# CDW Corp: Form 10-Q for the period ended Jun 30, 2021

- Company: [CDW Corp](/companies/cdw.md) (CIK 1402057)
- Form: 10-Q
- Filed: 2021-08-04
- Accepted by EDGAR: Aug 4, 2021, 16:06 ET
- Period: 2021-06-30
- Accession: 0001402057-21-000109
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1402057/000140205721000109/cdw-20210630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1402057/000140205721000109/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-04-01 to 2021-06-30 | $5.15bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2021-01-01 to 2021-06-30 | $9.98bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-04-01 to 2021-06-30 | $4.26bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2021-01-01 to 2021-06-30 | $8.31bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-04-01 to 2021-06-30 | $882.8m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2021-01-01 to 2021-06-30 | $1.68bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2021-04-01 to 2021-06-30 | $512.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2021-01-01 to 2021-06-30 | $984.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2021-04-01 to 2021-06-30 | $369.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2021-01-01 to 2021-06-30 | $693.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-04-01 to 2021-06-30 | $97.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2021-01-01 to 2021-06-30 | $153.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-04-01 to 2021-06-30 | $274.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2021-01-01 to 2021-06-30 | $506.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-04-01 to 2021-06-30 | $1.93 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2021-01-01 to 2021-06-30 | $3.56 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-04-01 to 2021-06-30 | $1.96 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2021-01-01 to 2021-06-30 | $3.60 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-04-01 to 2021-06-30 | 141,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2021-01-01 to 2021-06-30 | 142,400,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2021-01-01 to 2021-06-30 | $344.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2021-01-01 to 2021-06-30 | $38.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2021-01-01 to 2021-06-30 | $112.3m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2021-01-01 to 2021-06-30 | $735.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-06-30 | $501.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-06-30 | $5.42bn | us-gaap:AssetsCurrent |
| Total assets | at 2021-06-30 | $8.99bn | us-gaap:Assets |
| Current liabilities | at 2021-06-30 | $3.77bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2021-06-30 | $3.91bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2021-06-30 | $19.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-06-30 | $1.05bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 65,848 characters.

*Unless otherwise indicated or the context otherwise requires, as used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," the terms "we," "us," "the Company," "our," "CDW" and similar terms refer to CDW Corporation and its subsidiaries. "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the unaudited interim Consolidated Financial Statements and the related notes included elsewhere in this report and with the audited Consolidated Financial Statements and the related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. This discussion contains forward-looking statements that are subject to numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements. See "Forward-Looking Statements" at the end of this discussion.*

### Overview

CDW Corporation, a Fortune 500 company and member of the S&P 500 Index, is a leading multi-brand provider of information technology ("IT") solutions to small, medium and large business, government, education and healthcare customers in the US, the UK and Canada. Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise, hybrid and cloud capabilities across data center and networking, digital workspace, security and virtualization.

We are vendor, technology and consumption model "agnostic", with a solutions portfolio including more than 100,000 products and services from more than 1,000 leading and emerging brands. Our solutions are delivered in physical, virtual and cloud-based environments through approximately 7,000 customer-facing coworkers, including sellers, highly-skilled technology specialists and advanced service delivery engineers. We are a leading sales channel partner for many original equipment manufacturers ("OEMs"), software publishers and cloud providers (collectively, our "vendor partners"), whose products we sell or include in the solutions we offer. We provide our vendor partners with a cost-effective way to reach customers and deliver a consistent brand experience through our established end-market coverage, technical expertise and extensive customer access.

We have three reportable segments, Corporate, Small Business and Public. Our Corporate segment primarily serves US private sector business customers with more than 250 employees. Our Small Business segment primarily serves US private sector business customers with up to 250 employees. Our Public segment is comprised of government agencies and education and healthcare institutions in the US. We also have two other operating segments: CDW UK and CDW Canada, each of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category ("Other").

We may sell all or only select products that our vendor partners offer. Each vendor partner agreement provides for specific terms and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also resell software for major software publishers. Our agreements with software publishers allow the end-user customer to acquire software or licensed products and services. In addition to helping our customers determine the best software solutions for their needs, we help them manage their software agreements, including warranties and renewals. A significant portion of our advertising and marketing expenses are reimbursed through cooperative advertising programs with our vendor partners. These programs are at the discretion of our vendor partners and are typically tied to sales or other commitments to be met by us within a specified period of time.

### Trends and Key Factors Affecting our Financial Performance

We believe the following key factors may have a meaningful impact on our business performance, influencing our ability to generate sales and achieve our targeted financial and operating results:

- General economic conditions are a key factor affecting our results as they impact our customers' willingness to spend on information technology. This is particularly the case for our Corporate and Small Business customers, as their purchases tend to reflect confidence in their business prospects, which are driven by their discrete perceptions of business and general economic conditions. Additionally, changes in trade policy and product constraints from suppliers could have an adverse impact on our business.
- The global spread of the novel coronavirus ("COVID-19") pandemic continues to create macroeconomic uncertainty, volatility and disruption, including supply constraints. The supply constraints are being caused primarily by component availability, resulting in extended lead times and unpredictability. In 2021, customer top priorities have been digital transformation, security, hybrid and cloud solutions, client devices, and preparing for workers to return to the office and enhancing remote enablement capabilities as hybrid environments become the future work model. We have orchestrated solutions by leveraging client devices, accessories, collaboration tools, security, software and hybrid and cloud offerings to help customers build these capabilities and achieve their objectives.
- Changes in spending policies, budget priorities and funding levels, including current and future stimulus packages, are key factors influencing the purchasing levels of Government, Healthcare and Education customers. As schools prepare for students to return this fall, Education customers have prioritized investments towards equity and access for all students and enhancing the in-classroom experience. In addition, Healthcare customers resumed projects that were paused during the pandemic as budget certainty improved as more patients returned to elective procedures. As the duration and ongoing economic impacts of the COVID-19 pandemic remain uncertain, current and future budget priorities and funding levels for Government, Healthcare and Education customers may be adversely affected.
- Technology trends drive customer purchasing behaviors in the market. Current technology trends are focused on delivering greater flexibility and efficiency, as well as designing IT securely. These trends are driving customer adoption of solutions such as those delivered via cloud, software defined architectures and hybrid on-premise and off-premise combinations, as well as the evolution of the IT consumption model to more "as a service" offerings, including Device as a Service and managed services. Technology trends could also change as customers consider the impact of the COVID-19 pandemic on their operations.

### Key Business Metrics

We monitor a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business and make adjustments as necessary. We believe that the most important of these measures and ratios include average daily sales, gross margin, operating margin, Net income, Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income, Net sales growth on a constant currency basis, Net income per diluted share, Non-GAAP net income per diluted share, free cash flow, return on working capital, Cash and cash equivalents, net working capital, cash conversion cycle, debt levels including available credit, sales per coworker and coworker turnover. These measures and ratios are compared to standards or objectives set by management, so that actions can be taken, as necessary, in order to achieve the standards and objectives.

In this report, we discuss Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis, which are non-GAAP financial measures.

We believe these measures provide analysts, investors and management with helpful 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. For the definitions of Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis and reconciliations to the most directly comparable US GAAP measure, see "Results of Operations - Non-GAAP Financial Measure Reconciliations."

### Second Quarter Overview

The results of certain business metrics are as follows:

*(dollars in millions)*

|  | Three Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Net sales | $5,146.4 | $4,365.7 |
| Gross profit | 882.8 | 747.2 |
| Operating income | 369.9 | 283.4 |
| Net income | 274.1 | 189.1 |
| Non-GAAP operating income | 418.1 | 338.2 |
| Non-GAAP net income | 286.1 | 225.3 |
| Average daily sales(1) | 80.4 | 68.2 |
| Net debt(2) | 3,427.8 | 2,941.1 |
| Cash conversion cycle (in days)(3) | 21 | 25 |

(1) There were 64 selling days for both the three months ended June 30, 2021 and 2020.

(2) Defined as Total debt minus Cash and cash equivalents.

(3) Cash conversion cycle is defined as days of sales outstanding in Accounts receivable and certain receivables due from vendors plus days of supply in Merchandise inventory minus days of purchases outstanding in Accounts payable and Accounts payable-inventory financing, based on a rolling three-month average.

### Results of Operations

### Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Results of operations, in dollars and as a percentage of Net sales are as follows:

*Dollars in Millions*

*Dollars in Millions*

|  | Three Months Ended June 30, 2021 | Percentage of Net Sales | 2020 | Percentage of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $5,146.4 | 100.0% | $4,365.7 | 100.0% |
| Cost of sales | 4,263.6 | 82.8 | 3,618.5 | 82.9 |
| Gross profit | 882.8 | 17.2 | 747.2 | 17.1 |
| Selling and administrative expenses | 512.9 | 10.0 | 463.8 | 10.6 |
| Operating income | 369.9 | 7.2 | 283.4 | 6.5 |
| Interest expense, net | (35.5) | (0.7) | (39.7) | (0.9) |
| Other income, net | 36.8 | 0.7 | 1.7 | — |
| Income before income taxes | 371.2 | 7.2 | 245.4 | 5.6 |
| Income tax expense | (97.1) | (1.9) | (56.3) | (1.3) |
| Net income | $274.1 | 5.3% | $189.1 | 4.3% |

24

#### Net sales

Net sales by segment, in dollars and as a percentage of total Net sales, and the year-over-year dollar and percentage change in Net sales are as follows:

*(dollars in millions)*

|  | Three Months Ended June 30, 2021 Net Sales | Percentage of Total Net Sales | 2020 Net Sales | Percentage of Total Net Sales | Dollar Change | Percent Change(1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate | $1,983.3 | 38.5% | $1,557.5 | 35.7% | $425.8 | 27.3% |
| Small Business | 482.9 | 9.4 | 302.1 | 6.9 | 180.8 | 59.8 |
| Public: |  |  |  |  |  |  |
| Government | 513.4 | 10.0 | 719.7 | 16.5 | (206.3) | (28.7) |
| Education | 1,112.1 | 21.6 | 876.8 | 20.1 | 235.3 | 26.8 |
| Healthcare | 455.2 | 8.8 | 425.6 | 9.7 | 29.6 | 7.0 |
| Total Public | 2,080.7 | 40.4 | 2,022.1 | 46.3 | 58.6 | 2.9 |
| Other | 599.5 | 11.7 | 484.0 | 11.1 | 115.5 | 23.8 |
| Total Net sales | $5,146.4 | 100.0% | $4,365.7 | 100.0% | $780.7 | 17.9% |

(1) There were 64 selling days for both the three months ended June 30, 2021 and 2020.

Total Net sales for the three months ended June 30, 2021 increased $781 million, or 17.9%, to $5,146 million, compared to the three months ended June 30, 2020. Excluding the impact of foreign currency fluctuations, constant currency Net sales growth was 16.3%. Net sales growth was primarily driven by Corporate, Education and Small Business customers. Our Corporate and Small Business customers prepared for returning to the office and optimizing hybrid work environment capabilities, while Education customers prioritized equity and access to learning and enhancing the in-classroom experience. For additional information, see Note 11 (Segment Information) to the accompanying Consolidated Financial Statements and "Non-GAAP Financial Measure Reconciliations" below regarding constant currency Net sales growth.

Corporate segment Net sales for the three months ended June 30, 2021 increased $426 million, or 27.3%, compared to the three months ended June 30, 2020. Expectations that a hybrid environment will become the future work model resulted in increased demand for notebooks/mobile devices, video and accessories. Additionally, Corporate customers resumed infrastructure projects, driving growth in servers, enterprise storage and software.

Small Business segment Net sales for the three months ended June 30, 2021 increased $181 million, or 59.8%, compared to the three months ended June 30, 2020. Customers continued to focus on productivity and mobility as Net sales growth was driven by notebooks/mobile devices and increased demand for video.

Public segment Net sales for the three months ended June 30, 2021 increased $59 million, or 2.9%, compared to the three months ended June 30, 2020. Net sales to Education customers increased 26.8% primarily driven by integrated solutions including notebooks/mobile devices, video, accessories and services. Schools have prioritized equity and access to learning and are investing in the interactive classroom experience to prepare for students returning to in-person learning in the fall. Net sales to Healthcare customers increased 7.0% primarily due to desktops and video. Healthcare customers saw patients returning for elective procedures which increased confidence in budgets, enabling delayed projects to restart. Net sales to Government customers decreased 28.7% primarily driven by notebooks/mobile devices and desktops, and the completion of the Census project, comprised of other hardware, including accessories and smartphones, and services.

Net sales in Other, which is comprised of results from our UK and Canadian operations, for the three months ended June 30, 2021 increased $116 million, or 23.8%, compared to the three months ended June 30, 2020. In local currency, Canada Net sales increased as a result of increased customer confidence and higher vaccination rates while UK Net sales decreased due to a slower economic recovery. Customers in the UK and Canada continued to focus on productivity, mobility and security as Net sales growth was driven primarily by notebooks/mobile devices, video and other hardware, including accessories. The impact of foreign currency exchange increased Other Net sales by 13.9%, primarily due to the favorable translation of the Canadian dollar and British pound to the US dollar.

#### Gross profit

Gross profit increased $136 million, or 18.2%, to $883 million for the three months ended June 30, 2021, compared to $747 million for the three months ended June 30, 2020. As a percentage of Net sales, Gross profit margin increased 10 basis points to 17.2% for the three months ended June 30, 2021. The increase in Gross profit margin was primarily driven by an increase in the mix of net service contract revenue, primarily Software as a Service, and increased Net sales and margins on professional services, partially offset by overlapping higher margin configuration services in the prior year.

#### Selling and administrative expenses

Selling and administrative expenses increased $49 million, or 10.6%, to $513 million for the three months ended June 30, 2021, compared to $464 million for the three months ended June 30, 2020. The increase was primarily driven by higher sales payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against goals, partially offset by lower intangible asset amortization. Total coworker count was 10,666, up 618 from 10,048 at June 30, 2020 primarily due to an increase in new hires during 2021 and customer-facing coworkers as a result of our recent acquisitions.

As a percentage of total Net sales, Selling and administrative expenses decreased 60 basis points to 10.0% during the three months ended June 30, 2021, compared to 10.6% in the three months ended June 30, 2020 primarily due to lower intangible asset amortization, partially offset by higher payroll expenses.

#### Operating income

Operating income by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change are as follows:

*Dollars in Millions*

*Dollars in Millions*

| Segments:(1) | Three Months Ended June 30, 2021 | Operating Margin | 2020 | Operating Margin | Percent Change in Operating Income |
| --- | ---: | ---: | ---: | ---: | ---: |
| Corporate | $175.2 | 8.8% | $123.0 | 7.9% | 42.3% |
| Small Business | 44.0 | 9.1 | 21.0 | 7.0 | 109.4 |
| Public | 153.3 | 7.4 | 159.9 | 7.9 | (4.1) |
| Other(2) | 23.7 | 4.0 | 16.5 | 3.4 | 42.8 |
| Headquarters(3) | (26.3) | nm\* | (37.0) | nm\* | 28.9 |
| Total Operating income | $369.9 | 7.2% | $283.4 | 6.5% | 30.5% |

\* Not meaningful

(1) Segment operating income includes the segment's direct operating income, allocations for certain Headquarters' costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.

(2) Includes the financial results for our other operating segments, CDW UK and CDW Canada, which do not meet the reportable segment quantitative thresholds.

(3) Includes certain Headquarters' function costs that are not allocated to the segments.

Operating income was $370 million for the three months ended June 30, 2021, an increase of $87 million, or 30.5%, compared to $283 million for the three months ended June 30, 2020. Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher sales payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against goals. Total operating margin percentage increased 70 basis points to 7.2% for the three months ended June 30, 2021, compared to 6.5% for the three months ended June 30, 2020 primarily due to lower intangible asset amortization as a percentage of Net sales, partially offset by higher payroll expenses.

Corporate segment Operating income was $175 million for the three months ended June 30, 2021, an increase of $52 million, or 42.3%, compared to $123 million for the three months ended June 30, 2020. Corporate segment Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher sales payroll and performance-based compensation expenses. Corporate segment operating margin percentage increased 90 basis points to 8.8% for the three months ended June 30, 2021, compared to 7.9% for the three months ended June 30, 2020 primarily due to lower intangible asset amortization as a percentage of Net sales, partially offset by higher payroll expenses.

Small Business segment Operating income was $44 million for the three months ended June 30, 2021, an increase of $23 million, or 109.4%, compared to $21 million for the three months ended June 30, 2020. Small Business segment Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher sales payroll expenses. Small Business segment operating margin percentage increased 210 basis points to 9.1% for the three months ended June 30, 2021, compared to 7.0% for the three months ended June 30, 2020, primarily due to lower intangible asset amortization and lower payroll expenses as a percentage of Net sales, partially offset by lower product margin.

Public segment Operating income was $153 million for the three months ended June 30, 2021, a decrease of $7 million, or 4.1%, compared to $160 million for the three months ended June 30, 2020. Public segment Operating income decreased primarily due to higher sales payroll and performance-based compensation expenses, partially offset by higher Gross profit dollars. Public segment operating margin percentage decreased 50 basis points to 7.4% for the three months ended June 30, 2021, compared to 7.9% for the three months ended June 30, 2020, primarily due to higher payroll expenses as a percentage of Net sales, partially offset by higher margin from mixing into net service contract revenue.

Other Operating income was $24 million for the three months ended June 30, 2021, an increase of $7 million, or 42.8%, compared to $17 million for the three months ended June 30, 2020. Other Operating income increased primarily due to higher Gross profit dollars, partially offset by higher payroll expenses. Other operating margin percentage increased 60 basis points to 4.0% for the three months ended June 30, 2021, compared to 3.4% for the three months ended June 30, 2020 primarily due to lower payroll expenses, integration costs, intangible asset amortization, and other selling and administrative expenses as a percentage of Net sales, partially offset by lower product margin.

#### Interest expense, net

Interest expense, net for the three months ended June 30, 2021 was $36 million, a decrease of $4 million compared to $40 million for the three months ended June 30, 2020. This decrease was primarily driven by the benefits from the August 2020 senior notes refinancing, a lower effective interest rate on the Term Loan in 2021 compared to 2020 and lower borrowings under the revolving credit facility in 2021 compared to 2020.

#### Other income, net

During the three months ended June 30, 2021, we sold all ownership interests of an equity method investment and recognized a $36 million gain.

#### Income tax expense

Income tax expense was $97 million and $56 million for the three months ended June 30, 2021 and 2020, respectively. The effective tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 26.2% and 22.9% for the three months ended June 30, 2021 and 2020, respectively. The effective tax rate for the three months ended June 30, 2021 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate effective in 2023, partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the three months ended June 30, 2020 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes, partially offset by excess tax benefits on equity-based compensation.

The higher effective tax rate for the three months ended June 30, 2021 as compared to the same period in the prior year was primarily attributable to lower excess tax benefits on equity-based compensation and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate effective in 2023.

#### Non-GAAP Financial Measure Reconciliations

We have included reconciliations of Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis for the three months ended June 30, 2021 and 2020 below.

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, and acquisition and integration expenses. Non-GAAP operating income margin is defined as Non-GAAP operating income as a percentage of Net sales. Non-GAAP income before income taxes and Non-GAAP net income exclude, among other things, charges related to acquisition-related intangible asset amortization, equity-based compensation, acquisition and integration expenses, and the associated tax effects of each. Net sales growth on a constant currency basis is defined as Net sales growth excluding the impact of foreign currency translation on Net sales compared to the prior period.

Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance or financial position 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.

We believe these measures provide analysts, investors and management with helpful 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.

#### Non-GAAP operating income

Non-GAAP operating income was $418 million for the three months ended June 30, 2021, an increase of $80 million, or 23.6%, compared to $338 million for the three months ended June 30, 2020. As a percentage of Net sales, Non-GAAP operating income was 8.1% and 7.7% for the three months ended June 30, 2021 and 2020, respectively.

*(dollars in millions)*

|  | Three Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Operating income, as reported | $369.9 | $283.4 |
| Amortization of intangibles(1) | 24.4 | 44.4 |
| Equity-based compensation | 20.6 | 5.6 |
| Other adjustments | 3.2 | 4.8 |
| Non-GAAP operating income | $418.1 | $338.2 |
| Non-GAAP operating income margin | 8.1% | 7.7% |

(1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.

#### Non-GAAP net income

Non-GAAP net income was $286 million for the three months ended June 30, 2021, an increase of $61 million, or 27.0%, compared to $225 million for the three months ended June 30, 2020.

*(dollars in millions)*

|  | Three Months Ended June 30, 2021 Income before income taxes | Income tax expense(1) | Net income | 2020 Income before income taxes | Income tax expense(1) | Net income |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| US GAAP, as reported | $371.2 | $(97.1) | $274.1 | $245.4 | $(56.3) | $189.1 |
| Gain on sale of equity method investment | (36.0) | 8.8 | (27.2) | — | — | — |
| Amortization of intangibles(2) | 24.4 | (1.8) | 22.6 | 44.4 | (11.1) | 33.3 |
| Equity-based compensation | 20.6 | (6.2) | 14.4 | 5.6 | (6.3) | (0.7) |
| Other adjustments | 3.2 | (1.0) | 2.2 | 4.8 | (1.2) | 3.6 |
| Non-GAAP | $383.4 | $(97.3) | $286.1 | $300.2 | $(74.9) | $225.3 |

(1) Income tax on non-GAAP adjustments includes excess tax benefits associated with equity-based compensation.

(2) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.

#### Net sales growth on a constant currency basis

Net sales increased $781 million, or 17.9%, to $5,146 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020. Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased $720 million, or 16.3%.

*(dollars in millions)*

|  | Three Months Ended June 30, 2021 | 2020 | % Change(1) |
| --- | ---: | ---: | ---: |
| Net sales, as reported | $5,146.4 | $4,365.7 | 17.9% |
| Foreign currency translation(2) | — | 61.1 |  |
| Net sales, on a constant currency basis | $5,146.4 | $4,426.8 | 16.3% |

(1) There were 64 selling days for both the three months ended June 30, 2021 and 2020.

(2) Represents the effect of translating the prior year results of CDW UK and CDW Canada at the average exchange rates applicable in the current year.

### Six Months Overview

The results of certain business metrics are as follows:

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Net sales | $9,983.9 | $8,754.9 |
| Gross profit | 1,678.0 | 1,503.7 |
| Operating income | 693.3 | 529.2 |
| Net income | 506.7 | 357.0 |
| Non-GAAP operating income | 785.8 | 642.1 |
| Non-GAAP net income | 535.5 | 425.3 |
| Average daily sales(1) | 78.6 | 68.4 |
| Net debt(2) | 3,427.8 | 2,941.1 |
| Cash conversion cycle (in days)(3) | 21 | 25 |

(1) There were 127 and 128 selling days for the six months ended June 30, 2021 and 2020, respectively.

(2) Defined as Total debt minus Cash and cash equivalents.

(3) Cash conversion cycle is defined as days of sales outstanding in Accounts receivable and certain receivables due from vendors plus days of supply in Merchandise inventory minus days of purchases outstanding in Accounts payable and Accounts payable-inventory financing, based on a rolling three-month average.

### Results of Operations

### Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Results of operations, in dollars and as a percentage of Net sales are as follows:

*Dollars in Millions*

*Dollars in Millions*

|  | Six Months Ended June 30, 2021 | Percentage of Net Sales | 2020 | Percentage of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $9,983.9 | 100.0% | $8,754.9 | 100.0% |
| Cost of sales | 8,305.9 | 83.2 | 7,251.2 | 82.8 |
| Gross profit | 1,678.0 | 16.8 | 1,503.7 | 17.2 |
| Selling and administrative expenses | 984.7 | 9.9 | 974.5 | 11.2 |
| Operating income | 693.3 | 6.9 | 529.2 | 6.0 |
| Interest expense, net | (71.1) | (0.7) | (77.6) | (0.9) |
| Other income, net | 37.9 | 0.4 | 5.6 | 0.1 |
| Income before income taxes | 660.1 | 6.6 | 457.2 | 5.2 |
| Income tax expense | (153.4) | (1.5) | (100.2) | (1.1) |
| Net income | $506.7 | 5.1% | $357.0 | 4.1% |

#### Net sales

Net sales by segment, in dollars and as a percentage of total Net sales, and the year-over-year dollar and percentage change in Net sales are as follows:

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 Net Sales | Percentage of Total Net Sales | 2020 Net Sales | Percentage of Total Net Sales | Dollar Change | Percent Change | Average Daily Sales Percent Change(1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate | $3,788.9 | 37.9% | $3,468.5 | 39.6% | $320.4 | 9.2% | 10.1% |
| Small Business | 915.6 | 9.2 | 693.6 | 7.9 | 222.0 | 32.0 | 33.0 |
| Public: |  |  |  |  |  |  |  |
| Government | 1,029.5 | 10.3 | 1,288.2 | 14.7 | (258.7) | (20.1) | (19.5) |
| Education | 2,055.4 | 20.6 | 1,353.0 | 15.5 | 702.4 | 51.9 | 53.1 |
| Healthcare | 917.5 | 9.2 | 906.2 | 10.4 | 11.3 | 1.3 | 2.0 |
| Total Public | 4,002.4 | 40.1 | 3,547.4 | 40.6 | 455.0 | 12.8 | 13.7 |
| Other | 1,277.0 | 12.8 | 1,045.4 | 11.9 | 231.6 | 22.2 | 23.1 |
| Total Net sales | $9,983.9 | 100.0% | $8,754.9 | 100.0% | $1,229.0 | 14.0% | 14.9% |

(1) There were 127 and 128 selling days for the six months ended June 30, 2021 and 2020, respectively.

Total Net sales for the six months ended June 30, 2021 increased $1,229 million to $9,984 million, compared to the six months ended June 30, 2020. There was one less selling day in the six months ended June 30, 2021 compared to the same period of 2020, and Net sales on an average daily sales basis increased 14.9%. Excluding the impact of foreign currency fluctuations, constant currency Net sales growth on an average daily sales basis was 13.6%. Net sales growth was primarily driven by Education, Corporate and Small Business customers. Our Education customers prioritized equity and access to learning and enhancing the in-classroom experience, while Corporate and Small Business customers prepared for returning to the office and optimizing hybrid work environment capabilities. For additional information, see Note 11 (Segment Information) to the accompanying Consolidated Financial Statements and "Non-GAAP Financial Measure Reconciliations" below regarding constant currency Net sales growth.

Corporate segment Net sales for the six months ended June 30, 2021 increased $320 million, or 9.2%, compared to the six months ended June 30, 2020. On an average daily sales basis, Corporate segment Net sales increased 10.1%. Expectations that a hybrid environment will become the future work model resulted in higher demand for notebooks/mobile devices, video and accessories. Additionally, Corporate customers resumed infrastructure projects, driving growth in servers, enterprise storage and software.

Small Business segment Net sales for the six months ended June 30, 2021 increased $222 million, or 32.0%, compared to the six months ended June 30, 2020. On an average daily sales basis, Small Business segment Net sales increased 33.0%. Customers continued to focus on productivity and mobility as Net sales growth was driven by notebooks/mobile devices, video and accessories.

Public segment Net sales for the six months ended June 30, 2021 increased $455 million, or 12.8%, compared to the six months ended June 30, 2020. On an average daily sales basis, Public segment Net sales increased 13.7%. Net sales to Education customers increased 53.1% on an average daily sales basis primarily driven by integrated solutions including notebooks/mobile devices, video, accessories and services. Schools have prioritized equity and access to learning and investing in the interactive classroom experience to prepare for students returning to in-person learning in the fall. Net sales to Healthcare customers increased 2.0% on an average daily sales basis primarily due to services, servers and video, partially offset by notebooks/mobile devices. Healthcare customers saw patients returning for elective procedures which increased confidence in budgets, enabling delayed projects to restart. Net sales to Government customers decreased 19.5% on an average daily sales basis primarily driven by notebooks/mobile devices and desktops, software reflecting the continued mix into Software as a Service, and the completion of the Census project, comprised of other hardware, including accessories and smartphones, and services. These decreases were partially offset by increased infrastructure spending in enterprise storage.

Net sales in Other, which is comprised of results from our UK and Canadian operations, for the six months ended June 30, 2021 increased $232 million, or 22.2%, compared to the six months ended June 30, 2020. On an average daily sales basis, Other increased 23.1%. In local currency, Canada Net sales increased as a result of increased customer confidence and higher vaccination rates while UK Net sales increased at a lower rate due to a slower economic recovery. Customers in the UK and Canada continued to focus on productivity and mobility as Net sales growth was driven by notebooks/mobile devices, video and other hardware, including accessories. The impact of foreign currency exchange further increased Other Net sales by 11.0%, primarily due to the favorable translation of the Canadian dollar and British pound to the US dollar.

#### Gross profit

Gross profit increased $174 million, or 11.6%, to $1,678 million for the six months ended June 30, 2021, compared to $1,504 million for the six months ended June 30, 2020. As a percentage of Net sales, Gross profit margin decreased 40 basis points to 16.8% for the six months ended June 30, 2021. The decrease in Gross profit margin was primarily driven by lower product margin, including notebook mix and rate, and overlapping higher margin configuration services in the prior year, partially offset by an increase in the mix of net service contract revenue, primarily Software as a Service, and increased Net sales and margins on professional services.

#### Selling and administrative expenses

Selling and administrative expenses increased $10 million, or 1.1%, to $985 million for the six months ended June 30, 2021, compared to $975 million for the six months ended June 30, 2020. The increase was primarily due to higher payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against goals, partially offset by lower intangible asset amortization and lower bad debt expense. Total coworker count was 10,666, up 618 from 10,048 at June 30, 2020 primarily due to an increase in new hires during 2021 and customer-facing coworkers as a result of our recent acquisitions.

As a percentage of Net sales, Selling and administrative expenses decreased 120 basis points to 9.9% during the six months ended June 30, 2021, compared to 11.1% for the six months ended June 30, 2020, primarily due to lower intangible asset amortization and lower bad debt expense.

#### Operating income

Operating income by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change are as follows:

*Dollars in Millions*

*Dollars in Millions*

| Segments:(1) | Six Months Ended June 30, 2021 | Operating Margin | 2020 | Operating Margin | Percent Change in Operating Income |
| --- | ---: | ---: | ---: | ---: | ---: |
| Corporate | $336.6 | 8.9% | $250.4 | 7.2% | 34.4% |
| Small Business | 86.8 | 9.5 | 48.3 | 7.0 | 79.6 |
| Public | 290.0 | 7.2 | 272.3 | 7.7 | 6.5 |
| Other(2) | 51.4 | 4.0 | 31.2 | 3.0 | 64.4 |
| Headquarters(3) | (71.5) | nm\* | (73.0) | nm\* | 2.1 |
| Total Operating income | $693.3 | 6.9% | $529.2 | 6.0% | 31.0% |

\* Not meaningful

(1) Segment operating income includes the segment's direct operating income, allocations for certain Headquarters' costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.

(2) Includes the financial results for our other operating segments, CDW UK and CDW Canada, which do not meet the reportable segment quantitative thresholds.

(3) Includes certain Headquarters' function costs that are not allocated to the segments.

Operating income was $693 million for the six months ended June 30, 2021, an increase of $164 million, or 31.0%, compared to $529 million for the six months ended June 30, 2020. Operating income increased primarily due to higher Gross profit dollars, lower intangible asset amortization and lower bad debt expense, partially offset by higher payroll expenses consistent with higher Gross profit, higher coworker count and higher attainment against goals. Total operating margin percentage increased 90 basis points to 6.9% for the six months ended June 30, 2021, from 6.0% for the six months ended June 30, 2020, primarily due to lower intangible asset amortization and lower bad debt expense as a percentage of Net sales, partially offset by lower Gross profit margin.

Corporate segment Operating income was $337 million for the six months ended June 30, 2021, an increase of $86 million, or 34.4%, compared to $250 million for the six months ended June 30, 2020. Corporate segment Operating income increased primarily due to higher Gross profit dollars, lower intangible asset amortization and lower bad debt expense, partially offset by higher payroll expenses. Corporate segment operating margin percentage increased 170 basis points to 8.9% for the six months ended June 30, 2021, from 7.2% for the six months ended June 30, 2020, primarily due to lower intangible asset amortization and lower bad debt expense as a percentage of Net sales, and an increase in the mix of net service contract revenues, primarily Software as a Service.

Small Business segment Operating income was $87 million for the six months ended June 30, 2021, an increase of $39 million, or 79.6%, compared to $48 million for the six months ended June 30, 2020. Small Business segment Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher payroll expenses. Small Business segment operating margin percentage increased 250 basis points to 9.5% for the six months ended June 30, 2021, from 7.0% for the three months ended June 30, 2020, primarily due to lower intangible asset amortization, lower payroll expenses and lower bad debt expense as a percentage of Net sales.

Public segment Operating income was $290 million for the six months ended June 30, 2021, an increase of $18 million, or 6.5%, compared to $272 million for the six months ended June 30, 2020. Public segment Operating income increased primarily due to higher Gross profit dollars and lower bad debt expense, partially offset by higher payroll expenses. Public segment operating margin percentage decreased 50 basis points to 7.2% for the six months ended June 30, 2021, from 7.7% for the six months ended June 30, 2020, primarily due to overlapping higher margin configuration services in the prior year, partially offset by lower bad debt expense as a percentage of Net sales.

Other Operating income was $51 million for the six months ended June 30, 2021, an increase of $20 million, or 64.4%, compared to $31 million for the six months ended June 30, 2020. Other Operating income increased primarily due to higher Gross profit dollars and lower bad debt expense, partially offset by higher payroll expenses. Other operating margin percentage increased 100 basis points to 4.0% for the six months ended June 30, 2021, from 3.0% for the six months ended June 30, 2020, primarily due to lower bad debt expense, payroll expenses, integration costs and other selling and administrative expenses as a percentage of Net sales, partially offset by lower product margin.

#### Interest expense, net

Interest expense, net, for the six months ended June 30, 2021 was $71 million, a decrease of $7 million compared to $78 million for the six months ended June 30, 2020. This decrease was primarily driven by a lower effective interest rate on the Term Loan in 2021 compared to 2020, the benefits from the August 2020 senior notes refinancing, lower amortization on the interest rate cap premiums and lower borrowings under the revolving credit facility in 2021 compared to 2020, partially offset by additional interest expense on the April 2020 senior notes.

#### Other income, net

During the six months ended June 30, 2021, we sold all ownership interests of an equity method investment and recognized a $36 million gain.

#### Income tax expense

Income tax expense was $153 million and $100 million for the six months ended June 30, 2021 and 2020, respectively. The effective tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 23.2% and 21.9% for the six months ended June 30, 2021 and 2020, respectively. The effective tax rate for the six months ended June 30, 2021 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate effective in 2023, partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the six months ended June 30, 2020 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes, partially offset by excess tax benefits on equity-based compensation.

The higher effective tax rate for the six months ended June 30, 2021 as compared to the same period in the prior year was primarily attributable to a less favorable rate impact of excess tax benefits on equity-based compensation and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate effective in 2023.

#### Non-GAAP Financial Measure Reconciliations

We have included reconciliations of Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis for the six months ended June 30, 2021 and 2020 below.

#### Non-GAAP operating income

Non-GAAP operating income was $786 million for the six months ended June 30, 2021, an increase of $144 million, or 22.4%, compared to $642 million for the six months ended June 30, 2020. As a percentage of Net sales, Non-GAAP operating income was 7.9% and 7.3% for the six months ended June 30, 2021 and 2020, respectively.

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Operating income, as reported | $693.3 | $529.2 |
| Amortization of intangibles(1) | 46.0 | 89.0 |
| Equity-based compensation | 36.4 | 14.4 |
| Other adjustments | 10.1 | 9.5 |
| Non-GAAP operating income | $785.8 | $642.1 |
| Non-GAAP operating income margin | 7.9% | 7.3% |

(1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.

#### Non-GAAP net income

Non-GAAP net income was $536 million for the six months ended June 30, 2021, an increase of $111 million, or 25.9%, compared to $425 million for the six months ended June 30, 2020.

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 Income before income taxes | Income tax expense(1) | Net income | 2020 Income before income taxes | Income tax expense(1) | Net income |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| US GAAP, as reported | $660.1 | $(153.4) | $506.7 | $457.2 | $(100.2) | $357.0 |
| Gain on sale of equity method investment | (36.0) | 8.8 | (27.2) | — | — | — |
| Amortization of intangibles(2) | 46.0 | (7.2) | 38.8 | 89.0 | (22.2) | 66.8 |
| Equity-based compensation | 36.4 | (27.0) | 9.4 | 14.4 | (20.0) | (5.6) |
| Other adjustments | 10.5 | (2.7) | 7.8 | 9.5 | (2.4) | 7.1 |
| Non-GAAP | $717.0 | $(181.5) | $535.5 | $570.1 | $(144.8) | $425.3 |

(1) Income tax on non-GAAP adjustments includes excess tax benefits associated with equity-based compensation.

(2) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.

#### Net sales growth on a constant currency basis

Net sales for the six months ended June 30, 2021 increased $1,229 million, or 14.0%, to $9,984 million, compared to the six months ended June 30, 2020. Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased $1,125 million, or 12.7%.

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 | 2020 | % Change | Average Daily % Change(1) |
| --- | ---: | ---: | ---: | ---: |
| Net sales, as reported | $9,983.9 | $8,754.9 | 14.0% | 14.9% |
| Foreign currency translation(2) | — | 103.6 |  |  |
| Net sales, on a constant currency basis | $9,983.9 | $8,858.5 | 12.7% | 13.6% |

(1) There were 127 and 128 selling days for the six months ended June 30, 2021 and 2020, respectively.

(2) Represents the effect of translating the prior year results of CDW UK and CDW Canada at the average exchange rates applicable in the current year.

### Seasonality

While we have not historically experienced significant seasonality throughout the year, sales in our Corporate segment, which primarily serves US private sector business customers with more than 250 employees, are typically higher in the fourth quarter than in other quarters due to customers spending their remaining technology budget dollars at the end of the year. Additionally, sales in our Public segment have historically been higher in the third quarter than in other quarters primarily due to the buying patterns of the federal government and education customers. Since the onset of the pandemic, we have experienced variability compared to historic seasonality trends. As uncertainty due to the COVID-19 pandemic remains, seasonality by channel is expected to continue to be different than historical experience.

### Liquidity and Capital Resources

### Overview

We finance our operations and capital expenditures with internally generated cash from operations and borrowings under our revolving credit facility. As of June 30, 2021, we had $1.2 billion of availability for borrowings under our senior secured asset-based revolving credit facility. Our liquidity and borrowing plans are established to align with our financial and strategic planning processes and ensure we have the necessary funding to meet our operating commitments, which primarily include the purchase of inventory, payroll and general expenses. We also take into consideration our overall capital allocation strategy, which includes investment for future growth, dividend payments, acquisitions and share repurchases. We believe we have adequate sources of liquidity and funding available for at least the next year; however, there are a number of factors that may negatively impact our available sources of funds. The amount of cash generated from operations will be dependent upon factors such as the successful execution of our business plan, general economic conditions and working capital management, including accounts receivable.

#### Long-Term Debt and Financing Arrangements

During the first quarter of 2021, we amended, extended and increased the size of the Revolving Loan. As a result of the amended Revolving Loan, the variable rate CDW UK revolving credit facility was closed. Additionally, we paid off the remaining principal amount on the variable rate CDW UK term loan by drawing on the amended Revolving Loan.

As of June 30, 2021, we had total indebtedness of $3.9 billion, of which $1.5 billion was secured indebtedness. At June 30, 2021, we were in compliance with the covenants under our various credit agreements and indentures.

For additional information regarding our debt and refinancing activities, see Note 7 (Long-Term Debt) to the accompanying Consolidated Financial Statements.

#### Inventory Financing Agreements

We have entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions. These amounts are classified separately as Accounts payable-inventory financing on the Consolidated Balance Sheets. We do not incur any interest expense associated with these agreements as balances are paid when they are due. For additional information, see Note 5 (Inventory Financing Agreements) to the accompanying Consolidated Financial Statements.

#### Share Repurchase Program

During the six months ended June 30, 2021, we repurchased 4.6 million shares of our common stock for $735 million under the previously announced share repurchase program. For additional information on our share repurchase program, see "Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds."

#### Dividends

A summary of 2021 dividend activity for our common stock is as follows:

|  |  |  |  |
| ---: | --- | --- | --- |
| Dividend Amount | Declaration Date | Record Date | Payment Date |
| $0.40 | February 10, 2021 | February 25, 2021 | March 10, 2021 |
| $0.40 | May 5, 2021 | May 25, 2021 | June 10, 2021 |

On August 4, 2021, we announced that our Board of Directors declared a quarterly cash dividend of $0.40 per common share. The dividend will be paid on September 10, 2021 to all stockholders of record as of the close of business on August 25, 2021.

The payment of any future dividends will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any potential indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors that our Board of Directors deems relevant. In addition, our ability to pay dividends on our common stock will be limited by restrictions on our ability to pay dividends or make distributions to our stockholders and on the ability of our subsidiaries to pay dividends or make distributions to us, in each case, under the terms of our current and any future agreements governing our indebtedness.

### Cash Flows

Cash flows from operating, investing and financing activities are as follows:

*(dollars in millions)*

| Net cash provided by: | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Operating activities | $344.9 | $515.8 |
| Investing Activities |  |  |
| Capital expenditures(1) | (38.5) | (100.0) |
| Acquisition of business, net of cash acquired | (211.6) | — |
| Proceeds from sale of equity method investment | 36.0 | — |
| Cash flows used in investing activities | (214.1) | (100.0) |
| Financing Activities |  |  |
| Net change in accounts payable - inventory financing | (150.1) | 52.3 |
| Financing payments for revenue generating assets | (46.1) | — |
| Other cash flows used in financing activities | (846.3) | 342.0 |
| Cash flows (used in) provided by financing activities | (1,042.5) | 394.3 |
| Effect of exchange rate changes on cash and cash equivalents | 2.7 | (5.7) |
| Net (decrease) increase in cash and cash equivalents | $(909.0) | $804.4 |

(1) Includes expenditures for revenue generating assets.

#### Operating Activities

Cash flows provided by operating activities are as follows:

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 | 2020 | Change |
| --- | ---: | ---: | ---: |
| Net income | $506.7 | $357.0 | $149.7 |
| Adjustments for the impact of non-cash items(1) | 88.1 | 272.2 | (184.1) |
| Net income adjusted for the impact of non-cash items | 594.8 | 629.2 | (34.4) |
| Changes in assets and liabilities: |  |  |  |
| Accounts receivable(2) | (140.5) | (80.4) | (60.1) |
| Merchandise inventory(3) | (127.9) | (89.3) | (38.6) |
| Accounts payable-trade(4) | 107.5 | (2.1) | 109.6 |
| Other(5) | (89.0) | 58.4 | (147.4) |
| Cash flows provided by operating activities | $344.9 | $515.8 | $(170.9) |

(1) Includes items such as depreciation and amortization, deferred income taxes, provision for credit losses and equity-based compensation expense.

(2) The change is primarily due to increased sales volume in 2021, partially offset by improved collection performance.

(3) The change is primarily due to customer-driven stocking positions given continued supply constraints.

(4) The change is primarily due to mixing out of vendors with extended payment terms, partially offset by the increased sales and inventory volumes in 2021.

(5) The change is primarily due to growth in receivables from vendors in 2021 compared to a decline in the same period in 2020, as well as the timing of income tax payments.

In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. Components of our cash conversion cycle are as follows:

| (in days) | June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Days of sales outstanding (DSO)(1) | 56 | 59 |
| Days of supply in inventory (DIO)(2) | 16 | 18 |
| Days of purchases outstanding (DPO)(3) | (51) | (52) |
| Cash conversion cycle | 21 | 25 |

(1) Represents the rolling three-month average of the balance of Accounts receivable, net at the end of the period, divided by average daily Net sales for the same three-month period. Also incorporates components of other miscellaneous receivables.

(2) Represents the rolling three-month average of the balance of Merchandise inventory at the end of the period divided by average daily Cost of sales for the same three-month period.

(3) Represents the rolling three-month average of the combined balance of Accounts payable-trade, excluding cash overdrafts, and Accounts payable-inventory financing at the end of the period divided by average daily Cost of sales for the same three-month period.

The cash conversion cycle decreased to 21 days at June 30, 2021, compared to 25 days at June 30, 2020. DSO, DIO and DPO decreased 3 days, 2 days and 1 day, respectively, compared to June 30, 2020. The decrease in DSO was primarily due to improved collections in 2021. The decrease in DPO was primarily due to mixing out of vendors with extended payment terms. The change in DIO was primarily due to increased Net sales in 2021 and the impact of higher inventory levels last year relative to sales due to COVID-19.

#### Investing Activities

Net cash used in investing activities increased $114 million for the six months ended June 30, 2021 compared to June 30, 2020. This increase was primarily due to the acquisition of Amplified IT LLC in the first quarter of 2021, partially offset by proceeds from the sale of an equity method investment. For additional information regarding the acquisition, see Note 3 (Acquisition) to the accompanying Consolidated Financial Statements.

#### Financing Activities

Net cash used in financing activities increased $1,437 million for the six months ended June 30, 2021 compared to June 30, 2020. This increase was primarily due to no new proceeds from the issuance of long-term debt during 2021, higher share repurchases, decreased borrowings under our revolving credit facilities, the mixing out of vendors with extended payment terms under our inventory financing arrangements and increased financing payments for revenue generating assets. For additional information regarding the inventory financing agreements and debt activities, see Note 5 (Inventory Financing Agreements) and Note 7 (Long-Term Debt) to the accompanying Consolidated Financial Statements.

### Issuers and Guarantors of Debt Securities

Each series of our outstanding unsecured senior notes (the "Notes") are issued by CDW LLC and CDW Finance Corporation (the "Issuers") and are guaranteed by CDW Corporation ("Parent") and each of CDW LLC's direct and indirect, 100% owned, domestic subsidiaries (the "Guarantor Subsidiaries" and, together with Parent, the "Guarantors"). All guarantees by Parent and the Guarantors are joint and several, and full and unconditional; provided that guarantees by the Guarantor Subsidiaries are subject to certain customary release provisions contained in the indentures governing the Notes.

The Notes and the related guarantees are the Issuers’ and the Guarantors’ senior unsecured obligations and are:

- structurally subordinated to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries and;
- rank equal in right of payment with all of the Issuers' and the Guarantors’ existing and future unsecured senior debt.

The following tables set forth Balance Sheet information as of June 30, 2021 and December 31, 2020, and Statement of Operations information for the six months ended June 30, 2021 and for the year ended December 31, 2020. The financial information includes the accounts of the Issuers and the accounts of the Guarantors (the "Obligor Group"). The financial information of the Obligor Group is presented on a combined basis and the intercompany balances and transactions between the Obligor Group have been eliminated.

#### Balance Sheet Information

*(dollars in millions)*

|  | June 30, 2021 | December 31, 2020 |
| --- | ---: | ---: |
| Current assets | $4,623.9 | $5,161.3 |
| Goodwill | 2,369.7 | 2,239.1 |
| Other assets | 620.3 | 572.1 |
| Total Non-current assets | 2,990.0 | 2,811.2 |
| Current liabilities | 3,149.4 | 3,265.0 |
| Long-term debt | 3,851.1 | 3,856.5 |
| Other liabilities | 174.2 | 209.8 |
| Total Long-term liabilities | 4,025.3 | 4,066.3 |

#### Statement of Operations Information

*(dollars in millions)*

|  | Six Months Ended June 30, 2021 | Year Ended December 31, 2020 |
| --- | ---: | ---: |
| Net sales | $8,706.9 | $16,380.8 |
| Gross profit | 1,475.7 | 2,851.8 |
| Operating income | 641.9 | 1,113.2 |
| Net income | 468.9 | 738.8 |

### Commitments and Contingencies

The information set forth in Note 10 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements is incorporated herein by reference.

### Critical Accounting Policies and Estimates

Our critical accounting policies have not changed from those reported in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

### Recent Accounting Pronouncements

The information set forth in Note 2 (Recent Accounting Pronouncements) to the accompanying Consolidated Financial Statements is incorporated herein by reference.

### Forward-Looking Statements

This report contains "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical fact are forward-looking statements. These statements relate to analyses and other information, which are based on forecasts of future results or events and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. We claim the protection of The Private Securities Litigation Reform Act of 1995 for all forward-looking statements in this report.

These forward-looking statements are identified by the use of terms and phrases such as "anticipate," "assume," "believe," "estimate," "expect," "goal," "intend," "plan," "potential," "predict," "project," "target" and similar terms and phrases or future or conditional verbs such as "could," "may," "should," "will," and "would." However, these words are not the exclusive means of identifying such statements. Although we believe that our plans, intentions and other expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. All forward-looking statements are subject to risks and uncertainties that may cause actual results or events to differ materially from those that we expected.

Important factors that could cause actual results or events to differ materially from our expectations, or cautionary statements, are disclosed under the section entitled "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2020 and from time to time in our subsequent Quarterly Reports on Form 10-Q and our other US Securities and Exchange Commission ("SEC") filings. These factors include, among others, CDW's relationships with vendor partners and terms of their agreements; continued innovations in hardware, software and services offerings by CDW's vendor partners; substantial competition that could reduce CDW's market share; the continuing development, maintenance and operation of CDW's information technology systems; potential breaches of data security and failure to protect our information technology systems from cybersecurity threats; potential failures to provide high-quality services to CDW's customers; potential losses of any key personnel; potential adverse occurrences at one of CDW's primary facilities or customer data centers; increases in the cost of commercial delivery services or disruptions of those services; CDW's exposure to accounts receivable and inventory risks; future acquisitions or alliances; fluctuations in CDW's operating results; fluctuations in foreign currency; global and regional economic and political conditions including uncertainties related to COVID-19; potential interruptions of the flow of products from suppliers; decreases in spending on technology products and services; potential failures to comply with Public segment contracts or applicable laws and regulations; current and future legal proceedings and audits; changes in laws, including regulations or interpretations thereof; CDW's level of indebtedness and ability to generate sufficient cash to service such indebtedness; restrictions imposed by agreements relating to CDW's indebtedness on its operations and liquidity; changes in, or the discontinuation of, CDW's share repurchase program or dividend payments; and other risk factors or uncertainties identified from time to time in CDW's filings with the SEC. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in the section entitled "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2020 as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not reflect all of the factors that could cause actual results or events to differ from our expectations. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

## Market risk

As filed, 314 characters.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures of Market Risks" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. As of June 30, 2021, there have been no material changes in this information.

## Controls and procedures

As filed, 1,419 characters.

### Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has concluded that, as of the end of such period, the Company's disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Aug 4, 2021.
Source: SEC EDGAR, the filing index for accession 0001402057-21-000109. Last ingested by Listed: Nov 4, 2026, 16:25 ET. No prices; not investment advice.