CDW (US:CDW)2025-02-21 21:20Financial Performance - In 2024, CDW generated net sales of $20.99 billion, a decrease from $21.38 billion in 2023, and $23.75 billion in 2022[42]. - Net sales for the year ended December 31, 2024, decreased by $377 million, or 1.8%, to $20,998.7 million compared to $21,376.0 million in 2023[169]. - Gross profit for 2024 was $4,602.4 million, a decrease of $50 million, or 1.1%, with a gross profit margin of 21.9%, up from 21.8% in 2023[165]. - Operating income decreased by $30 million, or 1.8%, to $1,651.3 million for 2024, maintaining an operating income margin of 7.9%[167]. - Net income for 2024 was $1,077.8 million, down 2.4% from $1,104.3 million in 2023[163]. - Non-GAAP net income for 2024 was $1,287.2 million, compared to $1,346.2 million in 2023[160]. - Average daily sales decreased to $82.7 million in 2024 from $84.2 million in 2023[160]. - Free cash flow for 2024 was $1,154.7 million, down from $1,450.5 million in 2023, representing a decrease of approximately 20.3%[189]. - Adjusted free cash flow for 2024 was $1,079.0 million, compared to $1,426.8 million in 2023, reflecting a decline of about 24.4%[189]. - Net cash provided by operating activities was $1,277.3 million in 2024, down from $1,598.7 million in 2023[160]. - The effective income tax rate for 2024 was 24.9%, compared to 23.9% in 2023, primarily due to lower excess tax benefits on equity-based compensation[168]. Sales and Market Segments - The US business accounted for approximately 90% of net sales, with five dedicated customer channels each generating over $1.5 billion in net sales in 2024[27]. - Net sales from the UK and Canada combined reached $2.5 billion in 2024[27]. - Corporate segment net sales decreased by $124 million, or 1.4%, primarily due to a decrease in netcomm products[172]. - Public segment net sales decreased by $148 million, or 1.8%, mainly due to declines in various hardware categories[175]. Operational Insights - CDW serves over 250,000 customers across business, government, education, and healthcare sectors in the US, UK, and Canada[24]. - The company operates two distribution centers in North America and one in the UK, handling approximately 26 million units annually[32]. - Drop-shipment arrangements accounted for approximately 54% of total North America net sales in 2024[33]. - The company has partnerships with over 1,000 vendor partners, generating $2.0 billion in net sales from each of its three largest partners in 2024[29]. - The company is positioned to benefit from growing demand for IT solutions driven by new technologies, including hybrid and cloud computing and artificial intelligence[22]. Employee and Workplace - The company has approximately 15,100 coworkers globally, with 11,500 in the US and 3,600 in international locations[46]. - Over 50% of US net sales are generated by account managers with more than seven years of tenure[46]. - The company is committed to prioritizing the health and well-being of coworkers, dedicating resources to identify safety hazards and provide mental health resources[51]. - The company’s total rewards philosophy includes competitive compensation and benefits designed to attract and retain talent[50]. Risks and Challenges - Cybersecurity threats pose significant risks to the company's operations, with potential impacts on reputation and compliance with legal obligations[74]. - The company faces risks related to accounts receivable, particularly during economic downturns, which could adversely affect cash flows[89]. - Inventory risks are heightened due to rapid technological changes and potential obsolescence, necessitating effective inventory management strategies[90]. - The company is exposed to increased labor costs and turnover rates, which could disrupt operations and financial performance[84]. - The company maintains insurance for data security, but coverage may be insufficient to address all potential losses from security breaches[79]. - The company is subject to legal and regulatory risks, including compliance with public sector contracts, which could result in fines or termination of contracts[106]. Financial Position and Debt - The company had a total debt of $5.8 billion as of December 31, 2024, with an additional $355 million in obligations under inventory financing agreements[115]. - Total long-term debt increased to $5,606.8 million in 2024 from $5,031.4 million in 2023, marking an increase of about 11.4%[216]. - The company had $635 million of variable rate debt outstanding as of December 31, 2024, exposing it to interest rate risk[121]. - As of December 31, 2024, the company had $1.2 billion available for additional borrowing under its Revolving Loan Facility[120]. Shareholder Returns - On February 5, 2025, the Board of Directors declared a quarterly cash dividend of $0.625 per share, payable on March 11, 2025[140]. - The company repurchased a total of 0.8 million shares during the three months ended December 31, 2024, with an average price paid per share ranging from $177.39 to $216.91[142]. - The company authorized a $750 million increase to its share repurchase program, which was incremental to approximately $588 million remaining as of December 31, 2024[143]. - The company repurchased 2.4 million shares for $500 million under its share repurchase program in 2024[198]. Strategic Initiatives - The company is implementing a new enterprise resource planning (ERP) system, expected to be released in 2025, with incremental releases continuing in 2026[55]. - The company’s marketing strategy targets current and prospective customers through integrated programs across various channels, including digital and social media[53]. - The company’s ability to compete effectively depends on continued innovations in technology and the adoption of those innovations by customers[64].