Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call November 2, 2020 CDW.com | 800.800.4239
Slide 2: 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 3: Today's Agenda
Today's Agenda ▪ Third Quarter and YTD 2020 Results ▪ COVID-19 Response ▪ Performance Drivers ▪ Q&A 3
Slide 4: Q3 2020 and YTD Financial Performance
Q3 2020 and YTD Financial Performance Third Quarter: ▪ Net sales decreased $151 million from Q3 2019 to $4,756 million – Down 3.1% on a reported and average daily sales ("ADS") basis – Down 3.3% on an ADS constant currency basis ▪ Operating income down 0.9% to $318 million ▪ Net income down 4.2% to
Slide 5: Balanced Portfolio Drove Topline Results
Balanced Portfolio Drove Topline Results (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, Average Daily 2020 2019 % Change(1) 2020 2019 % Change % Change(1) Corporate $ 1,660.0 $ 1,913.5 (13.2)% $ 5,128.5 $ 5,533.6 (7.3)% (7.8)% Small Business 337.0 386.2
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: Q3 2020 Financial Results
Q3 2020 Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2020 2019 % Change Net sales $ 4,756.4 $ 4,907.7 (3.1)% Average daily net sales $ 74.3 $ 76.7 (3.1)% Gross profit $ 825.5 $ 816.5 1.1 % % of Net sales 17.4 % 16.6 % SG&A $ 507.7 $ 495.9 2
Slide 10: Q3 2020 Non-GAAP SG&A and Non-GAAP Operating Income
Q3 2020 Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Three Months Ended September 30, 2020 2019 % Change SG&A, as reported $ 507.7 $ 495.9 2.4 % Amortization of acquisition-related intangible assets (44.9) (44.6) Equity-based compensation (11.5) (12.8) Workforce reduction
Slide 11: Q3 2020 Non-Operating Expenses
Q3 2020 Non-Operating Expenses (Unaudited) ($ in millions) Three Months Ended September 30, 2020 2019 % Change Interest expense, net $ 40.2 $ 42.3 (5.1)% Other expense, net $ 27.5 $ 17.4 58.1 % Income tax expense $ 56.9 $ 59.2 (3.9)% 11
Slide 12: Q3 2020 US GAAP Effective Tax Rate
Q3 2020 US GAAP Effective Tax Rate (Unaudited) Three Months Ended September 30, 2020 2019 Federal statutory rate 21.0 % 21.0 % State taxes(1) 2.2 4.0 Excess benefits from equity-based compensation(2) (1.1) (3.5) All other items impacting tax rate 0.6 1.2 US GAAP effective tax rate 22.7 % 22.7 % (1)
Slide 13: Q3 2020 Non-GAAP Net Income
Q3 2020 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended September 30, 2020 Three Months Ended September 30, 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, a
Slide 14: Q3 2020 Earnings Per Share
Q3 2020 Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2020 2019 % Change Diluted EPS $ 1.33 $ 1.37 (2.6)% Non-GAAP net income* $ 265.4 $ 249.9 6.2 % Non-GAAP diluted EPS* $ 1.83 $ 1.70 8.0 % * Non-GAAP net income and Non-GAAP diluted EPS ar
Slide 15: YTD Financial Results
YTD Financial Results (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2020 2019 % Change Net sales $ 13,511.3 $ 13,495.5 0.1 % Average daily net sales $ 70.4 $ 70.7 (0.4)% Gross profit $ 2,329.2 $ 2,262.4 3.0 % % of Net sales 17.2 % 16.8 % SG&A $ 1,482.2 $ 1,412
Slide 16: YTD Non-GAAP SG&A and Non-GAAP Operating Income
YTD Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Nine Months Ended September 30, 2020 2019 % Change SG&A, as reported $ 1,482.2 $ 1,412.6 4.9 % Amortization of acquisition-related intangible assets (133.9) (133.7) Equity-based compensation (25.9) (37.7) Workforce reduction
Slide 17: YTD Non-Operating Expenses
YTD Non-Operating Expenses (Unaudited) ($ in millions) Nine Months Ended September 30, 2020 2019 % Change Interest expense, net $ 117.8 $ 121.1 (2.8)% Other expense, net $ 21.9 $ 15.0 46.4 % Income tax expense $ 157.1 $ 162.5 (3.3)% 17
Slide 18: YTD US GAAP Effective Tax Rate
YTD US GAAP Effective Tax Rate (Unaudited) Nine Months Ended September 30, 2020 2019 Federal statutory rate 21.0 % 21.0 % State taxes(1) 3.4 4.0 Excess benefits from equity-based compensation(2) (2.8) (2.9) All other items impacting tax rate 0.6 0.7 US GAAP effective tax rate 22.2 % 22.8 % (1) Net o
Slide 19: YTD Non-GAAP Net Income
YTD Non-GAAP Net Income (Unaudited) ($ in millions) Nine Months Ended September 30, 2020 Nine Months Ended September 30, 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 repo
Slide 20: YTD Earnings Per Share
YTD Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2020 2019 % Change Diluted EPS $ 3.80 $ 3.72 2.3 % Non-GAAP net income* $ 690.7 $ 673.0 2.6 % Non-GAAP diluted EPS* $ 4.77 $ 4.54 5.2 % * Non-GAAP net income and Non-GAAP diluted EPS are non-
Slide 21: Debt and Revolver Availability
Debt and Revolver Availability ($ in millions) September 30, 2020 December 31, 2019 September 30, 2019 (unaudited) (unaudited) Cash and cash equivalents $ 1,249.5 $ 154.0 $ 166.9 Total debt $ 3,930.9 $ 3,317.3 $ 3,284.4 Net debt (total debt net of cash and cash equivalents) $ 2,681.4 $ 3,163.3 $ 3,1
Slide 22: Free Cash Flow
Free Cash Flow (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 % Change 2020 2019 % Change Net cash provided by operating activities $ 222.6 $ 267.8 (16.9)% $ 738.4 $ 682.3 8.2 % Capital expenditures(1) (33.6) (31.1) (133.6) (75.0) Net change in
Slide 23: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) (Based on a rolling three-month average) September 30, 2020 December 31, 2019 September 30, 2019 Days of sales outstanding 61 57 56 Days of supply in inventory 13 14 13 Days purchases outstanding (58) (53) (52) Cash conversion cycle 16 18 17 23
Slide 24: Capital Allocation Priorities
Capital Allocation Priorities Priorities Objectives 2020 Actions Target ~25% payout of 5.3% increase in November 2020 Increase Dividends Annually Non-GAAP net income; to $1.60/share annually grow in-line with earnings Maintain Net Leverage ~2.5 to 3.0 times Net Currently at 1.8x(2) Ratio(1) leverage
Slide 25: Questions and Answers
[Mak Questions and Answers DW, PEOPLE WHO GETIT el iL JBL
Slide 26: Non-GAAP Operating Income Reconciliation
Non-GAAP Operating Income Reconciliation (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, % of Net % of Net % of Net % of Net 2020 sales 2019 sales 2020 sales 2019 sales Operating income, as reported $ 317.8 6.7 % $ 320.6 6.5 % $ 847.0 6.3 % $ 849.8 6.3 %
Slide 27: Net Sales Growth on a Constant Currency Basis
Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, Average % Daily % 2020 2019 % Change(1) 2020 2019 Change Change(1) Net sales, as reported $ 4,756.4 $ 4,907.7 (3.1)% $13,511.3 $13,495.5 0.1 % (0.4)% (2) Foreign
Slide 28: Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis
Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis (Unaudited) ($ and shares in millions, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 % Change 2020 2019 % Change Net income, as reported $ 193.2 $ 201.7 (4.2)% $ 550.2 $ 551.2 (