01—Abstract
Summary
Summary of the 10-Q filed July 31, 2024. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation's second-quarter 2024 Form 10-Q reports net sales of $5.42 billiona for the three months ended June 30, 2024, down from $5.63 billion a year earlier, with the filing attributing the decline to customers being cautious and measured in their approach to technology spending amid continued economic uncertainty.
Net income rose to $281.1 millionb from $262.6 million, and diluted EPS increased to $2.07 from $1.92. Operating income increased to $433.1 million from $412.2 million, aided by lower workplace optimization costs recorded in the second quarter of 2023. For the six months ended June 30, 2024, net sales were $10.30 billion versus $10.73 billion, while net income was $497.2 million versus $492.7 million.
Cash flow and balance sheet items were steady. Net cash provided by operating activities was $589.9 millionc for the six months, and adjusted free cash flow was $502.8 million versus $683.9 million a year earlier. The company repurchased $254.0 million of common stock and paid $166.3 million in dividends during the six months.
Total unsecured indebtedness was $5.6 billiond, and current maturities of long-term debt rose to $1.20 billion from $613.1 million at year-end 2023, while cash and cash equivalents increased to $665.3 million. The company reported $1.2 billion of availability under its Revolving Loan Facility.
The filing also discloses that on June 11, 2024, the company received a Civil Investigative Demand from the Department of Justice in connection with a False Claims Act investigation concerning bids submitted for contracts funded through the E-Rate Program. The company is cooperating and states it is unable to assess the probability or range of any possible loss at this stage.
02—Key points
Key Highlights
- Net sales declined 3.6% to $5.42 billion in Q2 2024 from $5.63 billion, with lower sales across all operating segments; six-month net sales fell 4.0% to $10.30 billion.
- Gross profit margin rose to 21.8% from 21.0% in the second quarter, driven mainly by a higher contribution of netted down revenue, primarily software as a service.
- Operating income increased 5.1% to $433.1 million in Q2 2024, benefiting from the absence of workplace optimization costs recorded in Q2 2023.
- Diluted EPS was $2.07 for Q2 2024 versus $1.92, while non-GAAP net income per diluted share fell to $2.50 from $2.56.
- Adjusted free cash flow for the six months was $502.8 million, down from $683.9 million, reflecting the change in inventory financing activity.
- The company repurchased $254 million of common stock and declared a quarterly dividend of $0.620 per share, payable September 10, 2024.
- A Department of Justice Civil Investigative Demand relating to E-Rate Program bids is pending, with the company unable to assess the outcome or potential loss.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, CDW kept $0.05.
- Revenue$5.42B100.0%
- Cost of revenue−$4.24B78.2%
- Gross profit$1.18B21.8%
- Operating costs−$750.0M13.8%
- Operating income$433.1M8.0%
- Interest, other & tax−$152.0M2.8%
- Net income$281.1M5.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 31, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $5.42B$5.63B | −3.6% |
| Cost of Revenue | $4.24B$4.44B | −4.6% |
| Gross Profit | $1.18B$1.18B | +0.1% |
| SG&A Expenses | $750.00M$769.30M | −2.5% |
| Operating Income | $433.10M$412.20M | +5.1% |
| Net Income | $281.10M$262.60M | +7.0% |
| EPS (Basic) | $2.10$1.95 | +7.7% |
| EPS (Diluted) | $2.07$1.92 | +7.8% |
| Shares Outstanding (Basic) | 134.10M134.60M | −0.4% |
| Shares Outstanding (Diluted) | 135.60M136.10M | −0.4% |
05—Questions
Frequently Asked Questions
Why did net sales decline in the second quarter of 2024?
The filing states that continued economic uncertainty and the complex technology landscape led customers to be cautious and measured in their technology spending. Net sales decreased $203 million, or 3.6%, with lower sales in all operating segments, including a $88 million, or 12.7%, decline in the Other segment (UK and Canada).
How did profitability change despite lower sales?
Gross profit increased $2 million, or 0.1%, to $1.18 billion, as gross profit margin rose 80 basis points to 21.8%, mainly from a higher contribution of netted down revenue. Operating income increased $21 million, or 5.1%, primarily because headquarters costs fell with no repeat of 2023 workplace optimization costs.
What is the company's debt and liquidity position?
As of June 30, 2024, total unsecured indebtedness was $5.6 billion and the company was in compliance with its covenants. Current maturities of long-term debt were $1.20 billion, up from $613.1 million at December 31, 2023, and the company could borrow up to an additional $1.2 billion under its Revolving Loan Facility. Cash and cash equivalents were $665.3 million.
What capital returns did the company make in the first half of 2024?
During the six months ended June 30, 2024, CDW repurchased 1.1 million shares for $254 million and paid $166.3 million in dividends. On July 31, 2024, the Board declared a quarterly dividend of $0.620 per share, payable September 10, 2024.
What legal matter did the company disclose?
On June 11, 2024, the company received a Civil Investigative Demand from the Department of Justice in connection with a False Claims Act investigation. The DOJ requested information about bids submitted for contracts funded in whole or in part by the Schools and Libraries Program (E-Rate Program). The company is cooperating and, at this stage, cannot assess the probability of any outcome or the range of possible loss.
06—Continue