Financial Highlights: Q4 2024

• Net Sales: $5.2 billion (↑ 3.3% YoY)
• Gross Profit: $1.16 billion (↑ 0.1% YoY)
• Operating Income: $409 million (↓ 6.1% YoY)
• Non-GAAP Operating Income: $499 million (↓ 3.8% YoY)
• Net Income: $264 million (↓ 10.8% YoY)
• Non-GAAP Net Income: $333 million (↓ 4.7% YoY)
• Net Income Per Diluted Share: $1.97 (↓ 9.8% YoY)
• Non-GAAP Net Income Per Diluted Share: $2.48 (↓ 3.7% YoY)

Full-Year 2024 Financial Summary

• Net Sales: $21.0 billion (↓ 1.8% YoY)
• Gross Profit: $4.6 billion (↓ 1.1% YoY)
• Gross Profit Margin: 21.9% (↑ 10 basis points)
• Operating Income: $1.65 billion (↓ 1.8% YoY)
• Non-GAAP Operating Income: $1.95 billion (↓ 4.5% YoY)
• Net Income: $1.08 billion (↓ 2.4% YoY)
• Non-GAAP Net Income: $1.29 billion (↓ 4.4% YoY)
• Net Income Per Diluted Share: $7.97 (↓ 1.6% YoY)
• Non-GAAP Net Income Per Diluted Share: $9.52 (↓ 3.6% YoY)

Sector-Wise Performance Analysis

CDW operates in multiple sectors, including Corporate, Small Business, Government, Education, Healthcare, and Other. Here’s how each segment performed:

Corporate Sector

• Q4 Net Sales: $2.34 billion (↑ 2.6% YoY)
• Full-Year Net Sales: $8.84 billion (↓ 1.4% YoY)
  ✅ Growth: Moderate increase in Q4, reversing a declining trend from earlier quarters.
  ⚠ Challenges: Full-year sales decline suggests some macroeconomic pressures on IT spending.

Small Business Sector

• Q4 Net Sales: $380 million (↑ 2.7% YoY)
• Full-Year Net Sales: $1.52 billion (↓ 2.1% YoY)
  ✅ Growth: Q4 saw improvement with 4.4% growth in Average Daily Sales.
  ⚠ Challenges: Full-year sales decline suggests that small businesses are still recovering from economic uncertainty.

Public Sector

• Q4 Net Sales: $1.85 billion (↑ 4.4% YoY)
• Full-Year Net Sales: $8.16 billion (↓ 1.8% YoY)

Government

• Q4 Net Sales: $613.5 million (↓ 7.1% YoY)
• Full-Year Net Sales: $2.49 billion (↓ 6.8% YoY)
  ⚠ Challenges: Weakness in government contracts and lower IT spending resulted in declines across both Q4 and the full year.

Education

• Q4 Net Sales: $557.4 million (↓ 3.7% YoY)
• Full-Year Net Sales: $3.17 billion (↓ 4.0% YoY)
  ⚠ Challenges: A drop in IT investments in educational institutions weighed on performance.

Healthcare

• Q4 Net Sales: $683.1 million (↑ 27.5% YoY)
• Full-Year Net Sales: $2.50 billion (↑ 7.1% YoY)
  ✅ Strong Growth: Healthcare IT spending is accelerating, likely driven by digital transformation initiatives and increased cloud and security investments.

Other Segments

• Q4 Net Sales: $607.1 million (↑ 3.4% YoY)
• Full-Year Net Sales: $2.48 billion (↓ 2.9% YoY)
  ⚠ Challenges: While Q4 was strong, the full-year decline suggests weakness in some diversified customer bases.

Profitability & Cost Management

• Gross Profit Margin: Q4 at 22.3% (↓ 70 basis points YoY); Full-year at 21.9% (↑ 10 basis points YoY)
• Operating Income Margin: Q4 at 7.9% (↓ from 8.7% YoY); Full-year at 7.9% (flat YoY)
• Interest Expense: Increased to $56.5 million in Q4 (↑ 6% YoY), adding pressure to net income.

Cash Flow & Balance Sheet

• Free Cash Flow: $1.15 billion (↓ 20.4% YoY)
• Total Debt: $5.84 billion (↑ from $5.64 billion YoY)
• Cash & Equivalents: $503.5 million (↓ from $588.7 million YoY)
  ✅ Strength: Healthy free cash flow and liquidity allow continued investment in growth initiatives.
  ⚠ Challenges: Rising debt levels and declining cash balances require careful capital allocation.

2025 Outlook & Expectations

CDW expects:

• Gross Profit Growth: Low-single digits.
• Non-GAAP Earnings Per Share Growth: Low-single digits.
• Capital Expenditures: $120–130 million.
• Interest Expense: $230–235 million.
• Non-GAAP Effective Tax Rate: 25.5%–26.5%.

Key Growth Priorities for 2025

1. Customer Spend: Targeting U.S. IT growth plus a premium of 200–300 bps.
2. M&A Strategy: Expanding strategic capabilities (11 acquisitions in the last 6 years).
3. Capital Return to Shareholders:
   • Increased dividend payout to $2.50/share annually.
   • $750 million share repurchase authorization.

Key Takeaways & Final Thoughts

1. Public Sector Struggles, But Healthcare Shines
   • Government (-7.1%) and Education (-3.7%) sectors faced headwinds.
   • Healthcare led growth with a 27.5% increase in Q4.
2. Corporate & Small Business Demand Is Stabilizing
   • Corporate sector returned to growth in Q4, though full-year remains slightly negative.
   • Small Business sales improved sequentially, though overall demand is still weaker YoY.
3. Declining Free Cash Flow & Rising Debt Need Attention
   • While cash flow remains strong, a 20% YoY drop raises concerns.
   • Increased debt levels suggest CDW is leveraging financing to sustain growth and shareholder returns.
4. 2025 Focus on IT Spending Growth & Strategic Acquisitions
   • CDW aims to outpace broader U.S. IT spending growth by 200–300 bps.
   • Acquisitions and cloud expansion remain key strategic pillars.

Overall Verdict: Mixed Performance with Strength in Healthcare & Corporate

• Strengths: Healthcare growth, improving corporate IT demand, strong capital return strategy.
• Weaknesses: Government & education declines, higher debt, declining free cash flow.
• Outlook: Cautiously optimistic, with a focus on cost management, M&A, and customer expansion.