Good morning. My name is Eric, and I will be your conference operator for today's call. At this time, I would like to welcome everyone to the CDW Fourth Quarter and Year-End 2013 Earnings Conference Call. [Operator Instructions] I'd like to remind you that today's conference is being recorded. If you have any objections, please disconnect now. It is my pleasure to turn the call over to CDW's Chairman and Chief Executive Officer, Tom Richards. Mr. Richards, you may begin your conference.

Thanks, Eric. Good morning, everyone, and thank you for joining us today to discuss CDW's fourth quarter and full year 2013 results. With me in the room are Ann Ziegler, our Chief Financial Officer; Chris Leahy, our General Council; and Sari Macrie, our VP, Investor Relations. I'll begin the call with a review of fourth quarter and full year performance, focusing on strategic progress and share some thoughts on 2014. Then I'll hand it over to Ann, who will take you through a more detailed review of the financials. After that, we'll open it up for some questions. But before we begin, Sari will present the company's Safe Harbor disclosure statement.

Thank you, Tom. Good morning, everyone. Our fourth quarter and full year 2013 earnings release was distributed this morning and is available on our website, along with supplemental slides that you can use to follow along with us during the call. I'd like to remind you that certain statements made during this presentation are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Those statements are subject to risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is contained in the Form 8-K we furnished to the SEC today and in the company's other filings with the SEC. CDW assumes no obligation to update the information presented during this webcast. Our presentation includes certain non-GAAP financial measures. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts in the slides for today's webcast as well as in our press release and the Form 8-K we furnished to the SEC. Please note that all references to growth rates or dollar amount increases in our remarks today are versus a comparable period in 2012. The number of selling days for the fourth quarter and full year are the same in both 2012 and 2013, so there is no difference in growth rates for average daily sales and reported sales. A replay of this webcast will be posted to our Investor Relations website, investor.cdw.com, by this time tomorrow. Finally, please note, this conference call is a property of CDW and may not be recorded or rebroadcast without specific written permission from the company. And with that, let me turn the call back to Tom.

Thanks, Sari. The combination of our balanced channel portfolio, broad product suite and focus on execution enabled us to deliver our strategic and financial objectives for 2013. At the beginning of 2013, we stated objectives of profitably growing 200 to 300 basis points faster than the market while making investments for future growth. I'm pleased to share that we met or exceeded all of these objectives. We delivered 2013 sales growth of 6.3%, well above the U.S. IT industry forecast, which generally ranged from 3% to 4% for 2013. We achieved this above-market growth while maintaining excellent profitability. We delivered a full year adjusted EBITDA margin of 7.5%, a strong outcome in the face of a highly competitive market, pricing pressures and more transactional products and headwinds in the Federal and Healthcare markets. Our adjusted EBITDA increased 5.5%, and when coupled with our progress deleveraging our balance sheet, we delivered non-GAAP net income per share of 27.1% higher than last year. And we accomplished this while making significant investments during the year to further our ability to deliver solutions. We added nearly 120 customer-facing coworkers, the majority in pre- and post-sale technical positions. These are our technical specialists and service delivery coworkers. And we broadened our solutions portfolio, including new offerings in cloud, mobility and security. Fourth quarter results represented a solid finish to our year of both strategic progress and financial performance. For the quarter, revenues increased 4.3%, adjusted EBITDA increased 3.2% and non-GAAP net income per share increased 43.2%. Once again, the power of our balanced portfolio that acts as a shock absorber against external factors, be they economic or otherwise, like the extraordinary shutdown of the federal government, was front and center this quarter. Our Corporate segment increased 7.6%. Corporate growth was led by continued momentum in…

Thanks, Tom. Good morning, everyone. As Tom indicated, Q4 and full year financial results reflect the benefit of our balanced portfolio, our focus on execution and our strategic progress. They also reflect the continued progress we are making against our financial strategy to drive strong cash flow, delever our balance sheet and deliver mid-teens earnings growth. Let me begin with our P&L. If you have access to the slides posted online, it will be helpful to follow along. I am on Slide 7. Top line growth was solid this quarter with net sales of $2.713 billion, 4.3% higher than last year, on both a reported and average daily sales basis as we had the same number of selling days in both quarters. Average daily sales grew to $43.1 million. Q4 was down sequentially 3.8% versus Q3 2013, a bit below our normal seasonality due to Federal channel performance. Gross profit for the quarter increased 5.4% to $448.3 million. Gross margin was 10 basis points higher than last year and 50 basis points higher than Q3. As expected, product margin pressure in transactional products continued in the quarter. This was more than offset by a higher contribution from net service contract revenues, which are booked at 100% gross margin, and higher volume incentive rebates, reflecting our success in attaining partner-aligned growth goals for both for certain transactional products and warranties. Reported SG&A including advertising expense was $306.3 million, up 3.9%. Advertising expense was up $2.6 million in the quarter as we put more dollars to work to build our brand. This year, we continued to highlight our "People Who Get It" campaign with Gordon & Taylor featuring Charles Barkley. And we had some of the highest NFL viewership since the "People Who Get It" campaign began. Lower non-cash equity compensation and…

[Operator Instructions] And our first question comes from Bill Shope of Goldman Sachs.

It's nice to see the Healthcare segment starting to bounce back. As we look into 2014, would you say we're on pace for a potential steady recovery here or can we expect this to be a bit choppy, particularly given this quarter's strength that was driven by budget flush?

Bill, thank you for the question. I think the general saying that one quarter does not a trend make is probably appropriate here. We were encouraged by the improvement. But I think until we get a couple of quarters under our belt, we're going to continue to think about it the way you described. But there were some encouraging signs during the last quarter of the year.

And then on the gross margin side of the equation, similar type of question. You had, I'd say, better-than-expected performance there relative to most expectations. How should we think about the sustainability of this? And if you could just give us a little more detail on the drivers for this quarter and how we should think about those drivers on a quarterly basis going forward?

Yes. Well, first, like if you remember last quarter when we had some questions about the gross margin pressure, I said one of the things that I always feel good about is when I can point to exactly what drives particular results. And last quarter, we had the significant sale of Chromebooks, and we saw some pricing pressure. In this quarter, we have been, as I articulated, investing in our services business, trying to grow our services revenue. And we saw a really strong performance in some of our warranty strategies and those services revenue. Now we hope they'll continue, but there's other factors that contribute to the gross margin like if we see continue to see pricing pressure in the marketplace and that continues to put pricing pressure on transactional products. So I think we have kind of said that we're going to continue to focus on EBITDA, and I think you should continue to see us kind of stay in the range we have been for gross profit. But it is going to bounce around, as Ann likes to remind everybody all the time, that there's a lot of exogenous factors that can influence that.

Yes. The other thing I did remind you, we are going to overlap a 16.7% gross margin in Q1. So you need to keep that in mind.

Our next question comes from Ben Reitzes of Barclays.

This is actually Ryan in for Ben. I just wanted to ask you quickly on the PC market. I mean, you've had some good results now. You've noted Healthcare and Education were 2 areas where that product is seeing success. Can you talk about how you see this market unfolding over the course of the year? And when will you start to get near the point where support is ended for Windows XP? How do you think about the deceleration or the market after that point?

Well, Ryan, I think we've talked about this on a number of calls that because of our B2B focus, we continue to see positive growth in the PC marketplace. There isn't a single driver. I know people ask, is it the introduction or the end of XP support or the introduction of 8? I think what you've seen in our performance is we have seen segments that continue to see and look at PCs from the value they create in the business. And so we are expecting that to continue. I think it's a fair way to say it. We're not seeing a tremendous amount of success driven just by XP and people trying to address that. So as we look out into 2014, we would expect it to continue to perform the way it has in 2013 for next year.

Okay. And then turning to the Education market, you've really had, I think, 3 really outstanding quarters in that vertical. And how sustainable is that as we go through the year? I mean, you'll start to lap some more difficult comparisons, I think, by the second quarter. So could you just give us some parameters in how we should think about growth in that business for 2014?

Well as you know, we don't provide any kind of guidance for the channels, if you will. But I think your instincts are accurate. We're going to lap some pretty amazing growth as we go into the latter part of the year. I will tell you, though, that we are making additional investments in that segment. So that tells you that we believe there is incremental opportunity. One of the things we are seeing play out just as we had hoped is those Chromebooks, when they get inside of a school district create incremental opportunities for network management and some of those services that Bill kind of asked about when it comes to the kinds of things that enhance gross margins. So we remain pretty, I don't know if the right word is aggressive or favorably disposed, to growth in that particular segment. But they are going to jump some pretty amazing comps as we get into the year.

Our next question comes from Brian Alexander of Raymond James.

Tom, you guys announced an interesting partnership with Google this week. I was hoping you could expand on the scope of the relationship, reselling versus services implementation, the motivation for the partnering more deeply with Google. And if there's any offsets with major software partners that we should consider as you grow this business?

Okay. So there was a lot in that one question, Brian. Let me take them, I hope, one at a time. Let me answer the last first. Look, this isn't about us doing anything other than finding a particular partner that had an opportunity in the marketplace and us building off of the success we had with the Chromebooks. I don't think it's going to have any impact on other partners. In fact, as it was, I think, reported in some places, it had nothing to do with our partnership with other people. We're excited about our partners, and I think the strategy some of our other partners are deploying about pushing people like CDW to the cloud is absolutely the right thing to do. We've been planning for it, investing for it, and so we feel really good about it. The actual relationship is customers are looking for us to represent and include in our recommendations to help them reselling some of those apps as a Software as a Service. And as I think we've talked about a lot, especially on the IPO road show, when a customer is moving to the cloud-based solutions, there is integration and aggregation opportunity that exists as it gets built into their IT infrastructure. I think as we talked about, Brian, that takes some services skill sets. We don't have those today resident in a meaningful way to scale, so we're going to use partnerships to get there. But just as we have done in other parts of our service business, as we build momentum and we build density, then we're going to look to add that to our service portfolio. But we are absolutely excited about that partnership, but it's not at the expense of other partnerships. Trust me.

Yes, no, appreciate that. And just a follow-up on the services strategy. I know you're taking a methodical approach to building out your services footprint. I think you said on the call 1 to 3 locations per year. If you look out over the next few years, let's say, 3 or 4 years, how should we be thinking about the services contribution to your gross profit dollars versus where we are today? How meaningful is this opportunity for CDW?

We think it's -- look, I'm not going to put a number on 3 to 4 years out, but I'll just say this, Brian. We think it's extremely meaningful. If you look at the change in the IT consumption model, if you think about the examples that I talked about in my formal comments, the ability for CDW to have a full suite of services capability, and I mean a full suite, not just professional services but managed services, configuration services, warranty services, really has a powerful impact on our ability to win additional business. And as you, I think, alluded to, services business has rich margins. And part of our strategy has always been to enhance that part of our business so that we are growing a part of our business rich in margins to offset the normal commoditization that sometimes happens in a transaction part of the business. So I think you can look for us to continue to invest, and I think you can look for us to continue to grow, and I think you can look for us to continue to expand the locations.

Our next question comes from Rich Kugele of Needham.

So quickly, I just wanted to dive a little deeper now that Washington has historically returned to somewhat normalcy if you think that these sales could pick up this quarter over the next couple of quarters, what your sales force is saying there could be on the pent-up demand side. And then I've got a follow-up.

Okay. Yes, I don't know if I'm going to comment on the normalcy comment. I'll just say that we're excited about some of the clarity that comes to the forefront here. And look, we're hopeful and I think that if you talk to our sellers, they'd say encouraged by just having some clarity, clarity around budgets, clarity about the debt ceiling kind of going away for a negotiating item. And now we're just kind of working through the process where now that the budgets are settled, you have to get to the allocations. But I would say the activity level has improved, and we feel good about that. I don't know that we're far enough into it yet for me to kind of predict when we'll get back to a normal rhythm, but I would tell you, we're encouraged, at least at this point, on the activity level.

Okay. And then just lastly, on the moving of the legal and other segments into MedLar. That's an interesting move. I'm just interested if you're -- what aspects of the MedLar group do you think can drive that? Obviously, you must be thinking that there's a stronger revenue opportunity for those segments. If you could just expand on that a little bit.

Yes. We're not going to fold them in under any of the existing MedLar group. They'll actually report directly to Chris Corley. But they have been performing at a rate. As I think I've said on previous calls that once they demonstrate a sustainable performance that is kind of in excess of the peer group, then we're going to move them to MedLar because of the resources that are available, be they service resources, be they technical resources. And it also then gives us the ability to kind of move and be consistent with customer size. And so we're kind of excited of this move from the incubator. I don't know what the right term is going to be, but they're just now going to be moved into a more sizable organization with more infrastructure.

Our next question comes from Katy Huberty of Morgan Stanley.

I don't think I heard you comment on the storage and server segments. And NetApp last night talked about cloud perhaps starting to have an impact, at least in delaying deals and large companies sweating assets. And so curious if you're seeing that trend. And then as my follow-up, a number of big companies that are your partners have guided to a sub-seasonal first quarter. And they're telling us that the month of January has come in weaker than expected. And so I know you don't give specific quarterly guidance, but just wondering if you have any qualitative commentary around the first quarter versus what the normal trends would be in the 1Q?

Okay. So let me -- on the first part, Katy, our cloud business has been growing pretty impressively, although it's still relatively, as you know, compared to the size of CDW, a pretty small number. We are seeing growth in Infrastructure as a Service, which is really where you see both the compute and storage play out. But I don't know that I would draw a correlation yet to it having an impact on server and storage revenues. And the reason I say that is because so much of our storage and server revenues in these last 2 quarters have been impacted by the Federal segment and what's going on in the Federal segment. And as you know, every product category has typically been down. So I guess what I would -- I think I would confirm on a positive note, the growth we're seeing in cloud computing coming in Infrastructure as a Service, as well as Software as a Service, I don't know that I'm quite there yet to draw the correlation to what we're seeing in some of the revenues in storage and servers in the quarter, okay? And the second one is I think for us, the first quarter is going to be interesting because we've never come through a fourth quarter where we had the federal government shutdown. And so while I would call the fourth quarter not normal, it'll be interesting to see how the first quarter plays out. I think Ann alludes to in her comments that the first quarter for us is generally a slower quarter sales-wise than the fourth quarter. And I think that's our assumption, but I will tell you, I think the real wildcard is do we begin to see some of the Federal stuff return and how might that impact us. I can't comment on January, obviously, about how it turned out. But qualitatively, it came -- it felt the year is starting the way we kind of assumed it would start. And so it feels at least normal to us so far.

Yes. Katy, I would say that our deviation from normal seasonality has been driven by our Federal channel, right? So as we move through the second half of the year, that's what caused our normal seasonality to deviate a little bit. And so that still remains a little bit of a wildcard for us, the Federal channel.

[Operator Instructions] And our next question comes from Jayson Noland of Robert Baird.

I wanted to ask about MedLar and Small Business. MedLar, really strong last year, cal '13, up 10% year-on-year. Small Business down slightly. Should we expect to see more balanced growth across Corporate in '14?

I think you have to keep those separate, Jayson. I continue to be encouraged by the performance in our MedLar segment. We've had strong growth for a number of quarters now. And so I'm not anticipating any backing off of that strong growth. And I would say in Small business, it's the second quarter of some positive numbers. And so I'm hopeful that, that will continue. I think we've gone through some periods of market dynamics relative to customer confidence. We've also been making some changes in how we think about and go to market with Small Business that I think are starting to stabilize our performance. So I would say that I am hopeful that what you're seeing in Small Business is going to continue going forward. But I will say this. As you guys know, the big caveat around that is kind of the general economy and the customer confidence level that kind of overhangs probably that segment as much as anyone.

Okay. And as a follow-up, we're hearing more about Dell in the field pushing into the channel, pushing a couple of hundred thousand accounts to the channel. Do you expect your relationship with Dell to change at all given their moves in the field?

Well look, we don't comment or specific -- or excuse me, particular OEMs. We continue to be kind of focused on customers. And we're not, at this point, in a position to comment one way or the other if -- we'll see how things play out here. I think you've got to let some time and some water go under the bridge here after a company goes private. We know that from first-hand experience. So we'll just kind of see what happens here on out.

Our next question comes from Mark Moskowitz of JPMorgan.

I wanted to follow up on the average daily sales growth profile. So that's a metric you guys talked about in the past as being an important barometer. It did decelerate to about 4.3%. I'm wondering if you could kind of tease out the Government impact. What would the average daily sales growth be if you can kind of teased out the Government for the fourth quarter? And then kind of my follow-up question and I'll just throw it out there now, is as we think about the March quarter, Q1 here, how should we think about average daily sales growth at the consolidated level, all in? Is it going to be around 4% again or can it closer to 5% or 6%?

All right. So the first one, you guys, and I think, Mark, probably do the math, back of the envelope, it would have been pretty meaningful growth absent Federal. It would have been in the high single digits for the quarter and the year. So that's -- if you can sense a tone of excitement or confidence on my part, it's because of that performance. And then on the second one, look, we're going to kind of stick to our 200 to 300 basis points above the IT market. And if the IT market grows 3% to 4% like it's forecasted, that pretty much tells you how we think about the whole year. I don't know that we have that kind of clairvoyance and want to get into particularly quarterly discussions about what we think is going to happen.

Our next question comes from Arun Seshadri from Credit Suisse.

First, I just wanted to ask, versus your expectations going into the quarter, the Corporate budget flush, how was it in the fourth quarter?

I would say -- if I could, Arun, average, I wouldn't say it was like kind of felt kind of normal again just talking about Corporate.

Okay, that's helpful. And then as far as Federal being a percent of revenue, can you give us any sort of -- for Q4, how much is Federal as a percent of revenue?

We don't break it down by that. But it's an important aspect of our business, as you can see on the slide, how big Government is as a percent of the business. You get a sense that Federal Government is generally somewhere between 7% to 10% of our business.

Okay, appreciate that. And one last question for Ann. I think, Ann, in your prepared commentary, you said -- you referred to current leverage target of 3x. Any -- maybe I was reading too much into the inflection there, but any sort of thoughts around changing that leverage target?

Yes, no, we'd indicated before, one of our key medium-term targets is to delever 1/2 to 1/3 turn per year. And we've indicated that we'll stick with that until we get to 3x leverage. At which point, we'll revisit whether that's an appropriate leverage target going forward. It will depend on interest rates at the time, and at that point, decide whether it's appropriate to stay there or go down further, and at the same time, potentially begin stock buyback.

Okay, so no change from prior quarters? Okay.

No change from prior quarters.

And I see no further questions at this time.

Okay. Just 2 thoughts in closing. One, as always, thank you, thank you for your questions, thanks for your interest. And if your company needs help, I can't imagine why you wouldn't talk to CDW. And the last is Happy Valentine’s Day to all you sweethearts out there. Thanks, everybody. See you.

Ladies and gentlemen, this concludes today's conference. Thank you for your attendance. You may now disconnect. Everyone, have a great day.