Operator: Our next question comes from Adam Tindle from Raymond James.
Adam Tindle: Okay. I just wanted to start on 2023 gross profit dollar guidance. Joyce, you mentioned you’re obviously finishing a very strong year in 2022, and I think, gross profit dollars grew 13% during 2022 after a very, very strong year. As we think about 2023, you’re talking about high single-digit gross profit dollar growth and called that guidance modest. And so as I kind of try to square those 2, a very strong year at 13%, but then we’re expecting high single digits next year and calling that modest, there’s a little bit of a disconnect. And I’m wondering if maybe, you could help bridge that, whether it’s maybe some sort of backlog expectation that gives you confidence to grow at that level on a difficult comparison.
Joyce Mullen: Yes. So first of all, I think — so the top line will grow more slowly in 2023 than it grew in 2022. That’s been consistently what Glynis has been talking about now, since the Investor Day, for sure. And obviously, there’s some translation into gross profit dollar growth there. And we do certainly expect to see — to get some help on our gross profit mix, due to flushing and the infrastructure backlog in the first half of the year. But as Glynis mentioned, I mean, it’s really around the mix of software, cloud and services, overall in the business that are driving the gross margin expansion versus sort of our historical rate of gross margin.
Glynis Bryan: Adam, if I could just add on to that. What I would say is that, if you look in the presentation deck, not right now, but at your leisure, you will see that we gave you a couple of stats about first half of 2022 versus second half of 2022. And part of what drove the gross profit dollar growth was high hardware sales in the first quarter of 2022. Which had lower gross margin associated with it. So in 2022, on that high gross profit growth, that we had in the first half, we — actually margin declined by 70 basis points in the first half. We made that up in the second half, plus some, primarily because devices were not as strong in the second half of the year as they were in the first half of the year. When you look at the growth that we’re seeing in 2023, it is less devices in that growth number, which helps us overall — from a overall gross margin perspective, and gives us the confidence with regard to what’s happening with infrastructure, our backlog around infrastructure, in particular, as well as the performance that we have shown in cloud, software and Insight core services that leads to that gross margin expansion number.
Shame on us for calling it modest.
Adam Tindle: All right. You got me there. Given what you just outlined, is there a way for..
Glynis Bryan: And Adam, it is also organic.
Adam Tindle: Yes. I realize that. Is there a way for us to think about seasonality in 2023, given kind of these different comparisons on a year-over-year basis and kind of an odd year last year that we’re going off of how to think about seasonality in 2023?
Joyce Mullen: Yes. I think as Glynis mentioned, I think it’s kind of going to be the inverse of last year. So I think the first half of this year is going to be a little the growth will be slower than the second half of the year, and last year was the inverse.
Glynis Bryan: Primarily around…
Adam Tindle: Last one for me, and I’ll pass it on. But I do want to ask Joyce, on the sales transformation initiatives. If you could maybe just a recap a little bit of more specifics. I understand, there’s been investments in systems, et cetera. But have you been moving around accounts or geographies? What’s been going on with that? And what do you think is left to do with the sales transformation?
Joyce Mullen: Sure. So yes, so we have spent a lot of time, as we talked about at Investor Day, really trying to think about how to focus on going deeper in our top accounts. So we have made changes in coverage to do just that. And that means, for our top accounts, we have — and top sellers in those accounts, we’ve reduced the size of their account base, or their books. And that is in order to make sure that we’re putting our highest-propensity sellers — or sellers who sell them out services, and who have the most services skills, aligned with the customers who are most likely to buy our services. And to — what the plan is to go deeper in those accounts so we can increase our understanding of their businesses in a very dramatic way and propose solutions that are going to be most relevant to them to help them deliver the success in their business that they’re looking for.
So we’ve done all of that. You’re never done, of course, but we’ve done that, as of the end of the year. And so that’s a pretty big push for us. We’ve also made some minor changes around how we think about account planning, how we’re training our sales execs and things like that, and that will continue. That will be an ongoing process. So we have now moved from talking about sales transformation to actually growing the business. So we believe we’re done with the planning phase, and we’re now into execution.
Operator: Our next question comes from Joseph Cardoso from JPMorgan Chase.
Joseph Cardoso: At the Investor Day, you provided a long-term revenue outlook to outperform the underlying market by 200 basis points. How should we think about that level of outperformance relative to 2023? Is that still the benchmark, we should align to our models? Or are there other factors we should consider this year that might put pressure on that?
Glynis Bryan: I think, we’ve always said that we will perform 200 to 300 basis points ahead of the market. That hasn’t changed. It’s just that we really want to focus on gross profit dollars because the composition of our revenue, specifically the composition of cloud in our revenue and the netting that occurs with that, makes our revenue metric a little hard to follow, especially when you’re following it each quarter. Q2 and Q4 are big cloud quarters. So that’s why we gave you some — the guidance around gross profit, but we still anticipate we will grow ahead of the market, yes, on the revenue line.
Joseph Cardoso: Got it. Got it. Appreciate it. And then just relative to cash generation, which is set to improve heading into 2023 based on kind of the commentary you made in your prepared remarks. I guess, just can you just remind us what the priorities are? And particularly, just given your comments around M&A, like are you seeing — is that more attractive going into this year? Are you seeing valuations coming down? And then are you just more inclined to do some kind of transaction to bolster your portfolio? Just kind of given what we’re seeing in the macro backdrop, and simultaneously with cash generation likely to improve.
Glynis Bryan: I appreciate it. So first call on capital, we’ll be continuing to invest in our organic business, as we have been doing over the past year. Then it would be M&A. Then it would be share buybacks, and then paying down debt. Paying down debt is at the bottom primarily because we’re in an environment now where our debt is 1.2x. — we’re 1.2x levered, which is low. What I would say is that, we continue to look at M&A. We continue to look for tuck-ins of — maybe small to medium sizes, if you want to think about it that way, that we can tuck into the existing business to fill certain capability gaps. That hasn’t changed. I think, that valuations on the smaller end of the market, the nonpublic ends of the market, are finally starting to come down a little bit.
As companies are out there and they haven’t seen the high prices, maybe, that they were getting in 2021 and early into 2022. So we will continue to be opportunistic in terms of adding to the overall portfolio around the pieces that we talk about, data, AI, cloud, et cetera.
Operator: Our next question comes from Anthony Lebiedzinski from Sidoti & Company, LLC.
