01—Abstract
Summary
Summary of the 10-K filed February 28, 2022. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation, a Fortune 500 company and S&P 500 member, is a multi-brand provider of IT solutions to business, government, education and healthcare customers in the US, UK and Canada.
Net sales for 2021 were $20.82 billiona, up from $18.47 billion in 2020, with growth led by the Corporate, Education and Small Business customers and the UK and Canadian operations. Gross profit rose to $3.57 billion, though gross margin declined to 17.1% from 17.4%. Operating income increased to $1.42 billion from $1.18 billion, and net income rose to $988.6 million from $788.5 million, or $7.04 per diluted share versus $5.45 in 2020.
Non-GAAP net income was $1.12 billionb. The company completed the approximately $2.4 billion acquisition of Sirius Computer Solutions on December 1, 2021, funded in part by $2.5 billion of senior notes. Total debt rose to $6.9 billion at year end, and cash and cash equivalents fell to $258.1 million from $1.41 billion.
Operating cash flow was $784.6 millionc, down from $1.31 billion, largely due to higher accounts receivable. The company repurchased $1.50 billion of stock in 2021 and declared a quarterly dividend of $0.50 per share.
Risks highlighted in the filing include dependence on vendor partner relationships, with Ingram Micro and TD SYNNEX together representing over 30%d of US purchases, exposure to public sector spending and procurement rules, a Department of Justice Civil Investigative Demand related to a False Claims Act investigation, and the leverage created by the Sirius financing. The filing also notes ongoing COVID-19 uncertainty and LIBOR transition effects on floating-rate debt.
02—Key points
Key Highlights
- Net sales rose 12.7% to $20.82 billion in 2021, including $197 million from the Sirius acquisition, with Corporate segment sales up 19.5% and Education up 18.8%.
- Government segment net sales fell 27.6% to $2.16 billion as several one-time 2020 activities did not recur and contracting delays occurred.
- Net income increased to $988.6 million, or $7.04 per diluted share, compared with $788.5 million, or $5.45 per diluted share, in 2020.
- Gross profit margin declined 30 basis points to 17.1%, while selling and administrative expenses fell to 10.3% of net sales from 11.0%, lifting operating margin to 6.8%.
- Total debt reached $6.9 billion at December 31, 2021, after $2.5 billion of senior notes issued to fund the Sirius acquisition, with $1.0 billion available under the revolving loan facility.
- Operating cash flow dropped to $784.6 million from $1,314.3 million, driven primarily by a $616.8 million increase in accounts receivable, with cash and cash equivalents ending at $258.1 million.
- The company repurchased 8.7 million shares for $1.50 billion in 2021 and paid $1.70 per share in dividends for the year, with a $0.50 quarterly dividend declared for March 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, CDW kept $0.05.
- Revenue$20.82B100.0%
- Cost of revenue−$17.25B82.9%
- Gross profit$3.57B17.1%
- Operating costs−$2.15B10.3%
- Operating income$1.42B6.8%
- Interest, other & tax−$430.4M2.1%
- Net income$988.6M4.7%
Where FY2021 revenue went
$20.82B- Cost of revenue: $17.25B, 83% of revenue
- Net income: $988.6M, 4.7% of revenue
- SG&A: $2.15B, 10% of revenue
- Interest, other & tax: $430.4M, 2.1% of revenue
Kept 4.7% as net incomeNet income $988.6M · 4.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 28, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $20.82B$18.47B | +12.7% |
| Cost of Revenue | $17.25B$15.26B | +13.1% |
| Gross Profit | $3.57B$3.21B | +11.2% |
| SG&A Expenses | $2.15B$2.03B | +5.8% |
| Operating Income | $1.42B$1.18B | +20.3% |
| Net Income | $988.60M$788.50M | +25.4% |
| EPS (Basic) | $7.14$5.53 | +29.1% |
| EPS (Diluted) | $7.04$5.45 | +29.2% |
| Shares Outstanding (Basic) | 138.50M142.60M | −2.9% |
| Shares Outstanding (Diluted) | 140.50M144.80M | −3.0% |
05—Questions
Frequently Asked Questions
What drove revenue growth in 2021?
Net sales increased $2,353 million, or 12.7%, to $20,821 million. Growth came primarily from the Corporate, Education and Small Business segments and from the UK and Canadian operations, which increased 24.0%. The filing attributes the Corporate and Small Business gains largely to hybrid work demand for notebooks, mobile devices and video.
How did the Sirius acquisition affect CDW's finances?
CDW completed the acquisition of Sirius Computer Solutions on December 1, 2021 for an aggregate consideration of approximately $2.4 billion, net of cash acquired. The company issued $2.5 billion of senior notes to fund it. Sirius contributed $197 million of net sales and $9 million of net income in 2021, and the company recorded preliminary intangible assets of $1,140.5 million.
What are the main risks to CDW's business?
The filing highlights dependence on vendor partners, which often have terminable agreements without long-term contracts, and concentration in wholesale distributors Ingram Micro and TD SYNNEX, which together represented over 30% of US purchases. Public sector exposure, a Department of Justice False Claims Act investigation, rising debt levels and COVID-19 supply disruptions are also cited as material risks.
Is CDW's leverage a concern for investors?
Total debt was $6.9 billion at December 31, 2021, including $1.7 billion of variable rate debt tied to LIBOR. The filing states that the company was in compliance with its debt covenants and had $1.0 billion available under its revolving loan facility. Management notes that higher interest rates would increase debt service obligations, and that net debt rose to $6,600.4 million from $2,517.0 million.
What returns has CDW provided to shareholders?
CDW repurchased $1.50 billion of common stock in 2021 and paid dividends totaling $1.70 per share. The Board declared a quarterly dividend of $0.50 per share payable March 10, 2022. The filing's cumulative total return table shows $100 invested at December 31, 2016 growing to $416 by December 31, 2021, compared with $213 for the S&P 500 Index.
06—Continue