01—Abstract
Summary
Summary of the 10-Q filed October 30, 2024. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation's third-quarter 2024 Form 10-Q reports net sales of $5.52 billiona for the three months ended September 30, 2024, down from $5.63 billion a year earlier, and $15.81 billion for the nine months, down from $16.36 billion.
Net income was $316.4 millionb for the quarter versus $315.5 million in the prior-year quarter, and $813.6 million for the nine months versus $808.2 million. Diluted EPS was $2.34 for the quarter (versus $2.32) and $6.00 for the nine months (versus $5.92). The company attributes the sales decline to customers being cautious and measured in technology spending, with lower netcomm and collaboration products, partially offset by higher notebooks and mobile devices.
Gross profit margin held at 21.8% for the quarter, while non-GAAP net income fell to $354.9 millionc from $369.4 million. Cash generation weakened over the nine months, with net cash provided by operating activities of $932.0 million versus $1,062.2 million, and adjusted free cash flow of $764.1 million versus $1,112.9 million. Net debt was $4.87 billion at September 30, 2024, compared with $5.26 billion a year earlier.
During the quarter, CDW issued $600 milliond of 5.100% senior notes due 2030 and $600 million of 5.550% senior notes due 2034, and used the proceeds to tender for portions of its 2024 and 2025 notes. The company repurchased $354 million of common stock in the nine months and declared a quarterly dividend of $0.625 per share on October 30, 2024. The filing also discloses a Civil Investigative Demand from the Department of Justice dated June 11, 2024, relating to a False Claims Act investigation concerning bids submitted for contracts funded by the E-Rate Program.
CDW states it is cooperating and cannot yet assess the probability or range of any possible loss. Management does not believe there is a reasonable possibility of a material loss beyond amounts already recognized in other proceedings.
02—Key points
Key Highlights
- Net sales fell 2.0% to $5.52 billion in Q3 2024 and 3.3% to $15.81 billion for the nine months, with declines in the Corporate, Public and Small Business segments.
- Net income rose slightly to $316.4 million in Q3 2024 from $315.5 million, and diluted EPS was $2.34 versus $2.32; non-GAAP diluted EPS declined to $2.63 from $2.72.
- Gross profit margin was 21.8% in both Q3 periods, and operating income was $481.6 million versus $478.4 million.
- Net cash from operations fell to $932.0 million for the nine months from $1,062.2 million, and adjusted free cash flow declined to $764.1 million from $1,112.9 million.
- Net debt decreased to $4.87 billion from $5.26 billion, following $1.2 billion of new senior notes issued in August 2024 to refinance higher-cost 2024 and 2025 notes.
- A Department of Justice Civil Investigative Demand relating to a False Claims Act investigation of E-Rate Program bids is disclosed; the company cannot yet assess potential loss.
- The Board declared a quarterly dividend of $0.625 per share on October 30, 2024, and $354 million of common stock was repurchased in the nine months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, CDW kept $0.06.
- Revenue$5.52B100.0%
- Cost of revenue−$4.32B78.2%
- Gross profit$1.20B21.8%
- Operating costs−$719.1M13.0%
- Operating income$481.6M8.7%
- Interest, other & tax−$165.2M3.0%
- Net income$316.4M5.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 30, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $5.52B$5.63B | −2.0% |
| Cost of Revenue | $4.32B$4.40B | −1.9% |
| Gross Profit | $1.20B$1.23B | −2.2% |
| SG&A Expenses | $719.10M$749.30M | −4.0% |
| Operating Income | $481.60M$478.40M | +0.7% |
| Net Income | $316.40M$315.50M | +0.3% |
| EPS (Basic) | $2.37$2.35 | +0.9% |
| EPS (Diluted) | $2.34$2.32 | +0.9% |
| Shares Outstanding (Basic) | 133.50M134.10M | −0.4% |
| Shares Outstanding (Diluted) | 134.90M135.90M | −0.7% |
05—Questions
Frequently Asked Questions
Why did CDW's net sales decline in the third quarter of 2024?
The filing attributes the 2.0% decline to customers being cautious and measured in technology spending amid continued economic uncertainty and a complex technology landscape. Netcomm products decreased, partially offset by higher notebooks and mobile devices, and the Public segment's Government channel was notably lower.
How did CDW's profitability change?
Operating income rose slightly to $481.6 million from $478.4 million, aided by lower selling and administrative expenses, which fell 4.0% to $719.1 million mainly due to lower performance-based compensation. Gross profit margin was steady at 21.8%. Non-GAAP operating income, however, declined to $534.0 million from $556.3 million.
What debt actions did CDW take in 2024?
In August 2024 CDW issued $600 million of 5.100% senior notes due 2030 and $600 million of 5.550% senior notes due 2034. It used the proceeds to tender for $391 million of its 5.500% notes due 2024 and $389 million of its 4.125% notes due 2025. On October 7, 2024, it redeemed the remaining 2024 notes at par for $184 million. The company stated it was in compliance with its debt covenants.
What is the status of the Department of Justice investigation?
On June 11, 2024, CDW received a Civil Investigative Demand from the Department of Justice in connection with a False Claims Act investigation about bids for contracts funded by the E-Rate Program. The company is cooperating and, at this stage, cannot assess the probability of any outcome or the range of possible loss.
How much cash did CDW return to shareholders?
In the nine months ended September 30, 2024, CDW repurchased $354 million of common stock and paid $249.0 million in dividends. The Board declared a quarterly dividend of $0.625 per share on October 30, 2024, payable December 10, 2024.
06—Continue