CDW Corp (CDW) Q4 2020 Earnings Call Transcript

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CDW Corp (CDW 0.03%)
Q4 2020 Earnings Call
Feb 10, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, my name is Kree, and I will be your conference operator today. At this time, I'd like to welcome everyone to the CDW Fourth Quarter 2020 Earnings Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Thank you. I would like to turn the conference over to Brittany Smith, VP of IR and FP&A. You may begin.

Brittany A. Smith -- Vice President, Investor Relations and Vice President, Corporate Communications Financial Planning

Thank you. Good morning everyone. Joining me remotely today to review our fourth quarter and full-year financial results are Chris Leahy, our Chief Executive Officer and Collin Kebo, our Chief Financial Officer. Our fourth 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 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 earnings release and 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 operating income and 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'll find reconciliation charts in the slides for today's webcast in our earnings release and Form 8-K we furnished to the SEC today. Please note that all references to growth rates or dollar amount increases in our remarks today are versus the comparable period in 2019 unless otherwise indicated.

In addition, all references to growth rates for hardware, software and services today represent US net sales only and do not include the results from CDW UK or Canada. Also, there was one fewer selling day in the fourth quarter of 2020 as compared to 2019. Replay of this webcast will be posted to our website later today. I also want to remind you that this conference call is a property of CDW and may not be recorded or rebroadcast without specific written permission from the company.

With that, let me turn the call over to Chris.

Christine A. Leahy -- President & Chief Executive Officer

Thank you Brittany. I'll begin this morning with an overview of fourth quarter and full year results and drivers of performance and share some thoughts on 2021. Collin will take you through a more detailed look at our financials, capital allocation strategy and outlook, we'll move quickly through our prepared remarks to ensure we have plenty of time for questions. Our fourth quarter and fiscal year results demonstrate the balance and strength of CDW's business model and strategy. For the fourth quarter net sales were $5 billion, 11% above last year on an average daily sales basis, adjusted for the impact of one fewer business day in fourth quarter of 2020 than 2019 and up 10.7% in constant currency.

Gross profit increased 13.3% to $881 million; non-GAAP operating income was $376 million an increase of 9.9% and non-GAAP net income per share was $1.82 16.1% above last year on a reported basis, and up 15.8% in constant currency. For the year, net sales were $18.5 billion, up nearly $0.5 billion year-over-year or 2.4% on a reported and constant currency basis. Gross profit increased 5.6% to $3.2 billion; non-GAAP operating income increased 2.6% to $1.4 billion and non-GAAP net income per share increased 8% on a reported and constant currency basis to $6.59.

2020 was an extraordinary year; I'm very proud of how the CDW quickly and smartly adapt to help our customers and partners during the challenge time. The diversity of our solutions portfolio and customer end markets served us well in 2020, providing balance and driving our exceptional results. During the year, our team helped customers across the full IT solution stack and the full IT lifecycle from client devices to cloud from designed managed services. We executed against our strategy and continue to invest in high growth solutions and services capabilities, including three acquisitions. IGNW a leading provider of cloud native service expertise and software development capabilities and Aeritae and Southern Dakota Solutions which expanded our service analogy [Phonetic]

Performance for our customer end markets varied; demand increased in some and decreased in others, but all experienced change or disruption to their technology needs and to their operations last year due to COVID-19. Our value proposition resonated with customers, we combined our services and broad solutions portfolio with our extensive technical knowledge and [audio blip] for our customers. This led to meaningful outperformance compared to the US IT market. We emerge from 2020 stronger and even more committed to executing our strategy.

Turning to the fourth quarter, we continued to help customers with remote enablement and resource optimization, cost reduction, security, hybrid and cloud solutions and digital transformation. Similar to the third quarter some customers within solutions projects and have started new projects. Performance for our most impacted customer end markets improved and trends for our more resilient customer end markets remain strong. During fourth quarter, we continue to leverage our distribution centers, extensive logistics capabilities, deep vendor partner relationships and strong balance sheet and liquidity position to navigate supply challenges and support our customers, in particular for Chromebooks for K-12 customers where demand greatly outstripped supply.

Now, let's take a deeper look at fourth quarter customer and market performance. Corporate declined 11% with similar levels of performance for transactions and solutions. In total, there was improvement versus the last few quarters. Customer spend for corporate customers was not uniform; some customers were doing well and investing in technology, whereas other customers in challenged industries or geographies more impacted by spikes in COVID cases were still cautious.

Small business declined mid single digits, as notebooks returned to growth. Small business customers tend to be more nimble than corporate customers, which drove the improvement versus the third quarter. The government team increased net sales, 30% federal delivered another excellent quarter with net sales up strong double-digits. During the quarter, our devices and service solutions for the US Census Bureau was mostly completed. All devices were returned to us for decommissioning and we started the process to resell the clean units through third-party remarketers.

Our team did an excellent job with this program. It was a multi-year effort to develop and execute this large, complex undertaking moving the nation's once the decade population count from paper to digital for the first time. Our services and logistical capabilities and multi-vendor solutions set us apart from the competition. We are unique in what we can deliver to our customers.

Outside of the Census project the federal team continue to help civilian agencies with remote enablement and device refresh. We also delivered on the Department of Defense projects that were awarded at the end of the third quarter. The state and local team delivered strong double-digit growth, IT investments continued to be a priority despite budget pressure.

Our team helped customers enable remote capabilities and restart solutions projects. Education increased an extraordinary 140% driven by some nominal growth in K-12. K-12 customers continued to focus on equity and access and remote learning, which drove triple-digit growth for notebook related to accessories and solutions, as customers turn to us for holistic capabilities. Higher education increased low-double digits as school continued to help students with remote enablement and resumed net com [Phonetic] projects with a focus on created connected communities to enhance the student experience. Healthcare declined mid-teen, a meaningful improvement compared to the third quarter. Customers continued to be cautious with their spend due to ongoing budget pressure focusing on key areas like remote enablement, telehealth and support infrastructure. Other, which represents our UK and Canadian operations was flat on a reported basis.

UK net sales increased mid single digits in constant currency and Canada net sales decreased low double digits in constant currency. Performance for both markets was driven by strong education demand to enable remote learning and healthcare spending to address the pandemic with softer corporate performance. In the UK, there was some [Indecipherable] customer demand before the announcement of the agreement with the EU as customers prepared for a potential card exit.

Over the last several weeks, the UK team has executed against its well planned Brexit mitigation strategy and has done a great job helping customers navigate through the complexity of the new agreement. Our Fourth quarter performance benefited from the diversity of our customer base and our deep and broad product portfolio. We continued to meet the critical demands of our customers across all categories. Hardware was up strong double digit, driven by excellent notebook growth, in particular for our public segment customers leading to over 30% client device growth. While software was flat, software gross profit increased mid teens, reflecting continued mix and software services.

Services grew low double digits, driven by device decommission services for Census project and configuration services. Services are fundamental to our go-to-market approach and a key enabler of our value proposition. Transactions increased strong double-digit, solutions declined low single digits and some customers continued to restart infrastructure and larger project engagement. The team delivered excellent growth in our cloud pockets, cloud customer spend increased strong double-digit across all customer end markets, driven by robust growth in collaboration, infrastructure as a service, security and productivity.

We expect strong customer demand for cloud solutions to continue. Let me also share a little more color on our security practice given its importance to our customers and cyber threats are constantly emerging and evolving and increasing. Security customer spend grew strong double digits as customers improved their security framework to respond to increasing threat.

Last year, customers spent $2 billion with us on security. Our fourth quarter and full-year operating and financial performance was the combined impact of our balanced portfolio of customer end markets, our full suite of solutions and services across the IT landscape and our ongoing success executing our three part strategy. They are important drivers of our past and our future performance.

The diversity of our customer end market serves us well when macro or other external challenges impact various industries and customers differently. Our extensive product services and solutions portfolio positions us to meet our customers' total needs across the broad spectrum of IT and can pivot quickly to trends in customer demand. As I shared, the balance of our customer end markets and our offerings are especially relevant in current environment. And the final driver of our performance; our two part strategy for growth is first to acquire new customers and capture share; second, enhance our solutions capabilities and third, expand our services capabilities.

Each pillar is crucial to our ability to profitably advice, design, orchestrate and manage integrated technology solutions, our customers want and need, today and in the future. Let me share a few examples of our strategy in action and how we helped customers last quarter; our small business team helped the born in the cloud financial technology companies, add more agility and flexibility to its operations and technology stack by becoming multi cloud. The customer initially came to our team requesting help to implementing backup solution for its existing public cloud provider, after a review by our digital velocity team our team uncovered the need for the customer to become multi-cloud with additional capabilities and redundancies.

Our team helped the customer build to secure second public cloud environment and address additional needs including application development functionality and consumption management. Our team has established CDW as a trusted partner with extensive cloud capabilities to help us research, evaluation procurement, implementation and management. Our customers are increasingly adopting cloud, but are also finding the growing need to become multi cloud. CDW's cloud expertise and cloud management platform across multi public cloud are a differentiator in the marketplace.

Let me share another story in the healthcare sector. To address COVID, healthcare customers have turned to CDW to provide care in new setting and in new way. An independent, non-profit healthcare provider in the US Northeast needed our guidance to enable remote COVID testing and vaccine distribution in numerous outdoor location.

The CDW account manager engaged one of our networking specialists to develop a solution that will deliver the required performance and scale quickly. The solution has since been rolled out to all locations and the next work with the customer on the site wireless connectivity, further leveraging our technical resources and strengthen their relationship. Our team saved the customer time and energy and provided great service as a forward thinking partner that the customer can trust.

The pandemic has created new issues requiring creative solutions and leading customers to rely on us more than ever as an extension of the team. This is the value that CDW brings to our customers, repair our broad solutions portfolio with our deep technical expertise to deliver the full outcomes the customers need. Finally, the digital divide has created significant learning challenges around the world. Our teams have worked closely with education customers in the US, in the UK and in Canada to tackle this challenge. In the UK, we are working with the London Grid for Learning, a charitable trust dedicated to the advancement of education to provide technology for 100s of schools across the country.

Last quarter, our team developed and provisioned turn key solution's, comprised of client devices, accessories software and services, leveraging our strong logistical and distribution capabilities and deep vendor relationship. There has been tight collaboration with our clients' vendor partners to provide the best possible device availability for the customer due to the current global Chromebooks supply constraint. Our distribution center in the UK has done a tremendous job to deliver over 100,000 units to date to hundreds of schools.

CDW is uniquely positioned to deliver for our customers and our vendor partners. This is a great example of our critical role. [Indecipherable] to highlight CDW's three part strategy for growth and demonstrate the success of investments in cloud, our strong relationships with customers and vendors and the importance of our competitive advantages. I'm proud of the way our team continued to deliver. Let me briefly update you now on our COVID response effort. Since the beginning of the pandemic, we have followed three key principles; first safeguard the health and wellbeing of our co-workers, second serve the mission-driven needs of our customers and third support our communities.

I'm proud of how the team has managed the impact of COVID-19 on our business. Teams at our distribution and configuration centers have done an outstanding job, maintaining the high level of customer service we are known for, while hearing to new protocols that safeguard the health and well-being of our co-workers to come to work every day. We have also taken deliberate actions to foster collaboration and co-worker engagement and to maintain connectivity and productivity to preserve and bolster our culture, even while we are distanced. These actions include leveraging tools and learning and development opportunities, expanded health and well-being program, increased content from our business resource groups and compensation investments to recognize the team's tremendous efforts and performance.

Now, let me share some thoughts on 2021. The near-term global health and macroeconomic environment is still uncertain. Our current outlook is for the US IT market to return to growth and grow between 2.5% and 3%. As you know, we hold ourselves accountable for growing faster than the IT market and we expect our top line and 2021 to grow 200 to 300 basis points faster than the market in constant currency. There are many wildcards though, including COVID 19 government restrictions and vaccine rollout, policies and new administration, including stimulus programs and tax changes and supply constraints in particular for Chromebook.

We are encouraged about our Q1 performance to date and how our teams are executing, but we're also cautious about the macro environment. Even though uncertainty continues, our confidence in the prospects for the business has never been higher. We believe that technology will be more essential to all sectors of the economy and will play an increasingly important role in the years ahead.

Last year, we went through our rigorous strategic planning process as we do every three years and we are now accelerating investment and execution against it. We have confidence that we have the right strategy to best serve our customers and partners to enhance our competitive position and to deliver sustainable profitable growth.

This confidence has led our Board of Directors to increase our share repurchase authorization by $1.25 billion. Our goal as a trusted strategic partner to our customers is more important now than ever. We will continue to do what we do best -- leverage our competitive advantages to help our customers address their IT priorities and achieve their strategic objectives and of course, out execute the competition.

Now Collin, will share more details on our financial performance Collin?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Thank you Chris. Good morning, everyone. I'm going to provide more detail on fourth quarter and full year results, capital allocation priorities and initial thoughts on 2021. Turning to our fourth quarter P&L on slide nine, consolidated net sales were $5 billion, up 9.2% on a reported basis and 11% on an average daily sales basis, as we had one less selling day. On a constant currency average daily sales basis, consolidated net sales grew 10.7%. On an average daily sales basis, sequential sales increased 7.6% versus the third quarter.

This was higher than historical seasonality of a mid-single digit decline, primarily due to how COVID-19 is impacting our channels differently. During this uncertain time, seasonality has been and is expected to continue to be different than historical experience. Our customer channels generally perform consistent with the demand writings commentary shared on our last earnings call, other than K-12 where demand was even stronger than expected.

Pockets of supply constraints continued in the quarter, primarily for lower end client devices such as Chromebooks. Our team did a great job navigating the fluid environment and leveraged our distribution capabilities and strong vendor partner relationships to procure a healthy share of supply for customers. Gross profit for the quarter was $881 million, an increase of 13.3%. Gross margin was 17.8%, up 70 basis points over last year. The gross margin expansion was driven by product margin mixing into netted down revenues, primarily software as a service.

Turning to SG&A on Slide 10 non-GAAP SG&A increased 15.9%, the increase was primarily driven by higher payroll costs due to higher gross profit and compensation investments and our co-workers to recognize and reward their tremendous efforts and performance in 2020. The acquisition of IGNW and ongoing investment in Aptris and COVID-19 expenses to safeguard and compensate frontline co-workers, partially offset by continued cost savings measures including decreased travel and entertainment.

Co-worker count at the end of the fourth quarter was 9,982, up 2 from the third quarter; year over year, co-worker count increased 86, driven by an increase of approximately 150 customer facing co-workers, including IGNW, partially offset by a decrease in non-customer facing co-worker count. GAAP operating income was $332 million, up 17.1% non-GAAP operating income, which better reflects operating performance was $376 million up 9.9%. Non-GAAP operating income margin was 7.6%.

Moving to slide 11, interest expense was $37 million down 2.9%. The decrease was primarily due to a lower LIBOR rate in savings from the August refinancing. Our GAAP effective tax rate shown on slide 12 was 19.2%, this resulted in fourth quarter tax expense of $57 million, compared to $50 million last year. To get to our non-GAAP effective tax rate, we adjust taxes consistent with non-GAAP net income, add backs as shown on slide 13. For the quarter, our non-GAAP effective tax rate was 22.2%, down 150 basis points versus last year's rate, primarily due to tax benefits associated with new regulations for global intangible low tax income and non-deductible expenses, partially offset by lower tax credits.

As you can see on slide 14 with fourth quarter weighted average diluted shares outstanding of $145 million, GAAP net income per share was $1.65, up 29.6%. Our non-GAAP net income was $264 million in the quarter, up 15%. Non-GAAP net income per share was $1.82, up 16.1% from last year. Turning to our full-year results on slides 15 through 20 revenue was $18.5 billion, an increase of 2.4%. Gross profit was $3.2 billion up 5.6%. Gross profit margin was 17.4%, up 50 basis points, driven by product margin and mixing into netted down revenues, primarily software as a service.

Before moving down the rest of the P&L, I want to take a moment to put 2020 sales and gross profit in context. We have consistently highlighted, the power of our diverse portfolio and customer end markets. We pivot to where the growth is, leveraging our competitive advantages to better serve customers and gain share. In 2020, we estimate the US IT market declined low single digits, call it down 2%. CDW net sales grew 440 basis points faster and gross profit grew 760 basis points faster than the 2% market decline. Census contributed 170 basis points of year-over-year net sales growth. Excluding the Census, CDW still delivered meaningful net sales and gross profit growth in excess of market.

During the 2009 recession, our net sales premium narrowed as customers paused on hardware purchases and gross profit margin compressed due to product margin pressure in the competitive environment. In 2020, our portfolio performed differently partially because of the unique dynamics of the pandemic, but also because of the progress we have made building out the solution and services capabilities our customer's value. For example, while US software and services collectively totaled 18% of US net sales in 2020, they accounted for approximately 40% of US gross profit. Returning to the full-year P&L, operating income was $1.2 billion and non-GAAP operating income was $1.4 billion up 26%.

Our non-GAAP effective tax rate was 24%, down 120 basis points versus last year's rate. The decrease in the effective tax rate is primarily due to new regulations for global intangible low taxed income and non-deductible expenses that are not expected to contribute as much of a benefit to the tax rate in 2021. Net income was $789 million and non-GAAP net income was $954 million, up 5.8%. Non-GAAP net income per share was $6.59, up 8%. Turning to the balance sheet on slide 21 at December 31, cash and cash equivalents were $1.4 billion and net debt with $2.5 billion. Liquidity further strengthened with cash plus revolver availability of approximately $2.5 billion. Full year free cash flow was $1.2 billion as shown on slide 22 this equates to 6.7% of sales, well above our historical free cash flow rule of thumb of 3.75% to 4.25%.

A portion of the outperformance was driven by timing or one-time items including mixing into vendors with extended payment terms, the Census, deferred payroll and UK tax payments and the timing of collections from some large customers. We expect the favorable timing to reverse over the next few quarters. Moving to slide 23, the three-month average cash conversion cycle was 17 days, down one day from last year's fourth quarter. DSO and DIO were unchanged from last year while PPO increased by one day. The increase in DPO was primarily driven by mixing into vendors with extended payment terms. As previously mentioned, we resumed our share buyback program in the fourth quarter repurchasing $200 million of stock. For full year 2020, we returned $561 million to shareholders, including $220 million of dividends and $341 million of share repurchases, at an average price of approximately $129 per share.

Turning to capital allocation priorities, on slide 24. Given our strong liquidity position, our priorities remain the same. First, increase the dividend in line with non-GAAP net income. To guide these increases, we will target the dividend at approximately 25% of non-GAAP net income and to grow in line with earnings going forward. Second, ensure we have the right capital structure in place with a targeted net leverage ratio of 2.5 times to 3 times. We ended the year at 1.7 times. Our third capital allocation priority is to supplement organic growth with strategic acquisitions. In the fourth quarter, we acquired two small ServiceNow solution practices to build on the success from our 2019 acquisition of Aptris. We remain actively evaluating targets.

And fourth, return excess cash after dividends in M&A to shareholders through share repurchases. Going forward, we expect to move closer to our target net leverage ratio of 2.5 times to 3 times through a combination of organic investments, M&A and cash returned to shareholders. We expect to return at least, $1.2 billion to shareholders in 2021, including approximately $1 billion for share repurchases, with the balance from dividends. At the end of December, we had $338 million remaining on our current share repurchase authorization.

As Chris mentioned, our Board of Directors authorized a $1.25 billion increase to the share repurchase program in support of our capital allocation priorities. Of course, as we always do, we'll closely monitor the macroeconomic environment, liquidity M&A activity, leverage and adjust as needed. Moving to the outlook for 2021 on slide 25, the current environment continues to be highly uncertain making a challenging to forecast expectations for IT market growth with a high degree of confidence. Therefore, we are providing a base case for 2021 IT market growth and how we expect CDW's business to perform in that environment.

Our base case assumes US IT market growth between 2.5% to 3%. We expect CDW net sales to grow 200 basis points, 300 basis points faster than market. Currency is expected to be a tailwind of approximately 50 basis points for the full year, assuming exchange rates of $1.36 to the British pound and $0.79 to the Canadian dollar. In terms of performance by segment for the year, there continues to be uncertainty among customers across end markets, but here are some drivers to consider. On the commercial side of the business, corporate and small business customers tend to respond quicker to the macroeconomic environment. We saw that last year, Q1 was the strongest quarter, then Q2 experienced the steepest decline with quarterly declines moderating thereafter.

We expect the timing and slope of a rebound in 2021 to be closely tied to customer confidence, which will be a function of the macroeconomic environment and success containing the virus. Moving to public, we expect continued success supporting Department of Defense and civilian agencies; however government is not expected to fully make up the loss of the Census project which contributed a total of approximately 230 basis points of net sales to CDW in 2020. Education growth is expected to be strong earlier in the year, with sales above historical seasonality, and then decelerate throughout the year due to overlaps and the unusual seasonality experienced in 2020. Chromebook supply continues to be a wildcard. Health overlaps are tougher in the first half as customer demand spiked at the beginning of the pandemic as then comparison feeds in the second half.

The timing and slope of a rebound in 2021 is linked to budget clarity, which we expect to be a function of success, containing the virus and potential stimulus support. Finally, our international businesses are more weighted to corporate customers, so the pace of recovery will be driven by the macro environment in the UK and Canada. Moving down the P&L, assuming IT market growth of 2.5% to 3%, we expect non-GAAP operating income margin to be in the mid 7% range and non-GAAP earnings-per-share growth to be in the mid to high single digits, call at 6.5% to 7% on a constant currency basis. This reflects the following below the operating line assumptions; one, a modest decline in interest expense to the mid to high 140s to a non-GAAP effective tax rate at the low end of our typical 25.5% to 26.5% range assuming current tax rates, the low end of the range is approximately 150 basis points higher than 2020's 24% rate, creating a headwind of over 200 basis points on earnings-per-share growth. Three, contribution from share repurchases with non-GAAP earnings per share growing approximately 200 basis points faster than non-GAAP net income.

Currency is expected to contribute approximately 40 basis points to reported earnings-per-share growth. Additional modeling thoughts for annual depreciation and amortization, can be found on page 26. Turning to the first quarter, historically the Q4 to Q1 sequential decline on an average daily sales basis has averaged down approximately 7%. We expect this year's first quarter sequential decline to be down high single-digits more than historical seasonality, primarily due to Census and Mississippi Department of Education.

On a year-over-year average daily sales basis, this equates to mid-single digit growth reflecting continued education and government strength, improving commercial trends, partially offset by the overlap of the March 2020 work from home search. We expect first quarter constant currency non-GAAP earnings-per-share growth to be a couple of hundred basis points higher than the full year EPS outlook, as we overlap last year's increase in the credit loss reserve, partially offset by having one fewer selling day, which adversely impacts quarterly profit growth by approximately 200 basis points.

This is timing and we will recoup the day in the fourth quarter. January segment trends are generally in line with my commentary on first quarter expectations. Additional modeling thoughts on the components of cash flow can be found on slide 27. Our long-term free cash flow rule of thumb remains unchanged at 3.75% quarters to 4.25% of net sales, assuming current tax rates. Given the timing impacts that contributed to 2020 significant over delivery, we expect 2021 free cash flow to be at or slightly below the low end of the range.

We expect capex to run approximately 75 basis points to 80 basis points as a percent of net sales, slightly higher than the historical 50 basis points rule of thumb, we believe now is the time to accelerate investment in digital transformation in our own business, enabling us to fortify our competitive position and make CDW the trusted partner of choice for customers and vendor partners. As we always do, we will provide updated views on the macro environment and our business on future earnings calls.

That concludes the financial summary. With that, I'll ask Kree to open it up for questions. Can we please ask each of you to limit your questions to one with a brief follow up. Thank you.

Questions and Answers:

Operator

Your first question comes from Katy Huberty with Morgan Stanley.

Kathryn Huberty -- Morgan Stanley -- Analyst

Thank you. Good morning. How much do you think the supply constraints on Chromebooks impacted the December quarter. In other words, how much better would you have done in December? And then, when do you expect those supply constraints to loosen up this year?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Hi Katy. Good morning. We did carry a higher backlog than normal, out of the fourth quarter into the first quarter in terms of when we expect supply conditions to get better. Obviously very difficult and fluid to call with any precision, but our expectation would be through the course of the first half of the year, we would see supply on the Chromebook side, the business begin to return to normal.

Kathryn Huberty -- Morgan Stanley -- Analyst

Okay, great. And then just as a follow-up, as netted down revenue increases and drives gross margins higher, how should we think about the flow through to the operating margin line? Does sales commission fully offset that gross margin expansion or should we see some scale benefits and potential operating margin expansion over time?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Yes, I mean you're right, there is a little bit of a get back on the sales comp line because we pay on gross profit dollars. I think Katy, from a secular perspective, our expectation is consistent with yours is that we would expect netted down items and software and services to grow faster than the balance of the business. I think we're just a little careful, though trying to understand where we are in the cycle, and whether a hardware refresh is coming and if it is coming, how strong it could be. So, I think that's something to keep in mind as you think about that netted down mix and the impact it has on gross margin going forward at least over the next several quarters. I think the other thing to think through on the margin and then the flow through to NGL line margin is we did benefit from really an exceptional product margin in 2020 and I think some of that was due to the unique dynamics of the supply environment, as well as the premium that customers we're placing on speed. And so, I think that's just also another thing to keep in mind as we think about gross margin going forward. Now again, I think those are probably more cyclical than secular, but something to think about.

Kathryn Huberty -- Morgan Stanley -- Analyst

That's helpful color. Congrats on the quarter.

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

Your next question comes from Ruplu Bhattacharya with Bank of America.

Ruplu Bhattacharya -- Bank of America -- Analyst

Hi, thanks for taking my questions. Chris, you're guiding fiscal 2021 for another year of 200 basis points to 300 basis points outperformance versus the US IT market and that's despite the year-on-year, 200 odd basis points headwind from the Census project. Given all the uncertainty that you've talked about, I mean maybe for us can you just give us your thoughts on what are some of the opportunities you have, what has given you confidence to guide for the full year that 200 basis point to 300 basis point out performance and in that vein, what can the federal -- are there other opportunities to offset that headwind from Census. So, just your thoughts on what's driving your confidence on the full year.

Christine A. Leahy -- President & Chief Executive Officer

Sure. Thanks Ruplu. Thanks for being on the call. Yes, we always hold ourselves accountable for outperforming the market, so on a relative basis we always expect ourselves to do better. And when you think about the combination of our competitive advantages, you saw them in quite really in one of the hardest periods in history in 2020.

So, we are confident that the advantages that we bring to the market will position us and allow us to continue to out perform pits to where our customers need us and grow faster than the market. When I think about headwinds and tailwinds going into 2020, certainly think about remote work and remote everything and that has certainly been driving growth in 2020 and should continue to do so in 2021 -- that's a very significant comparison, you all know because of the first quarter of last year because of the timing of the education -- the end of this past year and Census. But, it will still continue to be a trend we believe everyone will not be going straight back to work and we think it will be work from everywhere kind of situation.

We also believe that this digital acceleration is just going to continue, and so our strength across the full stack and when I say full stack, I mean cloud, services software and hardware plays very well with our customers because customers are always full stack and they're looking for a full solution. So, as they think about combined multi-vendor, multi-year component solutions, CDW is a great partner for them, and you can take them from the very front end of advising in designing to building, implementing, integrating orchestrating and managing and I'll tell you it seems that 2020 has really propelled customers to look for that value-added one-stop shop, trusted IT provider that can view the full spectrum across the whole life cycle.

So, we're very confident in our ability to deliver for our customers. On the federal side, I think you asked about specifically the Department of Defense and civilian. We expect to continue to maintain pretty strong -- look, on the commercial side on small business and corporate I'll tell you Collin said the speed and slope of any recovery is tied to confidence, which is tied to that macro which is tied to the virus, it's all tied together, so that's very hard to predict, but we've been seeing some close to our customers during 2020 that we feel absolutely confident that we will be well positioned to help them on their way up and to capture growth as they're growing. On the government side, stimulus is another wildcard out there and under the new administration, if we see some stronger stimulus that should also help to support on the education, healthcare in state and local side.

Ruplu Bhattacharya -- Bank of America -- Analyst

Okay, thanks for the details there Chris. That makes sense. Just my follow-up, in the UK given the resurgence of COVID-19 have you seen any impact to your operations and you talked about M&A on the call, can you just give us your thoughts on any geographic expansion possibility in 2021? Thanks.

Christine A. Leahy -- President & Chief Executive Officer

Yes, sure. In the UK I'll tell you, I mentioned that we saw a little bit of buy ahead, as people -- as customers were anticipating possibly a hard Brexit so we saw some benefit in the fourth quarter, but the good news is we're close -- remember, we put the mitigation strategy in place with our Netherlands entity and we've really been helping customers utilize that entity in the EU. So, while we've gone back into lock down, it does feel like it feels like customers are used to working that way and are still buying in the areas where they have needs like remote work, optimizing remote work, etc, so we haven't seen a significant impact any different than we would have seen in 2020 and we're managing those really quite well at this point.

In terms of M&A yes look, we never really pinpoint where we're going to be -- what we're going to be doing, but you know, we're focused on geographic expansion as well as expanding our capabilities, our technology capabilities. So, we continue to look, we continue to be very active, I doubt there's a deal out there that doesn't get to CDW's door to see, but we also have our screens that we need to adhere to which are the cultural and operating match, the financial match and the strategic match. So, we'll continue to look. We're excited about this. We did this year that continue to grow our cloud native and ServiceNow capabilities and frankly we're seeing the real benefit from those in terms of traction with our sales organization and deeper connections with our -- with our customers because they are really at the front end of that IT supply chain, if you will helping them to device solutions and then fulfilling. So those have been real positive winners for CDW and our customers.

Ruplu Bhattacharya -- Bank of America -- Analyst

Okay. Congrats on the strong results.

Christine A. Leahy -- President & Chief Executive Officer

Thank you.

Operator

Your next question is from Amit Daryanani with Evercore.

Amit Daryanani -- Evercore -- Analyst

Thanks for taking my questions, and congrats on a really good print here. I guess two from me as well first off, when I think about this calendar 2021 revenue guide 4.5% to 6% give or take, how does that stack up between transactional and solutions? What does that skew look like, and then exclusively I guess how you're doing PCs on that narrative for 2021?

Christine A. Leahy -- President & Chief Executive Officer

Yes, good morning Ruplu -- Amit I am sorry. It's really interesting. I would tell you that 2021, is almost a harder year to determine what sits underneath that IT market rate of growth. There is a wide dispersion of forecast out there across various technologies and what I would say is, I don't think anybody really knows precisely what we plan to do is what we do best which is pivot where our customers need us and you know whether that be in the client hardware refresh area, whether it be in building out cloud capabilities we're able to go in either direction and we're just getting very close to our customers, working with them literally day by day, week by week and supporting in their technology need.

Certainly, technology is more essential than ever, we don't see any of the trends slowing down. Frankly, we might see some things prolonged as a result of pandemic in the vaccine don't go as we all hoped. But at the end of the day, it's a mix and it's really quite hard to tell. I know that's not a great answer to the question of what it comprises, but it's very hard given the unprecedented uncertainty that we still have. I think sometimes -- I think people have felt in some ways we've come through 2020 and now we're in 2021 and it's sunrise and glory ahead and I think we really have to be cautious and conscious of where we sit in the vaccine roll out, new strains coming up and we just have to be very methodical in listening to our customers and taking care of them which we're very good at doing.

Amit Daryanani -- Evercore -- Analyst

That's really fair. And then I guess on the cloud spend Chris, you talked a few times about that business being up double digits and I think you said you expect this to continue. Is the shift to cloud driving new customers to CDW that haven't engaged with you before and need help to get to the cloud or is it more existing customers that are just migrating from on to off-premise and in that lot of scenario how does that play out through your P&L? Is that a good thing for CDW's revenue and profitability or it's a seasonal impact?

Christine A. Leahy -- President & Chief Executive Officer

Yeah, on the first question Amit, I'd say both. We are -- we certainly lean more heavily into penetrating current customers, as you know, but we are bringing in new customers with our cloud capabilities and our digital velocity and ServiceNow practices in particular. Again, as I mentioned earlier, they're really at the front end of that discussion advisory and that's where we're able to bring a great deal of value to the customer in the planning, particularly in a world where things are changing so quickly and plans that had been expected in place four, five, 12 months ago are moving and we're very well positioned to help them with that. So, it's both customers new and existing and we do expect to continue to see growth there.

I would note that Amit, you asked about existing customers and migrating to the cloud. One of the interesting things that I know you're aware of, but it's not just migrating to the cloud, but it's also -- some customers who are already cloud and becoming multi-cloud, so multi public cloud, other customers who are, have been public cloud capabilities, but they need some of mirror that on plan. So it's the whole -- I'd call the cloud environment a whole ecosystem that our teams are able to support customers with now again, which is a real advantage because it's bringing the customer the best for the customer and not just some narrow product category that we sell. In terms of the impact on the P&L I think Collin can jump in here.

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Yeah, good morning Amit. And because most of it gets netted down, it obviously has the lift on gross margin and operating margin. If you look at it -- gross profit divided by what the customer's actually spending, I would say cloud is very much like our entire portfolio, there are some things in it that are higher margin -- security would be a good example of that, a lot of it's delivered via the cloud and there are other things that are more commodity-like in terms of cloud offerings and would have lower margin.

So, in terms of the absolute amount of profit. It's really a function of how margin rich the particular offering is, which is typically rooted in value from the -- perceived value from the customer as well as then the services that we can wrap around it, and other value we can bring by consumption.

Amit Daryanani -- Evercore -- Analyst

Perfect. Thank you very much.

Operator

Next question is from Adam Tindle with Raymond James.

Adam Tindle -- Raymond James -- Analyst

Good morning. Chris, you alluded to the strategic planning process and accelerating investments alongside that, as I look into fiscal 2021 early outline it looks like operating margin is going to be flattish year-over-year, capex is going to be above the rule of thumb. So, just hoping if we could get a little bit more color on the nature of these implied investments and how we can think about gauging success or expected return over time?

Christine A. Leahy -- President & Chief Executive Officer

Sure. Good morning Adam. Yeah, let me take a step back in the strategic process, you know we do this every three years and our overarching strategy hasn't changed as I mentioned in my prepared remarks. I would say what we do is really hone where we are focusing our energy and investments to evolve the business as technology evolves and where we're focusing now are those areas in strategic services and solutions that our customers need. As you heard me mention, full-stack is a way that we go to market and investments in the capabilities across that full stack, such as cloud solutions, cloud services, software solutions and services in particular security and then obviously our hardware, I think about a couple of recent acquisition Scalar and IGNW as excellent examples of that strategy in action where we invested in cloud capabilities and ServiceNow capabilities and those are the areas that customers are needing advisors.

The other area that you can think about that we're investing in is our talent and digital in particular. So our technology, our own technology, we kind of put the mirror on ourselves and made some decisions about what we need as an organization and we are investing in our own technical capabilities, but also those digital tools that we've talked about in the past for so long -- I think you've heard us talk about Amanda. We have a number of other tools in the pipeline that allow our sellers in our digital platform -- our e-commerce platform to work for our customer in a really integrated, seamless intelligent way and that's what we're going for.

And then obviously, we're also reviewing our operating model, as we always do, but even more -- with more gusto I would say now to really remove the things that are inefficiencies and improve where we can and then re imagine a critical element for digital world and then reinvest back in the business. So, investing in technology, also investing in talent. We talked last quarter about reduction in our workforce, but a reduction was also to open up capacity for those rules and capabilities that we -- and we have been investing in people there. So, technology, people and digital is where you'll see the investment, as well as capabilities, behind those high growth areas.

Adam Tindle -- Raymond James -- Analyst

Okay, makes sense. And maybe just as a follow-up for Collin more near-term, you talked about how seasonality is expected to continue to be different than historical for the next few quarters and modeling has gotten tougher for us. You've historically talked about a first half, second half split of 40 to 52, is there any way that we could maybe think about 2021 in those terms?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Yeah. Adam, we elected not to provide thoughts on that, just given the highly uncertain environment, both on the demand on the supply side frankly. I mean, some of my comments in prepared remarks were slope of recovery, tied to economy and buy risk which I think is inherently uncertain and the supply environment is uncertain. So at this point, no perspective on that, obviously when we get on the call next quarter we can provide more thoughts on that.

Adam Tindle -- Raymond James -- Analyst

Okay. Understood, thank you.

Operator

Your next question is from Matt Cabral with Credit Suisse.

Matthew Cabral -- Credit Suisse -- Analyst

Yeah. Thank you. I wanted to dig into more of the on-premise hardware side of the business. Just curious if you could give a little bit more color on what you're seeing across categories like server, storage, net com [Phonetic] and just how we should think about that business and the potential for some refresh activity heading into 2021?

Christine A. Leahy -- President & Chief Executive Officer

Yeah, good morning Matt. I'll go back to the comments I made earlier which is, it's hard to know the timing and slope of when we might see server storage in particular pickup. For example in the corporate space, we think about the timing around when customers are really getting back to the office, which probably won't be till the second half of the year. We are seeing some pickup in areas like higher ed as an example where they are really focused on a connected community, so they've really expanded what the connected campus looks like. But, until we start to see I think a strength in recovery, which unfortunately is related to the virus, we are pretty cautious around on-prem solutions.

We also haven't obviously been able to get into locations. We still haven't been able to get into too many locations to help our customers there, so I would just say look -- a refresh will be coming, it's hard to know when in 2021 or beyond that will be.

Matthew Cabral -- Credit Suisse -- Analyst

Got it. And then on the commercial side of the business, it looks like in the fourth quarter, an improvement in the trajectory and small business a little bit more of a modest uptick in corporate, just wondering if you can compare and contrast a little bit, what you're seeing across those two customer types and how we should think about the pace of recovery, particularly for corporate as we head into 2021?

Christine A. Leahy -- President & Chief Executive Officer

Yeah Matt, I think we've said that before, small businesses just tend to be more nimble and so at the beginning of 2021-- 2020 excuse me, they went -- they slowed down more quickly and they come back up more quickly, so I think that's just the nature of small businesses. On the corporate side, it's really -- we've referenced it, it's kind of multiple layers and mosaic's and we're really seeing the same thing. It depends by geography, it depends by industry even individual customers within segment winners and losers so to speak.

So, it's really a mix across geo industry and individual customers. I will say that we did see some budget flush at the end of the year which felt like a good thing, but again until we see the macroeconomic uncertainty subside, and we see more customer confidence, which of course is driven by the success in extending the virus, I think we're still going to be a little cautious on corporate. On the other hand, look when things do normalize, we would expect corporate and small business similar to what we saw in 2009 and 2010 to really pick up again, and we'll be well prepared to help them do that.

Matthew Cabral -- Credit Suisse -- Analyst

Thank you.

Operator

Your next question is from Tim Yang with Citi.

Tim Yang -- Citi -- Analyst

Hi, thanks for taking my questions. I have a question on corporate and small business recovery as well. Chris, on slide six, you show the US sub-sector recovery cadence in financial crisis and I think it took only 1.5 to 2 years for corporate and small business to be back to pre-crisis level. For 2021 recovery do you expect corporate and small business to recover faster or lower than financial crisis, given we might have more stimulus package, but also there are COVID austerities.

Christine A. Leahy -- President & Chief Executive Officer

Yes. These are great questions, I wish I had a better crystal ball to answer them. It's just hard to say the unique dynamics of this downturn and the pandemic have really I think made it harder to predict and I think less comparable to what we saw in 2008, 2009 and 2010. And as Collin said in his prepared remarks the speed and the slope of the recovery is really in every way related to the success containing the virus. So, if we can get that under control and we can stem the uncertainty in the macroeconomic environment then I think we'll see it recover more quickly, and maybe with a very healthy slope given the importance of technology.

If we don't see that. I think we're going to see more muted growth over a longer period of time, certainly the stimulus is yet another wildcard which can help in the areas that we've mentioned, education state and local etc and can of course to help get that positive momentum going with the consumer, which ultimately impacts the businesses. But, I do think the dynamics of this environment and the pandemic, make it incredibly difficult to predict timing and slope. Again the beautiful thing is the diversity of our end markets, allows us to make sure that we are, where the growth is and able to support our customers wherever they need us, better than anyone.

Tim Yang -- Citi -- Analyst

Got it. That's very helpful. You mentioned K-12 demand strength and your education sector, Q4 performance was much better than normal seasonality. Can you just talk about how sustainable the demand is, and how should we think about the full-year growth for the sector?

Christine A. Leahy -- President & Chief Executive Officer

Yeah, well, I would say a couple of things in K-12 it's really important to understand that what was happening here was a great focus on equity and access for students and students' success and therefore schools were looking to get full holistic outcomes solutions to their school with a lot of speed, and not a lot of providers could do that because they needed to get in the hands of the students quite quickly, and so when you look at the tremendous success our team had in K-12 it is because of the capabilities that they are able to bring together and literally get turnkey solutions through the school, in a timely fashion.

And it's because of the relationships we have with our vendors to make sure we're getting a healthy proportion of the supply out there, which was really constrained. So, I would say a couple of things. Number one, the timing, the seasonality was different because of the great urgency schools have. Number two, our execution was just extraordinary and I wanted to say that loud and clear because the team did an extraordinary job. We have some backlogs going into the first quarter of next year, which will certainly benefit us in the first quarter, and then one would expect that going into the back half of next year, we'll get back to more, I guess, normal seasonality in K-12, but it's a confluence of both the demand and our capabilities and an unbelievable execution by the team.

Tim Yang -- Citi -- Analyst

Very helpful.

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Yea, thanks Tim. Just want to add a little bit more color on Q4 and build on Chris's comments, I mean, we did see extraordinary demand and I think everybody knows, we benefited from the Census but we also had that really large offering with Mississippi Department of Education that Chris talked about on previous earnings calls, just to dimensionalize the magnitude of those two offerings, if you excluded those from Q4 results, we would have grown our average daily sales in the neighborhood of 6% to 7% range. So, even excluding those two big deals, we still had a meaningful contribution from the education part of the market.

Tim Yang -- Citi -- Analyst

Great. Thank you so much.

Operator

Your next question is from Shannon Cross with Cross Research.

Unidentified Participant

Hi, this is Patrick Jackson [Phonetic] on for Shannon, I wanted to ask what you're seeing during the year from healthcare customers, have budgets continued to shift, customers focus on security and software spend while also considering timelines for investment in virtual care solutions, as there seems to be heightened demand for new offerings, as you work with the non-profit healthcare provider and then I have a quick follow-up.

Christine A. Leahy -- President & Chief Executive Officer

Yeah, I agree with everything you said, there's -- not to repeat it. I'd say we're pleased with the improvement in healthcare in this past quarter and continuing to be encouraged by first-quarter performance so far. The real wild card with healthcare is budget and more than any of the segments, I think it's tied to the virus in successfully containing it -- impacts to Healthcare segment. Long term, certainly there is an opportunity in virtual care and all the components of it on 202, to me, is going to be a bit of a wild card year with healthcare, because of the pandemic, they are really just fluctuating back and forth between the urgent care, reductions in elective care, their revenue streams, etc. So, we'll just have to see how it plays out in 2021, but the areas that you've identified yet are areas that they are focused on.

Unidentified Participant

Okay, thank you. And then you also referenced customers spent $2 billion, with the company on security during 2020. I just wanted to ask where seeing security investments, primarily being targeted and do you expect security spend to grow faster than the total IT market in 2021? Thank you.

Christine A. Leahy -- President & Chief Executive Officer

Yeah sure. Security is across the full-stack, so from the hybrid infrastructure, all the way out to the digital experience and endpoint devices so we're seeing it across the full-stack hardware and software in particular. We certainly provide some services reps around those, but it's across the full stack. Right now, given the remote enablement going on there is, I would say, increased focus on endpoint devices and all things endpoint security, but that's not -- that's not to diminish the security focus on the full data-center as well.

Unidentified Participant

Thank you.

Operator

Your next question is from Matt Sheerin with Stifel.

Matthew Sheerin -- Stifel -- Analyst

Yes, thanks and good morning, Chris I wanted to ask concerning your comments about work from home and remote working and working from everywhere, as you put it, obviously we've seen a very strong first wave of investments, but we're hearing from other solution providers about a potential second wave as customers go back and upgrade the hardware, but also infrastructure as you said endpoint and then also security -- are you having those conversations with customers yet and are you working with customers and see that as an opportunity?

Christine A. Leahy -- President & Chief Executive Officer

Yeah, hi Matt Yes we are, and again I'd say there are different flavors of what customers are doing. We have a healthy dose of customers who are in someone's like CDW, not so much waiting and seeing, but planning in a very flexible, adaptable optionality type kind of way. So, they are not clear on whether they're going back at the end of the year, whether they're going to go back 50% etc. So, I guess what I am saying, we've got customers some who are already back in the office, maybe 20% of our customers and we're obviously helping them set up the office etc.

But others are still planning for what their workforce ought to look like, and I'm sure you hear the types of things that companies are saying, they need to be in person for now collaboration, innovation, acculturation, these are things, companies are saying we need to be in the office for that, so we're helping them to design spaces that are most suitable for that, if in fact customers decide 80% of their workforce can work from anywhere, we are absolutely thrilled talking with them about what the blueprint for that looks like, in terms of 80% work from anywhere, 20% in the office or alternatively kind of a different kind of office environment where everybody is coming into the office at different times for different types of work.

I mean it's really interesting time right now, because I don't walk -- while there is a lot of talk about where this will settle out, the hard work really begins in the planning and what that looks like and how you create efficiency and productivity through workforce and we're right in the throes of that, and I think we're going to see a number of flavors frankly, but we're helping customers with all kind of flavors.

Matthew Sheerin -- Stifel -- Analyst

Okay, thanks for that, and I wanted to ask another question regarding client devices. I know you talked about the double-digit strength across most of your end markets, last year. We've seen a strong PC upgrade cycle going on three years now. How should we be thinking about of that number this year, particularly, both on the corporate side and in the public sector?

Christine A. Leahy -- President & Chief Executive Officer

Yes, I think look with client devices what we have some headwinds and some tailwinds certainly going into 2021 and you named one of them -- I mean refresh is something that might be on our side, we talked about devices that were from 2017, 2018. Also, the need for more resource devices depending on where organizations end up in terms of long-term remote and bolstering those and refreshing those at some point, extending those new use cases -- we've been talking about this for quite a long time as companies are evolving their business models, think retailers for example contact less purchasing. We've been -- new use cases will be a tailwind for client devices and again, thinking about what comes in from the stimulus package, that will be really interesting to see how our state and local education healthcare organizations can take advantage of it.

Look for CDW, we've got some big overlaps as talked about that we'll have to overcome and we'll have to keep an eye on the economy and employment, but look, there again, there are winners out there who are hiring and investing heavily in technology and that's a positive also for client devices.

Matthew Sheerin -- Stifel -- Analyst

Okay, great. And just a quick follow-up, regarding the timing about the security software $2 billion in customer spending is that a gross number or a netted down number?

Christine A. Leahy -- President & Chief Executive Officer

That's the growth number. That's customer spend, so that's what the customer will spend with us.

Matthew Sheerin -- Stifel -- Analyst

And that's really what you recognize, because of the netted down, right?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

No. The growth is what customers are spending with us. We're recognizing fewer dollars in that in revenue because a lot of that is getting netted down because of software [Indecipherable] and software as a service.

Matthew Sheerin -- Stifel -- Analyst

Exactly. Okay, great, thanks a lot.

Operator

Your next question is from Keith Housum with Northcoast Research.

Unidentified Participant

Hi, this is Trevor filling in for Keith, how broad were the supply chain constraints across the portfolio? Were Chromebooks the only products affected or were there others?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Chromebooks were the primary theory of constraints, we did see some tightness in some of the other lower-end notebooks and continue to see, I would say pockets of dislocation on collaboration hardware webcams and things like that, but I would say those things are -- we're gradually getting better, but Chromebooks by far were the biggest source of constraints.

Unidentified Participant

Okay, thanks. And a quick follow-up. Would you say the supply chain issues during the quarter got better or got worse as the quarter progressed?

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

I would say that's a difficult question to answer because we were chasing a moving target, and what I mean by that is I think we were pleasantly surprised by our ability to procure supply in Chromebooks. We were also pleasantly surprised by the amount of demand. So you know, on an absolute basis I think the supply was a little bit better, but it still came in short of what demand was because demand was just so much greater than expected.

Unidentified Participant

Okay, great, thanks a lot and congrats on the quarter.

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

At this time, there are no questions. I would now like to hand the call back over to Chris Leahy, President and CEO.

Christine A. Leahy -- President & Chief Executive Officer

Thank you, and thank you all. I want to recognize before we head off the tremendous, tremendous dedication of our co-workers around the globe and their extraordinary commitment to serving our customers, our partners and all of CDW stakeholders, and thank you to our customers for the privilege and opportunity to serve you and thank you to our investors and analysts participating in this call. We appreciate you and your continued interest in and support of CDW. Collin and I look forward to talking with you again, next quarter. Take care.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

Brittany A. Smith -- Vice President, Investor Relations and Vice President, Corporate Communications Financial Planning

Christine A. Leahy -- President & Chief Executive Officer

Collin B. Kebo -- Senior Vice President and Chief Financial Officer

Kathryn Huberty -- Morgan Stanley -- Analyst

Ruplu Bhattacharya -- Bank of America -- Analyst

Amit Daryanani -- Evercore -- Analyst

Adam Tindle -- Raymond James -- Analyst

Matthew Cabral -- Credit Suisse -- Analyst

Tim Yang -- Citi -- Analyst

Unidentified Participant

Matthew Sheerin -- Stifel -- Analyst

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