Diversified Customer Base Across Key Verticals CDW's customer base is well-diversified, with five primary sales channels in the U.S. - Corporate, Small Business, Healthcare, Government, and Education. Each of these channels generates over $1 billion in annual net sales, providing the company with a balanced and resilient revenue stream. Additionally, CDW's international operations in the U.K. and Canada contribute a significant portion of its total net sales, further diversifying the company's geographic footprint.
Founded in 1984 and headquartered in Vernon Hills, Illinois, CDW has grown to become a Fortune 500 company and member of the S&P 500 Index. The company's journey began as a direct marketer of computer hardware, software, and accessories, and has since evolved to encompass a broad array of IT solutions and services. A significant milestone in CDW's history was its initial public offering in 2013, which provided the company with additional resources to invest in its growth and capabilities.
Throughout its 40-year history, CDW has demonstrated a commitment to strategic growth through acquisitions. Notable examples include the acquisition of Berbee Information Networks Corporation in 2006 and Scalar Decisions Inc. in 2018. These strategic moves have allowed CDW to enhance its expertise in key areas such as cloud computing, security, and services, further solidifying its position as a comprehensive IT solutions provider.
CDW's success has not been without challenges. The company has had to navigate the constantly evolving IT landscape, adapting to changes in technology, customer buying behaviors, and competitive dynamics. To address these challenges, CDW has made ongoing investments in its sales force, technical capabilities, and solutions portfolio. This adaptive approach has enabled the company to maintain its position as a leading provider of IT solutions while continuing to deliver exceptional customer service and leveraging its strong vendor relationships.
Broad and Integrated Solutions Portfolio CDW's offering extends beyond discrete hardware and software products, encompassing a comprehensive range of integrated IT solutions and services. The company's expertise spans hybrid infrastructure, digital experience, and security, allowing it to address the evolving needs of its customers. By leveraging its deep technical knowledge and industry-specific capabilities, CDW is well-positioned to deliver customized solutions that drive business outcomes for its clients.
Relentless Execution of Growth Strategy CDW has consistently executed its three-part strategy for growth, focusing on enhancing its productivity and efficiency, strengthening its relevance to customers, coworkers, and partners, and pursuing strategic acquisitions. The company's recent acquisition of Mission Cloud Services, a premier AWS partner, underscores its commitment to expanding its cloud and managed services capabilities to better serve its customers.
Financials Despite facing a challenging macroeconomic environment in 2024, CDW demonstrated its financial resilience, generating over $1 billion in adjusted free cash flow for the year. The company has remained disciplined in its capital allocation, prioritizing investments in high-growth, high-relevance areas, while also returning capital to shareholders through dividend payments and share repurchases.
In the most recent fiscal year, CDW reported revenue of $20,998.7 million and net income of $1,077.8 million. For the most recent quarter, revenue was $5,186.0 million, representing a 3.3% year-over-year increase, while net income was $264.2 million, a 10.8% decrease from the previous year. The revenue increase was driven by growth across the Corporate, Small Business, Public, and International (UK & Canada) segments, partially offset by declines in the government and education sectors. The net income decrease was due to higher expenses and lower interest income.
CDW's operations are segmented into three reportable segments: Corporate, Small Business, and Public. The Corporate segment, serving US private sector business customers with more than 250 employees, generated $6.49 billion or 41.1% of total net sales during the nine months ended September 30, 2024. The Small Business segment, serving US private sector business customers with up to 250 employees, contributed $1.14 billion or 7.2% of total net sales. The Public segment, comprising government agencies, education, and healthcare institutions in the US, accounted for $6.30 billion or 39.8% of total net sales.
In terms of product and service offerings, CDW's net sales can be broken down into hardware (73.1% of total), software (17.6%), and services (8.8%) during the nine months ended September 30, 2024. The company maintained solid financial performance with gross profit margins holding steady at 21.8% for both the three and nine-month periods ended September 30, 2024.
Liquidity CDW's strong financial performance has contributed to its solid liquidity position, enabling the company to maintain flexibility in its operations and pursue strategic opportunities. The company's prudent financial management and consistent cash flow generation have allowed it to maintain a healthy balance sheet while continuing to invest in growth initiatives.
As of the most recent reporting period, CDW had a debt-to-equity ratio of 2.55 and cash and cash equivalents of $946.7 million. The company has a $1.3 billion senior unsecured revolving loan facility, of which $346 million was reserved for the floorplan sub-facility as of September 30, 2024. CDW's current ratio stands at 1.35, and its quick ratio is 1.23, indicating a strong ability to meet short-term obligations.
Navigating a Dynamic Market with Prudence and Flexibility As the IT landscape continues to evolve, CDW has shown its ability to adapt to changing customer needs and market conditions. In 2024, the company navigated a mixed demand environment, with some end markets experiencing stability while others, such as government and education, faced more significant challenges. CDW's focus on cloud, security, and services solutions has helped it partially offset the impact of hardware sales deceleration, highlighting the strength and flexibility of its business model.
Looking Ahead: Cautious Optimism and Continued Execution As CDW enters 2025, it remains cautiously optimistic about the IT market's potential for low single-digit growth. The company expects to outpace the market by 200 to 300 basis points, driven by its ability to deliver value-added solutions and services to its diverse customer base. While the company anticipates continued pressure on hardware sales, it is well-positioned to capitalize on the growing demand for cloud, security, and managed services offerings.
For the full year 2025, CDW expects low single-digit gross profit growth and relatively stable gross margins within the range of 2024 levels. The company anticipates low single-digit growth in non-GAAP earnings per diluted share year-over-year. For Q1 2025, CDW projects a mid-single-digit gross profit decline sequentially, leading to low single-digit year-over-year growth, with gross margins similar to overall 2024 levels. Operating expenses are expected to be similar to Q1 2024 and Q4 2024 on a dollar basis.
CDW's proven track record, diversified business model, and relentless focus on execution position it as a resilient and adaptable IT solutions provider in an ever-changing market landscape. By continuing to invest in its capabilities, foster strong customer relationships, and execute its strategic priorities, CDW is poised to navigate the dynamic environment and deliver long-term value for its shareholders.