CDW Corp Q4 FY2024 earnings call

• Fourth Quarter Performance: Net sales $5.2B, 5% above 2023; gross profit flat but up 2% daily; non-GAAP operating income down 4%, net income per share down 4%.
• Customer Priorities: Focus on operating efficiency, as a service solutions (cloud, SaaS), consultative services; mission-critical priorities driving hardware demand.
• Strategic Progress: Deepening technical/industry expertise; acquired Mission Cloud Services (AWS partner); investments in cloud migration, software dev, DevOps, consulting.
• 2025 Outlook: Expect U.S. IT market to grow low single digits, CDW to outpace by 200-300bps; cautious on public spending uncertainty and international market volatility.

For the fourth quarter, CDW reported net sales of $5.2 billion, 5% above 2023 on an average daily sales basis. Gross profit was $1.16 billion, flat reported but up 2% on an average daily basis. Non-GAAP operating income was nearly $500 million, 4% below 2023, and non-GAAP net income per share was $2.48, down 4% year-over-year.

Segment-wise, commercial markets showed stability with Corporate and Small Business up 4% each. Public markets had mixed performance: Education declined 2% (high ed offset by K-12), government declined due to federal uncertainty, and Healthcare was a standout at 30% growth. International net sales grew 5%.

Product solutions: Hardware increased 4%, Software up 5%, Cloud profit up mid-teens, Security had high single-digit growth, and Services top line grew 10% (CDW Managed Services up over 20%).

• 2025 Expectations: U.S. IT market growth low single digits, CDW to outpace by 200-300bps; gross profit low single-digit growth; gross margin stable; non-GAAP EPS low single-digit growth; first quarter gross profit mid-single-digit decline, non-GAAP EPS low single-digit growth.
• Capital Allocation: Dividend increase, target 25% payout ratio; net leverage 2.5x within target range; $750M share repurchase authorization added.

• Market Uncertainty: Public spending uncertainty in federal and Education; international market volatility due to macro factors and political change.
• Competition/Price Pressure: Continued competition and pricing pressure in hardware segment.

Q: Amit Daryanani of Evercore ISI on public vertical growth and Dodge impact A: Christine Leahy on public sector uncertainty, Education and federal challenges, but technology as long-term winner Q: Samik Chatterjee of JPMorgan on Healthcare growth driver A: Christine Leahy on Healthcare's balanced success due to strategy, investments in cloud and expertise Q: Unidentified Analyst on AWS marketplace disintermediation A: Christine Leahy on CDW's moat from services wrapped around marketplace, hybrid cloud needs Q: Ruplu Bhattacharya of Bank of America on SMB segment and core business margins A: Christine Leahy on SMB stabilization, Albert Miralles on core business margins holding firm in 2025 Q: Keith Housum of Northcoast Research on Mission Cloud acquisition A: Christine Leahy and Albert Miralles on Mission Cloud's profitability, integration, and future impact Q: Erik Woodring of Morgan Stanley on EPS growth and M&A appetite A: Christine Leahy on balancing growth investments and efficiency, Albert Miralles on M&A appetite and capital allocation Q: George Wang of Barclays on hardware segments and competition A: Albert Miralles on hardware category growth in 2025, continued competition in hardware