Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call February 10, 2021 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Fourth Quarter and Full Year 2020 Results ▪ COVID-19 Response ▪ Performance Drivers ▪ 2021 Outlook ▪ Q&A 2
Slide 3: Disclaimers
Disclaimers Forward-Looking Statements Statements in this presentation that are not statements of historical fact are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regardi
Slide 4: Q4 2020 and Full Year Financial Performance
Q4 2020 and Full Year Financial Performance Fourth Quarter: ▪ Net sales increased $419 million from Q4 2019 to $5.0 billion – Up 9.2% on a reported basis – Up 11.0% on an average daily basis ("ADS") – Up 10.7% on an ADS constant currency basis ▪ Operating income up 17.1% to $332 million ▪ Net income
Slide 5: Balanced Portfolio Drove Top-Line Growth
Balanced Portfolio Drove Top-Line Growth (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, Average Daily % 2020 2019 % Change Change(1) 2020 2019 % Change(1) Corporate $ 1,717.5 $ 1,965.4 (12.6)% (11.2)% $ 6,846.0 $ 7,499.0 (8.7)% Small Business 366.5 391.1 (6.3) (4
Slide 6: Highlights Combined Power of Business Model and Strategy
Highlights Combined Power of Business Model and Strategy ▪ Balanced portfolio of customer end-markets ▪ Diverse product and solutions portfolio ▪ Three-part strategy for growth 6
Slide 7: Our Three-Part Growth Strategy
Our Three-Part Growth Strategy Capture share and acquire new customers Enhance capabilities in high-growth solutions areas Expand services capabilities 7
Slide 8: COVID-19 Response
COVID-19 Response ▪ Safeguard the health and well-being of our coworkers ▪ Serve the mission-driven needs of our customers ▪ Support our communities, including efforts to contain and slow the virus 8
Slide 9: Q4 2020 Financial Results
Q4 2020 Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended December 31, 2020 2019 % Change Net sales $ 4,956.2 $ 4,536.9 9.2 % Average daily net sales $ 79.9 $ 72.0 11.0 % Gross profit $ 880.9 $ 777.5 13.3 % % of Net sales 17.8 % 17.1 % SG&A $ 548.7 $ 493.7 11
Slide 10: Q4 2020 Non-GAAP SG&A and Non-GAAP Operating Income
Q4 2020 Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Three Months Ended December 31, 2020 2019 % Change SG&A, as reported $ 548.7 $ 493.7 11.1 % Amortization of acquisition-related intangible assets (24.2) (44.8) Equity-based compensation (16.6) (10.8) Other adjustments (3
Slide 11: Q4 2020 Non-Operating Expenses
Q4 2020 Non-Operating Expenses (Unaudited) ($ in millions) Three Months Ended December 31, 2020 2019 % Change Interest expense, net $ 37.1 $ 38.3 (2.9)% Other expense, net $ 0.1 $ 9.5 nm* Income tax expense $ 56.7 $ 50.4 12.3 % * Not meaningful 11
Slide 12: Q4 2020 US GAAP Effective Tax Rate
Q4 2020 US GAAP Effective Tax Rate (Unaudited) Three Months Ended December 31, 2020 2019 Federal statutory rate 21.0 % 21.0 % State taxes(1) 3.6 3.0 Excess benefits from equity-based compensation(2) (3.0) (2.6) All other items impacting tax rate (2.4) — US GAAP effective tax rate 19.2 % 21.4 % (1) N
Slide 13: Q4 2020 Non-GAAP Net Income
Q4 2020 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended December 31, 2020 Three Months Ended December 31, 2019 Income Income before Income before Income income tax Net Effective income tax Net Effective taxes expense(1) income tax rate taxes expense(1) income tax rate GAAP, as rep
Slide 14: Q4 2020 Earnings Per Share
Q4 2020 Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Three Months Ended December 31, 2020 2019 % Change Diluted EPS $ 1.65 $ 1.27 29.6 % Non-GAAP net income* $ 263.7 $ 229.1 15.0 % Non-GAAP diluted EPS* $ 1.82 $ 1.57 16.1 % * Non-GAAP net income and Non-GAAP diluted EPS a
Slide 15: Full Year Financial Results
Full Year Financial Results (Unaudited) ($ in millions, except per share amounts) Year Ended December 31, 2020 2019 % Change Net sales $ 18,467.5 $ 18,032.4 2.4% Average daily net sales $ 72.7 $ 71.0 2.4% Gross profit $ 3,210.1 $ 3,039.9 5.6% % of Net sales 17.4 % 16.9 % SG&A $ 2,030.9 $ 1,906.3 6.5
Slide 16: Full Year Non-GAAP SG&A and Non-GAAP Operating Income
Full Year Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Year Ended December 31, 2020 2019 % Change SG&A, as reported $ 2,030.9 $ 1,906.3 6.5 % Amortization of acquisition-related intangible assets (158.1) (178.5) Equity-based compensation (42.5) (48.5) Workforce reduction c
Slide 17: Full Year Non-Operating Expenses
Full Year Non-Operating Expenses (Unaudited) ($ in millions) Year Ended December 31, 2020 2019 % Change Interest expense, net $ 154.9 $ 159.4 (2.8)% Other expense, net $ 22.0 $ 24.5 (9.9)% Income tax expense $ 213.8 $ 212.9 0.4 % 17
Slide 18: Full Year US GAAP Effective Tax Rate
Full Year US GAAP Effective Tax Rate (Unaudited) Year Ended December 31, 2020 2019 Federal statutory rate 21.0 % 21.0 % State taxes(1) 3.9 3.7 Excess benefits from equity-based compensation(2) (2.9) (2.8) All other items impacting tax rate (0.7) 0.5 US GAAP effective tax rate 21.3 % 22.4 % (1) Net o
Slide 19: Full Year Non-GAAP Net Income
Full Year Non-GAAP Net Income (Unaudited) ($ in millions) Year Ended December 31, 2020 Year Ended December 31, 2019 Income Income before Income before Income income tax Net Effective income tax Net Effective taxes expense(1) income tax rate taxes expense(1) income tax rate US GAAP, as reported $1,00
Slide 20: Full Year Earnings Per Share
Full Year Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Year Ended December 31, 2020 2019 % Change Diluted EPS $ 5.45 $ 4.99 9.2 % Non-GAAP net income* $ 954.4 $ 902.1 5.8 % Non-GAAP diluted EPS* $ 6.59 $ 6.10 8.0 % * Non-GAAP net income and Non-GAAP diluted EPS are non-GA
Slide 21: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) December 31, 2020 December 31, 2019 Cash and cash equivalents $ 1,410.2 $ 154.0 Total debt $ 3,927.2 $ 3,317.3 Net debt (total debt net of cash and cash equivalents) $ 2,517.0 $ 3,163.3 Revolver availability $ 1,059.3 $ 1,106.2 Cash plus rev
Slide 22: Free Cash Flow
Free Cash Flow (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, 2020 2019 % Change 2020 2019 % Change Net cash provided by operating activities $ 576.0 $ 344.9 67.1 % $ 1,314.3 $ 1,027.2 28.0 % Capital expenditures(1) (24.3) (161.3) (158.0) (236.3) Net change in ac
Slide 23: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) (Based on a rolling three-month average) December 31, 2020 December 31, 2019 Days of sales outstanding 57 57 Days of supply in inventory 14 14 Days purchases outstanding (54) (53) Cash conversion cycle 17 18 23
Slide 24: 2021 Capital Allocation Priorities
2021 Capital Allocation Priorities Priorities Objectives Actions Target ~25% payout of 5.3% increase in November 2020 Increase Dividends Annually Non-GAAP net income; to $1.60/share annually grow in-line with earnings Maintain Net Leverage ~2.5 to 3.0 times Net Currently at 1.7x(2) Ratio(1) leverage
Slide 25: 2021 Outlook
2021 Outlook 2021(1)(2) U.S. IT growth Net Sales Growth plus ~200 to 300 bps premium in constant currency Non-GAAP Operating Income Margin(3) Mid-7%s Mid-to-high single Non-GAAP Earnings Per digit growth Diluted Share Growth in constant currency (1) Annual targets are provided on a non-GAAP basis be
Slide 26: Modeling Thoughts for 2021
Modeling Thoughts for 2021 ▪ Full-year constant currency Net sales growth 200 to 300 bps faster than U.S. IT market growth • One fewer selling day vs. 2020 in Q1 '21; one extra selling day vs. 2020 in Q4 '21 • First quarter sales growth of mid-single digits on an average daily sales basis • Currency
Slide 27: Modeling Thoughts for 2021 Cash Flows
Modeling Thoughts for 2021 Cash Flows ▪ Annual Free Cash Flow at or slightly below the low end of the 'rule of thumb' of 3 ¾% to 4 ¼% of Net sales ▪ Capital expenditures ~75 to 80 basis points as a percent of Net sales on an annual basis ▪ Achieve Cash Conversion Cycle within target range of high te
Slide 28: Questions and Answers
[Mak Questions and Answers DW, PEOPLE WHO GETIT el iL JBL
Slide 29: Non-GAAP Operating Income Reconciliation
Non-GAAP Operating Income Reconciliation (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, % of Net % of Net % of Net % of Net 2020 sales 2019 sales 2020 sales 2019 sales Operating income, as reported 332.2 6.7 % $ 283.8 6.3 % 1,179.2 6.4 % $1,133.6 6.3 % Amortizati
Slide 30: Net Sales Growth on a Constant Currency Basis
Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, Average % Daily % % 2020 2019 Change Change(1) 2020 2019 Change(1) Net sales, as reported $ 4,956.2 $ 4,536.9 9.2 % 11.0 % $18,467.5 $18,032.4 2.4 % (2) Foreign currency
Slide 31: Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis
Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis (Unaudited) ($ in millions, except per share amounts) Three Months Ended December 31, Year Ended December 31, 2020 2019 % Change 2020 2019 % Change Net income, as reported $ 238.3 $ 185.6 28.4 % $ 788.5 $ 736.8 7.0 % Amortization of