01—Abstract
Summary
Summary of the 10-K filed February 26, 2024. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation (CDW) reported net sales of $21.38 billiona for the year ended December 31, 2023, down $2.37 billion, or 10.0%, from $23.75 billion in 2022.
The decline occurred across all operating segments, which the company attributes to continued economic uncertainty leading customers to reduce or delay hardware spending. Despite lower sales, gross profit was $4.65 billionb, roughly flat versus $4.69 billion in 2022, and gross profit margin rose to 21.8% from 19.7%, driven by a more favorable contribution of netted-down revenue, primarily software as a service, and higher product margin. Operating income declined to $1.68 billion from $1.74 billion, while net income was $1.10 billion, compared with $1.11 billion in 2022.
Diluted EPS was $8.10c versus $8.13, and non-GAAP net income per diluted share rose to $9.88 from $9.79. Cash generation and capital returns were stronger. Cash provided by operating activities rose to $1.60 billion from $1.34 billion, and adjusted free cash flow was $1.43 billion, up from $1.29 billion.
The company repurchased 2.6 million shares for $500 milliond during 2023, prepaid $150 million of its term loan, and ended the year with $5.6 billion of total debt and $1.2 billion of available revolver capacity. Total debt maturities include $613.8 million due in 2024. The board declared a quarterly dividend of $0.62 per share in February 2024 and authorized a $750 million increase to the share repurchase program.
The filing describes a diversified customer base of more than 250,000 customers across the US, UK and Canada, with the US representing approximately 90% of net sales. Public sector sales were $8.31 billion, or 38.8% of net sales. The filing also discloses a Civil Investigative Demand from the US Department of Justice dated September 20, 2021, related to a False Claims Act investigation concerning teaming agreements with OEMs, and states that the company is cooperating with the DOJ.
02—Key points
Key Highlights
- Net sales fell 10.0% to $21.38 billion in 2023 from $23.75 billion, with declines in all operating segments; Corporate segment sales dropped 13.4%.
- Gross profit margin improved 210 basis points to 21.8%, driven by a more favorable contribution of netted-down software-as-a-service revenue and higher product margin.
- Operating income decreased 3.1% to $1.68 billion; selling and administrative expenses rose to $2.97 billion, including workplace optimization costs of $47.7 million in non-GAAP adjustments.
- Net income was $1.10 billion ($8.10 diluted EPS) versus $1.11 billion ($8.13) in 2022; non-GAAP net income per diluted share increased to $9.88 from $9.79.
- Cash provided by operating activities increased to $1.60 billion from $1.34 billion, and adjusted free cash flow rose to $1.43 billion from $1.29 billion.
- Total debt was $5.6 billion at year-end, with $1.2 billion available under the revolving loan facility; the company repurchased $500 million of stock in 2023 and declared a $0.62 quarterly dividend in February 2024.
- A Civil Investigative Demand from the US Department of Justice relating to a False Claims Act investigation concerning teaming agreements with OEMs remains open, and the company is cooperating.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, CDW kept $0.05.
- Revenue$21.38B100.0%
- Cost of revenue−$16.72B78.2%
- Gross profit$4.65B21.8%
- Operating costs−$2.97B13.9%
- Operating income$1.68B7.9%
- Interest, other & tax−$576.6M2.7%
- Net income$1.10B5.2%
Where FY2023 revenue went
$21.38B- Cost of revenue: $16.72B, 78% of revenue
- SG&A: $2.97B, 14% of revenue
- Net income: $1.10B, 5.2% of revenue
- Interest, other & tax: $576.6M, 2.7% of revenue
Kept 5.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 26, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $21.38B$23.75B | −10.0% |
| Cost of Revenue | $16.72B$19.06B | −12.3% |
| Gross Profit | $4.65B$4.69B | −0.7% |
| SG&A Expenses | $2.97B$2.95B | +0.7% |
| Operating Income | $1.68B$1.74B | −3.1% |
| Net Income | $1.10B$1.11B | −0.9% |
| EPS (Basic) | $8.20$8.24 | −0.5% |
| EPS (Diluted) | $8.10$8.13 | −0.4% |
| Shares Outstanding (Basic) | 134.60M135.20M | −0.4% |
| Shares Outstanding (Diluted) | 136.30M137.00M | −0.5% |
05—Questions
Frequently Asked Questions
Why did CDW's net sales decline in 2023?
The filing states that net sales decreased $2,373 million, or 10.0%, to $21,376 million, and attributes the decline to continued economic uncertainty that led customers to focus their business priorities, resulting in a reduction or delay in hardware spending. Notebooks/mobile devices fell from $6.18 billion to $4.69 billion.
How did CDW's profitability change despite lower sales?
Gross profit was roughly flat at $4,652 million versus $4,687 million, but gross profit margin increased 210 basis points to 21.8%. The filing cites a more favorable contribution of netted-down revenue, primarily software as a service, and higher product margin due to lower notebook mix and increased margin rates across various categories. Operating income fell 3.1% to $1,681 million.
How strong is CDW's cash flow and balance sheet?
Net cash provided by operating activities was $1,598.7 million in 2023, up from $1,335.9 million. Free cash flow was $1,450.5 million. As of December 31, 2023, total debt was $5.6 billion, the company had $588.7 million of cash and cash equivalents, and $1.2 billion of revolver availability. The company stated it was in compliance with its debt covenants.
What are CDW's capital return plans?
In 2023, CDW paid dividends of $2.39 per share totaling $321.5 million and repurchased 2.6 million shares for $500 million. On February 7, 2024, the board declared a quarterly dividend of $0.62 per share, payable March 12, 2024, and authorized a $750 million increase to the share repurchase program. The filing states that dividends and repurchases remain at the board's discretion.
What legal or regulatory risks does the filing disclose?
The filing discloses a Civil Investigative Demand dated September 20, 2021, from the US Department of Justice in connection with a False Claims Act investigation, and states that the DOJ requested information related to teaming agreements with OEMs. The company is cooperating. The filing also states that management does not believe there is a reasonable possibility of a material loss exceeding amounts already recognized for proceedings in the ordinary course.
06—Continue