'The UK grew high single digits' - CDW CEO opens up on mixed quarter

CDW reported quarterly revenue yesterday, with sales dropping over five per cent year on year.

But the stock exchange filing did not tell the whole story, with CEO Christine Leahy opening up on the quarter during an earnings call with investors. We've picked out the key information here.

The UK business grew

The wider CDW business may have seen sales decline in two of the three regions it operates, but the UK was a shining light amid a difficult quarter.

CDW does not break out UK figures, instead lumping it in with the Canadian business. Together the pair reported a sales drop of 8.4 per cent.

But on the earnings call Leahy said that the UK division had in fact reported growth.

"The UK team delivered high single digit growth in constant currency with strong public sector demand, driven by healthcare customers and more muted corporate customer demand," she said.

The Canadian unit saw revenue decrease double digits in constant currency.

The quarter started well

Leahy said that the first month of the quarter (April) had actually been positive, with a backlog in demand driven by the shift to remote working lagging over into the new quarter.

"For the quarte,r net sales performance varied by month and by customer end market," she said.

"As we shared on our last earnings call, we entered April with a healthy backlog of remote workforce enablement solution, which contributed to strong performance in April.

"As the quarter progressed, for some of our customer end markets projects were postponed and demand declined, as the economic toll of the crisis impacted customer spend. In other customer end markets, IT investment was prioritised and remained healthy."

M&A is still on the cards

Leahy touts the prospective of further acquisitions on most earnings call and this one was no different.

CDW announced the acquisition of cloud and digital transformation firm IGNW in July and said that further deals could be in the way.

"M&A is an important part of our capital allocation strategy to expand CDWs strategic capabilities," Leahy said.

"During our 35 plus year history, CDW had a successful track record of evolving customer needs in the IT industry, in part through acquisition.

"We absolutely will continue to look at potential targets. And we're very active in inbounds, we're very active in outbound."

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'The UK grew high single digits' - CDW CEO opens up on mixed quarter

Not all markets declined

The high-level numbers in the quarterly reports showed sales declined across the board.

But the numbers in specific industries, revealed on the earnings call, painted a mixed picture.

Sales to the US government were up 24 per cent, for example, with federal sales up 50 per cent.

Revenue derived from the education sector were up 13 per cent, but healthcare declined low double digits.

"What I would say is it's hard to paint a picture, a single picture of where IT budgets are going," Leahy said.

"That said, we are having robust conversations with all of our customers, those that are spending today and those who are planning tomorrow."

Cloud growth continued

Despite declines in some verticals, cloud continued to drive growth across the board.

"We delivered strong growth in our cloud offerings," Leahy said.

"Customers spend increased double digit, driven by strong growth in analytics, collaboration, data storage and recovery, compute and security. We expect strong customer demand for cloud offerings to continue."

But she also reiterated that CDW doesn't expect on-prem infrastructure to die out.

"What we've seen is a real refocus on the urgency of remote work, optimising employees working remotely, really bolstering those capabilities over the last couple of quarters," the chief exec added.

"At the same time, we absolutely are seeing acceleration in discussions towards cloud and moving towards the cloud.

"In terms of on-prem we've said, and we'll say it again, that we believe that there's going to be a hybrid world out there.

"It continues to be a hybrid world and we're having those kinds of conversations with our customers.

"The good news is we've got the ability to help our customers through cloud deployments, and then manage once they're up and running."

The outlook remains unclear

CDW did not provide guidance on its current quarter (Q3) or the rest of the year, but said that the decline in business has recovered slightly from the peak declines in May and June.

"The economic outlook for the foreseeable future remains uncertain, as the duration and severity of COVID-19 are unknown and also uneven. Therefore, we are not providing 2020 targets," Leahy said.

"We continue to watch closely the near-term impact of COVID-19 on our customer end market.

"For Q3 to-date writing, the rate of decline has stabilised for our most impacted customer end market, and trends for more resilient customer end market continue. While encouraging, we believe it's premature to call this a trend as weekly writing do fluctuate."