Matt Sheerin: Okay, so like a three quarter lag.
Joyce Mullen: Overall we expect hardware to grow – sorry, go ahead.
Matt Sheerin: No, I’m sorry. You said you expect hardware to grow later this year.
Joyce Mullen: Yes. Mid-single-digits all in.
Matt Sheerin: Got it. Yes. And that’s – if client devices is growing faster, what’s the attach rate? I know that in the solution side, there’s a good attach rate of services and other things. I know there’s some attach rate to client devices, but in terms of how the gross margin shakes out, is it greater for the infrastructure side? So that could be a little bit of a headwind on gross margin.
Joyce Mullen: So gross margin on devices is lower than the hardware gross margin on infrastructure. There is significant attachment of services, and devices are generally a bigger part of a business than infrastructure. So we expect that device recovery should help services overall, strong margin. And by the way, we’ve put in, as we’ve mentioned a few times, profitability and pricing programs on hardware that we expect to continue.
Matt Sheerin: Got it. Okay. And then it looks like you’re guiding share count for the year up 700,000 shares or so. What, Glynis, is the right number for the first quarter. Is that increase due to the converts? And could you walk us through the mechanics there?
Glynis Bryan: Yes. We have a schedule in the back that can help you walk in the back of the presentation that can help walk you through the mechanics. We will be doing a $35 million share repurchase. It is included in the guidance and in the share count that you have there. And we’ll evaluate where our stock price goes relative to the warrants that really trigger the increase in the share count as we go throughout the year and would be willing to make other adjustments as we go forward. The $35 million purchases primarily around equity dilution, offsetting equity dilution.
Joyce Mullen: And we’re doing that in Q1.
Glynis Bryan: And we’re doing that in Q1.
Matt Sheerin: Got it. Okay. And just if I can ask another question regarding gross margin, just because of the significant impact from SADA last quarter, I think you said 110 basis points. So I guess, right off the bat, we would expect that decline, but it could be greater, right. Because their gross margin is much lower seasonally, correct?
Glynis Bryan: No. So the seasonal impact of SADA is driven because revenue and GP, the dollars are lower in the first quarter and second quarter than they are in the second half of the year Q3 and in Q4. And essentially SG&A is flat. So the impact for SADA in Q1 is really much more around the EBIT impact that they will have on us relative to the negative…
Matt Sheerin: I got it, because of the OpEx. Okay.
Glynis Bryan: Because of the OpEx. Because of the OpEx. Yes, yes. But it’s not going to be a decline in [indiscernible] But overall, remember, we got the strongest quarter of SADA, strongest month of SADA in December. So the SG&A and it had an impact of 110 basis points. But I wouldn’t want you to think that every quarter is going to be 110 basis points, which is why we’re guide the gross margins to 19% range, right.
Matt Sheerin: Got it. Exactly. Okay. Thank you very much.
Joyce Mullen: Continue investing during periods of…
Operator: Thank you. We have the next question from Adam Tindle of Raymond James. Adam, you may proceed with your question.
Jake Morrison: Okay. Thank you. This is Jake Morrison on for Adam. I just wanted to start on linearity in the quarter. We heard from some peers that the month of December was weaker than anticipated, and they didn’t see the budget flush they were expecting. Can you just touch on the environment you saw in the core business in December and how that played into your 2024 outlook? Thank you.
Joyce Mullen: Yes. Thanks, Jake. Yes, we would agree with that. It’s exactly what we saw. We didn’t expect as much budget flush as we had seen in previous years, but we definitely saw softness in December, particularly on infrastructure.
Glynis Bryan: And although, we’re seeing – we saw some sequential increase in Q4 associated with devices, it’s still down on a year-over-year basis. And as you go into 2024, we do believe that we’ll see some strengthening in hardware, specifically devices throughout the year. And there’s some sequential improvement in hardware between Q4 and Q1, but it’s still ultimately muted and down relative to the first half of 2023.
Jake Morrison: Got it. That makes sense. And then last one for me, just double clicking on that. What exactly is this 19% gross margin contemplating in terms of return to device spending? What are you guys hearing? I know you mentioned this sort of AI enabled computers coming out, but what are you guys contemplating in terms of return to device spending in relative to price increases? Thank you.
Joyce Mullen: So when we think about the device, so, first of all, we think devices are going to improve sequentially, but as Glynis just said, they’re down still. We expect them to be in sort of the in growth – growing in the back half of the year. Overall, we expect hardware to grow mid-single digits. When it comes to devices, we believe that, first of all, everybody’s got notebooks now. There’s many fewer desktops. The life of notebooks is generally shorter. Those notebooks are aging, and there’s a lot of interest in AI enabled PCs, but also refresh due to Windows 11. And also, everyone needs to be able to operate in a hybrid environment. And so there’s improvements around quality, sound quality, cameras, et cetera, et cetera. So the ASPs are likely to be higher, and that will help us.
