Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call February 8, 2023 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Fourth Quarter and Full Year 2022 Results ▪ Performance Drivers ▪ 2023 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 2022 and Full Year Financial Performance
Q4 2022 and Full Year Financial Performance Fourth Quarter: ▪ Net sales decreased $99 million from Q4 2021 to $5.4 billion – Down 1.8% on a reported basis and average daily sales ("ADS") basis – Down 0.4% on an ADS constant currency basis ▪ Operating income up 31.6% to $447 million ▪ Net income up 3
Slide 5: Balanced Portfolio Drove Top-Line Growth
Balanced Portfolio Drove Top-Line Growth (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, 2022 2021 % Change(1) 2022 2021 % Change(1) Corporate $ 2,484.0 $ 2,323.5 6.9 % $ 10,350.1 $ 8,179.7 26.5 % Small Business 423.7 487.4 (13.1) 1,938.9 1,870.1 3.7 Public Govern
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: Q4 2022 Financial Results
Q4 2022 Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended December 31, 2022 2021 % Change Net sales $ 5,438.3 $ 5,536.9 (1.8)% Average daily net sales $ 86.3 $ 87.9 (1.8)% Gross profit $ 1,181.1 $ 975.6 21.1 % % of Net sales 21.7 % 17.6 % SG&A $ 734.5 $ 636.3
Slide 9: Q4 2022 Non-GAAP SG&A and Non-GAAP Operating Income
Q4 2022 Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Three Months Ended December 31, 2022 2021 % Change SG&A, as reported $ 734.5 $ 636.3 15.4 % Amortization of acquisition-related intangible assets (41.5) (24.3) Equity-based compensation (19.7) (19.3) Acquisition and inte
Slide 10: Q4 2022 Non-Operating Expenses
Q4 2022 Non-Operating Expenses (Unaudited) ($ in millions) Three Months Ended December 31, 2022 2021 % Change Interest expense, net $ (59.4) $ (43.4) 36.9 % Other expense, net $ (6.0) $ (8.6) (30.2)% Income tax expense $ (94.0) $ (72.0) 30.6 % 10
Slide 11: Q4 2022 US GAAP Effective Tax Rate
Q4 2022 US GAAP Effective Tax Rate (Unaudited) Three Months Ended December 31, 2022 2021 Federal statutory rate 21.0 % 21.0 % State taxes(1) 3.9 2.8 Excess benefits from equity-based compensation(2) (0.7) (1.2) All other items impacting tax rate 0.5 2.5 US GAAP effective tax rate 24.7 % 25.1 % (1) N
Slide 12: Q4 2022 Non-GAAP Net Income
Q4 2022 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended December 31, 2022 Three Months Ended December 31, 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
Slide 13: Q4 2022 Earnings Per Share
Q4 2022 Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Three Months Ended December 31, 2022 2021 % Change Diluted EPS $ 2.09 $ 1.57 33.1 % Non-GAAP net income* $ 343.4 $ 285.4 20.3 % Non-GAAP diluted EPS* $ 2.50 $ 2.08 20.6 % * Non-GAAP net income and Non-GAAP diluted EPS a
Slide 14: Full Year Financial Results
Full Year Financial Results (Unaudited) ($ in millions, except per share amounts) Year Ended December 31, 2022 2021 % Change Net sales $ 23,748.7 $ 20,820.8 14.1 % Average daily net sales $ 93.5 $ 82.0 14.1 % Gross profit $ 4,686.6 $ 3,568.5 31.3 % % of Net sales 19.7 % 17.1 % SG&A $ 2,951.4 $ 2,149
Slide 15: 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, 2022 2021 % Change SG&A, as reported $ 2,951.4 $ 2,149.5 37.3 % Amortization of acquisition-related intangible assets (167.9) (94.9) Equity-based compensation (91.1) (72.6) Acquisition and integ
Slide 16: Full Year Non-Operating Expenses
Full Year Non-Operating Expenses (Unaudited) ($ in millions) Year Ended December 31, 2022 2021 % Change Interest expense, net $ (235.7) $ (150.9) 56.2 % Other (expense) income, net $ (11.7) $ 29.7 nm* Income tax expense $ (373.3) $ (309.2) 20.7 % * Not meaningful 16
Slide 17: Full Year US GAAP Effective Tax Rate
Full Year US GAAP Effective Tax Rate (Unaudited) Year Ended December 31, 2022 2021 Federal statutory rate 21.0 % 21.0 % State taxes(1) 4.2 3.9 Excess benefits from equity-based compensation(2) (0.9) (2.3) Change in tax law(3) — 0.4 All other items impacting tax rate 0.8 0.8 US GAAP effective tax rat
Slide 18: Full Year Non-GAAP Net Income
Full Year Non-GAAP Net Income (Unaudited) ($ in millions) Year Ended December 31, 2022 Year Ended December 31, 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 reported $1,48
Slide 19: Full Year Earnings Per Share
Full Year Earnings Per Share (Unaudited) ($ in millions, except per share amounts) Year Ended December 31, 2022 2021 % Change Diluted EPS $ 8.13 $ 7.04 15.6 % Non-GAAP net income* $ 1,341.5 $ 1,118.9 19.9 % Non-GAAP diluted EPS* $ 9.79 $ 7.97 22.9 % * Non-GAAP net income and Non-GAAP diluted EPS are
Slide 20: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) December 31, 2022 December 31, 2021 Cash and cash equivalents $ 315.2 $ 258.1 Total debt $ 5,922.7 $ 6,858.5 Net debt (total debt net of cash and cash equivalents) $ 5,607.5 $ 6,600.4 Revolver availability $ 1,083.6 $ 987.3 Cash plus revolve
Slide 21: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) (Based on a rolling three-month average) December 31, 2022 December 31, 2021 Days of sales outstanding 71 65 Days of supply in inventory 17 17 Days purchases outstanding (67) (58) Cash conversion cycle 21 24 21
Slide 22: Free Cash Flow
Free Cash Flow (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Net cash provided by operating activities $ 242.0 $ 147.9 $ 1,335.9 $ 784.6 Capital expenditures (30.6) (33.8) (127.8) (100.0) Net change in accounts payable-inventory financing 37.
Slide 23: 2023 Capital Allocation Priorities
2023 Capital Allocation Priorities Priorities Objectives Actions Target ~25% payout of 18% increase in November 2022 Increase Dividends Annually non-GAAP net income; to $2.36/share annually grow in-line with earnings Target ~2.0 to 3.0 times Net Maintain Net Leverage Leverage Ratio; consistent Curre
Slide 24: 2023 Outlook
2023 Outlook (1),(2) 2023 Outlook U.S. IT Market approximately flat Net Sales Growth plus ~200 to 300 bps CDW premium in constant currency Non-GAAP Operating Income Margin(3) Mid-to-High 8%s Non-GAAP Earnings Per Upper-end of mid-single digit growth Diluted Share Growth in constant currency (1) As o
Slide 25: Modeling Thoughts for 2023
Modeling Thoughts for 2023 ▪ Net sales • 1H sales split slightly below historical norm of 48% to 49% of full-year Net sales • First quarter reported sequential sales growth of flat to low single-digit on an average daily sales basis • Currency expected to be neutral for full year, with modest headwi
Slide 26: Questions and Answers
[Mak Questions and Answers DW, PEOPLE WHO GETIT el iL JBL
Slide 27: Non-GAAP Operating Income Reconciliation
Non-GAAP Operating Income Reconciliation (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, % of Net % of Net % of Net % of Net 2022 sales 2021 sales 2022 sales 2021 sales Operating income, as reported $ 446.6 8.2 % $ 339.3 6.1 % $1,735.2 7.3 % $1,419.0 6.8 % Amortiz
Slide 28: Net Sales Growth on a Constant Currency Basis
Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended December 31, Year Ended December 31, % % 2022 2021 Change 2022 2021 Change(1) Net sales, as reported $ 5,438.3 $ 5,536.9 (1.8)% $23,748.7 $20,820.8 14.1 % Foreign currency translation(2) — (75.7) — (197.3) N
Slide 29: Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis
Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis (Unaudited) ($ in millions, except per share amounts) Three Months Ended December 31, Year Ended December 31, 2022 2021 % Change 2022 2021 % Change Net income, as reported $ 287.2 $ 215.3 33.4 % $ 1,114.5 $ 988.6 12.7 % Amortization