CDW Corp is a multi-brand provider of information technology ("IT") solutions to small, medium, and large business, government, education, and healthcare customers in the United States, the United Kingdom, and Canada. The company's broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experience, and security. The company has three operating segments namely, Corporate, Small Business, and Public. The Corporate segment generates the majority of its revenue and primarily serves US private sector business customers with more than 250 employees.
Performance Overview
CDW Corp (CDW, Financial) reported net sales of $5,423.4 million for Q2 2024, a 3.6% decline from $5,626.1 million in Q2 2023. This decline reflects ongoing economic uncertainty and increased technology complexity, which have led customers to be cautious in their technology spending.
Despite the revenue decline, CDW Corp (CDW, Financial) achieved a net income of $281.1 million, up 7.0% from $262.6 million in the same period last year. This resulted in earnings per diluted share of $2.07, slightly below the analyst estimate of $2.10.
Segment Performance
The Corporate segment, which generates the majority of CDW Corp (CDW, Financial)'s revenue, reported net sales of $2,195.2 million, a 2.2% decrease from the previous year. The Small Business segment saw a 3.4% decline in net sales to $382.9 million, while the Public segment experienced a 2.3% decrease to $2,243.3 million. The Public segment's performance was primarily driven by a 6.2% decrease in net sales to Government customers and a 0.9% decrease in net sales to Education customers. Net sales to Healthcare customers remained relatively consistent.
Net sales for CDW Corp (CDW, Financial)'s UK and Canadian operations, combined as "Other" for financial reporting purposes, were $602 million, a 12.7% decrease from the previous year.
Financial Achievements
Gross profit for Q2 2024 remained relatively consistent at $1,183.1 million, compared to $1,181.5 million in Q2 2023. The gross profit margin improved to 21.8% from 21.0% in the previous year, primarily due to a higher contribution of netted down revenue, particularly software as a service, partially offset by an increased mix into notebooks/mobile devices.
Selling and administrative expenses decreased by 2.5% to $750 million, primarily due to workplace optimization costs in Q2 2023 with no similar activity in the current quarter, partially offset by increased transformation and other related costs.
Operating income increased by 5.1% to $433.1 million, while Non-GAAP operating income decreased by 3.7% to $510.3 million. The operating income margin was 8.0%, up from 7.3% in Q2 2023, while the Non-GAAP operating income margin remained consistent at 9.4%.
Key Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Net Sales | $5,423.4 million | $5,626.1 million | (3.6)% |
| Gross Profit | $1,183.1 million | $1,181.5 million | 0.1% |
| Operating Income | $433.1 million | $412.2 million | 5.1% |
| Net Income | $281.1 million | $262.6 million | 7.0% |
| EPS (Diluted) | $2.07 | $1.92 | 7.5% |
Commentary
"Within an ongoing period of limited demand, the team's value as a trusted advisor and ability to meet our customers' most pressing needs drove strong performance in cloud, security and services," said Christine A. Leahy, chair and chief executive officer, CDW. "This performance contributed to profitability that is underpinned by the strategic investments we have made over the past five years to enhance customer value and our returns."
"During the quarter, economic uncertainty and increased technology complexity continued to weigh heavily on solutions spend while refresh needs drove broad-based demand for client devices," said Albert J. Miralles, chief financial officer, CDW. "Our ability to optimize cash flow generation through effective management of our working capital provides strategic flexibility across our capital priorities including M&A and share repurchases."
Analysis
CDW Corp (CDW, Financial) demonstrated resilience in Q2 2024 by achieving higher net income and EPS despite a decline in net sales. The company's strategic investments in cloud, security, and services have contributed to its profitability, even in a challenging economic environment. The improvement in gross profit margin and reduction in selling and administrative expenses further highlight the company's effective cost management strategies.
However, the decline in net sales across all segments, particularly in the UK and Canadian operations, indicates that economic uncertainty and technology complexity continue to impact customer spending. CDW Corp (CDW, Financial) must navigate these challenges to maintain its growth trajectory and meet its target of exceeding US IT market growth by 200 to 300 basis points on a constant currency basis.
Explore the complete 8-K earnings release (here) from CDW Corp for further details.
