CDW Investor Presentation Winter/Spring 2019
DISCLAIMERS Forward-Looking Statements This presentation contains forward-looking statements, which are any predications, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today s earnings release, in the comments made during the conference call, and in the risk factors section of the Company's Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. The Company does not undertake any duty to update any forward-looking statement. Non-GAAP Financial Information This presentation contains certain non-gaap financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Non- GAAP net income, Non-GAAP net income per diluted share, Non-GAAP operating income, Non-GAAP operating income margin and Free cash flow. 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 excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. For a reconciliation of non-gaap financial measures to the applicable most comparable GAAP financial measures, see the financial statement tables in the Appendix of this presentation and on investor.cdw.com. Non-GAAP financial measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. 2
CDW OVERVIEW (1) Market-leading provider of integrated technology solutions to business, government, education and healthcare customers for 30+ years Based in Illinois, ~8,075 coworkers in North America and ~1,275 in the UK; ~2/3 are customer-facing (2) Full range of hardware, software and services technology solutions Offers 100,000+ products and services from 1,000+ brands to more than 250,000 customers in the US, UK and Canada Sweet spot is customers with <5,000 employees Attractive business model with demonstrated track record of profitable growth Net Sales ($bn) $7.2 $8.8 $9.6 $10.1 $10.8 $12.1 $13.0 $13.7 $14.8 $16.2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 GAAP Net Inc. & Adj. EBITDA ($mm) ($373) GAAP Net Income (Loss) Adj EBITDA $ $465 $602 ($29) $17 $717 $767 $119 $133 $809 $245 $907 $1,019 $403 $425 $1,118 $1,186 $523 $643 $1,302 Strong ROWC: 64.8% (3) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 3 1. Prior period information for 2016 and 2017 in this Investor Presentation has been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). 2. Includes coworkers associated with the Scalar Decisions Inc. acquisition which closed on February 1, 2019. 3. Year ended December 31, 2018. See ROWC calculation on page 29.
LARGE AND GROWING MARKET OPPORTUNITY Large Market Size and Attractive Growth Profile Partners Increasingly Reliant on the Indirect Channel Total US, UK and Canada IT Market (2) ~$1,000B Direct 40% CDW Current Addressable Market (1) : ~$325B Indirect 60% CDW $16B 2015-2019E CAGR IT Spending: 5.0% (2) Increased ~300bps since 2007 (3) 4 1. IDC and CDW internal estimates as of 1/2019. 2. IDC Worldwide Black Book, 12/21/18, includes Consumer and B2B for US, UK and Canada markets. 3. IDC/CDW Market Model, 12/10/18.
SUSTAINED MARKET SHARE GAINS ACROSS BUSINESS CYCLES US IT Spending CAGR (1) CDW Net Sales CAGR 9.5% 270 bps 4.8% 7.5% 420 bps 5.3% 2006-2018 2009-2018 CDW Plus the Other 5 Publicly Traded IT Solutions Companies (2) Represent ~10% of CDW s US Addressable Market Majority of the Market is Fragmented Across Thousands of Value-Added Resellers 5 1. IDC Worldwide Black Book, 12/21/18. 2. Estimated market share for top 6 publicly traded IT solutions companies: CDW, Insight North America & EMEA, Presidio, PC Connection, PCM, and e-plus as of 2/5/2019.
UNIQUELY POSITIONED TO DELIVER CUSTOMER AND PARTNER VALUE Vendor Partner Value CDW Intimate Knowledge of IT Environment and Landscape VALUE TO VENDOR PARTNERS: More than 250,000 customers Large and established customer channels Strong distribution and implementation capabilities Customer relationships driving insight into technology roadmaps VALUE TO CUSTOMERS: Broad selection of multi-branded IT solutions Value-added services Highly-skilled specialists and engineers Solutions across IT lifecycle CDW Sits Between Customers and Vendor Partners Creating Value for Both 6
BALANCED PORTFOLIO OF CUSTOMER CHANNELS (1) 2018 Net Sales ($16.2B) Net Sales Growth % Other (Canada, UK) Corporate (>250 employees) '08-'09 Growth (Other includes ATS & Canada) 11% 3% Total Growth Healthcare $1.9-22% -18% 0% -4% (11%) $1.7 $6.8 '09-'11 CAGR (Other includes ATS & Canada) 19% 14% 3% 7% 30% 29% 16% Education (K-12, Higher Ed) $2.3 '09-'15 CAGR (Other includes ATS & Canada) 11% 5% 5% 10% 15% 14% 10% $2.1 Government (Federal, State & Local) $1.4 Small Businesses (<250 employees) '15-'18 CAGR Other Includes Canada & CDW UK (Aug 2015-Dec 2018) 5% 8% 7% 9% 1% Diverse Customer Channels and Geography Create Multiple Drivers of Growth and Diversification Against Macro and Exogenous Headwinds 31% 8% 7 1. Prior period information for 2016 and 2017 in this Investor Presentation has been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).
LEADING SALES CHANNEL FOR KEY VENDOR PARTNERS Major Vendor Partners Emerging Vendor Partners Mission-Critical for Key Vendors 8
Complexity / Productivity and Growth Benefits PROVEN TRACK RECORD OF EVOLVING WITH IT TRENDS Highly Integrated and Interconnected Technology Ecosystem Hardware and Software Products Printers Storage Networking Electronics Monitors Software Cables Servers Computers Accessories Office Services 9 Early 2000s Products Current Integrated Solutions
HIGHLY-SKILLED SALES AND SERVICES CAPABILITIES +101% Specialists Advanced Services Delivery Engineers Field Sellers +28% Account Managers 2006 2018 Specialists and Engineers Allow CDW to Deliver Increasingly Complex IT Solutions 10 Chart reflects North American operations only. Excludes coworkers associated with the Scalar Decisions Inc. acquisition which closed on Feb. 1, 2019.
HIGHLY SKILLED TECHNICAL ORGANIZATION CLOUD SOFTWARE DIGITAL WORKSPACE Cloud Planning Services World Class Portfolio Migration, Integration and Managed Software Lifecycle Advisory Services Design and Optimization Services Portfolio Management Network Solutions Consult, Design and Architect Communications, Mobility and Productivity SECURITY SERVICES DATA CENTER Architecture and Design Advisory Services Managed Security IT Advisory Service IT Architecture Services IT Managed Services Hybrid Consultancy Converged and Hyperconverged Infrastructure Software Defined Data Center 11
12 COMPREHENSIVE SUITE OF CLOUD SOLUTIONS
CAPTURING SHARE IN GROWING SOLUTIONS AREAS Estimated 2013-2018 Market CAGR CDW Customer Spend Growth 2013-2018 (1) (2) 59% 32% 22% 5% 9% 14% 10% 9% 4% 11% Data Center Digital Workspace Security Cloud Services Enabling Customers to Navigate Increasingly Complex IT Market 13 1. IDC, Gartner and CDW proprietary calculations as of January 2019; CDW U.S. Addressable Market. 2. CDW CAGR based on the 2013-2018 customer spend.
INTERNATIONAL PRESENCE TO BETTER SERVE CUSTOMERS Located in 9 countries Able to export to 100+ Supplement with fulfillment partners and export capabilities No presence 14
SUSTAINABLE COMPETITIVE ADVANTAGES Scale and Scope Highly Engaged And Performance Driven Culture Highly-Skilled Sales and Services Capabilities Distribution National Footprint with International Capabilities Deep and Experienced Management Superior Value Differentiated Growth Strong ROWC 15
STRONG FINANCIAL PERFORMANCE (1) Net Sales ($bn) GAAP and Non-GAAP Net Income ($mm) GAAP NI NGNI $8.8 $9.6 $10.1 $10.8 $12.1 $13.0 $13.7 $14.8 $16.2 86 $199 $247 $314 $410 $504 $570 $606 $794 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Leverage Ratio (2) Adj. EBITDA ($mm) and Margin (3) (%) Adj. EBITDA Adj. EBITDA Margin 7.1x 5.9x 5.2x 3.8x 3.1x 3.0x 2.7x 2.6x 2.3x $602 6.8% $1,186 $1,302 $1,118 $1,019 $717 $767 $809 $907 7.5% 7.6% 7.5% 7.5% 7.8% 8.2% 8.0% 8.0% Q4'10 Q4'11 Q4'12 Q4'13 Q4'14 Q4'15 Q4'16 Q4'17 Q4'18 2010 2011 2012 2013 2014 2015 2016 2017 2018 16 1. Prior period information for 2016 and 2017 in this Investor Presentation has been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). 2. Defined in our credit agreement, on a consolidated basis, as the ratio of total debt at period-end excluding any unamortized discount and/or premium and unamortized deferred financing costs, less cash and cash equivalents, to trailing twelve months (TTM) Adjusted EBITDA, a non-gaap measure defined in our credit agreement. 3. Defined as Adj. EBITDA/Net Sales. See Adjusted EBITDA Margin Reconciliation on page 30.
Return on Working Capital (%) STRONG RETURN ON WORKING CAPITAL 64.8% 42.0% 47.2% 47.8% 51.5% 52.6% 55.0% 54.8% 26.6% 32.8% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 17 See Return on Working Capital calculation on page 29.
2019 CAPITAL ALLOCATION PRIORITIES Priorities Objectives Actions Increase Dividends Annually Target 30% payout of FCF in 5 years (1) 40% increase in November 2018 to $1.18/share annually Maintain Net Leverage Ratio (2) ~2.5 to 3.0 times Net Leverage Currently at 2.3x (3) Supplement Organic Growth with M&A Expand CDW strategic capabilities Scalar Decisions Inc. acquisition Return Excess FCF after Dividends & M&A Through Share Repurchase Offset to incentive plan dilution and to supplement EPS growth Repurchase program 1. Target established November 2014. 2. As defined in the Company s credit agreement. 3. As of December 31, 2018. 18
2019 PERFORMANCE TARGETS Annual Target 2019 (1) Net Sales Growth U.S. IT growth + 200 300 bps + 100 bps for Scalar (2) acquisition in constant currency Non-GAAP Operating Income (3) Margin Mid 7% s Non-GAAP EPS Growth ~10% in constant currency 19 1. As of February 7, 2019. 2. The Company acquired Scalar Decisions Inc., a premier Canadian IT solutions and services provider, on 2/1/19. 3. New pre-tax profit metric defined as Non-GAAP Operating Income, which is GAAP Operating Income adjusted for the amortization expense for acquisition-related intangible assets, equity-based compensation and other non-recurring or unusual income and expenses. See page 32 for historical reconciliations.
CAPITAL RETURNS SINCE IPO Dividends Paid ($ in Millions) Share Repurchases ($ in Millions) $139.4 $534.0 $522.3 $52.9 $78.7 $106.9 $241.3 $366.6 $33.6 $7.3 2013 2014 2015 2016 2017 2018 2015 2016 2017 2018 Returned ~$2.1B since 2013 (1) 20 1. From IPO through December 31, 2018.
INVESTMENT HIGHLIGHTS ~$325B addressable market opportunity with attractive growth potential Clear leader with sustained market share gains in a highly fragmented market Proven ability to evolve and capitalize on IT trends Flexible, nimble performance-driven culture generating a strong financial track record Attractive business model with sustainable competitive advantages Multiple levers for growth and creation of shareholder value 21
22 APPENDIX
SCALAR DECISIONS INC. ACQUISITION SNAPSHOT Strategic acquisition closed on Feb. 1, 2019 Premier Canadian IT solutions and services provider Founded in 2004 Privately held ~350 coworkers Locations in Toronto, Montreal, Ottawa, Vancouver, Edmonton, Calgary and Winnipeg Solutions offerings include security, infrastructure, cloud and digital transformation Trailing 12-month net sales of approximately C$250million 23
SCALAR DECISIONS INC. ACQUISITION RATIONALE Complements three-part growth strategy and enhances customer value proposition Captures share and acquires new customers through established geographic presence across Canada with minimal customer overlap Enhances capabilities in high-growth solutions areas such as infrastructure, security and cloud Expands services capabilities with advanced network and security operation centers to drive managed services and technical expertise in professional services Strong cultural fit Shared values with a customer-first focus and a solutions-led approach Expands balance More robust solutions portfolio in Canada Value creative Strategic use of capital, consistent with our priorities 24
ADJUSTED EBITDA RECONCILIATION: 2009-2013 (Unaudited) ($ in millions) 2009 2010 2011 2012 2013 Net income (loss) $ (373.4) $ (29.2) $ 17.1 $ 119.0 $ 132.8 Depreciation and amortization 218.2 209.4 204.9 210.2 208.2 Income tax expense (benefit) (87.8) (7.8) 11.2 67.1 62.7 Interest expense, net 431.7 391.9 324.2 307.4 250.1 EBITDA $ 188.7 $ 564.3 $ 557.4 $ 703.7 $ 653.8 Adjustments: Equity-based compensation 15.9 11.5 19.5 22.1 8.6 Net loss (gain) on extinguishments of long-term debt (2.0) 118.9 17.2 64.0 IPO and secondary-offering related expenses (1) 75.0 Goodwill impairment 241.8 Other adjustments (2) 19.0 28.0 21.5 23.6 7.1 Adjusted EBITDA $ 465.4 $ 601.8 $ 717.3 $ 766.6 $ 808.5 Net Sales $ 7,162.6 $ 8,801.2 $ 9,602.4 $ 10,128.2 $ 10,768.6 Adjusted EBITDA Margin (3) 6.5% 6.8% 7.5% 7.6% 7.5% (1) 2013 includes IPO related expenses of $74.3 million, consisting of (1) acceleration charge for certain equity awards and related employer payroll taxes ($40.7 million); (2) RDU Plan cash retention pool accrual ($7.5 million); (3) management services agreement termination fee ($24.4 million); and (4) other expenses ($1.7 million). 2013 also includes $0.7 million of secondary-offering related expenses. (2) Other adjustments primarily include items such as sponsor fees, historical retention costs, expenses related to the consolidation of office space and certain consulting and debt related professional fees. (3) Defined as Adjusted EBITDA divided by Net sales. 25
ADJUSTED EBITDA RECONCILIATION: 2014 2018 (Unaudited) ($ in millions) 2014 2015 (1) 2016 (1)(2) 2017 (2) 2018 Net income $ 244.9 $ 403.1 $ 425.1 $ 523.1 $ 643.0 Depreciation and amortization 207.9 227.4 254.5 260.9 265.6 Income tax expense 142.8 243.9 248.1 137.6 197.5 Interest expense, net 197.3 159.5 146.5 150.5 148.6 EBITDA $ 792.9 $ 1,033.9 $ 1,074.2 $ 1,072.1 $ 1,254.7 Adjustments: Equity-based compensation 16.4 31.2 39.2 43.7 40.7 Net loss on extinguishments of long-term debt 90.7 24.3 2.1 57.4 IPO and secondary-offering related expenses (3) 1.4 0.8 Gain on remeasurement of equity investment (4) (98.1) Reinstatement of prior year unclaimed property balance (5) 4.1 Other adjustments (6) 5.6 26.4 2.6 8.7 6.8 Adjusted EBITDA $ 907.0 $ 1,018.5 $ 1,118.1 $ 1,186.0 $ 1,302.2 Net Sales $ 12,074.5 $ 12,988.7 $ 13,672.7 $ 14,832.9 $ 16,240.5 Adjusted EBITDA Margin (9) 7.5% 7.8% 8.2% 8.0% 8.0% 26 (1) 2015 and 2016 reflect the impact of consolidating CDW UK's financial results for five months and twelve months, respectively. (2) Amounts for 2017 and 2016 have been adjusted to reflect the full retrospective adoption of Topic 606. (3) 2014 and 2015 include expenses related to various secondary offerings completed during that time. (4) Represents the gain resulting from the remeasurement of the Company's previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. (5) Comprised of the reinstatement of prior year unclaimed balances as a result of a retroactive Illinois state law change enacted in 2017. (6) Other adjustments include items such as 2018 expenses related to the acquisition of Scalar Decisions Inc., expenses related to CDW UK during 2015, 2016 and 2017, the Company's share of net (income) loss from its equity investments, sponsor fees, historical retention costs, expenses related to the consolidation of office space, settlement payments received from the Dynamic Random Access Memory class action lawsuits and certain consulting and debt related professional fees. 2015 includes the Company's 35% share of CDW UK's (previously known as Kelway) net loss which includes the Company's 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the acquisition. (7) Defined as Adjusted EBITDA divided by Net sales.
NON-GAAP NET INCOME RECONCILIATION: 2010-2014 (Unaudited) ($ in millions) 2010 2011 2012 2013 2014 Net income $ (29.2) $ 17.1 $ 119.0 $ 132.8 $ 244.9 Amortization of intangibles (1) 166.8 165.7 163.7 161.2 161.2 Equity-based compensation 11.5 19.5 22.1 8.6 16.4 Net loss on extinguishments of long-term debt (2.0) 118.9 17.2 64.0 90.7 Interest expense adjustment related to extinguishments of long-term debt (2) (0.7) (19.4) (3.3) (7.5) (1.1) IPO and secondary-offering related expenses (3) 75.0 1.4 Debt-related refinancing costs 5.6 3.8 Other adjustments (4) (6.3) (0.6) Aggregate adjustment for income taxes (5) (66.3) (106.8) (71.6) (113.5) (103.0) Non-GAAP net income $ 85.7 $ 198.8 $ 247.1 $ 314.3 $ 409.9 (1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (2) Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. (3) 2013 includes IPO related expenses of $74.3 million, consisting of (1) acceleration charge for certain equity awards and related employer payroll taxes ($40.7 million); (2) RDU Plan cash retention pool accrual ($7.5 million); (3) management services agreement termination fee ($24.4 million); and (4) other expenses ($1.7 million). 2013 also includes $0.7 million of secondary-offering related expenses. 2014 includes various expenses related to secondary offerings completed during that time. (4) Other adjustments primarily include items such as expenses related to the consolidation of office space. (5) Aggregate adjustment for income taxes consists of the following: 2010 2011 2012 2013 2014 Total Non-GAAP adjustments $ 181.2 $ 288.5 $ 199.7 $ 295.0 $ 268.0 Weighted-average statutory rate 39.0% 39.0% 39.0% 39.0% 39.0% Income tax (70.7) (112.5) (77.9) (115.1) (104.5) Non-deductible adjustments and other 4.4 5.7 6.3 1.6 1.5 Total aggregate adjustment for income taxes $ (66.3) $ (106.8) $ (71.6) $ (113.5) $ (103.0) 27
NON-GAAP NET INCOME RECONCILIATION: 2015 2018 (Unaudited) ($ in millions) 2015 (1) 2016 (1)(2) 2017 (2) 2018 Net income $ 403.1 $ 425.1 $ 523.1 $ 643.0 Amortization of intangibles (3) 173.9 187.2 185.1 182.7 Equity-based compensation 31.2 39.2 43.7 40.7 Equity-based compensation related to equity investment (4) 20.0 Net loss on extinguishments of long-term debt 24.3 2.1 57.4 IPO and secondary-offering related expenses (5) 0.8 Gain on remeasurement of equity investment (6) (98.1) Reinstatement of prior year unclaimed property balance (7) 4.1 Other adjustments (8) 13.1 1.9 7.4 5.9 Aggregate adjustment for income taxes (9) (64.8) (85.8) (214.9) (78.0) Non-GAAP net income $ 503.5 $ 569.7 $ 605.9 $ 794.3 (1) 2015 and 2016 reflect the impact of consolidating CDW UK's financial results for five months and twelve months, respectively. (2) Amounts for 2017 and 2016 have been adjusted to reflect the full retrospective adoption of Topic 606. (3) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (4) Represents the Company's 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the Company's acquisition. (5) 2015 includes expenses related to various secondary offerings completed during that time. (6) Represents the gain resulting from the remeasurement of the Company's previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. (7) Comprised of the reinstatement of prior year unclaimed property balances as a results of a retroactive Illinois state law change enacted in 2017. (8) Other adjustments include items such as 2018 expenses related to the acquisition of Scalar Decisions Inc., expenses related to CDW UK during 2015, 2016 and 2017, expenses related to the consolidation of office space, settlement payments received from the Dynamic Random Access Memory class action lawsuits and the favorable resolution of a local sales tax matter. (9) Aggregate adjustment for income taxes consists of the following: 2015 2016 2017 2018 Total Non-GAAP adjustments $ 165.2 $ 230.4 $ 297.7 $ 229.3 Weighted-average statutory rate 38.0% 36.0% 36.0% 25.0% Income tax (62.8) (82.9) (107.2) (57.3) Deferred tax adjustment due to law changes (4.0) (1.5) 1.3 0.5 Excess tax benefits from equity-based compensation (1.8) (36.2) (19.1) Withholding tax expense on the unremitted earnings of the Company's Canadian subsidiary 3.3 Impact from 2018 Tax Cut and Jobs Act (75.5) (1.9) Non-deductible adjustments and other (1.3) 0.4 2.7 (0.2) Total aggregate adjustment for income taxes $ (64.8) $ (85.8) $ (214.9) $ (78.0) 28
RETURN ON WORKING CAPITAL (ROWC) CALCULATION (Unaudited) ($ in millions) 2009 2010 2011 2012 2013 2014 2015 2016 (1) 2017 (1) 2018 Numerator Operating income $ (31.9) $ 352.7 $ 470.7 $ 510.6 $ 508.6 $ 673.0 $ 742.0 $ 820.0 $ 866.5 $ 987.3 Amortization of intangibles (2) 168.9 166.8 165.7 163.7 161.2 161.2 173.9 187.2 185.1 182.7 Debt-related refinancing costs (3) 5.6 3.8 Non-cash equity-based compensation 15.9 11.5 19.5 22.1 8.6 16.4 31.2 39.2 43.7 40.7 Goodwill impairment 241.8 Other one-time items as incurred (4) 1.4 68.7 0.8 12.0 4.5 7.2 3.2 Adjusted NOPBT 396.1 536.6 659.7 696.4 747.1 851.4 959.1 1,050.9 1,102.5 1,213.9 Taxes (5) (154.5) (209.3) (257.3) (271.6) (291.4) (332.0) (374.1) (388.9) (407.9) (315.6) Adjusted NOPAT $ 241.6 $ 327.3 $ 402.4 $ 424.8 $ 455.7 $ 519.4 $ 585.1 $ 662.0 $ 694.6 $ 898.3 Denominator Trailing 5-point avg. AR (incl. misc. rec.) $ 1,008.9 $ 1,210.7 $ 1,352.5 $ 1,400.1 $ 1,502.0 $ 1,629.6 $ 1,909.4 $ 2,251.7 $ 2,535.5 $ 2,850.4 Trailing 5-point avg. Inventory 252.8 286.9 317.4 330.3 357.5 396.2 387.1 422.0 457.5 481.9 Trailing 5-point avg. AP (354.9) (500.4) (712.0) (831.2) (906.7) (1,017.8) (1,184.4) (1,470.8) (1,726.4) (1,946.8) Working Capital $ 906.8 $ 997.2 $ 957.9 $ 899.2 $ 952.8 $ 1,008.0 $ 1,112.1 $ 1,202.9 $ 1,266.6 $ 1,385.5 Return on Working Capital (ROWC) 26.6% 32.8% 42.0% 47.2% 47.8% 51.5% 52.6% 55.0% 54.8% 64.8% 29 (1) Amounts for 2017 and 2016 have been adjusted to reflect the full retrospective adoption of Topic 606. (2) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (3) Represents fees and costs expensed related to the December 2010 and March 2011 amendments to the Company's prior term loan facility. (4) Includes IPO and secondary-offering related expenses, litigation items, acquisition and integration expenses and expenses related to the consolidation of office locations north of Chicago, the impact of the IL state law change on unclaimed property balances in 2017 and other project costs. (5) As of Q1 2018, the normalized effective tax rate is 26%. The prior rate for Q1 2016-Q4 2017 was 37%, and the rate that was used for all prior periods before was 39%.
ADJUSTED EBITDA MARGIN RECONCILIATION (Unaudited) ($ in millions) 2010 2011 2012 2013 2014 2015 2016 (1) 2017 (1) 2018 Net Sales $8,801.2 $9,602.4 $10,128.2 $10,768.6 $12,074.5 $12,988.7 $13,672.7 $14,832.9 $16,240.5 Adjusted EBITDA $601.8 $717.3 $766.6 $808.5 $907.0 $1,018.5 $1,118.1 $1,186.0 $1,302.2 Adjusted EBITDA Margin 6.8% 7.5% 7.6% 7.5% 7.5% 7.8% 8.2% 8.0% 8.0% (1) Amounts for 2016 and 2017 have been adjusted to reflect the full retrospective adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). 30
NEW PROFIT METRIC: NON-GAAP OPERATING INCOME Transitioning from Adjusted EBITDA to Non-GAAP Operating Income (1) Advantages More fully recognizes costs of doing business as IT market continues to evolve Harmonizes non-gaap adjustments throughout the income statement Enhances comparability to publicly traded industry peers Calculation Methodology GAAP Operating Income + Amortization expense for acquisition-related intangible assets + Equity-based compensation -/+ Other unusual or non-recurring income and expense items (1) Effective Q1-2019 31
NON-GAAP OPERATING INCOME RECONCILIATION 2018 Q1 Q2 Q3 Q4 Full Year Operating income $ 204.1 $ 265.5 $ 274.8 $ 242.9 $ 987.3 Amortization of intangibles (1) 46.7 46.6 45.3 44.1 182.7 Equity-based compensation 8.1 11.0 10.8 10.8 40.7 Other (2) 0.5 0.7 3.0 1.7 5.9 Non-GAAP Operating Income $ 259.4 $ 323.8 $ 333.9 $ 299.5 $ 1,216.6 Non-GAAP Operating Income Margin 7.2% 7.7% 7.6% 7.3% 7.5% 2017 (3) Q1 Q2 Q3 Q4 Full Year (4) Operating income $ 170.7 $ 230.8 $ 244.0 $ 221.1 $ 866.5 Amortization of intangibles (1) 46.1 46.3 46.5 46.2 185.1 Equity-based compensation 12.1 11.5 10.0 10.1 43.7 Other (2) 1.9 5.7 3.8 0.1 11.5 Non-GAAP Operating Income $ 230.8 $ 294.3 $ 304.3 $ 277.5 $ 1,106.8 Non-GAAP Operating Income Margin 7.1% 7.6% 7.7% 7.4% 7.5% (1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (2) Includes other expenses such as payroll taxes on equity-based compensation, 2018 expenses related to the acquisition of Scalar Decisions Inc. and 2017 integration expenses related to CDW UK. (3) Amounts for 2017 have been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). (4) Amounts may not cross-foot due to rounding. 32
NET SALES BY SEGMENT RESTATED UNDER ASC 606 * Full year amounts may not tie to reported due to rounding. 33
MATURITY PROFILE As of December 31, 2018 Weighted Average Rate*: 4.5% Weighted Average Maturity: 5.2 years $1.453 $1.057 $393 $525 $575 $600 $64 $65 2019 2020 2021 2022 2023 2024 2025 $1.45B ABL - Drawn $1.45B ABL - Floorplan $1.45B ABL - Undrawn Senior Notes 5% Due 2023 Term Loan L+175 w/ No Floor Senior Notes 5.5% Due 2024 Senior Notes 5.00% Due 2025 CDW UK Term Loan L+140 CDW UK Revolving Credit - Undrawn CDW UK Revolving Credit - Drawn * Rate reflects impact of Interest Rate Caps 34
For a copy of this presentation, please access CDW s investor relations website at: http://investor.cdw.com/