CDW (US:CDW)2021-11-03 17:05Financial Data and Key Metrics Changes - CDW reported record net sales of $5.311 billion, a 0.4% increase year-over-year, and a 10.7% increase in constant currency [8][27] - Non-GAAP operating income was $435 million, up 12.6%, and non-GAAP net income per share was $2.13, reflecting a 13.4% increase on a reported basis and a 15.8% increase in constant currency [8][30] - Gross profit for the quarter was $915 million, an increase of 10.8%, with a gross margin of 17.3%, down approximately 10 basis points year-over-year [28] Business Line Data and Key Metrics Changes - Corporate sales increased by 25%, driven by strong demand for digital transformation and hybrid work solutions [11][12] - Small business sales grew nearly 40%, benefiting from flexibility in technology requirements [12] - Government channel net sales decreased by 33%, primarily due to the impact of the U.S. Census Bureau project from the previous year [13] - Healthcare sales increased by 31%, driven by resumed projects related to COVID-19 [15][16] Market Data and Key Metrics Changes - U.S. public business saw a mid-single-digit decline, while international operations posted significant double-digit increases [10][16] - Education market net sales increased by 2%, with higher education driving growth through campus connectivity initiatives [14] - UK and Canadian operations experienced over 30% growth, with customer priorities aligning with those in the U.S. [16] Company Strategy and Development Direction - CDW's strategy focuses on taking market share and investing in solutions that customers need, with a balanced portfolio across various customer end markets [8][19] - The planned acquisition of Sirius Computer Solutions aims to enhance service capabilities and position CDW as a trusted technology advisor [19][20] - The company expects to continue its evolution as a leading IT solutions provider, emphasizing the importance of services in customer IT spending [21][25] Management's Comments on Operating Environment and Future Outlook - Management noted that supply constraints are expected to persist, impacting lead times and backlog, but they remain confident in the business's health and growth prospects [24][38] - The company anticipates U.S. IT market growth of approximately 5% and aims to outperform this by 425 to 500 basis points [38] - Inflation is a concern, but management believes technology investments will remain a priority for customers [49] Other Important Information - The board approved a 25% increase in the quarterly cash dividend, marking the eighth consecutive year of increases since the IPO [26][33] - Year-to-date free cash flow was $341 million, lower than the previous year's record due to timing and strategic investments [32] Q&A Session Summary Question: Feedback on Sirius acquisition and potential revenue synergies - Management received positive feedback from customers regarding the Sirius acquisition, with expectations of enhanced capabilities and services [41][42] Question: Backlog composition and order cancellations - There are no significant order cancellations, and the backlog remains strong, with some pull-forward of orders due to the uncertain supply environment [45][47] Question: Education market performance and stimulus funding - Management expressed confidence in the education market's long-term growth, highlighting the importance of stimulus funding for technology investments [51][54] Question: Operating margins sustainability - Operating margins are influenced by product mix and supply chain dynamics, with expectations for high 7% margins moving forward [55][58] Question: Visibility on stimulus funding and order placements - Management is confident in navigating the complexities of stimulus funding and believes K-12 customers will not miss out on funding opportunities [60][62]