01—Abstract
Summary
Summary of the 8-K filed May 1, 2024. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation reported first quarter 2024 results in an 8-K furnished with a May 1, 2024 press release (Exhibit 99.1).
Net sales were $4,872.7 milliona, down 4.5% from $5,103.1 million a year earlier, and on a constant currency basis net sales decreased 4.9%. Management said first quarter IT market conditions were weaker than expected, with customers' capital investment decisions adversely affected and decision-making elongated, partly offset by demand for client devices. Gross profit was $1,063.3 million, down 2.4%, but gross profit margin rose to 21.8% from 21.3%, driven mainly by a more favorable contribution of netted down revenue, primarily software as a service.
Operating income was $328.0 millionb, down 7.7%, and non-GAAP operating income was $403.5 million, down 7.1%. Net income was $216.1 million and diluted EPS was $1.59, compared with $1.68 a year earlier; non-GAAP diluted EPS was $1.92, down 5.5%. By segment, Corporate net sales were $2,135.9 million (down 3.1%), Small Business $380.9 million (down 7.4%), Public $1,724.7 million (down 4.9%, with Education down 10.4%), and Other (UK and Canada) $631.2 million (down 6.5%).
Operating cash flow was $440.0 millionc versus $365.4 million, and free cash flow was $410.5 million versus $333.7 million. Cash and cash equivalents rose to $803.8 million from $588.7 million at December 31, 2023, and net debt fell to $4,828.5 million from $5,056.2 million.
The Board declared a quarterly cash dividend of $0.62d per share, payable June 11, 2024 to stockholders of record as of May 24, 2024 (Item 8.01, Exhibit 99.2). Management reiterated its target of exceeding US IT market growth by 200 to 300 basis points on a constant currency basis and said it will continue to optimize cash flow, with capital priorities including strategic M&A and share repurchases.
02—Key points
Key Highlights
- Net sales fell 4.5% to $4,872.7 million; on a constant currency basis they fell 4.9%, with 64 selling days in both periods.
- Gross profit margin improved to 21.8% from 21.3%, driven mainly by a more favorable contribution of netted down revenue, primarily software as a service, partly offset by a higher mix of notebooks/mobile devices.
- GAAP operating income fell 7.7% to $328.0 million; non-GAAP operating income fell 7.1% to $403.5 million.
- Diluted EPS was $1.59 versus $1.68, a 5.2% decline; non-GAAP diluted EPS was $1.92 versus $2.03, a 5.5% decline.
- Operating cash flow rose to $440.0 million from $365.4 million, and free cash flow rose to $410.5 million from $333.7 million.
- Net debt declined to $4,828.5 million from $5,056.2 million at December 31, 2023, and cash rose to $803.8 million.
- Board declared a quarterly dividend of $0.62 per share, payable June 11, 2024 to holders of record on May 24, 2024.
03—Questions
Frequently Asked Questions
Why did CDW's net sales decline in the first quarter of 2024?
Management said IT market conditions were weaker than expected, with caution, concern and complexity adversely affecting customers' capital investment decisions and lengthening their decision-making. Public segment Education net sales fell 10.4%, and the Corporate and Small Business segments also declined. Demand for client devices partly offset the decline in solutions spend.
Did profitability hold up despite lower sales?
Partly. Gross profit margin rose to 21.8% from 21.3%, mainly due to a more favorable contribution of netted down revenue, primarily software as a service. However, operating income fell 7.7%, and selling and administrative expenses were roughly flat at $735.3 million, reflecting workplace optimization costs offset by lower performance-based compensation.
What is the dividend and when is it payable?
The Board declared a quarterly cash dividend of $0.62 per common share, payable June 11, 2024 to stockholders of record as of the close of business on May 24, 2024. The filing notes that future dividends are subject to Board approval.
How is CDW's balance sheet and cash generation trending?
Cash and cash equivalents increased to $803.8 million from $588.7 million at December 31, 2023. Net debt declined to $4,828.5 million from $5,056.2 million, and revolver availability rose to $1,251.7 million. Free cash flow was $410.5 million, compared with $333.7 million a year earlier. Management said it will continue to optimize working capital, with capital priorities including strategic M&A and share repurchases.
What is management's outlook?
Management said CDW remains well positioned to attain its target of exceeding US IT market growth by 200 to 300 basis points on a constant currency basis. The release did not provide a specific revenue or earnings forecast for the remainder of 2024.
04—Continue