Slides
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CDW Corporation May 7, 2025 Webcast Conference Call
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2 Today's Agenda First Quarter 2025 Results Performance Drivers Outlook Q&A
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3 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 regarding the future financial performance, 2025 outlook, capital allocation priorities and growth prospects of CDW. These forward-looking statements are subject to risks and uncertainties that may cause actual results or events to differ materially from those described in such statements. Although CDW believes that its plans, intentions and other expectations reflected in or suggested by such forward- looking statements are reasonable, it can give no assurance that it will achieve those plans, intentions or expectations. Reference is made to a more complete discussion of forward-looking statements and applicable risks contained under the captions "Forward-Looking Statements" and "Risk Factors" in CDW's Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent filings with the SEC. CDW undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. Forward-Looking Statements
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4 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. Our non-GAAP performance measures include 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, and our non-GAAP financial condition measures include Free cash flow and Adjusted free cash flow. These non-GAAP performance measures and non-GAAP financial condition measures are collectively referred to as "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 and Non-GAAP net income per diluted share exclude, 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, workplace optimization and their associated income tax effects. Net sales on a constant currency basis is defined as Net sales excluding the impact of foreign currency translation on Net sales. Free cash flow is defined as Net cash 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. We believe our non-GAAP performance measures provide analysts, investors and management with useful information regarding the underlying operating performance of our business, as they remove the impact of items that management believes are not reflective of underlying operating performance. Management 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 non-GAAP financial condition measures as we believe they provide analysts, investors and management with more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance- based compensation. Our outlook includes non-GAAP financial measures 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 our underlying performance, such as refinancing activities or acquisition and integration expenses. Non-GAAP financial measures in this presentation are denoted with an asterisk (*) when shown. For a reconciliation of non-GAAP financial measures to the most comparable US GAAP financial measures, see the CDW Investor Relations website: https://investor.cdw.com/financials/quarterly-results/default.aspx. Non-GAAP Financial Measures
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5 Financial Performance • Net sales of $5.2 billion • Up 6.7% on a reported basis • Up 8.4% on an average daily sales ("ADS") basis • Up 8.7% on an ADS constant currency* basis • Gross profit of $1.1 billion, up 5.5% • Gross profit margin of 21.6%, down 20 basis points • Operating income of $361 million, up 10.2% • Non-GAAP operating income* of $444 million, up 10.0% • Net income of $225 million, up 4.1% • Net income per diluted share of $1.69, up 6.1% • Non-GAAP net income per diluted share* of $2.15, up 11.9% *Non-GAAP Measure
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6 ($ in millions) Three Months Ended March 31, 2025 2024 % Change Average Daily % Change(1) Corporate $ 2,236.0 $ 2,135.9 4.7 % 6.3 % Small Business 404.6 380.9 6.2 7.9 Public Government 537.8 543.3 (1.0) 0.6 Education 652.4 596.8 9.3 11.1 Healthcare 687.9 584.6 17.7 19.5 Total Public 1,878.1 1,724.7 8.9 10.6 Other 680.4 631.2 7.8 9.5 Total Net Sales $ 5,199.1 $ 4,872.7 6.7 % 8.4 % (1) There were 63 and 64 selling days for the three months ended March 31, 2025 and 2024, respectively. Average Daily Sales is defined as Net sales divided by the number of selling days. Net Sales By Channel
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7 ($ in millions, except percentages) Three Months Ended March 31, 2025 2024 % Change Net sales $ 5,199.1 $ 4,872.7 6.7 % Average daily net sales(1) $ 82.5 $ 76.1 8.4 Gross profit $ 1,122.3 $ 1,063.3 5.5 Gross profit margin 21.6 % 21.8 % Selling and administrative expenses $ 760.9 $ 735.3 3.5 Operating income $ 361.4 $ 328.0 10.2 Operating income margin 7.0 % 6.7 % Non-GAAP SG&A* $ 678.3 $ 659.8 2.8 Non-GAAP operating income* $ 444.0 $ 403.5 10.0 Non-GAAP operating income margin* 8.5 % 8.3 % Interest expense, net $ 57.1 $ 51.3 11.3 Other income (expense), net $ (0.3) $ (0.1) **nm Net income $ 224.9 $ 216.1 4.1 Non-GAAP net income* $ 286.5 $ 260.8 9.9 Effective Tax Rate 26.0 % 21.9 % Non-GAAP Effective Tax Rate* 25.9 % 25.9 % * Non-GAAP measure. ** Not meaningful (1) There were 63 and 64 selling days for the three months ended March 31, 2025 and 2024, respectively. Average Daily Sales is defined as Net sales divided by the number of selling days. Financial Results
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8 ($ and shares in millions, except per share amounts) Three Months Ended March 31, 2025 2024 % Change US GAAP Net income $ 224.9 $ 216.1 4.1 % Weighted-average common shares outstanding - Diluted 133.5 136.0 Net income per diluted share $ 1.69 $ 1.59 6.1 Non-GAAP net income* $ 286.5 $ 260.8 9.9 Weighted-average common shares outstanding - Diluted 133.5 136.0 Non-GAAP net income per diluted share* $ 2.15 $ 1.92 11.9 * Non-GAAP measure Earnings Per Diluted Share
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9 ($ in millions) March 31, 2025 December 31, 2024 March 31, 2024 Cash and cash equivalents $ 471.4 $ 503.5 $ 803.8 Short-term investments 216.7 214.2 — Total debt 5,853.0 5,842.8 5,632.3 Net debt* 5,164.9 5,125.1 4,828.5 Revolver availability 1,265.0 1,244.1 1,251.7 Cash plus revolver availability 1,736.4 1,747.6 2,055.5 * Defined as total debt minus Cash and cash equivalents and Short-term investments Debt and Revolver Availability
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10 (Based on a rolling three-month average) March 31, 2025 December 31, 2024 March 31, 2024 Days of sales outstanding 86 84 75 Days of supply in inventory 13 13 14 Days purchases outstanding (84) (79) (73) Cash conversion cycle 15 18 16 Cash Conversion Cycle
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11 ($ in millions) Three Months Ended March 31, 2025 2024 Net cash provided by operating activities $ 287.2 $ 440.0 Capital expenditures (26.9) (29.5) Free Cash Flow* 260.3 410.5 Net change in accounts payable - inventory financing (11.5) (46.1) Adjusted free cash flow*(1) $ 248.8 $ 364.4 * Non-GAAP measure (1) Defined as Net cash provided by operating activities less Capital expenditures, adjusted to include cash flows from financing activities that relate to the purchase of inventory. Free Cash Flow and Adjusted Free Cash Flow
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12 2025 Capital Allocation Priorities Target ~25% payout of Non-GAAP net income; grow in-line with earningsIncrease Dividend annually ~1% increase in November 2024 to $2.50/share annually Target ~2.0 to 3.0 times Net Leverage Ratio; consistent with our commitment to an investment grade capital structure Maintain Net Leverage Ratio (1) Currently at 2.5x(2) Supplement organic growth with M&A Expand CDW’s strategic capabilities Eleven acquisitions over the last six years Return e xcess Adjusted FCF after Divid ends and M&A through share repurchases Target, in aggregate with dividend, returning 50% to 75% of Adjusted FCF to shareholders Returned $283M YTD(2) to shareholders in the form of share repurchases and dividends OBJECTIVESPRIORITIES ACTIONS 1. Defined as the ratio of total debt at period-end excluding any unamortized discount and/or premium and deferred financing costs, less cash and cash equivalents and short-term investments, to trailing twelve-month Non-GAAP operating income plus depreciation and amortization in SG&A (excluding amortization expenses for acquisition-related intangible assets). 2. As of March 31, 2025.
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13 1. Certain annual outlooks are 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 underlying performance, such as refinancing activities or acquisition and integration expenses. 2. As of May 7, 2025; all growth rates are on a year-over-year constant currency basis. 2025 Outlook CUSTOMER SPEND U.S. IT growth plus a premium target of ~200 to 300 bps GROSS PROFIT Low-single digit growth NON-GAAP EARNINGS PER DILUTED SHARE Low-single digit growth (1),(2)
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14 Modeling Thoughts Metric Expectations Gross profit • Mid-to-high single digit sequential growth in Q2 leads to low-single digit year-over-year growth • 1H slightly lower than 2H, but slightly weighted more to 1H than historical splits • Currency expected to be approximately neutral for the year Annual depreciation and amortization expense • Approximately $300 million • Includes ~$175 million of amortization expense for acquisition-related intangible assets • Excluding acquisition-related intangibles, expected to be ~$125 million Annual interest expense • In range of $230 million to $235 million Non-GAAP effective tax rate • In range of 25.5% to 26.5% Annual adjusted free cash flow • In range of 80% to 90% on Non-GAAP Net Income for the full year Capital expenditures • In range of $120 million to $130 million Cash conversion cycle • In range of high teens to low 20s
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15 Questions and Answers