CDW Nearly Doubles Q2 Profit, Sees Strong PC Sales On IPO Anniversary

Vernon Hills, Ill.-based CDW nearly doubled its second-quarter profit from the year-ago period, after celebrating the one-year anniversary of its IPO in June.

Second-quarter sales totaled $3.1 billion, up 11.8 percent from a year earlier. Net income was $86.6 million, up 85.5 percent from the year-ago period. The quarter represented all-time records for adjusted EBITDA, non-GAAP earnings per share and net sales. It was the first quarter in the company's history when sales surpassed $3 billion.

"These results reflect the combined power of our diverse customer channels, the benefit of our full suite of offerings that address customer priorities across the IT landscape and ongoing success executing our three-part strategy," CEO Tom Richards said during the company's earnings call with analysts.

[Related: CDW, World Wide Technology: Cloud Is An Opportunity Not A Threat]

That three-part strategy for the company includes capturing market share from existing and new customers, expanding its solutions portfolio and building out services capabilities.

CDW's sales growth was driven by gains from throughout its customer channels, Richards said, and varied from a low of 6 percent growth to a high of 25 percent. In particular, Richards highlighted public sector growth driven by education, where sales were up 25 percent, due to continued strong performance in K-12 and higher education. He said that federal sales returned to low-single-digit growth for the quarter. Healthcare was on the rise as well, he said.

CDW said it saw continued strong demand for client devices, such as notebooks, tablets and desktops. The company saw particularly strong demand for Chromebooks resulting from the expiration of XP support and the upgrade of older devices.

"Our full suite of products, which includes transactional products, solutions and services enabled us to quickly and effectively meet strong PC demand, which we experienced across our entire portfolio of customer channels," Richards said.

CDW expects client devices to slow their growth rate going forward due to the end of XP tailwinds, but Richards said he still expects the company to beat market rates.

Richards also highlighted strong demand for wireless networks, network security and managed services. Enterprise storage declined in the low single digits, he said, and servers were down year over year, but not by as much as the previous quarter.

CDW also saw services growth, which Richards said was driven by increased warranties and configuration for hardware refreshes and Chromebooks, as well as cloud services.

The company expects client device sales to be slightly above 4 percent for the full year, which it says is between 400 and 500 points above the U.S. IT market.

PUBLISHED JULY 31, 2014