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CDW Sees Big Gains Across The Board As It Looks To M&A

‘We are in the market. We're looking, constantly, we are proactive. We tend not to be reactive, as you know. The way we think about it from a strategy perspective, is kind of pretty straightforward. Two things: expand our solutions capabilities or extend our services capabilities. Those two things plus geo expansion, that's essentially how we think about M&A,’ CEO Chris Leahy says.

CDW Corp. posted a record $4.6 billion quarter gaining $444 million in revenue on a year-over-year basis, which CEO Chris Leahy attributed to customers’ expanded payrolls, a refresh of old equipment, cybersecurity, and customers seeking “flexible architecture” for their networks.

“Our double-digit sales increase was driven by excellent results across all five of our U.S. channels, each growing high single-digits or better,” she told investors Wednesday. “U.S. customers remain focused on client devices to meet growing needs from full employment, as well as refresh, driven by older equipment, new use cases and new security features. At the same time, customers continue to modernize their IT infrastructure and adopt more flexible architectures.”

This is Leahy’s second quarter since taking the reins of the massive solution provider in January. For the quarter ending June 30, the company’s year-over-year revenue was up 10.6 percent, while net income gained 13.6 percent coming in at $196.6 million for an earnings per share of $1.33.

Year to date, CDW is outpacing 2018 revenue by $795 million.

The gains were driven, in part, by growing year-over-year spending in small business, government and health care, which each grew in the low to high teens. Leahy said growth in small business spend was made possible by offering those customers dedicated account reps, and pre-packaged solutions.

“Packaging solutions with services is one of the ways our dedicated small business segment is making solutions more accessible for the customer, and easier for the seller to sell,” Leahy said. “Prior to our investment in dedicated small business technical coworkers and development of small business focus packaged solutions, this solution would have required meaningful technical resources and investment of time, that would not have met our threshold for profitable growth.”

CDW’s priorities for the remainder of 2019 include M&A. The company acquired Canadian cybersecurity company Scalar in February for an undisclosed sum. Leahy said the bet on security has already paid off, helping a customer craft a solution that grew their existing business with CDW by about $500,000.

Scalar's security services team did a deep dive with the customer and developed a comprehensive solution, which included hardware, software and services. The solution centered on a zero-trust security model, that utilizes cloud-based firewall virtualization, to protect both enterprise and customer facing environments,” she said. “Great early proof points on the benefit of the technical and services investment made in Scalar.”

Leahy said they are “looking, constantly” for M&A targets.

“We are in the market. We're looking, constantly, we are proactive. We tend not to be reactive, as you know,” she told analysts. “The way we think about it from a strategy perspective, is kind of pretty straightforward. Two things: expand our solutions capabilities or extend our services capabilities. Those two things plus geo expansion, that's essentially how we think about M&A.”

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