CDW Corporation Q3 2024 Earnings Call Summary

In the recent earnings call for the third quarter of 2024, CDW (NASDAQ: CDW) Corporation CEO Chris Leahy and CFO Al Miralles discussed the company's financial performance and strategic direction during a challenging market.

CDW reported a 3.5% year-over-year decline in net sales, totaling $5.5 billion. Gross profit decreased to $1.2 billion, marking a 2% drop from the previous year. Despite a stable gross margin of 21.8%, non-GAAP operating income and non-GAAP net income per share fell by 4% and 3% respectively. The company faced difficulties in hardware solutions due to extended sales cycles, macroeconomic uncertainties, and increased competition, notably experiencing a 12% decline in government sales.

Key Takeaways

• Net sales of $5.5 billion, a 3.5% decrease year-over-year.
• Gross profit down 2%, with gross margin stable at 21.8%.
• Non-GAAP operating income and net income per share fell by 4% and 3% respectively.
• Significant pressure on hardware solutions; however, growth was noted in cloud solutions and client devices.
• A focus on enhancing cloud and software offerings and customer experience remains central to CDW's strategy.
• CDW anticipates flat U.S. IT market conditions for the remainder of 2024.

Company Outlook

• CDW expects a flat U.S. IT market and a low single-digit decline in gross profit for 2024.
• Anticipated non-GAAP earnings per diluted share are expected to decrease in the mid-single digits.
• Strategic investments and strong customer relationships are deemed critical.

Bearish Highlights

• Public sector sales dropped 12%, notably in federal markets.
• Hardware sales declined by 7%, impacting gross profit.
• Muted hardware demand and ongoing transformation efforts adversely affected financial results.

Bullish Highlights

• Growth in software and services by 3.5% and 13% respectively.
• CDW is dedicated to returning 50% to 75% of adjusted free cash flow to shareholders.
• Further strategic investments in cloud services for future growth.

Misses

• Non-GAAP SG&A expenses were about 55% of gross profit, slightly above expectations.
• A 2% workforce reduction was implemented to align with market conditions.

Q&A Highlights

• Leahy noted competition as “irrational pricing,” affecting industry margins.
• Responses to queries regarding prolonged gross profit declines indicated ongoing transformation efforts and muted hardware demand as contributing factors.

CDW Corporation remains focused on strategic investments and adapting offerings to improve financial performance in a challenging market. Despite current headwinds, the company aims to leverage its customer relationships for future recovery and growth.

InvestingPro Insights

• CDW has a market cap of $26.22 billion.
• Despite declines, it maintains a solid revenue base of $20.94 billion.
• CDW has raised its dividend for 11 consecutive years, indicating commitment to shareholder returns.
• Current dividend yield is 1.13%.

Full Transcript Availability

For more details, the full transcript of the Q3 2024 earnings call is available on CDW's investor relations page.