Christine A. Leahy
President and Chief Executive Officer at CDW
Thank you, Brittany. I'll begin this morning with an overview of second quarter results and drivers of performance and share our updated thoughts on 2021. Collin will then take you through a more detailed look at the financials and capital allocation strategy and outlook. We'll move quickly through our prepared remarks, as always, to ensure we have plenty of time for questions. We had a record second quarter. Our results demonstrate the balance and strength of CDW's business model and strategy. For the second quarter, net sales were $5.1 billion, a quarterly record and our first quarter over $5 billion of net sales. Net sales grew 17.9% above last year on a reported and average daily sales basis and up 16.3% in constant currency. Gross profit increased 18.2% to $883 million. Non-GAAP operating income was $418 million, an increase of 23.6% and non-GAAP net income per share was $2.02, up 29.3% on a reported basis and up 27.9% in constant currency. Our outstanding results reflect our team's extraordinary execution and the importance of our scale, industry experience and knowledge and strong customer relationships. The diversity of our customer end markets and breadth of our solutions portfolio continues to serve us well. Our record second quarter performance reflected a rebound in commercial customer spending, driving excellent results in our Corporate, Small Business and Canada segments and continued strength in our Education channel.
Our results reflect strong momentum across our business as technology spending recovers from lower spending last year and also increased demand as customers seek to modernize, optimize and innovate. In 2020, customers prioritize remote enablement and continuity. So far in 2021, customers have prioritized digital transformation, security and hybrid and cloud solutions as well as continued investments in end point solutions, driving strong growth for solutions and transactions. Customers are investing to enable the future and adding resilience into their operations, strengthening and securing infrastructure, platforms and end points, leveraging the cloud, preparing for return to in-person operations and industrializing remote enablement for permanently changed work models. We've combined our services and broad solutions portfolio with our extensive technical knowledge and unique logistical and distribution capabilities to advise, design and orchestrate the best outcomes for our customers. Last quarter, we leveraged our distribution centers, extensive logistics capabilities, deep vendor partner relationships and strong balance sheet and liquidity position to navigate the supply environment. Our scale and strong financial position enabled us to continue helping customers navigate the choppy supply environment.
As we previewed on our last earnings call, supply challenges increased during the second quarter for many transactional products and some infrastructure products. While writings strengthened as economies rebounded and more customers turned to CDW for expertise across the full technology solution stack and life cycle, our backlog increased compared to the first quarter. Another impact in the tight supply environment was increasing prices, which our teams were generally able to pass on. We expect supply constraints to continue through the second half of the year and into next year. Now let's take a deeper look at the second quarter customer end market performance. Corporate increased 27% as customer spend sharply recovered with strong transactional and solutions performance. Customers remain focused on digital transformation, hybrid and cloud and security. Customers also began to prepare for employees to return to the office in the coming months, driving end point solutions, including notebooks, video and accessory growth. Our Corporate backlog increased during the quarter as customers await availability due to standards requirements and generally larger orders. Small Business delivered exceptional growth, growing 60%, yes, 6-0 percent, as optimism improved and hiring increased.
Our team helps customers with remote enablement, security and video, leading to strong growth in both transactional and solution spend. As we've shared previously, Small Business customers tend to be nimbler in their technology requirements so performance was less impacted by supply constraints. Net sales for our Government channel decreased 29%. Federal declined double digits due to overlapping our Device as a Service solution for the U.S. Census Bureau and other client device programs that were strong last year. State & Local decreased mid-single digits. Customers evaluated their needs at the beginning of the quarter and started to make investments utilizing stimulus funding towards the end of the quarter, making timing versus demand more of a driver of performance. Our Education channel grew 27%. The team delivered another $1 billion-plus quarter with strong double-digit growth from both K-12 and higher ed. K-12 and higher ed customers are focused on investments to support equity and access and to enhance the in-classroom experience as schools prepare for students to return this fall, which drove both strong transactional and solutions performance.
Customers continue to turn to us for our holistic capabilities across technology solutions and our deep education experience. Healthcare increased 7%, returning to year-over-year growth. Customers resumed projects that have been sidelined during the pandemic as budgets reopened driven by patients returning for elective procedures and providers made investments for the future. Growth was balanced between transactional and solutions categories. Other, which represents our U.K. and Canadian operations, increased over 20% on a reported basis. In local currency, U.K. net sales decreased low single digits, overlapping strong public sector performance and reflecting a slower commercial recovery. The Canada team drove strong double-digit growth in local currency, powered by commercial customer strength and strong transactional and solutions performance. Our second quarter performance benefited from the diversity of our customer base and from our deep and broad product portfolio.
Transactions increased strong double digits driven by client device growth of 17% as well as strong growth in video and accessories. Solutions also increased strong double digits driven by software, collaboration tools and data center solutions. This led to balanced double-digit growth across hardware, software and services. Our services growth reflects strong organic performance and inorganic contributions. As I've shared before, services are fundamental to our go-to-market approach and a key enabler of our value proposition. We also delivered excellent growth in our cloud practice. Cloud customer spend increased strong double digits across all customer segments driven by robust growth in security, Infrastructure as a Service and productivity. We expect strong customer demand for cloud solutions to continue, and we're well positioned to deliver. I want to take a moment to highlight our security practice given its importance to our customers as cyber threats are constantly emerging and evolving and increasing. Security customer spend grew strong double digits as customers improve their security frameworks to respond to increasing threats.
Our teams help customers through a cohesive strategy of security assessment, data protection and threat mitigation. Our second quarter operating and financial performance reflected the combined impact of our balanced portfolio of customer end markets, our full suite of solutions and services across the IT landscape and our ongoing success executing our 3-part strategy for growth. They are all important drivers of our past and future performance. The diversity of our customer end markets serves us well when macro or other external challenges impact various industries and customers differently. Our extent of products, services and solutions portfolio positions us to meet our customers' total needs across the sector of IT. The balance of our customer end markets and our offerings are especially relevant in the current environment. Technology has become more essential to our customers, and we are best positioned to help them navigate the complexity. And the final driver of our performance, our 3-part strategy for growth, which is to: first, acquire new customers and capture share; second, enhance our solutions capabilities; and third, expand our services capabilities.
Each pillar is crucial to our ability to profitably advise, design, orchestrate and manage integrated technology solutions our customers want and need today and in the future. Let me share a few examples of our strategy in action. Earlier this week, we announced that we acquired Focal Point. Focal Point is a leading provider of cybersecurity services with deep capabilities in identity and access management as well as the ability to serve customers across the full cybersecurity landscape. Focal Point is a leader in the cybersecurity space with an expert team and complementary customer relationships. As I shared earlier, security is a top focus area for our customers. The addition of Focal Point expands and accelerates our security practice, adding over 200 coworkers, who we welcome to CDW. We see many significant opportunities ahead, and this is a great example of adding capability to help customers across the full technology solution stack and full technology life cycle. We view M&A as an important part of our capital allocation strategy to expand CDW's strategic capabilities.
Our success is a testament to our coworkers, including those who joined CDW through acquisition, who have delivered consistent with the strategic rationale of each deal, delivering tremendous value to our customers. Let me share another example. Over the last year, Education customers have embraced technology more than ever and fundamentally changed how they purchased, with districts and school systems banding together to access stimulus programs and procure technology to enable remote, hybrid and in-person model. A long-time higher ed customer who was transitioning from a decentralized technology program to centralized turned to us to provide a better end-user experience for its students and staff across its 20-plus campuses. Our team leveraged our digital capabilities to integrate directly into their systems. This greatly improved the ease of purchasing, providing configured branded bundles, hitting prenegotiated pricing, direct-to-home logistics and product availability in a constrained environment.
Our customer-first focus and logistical capabilities continue to be differentiators that drive value with our customers and vendor partners. This is a great example of how we leverage our competitive advantages to win. Last, I want to share a story about a corporate customer that our team helped execute a global compute refresh, changing from a BYOD organization to corporate standards. The Director of Global IT Service Delivery leading the project turned exclusively to us to partner on this important initiative for over 8,000 employees in 20 countries. Having a global partner was very important. Our teams in the U.S., U.K. and Canada worked closely together to deliver for the customer. We worked with our vendor partners to ensure we had product when the customer needed it, which is crucial in the current environment, and the capability we have, given our deep partner relationships, strong financial position and distribution centers. What started as a device refresh has led to partnering on the customer's return-to-office initiative and technology enhancements as well as software and security projects, growing the account from less than $1 million in net sales last year to over $7 million this year.
Our team understood the customer's challenges and leveraged CDW's capabilities on a worldwide basis to provide outstanding service, leading to more opportunities. These examples highlight CDW's 3-part strategy for growth and demonstrates the value of M&A to add solutions and services capabilities to best serve our customers and how we leverage our competitive advantages to win in the marketplace. I am so proud of the way our teams continue to deliver for our customers. Our distribution and configuration centers remain fully operational. During the quarter, our teams continued to safely reengage with customers and partners in person. Although the environment is dynamic, groups of coworkers have started to return to our offices for team meetings and small events and others are starting to work more regularly in our offices. Our ReunITe team is working hard to thoughtfully reimagine and orchestrate the future of work so we can continue to serve our customers and partners better than anyone else can, while we continue to fortify our strong culture. Let me now share our updated thoughts on 2021. We are again increasing our outlook for both U.S. IT market growth and CDW's net sales premium to market.
We now expect the U.S. IT market to grow about 5% and our top line to grow 425 to 500 basis points faster than the market in constant currency. For the third quarter, we expect customer demand trends to continue and have confidence in how our teams are executing and in our solutions and services portfolio. That said, we remain cautious about the supply environment, which we expect to continue to be challenged. While there are other wildcards such as COVID variants, vaccine rollout, return to office and potential policy changes, including infrastructure and taxes, our confidence in the prospects for the business has never been higher. Technology is more essential to all sectors of the economy and will continue to play an increasingly important role in years ahead. We have great confidence that we have the right strategy to best serve our customers and partners, enhance our competitive position and deliver sustainable, profitable growth.
Our role as a trusted strategic partner to our customers is more important now than ever. We will continue to do what we do best, leverage our competitive advantages to help our customers address their IT priorities and achieve their strategic objectives and out-execute our competition. Finally, let me take a moment to update you on our CFO transition. The process is progressing very well. I'm really pleased with the caliber of candidates interested and excited about CDW. We will provide further updates once the process is complete. Until then, Collin is fully engaged and after a successor is named, he will remain onboard to ensure a smooth transition.
With that, I'll turn it over to Collin.