Oct 30 2024

CDW has been in business for 40 years and serves business, government, education, and healthcare customers
The company has over 15,400 coworkers, with over two-thirds being customer-facing. Of those, approximately 6,800 are technical coworkers, including pre-sales

specialists and advanced services delivery engineers
CDW offers over 100,000 products and solutions from more than 1,000 brands to over 250,000 customers in the US, UK, and Canada .
Their target market focuses on customers with fewer than 5,000 employees
Financial Performance

CDW demonstrates a consistent track record of profitable growth. From 2014 to 2023:
Non-GAAP Operating Income CAGR: 10%
US GAAP Operating Income CAGR: 11%
Gross Profit CAGR: 10%
Net Sales CAGR: 7%
Net sales in 2023 totaled $21.4 billion, marking a 10% decline year-over-year
Despite economic downturns like the Great Recession and the COVID-19 pandemic, CDW has shown resilience and growth, particularly in gross profit [5, 6].
Market Position

CDW operates in a large and growing IT market, estimated at ~$1.3 trillion in the US, UK, and Canada .
Their current addressable market is approximately ~$440 billion .
While a market leader, CDW holds a relatively low share in this fragmented market, suggesting significant room for growth .
Growth Strategy

CDW’s three-part strategy for growth involves:

Capturing market share and acquiring new customers .
Enhancing capabilities in high-growth solution areas .
Expanding service capabilities .
Value Proposition

CDW creates value for both customers and vendor partners :
Customer Value: Broad product selection, multi-branded solutions, value-added services, skilled specialists, and solutions spanning the entire IT lifecycle .
Vendor Partner Value: Access to over 250,000 customers, established customer channels, strong distribution and implementation capabilities, and customer

insights into technology roadmaps .
The company positions itself as a trusted advisor, helping customers navigate a changing technological landscape by providing advice and solutions .
Solutions and Services

CDW provides a full stack of solutions covering the entire IT lifecycle, including design, orchestration, and management across on-premise, hybrid, and

multi-cloud environments .
Their portfolio is designed to meet customer needs and adapt to changing demands through both organic investments and strategic acquisitions .
Acquisitions and Expansion

CDW has a history of strategic acquisitions to bolster its capabilities. Key acquisitions include:
Berbee Information Networks (1998)
UK-based Kelway (2015)
IGNW, Aeritae, and Southern Dakota Solutions (2017)
Scalar Decisions and Aptris (2019)
Amplified IT, Focal Point, and Sirius Computer Solutions (2021)
Locus Recruiting and Enquizit (2023)
International Presence

While headquartered in the US, CDW has a multinational presence to better serve its customers. The company is:
Located in 11 countries
Able to provide IT solutions to over 150 countries
Sustainable Competitive Advantages

CDW highlights several sustainable competitive advantages, including:

Scale and scope
Robust distribution and logistics capabilities
Highly engaged, performance-driven culture
Multinational footprint with international capabilities
Highly skilled sales and service capabilities
Deep and experienced management team
These advantages lead to superior value, differentiated growth, and strong return on working capital .

Capital Allocation Priorities for 2024

Increase Dividend Annually: Target ~1% increase in November 2024 to $2.50/share annually
Maintain Net Leverage Ratio: Target ~2.0 to 3.0 times; currently at 2.3x .
Supplement Organic Growth with M&A: Expand CDW’s strategic capabilities, building on ten acquisitions in the last five years .
Return Excess Adjusted FCF Through Share Repurchases: After dividends and M&A, target a return of 50% to 75% of Adjusted FCF to shareholders. $354 million of

share repurchases were completed year-to-date .
2024 Outlook

Gross Profit: Low-single-digit decline
Non-GAAP Earnings per Diluted Share: Mid-single-digit decline
Customer Spend: U.S. IT growth plus a premium target of ~200 to 300 basis points
Debt Maturity Profile

CDW maintains a diversified debt maturity profile, with weighted average interest rate of 4.1% and a weighted average maturity of 4.5 years as of September

30, 2024 .
Investment Highlights

Key takeaways for investors include:

A ~$440 billion addressable market with attractive growth potential .
Market-leading position in a fragmented IT solutions industry .
Proven ability to adapt and capitalize on evolving IT trends .
Flexible, performance-driven culture resulting in strong financial performance .
Attractive business model with sustainable competitive advantages .
Multiple levers for growth and shareholder value creation.