Q1 2021 CDW Corp Earnings Call
Approximately $1 billion per share repurchases with the balance from dividends of course, as we always do we will closely monitor the macroeconomic environment liquidity M&A activity leverage and adjust as needed.
Moving to the outlook for 2021 on slide 18, the current environment continues to be challenging to forecast with a high degree of confidence on the demand side. We are encouraged by the activity and building momentum, particularly with U S commercial customers, where April writings for corporate and small business were up healthy double.
Digits on a year over year basis. We're also seeing good activity at CDW, Canada and CDW UK.
On the supply side uncertainty has increased since the first quarter, our backlog is higher than normal and increasing with lead times, extending and visibility challenged at suppliers notebooks certain chromebooks displays and pockets of infrastructure hardware are becoming more constrained net demand, particularly with commercial customers feel.
Stronger than three months ago, but supply is more challenged.
With that context, our updated outlook is for the U S market to grow approximately 4%, we expect CDW net sales to grow 300 to 400 basis points faster than the market in constant currency, including the contribution from amplified it.
Currency is expected to be a tailwind of approximately 60 basis points for the full year, assuming exchange rates of $1 36 to the British pound and 79 for the Canadian dollar.
Moving down the P&L, we continue to expect non-GAAP operating income margin to be in the mid 7% range for 2021.
We now expect non-GAAP constant currency earnings per share growth in the low double digits call. It 11 to 11, 5% currency.
<unk> is expected to contribute an additional approximately 50 basis points to earnings per share growth. This updated full year outlook for non-GAAP earnings per share is an increase of approximately 30 over last quarter.
Additional modeling thoughts for annual depreciation and amortization interest expense and a non-GAAP effective tax rates are unchanged from last quarter and can be found on page 19.
Moving to modeling thoughts for the second quarter on the February earnings call. We did not provide a first half second half sales split as we typically would because of the uncertainty.
Based on our current assessment, we expect the split to be approximately 48, 5% to 49% first half 51, 5% to 51% second half. This assumes a slight sequential increase from Q1 to Q2 on an average daily sales basis equates to low double digit year over year growth in the second quarter.
We expect second quarter non-GAAP earnings per share to grow in line with full year non-GAAP earnings per share growth.
If supply turns out to be more resilient, enabling us to work down the backlog or keep pace with even stronger demand that would be upside to the outlook. We feel good about the health of the business and believes supply uncertainty is a question of timing across the next three quarters and potentially into 2022.
Additional modeling thoughts on the components of cash flow can be found on slide 20, our long term free cash flow rule of thumb remains unchanged at three and three quarters to fourth quarter percent of net sales assuming current tax rates.
Given the timing impacts that contributed to 2020 significant over delivery. We continue to expect 2021 free cash flow to be at or slightly below the low end of the range.
We continue to expect Capex to run approximately 75% to 80 basis points as a percent of net sales slightly higher than the historical 50 basis points rule of thumb as we mentioned before we believe now is the time to accelerated investment in digital transformation in our own business, enabling us to fortify our competitive position in <unk>.
CDW the trusted partner of choice for customers and vendor partners.
As we always do we will provide updated views on the macro environment and our business on future earnings calls that concludes the financial summary, with that I'll ask Christophe to open it up for questions can we please ask each of you to limit your questions to one with a brief follow up thank you.
Okay.
Wanted to ask an audio question. Please press star one on your question from once again that is star one to ask an audio question.
Your first question comes from the line of net.
Ronnie with Evercore.
Okay.
Good morning, Thanks for taking the question Collin Best of luck on your retirement, it's really be the pleasure working with you.
We will flow.
Questions from the one that I've been getting asked by clients a lot of it maybe just step back and talk a little bit of what's happened to gross margin. It seems from a sequential basis, but what drove the drop on a sequential basis. The loss is moving in a while and then how do you view gross margins progressing as we go through the year.
Thanks, Amit.
Good morning.
Both the year over year and sequential basis.
Recurring thing I would say the biggest driver is product margin, particularly driven by notebook mix and rate. Obviously, we've had strong growth in chromebooks and education.
The other thing that happened in the quarter with really strong growth in our UK and Canadian businesses.
Our fiscal year end from many of their public customers. We had a very strong fiscal year end in those markets and a lot of those deals tended to be in client devices. So you have <unk>.
<unk> and quiet device end market mix internationally.
In the previous quarter Q4 benefited from strong configuration services as we decommission the majority of the devices. We had from the sensus device as a service offering last year, a little of that spilled over into the first quarter, but for the most part of from most part it was done.
As you think about.
Gross margin.
As you know, we don't provide an outlook it can bounce around from quarter to quarter based on a variety of factors.
We do tend to focus on the <unk> margin because of our variable cost structure and thats more variable, but if I can just share some thoughts on some of the puts and takes to gross margin as you think about the next couple of quarters.
I think from a tailwind perspective.
I would expect.
The longer term secular trend to 100% gross margin items and.
As well as us continuing to grow our higher margin services businesses.
In terms of headwind.
We've talked about this for some time, but theres hardware mix and particularly within the hardware mix client devices and Chromebooks and then from a product margin perspective, I think some things to think about that.
Continuous commoditization that you can see I think we went through a unique period over the past couple of quarters, where we saw customers prioritizing speed and execution over price, we're beginning to move into what I would describe as a more normalized customer behavior environment, where customers are willing to wait a little bit.
Longer and prioritize price over speed.
Good.
The urgency and kind of exit potential threat of the pandemic and business continuity isn't as great. As it was this a few quarters ago.
From an OEM perspective, obviously there is.
Some supply challenges out there and Oems are getting as aggressive on special pricing programs that they might with it channel more normalized environment. So I think you have a lot of things going on there.
We have been through cycles like this before I'd point to the 2018 to 2019 timeframe, where our topline kicks up into the high single digits or even low double digits as we sell a lot of hardware, we exceed our 200 to 300 basis point premium by a meaningful amount.
But gross margin has a 16 handle on it and I think that's part of the power of the business model is that we pivot to where the profitable growth is and that's why we do focus on non-GAAP operating income and EPS and free cash flow.
Okay.
That is really helpful and maybe just follow up with Chris on a different topic.
Since you've seen this hardware business grow double digit software and services are lagging somewhat.
Is this something normal that you would expect as the onset of the macro cyclical recovery and perhaps will likely budgets become more normalized <unk>.
Should we expect that softens, those whose business is not growing in line from a classes and CDW averages by the end of the year or something but I'm. Just curious how you stack the hardware versus software and services as we go forward.
Yes.
And I'd say look is.
As customers continue to work through their budgets.
Yes, keep a close eye on the macro environment and the vaccine rollout, that's really going to do 10-K.
<unk>.
Where they're spending and if we continue to see that uptick in hardware refresh.
Refresh.
In terms of thoughts were looked at can be fairly lumpy as we've talked about before depending on the mix of software. This quarter. We saw license in the shorter term licenses from licenses and non.
Strong, but I'll tell you is that continues to be quite strong across the portfolio. So we don't expect software to <unk>.
To diminish as we move forward in the year notwithstanding a hardware refresh is still critically important obviously to the full stack. So I think we'll continue to see software strong, it's just going to bounce around depending on what's being bought and whether or not netted down.
Perfect. Thank you and congrats on a nice quarter.
Thanks, Amit.
Your next question comes from the line of Katy Huberty with Morgan Stanley.
Thank you good morning, just a clarification first I think IDC forecasts hardware software.
Growth is north of 6% at this point why do you think 4% is the appropriate forecast. If you think about the increase since three months ago is it largely PC and chromebook driven or is it more broad based than that.
Follow up.
Okay, Katy it's Chris I'll take that I think I heard you cut out for a minute, but I think the question was on the market rate of growth given some of that.
Our cash out there and.
We triangulate from a great sources customer input partnering.
The CIO in var surveys and the IV Eaton partners and I would share a couple of thoughts I think the forecast.
Tend to lag current market conditions or the third party analysts.
While demand feels very healthy I'm not sure how many of the external forecasts are incorporating the impact of supply chain that we've talked about.
And the CIO surveys that can focus on that they are a little more caution from some of the <unk>.
So we feel pretty pretty confident that we've landed on a growth rate that feels right right now but of course as we go through the year as we always do we'll update based on what we see that changing from the market.
And is that is the increase in your mind, largely PC driven or is it more broad based than that.
Yeah.
I would say is over weighted to.
It's over weighted to hardware in client, but it's really broadly drive that.
Demand in the prosper Transat transactional and.
And solutions and that's driving the market rate of growth in our view.
Thank you and Collin just a follow up for you you mentioned <unk>.
From ratings growth in the April quarter can you just talk about that.
GAAP in in the last three months or so between writing writings growth and revenue growth and whether that GAAP increased as you as you moved into April given the supply constraints.
Okay.
Yeah Katy.
What I would say is we came into the year with a higher than normal backlog in.
While there were some ups and downs as we went through the quarter and some ups and downs by end market by the time. We ended the first quarter. The backlog was relatively consistent with where it was at the beginning of the year. So that would tell you that.
Writings in sales than sales generally kept pace with each other where we've seen the backlog increase had been more subsequent to the end of the first quarter and that would tell us that we're writing well ahead of shipments.
Okay. Thank you congratulations on retirement and Collin.
Thank you.
Your next question comes from the line of Shannon Cross with Cross research.
Thank you.
I was wondering with regard I know you touched on a little bit during the call, but but stimulus how are you thinking about the benefits.
Significant amount of money that's going to be.
It has and will be flooding into education, I think government is going to have a fair amount of funding as well so.
As you look ahead given.
Your your customer mix in that how are you thinking about stimulus maybe.
And how long do you think it will we will continue to benefit I guess.
Yes, great question Shannon.
It will be a tailwind in our mind for sure I think about it a little bit like getting an elephant through the snake. It takes them some time.
And to actually get it moving through the system. So when you think about the three different stimulus.
That had been passed last March and then last December and then most recently in March there are funds that have been available for state and local K through 12.
In healthcare in particular, where we see the most benefit from our customers and we have a team actually that.
Through the stimulus bills and understand where the dollars are going and frankly help our customers quite a bit and understanding how and where and when they can spend their dollars, but we see it as an absolute tailwind and our customers look to us to help understand.
Best to utilize those tons. If you look at the most recent.
The American rescue plan in March there's about $350 billion go into state and local and $130 billion going to K through 12. So we certainly look forward to helping them use them and invest in technology and they come out of the current environment.
Are there any specific areas that are targeted within stimulus I mean is it is it continues chromebook sales or will we see maybe a move up the stack from a hardware perspective.
Yes look we take K through 12 for example, we go to market with what we call customer centric solutions that we're focused on those areas that are most strategic and important to our customers. K 12 for example, take a classroom transformation. Thank at school safety networking augmentation, so certainly the stacks.
Starting with a consultative role in a defined role and then bringing bringing to bear our implementation integrating integration management management capabilities.
But we K through 12 really turns to CDW and state and local healthcare, who we're going to be beneficiaries of the stimulus for the holistic capabilities that we bring to bear.
And at the end of the day that actually helps maximize the dollars. They can use through stimulus because we know how to we.
We know how to work those dollars through the needle.
Great. Thank you so much.
Yes.
Your next question comes from the line of Adam Tindle with Raymond James.
Okay. Thanks, Good morning, Chris I wanted to start on the growth premium versus the market, which are raising today and I think coming out of the last cycle. The growth premium contracted. So I'm wondering is the raised today more reflective of device demand remaining stronger for longer or do you think that youre noticing structural.
<unk> is versus the last cycle that are enabling you to stay at an elevated growth premium regardless of product cycles.
Yes, good morning.
Adam.
Well, our premium does tend to be two to 300 basis points higher than the market would need when we start the year, we hold ourselves accountable for that.
And.
When we sell a lot of hardware as you know which is recognized as revenue we tend to outperform that.
Premium so we brought it up to $3 to 400 basis point. When you think about the mix of hardware that seems to make a lot of songs kilos. So if I just go through the math.
If we if we take census.
The baseline, which contributed about two to 200 240 basis points the premium last year.
We're looking at a good five to 600 basis points this year by bringing our premium up those 100 basis points. So when you asked about whether or not we got it done.
Durable.
Forecast or outlook for for outperformance I would say it really depends on the mix.
In years, where we have high hardware, we tend to outperform because we recognize much of what we sell on a net sales basis.
In times, when we have slower sales of hardware and we have more netted down items. That's when we'll see the topline more muted. So we're hesitant to connect to.
Two.
Get to a higher premium generally because of the mix of the business and the beauty of the model is exactly that makes it the business. We've got the full range of products and we go where our customers need them when they when they need us so.
I don't see us bringing that up.
At a higher level at any point soon but rather toggling to where our customers need us.
Understood and maybe as a follow up Collin, Congrats and I'm sure there's going to be some aspects of the John that you won't Miss like this one where I'm going to beat a dead horse on gross margin.
But I do have to ask I mean.
I know theres notebook demand, but devices have been strong for some time sequentially SMB and international grew most which are among the higher gross margin segments for this gross margin compression is so much more than normal. So I guess the question would be on a like for like product basis are you seeing pressure on gross margin and <unk>.
Why is there inflation or price increases that you are eating more of our sharing in some of the pain that is helping you to gain some share.
Yeah, Adam I mean, we.
First thank you.
You are right. This is one of the parts of the job.
What moves down the road, but.
Okay.
Putting all the mix issues. Aside we are seeing some product margin compression in certain categories and just to go a little bit deeper on <unk>.
Some of the comments I made before.
Again, I just I think 2020 was really unique in the way that customers were prioritizing speed and execution overtaking every last basis point off the table in terms of their buying behavior and I think.
Now that we're moving into a different phase of the pandemic where that Mitch.
Mission critical nature of getting that purchase as quickly as possible just isn't there we're seeing a return to kind of some of that more normal customer buying behavior I would characterize the competitive environment as competitive not irrational, but we compete in a highly competitive marketplace.
From an OEM perspective, they are obviously wrestling with.
Higher input costs.
And supply challenges right and so because of that.
That dropped a couple of things one they are not incentivized to.
Aggressively invest as much in the channel and special tire pricing programs and things like that that they might in a more normal supply environment in a more.
Normal competitive environment, where they are battling it out to gain share.
And in some instances, they're taking those higher costs and passing them along in the form of price increases now we do work on a cost plus model as we've talked about over the years, but if you just think about the math of the way of price increase works if for argument's sake, we make $100 per unit of gross profit out of notebook and that notebook.
The price goes up by five or 10% that is going to be a lower reported gross margin percentage. So I think those are some of the dynamics that are driving.
Some of the changes we're seeing on product margin currently versus some of the preceding quarters.
Understood. Thank you.
Your next question comes from the line of Matt Cabral with credit Suisse.
Yes. Thank you Collin also wanted to extend my congratulations on your retirement, all the best going forward.
I guess good to hear some momentum coming back into the business on the infrastructure side.
I guess I'm wondering if you could expand a little more on what youre seeing underneath there and talk about trends across the data center in categories like server storage net come in.
Taking a step back and be curious from your perspective volume just how customers are balancing the desire to refresh or invest in their on prem footprint versus the push to accelerate the move towards the public cloud going forward.
Good morning, Yeah, let.
Let me start with the step back if you think across.
Customers from here quite a bit about when people are going back or returning to the office and I'll tell you well certainly there are you seeing any of the couple of larger organizations that are returning to the office pretty pretty quickly in the summer most of our customers around across commercial and small business are still I'd say not rushing theirs.
Still planning and there is still a little cautious because they've got employees on both sides of the spectrum and I just wanted to get back and those who frankly have to get ready to get back to that first I would just day, we're in a time right now where as the vaccination.
<unk> might accelerate and see what happens over the next couple of years, we've got to be patient per a couple of months all that said clearly the hybrid work world is here to stay and our customers are thinking and planning around how to have flexible where people are now calling high flex environment hybrid <unk>.
Flexible environment and so we are in the we are still planning with them. We are seeing some customers that have had John.
Old infrastructure, and a real need to upgrade get <unk> over the past couple of months.
But we are still heavily in the fees of I'll call it assessment to optimize weather.
Plans to upgrade go out the window and you start to move more to cloud whether customers.
I think more strongly about on Prem cloud like solutions, which are now really readily available.
And a great interest so what I would say that is that were still customers are still assessing.
And there being more reflective as Collin mentioned in there last year. This was there is just that kind of a.
A rush to get business continuity and now there is a more measured reflected strategic approach on what's going to be durable competitive advantage for the long term. So what does that all mean, we have seen.
Some customers spending more on infrastructure hardware infrastructure obviously.
Really quite well.
We saw server uptick storage is getting stronger.
I would expect we'd see net com.
Really come to come to life later in the year or mid year as customers are heading back to the office.
But there is.
On Prem hardware is not going to go away. It's just what's going to be most optimal and as I said customers are really weighing the benefits right now.
Okay.
That's really helpful and I guess as my follow up I wanted to dig in a little bit more on the commentary for the second quarter and I think I heard slight sequential growth and I know, we're coming off of a really strong first quarter base I guess, if I look back prior to last year. The business was typically up much more meaningfully from the first quarter to the second quarter from.
Im wondering if you can just help bridge the gap a little bit and just speak to how much is maybe normalization on the education side or from the supply challenges.
Just the trajectory and the wider business.
Good morning, Matt.
I would say.
Education abnormal education seasonality as is the single biggest driver here. If you look historically what has driven.
The increase in sequential growth from Q1 to Q2.
<unk> is by far the number one factor when you look across our end markets. So we just come into the typical education peak season with a much stronger base and we've talked about several quarters now of unusual or abnormal education seasonality. So I would say that's the first driver.
Touched on a couple of other ones in my prepared comments, but again.
Just an.
Unusually strong public here and finish and the U K and Canada I know its public year end every year in the first quarter, but we just had a particularly strong finish this year and then we also.
Carried a little bit of sensus revenue in the first quarter as we completed the device to decommissioning we are completely done with that.
No census revenue growth going forward I think the other thing that I would think about it.
<unk> made this comment in one of the answers earlier was that our backlog was relatively unchanged over the course of the first quarter.
If supply is more resilient and we think that's because I didn't think it would be but if supply is more resilient.
And we can begin whittling down that backlog or if demand is even greater.
And supply can keep up with that greater demand I think that could provide some upside in terms of.
Sequential growth into the back half of the year. We just don't have the visibility at this point, though to to build that.
Our confidence on supply into the full year outlook and into the second quarter.
Perfect. Thank you very much.
Your next question comes from the line of Oslo bucket genre with Bank of America.
Hi, Thank you for taking my questions Collin.
Pleasure working with you and wishing you the best for your retirement.
First question is for you as well.
Can you give us some details on capex spend this year what areas are you investing in and what utilization are your distribution centers running at and at what point would you need to invest in another facility.
Thanks, <unk> and good morning.
In terms of our own capex.
Again, we talked about this a little bit on the call but.
A lot of that is going into our own digital transformation.
That can be.
Better tools for our sellers.
More.
Hi.
How our customers interact with CDW and making those transactions more frictionless as well as the investments, we're making in supply chain both.
Resiliency as well as flexibility so I would think about capex going across those buckets.
In terms of adding another distribution center.
I don't know that in the next few years, we would have.
Build another half million square foot distribution center.
I think we would.
Look at more dynamic and flexible models working with third party logistics organizations and really thinking through how to optimize our.
<unk> footprint across the U S from a supply chain perspective.
Okay. Thanks for COVID-19 and I think you had a question on utilization.
Yes.
The distribution centers are busy theres no doubt about that.
Part of that is us flexing, our muscles, and where we can bring inventory in and configuring that and staging it for our customers and helping them through this choppy environment.
So.
There is.
Some capacity there it is tight and again I think we would use more of a flexible model and more of our renting space in the short term as we needed until we get a better sense of what supply and demand look like over the longer term.
Thanks for the details on that.
My second question is for Chris.
What percent of your coworkers are currently working from home and given certain regions are going back into Lockdowns. I mean, how do you think about that and is the updated revenue guidance for the year that you gave this morning is that dependent on a certain percent of co workers being able to go back into the customer sites.
And get acceptance for projects, so as the mix of co workers working from home versus being able to travel.
The revenue for the full year.
Okay. Good morning, everybody. Thanks for the question, let me start with the second part first our guidance isn't dependent on.
When or how many people we get back into the office or going on to customer site. So we.
We've done a great job the team has done a great channel staying connected and productive.
No.
It's not dependent on that in terms of going back to the office and.
How we think about that a couple of things first of all we have co workers on both ends of the spectrum as I mentioned before as most companies do we've got some who are really eager to be back and some who are still cautious until we get through.
The pandemic more fully.
So what we've done is we have created.
We created opportunities per customer per coworkers to come together and have social networking time in a safe way.
Also given guidance to our co workers, who are customer facing around getting together with customers, who would like to get together again in a safe way and that started to happen. We also have customers who are very comfortable with our service provider provision in a remote way, which we've been doing throughout the pandemic.
We also have customers, who are now opening up and allowing us back on site. We have bases that are opening et cetera. So I guess I'd say look we're doing very well from a productivity and connectivity perspective, we are starting to get together with customers in person and you can imagine it depends on what's happening within each state for example, or each country I think the U K.
Just had their garden clubs open and that was a big event and customers do you wanted to get together.
But we're going to do this right we don't really wanted to.
Starts that that's really the key for us we want to be able to have our co workers come back together in a way that is that continues our highly engaged from high performing culture and keeps the customer at the center of how we actually work together. So we can continue to serve our customers and partners better than anyone else.
Okay. Thanks for the details.
Okay.
Your next question comes from the line of Jim Suva with Citigroup investment.
Thank you.
As you start to see some mid and small sized businesses coming back to work and in person meetings and interest works are you seeing that they are still very kind of PC notebook centric weighted or are they going back to kind of pre COVID-19 mixed level or any type of.
Preference to what they are installing when they do come back to work.
Okay.
Good morning, Jim I would say.
If you were to take a scale of one to 100, how many are actually back at work, we're still very much on the lower end of the spectrum. So we still have.
A very large number of customers who are continuing to work remotely for those who are.
<unk> had some folks going back into the office, but we're observing is our continued investment in mobile employees the ability to be in the office on a flexible basis.
The ability to move around the office and used to be.
The office in a different way now the question is what work are you doing in the office from do you need to have even more collaboration spaces and the ability for your employees to have mobile devices that they can move around with K com. So I would say our view is that.
The net flexible hybrid work environment is what the preponderance of our customers expect to be in over the long term.
And that includes no per.
Look the higher density of notebooks, obviously more enterprise level of collaboration capabilities. We do have from customers, who are contemplating whether to have a desktop in the office and a notebook at home.
But it really depends on it depends on the industry.
Things like lockers in hotel Ing.
Our really points of discussion now, but that's what we're seeing overall if that's helpful.
Great and now that we're lapping one year of COVID-19 like from the education and government sectors are they still very much needing to.
Catch up and do a lot more PC and chromebook installations or are they kind of this some are going to be in the procurement cycle per SKU is going back to school or theyre going to be like a little less notebook.
And chromebook dependent or are they actually going to be more because maybe there is some districts, who are fully stocked and others, who aren't or are they going to do more infrastructure and just kind of curious kind of what your view for that.
Yes, I guess, if I think about K 12, education and I'm trying to take her 12, a couple of things.
Demand continues to remain strong because there is such a GAAP to that one on one device ratio that schools are trying to get to for equity and access and also for something they're referring to is learning along these GAAP that might've happened over the pandemic. So there's plenty of headroom.
<unk> devices going forward.
With regard to CDW.
These are tough compares.
From last year. So if you think about our growth over last year very tough compares but the demand is strong the other thing I would say is as.
As we're going into the next school year schools are figuring it and we're working with growth to figure out.
How to create the most optimal class from an experienced and that would be a blended experience hybrid experience all in class schools really have.
They are looking at the ways of learning that they can use technology within a classroom or outside the classroom, but we're working through all of the school and much more creative ways. So from an infrastructure I'll call. It networking in particular perspective.
We'd expect to see upticks, there and then think of.
Audio and visual.
The older Interactive flat.
Flat screen panels.
Getting old now, but there are newer availability of solutions that work better. So that's another opportunity to help really modernize the classroom.
So net net.
Demand will remain strong with regard to devices, but the opportunity for infrastructure network augmentation Ann for video will be will be a good opportunity as well.
Thank you so much for the details.
Your next question comes from the line of Matt Sheerin with Stifel.
Yes, yes, thank you Ann good morning.
Just wanted to ask another question regarding the client devices in the PC upgrade cycle, that's going on three years to four years now.
Theres been talk obviously at some point that leveling off or being down, but we're also seem to be lapping.
The four year anniversary of when companies started to upgrade to Windows 10, and given the concern that's out there seems like there's still a backlog. So could you talk to the client devices and notebook upgrade cycle and your thoughts there.
Yes, sure Matt let me.
Talk a little bit about maybe tailwind and headwind. So when we think of that tailwind certainly the need for more remote devices and we've talked a lot about that today, whether it's.
Enablement, we're enabled work or learning and device density than there are new use cases, we've seen great uptick in tablets. For example in terms of how our customers engage with their customers in new ways that you'd get demand from there you've got leverage get the ability to leverage the skinny unless we get those dollars flowing through and then we also have our corporate and <unk>.
Small business segments that are to recover nicely in the Comparables of last year are pretty low so we've got some.
From positive isn't there then you mentioned the refresh absolutely 2017, and 18, we have seen and we expect to continue to see that refreshed go on so we are selling into that.
On the headwind side look we had big overlaps over 2020, and some of our segments, including K through 12.
And the economy is still a wildcard, though employment looks like its picking up and thats been quite helpful. Frankly in the small business day with regard to endpoint solution and then the last thing I'd just emphasizes the headwinds as the supply challenges that we're facing.
Relax visibility there, but otherwise the demand for client devices continued to be strong.
Okay. Thanks for that and just the last quick one regarding the head count you talked about I think 200.
Additional co workers, including 40 from the acquisition.
But are you looking to continue to expand.
Your coworker count this year given.
The relatively strong outlook for demand.
Yes, we absolutely are going to continue to invest in our business, whether it's co workers other acquisitions or digital transformation as Collin mentioned, so we certainly will continue to invest in our co workers.
Okay. Thanks, a lot.
Your next question comes from the line of Keith Wilson with Northcoast.
Good morning, guys and I. Appreciate you guys getting me in Hey, Collin I'll Echo congratulations on retirement.
Is the pricing environment that we're currently in the CW have any pricing power I guess was sort of his customers and in fact.
It's just harder to get from our product into their hands.
No Keith I, Wouldnt say pricing power per se I think the competitive advantage is probably more on the ability to secure supply to the extent it's available in <unk>.
Getting at least our fair share.
I think ultimately your ability to price through it is a function of the competitive environment and the customer's willingness to wait and I think that's what's different now versus say two three quarters ago, where the customer wasn't willing or couldnt wait.
So I don't know that Theres, a huge opportunity to two.
Pass along incremental pricing beyond what the market will bear as what I would say fair.
Fair enough fair enough.
In terms of the supply chain challenges that you're facing are there challenges more on the logistical side or more on the components side, it's going to the final products.
I would say it's both.
The components I mean, obviously the processor shortage is well documented but things like glass and.
Sure.
Just.
All of the challenges associated with that and then again the logistics challenges of ports canals and natural disasters and all of those things. So it is really a <unk>.
Confluence of events that.
Our impact from supply.
Alright, Thank you very much.
Thanks, David.
We have no further questions I will now turn the call back to Chris Leahy, President and CEO for closing remarks.
Thank you.
Thank.
Thank you to everyone on the call today I would like to really recognize the incredible dedication of our coworkers around the globe and they are extraordinarily committed approach to serving our customers our partners and all of our CDW stakeholders. Our coworkers bring it every single day and thank you to our customers for the privilege and opportunity.
To serve you to our investors and analysts participating in this call. We appreciate you and your continued interest and support of CDW and we look forward to talking with you again next quarter.
You.
This concludes today's conference call you may now disconnect.
Okay.
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