CDW Corporation (NASDAQ:CDW) Q2 2018 Earnings Conference Call - Final Transcript

Aug 02, 2018 • 08:30 am ET


CDW Corporation (NASDAQ:CDW) Q2 2018 Earnings Conference Call - Final Transcript


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Tom Richards

$345 million and non-GAAP net income per share increased 35% to $1.38. On a constant-currency basis, non-GAAP EPS increased 34.5%.

Our consistent performance since the IPO has been driven by 3 factors: first, our balance across customer end markets; second, the breadth of our products and solutions portfolio; and third, our ongoing investments and our 3-part strategy for growth. Let's take a look at how each contributed to this quarter's performance.

First, the balance across our customer end markets. As you know, we have 5 US sales channels: corporate, small business, healthcare, government and education. Each of the channels are meaningful businesses generating annual sales of more than $1 billion. This scale enables us to further align sales teams into vertical customer end markets, including K-12, higher education, state and local government and federal government. In addition, we have our UK and Canadian operations, which together delivered 2017 sales of more than USD 1.5 billion.

These unique sales organizations serve us well when end markets behave differently from each other. Sometimes that occurs because markets are disrupted by macro or external changes, sometimes it occurs when customer behavior differs due to different priorities. Our balanced portfolio of customer end markets is one of the hallmarks of our ability to generate consistent profitable growth. Chris will walk you through more on this quarter's results by end market. Chris?

Chris Leahy

Thanks, Tom. Good morning, everyone. The power of the diversity of our customer end market is clearly evident this quarter. 5 of our 7 US-based customer-facing end markets as well as both of our international operations posted top line gains. This more than offset declines in 2 of our end markets, enabling us to deliver our consolidated 7.6% top line increase.

Corporate had an excellent quarter with sales up 10%. Client refresh remained healthy, driven by strong employment and customers' continued use of client devices to drive productivity. This contributed to strong transactions growth for the quarter up mid-teens, very impressive results given last year's second quarter low double-digit transaction growth.

At the same time, the team was generating double-digit transactions growth. They also delivered a mid-single-digit increase in solutions as they continue to help customers drive digital transformation into their businesses.

While customers are not explicitly pointing to tax reform as the driver of incremental spend, it does feel as though it is spurring corporate customer confidence in the economy to move forward with their existing spending plans.

In the small business market, confidence remained strong and the team posted a 5% increase in net sales. Client refresh driven mid-single-digit increase in transactions, and the team's focus on driving profitable sales drove meaningful product margin improvement.

As the segment, Public was flat for the quarter, performance varied across channels and within customer end market. Government was down just under 6%, results were mixed across our 2 customer end markets with state and local up and federal down.

State and local performance was solid, even as they jumped from tough compares when sales