CDW Corp Q1 FY2025 earnings call

• Chris Leahy began by outlining first quarter performance, noting strong execution, industry-leading margins, and expense management. Customers focused on mission-critical projects, operating efficiency, and client device prioritization. Discussed the balanced portfolio of customer end-markets, broad solutions and services portfolio, and ongoing investment in customer-driven strategy, including recent acquisition of Mission Cloud Services.
• Al Miralles provided details on financial results, noting gross profit up 5.5% year-over-year, EBITDA revenues up 12%, and discussed capital allocation priorities: increasing dividend, managing capital structure, M&A, and share repurchases. Outlined 2025 outlook with US IT market growth in low-single-digits, CDW growth premium, and expectations for gross profit and earnings per share.

Net sales for the first quarter were $5.2 billion, 8% higher than the comparable period in 2024 on an average daily sales basis. Gross profit was $1.1 billion, 7% higher on an average daily basis. Non-GAAP operating income was $444 million, up 10%, and non-GAAP net income per share was $2.15, up 12%. All customer end-markets posted average daily sales growth. Commercial (corporate and small business) saw strong growth, with corporate up 68% and small business up 68%. Public top-line increased by 11%, healthcare was up 20% driven by client devices, cloud, and services, education up 11%, government net sales increased slightly, and international (UK and Canada) posted a 10% increase led by the UK. Across solutions and services, hardware increased top-line by 7%, software by 10%, and services by 14%.

• Maintained 2025 outlook with US IT market growth in low-single-digits and CDW growth premium of 200-300 basis points. Full year non-GAAP earnings per diluted share expected low-single-digit growth. Second quarter anticipated mid to high-single-digit gross profit growth sequentially, low-single-digit year-over-year, with gross margin similar to 2024 levels. Second quarter operating expenses expected to increase seasonally aligned to gross profit, with non-GAAP SG&A as a percentage of gross profit lower than first quarter.

• Uncertain market conditions, including federal and education customers adjusting to government efficiency initiatives. General economic uncertainty and potential recessionary conditions that could mute growth. Volatility in international end-markets due to economic and political uncertainty.

Q: David Voigt of UBS asked about product categories like Netcomm and storage.

A: Christine Leahy said networking results reflect shift to software-defined architectures and timing issue, not problematic, with design discussions as leading indicator.

Q: Unidentified Analyst from Morgan Stanley asked about pricing landscape.

A: Christine Leahy and Albert Miralles said they can pass along price increases, with orderly market and being cost plus provider allowing them to maintain margin.

Q: Asiya Merchant of Citigroup asked about healthcare performance.

A: Christine Leahy said healthcare results reflect strategic progress, investment in sales and technologists, acceleration in cloud adoption, and security as a driver.

Q: Amit Daryanani of Evercore ISI asked about SMB and corporate verticals.

A: Christine Leahy said solid underlying demand and healthy rhythm, customers incrementally cautious but in planning phases. Albert Miralles discussed buybacks in EPS guide.

Q: Samik Chatterjee of JPMorgan asked about commercial spend and gross margin.

A: Christine Leahy said solid balanced spend, Albert Miralles said gross margins expected similar to 2024 levels with mix shift explaining variation.

Q: Harry Read of Redburn asked about hiring plans and operating leverage.

A: Christine Leahy and Albert Miralles said balanced co-worker investments, no significant wage inflation, and operating leverage expected but less than Q1 due to asymmetry.

Q: Keith Housum of Northcoast Research asked about pricing impact.

A: Albert Miralles said pricing varied by OEM, with software and services not seeing much impact, and vendors having price increases which were managed.

Q: George Wang of Barclays asked about AI and partnerships.

A: Christine Leahy said refresh and Win 11 drive client devices, and CDW is in conversations with partners but didn't detail specific ones.

Q: Ruplu Bhattacharya of Bank of America asked about core business margins and seasonality.

A: Albert Miralles said non-netted down gross margins affected by mix, Christine Leahy discussed pull forward in education seasonality and muted federal growth.