Q1 2021 Insight Enterprises Inc Earnings Call
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Good morning, My name is Gary and it'll be accompanied calculator today at the time I'd like to walk on maybe one for the insight enterprises first quarter of 2021 operating results conference call online shopping based on need to prevent any background noise. After the speaker's remarks, Bill will be a question of.
True session, if you'd like to ask a question. During this time, sometimes we price starting the number one on your telephone keypad. If you want the most out of your question price. The pankey. Thank you on I'd like to turn the company for every two Mitch Glenn It's Y M. C. S O.
Thank you.
Welcome to the one and thank you for joining the instead of enterprises earnings per day, we will be the 16th.
Reading results for the quarter ended March 31st.
The word.
I'm glad the spine.
Alright, and joining the presidential chief executive on.
If you did not have a copy of the press release on the cooking Frank presentation that was posted this morning of Ssilence of the Securities and Exchange Commission or from 8-K, you will find them on our website insight dot com under the Investor Relations texture today's call, including the question. The answer period is the web capitalize and can be accessed by the restoration can you.
Okay.
Clients continue to focus on business agility and continuity by leveraging cloud solutions for certain workloads, our clear strategy and deep expertise delivering digital solutions to clients of all sizes allowed us to grow our sales of cloud SaaS and infrastructure of service high double digits in the quarter, which drove cloud gross profit to 21% of our total gross.
Profit up more than 300 basis points year over year.
In addition hardware bookings trends improved throughout the quarter given the current supply constraints constraints and long lead times, we are working with clients to assess their 2021 device refresh needs and employee hiring plans to get orders placed in the queue for fulfillment in 2021 as a result, we exited the first quarter with elevated backlog.
And I'm pleased to see the pipeline for future sales build to help the healthy levels.
I'm happy to report that our business returned to top line growth year over year on the first quarter fueled by low single digit growth in corporate and enterprise clients and strong growth in public sector of particularly K through 12.
Largely consistent gross margins year over year combined with operating leverage drove adjusted earnings from operations up 3% and adjusted and adjusted return on invested capital to 13, 1% up from 12, 6% in the first quarter last year.
The performance for the quarter set a good base, what we expect will be a strong year.
We're happy with our team's operational execution of the first quarter and of financial results are on track towards our 2021 commitments.
Through a combination of organic investment strategic M&A and a culture of innovation over the last five years, plus we've transformed insight into a leading global intelligent technology solutions provider with a focus on integrated solutions, which are digital innovation solutions to help customers navigate their digital transformation journey and improve their business end to end.
Datacenter and cloud services solutions to help visitors modernize and secure of critical platforms to transform it.
And thirdly, modern workforce solutions that help organizations keep their employees connected productive and secure.
And underpinning the solutions areas as our strength of supply chain optimization, providing clients with the critical products and services that they need.
The comprehensive methodology recommended by the entire team on data replication and disaster recovery increased the short and long term return on investment for the credit Union.
As we help clients.
Companies shifting of public cloud to modernize their infrastructure. We're also engaged in improving data security for their clients' needs to implement new security measures for the business are enhanced security measures already in place our connected workforce team has the expertise to provide solutions tailored to the needs of our clients.
For example, one of our clients whose of professional service provider for the government segment needed help identifying and implementing the security solution to meet new government compliance requirements. In addition to compliance. They also wanted to reduce cost and improve the security baselines, including the end user awareness of things like fishing.
Our team implemented an architecture that include the professional services and ongoing managed services that address remediation management and maintenance of controls to meet security and compliance requirements.
The managed services, our holistic solution addressing all the technical points of security, but also focus on the end user training and adoption of in line security practices. The.
Important takeaway for this example is that our connected workforce team helps clients develop of technology strategy that provides the best end user experience execute against it and maintain it so a lot of the business to reach and sustain their goals.
Our teams approach is to focus on providing capabilities of just three nature of business shifts anywhere operations, improving employee experience and empowering the IP.
In late 2019.
The last year's reinforced the belief that the it industry's resilient and demand for items solutions for continued to evolve during economic downturns and recoveries.
Across the markets, where we do business for 2000 22021 industry analysts expect mid single digit growth across hardware software and services of sales the recovery on a macro level has seen positive indicators of global markets. However, we expect the timing extensive the recovery to vary across are different clients and then markets.
Combination of 2021, we had elevated backlog.
And that trend has continued throughout this quarter supply constraints that the chip and display shortages are now expected to continue to balance of the year. How are we continue to see healthy hardware booking trends that are up significantly year over year. So far on the second quarter will.
When combined with already elevated backlog, we feel confident that we'll see seasonally higher hardware sales in queue to an over the balance of the year compared for the first quarter.
The market is growing once again and we expect this will accelerate in the back half of this year the acceleration will drive stronger top line growth in the back half of 2021 compared to what we expect to see in the first half of 2021 strategically we believe we're well positioned to compete in the areas are client state most namely improve workforce experienced modernising the data centers and realizing in the opportune.
City to go digital.
Organizationally, we continued to try to optimize the resources the best position of solutions in the marketplace, including invested in our sales and technical teams to ensure we can lead with solutions and core and markets and enhancing of Scaleable, it systems and processes, including R. e-commerce platforms targeted the mid market and those supporting as of service consumption model.
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We plan to continue to invest in these critical areas with the goal to deliver the great client experience, while also optimize on our infrastructure the scale for future growth.
Recently recognized as Forbes.
Is one of the best.
Employers for diversity in 2021.
The number of 140 out of 500. The annual list covers 25 industry sectors and insight is ranked the highest of five Arizona companies, making the rankings. We've also been recognized as a great place to work and best price to work in various locations in North America in there and in Australia.
We're well positioned to help our clients solve complex challenges, we believe that the strategic investments you made.
And go to market solution areas of the last several years as well as investments in a solution of the technical talent position as well to achieve our business goals as you're aware, we announced this morning that I will be retiring this has been of difficult decision for me of take care of deeply about insight and are incredible teammates. We accomplish a lot of my time, it inside and I'm excited about our trajectory.
Sort of a strong and talented management team and the gauge workforce, who believe in continue to execute the strategy that we outlined in our Investor day in 2019, and insight is very well positioned for the future.
The board of the top of the higher the top tier search for them and the company has undertaken of thoughtful process to evaluate internal and external on candidates. This is of critical search for insight and I'll be working with the board to identify the new CEO on committees continuing to lead this team of <unk> until the right successor is appointed.
For all of you for your interest and insight over the years from now and the call back over to Glenn as to cover the details of our financial performance.
Thank you Kenneth.
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Just the earnings from operation on the $68 million per cent year on the year of contact for 20.
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Okay and the gain on the sale of real estate and one of 2021 at $8 million.
When the has the results for operating segment of the starting with North American Slide 13 in North America net air for $1.7 billion from the first quarter down one per cent ear to ear due primarily to the lower heart breaks out as the results of some type of drank concerning an extended practically time typing high of that Clark.
Credit profit of $253 million in North America, the sound slightly ear to ear and gross margin of 53% the slack of cats.
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America, North America suggested SG&A.
At least 1% of ear to guarantee the overall reduction in discretionary spending fresh half harshly Inc.
Pieces of executive compensation as long as variable compensation G E variable compensation plan implemented January for it.
Any of the percentage of net sales on on the gap basis, but for.
5% of the first quarter.
For the full year of 2021, we expect adjusted SG&A at the percent of net sales will.
Will be 11.3.
I just did earnings from operations decrease two per cent year over year for $54 million for the quarter on the gap basis earnings from operations increased 27% year on year to $54 million.
EMEA net sales of the first quarter increased 5% of constant currency gross profit also on three 3% of constant kind of pain and when combined with the operating leverage from lower SG&A cloud dyslexia adjusted earnings.
From operation, which includes 50 per cent in constant currency $11 billion moving on to the 515.
And APEC net sales of 50.
$59 million in gross profit of $12 million on the first quarter increased 2% and 10% respectively. Every year in constant currency due to higher sales of hardware and services on the return, which led to adjusted earnings from operation of the $3 million on the quarter up 21 per second constant currency.
Moving on to our tax rate of effective tax rate for the first quarter of 2021 with 23 eight per cent compared to 23% of the prior year quarter and.
In the prior year, the lower effective tax rate. The few primarily for the Remeasurement of acquired net operating assets to be carried back higher tax here it under the care of that.
Turning to our cash flow and 20 and the first quarter of 2020 line, we generate a $14 million of cash flow from operations compared to $93 million and the prior year.
I'm periods last year.
The decrease year over year is primarily for the working capital investments included investments in inventory for.
Specific current engagements and additional short term demand.
As previously disclosed we expect cash flow of the normalized and 2021 as our business growth for except for the.
For your of 2021, we expect cash flow from operations will be between the 202 hundred $59.
And the first quarter of 2021, we invested approximately $8 million on capital expenditure mainly related to technology on for some of the investment.
We also receive $27 million of net proceeds from the sale of three buildings in Tempe on our property and look bricks, Illinois.
Day, we have the majority of our for $2 billion AVR facility available in of Apple.
To find the future growth.
At the end of the first quarter, we had a cash balance of of $139 million of which of $119 million has residents of our foreign to the area compared to the prior year cash balance of $63 million.
We have $417 million of outstanding debt, including are seeing a convertible notes at the end of the quarter down for the total debt of $751 million and the prior year.
As we exited the quarter with a leverage position at 1.1 time that the cash flow or EBITDA, which is well within our iron level of comfort on our AVR agreement our primary complaints the covenant as of fixed charge coverage ratio, which includes trailing 12 months EBITDA coverage over capital expenditure.
And interest in cash in check.
As of March 31st or at for time against the minimum requirement of one time and we are constantly just part of capital requirements on liquidity needs.
Net and wanted to notify you of that this week, a board of directors of truth and authorization on to repurchase of $225 million of our current stock.
Including $25 million that was previously authorized in February of 2020.
The market conditions, we will commence his program on 2021 however.
However, the guidance for maintaining does not include the impact of this program as the the amount of the market conditions over the coming week, we plan to update you on our second quarter earnings call regarding our progress and expect the EPS impacts of the year.
As Ken mentioned for maintaining our previous the issue guidance of 2021, we expect to deliver net sales flow between four and 8%. We also expect diluted earnings per share for the full year of 2021 to the beach.
True $6 60.
At $6.80.
This outlook of Sam interest expense between 25 of $28 million and effective tax rate of 25 of 26% for the full year of 2021 capital expenditures of 70 $585 million, including the both at the bringing of corporate headquarters and on average share count for the year of approximately $36 million.
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This albuquerque's goods acquisition related intangible ex fan of approximately $32 million the non cash convert OPEC discounts on insurance costs reported of part of interest expense of approximately $12 million and as soon as in the acquisition related or segments of restructuring.
For the sixth with your modeling we've posted of scheduled on on our website on the Investor Relations page. The Cherokee expect the amerasian expense and the non cash convertible debt discounts on the issuance costs by quarter for 2021 I.
I will now turn on the call back again. Thank goodness. In addition to the rewards mentioned previously we issued on third annual corporate citizen reported February Sharon, how environmental social on governance practices, possibly impact our teammates clients and communities issues reported emphasizes or continue to access the support of team oriented workplace of diversity.
The quality of inclusion and high-low total revise of hunger for it in harmony align with our investments and environmental on sustainable initiatives most.
Most importantly for people first we don't think of ourselves as individuals but his teammates we took care of of each other our clients on our communities, we trusted each other and take pride in what we can collectively cheese and.
And once again one of the thank our teammates across the world for everything they do for insight for clients partners from each other and for all of it should be part of such a diverse and talented team. So that concludes my comments. Thank you again for joining us today, who will now open the line up for your questions.
[noise] cash please check for Monday at the.
On your telephone keypad.
Yeah. The first question comes from the line of Adam Kendall with Raymond James.
Okay. Thanks, good morning, Congrats Ken well on retirement the industry will certainly machine and then we'll we'll miss you as well.
I wanted to maybe just start on the comment that you made about expecting acceleration in the back half of the year that will drive stronger top line growth and I would go on to this question I'm sure you won't Miss this part of of.
Of your job, but as of fear from investors that devices are gonna slow in the back half of the year and it's a big part of items spend so maybe just match that with why you're expecting acceleration in the back half of the year of the categories of vertical that give you confidence and of Glenn it's wants to weigh in on.
Sense of magnitude for that for a model the <unk>.
<unk> in the queue for going to be over that for the 8% for year revenue growth while queue to it's under just help us shape on models. Thanks, Yes.
Yeah. Thanks, so much Ottoman thanks for the commentary and certainly your support and guidance throughout the my tenure here.
A couple of the reasons why of course, we believe the second half of the accelerated one is I think from of economic point of view as well as of course as you know the compares are much much easier, whereas you get two Q2 Q3 and Q for.
So that's certainly just the math that works there, but from the device point of view that you touched on certainly we've we've experienced elevated backlog or backlog is up low single digits from Q3 to queue for the continued to be up low single digits from queue for the Q1 and that trend is continuing.
Now into the queue to so.
So there is certainly good indication of the demand booking rates are up against substantially from where there were a year ago. So I think all those the line very very well to the kind of growth that we're seeing now we will see constraints of course with with the semiconductor chip shortages that we're all experience in the industry.
But I do believe in all of the indications we have will so the the Oems are still going to ship more units.
This year than the certainly the last year. So I think there will be won't be able to get everything we want by any means but is certainly will be acceleration. We also believe that is his clients now start to get back to offices I do think that definitely impacts how infrastructure spend will be done. So while we did see improvements as we talked about.
And Ah corporate an enterprise the client base of we still positive growth in the quarter, which was really good news because we haven't seen net and a bit.
We think that starts to accelerate even further.
As we get into the second half of the year and I think is dissemblance of people start to come back to their work environments and the hybrid fashion I do believe that that will definitely help accelerate a lot of the private infrastructure that is definitely been much more muted on you know.
Over the past four quarters.
A lot of them because people now in place to be able to you know.
Look at the equipment test the equipment and so forth. So a lot of those things of the factor, but I think the the economic backdrop, certainly favors the certainly the vaccines coming out of certainly what the UK in the U S has experience already on that starts to of course really evolve into Canada in the mail on here in the coming months. So so I do think that the.
The the economy's and spend the will certainly improve in the second half the coolness, let me turn it over to you to see if you wanted to add anything.
I think Matt tie.
[laughter] part of time on that.
So I think that if you look at the grocery presenting queue line, we anticipate that we're going to be growing in the free.
Range for the full year.
On the statistics now coming out on the various agencies would indicate MC English they hit the ground for wax the sector of anticipate will be slightly better than that the compares of can mentioned are lower in the second half of the year and we also as kind of outline anticipate that that's gonna be easing of some of the can shrink and we'll have more access to.
Products as we go through the Mcs, we expect that on the second half of the year, we will see higher than the at least 8% of 48% range.
In terms of the growth.
And the second Satya not next two items.
The second half for sure.
Understood. That's help on this is a follow up of I wanted to ask on gross margin. It was found year over year for the first time on awhile, albeit slightly and certainly whether better than others out there on time.
Of your main competitors, but I wanted to ask about then the rebates and incentives can maybe the state of those right now it seems like it wouldn't need incentives much because there's no supply any way and I'm wondering if you're seeing that and secondly, how how do you think about those once supply comes back to those returned of normal rebate levels of could we potentially hit of new.
The normal on gross margin for the company.
Yeah, So I'll comment in like on the set and Adam So yeah, we were down 10 basis points as you saw uhm.
For of gross margin a lot of the begin driven by the acceleration that we talked about with hardware Terry lower gross margin than the rest of our business. So on some of the acceleration the everything drove that the the.
I think that's that's the certainly main factor.
That we're going to but for this I don't know if you wanted to add anything towards that or not I think.
On what we have said back in.
February of 19 maintain Alice at the margins are gross margin in Buffy flat for of 2021, partly because we anticipate at hyperactive percentage of the total will be greater.
Then it was in 2020 of on the head more crowd based on 100% margin business at the <unk>.
The percentage of our total so with the improvements hardware dot net.
Okay.
And the second half of the air we believe the gross margin for it'll be a flattish on the year over year basis.
And I would see.
Two one a day.
Got it.
Okay, maybe just one final one bigger picture Kenneth what are the key attributes that you on the border of going to be looking for on the successor, if you could maybe stack rank a couple of things of that vendor experience global experience large acquisitions cloud.
Yeah, Let me think of all of those for pizza with the first and foremost of of course, we're looking for very solid leader. That's the first on top of the list. We think we've got the right elements in place we of the right strategy in place. So I think all of the above type of of experiences that you mentioned of course, they're going to be important ingredients to that so we're excited about that.
I think it will be very thoughtful process and we have as I mentioned, a few really good internal candidates and a good slate thus far of external candidates that were just in the process of starting to engage with so nothing I think of out of the norm of what you'd expect.
Got it it'll be the big shoes to fill congrats again, thank you.
Thanks, Adam.
And the next question is from that came in with the Stifel.
Alright, yeah. Thanks for a good morning, it's one of a follow up on the items question just regarding your outlook.
For for acceleration of in the second half uhm in the second quarter. It looks like you're going to have a pretty easy time. So I think last year the were down like mid teens on a pro forma basis year over year 80 per cent sequentially in your typically up sequentially of reached a little bit.
The June quarter. So is there anything preventing you from from growing out of your style modestly sequentially Uhm constraining sure that outlook in terms of the infrastructure spend does that work for Ya.
Skewed towards the back half.
We will grow sequentially entering into the queue to didn't mean to suggest that we would not be growing sequentially going into the queue to we still have from supply constraints as it relates to more devices.
As opposed to the infrastructure.
But we will continue to grow our queue to is normally.
Ah heavy software quarter for us because of the Microsoft.
The end.
In June.
Some of that gets netted the kind of made the top line growth, but we would anticipate that we're going to perform well for the middle of our software perspective Hydro day, a little bit more muted just because of the price of strength, but we started.
And just a sequential growth from.
On the first quarter.
Okay. That's helpful. And then kind of as you you talk about the opportunities with on the infrastructure size of hybrid.
Side and in the bookings could you quantify I think you said your backlog was up a little bit, but that's on the client device, but in terms of the real solutions projects could you quantify how strong non smoking.
Yeah, I would say that we've certainly seen.
We certainly had growth in the first quarter.
That space.
Well again, we anticipate with the projects for seeing with the backlog of bookings that we're we're starting to see come to reality that that's that's certainly increases and again more favorite towards the second half of the year is people come again back more of a hybrid work environment back on site, we think that helps the the acceleration in the course of the economic.
Ex do improve certainly in the second half and.
And the compares of course as you mentioned get easier as well. So so we are definitely seeing good activity in that area and as we talk to you and as you talk to the the Oems Cisco and day.
<unk> net after the pure storage on I think you'll see a similar sort of storing up in that day and as well. So that's why we come to the conclusion that the second half will be <unk>.
Certainly stronger from an infrastructure point of view of meeting the hybrid infrastructure point of view in the second half of the year.
Okay, and then lastly on the public sector, you talked about strength there in the education market and we've seen of multiple strong quarters of of demand.
Is there still get of legs left there in terms of of that the cycle Uhm the education of the public sector markets.
Yeah, I think there definitely is and of course, we're we're not nearly as heavily skewed towards that segment of the business is one of our competitors is so it's a much smaller part of of your business. We did see continued growth, but I think the main aspect to think of what we're all seen of course of the pandemic drove matter of it was not as of that.
I think on average it used to be there was.
For the average household one P. C per household I think now you're seeing of course, it's one P C per person per household.
Due to the education requirements that are necessary for distance learning. So so I do think that there is a huge proliferation as we've seen with the chromebooks primarily in that market set and I think that's going to continue now that you're going to have refresh cycle that will be probably certainly more accelerated.
With the with the numbers that you're seeing out there.
And the fact that there's a lot of wear and tear on those with the students. So I do think that that's what that's going to continue now is there a surge going on now in the last quarter and the next and this quarter and maybe into the queue to yes, there's no question.
Won't continue with that accelerated pace, but the the baseline has improved pretty dramatically. When you look at the numbers of units. So if you just take the refresh sort of cycles of that that's going to certainly increase the base pretty substantially for the education market.
Okay, Great alright, thanks for walking.
Your next question is from happening of the business.
S T.
Yes, the boring.
The congratulations on your pending with Samantha.
My first question is in regards to the pie chain constraint. The that are out there just wondering when you look at the the issues of falling out now of versus quarter and.
The things improved or gotten worse or about the same can you just give us some more color on that please.
Anthony Thanks for your question, Yes, I would say the about the same we were very close to this as you can imagine so we're very on top of this with the likes of Apple Lenovo Dell.
HP of course, where most of that is occurring so I would say that they're.
They're managing that they're getting better visibility is so I would say, it's it's pretty much basically about the same and we anticipate that those constraints will certainly occur through the rest of this calendar year and then we'll certainly be.
There's obviously capacity coming on line, but that typically takes a few quarters to three quarters to really.
Start being fulfilled so I think it will see that into certainly the rest of this year and into the first part of next year potentially.
Got it okay, thanks, and give us some kind of on the public sector. Just wondering if you could give us.
Some additional color on some of your other vertical market. So what are you seeing the.
Yes, again, as we said, we're seeing that our enterprise in corporate and commercial clients. That's really we did see positive growth for.
For the first time in a while on those in those sectors. So that was really good news to see from the business point of view and again, we continue to see you know looking rates improve very nicely.
As well as of course, as we talk to a backlog improving so that's what gives us the confidence with the ongoing sort of the trajectory that we see in the business.
Got it okay and a lot of the last question for me on as far as of.
Oh all of those more discussion of if for some of the car.
Companies about inflation, just wondering eating the the weather for age inflation of other costs of increasing it out of how you're doing as managing that.
Yeah of not seeing that yet Anthony of courses of tremendous amount of talk about it has been for the last couple of months, but we're not seeing that impacts of the business yet it at this stage, but certainly mindful of that and what that could mean.
There's no question, we will see price increases.
On on devices because of the the semiconductor shortages is obviously those prices are increasing for the OEM. So those of the pass through now for US. That's that's a positive the situation because the tire is piece for us and we do have systems to make sure that gets immediately pass through to our clients. So.
But I don't think that's.
That's in that's the basically the increase in pricing that might be viewed inflationary, but that's really just due to the constraints the more than anything else, but so too many question of inflation not really seen the impact.
Any sort of clients or any discussion around that yet.
Got it alright, well thank you on the wall.
Thank you.
Okay. The next question is from Paul coaster with J P. Morgan.
Hi, This is the pulse hung on for cost Sir. Thank you for taking my questions and can congrats on of your retirement, you seen of material amount of shareholder value of Christian under your leadership. So congrats on that and just on the competitive landscape or you Kenny market share of particularly.
I think the smaller players as your size kind of enables you.
To work relatively better do you supply can change. The then just how do you think the industry evolves from kind of the lessons learned during the pandemic and do you expect kind of more consolidation in the space.
Yeah, a lot of net question there Paul So first of all thanks for the thoughts the.
Yes, I would say from.
A couple of areas said that we're seeing from Ah the smaller smaller competitors. The very resilient group of people. There's no questions for their business as of pivoting, but there's no question that I think the trends that we've seen in some of the datasets, we've seen where the larger players the top sort of.
10, 15 players in the industry or certainly growing Ah significantly faster almost two ex what the smaller players of growing and that's just the data that would show that so the Jimmy they are going away that means of the smaller players of pivoting to becoming more met of service providers in looking at different parts of the business, but I do think that it's becoming more and more difficult for.
For smaller players to continue to play in the supply chain on the aggregation game I think the system's the tools.
Out of required now are much different than they were a few years back. So I think that does play to the the the larger companies who can invest in really strong on.
Platform Storm E Commerce engine strong digital marketing type of capabilities. So I think that's been playing out and I think that will continue I think that is leading of course to more consolidation I think you're seeing that across the landscape and many many facets and I think that's only going to continue and it's a very natural thing that occurs as industries continue the mature.
And gross so I think that's that's definitely happening as far as the lessons learned I think the.
I think the the obvious ones for US I think companies of realizing that you know at the heart of the heart of the pandemic really was the reliance on it.
It was the solution for them right Uhm as we said in our script 510 years ago would of been really difficult for this woman you look at the advent of the level of of machines that we have for devices that of relatively inexpensive to allow people who work remotely of the.
Scalability of the networks.
That's occurring the application of things like Cisco Webex and teams, which really help the collaboration front.
I'll play really strongly so I think.
For it I think overall, it's the pandemic has been a good thing and the fact that more of our company's realize that at the heart of it they've got to become much more digital as the company in order for them to succeed and I think we will see some of the remnants of this of course continue right on the thing.
I think we all agree that the workforce won't be the same.
Moving forward on there will be a reboot believes that it'll be hybrid, but we'll certainly be more work from anywhere type of activities that will continue to migrate. So I think those are some of the obvious on on lessons learned but I think overall.
Just shows how resilient people are to to get the job done.
Gotcha. Thank you for that Uhm, and then Glenn as of you think about free cash flow of for the year I assume we should expect pretty strong seasonal of two two is similar to the last year and then some drag and the second half what are some of the the can take as we navigate kind of through the year of.
And that could drive some upsides, maybe your cash from operations. Thank you.
Mhm.
Select that after tricky question on our part of that I think if that has been navigate on the second half of the year, we will have.
We anticipate that we're going to have more more hardware purchases on that typically.
The address as well.
Half of <unk>, we do anticipate that we will have that.
That of performance around software, which typically helped us from one of our cash for prospective cow I think that combination Israeli much kind of drive.
The cash flow performance that we received on the second half of the air as.
As well as the improvements that we're seeing in our connection's from out of all.
Uhm.
Hey, our perspective and the reductions in on on the account and we kind of good job on expanding on on the pampered side with the facility and the image of like Nancy 30 that we use that can continue to each of those will also the drive to the cash flow performing anticipating and the second half of the.
Yeah.
Okay, great. Thank you.
Okay next question comes on.
Hi, Pat day with Barrington Research.
[laughter], Yeah, Kenneth what day.
Areas of your business are you are you experiencing a market share of games.
Yeah. Thanks for the for the question no question on the software side, where we get good datasets.
From the publishers and so forth.
No question, we're gaining share when you look at clouds of when you look at as your consumption from Microsoft.
When you look at what we're doing with the likes of companies like Vmware No question that that was certainly gaining minutes in the area of big area of focus for us as the company. So.
Certainly good data sets the point for the fact that we are.
Copies of like Adobe, we're definitely doing well on the software front on the harbour front of it depends upon the the the specific situation a little bit hard and these kind of very constrained environment to gain share on your goal really is to make sure you don't lose any share during this environment and that you're getting the right allocation of products of the support your client needs.
And then of course, the the big segment of courses on.
Uhm servers storage on networking side of the business. So on networking is going well for us on some areas of focus for us and server and storage for I think we've given up a little bit of share.
In those areas for that would be sort of a summary of of how we see the business.
And why are you assuming that.
People get back to the office and your guidance.
Yeah. Good question, we haven't we told our teammates that of course will give them a month's notice for that and.
And of course, it depends upon where you are on the world. So certainly in Australia, and New Zealand of our people are the offices of fully open and have been for awhile.
And certainly we're seeing that in Hong Kong, and Singapore, certainly China on our offices in China of an open for a long long time.
Europe as the different situation the the UK of course looking much more positive than the rest of of Europe. So I think that's going to take a few more of months I wouldn't expect Europe to really get back to more of the offices until sort of the late summer.
The.
September is timeframe base.
Based upon what we're seeing Ah the U S. We've got our office is open their little sort of voluntary basis, but we do believe that as we get into July that that will become a much more sort of hybrid sort of situation, where we will be having our main larger offices open but again will follow all of the C. D C guidelines and so.
Fourth Canada, similar to Europe, right, a little bit more constrained certainly with the lockdowns that vaccines coming out pretty quickly. So so anticipation again would be that sort of in the.
On July timeframe that we'd see certainly much more activity of back to offices and we're hearing the same sort of the situation with our clients.
As well when you look at what their plans are certainly you've been in the financial community know the financial condition meeting this what you've seen with Goldman and J P. Morgan of said in regards to offices opening in June and a lot more activity. So we think thats that's positive as we get back to more of a hybrid sort of environment.
Thanks for answering my questions.
One of the the question like Adam of I apologize of Mister question on the rebates of wrote it down but didn't get Ya in the verbal response on the rebate front, we're actually not seen any degradation now we're seeing great support continued from our partners and the investments and how important are activities are to their portfolio. So we are not seeing.
Degradations in regards to any of the rebate.
Sort of programs that we have in place so and we think obviously as we come out of that come out of the economy gets stronger and vines grow up the double of those will always be very similar what they were but during the pandemic. We didn't see any of our partners really retract for.
From that situation at all so that continues to be pretty stable for us.
And then can I just clarify one question at of Hollywood debt that we've taken care of.
So.
I, just think about SG&A with giving guidance on it.
Anticipate the look at 11.
Sg&a's percentages down adjusting ex.
<unk> percentage of stand for the year, but in the first half of the ice.
And then on that.
And on the second half of the year.
Right amount.
<unk> the anticipate on kitchen, SG&A with the higher and that appointment seven per cent and it would come down on the second half here.
[laughter].
Okay.
Okay. So thanks for everybody for joining we appreciate it.
This concludes today's conference you may now disconnect.
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