Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1] Zacks Style Scores - Zacks Style Scores are indicators that assist investors in selecting stocks likely to outperform the market within 30 days, rated from A to F based on value, growth, and momentum characteristics [2] Value Score - The Value Style Score focuses on identifying undervalued stocks using ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow to highlight attractive investment opportunities [3] Growth Score - The Growth Style Score emphasizes a company's financial health and future outlook, analyzing projected and historical earnings, sales, and cash flow to find stocks with sustainable growth potential [4] Momentum Score - The Momentum Style Score helps investors capitalize on price trends by evaluating one-week price changes and monthly earnings estimate changes, indicating favorable buying opportunities for high-momentum stocks [5] VGM Score - The VGM Score combines all three Style Scores, serving as a comprehensive indicator to identify stocks with strong value, growth forecasts, and promising momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [7][8] Stock to Watch: CDW Corporation - CDW Corporation, a leading IT solutions provider, holds a 3 (Hold) Zacks Rank and a VGM Score of B, indicating a solid position in the market [12] - The company has a Value Style Score of B, supported by a forward P/E ratio of 18.4, making it attractive to value investors [13] - Recent upward revisions in earnings estimates for fiscal 2025 have increased the Zacks Consensus Estimate by $0.14 to $9.71 per share, with an average earnings surprise of 2.1%, positioning CDW as a noteworthy investment option [13]

Summary of CDW FY Conference Call - May 13, 2025 Company Overview - **Company**: CDW (CDW) - **Industry**: Technology Solutions and Services Key Points and Arguments Macroeconomic Concerns - There is significant macroeconomic volatility and uncertainty, but technology remains essential for competitive advantage and employee attraction [2][3] - Customers are cautious due to policy uncertainty, yet there is pent-up demand for technology across various sectors [3][4] Demand and Growth Outlook - CDW anticipates muted growth in specific sectors like federal and education, but overall technology spending remains strong [4][11] - The commercial space has shown a steady return to growth over the last two quarters, although enterprise solutions have experienced some variability [9][10] Tariff Impact - CDW has leveraged tariff uncertainties to assist customers by providing pre-tariff pricing on client devices, particularly in the K-12 sector [6][7] - The company maintains strong relationships with customers, which helps navigate complexities arising from tariff changes [7][8] International Business Performance - CDW's international business has performed well despite geopolitical uncertainties, with a cautious outlook for the fiscal year [18] AI and Technology Investments - CDW is positioned as a full-stack organization, focusing on AI investments to enhance efficiency, personalization, and customer experience [19][20] - The company has established healthcare innovation labs to facilitate customer engagement and technology exploration [22][23] Client Device Market - Growth in client devices has been broad-based, with education seeing more pre-buying activity compared to enterprise [28][29] Cloud Strategy - CDW is focused on scaling its cloud business, emphasizing professional and managed services to drive customer engagement [32][33] - The company views cloud and security as high-growth areas for future acquisitions [35][36] Financial Performance - Gross margins have expanded significantly over the past six years but are plateauing due to shifts in product mix [50][51] - Operating expenses have been consistently expanded to support growth initiatives, with a focus on balancing customer service and cost leverage [53][54] Government and Education Sector Exposure - The federal government sector has shown a modest decline, while state and local government business has grown modestly [59][60] - The K-12 education sector may experience muted spending due to economic pressures [61] Pricing and Demand Elasticity - Price increases due to tariffs have been largely accepted by customers, with spending continuing despite economic uncertainties [62] - CDW operates as a cost-plus provider, successfully passing on price increases while maintaining gross profit neutrality [63] Additional Important Insights - CDW's strategy emphasizes a full lifecycle approach, integrating consultancy and managed services with product sourcing to enhance customer experience [38][40] - The company is actively refining its go-to-market strategy to capture opportunities across various customer segments [46] - CDW's ability to adapt its pricing and bundling strategies based on customer behavior is a key focus for future growth [107][108]

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements%3A) The financial statements detail CDW's financial position and performance for Q1 2025, showing asset growth, increased net sales, and reduced operating cash flow [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$15.02 billion** as of March 31, 2025, with liabilities rising and stockholders' equity slightly decreasing Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $7,651.6 | $7,373.1 | | Goodwill | $4,636.1 | $4,620.4 | | **Total Assets** | **$15,018.5** | **$14,678.4** | | **Total Current Liabilities** | $5,781.5 | $5,474.4 | | Long-term Debt | $5,622.4 | $5,607.0 | | **Total Liabilities** | **$12,695.4** | **$12,325.7** | | **Total Stockholders' Equity** | **$2,323.1** | **$2,352.7** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2025, Net Sales grew 6.7% to **$5.20 billion**, operating income increased, and Net Income rose to **$224.9 million** Q1 2025 vs. Q1 2024 Performance (in millions, except per-share data) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $5,199.1 | $4,872.7 | 6.7% | | Gross profit | $1,122.3 | $1,063.3 | 5.5% | | Operating income | $361.4 | $328.0 | 10.2% | | Net income | $224.9 | $216.1 | 4.1% | | Diluted EPS | $1.69 | $1.59 | 6.3% | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$287.2 million** in Q1 2025, mainly due to working capital changes, with increased cash used in financing activities Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $287.2 | $440.0 | | Net cash used in investing activities | $(31.9) | $(29.7) | | Net cash used in financing activities | $(294.1) | $(192.6) | | Net (decrease) increase in cash | $(32.1) | $215.1 | - The decrease in operating cash flow was primarily driven by changes in working capital, including a **$184.5 million** use of cash for accounts receivable and a **$112.1 million** use for merchandise inventory[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, acquisitions, debt, segment performance, and contingencies, including a DOJ investigation related to the E-Rate Program - The company completed its acquisition of Mission Cloud Services, Inc. on November 27, 2024, for a base purchase price of **$330 million**, with the purchase price allocation being preliminary[30](index=30&type=chunk) - Total long-term debt, including current maturities, stood at approximately **$5.85 billion** as of March 31, 2025, with the company in compliance with all debt covenants[40](index=40&type=chunk) Net Sales by Segment - Q1 2025 vs Q1 2024 (in millions) | Segment | Q1 2025 Net Sales | Q1 2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Corporate | $2,236.0 | $2,135.9 | 4.7% | | Small Business | $404.6 | $380.9 | 6.2% | | Public | $1,878.1 | $1,724.7 | 8.9% | | Other | $680.4 | $631.2 | 7.8% | | **Total** | **$5,199.1** | **$4,872.7** | **6.7%** | - The company received a Civil Investigative Demand from the Department of Justice (DOJ) on June 11, 2024, related to a False Claims Act investigation concerning the E-Rate Program, and is cooperating without currently assessing the outcome or potential loss[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2025 revenue growth to improved customer spending, with a slight gross profit margin decrease and strong liquidity [Results of Operations](index=22&type=section&id=Results%20of%20Operations) In Q1 2025, Net Sales rose by **$326 million** (6.7%) YoY, driven by demand for various products, with operating income increasing despite a higher effective tax rate - Net sales increase was primarily due to customer demand for notebooks/mobile devices, desktops, software and services, partially offset by decreases in other hardware categories[93](index=93&type=chunk) - Gross profit margin decreased by **20 basis points**, attributed to an increased mix of lower-margin products, particularly notebooks/mobile devices[94](index=94&type=chunk) - The effective income tax rate increased from **21.9%** to **26.0%** YoY, mainly because of lower excess tax benefits on equity-based compensation in 2025[98](index=98&type=chunk) [Segment Results of Operations](index=23&type=section&id=Segment%20Results%20of%20Operations) All segments reported year-over-year net sales growth in Q1 2025, with the Public segment leading and Corporate and Other segments showing significant operating income increases Operating Income by Segment - Q1 2025 vs Q1 2024 (in millions) | Segment | Q1 2025 Operating Income | Q1 2024 Operating Income | % Change | | :--- | :--- | :--- | :--- | | Corporate | $220.7 | $178.0 | 24.0% | | Small Business | $43.4 | $46.5 | (6.7)% | | Public | $141.2 | $126.0 | 12.1% | | Other | $39.1 | $25.3 | 54.5% | - Public segment growth was driven by notebooks/mobile devices in education and healthcare, and desktops and software in healthcare[107](index=107&type=chunk) - Corporate segment operating income grew significantly due to higher gross profit and lower coworker-related costs, despite higher performance-based compensation[105](index=105&type=chunk) [Non-GAAP Financial Measure Reconciliations](index=25&type=section&id=Non-GAAP%20Financial%20Measure%20Reconciliations) The company provides non-GAAP metrics for Q1 2025, showing Non-GAAP Operating Income of **$444.0 million** and Non-GAAP EPS of **$2.15** after various adjustments Non-GAAP Reconciliation Highlights (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Income (GAAP) | $361.4 | $328.0 | | **Non-GAAP Operating Income** | **$444.0** | **$403.5** | | Net Income (GAAP) | $224.9 | $216.1 | | **Non-GAAP Net Income** | **$286.5** | **$260.8** | | Diluted EPS (GAAP) | $1.69 | $1.59 | | **Non-GAAP Diluted EPS** | **$2.15** | **$1.92** | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) CDW maintains strong liquidity with **$1.3 billion** available under its Revolving Loan Facility, despite decreased operating cash flow and significant share repurchases - As of March 31, 2025, the company had **$1.3 billion** of availability for borrowings under its Revolving Loan Facility[124](index=124&type=chunk) - During Q1 2025, the company repurchased **1.1 million** shares for **$200 million**[128](index=128&type=chunk) - The cash conversion cycle decreased to **15 days** at March 31, 2025, from **16 days** at March 31, 2024, driven by a lower Days of Supply in Inventory (DIO)[135](index=135&type=chunk)[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures were reported from the Annual Report on Form 10-K for the year ended December 31, 2024 - As of March 31, 2025, there have been no material changes in the company's quantitative and qualitative disclosures about market risk[152](index=152&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The company's management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[153](index=153&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[154](index=154&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a DOJ False Claims Act investigation related to the E-Rate Program, with the outcome currently unassessable - The company received a Civil Investigative Demand from the DOJ in connection with a False Claims Act investigation regarding the Schools and Libraries Program (E-Rate Program)[61](index=61&type=chunk)[155](index=155&type=chunk) - At this stage, the company is unable to assess the probability of any outcome or the range of possible loss related to the DOJ investigation[61](index=61&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The report refers to the Annual Report on Form 10-K for a discussion of risk factors, with no new risks detailed in this 10-Q - For a discussion of risk factors, the report refers to the company's Annual Report on Form 10-K for the year ended December 31, 2024[156](index=156&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, CDW repurchased **1.1 million** shares for **$200 million**, and the Board authorized a **$750 million** increase to the share repurchase program Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 0.1 | $187.76 | | February 2025 | 0.2 | $189.52 | | March 2025 | 0.8 | $168.90 | | **Total** | **1.1** | | - On February 5, 2025, the Board of Directors authorized a **$750 million** increase to the company's share repurchase program[159](index=159&type=chunk) [Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - No defaults upon senior securities were reported for the period[160](index=160&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - This item is not applicable to the company[161](index=161&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) None reported - No other information was reported under this item for the period[162](index=162&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including award agreements and CEO/CFO certifications - Exhibits filed include various forms of Performance Share Unit and Restricted Stock Unit award agreements, as well as CEO and CFO certifications (Rule 15d-14(a) and 18 U.S.C. 1350)[163](index=163&type=chunk)

Core Insights - CDW reported revenue of $5.2 billion for the quarter ended March 2025, reflecting a year-over-year increase of 6.7% and exceeding the Zacks Consensus Estimate by 6.25% [1] - Earnings per share (EPS) for the quarter was $2.15, up from $1.92 in the same quarter last year, representing a surprise of 9.69% over the consensus estimate of $1.96 [1] Financial Performance Metrics - Public-Government segment generated $537.80 million, surpassing the average estimate of $497.84 million, with a year-over-year change of -1% [4] - Public-Education segment reported $652.40 million, exceeding the average estimate of $601.26 million, with a year-over-year increase of 9.3% [4] - Public-Healthcare segment achieved $687.90 million, compared to the average estimate of $630.71 million, marking a year-over-year growth of 17.7% [4] - Total net sales for the Public segment were $1.88 billion, above the average estimate of $1.73 billion, reflecting an 8.9% year-over-year increase [4] - Other net sales reached $680.40 million, exceeding the average estimate of $637.67 million, with a year-over-year change of 7.8% [4] - Corporate net sales amounted to $2.24 billion, surpassing the average estimate of $2.16 billion, indicating a year-over-year increase of 4.7% [4] - Small Business segment reported $404.60 million, exceeding the average estimate of $380.47 million, with a year-over-year growth of 6.2% [4] Stock Performance - CDW shares have returned +12.3% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - CDW Corporation reported strong first-quarter 2025 results, with non-GAAP EPS of $2.15, exceeding estimates and showing a 12% year-over-year increase [1][2] Financial Performance - Revenues grew 6.7% year over year to $5.199 billion, driven by strong demand for notebooks, mobile devices, desktops, software, and services, despite declines in some hardware categories [2] - Quarterly revenues surpassed the consensus estimate of $4.89 billion [2] - Gross profit increased 5.5% year over year to $1.122 billion, while gross profit margin slightly decreased from 21.8% to 21.6% due to a higher mix of lower-margin products [6] - Non-GAAP operating income rose 10% year over year to $444 million, with the non-GAAP operating margin increasing to 8.5% from 8.3% [6] Segment Performance - Corporate segment net sales were $2.236 billion, up 6.3% year over year [4] - Small Business segment net sales increased 7.9% year over year to $405 million [4] - Public segment revenues reached $1.878 billion, representing a 10.6% growth, driven by significant increases in Healthcare (19.5%) and Education (11.1%) customer sales [5] - Other operations (Canadian and U.K.) saw net sales rise 9.5% to $680 million [5] Expenses and Cash Flow - Selling and administrative expenses rose 3.5% year over year to $761 million, influenced by lower performance-based compensation and transformation-related costs [8] - Cash flow from operating activities for the quarter was $287.2 million, down from $440 million in the previous year [9] Dividend Announcement - The company announced a quarterly dividend of 62.5 cents, payable on June 10, 2025, to shareholders on record as of May 26 [3] Stock Performance - Following the results, CDW's shares increased by 2% in pre-market trading on May 7, although shares have declined 25.6% over the past year compared to the industry growth of 4.2% [4]

Financial Data and Key Metrics Changes - For Q1 2025, net sales were $5.2 billion, an 8% increase compared to the same period in 2024 on an average daily sales basis [7] - Gross profit reached $1.1 billion, up 7% year over year on an average daily sales basis [7] - Non-GAAP operating income was $444 million, reflecting a 10% increase, while non-GAAP net income per share was $2.15, up 12% [8][31] Business Line Data and Key Metrics Changes - Commercial market growth was strong, with corporate and small business sales increasing by 68% [11] - Healthcare saw a 20% increase in net sales, driven by client devices, cloud, and services [12] - Education increased by 11%, with K-12 growth driven by Chromebook demand [12] - Government net sales increased slightly, with state and local growth offsetting federal agency decision-making pauses [13] Market Data and Key Metrics Changes - The federal government market growth was subdued, while education growth accelerated towards the end of the quarter [9] - UK and Canadian operations delivered sales of $2.5 billion last year, with the UK leading the growth [11] - The commercial market showed consistent growth, while the federal and education markets faced challenges [28] Company Strategy and Development Direction - The company is focused on a three-part growth strategy, emphasizing cloud adoption, cybersecurity, and IT workflow optimization [15] - Recent investments include embedding services throughout the portfolio, particularly in Mission Cloud Services [15] - The company aims to maintain its position as a trusted adviser and vendor partner in a dynamic environment [23] Management's Comments on Operating Environment and Future Outlook - The company maintains its 2025 outlook, expecting low single-digit growth in the US IT market with a growth premium of 200 to 300 basis points [19] - Management noted that while customers are cautious, they do not intend to alter their spending plans significantly [20] - The environment remains fluid, and the company is prepared to navigate uncertainties as they arise [21] Other Important Information - Non-GAAP SG&A expenses totaled $678 million, up 2.8% year over year, reflecting higher gross profit achievement [30] - The company returned approximately $200 million in share repurchases and $83 million in dividends as part of its capital allocation strategy [34] - The cash conversion cycle was 15 days, down from the prior year, indicating effective working capital management [32] Q&A Session Summary Question: Insights on product categories, specifically NetComm and storage - Management acknowledged a pause in spending in these markets but noted ongoing design discussions as a positive indicator for future activity [46][47] Question: Pricing landscape and ability to pass through tariff-related costs - Management expressed confidence in maintaining profitability despite potential price increases, citing a resilient gross margin [52][54] Question: Performance in healthcare and future channel performance - Strong healthcare results were attributed to strategic investments and increased cloud adoption, with expectations for continued growth [60][61] Question: Changes in order behavior in Q2 - Management reported solid underlying demand and a healthy rhythm in the commercial sector, with cautious optimism for future growth [66][67] Question: Guidance on EPS growth and buybacks - Management confirmed that buybacks are embedded in the EPS guidance, with a focus on returning 50% to 75% of adjusted free cash flow to shareholders [70][88] Question: Hiring plans and wage inflation - Management plans to maintain a balanced approach to hiring while managing expenses prudently, with no significant wage inflation observed [84][87]

Core Insights - CDW reported quarterly earnings of $2.15 per share, exceeding the Zacks Consensus Estimate of $1.96 per share, and showing an increase from $1.92 per share a year ago, resulting in an earnings surprise of 9.69% [1] - The company generated revenues of $5.2 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 6.25% and up from $4.87 billion year-over-year [2] - CDW has outperformed consensus revenue estimates three times in the last four quarters [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.44 on revenues of $5.41 billion, and for the current fiscal year, it is $9.53 on revenues of $21.05 billion [7] - The trend of estimate revisions for CDW is mixed, leading to a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Computers - IT Services industry, to which CDW belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Amdocs, another company in the same industry, is expected to report quarterly earnings of $1.71 per share, reflecting a year-over-year increase of 9.6% [9]

CDW Corporation Webcast Conference Call May 7, 2025 Today's Agenda First Quarter 2025 Results Performance Drivers Outlook Q&A 2 Forward-Looking Statements Statements in this presentation that are not statements of historical fact are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding the future financial performance, 2025 outlook, capital allocation priorities and growth pros ...

[Q1 2025 Earnings Overview](index=1&type=section&id=CDW%20Reports%20First%20Quarter%202025%20Earnings) CDW reported strong Q1 2025 results with significant revenue and profitability growth across all segments, driven by robust customer demand for technology solutions [Financial Highlights and Management Commentary](index=1&type=section&id=Financial%20Highlights%20and%20Management%20Commentary) CDW reported a strong start to 2025 with net sales up 6.7% to $5.2 billion and Non-GAAP diluted EPS rising 11.9% to $2.15, driven by strong customer demand and a balanced portfolio Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,199.1 M | $4,872.7 M | 6.7% | | Gross Profit | $1,122.3 M | $1,063.3 M | 5.5% | | Operating Income | $361.4 M | $328.0 M | 10.2% | | Non-GAAP Operating Income | $444.0 M | $403.5 M | 10.0% | | Net Income | $224.9 M | $216.1 M | 4.1% | | Non-GAAP Net Income | $286.5 M | $260.8 M | 9.9% | | Net Income per Diluted Share | $1.69 | $1.59 | 6.1% | | Non-GAAP Net Income per Diluted Share | $2.15 | $1.92 | 11.9% | - The Board of Directors approved a quarterly cash dividend of **$0.625** per common share, payable on June 10, 2025[3](index=3&type=chunk) - Management attributes the robust growth to the company's ability to meet compelling technology needs for customers, effective working capital management, and a strong value proposition as a trusted advisor across the full technology stack[4](index=4&type=chunk) - CDW continues to target exceeding US IT market growth by 200 to 300 basis points on a constant currency basis[4](index=4&type=chunk) [Detailed Financial Performance Analysis](index=2&type=section&id=First%20Quarter%20of%202025%20Highlights) Q1 2025 net sales grew 6.7% to $5.2 billion, driven by strong demand for technology solutions, while operating income rose 10.2% despite a slight gross profit margin decline - Net sales growth was primarily driven by customer demand for notebooks/mobile devices, desktops, software, and services, partially offset by decreases in other hardware categories[5](index=5&type=chunk) - Gross profit margin decreased slightly from **21.8%** to **21.6%** YoY, mainly due to an increased mix of lower-margin products like notebooks, which was partially offset by a higher contribution from netted down software-as-a-service revenue[6](index=6&type=chunk) - Selling and administrative expenses increased by **3.5%**, primarily due to higher performance-based compensation and transformation costs[7](index=7&type=chunk) - The effective income tax rate rose to **26.0%** in Q1 2025 from **21.9%** in Q1 2024, primarily due to lower excess tax benefits on equity-based compensation[10](index=10&type=chunk) - Non-GAAP net income increased by **9.9%** to **$287 million**, and Non-GAAP net income per diluted share grew **11.9%** to **$2.15**[11](index=11&type=chunk)[13](index=13&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) All segments reported higher net sales, with the Public segment leading at 10.6% growth on an average daily sales basis, driven by strong Healthcare and Education performance Q1 2025 Net Sales Growth by Segment (Average Daily Sales Basis) | Segment | Q1 2025 Net Sales | YoY Growth (ADS) | | :--- | :--- | :--- | | Corporate | $2,236 M | 6.3% | | Small Business | $405 M | 7.9% | | Public | $1,878 M | 10.6% | | - Healthcare | $688 M | 19.5% | | - Education | $652 M | 11.1% | | Other (UK & Canada) | $680 M | 9.5% | [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents CDW's consolidated financial statements, including detailed operations, balance sheet, and cash flow, highlighting key financial positions and performance metrics [Consolidated Statements of Operations](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Q1 2025 consolidated operations show net sales up 6.7% to $5.2 billion, operating income growing 10.2% to $361.4 million, and diluted EPS increasing 6.1% to $1.69 Q1 2025 Consolidated Statement of Operations Highlights | Line Item | Q1 2025 ($M) | Q1 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net sales | 5,199.1 | 4,872.7 | 6.7% | | Gross profit | 1,122.3 | 1,063.3 | 5.5% | | Operating income | 361.4 | 328.0 | 10.2% | | Income before income taxes | 304.0 | 276.6 | 9.9% | | Net income | 224.9 | 216.1 | 4.1% | | Diluted EPS | $1.69 | $1.59 | 6.1% | [Net Sales Detail](index=7&type=section&id=NET%20SALES%20DETAIL) Net sales grew 8.4% on an average daily sales basis, with the Public segment leading at 10.6% growth, and $4.42 billion of revenue recognized as principal Net Sales by Segment (Q1 2025 vs Q1 2024) | Segment | Net Sales 2025 ($M) | Net Sales 2024 ($M) | Avg. Daily Sales % Change | | :--- | :--- | :--- | :--- | | Corporate | 2,236.0 | 2,135.9 | 6.3% | | Small Business | 404.6 | 380.9 | 7.9% | | Total Public | 1,878.1 | 1,724.7 | 10.6% | | Other | 680.4 | 631.2 | 9.5% | | **Total Net sales** | **5,199.1** | **4,872.7** | **8.4%** | - In Q1 2025, **$4.42 billion** of revenue was recognized at a point in time with CDW as principal, **$410.2 million** as agent, and **$372.5 million** over time as principal; these figures are all higher than the corresponding period in 2024[33](index=33&type=chunk)[34](index=34&type=chunk) [Condensed Consolidated Balance Sheets](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2025, total assets increased to $15.0 billion, total liabilities to $12.7 billion, and stockholders' equity to $2.3 billion Balance Sheet Summary (as of March 31) | Item | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Cash and cash equivalents | 471.4 | 803.8 | | Total current assets | 7,651.6 | 6,633.8 | | Total assets | 15,018.5 | 13,192.8 | | Total current liabilities | 5,781.5 | 5,261.0 | | Total debt (Current + Long-term) | 5,853.0 | 5,632.3 | | Total liabilities | 12,695.4 | 11,054.1 | | Total stockholders' equity | 2,323.1 | 2,138.7 | [Debt, Working Capital, and Cash Flow](index=10&type=section&id=DEBT%20AND%20WORKING%20CAPITAL%20INFORMATION) Q1 2025 ended with total debt of $5.85 billion, a 15-day cash conversion cycle, and net cash from operations of $287.2 million - The cash conversion cycle was **15 days**, composed of **86 days** of sales outstanding, **13 days** of supply in inventory, and offset by **84 days** of purchases outstanding[39](index=39&type=chunk)[40](index=40&type=chunk) Cash Flow Summary (Three Months Ended March 31) | Cash Flow Item | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | 287.2 | 440.0 | | Net cash used in investing activities | (31.9) | (29.7) | | Net cash used in financing activities | (294.1) | (192.6) | | Net (decrease) increase in cash | (32.1) | 215.1 | [Non-GAAP Reconciliations & Definitions](index=4&type=section&id=NON-GAAP%20FINANCIAL%20MEASURE%20RECONCILIATIONS) This section provides reconciliations of GAAP to non-GAAP financial measures, explaining their utility for assessing underlying business performance and liquidity [Explanation of Non-GAAP Measures](index=4&type=section&id=Explanation%20of%20Non-GAAP%20Measures) CDW utilizes non-GAAP measures like operating income and net income to provide investors with a clearer view of underlying operating performance by excluding specific non-recurring items - Key non-GAAP measures include Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales on a constant currency basis, and Free cash flow[20](index=20&type=chunk) - Management uses these non-GAAP measures to evaluate underlying operating performance, assess liquidity and capital resources, and determine components of performance-based compensation[21](index=21&type=chunk) [Reconciliation of Non-GAAP Operating Income](index=11&type=section&id=Reconciliation%20of%20Non-GAAP%20Operating%20Income) Q1 2025 GAAP operating income of $361.4 million was reconciled to Non-GAAP operating income of $444.0 million, with a resulting Non-GAAP operating margin of 8.5% Reconciliation of GAAP to Non-GAAP Operating Income (Q1 2025) | Description | Amount ($M) | | :--- | :--- | | **Operating income, as reported (GAAP)** | **361.4** | | Amortization of intangibles | 42.8 | | Equity-based compensation | 20.5 | | Transformation initiatives | 13.7 | | Other adjustments | 5.6 | | **Non-GAAP operating income** | **444.0** | [Reconciliation of Non-GAAP Net Income](index=12&type=section&id=Reconciliation%20of%20Non-GAAP%20Net%20Income) Q1 2025 GAAP net income of $224.9 million was reconciled to Non-GAAP net income of $286.5 million, leading to a Non-GAAP diluted EPS of $2.15 Reconciliation of GAAP to Non-GAAP Net Income (Q1 2025) | Description | Net Income ($M) | Diluted EPS ($) | | :--- | :--- | :--- | | **US GAAP, as reported** | **224.9** | **1.69** | | Amortization of intangibles (after tax) | 31.7 | | | Equity-based compensation (after tax) | 15.6 | | | Other adjustments (after tax) | 14.3 | | | **Non-GAAP** | **286.5** | **2.15** | [Other Reconciliations (Constant Currency & Free Cash Flow)](index=13&type=section&id=Other%20Reconciliations) Q1 2025 net sales grew 7.0% on a constant currency basis, with free cash flow at $260.3 million and adjusted free cash flow at $248.8 million - On a constant currency basis, Q1 2025 Net sales were **$5,199.1 million**, a **7.0%** increase from **$4,857.9 million** in the prior year[54](index=54&type=chunk) Free Cash Flow Reconciliation (Q1 2025) | Item | Amount ($M) | | :--- | :--- | | Net cash provided by operating activities | 287.2 | | Capital expenditures | (26.9) | | **Free cash flow** | **260.3** | | Net change in accounts payable - inventory financing | (11.5) | | **Adjusted free cash flow** | **248.8** | [Other Information](index=3&type=section&id=Other%20Information) This section includes important disclosures regarding forward-looking statements and company information, outlining potential risks and investor communication details [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines standard forward-looking statement disclaimers, highlighting key risks such as inflationary pressures, interest rates, competition, and cybersecurity threats - The company claims protection under The Private Securities Litigation Reform Act of 1995 for all forward-looking statements[14](index=14&type=chunk) - Key risk factors mentioned include: inflationary pressures, interest rates, vendor relationships, competition, cybersecurity threats, economic conditions, changes in technology spending, and supply chain interruptions[16](index=16&type=chunk) [About CDW and Investor Relations](index=5&type=section&id=About%20CDW%20and%20Investor%20Relations) CDW, a Fortune 500 IT solutions provider, announced a conference call and webcast to discuss Q1 2025 results for investors and media - CDW is a leading multi-brand provider of IT solutions and a Fortune 500 company[24](index=24&type=chunk) - A conference call to discuss financial results was scheduled for May 7, 2025, with a live webcast available on the company's investor relations website[25](index=25&type=chunk)

Core Viewpoint - CDW Corporation is expected to report first-quarter 2025 results on May 7, with revenue estimates of $4.89 billion, indicating a 0.4% growth year-over-year, and earnings per share estimated at $1.96, reflecting a 2.08% increase from the previous year [1][2]. Group 1: Upcoming Results Expectations - The Zacks Consensus Estimate for revenues is $4.89 billion, suggesting a 0.4% growth from the year-ago quarter's reported figure [1]. - The consensus estimate for earnings is pegged at $1.96 per share, unchanged in the past 60 days, indicating an increase of 2.08% from the year-ago quarter's reported figure [1]. - CDW's earnings have missed the Zacks Consensus Estimate in three of the last four quarters, with an average negative surprise of 3.1% [2]. Group 2: Factors Influencing Performance - Increasing momentum in cloud and SaaS is likely to have aided CDW's top line, with security and cloud revenues benefiting from customer spending priorities on cost optimization, data protection, and workforce productivity [3]. - Elevated demand for consumer devices, particularly Notebooks and Chromebooks, along with steady growth in software and services, is expected to drive revenue growth, with Notebooks/Mobile Devices revenues estimated at $1,185.9 million, up 3.9% year-over-year [4]. - Revenues from Corporate, Government, and Healthcare sectors are expected to be $2,120.3 million, $512.4 million, and $552.3 million, reflecting declines of 0.7%, 5.7%, and 5.5%, respectively, while Education and Small Business revenues are estimated to increase by 12% and 0.4% to $668.7 million and $382.4 million [5]. Group 3: Risks and Challenges - The company faces risks from a cautious customer approach due to challenges in managing workloads, strengthening security, and upgrading aging client devices, compounded by uncertain macroeconomic conditions [6]. - Slower public spending in federal and education sectors, along with rising uncertainty in the U.K. and Canada, may negatively impact CDW's performance in the upcoming quarter [7]. Group 4: Earnings Prediction Model - The model predicts an earnings beat for CDW, supported by a positive Earnings ESP of +1.02% and a Zacks Rank of 3 (Hold), which increases the likelihood of an earnings beat [8].