Good day ladies and gentlemen, and welcome to the CDW Corporation's First Quarter Earnings Call. At this time, all participant lines are in a listen-only mode to reduce background noise. But, later we will be conducting a question-and-answer session and instructions will follow at that time. I would now like to introduce your first speaker for today Mr. Tom Richards, Chairman and CEO. You have the floor, sir.

Good morning, everyone. It's a pleasure to be with you today and to report on our first quarter results. Joining me on this call this morning are Ann Ziegler, our Chief Financial Officer; Chris Leahy, our General Counsel; and Sari Macrie, our Vice President, Investor Relations. I'll begin today's call with a brief overview of our results and key drivers, and we'll run through the financials and then we'll go right to your questions. But before we begin, Sari will provide a few important comments regarding what we will share with you today.

Thank you, Tom. Good morning, everyone. Our first quarter earnings release was distributed this morning and is available on our website, investor.cdw.com, along with supplemental slides that you can use to follow along with us during the call. I'd like to remind you that certain comments made in 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 also includes certain non-GAAP financial measures, including non-GAAP earnings per share. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation charts in the slides for today's 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 the comparable period in 2015 unless otherwise indicated. In addition, all references to growth rates for hardware product, software and services, today represent organic net sales only and do not include the results from CDW UK. Also, there was one additional selling day in the first quarter of 2016 compared to the first quarter of 2015. So all sales growth rates references during the call will be on an average daily sales basis unless otherwise indicated. A replay of this webcast will be posted to our website by this time tomorrow. I also want to remind you that this conference call is the property of CDW and may not be recorded or rebroadcast without specific written permission from the company. And with that, let me turn the call back to Tom.

Thanks, Sari. We had a good start to the year as we successfully leveraged the strength of our business model to deliver excellent profitability on solid top line growth. Consolidated net sales were $3.1 billion, up 11.4% above last year. Organic constant currency average daily sales, which exclude the results from our acquisition of UK solutions provider Kelway, increased 3.5%. Gross profit increased 14.9% to $525 million. Adjusted EBITDA increased 10.4% to $233 million and non-GAAP net income per share increased 18.5% to $0.67 per share. These results reflect the impact of three key drivers this quarter. Our balanced portfolio of channels, broad product and solutions suite, and the impact of mix on our profitability. First, our balanced portfolio. We have five U.S. channels each generating an estimated $1 billion or more in annual sales. Our UK and Canadian operations add another $1 billion plus of geographically diverse annual sales. The benefit of this balance was clearly evidenced across the business this quarter. Reflecting the anticipated slower start to the year that we shared with you on our last earnings call, corporate sales increased 3.4%, results were balanced with MedLar up 3.5% and Small Business up 3.2%. As expected, we saw pockets of industry weakness with a generally overall slower economic picture. Public increased 3.5%. Government results were excellent, up 13.7% reflecting ongoing success in meeting public safety needs at the state and local level and program alignment at the federal level. As expected, healthcare increased 1.3% as customers continued their focus on reducing cost as part of merger consolidations and ongoing reimbursement pressure. Education decreased 2.8%; K-12 was down just over 1% while higher-ed was down high single digits. Higher-ed continued to be impacted by large state budget log jams and ongoing budget prioritizations. K-12 delivered excellent increases in…

Thanks, Tom. Good morning, everyone. As Tom indicated, our first quarter financial results reflect the combined power of our balanced portfolio of channels, breadth of product offerings, and focus on profitable growth. They also reflect the progress we are making against our long-term financial strategy to drive strong cash flow, deliver double-digit earnings growth and return cash to our shareholders. Turning to our P&L, if you have access to the slides posted online, it will be helpful to follow along. I am on slide seven. Consolidated top-line growth was excellent this quarter with net sales of $3.1 billion, 13.1% higher than last year on a reported basis and 11.4% on an average daily sales basis, as there was one more selling day this quarter than last year. Average daily sales were $48.7 million. While Canada represents a relatively small portion of our total net sales at just over $120 million this quarter, Canadian dollar translation continues to impact our organic net sales growth, shaving approximately 40 basis points off of organic growth in the quarter, 20 basis points less than the first quarter of last year, and 30 basis points less than last quarter. On a constant currency basis, organic net sales were 3.5% higher than last year. Organic sequential sales were down 11.4% on an ADS basis versus Q4 2015, which is slightly higher than our historical Q1 to Q4 sequential decline. Gross profit for the quarter increased 14.9% to $524.5 million. Gross margin in the first quarter was 16.8%, 25 basis points above last year. Product margin declines were more than offset by our higher mix of net service contract revenues, including 10 basis points from SaaS and higher vendor partner funding. Turning to SG&A on slide eight, as expected, consolidated reported SG&A, including advertising expense, grew faster…

Our first question comes from the line of Matt Cabral from Goldman Sachs. Your line is open. Matthew Cabral - Goldman Sachs & Co.: Thank you. On last quarter's call, Tom, you talked about some macro volatility that was causing your customers to be a little bit more cautious at the start of the year, did that change at all as you went through the quarter? And then how would characterize your customers' current views on the macro and how that impacts their setting patterns today relative to how they were thinking about it three months ago?

Matt, I would tell you one of the things that I think is a benefit to the CDW business model is the diversification of segments, and so the answer to that question kind of depends on the segment you're thinking about. The segment that probably ties the most to the macro-economic marketplace is our corporate segment, and as you heard me state, it feels like there's still in caution out there. And I think even within our corporate segment, you can see differences in different parts of the country depending on which industries they support. For example, our West Coast gang was continued to be fairly optimistic; the people that handled the oil and gas part of the world continue to be conservative. So I think it's mixed, and it still feels like there's a dose of caution out there. I don't know that there was a dramatic change as we kind of move through the quarter. Matthew Cabral - Goldman Sachs & Co.: Got it. And then as a follow up, it's been about nine months or so since you closed the Kelway acquisition, what's your current appetite for further tuck-in acquisitions and are there any particular areas that you're focused on?

Our current appetite is, we've got all we can eat right now on integrating CDW UK. I almost said Kelway, but we've committed ourselves to say CDW UK. But look, in all seriousness now, we will continue to look at those areas, and I think we talked about this in the past, there may be some solution areas, where we feel like we need some either particular skills or there are some products, but I would say for the foreseeable future, we're going to be remained focused on getting CDW UK fully integrated and delivering kind of that one-company experience I talked about earlier. Matthew Cabral - Goldman Sachs & Co.: Thank you.

Yep.

Thank you. Our next question comes from the line of Amit Daryanani from RBC Capital Markets. Your line is open.

Good morning, Amit.

Good morning, guys. How are you doing?

Good.

I guess question and a follow-up from me as well. Tom, so I was surprised by the organic growth trends you talked about in storage and networking. I think you said up low-single digits. Most of the OEMs there haven't had such good numbers. I'm curious, what are you seeing that's different and are you actually seeing a shift from these vendors shifting more aggressively towards the channel that's perhaps helping you out?

Well, I think one of the reasons we continue to maybe perform a little differently is a) the breadth of the OEM partners that we support. Now, you've heard me talk about in the past that there's a lot of new players in that space, and we have benefited from the excitement around a lot of their products. But as I think I also mentioned on previous calls, I did not expect the traditional OEM partners to just sit there and say, okay, we're going to acquiesce. As we saw this quarter, we saw some of the traditional partners, especially in the flash area, be meaningful contributors. So I think it kind of comes back to the basis of the business model and the diversification we talk about is one of the reasons you see our growth sometimes be a little different than what you hear from people who are purely kind of in one particular product line or in one particular OEM.

Got it. And as a follow up, Tom, I guess, and given where the leverage today is well in that 2.5 to 3 times range for you guys, how do you think about the free cash flow that you see over the next 12 months, let's say? Given leverage where it is, should we think more about the free cash flow being used for buybacks and sustain the dividend, or would you like to actually delever below the low end of the target?

I think that we'll be consistent with the capital allocation target that we've been following for over a year and that is to continue to increase our dividend until we get the 30% of free cash flow. We have done some significant increases the past two years, 59% each year. So, I would expect us to continue to do that until we get to the 30% target. And then, we will use excess cash for tuck-in acquisitions. Tom mentioned we've probably got our handful in the short run, and then to buy back stock. I think in this interest rate environment, 2.5 times to 3.0 times, we're very comfortable with that leverage ratio. If there were to be a material change in interest rates, we obviously would re-address.

Perfect. Thanks and congrats on the quarter, guys.

Hey, thanks Amit.

Thank you. Our next question comes from the line of Matt Sheerin from Stifel. Your line is open.

Good morning, Matt. Matthew Sheerin - Stifel, Nicolaus & Co., Inc.: Yes. Thanks and good morning, everyone. Just a couple of questions from me. Tom, you're looking across the technology supply chain, last quarter, you saw a bunch of your competitors, distributors, as well as OEMs talk about an acceleration to cloud adoption from customers, which is adversely affecting hardware sales. It sounds like you guys are adopting with your customer or adapting with your customers on the cloud, how would you characterize that environment and have you seen that acceleration?

Well. I think, Matt, if you think about the success of our cloud practice, we too are experiencing what I would describe as the benefit of customers thinking about within their infrastructure, what parts of that infrastructure, what applications, what workloads make sense for me to put in the cloud. I think that has a lot to do with why you're seeing the growth I alluded to. But I also think what you're seeing, because we had a number of segments that had storage and server growth this quarter, you're also seeing people continue to look at what I believe is the ultimate model is going to be a hybrid infrastructure. And so, they'll look at those situations where it makes sense to have it either on prem – and, in fact, we just had a bunch of customers at one of our leadership off-sites and it was interesting to hear them talk and how they think about where an application goes. And I'd tell you it's partially driven by economics, it's partially driven by flexibility, it's partially driven by cost and I think that's one of the reasons that we've had the balanced growth of both our cloud practice and some of the more traditional hardware categories. Matthew Sheerin - Stifel, Nicolaus & Co., Inc.: And just as a follow up to that. As you see $100 spent five years ago on internal data center or cloud and now parsed into off-premise and on-premise, are you able to capture all or most of that revenue opportunity now with the cloud or is it less?

Well, I think it's interesting. Maybe I'll put a little different spin on it, Matt, is the dollar flows are different because of how cloud is billed. And as I've talked about it a couple of times, some people have adopted a subscription model, which if I'd draw an analogy, it'd be like the old days when there was a fair amount of leasing of hardware, where the revenue stream is more ratable, so to speak, and more predictable. So I think that makes it hard to make the perfect correlation. Do we have the capability to capture all of the spend? Yes, we have the broad product suite to do that. But ultimately, I guess if you're really honest, it comes down to your ability to continue to execute in the marketplace is going to determine whether or not you're going to capture the majority of the revenue stream. Matthew Sheerin - Stifel, Nicolaus & Co., Inc.: Okay. Thanks very much.

Yep. Thanks, Matt.

Our next question comes from the line of Brian Alexander from Raymond James. Your line is open. Brian G. Alexander - Raymond James & Associates, Inc.: Okay. Thanks and good morning. Ann, just on the buyback. How should we read the $750 million authorization in terms of the timing given that it's 12% of the market cap. Should we be reading this as an expectation that buybacks might be a larger contributor to your double-digit EPS growth objective than you previously anticipated? Maybe just some help on the timing that you expect to execute it. Thanks.

Yeah. No, we would expect that authorization to last for several years, I would say. And part of it just depends – I mean, in the capital allocation strategy, we don't have a desire to forecast (43:39) so to speak – at interest rates near zero, having a lot of cash on our balance sheet isn't something that we want to do or that the business model needs. And so, as we see potential acquisition opportunities, we'll look at those. If we don't have the capacity or there isn't anything attractive out there, we'll deploy excess cash after dividends to buy back stock. Brian G. Alexander - Raymond James & Associates, Inc.: But your organic EBITDA growth, if you will, the expectations for that hasn't changed?

No. I mean, we maintain you know to outgrow the U.S. IT market by 200 basis points to 300 basis points and essentially to maintain our adjusted EBITDA margins in the mid-7% range, so that just flows through to EBITDA, so to speak. Brian G. Alexander - Raymond James & Associates, Inc.: Right, okay. And then just on Kelway, which looked like it over achieved in Q1, it added over 8% to growth. You're expecting it to add I guess 7% to growth in the first half, so that implies in Q2 your UK revenue will decline roughly double-digits sequentially. Is that related to the integration or is that just the seasonality of the business? Maybe a little bit more on...yeah.

Yeah, Brian, yes, this is Tom. It's just the seasonality. I mean, they have a different rhythm because of the first quarter end to their fiscal year. And so, interestingly enough, it's very similar to what you see here when we have the sequential behavior, the same is true over there. And then they had the added part that last year was an election year, so you had this kind of big second quarter. And we knew that. That's one of the reasons when we gave you the signal of $650 million to $700 million for the first half. We knew we had that kind of different rhythm, if I can say it that way, than the U.S. So it is performing exactly as we expected. Except, I will say, they performed better than we expected in the first quarter. Brian G. Alexander - Raymond James & Associates, Inc.: Okay, great. Thank you.

Thank you. Our next question comes from the line of Osten Bernardez from Cross Research. Your line is open.

Hi. Yes, good morning.

Good morning Osten.

How's it going, Tom? So I just had a couple of questions. First, with respect to your revenues from client devices; they seem to be growing faster than the rest of the market even and some of those other channel players, and I wanted to know to what extent do you attribute your Dell relationship to the growth that you're seeing in your mobile computing devices?

I would say, look, it's kind of as expected, Osten. We thought there would be some additional contribution from adding Dell to the product suite. That was kind of the rationale and, in fact, we saw that. But I don't know that I would attribute all of that growth to Dell. I think some of it is kind of the cyclical nature of refresh, and we did have a little bit of a strange, as you heard me call out in the script, dichotomy of performance, if you will, in that transactional growth was very heavy in our corporate segment and just the opposite in our public segment. I think some of that has to do maybe with just project momentum. And some of the caution you may have heard me articulate in the script about corporate and MedLar may have given people incentive to do some projects on the transaction side versus the solution side.

Yep, good question. Hey, let me offer one other thing, too. We did have some really strong success with some new form factors in the quarter, and I think that contributed a lot to that improved growth that you saw in the transaction space. And then back to E-Rate, E-Rate is – especially as you're starting to think about, you still have 2015 E-Rate funds and now they started to 2016 process. So let me see if I can give some clarity. If you think about the 2015 money, just comparing last year, first quarter of this year, the E-Rate funds we received, or flowed through in revenue, was 12% higher. So it is having a positive impact in the education segment. As you may or may not know, we've been able to see customers spend a little greater than 50% of the money that was allocated. So, let's say $120 million were allocated to CDW customers and we've seen them spend in the north of 50%, 60% range. So that means there's a still hunk of spend out there to be spent. Now, in reality, Osten, they don't ever really spend 100%, so we've got some incremental runway on last year's E-Rate revenue. Now, we start 2016 E-Rate process, which unfortunately was delayed a month because of a systems glitch, so it's a little bit behind where we were last year. But we would anticipate, and we are expecting ourselves, to perform at the same rate when it comes to capturing that new revenue. And then I think lesson learned, we'll expect that the spend is going to take over a year as we move through the process.

Okay. Thanks, Osten.

Thank you. Our next question comes from the line of Sherri Scribner from Deutsche Bank. Your line is open.

Hi, thanks. Tom, it sounded from your commentary that the macro environment is generally still about what you saw at the beginning of the year. I just wanted to make sure that was the case, even though there's been a number of puts and takes, in general, it sounds like your outlook is relatively unchanged for the year.

Yeah. I would say, it remains the same. I think there's still a dose of caution out there in the marketplace. Now, granted, we don't have what I'll call the panic that was driven by the financial markets in January and February, but I also believe there's enough indications. Look, if you think about it, Sherri, this way, what were they forecasting GDP in the first quarter? It was forecasted to be like 1.3% and it came in at 0.5%. So I think that caution is driven by the reality of kind of the fragile economy we're dealing with. Now, we are expecting it to improve as we go through the year, and that gives us some optimism when we think about some of our segments.

And then maybe could you just touch on the earlier comments you made about some changes in form factor? I assume that's in the PC segment, are you seeing more momentum in things like two and ones, and...

Yeah. Exactly.

...tablets? And then maybe what's your outlook for the second half of the year for the PC market? Thanks.

Well, we're not going to give you an outlook for the second half of the year, but I will tell you that you're 100% on target, it is those two-for-one new form factors that I think seem to be appealing to a market need and we have benefited from the introduction of those, especially as other OEMs have adopted that introduction.

Thanks, Tom.

Okay. Thank you.

Our next question comes from the line of Mark Moskowitz from Barclays. Your line is open.

Good morning, Mark.

Thank you. Good morning, Tom and Ann. Two questions if I could. Tom, can you just talk a little more about how investors should think about CDW's ability to really size up some of these macro and the IT blues that some of my peers have talked about during today's call in terms of just how much are you being able to offset this with increasing penetration of existing customers versus new logos in terms of new customers. I want to see if you can get any more market share in terms of new customers and then how we should think about that in terms of sustainability? And then the other question is really around the cloud. If you could talk about the cloud in terms of – and update you can provide us in terms of marquee kind of partnerships that could be announced, or are you working on with respect to some of the Tier 1 and Tier 2 cloud providers that you could partner with over the next year or so? Thank you.

Okay. I think, let me try to walk through the first question, Mark. I think part of it starts with our scale that gives us the ability to go to market in a segmented way. And that diversification of markets that we address I think has a lot to do with our ability to consistently deliver performance above the market. If you think about it, these markets operate so independently. I mean, you just think about the success we had in the government segment and in particular in state and local, you look at small business had a pretty good quarter. And then, you look at – like education and even that's a bifurcated market. What we saw in K-12, while it ended up down slightly for the quarter, was really an upswing and momentum as we went through the quarter. And then you look at higher-ed who just has the budget issues. So I think that diversification, and at least in my experience here at CDW, is one of the main reasons that we were able to kind of have this sustainable performance. The second thing is the breadth of the OEM partners that we have. We've talked about storage is just a great example. We've been able to maintain what I would describe as a solid storage track record here over the last five quarters or six quarters, in part, because we have a number of new entrants that are coming in. We bring on 60 to 70 new people every year. And that influences new opportunities in the marketplace. And I think, I've said this before – as you might have an OEM have a tough quarter, the breadth of the OEMs that we carry have a tendency to mitigate the negative swings we might have in…

Thank you very much.

All right, Mark, thank you.

Thank you. Our next question comes from the line of Tien-tsin Huang, from JPMorgan. Your line is open.

Great, thanks, good morning. Just wanted to ask about CDW's services, up almost double digit. Should this be an above average grow rate this year you think? And obviously some implications for gross margin, so I'm just trying to understand that a little bit better.

Yep. Well, we have high expectations of our services organization, as always. And we've made a meaningful investment in that business when it comes to service delivery engineers, and so we expect them to continue to grow. I think if you heard this quarter, the two people – two people, right Tom, the two parts of services that grew where warranties, which is kind of tied to some of the transactional growth success we had, and CDW best services (57:13), which is really kind of our professional services business. And that very much is a link to our solutions practice. So when you see us growing servers and Netcom and some of the wireless capabilities, having this service ability to not only procure it, but implement it and manage it is important. So I'm not going to give you an actual forecast, but suffice it to say, we expect them to continue to perform at a meaningful rate.

That's helpful. Just on the Kelway. Just any update on synergies? I know it's doing well, and I caught the fiscal year end comment, but just the synergy part, capturing the U.S. spend in overseas with their locations, et cetera?

Yeah. We've had a really strong success. Inside of our referral business, it's a – I don't want to give you the exact number, but just suffice it to say that it's meaningful double-digits of deals that we've had as a result of having that capability. And it's not just one way. It's not just UK benefiting from U.S. customers; we are benefiting in the U.S. from UK customers. So it's executing the way we had hoped.

Okay, great. I like the Orchestration campaign, by the way. I like the Orchestration campaign, by the way, Tom.

Thank you.

I like the Barclay ones as well, but I figured I'd throw it out there.

Yeah, well, you just made one guy in this room really happy, so I'll have him send you a thank-you note. All right, good.

Thank you. The last question that we have time for today will be from the line of Katy Huberty from Morgan Stanley. Your line is open.

Good morning, Katy. Kathryn Lynn Huberty - Morgan Stanley & Co. LLC: Good morning, thank you. So two quick questions. First, you talked about accelerated product growth in the back half, is that just normal seasonality or do you have a pipeline of deals that suggest an acceleration in that business? And then secondly, you made a comment about lumpiness in server growth, can you just go through why it is again that you think that there'll be some volatility in that part of the business? Thank you.

Okay. So on the first one, I'd say it's a combination of two things. It is looking at some of the larger deals that we have, that we feel like we're beginning to ship product as we move through the year. But it also is kind of the – if you think about the composite of our customer set, Katy, there's a fair amount of our customers that are small to mid-size businesses that tend to move with the economy. So some of that is driven by an expected improvement in GDP. and therefore expected spend. So it's a combination of both. And the lumpiness in server hardware versus server solutions, which has been pretty consistent growth, is in part driven by certain segments. For example, we had a couple of segments that had just incredible server hardware quarters, but we had other segments that were benefiting from virtualization and doing something to create capacity. So, what we're seeing is, depending on where customers are in their lifecycle, if they're in the middle of virtualization and creating additional capacity, they're not buying new hardware. We've a couple of segments, truthfully, that are waiting for the new chipset, and feel very much like when that gets delivered, we're going to see some incremental server hardware takeoff. So just trying to be transparent into kind of the different dynamics influencing that server – server solutions area. Kathryn Lynn Huberty - Morgan Stanley & Co. LLC: Got it. That makes sense. Thank you very much.

All right, Katy. Thank you.

Thank you. That's all the time that we have for questions today, so I'd like to turn the call back over to management for closing comments.

Okay. Thanks, Andrew. Thanks again, everybody. I appreciate you taking the time today and appreciate your questions, and your following CDW. As always, if there's anything we can help your businesses with, we'll be more than happy to share some of those investments we've been making in people and technology. And, as always, it's Mother's Day on Sunday. So do not forget, she's the reason you're here. All right. Thanks, everybody. See you.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program. And you all may disconnect your telephone lines at this time. Everyone have a great day.