01—Abstract
Summary
Summary of the 10-K filed February 24, 2023. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation (CDW), 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.
For 2022, Net sales were $23,748.7 milliona, up 14.1% from $20,820.8 million, with all operating segments contributing. Gross profit rose to $4,686.6 million (19.7% of Net sales, up 260 basis points), and operating income increased 22.3% to $1,735.2 million. Net income was $1,114.5 million, or $8.13 per diluted share, versus $7.04 in 2021.
Non-GAAP net income per diluted share was $9.79b, compared with $7.97 in 2021. Cash provided by operating activities rose to $1,335.9 million from $784.6 million, and free cash flow was $1,292.7 million, versus $476.7 million. The Corporate segment drove growth, with Net sales up 26.5% to $10,350.1 million, while Public segment Net sales rose 4.5%, led by Healthcare (up 22.7%) and Government (up 19.4%), partly offset by Education (down 11.9%).
Interest expense, net increased to $235.7 millionc from $150.9 million, reflecting notes issued in December 2021 to fund the Sirius acquisition. Total debt outstanding was $5.9 billion at December 31, 2022, and $1.1 billion was available under the Revolving Loan Facility. The company made no share repurchases in 2022, retained $87.6 million under its program, and the Board authorized a $750 million increase to the program on February 8, 2023.
The Board also declared a quarterly dividend of $0.59d per share, payable March 10, 2023. The filing highlights risks including dependence on vendor partner relationships, competition, supply chain concentration with Ingram Micro and TD SYNNEX (about one-third of US purchases), cybersecurity, public sector contract compliance, and a Civil Investigative Demand from the Department of Justice tied to a False Claims Act investigation, for which the company stated it cannot assess the probability of outcome or range of loss.
02—Key points
Key Highlights
- Net sales grew 14.1% to $23,748.7 million in 2022, with all operating segments contributing to the increase.
- Gross profit margin expanded 260 basis points to 19.7%, driven by product mix and rate, higher mix of netted-down revenue, and services growth from acquisitions.
- Operating income rose 22.3% to $1,735.2 million, while Net income reached $1,114.5 million, or $8.13 per diluted share (Non-GAAP: $9.79).
- Free cash flow was $1,292.7 million, up from $476.7 million, as operating cash flow increased to $1,335.9 million.
- Corporate segment Net sales rose 26.5% to $10,350.1 million, while Public segment Net sales grew 4.5% despite an 11.9% decline in Education.
- Total debt was $5.9 billion at year-end, with $1.1 billion available under the Revolving Loan Facility; no share repurchases were made in 2022.
- The Board declared a $0.59 quarterly dividend and authorized a $750 million increase to the share repurchase program in February 2023.
- A Department of Justice Civil Investigative Demand under the False Claims Act is pending, and the company cannot assess the outcome or range of possible loss.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, CDW kept $0.05.
- Revenue$23.75B100.0%
- Cost of revenue−$19.06B80.3%
- Gross profit$4.69B19.7%
- Operating costs−$2.95B12.4%
- Operating income$1.74B7.3%
- Interest, other & tax−$620.7M2.6%
- Net income$1.11B4.7%
Where FY2022 revenue went
$23.75B- Cost of revenue: $19.06B, 80% of revenue
- SG&A: $2.95B, 12% of revenue
- Net income: $1.11B, 4.7% of revenue
- Interest, other & tax: $620.7M, 2.6% of revenue
Kept 4.7% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 24, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $23.75B$20.82B | +14.1% |
| Cost of Revenue | $19.06B$17.25B | +10.5% |
| Gross Profit | $4.69B$3.57B | +31.3% |
| SG&A Expenses | $2.95B$2.15B | +37.3% |
| Operating Income | $1.74B$1.42B | +22.3% |
| Net Income | $1.11B$988.60M | +12.7% |
| EPS (Basic) | $8.24$7.14 | +15.4% |
| EPS (Diluted) | $8.13$7.04 | +15.5% |
| Shares Outstanding (Basic) | 135.20M138.50M | −2.4% |
| Shares Outstanding (Diluted) | 137.00M140.50M | −2.5% |
05—Questions
Frequently Asked Questions
How did CDW perform financially in 2022?
Net sales increased 14.1% to $23,748.7 million, gross profit rose 31.3% to $4,686.6 million, and net income was $1,114.5 million, or $8.13 per diluted share, compared with $7.04 in 2021.
What drove the growth in 2022?
The filing attributes growth to customer priorities on digital transformation and hybrid work, higher Net sales from the Sirius acquisition completed December 1, 2021, and more favorable product mix and rate. The Corporate segment contributed the largest increase, up $2,170.4 million.
How is CDW's balance sheet and debt position?
Total debt was $5.9 billion as of December 31, 2022, and interest expense, net rose to $235.7 million from $150.9 million. The company had $315.2 million in cash and cash equivalents and $1.1 billion of availability under its Revolving Loan Facility, and it reported compliance with its debt covenants.
What is the outlook for shareholder returns?
The Board declared a quarterly cash dividend of $0.59 per share payable March 10, 2023, and expects to continue paying quarterly dividends at its discretion. It also authorized a $750 million increase to the share repurchase program on February 8, 2023, after making no repurchases in 2022.
What are the key risks investors should note?
Key risks include reliance on vendor partner agreements that are generally terminable on notice, concentration of purchases with wholesale distributors Ingram Micro and TD SYNNEX (about one-third of US purchases), cybersecurity threats, public sector contract compliance, and a Department of Justice False Claims Act investigation related to teaming agreements with OEMs.
06—Continue