CDW 10-K & 10-Q changes, risk factors and insider trading

There are many factors that could adversely affect our business, results of operationsoperations, and cash flows, some of which are beyond our control. The following is a description of some important factors that may cause our business prospects, results of operationsoperations, and cash flows in future periods to differ materially from those currently expected or desired. Factors not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of operationsoperations, and cash flows.

Our solutions portfolio includes products and services from OEMs, software publisherspublishers, and cloud providers. We are authorized by these vendor partners to sell all or some of their products and services via direct marketing activities. Our authorization with each vendor partner is subject to specific terms and conditions regarding such things as sales channel restrictions, product return privileges, services performance commitments, price protection policies, purchase discountsdiscounts, and vendor partner programs and funding, including purchase rebates, sales volume rebates, purchasing incentivesincentives, and cooperative advertising reimbursements. However, our contracts with our vendor partners are primarily short-term and many of these arrangements are terminable upon notice by either party. A reduction in vendor partner programs or funding or our failure to timely react to changes in vendor partner programs or funding could have an adverse effect on our business, results of operationsoperations, or cash flows. In addition, a reduction in the amount or a change in the terms of credit granted to us by our vendor partners could increase our need for, and the cost of, working capital and could have an adverse effect on our business, results of operationsoperations, or cash flows.

From time to time, vendor partners may terminate or limit our right to sell some or all of their products or change the terms and conditions or reduce or discontinue the incentives that they offer us. For example, there is no assurance that, as our vendor partners continue to sell directly to end users and through resellers, they will not limit or curtail the availability of their products to solutions providers like us. Any such termination or limitation or the implementation of such changes could have a negative impact on our business, results of operationsoperations, or cash flows.

We purchase the products included in our portfolio both directly from our vendor partners and from wholesale distributors. A significant portion of our sales are derived from products manufactured by Apple, Cisco, Dell Technologies, HP Inc., LenovoLenovo, and Microsoft. In addition, purchases from two wholesale distributors, Ingram Micro and TD SYNNEX, represent over 25% of our total purchases. The loss of, or change in business relationship with, any of these or any other wholesale distributors or key vendor partners, or the diminished availability of their products, including due to backlogs for their products, could reduce the supply and impact the cost of products we sell and negatively impact our competitive position.

Further, the sale, spin-offspin-off, or combination of any of our key vendor partners or wholesale distributors and/or certain of their business units, including any such sale to or combination with a vendor with whom we do not currently have a commercial relationship or whose products we do not sell, or our inability to develop relationships with new and emerging vendors and vendors that we have not historically represented in the marketplace, could have an adverse impact on our business, results of operationsoperations, or cash flows.

The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, softwaresoftware, and services, such as cloud-based and other “as a service” solutions, hyper-converged infrastructure, embedded software solutionssolutions, and solutions that incorporate artificial intelligence.AI. We have been and will continue to be dependent on innovations in technology, as well as the adoption of those innovations by customers. Also, customers may delay spending while they evaluate new technologies. A decrease in the rate of innovation, a lack of adoption of innovations by our customerscustomers, or delays in technology spending by our customers, could have an adverse effect on our business, results of operationsoperations, or cash flows.

In addition, if we are unable to anticipate and expand our capabilities to keep pace with changes in technology and new hardware, softwaresoftware, and services, for example by providing the appropriate training to our account managers, specialistsspecialists, and engineers to enable them to effectively sell and deliver such new offeringssolutions to customers, our business, results of operationsoperations, or cash flows could be adversely affected.

We also are dependent upon our vendor partners for the development and marketing of hardware, softwaresoftware, and services to compete effectively with hardware, softwaresoftware, and services of vendors whose products and services we do not currently offer or that we are not authorized to offer in one or more customer channels. In rapidly evolving categories such as cloud-based solutions, AI, and software “as a service” solutions, our dependence on our vendor partners for innovation can add additional complexity as vendor channel strategies and authorization models may change more frequently. To the extent that a vendor’s offering that is in high demand is not available to us for resale in one or more customer channels, and there is not a competitive offering from another vendor that we are authorized to sell in such customer channels, our business, results of operationsoperations, or cash flows could be adversely impacted.

Issues relating to the use or capabilities of artificial intelligence,AI, including social, ethicalethical, and safety issues, in hardware, softwaresoftware, and services offerings may result in reputational harm, liabilityliability, or increased costs.

Social, ethical and safety issues relating to the use of new and evolving technologies such as artificial intelligence-based technologies, including generative AI in our hardware, software and service offerings, as well as in our internal platforms, may result in reputational harm and liability. Certain of the hardware, software and servicesAs we offerinvest increasingly utilize AI, and, as with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. If wein, use, enableenable, or offer solutions that draw controversy due to their perceived or actual impact on society,society and the environment, we may experience brand or reputational harm, competitive harmharm, and/or legal liability. IncreasedThe rapid development and deployment of tools that leverage AI is also causing governments to consider and implement regulation of AI. Such increased focus and potential government regulation of AI may also increase the burden and cost of compliance in this area, subjecting us to brand or reputational harm, competitive harmharm, and/or legal liability. Failure to address AI issues by us or others in our industry could undermine public confidence in AI and slow adoption of AI in our products and services.

Additionally, the development, adoptionadoption, and use of AI by us or our vendor partners could result in unintended consequences, including exposing us to additional risks related to cybersecurity, privacyprivacy, and data security, such as the risk of increased vulnerability to cybersecurity threats and exposure or theft of proprietary or sensitive information (which could result in such information being made available to our competitors and other members of the public), impacts to the stability of our operations, the generation of factually incorrect or biased outputs, reliance on outdated or unverified data, potential intellectual property infringements, the inability to protect generated content while facing unfavorable licensing termsterms, and the inability to attract and retain key personnel. AI technologies are complex and rapidly evolving, and we face significant competition in the market and from other companies regarding such technologies. Further, the responsible development and deployment of AI requires ongoing investment in research, development and governance, which could adversely affect our results of operation or cash flows.

We compete with resellers, manufacturers who sell directly to customers, large service providers and system integrators, communications service providers, cloud providers, e-commerce companies and office supply retailers, among others. We expect the competitive landscape to continue to evolve as new technologies and consumption models emerge, such as cloud-based and other “as a service” solutions, hyper-converged infrastructure, embedded software solutionssolutions, and solutions that incorporate artificial intelligence.AI. Our continued competitiveness depends upon our ability to anticipate and evolve at pace and scale with new technologies, servicesservices, and solutions through strategic and timely investments in innovation, expansion of offeringsofferings, and the capabilities necessary to implement them.

While innovation can help our business as it creates new offerings for us to sell, it can also disrupt our business model and create new and stronger competitors. For instance, while cloud-based solutions present an opportunity for us, cloud-based solutions and technology solutions as a service could increase the amount of sales directly to customers rather than through solutions providers like us, or could reduce the amount of hardware we sell. For example, growing hyperscaler marketplaces such as AWS Marketplace, Google Cloud Marketplace, and Microsoft Marketplace and evolving partner authorization and incentive models could change the role of traditional resellers, which may limit access to offerings, pressure margins, and restrict participation in certain channels. In addition, some of our hardware and software vendor partners sell, and could intensify their efforts to sell,sell their products directly to our customers. Moreover, traditional OEMs have increased their services capabilities through mergers and acquisitions, which could potentially increase competition in the market to provide comprehensive technology solutions to customers. If we are unable to effectively respond to the evolving competitive landscape, or respond in a manner that is less effective than that of our competitors, our business, results of operationsoperations, or cash flows could be adversely impacted.

We focus on providing high qualityhigh-quality service to gain new customers and retain existing customers. To the extent we face increased competition to gain and retain customers, we may be required to reduce prices, increase advertising expendituresexpenditures, or take other actions which could adversely affect our business, results of operationsoperations, or cash flows. Additionally, some of our competitors may reduce their prices in an attempt to stimulate sales, which may require us to reduce prices. This would require us to sell a greater number of products to achieve the same level of Net sales and Gross profit. If such a reduction in prices occurs and we are unable to attract new customers and sell increased quantities of products, our sales growth and profitability could be adversely affected.

The success of our business depends on the continuing development, maintenancemaintenance, and operation of our information technology systems.

Our success is dependent on the accuracy, proper utilizationutilization, and continuing operation, maintenancemaintenance, and development of our information technology systems, including our business systems, such as our sales, customer management, financial and accounting, marketing, purchasing, warehouse management, and e-commerce and mobile systems, as well as our operational platforms, including voice and data networks and power systems, which may include third-party hosted systems or systems that may utilize cloud technologies outside of our control. As we increasingly rely on cloud-based enterprise applications to support critical business functions, our operational performance depends in part on the availability, reliability, and proper integration of these externally hosted systems. The quality and our utilization of the information generated by our information technology systems, and our success in implementing new systems and upgrades, including our transformation initiatives, could adversely affect, among other things, our ability to:

•effectuate comprehensive and reliable data collection, maintenancemaintenance, and governance;

•manage our inventory, accounts receivablereceivable, and accounts payable;

•purchase, sell, shipship, and invoice our hardware and software products and provide and invoice our services efficiently and on a timely basis;

Our information technology systems are inherently exposed to varied technological threats beyond our control. While we have taken steps to protect our information technology systems from a variety of threats, both internal and external, and from human error, there can be no guarantee that those steps will be effective. Furthermore, although we have redundant systems at a separate location to back up our primary systems, there can be no assurance that these redundant systems will operate properly if and when required. Moreover, software vulnerabilities within the third-party information technology software and systems we use are discovered and reported on nearly a daily basis. When made public or otherwise known to us, we attempt to remediate or mitigate these vulnerabilities following guidance provided by the software vendor, and/or appropriate authorities, and before the vulnerability is successfully used in a cyberattack against our systems. If and when cyberattacks target and successfully exploit these vulnerabilities, we take steps designed to contain and limit the impact on our business. Any disruption to or infiltration of our information technology systems could significantly impact our ongoing business operations, harm our reputationreputation, and adversely affect our results of operations and our ability to comply with customer, partner, legallegal, or regulatory obligations.

We maintain and periodically upgrade many of our information technology systems, some of which are complex, costlycostly, and time consuming. If our information technology systems are not properly maintained or enhanced, the attention of our coworkers could be diverted and our ability to provide the level of service our customers demand could be constrained for some time. Further, new information technology systems and updates to existing information technology systems may not properly integrate with other information technology systems. Also, once implemented, the new information technology systems, updates to existing information technology systemssystems, and related technology may not provide the intended efficiencies or anticipated benefits, or could be defective, contain a security vulnerabilityvulnerability, or be improperly installed or managed, and could add costs, complicationscomplications, and disruptions to our ongoing operations. Implementation of new systems or significant changes to existing systems may also require updates to related business processes and internal controls, which could increase the risk of errors or delays until such controls are fully established.

From time to time, we may acquire new companies, businessesbusinesses, or sites with cybersecurity and data protection systems which may not conform with our standards. It may require significant time and expense to upgrade and integrate such systems and controls, and if we are unable to do so in a timely manner, or at all, failures or breaches of such systems could harm our reputation, businessbusiness, and results of operations due to failure to comply with customer, partner, legallegal, or regulatory obligations.

Our business involves the handling, storagestorage, and transmission of proprietary information and sensitive or confidential data, including personal information of coworkers, customers, partnerspartners, and others, which we must do in compliance with applicable law. In connection with our services business, some of our coworkers have access to our customers’ confidential data and other information. Additionally, third parties, such as data center colocation and hosted solution partners, provide services to us and also provide services as a component of our services delivery to customers and to customer systems. These third parties may also utilize or embed AI capabilities in providing their services to us and our customers. These third parties or others that are a part of our supply chainchain, and their use of AI capabilities, could also be a source of security risk in the event of a failure to protect their own products, security systems and infrastructure and we may not be able to control the manner in which these third parties respond to any security breach. We have privacy and data security policies, practicespractices, and controls in place that are designed to prevent security breaches; however, as newer technologies evolve, as more business is conducted over the internet and remotely, as we acquire more business operations from targetsorganizations with differing cybersecurity and data protection controlscontrols, and as the portfolio of the service providers we exchange confidential information, softwaresoftware, and/or hardware with expands, we have been subject to breaches in security and are increasingly likely to be exposed to risks from breaches in security, including those arising from human error, negligencenegligence, or mismanagement or from illegal or fraudulent acts, such as cyberattacks. Further, as AI continues to evolve, malicious actors could use AI to enhance the sophistication and coordination of their attacks, which could pose significant challenges to our security defenses. Additionally, as technology vendors consolidate and aggregate applications into unified platforms, the risk and magnitude of business disruption from security breaches increases due to vendor/ and system concentration.

We, and third parties upon which we rely, regularly experience malicious attacks and other attempts to gain unauthorized access to our systems, and attacks against us by state-sponsored organizations and nation-states may increase during periods of intense diplomatic or armed conflicts. Further, security breaches may go undetected and persist in our environments for extended periods. Although we have not experienced a material security breach to date, the evolving and escalating nature of cybersecurity threats, in light of new and sophisticated methods used by criminals and cyberterrorists, state-sponsored organizationsorganizations, and nation-states, including computer viruses, malware, ransomware, phishing, misrepresentation, social engineeringengineering, and forgery, make it increasingly challenging to anticipate, detectdetect, and defend against these threats. We and our third-party partners have implemented various security controls to meet compliance and privacy requirements while defending against these evolving security threats. However, breaches in security could expose us, our supply chain, our customerscustomers, or other individuals to significant disruptions and a risk of public disclosure, lossloss, or misuse of confidential data.

Security breaches could result in legal claims or proceedings, liabilityliability, or regulatory penalties under laws protecting the privacy of personal information (including those under the European UnionUnion’s General Data Protection Regulation and the California Privacy Rights Act), significant remediation costs as well as the loss of partners and existing or potential customers and, ultimately, damage to our brand and reputation and adversely impact our business. While we maintain insurance coverages that are intended to address certain aspects of data security, such insurance may be insufficient to cover all losses or all types of claims that may arise,arise and may not continue to be available to us on economically reasonable terms or at all. Moreover, media or other reports of perceived vulnerabilities in our network security or perceived lack of security within our environment, even if inaccurate, could materially adversely impact our reputation and business. The cost and operational consequences of implementing further data protection measures could also be material. Such breaches, costscosts, and consequences could adversely affect our business, results of operationsoperations, or cash flows.

If we or our third-party service providers fail to provide high-quality services to our customers, our reputation, brand, business, results of operationsoperations, or cash flows could be adversely affected.

Our services include professional services, managed services, warranties, configuration services, partner servicesservices, and telecom services. Additionally, we deliver and manage mission critical software, systemssystems, and network solutions for our customers. We also offer certain services, such as implementation and installation services and repair services, to our customers through various third-party service providers engaged to perform these services on our behalf. If we or our third-party service providers fail to provide high-quality services to our customers or such services result in an unplanned disruption of our customers’ businesses, this could, among other things, result in legal claims and proceedings and liability for us. Moreover, as we expand our services and solutions business and provide increasingly complex services and solutions, including solutions that incorporate AI, we may be exposed to additional operational, regulatoryregulatory, and other risks. We also could incur liability for failure to comply with the rules and regulations applicable to the new services and solutions we provide to our customers. If any of the foregoing were to occur, our reputation with our customers, our brandbrand, and our business, results of operationsoperations, or cash flows could be adversely affected.

If we lose any of our key personnel, are unable to attract and retain the talent required for our business, our labor costs significantly increaseincrease, or our approach to workforce management is ineffective, our business could be disrupteddisrupted, and our financial performance could suffer.

Our success is heavily dependent upon our ability to attract, develop, engageengage, and retain key personnel to manage, lead, innovateinnovate, and grow our business, including our key executive, management, sales, services, specialistsspecialists, and engineers. Additionally, we rely on offshore operations to execute and deliver on certain functions within the organization.

In order to attract, retain, and motivate key personnel in a competitive marketplace, it is important to provide a competitive compensation package. If our compensation package is not viewed as being competitive, our ability to attract, retain, and motivate key personnel could be adversely affected. Additionally, as minimum wage rates increase or related laws and regulations change, we have and may need to continue to increase the wages paid to our hourly or salaried coworkers as wage rates and salaries become pressured. A sustained labor shortage or increased turnover rates within our coworker base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain coworkers, and could adversely affect our business, results of operationsoperations, or cash flows. Additionally, if we fail to effectively manage our workforce, we may need to terminate or reposition coworkers within our Company to eliminate an abundance of or to reconfigure resources, which could damage our coworker relations and our ability to attract and retain key personnel.

If we are unable to attract, develop, engageengage, and retain key personnel, or if our approach to workforce management, including management of our offshore operations, is ineffective, our relationships with our vendor partners and customers and our ability to expand our offerings of value-added services and solutions could be adversely affected. Moreover, if we are unable to continue to train our sales, servicesservices, and technical personnel effectively to meet the rapidly changing technology needs of our customers, the overall quality and efficiency of such personnel could decrease. Such consequences could adversely affect our business, results of operationsoperations, or cash flows.

We rely on our outsource partners, including offshore partners, to execute and deliver on certain business processes within the organization. While we make significant effort to conduct appropriate diligence before entering into arrangements with an outsourcing partner, failure by these outsource partners to meet their contractual, regulatoryregulatory, and other obligations to us, including cybersecurity protections, or our failure to adequately monitor their performance, could negatively impact our operations, expected cost savings or efficiencies, and could result in work stoppages, strikesstrikes, or performance issues with such outsource partners. As a result of these outsourcing arrangements, we may experience interruptions or delays in our processes, loss or theft of proprietary or sensitive datadata, or other cybersecurity issues, compliance issues, challenges in maintaining and reporting financial and operational information, and increased costs to remediate any unanticipated issues that arise, any of which could materially and adversely affect our business, financial conditioncondition, and results of operations.

If the warehouse and distribution equipment or operations at one of our distribution centers or such facilities or operations of our outsource partners were to be seriously damageddamaged, such as in a fire, or disrupted by a natural disaster, which may increase in number or severity as a result of climate change, or other adverse occurrence, including disruption related to political or social unrest, we could experience significant interruptions in our services and may incur material incremental operating costs. While we could utilize another distribution center or third-party distributors to ship products to our customers. However,customers, this also may not be sufficient to avoid interruptions in our service and may not enable us to meet all of the needs of our customers and could cause us to incur incremental operating costs. In addition, we operate numerous facilities which may contain both business-critical data and confidential information of our customers and third parties, such as data center colocation, managed services sitessites, and hosted solution partners, and third parties provide services as a component of our services delivery to customers. A natural disaster or other adverse occurrence at any of our major data storage locations, managed services sitessites, or third-party provider locations could negatively impact our business, results of operationsoperations, or cash flows.

We generally ship hardware products to our customers by FedEx,third United Parcel Service and otherparty commercial delivery services and invoice customers for delivery charges. If we are unable to pass on to our customers future increases in the cost of commercial delivery services and transportation costs (including those that may result from an increase in fuel or personnel costs or a need to use higher cost delivery channels during periods of increased demand), our profitability could be adversely affected. Additionally, strikes, inclement weather, natural disastersdisasters, or other service interruptions by such shippers or periods of increased demand on delivery services, such as those we have experienced during the COVID-19 pandemic,services could materially adversely affect our ability to deliver or receive products on a timely basis.

We extend credit to our customers for a significant portion of our sales. We are subject to the risk that our customers may not pay for the products they have purchased or may pay at a slower rate than we have historically experienced. These risks are heightened during periods of global or industry-specific economic downturn or uncertainty, during periods of rising interest rates or, in the case of public sector customers, during periods of budget constraintsconstraints, budget cuts, or budgeta cuts.government shutdown. Further, evolving product delivery models, such as multi-year subscriptions, may result in prolonged risk as customer terms extend in duration. Significant failures of customers to timely pay all amounts due to us could adversely affect our business, results of operationsoperations, or cash flows.

We are also exposed to inventory risks as a result of the rapid technological changes that affect the market and pricing for the products we sell. In addition to drop-ship arrangements with many of our OEMs and wholesale distributors, we seek to minimize our inventory exposure through a variety of inventory management procedures and policies, including our rapid-turn inventory model, as well as vendor price protection and product return programs. However, if we were unable to maintain our rapid-turn inventory model, if there were unforeseen product developments that created more rapid obsolescence or if our vendor partners were to change their terms and conditions, our inventory risks could increase. We also from time to time take advantage of costdiscounted savingspricing associated with certain opportunistic bulk inventory purchases offered by our vendor partners or we may decide to carry high inventory levels of certain products that have limited or no return privileges due to customer demand or request or to manage supply chain interruptions. If we purchase inventory in anticipation of customer demand that does not materialize, or if customers reduce, delaydelay, or decommit from orders, and if we were unable to return the inventory to a vendor partner, we would be exposed to an increased risk of inventory obsolescence.obsolescence which could adversely affect our business, results of operations, or cash flows.

We could be exposed to additional costs and risks if we continue to make strategic investments or acquisitions or enter into joint ventures or alliances.

We may continue to pursue transactions, including strategic investments, acquisitionsacquisitions, joint ventures, or alliances, in an effort to extend or complement our existing business. These types of transactions involve numerous business risks, including finding suitable transaction partners and negotiating terms that are acceptable to us, the diversion of management’s attention from other business priorities, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, an acquisition target’s differing or inadequate cybersecurity and data protection controls, the potential loss of key coworkers or business relationshipsrelationships, and successfully integrating acquired businesses. There can be no assurance that the intended benefits of our investments, acquisitionsacquisitions, joint ventures, and alliances will be realized, or that those benefits will offset these numerous risks or other unforeseen factors, any of which could adversely affect our business, results of operationsoperations, or cash flows.

In addition, our financial results could be adversely affected by financial adjustments required by generally accepted accounting principles in the United States of America (“US GAAP”) in connection with these types of transactions where significant goodwill or intangible assets are recorded. To the extent the value of goodwill or identifiable intangible assets becomes impaired, we may be required to incur material charges relating to the impairment of those assets.

Our future operating results may fluctuate significantly,significantly due to the volatility and rapidly changing state of the technology industry, which may result in volatility in the market price of our stock and could impact our ability to operate our business effectively.

We may experience significant variations in our future quarterly results of operations. These fluctuations may cause the market price of our common stock to be volatile and may result from many factors, including the state of the technology industry in general, shifts in demand and pricing for hardware, softwaresoftware, and services, and the introduction of new products or upgrades. Further, if our customers’ businesses are adversely affected by global or regional economic conditions such as cost inflation or rising interest rates, they may delay or reduce purchases from us, which could adversely affect our results of operations.

Our operating results are also highly dependent on Gross profit. Our Gross profit fluctuates due to numerous factors, some of which may be outside of our control, including general macroeconomic conditions including inflation; pricing pressures; changes in product costs from our vendor partners; the availability of price protection, purchase discountsdiscounts, and incentive programs from our vendor partners; changes in product, order sizesize, and customer mix; the risk of some items in our inventory becoming obsolete; increases in product and delivery costs that we cannot pass on to customers; and general market and competitive conditions.

In addition, our cost structure is based, in part, on anticipated sales and gross margins. Therefore, we may not be able to adjust our cost structure quickly enough to compensate for any unexpected sales or gross margin shortfall, and any such inability could have an adverse effect on our business, results of operationsoperations, or cash flows.

Our exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of our Consolidated Financial Statements. While our Consolidated Financial Statements are reported in US dollars, the financial statements of our subsidiaries outside the US are prepared using the local currency as the functional currency and translated into US dollars. As a result, fluctuations in the exchange rate of the US dollar relative to the local currencies of our international subsidiaries, particularly the British pound and the Canadian dollar, could cause material fluctuations in our reported results of operations. We also have foreign currency exposure to the extent sales and purchases are not denominated in a subsidiary’s functional currency, which could have an adverse effect on our business, results of operationsoperations, or cash flows.

Political events, tradetrade, and other international disputes, geopolitical tensions, war, terrorism, natural disasters, public health issues, including pandemics such as COVID-19,pandemics, industrial accidentsaccidents, significant labor disputes and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, outsource partners, logistics providers, distributors, cellular network carrierscarriers, and other channel partners.

Weak or unstable economic conditionsconditions, generally, inflationinflation, and actions taken by central banks to counter inflation (such as those that prevailed in recent years),inflation, sustained uncertainty about global political conditions, periods of intense diplomatic or armed conflict, government spending cuts or prolonged governmental shutdowns, and the impact of new government policies (including the introduction of new or increased taxes, the imposition of minimum taxestaxes, or new or increased limitations on deductions, creditscredits, or other tax benefits, or any other changes to tax laws), or a tightening of credit markets, including as a result of rising interest rates or bank failures, could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operationsoperations, or cash flows.

Our sales are impacted by customer decisions on budget priorities and technology spending, including decisions to defer any such spending. Our customer’s spending decisions and budget priorities have and can be impacted by government spending and funding policies, especially but not exclusively for our public sector, healthcare and education customers, and our other customers that do business with our public sector customers or otherwise rely directly or indirectly on government funding. Federal government spending policies and budget priorities often shift during a change in federal administration, which has and can create increased levels of uncertainty with respect to these policies and priorities. An adverse change or anticipated change in government spending or funding policies (such as budget cuts or limitations or funding delays), shifts in budget priorities, changes in purchasing protocols, reductions in revenue levelslevels, or significant or prolonged government shutdowns could cause our customers to reduce or delay their purchases or to terminate or not renew their contracts with us, which could adversely affect our business, results of operationsoperations, or cash flows. Additionally, such adverse change in government spending policies, shifts in budget prioritiespriorities, or reductions in revenue levels could impact cash collections from contracts which could adversely affect our business, results of operationsoperations, or cash flows. Our vendor partners may also be negatively impacted by changes in government spending policies and budget priorities, which could impact their ability to fulfill their contractual obligations to us.

Our business depends on the timely supply of products in order to meet the demands of our customers. Manufacturing interruptions or delays, including as a result of the financial instability or bankruptcy of manufacturers, significant labor disputes such as strikes, natural disasters (which may increase in number or severity as a result of climate change), political or social unrest, armed conflict, pandemics (such as the COVID-19 pandemic) or other public health crises, or other adverse occurrences affecting any of our suppliers’ facilities, could disrupt our supply chain and cause volatility in our level of inventory and delays in completion of orders and installations for our customers. We have experienced and could in the future experience product constraints due to the failure of suppliers to accurately forecast customer demand, or to manufacture sufficient quantities of product to meet customer demand (including as a result of shortages of product components), among other reasons. For example, more recent tightening in the availability of high-performance memory and storage as demand has increased significantly and OEMs are prioritizing datacenters and AI workloads, pushing commercial devices and many server configurations into longer lead times and higher pricing. As demand for AI increases, supply capacity for high-performance memory and storage may continue to be limited until supply capacity increases. This memory shortage could ultimately result in shortages of finished goods such as client devices and servers where memory is a key component of the bill of materials for their production. Additionally, the relocation of key distributors utilized in our purchasing model could increase our need for, and the cost of, working capital and have an adverse effect on our business, results of operationsoperations, or cash flows.

Our supply chain is also exposed to risks related to international operations. While we purchase our products primarily in the markets we serve (for example, products for US customers are sourced in the US), our vendor partners manufacture or purchase a significant portion of the products we sell outside of the US, primarily in Asia. Political, socialsocial, or economic instability in Asia, or in other regions in which our vendor partners purchase or manufacture the products we sell, could cause disruptions in trade, including exports to the US. Other events related to international operations that could cause disruptions to our supply chain include:

•the imposition of additional trade law provisions or regulations, including the adoption or expansion of trade restrictions or sanctions;

•the imposition of additional duties, tariffstariffs, and other charges on imports and exports, including any resulting retaliatory tariffs or charges and any reductions in the production of products subject to such tariffs and charges;

We cannot predict whether the countries in which the products we sell, or any components of those products, are purchased or manufactured will be subject to new or additional trade restrictions or sanctions imposed by the US or foreign governments, including the likelihood, typetype, or effect of any such restrictions. Periods of intense diplomatic or armed conflict, may result in new and rapidly evolving trade restrictions and sanctions. Trade restrictions, including new or increased tariffs or quotas, embargoes, sanctions, safeguardssafeguards, and customs restrictions against the products we sell, could increase the cost or reduce the supply of product available to us and adversely affect our business, results of operationsoperations, or cash flows. In addition, our exports are subject to regulations, some of which may be inconsistent, and noncompliance with these requirements could have a negative effect on our business, results of operationsoperations, or cash flows.

The failure to comply with our public sector contracts or applicable laws and regulations could result in, among other things, termination, finesfines, or other liabilities, and changes in procurement regulations could adversely impact our business, results of operationsoperations, or cash flows.

Revenues from our public sector customers are derived from sales to governmental entities, educational institutionsinstitutions, and healthcare customers through various contracts and open market sales of products and services. Sales to public sector customers are highly regulated and present different risks and challenges not present infrom private commercial agreements. Noncompliance with contract provisions, government procurement regulationsregulations, or other applicable laws or regulations (including the False Claims Act, the Medicare and Medicaid Anti-Kickback StatuteStatute, or similar laws of the jurisdictions for our business activities outside of the US) or security clearance and confidentiality requirements could result in civil, criminalcriminal, and administrative liability, including substantial monetary fines or damages, termination of government contracts or other public sector customer contracts, and suspension, debarmentdebarment, or ineligibility from doing business with governmental entities or other customers in the public sector. In addition, contracts in the public sector are generally terminable at any time for convenience of the contracting agency or group purchasing organization (“GPO”) or upon default and public sector contracts may be subject to periodic funding approval, rejectionsrejections, or delays, which could adversely impact public sector demand for our products and services. Furthermore, our inability to enter into or retain contracts with GPOs may threaten our ability to sell to customers in those GPOs and compete effectively. The effect of any of these possible actions or failures could adversely affect our business, results of operationsoperations, or cash flows. In addition, the adoption of new or modified procurement regulations and other requirements may increase our compliance costs and reduce our gross margins, which could have a negative effect on our business, results of operationsoperations, or cash flows.

We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, employment, torttort, and other litigation.

Unless otherwise indicated or the context otherwise requires, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “we,” “us,” “the Company,” “our,” “CDWCDW,” and similar terms refer to CDW Corporation and its subsidiaries. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements that are subject to numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements. See “Forward-Looking Statements” above.

CDW Corporation (“Parent”), a Fortune 500 company and member of the S&P 500 Index, is a leading multi-brand provider of information technology (“IT”) solutions to business, government, educationeducation, and healthcare customers in the United States (“US”), the United Kingdom (“UK”), and Canada. Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experienceexperience, and security.

We have three reportable segments: “Corporate,” “Small BusinessBusiness,” and “Public.” Our Corporate segment primarily serves US private sector business customers with more than 250 employees. Our Small Business segment primarily serves US private sector business customers with up to 250 employees. Our Public segment is comprised of government agencies and education and healthcare institutions in the US. We also have two other operating segments: CDW UK and CDW Canada, each of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category (“Other”).

We are vendor, technologytechnology, and consumption model unbiased, with a solutions portfolio including more than 100,000 products and services from more than 1,000 leading and emerging brands. Our solutions are delivered in physical, virtualvirtual, and cloud-based environments through approximately 10,90010,500 customer-facing coworkers, including sellers, highly-skilled specialistsspecialists, and engineers. We are a leading sales channel partner for many original equipment manufacturers,manufacturers (“OEMs”), software publishers, and cloud providers (collectively, our “vendor partners”) and wholesale distributors, whose products we sell or include in the solutions we offer. We provide our vendor partners with a cost-effective way to reach customers and deliver a consistent brand experience through our established end-market coverage, technical expertiseexpertise, and extensive customer access.

We may sell all or only select products that our vendor partners offer. Each vendor partner agreement provides for specific terms and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discountsdiscounts, and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also resell software for major software publishers. Our agreements with software publishers allow the end-user customer to acquire software or licensed products and services. In addition to helping our customers determine the best software solutions for their needs, we help them manage their software agreements, including warranties and renewals. A significant portion of our advertising and marketing expenses are reimbursed through cooperative advertising programs with our vendor partners. These programs are at the discretion of our vendor partners and are typically tied to sales or other commitments to be met by us within a specified period of time.

For a discussion of results for the year ended December 31, 2023,2024, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024, compared with the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 26,21, 2024.2025.

•General economic conditions are a key factor affecting our results as they can impact our customers’ willingness and ability to spend on informationIT. technology.The Macroeconomicprevailing economic conditions remain challenging, largely due to ongoing uncertainty persistssurrounding asevolving aglobal resulttrade ofpolicies theand geopolitical conditions along with other drivers. These dynamics may continue to influence supply chains, drive inflationary environmentpressures, and the corresponding level ofaffect interest rates driven by monetary policy.rates. The uncertainty in the current economic environment resultedhas in,impacted and may continue to resultimpact in,the a delay, pause or reductiontiming of our customers’ investments in technology by our customers.technology.

•Customers are evaluating the complex technology landscape in order to balance priorities and focus on solutions that lead to business optimization, cost managementmanagement, and security risk management, among other factors, resulting in a more measured approach to their IT spending. We have orchestrated solutions bythat leveragingleverage security, softwaresoftware, artificial intelligence (“AI”), and hybrid and cloud offerings to help customers achieve their objectives.

•Changes and uncertainty related to spending policies, budget priorities, timing and funding levels, including stimulus packages,levels are key factors influencing the purchasing levels of government, healthcare and education customers. As the duration and ongoing impact of current economic conditions remain uncertain, including any US government shutdowns, current and future budget priorities and funding levels for government, healthcare and education customers may be adversely affected, leading to lower IT spend.

•Technology trends drive customer purchasing behaviors in the market. Current technology trends are focused on delivering greater flexibility and efficiency, as well as designing and managing IT securely.securely, while balancing product availability creating an inflationary environment. These trends are driving customer adoption of cloud, artificial intelligence,AI, software defined architectures and hybrid on-premise and off-premise combinations. The trends are further driven by the evolution of the IT consumption model to more “as a service” offerings,solutions, including software as a service and infrastructure as a service, in addition to ongoing managed and professional service arrangements. Technology trends are likely to evolve asand customers will prioritize spend that will produce the most important outcomes for their business.

We monitor a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business and make adjustments as necessary. Financial measures includeare presented both USin GAAP,accordance with the accounting principles generally accepted in the United States of America,America (“GAAP”), and Non-GAAP,non-GAAP, which excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with US GAAP. We believe that the most important of these measures and ratios include Gross profit, Gross profit margin, Operating income, Operating income margin, Non-GAAP operating income, Non-GAAP operating income margin, Net income, Non-GAAP net income, Net income per diluted share, Non-GAAP net income per diluted share, Average daily sales, Net cash provided by operating activities, Adjusted free cash flow, Cash conversion cyclecycle, and Net debt. These measures and ratios are closely monitored by management, so that actions can be taken, as necessary, in order to achieve financial objectives.

For the definitions, discussion of management’s use of Non-GAAPnon-GAAP measures and reconciliations to the most directly comparable US GAAP measure, see “Results of Operations - Non-GAAP Financial Measure Reconciliations.”

(32)Defined as days of sales outstanding related to the current portion of Accounts receivable and certain receivables due from vendors, plus days of supply in Merchandise inventory, minus days of purchases outstanding related to the current portion of Accounts payablepayable-trade and Accounts payable-inventory financing, based on a rolling three-month average.

Results of operations, including Gross profit margin and Operating income margin, expressed as Gross profit and Operating income as a percentage of Net sales, respectively, for the years ended December 31, 20242025 and 20232024 are below. For additional information on Net sales, Gross profitprofit, and Operating income by segment, see the “Segment Results of Operations.”

Selling and administrative expenses decreasedincreased $20$267 million, or 0.7%,9.0%, primarily due to lowerhigher performance-based compensation, includingtransformation equity-basedrelated compensation, consistent with lower attainment against certain financial measures,costs, and lowercoworker-related workforce optimization costs, partially offset by a higher provision for expected credit losses and transformation and other related costs in the current year.costs.

Operating income decreasedincreased $30$4 million, or 1.8%,0.3%, to $1,656 million for the year ended December 31, 2025, compared to $1,651 million for the year ended December 31, 2024, compared to $1,681 million for the year ended December 31, 2023.2024.

Interest expense, net decreasedincludes $12interest expense and interest income. Interest expense, net increased $13 million, or 5.3%,6.0%, primarily due to increasedlower interest income earned on higher average cash balances.

Income tax expense wasincreased $358$3 millionmillion, foror the year ended December 31, 2024, compared to $346 million for the year ended December 31, 2023.0.9%. The effective income tax rate, expressed by calculating income tax expense as a percentage of Income before income taxes, was 24.9%25.3% and 23.9%24.9% for 20242025 and 2023,2024, respectively. The higherincrease in effective income tax rate for the year ended December 31, 2024 as compared to the prior year was primarily attributable to lower excess tax benefits on equity-based compensation.

(3)Includes Headquarters’headquarters function costs that are not allocated to the segments.

Corporate segment Net sales decreasedincreased $124$605 million, or 1.4%,6.8%, primarily due to aincreased decreasecustomer demand primarily in software, notebooks/mobile devices, netcomm products, partially offset by an increase in notebooks/mobile devices and software.desktops.

Corporate segment Gross profit dollars decreasedincreased $28$102 million, or 1.3%,4.9%, althoughdue to higher Net sales, partially offset by increasedlower nettedgross downprofit revenue.margin. Gross profit margin remaineddecreased relatively50.0 consistentbasis atpoints, 23.8%.to 23.3%, due to decreased rates in certain hardware categories, primarily data storage and servers.

PublicCorporate segment Operating income increased $11$10 million, or 1.5%,1.1%, primarily due to decreasedhigher acquisitionGross profit dollars, partially offset by higher performance-based compensation, amortization expense on acquisition-related intangible assets, and integrationcoworker-related costs.

OtherSmall Business segment Gross profit dollars decreasedincreased $5$41 million, or 0.9%.11.6%, due to higher Net sales, partially offset by lower gross profit margin. Gross profit margin increaseddecreased 4040.0 bps,basis points, to 19.8%,22.8%, due to increasedmixing into certain lower margin hardware categories, primarily notebooks/mobile devices, partially offset by a higher contribution of netted down revenue.

OtherSmall Business segment Operating income decreasedincreased $30$22 million, or 21.1%,12.3%, primarily due to increased transformation initiative expense, lowerhigher Gross profit dollarsdollars, andpartially offset by an increased bad debt expenseprovision for expected credit losses.losses and higher performance-based compensation.

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial condition that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with US GAAP. Non-GAAP financial measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Our non-GAAP performance measures include Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted shareshare, and Net sales on a constant currency basis, and our non-GAAP financial condition measures include Free cash flow and Adjusted free cash flow. These non-GAAP performance measures and non-GAAP financial condition measures are collectively referred to as “non-GAAP financial measures.” The GAAP measures most directly comparable to Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, and Net sales on a constant currency basis are Operating income, Operating income margin, Net income, Net income per diluted share, and Net sales, respectively. The GAAP measure most directly comparable to Free cash flow and Adjusted free cash flow is Net cash provided by operating activities.

Non-GAAP operating income excludes, among other things, charges related to the amortization of acquisition-related intangible assets, equity-based compensation and the associated payroll taxes, acquisition and integration expenses, transformation initiativesinitiatives, and workplace optimization. Non-GAAP operating income margin is defined as Non-GAAP operating income as a percentage of Net sales. Non-GAAP net income and Non-GAAP net income per diluted share exclude, among other things, charges related to the amortization of acquisition-related intangible assets, equity-based compensation and the associated payroll taxes, acquisition and integration expenses, transformation initiatives, workplace optimizationoptimization, and their associated income tax effects. Net sales on a constant currency basis is defined as Net sales excluding the impact of foreign currency translation on Net sales. Free cash flow is defined as Net cash provided by operating activities less capital expenditures. Adjusted free cash flow is defined as Free cash flow adjusted to include certain cash flows from financing activities incurred in the normal course of operations or as capital expenditures.

We believe our non-GAAP performancefinancial measures provide analysts, investorsinvestors, and management with useful information regarding the underlying operating performance of our business, as they remove the impact of items that management believes are not reflective of underlying operating performance. Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. We also present non-GAAP financial condition measures as we believe they provide analysts, investorsinvestors, and management with more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation.

See “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our risk factors during the threesix months ended MarchJune 31,30, 2026.

CDW Corporation (“Parent”), a Fortune 500 company and member of the S&P 500 Index, is a leading multi-brand provider of information technology (“IT”) solutions to business, government, education, and healthcare customers in the United States (“US”), the United Kingdom (“UK”), and Canada. Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experience, and security.

We are vendor, technology, and consumption model unbiased, with a solutions portfolio including more than 100,000 products and services from more than 1,000 leading and emerging brands. Our solutions are delivered in physical, virtual, and cloud-based environments through approximately 10,40010,300 customer-facing coworkers, including sellers, highly-skilledhighly skilled specialists, and engineers. We are a leading sales channel partner for many original equipment manufacturers (“OEMs”), software publishers, and cloud providers (collectively, our “vendor partners”), and wholesale distributors, whose products we sell or include in the solutions we offer. We provide our vendor partners with a cost-effective way to reach customers and deliver a consistent brand experience through our established end-market coverage, technical expertise, and extensive customer access.

•General economic conditions are a key factor affecting our results as they can impact our customers’ willingness and ability to spend on IT. The prevailing economic conditions remain challenging,complex, largely due to ongoing uncertainty surrounding evolving global trade policies and geopolitical conditions, along withamong other drivers. TheseIn addition, there has been increased demand for memory-intensive products driven by the rapid adoption of artificial intelligence (“AI”) applications and related data center investments. Collectively, these dynamics may continue to influence supply chains,chains and drive inflationarypricing pressures, andwhile the broader economic conditions may affect interest rates. The uncertainty in the current economic environment has impacted and may continue to impact the timing of our customers’ investments in technology.

We monitor a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business and make adjustments as necessary. Financial measures are presented both in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), and non-GAAP, which excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that the most important of these measures and ratios include Gross profit, Gross profit margin, Operating income, Operating income margin, Non-GAAP operating income, Non-GAAP operating income margin, Net income, Non-GAAP net income, Net income per diluted share, Non-GAAP net income per diluted share, Average daily sales, Net debt, Cash conversion cycle, Net cash provided by operating activities, and Adjusted free cash flow, Cash conversion cycle, and Net debt.flow. These measures and ratios are closely monitored by management, so that actions can be taken, as necessary, in order to achieve financial objectives.

(1)Defined as Net sales divided by the number of selling days. There were 6364 selling days for both the three months ended MarchJune 31,30, 2026 and 2025. There were 127 selling days for both the six months ended June 30, 2026 and 2025.

(1)Defined as total debt minus Cash and cash equivalents and Short-term investments.equivalents. As of MarchJune 31,30, 2026 and MarchJune 31,30, 2025, total debt was $5.6$5.8 billion and $5.9$5.6 billion, respectively, and Cash and cash equivalents was $579$362 million and $471$481 million, respectively. Short-term investments was $217 million as of March 31, 2025. We did not hold Short-term investments as of March 31, 2026.

Results of operations, including Gross profit margin and Operating income margin, expressed as Gross profit and Operating income as a percentage of Net sales, respectively, for the three and six months ended MarchJune 31,30, 2026 and 2025 are below. For additional information on Net sales, Gross profit, and Operating income by segment, see the “Segment Results of Operations.”

Three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025

Net sales increased $481$596 million, or 9.2%,10.0%, with higher Net sales across all operating segments. Net sales on a constant currency basis increased 8.4%9.9% infor the firstthree quartermonths ofended 2026.June While30, economic2026, and geopolitical uncertainty persists, all of our segments continuedcompared to experience improved customer spending during the quarter.three Themonths increaseended inJune customer30, 2025. Customer demand drove Net sales growth primarily in data storage and servers, netcommnotebooks/mobile products,devices, software, and notebooks/mobilenetcomm devices.products.

Gross profit increased $68$79 million, or 6.0%, primarily6.3%, due to higher Net sales, partially offset by lower gross profit margin. Gross profit margin decreased 6070 basis points to 21.0%,20.1%, primarily driven by mix into and lower margin in certain hardware categories, partially offset by a lowerhigher contribution of netted down revenue.

Selling and administrative expenses increased $53$70 million, or 7.0%,8.6%, primarily due to higher compensation expense, including performance-based incentives, coworker-related costs, and investmentsworkplace tooptimization support our AI initiatives.costs.

Operating income increased $15$8 million, or 4.0%,2.0%, to $376$429 million for the three months ended MarchJune 31,30, 2026, compared to $361$420 million for the three months ended MarchJune 31,30, 2025.

Interest expense, net includes interest expense and interest income. Interest expense, net decreasedincreased $2$3 million, or 3.2%,6.0%, primarily due to decreasedhigher interest expense on loweraverage debt levels and a lower variable interest rate on theour senior unsecured termrevolving loan,loan partially offset by lower interest income earned on cash balances.facility.

The effectiveOperating income taxincreased rate$23 million, or 2.9%, to $805 million for the threesix months ended MarchJune 31,30, 20262026, wascompared relativelyto consistent$782 with the effective income tax ratemillion for the threesix months ended MarchJune 31,30, 2025.

(1)There were 6364 selling days for both the three months ended MarchJune 31,30, 2026 and 2025. There were 127 selling days for both the six months ended June 30, 2026 and 2025. Average daily sales is defined as Net sales divided by the number of selling days.

Gross profit by segment for the comparative periods areis as follows:

Operating income by segment for the comparative periods areis as follows:

*nm - Not meaningful (1)Segment operating income includes the segment’s direct operating income, allocations for certain headquarters function costs, allocations for income and expenses from logistics, certain inventory adjustments and volume rebatesrebates, and cooperative advertising from vendors.

Three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025

Net sales increased $314$334 million, or 9.6%,9.2%, primarily due to an increased customer demand in data storage and servers across all customer channels, software, and netcomm products in the corporate customer channel, and softwarenotebooks/mobile acrossdevices in the corporate and healthcare customer channels, and data storage and servers in the financial services customer channel.channels.

Gross profit dollars increased $48$56 million, or 6.4%, primarily7.1%, due to higher Net sales, partially offset by lower gross profit margin. Gross profit margin decreased 6040 basis points,points to 22.4%,21.3%, which is primarily attributed to mix into and lower margin in certain hardware categories, partially offset by a lowerhigher contribution of netted down revenue.

Operating income decreasedincreased $6$11 million, or 1.7%,2.9%, primarily due to higher Gross profit dollars, partially offset by higher compensation expense, including performance-based incentives, and coworker-related costs, partially offset by higher Gross profit dollars.incentives.

Net sales increased $28$101 million, or 4.6%,13.6%, primarily due to increased customer demand primarily in netcomm products, data storage and servers.servers, and software.

Gross profit decreased $10$5 million, or 7.6%, primarily2.7%, due to lower gross profit margin, partially offset by higher Net sales. Gross profit margin decreased 260320 basis points, to 19.7%,19.3%, which is attributed to mix into and lower margin in services and certain hardware categories,categories and a lower contribution of netted down revenue.services.

Net sales increased $17$7 million, or 2.5%, primarily0.7%, due to increased customer demand primarily in notebooks/mobile devices.devices and software, partially offset by decreased customer demand in various hardware categories.

Gross profit dollars increased $7$11 million, or 6.7%,7.9%, primarily due to higher Net sales and Gross profit margin.margin and Net sales. Gross profit margin increased 70110 basis points, to 16.7%,16.4%, which is attributed to a higher margin in software.certain product categories and a higher contribution of netted down revenue.

Net sales increased $122$154 million, or 17.9%,22.9%, primarily due to increased customer demand primarily in notebooks/mobile devices,devices and data storage and servers, and collaboration productsservers within the UK and Canada operations.

Gross profit dollars increased $23$16 million, or 17.0%, primarily11.1%, due to higher Net sales.sales, partially offset by lower Gross profit margin. Gross profit margin remaineddecreased relatively200 consistentbasis atpoints, 19.3%.to 19.1%, which is primarily attributed to mix into and lower margin in certain product categories.

Operating income increased $7$9 million, or 18.9%,22.1%, primarily due to higher Gross profit dollars, partially offset by higher compensation expense, including performance-based incentives,incentives within theCanada and UK and Canada operations.