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    CDW Corp (CDW)

    Business Description

    CDW Corporation is a Fortune 500 company and a leading multi-brand provider of information technology (IT) solutions to a diverse range of customers, including small, medium, and large businesses, government, education, and healthcare sectors in the United States, United Kingdom, and Canada . The company's offerings span discrete hardware and software products to integrated IT solutions and services, which include on-premise and cloud capabilities across hybrid infrastructure, digital experience, and security . CDW is vendor, technology, and consumption model unbiased, providing a broad selection of products and multi-branded solutions .

    1. Hardware - Offers a wide range of physical IT products, including computers, networking equipment, and data storage solutions.
    2. Software - Provides various software products, including operating systems, productivity applications, and enterprise software solutions.
    3. Services - Delivers IT services that encompass consulting, implementation, and managed services to support customer IT environments.
    4. Corporate Segment - Serves US private sector businesses with more than 250 employees, offering tailored IT solutions and services.
    5. Public Segment - Caters to government agencies, education, and healthcare institutions, providing specialized IT solutions and services.
    6. Small Business Segment - Focuses on US businesses with up to 250 employees, delivering IT products and services suited to smaller enterprises.
    7. Other (UK and Canada Operations) - Includes operations in the UK and Canada, offering a similar range of IT solutions and services as in the US.

    Q2 2024 Summary

    Initial Price$255.79April 1, 2024
    Final Price$219.19July 1, 2024
    Price Change$-36.60
    % Change-14.31%

    What went well

    • CDW is gaining market share across virtually every category, including security, services, and cloud, even in a low-demand market.
    • Strong pipeline and customer engagement suggest that as customer cautiousness decreases, CDW is well-positioned to convert its pipeline into growth.
    • Sustained growth expected in cloud, security, and services, which are not slowing down and provide cost optimization opportunities for customers, aligning with CDW's broad portfolio and capabilities.

    What went wrong

    • Delayed Revenue Conversion Due to Customer Caution: Despite a strong pipeline, CDW is not seeing customers' "appetite to convert," indicating potential delays in revenue realization due to cautious customer spending.
    • Persistent Weakness in Networking and Server Demand: CDW continues to face slow demand in networking and server products as customers digest prior purchases and exercise caution in new spending, with a pivot towards cloud solutions over traditional infrastructure upgrades.
    • Shift Towards Cloud Solutions Affecting Traditional Revenue Streams: Customers are increasingly opting for cloud and elastic solutions instead of on-premise infrastructure investments, which may negatively impact CDW's traditional hardware revenue segments.

    Q&A Summary

    1. Guidance and Forecasting Changes
      Q: Why did you miss guidance, and what's changed in forecasting?
      A: Al acknowledged recent volatility impacting their guidance, noting that the miss was due to unanticipated weakness in the federal business and international markets. Excluding these factors, results were close to historical seasonality. Going forward, they expect mid-single-digit sequential growth, following a more normal glide path with a 48-52 split between first and second half.

    2. Pipeline Conversion and Demand Outlook
      Q: What's the outlook for demand and pipeline conversion?
      A: Christine stated that while the business feels more stable, the appetite to convert pipeline into sales is lacking. They continue to engage closely with customers, focusing on cost optimization solutions. As stability increases, she expects pipeline conversion to improve, leading to growth.

    3. Gross Margin Sustainability
      Q: Can core gross margins continue to grow?
      A: Al expects gross margins to remain similar to the first half and much like 2023 overall. Netted down revenues, particularly from cloud and SaaS renewals, are expected to remain strong. Product margins have held firm, and they anticipate this trend to continue.

    4. Impact of AI on Business
      Q: How is AI affecting your business and customers?
      A: Christine mentioned they're in the early stages of AI monetization, investing in people and enablement. AI is causing customers to reevaluate their compute, storage, and networking architectures. While this assessment phase may delay some sales cycles, they see AI as an accelerant that will be embedded in every layer of the stack.

    5. End Markets Performance and Recovery
      Q: Any signs of recovery in networking and server markets?
      A: On networking, customers prioritize modernization but are still digesting previous purchases. Supply chain normalization hasn't yet translated into increased demand. In mid-market servers, there's some strength, but customers are cautious, pivoting towards cloud solutions.

    6. Market Share Gains
      Q: Are you gaining market share despite the sluggish macro?
      A: Christine is confident they're continuing to gain share across virtually every category, including security, services, cloud, and client devices. This is validated by both their data and partner reviews.

    7. Operating Expenses and Leverage
      Q: How should we think about your OpEx trajectory?
      A: Al explained that the first half showed higher expenses due to seasonality and lower gross profit production. They expect operating leverage to improve in the back half as expenses balance out and gross profit increases.

    8. Security Business and CrowdStrike Impact
      Q: How did the CrowdStrike issue affect you?
      A: Christine noted that the impact was minimal, but it reinforced the importance of their trusted adviser role. They swiftly helped customers with fixes and see such events as opportunities to strengthen customer relationships. Customers are on high alert around cybersecurity, leading to heightened conversations but not delaying other projects.

    9. Netted Down Revenues Mix
      Q: Can you elaborate on netted down revenues?
      A: Al clarified that netted down revenues include software assurance, warranty, SaaS, and cloud. The strength is primarily in SaaS and cloud, covering various workloads. Software assurance and warranty have lagged due to their attachment to hardware and licensed software, which have been slower.

    10. Government Business Outlook
      Q: Are there offsets to federal weakness?
      A: Al stated they expect normal seasonality in government business, with strength in state and local offsetting federal softness. Overall, they foresee regular seasonality with a slight downtick in federal for Q3 and Q4.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Corporate2,203.72,245.02,226.52,285.68,960.82,135.92,195.22,161.2
    Small Business411.4396.2378.4371,556.0380.9382.9379.7
    - Medium/Large Business--------
    - Small Business--------
    Public1,812.82,295.12,422.11,775.78,305.71,724.72,243.32,335.7
    - Government551.5681.2775.7660.72,669.1543.3-691.0
    - Education665.71,026.81,026.7579.13,298.3596.8-995.7
    - Healthcare595.6587.1619.7535.92,338.3584.6-649.0
    Other28.128.528.627.6112.826.427.527.8
    Hardware3,688.24,280.34,181.43,552.715,702.63,546.14,061.93,958.6
    - Notebooks/Mobile Devices1,064.61,320.91,228.91,076.14,690.51,141.31,438.21,370.4
    - Netcomm Products744.5916.4877.1647.43,185.4569.9639.6667.6
    - Collaboration476.0533.6490.1411,909.7415.3489.3460.3
    - Data Storage and Servers541.9536.1575.6587.12,240.7540.6546.6506.0
    - Desktops257.9304.8264.6241.81,069.1258.4295.5291.4
    - Other Hardware603.3668.5745.1590.32,607.2620.6652.7662.9
    Software944.7864.1997.0993.53,799.3874.4855.61,048.3
    Services442.1453.2421.3444.71,761.3425.8478.4481.9
    Total Revenue5,103.15,626.15,628.35,018.521,376.04,872.75,423.45,516.6
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States4,429.94,903.95,003.84,417.318,754.94,220.64,809.14,863.1
    Rest of World673.2722.2624.5601.22,621.1652.1614.3653.5
    Other--------
    Total Revenue5,103.15,626.15,628.35,018.521,376.04,872.75,423.45,516.6
    KPIs - MetricFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Cash Conversion Cycle **[0001402057-23-000052_cdw-20221231.htm:56]****[0001402057-23-000091_cdw-20230331.htm:25]****[0001402057-23-000132_cdw-20230630.htm:19]****[0001402057-23-000169_cdw-20230930.htm:21]****[0001402057-24-000015_cdw-20231231.htm:58]****[0001402057-24-000088_cdw-20240331.htm:17]****[0001402057-24-000138_cdw-20240630.htm:34]****[0001402057-24-000182_cdw-20240930.htm:22]**18141517-161717
    Days of Sales Outstanding **[0001402057-23-000052_cdw-20221231.htm:56]****[0001402057-23-000091_cdw-20230331.htm:25]****[0001402057-23-000132_cdw-20230630.htm:31]****[0001402057-23-000169_cdw-20230930.htm:37]****[0001402057-24-000015_cdw-20231231.htm:58]****[0001402057-24-000088_cdw-20240331.htm:26]****[0001402057-24-000138_cdw-20240630.htm:34]****[0001402057-24-000182_cdw-20240930.htm:35]**72677377-757279
    Days of Supply in Inventory **[0001402057-23-000052_cdw-20221231.htm:56]****[0001402057-23-000091_cdw-20230331.htm:25]****[0001402057-23-000132_cdw-20230630.htm:31]****[0001402057-23-000169_cdw-20230930.htm:37]****[0001402057-24-000015_cdw-20231231.htm:58]****[0001402057-24-000088_cdw-20240331.htm:26]****[0001402057-24-000138_cdw-20240630.htm:34]****[0001402057-24-000182_cdw-20240930.htm:35]**15141413-141314
    Days of Purchases Outstanding **[0001402057-23-000052_cdw-20221231.htm:56]****[0001402057-23-000091_cdw-20230331.htm:25]****[0001402057-23-000132_cdw-20230630.htm:31]****[0001402057-23-000169_cdw-20230930.htm:37]****[0001402057-24-000015_cdw-20231231.htm:58]****[0001402057-24-000088_cdw-20240331.htm:26]****[0001402057-24-000138_cdw-20240630.htm:34]****[0001402057-24-000182_cdw-20240930.htm:35]**69677273-736876

    Executive Team

    NamePositionStart DateShort Bio
    Christine A. LeahyChair, President, and Chief Executive OfficerJanuary 2019Christine A. Leahy has been serving as the Chair, President, and CEO of CDW since January 2019. She became Chair of the Board on January 1, 2023. Previously, she was the Chief Revenue Officer .
    Sona ChawlaChief Growth and Innovation OfficerJanuary 2020Sona Chawla has been serving as the Chief Growth and Innovation Officer at CDW since January 2020. Previously, she was the President of Kohl's Corporation .
    Christina M. CorleyPresident, International and Vice ChairOctober 25, 2024Christina M. Corley has been with CDW since September 2011. She transitioned to President, International and Vice Chair on October 25, 2024, focusing on international strategy .
    Frederick J. KulevichSenior Vice President, General Counsel & Corporate SecretaryOctober 2017Frederick J. Kulevich has been serving as the Senior Vice President, General Counsel and Corporate Secretary since October 2017. He became Interim Chief People Officer in November 2023 .
    Albert J. MirallesSenior Vice President and Chief Financial OfficerSeptember 2021Albert J. Miralles has been the Senior Vice President and CFO of CDW since September 2021. Previously, he was the EVP and CFO at CNA Financial Corporation .
    Mark C. ChongSenior Vice President, Product and Partner ManagementN/AMark C. Chong is the Senior Vice President, Product and Partner Management at CDW Corporation .
    Elizabeth H. ConnellySenior Vice President, Vertical MarketsN/AElizabeth H. Connelly serves as the Senior Vice President, Vertical Markets at CDW Corporation. Specific start date details are not provided.
    Michael S. DrorySenior Vice President, Strategy and Corporate DevelopmentN/AMichael S. Drory serves as the Senior Vice President, Strategy and Corporate Development at CDW Corporation. Specific start date details are not provided.
    Andrew J. EcclesSenior Vice President, Integrated Technology SolutionsN/AAndrew J. Eccles serves as the Senior Vice President, Integrated Technology Solutions at CDW Corporation. Specific start date details are not provided.
    Robert F. KirbySenior Vice President, Public SalesN/ARobert F. Kirby serves as the Senior Vice President, Public Sales at CDW Corporation. Specific start date details are not provided.
    Aletha C. NoonanSenior Vice President, Corporate SalesN/AAletha C. Noonan serves as Senior Vice President, Corporate Sales at CDW. Specific start date details are not provided.
    Anand J. RaoSenior Vice President, Chief Marketing and Digital OfficerN/AAnand J. Rao is the Senior Vice President, Chief Marketing and Digital Officer at CDW Corporation .
    Sanjay SoodSenior Vice President and Chief Technology OfficerN/ASanjay Sood is the Senior Vice President and Chief Technology Officer at CDW Corporation .
    Conor J. WaddellSenior Vice President, Integrated Technology SolutionsN/AConor J. Waddell serves as the Senior Vice President, Integrated Technology Solutions at CDW .
    Liz ConnellyChief Commercial Officer2018Liz Connelly joined CDW in 2018 and has been appointed as the Chief Commercial Officer, responsible for U.S. sales and sales enablement .

    Questions to Ask Management

    1. Given the continued slow demand for networking and server solutions over the past three quarters, what specific strategies is CDW implementing to stimulate growth in these areas, and do you foresee any signs of recovery in the near term?
    2. With a solid pipeline but challenges in conversion due to customer uncertainty, how does CDW plan to accelerate pipeline conversion to revenue, and what are your expectations for improved demand conditions, especially considering the macroeconomic environment?
    3. In light of recent cybersecurity incidents like the CrowdStrike debacle, how has this affected CDW's relationships with security vendors and customers, and what impact do you anticipate on your cybersecurity business growth trajectory?
    4. Considering the worsening market conditions in the U.K. and ongoing federal funding challenges, how are these factors impacting CDW's overall performance, and what measures are you taking to mitigate these risks and achieve your growth targets?
    5. As customers, particularly in the SMB and mid-market segments, accelerate their shift toward cloud solutions over on-premise upgrades, how is CDW adapting its business model to address this trend, and what impact do you expect on your traditional hardware and infrastructure sales?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateFebruary 7, 2024
    End Date/DurationN/A
    Total additional amount$750 million
    Remaining authorization amount$733.5 million as of September 30, 2024
    DetailsThe program allows CDW Corporation to repurchase shares of its common stock in various transactions based on market conditions and other factors. It does not obligate the company to repurchase any minimum amount and can be modified, suspended, or discontinued at any time.

    Past Guidance

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Gross Margin: Expected to be similar to the full year 2023 and the first half of 2024.
      2. Non-GAAP Earnings Per Diluted Share: Expected to be flat to up slightly year-over-year.
      3. Gross Profit Growth: Anticipated flat to low single-digit growth for the full year.
      4. Seasonality: Expected to be roughly in line with historical levels, with the first half contributing approximately 48% of net sales and gross profit.
      5. Adjusted Free Cash Flow: Expected to be in the range of 80% to 90% of non-GAAP net income for the full year.
      6. Third Quarter Gross Profit Growth: Anticipated low single-digit growth compared to the prior year.
      7. Third Quarter Operating Expenses: Expected to be moderately higher than Q3 2023 on a dollar basis, but at a similar ratio relative to gross profit.
      8. Third Quarter Non-GAAP Earnings Per Diluted Share: Expected to grow in the mid-single-digit range year-over-year.
      9. Fourth Quarter: Expected to be meaningfully lower compared to the third quarter, due to seasonally lower demand from education and government customers .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. U.S. IT Market Growth: Expected to be in the low single digits, with CDW targeting to grow 200 to 300 basis points above the market.
      2. Full Year Gross Profit Growth: Expected to be in the low single-digit range.
      3. Full Year Gross Margin: Expected to be similar to the full year 2023.
      4. Full Year Non-GAAP Earnings Per Diluted Share: Expected to be up in the low single digits year-over-year.
      5. Second Quarter Gross Profit Growth: Anticipated to be in the low single-digit range compared to the prior year.
      6. Second Quarter Operating Expenses: Expected to be moderately higher than Q2 2023 on a dollar basis.
      7. Second Quarter Non-GAAP Earnings Per Diluted Share Growth: Expected to be in the low single-digit range year-over-year.
      8. Adjusted Free Cash Flow for 2024: Expected to be in the range of 80% to 90% of non-GAAP net income.
      9. Capital Allocation: Committed to returning 50% to 75% of adjusted free cash flow to shareholders via dividends and share repurchases.
      10. Net Leverage Ratio: Targeted to be within the range of 2 to 3x .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. IT Market Growth: Expected to grow by low single digits in 2024.
      2. Market Share Gain: Aiming to gain 200 to 300 basis points of market share.
      3. Gross Profit Growth: Expected low to mid-single-digit growth.
      4. Non-GAAP Earnings Per Diluted Share: Anticipated mid-single-digit increase year-over-year.
      5. Adjusted Free Cash Flow: Expected to be in the range of 80% to 90% of non-GAAP net income.
      6. First Quarter 2024 Guidance:
        • Gross Margin: Expected to be comparable to 2023's level.
        • Operating Expenses: Expected to be higher at the beginning of 2024.
        • Non-GAAP Earnings Per Diluted Share: Expected to be in the low to mid-single-digit range year-over-year for the first quarter .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not provide information about CDW's guidance from the Q3 2024 earnings call. The available information is from the Q2 2024 earnings call.

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Hardware resellers
    • Manufacturers who sell directly to customers
    • Large service providers and system integrators
    • Communications service providers
    • Cloud providers
    • E-commerce companies
    • Office supply retailers

    These competitors are mentioned in the context of CDW's competitive landscape, which is expected to evolve with new technologies and consumption models such as cloud-based solutions, hyper-converged infrastructure, and embedded software solutions .