01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation is a multi-brand provider of information technology solutions to business, government, education and healthcare customers in the US, UK and Canada.
For 2020, Net sales rose $435 milliona, or 2.4%, to $18,467.5 million. Gross profit increased $170 million, or 5.6%, to $3,210.1 million, and gross margin rose 50 basis points to 17.4%. Operating income increased $46 million, or 4.0%, to $1,179.2 million, and net income was $788.5 million, compared with $736.8 million in 2019.
Diluted earnings per share were $5.45b, compared with $4.99. Non-GAAP operating income was $1,404.6 million, or 7.6% of Net sales. Growth was concentrated in the Public segment, where Net sales increased 18.5% to $8,137.7 million.
Education customers rose 43.4%c, driven by notebooks and mobile devices as schools invested in remote enablement, and Government customers rose 18.2%, driven by the Census project. Corporate Net sales fell 8.7%, Small Business fell 7.5%, Healthcare fell 12.0%, and Other, which covers the UK and Canada, fell 3.3%. The filing attributes the declines in most segments to the impact of the COVID-19 pandemic on customer demand.
The balance sheet strengthened during 2020. Cash and cash equivalents rose to $1,410.2 milliond from $154.0 million, and total debt and finance lease obligations were $3,927.2 million. The company issued $600 million of 4.125% senior notes due 2025 and $700 million of 3.25% senior notes due 2029, and it repurchased 2.6 million shares for $341 million after suspending buybacks from March through October 2020.
In February 2021 the Board declared a $0.400 quarterly dividend and authorized a $1.25 billion increase to the share repurchase program. Key risks disclosed include dependence on vendor partners, with products from Apple, Cisco, Dell EMC, HP Inc., Lenovo and Microsoft representing about 60% of 2020 consolidated Net sales, and $1.5 billion of variable rate debt.
02—Key points
Key Highlights
- Net sales were $18,467.5 million in 2020, up $435 million, or 2.4%, from $18,032.4 million in 2019.
- Gross profit margin rose 50 basis points to 17.4%, and operating margin rose to 6.4% from 6.3%.
- Net income was $788.5 million, and diluted earnings per share were $5.45, compared with $4.99 in 2019.
- The Public segment grew 18.5% to $8,137.7 million, led by Education (up 43.4%) and Government (up 18.2%), while Corporate fell 8.7% and Healthcare fell 12.0%.
- Cash and cash equivalents increased to $1,410.2 million from $154.0 million, and operating cash flow was $1,314.3 million.
- The company repurchased $341 million of stock in 2020 and declared a $0.400 quarterly dividend in February 2021; the Board also authorized a $1.25 billion increase to the repurchase program.
- Sales concentration is high: products from Apple, Cisco, Dell EMC, HP Inc., Lenovo and Microsoft represented about 60% of 2020 consolidated Net sales, and Dell EMC and HP Inc. about 25%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, CDW kept $0.04.
- Revenue$18.47B100.0%
- Cost of revenue−$15.26B82.6%
- Gross profit$3.21B17.4%
- Operating costs−$2.03B11.0%
- Operating income$1.18B6.4%
- Interest, other & tax−$390.7M2.1%
- Net income$788.5M4.3%
Where FY2020 revenue went
$18.47B- Cost of revenue: $15.26B, 83% of revenue
- Net income: $788.5M, 4.3% of revenue
- SG&A: $2.03B, 11% of revenue
- Interest, other & tax: $390.7M, 2.1% of revenue
Kept 4.3% as net incomeNet income $788.5M · 4.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $18.47B$18.03B | +2.4% |
| Cost of Revenue | $15.26B$14.99B | +1.8% |
| Gross Profit | $3.21B$3.04B | +5.6% |
| SG&A Expenses | $2.03B$1.91B | +6.5% |
| Operating Income | $1.18B$1.13B | +4.0% |
| Net Income | $788.50M$736.80M | +7.0% |
| EPS (Basic) | $5.53$5.08 | +8.9% |
| EPS (Diluted) | $5.45$4.99 | +9.2% |
| Shares Outstanding (Basic) | 142.60M145.10M | −1.7% |
| Shares Outstanding (Diluted) | 144.80M147.80M | −2.0% |
05—Questions
Frequently Asked Questions
How did CDW perform financially in 2020?
Net sales increased 2.4% to $18,467.5 million, gross profit rose 5.6% to $3,210.1 million, operating income rose 4.0% to $1,179.2 million, and net income was $788.5 million, up from $736.8 million. Non-GAAP net income was $954.4 million, an increase of $52 million, or 5.8%.
Which customer segments drove growth and which declined?
The Public segment drove growth, with Net sales up 18.5%, Education up 43.4% and Government up 18.2%. Corporate Net sales declined 8.7%, Small Business declined 7.5%, Healthcare declined 12.0%, and Other, which includes the UK and Canada, declined 3.3%. The filing says the declines were largely due to COVID-19's impact on customer demand.
How strong is CDW's balance sheet and liquidity?
Cash and cash equivalents were $1,410.2 million at December 31, 2020. Total debt and finance lease obligations were $3,927.2 million, and the company had $1.0 billion available for borrowing under its Revolving Loan after borrowing base limitations, plus an additional £50 million ($68 million) under the CDW UK revolving credit facility. Management believes it has adequate liquidity for at least the next year.
What is CDW's capital return policy?
In 2020 CDW repurchased 2.6 million shares for $341 million after temporarily suspending buybacks from March through October 2020. In February 2021 the Board declared a quarterly cash dividend of $0.400 per share, payable March 10, 2021, and authorized a $1.25 billion increase to the share repurchase program. Dividends declared in 2020 totaled $1.540 per share.
What are the main risks to CDW's business?
The filing highlights dependence on vendor partners, which have no long-term contracts with CDW and can terminate or change terms, and concentration in a few manufacturers. It also notes the continuing COVID-19 pandemic's effect on demand and customer payments, the complexity of its public sector contracts, and $1.5 billion of variable rate debt that exposes it to interest rate increases.
06—Continue