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What changed in CDW Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CDW Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+223 added−241 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-24)

Top changes in CDW Corporation's 2023 10-K

223 paragraphs added · 241 removed · 182 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

41 edited+8 added−15 removed26 unchanged
Biggest changeAlthough we believe customers increasingly view technology purchases as solutions rather than discrete product and service categories, our Net sales by major category, based upon our internal category classifications, was as follows: Year Ended December 31, 2022 2021 2020 Dollars in Millions Percentage of Total Net Sales Dollars in Millions Percentage of Total Net Sales Dollars in Millions Percentage of Total Net Sales Hardware: Notebooks/Mobile Devices $ 6,179.7 26.0 % $ 6,659.4 32.0 % $ 5,486.2 29.7 % Netcomm Products 2,729.7 11.5 1,950.9 9.4 1,955.0 10.6 Desktops 1,284.9 5.4 1,203.6 5.8 1,132.4 6.1 Video 1,785.2 7.5 1,605.0 7.7 1,190.8 6.4 Enterprise and Data Storage (Including Drives) 1,375.0 5.8 992.1 4.8 947.4 5.1 Other Hardware 4,736.5 19.9 4,358.6 20.9 4,121.6 22.3 Total Hardware 18,091.0 76.1 16,769.6 80.6 14,833.4 80.2 Software (1) 3,684.9 15.5 2,802.4 13.5 2,581.0 14.0 Services (1) 1,842.0 7.8 1,126.1 5.4 913.9 4.9 Other (2) 130.8 0.6 122.7 0.5 139.2 0.9 Total Net sales $ 23,748.7 100.0 % $ 20,820.8 100.0 % $ 18,467.5 100.0 % 1.
Biggest changeAlthough we believe customers increasingly view technology purchases as solutions rather than discrete product and service categories, our Net sales by major category, based upon our internal category classifications, was as follows: Year Ended December 31, 2023 2022 2021 (dollars in millions) Net Sales Percentage of Total Net Sales Net Sales Percentage of Total Net Sales Net Sales Percentage of Total Net Sales Hardware: Notebooks/Mobile Devices $ 4,690.5 21.9 % $ 6,179.7 26.0 % $ 6,659.4 32.0 % Netcomm Products 3,185.4 14.9 2,729.7 11.5 1,950.9 9.4 Collaboration (3) 1,909.7 8.9 2,394.8 10.1 2,218.8 10.7 Data Storage and Servers (3) 2,240.7 10.5 2,479.0 10.4 2,044.9 9.8 Desktops 1,069.1 5.0 1,284.9 5.4 1,203.6 5.8 Other Hardware (3) 2,607.2 12.3 3,022.9 12.7 2,692.0 12.9 Total Hardware 15,702.6 73.5 18,091.0 76.1 16,769.6 80.6 Software (1) 3,799.3 17.8 3,684.9 15.5 2,802.4 13.5 Services (1) 1,761.3 8.2 1,842.0 7.8 1,126.1 5.4 Other (2) 112.8 0.5 130.8 0.6 122.7 0.5 Total Net sales $ 21,376.0 100.0 % $ 23,748.7 100.0 % $ 20,820.8 100.0 % (1) Certain software and services revenue is recorded on a net basis for accounting purposes.
This broad portfolio of partners and technologies enables us to offer customers significant options and meet customer demand for the products and solutions that best meet their needs. We believe our value proposition to vendor partners enables us to evolve our offering as new technologies emerge and new companies seek us as a channel partner.
This broad portfolio of vendor partners and technologies enables us to offer customers significant options and meet customer demand for the products and solutions that best meet their needs. We believe our value proposition to vendor partners enables us to evolve our offering as new technologies emerge and new companies seek us as a channel partner.
Our solutions are delivered in physical, virtual and cloud-based environments through approximately 10,600 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.
Our solutions are delivered in physical, virtual and cloud-based environments through approximately 10,900 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.
Partners We provide more than 100,000 products and services from more than 1,000 partners, including well-established companies such as Adobe, APC, Apple, Cisco, Dell EMC, Google, Hewlett Packard Enterprise, HP Inc., IBM, Intel, Lenovo, Microsoft, NetApp, Nutanix, Palo Alto Networks, Poly, Pure Storage, Samsung, and VMware, as well as from emerging technology companies to expand our portfolio.
Partners We provide more than 100,000 products and services from more than 1,000 vendor partners, including well-established companies such as Adobe, APC, Apple, Cisco, Dell EMC, Google, Hewlett Packard Enterprise, HP Inc., IBM, Intel, Lenovo, Microsoft, NetApp, Nutanix, Palo Alto Networks, Pure Storage, Samsung and VMware, as well as from emerging technology companies to expand our portfolio.
Inventory Management We operate two distribution centers in North America and one distribution center in the UK which combined are more than 1 million square feet in size. Leveraging our distribution and logistics capabilities, we handle and ship approximately 38 million units annually on an aggregate basis from our distribution centers.
Inventory Management We operate two distribution centers in North America and one distribution center in the UK which combined are more than 1 million square feet in size. Leveraging our distribution and logistics capabilities, we handle and ship approximately 35 million units annually on an aggregate basis from our distribution centers.
Our broad portfolio of hardware and software products, encompassing both on and off-premise solutions, enables us to provide well-integrated solutions, including converged and hyper-converged infrastructure, physical and virtualized servers, software defined automation and orchestration solutions, hybrid storage, energy-efficient power and cooling, and data center networking. 6 Table of Contents • Digital Experience : We build end-to-end solutions that deliver access to applications that improve our customers’ productivity regardless of device or location.
Our broad portfolio of hardware and software products, encompassing both on and off-premise solutions, enables us to provide well-integrated solutions, including converged and hyper-converged infrastructure, physical and virtualized servers, software defined automation and orchestration solutions, hybrid storage, energy-efficient power and cooling, and data center networking. • Digital Experience : We build end-to-end solutions that deliver access to applications that improve our customers’ productivity regardless of device or location.
We believe that demand for IT will continue to outpace general economic growth in the markets we serve, fueled by new technologies, including hybrid and cloud computing, virtualization and mobility as well as growing end-user demand for security, efficiency and productivity.
We believe that demand for IT will continue to outpace general economic growth in the markets we serve, fueled by new technologies, including hybrid and cloud computing, virtualization, mobility and artificial intelligence, as well as growing end-user demand for security, efficiency and productivity.
Our coworker engagement strategy utilizes frequent, short surveys as well as virtual listening groups to gain a real-time understanding of the coworker experience at CDW. As a result of our coworkers’ consistent engagement, we have garnered meaningful feedback and recommendations, which have led to measurable and impactful results.
Our coworker engagement strategy utilizes periodic surveys as well as virtual listening groups to gain a real-time understanding of the coworker experience at CDW. As a result of our coworkers’ consistent engagement, we have garnered meaningful feedback and recommendations, which have led to measurable and impactful results.
We believe competitive sources of supply are available in substantially all of the product categories that we offer. 5 Table of Contents Competition The market for technology products and services is highly competitive and subject to economic conditions and rapid technological changes.
We believe competitive sources of supply are available in substantially all of the product categories that we offer. Competition The market for technology products and services is highly competitive and subject to economic conditions and rapid technological changes.
We also have drop-shipment arrangements with many of our OEMs and wholesale distributors, which permit us to offer products to our customers without having to take physical delivery at our distribution centers. These arrangements represented approximately 51% of total North America Net sales in 2022.
We also have drop-shipment arrangements with many of our OEMs and wholesale distributors, which permit us to offer products to our customers without having to take physical delivery at our distribution centers. These arrangements represented approximately 55% of total North America Net sales in 2023.
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.
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.
Training & Development We focus on skills enhancement, leadership development, innovation excellence and professional growth throughout our coworkers’ careers at CDW.
Training & Development We focus on skills enhancement, leadership development, innovation excellence and professional growth throughout our coworkers’ careers.
We have built a strong sales organization and deep services and solutions capabilities over time and expect to continue to invest to enhance these capabilities, which we believe when combined with our competitive advantages of scale and a performance driven culture, will help drive sustainable, profitable growth for us today and in the future.
We have built a strong sales organization and deep services and solutions capabilities over time and expect to continue to invest to enhance these capabilities. We believe the combination of our competitive advantages of scale, performance driven culture and enhanced capabilities will help drive sustainable, profitable growth for us today and in the future.
Our coworker relations are strong and none of our coworkers are covered by collective bargaining agreements. Diversity, Equity and Inclusion CDW’s commitment to diversity, equity and inclusion is a core value that shapes who we are, and how we work, grow and do business.
Our coworker relations are strong, and none of our coworkers are represented by a labor union or covered by a collective bargaining agreement. Diversity, Equity and Inclusion CDW’s commitment to diversity, equity and inclusion is a core value that shapes who we are and how we work, grow and do business.
We provide a comprehensive benefits package to our coworkers, including healthcare, retirement plans with profit sharing and match, tuition assistance, inclusive parental leave policies, adoption assistance, paid time off, paid volunteer hours and philanthropic match programs based upon eligibility and location. Health and Safety We continue to follow our three guiding principles.
We provide a comprehensive benefits package to our coworkers, including healthcare, retirement plans with profit sharing and match, tuition assistance, inclusive parental leave policies, adoption assistance, paid time off, paid volunteer hours and philanthropic match programs based upon eligibility and location.
Our Board understands the importance of our inclusive, performance-driven culture to our ongoing success and is actively engaged with our President and Chief Executive Officer and our Chief People Officer across a broad range of human capital management topics. 8 Table of Contents Marketing We market the CDW brand to US, UK and Canadian audiences using a variety of channels that include digital, broadcast, print, social and other emerging channels.
Our Board understands the importance of our inclusive, performance-driven culture to our ongoing success and is actively engaged with our President and Chief Executive Officer and our Chief People Officer across a broad range of human capital management topics. 8 Table of Contents Marketing We market the CDW brand to US, UK and Canadian audiences through various channels, including mass media, digital, print, social media and other emerging channels.
Our value proposition to our customers Our value proposition to our vendor partners ● Broad selection of products and multi-branded IT solutions ● Access to over 250,000 customers ● Value-added services with integration capabilities ● Large and established customer channels ● Highly-skilled specialists and engineers ● Strong distribution and implementation capabilities ● Solutions across IT lifecycle ● Customer relationships driving insight into technology roadmaps Customers We provide integrated IT solutions to over 250,000 small, medium and large business, government, education and healthcare customers throughout the US, UK and Canada. 4 Table of Contents We serve our customers through sales teams focused on customer end-markets that are supported by technical specialists and highly-skilled service delivery engineers.
Our value proposition to our customers Our value proposition to our vendor partners ● Broad selection of products and multi-branded IT solutions ● Access to over 250,000 customers ● Value-added services with integration capabilities ● Large and established customer channels ● Highly-skilled specialists and engineers ● Strong distribution and implementation capabilities ● Solutions across IT lifecycle ● Customer relationships driving insight into technology roadmaps Customers We provide integrated IT solutions to over 250,000 small, medium and large business, government, education and healthcare customers throughout the US, UK and Canada.
To help our customers accomplish this, we have built a robust portfolio of solutions across hybrid infrastructure, digital experience, security and services that we provide in physical, virtual, or cloud-based environments.
IT is important to both critical business operations and to drive greater growth and productivity. To help our customers accomplish this, we have built a robust portfolio of solutions across hybrid infrastructure, digital experience, security and services that we provide in physical, virtual or cloud-based environments.
We believe this diversity of customer end-markets provides us with multiple avenues for growth and has been a key factor in our ability to weather economic and technology cycles and continue to gain market share.
Net sales to customers in the UK and Canada combined generated $2.6 billion in 2023. We believe this diversity of customer end-markets provides us with multiple avenues for growth and has been a key factor in our ability to weather economic and technology cycles and continue to gain market share.
We have approximately 15,100 coworkers across the globe, with 12,250 coworkers in the US, 1,750 in the UK and 1,100 in Canada. More than 50% of our US Net sales are generated by account managers who have more than seven years of tenure with CDW.
We have approximately 15,100 coworkers across the globe, with 11,700 coworkers in the US and 3,400 coworkers in international locations. More than 50% of our US Net sales are generated by account managers who have more than seven years of tenure with CDW.
We believe our websites and software tools, which provide electronic order processing and advanced features, such as order tracking, reporting and asset management, make it easy for customers to transact business with us and ultimately strengthen our customer relationships. History Founded in 1984, CDW became a public company in 1993.
We believe our websites and software tools, which provide electronic order processing and advanced features, such as order tracking, reporting and asset management, make it easy for customers to transact business with us and ultimately strengthen our customer relationships. Available Information We maintain a website at www.cdw.com.
Our programs include: leadership development trainings, unique developmental opportunities for our high-potential emerging leaders, a 24-month training program for new North American sales coworkers, technical skill development training, an 15-month apprentice-style program for aspiring engineers, and coworker access to over 15,000 on-demand educational modules.
Our programs include, but are not limited to: leadership development trainings, unique developmental opportunities for our high-potential emerging leaders, a robust training program for new sales coworkers, technical skill development training, a 12-month apprentice-style program for aspiring engineers and coworker access to over 20,000 on-demand educational modules with new content updated frequently.
In addition, we implemented safety protocols at our distribution centers, such as additional personal protective equipment, expanded health and safety training and increased available mental health resources. Oversight and Management Our Coworker Services organization is responsible for the strategy and management of coworker-related matters, working in concert with all our leaders.
We also monitor guidance from leading health authorities and have implemented robust safety protocols at our distribution centers. These include enhanced personal protective equipment, expanded health and safety training and increased access to mental health resources. Oversight and Management Our Coworker Services organization is responsible for the strategy and management of coworker-related matters, working in concert with all our leaders.
Our systems provide us with thorough and detailed information regarding key aspects of our business. These capabilities help us to continuously enhance productivity, ship customer orders quickly and efficiently, respond appropriately to industry changes and provide high quality customer service.
These capabilities help us to continuously enhance productivity, ship customer orders quickly and efficiently, respond appropriately to industry changes and provide high quality customer service.
We believe that our logistics and configuration capabilities delivered by our highly skilled and certified team enable us to customize technology for our customers to meet their unique needs.
We believe that the location of our distribution centers allows us to efficiently ship products to our customers and provide timely access to our principal distributors. We believe that our logistics and configuration capabilities delivered by our highly skilled and certified team enable us to customize technology for our customers to meet their unique needs.
This competitive environment includes the ability to tailor specific solutions to customer needs, the quality and breadth of product and service offerings, knowledge and expertise of sales force, customer service, price, product availability, speed of delivery and credit availability.
This competitive environment includes the ability to tailor specific solutions to customer needs, the quality and breadth of product and service offerings, knowledge and expertise of sales force, customer service, price, product availability, speed of delivery and credit availability. We face competition from resellers, direct manufacturers, large service providers, cloud providers, telecommunication companies, and to a lesser extent retailers.
Includes items such as delivery charges to customers. 7 Table of Contents Our Internal Capabilities Human Capital Management Our culture is reflected through our coworkers, who are driven to serve our customers, our partners, our communities and all our stakeholders.
(3) Prior period amounts have been reclassified to conform with current period presentation. 7 Table of Contents Our Internal Capabilities Human Capital Management Our culture is reflected through our coworkers, who are driven to serve our customers, our partners, our communities and all our stakeholders.
In 2022, we generated over $1.5 billion of Net sales from each of our five largest vendor partners.
In 2023, we generated $2.0 billion of Net sales from each of our three largest vendor partners.
Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experience and security. On December 1, 2021, we completed our previously announced acquisition of Sirius Computer Solutions, Inc. (“Sirius”).
Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experience and security. We are vendor, technology and consumption model unbiased, offering a broad selection of products and multi-branded IT solutions.
We are a security solutions integrator that combines our expertise in design, solution architecture and implementation services. Our customer solutions can take the form of hardware, software or Software as a Service across a multitude of categories such as: endpoint security, email security, web security, intrusion prevention, authentication, firewall, virtual private network services and network access control.
Our customer solutions can take the form of hardware, software or Software as a Service across a multitude of categories such as: endpoint security, email security, web security, intrusion prevention, 6 Table of Contents authentication, firewall, virtual private network services and network access control. Security consulting engagements include security assessment, policy and procedure gap analysis, security roadmaps and health checks.
For additional information on the risks associated with competition, see “Item 1A. Risk Factors.” We believe we have sustainable competitive advantages that differentiate us in the marketplace.
While innovation can help our business as it creates new offerings for us to sell, it can also disrupt our business model and create new and stronger competitors. For additional information on the risks associated with competition, see “Item 1A. Risk Factors.” We believe we have sustainable competitive advantages that differentiate us in the marketplace.
We have capabilities to provide integrated IT solutions in more than 150 countries for customers with primary locations in the US, UK and Canada, which are large and growing markets. According to the International Data Corporation (“IDC”), the total US, UK and Canadian IT market generated approximately $1.4 trillion in sales in 2022.
We have capabilities to provide integrated IT solutions in more than 150 countries for customers with primary locations in the US, UK and Canada, which are large and growing markets. These are highly fragmented markets served by thousands of IT resellers and solutions providers.
Our website and the information contained on that site, or connected to that site, are not incorporated into and are not a part of this report. 9 Table of Contents
Our website and the information contained on that site, or connected to that site, are not incorporated into and are not a part of this report. Information about our Executive Officers The following table lists the name, age as of February 26, 2024 and positions of each executive officer of the Company. Name Age Position Christine A.
Information Technology Systems We maintain customized IT and unified communication systems that enhance our ability to provide prompt, efficient and expert service to our customers. In addition, these systems enable centralized management of key functions, including purchasing, inventory management, billing and collection of accounts receivable, sales, distribution and financial accounting and reporting.
In addition, these systems enable centralized management of key functions, including purchasing, inventory management, billing and collection of accounts receivable, sales, distribution and financial accounting and reporting. Our systems provide us with thorough and detailed information regarding key aspects of our business.
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. We believe that our results and analytical techniques that measure the efficacy of our marketing programs differentiate us from our competitors.
As a result of our relationships with vendor partners, a significant portion of our advertising and marketing expenses is reimbursed through cooperative advertising programs. 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.
Our market segmentation allows us to customize our offerings and to provide enhanced expertise in designing and implementing IT solutions that meet our customer’s specific needs. 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.
We serve our customers through sales teams focused on customer end-markets that are supported by technical specialists and highly-skilled service delivery engineers. Our market segmentation allows us to customize our offerings and to provide enhanced expertise in designing and implementing IT solutions that meet our customer’s specific needs. We have three reportable segments: Corporate, Small Business and Public.
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 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”). 4 Table of Contents In our US business, which represents approximately 90% of our Net sales, we currently have five dedicated customer channels: corporate, small business, government, education and healthcare, each of which generated approximately $1.6 billion or greater in Net sales in 2023.
This promotion is also supported by integrated communication efforts targeting technology decision-makers, influencers and the general public using a combination of expert technology articles, videos, case studies, media interviews and speaking opportunities. As a result of our relationships with our vendor partners, a significant portion of our advertising and marketing expenses is reimbursed through cooperative advertising programs.
We target current and prospective customers through integrated marketing programs including email, display ads, paid search, social media, events and sponsorships. These programs are supported by integrated communication efforts targeting technology decision-makers, influencers and the general public using a combination of expert technology articles, videos, case studies, media interviews and speaking events.
Certain software and services revenue is recorded on a net basis for accounting purposes, so the category percentage of Net sales is not representative of the category percentage of gross profits. 2.
As a result, the category percentage of Net sales is not representative of the category percentage of gross profits. (2) Includes items such as delivery charges to customers.
We face competition from resellers, direct manufacturers, large service providers, cloud providers, telecommunication companies, and to a lesser extent e-tailers and retailers. Smaller, local or regional value-added resellers typically focus on a single solution suite or portfolio of solutions from one or two vendor partners.
Smaller, local or regional value-added resellers typically focus on a single solution suite or portfolio of solutions from one or two vendor partners. 5 Table of Contents We believe we are well positioned to compete within this marketplace due to our competitive advantages. We expect the competitive landscape to continue to evolve as new technologies are developed.
Our software products include application suites, security, virtualization, operating systems and network management. Our services include advisory and design, software development, implementation, managed services and warranties. IT is important to both critical business operations and to drive greater growth and productivity.
Our hardware category includes notebooks/mobile devices (including t ablets), network communications (“netcomm products”), desktop computers, collaboration, data storage and servers and other hardware. Our software category includes cloud solutions, software assurance, application suites, security, virtualization, operating systems and network management. Our services include advisory and design, software development, implementation, managed services and warranties.
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This strategic acquisition has enhanced our services and solutions capabilities in key areas, including hybrid infrastructure, security, digital and data innovation, and cloud and managed services, as well as added services scale, further balancing and diversifying our portfolio mix.
Added
We are a security solutions integrator that combines our expertise in design, solution architecture and implementation services.
Removed
The addition of Sirius strengthens our role as the trusted technology advisor to our customers, with the expertise and portfolio breadth, depth and scale to orchestrate complete customer-centric solutions. We are vendor, technology and consumption model “agnostic”, offering a broad selection of products and multi-branded IT solutions.
Added
Health and Safety We are committed to prioritizing the health and well-being of our coworkers and addressing the mission driven needs of our business partners. We dedicate time and resources to identify safety hazards of all types, mitigate safety risk and routinely train our coworkers using industry best-practices as our standard.
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We believe our addressable markets in the US, UK and Canada represent approximately $460 billion in annual sales. These are highly fragmented markets served by thousands of IT resellers and solutions providers. For the year ended December 31, 2022, we estimate that our total Net sales of $23.7 billion represented approximately 5% of our addressable markets.
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We believe that our results and analytical techniques for measuring marketing efficacy differentiates us from our competitors. Information Technology Systems We maintain customized IT and unified communication systems that enhance our ability to provide prompt, efficient and expert service to our customers.
Removed
In our US business, which represents approximately 90% of our revenues, we currently have five dedicated customer channels: corporate, small business, government, education and healthcare, each of which generated $1.9 billion or greater in Net sales in 2022. Net sales to customers in the UK and Canada combined generated $2.9 billion in 2022.
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Leahy 59 Chair of our Board of Directors since January 1, 2023; President and Chief Executive Officer and member of our Board of Directors since January 2019; Chief Revenue Officer from July 2017 to December 2018; Senior Vice President - International, Chief Legal Officer and Corporate Secretary from May 2016 to July 2017; Senior Vice President, General Counsel and Corporate Secretary from January 2007 to May 2016.
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Electronic delivery for software licenses is approximately 12% of total North America Net sales in 2022. We believe that the location of our distribution centers allows us to efficiently ship products to our customers and provide timely access to our principal distributors.
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Sona Chawla 56 Chief Growth and Innovation Officer since January 2020; President, Kohl’s Corporation (an omnichannel retailer) from May 2018 to October 2019 and Chief Operating Officer, Kohl’s Corporation from November 2015 to May 2018. Christina M.
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We believe we are well positioned to compete within this marketplace due to our competitive advantages. We expect the competitive landscape to continue to evolve as new technologies are developed. While innovation can help our business as it creates new offerings for us to sell, it can also disrupt our business model and create new and stronger competitors.
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Corley 56 Chief Commercial and Operating Officer since January 2020; Chief Operating Officer from January 2019 to January 2020; Senior Vice President, Commercial and International Markets from July 2017 to December 2018; Senior Vice President, Corporate Sales from September 2011 to July 2017. Frederick J.
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We estimate that approximately 50% of our Net sales in 2022 in the US came from sales of product categories and services typically associated with solutions. Our hardware products include notebooks/mobile devices (including t ablets), network communications, desktop computers, video monitors, enterprise and data storage, and other hardware.
Added
Kulevich 58 Senior Vice President, General Counsel and Corporate Secretary since October 2017 and Interim Chief People Officer since November 2023; Vice President and Deputy General Counsel from May 2016 to October 2017; Vice President and Assistant General Counsel from May 2014 to May 2016; Senior Director, Ethics and Compliance from July 2006 to May 2014. Albert J.
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Security consulting engagements include security assessment, policy and procedure gap analysis, security roadmaps and health checks.
Added
Miralles 54 Senior Vice President and Chief Financial Officer since September 2021; Executive Vice President and Chief Financial Officer, CNA Financial Corporation (a commercial property and casualty insurance company) from February 2020 to September 2021; President, CNA Warranty from October 2019 to September 2021; Executive Vice President and Chief Risk Officer of the CNA Insurance Companies from January 2018 to October 2019. 9 Table of Contents
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First, safeguard the health and well-being of our coworkers, second, serve the mission-driven needs of our customers and third, support our communities. We have implemented a wide variety of measures to help keep our coworkers healthy and safe.
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Since the start of the pandemic, we have maintained a cross-functional response team led by senior leadership to guide the Company’s response to COVID-19, and we continually monitor guidance of the world’s leading health authorities.
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We market to current and prospective customers through integrated marketing programs including behaviorally targeted email, display ads, paid search, social media, events and sponsorships, as well as mass media.
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In 2006, we acquired Berbee Information Networks Corporation to expand our capabilities in customized engineering services and managed services. In 2007, we went private and then became public again in 2013. In 2015, we acquired control of 100% of UK-based IT solutions provider, Kelway TopCo Limited. Rebranded CDW UK in 2016, the acquisition extended our footprint into the UK.
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In 2019, we acquired Canada-based technology solutions provider, Scalar Decisions Inc. CDW’s Amplified TM Services portfolio has been aided by acquisitions of various companies.
Removed
In addition to the acquisition of Sirius in 2021, an IT solutions integrator, as described above, we further strengthened our consulting and services expertise by acquiring Aptris, an IT service management solutions provider and ServiceNow Elite partner, in 2019. In 2020, we acquired IGNW, a cloud-native services, software development and data orchestration capability provider.
Removed
In 2021, we acquired Amplified IT, which has expert capability in Google Workspace for Education and Focal Point Data Risk, which has expert capabilities in cybersecurity services. Available Information We maintain a website at www.cdw.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+16 added−21 removed100 unchanged
Biggest changeThe technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, software and services, such as cloud-based and other “as a service” solutions. We have been and will continue to be dependent on innovations in hardware, software and services, as well as the acceptance of those innovations by customers.
Biggest changeOur sales are dependent on continued innovations in technology by our vendor partners and the competitiveness of their offerings, and our ability to partner with new and emerging technology providers. The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, software and services, such as cloud-based and other “as a service” solutions.
Our Gross profit percentage fluctuates due to numerous factors, some of which may be outside of our control, including general macroeconomic conditions including inflation; pricing pressures; changes in product costs from our vendor partners; the availability of price protection, purchase discounts and incentive programs from our vendor partners; changes in product, order size and customer mix; the risk of some items in our inventory becoming obsolete; increases in product and delivery costs that we cannot pass on to customers; and general market and competitive conditions.
Our Gross profit fluctuates due to numerous factors, some of which may be outside of our control, including general macroeconomic conditions including inflation; pricing pressures; changes in product costs from our vendor partners; the availability of price protection, purchase discounts and incentive programs from our vendor partners; changes in product, order size and customer mix; the risk of some items in our inventory becoming obsolete; increases in product and delivery costs that we cannot pass on to customers; and general market and competitive conditions.
Although we have not experienced a material security breach to date, the evolving nature of cybersecurity threats, in light of new and sophisticated 12 Table of Contents methods used by criminals and cyberterrorists, state-sponsored organizations and nation-states, including computer viruses, malware, ransomware, phishing, misrepresentation, social engineering and forgery, make it increasingly challenging to anticipate, detect and defend against these threats.
Although we have not experienced a material security breach to date, the evolving and escalating nature of cybersecurity threats, in light of new and sophisticated methods used by criminals and cyberterrorists, state-sponsored 12 Table of Contents organizations and nation-states, including computer viruses, malware, ransomware, phishing, misrepresentation, social engineering and forgery, make it increasingly challenging to anticipate, detect and defend against these threats.
The loss of, or change in business relationship with, any of these or any other wholesale distributors or key vendor partners, or the diminished availability of their products, including due to backlogs for their products, could reduce the supply and increase the cost of products we sell and negatively impact our competitive position.
The loss of, or change in business relationship with, any of these or any other wholesale distributors or key vendor partners, or the diminished availability of their products, including due to backlogs for their products, could reduce the supply and impact the cost of products we sell and negatively impact our competitive position.
An adverse change in government spending policies (such as budget cuts or limitations or temporary shutdowns of government operations), shifts in budget priorities or reductions in revenue levels, could cause our impacted public sector customers or our other customers that do business with impacted public sector customers to reduce or delay their purchases or to terminate or not renew their contracts with us, which could adversely affect our business, results of operations or cash flows.
An adverse change in government spending policies (such as budget cuts or limitations), shifts in budget priorities, reductions in revenue levels or significant government shutdowns could cause our impacted public sector customers or our other customers that do business with impacted public sector customers to reduce or delay their purchases or to terminate or not renew their contracts with us, which could adversely affect our business, results of operations or cash flows.
We may experience significant variations in our future quarterly results of operations. These fluctuations may cause the market price of our common stock to be volatile and may result from many factors, including the condition of the technology industry in general, shifts in demand and pricing for hardware, software and services, the introduction of new products or upgrades.
We may experience significant variations in our future quarterly results of operations. These fluctuations may cause the market price of our common stock to be volatile and may result from many factors, including the state of the technology industry in general, shifts in demand and pricing for hardware, software and services, the introduction of new products or upgrades.
Noncompliance with contract provisions, government procurement regulations or other applicable laws or regulations (including the False Claims Act, the Medicare and Medicaid Anti-Kickback Statute or similar laws of the jurisdictions for our business activities outside of the US) or security clearance and confidentiality requirements could result in civil, criminal and administrative liability, including substantial monetary fines or damages, termination of government contracts or other public sector customer contracts, and suspension, debarment or ineligibility from doing business with governmental entities or other customers in the public sector.
Noncompliance with contract provisions, government procurement regulations or other applicable laws or regulations (including the False Claims Act, the Medicare and Medicaid Anti-Kickback Statute or similar laws of the jurisdictions for our business activities outside of 16 Table of Contents the US) or security clearance and confidentiality requirements could result in civil, criminal and administrative liability, including substantial monetary fines or damages, termination of government contracts or other public sector customer contracts, and suspension, debarment or ineligibility from doing business with governmental entities or other customers in the public sector.
A natural disaster or other adverse occurrence at any of our major data storage locations or third-party provider locations could negatively impact our business, results of operations or cash flows. Increases in the cost of commercial delivery services or disruptions of those services could materially adversely impact our business.
A natural disaster or other adverse occurrence at any of our major data storage locations, managed services sites or third-party provider locations could negatively impact our business, results of operations or cash flows. Increases in the cost of commercial delivery services or disruptions of those services could materially adversely impact our business.
Interest rates increased significantly during 2022 and may continue to do so. When interest rates increase, our debt service obligations on the variable rate indebtedness increase even though the amount borrowed remains the same, and could negatively impact our net income absent any derivative instruments.
Interest rates increased significantly during 2023 and may continue to do so. When interest rates increase, our debt service obligations on the variable rate indebtedness increase even though the amount borrowed remains the same, and could negatively impact our net income absent any derivative instruments.
Moreover, media or other reports of perceived vulnerabilities in our network security or perceived lack of security within our environment, even if inaccurate, could materially adversely impact our reputation and business. The cost and operational consequences of implementing further data protection measures could also be significant.
Moreover, media or other reports of perceived vulnerabilities in our network security or perceived lack of security within our environment, even if inaccurate, could materially adversely impact our reputation and business. The cost and operational consequences of implementing further data protection measures could also be material.
Our senior credit facilities and, to a lesser degree, our indentures contain, and any future indebtedness of ours may contain, various covenants that limit our ability to, among other things: • incur or guarantee additional debt; • receive dividends or other payments from our subsidiaries; • enter into transactions with affiliates; • pledge our assets as collateral; 18 Table of Contents • merge or consolidate with other companies or transfer all or substantially all of our assets; and • engage in sale leaseback transactions.
Our senior credit facilities and, to a lesser degree, our indentures contain, and any future indebtedness of ours may contain, various covenants that limit our ability to, among other things: • incur or guarantee additional debt; • receive dividends or other payments from our subsidiaries; • enter into transactions with affiliates; • pledge our assets as collateral; • merge or consolidate with other companies or transfer all or substantially all of our assets; and • engage in sale leaseback transactions.
If we lose any of our key personnel, are unable to attract and retain the talent required for our business, our labor costs significantly increase or if our approach to workforce management is ineffective, our business could be disrupted and our financial performance could suffer.
If we lose any of our key personnel, are unable to attract and retain the talent required for our business, our labor costs significantly increase or our approach to workforce management, inclusive of outsourcing, is ineffective, our business could be disrupted and our financial performance could suffer.
A sustained labor shortage or increased turnover rates within our coworker base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain coworkers, and could adversely affect our business, results of operations or cash flows.
In addition, a sustained labor shortage or increased turnover rates within our coworker base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain coworkers, and could adversely affect our business, results of operations or cash flows.
In addition, we operate numerous facilities which may contain both business-critical data and confidential information of our customers and third parties, such as data center colocation and hosted solution partners, and third-parties provide services as a component of our services delivery to customers.
In addition, we operate numerous facilities which may contain both business-critical data and confidential information of our customers and third parties, such as data center colocation, managed services sites and hosted solution partners, and third parties provide services as a component of our services delivery to customers.
Our global operations span a variety of legal regimes, subjecting us to numerous complex, diverse, evolving and at times potentially inconsistent laws and regulations in a number of areas, including labor and employment, advertising, e-commerce, 17 Table of Contents tax, trade, import and export controls, economic and trade sanctions, anti-corruption, data privacy and security requirements, competition, climate, environmental and health and safety.
Our global operations span a variety of legal regimes, subjecting us to numerous complex, diverse, evolving and at times potentially inconsistent laws and regulations in a number of areas, including labor and employment, advertising, e-commerce, tax, trade, import and export controls, economic and trade sanctions, anti-corruption, data privacy and security requirements, competition, climate, environmental and health and safety.
If we are unable to effectively respond to the evolving competitive landscape, or respond in a manner that is less effective than that of our competitors, our business, results of operations or cash flows could be adversely impacted. 11 Table of Contents We focus on providing high quality service to gain new customers and retain existing customers.
If we are unable to effectively respond to the evolving competitive landscape, or respond in a manner that is less effective than that of our competitors, our business, results of operations or cash flows could be adversely impacted. We focus on providing high quality service to gain new customers and retain existing customers.
To the extent that a vendor’s offering that is in high demand is not available to us for resale in one or more customer channels, and there is not a competitive offering from another vendor that we are authorized to sell in such customer channels, our business, results of operations or cash flows could be adversely impacted.
To the extent that a vendor’s offering that is in high demand is not available to us for resale in one or more customer channels, and there is not a competitive offering from another 10 Table of Contents vendor that we are authorized to sell in such customer channels, our business, results of operations or cash flows could be adversely impacted.
Moreover, if we are unable to continue to train our sales, services and technical personnel effectively to meet the rapidly changing technology needs of our customers, the overall quality and 13 Table of Contents efficiency of such personnel could decrease. Such consequences could adversely affect our business, results of operations or cash flows.
Moreover, if we are unable to continue to train our sales, services and technical personnel effectively to meet the rapidly changing technology needs of our customers, the overall quality and efficiency of such personnel could decrease. Such consequences could adversely affect our business, results of operations or cash flows.
There can be no assurance that the intended benefits of our investments, acquisitions and alliances will be realized, or that those benefits will offset these numerous risks or other unforeseen factors, any of which could adversely affect our business, results of operations or cash flows.
There can be no assurance that the intended benefits of our investments, acquisitions and alliances will be realized, or that those benefits will offset these 14 Table of Contents numerous risks or other unforeseen factors, any of which could adversely affect our business, results of operations or cash flows.
In addition, our financial results could be adversely affected by financial adjustments required by generally accepted accounting principles in the United States of America (“US GAAP”) in connection with these types of transactions, including the Sirius Acquisition, where significant goodwill or intangible assets are recorded.
In addition, our financial results could be adversely affected by financial adjustments required by generally accepted accounting principles in the United States of America (“US GAAP”) in connection with these types of transactions where significant goodwill or intangible assets are recorded.
To the extent that we incur additional indebtedness, the risks associated with our level of indebtedness described above, including our possible inability to service our debt, will increase. As of December 31, 2022, we had $1.1 billion available for additional borrowing under our Revolving Loan Facility.
To the extent that we incur additional indebtedness, the risks associated with our level of indebtedness described above, including our possible inability to service our debt, will increase. As of December 31, 2023, we had $1.2 billion available for additional borrowing under our Revolving Loan Facility.
Security breaches could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information (including those under the European Union General Data Protection Regulation and the California Privacy Rights Act), significant remediation costs as well as the loss of existing or potential customers and, ultimately, damage to our brand and reputation.
Security breaches could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information (including those under the European Union General Data Protection Regulation and the California Privacy Rights Act), significant remediation costs as well as the loss of partners and existing or potential customers and, ultimately, damage to our brand and reputation and adversely impact our business.
The quality and our utilization of the information generated by our information technology systems, and our success in implementing new systems and upgrades, affects, among other things, our ability to: • conduct business with our customers, including delivering services and solutions to them; • provide the means to effectively manage global operations across time zones; • keep pace with changes and innovation and compete effectively; • effectuate comprehensive and reliable data collection, maintenance and governance; • manage our inventory, accounts receivable and accounts payable; • support planned growth in services and solutions and continued evolution of the business; • purchase, sell, ship and invoice our hardware and software products and provide and invoice our services efficiently and on a timely basis; and • maintain our cost-efficient operating model while scaling our business.
The quality and our utilization of the information generated by our information technology systems, and our success in implementing new systems and upgrades, could adversely affect, among other things, our ability to: • conduct business with our customers, including delivering services and solutions to them; • provide the means to effectively manage global operations across time zones; 11 Table of Contents • keep pace with changes and innovation and compete effectively; • effectuate comprehensive and reliable data collection, maintenance and governance; • manage our inventory, accounts receivable and accounts payable; • support planned growth in services and solutions and continued evolution of the business; • purchase, sell, ship and invoice our hardware and software products and provide and invoice our services efficiently and on a timely basis; and • maintain our cost-efficient operating model while scaling our business.
Further, if our customers’ businesses are adversely affected by global or regional economic conditions such as cost inflation or rising interest rates, they may delay or reduce purchases from us, which could adversely affect our results of operations. Our operating results are also highly dependent on Gross profit as a percentage of Net sales.
Further, if our customers’ businesses are adversely affected by global or regional economic conditions such as cost inflation or rising interest rates, they may delay or reduce purchases from us, which could adversely affect our results of operations. Our operating results are also highly dependent on Gross profit.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Certain of our borrowings, primarily borrowings under our senior credit facilities, are at variable rates of interest and expose us to interest rate risk. As of December 31, 2022, we had $857 million of variable rate debt outstanding.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Certain of our borrowings, primarily borrowings under our senior credit facilities, are at variable rates of interest and expose us to interest rate risk. As of December 31, 2023, we had $635 million of variable rate debt outstanding.
We extend credit to our customers for a significant portion of our sales. We are subject to the risk that our customers may not pay for the products they have purchased, may pay at a slower rate than we have historically experienced, or may seek extended payment terms.
We extend credit to our customers for a significant portion of our sales. We are subject to the risk that our customers may not pay for the products they have purchased or may pay at a slower rate than we have historically experienced.
Our sales to our public sector customers, and our other customers that do business with our public sector customers in particular, are impacted by government spending policies, budget priorities and revenue levels.
Our sales to our public sector customers, and our other customers that do business with our public sector customers in particular, are impacted by government spending policies, budget priorities 15 Table of Contents and revenue levels.
Our stockholders may not be able to resell their shares of common stock at or above the price at which they purchased such shares, due to fluctuations in the market price of our common stock, which may be caused by a number of factors, many of which we cannot control, including the risk factors described in this Annual Report on Form 10-K and the following: 19 Table of Contents • changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of securities analysts to maintain coverage of our common stock; • downgrades by any securities analysts who follow our common stock; • future sales of our common stock by our officers, directors and significant stockholders; • market conditions or trends in our industry or the economy as a whole; • investors’ perceptions of our prospects; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures or capital commitments; and • changes in key personnel.
Our stockholders may not be able to resell their shares of common stock at or above the price at which they purchased such shares, due to fluctuations in the market price of our common stock, which may be caused by a number of factors, many of which we cannot control, including the risk factors described in this Annual Report on Form 10-K and the following: • changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of securities analysts to maintain coverage of our common stock; • downgrades by any securities analysts who follow our common stock; • future sales of our common stock by our officers, directors and significant stockholders; • market conditions or trends in our industry or the economy as a whole including market expectations of changes in interest rates; • investors’ perceptions of our prospects; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures or capital commitments; and • changes in key personnel. 19 Table of Contents In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including companies in our industry.
A significant portion of our sales are derived from products manufactured by Apple, Cisco, Dell EMC, HP Inc., Lenovo and Microsoft. In addition, purchases from two wholesale distributors, Ingram Micro and TD SYNNEX, represent approximately one-third of our total US purchases.
A significant portion of our sales are derived from products manufactured by Apple, Cisco, Dell EMC, HP Inc., Lenovo and Microsoft. In addition, purchases from two wholesale distributors, Ingram Micro and TD SYNNEX, represent over 25% of our total purchases.
We have privacy and data security policies, practices and controls in place that are designed to prevent security breaches; however, as newer technologies evolve, as more business is conducted over the internet and remotely, as we acquire more business operations and as the portfolio of the service providers we exchange confidential information, software and/or hardware with expands, we are exposed to increased risks from breaches in security, including those arising from human error, negligence or mismanagement or from illegal or fraudulent acts, such as cyberattacks.
We have privacy and data security policies, practices and controls in place that are designed to prevent security breaches; however, as newer technologies evolve, as more business is conducted over the internet and remotely, as we acquire more business operations from targets with differing or inadequate cybersecurity and data protection controls and as the portfolio of the service providers we exchange confidential information, software and/or hardware with expands, we have been subject to breaches in security and are increasingly likely to be exposed to risks from breaches in security, including those arising from human error, negligence or mismanagement or from illegal or fraudulent acts, such as cyberattacks.
Upon the occurrence of an event of default under our senior credit facilities, the lenders: • will not be required to lend any additional amounts to us; • could elect to declare all borrowings outstanding thereunder, together with accrued and unpaid interest and fees, to be due and payable; or • could require us to apply all of our available cash to repay these borrowings.
Upon the occurrence of an event of default under our senior credit facilities, the lenders: • will not be required to lend any additional amounts to us; • could elect to declare all borrowings outstanding thereunder, together with accrued and unpaid interest and fees, to be due and payable; or • could require us to apply all of our available cash to repay these borrowings. 18 Table of Contents The acceleration of amounts outstanding under our senior credit facilities would likely trigger an event of default under our existing indentures.
These types of transactions involve numerous business risks, including finding suitable transaction partners and negotiating terms that are acceptable to us, the diversion of management’s attention from other business concerns, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, the potential loss of key coworkers or business relationships and successfully integrating acquired businesses.
These types of transactions involve numerous business risks, including finding suitable transaction partners and negotiating terms that are acceptable to us, the diversion of management’s attention from other business priorities, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, an acquisition target’s differing or inadequate cybersecurity and data protection controls, the potential loss of key coworkers or business relationships and successfully integrating acquired businesses.
As of December 31, 2022, we had $5.9 billion of total debt outstanding and $519 million of obligations outstanding under our inventory financing agreements, and the ability to borrow an additional $1.1 billion under our senior unsecured revolving loan facility (the “Revolving Loan Facility”).
As of December 31, 2023, we had $5.6 billion of total debt outstanding and $431 million of obligations outstanding under our inventory financing agreements, and the ability to borrow an additional $1.2 billion under our senior unsecured revolving loan facility (the “Revolving Loan Facility”).
Weak or unstable economic conditions generally, inflation and actions taken by central banks to counter inflation, sustained uncertainty about global political conditions (such as that caused by UK’s exit from the European Union in 2020, referred to as “Brexit”), periods of intense diplomatic or armed conflict (such as the ongoing conflict between Russia and Ukraine and responsive sanctions against Russia), government spending cuts and the impact of new government policies (including the introduction of new or increased taxes, the imposition of minimum taxes or new or increased limitations on deductions, credits or other tax benefits), or a tightening of credit markets, including as a result of the COVID-19 pandemic or rising interest rates, could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows. 15 Table of Contents The interruption of the flow of products from suppliers could disrupt our supply chain.
Weak or unstable economic conditions generally, inflation and actions taken by central banks to counter inflation, sustained uncertainty about global political conditions (such as that caused by UK’s exit from the European Union in 2020, referred to as “Brexit”), periods of intense diplomatic or armed conflict, government spending cuts and the impact of new government policies (including the introduction of new or increased taxes, the imposition of minimum taxes or new or increased limitations on deductions, credits or other tax benefits), or a tightening of credit markets, including as a result of rising interest rates or bank failures, could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows.
The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us. Item 1B. Unresolved Staff Comments None.
The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.
Our disclosure on these matters and our failure, or perceived failure, to meet our commitments or otherwise effectively address these matters may erode customer trust or confidence, particularly if they receive considerable publicity or result in litigation, and could have a negative impact on our business.
Our disclosure on 17 Table of Contents these matters and our failure, or perceived failure, to meet our commitments (including with respect to climate change) or otherwise effectively address these matters may erode customer trust or confidence, particularly if they receive considerable publicity or result in litigation, and could have a negative impact on our business.
If we were involved in securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from our business. In the future, we may also issue our securities in connection with investments or acquisitions.
In the past, securities class action litigation has followed periods of market volatility. If we were involved in securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from our business. In the future, we may also issue our securities in connection with investments or acquisitions.
Periods of intense diplomatic or armed conflict, such as the ongoing conflict in Ukraine, may result in new and rapidly evolving trade restrictions and sanctions.
Periods of intense diplomatic or armed conflict, may result in new and rapidly evolving trade restrictions and sanctions.
These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • generally prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • provide that special meetings of the stockholders can only be called by or at the direction of our Board of Directors pursuant to a written resolution adopted by the affirmative vote of the majority of the total number of directors that the Company would have if there were no vacancies; • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • provide that our Board of Directors is expressly authorized to make, alter or repeal our amended and restated bylaws.
These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • generally prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • provide that special meetings of the stockholders can only be called in accordance with certain requirements and limitations set forth in our amended and restated bylaws; • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • provide that our Board of Directors is expressly authorized to make, alter or repeal our amended and restated bylaws.
Any determination to pay dividends on, or repurchase, shares of our common 20 Table of Contents stock in the future will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any potential indebtedness we may incur, our target leverage ratio, restrictions imposed by applicable law, tax considerations and other factors our Board of Directors deems relevant.
Any determination to pay dividends on, or repurchase, shares of our common stock in the future will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions (including in current or future agreements governing our indebtedness), restrictions imposed by applicable law, tax considerations and other factors our Board of Directors deems relevant.
Our financial performance could be adversely affected by decreases in spending on technology products and services by our public and private sector customers due to, among other things, customer spending decisions and government spending policies. Our sales are impacted by customer spending decisions on technology, including refresh decisions, customer initiatives that drive technology spending and customer budget priorities.
Decreases in spending on technology products and services by our public and private sector customers due to, among other things, customer spending decisions and government spending policies may have an adverse impact on our business. Our sales are impacted by customer spending decisions on technology, including refresh decisions, customer initiatives that drive technology spending and customer budget priorities.
Also, customers may delay spending while they evaluate new technologies. A decrease in the rate of innovation, a lack of acceptance of innovations by our customers or delays in technology spending by our customers, could have an adverse effect on our business, results of operations or cash flows.
A decrease in the rate of innovation, a lack of adoption of innovations by our customers or delays in technology spending by our customers, could have an adverse effect on our business, results of operations or cash flows.
We may continue to pursue transactions, including strategic investments, acquisitions or alliances, in an effort to extend or complement our existing business.
We could be exposed to additional risks if we continue to make strategic investments or acquisitions or enter into alliances. We may continue to pursue transactions, including strategic investments, acquisitions or alliances, in an effort to extend or complement our existing business.
Our business depends on the timely supply of products in order to meet the demands of our customers.
The interruption of the flow of products from suppliers could disrupt our supply chain. Our business depends on the timely supply of products in order to meet the demands of our customers.
Our success is heavily dependent upon our ability to attract, develop, engage and retain key personnel to manage, lead, innovate and grow our business, including our key executive, management, sales, services and technical coworkers.
Our success is heavily dependent upon our ability to attract, develop, engage and retain key personnel to manage, lead, innovate and grow our business, including our key executive, management, sales, services and technical coworkers. Additionally, we rely on outsource partners to execute and deliver on certain functions within the organization.
We, and some third parties upon which we rely, regularly experience malicious attacks and other attempts to gain authorized access to our systems, and attacks against us by state-sponsored organizations and nation-states may increase during periods of intense diplomatic or armed conflicts such as the ongoing conflict between Russia and Ukraine.
We, and some third parties upon which we rely, regularly experience malicious attacks and other attempts to gain unauthorized access to our systems, and attacks against us by state-sponsored organizations and nation-states may increase during periods of intense diplomatic or armed conflicts. Further, security breaches may go undetected and persist in our environments for extended periods.
Additionally, such adverse change in government spending policies, shifts in budget priorities or reductions in revenue levels could impact cash collections from contracts with our impacted public sector customers or other customers that do business with impacted public sector customers, which could adversely affect our business, results of operations or cash flows. 16 Table of Contents Legal and Regulatory Risks The failure to comply with our public sector contracts or applicable laws and regulations could result in, among other things, termination, fines or other liabilities, and changes in procurement regulations could adversely impact our business, results of operations or cash flows.
Additionally, such adverse change in government spending policies, shifts in budget priorities or reductions in revenue levels could impact cash collections from contracts with our impacted public sector customers or other customers that do business with impacted public sector customers, which could adversely affect our business, results of operations or cash flows.
Furthermore, although we have redundant systems at a separate location to back up our primary systems, there can be no assurance that these redundant systems will operate properly if and when required.
Furthermore, although we have redundant systems at a separate location to back up our primary systems, there can be no assurance that these redundant systems will operate properly if and when required. Moreover, software vulnerabilities within the third-party information technology systems we use are discovered and reported on nearly a daily basis.
Additionally, third parties, such as data center colocation and hosted solution partners, provide services to us and also provide services as a component of our services delivery to customers.
In connection with our services business, some of our coworkers have access to our customers’ confidential data and other information. Additionally, third parties, such as data center colocation and hosted solution partners, provide services to us and also provide services as a component of our services delivery to customers and to customer systems.
Our business involves the handling, storage and transmission of proprietary information and sensitive or confidential data, including personal information of coworkers, customers, partners and others, which we must do in compliance with applicable law. In connection with our services business, some of our coworkers have access to our customers’ confidential data and other information.
Breaches of data security and the failure to protect our information technology systems from cybersecurity threats could adversely impact our business. Our business involves the handling, storage and transmission of proprietary information and sensitive or confidential data, including personal information of coworkers, customers, partners and others, which we must do in compliance with applicable law.
If we are unable to attract, develop, engage and retain key personnel, or if our approach to workforce management is ineffective, our relationships with our vendor partners and customers and our ability to expand our offerings of value-added services and solutions could be adversely affected.
Additionally, if we fail to effectively manage our workforce, we may need to terminate or reposition coworkers within our Company to eliminate an abundance of or to reconfigure resources, which could damage our coworker relations and our ability to attract and retain key personnel. 13 Table of Contents If we are unable to attract, develop, engage and retain key personnel, or if our approach to workforce management is ineffective, our relationships with our vendor partners and customers and our ability to expand our offerings of value-added services and solutions could be adversely affected.
Any disruption to or infiltration of our information technology systems could significantly harm our reputation, business and results of operations due to failure to comply with customer, partner, legal or regulatory obligations. Breaches of data security and the failure to protect our information technology systems from cybersecurity threats could adversely impact our business.
If and when cyberattacks target and successfully exploit these vulnerabilities, we take steps designed to contain and limit the impact on our business. Any disruption to or infiltration of our information technology systems could significantly harm our reputation, business and results of operations due to failure to comply with customer, partner, legal or regulatory obligations.
For example, we may be subject to increased costs and use of operational resources associated with complying with any new climate-related laws and regulations. Additionally, the hardware, software and services we offer increasingly utilize new and evolving technologies such as artificial intelligence (“AI”), which presents risks and challenges that could result in legal liability.
For example, we may be subject to increased costs and use of operational resources associated with complying with any new climate-related laws and regulations.
However, any determination to pay dividends in the future will be at the discretion of our Board of Directors.
There can be no assurance that we will continue to pay dividends on our common stock or repurchase any of our common stock under our share repurchase program. We expect to continue to pay a cash dividend on our common stock. However, any determination to pay dividends in the future will be at the discretion of our Board of Directors.
Additionally, there is increased focus by stakeholders on environmental sustainability and corporate responsibility matters, including climate change response, packaging and waste reduction, energy consumption, and diversity, equity and inclusion.
Additionally, there is increased focus by stakeholders on environmental sustainability and corporate responsibility matters, and stakeholders may disagree with the Company’s commitments and initiatives on such matters.
Removed
The outbreak of the novel coronavirus (“COVID-19”) pandemic has adversely impacted and could continue to adversely impact our business and results of operations and could also adversely impact our cash flows, financial condition and liquidity. The global spread of COVID-19 continues to create significant macroeconomic uncertainty, volatility and disruption.
Added
We have been and will continue to be dependent on innovations in technology, as well as the adoption of those innovations by customers. Also, customers may delay spending while they evaluate new technologies.
Removed
Many governments and health authorities have from time to time implemented recommendations or mandates intended to slow the further spread of the disease, such as shelter-in-place orders, resulting in the temporary closure of schools and non-essential businesses, or social distancing and other mitigation measures, resulting in modified operations of various businesses including ours, and these measures may remain in place for a significant period of time.
Added
Issues relating to the use or capabilities of artificial intelligence, including social and ethical issues, in hardware, software and services offerings may result in reputational harm and liability and increased costs.
Removed
While some of these restrictions have been lifted or eased in certain jurisdictions, the recovery process remains uncertain.
Added
Social and ethical issues relating to the use of new and evolving technologies such as artificial intelligence (“AI”) in our hardware, software and service offerings, as well as in our internal platforms, may result in reputational harm and liability.
Removed
We have experienced and could continue to experience disruptions, including as a result of resurgences of COVID-19, that prevent us from meeting the demands of our customers, such as product constraints from our vendor partners and wholesale distributors and other disruptions to our supply chain, disruptions in or restrictions on the ability of our coworkers to work effectively, temporary closures of our distribution facilities, modifications in the operation of facilities that remain open and disruptions of commercial delivery services.
Added
The hardware, software and services we offer increasingly utilize AI, and, as with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. If we use, enable or offer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm or legal liability.
Removed
The impact of COVID-19 and measures implemented to slow the spread have caused and could continue to cause delay in, or limit the ability of, our customers to place orders for our products and services and make timely payments to us and could materially increase our labor, logistics and other costs.
Added
Increased focus and potential government regulation in the space of AI ethics may also increase the burden and cost of research and development in this area, subjecting us to brand or reputational harm, competitive harm or legal liability.
Removed
As long as the pandemic continues, our coworkers will continue to be exposed to health risks, and we could be negatively impacted in the future if a significant number of our coworkers, or coworkers who perform critical functions, become unable to work as a result of exposure to COVID-19.
Added
Failure to address AI ethics issues by us or others in our industry could undermine public confidence in AI and slow adoption of AI in our products and services.
Removed
In addition, the pandemic has resulted in a 10 Table of Contents widespread health crisis that has adversely affected the economies and financial markets of many countries, including the US, the UK and Canada.
Added
Additionally, the development, adoption and use for AI is still in its early stages, and ineffective or inadequate AI development or deployment practices by us or our vendor partners could result in unintended consequences. AI technologies are complex and rapidly evolving, and we face significant competition in the market and from other companies regarding such technologies.
Removed
During the COVID-19 pandemic and even after it has subsided, we may experience adverse impacts to our business as a result of the pandemic’s global economic impact, including any recession, economic downturn or volatility, government spending cuts, tightening of credit markets or increased unemployment that has occurred or may occur in the future, which could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices.
Added
When made public or otherwise known to us, we attempt to remediate or mitigate these vulnerabilities following guidance provided by the software vendor, and/or appropriate authorities, and before the vulnerability is successfully used in a cyberattack against our systems.
Removed
In addition, we have experienced and may continue to experience inflationary pressures, resulting in increased product prices that we may be unable to pass on to our customers.
Added
We maintain and periodically upgrade many of our information technology systems, some of which are complex, costly and time consuming. If our information technology systems are not properly maintained or enhanced, the attention of our coworkers could be diverted and our ability to provide the level of service our customers demand could be constrained for some time.
Removed
Individually and collectively, the consequences of the COVID-19 pandemic have adversely impacted and could continue to adversely impact our business and results of operations and could also adversely impact our cash flows, financial condition and liquidity.
Added
Further, new information technology systems and updates to existing information technology systems may not properly integrate with other information technology systems.
Removed
The extent to which the COVID-19 pandemic impacts our business, results of operations, cash flows, financial condition and liquidity in the future will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the ultimate duration of the pandemic, future resurgences and emergences of new variants of the virus and their severity, the availability, efficacy and acceptance of vaccines and treatments, actions taken to contain the virus including reimplementation of closures, and the effectiveness of these actions, and to what extent normal economic and operating conditions can resume and be sustained.
Added
Also, once implemented, the new information technology systems, updates to existing information technology systems and related technology may not provide the intended efficiencies or anticipated benefits, or could be defective or improperly installed, and could add costs, complications and disruptions to our ongoing operations.
Removed
The COVID-19 pandemic has and may continue to have the effect of heightening many of the other risks described in this “Risk Factors” section. Our sales are dependent on continued innovations in hardware, software and services by our vendor partners and the competitiveness of their offerings, and our ability to partner with new and emerging technology providers.
Added
From time to time, we may acquire new companies, businesses or sites with cybersecurity and data protection systems which may not conform with our standards.
Removed
Additionally, if we fail to effectively manage our workforce, we may need to terminate or reposition coworkers within our Company to eliminate an abundance of or to reconfigure resources, which could damage our coworker relations and our ability to attract and retain key personnel.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of December 31, 2022, we owned or leased a total of 2.4 million square feet of space, primarily in the US, UK and Canada. We own two properties: a 513,240 square foot distribution center in North Las Vegas, Nevada, and a combined office and a 442,400 square foot distribution center in Vernon Hills, Illinois.
Biggest changeItem 2. Properties As of December 31, 2023, we owned or leased a total of 2.3 million square feet of space, primarily in the US, UK and Canada. We own two properties: a 513,240 square foot distribution center in North Las Vegas, Nevada, and a combined office and a 442,400 square foot distribution center in Vernon Hills, Illinois.
Leases covering our currently occupied leased properties expire at varying dates, all within the next 13 years. We anticipate no difficulty in retaining occupancy through lease renewals, month-to-month occupancy or replacing the leased properties with equivalent properties. We believe that suitable additional or substitute leased properties will be available as required.
Leases covering our currently occupied leased properties expire at varying dates, all within the next 12 years. We anticipate no difficulty in retaining occupancy through lease renewals, month-to-month occupancy or replacing the leased properties with equivalent properties. We believe that suitable additional or substitute leased properties will be available as required.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, intellectual property, employment, tort and other litigation matters. For additional information regarding legal proceedings, refer to Note 16 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements.
Biggest changeItem 3. Legal Proceedings We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, intellectual property, employment, tort and other litigation matters. For additional information regarding legal proceedings, refer to Note 16 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements. 21 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDecember 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 CDW Corp $ 100 $ 118 $ 210 $ 196 $ 308 $ 272 S&P 500 $ 100 $ 94 $ 121 $ 140 $ 178 $ 144 S&P Information Technology $ 100 $ 98 $ 146 $ 207 $ 276 $ 196 CDW Peers $ 100 $ 89 $ 117 $ 136 $ 191 $ 150 Recent Sales of Unregistered Securities None. 24 Table of Contents Item 6. [RESERVED] 25 Table of Contents
Biggest changeDecember 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 CDW Corp $ 100 $ 178 $ 167 $ 261 $ 231 $ 297 S&P 500 100 129 150 190 153 190 S&P 500 Information Technology 100 148 211 281 200 312 CDW Peers 100 132 152 215 169 213 Recent Sales of Unregistered Securities None.
This peer group was selected based on a review of publicly available information about these companies and our determination that they 23 Table of Contents met one or more of the following criteria: (i) similar size in terms of revenue and/or enterprise value (one-third to three times our revenue or enterprise value); (ii) operates in a business-to-business distribution environment; (iii) members of the technology industry; (iv) similar customers ( i.e. , business, government, healthcare, and education); (v) companies that provide services and/or solutions; (vi) similar margins; (vii) comparable percentage of international sales; (viii) frequently identified as a peer by the other peer companies or Institutional Shareholder Services Inc.; or (ix) identified by the Company as a competitor.
This peer group was selected based on a review of publicly available information about these companies and our determination that they met one or more of the following criteria: (i) similar size in terms of revenue and/or enterprise value (one-third to three times our revenue or enterprise value); (ii) operates in a business-to-business distribution environment; (iii) members of the technology industry; (iv) similar customers ( i.e. , business, government, healthcare, and education); (v) companies that provide services and/or solutions; (vi) similar margins; (vii) comparable percentage of international sales; (viii) frequently identified as a peer by the other peer companies or Institutional Shareholder Services Inc.; or (ix) identified by the Company as a competitor.
Our peer group index for 2022 consists of the following companies: Accenture plc, Arrow Electronics, Inc., Avnet, Inc., Best Buy Company, Inc., CGI Group Inc., Cognizant Technology Solutions Corporation, DXC Technology Company, Flex Ltd., Genuine Parts Company, Henry Schein, Inc., Hewlett Packard Enterprise Company, Insight Enterprises, Inc., Jabil, Inc., LKQ Corporation, TD SYNNEX Corporation, W.W.
Our peer group index for 2023 consists of the following companies: Accenture plc, Arrow Electronics, Inc., Avnet, Inc., Best Buy Company, Inc., CGI Group Inc., Cognizant Technology Solutions Corporation, DXC Technology Company, Flex Ltd., Genuine Parts Company, Henry Schein, Inc., Hewlett Packard Enterprise Company, Insight Enterprises, Inc., Jabil, Inc., LKQ Corporation, TD SYNNEX Corporation, W.W.
Cumulative Total Shareholder Return The information contained in this Cumulative Total Shareholder Return section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Cumulative Total Shareholder Return The information contained in this Cumulative Total Shareholder Return section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically request that such information be treated as soliciting material or incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been listed on the Nasdaq Global Select Market since June 27, 2013 under the symbol “CDW.” Holders As of February 21, 2023, there were 7 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been listed on the Nasdaq Global Select Market since June 27, 2013 under the symbol “CDW.” Holders As of February 20, 2024, there were 4 holders of record of our common stock.
The number of beneficial stockholders is substantially greater than the number of holders of record because a portion of our common stock is held through brokerage firms. Dividends On February 8, 2023, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.59 per share.
The number of beneficial stockholders is substantially greater than the number of holders of record because a portion of our common stock is held through brokerage firms. Dividends On February 7, 2024, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.62 per share.
We expect to continue to pay quarterly cash dividends on our common stock in the future, but such payments remain 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.
We expect to continue to pay quarterly cash dividends on our common stock in the future, but such payments remain at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions (including in current or future agreements governing our indebtedness), restrictions imposed by applicable law, tax considerations and other factors that our Board of Directors deems relevant.
The following graph compares the cumulative total shareholder return, calculated on a dividend reinvested basis, on $100.00 invested at the closing of the market on December 31, 2017 through and including the market close on December 31, 2022, with the cumulative total return for the same time period of the same amount invested in the S&P 500 Index, the S&P Information Technology Index and a peer group index.
The following graph compares the cumulative total shareholder return, calculated on a dividend reinvested basis, on $100 invested at the closing of the market on December 31, 2018 through and including the market close on December 31, 2023, with the cumulative total return for the same time period of the same amount invested in the Standard & Poor’s 500 Stock 23 Table of Contents (“S&P 500”) Index, the S&P 500 Information Technology Index and a peer group index.
The dividend will be paid on March 10, 2023 to all stockholders of record as of the close of business on February 24, 2023.
The dividend will be paid on March 12, 2024 to all stockholders of record as of the close of business on February 26, 2024.
Issuer Purchases of Equity Securities On February 10, 2021, we announced that our Board of Directors authorized a $1.25 billion increase to our share repurchase program under which we may repurchase shares of our common stock from time to time in private transactions, open market purchases or other transactions as permitted by securities laws and other legal requirements.
On February 7, 2024, we announced that our Board of Directors authorized a $750 million increase to our share repurchase program (which was incremental to the amount remaining under the $750 million authorization announced on February 8, 2023) under which we may repurchase shares of our common stock from time to time in privately negotiated transactions, open market purchases or other transactions as permitted by securities laws and other legal requirements.
For additional information on our cash resources and needs and restrictions on our ability to pay dividends, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included elsewhere in this report. For additional information on restrictions on our ability to pay dividends, see Note 9 (Debt) to the accompanying Consolidated Financial Statements.
For additional information on our cash resources and needs and restrictions on our ability to pay dividends, see “Item 7.
Removed
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.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Issuer Purchases of Equity Securities Information relating to the Company’s purchases of its common stock during the three months ended December 31, 2023 is as follows: Period Total Number of Shares Purchased (in millions) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program (in millions) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plan or Program (1) (in millions) October 1 through October 31, 2023 0.1 $ 204.19 0.1 $ 369.6 November 1 through November 30, 2023 0.1 212.56 0.1 352.7 December 1 through December 31, 2023 0.0 219.02 0.0 337.6 Total 0.2 0.2 (1) The amounts presented in this column are the remaining total authorized value to be spent after each month’s repurchases.
Removed
During the three months ended December 31, 2022, we made no share repurchases. As of December 31, 2022, we had $87.6 million remaining available under our share repurchase program. On February 8, 2023, we announced that our Board of Directors authorized a $750 million increase to our share repurchase program.
Removed
We added the S&P Information Technology Index to provide investors with additional information on our performance relative to the general IT industry and will continue to also present our peer group index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNon-GAAP operating income and Non-GAAP operating income margin Year Ended December 31, (dollars in millions) 2022 2021 % Change Operating income, as reported $ 1,735.2 $ 1,419.0 22.3 % Amortization of intangibles (1) 167.9 94.9 Equity-based compensation 91.1 72.6 Acquisition and integration expenses 48.3 54.3 Other adjustments 8.0 4.6 Non-GAAP operating income 2,050.5 1,645.4 24.6 % Non-GAAP operating income margin 8.6 % 7.9 % (1) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. 32 Table of Contents Non-GAAP net income and Non-GAAP net income per diluted share Year Ended December 31, 2022 Year Ended December 31, 2021 (dollars in millions) Income before income taxes Income tax expense (1) Net income Income before income taxes Income tax expense (1) Net income Net Income % Change US GAAP, as reported $ 1,487.8 $ (373.3) $ 1,114.5 $ 1,297.8 $ (309.2) $ 988.6 12.7 % Amortization of intangibles (2) 167.9 (44.6) 123.3 94.9 (18.9) 76.0 Equity-based compensation 91.1 (30.4) 60.7 72.6 (42.6) 30.0 Acquisition and integration expenses 48.3 (12.4) 35.9 54.3 (10.4) 43.9 Gain on sale of equity method investment — — — (36.0) 8.5 (27.5) Net loss on extinguishment of long-term debt 1.6 (0.4) 1.2 6.0 (1.5) 4.5 Other adjustments 8.0 (2.1) 5.9 4.6 (1.2) 3.4 Non-GAAP $ 1,804.7 $ (463.2) $ 1,341.5 $ 1,494.2 $ (375.3) $ 1,118.9 19.9 % Net income per diluted share, as reported $ 8.13 $ 7.04 Non-GAAP net income per diluted share $ 9.79 $ 7.97 Shares used in computing US GAAP and Non-GAAP net income per diluted share 137.0 140.5 (1) Income tax on non-GAAP adjustments includes excess tax benefits associated with equity-based compensation.
Biggest change(3) Includes costs related to the workforce reduction program and charges related to the reduction of our real estate lease portfolio. 30 Table of Contents Non-GAAP net income and Non-GAAP net income per diluted share Year Ended December 31, 2023 Year Ended December 31, 2022 (dollars in millions) Income before income taxes Income tax expense (1) Net income Income before income taxes Income tax expense (1) Net income Net Income % Change US GAAP, as reported $ 1,450.2 $ (345.9) $ 1,104.3 $ 1,487.8 $ (373.3) $ 1,114.5 (0.9) % Amortization of intangibles (2) 154.4 (40.2) 114.2 167.9 (44.6) 123.3 Equity-based compensation 93.7 (47.6) 46.1 91.1 (30.4) 60.7 Acquisition and integration expenses 30.0 (7.8) 22.2 48.3 (12.4) 35.9 Transformation initiatives (3) 27.1 (7.1) 20.0 6.3 (1.6) 4.7 Workplace optimization (4) 47.7 (12.4) 35.3 — — — Net loss on extinguishment of long-term debt — — — 1.6 (0.4) 1.2 Other adjustments 5.3 (1.2) 4.1 1.7 (0.5) 1.2 Non-GAAP $ 1,808.4 $ (462.2) $ 1,346.2 $ 1,804.7 $ (463.2) $ 1,341.5 0.4 % Net income per diluted share, as reported $ 8.10 $ 8.13 Non-GAAP net income per diluted share $ 9.88 $ 9.79 Shares used in computing US GAAP and Non-GAAP net income per diluted share 136.3 137.0 (1) Income tax on non-GAAP adjustments includes excess tax benefits associated with equity-based compensation.
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 certain of each CDW LLC’s direct and indirect, 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors”).
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 certain of CDW LLC’s direct and indirect, 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors”).
Technology trends are likely to change as customers prioritize the projects that produce the most important outcomes for 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.
Technology trends are likely to change as customers prioritize the projects that produce the most important outcomes for their business. 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 Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share and Net sales growth on a constant currency basis 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.
We believe Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share and Net sales on a constant currency basis 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.
Revenue Recognition We sell some of our products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of different products and services. Significant judgment may be required when determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together.
Revenue Recognition We sell some of our products and services as part of bundled contract arrangements containing multiple performance obligations, which may include a combination of different products and services. Significant judgment may be required when determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together.
Our solutions are delivered in physical, virtual and cloud-based environments through approximately 10,600 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.
Our solutions are delivered in physical, virtual and cloud-based environments through approximately 10,900 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.
Our broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experience and security. 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 broad array of offerings ranges from discrete hardware and software products to integrated IT solutions and services that include on-premise and cloud capabilities across hybrid infrastructure, digital experience and security. We are vendor, technology and consumption model unbiased, with a solutions portfolio including more than 100,000 products and services from more than 1,000 leading and emerging brands.
We believe that the most important of these measures and ratios include average daily sales, Gross profit, Net income, Non-GAAP operating income, Non-GAAP operating income margin, 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, Cash and cash equivalents, cash conversion cycle and debt levels including available credit.
We believe that the most important of these measures and ratios include average daily sales, Gross profit, Net income, Operating income, Operating income margin, Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Net sales on a constant currency basis, Net income per diluted share, Non-GAAP net income per diluted share, Free cash flow, Adjusted free cash flow, Cash and cash equivalents, cash conversion cycle and debt levels including available credit.
Revenues from professional services are primarily recognized using an input method, which requires management to make estimates regarding the amount of resources required for each engagement in order to satisfy the performance obligation. 38 Table of Contents Goodwill Goodwill is allocated to reporting units expected to benefit from the business combination.
Revenues from professional services are primarily recognized using an input method, which requires management to make estimates regarding the amount of resources required for each engagement in order to satisfy the performance obligation. 36 Table of Contents Goodwill Goodwill is allocated to reporting units expected to benefit from the business combination.
Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. We also present Free cash flow as we believe this measure provides more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation.
Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. We also present Free cash flow and Adjusted free cash flow as we believe these measures provide more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation.
Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. We also present Free cash flow as we believe this measure provides more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation.
Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. We also present Free cash flow and Adjusted free cash flow as we believe these measures provide more information regarding our liquidity and capital resources. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation.
However, our past estimates of fair value would not have indicated an impairment when revised to include subsequent years’ actual results. We completed our annual impairment analysis during the fourth quarter of 2022.
However, our past estimates of fair value would not have indicated an impairment when revised to include subsequent years’ actual results. We completed our annual impairment analysis during the fourth quarter of 2023.
In this section, we present Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales growth on a constant currency basis and Free cash flow, which are non-GAAP financial measures.
In this section, we present Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales on a constant currency basis, Free cash flow and Adjusted free cash flow, which are non-GAAP financial measures.
We believe Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share and Net sales growth on a constant currency basis 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.
We believe Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share and Net sales on a constant currency basis provide analysts, investors and management with useful 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.
The following tables set forth Balance Sheet information as of December 31, 2022 and December 31, 2021, and Statement of Operations information for the years ended December 31, 2022 and 2021 for the accounts of the Issuers and the accounts of the Guarantors (the “Obligor Group”).
The following tables set forth Balance Sheet information as of December 31, 2023 and December 31, 2022, and Statement of Operations information for the years ended December 31, 2023 and 2022 for the accounts of the Issuers and the accounts of the Guarantors (the “Obligor Group”).
See Note 9 (Debt) and Note 11 (Leases) to the accompanying Consolidated Financial Statements for additional information regarding future maturities of debt and operating leases. Long-Term Debt and Financing Arrangements During the year ended December 31, 2022, we prepaid $636 million on our senior unsecured term loan facility without penalty.
See Note 9 (Debt) and Note 11 (Leases) to the accompanying Consolidated Financial Statements for additional information regarding future maturities of debt and operating leases. Long-Term Debt and Financing Arrangements During the year ended December 31, 2023, we prepaid $150 million on our senior unsecured term loan facility without penalty.
The fair value measurements were primarily based on significant inputs that are not observable, which are categorized as a Level 3 measurement in the fair value hierarchy. The values assigned to consideration transferred, assets acquired and liabilities assumed may be adjusted during the measurement period as new information arises.
The fair value measurements were primarily based on significant inputs that are not observable, which are categorized as a Level 3 measurement in the fair value hierarchy. The values assigned to consideration transferred, assets acquired and liabilities assumed may be adjusted during the measurement period as new information arises that existed as of the acquisition date.
(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 December 31, 2022, compared to 24 days at December 31, 2021.
(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 17 days at December 31, 2023, compared to 21 days at December 31, 2022.
Liquidity and Capital Resources Overview We finance our operations and capital expenditures with cash from operations and borrowings under our revolving loan facility. As of December 31, 2022, we had $1.1 billion of availability for borrowings under our revolving loan facility.
Liquidity and Capital Resources Overview We finance our operations and capital expenditures with cash from operations and borrowings under our revolving loan facility. As of December 31, 2023, we had $1.2 billion of availability for borrowings under our revolving loan facility.
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 COVID-19 pandemic, we have experienced variability compared to historic seasonality trends. Seasonality by channel is expected to continue to be different than historical experience.
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 2020, we have experienced variability compared to historic seasonality trends. Seasonality by channel is expected to continue to be different than historical experience.
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 operating income excludes, among other things, charges related to the amortization of acquisition-related intangible assets, equity-based compensation and the associated payroll taxes, acquisition and integration expenses, transformation initiatives and workplace optimization. Non-GAAP operating income margin is defined as Non-GAAP operating income as a percentage of Net sales.
Based on this definition, we have identified the critical accounting policies and estimates addressed below. For additional information related to significant accounting policies used in the preparation of our Consolidated Financial Statements, see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements.
Based on this definition, we have identified the critical accounting policies and estimates addressed below. For additional information related to significant accounting policies used in the preparation of our Consolidated Financial Statements, see Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements included in Part II, Item 8 of this report.
Components of our cash conversion cycle are as follows: December 31, (in days) 2022 2021 Days of sales outstanding (DSO) (1) 71 65 Days of supply in inventory (DIO) (2) 17 17 Days of purchases outstanding (DPO) (3) (67) (58) Cash conversion cycle 21 24 (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.
Components of our cash conversion cycle are as follows: December 31, (in days) 2023 2022 Days of sales outstanding (DSO) (1) 77 71 Days of supply in inventory (DIO) (2) 13 17 Days of purchases outstanding (DPO) (3) (73) (67) Cash conversion cycle 17 21 (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.
Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales growth on a constant currency basis and Free cash flow are considered non-GAAP financial measures.
Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales on a constant currency basis, Free cash flow and Adjusted free cash flow are considered non-GAAP financial measures.
As a result of the prepayment, no additional mandatory payments are required on the remaining principal amount until its maturity date on December 1, 2026. As of December 31, 2022, we had total unsecured indebtedness of $5.9 billion and we were in compliance with the covenants under our various credit agreements and indentures.
No additional mandatory payments are required on the remaining principal amount until its maturity date on December 1, 2026. As of December 31, 2023, we had total unsecured indebtedness of $5.6 billion and we were in compliance with the covenants under our credit agreements and indentures.
For additional information about our share repurchase program, refer to Note 12 (Stockholders’ Equity) to the accompanying Consolidated Financial Statements. 34 Table of Contents Dividends A summary of 2022 dividend activity for our common stock is as follows: Dividend Amount Declaration Date Record Date Payment Date $0.500 February 9, 2022 February 25, 2022 March 10, 2022 $0.500 May 4, 2022 May 25, 2022 June 10, 2022 $0.500 August 3, 2022 August 25, 2022 September 9, 2022 $0.590 November 2, 2022 November 25, 2022 December 9, 2022 $2.090 On February 8, 2023, we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.590 per share.
For additional information about our share repurchase program, refer to Note 12 (Stockholders’ Equity) to the accompanying Consolidated Financial Statements. 32 Table of Contents Dividends A summary of 2023 dividend activity for our common stock is as follows: Dividend Amount Declaration Date Record Date Payment Date $ 0.590 February 7, 2023 February 24, 2023 March 10, 2023 0.590 May 3, 2023 May 25, 2023 June 13, 2023 0.590 August 2, 2023 August 25, 2023 September 12, 2023 0.620 November 1, 2023 November 24, 2023 December 12, 2023 $ 2.390 On February 7, 2024 , we announced that our Board of Directors declared a quarterly cash dividend on our common stock of $0.620 per share.
Other Net sales in Other, which is comprised of results from our UK and Canadian operations, for the year ended December 31, 2022 increased $321 million, or 12.4%, compared to the year ended December 31, 2021.
Other Net sales in Other, which is comprised of results from our UK and Canadian operations, for the year ended December 31, 2023 decreased $355 million, or 12.2%, compared to the year ended December 31, 2022.
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.
We have orchestrated solutions by leveraging netcomm products, security, software and hybrid and cloud offerings to help customers achieve their objectives. 25 Table of Contents • 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.
The payment of any fu ture 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.
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 (including in current or future agreements governing our indebtedness), restrictions imposed by applicable law, tax considerations and other factors that our Board of Directors deems relevant.
For the definitions of Non-GAAP measures and reconciliations to the most directly comparable US GAAP measure, see “Results of Operations - Non-GAAP Financial Measure Reconciliations.” 27 Table of Contents The results of certain key business metrics are as follows: Year Ended December 31, (dollars in millions, except per share amounts) 2022 2021 Net sales $ 23,748.7 $ 20,820.8 Gross profit 4,686.6 3,568.5 Operating income 1,735.2 1,419.0 Net income 1,114.5 988.6 Non-GAAP operating income 2,050.5 1,645.4 Non-GAAP net income 1,341.5 1,118.9 Net income per diluted share 8.13 7.04 Non-GAAP net income per diluted share 9.79 7.97 Average daily sales (1) 93.5 82.0 Net debt (2) 5,607.5 6,600.4 Cash conversion cycle (in days) (3) 21 24 Cash provided by operating activities 1,335.9 784.6 Free cash flow 1,292.7 476.7 (1) There were 254 selling days for both the years ended December 31, 2022 and 2021.
For the definitions of Non-GAAP measures and reconciliations to the most directly comparable US GAAP measure, see “Results of Operations - Non-GAAP Financial Measure Reconciliations.” 26 Table of Contents The results of certain key business metrics are as follows: Year Ended December 31, (dollars in millions, except per share amounts) 2023 2022 Net sales $ 21,376.0 $ 23,748.7 Gross profit 4,652.4 4,686.6 Operating income 1,680.9 1,735.2 Net income 1,104.3 1,114.5 Non-GAAP operating income 2,039.1 2,050.5 Non-GAAP net income 1,346.2 1,341.5 Net income per diluted share 8.10 8.13 Non-GAAP net income per diluted share 9.88 9.79 Average daily sales (1) 84.2 93.5 Net debt (2) 5,056.2 5,607.5 Cash conversion cycle (in days) (3) 17 21 Cash provided by operating activities 1,598.7 1,335.9 Adjusted free cash flow (4) 1,426.8 1,292.7 (1) There were 254 selling days for both the years ended December 31, 2023 and 2022.
Operating income by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change was as follows: Year Ended December 31, 2022 2021 Dollars in Millions Percentage of Net Sales Dollars in Millions Percentage of Net Sales Percent Change in Operating Income Segments: (1) Corporate $ 931.7 9.0 % $ 697.3 8.5 % 33.6 % Small Business 186.8 9.6 167.7 9.0 11.4 Public 681.7 8.0 606.7 7.4 12.4 Other (2) 130.7 4.5 115.8 4.5 12.9 Headquarters (3) (195.7) nm* (168.5) nm* 16.1 Total Operating income $ 1,735.2 7.3 % $ 1,419.0 6.8 % 22.3 % * Not meaningful 30 Table of Contents (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.
Average daily sales is defined as Net sales divided by the number of selling days. 28 Table of Contents Operating income by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change was as follows: Year Ended December 31, 2023 2022 (dollars in millions) Operating Income Operating Income Margin Operating Income Operating Income Margin Percent Change in Operating Income Segments: (1) Corporate $ 846.8 9.5 % $ 931.7 9.0 % (9.1) % Small Business 177.3 11.4 186.8 9.6 (5.1) Public 735.0 8.8 681.7 8.0 7.8 Other (2) 142.1 5.6 130.7 4.5 8.7 Headquarters (3) (220.3) nm* (195.7) nm* 12.6 Total Operating income $ 1,680.9 7.9 % $ 1,735.2 7.3 % (3.1) % *nm - 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.
Purchased intangible assets other than goodwill are initially recognized at fair value and amortized over their useful lives. We determine the fair value of purchased intangible using an income approach on an individual asset basis.
Determining the fair value of these assets and liabilities requires the use of significant estimates, particularly in valuing acquired intangible assets and Goodwill. Purchased intangible assets other than goodwill are initially recognized at fair value and amortized over their useful lives. We determine the fair value of purchased intangible assets using an income approach on an individual asset basis.
As a percentage of Net sales, Gross profit margin increased 260 basis points to 19.7% for the year ended December 31, 2022.
As a percentage of Net sales, Gross profit margin increased 210 basis points to 21.8% for the year ended December 31, 2023.
Free cash flow Year Ended December 31, (dollars in millions) 2022 2021 Net cash provided by operating activities $ 1,335.9 $ 784.6 Capital expenditures (127.8) (100.0) Net change in accounts payable - inventory financing 84.6 (161.8) Financing payments for revenue generating assets — (46.1) Free cash flow $ 1,292.7 $ 476.7 33 Table of Contents 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, have historically been higher in the fourth quarter than in other quarters due to customers spending their remaining technology budget dollars at the end of the year.
Free cash flow and Adjusted free cash flow Year Ended December 31, (dollars in millions) 2023 2022 Net cash provided by operating activities $ 1,598.7 $ 1,335.9 Capital expenditures (148.2) (127.8) Free cash flow 1,450.5 1,208.1 Net change in accounts payable - inventory financing (23.7) 84.6 Adjusted free cash flow (1) $ 1,426.8 $ 1,292.7 (1) Defined as Cash flows provided by operating activities less capital expenditures, adjusted to include cash flows from financing activities that relate to the purchase of inventory. 31 Table of Contents 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, have historically been higher in the fourth quarter than in other quarters due to customers spending their remaining technology budget dollars at the end of the year.
The overall decrease was impacted by the acquisition of Sirius. In addition, netted down revenue increases DSO and DPO as the corresponding receivables and payables reflect the gross amounts due from customers and due to vendors while the corresponding sales and cost of sales are reflected on a net basis.
In addition, netted down revenue has an unfavorable impact to DSO and a favorable impact to DPO as the corresponding receivables and payables reflect the gross amounts due from customers and due to vendors while the corresponding sales and cost of sales are reflected on a net basis within Net sales.
(2) Represents the effect of translating Net sales for the year ended December 31, 2021 of CDW UK and CDW Canada at the average exchange rates applicable in 2022.
Average daily sales is defined as Net sales divided by the number of selling days. (2) Represents the effect of translating Net sales for the year ended December 31, 2022 of CDW UK and CDW Canada at the average exchange rates applicable in 2023.
Net sales growth on a constant currency basis Year Ended December 31, (dollars in millions) 2022 2021 % Change (1) Net sales, as reported $ 23,748.7 $ 20,820.8 14.1 % Foreign currency translation (2) — (197.3) Net sales, on a constant currency basis $ 23,748.7 $ 20,623.5 15.2 % (1) There were 254 selling days for both the years ended December 31, 2022 and 2021.
Net sales on a constant currency basis Year Ended December 31, (dollars in millions) 2023 2022 % Change (1) Net sales, as reported $ 21,376.0 $ 23,748.7 (10.0) % Foreign currency translation (2) — (28.2) Net sales, on a constant currency basis $ 21,376.0 $ 23,720.5 (9.9) % (1) There were 254 selling days for both the years ended December 31, 2023 and 2022.
We do not incur any interest expense associated with these agreements as balances are paid when they are due. For additional information, see Note 7 (Inventory Financing Agreements) to the accompanying Consolidated Financial Statements. Share Repurchase Program During 2022, we made no share repurchases.
We do not incur any interest expense associated with these agreements as balances are paid when they are due. For additional information, see Note 7 (Inventory Financing Agreements) to the accompanying Consolidated Financial Statements. Share Repurchase Program During 2023, we repurchased 2.6 million shares of our common stock for $500 million under the previously announced share repurchase program.
T he dividend will be paid on March 10, 2023 to all stockholders of record as of the close of business on February 24, 2023.
T he dividend will be pa id on March 12, 2024 to all stockholders of record as of the close of business on February 26, 2024.
Selling and administrative expenses Selling and administrative expenses increased $802 million, or 37.3%, to $2,951 million for the year ended December 31, 2022, compared to $2,150 million for the year ended December 31, 2021.
Selling and administrative expenses Selling and administrative expenses increased $20 million, or 0.7%, to $2,972 million for the year ended December 31, 2023, compared to $2,951 million for the year ended December 31, 2022.
Cash Flows Cash flows from operating, investing and financing activities are as follows: Year Ended December 31, (dollars in millions) 2022 2021 Net cash provided by (used in): Operating Activities $ 1,335.9 $ 784.6 Investing Activities Capital expenditures (127.8) (100.0) Acquisitions of businesses, net of cash acquired (36.7) (2,705.6) Proceeds from sale of equity method investment — 36.0 Cash flows used in investing activities (164.5) (2,769.6) Financing Activities Net change in accounts payable - inventory financing 84.6 (161.8) Financing payments on revenue generating assets — (46.1) Other cash flows from financing activities (1,186.7) 1,040.7 Cash flows (used in) provided by financing activities (1,102.1) 832.8 Effect of exchange rate changes on cash and cash equivalents (12.2) 0.1 Net increase (decrease) in cash and cash equivalents $ 57.1 $ (1,152.1) 35 Table of Contents Operating Activities Cash flows from operating activities are as follows: Year Ended December 31, (dollars in millions) 2022 2021 Change Net income $ 1,114.5 $ 988.6 $ 125.9 Adjustments for the impact of non-cash items (1) 388.0 227.6 160.4 Net income adjusted for the impact of non-cash items 1,502.5 1,216.2 286.3 Changes in assets and liabilities: Accounts receivable (2) (34.8) (616.8) 582.0 Merchandise inventory (3) 111.9 (151.0) 262.9 Accounts payable-trade (4) (260.0) 374.5 (634.5) Other 16.3 (38.3) 54.6 Net cash provided by operating activities $ 1,335.9 $ 784.6 $ 551.3 (1) Includes items such as depreciation and amortization, deferred income taxes, provision for credit losses and equity-based compensation expense.
Cash Flows Cash flows from operating, investing and financing activities are as follows: Year Ended December 31, (dollars in millions) 2023 2022 Net cash provided by (used in): Operating Activities $ 1,598.7 $ 1,335.9 Investing Activities Capital expenditures (148.2) (127.8) Acquisitions of businesses, net of cash acquired (76.4) (36.7) Other (5.0) — Cash flows used in investing activities (229.6) (164.5) Financing Activities Net change in accounts payable - inventory financing (23.7) 84.6 Other cash flows from financing activities (1,075.0) (1,186.7) Cash flows used in financing activities (1,098.7) (1,102.1) Effect of exchange rate changes on cash and cash equivalents 3.1 (12.2) Net increase in cash and cash equivalents $ 273.5 $ 57.1 33 Table of Contents Operating Activities Cash flows from operating activities are as follows: Year Ended December 31, (dollars in millions) 2023 2022 Change Net income $ 1,104.3 $ 1,114.5 $ (10.2) Adjustments for the impact of non-cash items (1) 375.6 388.0 (12.4) Net income adjusted for the impact of non-cash items 1,479.9 1,502.5 (22.6) Changes in assets and liabilities: Accounts receivable (2) (54.5) (34.8) (19.7) Merchandise inventory 139.0 111.9 27.1 Accounts payable-trade (3) (55.4) (260.0) 204.6 Other (4) 89.7 16.3 73.4 Net cash provided by operating activities $ 1,598.7 $ 1,335.9 $ 262.8 (1) Includes items such as depreciation and amortization, deferred income taxes, provision for credit losses and equity-based compensation expense.
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.
As the duration and ongoing impact of current economic conditions remain uncertain, current and future budget priorities and funding levels for Government, Healthcare and Education customers may be adversely affected, leading to lower IT spend. • Technology trends drive customer purchasing behaviors in the market.
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 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.
Other Operating income increased primarily due to higher Gross profit dollars, partially offset by higher payroll. 31 Table of Contents 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, Non-GAAP net income per diluted share, Net sales growth on a constant currency basis and Free cash flow for the years ended December 31, 2022 and 2021 below.
Non-GAAP Financial Measure Reconciliations We have included reconciliations of Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP net income, Non-GAAP net income per diluted share, Net sales on a constant currency basis, Free cash flow and Adjusted free cash flow for the years ended December 31, 2023 and 2022 below.
Segment Results of Operations 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: Year Ended December 31, 2022 2021 (dollars in millions) Net Sales Percentage of Total Net Sales Net Sales Percentage of Total Net Sales Dollar Change Percent Change (1) Corporate $ 10,350.1 43.6 % $ 8,179.7 39.3 % $ 2,170.4 26.5 % Small Business 1,938.9 8.2 1,870.1 9.0 68.8 3.7 Public: Government 2,574.3 10.8 2,155.6 10.4 418.7 19.4 Education 3,621.4 15.2 4,108.7 19.7 (487.3) (11.9) Healthcare 2,355.6 9.9 1,919.3 9.2 436.3 22.7 Total Public 8,551.3 35.9 8,183.6 39.3 367.7 4.5 Other 2,908.4 12.3 2,587.4 12.4 321.0 12.4 Total Net sales $ 23,748.7 100.0 % $ 20,820.8 100.0 % $ 2,927.9 14.1 % (1) There were 254 selling days for both the years ended December 31, 2022 and 2021.
Segment Results of Operations 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: Year Ended December 31, 2023 2022 (dollars in millions) Net Sales Percentage of Total Net Sales Net Sales Percentage of Total Net Sales Dollar Change Percent Change (1) Corporate $ 8,960.8 41.9 % $ 10,350.1 43.6 % $ (1,389.3) (13.4) % Small Business 1,556.0 7.3 1,938.9 8.2 (382.9) (19.7) Public: Government 2,669.1 12.5 2,574.3 10.8 94.8 3.7 Education 3,298.3 15.4 3,621.4 15.2 (323.1) (8.9) Healthcare 2,338.3 10.9 2,355.6 9.9 (17.3) (0.7) Total Public 8,305.7 38.8 8,551.3 35.9 (245.6) (2.9) Other 2,553.5 12.0 2,908.4 12.3 (354.9) (12.2) Total Net sales $ 21,376.0 100.0 % $ 23,748.7 100.0 % $ (2,372.7) (10.0) % (1) There were 254 selling days for both the years ended December 31, 2023 and 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 28, 2022. 26 Table of Contents 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 can impact our customers’ willingness to spend on information technology.
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 can impact our customers’ willingness and ability to spend on information technology.
Balance Sheet Information December 31, (dollars in millions) 2022 2021 Current assets $ 5,588.3 $ 4,584.1 Goodwill 3,939.7 2,373.1 Other assets 2,032.6 1,017.3 Total Non-current assets 5,972.3 3,390.4 Current liabilities 4,369.3 3,393.0 Long-term debt 5,792.9 6,534.6 Other liabilities 641.9 562.4 Total Long-term liabilities 6,434.8 7,097.0 Statements of Operations Information Year Ended December 31, (dollars in millions) 2022 2021 Net sales $ 20,741.8 $ 17,979.4 Gross profit 4,156.6 3,078.0 Operating income 1,584.7 1,301.9 Net income 1,005.8 921.3 37 Table of Contents Commitments and Contingencies The information set forth in Note 16 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part II, Item 8 of this report is incorporated herein by reference.
Balance Sheet Information December 31, (dollars in millions) 2023 2022 Current assets $ 5,770.0 $ 5,588.3 Goodwill 3,939.7 3,939.7 Other assets 1,978.4 2,032.6 Total Non-current assets 5,918.1 5,972.3 Current liabilities 4,975.4 4,369.3 Long-term debt 5,031.4 5,792.9 Other liabilities 697.7 641.9 Total Long-term liabilities 5,729.1 6,434.8 Statements of Operations Information Year Ended December 31, (dollars in millions) 2023 2022 Net sales $ 18,759.4 $ 20,741.8 Gross profit 4,106.4 4,156.6 Operating income 1,507.3 1,584.7 Net income 945.6 1,005.8 Commitments and Contingencies The information set forth in Note 16 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part II, Item 8 of this report is incorporated herein by reference. 35 Table of Contents Critical Accounting Policies and Estimates The preparation of the Consolidated Financial Statements in accordance with US GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities in the Consolidated Financial Statements and accompanying notes.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations or liquidity.
For additional information regarding the inventory financing and debt activities, see Note 7 (Inventory Financing Agreements) and Note 9 (Debt) to the accompanying Consolidated Financial Statements. 34 Table of Contents Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations or liquidity.
Public segment Operating income was $682 million for the year ended December 31, 2022, an increase of $75 million, or 12.4%, compared to $607 million for the year ended December 31, 2021. Public segment Operating income increased primarily due to higher Gross profit dollars, partially offset by higher payroll and higher intangible asset amortization from the acquisition of Sirius.
Public segment Operating income was $735 million for the year ended December 31, 2023, an increase of $53 million, or 7.8%, compared to $682 million for the year ended December 31, 2022. Public segment Operating income increased primarily due to lower payroll expenses, higher Gross profit dollars and reduced discretionary spend.
The increase in Gross profit margin was primarily driven by more favorable product mix and rate and higher mix of netted down revenue, as well as increased Net sales and margins on services as a result of the recent business acquisitions.
The increase in Gross profit margin was primarily driven by a more favorable contribution of netted down revenue, primarily software as a service, and higher product margin due to lower mix in notebooks and increased margin rate across various categories.
(2) The change is primarily due to sales volume and collection performance. (3) The change is primarily driven by shipment activity related to customer stocking positions. (4) The change is primarily due to timing of payments.
(2) The change is primarily due to higher sales activity during the fourth quarter 2023, partially offset by collection performance. (3) The change is primarily due to higher sales activity during the fourth quarter 2023 and timing of payments.
Small Business segment Operating income increased primarily due to higher Gross profit dollars, partially offset by higher payroll. Public Public segment Net sales for the year ended December 31, 2022 increased $368 million, or 4.5%, compared to the year ended December 31, 2021.
Small Business segment Operating income was $177 million for the year ended December 31, 2023, a decrease of $10 million, or 5.1%, compared to $187 million for the year ended December 31, 2022. Small Business segment Operating income decreased primarily due to lower Gross profit dollars, partially offset by lower payroll expenses and reduced discretionary spend.
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.
Non-GAAP net income excludes, among other things, charges related to acquisition-related intangible asset amortization, equity-based compensation, acquisition and integration expenses, transformation initiatives, workplace optimization and the associated tax effects of each. Net sales on a constant currency basis is defined as Net sales excluding the impact of foreign currency translation on Net sales compared to the prior period.
(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. 28 Table of Contents Results of Operations Results of operations, in dollars and as a percentage of Net sales are as follows: Year Ended December 31, 2022 2021 Dollars in Millions Percentage of Net Sales Dollars in Millions Percentage of Net Sales Net sales $ 23,748.7 100.0 % $ 20,820.8 100.0 % Cost of sales 19,062.1 80.3 17,252.3 82.9 Gross profit 4,686.6 19.7 3,568.5 17.1 Selling and administrative expenses 2,951.4 12.4 2,149.5 10.3 Operating income 1,735.2 7.3 1,419.0 6.8 Interest expense, net (235.7) (1.0) (150.9) (0.7) Other (expense) income, net (11.7) — 29.7 0.1 Income before income taxes 1,487.8 6.3 1,297.8 6.2 Income tax expense (373.3) (1.6) (309.2) (1.5) Net income $ 1,114.5 4.7 % $ 988.6 4.7 % Net sales Total Net sales for the year ended December 31, 2022 increased $2,928 million, or 14.1%, to $23,749 million compared to the prior year.
Results of Operations Results of operations, in dollars and as a percentage of Net sales are as follows: Year Ended December 31, 2023 2022 Dollars in Millions Percentage of Net Sales Dollars in Millions Percentage of Net Sales Net sales $ 21,376.0 100.0 % $ 23,748.7 100.0 % Cost of sales 16,723.6 78.2 19,062.1 80.3 Gross profit 4,652.4 21.8 4,686.6 19.7 Selling and administrative expenses 2,971.5 13.9 2,951.4 12.4 Operating income 1,680.9 7.9 1,735.2 7.3 Interest expense, net (226.6) (1.1) (235.7) (1.0) Other expense, net (4.1) — (11.7) — Income before income taxes 1,450.2 6.8 1,487.8 6.3 Income tax expense (345.9) (1.6) (373.3) (1.6) Net income $ 1,104.3 5.2 % $ 1,114.5 4.7 % Net sales Net sales decreased $2,373 million, or 10.0%, to $21,376 million for the year ended December 31, 2023, compared to $23,749 million for the year ended December 31, 2022.
Operating income Operating income was $1,735 million for the year ended December 31, 2022, an increase of $316 million, or 22.3%, compared to $1,419 million for the year ended December 31, 2021. Operating income increased primarily due to higher Gross profit dollars, partially offset by higher payroll expenses and higher intangible asset amortization from the acquisition of Sirius.
Corporate segment Operating income was $847 million for the year ended December 31, 2023, a decrease of $85 million, or 9.1%, compared to $932 million for the year ended December 31, 2022. Corporate segment Operating income decreased primarily due to lower Gross profit dollars and increased payroll expenses, partially offset by reduced discretionary spend.
All operating segments contributed to the Net sales growth. For additional information, see the “Segment Results of Operations” below. Gross profit Gross profit was $4,687 million for the year ended December 31, 2022, an increase of $1,118 million, or 31.3%, compared to $3,569 million for the year ended December 31, 2021.
For additional information, see the “Segment Results of Operations” below. 27 Table of Contents Gross profit Gross profit decreased $34 million, or 0.7%, to $4,652 million for the year ended December 31, 2023, compared to $4,687 million for the year ended December 31, 2022.
The 2022 effective tax rate was higher than 2021 primarily attributable to lower excess tax benefits on equity-based compensation, partially offset by a prior year discrete deferred tax expense as a result of an increase in the UK corporate tax rate effective in 2023.
The lower effective tax rate for the year ended December 31, 2023 as compared to the prior year was primarily attributable to higher excess tax benefits on equity-based compensation.
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. On December 1, 2021, we completed the acquisition of Sirius Computer Solutions, Inc. (“Sirius”).
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.
The effective income tax rate, expressed by calculating income tax expense as a percentage of Income before income taxes, was 25.1% and 23.8% for 2022 and 2021, respectively. For 2022, the effective tax rate differed from the US federal statutory rate primarily due to state and local income taxes, partially offset by excess tax benefits on equity-based compensation.
Income tax expense Income tax expense was $346 million for the year ended December 31, 2023, compared to $373 million for the year ended December 31, 2022. The effective income tax rate, expressed by calculating income tax expense as a percentage of Income before income taxes, was 23.9% and 25.1% for 2023 and 2022, respectively.
(2) Defined as Total debt minus Cash and cash equivalents.
Average Daily Sales is defined as Net sales divided by the number of selling days. (2) Defined as Total debt minus Cash and cash equivalents.
Business combinations We allocate purchase price consideration to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. Determining the fair value of these assets and liabilities requires the use of significant estimates, particularly in valuing acquired intangible assets and Goodwill.
We performed a quantitative analysis for all reporting units and determined that the fair values of each reporting unit substantially exceeded their carrying values and, therefore, no impairment existed. Business combinations We allocate purchase price consideration to the assets acquired and liabilities assumed based on their fair values as of the acquisition date.
This increase was primarily driven by customers’ priorities on digital transformation, resulting in increased Net sales in services, software and notebooks/mobile devices. Small Business segment Operating income was $187 million for the year ended December 31, 2022, an increase of $19 million, or 11.4%, compared to $168 million for the year ended December 31, 2021.
Small Business Small Business segment Net sales for the year ended December 31, 2023 decreased $383 million, or 19.7%, compared to the year ended December 31, 2022. This decrease was across various categories primarily within notebooks/mobile devices.
This strategic acquisition has enhanced our breadth and depth of services and solutions offerings. 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 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.
Interest expense, net Interest expense, net was $236 million for the year ended December 31, 2022, an increase of $85 million, or 56.2%, compared to $151 million for the year ended December 31, 2021.
Operating income Operating income decreased $54 million, or 3.1%, to $1,681 million for the year ended December 31, 2023, compared to $1,735 million for the year ended December 31, 2022. Interest expense, net Interest expense, net includes interest expense and interest income.
These factors resulted in higher Net sales across various categories, including software, netcomm products, services, enterprise storage, notebooks/mobile devices and video. Corporate segment Operating income was $932 million for the year ended December 31, 2022, an increase of $234 million, or 33.6%, compared to $697 million for the year ended December 31, 2021.
Corporate Corporate segment Net sales for the year ended December 31, 2023 decreased $1,389 million, or 13.4%, compared to the year ended December 31, 2022. This decrease in Net sales was across various hardware categories and services, partially offset by increases in netcomm products.
(2) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.
(2) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (3) Includes cost related to strategic transformation initiatives focused on optimizing various operations and systems. (4) Includes costs related to the workforce reduction program and charges related to the reduction of our real estate lease portfolio.
Investing Activities Net cash used in investing activities decreased $2,605 million in 2022 compared to 2021.
Investing Activities Net cash used in investing activities increased $65 million in 2023 compared to 2022. This increase was primarily due to higher acquisition activity in 2023 and increased capital expenditures. Financing Activities Net cash used in financing activities decreased $3 million in 2023 compared to 2022.
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. Free cash flow is defined as cash flows from operating activities less capital expenditures, adjusted for the net change in accounts payable-inventory financing and other financed purchases.
Free cash flow is defined as cash flows provided by operating activities less capital expenditures. Adjusted free cash flow is defined as Free cash flow adjusted to include certain cash flows from financing activities incurred in the normal course of operations or as capital expenditures.
For a discussion of results for the year ended December 31, 2021, see “Item 7.
For a discussion of results for the year ended December 31, 2022, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 24, 2023.
Removed
Sirius is a leading provider of secure, mission-critical technology-based solutions and is one of the largest IT solutions integrators in the United States, leveraging its services-led approach, broad portfolio of hybrid infrastructure solutions, and deep technical expertise of its 2,600 coworkers to support corporate and public customers.
Added
Macroeconomic uncertainty persists as a result of the current inflationary environment, the corresponding increase in interest rates driven by monetary policy and lower economic growth rates in the United States and other countries.
Removed
The financial results of Sirius have been included in our Consolidated Financial Statements and the results of our Corporate, Small Business and Public segments since the date of the acquisition. We may sell all or only select products that our vendor partners offer.
Added
The uncertainty in the current economic environment resulted in, and may continue to result in, a delay, pause or reduction of investments in technology by our customers. • Customers continue to balance priorities to focus on solutions that lead to business optimization, cost management and security risk management and in many cases are reassessing the timing of IT refresh cycles and pausing or deferring their IT spend.
Removed
Macroeconomic uncertainty persists as a result of the continued rate of inflation and the corresponding increase in interest rates driven by monetary policy. Additionally, social and geopolitical factors such as resurgences of COVID-19, changes in government administration and laws and the ongoing military conflict between Russia and Ukraine have resulted in business volatility and disruption.
Added
Current technology trends are focused on delivering greater flexibility and efficiency, as well as designing and managing IT securely.
Removed
The enhanced uncertainty in the current environment may result in a delay or pause on investments in technology by our customers. • Customers’ top priorities continue to be digital transformation, security, hybrid and cloud solutions and end point solutions as hybrid environments become the accepted work model and drive demand for remote collaboration and work-and-learn-from-anywhere capabilities.
Added
(3) 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.
Removed
The increase was primarily driven by higher payroll expenses consistent with higher Gross profit and higher coworker count, including the impact of the acquisition of Sirius, and higher intangible asset amortization expense from the acquisition of Sirius.
Added
(4) Defined as Cash flows provided by operating activities less capital expenditures, adjusted to include cash flows from financing activities that relate to the purchase of inventory.
Removed
This increase was primarily driven by additional interest expense from the $2.5 billion aggregate principal amount of unsecured senior notes issued on December 1, 2021, the net proceeds of which were used to fund the acquisition of Sirius.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor additional information on our debt, refer to Note 9 (Debt) to the accompanying Consolidated Financial Statements. Foreign Currency Risk We transact business in foreign currencies other than the US dollar, primarily the British pound and the Canadian dollar, which exposes us to foreign currency exchange rate fluctuations.
Biggest changeFor additional information on our financial instruments and debt, see Note 8 (Financial Instruments) and Note 9 (Debt) to the accompanying Consolidated Financial Statements. Foreign Currency Risk We transact business in foreign currencies other than the US dollar, primarily the British pound and the Canadian dollar, which exposes us to foreign currency exchange rate fluctuations.
We 39 Table of Contents manage our exposure to interest rate risk through the proportion of fixed-rate debt and variable-rate debt in our debt portfolio. Additionally, from time to time, we may execute derivative instruments in order to manage the risk associated with changes in interest rates on borrowings under our variable-rate debt facilities.
We manage our exposure to interest rate risk through the proportion of fixed-rate debt and variable-rate debt in our debt portfolio. 37 Table of Contents Additionally, from time to time, we may execute derivative instruments in order to manage the risk associated with changes in interest rates on borrowings under our variable-rate debt facilities.
The direct effect of foreign currency fluctuations on our results of operations has not been material as the majority of our results of operations are denominated in US dollars. 40 Table of Contents
The direct effect of foreign currency fluctuations on our results of operations has not been material as the majority of our results of operations are denominated in US dollars. 38 Table of Contents

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