CDW (CDW) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements 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 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 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 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] Notes to Consolidated Financial Statements 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] - 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] 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] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2025 revenue growth to improved customer spending, with a slight gross profit margin decrease and strong liquidity Results of Operations 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] - Gross profit margin decreased by 20 basis points, attributed to an increased mix of lower-margin products, particularly notebooks/mobile devices[94] - 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] Segment Results of Operations 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] - Corporate segment operating income grew significantly due to higher gross profit and lower coworker-related costs, despite higher performance-based compensation[105] Non-GAAP Financial Measure Reconciliations 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 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] - During Q1 2025, the company repurchased 1.1 million shares for $200 million[128] - 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][140] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II OTHER INFORMATION Legal Proceedings 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][155] - 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults Upon Senior Securities None reported - No defaults upon senior securities were reported for the period[160] Mine Safety Disclosures Not applicable - This item is not applicable to the company[161] Other Information None reported - No other information was reported under this item for the period[162] Exhibits 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]