Christine Leahy
President and Chief Executive Officer at CDW
Thank you, Kevin and good morning everyone. I'll begin today with an overview of third quarter results and drivers of performance, I will take you then through a more detailed look at our financials, as well as our capital allocation strategy and outlook. We'll move quickly through our prepared remarks as we always try to do to ensure we have plenty of time for questions.
But before I get started, I do want to pause for a moment to honor the life and legacy of our former CEO, Tom Richards, who passed away last week after a valiant fight with cancer. I suspect most of you on this call have likely met Tom, in person. I'm certain that everyone on this call has been impacted by Tom. He was a fierce competitor and equally a kind human being. Tom, had a lot of what we like to call it CDW Tomism. Simple way of getting to the essence of something in a way that stuck. One of my personal favorite is when Tom used to say, at CDW we take what we do seriously, but we don't take ourselves too seriously. That's the essence of who we are. That is our CDW culture. Capture so simply and amplifies so strongly by Tom Richards. Tom, also had an unexpected way of signing off on our earnings call. Usually with the right comment about an upcoming holiday. Like Halloween or Mother's Day or even Valentine's Day. As a result, we always ending the call on a high note and with the chuckle. Some news audience as well.
In honor of Tom, I'd like to kick off this earnings call with the tagline depend on every communication to a coworkers. Tom always signed off with you make a difference. Literally injecting into each coworker, Tom, personal belief in them and their important impact. On behalf of all of our coworkers around the globe, our customers and our partners, our communities and our investors, I would like to say thank you to Tom, you've made a difference.
Let me turn now to the Q3 performance. Once again CDW posted strong top line growth and profitability. Overall demand was strong and the teams did a great job addressing customer needs. For the quarter, we delivered record net sales of $5.3 billion, 11% higher than last year and up 10.7% in constant currency. Non-GAAP operating income of $435 million, up 12.6% and non-GAAP net income per share of $2.13, 15.4% higher than last year on a reported basis and up 15.8% in constant currency.
Our ability to deliver the strong top line and profitability was the result of three key drivers, our balanced portfolio of customer end markets, the breadth of our product and solutions portfolio and our ongoing execution against our three part strategy which is focused on taking share and investing in the solutions and capabilities our customers need and want. Let me walk through each one of these and share some detail about how they contributed to our performance.
First, our balanced portfolio of customer end markets. As you know, we have five US sales channels. Corporate, small business, healthcare, government which include federal and state and local customers and education with K-12 and higher ed. We also had our U.K. and Canadian operations each serving public and commercial customers. All of these operations represent meaningful businesses in their own right. Often different factors impact these diverse customer end market. In this quarter we saw that play out as our commercial business in the US, our small and corporate channels and our international operations posted significant double-digit increases, while our US public business posted a mid single-digit decline.
From a macro perspective, supply remained under pressure this quarter demand outpaced supply and lead times extended, particularly in several solutions areas. The team continue to leverage our distribution centers extensive logistics capabilities deep vendor partner relationship and strong balance sheet and liquidity position to navigate the supply environment, they did an exceptional job working with our partners to stay on top of availability status. Our sellers and technical specialists also work with customers and whenever possible found alternative available product and build alternative solutions. These efforts helped mitigate some of the pressure and our backlog increase was consistent with last quarter. The tight supply environment continue to impact prices which our teams were generally able to pass along.
Let's take a deeper look at third quarter customer end market performance. Commercial customer priorities remain the same as in the second quarter. Digital transformation, security and hybrid and cloud solutions. Customers continue to prioritize investments to enable the future and add resiliency to their operations to strengthen and secure infrastructure platform and endpoint. Within this backdrop corporate increased 25% and customer -- customer demand remains strong. While many customers delayed return to office, they continued to prepare, as well as invest to facilitate hybrid work. This drove ongoing strong double-digit increases in transactions, propelled by notebooks, audiovisual and desktop.
At the same time digital transformation remains a top priority. While buying sentiment was clearly there in many cases the product would not. Writings were strong but with extended lead time backlog built during the quarter. Lack of product availability particularly in the common storage muted corporate solutions growth. Small business also delivered another exceptional quarter growth increasing almost 40%. The team continue to help customers with remote enablement, security and video driving strong growth across both transactional and solutions categories.
As we've shared previously small business customers tend to be more flexible in their technology requirements. So while they did see some impact from supply constraints, small business did not experience as much as corporate a great example of the power of diverse end markets. You also see the power of our diverse end markets in our public performance. Net sales for our government channel decreased 33%, federal declined double digit in large part due to the overlapping of our devices service solution for the US Census Bureau and other client device programs that were particularly strong last year.
Security remains robust with net sales, up more than 30%. Security of Washington were slower than typical at federal year end and we had contracting delays in several large contract. This is not unusual. Given the magnitude of federal contract timing can influence performance. You've heard us talk about federal's lumpy nature in the past. This will unwind and we expect to see a reversal back to growth in the first half of 2022. It local posted a mid single-digit decline.
Stimulus funding remained largely unallocated to the local level. This because access multi-year American rescue plan Act funding with deadlines in 2024 led to greater focus on the multi-year budget planning. At the same time, state and local customers were focused on digesting last year's meaningful stimulus funded IT investment. We continue to work with our customers. But given the complexity of the various funding opportunities and multi-year phasing, we do not expect to see projects moving ahead meaningfully until early 2022.
Education increased by 2%. Higher ed delivered high single-digit growth driven by ongoing focus on campus connectivity and enhancing the dorm room experience with double-digit growth in both security software and servers. The K-12 team did an excellent job and matched last year's record net sales coming in flat on top of last year's 30% plus growth. This was consistent with the expectations we shared on our year-end 2020 call, where we look for strong non-seasonal first half performance to be followed by a deceleration in the second half.
Chromebook availability continue to improve during the quarter and client devices increased low-single digit on top of last year's stimulus equity in access driven growth. Overall transactions increased low-single digits on top of last year's strong double-digit growth. Solutions declined driven by a double-digit decline in net, largely reflecting supply challenges. We continue to expect above historical net sales against some very tough on seasonal forth quarter compares.
Healthcare posted a 31% increase, by the second wave of COVID, staff shortages and limited ICU bed availability during the quarter, some projects that have been sidelined did resume. This was particularly the case in security and healthcare remains the target for cybercrime. Our security experts continue to guide hospital systems to find the best solutions that protect their sensitive data and security sales increased strong double digits.
Other, which represents our U.K. and Canadian operations increased over 30% on a reported basis. Both the U.K. and Canada delivered mid 20% growth in local currency. Customer priorities in both markets remain the same as the US digital transformation, security and hybrid and cloud solutions. As do their investments to enable the future and add resiliency to their operations. Both operations experienced increased back orders.
Clearly, the 11% plus, sales growth we delivered demonstrates the power of the first driver of our performance, our balanced portfolio of customer end markets. It also demonstrates the power of the second driver of our performance this quarter, the breadth of our product and solutions portfolio, which you can see in our major category performance. Transactions increased low double digits driven by client device growth in video. Solutions were flat with double digit increases in servers and collaboration tools offset by declines in Netcom and enterprise storage. Drilling further down into key solution categories cloud customer spend once again increased strong double digits. We saw robust growth across all three top cloud workloads, security, infrastructure as a service and productivity. We expect strong customer demand for cloud solutions to continue and we are well positioned to deliver.
And once again given its ongoing important through our customers, our security practice delivered excellent results. Customer spend was up strong double digit. Our teams continue to guide customers on their security posture assess their environment, design the best approach and deploy and manage the solutions throughout its life cycle. Overall for the quarter, we delivered double-digit growth in hardware, low single digit growth in software and strong double digit growth in services. Software net sales increased low-single digits. Strong double digit increase in security software database software and backup and recovery were partially offset by declines in network management software, storage and telephony related software. As I've shared before services are fundamental to our go-to-market approach and a key enabler of our value proposition. This quarter's nearly 30% growth with the product of both organic, performance and inorganic contribution and was driven by both professional and managed services. And this leads to the final driver of our performance in the quarter, the impact of investments we are making in our three part strategy for growth.
As you know, in October, we announced our planned acquisition of Sirius Computer Solutions. When we announced the acquisition I shared how it deepens and add scale to our services capabilities. Capabilities that will ensure we remain the trusted technology advisor to our customers as they accelerate their digital transformation. Notice, I said deepen, Sirius is additive to our existing capabilities. Capabilities we have built through both organic and inorganic investments. Capabilities that enable us to serve customers as their trusted advisor whether in a physical, digital or cloud-based environment in the US and internationally. Why so many investments and services capabilities? Simply put, services are becoming an increasingly larger component of total customer IT spend. For CDW services position us to enable the whole solution, increase our engagement with customers and stickiness and provide insight into opportunities to further help our customers across the full IT lifecycle.
Today IT leaders are accountable for both running the business and using technology to transform the business and deliver strategic outcomes. To both run the business and transform that leaders need to invest resources where they can have the greatest impact and do so with the greatest speed. Services are critical to making this happen. To address this need we have built engineering services capability [Technical Issues] our technical organization has grown to more than 3,700 presale specialists and engineers. Today we can deliver complex digital transformation solutions from [Technical Issues] them quickly.
Let me share example of how our services team is helping a global online home retailer transform their business for their next wave of growth. Our transformation that was hindered by [Technical Issues] to accelerate their transformation [Technical Issues] customer opted for a combination of public cloud technologies and new cloud native patterns. This would create the agility they needed essentially [Technical Issues] and on-demand environment. A great idea but accelerating cloud technology require specialized expertise that is inefficiency keep on staff and that is where CDW came in. First, we leveraged our cloud managed services and offloaded some of the projects from the customer to CDW, then we pulled in our digital velocity talent orchestration services or DVT. DVT orchestration customers with talent to work inside the customer's existing team [Technical Issues] talent is becoming more and more vital in today's environment. Digital velocity talent orchestration delivers highly vetted resources whether already employed by CDW or sourced by us. CDW services enabled the solution, but it did so much more. As you can imagine, this level of high touch integration creates customer loyalty with ongoing relationships on the ground and continue to exchange between CDW and the customer, ultimately leading to more business. Great for the customer and great for CDW.
This is an excellent example of our three part strategy in action and how M&A enhances our organic investments to ensure we remain our customers number one choice as a trusted advisor solving key business problems for our customer in today's environment requires strong service and solutions capabilities. Capabilities that when combined with our great relationships and competitive advantages of scale, scope and disciplined execution enable us to win in the marketplace and deliver sustainable profitable growth today and in the future.
And that leads me to our expectations for the balance of the year. We continue to look for growth in 2021 to come in between nine and a quarter and 10% in constant currency. But roughly between 5% IT market growth and 425 to 500 basis points of CDW market outperformance. This reflects our expectation that supply constraints, do not mitigate anytime in the near future, but do not get materially worse. Remember these constraints don't just reflect component shortages but also labor and logistic challenges. Challenges we do not expect to reverse in the near term and challenge that we do not expect to resolve at the flush rather gradually.
As far as wildcards in addition to the fluids supply situation and the potential for another wave of COVID given the slowdown in the third quarter GDP growth, we will keep a watchful eye out for any slowdown in the economy. As we do, 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 outexecute our competition.
I hope you can tell from my comments this quarter's performance reinforced our confidence that we have the right strategy in place. A strategy that served us well when confronted with macro or customer-specific challenges and positions us for sustainable growth. A strategy designed to continue our evolution as the leading IT solutions provider and most importantly a strategy that delivers profitable growth and returns to shareholders. This confidence underpins today's action by our board to increase our quarterly cash dividend by 25%.
I know many of you may be wondering what we expect for next year. We are in the middle of our planning process and as we always do, we'll provide our outlook for 2022 on our year-end conference call. And with that let me turn it over to Al, who will share more detail on our financial performance, Al.
