Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

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

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

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

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

On October 15, 2021, the Company entered into a definitive agreement to acquire Sirius Computer Solutions, Inc. ("Sirius"), for $2.5 billion in cash, subject to customary closing adjustments. 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. This strategic acquisition will enhance the Company’s breadth and depth of services and solutions offerings. The completion of this acquisition is subject to customary regulatory approvals and closing conditions. The

Company expects the transaction to close in the fourth quarter of 2021.

Trends and Key Factors Affecting our Financial Performance

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

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

Key Business Metrics

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

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

We believe these measures provide analysts, investors and management with helpful information regarding the underlying operating performance of our business, as they remove the impact of items that management believes are not reflective of underlying operating performance. Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. Certain non-GAAP financial measures are also used to determine certain components of performance-based compensation. For the definitions of Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis and reconciliations to the most directly comparable US GAAP measure, see "Results of Operations - Non-GAAP Financial Measure Reconciliations."

Third Quarter Overview

The results of certain business metrics are as follows:


	Three Months Ended September 30,
(dollars in millions)	2021		2020
Net sales	$	5,300.0	$	4,756.4
Gross profit	914.9		825.5
Operating income	386.4		317.8
Net income	266.6		193.2
Non-GAAP operating income	435.1		386.3
Non-GAAP net income	298.0		265.4
Average daily sales(1)	82.8		74.3
Net debt(2)	3,821.1		2,681.4
Cash conversion cycle (in days)(3)	25		16

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

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

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

Results of Operations

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

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


	Three Months Ended September 30,
	2021				2020
	Dollars in Millions		Percentage of Net Sales		Dollars in Millions		Percentage of Net Sales
Net sales	$	5,300.0	100.0	%	$	4,756.4	100.0	%
Cost of sales	4,385.1		82.7		3,930.9		82.6
Gross profit	914.9		17.3		825.5		17.4
Selling and administrative expenses	528.5		10.0		507.7		10.7
Operating income	386.4		7.3		317.8		6.7
Interest expense, net	(36.4)		(0.7)		(40.2)		(0.8)
Other income (expense), net	0.4		—		(27.5)		(0.6)
Income before income taxes	350.4		6.6		250.1		5.3
Income tax expense	(83.8)		(1.6)		(56.9)		(1.2)
Net income	$	266.6	5.0	%	$	193.2	4.1	%

Net sales

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


	Three Months Ended September 30,
	2021				2020
(dollars in millions)	Net Sales		Percentage of Total Net Sales		Net Sales		Percentage of Total Net Sales		Dollar Change		Percent Change(1)
Corporate	$	2,067.3	39.0	%	$	1,660.0	34.9	%	$	407.3	24.5	%

Small Business	467.1		8.8		337.0		7.1		130.1		38.6

Public:
Government	568.8		10.7		847.7		17.8		(278.9)		(32.9)
Education	1,103.6		20.8		1,078.2		22.7		25.4		2.4
Healthcare	481.5		9.1		367.9		7.7		113.6		30.9
Total Public	2,153.9		40.6		2,293.8		48.2		(139.9)		(6.1)

Other	611.7		11.6		465.6		9.8		146.1		31.4

Total Net sales	$	5,300.0	100.0	%	$	4,756.4	100.0	%	$	543.6	11.4	%

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

Total Net sales for the three months ended September 30, 2021 increased $544 million, or 11.4%, to $5,300 million, compared to the three months ended September 30, 2020. Excluding the impact of foreign currency fluctuations, constant currency Net sales growth was 10.7%. Net sales growth was primarily driven by Corporate, Small Business and Healthcare customers. For additional information, see Note 11 (Segment Information) to the accompanying Consolidated Financial Statements and "Non-GAAP Financial Measure Reconciliations" below regarding constant currency Net sales growth.

Corporate segment Net sales for the three months ended September 30, 2021 increased $407 million, or 24.5%, compared to the three months ended September 30, 2020. Expectations that a hybrid environment will become the future work model resulted in increased demand for notebooks/mobile devices, video, accessories and collaboration hardware. Additionally, Corporate customers resumed infrastructure projects, driving growth in servers.

Small Business segment Net sales for the three months ended September 30, 2021 increased $130 million, or 38.6%, compared to the three months ended September 30, 2020. Customers continued to focus on productivity and mobility as Net sales growth was driven by notebooks/mobile devices and increased demand for video.

Public segment Net sales for the three months ended September 30, 2021 decreased $140 million, or 6.1%, compared to the three months ended September 30, 2020. Net sales to Healthcare customers increased 30.9% primarily due to desktops, notebooks/mobile devices, servers, video and enterprise storage. Healthcare customers saw patients returning for elective procedures which increased confidence in budgets, enabling delayed projects to restart. Net sales to Education customers increased 2.4% primarily driven by video, desktops and services, partially offset by accessories. Schools continued to prioritize equity and access to learning and invested in the interactive classroom experience for students returning to in-person learning. Net sales to Government customers decreased 32.9% primarily driven by notebooks/mobile devices, video and desktops, and the completion of the Census project in 2020, which impacted other hardware, including accessories and smartphones, and services. Net sales to Federal customers was further impacted due to the extended timing of procurement processing and the recent on-site restrictions due to increased COVID-19 cases.

Net sales in Other, which is comprised of results from our UK and Canadian operations, for the three months ended September 30, 2021 increased $146 million, or 31.4%, compared to the three months ended September 30, 2020. UK and Canada Net sales increased as a result of the economic recovery from 2020 and increased customer confidence. Customers in the UK and Canada continued to focus on productivity, mobility and security as Net sales growth was driven primarily by notebooks/mobile devices, video and other hardware, including accessories. The impact of foreign currency exchange increased Other Net sales by 7.8%, primarily due to the favorable translation of the Canadian dollar and British pound to the US dollar.

Gross profit

Gross profit increased $89 million, or 10.8%, to $915 million for the three months ended September 30, 2021, compared to $826 million for the three months ended September 30, 2020. As a percentage of Net sales, Gross profit margin decreased 10 basis points to 17.3% for the three months ended September 30, 2021. The decrease in Gross profit margin was primarily driven by lower product margin, partially offset by an increase in the mix of net service contract revenue, primarily Software as a Service, and increased Net sales and margins on professional services.

Selling and administrative expenses

Selling and administrative expenses increased $21 million, or 4.1%, to $529 million for the three months ended September 30, 2021, compared to $508 million for the three months ended September 30, 2020. The increase was primarily driven by higher sales payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against financial goals, partially offset by lower intangible asset amortization in 2021. Total coworker count was 11,098, up 1,118 from 9,980 at September 30, 2020, primarily due to an increase in new hires during 2021 and customer-facing coworkers as a result of our recent acquisitions.

As a percentage of total Net sales, Selling and administrative expenses decreased 70 basis points to 10.0% during the three months ended September 30, 2021, compared to 10.7% in the three months ended September 30, 2020 primarily due to lower intangible asset amortization in 2021 and costs associated with a workforce reduction program in 2020.

Operating income

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


	Three Months Ended September 30,
	2021				2020
	Dollars in Millions		Operating Margin		Dollars in Millions		Operating Margin		Percent Change in Operating Income
Segments:(1)
Corporate	$	186.0	9.0	%	$	128.5	7.7	%	44.9	%
Small Business	41.4		8.9		24.3		7.2		70.6
Public	178.7		8.3		196.1		8.5		(8.9)
Other(2)	21.9		3.6		18.7		4.0		17.1
Headquarters(3)	(41.6)		nm*		(49.8)		nm*		16.5
Total Operating income	$	386.4	7.3	%	$	317.8	6.7	%	21.6	%

Not meaningful

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

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

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

Operating income was $386 million for the three months ended September 30, 2021, an increase of $68 million, or 21.6%, compared to $318 million for the three months ended September 30, 2020. Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher sales payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against financial goals. Total operating margin percentage increased 60 basis points to 7.3% for the three months ended September 30, 2021, compared to 6.7% for the three months ended September 30, 2020 primarily due to lower intangible asset amortization as a percentage of Net sales and costs associated with a workforce reduction program in 2020.

Corporate segment Operating income was $186 million for the three months ended September 30, 2021, an increase of $57 million, or 44.9%, compared to $129 million for the three months ended September 30, 2020. Corporate segment Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher

sales payroll expenses. Corporate segment operating margin percentage increased 130 basis points to 9.0% for the three months ended September 30, 2021, compared to 7.7% for the three months ended September 30, 2020 primarily due to lower intangible asset amortization and payroll expenses as a percentage of Net sales, partially offset by lower product margin.

Small Business segment Operating income was $41 million for the three months ended September 30, 2021, an increase of $17 million, or 70.6%, compared to $24 million for the three months ended September 30, 2020. Small Business segment Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher sales payroll expenses. Small Business segment operating margin percentage increased 170 basis points to 8.9% for the three months ended September 30, 2021, compared to 7.2% for the three months ended September 30, 2020, primarily due to lower intangible asset amortization and lower payroll expenses as a percentage of Net sales, partially offset by lower product margin.

Public segment Operating income was $179 million for the three months ended September 30, 2021, a decrease of $17 million, or 8.9%, compared to $196 million for the three months ended September 30, 2020. Public segment Operating income decreased primarily due to higher sales payroll and performance-based compensation expenses. Public segment operating margin percentage decreased 20 basis points to 8.3% for the three months ended September 30, 2021, compared to 8.5% for the three months ended September 30, 2020, primarily due to higher payroll expenses as a percentage of Net sales, partially offset by higher margin from mixing into net service contract revenue.

Other Operating income was $22 million for the three months ended September 30, 2021, an increase of $3 million, or 17.1%, compared to $19 million for the three months ended September 30, 2020. Other Operating income increased primarily due to higher Gross profit dollars, partially offset by higher payroll expenses. Other operating margin percentage decreased 40 basis points to 3.6% for the three months ended September 30, 2021, compared to 4.0% for the three months ended September 30, 2020, primarily due to lower product margin, partially offset by lower payroll expenses, intangible asset amortization, and other selling and administrative expenses as a percentage of Net sales.

Interest expense, net

Interest expense, net for the three months ended September 30, 2021 was $36 million, a decrease of $4 million compared to $40 million for the three months ended September 30, 2020. This decrease was primarily driven by the lower effective interest rate from the August 2020 senior notes refinancing and lower amortization on interest rate cap premiums.

Income tax expense

Income tax expense was $84 million and $57 million for the three months ended September 30, 2021 and 2020, respectively. The effective tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 23.9% and 22.7% for the three months ended September 30, 2021 and 2020, respectively. The effective tax rate for the three months ended September 30, 2021 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes, partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the three months ended September 30, 2020 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate that was effective in the prior year, partially offset by excess tax benefits on equity-based compensation.

The higher effective tax rate for the three months ended September 30, 2021 as compared to the same period in the prior year was primarily attributable to higher non-deductible expenses and global intangible low-taxed income taxes as well as a discrete benefit from a state tax refund claim recorded in the same period of the prior year. This was partially offset by higher excess tax benefits in the current quarter and a discrete deferred tax expense to reflect the increase in the UK corporate tax rate in the same period of the prior year.

Non-GAAP Financial Measure Reconciliations

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

Non-GAAP operating income excludes, among other things, charges related to the amortization of acquisition-related intangible assets, equity-based compensation and the associated payroll taxes, and acquisition and integration expenses. Non-GAAP operating income margin is defined as Non-GAAP operating income as a percentage of Net sales. Non-GAAP income before income taxes and Non-GAAP net income exclude, among other things, charges related to acquisition-related intangible asset amortization, equity-based compensation, acquisition and integration expenses, and the associated tax effects of each. Net sales

growth on a constant currency basis is defined as Net sales growth excluding the impact of foreign currency translation on Net sales compared to the prior period.

Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income and Net sales growth on a constant currency basis are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance or financial position that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with US GAAP. Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Non-GAAP operating income

Non-GAAP operating income was $435 million for the three months ended September 30, 2021, an increase of $49 million, or 12.6%, compared to $386 million for the three months ended September 30, 2020. As a percentage of Net sales, Non-GAAP operating income was 8.2% and 8.1% for the three months ended September 30, 2021 and 2020, respectively.


	Three Months Ended September 30,
(dollars in millions)	2021			2020
Operating income, as reported	$	386.4		$	317.8
Amortization of intangibles(1)	24.6			44.9
Equity-based compensation	16.9			11.5
Other adjustments	7.2			12.1
Non-GAAP operating income	$	435.1		$	386.3
Non-GAAP operating income margin	8.2		%	8.1		%

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

Non-GAAP net income

Non-GAAP net income was $298 million for the three months ended September 30, 2021, an increase of $33 million, or 12.3%, compared to $265 million for the three months ended September 30, 2020.


	Three Months Ended September 30,
	2021						2020
(dollars in millions)	Income before income taxes		Income tax expense(1)		Net income		Income before income taxes		Income tax expense(1)		Net income
US GAAP, as reported	$	350.4	$	(83.8)	$	266.6	$	250.1	$	(56.9)	$	193.2
Amortization of intangibles(2)	24.6		(6.2)		18.4		44.9		(8.6)		36.3
Equity-based compensation	16.9		(9.3)		7.6		11.5		(5.1)		6.4
Net loss on extinguishment of long-term debt	—		—		—		27.3		(6.8)		20.5
Other adjustments	7.2		(1.8)		5.4		12.1		(3.1)		9.0
Non-GAAP	$	399.1	$	(101.1)	$	298.0	$	345.9	$	(80.5)	$	265.4

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

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

Net sales growth on a constant currency basis

Net sales increased $544 million, or 11.4%, to $5,300 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased $514 million, or 10.7%.


	Three Months Ended September 30,
(dollars in millions)	2021		2020		% Change(1)
Net sales, as reported	$	5,300.0	$	4,756.4	11.4	%
Foreign currency translation(2)	—		29.5
Net sales, on a constant currency basis	$	5,300.0	$	4,785.9	10.7	%

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

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

Nine Months Overview

The results of certain business metrics are as follows:


	Nine Months Ended September 30,
(dollars in millions)	2021		2020
Net sales	$	15,283.9	$	13,511.3
Gross profit	2,592.9		2,329.2
Operating income	1,079.7		847.0
Net income	773.3		550.2
Non-GAAP operating income	1,220.9		1,028.4
Non-GAAP net income	833.5		690.7
Average daily sales(1)	80.0		70.4
Net debt(2)	3,821.1		2,681.4
Cash conversion cycle (in days)(3)	25		16

(1) There were 191 and 192 selling days for the nine months ended September 30, 2021 and 2020, respectively.

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

Results of Operations

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

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


	Nine Months Ended September 30,
	2021				2020
	Dollars in Millions		Percentage of Net Sales		Dollars in Millions		Percentage of Net Sales
Net sales	$	15,283.9	100.0	%	$	13,511.3	100.0	%
Cost of sales	12,691.0		83.0		11,182.1		82.8
Gross profit	2,592.9		17.0		2,329.2		17.2
Selling and administrative expenses	1,513.2		9.9		1,482.2		10.9
Operating income	1,079.7		7.1		847.0		6.3
Interest expense, net	(107.5)		(0.7)		(117.8)		(0.9)
Other income (expense), net	38.3		0.3		(21.9)		(0.1)
Income before income taxes	1,010.5		6.7		707.3		5.3
Income tax expense	(237.2)		(1.6)		(157.1)		(1.2)
Net income	$	773.3	5.1	%	$	550.2	4.1	%

Net sales

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


	Nine Months Ended September 30,
	2021				2020
(dollars in millions)	Net Sales		Percentage of Total Net Sales		Net Sales		Percentage of Total Net Sales		Dollar Change		Percent Change		Average Daily Sales Percent Change(1)
Corporate	$	5,856.2	38.3	%	$	5,128.5	38.0	%	$	727.7	14.2	%	14.8	%

Small Business	1,382.7		9.0		1,030.6		7.6		352.1		34.2		34.9

Public:
Government	1,598.3		10.5		2,135.9		15.8		(537.6)		(25.2)		(24.8)
Education	3,159.0		20.7		2,431.2		18.0		727.8		29.9		30.6
Healthcare	1,399.0		9.2		1,274.1		9.4		124.9		9.8		10.4
Total Public	6,156.3		40.4		5,841.2		43.2		315.1		5.4		5.9

Other	1,888.7		12.3		1,511.0		11.2		377.7		25.0		25.6

Total Net sales	$	15,283.9	100.0	%	$	13,511.3	100.0	%	$	1,772.6	13.1	%	13.7	%

(1)There were 191 and 192 selling days for the nine months ended September 30, 2021 and 2020, respectively.

Total Net sales for the nine months ended September 30, 2021 increased $1,773 million to $15,284 million, compared to the nine months ended September 30, 2020. There was one less selling day in the nine months ended September 30, 2021 compared to the same period of 2020, and Net sales on an average daily sales basis increased 13.7%. Excluding the impact of foreign currency fluctuations, constant currency Net sales growth on an average daily sales basis was 12.6%. Net sales growth was primarily driven by Education, Corporate and Small Business customers. For additional information, see Note 11 (Segment Information) to the accompanying Consolidated Financial Statements and "Non-GAAP Financial Measure Reconciliations" below regarding constant currency Net sales growth.

Corporate segment Net sales for the nine months ended September 30, 2021 increased $728 million, or 14.2%, compared to the nine months ended September 30, 2020. On an average daily sales basis, Corporate segment Net sales increased 14.8%. Expectations that a hybrid environment will become the future work model resulted in higher demand for notebooks/mobile

devices, video and accessories. Additionally, Corporate customers resumed infrastructure projects, driving growth in servers and software.

Small Business segment Net sales for the nine months ended September 30, 2021 increased $352 million, or 34.2%, compared to the nine months ended September 30, 2020. On an average daily sales basis, Small Business segment Net sales increased 34.9%. Customers continued to focus on productivity and mobility as Net sales growth was driven by notebooks/mobile devices, video and accessories.

Public segment Net sales for the nine months ended September 30, 2021 increased $315 million, or 5.4%, compared to the nine months ended September 30, 2020. On an average daily sales basis, Public segment Net sales increased 5.9%. Net sales to Education customers increased 30.6% on an average daily sales basis primarily driven by integrated solutions including notebooks/mobile devices, video, accessories and services. Schools continued to prioritize equity and access to learning and investing in the interactive classroom experience to enhance in-person learning. Net sales to Healthcare customers increased 10.4% on an average daily sales basis primarily due to desktops, notebooks/mobile devices, servers, video and services. Healthcare customers saw patients returning for elective procedures which increased confidence in budgets, enabling delayed projects to restart. Net sales to Government customers decreased 24.8% on an average daily sales basis primarily driven by notebooks/mobile devices and desktops, software reflecting the continued mix into Software as a Service, and the completion of the Census project in 2020, which impacted other hardware, including accessories and smartphones, and services. These decreases were partially offset by increased infrastructure spending in enterprise storage. Net sales to Federal customers was further impacted due to the extended timing of procurement processing and the recent on-site restrictions due to increased COVID-19 cases.

Net sales in Other, which is comprised of results from our UK and Canadian operations, for the nine months ended September 30, 2021 increased $378 million, or 25.0%, compared to the nine months ended September 30, 2020. On an average daily sales basis, Other increased 25.6%. In local currency, Canada Net sales increased as a result of the economic recovery from 2020 and increased customer confidence. Customers in the UK and Canada continued to focus on productivity and mobility as Net sales growth was driven by notebooks/mobile devices, video and other hardware, including accessories. The impact of foreign currency exchange further increased Other Net sales by 10.1%, primarily due to the favorable translation of the Canadian dollar and British pound to the US dollar.

Gross profit

Gross profit increased $264 million, or 11.3%, to $2,593 million for the nine months ended September 30, 2021, compared to $2,329 million for the nine months ended September 30, 2020. As a percentage of Net sales, Gross profit margin decreased 20 basis points to 17.0% for the nine months ended September 30, 2021. The decrease in Gross profit margin was primarily driven by lower product margin, including notebook mix and rate, and overlapping higher margin configuration services in the prior year, partially offset by an increase in the mix of net service contract revenue, primarily Software as a Service, and increased Net sales and margins on professional services.

Selling and administrative expenses

Selling and administrative expenses increased $31 million, or 2.1%, to $1,513 million for the nine months ended September 30, 2021, compared to $1,482 million for the nine months ended September 30, 2020. The increase was primarily due to higher payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against financial goals, partially offset by lower intangible asset amortization and lower bad debt expense. Total coworker count was 11,098, up 1,118 from 9,980 at September 30, 2020 primarily due to an increase in new hires during 2021 and customer-facing coworkers as a result of our recent acquisitions.

As a percentage of Net sales, Selling and administrative expenses decreased 100 basis points to 9.9% during the nine months ended September 30, 2021, compared to 10.9% for the nine months ended September 30, 2020, primarily due to lower intangible asset amortization, lower bad debt expense and lower payroll expenses as a percentage of Net sales.

Operating income

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


	Nine Months Ended September 30,
	2021				2020
	Dollars in Millions		Operating Margin		Dollars in Millions		Operating Margin		Percent Change in Operating Income
Segments:(1)
Corporate	$	522.6	8.9	%	$	378.9	7.4	%	37.9	%
Small Business	128.2		9.3		72.6		7.0		76.6
Public	468.7		7.6		468.4		8.0		0.1
Other(2)	73.3		3.9		49.9		3.3		46.5
Headquarters(3)	(113.1)		nm*		(122.8)		nm*		8.0
Total Operating income	$	1,079.7	7.1	%	$	847.0	6.3	%	27.5	%

Not meaningful

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

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

Operating income was $1,080 million for the nine months ended September 30, 2021, an increase of $233 million, or 27.5%, compared to $847 million for the nine months ended September 30, 2020. Operating income increased primarily due to higher Gross profit dollars, lower intangible asset amortization and lower bad debt expense, partially offset by higher payroll expenses consistent with higher Gross profit, higher coworker count and higher performance-based compensation consistent with higher attainment against financial goals. Total operating margin percentage increased 80 basis points to 7.1% for the nine months ended September 30, 2021, from 6.3% for the nine months ended September 30, 2020, primarily due to lower intangible asset amortization, lower bad debt expense and lower payroll as a percentage of Net sales, partially offset by lower Gross profit margin.

Corporate segment Operating income was $523 million for the nine months ended September 30, 2021, an increase of $144 million, or 37.9%, compared to $379 million for the nine months ended September 30, 2020. Corporate segment Operating income increased primarily due to higher Gross profit dollars, lower intangible asset amortization and lower bad debt expense, partially offset by higher payroll expenses. Corporate segment operating margin percentage increased 150 basis points to 8.9% for the nine months ended September 30, 2021, from 7.4% for the nine months ended September 30, 2020, primarily due to lower intangible asset amortization and lower bad debt expense as a percentage of Net sales.

Small Business segment Operating income was $128 million for the nine months ended September 30, 2021, an increase of $55 million, or 76.6%, compared to $73 million for the nine months ended September 30, 2020. Small Business segment Operating income increased primarily due to higher Gross profit dollars and lower intangible asset amortization, partially offset by higher payroll expenses. Small Business segment operating margin percentage increased 230 basis points to 9.3% for the nine months ended September 30, 2021, from 7.0% for the three months ended September 30, 2020, primarily due to lower intangible asset amortization, lower payroll expenses and lower bad debt expense as a percentage of Net sales.

Public segment Operating income was $469 million for the nine months ended September 30, 2021, which was an increase of $1 million, compared to $468 million for the nine months ended September 30, 2020. Public segment Operating income increased primarily due to higher Gross profit dollars and lower bad debt expense, partially offset by higher payroll expenses. Public segment operating margin percentage decreased 40 basis points to 7.6% for the nine months ended September 30, 2021, from 8.0% for the nine months ended September 30, 2020, primarily due to higher payroll expenses and overlapping higher margin configuration services in the prior year, partially offset by lower bad debt expense as a percentage of Net sales.

Other Operating income was $73 million for the nine months ended September 30, 2021, an increase of $23 million, or 46.5%, compared to $50 million for the nine months ended September 30, 2020. Other Operating income increased primarily due to higher Gross profit dollars and lower bad debt expense, partially offset by higher payroll expenses. Other operating margin percentage increased 60 basis points to 3.9% for the nine months ended September 30, 2021, from 3.3% for the nine months ended September 30, 2020, primarily due to lower bad debt expense, payroll expenses, integration costs and other selling and administrative expenses as a percentage of Net sales, partially offset by lower product margin.

Interest expense, net

Interest expense, net, for the nine months ended September 30, 2021 was $108 million, a decrease of $10 million compared to $118 million for the nine months ended September 30, 2020. This decrease was primarily driven by a lower interest rate on the Term Loan in 2021 compared to 2020, the lower interest rate from the August 2020 senior notes refinancing and lower amortization on interest rate cap premiums, partially offset by additional interest expense on the new issuance of April 2020 senior notes.

Other income (expense), net

During the nine months ended September 30, 2021, we sold all ownership interests of an equity method investment and recognized a $36 million gain. During the nine months ended September 30, 2020, we completed the August 2020 senior notes refinancing and recorded a $27 million Net loss on extinguishment of long-term debt.

Income tax expense

Income tax expense was $237 million and $157 million for the nine months ended September 30, 2021 and 2020, respectively. The effective tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 23.5% and 22.2% for the nine months ended September 30, 2021 and 2020, respectively. The effective tax rate for the nine months ended September 30, 2021 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate effective in 2023, partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the nine months ended September 30, 2020 differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes and a discrete deferred tax expense as a result of an increase in the UK corporate tax rate being largely offset by excess tax benefits on equity-based compensation.

The higher effective tax rate for the nine months ended September 30, 2021 as compared to the same period in the prior year was primarily attributable to a less favorable tax rate impact of excess tax benefits on equity-based compensation and a discrete benefit from a state tax refund claim recorded in the same period of the prior year.

Non-GAAP Financial Measure Reconciliations

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

Non-GAAP operating income

Non-GAAP operating income was $1,221 million for the nine months ended September 30, 2021, an increase of $193 million, or 18.7%, compared to $1,028 million for the nine months ended September 30, 2020. As a percentage of Net sales, Non-GAAP operating income was 8.0% and 7.6% for the nine months ended September 30, 2021 and 2020, respectively.


	Nine Months Ended September 30,
(dollars in millions)	2021			2020
Operating income, as reported	$	1,079.7		$	847.0
Amortization of intangibles(1)	70.6			133.9
Equity-based compensation	53.3			25.9
Other adjustments	17.3			21.6
Non-GAAP operating income	$	1,220.9		$	1,028.4
Non-GAAP operating income margin	8.0		%	7.6		%

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

Non-GAAP net income

Non-GAAP net income was $834 million for the nine months ended September 30, 2021, an increase of $143 million, or 20.7%, compared to $691 million for the nine months ended September 30, 2020.


	Nine Months Ended September 30,
	2021						2020
(dollars in millions)	Income before income taxes		Income tax expense(1)		Net income		Income before income taxes		Income tax expense(1)		Net income
US GAAP, as reported	$	1,010.5	$	(237.2)	$	773.3	$	707.3	$	(157.1)	$	550.2
Amortization of intangibles(2)	70.6		(13.4)		57.2		133.9		(30.8)		103.1
Equity-based compensation	53.3		(36.3)		17.0		25.9		(25.2)		0.7
Gain on sale of equity method investment	(36.0)		8.8		(27.2)		—		—		—
Net loss on extinguishment of long-term debt	0.4		(0.1)		0.3		27.3		(6.8)		20.5
Other adjustments	17.3		(4.4)		12.9		21.6		(5.4)		16.2
Non-GAAP	$	1,116.1	$	(282.6)	$	833.5	$	916.0	$	(225.3)	$	690.7

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

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

Net sales growth on a constant currency basis

Net sales increased $1,773 million, or 13.1%, to $15,284 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased $1,640 million, or 12.0%.


	Nine Months Ended September 30,
(dollars in millions)	2021		2020		% Change		Average Daily % Change(1)
Net sales, as reported	$	15,283.9	$	13,511.3	13.1	%	13.7	%
Foreign currency translation(2)	—		132.8
Net sales, on a constant currency basis	$	15,283.9	$	13,644.1	12.0	%	12.6	%

(1)There were 191 and 192 selling days for the nine months ended September 30, 2021 and 2020, respectively.

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

Seasonality

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

Liquidity and Capital Resources

Overview

We finance our operations and capital expenditures with internally generated cash from operations and borrowings under our revolving credit facility. As of September 30, 2021, we had $1.2 billion of availability for borrowings under our senior secured asset-based revolving credit facility. Our liquidity and borrowing plans are established to align with our financial and strategic planning processes and ensure we have the necessary funding to meet our operating commitments, which primarily include the purchase of inventory, payroll and general expenses. We also take into consideration our overall capital allocation strategy,

which includes dividend payments, net leverage ratio targets, acquisitions and share repurchases. We believe we have adequate sources of liquidity and funding available for at least the next year, including for the proposed acquisition of Sirius; however, there are a number of factors that may negatively impact our available sources of funds. The amount of cash generated from operations will be dependent upon factors such as the successful execution of our business plan, general economic conditions and working capital management, including accounts receivable.

Long-Term Debt and Financing Arrangements

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

As of September 30, 2021, we had total indebtedness of $4.1 billion, of which $1.6 billion was secured indebtedness. At September 30, 2021, we were in compliance with the covenants under our various credit agreements and indentures. In connection with entry into the definitive agreement to acquire Sirius, on October 15, 2021, we entered into a commitment letter for a $2.5 billion senior unsecured 364-day bridge loan facility, which will be used to finance the proposed acquisition, if necessary. The funding of the facility is subject to the satisfaction of customary conditions for transactions of this type.

For additional information regarding our debt and refinancing activities, see Note 7 (Debt) to the accompanying Consolidated Financial Statements. For additional information regarding the acquisition of Sirius, see Note 12 (Subsequent Event) to the accompanying Consolidated Financial Statements.

Inventory Financing Agreements

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

Share Repurchase Program

During the nine months ended September 30, 2021, we repurchased 7.0 million shares of our common stock for $1,185 million under the previously announced share repurchase program. For additional information on our share repurchase program, see "Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds."

Dividends

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


Dividend Amount	Declaration Date	Record Date	Payment Date
$0.40	February 10, 2021	February 25, 2021	March 10, 2021
$0.40	May 5, 2021	May 25, 2021	June 10, 2021
$0.40	August 4, 2021	August 25, 2021	September 10, 2021

On November 3, 2021, we announced that our Board of Directors declared a quarterly cash dividend of $0.50 per common share. The dividend will be paid on December 10, 2021 to all stockholders of record as of the close of business on November 24, 2021.

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

Cash Flows

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


	Nine Months Ended September 30,
(dollars in millions)	2021		2020
Net cash provided by:
Operating activities	$	636.7	$	738.4

Investing Activities
Capital expenditures(1)	(66.2)		(133.6)
Acquisitions of businesses, net of cash acquired	(339.7)		(38.5)
Proceeds from sale of equity method investment	36.0		—
Cash flows used in investing activities	(369.9)		(172.1)

Financing Activities
Net change in accounts payable - inventory financing	(183.7)		232.5
Financing payments for revenue generating assets	(46.1)		—
Other cash flows used in financing activities	(1,202.0)		299.2
Cash flows (used in) provided by financing activities	(1,431.8)		531.7

Effect of exchange rate changes on cash and cash equivalents	(0.1)		(2.5)
Net (decrease) increase in cash and cash equivalents	$	(1,165.1)	$	1,095.5

(1)Includes expenditures for revenue generating assets.

Operating Activities

Cash flows provided by operating activities are as follows:


	Nine Months Ended September 30,
(dollars in millions)	2021		2020		Change
Net income	$	773.3	$	550.2	$	223.1
Adjustments for the impact of non-cash items(1)	145.9		441.3		(295.4)
Net income adjusted for the impact of non-cash items	919.2		991.5		(72.3)
Changes in assets and liabilities:
Accounts receivable	(323.5)		(304.9)		(18.6)
Merchandise inventory(2)	(87.5)		(34.2)		(53.3)
Accounts payable-trade(3)	179.7		106.8		72.9
Other(4)	(51.2)		(20.8)		(30.4)
Cash flows provided by operating activities	$	636.7	$	738.4	$	(101.7)

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

(2)The change is primarily due to customer and strategic stocking positions related to continued supply constraints, partially offset by timing of receipts and shipments.

(3)The change is primarily due to increased sales and timing of payments, partially offset by the impact of inventory purchases at the end of 2020.

(4)The change is primarily due to lower current liabilities, partially offset by higher contract liabilities.

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


	September 30,
(in days)	2021	2020
Days of sales outstanding (DSO)(1)	61	61
Days of supply in inventory (DIO)(2)	17	13
Days of purchases outstanding (DPO)(3)	(53)	(58)
Cash conversion cycle	25	16

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

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

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

The cash conversion cycle increased to 25 days at September 30, 2021, compared to 16 days at September 30, 2020. DPO decreased 5 days and DIO increased 4 days compared to September 30, 2020. The increase in DIO was primarily due to customer and strategic stocking positions related to continued supply constraints, partially offset by timing of receipts and shipments. The decrease in DPO was primarily due to mixing out of vendors with extended payment terms.

Investing Activities

Net cash used in investing activities increased $198 million for the nine months ended September 30, 2021 compared to September 30, 2020. This increase was primarily due to the acquisitions of Amplified IT LLC and Focal Point Data Risk LLC, partially offset by lower capital expenditures and proceeds from the sale of an equity method investment. For additional information regarding the acquisition, see Note 3 (Acquisitions) to the accompanying Consolidated Financial Statements.

Financing Activities

Net cash used in financing activities increased $1,964 million for the nine months ended September 30, 2021 compared to September 30, 2020. This increase was primarily due to higher share repurchases, no new proceeds from the issuance of long-term debt during 2021, the mixing out of vendors with extended payment terms under our inventory financing arrangements and increased financing payments for revenue generating assets. For additional information regarding the inventory financing agreements and debt activities, see Note 5 (Inventory Financing Agreements) and Note 7 (Debt) to the accompanying Consolidated Financial Statements.

Issuers and Guarantors of Debt Securities

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

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

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

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

Balance Sheet Information


(dollars in millions)	September 30, 2021		December 31, 2020
Current assets	$	4,446.1	$	5,161.3
Goodwill	2,451.4		2,239.1
Other assets	712.9		572.1
Total Non-current assets	3,164.3		2,811.2
Current liabilities	3,239.9		3,265.0
Long-term debt	3,920.8		3,856.5
Other liabilities	222.6		209.8
Total Long-term liabilities	4,143.4		4,066.3

Statement of Operations Information


(dollars in millions)	Nine Months Ended September 30, 2021		Year Ended December 31, 2020
Net sales	$	13,395.2	$	16,380.8
Gross profit	2,295.0		2,851.8
Operating income	1,006.4		1,113.2
Net income	719.3		738.8

Commitments and Contingencies

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

Critical Accounting Policies and Estimates

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

Recent Accounting Pronouncements

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

Forward-Looking Statements

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

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

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

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

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