CDW (CDW) - 2025 Q2 - Quarterly Results

CDW Q2 2025 Earnings Overview CDW reported strong Q2 2025 net sales growth to $5.98 billion, but GAAP net income declined, while non-GAAP metrics showed modest growth Financial Highlights CDW reported strong Q2 2025 top-line growth with net sales up 10.2% to $5.98 billion, though GAAP net income decreased 3.5% Q2 2025 Key Financial Metrics (GAAP) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,976.6 M | $5,423.4 M | 10.2% | | Gross Profit | $1,241.2 M | $1,183.1 M | 4.9% | | Operating Income | $420.2 M | $433.1 M | (3.0)% | | Net Income | $271.2 M | $281.1 M | (3.5)% | | Diluted EPS | $2.05 | $2.07 | (1.2)% | Q2 2025 Key Financial Metrics (Non-GAAP) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Non-GAAP Operating Income | $519.7 M | $510.3 M | 1.8% | | Non-GAAP Net Income | $343.7 M | $338.8 M | 1.4% | | Non-GAAP Diluted EPS | $2.60 | $2.50 | 3.9% | - The Board of Directors approved a quarterly cash dividend of $0.625 per common share, payable on September 10, 2025[3] Management Commentary and Outlook Management highlighted strong top-line growth and effective working capital management, reaffirming targets to exceed US IT market growth - CEO Christine A. Leahy attributed the strong performance to the company's balanced portfolio and ability to help customers with mission-critical outcomes across the full IT stack[4] - CFO Albert J. Miralles noted that strong topline growth was coupled with consistent cash flow, enabled by effective working capital management[4] - CDW continues to target exceeding US IT market growth by 200 to 300 basis points on a constant currency basis by focusing on the needs of its customers and partners[4] Detailed Financial Performance This section details Q2 2025 financial performance, including revenue growth, gross profit margin decline, and operating income contraction Revenue and Gross Profit Analysis Q2 2025 net sales increased 10.2% to $5.98 billion, driven by demand across categories, but gross profit margin declined by 100 basis points - The increase in Net Sales was driven by higher customer demand for notebooks/mobile devices, software, netcomm products, and data storage and servers[5] Q2 2025 Net Sales by Segment (vs. Q2 2024) | Segment | Q2 2025 Net Sales | % Change YoY | | :--- | :--- | :--- | | Corporate | $2,582 M | 17.6% | | Small Business | $431 M | 12.6% | | Public | $2,292 M | 2.2% | | - Healthcare | - | 24.1% | | - Government | - | 2.7% | | - Education | - | (10.9)% | | Other (UK & Canada) | $672 M | 11.6% | - Gross profit margin decreased from 21.8% in Q2 2024 to 20.8% in Q2 2025, attributed to decreased rates in hardware categories and a lower contribution from netted down revenue[6] Operating Expenses and Profitability Q2 2025 operating income decreased 3.0% to $420 million, with margin contraction due to increased selling and administrative expenses - Selling and administrative expenses increased 9.5% to $821 million, primarily due to higher performance-based compensation, transformation costs, workplace optimization costs, and amortization of acquisition-related intangibles[7] Q2 2025 Profitability Metrics | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Income | $420 M | $433 M | (3.0)% | | Operating Income Margin | 7.0% | 8.0% | -100 bps | | Net Income | $271 M | $281 M | (3.5)% | - Net interest expense increased by 8.6% to $57 million, mainly due to lower interest income on cash balances and a higher fixed interest rate on senior notes[9] - The effective income tax rate was 25.7%, slightly down from 26.0% in the prior year, primarily due to higher excess tax benefits on equity-based compensation[10] Financial Statements This section presents CDW's consolidated statements of operations, balance sheets, and cash flow for Q2 2025 Consolidated Statements of Operations The statement shows Q2 2025 net sales growth of 10.2% to $5.98 billion, but higher costs led to declines in operating and net income Consolidated Statements of Operations - Q2 2025 vs Q2 2024 (in millions) | Line Item | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $5,976.6 | $5,423.4 | 10.2% | | Gross profit | $1,241.2 | $1,183.1 | 4.9% | | Operating income | $420.2 | $433.1 | (3.0)% | | Income before income taxes | $364.9 | $379.7 | (3.9)% | | Net income | $271.2 | $281.1 | (3.5)% | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $15.27 billion, driven by receivables and goodwill, with total debt at $5.63 billion Key Balance Sheet Items (in millions) | Account | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $481.0 | $665.3 | | Accounts receivable, net | $5,626.9 | $4,718.8 | | Total assets | $15,265.7 | $13,638.7 | | Total debt (Current + Long-term) | $5,632.7 | $5,628.3 | | Total stockholders' equity | $2,467.2 | $2,174.9 | Cash Flow, Debt, and Working Capital Net cash from operating activities decreased to $443.1 million for H1 2025, while the cash conversion cycle improved to 16 days Cash Flow Summary - Six Months Ended June 30 (in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $443.1 | $589.9 | | Capital expenditures | $(49.4) | $(60.4) | | Net cash (used in) financing activities | $(649.2) | $(449.6) | Working Capital and Debt Metrics | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash conversion cycle | 16 days | 17 days | | Total debt | $5,632.7 M | $5,628.3 M | | Net debt | $5,151.7 M | $4,963.0 M | Non-GAAP Financial Measures and Reconciliations This section explains and reconciles non-GAAP financial measures, providing insights into underlying operating performance Explanation and Reconciliation of Non-GAAP Measures CDW uses non-GAAP measures to show underlying performance by excluding specific items, with Q2 2025 non-GAAP operating income at $519.7 million - The company believes non-GAAP measures provide useful information by removing the impact of items not reflective of underlying operating performance, such as amortization of acquisition-related intangibles, equity-based compensation, and transformation initiatives[20][21] Reconciliation of GAAP to Non-GAAP Operating Income - Q2 2025 (in millions) | Description | Amount | | :--- | :--- | | Operating income, as reported (GAAP) | $420.2 | | Amortization of intangibles | $42.4 | | Equity-based compensation | $23.5 | | Transformation initiatives | $17.4 | | Workplace optimization | $12.7 | | Other adjustments | $3.5 | | Non-GAAP operating income | $519.7 | Reconciliation of GAAP to Non-GAAP Net Income - Q2 2025 (in millions) | Description | Amount | | :--- | :--- | | Net income, as reported (GAAP) | $271.2 | | Non-GAAP adjustments (pre-tax) | $100.0 | | Tax effect of adjustments | $(27.0) | | Non-GAAP net income | $343.7 | - Adjusted Free Cash Flow for the six months ended June 30, 2025 was $458.9 million, compared to $502.8 million for the same period in 2024[59] Other Information This section includes cautionary forward-looking statements and general information about CDW Corporation Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, including economic conditions and competition, which may cause actual results to differ - The report contains forward-looking statements that are subject to risks and uncertainties which may cause actual results to differ materially from expectations[14][15] - Key risk factors include inflationary pressures, interest rates, vendor relationships, competition, cybersecurity threats, and global economic and political conditions[16] About CDW and Investor Relations CDW, a Fortune 500 IT solutions provider, announced a conference call to discuss Q2 results and provided investor contact information - CDW is a leading multi-brand provider of IT solutions and a member of the Fortune 500 and S&P 500 Index[24] - A conference call to discuss the financial results was scheduled for August 6, 2025, with a webcast available on the company's investor relations website[25]