CDW at Morgan Stanley Conference: Strategic Growth Amid Challenges

CDW Corp (NASDAQ: CDW) presented a strategic overview at the Morgan Stanley Technology, Media & Telecom Conference on Tuesday, 04 March 2025. Al Morales, CFO of CDW, discussed the company’s performance, highlighting both challenges and growth opportunities. While macroeconomic factors posed obstacles, investments in cloud and SaaS, including the MissionCloud acquisition, signal a positive outlook.

Key Takeaways

• CDW’s 2025 guidance is "appropriately prudent," reflecting caution amid market uncertainties.
• The company continues to invest in strategic growth areas like cloud and SaaS.
• Healthcare verticalization has shown positive results, with centers of excellence aiding customer transformation.
• The PC refresh cycle is in its early stages, not yet driven by Windows 11 or AI.
• CDW focuses on competing on value rather than price, with a strong customer base.

Financial Results

• Macro: CDW’s guidance for 2025 remains cautious due to the uncertain macroeconomic environment.
• Corporate: The corporate sector is steady, with a constructive outlook.
• Small Business: A return to growth is noted, though it is based on a single quarter of data.
• Public Sector: The outlook is mixed, influenced by government spending and education funding transitions.
• Healthcare: Despite a strong Q4, a 30% growth rate is not expected to continue.
• Netted Down Revenue: Expected to outperform overall growth, driven by SaaS and cloud.
• Gross Margins: Anticipated to be flat to modestly down in 2025 due to product margin compression.

Operational Updates

• Market Challenges: CDW faced macroeconomic headwinds and hardware cyclicality.
• Investments: Continued focus on cloud and SaaS, highlighted by the acquisition of MissionCloud.
• Verticalization: Investments in healthcare verticalization are yielding positive results.
• International Markets: These markets lag behind the U.S. and show uneven performance.
• PC Refresh: The cycle is in early stages, not driven by new OS or AI.
• Enterprise Infrastructure: Cautious optimism for growth in solutions, with storage as a key component.

Future Outlook

• Macro Economic: Cautious outlook due to uncertainties.
• Market Segments: Corporate space is constructive; public sector outlook is mixed.
• Government Business: Potential upside as technology drives efficiencies.
• AI Influence: Impact on infrastructure decisions expected to ease over time.
• Competition: Focus remains on value over price.
• Operating Model: Operating leverage constrained by necessary investments.

Q&A Highlights

• SMB Market: Tech spending is focused on ROI, with broad spend limited to cloud and SaaS.
• Healthcare Industry: Success attributed to verticalization and openness to cloud services.
• Government Spend: Federal spending shows friction, while state and local spending is consistent.
• Hardware Market: Focus on hardware refresh, not new OS or AI.
• Channel Incentives: Adjustments to new Microsoft incentives expected to be manageable.

Readers are encouraged to refer to the full transcript for a detailed understanding of CDW’s strategic direction and insights shared during the conference.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Eric: We joined this morning by Al Morales, CFO of CDW, a constant President at our conference. Again, joined CDW late in 2021, been CFO ever since. So Al, thank you for joining us today.

Al Morales, CFO, CDW: Thanks, Eric. Great to be here.

Eric: So obviously a very dynamic market, a lot going on in the world. So a ton of interest in what you have to say today. If we maybe start from the top, I always try to do like a very quick look back and really what that is over the last two years, the headwinds that CDW has faced, some have been market, a lot has been market oriented or market related. But what kind of initiatives we don’t have to do the look back, but what initiatives have you maybe put in place, you, Chris and the team to make sure that any company specific challenges are kind of now being addressed and behind you and getting back to kind of the CDW of old, so to speak?

Al Morales, CFO, CDW: Sure. I will just do a quick summary back for the last two years. Eric, I would say it’s been an extreme period, right? So we’ve had plenty of extreme periods, but this one, a combination of macroeconomic factors, I’d say pretty significant hardware, cyclicality, all of this kind of following the pandemic, and a pretty extreme period of unevenness, fits and starts across our different segments and a period where often we would say our different segments can be will be diversifying and they were not, right, which is extreme. So kind of a correlation effects out of whack.

So when you add that all up, it was pretty significant. That being said, we pride ourselves on our execution in areas where certainly we could have done better and I’d say notably in 2024. So what have we done? I’d say look, during that period of extremity, we’ve done a lot to adjust our fixed cost base to drive efficiency. But importantly, Eric continued to invest behind the business.

And so our expectation is those investments do ultimately pay off. And we kind of put the highest premium on investing behind our strategy so that we can withstand extreme periods like this. We talked about as well in a recent call our mix of business and that our mix of business may be underweighted significant growth areas like cloud and SaaS. And so we’ve put a premium there as well on investing behind those sectors. We made a recent acquisition of MissionCloud, which is a great example.

We call it a tuck in acquisition, but high growth business, it’s profitable, great management team, IP, great platform. It’s a great example of during a challenging period still investing behind our strategy and in an asset that we think we can build upon. And so all of that serves as well as we think about the path forward.

Eric: Okay, perfect. So a lot to get into and we’ll get into a lot of these topics in detail, but maybe just start if we discuss the demand landscape. Obviously, dynamic market, a lot of uncertainty, a lot of volatility. What are you hearing from customers today? And really, what does that mean financially for this business?

What can you grow? Help us understand. And again, helping understand by the end markets is always helpful, end markets, customers, etcetera.

Al Morales, CFO, CDW: Sure. Look, we are cautiously optimistic in this environment. It continues to be uncorrelated in terms of the impacts of the different end markets and segments. But if I just tick through those on the corporate side, we pointed to in Q4 a greater steadiness, stability in that space. Now it’s one quarter, so we’re not going to declare that a trend, but I would say on better putting there on the corporate end of things.

Small business, likewise, saw a return to growth after a prolonged period of bouncing along the bottom. We are cautious there just because, again, it is one quarter, but I would say that, like corporate, the catalysts are there for growth, the needs are there. These customers have just withstood a pretty significant period of focusing on ROI, constraining their spend to make sure that they can get by, and ultimately, they’re going to get back to some of these growth vectors. The public segment is obviously more of a mixed bag. I know we’re going to get into government and federal and all those variables, but you’ve got those variables in government.

You’ve got education that’s going through a period of getting back to traditional funding sources. So we’re neutral to optimistic in the education space. And then healthcare has been a channel for us that had a great Q4, and we feel optimistic on the growth potential, maybe not at a 30% clip, but optimistic. And that is an example where on the heels of our significant investments, those investments are paying off. So that’s how I would kind of tick through in terms of the channels and the segments.

Eric: Okay. All right. Super helpful. Now, if we as you mentioned, kind of digging into each quickly, broadly speaking, we have heard about more confidence, especially at the SMB level. And that’s been an end market for you, as you mentioned, kind of bouncing along the bottom, never being able to really inflect.

I realize it’s only a month beyond earnings, but has your view on kind of the sustainability of this cohort changed at all? And what do you think primarily influences spending with this group? Because we could make the argument there’s still a lot of uncertainty. So kind of what gets things to change for them?

Al Morales, CFO, CDW: Yes. Look, one quarter that we would say was modestly better, so certainly not a trend. So we’re still cautious. This sector has been super focused on ROI and has leaned in pretty significantly into cloud and SaaS and things that would give them a bit more instant gratification. What we haven’t seen in small is more broad and diversified spend, including in solutions.

What we would want to see is just that. And I’d make this comment, Eric, more broadly is health of IT spend, I think, is predicated on are you seeing diversity of spend? Is there spend across different categories? So solutions, not just cloud and SaaS and not just PCs, if you will. So we’d like to see more diversity of spend.

I think the reality on small is they operate in the current reality. That is the how am I feeling about how interest rates were impacting me today, how am I feeling about inflation is impacting me today, whereas maybe juxtaposition to corporate enterprise operate a bit more on forward expectations, what’s going to happen, all lives in today’s reality. And today’s reality is still not providing significant relief. So the fact that we saw maybe honestly better quarter, a good sign, but until some of those dynamics ease for small, probably not going to see significant growth.

Eric: And just as a follow-up to that, can you maybe delve into or give a little bit more detail on the pipeline there? Because even if that spend isn’t unlocked, what are they telling you in terms of not maybe prioritization of projects today, but like is there pent up demand there is maybe my question.

Al Morales, CFO, CDW: There is. And I’ll just make the broad comment beyond small that the catalyst for growth are there. It is broadly, in our minds, a matter of when, not if, it’s going to happen. So if you think about the proliferation of data for companies, significant. The need for network modernization as increasing security threats driving cyber spend significant and ultimately AI as well.

So all of the catalysts are there for growth. They’ve just been pretty much muted during this period of tougher conditions.

Eric: Right. Okay. Let’s shift over to I’m going to start with healthcare. Obviously, extremely strong growth in December, ’30 percent. Some of the pushback that I got that I just want to clarify was like, was there anything one time in December?

How sustainable? I know you’re not talking about 30% sustainable growth, but anything that was one time to call out, and really what is driving the strength in this end market?

Al Morales, CFO, CDW: Yes. Let me start with what’s driving it. So first, I mentioned the investing behind our strategy. I’d say healthcare is a great example of our efforts around verticalization and how we can get deeper with our customers, really understand their business, help them to transform. And if you think about healthcare, it’s a great example of a vertical where the need is there, right?

Need to transform their business to get out of a tough period where they’ve been doing a ton of cost cutting. So that’s number one. We’ve made significant investments. We have centers of excellence for health care organizations. We have a team of healthcare strategists that are ex CTOs, CIOs that work closely with our customers to help them to think about their transformation agenda and how tech can play a part.

So a big part of what you’re seeing there, and again, it’s a single quarter, but we are very optimistic, is on the back of the investments we’ve made in that vertical. So that’s number one. Number two would be the for years, these health organizations, which have been going through tough times, they were more reluctant to get on with things like cloud. What we’re seeing is that we appear to be broadly beyond that and there is definitely an acceptance and endorsement of cloud for healthcare organizations, so that’s driving spend. And I think just broadly, these organizations have figured out the balance of efforts to transform their business and get beyond just cost cutting.

And it’s making a difference. And look, we see this a bit in the broader financial markets, some of the health core organizations that are now doing much better, have better growth expectations and are thriving in a still challenging world. And so we’re super pleased to be kind of partnered with some of these organizations that are driving this transformation again. Okay.

Eric: Helpful. And then obviously, I’d be remiss if we didn’t touch on kind of the government exposure, just given what’s going on with the volatility in the government and government spending consolidation there. So this is going to be more of a short term question, but I’d love at the end if you could kind of think about how maybe long term things could change for spending with the government. But exposure to federal government, what you’re hearing from customers, how that might be juxtaposed versus state and local spending and education spending too?

Al Morales, CFO, CDW: Sure. So let me start with government. So just to size it for you. So government on a net sales basis is about 12% of our business. Federal is about half of that and the other half would be state and local.

Within federal, you have a civilian business and you have more department and defense business. The friction, consternation, if you will, is most centered right now in the civilian business. So you can get a sense for how to box that. And it is from our perspective, the direct exposure is contained. We are not contemplating even as we look at that civilian business, we are not contemplating an implosion, if you will.

There is still spending. There is still business going on. It’s just a bit more friction than you would like in that space, but just kind of contextualize it for you. Okay. That’s first order civilian business.

Now that’s not to say that you can have impacts on DoD. It’s not to say you couldn’t have a bit of a second order effect in some of these other areas like education, but the direct exposure would be in that surveillance space just to box it for you.

Eric: Okay, perfect. And any difference at the state and local level? Is there kind of like a trickle down effect there

Al Morales, CFO, CDW: that we There’s always the risk of that. We have not really seen that. If we look back to 2024, our government business altogether was down 7% and state and local grew. And so the other side of the business would have declined, right? So would you get a sense for what the dynamics look like there?

Eric: Okay, perfect. So as CFO, I think my question now becomes, as we take all of these kind of different end markets together and the various puts and takes that they’re facing in 2025, how do you, with the context of what’s happened in the last two years, how do you kind of bring that into your guidance for 2025, right? Because there’s always this historical beat and raise cadence that CDW has had, but the world is awash in uncertainties. Do you kind of take an extra layer of like being prudent to make sure that these uncertainties are factored into the degree that you can,

Al Morales, CFO, CDW: so to speak. Sure. I’ll give it to you, Eric, macro, micro. The macro, I would say our outlook is cautious, and caution prevails. Even despite a better Q4, we’re still cautious about where things will go.

As you can imagine, if you add up the puts and takes, there are enough that caution is appropriate. And so not unlike our Q4 guide, where we’d say we were and I think I used the terms appropriately prudent, I would say our 25 not to mince the words, but appropriately prudent, our 2025 guide is appropriately prudent. Now that’s the macro. On the micro, there are various puts and takes. I won’t go through all of them, but broadly, we feel more constructive in the corporate space.

The pacing through our last earnings period in the corporate space, more steady, more stable. We are cautiously optimistic on small. And I think I gave you some of the puts and takes in the public space, but the micro components would say there are pluses and minuses, all in the realm of low single digits growth. So we didn’t outsize or overweight any single wild card, right? So we didn’t say this is going to be an utter disaster in the federal space, but we also didn’t say, hey, we’re going to have 30% returns in the healthcare sector.

Eric: Right. Okay. Perfect. And maybe just going back to the government side, longer term, I think I can envision a world where short term there’s a lot of change and maybe volatility going on. But if the view is we want to drive efficiencies and productivity, well, there’s an opportunity for technology to kind of be the source of driving that efficiency and productivity.

Based on your conversations, is there any insight into that longer term view yet or we’re still kind of so focused, not you, but everything is still so focused on the short term that maybe that long term view hasn’t become totally clear. Any way that you think

Al Morales, CFO, CDW: about that? I think it’s reasonable to assume medium to long term that you could see some of that play out. Right. Today, we’re in the day to day fluidity of the current. And so we’re living through that.

But I think it is reasonable to assume there could be upside on the other side of this.

Eric: Okay. And then can you touch on the international markets as well, just because they were a little weaker in 4Q as well. So what are the headwinds that international Canada and UK are facing? How kind of persistent are those as we think about 2025? Sure.

Al Morales, CFO, CDW: I think I’ve said that international markets appear to be a number of quarters behind The U. S. And I continue to believe that to be the case. I think we’re in a stage with international, and I’ll just paint this broadly, of unevenness. So if you go back a year with The U.

S, that’s what we were living. We’d have a month, even a quarter where we’d say things seem steady and then it would completely go the other direction. I think we’re feeling some of the effects of that where we have a quarter where we’d say that was better and then a quarter we’d say and then it went the other way. So I think our outlook and our expectations is that that’s likely going to continue in the near term and then hopefully things will ease. You’ve got a lot of extraordinary forces going on when you think international as including the impact from currency.

Now that currency is baked into our outlook. Right. But in the immediate, I’d say, we’d expect it continue to be uneven.

Eric: Okay. So we talked a lot about end markets. Maybe let’s talk about the product side of things. You called out PC growth in the December. Maybe just help us all understand it’s kind of your biggest hardware exposure.

What are you seeing as we kind of enter this period where everyone’s expecting a refresh, but maybe it’s not fully there. I think your results have actually been better than a lot of what we’ve seen and heard in the market. So really, what are you seeing on PCs and how much longevity is there to that in 2025 or maybe even beyond?

Al Morales, CFO, CDW: Sure. 2024, I think we were pleased with our performance in client devices, and we would say it’s an area where we did quite well in terms of outperformance. So pleased with that. That being said, Eric, we’d call it early days of refresh. What we experienced was and look, we knew this, many customers needed to get on with their aging fleets and needed to move on beginning the refresh cycle.

What it was not was driven by Win eleven and what it was not was driven by AI. It was more let’s get on with refresh and let’s get the latest and greatest product generations that we need to support our coworkers. And so pleased with the progress there and the growth that we saw in ’twenty four and ’twenty five, our outlook calls for kind of a continuation of that. The upside is that ultimately, I do think that customers will focus more on 01/2011 as we get closer to that date where the support may not be there. And I also think that customers will get on with the potential of AI PCs.

We just haven’t seen it to date.

Eric: They haven’t seen it to date. Okay. And then pivoting away from PCs, I’m going to term I’m going to use the term enterprise infrastructure, but that means a lot. That means servers. That means storage.

Networking, where you had really tough compares last year. How do we think about kind of demand in those kind of three major buckets on more of the solutions side of things for 2025?

Al Morales, CFO, CDW: First, Macros solutions were better Q4, not gangbusters, but better. We’re cautiously optimistic. We’ll see a return to growth on solutions. I’d call that a tick down from PCs, right? And if you think about where customers are in the backdrop of caution, it makes sense that customers will likely be particular and judicious in their spending solutions because the dollar amounts and the commitments they make there are more significant.

So it’s on the radar of growth, but I wouldn’t call it outsized. If I had to jack and rack the components, feel probably most constructive on storage. And we did see three out of four quarters of growth in storage in 2024. I put NetComm second. I put servers last.

NetComm, as you mentioned, just overcoming periods of tough comps. So we’re now on the other side of that. And I’d say the demand is there. I mentioned that as a catalyst area, but we’re again being appropriately prudent on the expectation for 2025.

Eric: And how is AI playing a role in making these decisions? And really my question is, we hear the term data center modernization as it relates to AI. Does that hold up some of this infrastructure spend a little bit as customers are maybe taking longer to really figure out they need to do in AI? Do they basically say I’m pausing everything? Or can they make separate decisions and say AI is over here, traditional workloads are over here, I need to spend here while I wait for that?

How is is that just intermediated? How should we think about that now?

Al Morales, CFO, CDW: I think a year ago, we would have said that, yes, it’s definitely a factor in decisions for solutions. It’s one more reason that maybe customers were not getting on with more significant solution spend. Over time, as time passes, that has the potential to ease. And I think that’s predicated on greater clarity of what the AI landscape may look like, what customers want to do and how their plans are impacted by the AI landscape, and likely more offerings from our OEM partners that can support AI. Certainly, as we think about the democratization of AI and some of the latest news of AI has the potential for AI to move downstream and become easier for customers to embrace and figure out kind of how can they get on with solution spend and not block their AI efforts.

So I think that’s upside. That’s not baked into our outlook. That would be more upside as we think about the medium term. So I do think that we’ll see that play out over time. Every day that goes by, I think it gets it eases a bit more and I think becomes less of a friction point.

Eric: Okay. Helpful. If we maybe pivot the conversation, and I don’t want to overemphasize this point, but you brought it up maybe two quarters ago around kind of price competition within the market. What did you see again, make sure you keep me honest and that I’m not overemphasizing this point. And how do you fight back as the scale winner in this market?

How do you fight back to protect your competitive position?

Al Morales, CFO, CDW: Sure. Look, Lou’s comments, which I think were Q3, maybe more a bit more expansive than we were intending. It was intended to be more of a contextual explanation or discussion on the landscape we’ve seen over the last year plus. It wasn’t a Q3 phenomenon. And the way I would describe that, Eric, would be low demand environment, just as many competitors vying for that business and some of them willing to buy business or compete just on price.

Right. We would, at a headline level, say we compete on value, not price. And so some of the business we did and we will step away from. So I’ve gotten the question, the, hey, is that abated? Well, okay, we weren’t saying it was a Q3 phenomenon.

It’s been ongoing in this tough period. We always live in a very competitive environment. It’s just been more extreme during a lower demand backdrop. So we continue to focus on competing on value. We’ve got a deep customer base.

Our average customer has been with us for twelve years. So our value prop is that we know them well, we know their technology estates well, we can bring tremendous value to them, not just the best price.

Eric: Right. And it kind of again, your point is, there’s just as many mouths to feed with fewer dollars. And so there’s a cyclical element to this. Nothing at the secular market multi year level has necessarily changed from your perspective.

Al Morales, CFO, CDW: Correct.

Eric: Right. Okay, perfect. Let’s touch on netted down revenue. Obviously, 2022, a bit of an aberration that you had Sirius, so that business grew extremely strong, 8% growth in 2023, ’6 percent growth in 2024. It’s kind of a key driver of your gross margin stability.

How do we think about this netted down business growth rate in the next one to three years? Are we looking at kind of the right growth rate in the 6% to 8% range? Could it accelerate? Just maybe put some context to that.

Al Morales, CFO, CDW: Yes. I don’t have a number for you, Eric. What I would say and we’ve been saying is we expect that netted down will continue to outperform our overall growth. And I think that it’s fair to say that will continue to be the case. We’ll let you know if that changes in any way.

Reminder, what’s in netted down. So number one, SaaS and cloud. Number two, software assurance that is tied to software license and then warranty. So it’s a little tricky, right, because SaaS and cloud has been ruled the day in terms of netted down revenue growth. Warranty with hardware growth being more muted certainly kind of ebbs and flows, but has been more muted itself.

And then Software Assurance is tied to software license. And therefore, if you subscribe to the software licenses in secular decline, which we would say we subscribe to, Software Assurance is not a great performer. So you do have some puts and takes. But back to the my comment, netted down revenues will outperform other categories. We believe that will continue to be the case.

Eric: Okay. And can you maybe touch on again a point that I hear from investors is about some of the changes some of your very large technology partners have made to channel incentives. Is that having an impact? Will that have an impact? Just again, maybe add some context to how that’s impacting spend from your customers.

Al Morales, CFO, CDW: Sure. Look, partner incentives changes, channel changes and the like happen all the time. They’ve always happened. Some of these have maybe hit the wire in a more extreme way over the last year, and most notably, some of the Microsoft changes around enterprise agreements. We generally are on the very front end of knowing how those things are going to play out and we’re getting kind of indications early on.

So as an example with the Microsoft EAs, we’ve known for a while. They telegraph that. We knew it was coming. They want us to drive more business to CSPs and we prepare for that. We make plans for that, and we make sure that that’s both baked into our outlook, but also that we have other growth vectors that can make up the difference.

So I wouldn’t call that an extreme component to our outlook. And our job is to navigate those changes, whatever they are.

Eric: Okay. A few more topics. Just on gross margins, we kind of talked about netted down revenue, easy to get to the gross margin on that business. Non netted down revenue, kind of the traditional hardware centric business. You’ve been able to maintain pretty strong gross margins there, kind of let’s call it in the 15%, fifteen point five % range.

Is that sustainable? Why or why not?

Al Morales, CFO, CDW: My comments I’ll give you would be around 2025. So non netted down revenues, I would say prior to 2024 have had quite a run. And that’s been driven by our growth of services, because that would be in there. Our growth of solutions, some of that on the heels of our Sirius acquisition, but also our investments behind solutions. A trend towards customers buying more highly configured higher premium products, which I’ve mentioned on a few calls, all of those things help to strengthen non netted down margins.

What we saw in 2024 is lower solution spend that degraded those non netted down margins a bit, Maybe a bit more muted services growth because some of that services is tied to hardware. And then maybe a little bit of a like for like product margin compression in 2024. As we look forward to 2025, we feel more constructive around solutions growth. We feel more constructive around services. You get a little bit of a dilution of client devices continues to pick up.

And then finally, we’ve made a little space for product compression, just knowing that we’ve had quite the run on these margins. So all of that, when you add it all together, I would say we feel pretty good about kind of flat to maybe modestly down on the non netted margins.

Eric: Okay. Perfect. And let’s also touch on kind of the operating side of the business because you talk about making investments. Yes. But at the same time, this model kind of a key attribute of this model is driving operating leverage.

And maybe my question is, as we think about your guide, is there some kind of conservative baked into the fact that you’re kind of talking about EPS and revenue growth relatively at the same rate? Or are you somewhat being forced to invest more such that that operating leverage doesn’t appear, maybe push back on that as you think about the CDW operating model?

Al Morales, CFO, CDW: Yes. Look, just big picture, we basically have given a guide of low single digits kind of up and down the P and L. Now, there’s certainly some variability to some degree across each of the volumes, though I would not call it outsized. Depending on what the mix components, we could be a plus or minus on gross margin, but we’re not giving you extremity in terms of movement in gross margin. When we go from gross profit down to non GAAP operating income, it’s low single digits to low single digits.

I think that would reflect that our operating leverage or kind of expense management will kind of hold the line relative to where we are. That is, Eric, a bit higher than what I’d call our sweet spot of expenses relative to gross profit. So we I would say our sweet spot of SG and A relative to gross profit is that 55%, fifty six % range. Our outlook presumes that we would be a bit higher than that. And that is a reflection mostly from a standpoint of with low growth, we’re not likely getting back down to that sweet spot range.

And it is predicated on we’ll continue to drive efficiency, but we have to invest in the business.

Eric: Right. Okay.

Al Morales, CFO, CDW: If growth returns in a more meaningful way, certainly, we’d get back to a drumbeat of operating leverage, but we’re being cautious that that may not play out. And then non GAAP operating income down to EPS, Eric, You have a bit of a dilution at the interest expense line as we just did a pretty significant refinancing that will create a little bit more interest expense and then we get a little bit of pickup from share repurchases.

Eric: Okay. Well, there’s plenty more, but unfortunately I’m out of time. So, thank you very much for joining us.

Al Morales, CFO, CDW: You got it. Thanks so much for having us.

Eric: Thank you.

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