CDW (CDW) - 2025 Q1 - Quarterly Results

Q1 2025 Earnings Overview 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 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] - 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] - CDW continues to target exceeding US IT market growth by 200 to 300 basis points on a constant currency basis[4] Detailed Financial Performance Analysis 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] - 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] - Selling and administrative expenses increased by 3.5%, primarily due to higher performance-based compensation and transformation costs[7] - 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] - 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][13] Segment Performance 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 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 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 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][34] Condensed Consolidated Balance Sheets 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 Q1 2025 ended with total debt of $5.85 billion, a 15-day cash conversion cycle, and net cash from operations of $287.2 million - The cash conversion cycle was 15 days, composed of 86 days of sales outstanding, 13 days of supply in inventory, and offset by 84 days of purchases outstanding[39][40] Cash Flow Summary (Three Months Ended March 31) | Cash Flow Item | 2025 ($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 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 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] - Management uses these non-GAAP measures to evaluate underlying operating performance, assess liquidity and capital resources, and determine components of performance-based compensation[21] Reconciliation of Non-GAAP Operating Income 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 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) 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 $4,857.9 million in the prior year[54] Free Cash Flow Reconciliation (Q1 2025) | Item | Amount ($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 This section includes important disclosures regarding forward-looking statements and company information, outlining potential risks and investor communication details Forward-Looking Statements 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] - 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] About CDW and Investor Relations 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] - 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]