Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call November 2, 2022 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Third Quarter and YTD 2022 Results ▪ Performance Drivers ▪ 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: Q3 2022 and YTD Financial Performance
Q3 2022 and YTD Financial Performance Third Quarter: ▪ Net sales increased $916 million from Q3 2021 to $6.2 billion – Up 17.3% on a reported and average daily sales ("ADS") basis – Up 18.7% on an ADS constant currency basis ▪ Operating income up 20.7% to $466 million ▪ Net income up 11.7% to $298 m
Slide 5: Balanced Portfolio Drove Record Top-Line Results
Balanced Portfolio Drove Record Top-Line Results (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 % Change(1) 2022 2021 % Change(1) Corporate $ 2,577.8 $ 2,067.3 24.7 % $ 7,866.1 $ 5,856.2 34.3 % Small Business 491.2 467.1 5.2 1,515.2 1,382.7 9.6
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, services 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: Q3 2022 Financial Results
Q3 2022 Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2022 2021 % Change Net sales $ 6,215.5 $ 5,300.0 17.3 % Average daily net sales $ 97.1 $ 82.8 17.3 % Gross profit $ 1,233.2 $ 914.9 34.8 % % of Net sales 19.8 % 17.3 % SG&A $ 766.8 $ 528.
Slide 9: Q3 2022 Non-GAAP SG&A and Non-GAAP Operating Income
Q3 2022 Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Three Months Ended September 30, 2022 2021 % Change SG&A, as reported $ 766.8 $ 528.5 45.1 % Amortization of acquisition-related intangible assets (44.8) (24.6) Equity-based compensation (26.8) (16.9) Acquisition and int
Slide 10: Q3 2022 Non-Operating Expenses
Q3 2022 Non-Operating Expenses (Unaudited) ($ in millions) Three Months Ended September 30, 2022 2021 % Change Interest expense, net $ 62.6 $ 36.4 72.0 % Other income (expense), net $ (4.8) $ 0.4 *nm Income tax expense $ 101.2 $ 83.8 20.8 % * Not meaningful 10
Slide 11: Q3 2022 US GAAP Effective Tax Rate
Q3 2022 US GAAP Effective Tax Rate (Unaudited) Three Months Ended September 30, 2022 2021 Federal statutory rate 21.0 % 21.0 % State taxes(1) 4.1 4.2 Excess benefits from equity-based compensation(2) (0.6) (1.9) All other items impacting tax rate 0.9 0.6 US GAAP effective tax rate 25.4 % 23.9 % (1)
Slide 12: Q3 2022 Non-GAAP Net Income
Q3 2022 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 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 13: Q3 2022 Earnings Per Share
Q3 2022 Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2022 2021 % Change Diluted EPS $ 2.17 $ 1.91 13.7 % Non-GAAP net income* $ 357.0 $ 298.0 19.8 % Non-GAAP diluted EPS* $ 2.60 $ 2.13 22.0 % * Non-GAAP net income and Non-GAAP diluted EPS
Slide 14: YTD Financial Results
YTD Financial Results (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2022 2021 % Change Net sales $ 18,310.4 $ 15,283.9 19.8 % Average daily net sales $ 95.9 $ 80.0 19.8 Gross profit $ 3,505.5 $ 2,592.9 35.2 % % of Net sales 19.1 % 17.0 % SG&A $ 2,216.9 $ 1,513
Slide 15: 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, 2022 2021 % Change SG&A, as reported $ 2,216.9 $ 1,513.2 46.5 % Amortization of acquisition-related intangible assets (126.4) (70.6) Equity-based compensation (71.4) (53.3) Acquisition and int
Slide 16: YTD Non-Operating Expenses
YTD Non-Operating Expenses (Unaudited) ($ in millions) Nine Months Ended September 30, 2022 2021 % Change Interest expense, net $ 176.3 $ 107.5 64.0 % Other (expense) income, net $ (5.7) $ 38.3 *nm Income tax expense $ 279.3 $ 237.2 17.7 % * Not meaningful 16
Slide 17: YTD US GAAP Effective Tax Rate
YTD US GAAP Effective Tax Rate (Unaudited) Nine Months Ended September 30, 2022 2021 Federal statutory rate 21.0 % 21.0 % State taxes(1) 4.2 4.2 Excess benefits from equity-based compensation(2) (0.9) (2.6) All other items impacting tax rate 0.9 0.9 US GAAP effective tax rate 25.2 % 23.5 % (1) Net o
Slide 18: YTD Non-GAAP Net Income
YTD Non-GAAP Net Income (Unaudited) ($ in millions) Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 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 19: YTD Earnings Per Share
YTD Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2022 2021 % Change Diluted EPS $ 6.04 $ 5.47 10.5 % Non-GAAP net income* $ 998.0 $ 833.5 19.7 % Non-GAAP diluted EPS* $ 7.29 $ 5.89 23.7 % * Non-GAAP net income and Non-GAAP diluted EPS are n
Slide 20: Debt and Revolver Availability
Debt and Revolver Availability ($ in millions) September 30, September 30, 2022 December 31, 2021 2021 (unaudited) (unaudited) Cash and cash equivalents $ 384.6 $ 258.1 $ 245.1 Total debt $ 6,157.8 $ 6,858.5 $ 4,066.2 Net debt (total debt net of cash and cash equivalents) $ 5,773.2 $ 6,600.4 $ 3,821
Slide 21: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) (Based on a rolling three-month average) September 30, 2022 December 31, 2021 September 30, 2021 Days of sales outstanding 68 65 61 Days of supply in inventory 18 17 17 Days purchases outstanding (68) (58) (53) Cash conversion cycle 18 24 25 21
Slide 22: Free Cash Flow
Free Cash Flow (Unaudited) ($ in millions) Three Months Ended September Nine Months Ended September 30, 30, 2022 2021 2022 2021 Net cash provided by operating activities $ 332.9 $ 291.8 $ 1,094.0 $ 636.7 Capital expenditures (33.6) (27.7) (97.2) (66.2) Net change in accounts payable - inventory fina
Slide 23: 2022 Capital Allocation Priorities
2022 Capital Allocation Priorities Priorities Objectives Actions Target ~25% payout of 18% increase in November 2022 Increase Dividends Annually Non-GAAP net income; to $2.36/share annually grow in-line with earnings Use FCF after dividends to Currently at 2.7x(2). Down from pay down debt until 3.4x
Slide 24: 2022 Outlook
2022 Outlook 2022 Outlook On a Combined Basis(1),(2),(3) U.S. IT growth of ~4% plus the upper end of ~325 to Net Sales Growth 425 bps premium range in constant currency Non-GAAP Operating Low-8%s Income Margin(4) Non-GAAP Earnings Per • ~16.0% growth in constant currency on a combined basis Diluted
Slide 25: Modeling Thoughts for 2022
Modeling Thoughts for 2022 ▪ Full-year Net sales expected to grow at the upper end of our range of ~325 to 425 bps faster than the U.S. IT market growth on a combined basis, in constant currency • Expected to equate to full year growth of ~18.5% on a reported basis, in constant currency • Expect fou
Slide 26: Questions and Answers
[Mak Questions and Answers DW, PEOPLE WHO GETIT el iL JBL
Slide 27: Non-GAAP Operating Income Reconciliation
Non-GAAP Operating Income Reconciliation (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, % of Net % of Net % of Net % of Net 2022 sales 2021 sales 2022 sales 2021 sales Operating income, as reported $ 466.4 7.5 % $ 386.4 7.3 % $ 1,288.6 7.0 % $ 1,079.7 7.
Slide 28: 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, % % 2022 2021 Change(1) 2022 2021 Change(1) Net sales, as reported $ 6,215.5 $ 5,300.0 17.3 % $ 18,310.4 $ 15,283.9 19.8 % (2) Foreign currency translation — (63
Slide 29: 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, 2022 2021 % Change 2022 2021 % Change Net income, as reported $ 297.8 $ 266.6 11.7 % $ 827.3 $ 773.3 7