements are subject to risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is contained in the Form 8-K we furnished to the SEC today and in the company's other filings with the SEC. CDW assumes no obligation to update the information presented during this webcast. Our presentation also includes certain non-GAAP financial measures, including non-GAAP earnings per share. All non-GAAP measures have been reconciled to the most directly-comparable GAAP measures in accordance with SEC rules. You will find reconciliation charts in the slides for today's webcast, as well as in the press release and Form 8-K we furnished to the SEC today. Please note that all references to growth rates or dollar amount increases in our remarks today are versus the comparable period in 2015, unless otherwise indicated. In addition, all references to growth rates for hardware, product, software and services today represent organic net sales only and do not include the results from CDW UK. There were the same number of selling days in the second quarter of 2016 compared to the first quarter of 2015, and one additional day in the first half of 2016 versus the first half of 2015. All sales growth rates referenced during the call will be average daily sales, unless otherwise indicated. A replay of this webcast will be posted to our website by this time tomorrow. I also want to remind you that this conference call is the property of CDW and may not be recorded or rebroadcast without specific written permission from the company. And with that, let me turn the call back to Tom.

[Thomas E. Richards:]

Thanks, Sari. We delivered solid top-line growth and excellent profitability in what continues to be a challenging market. Consolidated sales were $3.7 billion, up 10.6% above last year. Organic constant currency sales, which exclude the results from CDW UK, increased by 4.5%. Gross profit increased 14.2% to $610 million. Adjusted EBITDA increased 12.2% to $301 million, and non-GAAP net income per share increased 15.8% to $0.93 per share. This quarter's results demonstrate the power of our balanced portfolio of channels, as well as our breadth of product offerings, particularly our ability to bring innovative emerging technologies to our customers and the ongoing success of our three-part strategy. Let me walk through how each contributed to performance

[Ann E. Ziegler:]

Thanks, Tom. Good morning, everyone. As Tom indicated, our second quarter financial results reflect the combined power of our balanced portfolio of channels, breadth of product offerings, and our strategic progress. They also reflect the progress we are making against our long-term financial strategy to drive strong cash flow, deliver double-digit earnings growth, and return cash to our shareholders. Turning to our P&L, if you have access to the slides posted online, it will be helpful to follow along. I am on Slide 8. Consolidated top-line growth was excellent this quarter, with net sales of $3.7 billion, 10.6% higher than last year on a reported basis and on an average daily sales basis. Average daily sales were $57.3 million. While Canada represents a relatively small portion of our total net sales, at just over $130 million this quarter, Canadian dollar translation continues to impact organic net sales growth, shaving approximately 20 basis points off of organic growth, which excludes CDW UK. This is 30 basis points less than the second quarter last year and 20 basis points less than last quarter. On a constant currency basis, organic net sales were 4.5% higher than last year. Organic sequential sales increased 17.6% on an average daily sales basis versus Q1, 2016, which is slightly higher than our historical Q2 to Q1 sequential increase and slightly below last year's sequential growth. Gross profit for the quarter increased 14.2% to $610.5 million. Gross margin in the second quarter was 16.7%, 60 basis points above last year. This increase reflected the combination of our mix into revenue recorded at 100% gross margin, such as our net service contract revenue, which includes SaaS, higher vendor partner funding, and the inclusion of CDW UK, which has a higher mix of services. As you know, mixing into net service contract revenue favorably impacts gross margin and gross profit growth, but tempers our revenue growth. Turning to SG&A on Slide 9, as expected, consolidated reported SG&A, including advertising expense, grew faster than sales coming in at 17.8% higher than last year. This reflects the impact of 390 incremental North American coworkers added since the end of Q2 last year, incremental CDW UK SG&A and our continued investment in advertising, which increased 11%. Adjusted SG&A for the quarter, which excludes $9.7 million of non-cash equity compensation, $2.2 million of acquisition and integration expense, and $0.7 million of historical retention costs and other expenses, increased 16.7%. To make it easier to calculate our adjusted EBITDA, which is essentially our gross profit less adjusted SG&A expenses, we also adjust for depreciation and amortization. Non-cash equity-based compensation expense increased $2.2 million year-over-year to $9.7 million, primarily due to 2016 annual equity awards granted late in the first quarter of 2016 and equity awards granted in connection with our acquisition of CDW UK. Our adjusted EBITDA for the quarter was $300.6 million, up 12.2%, delivering a margin of 8.2%, an increase of 10 basis points over last year. Looking at the rest of the P&L on Slide 10, interest expense was $36.9 million, down slightly from Q1 and last year's Q2, due to a current period interest income benefit. Turning to taxes, our effective tax rate was 37.3% compared to 37.1% in last year's Q2, which resulted in a tax expense of $70 million versus $63.9 million. On a GAAP basis, we earned $117.5 million of net income. Our non-GAAP net income, which better reflects our operating performance, was $155.6 million in the quarter, up 11.9% over last year. As you can see on Slide 11, non-GAAP net income reflects after-tax add-backs that fall into four general buckets

[Operator:]

We'll be taking our first question from the line of Matt Cabral from Goldman Sachs. Your line is open.

[Matthew Cabral:]

Thank you very much. I wanted to dig a little bit deeper into the weakness that you saw in MedLar in the quarter and, in particular, if there are any verticals or products that stood out to the downside. And then, if you could just help us understand. Tom, I think you were talking about a bit of an inflection going into the back half of the year. Just what gives you the confidence that this is more of a near-term slowdown within that vertical?

[Thomas E. Richards:]

Morning, Matt, thanks for your question. Yeah, so, let me just kind of comment because I think, as we said, the tale of two cities, kind of gets to the very heart of the issue. In MedLar, we knew going into the beginning of the year, that we didn't have many of those large deals. It's why we carefully signaled that we thought it would be a slow start to the year in the Corporate business. And that's kind of one of the reasons we have a little more confidence in the second half. We've got a line of sight to a number of significant large projects that were closed and will be implemented, but all of that kind of that depends on kind of the underlying economy. We're all hopeful that it gets above whatever it was, 1.2%, because that does drives business behavior over the long-term when it comes to investment, if you think about it. So, we're all, I guess, would be hopeful. But the fact that we have line of sight to some of those larger deals that we've already closed, just will be shipping, is kind of the primary reason you have some confidence in improved performance. The other side is, if you look at the success of Small Business, right, it continues to perform. And that gives you some confidence that your overall Corporate business is going to return. And we've been through this. And even in the five years I've been at CDW, where you'll go through a couple of cycles. Some of it's tied to refresh projects. I'll give you a linkage example. When we had the Windows 2003 Server Refresh project, there was a great deal of concentration in server upgrades. A lot of that took place in our Corporate business. And you don't have that kind of exogenous driver right now going on, although you do have some other things coming down the line, which I think gives us, like I said, some of the confidence over the back half of the year.

[Matthew Cabral:]

Thank you. And then, as a follow-up, and switching gears over to the government side of things, that's been a pretty big revenue driver for you guys. Can you just help us understand what's changed over the last 12 or 18 months or so that's really allowed you to attack that segment more effectively and then how sustainable you think the growth trajectory is going forward?

[Thomas E. Richards:]

Well, I think you heard me, Matt, on both cases, I think I used continue to be healthy and continue to perform to describe a couple of the Public segments. As I articulated, I think there's two things that drive it, and they're a little different. In the Federal business, a little over two years ago, we took a step back and changed our approach to align around strategic programs. And a lot of that was with the change of the acquisition strategy that existed in the Federal Government, which had been very geographic-driven and then became more programmatic in how it was driven, instead of concentrating just on bases, you're concentrating on programs. And I think that's proved to be really effective for us in the Federal market. In State & Local, it continues to be a function of our differentiation in a solutions area tied to public safety that drives growth as well as a pretty aggressive acquisition strategy when it comes to new contracts. So I'd say those are the primary drivers. And despite some pretty challenging comps for that gang, we expect them to continue to perform as they have.

[Matthew Cabral:]

Thank you.

[Thomas E. Richards:]

Okay.

[Operator:]

Thank you. Our next question comes from the line of Amit Daryanani from RBC Capital Markets. Your line is open.

[Thomas E. Richards:]

Morning, Amit.

[Amit Daryanani:]

Good morning, guys. Congrats on a nice quarter.

[Thomas E. Richards:]

Thank you.

[Amit Daryanani:]

Questions from me if I could, one on the Public side, just to follow-up, the strength you guys saw in the June quarter, could you just talk about your comfort that this wasn't any level of pull-in that perhaps happened from September into June? And if you just update us on the E-Rate funding, how much is left, because I think last quarter, you talked about CDW allocated $120 million, so just an update there would be great, too?

[Thomas E. Richards:]

Yeah. So, the E-Rate has been an important driver, as you know, in the K-12 part of education. And now you kind of have to think about it in two funding cycles. We're still working through the 2015 funding cycle. And we've got 60% to 70% of the authorized funds have actually been deployed, which means we still have 30% of 2015. And we're now in the middle of the 2016 cycle, and I can tell you that we're very pleased with the number of times CDW has been named as the initial partner to deploy those funds. Although, I think the one thing we learned going through the last E-Rate rate cycle is the timeline between getting approved and getting the funds ready, then getting the funds deployed can stretch out. In fact, we have customers who got approval in 2015 and they can deploy it all the way through beginning of next year, if they get an exception. So, I guess on one hand, that would be a good news item, because that means there will be continued revenue to come from it, but we feel good about that. A lot of the E-Rate funding has driven the excellent network results that we saw in K-12.

[Amit Daryanani:]

Got it. That's really helpful. And then, I guess, Tom, I want to follow-up on the Dell relationship. You've had it for a few quarters now. As you think about this longer term, do you think this $200 million or so incremental revenue you get in calendar 2016 is that the steady state run rate or based on what you see in the field right now, that could be inflection higher, over time, in 2017 potentially?

[Thomas E. Richards:]

Well, look, I would expect it to approve (sic) [improve] (40

[Amit Daryanani:]

Perfect. Thank you, guys.

[Thomas E. Richards:]

Okay.

[Operator:]

Thank you. Our next question comes from the line of Matt Sheerin from Stifel. Your line is open.

[Matthew Sheerin:]

Yes, thanks, and good morning, everyone. Question regarding your cloud business. You talked about the 6% of gross margin – gross profit now derived from cloud. Could you talk about the economics of that business in terms of operating costs, SG&A to support that, and working capital? And as that business continues to grow at a faster rate than the company, what does that do to the economics of working capital returns, et cetera?

[Thomas E. Richards:]

Well, there was a lot in there, Matt. So, let me try to go through it and get you to the finish line. So, the first thing is it's a little different business. So let me just start with a working capital perspective, because we're obviously not buying products and putting them in warehouses. And so that's a kind of a whole different model. It is, as you might expect, an extremely profitable business for us, but it is like all of our solution areas. It's a different selling motion. It requires a different level of technical skills. And, as I said, we're kind of thrilled, but we started this thing back in 2011. So, it's not by surprise. It's kind of the result of CDW's ability to invest heavily in solution areas that ends up generating the kind of performance. In some cases, Matt, you get paid kind of an agency fee, which is a percentage of the value of the contract. In other cases, it's done a little differently, maybe more as a service billing. And if you think about it, we provide cloud across – there is kind of the SaaS-based part of the model. That can have a different, kind of more of an agency feel. There is the Infrastructure as a Service part of the model, which is kind of a cross between an agency and a monthly billing. There is the ag services part of the model. And so, all of those have a little different economics. But I think, at the end of the day, you can think about it as having a similar cost structure to our software business, a similar cost structure to our security business. And the biggest investment for us is making sure we have the technical skills that can sit down and help a customer think through their options from a cloud computing perspective.

[Matthew Sheerin:]

Okay. That's very helpful. I'll leave it at that. Thanks a lot.

[Thomas E. Richards:]

All right. Thanks, Matt.

[Operator:]

Thank you. Our next question comes from the line of Mark Moskowitz from Barclays. Your line is open.

[Thomas E. Richards:]

Morning, Mark.

[Mark Moskowitz:]

Yes. Thank you, good morning. Tom, I wonder if you could talk a little bit more about your commentary. I think you said you're expecting more at the low end of the 200 to 300 basis point for this year for U.S. Can you talk about the puts and takes regarding that commentary, in terms of how we should think about where there can maybe be upside, if there is, and maybe where things could get worse if they do get worse?

[Thomas E. Richards:]

Well I think, Mark, we try to be pretty consistent on this. I think it starts with you've got an underlying economy that is, I think, growing slower than a lot of people had hoped, right? What is it, 0.8% in the first quarter; 1.2% in the second quarter. And you know, while business continues to invest, I think, much like my investment here at CDW, it is with a touch of caution, because you're trying to think about kind of what's going to happen in those next couple quarters. And as we just think about what IT has done in the first half of this year and you think about the underlying GDP, it does tend to make you believe while you started slower, and even if you have the acceleration we're hoping for, you're still going to probably come in at the low end of the 2% to 3% range. That's kind of the science behind it, Mark, truthfully. Now, the accelerants, if you will, could be, I think, if we get some stability and you begin to see GDP driven a little more by business investment than maybe just a strong consumer sentiment, all of that, I think, would suggest room for opportunity and accelerated performance.

[Mark Moskowitz:]

Okay. And then, just a follow-up, if I could, you talked about some Brexit opportunities. Could you talk a little more about that? And if there is any sort of situation here where because there could be some uncertainty in that region, given CDs (sic) [CDWs] (45

[Thomas E. Richards:]

Okay. All right. Well, I'm glad you kept talking, because I thought I had the answer 'til you got to the very end. So, let me kind of go back and reconstruct, Mark, how we're thinking about it.

[Mark Moskowitz:]

Thank you.

[Thomas E. Richards:]

So the first thing is, the original thesis for the Kelway acquisition for us was serving those U.S. multi-national customers. And so, in many ways, the Brexit decision doesn't impact that. It will play that role and help us get to I think it's over 80-plus countries that they have the ability to get to. And so that's important to us. I think when you move to the, what I'll call, local aspect of it, clearly, the lack of clarity is causing all kind of theories and scenarios to be built out about the UK economy. A couple of things when it comes to our ability to – depending on how those negotiations turn out, our ability to kind of move in and about the EU. First of all, one of our locations from CDW UK is in Ireland, so that gives us an EU presence kind of right off the bat. But as we move forward, we have been, I think, pretty clear in thinking about expanding our hub-and-spoke model. And looking at other places in the footprint and, to some degree, we'll be both trying to optimize kind of our current position and looking for, what I'll call, additional or alternate distribution mechanisms going forward.

[Mark Moskowitz:]

Thank you.

[Thomas E. Richards:]

Okay. Thanks, Mark.

[Operator:]

Thank you. Our next question comes from the line of Osten Bernardez from Cross Research. Your line is open.

[Osten H. Bernardez:]

Good morning. Thanks for taking my questions.

[Thomas E. Richards:]

Morning, Osten.

[Osten H. Bernardez:]

Hey, there. So, just wanted to touch base on your commentary with respect to what you're seeing from the storage side of things. You noted seeing growth from traditional vendors. I'm assuming you're capturing channel share from those vendors as they're becoming more dependent on you. Can you highlight how sustainable that is or how do you see that playing out from a traditional standpoint for the rest of the year or over the next 12 months?

[Thomas E. Richards:]

Yeah, Osten, first of all, thanks for your question. I think the storage picture is an interesting one, because I think it represents a lot of what you're going to see in the data center technologies in it. It does emphasize what I would argue is one of the real strengths of the CDW model in the solutions business, which is our scale. Because what it does is, our scale attracts a lot of new entrants. And they're anxious to be a partner of CDW because of what we can do to help grow their business. That also gives us, what I would call, a diversity or breadth of solutions for customers and we've actually seen that play out. If you look at our storage business, it's kind of been a steady mid-single-digit growth as we've had a lot of these new entrants kind of driving growth as the traditional OEM partners transform their product line. And I think what you saw this quarter is the result of some of the traditional providers, that transformation beginning to take place. So as I think about going forward, I would expect us to continue to get growth from both of those two. And as you've heard me talk about last year, I think it feels like for the last five or six quarters, it just continues to be kind of a growth momentum. And I actually, sitting here, love the fact that we've got that kind of new infusion of anxious competitors and traditional people responding because it just drives competition. And that's good for us and it drives solutions for customers in the marketplace. So, I don't want to get into the business of predicting future quarters for different products, because you can get surprised. But I do feel good about the advantage that scale gives us in the solutions business and storage is a good example.

[Osten H. Bernardez:]

And then, lastly real briefly, I appreciate the commentary on net comp. I believe you broke it out from an end market perspective, but I don't recall whether you provided net comp directionally on a consolidated basis. If you did, I apologize.

[Thomas E. Richards:]

No, no, that's okay. It was basically flat and it was the tale of two cities story. Just I think I went through that really pretty quickly in the script, where we saw really strong growth in a number of the Public segments, if you will. And we saw a little bit of contraction inside of MedLar.

[Osten H. Bernardez:]

Okay. Thank you.

[Thomas E. Richards:]

All right. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Rich Kugele from Needham & Company. Your line is open.

[Rich J. Kugele:]

Thank you. Good morning. So, I just wanted to focus on one question. The vendor incentives, have you seen any changes in how the vendors themselves have been dealing with this kind of stutter-step investment, especially on the MedLar side? I mean, what are they doing to try and generate growth and are they trying to be more helpful than in previous years? Thanks.

[Thomas E. Richards:]

I don't think there has been a stutter step in their investment. If you got that, I don't want to suggest that. I think they've been pretty aggressive. And you know, a lot of the OEM partners tell us that, even when they've had depressed revenue and CDW has had depressed revenue, we still are taking share, although it's kind of a weird way to think about it, but and so their investment continues to be significant and meaningful. And a lot of time, as I alluded to, just if you think about it in the last quarter, we had over 50 partners funding programs and strategies and initiatives trying to drive share take, whether it comes in the form of new accounts and/or customer penetration. So they've been pretty consistent and, at least based on many of my one-on-one discussions with the CEOs of a lot of our partners, pretty pleased with CDW.

[Rich J. Kugele:]

That's helpful, and well done in the quarter. Thanks.

[Thomas E. Richards:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Brian Alexander from Raymond James. Your line is open.

[Brian G. Alexander:]

Thanks. Tom, just want to follow-up, in terms of the Corporate sales being down 1%, I think this might be the first down quarter since the great recession. How much of this do you think was just market related and temporary versus anything competitive or more structural? And do you think customer migrations to the public cloud are playing a role here at all?

[Thomas E. Richards:]

No. Let me answer the latter part. I don't think that's playing a role, because not in the, what I would call, overall top-line performance I mean, clearly the incredible success we're having in our cloud business is one of the reasons you're seeing the impact on servers. But I think that's kind of multi-faceted, Brian. You have our cloud business growing. You've got our converged infrastructure kind of business on fire. And so I think those are kind of related. I think the Corporate business was just more a function of, as I said, as you go into a year, we didn't have the number of big deals. Some of that was driven by just the ongoing success and the underlying kind of economic longer selling cycle, lots more discussions when it comes to, gee, do I want to execute this project. So, look, I don't have any systemic worries. Now, having said that, I think the team would tell you, you know, Richards is always worried when it comes to future growth. So, I don't sense that there's any new thing there that would say they wouldn't kind of return to performance. And I think if you look at Small Business, Brian, they're both in the corporate world and the Small Business that continue to grow.

[Brian G. Alexander:]

Okay. And then, Ann, gross margins have been really strong, up for six straight quarters, up quite nicely, actually. And I think you're talking about flat year-over-year gross margin trends in the second half. So, could you just talk about what is changing specifically from a mix perspective that would cause gross margin improvement to moderate in the second half? Is it the large deals in MedLar that are coming back or is there anything competitively that we should think about?

[Ann E. Ziegler:]

Yeah. No, I think you need to remember that as we move through Q3 and Q4, we mix significantly into Federal Government business. And that, as we've said for years, has a lower margin. So, that's going to have the impact. And as you see product sales accelerate, right, then the NSCR, the positive mix impact we're getting for mixing into NSCR, will reverse or mitigate as we mix back into product. So, it's a combination of those two things.

[Brian G. Alexander:]

Okay. Thank you.

[Thomas E. Richards:]

Thanks, Brian.

[Operator:]

Thank you. Our next question comes from the line of Sherri Scribner from Deutsche Bank. Your line is open.

[Sherri A. Scribner:]

Hi, thank you. Tom, I just was interested in exploring your comments about demand being more at the low-end of the 2% to 3% range. I guess, thinking about where the Street is modeling your revenue growth this year, it's somewhere around 9% growth, based on consensus. So, you've got maybe 2% underlying growth, 2% to 3% growth on top of that, based on your execution and then some benefit from Dell. I guess the question is are you signaling that that 9% maybe should be a little bit softer, given the demand environment's a bit softer and we've also got some currency headwinds?

[Thomas E. Richards:]

Well, I think that last part, Sherri, is important. We probably have a little more currency headwind post-Brexit than we anticipated the last time we talked. And so that'll be an important part of some of the pressure that happens. I think the second thing is, is you got to look at UK, just as an entity and think about what happens post-Brexit when it comes to pressuring that part of the business. I think those are two factors that kind of sit on top of the total growth rate. I still expect us to outperform the market by 200 to 300 basis points. I still expect Dell to give us 150 basis points. All of those are true, but the two new wild cards is the currency issue and, what I would call, the UK local phenomenon, if I could say it that way.

[Ann E. Ziegler:]

Yeah. And, Sherri, it's Ann. In the build you did, you need to remember to add the impact of UK from the wrap we had the first half of the year.

[Sherri A. Scribner:]

Right. Okay, great. Thank you.

[Thomas E. Richards:]

All right. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Tien-Tsin Huang from JPMorgan. Your line is open.

[Tien-Tsin Huang:]

Hey, good morning. Good quarter here. Just want to better understand the visibility in the second half outlook for the solution sales within MedLar. It sounds like there are some deals that you've signed. Is there pent-up demand, too, given longer sales and decision cycles?

[Thomas E. Richards:]

Yeah. Well, I would say it's more just – it's kind of that two factor is the way I think about it, Tien-Tsin, is, yeah, we have some visibility, more visibility in the deals that have already been sold. By definition, they tend to be more solutions-oriented. Now, you do have some client rollouts in there that are meaningful, but I think that the wild card for me is the underlying economy and what happens as we kind of move forward through the rest of this year, because I think that's going to influence business investment and that influence is the corporate side of the world. And we kind of think about it as we can only execute against what goes on in the macroeconomic environment, and we'll continue to do that. But it's kind of like similar to the question Brian asked. Do I think there is some systemic issue inside of that? I do not. This time last year, a couple of those segments were at an 18% growth rate. So kind of, it's just a function of the cycle.

[Tien-Tsin Huang:]

Understood, got it, it's the cycle. And then, just maybe as a follow-up, maybe a stupid question here, but just the election year impact, I was thinking about – what might that have on government or maybe just budget flush in general? I mean, I don't know if you could look back in the past or if doesn't matter at all, but I'd figure I'd ask you, Tom, anyway?

[Thomas E. Richards:]

Yeah, wow. Okay. No, truthfully, I would say, we're not sitting here anticipating some kind of spend it now or lose it before the new regime gets in. But, hey, stranger things have happened and if they decide they want to spend it, I guarantee you CDW will be there to help them.

[Tien-Tsin Huang:]

Got it. As always, thank you.

[Thomas E. Richards:]

All right. Thank you.

[Operator:]

Thank you. That is all the time that we have for questions today. So, I would like to turn the call back over to management for closing remarks.

[Thomas E. Richards:]

Okay. Thanks again to everybody. I appreciate you taking the time this morning and thank you for your interest in CDW. I do think it was a strong quarter for us, proud of the team's focus and execution. And our ability to kind of reallocate resources and focus where we have meaningful opportunity continues to be an important part of this business model. And for those of you that need help figuring out how to use IT, we can help you. And since it's Olympics season, I guess my comment would be go USA, go UK, go Canada, all right? Okay. Thanks, everybody. See you.

[Operator:]

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program, and you all may disconnect at this time. Everyone, have a great day.