Release Date: February 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CDW Corp (CDW, Financial) reported net sales of $5.2 billion for the fourth quarter, a 5% increase compared to 2023 on an average daily sales basis.
- The company achieved its highest quarterly gross margin level in 2024, demonstrating resilience despite a challenging environment.
- CDW Corp (CDW) returned $832 million to shareholders through dividends and share repurchases, reinforcing its commitment to shareholder value.
- Healthcare was a standout performer, with sales up 30%, reflecting strategic investments and strong execution in this sector.
- The acquisition of Mission Cloud Services is expected to enhance CDW Corp (CDW)'s cloud capabilities and drive future growth.
Negative Points
- Non-GAAP operating income for the fourth quarter was down 4% compared to 2023, indicating pressure on profitability.
- The Education sector experienced a 2% decline due to the absence of stimulus-based government funding programs.
- Government sales were impacted by federal end market uncertainty, leading to spending pauses and a decline in this segment.
- CDW Corp (CDW) faced a challenging environment in 2024, with a 3% decline in top-line revenue for the full year.
- The company anticipates continued cautious customer sentiment and macroeconomic uncertainty, which may impact future demand.
Q & A Highlights
Q: How is CDW approaching the public sector growth in 2025, considering the focus on efficiencies and the impact on government spending?
A: Christine Leahy, CEO, explained that CDW is cautiously analyzing the public sector, particularly Education and federal spending, due to a lack of clarity and fluid conditions. They are factoring in potential workforce reductions and efficiency drives, which could slow government spending but benefit technology in the long run. CDW is leveraging its strong federal, state, and local business to navigate these changes and identify opportunities.
Q: What drove the strong performance in the Healthcare vertical, which was up nearly 30%?
A: Christine Leahy, CEO, attributed the strong Healthcare performance to a balanced strategy that combines a broad portfolio, particularly in cloud solutions, with deep Healthcare expertise. Investments in capabilities and partnerships have made CDW a trusted partner for Healthcare customers on their cloud journeys. The growth also reflects overcoming difficult comparisons from previous years.
Q: How is CDW navigating changes in cloud subscription practices, particularly with Microsoft?
A: Albert Miralles, CFO, noted that changes in partner incentives, like those from Microsoft, are common and were anticipated. The impact on 2025 results is not material, as CDW has been pivoting to other growth opportunities with Microsoft and other partners.
Q: Can you elaborate on the strategic importance of the Mission Cloud Services acquisition?
A: Christine Leahy, CEO, highlighted that Mission Cloud Services brings AWS expertise and is in a growth mode, which aligns with CDW's strategy. While not materially impacting the bottom line in 2025 due to foregone interest, it is expected to significantly enhance CDW's strategic capabilities and growth rates in the future.
Q: Why isn't CDW seeing as much leverage in the model as historically, despite macro uncertainties?
A: Christine Leahy, CEO, explained that the current environment of low to no growth exacerbates deleverage, even as CDW invests in growth capabilities. The company is balancing growth investments with efficiency, and expects operating leverage to return as the environment improves.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
