CDW Reports Fourth Quarter and Full Year 2023 Earnings
- Strong margins and disciplined capital allocation led to an increase in earnings per diluted share for the quarter and record cash flows from operations for the year.
- The company announced a $750 million increase to its share repurchase authorization and a 5% increase in quarterly cash dividends.
- CDW remains well-positioned to outpace US IT market growth by 200 to 300 basis points in 2024.
- Net sales decreased by 7.7% for the quarter and 10.0% for the year, driven by economic uncertainty and reduced hardware spend by customers.
- The decline in net sales was driven by all operating segments, including Corporate, Small Business, Public, and the UK and Canadian operations.
Insights
An examination of CDW Corporation's financial results reveals a nuanced picture of the company's performance in a challenging economic environment. Despite a 10% decline in net sales year-over-year, the company has managed to increase its gross profit margin from 19.7% to 21.8% in 2023. This improvement suggests a strategic shift towards higher-margin offerings, such as software as a service and possibly a better product mix. The increase in net income per diluted share by 4.3% for the quarter and a slight increase of 0.9% for the full year, despite the sales dip, indicates effective cost management and possibly a benefit from share repurchases, which can enhance earnings per share by reducing the number of outstanding shares.
The company's decision to increase its share repurchase authorization by $750 million and raise its quarterly cash dividend points to confidence in its cash flow generation and capital allocation strategy. For investors, this could signal a robust balance sheet and a commitment to returning value, which might be particularly appealing during periods of market volatility. However, the overall sales decline does raise questions about the company's growth trajectory and its ability to navigate prolonged economic uncertainty, especially in the hardware segment where spending has been reduced or delayed.
CDW's performance must be contextualized within the broader IT solutions market. The company's strategic goal to outpace US IT market growth by 200 to 300 basis points on a constant currency basis suggests a competitive edge, potentially through a diversified portfolio and strong customer relationships. However, the reported sales decline across all segments, with a notable 19.7% drop in the Small Business segment, could indicate sector-specific challenges or a general market contraction. The resilience in the Government segment, with a 3.7% increase, may reflect a more stable demand for IT solutions within the public sector.
CDW's emphasis on maintaining a 'laser focus' on customer needs and aligning with leading and emerging technology brands is critical for future growth. Their ability to adapt to evolving technology markets will likely determine their performance relative to competitors. The reported decrease in sales to Education and Healthcare customers could suggest a need for reevaluating strategies in these verticals or may reflect broader budgetary constraints within those sectors.
The financial results of CDW Corporation must be assessed in the context of ongoing economic uncertainty. The reduction in hardware spend by customers reflects a broader trend of cautious capital expenditure amid economic headwinds. CDW's resilience, in terms of its gross profit margin and net income, indicates an ability to maintain profitability despite adverse market conditions. This is a positive sign of the company's operational efficiency and pricing power.
From an economic standpoint, the company's performance highlights the importance of strategic investments and financial rigor in sustaining business operations during downturns. The increased gross profit margin, despite a significant sales decline, suggests that CDW's business model can withstand market fluctuations to some extent. However, the reliance on continued strategic investments to drive growth amidst economic uncertainty could be a double-edged sword, requiring careful balance between growth initiatives and cost containment.
Strong Margins Reinforce Power of Business Model and Strategy
(Dollars in millions, except per share amounts) |
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||
2023 |
2022 |
% Chg. |
2023 |
2022 |
% Chg. |
|||||||
Net Sales |
$ |
5,018.5 |
$ |
5,438.3 |
(7.7 |
)% |
$ |
21,376.0 |
$ |
23,748.7 |
(10.0 |
)% |
Average Daily Sales1 |
|
79.7 |
|
86.3 |
(7.7 |
) |
|
84.2 |
|
93.5 |
(10.0 |
) |
Gross Profit |
|
1,153.8 |
|
1,181.1 |
(2.3 |
) |
|
4,652.4 |
|
4,686.6 |
(0.7 |
) |
Operating Income |
|
435.0 |
|
446.6 |
(2.6 |
) |
|
1,680.9 |
|
1,735.2 |
(3.1 |
) |
Net Income |
|
296.1 |
|
287.2 |
3.1 |
|
|
1,104.3 |
|
1,114.5 |
(0.9 |
) |
Net Income per Diluted Share |
$ |
2.18 |
$ |
2.09 |
4.3 |
|
$ |
8.10 |
$ |
8.13 |
(0.4 |
) |
Non-GAAP Operating Income2 |
|
518.7 |
|
523.1 |
(0.8 |
) |
|
2,039.1 |
|
2,050.5 |
(0.6 |
) |
Non-GAAP Net Income per Diluted Share2 |
$ |
2.57 |
$ |
2.50 |
2.8 |
% |
$ |
9.88 |
$ |
9.79 |
0.9 |
% |
1 Defined as Net sales divided by the number of selling days. There were 63 selling days for both the three months ended December 31, 2023 and 2022. There were 254 selling days for both the years ended December 31, 2023 and 2022. |
||||||||||||
2 Non-GAAP measures used in this release that are not based on accounting principles generally accepted in |
||||||||||||
CDW Corporation (Nasdaq:CDW), a leading multi-brand provider of information technology solutions to business, government, education and healthcare customers in
"Strong margins, both for the quarter and the year, highlight the power of our execution excellence and financial rigor when underpinned by the strategic investments we have made over the past five years," said Christine A. Leahy, chair and chief executive officer, CDW. "In this period of ongoing economic uncertainty, customers are increasingly turning to CDW to address mission-critical needs across the full IT solutions stack and lifecycle, and our value proposition is stronger than ever."
"Healthy operating results, our resilient business model, and our disciplined approach to capital allocation delivered growth in earnings per diluted share for the quarter and record cash flows from operations for the year," said Albert J. Miralles, chief financial officer, CDW. "We continue to convert earnings to cash at a productive rate, ahead of our targets, and optimize our use of cash flow through dividends and share repurchases."
"Looking ahead to 2024, we remain well-positioned to continue our track record of outpacing the US IT market growth by 200 to 300 basis points on a constant currency basis. To accomplish this, we will maintain our laser focus on meeting the needs of our more than 250,000 customers and remaining the partner of choice for more than 1,000 leading and emerging technology brands as the technology market continues to evolve," concluded Leahy.
Fourth Quarter of 2023 Highlights:
Net sales in the fourth quarter of 2023 were
-
Corporate segment Net sales of
$2,286 million
-
Small Business segment Net sales of
$370 million
-
Public segment Net sales of
$1,776 million
-
Net sales for CDW's
UK and Canadian operations, combined as "Other" for financial reporting purposes, of$587 million
Gross profit was
Selling and administrative expenses were
Operating income was
Interest expense, net includes interest expense and interest income. Interest expense, net was
The effective tax rate was 22.2 percent in the fourth quarter of 2023, compared to 24.7 percent in the fourth quarter of 2022, which resulted in tax expense of
Net income was
Weighted average diluted shares outstanding were 136 million for the fourth quarter of 2023, compared to 137 million for the fourth quarter of 2022. Net income per diluted share was
Full Year 2023 Highlights:
Net sales in 2023 were
-
Corporate segment Net sales of
$8,961 million
-
Small Business segment Net sales of
$1,556 million
-
Public segment Net sales of
$8,306 million
-
Net sales for CDW's
UK and Canadian operations, combined as "Other" for financial reporting purposes, of$2,554 million
Gross profit was
Selling and administrative expenses were
Operating income was
Interest expense, net includes interest expense and interest income. Interest expense, net was
The effective tax rate was 23.9 percent in 2023, compared to 25.1 percent in 2022, which resulted in tax expense of
Net income was
Weighted average diluted shares outstanding were 136 million in 2023, compared to 137 million in 2022. Net income per diluted share was
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical fact are forward-looking statements. These statements relate to analyses and other information, which are based on forecasts of future results or events and estimates of amounts not yet determinable. These statements also relate to our future prospects, growth, developments and business strategies. We claim the protection of The Private Securities Litigation Reform Act of 1995 for all forward-looking statements in this release.
These forward-looking statements are identified by the use of terms and phrases such as "anticipate," "assume," "believe," "estimate," "expect," "goal," "intend," "plan," "potential," "predict," "project," "target" and similar terms and phrases or future or conditional verbs such as "could," "may," "should," "will," and "would." However, these words are not the exclusive means of identifying such statements. Although we believe that our plans, intentions and other expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. All forward-looking statements are subject to risks and uncertainties that may cause actual results or events to differ materially from those that we expected.
Important factors that could cause actual results or events to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled "Risk Factors" and "Trends and Key Factors Affecting our Financial Performance" included in our Annual Report on Form 10-K for the year ended December 31, 2022, and from time to time in our subsequent Quarterly Reports on Form 10-Q and our other US Securities and Exchange Commission ("SEC") filings and public communications. These factors include, among others, inflationary pressures; level of interest rates; CDW's relationships with vendor partners and terms of their agreements; continued innovations in technology by CDW's vendor partners; the use or capabilities of artificial intelligence; substantial competition that could reduce CDW's market share; the continuing development, maintenance and operation of CDW's information technology systems; potential breaches of data security and failure to protect our information technology systems from cybersecurity threats; potential failures to provide high-quality services to CDW's customers; potential losses of any key personnel, significant increases in labor costs or ineffective workforce management; potential adverse occurrences at one of CDW's primary facilities or third-party data centers, including as a result of climate change; increases in the cost of commercial delivery services or disruptions of those services; CDW's exposure to accounts receivable and inventory risks; future acquisitions or alliances; fluctuations in CDW's operating results; fluctuations in foreign currency; global and regional economic and political conditions, including the impact of pandemics such as COVID-19 and armed conflicts; potential interruptions of the flow of products from suppliers; decreases in spending on technology products and services, including impacts of adverse change in government spending policies; potential failures to comply with Public segment contracts or applicable laws and regulations; current and future legal proceedings, investigations and audits, including intellectual property infringement claims; changes in laws, including regulations or interpretations thereof, or the potential failure to meet stakeholder expectations on environmental sustainability and corporate responsibility matters; CDW's level of indebtedness; restrictions imposed by agreements relating to CDW's indebtedness on its operations and liquidity; failure to maintain the ratings assigned to CDW's debt securities by rating agencies; changes in, or the discontinuation of, CDW's share repurchase program or dividend payments; and other risk factors or uncertainties identified from time to time in CDW's filings with the SEC. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by those cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this release in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not reflect all of the factors that could cause actual results or events to differ from our expectations. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Non-GAAP Financial Measures
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 initiatives 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 excludes, among other things, charges related to acquisition-related intangible asset amortization, equity-based compensation, acquisition and integration expenses, transformation initiatives, workplace optimization and the associated tax effects of each. Net sales on a constant currency basis is defined as Net sales excluding the impact of foreign currency translation on Net sales compared to the prior period. Free cash flow is defined as cash flows 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.
Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales on a constant currency basis, Free cash flow and Adjusted free cash flow are considered non-GAAP financial measures. 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 measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
CDW believes 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 provide analysts, investors and management with useful information regarding the underlying operating performance of CDW's business, as they remove the impact of items that management believes are not reflective of underlying operating performance. CDW 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 Free cash flow and Adjusted free cash flow as we believe these measures provide more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation.
CDW's outlook is provided on a non-GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled, such as currency impacts or interest rates, or reliably predicted because they are not part of CDW's routine activities, such as refinancing activities or acquisition and integration expenses.
The financial statement tables that accompany this press release include a reconciliation of non-GAAP financial measures to the applicable most comparable US GAAP financial measures.
About CDW
CDW Corporation (Nasdaq:CDW) is a leading multi-brand provider of information technology solutions to business, government, education and healthcare customers in
Webcast
CDW Corporation will hold a conference call today, February 7, 2024 at 7:30 a.m. CT/8:30 a.m. ET to discuss its fourth quarter and full year financial results. The conference call, which will be broadcast live via the Internet, and a copy of this press release along with supplemental slides used during the call, can be accessed on CDW’s website at investor.cdw.com. For those unable to participate in the live call, a replay of the webcast will be available at investor.cdw.com approximately 90 minutes after the completion of the call and will be accessible on the site for approximately one year.
CDWPR-FI
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars and shares in millions, except per-share amounts) |
||||||||||||||||||||||
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||||||
|
|
2023 |
|
2022 |
|
% Change(i) |
|
2023 |
|
2022 |
|
% Change(i) |
||||||||||
|
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
|
|
|
||||||||||
Net sales |
|
$ |
5,018.5 |
|
|
$ |
5,438.3 |
|
|
(7.7 |
)% |
|
$ |
21,376.0 |
|
|
$ |
23,748.7 |
|
|
(10.0 |
)% |
Cost of sales |
|
|
3,864.7 |
|
|
|
4,257.2 |
|
|
(9.2 |
) |
|
|
16,723.6 |
|
|
|
19,062.1 |
|
|
(12.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross profit |
|
|
1,153.8 |
|
|
|
1,181.1 |
|
|
(2.3 |
) |
|
|
4,652.4 |
|
|
|
4,686.6 |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling and administrative expenses |
|
|
718.8 |
|
|
|
734.5 |
|
|
(2.1 |
) |
|
|
2,971.5 |
|
|
|
2,951.4 |
|
|
0.7 |
|
Operating income |
|
|
435.0 |
|
|
|
446.6 |
|
|
(2.6 |
) |
|
|
1,680.9 |
|
|
|
1,735.2 |
|
|
(3.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net |
|
|
(53.3 |
) |
|
|
(59.4 |
) |
|
(10.3 |
) |
|
|
(226.6 |
) |
|
|
(235.7 |
) |
|
(3.9 |
) |
Other expense, net |
|
|
(1.0 |
) |
|
|
(6.0 |
) |
|
nm* |
|
|
(4.1 |
) |
|
|
(11.7 |
) |
|
nm* |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes |
|
|
380.7 |
|
|
|
381.2 |
|
|
(0.1 |
) |
|
|
1,450.2 |
|
|
|
1,487.8 |
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income tax expense |
|
|
(84.6 |
) |
|
|
(94.0 |
) |
|
(10.0 |
) |
|
|
(345.9 |
) |
|
|
(373.3 |
) |
|
(7.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income |
|
$ |
296.1 |
|
|
$ |
287.2 |
|
|
3.1 |
% |
|
$ |
1,104.3 |
|
|
$ |
1,114.5 |
|
|
(0.9 |
) % |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
|
$ |
2.20 |
|
|
$ |
2.12 |
|
|
4.2 |
% |
|
$ |
8.20 |
|
|
$ |
8.24 |
|
|
(0.4 |
)% |
Diluted |
|
$ |
2.18 |
|
|
$ |
2.09 |
|
|
4.3 |
% |
|
$ |
8.10 |
|
|
$ |
8.13 |
|
|
(0.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
|
|
134.1 |
|
|
|
135.5 |
|
|
|
|
|
134.6 |
|
|
|
135.2 |
|
|
|
||
Diluted |
|
|
135.9 |
|
|
|
137.4 |
|
|
|
|
|
136.3 |
|
|
|
137.0 |
|
|
|
||
* Not meaningful |
||||||||||||||||||||||
| (i) | There were 63 selling days for both the three months ended December 31, 2023 and 2022. There were 254 selling days for both the years ended December 31, 2023 and 2022. Average Daily Sales is defined as Net sales divided by the number of selling days. |
CDW CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
CDW has included reconciliations of 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 for the three months and years ended December 31, 2023 and 2022 below. In addition, a reconciliation of Free cash flow and Adjusted free cash flow is included for the years ended December 31, 2023 and 2022.
CDW CORPORATION AND SUBSIDIARIES NON-GAAP OPERATING INCOME AND NON-GAAP OPERATING INCOME MARGIN (dollars in millions) (unaudited) |
|||||||||||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||||||||
|
2023 |
|
% of Net sales |
|
2022 |
|
% of Net sales |
|
2023 |
|
% of Net sales |
|
2022 |
|
% of Net sales |
||||||||
Operating income, as reported |
$ |
435.0 |
|
8.7 |
% |
|
$ |
446.6 |
|
8.2 |
% |
|
$ |
1,680.9 |
|
7.9 |
% |
|
$ |
1,735.2 |
|
7.3 |
% |
Amortization of intangibles(i) |
|
38.2 |
|
|
|
|
41.5 |
|
|
|
|
154.4 |
|
|
|
|
167.9 |
|
|
||||
Equity-based compensation |
|
22.1 |
|
|
|
|
19.7 |
|
|
|
|
93.7 |
|
|
|
|
91.1 |
|
|
||||
Acquisition and integration expenses |
|
5.3 |
|
|
|
|
12.0 |
|
|
|
|
30.0 |
|
|
|
|
48.3 |
|
|
||||
Transformation initiatives(ii) |
|
11.1 |
|
|
|
|
2.9 |
|
|
|
|
27.1 |
|
|
|
|
6.3 |
|
|
||||
Workplace optimization(iii) |
|
5.2 |
|
|
|
|
— |
|
|
|
|
47.7 |
|
|
|
|
— |
|
|
||||
Other adjustments |
|
1.8 |
|
|
|
|
0.4 |
|
|
|
|
5.3 |
|
|
|
|
1.7 |
|
|
||||
Non-GAAP operating income |
$ |
518.7 |
|
10.3 |
% |
|
$ |
523.1 |
|
9.6 |
% |
|
$ |
2,039.1 |
|
9.5 |
% |
|
$ |
2,050.5 |
|
8.6 |
% |
(i) |
Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. |
|
|
(ii) |
Includes costs related to strategic transformation initiatives focused on optimizing various operations and systems. |
|
|
(iii) |
Includes costs related to the workforce reduction program and charges related to the reduction of our real estate lease portfolio. |
CDW CORPORATION AND SUBSIDIARIES NON-GAAP NET INCOME AND NON-GAAP NET INCOME PER DILUTED SHARE (dollars and shares in millions, except per-share amounts) (unaudited) |
||||||||||||||||||||||||||||
|
Three Months Ended December 31, |
|
|
|||||||||||||||||||||||||
|
2023 |
|
2022 |
|
|
|||||||||||||||||||||||
|
Income before Income Taxes |
|
Income Tax Expense(i) |
|
Net Income |
|
Effective Tax Rate |
|
Income before Income Taxes |
|
Income Tax Expense(i) |
|
Net Income |
|
Effective Tax Rate |
|
Net Income % Change |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
US GAAP, as reported |
$ |
380.7 |
|
$ |
(84.6 |
) |
|
$ |
296.1 |
|
22.2 |
% |
|
$ |
381.2 |
|
$ |
(94.0 |
) |
|
$ |
287.2 |
|
24.7 |
% |
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Amortization of intangibles(ii) |
|
38.2 |
|
|
(10.0 |
) |
|
|
28.2 |
|
|
|
|
41.5 |
|
|
(10.8 |
) |
|
|
30.7 |
|
|
|
|
|||
Equity-based compensation |
|
22.1 |
|
|
(14.9 |
) |
|
|
7.2 |
|
|
|
|
19.7 |
|
|
(6.7 |
) |
|
|
13.0 |
|
|
|
|
|||
Acquisition and integration expenses |
|
5.3 |
|
|
(1.4 |
) |
|
|
3.9 |
|
|
|
|
12.0 |
|
|
(3.0 |
) |
|
|
9.0 |
|
|
|
|
|||
Transformation initiatives(iii) |
|
11.1 |
|
|
(2.9 |
) |
|
|
8.2 |
|
|
|
|
2.9 |
|
|
(0.8 |
) |
|
|
2.1 |
|
|
|
|
|||
Workplace optimization(iv) |
|
5.2 |
|
|
(1.3 |
) |
|
|
3.9 |
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|||
Net loss on extinguishment of long-term debt |
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
1.6 |
|
|
(0.4 |
) |
|
|
1.2 |
|
|
|
|
|||
Other adjustments |
|
1.8 |
|
|
(0.2 |
) |
|
|
1.6 |
|
|
|
|
0.4 |
|
|
(0.2 |
) |
|
|
0.2 |
|
|
|
|
|||
Non-GAAP |
$ |
464.4 |
|
$ |
(115.3 |
) |
|
$ |
349.1 |
|
24.8 |
% |
|
$ |
459.3 |
|
$ |
(115.9 |
) |
|
$ |
343.4 |
|
25.2 |
% |
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
US GAAP net income per diluted share |
|
|
|
|
$ |
2.18 |
|
|
|
|
|
|
|
$ |
2.09 |
|
|
|
|
|||||||||
Non-GAAP net income per diluted share |
|
|
|
|
$ |
2.57 |
|
|
|
|
|
|
|
$ |
2.50 |
|
|
|
|
|||||||||
Shares used in computing US GAAP and Non-GAAP net income per diluted share |
|
|
|
|
|
135.9 |
|
|
|
|
|
|
|
|
137.4 |
|
|
|
|
|||||||||
| (i) | Income tax on non-GAAP adjustments includes excess tax benefits associated with equity-based compensation. |
|
|
| (ii) | Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. |
|
|
| (iii) | Includes costs related to strategic transformation initiatives focused on optimizing various operations and systems. |
|
|
| (iv) | Includes costs related to the workforce reduction program and charges related to the reduction of our real estate lease portfolio. |
CDW CORPORATION AND SUBSIDIARIES NON-GAAP NET INCOME AND NON-GAAP NET INCOME PER DILUTED SHARE (dollars and shares in millions, except per-share amounts) (unaudited) |
||||||||||||||||||||||||||||
|
Year Ended December 31, |
|
|
|||||||||||||||||||||||||
|
2023 |
|
2022 |
|
|
|||||||||||||||||||||||
|
Income before Income Taxes |
|
Income Tax Expense(i) |
|
Net Income |
|
Effective Tax Rate |
|
Income before Income Taxes |
|
Income Tax Expense(i) |
|
Net Income |
|
Effective Tax Rate |
|
Net Income % Change |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
US GAAP, as reported |
$ |
1,450.2 |
|
$ |
(345.9 |
) |
|
$ |
1,104.3 |
|
23.9 |
% |
|
$ |
1,487.8 |
|
$ |
(373.3 |
) |
|
$ |
1,114.5 |
|
25.1 |
% |
|
(0.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Amortization of intangibles(ii) |
|
154.4 |
|
|
(40.2 |
) |
|
|
114.2 |
|
|
|
|
167.9 |
|
|
(44.6 |
) |
|
|
123.3 |
|
|
|
|
|||
Equity-based compensation |
|
93.7 |
|
|
(47.6 |
) |
|
|
46.1 |
|
|
|
|
91.1 |
|
|
(30.4 |
) |
|
|
60.7 |
|
|
|
|
|||
Acquisition and integration expenses |
|
30.0 |
|
|
(7.8 |
) |
|
|
22.2 |
|
|
|
|
48.3 |
|
|
(12.4 |
) |
|
|
35.9 |
|
|
|
|
|||
Transformation initiatives(iii) |
|
27.1 |
|
|
(7.1 |
) |
|
|
20.0 |
|
|
|
|
6.3 |
|
|
(1.6 |
) |
|
|
4.7 |
|
|
|
|
|||
Workplace optimization(iv) |
|
47.7 |
|
|
(12.4 |
) |
|
|
35.3 |
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|||
Net loss on extinguishment of long-term debt |
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
1.6 |
|
|
(0.4 |
) |
|
|
1.2 |
|
|
|
|
|||
Other adjustments |
|
5.3 |
|
|
(1.2 |
) |
|
|
4.1 |
|
|
|
|
1.7 |
|
|
(0.5 |
) |
|
|
1.2 |
|
|
|
|
|||
Non-GAAP |
$ |
1,808.4 |
|
$ |
(462.2 |
) |
|
$ |
1,346.2 |
|
25.6 |
% |
|
$ |
1,804.7 |
|
$ |
(463.2 |
) |
|
$ |
1,341.5 |
|
25.7 |
% |
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
US GAAP net income per diluted share |
|
|
|
|
$ |
8.10 |
|
|
|
|
|
|
|
$ |
8.13 |
|
|
|
|
|||||||||
Non-GAAP net income per diluted share |
|
|
|
|
$ |
9.88 |
|
|
|
|
|
|
|
$ |
9.79 |
|
|
|
|
|||||||||
Shares used in computing US GAAP and Non-GAAP net income per diluted share |
|
|
|
|
|
136.3 |
|
|
|
|
|
|
|
|
137.0 |
|
|
|
|
|||||||||
|
|
(i) |
Income tax on non-GAAP adjustments includes excess tax benefits associated with equity-based compensation. |
|
|
(ii) |
Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. |
|
|
(iii) |
Includes costs related to strategic transformation initiatives focused on optimizing various operations and systems. |
|
|
(iv) |
Includes costs related to the workforce reduction program and charges related to the reduction of our real estate lease portfolio. |
CDW CORPORATION AND SUBSIDIARIES NET SALES CHANGE ON A CONSTANT CURRENCY BASIS (dollars in millions) (unaudited) |
|||||||||||||||||||
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|||||||||||||||
|
|
2023 |
|
2022 |
|
% Change(i) |
|
2023 |
|
2022 |
|
% Change(i) |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales, as reported |
|
$ |
5,018.5 |
|
$ |
5,438.3 |
|
(7.7 |
)% |
|
$ |
21,376.0 |
|
$ |
23,748.7 |
|
|
(10.0 |
)% |
Foreign currency translation(ii) |
|
|
— |
|
|
23.8 |
|
|
|
|
— |
|
|
(28.2 |
) |
|
|
||
Net sales, on a constant currency basis |
|
$ |
5,018.5 |
|
$ |
5,462.1 |
|
(8.1 |
)% |
|
$ |
21,376.0 |
|
$ |
23,720.5 |
|
|
(9.9 |
)% |
(i) |
There were 63 selling days for both the three months ended December 31, 2023 and 2022. There were 254 selling days for both the years ended December 31, 2023 and 2022. Average Daily Sales is defined as Net sales divided by the number of selling days. |
|
|
(ii) |
Represents the effect of translating the prior year results of CDW |
CDW CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in millions) |
|||||
|
December 31, 2023 |
|
December 31, 2022 |
||
Assets |
(unaudited) |
|
|
||
|
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
588.7 |
|
$ |
315.2 |
Accounts receivable, net of allowance for credit losses of |
|
4,567.5 |
|
|
4,461.3 |
Merchandise inventory |
|
668.1 |
|
|
800.2 |
Miscellaneous receivables |
|
470.5 |
|
|
489.1 |
Prepaid expenses and other |
|
410.2 |
|
|
498.2 |
Total current assets |
|
6,705.0 |
|
|
6,564.0 |
|
|
|
|
||
Operating lease right-of-use assets |
|
128.8 |
|
|
149.2 |
Property and equipment, net |
|
195.5 |
|
|
188.8 |
Goodwill |
|
4,413.4 |
|
|
4,342.7 |
Other intangible assets, net |
|
1,369.7 |
|
|
1,490.7 |
Other assets |
|
472.2 |
|
|
396.1 |
Total assets |
$ |
13,284.6 |
|
$ |
13,131.5 |
|
|
|
|
||
Liabilities and Stockholders’ Equity |
|
|
|
||
|
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable - trade |
$ |
2,881.0 |
|
$ |
2,821.3 |
Accounts payable - inventory financing |
|
430.9 |
|
|
519.0 |
Current maturities of long-term debt |
|
613.1 |
|
|
56.3 |
Contract liabilities |
|
487.4 |
|
|
485.5 |
Accrued expenses and other liabilities |
|
1,029.6 |
|
|
1,065.0 |
Total current liabilities |
|
5,442.0 |
|
|
4,947.1 |
|
|
|
|
||
Long-term liabilities: |
|
|
|
||
Debt |
|
5,031.8 |
|
|
5,866.4 |
Deferred income taxes |
|
171.4 |
|
|
203.4 |
Operating lease liabilities |
|
164.0 |
|
|
175.2 |
Other liabilities |
|
432.9 |
|
|
336.1 |
Total long-term liabilities |
|
5,800.1 |
|
|
6,581.1 |
|
|
|
|
||
Total stockholders’ equity |
|
2,042.5 |
|
|
1,603.3 |
Total liabilities and stockholders’ equity |
$ |
13,284.6 |
|
$ |
13,131.5 |
CDW CORPORATION AND SUBSIDIARIES NET SALES DETAIL (dollars in millions) |
||||||||||||||||||
|
|
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
|
|
2023 |
|
2022 |
|
% Change(i) |
|
2023 |
|
2022 |
|
% Change(i) |
||||||
|
|
(unaudited) |
|
(unaudited) |
|
|
|
(unaudited) |
|
|
|
|
||||||
Corporate |
|
$ |
2,285.6 |
|
$ |
2,484.0 |
|
(8.0 |
)% |
|
$ |
8,960.8 |
|
$ |
10,350.1 |
|
(13.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Small Business |
|
|
370.0 |
|
|
423.7 |
|
(12.7 |
) |
|
|
1,556.0 |
|
|
1,938.9 |
|
(19.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Public: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Government |
|
|
660.7 |
|
|
632.5 |
|
4.5 |
|
|
|
2,669.1 |
|
|
2,574.3 |
|
3.7 |
|
Education |
|
|
579.1 |
|
|
656.2 |
|
(11.7 |
) |
|
|
3,298.3 |
|
|
3,621.4 |
|
(8.9 |
) |
Healthcare |
|
|
535.9 |
|
|
562.3 |
|
(4.7 |
) |
|
|
2,338.3 |
|
|
2,355.6 |
|
(0.7 |
) |
Total Public |
|
|
1,775.7 |
|
|
1,851.0 |
|
(4.1 |
) |
|
|
8,305.7 |
|
|
8,551.3 |
|
(2.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
587.2 |
|
|
679.6 |
|
(13.6 |
) |
|
|
2,553.5 |
|
|
2,908.4 |
|
(12.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Net sales |
|
$ |
5,018.5 |
|
$ |
5,438.3 |
|
(7.7 |
)% |
|
$ |
21,376.0 |
|
$ |
23,748.7 |
|
(10.0 |
)% |
| (i) | There were 63 selling days for both the three months ended December 31, 2023 and 2022. There were 254 selling days for both the years ended December 31, 2023 and 2022. Average Daily Sales is defined as Net sales divided by the number of selling days. |
CDW CORPORATION AND SUBSIDIARIES TIMING OF REVENUE RECOGNITION (dollars in millions) (unaudited) |
||||||||||||||
|
Three Months Ended December 31, 2023 |
|||||||||||||
|
Corporate |
|
Small Business |
|
Public |
|
Other |
|
Total |
|||||
Timing of Revenue Recognition |
|
|
|
|
|
|
|
|
|
|||||
Transferred at a point in time where CDW is principal |
$ |
1,901.1 |
|
$ |
320.8 |
|
$ |
1,552.5 |
|
$ |
493.9 |
|
$ |
4,268.3 |
Transferred at a point in time where CDW is agent |
|
214.7 |
|
|
38.5 |
|
|
118.5 |
|
|
37.0 |
|
|
408.7 |
Transferred over time where CDW is principal |
|
169.8 |
|
|
10.7 |
|
|
104.7 |
|
|
56.3 |
|
|
341.5 |
Total Net sales |
$ |
2,285.6 |
|
$ |
370.0 |
|
$ |
1,775.7 |
|
$ |
587.2 |
|
$ |
5,018.5 |
|
|
|
|
|
|
|
|
|
|
|||||
|
Three Months Ended December 31, 2022 |
|||||||||||||
|
Corporate |
|
Small Business |
|
Public |
|
Other |
|
Total |
|||||
Timing of Revenue Recognition |
|
|
|
|
|
|
|
|
|
|||||
Transferred at a point in time where CDW is principal |
$ |
2,138.0 |
|
$ |
376.5 |
|
$ |
1,655.0 |
|
$ |
595.6 |
|
$ |
4,765.1 |
Transferred at a point in time where CDW is agent |
|
202.1 |
|
|
36.1 |
|
|
97.6 |
|
|
26.7 |
|
|
362.5 |
Transferred over time where CDW is principal |
|
143.9 |
|
|
11.1 |
|
|
98.4 |
|
|
57.3 |
|
|
310.7 |
Total Net sales |
$ |
2,484.0 |
|
$ |
423.7 |
|
$ |
1,851.0 |
|
$ |
679.6 |
|
$ |
5,438.3 |
CDW CORPORATION AND SUBSIDIARIES TIMING OF REVENUE RECOGNITION (dollars in millions) (unaudited) |
||||||||||||||
|
Year Ended December 31, 2023 |
|||||||||||||
|
Corporate |
|
Small Business |
|
Public |
|
Other |
|
Total |
|||||
Timing of Revenue Recognition |
|
|
|
|
|
|
|
|
|
|||||
Transferred at a point in time where CDW is principal |
$ |
7,515.7 |
|
$ |
1,374.1 |
|
$ |
7,411.1 |
|
$ |
2,212.0 |
|
$ |
18,512.9 |
Transferred at a point in time where CDW is agent |
|
778.0 |
|
|
145.3 |
|
|
480.6 |
|
|
117.9 |
|
|
1,521.8 |
Transferred over time where CDW is principal |
|
667.1 |
|
|
36.6 |
|
|
414.0 |
|
|
223.6 |
|
|
1,341.3 |
Total Net sales |
$ |
8,960.8 |
|
$ |
1,556.0 |
|
$ |
8,305.7 |
|
$ |
2,553.5 |
|
$ |
21,376.0 |
|
|
|
|
|
|
|
|
|
|
|||||
|
For the year ended December 31, 2022 |
|||||||||||||
|
Corporate |
|
Small Business |
|
Public |
|
Other |
|
Total |
|||||
Timing of Revenue Recognition |
|
|
|
|
|
|
|
|
|
|||||
Transferred at a point in time where CDW is principal |
$ |
8,971.4 |
|
$ |
1,751.1 |
|
$ |
7,717.1 |
|
$ |
2,576.5 |
|
$ |
21,016.1 |
Transferred at a point in time where CDW is agent |
|
749.3 |
|
|
140.1 |
|
|
426.9 |
|
|
97.7 |
|
|
1,414.0 |
Transferred over time where CDW is principal |
|
629.4 |
|
|
47.7 |
|
|
407.3 |
|
|
234.2 |
|
|
1,318.6 |
Total Net sales |
$ |
10,350.1 |
|
$ |
1,938.9 |
|
$ |
8,551.3 |
|
$ |
2,908.4 |
|
$ |
23,748.7 |
CDW CORPORATION AND SUBSIDIARIES DEBT AND WORKING CAPITAL INFORMATION (dollars in millions) (unaudited) |
|||||||
|
December 31, 2023 |
|
December 31, 2022 |
||||
Debt and Revolver Availability |
|
|
|
||||
Cash and cash equivalents |
$ |
588.7 |
|
|
$ |
315.2 |
|
Total debt |
|
5,644.9 |
|
|
|
5,922.7 |
|
Revolver availability |
|
1,208.1 |
|
|
|
1,083.6 |
|
Cash plus revolver availability |
|
1,796.8 |
|
|
|
1,398.8 |
|
|
|
|
|
||||
Working Capital(i) |
|
|
|
||||
Days of sales outstanding |
|
77 |
|
|
|
71 |
|
Days of supply in inventory |
|
13 |
|
|
|
17 |
|
Days of purchases outstanding |
|
(73 |
) |
|
|
(67 |
) |
Cash conversion cycle |
|
17 |
|
|
|
21 |
|
| (i) | Based on a rolling three-month average. |
CDW CORPORATION AND SUBSIDIARIES CASH FLOW INFORMATION (dollars in millions) |
|||||||
|
Year Ended December 31, |
||||||
|
|
2023 |
|
|
|
2022 |
|
|
(unaudited) |
|
|
||||
Cash flows provided by operating activities |
$ |
1,598.7 |
|
|
$ |
1,335.9 |
|
|
|
|
|
||||
Capital expenditures |
|
(148.2 |
) |
|
|
(127.8 |
) |
Acquisition of businesses, net of cash acquired |
|
(76.4 |
) |
|
|
(36.7 |
) |
Other |
|
(5.0 |
) |
|
|
— |
|
Cash flows used in investing activities |
|
(229.6 |
) |
|
|
(164.5 |
) |
|
|
|
|
||||
Net change in accounts payable - inventory financing |
|
(23.7 |
) |
|
|
84.6 |
|
Other cash flows used in financing activities |
|
(1,075.0 |
) |
|
|
(1,186.7 |
) |
Cash flows used in financing activities |
|
(1,098.7 |
) |
|
|
(1,102.1 |
) |
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents |
|
3.1 |
|
|
|
(12.2 |
) |
Net increase in cash and cash equivalents |
|
273.5 |
|
|
|
57.1 |
|
Cash and cash equivalents - beginning of period |
|
315.2 |
|
|
|
258.1 |
|
Cash and cash equivalents - end of period |
$ |
588.7 |
|
|
$ |
315.2 |
|
|
|
|
|
||||
Supplementary disclosure of cash flow information: |
|
|
|
||||
Interest paid |
$ |
(233.2 |
) |
|
$ |
(224.3 |
) |
Income taxes paid, net |
$ |
(401.4 |
) |
|
$ |
(362.2 |
) |
CDW CORPORATION AND SUBSIDIARIES FREE CASH FLOW AND ADJUSTED FREE CASH FLOW RECONCILIATION (dollars in millions) (unaudited) |
|||||||
|
Year Ended December 31, |
||||||
|
|
2023 |
|
|
|
2022 |
|
Net cash provided by operating activities |
$ |
1,598.7 |
|
|
$ |
1,335.9 |
|
Capital expenditures |
|
(148.2 |
) |
|
|
(127.8 |
) |
Free cash flow |
|
1,450.5 |
|
|
|
1,208.1 |
|
Net change in accounts payable - inventory financing |
|
(23.7 |
) |
|
|
84.6 |
|
Adjusted free cash flow(i) |
$ |
1,426.8 |
|
|
$ |
1,292.7 |
|
| (i) | Defined as Cash flows provided by operating activities less capital expenditures, adjusted to include cash flows from financing activities that relate to the purchase of inventory. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240207242542/en/
Investor Inquiries
Steven O'Brien
Vice President, Investor Relations
(847) 968-0238
investorrelations@cdw.com
Media Inquiries
Sara Granack
Vice President, Corporate Communications
(847) 419-7411
mediarelations@cdw.com
Source: CDW Corporation
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