Summary of the Conference Call on Supply Chain Reorientation Industry Overview - The report focuses on the **Global Technology** sector, particularly in the **Asia Pacific** region, analyzing the ongoing **supply chain reorientation** in the context of a **Multipolar World** [1][2][3]. Key Insights and Arguments - **Supply Chain Shift**: The supply chain dynamics have been tracked since **2018**, primarily due to rising geopolitical tensions, especially between the **US and China**. The report outlines two phases of shifts: - **Phase I (2019-2022)**: Known as "China + 1", where hardware ODMs and EMS companies began relocating production outside of China to mitigate tariff impacts [11]. - **Phase II (2022-2025)**: Companies are establishing regional production bases globally to cater to local demand, influenced by rising labor costs in China and regulatory crackdowns [12]. - **Decline in Reliance on China**: The reliance on China for key technology products has decreased significantly. In **2018**, China accounted for **88%** of US tech imports (~US$100 billion), but by **2024**, this figure dropped to **74%** (~US$108 billion), with imports from other Asian countries like **Vietnam** and **Thailand** increasing [13][44]. - **Future Capacity Needs**: - **Notebooks**: Sufficient capacity outside China to meet US demand by the end of **2025** [14]. - **iPhones**: More capacity is needed outside China to meet US demand, with only **10-15%** produced outside China as of **2024** [14]. - **Servers**: Majority of servers for the US market are assembled in North America, compliant with USMCA [14]. - **Onshoring Production**: The report discusses the feasibility of onshoring production to the US, suggesting it is only viable for low-volume, high-value products due to high labor costs and the lack of a complete supply chain ecosystem in the US [16][17]. - **China's Response**: China is adapting by focusing on high-margin R&D and manufacturing, as well as enhancing its branding and after-sales services. The country is also increasing its semiconductor manufacturing capabilities to achieve self-sufficiency [18][20]. Additional Important Points - **Company Profiles**: The report includes profiles of **10 manufacturing companies** (e.g., Wistron, Foxconn) and **5 global brands** (e.g., Apple, Dell) detailing their revenue exposure and supply chain dynamics [9][23]. - **Trade Observations**: Insights on global trade flows and US imports for key tech products, including notebooks, smartphones, and servers, are provided [9][91][95]. - **Tariff Implications**: The report highlights the impact of tariffs on supply chain decisions, particularly under the current political climate [15][20]. Conclusion - The ongoing supply chain reorientation is a complex and evolving process influenced by geopolitical tensions, economic factors, and strategic corporate decisions. The report emphasizes the need for companies to adapt to these changes to remain competitive in the global market [1][3][36].

Financial Data and Key Metrics Changes - Revenue for fiscal Q3 was $164.6 million, representing a 9.7% year-over-year increase but a 4.9% sequential decline [6][19] - Non-GAAP gross margin was 22.5%, down from 24.2% in the previous quarter and 25.2% a year ago [19] - Non-GAAP EPS was a loss of $0.10, compared to a loss of $0.09 in the prior quarter and a loss of $0.04 a year ago [20] - Operating cash flow was $7.4 million, down from $14.1 million in the prior quarter and $28.2 million a year ago [21] Business Line Data and Key Metrics Changes - Computing segment revenue increased nearly 15% year-over-year and 3.6% sequentially, accounting for 47.9% of total revenue [8][11] - Consumer segment revenue decreased 9% year-over-year and 4.9% sequentially, representing 13% of total revenue [11][12] - Communications segment revenue was up 5.8% year-over-year but down 14.4% sequentially, making up 17.2% of total revenue [12][13] - Power Supply and Industrial segment revenue increased 32.4% year-over-year but declined 6.2% sequentially, accounting for 19.9% of total revenue [14][15] Market Data and Key Metrics Changes - The Computing segment saw robust demand for graphics and AI accelerated cards, driven by a key customer scaling their next-generation platform [9] - The Consumer segment is expected to see over 25% sequential growth in June, driven by gaming and home appliances [12] - Communications segment growth is anticipated to be flattish sequentially, with growth from U.S. and Korean smartphone customers offset by slower sales from China [13] Company Strategy and Development Direction - The company aims to transform from a component supplier to a total solutions provider, leveraging customer relationships to expand market share [7][8] - The focus remains on executing the strategy and delivering sustained value for stakeholders despite near-term uncertainties [17][18] Management's Comments on Operating Environment and Future Outlook - Management highlighted a dynamic landscape with macroeconomic, geopolitical, and trade-related uncertainties impacting visibility for the second half of 2025 [7][17] - The company expects low to mid-single-digit sequential revenue growth in June, driven by strength in Computing and Consumer segments [17][24] Other Important Information - The company completed the quarter with a cash balance of $169.4 million, down from $182.6 million at the end of the previous quarter [22] - CapEx for the quarter was $8.1 million, with expectations for June ranging from $12 million to $14 million [23][24] Q&A Session Summary Question: Can you quantify the magnitude of the pull-ins on the PC side and discuss graphics card success? - Management noted increased demand due to tariff situations, with an estimated $6 million of revenue increase attributed to notebook shipments [28] Question: What is the tariff impact on the company? - Direct exposure to tariffs is minimal due to limited U.S. shipments, but indirect impacts on overall demand remain uncertain [32] Question: How is the margin guidance for June despite the fall-off in licensing revenue? - Margin guidance is based on a better product mix and higher factory utilization [35] Question: Can you provide an update on the China JV and wafer requirements? - The China JV accounts for about 20% of total supply, with minimal tariff impact [38] Question: What are the cash flow dynamics expected throughout the year? - Cash flow is expected to remain stable, targeting 6% to 8% of revenue, with CapEx projected around $40 million to $50 million for the year [42][45] Question: What is the pricing environment and competitive landscape? - ASP erosion is tracking historical trends, with increased competition from all players [48]

Core Viewpoint - CDW Corporation reported strong first-quarter 2025 results, with non-GAAP EPS of $2.15, exceeding estimates and showing a 12% year-over-year increase [1][2] Financial Performance - Revenues grew 6.7% year over year to $5.199 billion, driven by strong demand for notebooks, mobile devices, desktops, software, and services, despite declines in some hardware categories [2] - Quarterly revenues surpassed the consensus estimate of $4.89 billion [2] - Gross profit increased 5.5% year over year to $1.122 billion, while gross profit margin slightly decreased from 21.8% to 21.6% due to a higher mix of lower-margin products [6] - Non-GAAP operating income rose 10% year over year to $444 million, with the non-GAAP operating margin increasing to 8.5% from 8.3% [6] Segment Performance - Corporate segment net sales were $2.236 billion, up 6.3% year over year [4] - Small Business segment net sales increased 7.9% year over year to $405 million [4] - Public segment revenues reached $1.878 billion, representing a 10.6% growth, driven by significant increases in Healthcare (19.5%) and Education (11.1%) customer sales [5] - Other operations (Canadian and U.K.) saw net sales rise 9.5% to $680 million [5] Expenses and Cash Flow - Selling and administrative expenses rose 3.5% year over year to $761 million, influenced by lower performance-based compensation and transformation-related costs [8] - Cash flow from operating activities for the quarter was $287.2 million, down from $440 million in the previous year [9] Dividend Announcement - The company announced a quarterly dividend of 62.5 cents, payable on June 10, 2025, to shareholders on record as of May 26 [3] Stock Performance - Following the results, CDW's shares increased by 2% in pre-market trading on May 7, although shares have declined 25.6% over the past year compared to the industry growth of 4.2% [4]

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 were $700 million, representing a 10.9% increase compared to Q1 2024 [6] - Gross profit increased by nearly 8% to $127.3 million, while gross margins slightly decreased to 18.2%, down 50 basis points year over year [6][8] - Operating income for Q1 was $14.5 million, a 7.9% increase year over year, with operating income as a percentage of sales remaining flat at 2.1% [7][8] - Net income was $13.5 million, up 2.5% from $13.2 million in the prior year, with diluted earnings per share increasing by 2% to $0.51 [8][14] - Adjusted diluted earnings per share rose by 20% to $0.60 [8][14] Business Line Data and Key Metrics Changes - Net sales for notebooks and desktops increased by 21% year over year, driven by device refresh initiatives [9] - Advanced Technologies and Integrated Solutions revenue grew by 7%, supported by software and server storage solutions [9] - Business Solutions segment net sales were $258.4 million, a 1% increase, with gross profit rising by 8.4% to $65.4 million [10] - Public Sector Solutions net sales increased by 4.7% to $144.6 million, with gross profit up 30.9% [11] - Enterprise Solutions segment net sales grew by 5.4% to $298 million, although gross profit decreased by 1% [12] Market Data and Key Metrics Changes - Financial Services net sales increased by 32% and gross profit by 31% year over year [20] - Healthcare segment net sales grew by 13% and gross profit by 10% year over year [20] - The backlog at the end of Q1 was at its highest level in nearly two years, indicating strong future demand [23] Company Strategy and Development Direction - The company is focused on integrated IT solutions and customer service, aiming to drive internal efficiencies and reduce costs [6][19] - There is a strong emphasis on AI technology and its implementation, with investments in frameworks and advisory capabilities to support customer needs [21][22] - The company anticipates outperforming the U.S. IT market growth by 200 basis points, aligning its strategy with shifting customer technology consumption dynamics [24] Management Comments on Operating Environment and Future Outlook - Management noted a mixed customer response to economic conditions, with some accelerating purchases while others delayed due to cost concerns [29] - The company remains optimistic about future growth, driven by device refresh momentum and data center modernization initiatives [22][23] - There is caution regarding the economic backdrop, but management believes they can navigate through challenges and capitalize on opportunities [46][48] Other Important Information - The company declared a quarterly dividend of $0.15 per share, payable on May 30, 2025 [16] - A significant increase in share buyback activity was noted, with 697,000 shares repurchased at an average price of $64.22 [15] Q&A Session Summary Question: Customer purchasing patterns in Q1 - Management indicated a mixed response from customers, with some accelerating purchases due to cost containment concerns while others delayed spending [29][30] Question: Expected growth for the year - Management projected mid to high single-digit growth for the year, with a solid enterprise funnel but caution due to economic conditions [36][39] Question: Q1 performance progression - The quarter saw stronger performance in March compared to January and February, attributed to improved customer confidence and pre-tariff buying [43][44] Question: Q2 outlook amidst tariffs - Management acknowledged that tariffs are impacting customer decisions, but they are working to help customers navigate these challenges [46][48] Question: Acquisition plans - The company remains open to acquisitions, particularly tuck-in deals that expand capabilities or enter new markets, despite current market conditions [49][50]