CDW Sees Strong Sales Across The Board In Q3

CDW saw revenue grow 11 percent year over year, which outgoing CEO Tom Richards said is due in part to the “longest refresh streak in recent history.”

The Vernon Hills, Ill.-based integrator -- No. 5 on the 2018 CRN Solution Provider 500 -- saw earnings per share grow to $1.20 on quarterly revenue of $4.37 billion in its third quarter, which ended Sept. 30. The market rewarded CDW’s strong showing, sending the stock higher Wednesday by 14 percent, up $11.17 to $91.43 per share.

“This was our ninth consecutive quarter of double-digit growth in client devices, the longest refresh streak in recent history,” he told investors.

Richards said key drivers of growth this quarter were sales in each of the company’s five channels – corporate, SMB, health care, government and education -- which grew in the high single digits or better. He said that is great news, coming off last year when each produced more than $1 billion in revenue.

The company’s corporate business -- which serves customers that have 200 or more employees -- grew 10 percent, small business, grew 11 percent, as CDW said SMB customers remained optimistic about the economy and their prospects, health care increased its spend with CDW by 8 percent, education by 15, driven in part by Chromebook shipments, and government was up by 8 percent. This last figure was driven by CDW’s continued success in integrated solutions like CANES, the U.S. Navy's floating cloud program, and solutions aligned with DoD goals to enhance cybersecurity and enhance combat readiness.

“This quarter, we had excellent balance across transactions and solutions with both increasing in line with total company growth,” he told investors. “We also had balanced performance across hardware, software and services, all posting double-digit increases.”

Richards -- who will retire at the end of the year -- said the most recent quarter saw the debut of a new strategy to capture share that uses data analytics and propensity modeling.

“We identified 1,400 targets in a specific geography with high opportunity to spend,” he said. “We then executed a focused marketing campaign anchored with targeted e-mails and engagement triggers along with local media coverage. More than a quarter of the prospects targeted made at least one purchase. Together they spent more than $6 million in the third quarter.”

Richards said he is “very, very pleased” with the program, which he called a “winning formula.” He said given its success, CDW is scaling it to all of its corporate markets by next year. During the question and answer period, Richards added that SMBs would be a likely next target.

“I think it's natural to think about small business as another place where you'd have that kind of benefit but we were obviously very pleased,” he said.

Given CDW’s healthy financials, an analyst asked if the company would be more aggressive about M&A. Richards said just because CDW has cash on hand -- $255.1 million in cash and cash equivalents as of Sept. 30 -- doesn’t mean the company will be especially acquisitive.

“We think about acquisitions in a strategic perspective and I think I've mentioned on a number of calls, we continue to look for those opportunities that are out in the marketplace that seem to meet our strategy and have the right kind of financial picture,” he said. “So I wouldn't connect the dot there that the cash flow that you saw would motivate that at this point in time.”