Welcome to the CDW first quarter 2024 earnings call. My name is Carla, and I'll be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Steve O'Brien, with Investor Relations to begin. Steve, please go ahead. Thank you, Carla. Good morning, everyone. Joining me today to review our first quarter 2024 results are Chris Leahy, our Chair and Chief Executive Officer, and Al Miralles, our Chief Financial Officer. Our first 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 during the call. I'd like to remind you that certain comments made in the presentation are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Those statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is contained in the earnings release and Form 8-K, which 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 operating income, non-GAAP operating income margin, non-GAAP net income, and 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'll find reconciliation charts in the slides for today's webcast and in our earnings release and Form 8-K. Please note, all references to growth rates or dollar amount changes in our remarks today are versus the comparable prior period in 2024, unless otherwise indicated. Replay of this webcast will be posted to our website later today. 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. With that, let me turn the call over to Chris. Thank you, Steve. Good morning, everyone. I'll begin today's call with a brief overview of our performance, our strategic progress, and view for the balance of the year. Al will provide additional details on our results, our capital allocation priorities, and our outlook. We'll move quickly through our prepared remarks to ensure we have plenty of time for questions. Market conditions remained challenging, and first quarter results came in below our expectations. For the quarter, gross profit was $1.1 billion, 2% lower than last year. Non-GAAP operating income was $404 million, down 7%, and non-GAAP net income per share was $1.92, down 6%. In the first quarter, customers demonstrated caution and concern given heightened macro uncertainty, weighing on capital investment decisions. At the same time, the complexity of the tech landscape continued to ratchet up, particularly given the additional layer of AI and changes in the IT market landscape. This lengthened decision-making as customers deliberated on both how to navigate technology roadmaps and when to spend on infrastructure in a challenging economic environment. While activity was reflected in a solid pipeline, with deals being pushed out, our sales and gross profit lagged. Results were also impacted by the federal budget stalemate, which led to a pause in our federal channel. Bottom line, while many of these factors are beyond our control, we are never satisfied, and as we do not expect decision cycles to improve in the near term, we remain focused on accelerating pipeline growth and using all of our competitive advantages to take share in this low-growth environment. During the quarter, our teams maintained a high level of engagement, working with customers to implement mission-critical projects, help prioritize and evaluate options, develop multi-year plans, and prove out use cases. You see the impact of this in our gross margin, which was a first quarter record, and our excellent cash flow, which together reinforce the durability of our underlying profitability and integrity of our strategy. Whatever the market condition, we are laser-focused on delivering exceptional value to our customers. To ensure we continue to deliver on this commitment, we remain resolute in our strategy and continue to invest to ensure we have the capabilities to deliver full-stack solutions and services. Broadly speaking, customer priorities included cost optimization, data protection, and workforce productivity. This drove focus on security, cloud, and as a service, as well as client demand and interest in AI. Let's take a look at how all of these priorities impacted performance. First, customer and market performance. Recall, we have five sales channels: corporate, small business, healthcare, government, and education, and markets. Each a meaningful business on its own, with 2023 annual sales ranging from $1.6 billion-$9 billion. Within each channel, the teams are further segmented to focus on customer end markets, including geography and verticals. Our commercial operations are organized around geographies, verticals, customer size, and spend. Teams are similarly segmented in our UK and Canadian operations, which together delivered $2.6 billion in 2023 sales. These unique customer end markets often act in a countercyclical way, given the different macroeconomic and external factors that impact each of them. Corporate top line declined 3% year-over-year. Decision-making further elongated with heightened focus on ROI and a high level of project scrutiny, given interest rate expectations. Cloud and security prioritization continued to drive excellent increases in customer spend, and the team capitalized on client device demand, and year-over-year client sales were up low double digits. Corporate saw declines in hardware categories undergoing transition and absorbing capacity, notably servers and NetComm. Storage, however, was a standout category, up double digits, driven by data and workload growth as customers improve efficiency and captured savings from newer solutions. Small business posted a 7% year-over-year top-line decline, but with sequential improvement versus the fourth quarter. The team continued to help customers address mission-critical priorities around security and productivity, which drove meaningful increases in cloud and software customer spend. Consistent with corporate, NetComm and servers declined and storage increased. Small business continued to be accretive to overall margins. Client devices posted a sequential increase, yet remained down year-over-year. Public sales declined 5% from the prior year. Healthcare declined 2%. Transactional performance was positive, with an increase in client devices, while solutions declined. Healthcare performance was similar to commercial, with customer caution, given the significant focus on cost optimization. Security was also a major focus area, delivering double-digit increases in spend and gross profit. State and local's mid-teens increase was more than offset by a decline in federal top line, and total government declined 1.5%. State and local's performance was broad-based, with strength across transactional and solutions categories. Client devices sales increased for the third quarter in a row, up high teens. Public safety remained a key focus area, with security up substantially double digits. Cloud adoption continued to gain traction. Federal's mid-teens decline was driven by the congressional budget impact, which was not resolved until late March. Some activity related to existing contracts continued, including client device refreshes, which drove a mid-teen increase. Larger-scale network and data center projects paused. Engagement remains strong, and we expect to pick up and spend once agencies are able to allocate their appropriated funds. It continues to be a challenging environment for education, and the segment posted a 10% decline. Consistent with recent quarters, higher ed institutions remained focused on doing more with less, and the team posted a mid-teens top-line decline. Hardware categories declined across the board, while ongoing focus on cost elasticity led to a strong double-digit increase in cloud. K-12's top line decreased by high single digits. Client device sales increased by low single digits, with some school systems refreshing aged Chromebooks, several funded via normal operating budgets and not stimulus programs. Audio visual solutions like smart whiteboards and interactive flat panels posted a substantial decline as schools continued to digest purchases from the past several years. Security remained a top priority, and both top line and gross profit increased by mid-single digits. Our UK and Canadian international operations, which we report as other, continued to experience challenging market conditions, and each declined by mid-single digits. Both teams continue to execute well and are leveraging their capabilities to deliver great outcomes for our customers. For the most part, portfolio performance was consistent across customer end markets. Transactional product sales performed somewhat better than solutions and modestly increased sequentially. Both posted year-over-year declines, with a greater decline in solutions from the fits and starts of decision making. At the portfolio level, hardware top line decreased by 4%. Services also decreased by 4%, as weakness in services tied to hardware more than offset growth in managed services, which increased by low teens. Even though software net sales declined by 7%, gross profit increased slightly year-over-year. Top-line performance was driven by declines in licensed software due to accelerated transitions to SaaS models. Let's turn now to the topic that is getting a lot of attention, AI, and specifically what we are doing for our customers in this space. Right now, most of our customers are at the initial stages of the assessment process, developing and analyzing use cases, and adopting data governance best practices to deliver insights and ensure end-to-end security. Essentially, they are exploring the art of the possibility and working through the science of exactly how do we do this. This is exciting work for all of us and our customers. The complexity of adopting AI plays to our strengths. We know how to bridge the gap between the promise of technology and transformational outcomes. And since deploying AI drives the need for technology investment across the full stack, with entry points across the entire stack, we are uniquely positioned to serve our customers, and we are doing that today. To support our customers as they navigate successful AI adoption, we offer two broad areas of consulting services. First, connecting AI to outcomes and ROI, which we call AI Discovery, and second, a practical approach to implementing AI, including data governance and security, which we call Mastering Operational AI Transformation, or MOAT. While still early innings, these services are gaining traction. We scoped the broad AI opportunity around 4 areas of focus: workforce productivity, notably end-user systems and edge devices, high-value use cases, broad-scale vertical solutions, and full stack, where customers rely on us to provide the infrastructure underlying applications and solutions. A great example of full stack is a corporate training and development domain-specific large language model solution we shared with you last quarter. Our broad-scale solutions are vertically based. As you know, we have expertise across many verticals, including healthcare, financial services, and many key industry segments. Expertise that enables us to deeply understand the unique needs and challenges faced by organizations in these sectors, and tailor solutions and services that directly address their opportunities and pain points. Let's take a look at a couple of the vertical AI examples. First, our AI offering for the K-12 market. AI presents an exciting opportunity to empower teachers and improve learning outcomes, but it must be done very carefully. Our education team has leveraged its expertise and relationships in this field to offer a safe AI platform that is specifically designed for K-12 classrooms, with a custom large language model that generates responses from vetted educational content, not the entire internet. The second example is a proprietary CDW healthcare solution, Patient Room Next. While AI holds the promise of medical breakthroughs, our solution addresses the intense pressure institutions face to manage costs while sustaining high levels of patient outcomes. Our solution combines AI and connected devices to transform patient rooms, improve care delivery, and enhance overall healthcare experiences. The solution is HIPAA compliant and runs on an end-to-end intelligent platform powered by GPUs, a platform that provides real-time insights from data and automated documentation. One current application serves over 300 beds and bills $4 million in annual licensing. Add to that, the services and equipment we provide for an end-to-end solution, like cameras, network connections, and servers, and you can see the opportunity this represents to deliver value for our customers and for CDW. Of course, AI will take time to become embedded across our entire customer set. We know that. We have been here before as we've helped our customers adopt cloud, and while the hype cycle is much shorter than cloud, the arc of adoption is very similar. Bottom line, we are here for our customers today, and we'll be there for them in the future as they continue to ramp their efforts. That leads me to our thoughts on the balance of 2024. You will recall that on last quarter's conference call, we shared our expectations for 2024 U.S. IT market growth in the low single digits, and our target to grow 200-300 basis points above market. Despite the slow start to the year, we still see potential for market growth. Let me be clear that we do not expect a demand hockey stick, but do see potential for client device refresh and for improved solutions performance. Wild cards include further dampening of capital investment from sustained high interest rates, worsening of geopolitical issues, as well as unusual election year uncertainty. As we always do, we will update our view of the market as we move through the year. A hallmark of CDW is to serve our customers wherever their priorities lie. As we look ahead, our customers face a compelling need to address cloud workload growth, protect against increasing security threats, manage an aging client device base, and navigate all things data as they build out their plans to leverage AI to capture insights and achieve their productivity aspirations. Armed with our full stack, full outcomes, full lifecycle portfolio, and unique vertical expertise, no one is more prepared to help our customers successfully navigate this period of unprecedented change. With that, let me turn it over to Al. Thank you, Chris, and good morning, everyone. I will start my prepared remarks with detail on our first quarter performance, move to capital allocation priorities, and then finish with our 2024 outlook. Turning to the first quarter, we began 2024 experiencing the same uneven IT market conditions that we faced throughout last year. Caution and uncertainty reigned. High interest rates and growing pessimism towards the timing of rate cuts put deals under even greater scrutiny, and ultimately led to the dampening of capital investment. Customers are evaluating, optimizing their IT spending, and while we actively partner with them to build out tech roadmaps to support their strategies, the overhang of economic and financial uncertainty has led to delay in deliberation and ultimate decision-making, exacerbating elongated sales cycles. During the quarter, we were able to capitalize on demand for client devices, as some customers could no longer postpone refresh activity. But sales of more complex solutions tied to digital transformation and network modernization were weaker. Notwithstanding, we see the potential for both client device refresh activity to continue and for improved future conversion of our solid solutions pipeline. Moving on to the specific results. First quarter gross profit was $1.1 billion, down 2.4% versus prior year, and below our original expectations for low single-digit growth for the quarter. Consolidated first quarter net sales of $4.9 billion were down 4.5% versus prior year on a reported and average daily sales basis. Gross margin increased roughly 50 basis points year-over-year and partially offset the impact of lower net sales. Gross margin of 21.8% was a first quarter record and was broadly in line with both full year 2023 levels and our expectations for 2024. First quarter margin expansion was primarily driven by higher mix in the netted down revenues. This category grew by 6%, once again outpacing overall net sales growth and representing 35.1% of our gross profit, compared to 32.3% in the prior year first quarter, as our teams were successful serving customers with cloud and SaaS-based solutions. While we continue to expect the mix of netted down revenues to be an important and durable trend within our business. It is important to recognize that this mix may fluctuate with customer priorities and product demand. However, even with a higher mix of client devices, margins remained firm in the quarter, consistent with our expectations. First quarter gross profit was down 7.8% compared to the fourth quarter on a reported basis. On a sequential average daily sales basis, first quarter net sales decreased 4.4%. While first quarter net sales and gross profit are typically lower than the fourth quarter, we had anticipated a more modest sequential decline as early 2024 customer engagement suggested more balanced spending across categories than we ultimately experienced. Instead, the sequential decline this quarter was more in line with traditional seasonality, reflecting continued uncertain conditions impacting the spend of our corporate customers, in addition to the Congressional budget impasse delaying spending of federal customers. Turning to expenses for the first quarter, non-GAAP SG&A totaled $660 million, up 0.7% year-over-year. Expenses were consistent with the expectation we shared on our last earnings call, with the first quarter higher than the fourth quarter as we reset some of our variable expenses for the year and accrue for other seasonally higher items. This played out as expected, but our expense efficiency ratio was further elevated due to our lower gross profit production for the quarter. As we scroll forward, we continue to manage discretionary expenses prudently and diligently, while balancing this against both our expectations for the year and the need to expand our capabilities and drive future growth. Our discipline was also reflected in our coworker count at the end of the first quarter, which was approximately 15,000, and down slightly relative to year-end 2023. Customer-facing coworker count was also unchanged at approximately 10,900. As we expand our solutions and services capabilities, we are concurrently driving efficiency and cost leverage from our broader operations intended to fund these investments. Following along on slide eight, we delivered Non-GAAP operating income of $404 million, down 7.1% versus the prior year, driven by the combination of our gross profit shortfall and flat expenses year-over-year. Non-GAAP operating income margin of 8.3% was down 20 basis points from the prior year. As reflected on slide nine, our Non-GAAP net income was $261 million in the quarter, down 6.4% on a year-over-year basis. With first quarter weighted average diluted shares of approximately $ 136 million, Non-GAAP net income per diluted share of $1.92 was down 5.1-5.5% year-over-year. Moving ahead to Slide 10. At period end, net debt was $4.8 billion. Net debt declined by approximately $230 million from the fourth quarter, primarily reflecting our increased cash position alongside modest debt repayment during the quarter. Liquidity remains strong, with cash plus revolver availability of approximately $2.1 billion. Moving to Slide 11. The three-month average cash conversion cycle was 16 days, down two days from the prior year and slightly below our target range of high teens to low twenties. Our cash conversion reflects our effective management of working capital, particularly with respect to our inventory levels. As we've mentioned in the past, timing and market dynamics will influence working capital in any given quarter or year. We continue to believe our target cash conversion range remains the best guidepost for modeling working capital longer term. Despite profits that were moderately lower than our expectations, effective working capital management drove strong adjusted free cash flow of $364 million, as shown on Slide 12. Over the last 12 months, adjusted free cash flow was 104% of non-GAAP net income, well above our stated rule of thumb of 80%-90%. As we've mentioned in the past, timing will impact adjusted free cash flow throughout the year, but we're pleased with our first quarter performance, and we'll continue to update our outlook on this front as the year plays out. For the quarter, we utilized cash consistent with our 2024 capital allocation objectives, including returning approximately $83 million to shareholders through dividends and $52 million in share repurchases. We remain committed to our target to return 50%-75% of adjusted free cash flow to shareholders via the dividend and share repurchases in 2024. That brings me to our capital allocation priorities on Slide 13. Our first capital priority is to increase the dividend in line with non-GAAP net income. Last November, we announced a 5% increase of our dividend to $2.48 annually, our 10th consecutive year of increasing the dividend. We will continue to target a 25% payout ratio in 2024, growing the dividend in line with earnings. Our second priority is to ensure we have the right capital structure in place with a targeted net leverage ratio. We ended the first quarter at 2.3x, down from 2.4x at the end of 2023, and within our targeted range of 2 to 3 times. We will continue to manage liquidity while maintaining flexibility. Finally, our third and fourth capital allocation priorities of M&A and share repurchases remain important drivers of shareholder value. We currently have over $1 billion of availability under our share repurchase program. And that leads us to our outlook on slide 14. The uncertain market conditions we operated under throughout 2023 have persisted into 2024, and customer sentiment remains cautious and prudent. Last quarter, we spoke about a slow start to the year for 2024 IT spending, which has come to fruition and will likely continue in the near term. However, as we look forward, we continue to see a compelling need to address cloud workload growth, increasing security threats, aging client devices, and all things data, as we help our customers build out their plans to leverage AI and capture insights, and achieve their productivity aspirations. Our updated full year 2024 expectation is for low single-digit gross profit growth, reflecting the slower start to the year. We maintain our view that customers will spend their IT budgets in the upcoming quarters, but within the context of historical seasonality. With this also comes an unchanged expectation for 2024 gross margin to be similar to the full year 2023. Finally, we expect our full-year non-GAAP earnings per diluted share to be up low single digits year over year. Please remember that we hold ourselves accountable for delivering our financial outlook on a full-year constant currency basis. Additional modeling thoughts for annual depreciation and amortization, interest expense, and the non-GAAP effective tax rate can be found on slide 15. Moving to modeling thoughts for the second quarter. We anticipate low single-digit gross profit growth compared to the prior year, with no change to our expectation that gross margin will be comparable to full year 2023 and Q1 2024. Our first half/second half split is slightly more weighted to the second half than historical levels, in keeping with our expectations for the market. However, we still anticipate seasonal quarterly patterns to reasonably hold, including a lower fourth quarter compared to the third quarter. Moving down the P&L, we expect second quarter operating expenses to be moderately higher than the second quarter of 2023 on a dollar basis, but reflecting a more normalized ratio relative to gross profit than we experienced in Q1. Finally, we expect second quarter non-GAAP earnings per diluted share growth to be in the low single-digit range year-over-year. For 2024, we're maintaining our expectation for adjusted free cash flow to be in the range of 80%-90% of our non-GAAP net income, assuming a higher level of working capital investments to support growth. That concludes the financial summary. As always, we'll provide updated views of the macro environment and our business on our future earnings calls. And with that, I will ask the operator to open it up for questions. We would ask each of you to limit your questions to one with a brief follow-up. Thank you. Thank you, Al. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Adam Tindle from Raymond James. Okay, thanks. Good morning, Chris. I just wanted to start, you know, one of the big themes during tech earnings season is spending on AI as very, very strong, and appreciate all your comments in the prepared remarks. But it's hard not to dovetail that with CDW results here for Q1 that were a little bit weaker than expected, and showing a decline in solutions where presumably AI would be reporting. Just figured I'd throw it out there to address any investor concerns that perhaps CDW is not participating in AI spending. What would that thesis be missing? And if there's portions of that that might be fair, you know, things that you can do to capitalize more on AI spending, whether that's organic or inorganic. Thanks. Adam, thanks for the question, and if I could, let me zoom out first and then zoom back into AI. Let me just start with the environment that we experienced in Q1. You know, there are a couple of factors that impacted results and complex solutions results. And look, we had a dynamic and a pretty complex environment that manifested in what I would call fits and starts of both the market and our customers, who had lack of certainty and visibility. If you take the first economic and financial uncertainty, in other words, the interest rate and inflation environment, and that was really the primary driver of the impact for our corporate team and our small business team. That created an overhang in the environment, which drove what I'll call an uneven market condition situation, pretty similar to the trends we saw in 2023. As a result, our customers remained cautious. They remained prudent. There was relentless scrutiny on deals across the board in the solution space, in particular, as customers focused on cost optimization and short-term ROI, and ultimately, that dampened capital investment in the period. I'd also say, to a lesser degree, AI considerations as an added complexity in the deliberation process entered the picture. We're at a real inflection point with AI, a critical decision for all of our businesses, understanding what it means to their business and their workforce, what it means to their roadmap, technology roadmaps, and what the implications for infrastructure are. I just would highlight a couple of other pressure points during the quarter, a lesser impact, but we, you know, we had some changes in the IT landscape with some consolidation and acceleration into as a service, which creates a natural interruption, I would say, in just the customer process. Fed budget's delayed, and then the education market is transitioning really back to a more normalized funding mechanism. And the result of all of that was collectively, we had to spend deficits. What I would say is, our engagement overall has been incredibly strong. I'm really pleased with the engagement, and we are seeing that, that our value continues to build as we help our customers manage the complex tech environment and a dynamic period. But what didn't happen is the solid pipeline that that translated into did not then translate into invoicing in the solutions portfolio, as it would in a normal operating environment. Now, while we have seen the pause on the complex solutions, we are helping customers who, who need to refresh client, actually start doing that. And that's some positive signs in what I'll call a lower risk, lower friction client category. But at the end of the day, right, it was solutions that impacted our results overall. Now, if I flip to your question on AI, here's what I'd say: Look, we're in the early innings. Some of our customers are advanced, but really, most are in an assessment and experimentation stage, and it's gonna unfold over time. CDW is uniquely positioned in the space to take advantage of what will be ubiquitous and a full stack opportunity. We know how to take customers on a journey. We've done it before, this art and science of new technologies. We've got the full stack and broad portfolio, so we can help customers at every entry point, and we've got services against the entire part of the stack across the lifecycle, and so we've got the ability to deliver integrated solutions. We also understand our customers' pain points and opportunities, given our deep vertical expertise and our intimacy with our customers. So we can create packaged solutions that can scale pretty quickly, as well as customize, customized solutions. So you think about it in terms of the choice, we help them identify the best solution, compatibility, developing roadmaps for integration, and cost, and value analysis. Now, in the areas of opportunity, there are four that I mentioned in the prepared remarks, and I'll just emphasize those, and then I'll talk about where we're seeing pickup now and what we anticipate going forward. First, in workforce, think productivity tools and assistance. You know, we're the leader here with regard to many of our partners, and there is much interest in workforce AI impact currently. High-value use cases, think horizontal and aligned personas, things like security and customer experience, chatbots, and that can be deployed horizontally across many of our customers. Think broad-scale vertical applications, where they're deeply verticalized and multidimensional. And then the full stack infrastructure to underpin the applications and solutions. Now, we are leveraging our deep partner relationships to understand and use our customer knowledge to influence our roadmaps, very similar to what we've done in the past, whether it was cloud or security, and to bring to market products that are suitable for, fit for certain customers. We're expanding our engineering and services capabilities, we're partnering with innovative AI startups, and we're developing our own internal experience, which helps us operationally, but builds credibility with our customers. Where we sit now, Adam, is primarily a services engagement. We have a lot of activity around those two solutions, Moat and Discovery, that I mentioned. Typically in those, we're finding that customers come to find that their data is not in the shape that it needs to be, and that leads to engagement around data and data governance and data security, et cetera. Over time, we would expect the arc of AI to move from the application layer and the services that we're providing through to inference at the edge, and then into the data center. But it's going to be a journey, and we're the early innings, and we've seen this before play out. We certainly feel absolutely confident that it will be a full stack play, and that our strategy and the strength of the partnerships is gonna, you know, we're positioned and are already capturing the ability to navigate our customers through the journey. Yep, complexity is typically good for CDW. That makes sense. Just a quick follow-up, Al, on guidance. The gross profit dollar for Q2, where you talked about low single digit year-over-year growth, I think if I did the math on a sequential basis, it's like low double digits. And the last couple of years, it's been more like 6%-8% sequentially, so you know, above the last couple of years. Just given a little bit weaker than expected trend in Q1 and not wanting to get into that situation again in Q2, maybe just help us with how you thought about that gross profit dollar guidance in Q2, and is there anything that maybe underpins that sequential growth, whether it was maybe push-outs from Q1 or something like that? Thank you. Yeah, sure, Adam, happy to address that. A couple things. First, I think we mentioned our prepared remarks. Look, we feel encouraged by the pipeline that we have, and kind of what's out there from a customer spend perspective. And a lot of that would be more in the solutions category, as we talked about. So that's number one. The thinking, Adam, is, look, if you look back over a history of seasonality, historical seasonality, now would be more in the, like, the mid-teens level. And so when we take the sum of the catalyst that Chris mentioned up front, that is the workload and data growth, the need on the security front, and the obsolescence of client devices. We think that there's both catalyst there, but also kind of an existing tangible pipeline that we see. So when you add that together and you think about the context of historical seasonality in the more mid-teens, our Q2 outlook would actually be short of that seasonality modestly. And we think that knowing that Q1 was a slower start, there's a decent pipeline there. And we know that ultimately our customers have to get back to these critical spend items. We have confidence in ability to get to that level from a seasonality perspective in the second quarter. Got it. Thank you very much. Yep. Our next question comes from Samik Chatterjee from J.P. Morgan. Hi, thanks for taking my question. I guess, Chris, I sort of appreciate all your comments about what you're seeing in terms of a challenging sort of customer spending environment. I'm just more curious when I contrast this to last year. Obviously, the challenges or sort of the scrutiny on budgets isn't new, but through last year, we did see sort of solutions remaining quite robust, and it was more the transactional business that was sort of impacted. So as you now are starting to see the transactional business open up a bit, but the solutions business pull back, any sort of insights or sort of reading to sort of what the change in customer thinking is, or, when what we might be able to see in terms of recovery in that solutions business, from the insights you have from the transactional business as well? Just curious on that, and I have a quick follow-up. Thank you. Yeah, let me start on that one. I think what we're seeing now is we talked about the macro environment and the added complexity now of AI as a consideration. And as our customers this year are continuing on that kind of pause and deliberation, added to it the AI factor, if you will, they are also faced with the need to refresh client devices. And so I tell you what I think we're seeing is a need to go ahead and spend budget on things that they really can't hold off on anymore. They have old devices. They'd like to get over to the new operating system. They want to make sure the devices are available as demand will start to pick up, and there, there's some switching of the budget over to the devices right now. I think that's a behavior we certainly are seeing. In terms of the trend as we go through the year, I'll let Al speak to the outlook and our expectation regarding the outlook. Yeah, sure, and good morning, Samik. A couple of things I would mention when we think about the parallel to 2023. Look, a year later, a lot of the caution and concern that we experienced has persisted, and I would say to some extent in Q1, became even more heightened. And look, there is a mixed story on the economy, but when you think about the financial aspects, intra-quarter, we went from an expectation in the market of a number of rate cuts to the potential of now just a few. So there's been quite the whipsaw effect. So just to give that kind of backdrop, if you will, that it's the economic and financial environment continues to get more complicated, Samik, for sure. The other element I would add is on the solutions front, a year later, notwithstanding those comments about macro uncertainty persisting, we've got several categories that obviously have gone through pretty significant market transitions, and digestion of capacity. And really, it all points back to as the clock moves forward, we get closer and closer to those catalysts that we talked about. That is, need for network modernization, need to address workload and data growth. And so, you know, our confidence on the solutions front is that ultimately customers will have to act on those things. And I would say our pipeline reflects a lot of those intended actions. Just the space that we're in right now is customers are deferring, taking longer, have more decision makers to get to that solution spend, but we know that it's out there. So that would be how I compare the different periods. You know, look, hopefully we'll get more economic and financial clarity that will assist. Hopefully, we'll get further down the path of customers thinking about what their IT roadmaps will look like in this era of AI. And then we do believe that we would see more balanced spending across those solutions and transactions. Got it. Got it. And, Al, a quick follow-up for you. Just in terms of expectations for then gross margin as we go progress through the year, you sort of did a 21.8% in Q1, you're guiding to a similar number for the full year. Is it going to be pretty similar through all four quarters as you sort of see solution spend improving maybe through the year, but client devices being a headwind on that margin? Like, how should we think about progression here? Sure, Samik. For the full year, I would say we're holding to our expectation on gross margin that we gave, which was that it would be similar to 2023 all in. I think there's gonna probably be some variability quarter to quarter. Obviously, most notably driven by mix, but at this juncture, we would hold to those expectations. You know, certainly, given that the mix has shifted a bit in Q1, and we saw stronger client device growth and less solutions, you'd expect that that would have some impact on our gross margin. But I would say when we think about the contribution of netted down revenue, which we think is durable, that's helped to hold those margins in. So at this juncture, we're holding to that expectation of that kind of high 20s gross margin, similar to 2023. Good. Okay, thank you. Thanks for taking my questions. Our next question comes from Amit Daryanani from Evercore. Yep, good morning, everyone. I have, I guess, a question and a follow-up as well. You know, when you folks talked about the hardware categories, one of the things that really stood out was storage performance was fairly good. I'm curious, like, historically speaking, does storage tend to be a leading indicator for what you see eventually with NetComm and servers, or not? I'd love to kinda understand from a historical perspective, is storage a better indicator? And then, you know, maybe related to that, the NetComm weakness, do you think it's more inventory digestion at this point, or is it really demand is weak? Amit, it's Chris. You know, I think what we're seeing with storage right now are a confluence of two things. One, we had a number of customers who were investing in networking, and implementing networking over the last few years, and storage is kinda coming, storage kind of was the next investment, if you will. So we're seeing positive results there. The other thing is, we've, you know, we've got some new, exciting products out in the market, and that's always appealing to our customers. So that's really what I think is driving the storage, the storage growth in this period. Got it. And then, you know, I guess, Al, just for you, on capital allocation, the buybacks were fairly minimal in the quarter, given, you know, how good the free cash flow generation was and the fact that leverage is towards the lower end of that 2-3 times range that you folks talk about. How do we think with buybacks for the rest of the year, and is the intent to perhaps shore up some capital or cash for the debt paydown that you might have to do by the end of this year and early next year, or would you use it for buybacks? Yeah, thanks, Amit. Appreciate the question. Look, we will continue to do what we've done in terms of balancing both the strategic and tactical elements on the capital allocation front. And I think, look, I think 2023 is probably a good guidepost for you in terms of what that look like. At any given time, we're gonna look at all the elements of the, what's gonna provide the best short-term return, how do we feel about the valuation front, and where do we get the most strategic value? I think the opportunity for us, Amit, in 2024 is, we'll continue to be patient and opportunistic, but with $800 million of cash on the balance sheet, I'd say pretty consistent track record here of cash flow generation. We feel like we've got plenty of opportunity and optionality to be able to create value across all four of the priorities in our capital allocation scheme. Thank you. Our next question comes from Matthew Sheerin from Stifel. Yes, thank you. Good morning. Chris, I hope you can elaborate more on what you're seeing in the government sectors. You talked about budget-related push-outs in federal. So, and I know there's obviously some seasonality, particularly in the September quarter. So what should we expect in terms of the seasonality across those markets? Yeah, good morning, Matt. On federal, I'd tell you that a federal budget delay, which was about, you know, pushes things out by about six to eight weeks, creates a pretty much a complete pause. But once the budget was implemented, then the trickle-down effect starts to happen, and the money is making its way to the agencies. We have seen, I call it, very strong activity in both, projects and programs that were ready to go, and that's been a positive and very strong activity on those that will take a little while to get through the pipeline. So what I would say, Matt, is, you know, as we think about seasonality back to the full year, landing more on what you'd see as a federal seasonal year, with it being more back-end loaded. And remember, you know, sometimes when you get pushed out by a quarter or so in terms of the government decision-making, oftentimes you just need to get the PO in by the end of the year. So it's possible we see some of it pushed even into the following year, that January sometimes happens. But what I would just tell you is, we knew it was coming, we've been working with the customers poised to start moving the orders, and I feel quite good around federal playing out seasonally for the year. Okay, thank you for that. And then, just as a follow-up, concerning the client device demand that you're starting to see pick up, are you seeing any interest or traction on AI enabled PCs yet, or is that still early? You know, Matt, I would say it's still early, and when we looked at the units that we're selling now, really minimally AI PCs, they're the Win 11 and Apple next generation. And the impetus is really threefold. It's just refresh aging machines, it's get to Win 11, frankly, and it's also an interest in getting ahead of any increasing demand. You know, we are finding customers having longer memories when it comes to the pandemic, and remembering that sometimes just in time doesn't work because you got to stay ahead of the supply. So that's also been a factor in the positive signs that we're seeing. I'd also say, look, you know, I mentioned it before, it's a low-friction purchase, and it's a kind of no regrets. When you put together aging machines, the need for Win 11 with a kind of stable landscape, customers are just starting to move forward. The AI PCs will come. There is interest. There's a lot of talk with customers, a lot of talk around which personas are they best going to be used for, but right now, what our partners are providing have ample compute power to handle the AI that is in current form. Okay, thank you very much. Our next question comes from Eric Woodring, from Morgan Stanley. Great. Thanks so much for taking my questions this morning. Chris, maybe I'd love if you could maybe unpack some of your pipeline comments a bit more. You know, outside of federal, if we put that to the side, you know, you mentioned broad push-outs, but can you maybe clarify anything you're seeing in terms of customer set or products where you're seeing this behavior most acutely? You know, are you seeing any cancellations? Is the push-out behavior this quarter, you know, any more notable than past quarters? And is it as simple as, you know, the macro is the key factor here that can unlock this spend, or are there any other factors that you see, or when you speak to your clients, where they say, "Listen, we just, we just have to refresh these devices," for example, or, "We have to modernize our data center infrastructure?" And then I have a quick follow-up. Thank you. Yeah, sure. Thanks for the question. Let me just start with where you ended, and I would say, as we've suggested, the macro overhang really is the predominant factor in the extended and elongated, sales cycles. What we're not seeing is, we're not seeing cancellations. We're seeing, just more deliberation and, greater time and more involvement, frankly, by more business unit, constituents in the decision-making process. And as I said, the AI consideration is a real thing. It's a bit of a pause. How do we think about this over the long-term? As you know, the progress, the speed with which AI functionality is moving is really, fast, and they're taking that into consideration. But I would say that it feels very similar to 2023. As Al mentioned, I mean, this quarter did create more uncertainty in some ways than we saw in certain quarters last year. It's not that dissimilar, and it really does have to do across what I'll call complex solution sets. Remember, we don't really have customers buying point products per se. We are seeing, you know, in some areas, a server, for example, refresh. We're just at the point where customers need to refresh, and we're figuring out how to do that or potentially starting to move some things to cloud. But I would just characterize it as very similar to the trend from last year. Maybe, Eric, just adding on to that and to kind of stitch the story together. We talk about these catalysts. Within those catalysts Sure are plenty of opportunities from a solutions perspective. I think that what we saw transpire is this kind of heightened caution and concern, kind of, the what's around the corner phenomena, if you will, from a corporate perspective, just caused more delay and deliberation. And then to Chris's point, you add on AI and the complexity of the what is it ultimately gonna mean for these customers', infrastructure environments, and it's just more impetus to say, "Let's take a little time." And I think the corollary there, Eric, would be, that, we had a pickup in client device, and it was literally across our end markets. And so we would have said that that was a catalyst that was out there, and that was a catalyst that started to see some free up, call it modest, but some free up, of spend in that, in that regards, because, despite it being a catalyst, kind of been held back before, it really was the lowest friction choice for customers, and so that's how the quarter played out. Yeah, and I would just add that the durable categories we've seen over the last several quarters are security and cloud. Yeah. Okay. Very helpful. And then just maybe a clarification, quick follow-up is, you know, you mentioned expectations, at least for 2024 US IT market growth to be relatively similar. You know, you did guide to low-single-digit gross profit growth versus low- to mid-single-digit growth last quarter. So that would presume, you know, weak gross margins would be a bit weaker than when you guided 90 days ago. But Al, you reiterated kind of the expectation for similar gross margins to 2023. So can you just help me maybe unpackage what is the main factor that is causing the gross profit dollar, the slight change in gross profit dollar growth guidance for 2024? And that's it for me. Thank you so much. Yeah, Eric, a couple of things. So look, from a just working from the top, from a customer spend perspective, you know, we're calling for low single digits plus our typical premium, so that's come off a bit. If it were coming off in a category, that would probably be substantially from a solutions perspective. That is, the slow start that we experienced in Q1, we're not suggesting we're going to make that up. So it that comes off the top, and then that's basically just kind of works its way down to GP. We're getting an earlier start to client device, at least for the first quarter, than maybe we would have anticipated. So while that doesn't help from a gross margin perspective, it certainly does help from a gross profit perspective, right? Because you're getting the volume. And I think if you look down our P&L for the quarter, you'd see the delta on net sales was closer, 'cause we saw more from a client device perspective. So, there's some puts and takes within that, but I'd say, you know, we're in the range of, of, with solutions being a little lighter, client being a little stronger, and frankly, continued durability of netted down revenues, there's not much of a change there on the gross margin front. Super. Thanks so much for the color, guys. Our next question comes from David Vogt from UBS. Great. Thanks, guys, for taking my question. I just wanna come back to maybe a longer-term kind of discussion on AI and some of your hardware categories. You know, as you guys look out maybe beyond this year into 2025, as traction starts to really accelerate in AI, how are you thinking about sort of the uplift in maybe configurations, ASPs, and how does that flow through your business? So for example, obviously, AI PCs, there's a lot of discussion of having, you know, considerably higher price points. The same obviously holds true, I think, with AI-enabled optimized servers. So just trying to think about how you're thinking about that as it impacts your business, maybe not this year, but in 2025. Thanks. Yeah, David, I'll take it, I'll take this. Look, I think TBD to some extent, right? We're gonna see how pricing plays out. What I would tell you is, in current context, we're not seeing much in the way of ASP changes. I'd say prices broadly, including on the client device front, held pretty firm, so our growth during quarter was largely units. Certainly there is plenty of buzz out there that as we start to see AI PCs and other AI categories emerge, that you could see price increases. But I'm not sure that, you know, we're fully prepared to kinda call on what that would look like. Just remember, for us, look, we're gonna work closely with our customers as we are now, and we'll continue to, in terms of that, how do you navigate that landscape? How do we help them get in front of it to the extent that they can? But also remember that for us, in terms of kind of impacts, any lift there on the ASPs, you know, may lift the top line, but we're largely still very much a cost-plus provider, so you may not see significant movement from a gross margin perspective. Got it. Just, just to clarify, obviously, it wouldn't be subject to ASC 606 accounting. These would be grossed-up revenue and then the commensurate gross profit dollars associated with the revenue, correct? Is the right way to think about it? As we understand it now, and what the new product generations look like, I think that's true. Great. Thanks, Al. We currently have no further questions. We'll hand it back over to Christine, Chair and CEO, for final remarks. Thank you, and let me close by re-emphasizing my confidence in this team, our strategy, and the durability of our resilient business model. Thank you to our CDW coworkers across the globe for your unwavering commitment to our customers. Thank you to our customers for the privilege and opportunity to help you achieve your goals. Thank you to those listening for your time and continued interest in CDW. Al and I look forward to talking to you next quarter. This concludes today's call. Thank you for joining. You may now disconnect your lines.