CDW Corporation EBITDA surged on 11.1% and Revenue increased on 9.5%
02/07/2019 • About CDW Corporation (
$CDW) • By InTwits
CDW Corporation reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is relatively stable: 7.7% in 2018 vs. 7.6% in 2017 vs. 7.3% in 2014
- CDW Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.5%.
- In the last 5 years the company invested considerably less than D&A: $376m vs. $1,216m. In 2018 this situation was still the same: CAPEX was 86 while D&A was 266
- The company has highly profitable business model: ROIC is 23.1%
- It operates with high leverage: Net Debt/EBITDA is 2.4x while industry average is 0.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
CDW Corporation's Revenue increased on 9.5%. Revenue growth showed small slowdown in 18Q4 - it was 8.6% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018. EBITDA Margin was relatively stable in the last 5 years.
Gross Margin showed almost no change in 2018. Gross Margin stuck to a growing trend at 0.17 pp per annum in 2014-2018. SG&A as a % of Revenue showed almost no change in 2018. During the last 5 years SG&A as a % of Revenue topped in 2016 at 10.8% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During the last 5 years SBC as a % of Revenue topped in 2017 at 0.29%.
Net Income margin showed almost no change in 2018. Net Income margin stuck to a growing trend at 0.43 pp per annum in 2014-2018. The efficient tax rate was 23.5% in 2018 while the average for the last five years was 30.2%.
Investments (CAPEX, working capital and M&A)
In 2018 CDW Corporation had CAPEX/Revenue of 0.53%. The company showed almost no change in CAPEX/Revenue from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 0.51%.
Accounts receivable as a % of Revenue increased slightly on 0.74 pp from 15.7% to 16.4% in 2018. Inventories as a % of Revenue showed almost no change at 2.8% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
Return on investment
The company operates at high and attractive ROIC (23.1%) and ROE (65.6%). ROIC increased on 3.0 pp from 20.1% to 23.1% in 2018. ROE surged on 14.1 pp from 51.5% to 65.6% in 2018. ROIC grew at 1.6 pp per annum in the last 5 years. ROE stuck to a growing trend at 8.4 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 2.4x Net Debt / EBITDA and 2.6x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 2.7x to 2.4x in 2018. Debt decreased slightly on 0.83% while cash surged on 42.7%. Net Debt/EBITDA followed a declining trend at -0.2x per annum in 2014-2018.
CDW Corporation has no short term refinancing risk: cash is higher than short term debt (813.4%).
Valuation and dividends
The company's trades at EV/EBITDA 13.6x and P/E 21.7x.
The company paid 21.6% of Net Income as dividends in 2018. Dividends grew on average at 32.5% per annum in the last 5 years).
Management team
The company's CEO is Christine A Leahy. Christine A Leahy is a founder and has 0 years tenure with the company. CEO total compensation was
$9,061,299 in 2018 which included
$990,769 salary. CDW Corporation's CFO is Collin B Kebo. Collin B Kebo has 1 year tenure at the company.
At the end of financial year the company had 1.2% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 9,019 employees. The number of employees increased on 3.4%. Average revenue per employee in 2018 was
$1,800,699 and it increased on 5.9%.
Financial and operational results
FY ended 12/31/2018
CDW Corporation ($CDW) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 12,075 | 12,989 | 13,982 | 14,833 | 16,241 | 9.5% |
| Gross Profit | 1,921 | 2,116 | 2,327 | 2,450 | 2,707 | 10.5% |
| SG&A | 1,248 | 1,374 | 1,508 | 1,584 | 1,720 | 8.6% |
| EBITDA | 881 | 969 | 1,074 | 1,127 | 1,253 | 11.1% |
| EBIT | 673 | 742 | 819 | 867 | 987 | 13.9% |
| Tax | 143 | 244 | 248 | 138 | 198 | 43.5% |
| Net Income | 245 | 403 | 424 | 523 | 643 | 22.9% |
| Stock Based Compensation | 16 | 31 | 39 | 44 | 41 | -6.9% |
Balance Sheet
|
|---|
| Cash | 345 | 38 | 264 | 144 | 206 | 42.7% |
| Accounts Receivable | 1,561 | 2,017 | 2,169 | 2,329 | 2,671 | 14.7% |
| Inventory | 338 | 393 | 452 | 412 | 454 | 10.4% |
| Accounts Payable | 704 | 1,306 | 1,653 | 1,816 | 2,006 | 10.5% |
| Short Term Debt | 15 | 27 | 19 | 26 | 25 | -0.8% |
| Long Term Debt | 3,175 | 3,233 | 3,216 | 3,210 | 3,183 | -0.8% |
Cash flow
|
|---|
| Capex | 55 | 90 | 64 | 81 | 86 | 6.2% |
| Dividends | 34 | 53 | 79 | 107 | 139 | 29.9% |
| Acquisitions | | 264 | | | | |
Ratios
|
|---|
| Revenue growth | 12.1% | 7.6% | 7.6% | 6.1% | 9.5% | |
| EBITDA growth | 22.9% | 10.0% | 10.8% | 5.0% | 11.1% | |
|
|---|
| Gross Margin | 15.9% | 16.3% | 16.6% | 16.5% | 16.7% | 0.1% |
| EBITDA Margin | 7.3% | 7.5% | 7.7% | 7.6% | 7.7% | 0.1% |
| EBIT Margin | 5.6% | 5.7% | 5.9% | 5.8% | 6.1% | 0.2% |
| SG&A, % of revenue | 10.3% | 10.6% | 10.8% | 10.7% | 10.6% | -0.1% |
| SBC, % of revenue | 0.1% | 0.2% | 0.3% | 0.3% | 0.3% | -0.0% |
| Net Income Margin | 2.0% | 3.1% | 3.0% | 3.5% | 4.0% | 0.4% |
| CAPEX, % of revenue | 0.5% | 0.7% | 0.5% | 0.5% | 0.5% | -0.0% |
|
|---|
| ROIC | 16.5% | 17.3% | 18.8% | 20.1% | 23.1% | 3.0% |
| ROE | 29.7% | 39.7% | 39.6% | 51.5% | 65.6% | 14.1% |
| Net Debt/EBITDA | 3.2x | 3.3x | 2.8x | 2.7x | 2.4x | -0.3x |
People
|
|---|
| Insider ownership | 1.2% | 1.2% | 1.2% | 1.2% | 1.2% | 0.0% |
| Employees | 7,211 | 8,465 | 8,516 | 8,726 | 9,019 | 3.4% |
| Revenue/Employee, th. $ | 1,674 | 1,534 | 1,642 | 1,700 | 1,801 | 5.9% |
CDW Corporation ($CDW) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,606 | 4,186 | 4,373 | 4,075 | | 10.8% | 7.6% | 11.2% | 8.6% |
| EBITDA | 271 | 332 | 341 | 310 | | 15.2% | 12.1% | 10.0% | 8.0% |
| Net Income | 127 | 173 | 184 | 159 | | 118.2% | 22.8% | 42.1% | -18.2% |
Balance Sheet
|
|---|
| Cash | 221 | 101 | 255 | 206 | | -12.2% | 27.5% | 160.6% | 42.7% |
| Short Term Debt | 26 | 39 | 32 | 25 | | 39.5% | 108.6% | -22.9% | -0.8% |
| Long Term Debt | 3,210 | 3,202 | 3,187 | 3,183 | | -1.6% | -2.3% | -5.9% | -0.8% |
Ratios
|
|---|
| Gross Margin | 16.7% | 16.6% | 16.3% | 17.0% | | -0.3% | 0.2% | -0.0% | 0.7% |
| EBITDA Margin | 7.5% | 7.9% | 7.8% | 7.6% | | 0.3% | 0.3% | -0.1% | -0.0% |
| Net Income Margin | 3.5% | 4.1% | 4.2% | 3.9% | | 1.7% | 0.5% | 0.9% | -1.3% |
Peers in Technology Distributors
Below we provide CDW Corporation benchmarking against other companies in Technology Distributors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Tech Data Corporation ($TECD) | | 3.2% | -4.7% | -8.3% | 38.9% |
| EACO Corp ($EACO) | | 4.1% | 5.9% | 5.7% | 23.1% |
| Richardson Electronics, Ltd. ($RELL) | | -0.7% | 3.7% | -3.6% | 19.2% |
| Synnex Corporation ($SNX) | | -3.6% | 5.4% | 21.2% | 17.6% |
| Wayside Technology Group, Inc. ($WSTG) | | 12.1% | 9.4% | -61.6% | 13.0% |
| |
|---|
| Median (16 companies) | | 4.1% | 4.6% | 4.2% | 8.3% |
|---|
| CDW Corporation ($CDW) | | 7.6% | 7.6% | 6.1% | 9.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | 25.4% | 31.1% | -10.8% | 39.4% | 44.0% |
| Richardson Electronics, Ltd. ($RELL) | 29.7% | 30.0% | 31.6% | 32.1% | 33.7% |
| EACO Corp ($EACO) | 27.5% | 29.3% | 29.3% | 28.5% | 28.5% |
| Surge Components Inc ($SPRS) | 24.5% | 25.0% | 25.2% | 25.2% | 25.6% |
| ADDvantage Technologies Group, Inc. ($AEY) | 32.3% | 35.0% | 32.2% | 30.4% | 23.7% |
| |
|---|
| Median (16 companies) | 14.2% | 13.5% | 13.8% | 16.9% | 15.6% |
|---|
| CDW Corporation ($CDW) | 15.9% | 16.3% | 16.6% | 16.5% | 16.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | -8.6% | -3.2% | -39.0% | 13.0% | 19.2% |
| ePlus inc. ($PLUS) | 7.3% | 7.5% | 7.6% | 7.3% | 7.1% |
| EACO Corp ($EACO) | 4.0% | 4.5% | 4.7% | 4.5% | 5.9% |
| Surge Components Inc ($SPRS) | 2.8% | 3.8% | -1.5% | 1.2% | 4.8% |
| Anixter International Inc. ($AXE) | 6.3% | 5.1% | 4.6% | 4.8% | 4.5% |
| |
|---|
| Median (16 companies) | 3.2% | 3.5% | 3.4% | 3.5% | 4.0% |
|---|
| CDW Corporation ($CDW) | 7.3% | 7.5% | 7.7% | 7.6% | 7.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Richardson Electronics, Ltd. ($RELL) | 2.0% | 3.5% | 3.4% | 3.8% | 3.2% |
| ePlus inc. ($PLUS) | 0.9% | 1.0% | 2.1% | 1.5% | 1.0% |
| EACO Corp ($EACO) | 0.6% | 0.4% | 0.3% | 5.5% | 0.8% |
| Avnet, Inc. ($AVT) | 0.4% | 0.6% | 0.8% | 0.7% | 0.8% |
| PC Connection, Inc. ($CNXN) | 0.3% | 0.5% | 0.4% | 0.4% | 0.8% |
| |
|---|
| Median (16 companies) | 0.4% | 0.5% | 0.4% | 0.5% | 0.5% |
|---|
| CDW Corporation ($CDW) | 0.5% | 0.7% | 0.5% | 0.5% | 0.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Surge Components Inc ($SPRS) | 6.7% | 9.5% | -4.0% | 3.9% | 24.6% |
| EACO Corp ($EACO) | 19.6% | 21.8% | 22.2% | 16.1% | 21.2% |
| ePlus inc. ($PLUS) | 20.1% | 21.0% | 21.5% | 22.8% | 20.8% |
| Insight Enterprises, Inc. ($NSIT) | 17.0% | 17.4% | 20.7% | 19.3% | 20.0% |
| PC Connection, Inc. ($CNXN) | 20.1% | 19.9% | 18.6% | 16.6% | 17.0% |
| |
|---|
| Median (17 companies) | 11.9% | 11.9% | 12.1% | 9.9% | 11.2% |
|---|
| CDW Corporation ($CDW) | 16.5% | 17.3% | 18.8% | 20.1% | 23.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Synnex Corporation ($SNX) | 2.0x | 0.9x | 1.2x | 2.1x | 3.9x |
| Anixter International Inc. ($AXE) | 3.2x | 4.7x | 3.6x | 3.0x | 3.1x |
| ScanSource, Inc. ($SCSC) | -1.4x | -0.9x | 0.2x | 0.6x | 2.5x |
| Arrow Electronics, Inc. ($ARW) | 1.8x | 2.2x | 2.2x | 2.3x | 2.2x |
| Avnet, Inc. ($AVT) | 1.2x | 1.1x | 2.2x | 1.5x | 2.2x |
| |
|---|
| Median (15 companies) | -0.2x | -0.4x | 0.1x | 0.9x | 0.5x |
|---|
| CDW Corporation ($CDW) | 3.2x | 3.3x | 2.8x | 2.7x | 2.4x |
