Cdw Corporation · NASDAQ:CDW
Cdw — Q2 2019 Earnings Presentation
28 slides from Cdw's earnings presentation, Jul 31, 2019
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call July 31, 2019 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Second Quarter and YTD 2019 Results ▪ Performance Drivers ▪ Outlook ▪ Q&A 2
Slide 3: Disclaimers
Disclaimers Forward-Looking Statements This presentation contains forward-looking statements, which are any predications, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual resul
Slide 4: Strong Q2 2019 and YTD Financial Performance
Strong Q2 2019 and YTD Financial Performance Second Quarter: ▪ Net sales increased $444 million from Q2 2018 to $4.6 billion – Up 10.6% on a reported and average daily sales ("ADS") basis – Up 11.2% on a constant currency basis ▪ Operating income up 13.1% to $300 million ▪ Net income up 13.6% to $19
Slide 5: Highlights Combined Power of Business Model and Strategy
Highlights Combined Power of Business Model and Strategy ▪ Balanced portfolio of customer end-markets ▪ Broad product and solutions portfolio ▪ Three-part strategy for growth 5
Slide 6: Balanced Portfolio Drove Topline Growth
Balanced Portfolio Drove Topline Growth (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, Average Daily 2019 2018 % Change(1) 2019 2018 % Change % Change(2) Corporate $ 1,883.9 $ 1,733.8 8.7% $ 3,620.1 $ 3,299.6 9.7% 10.6% Small Business 377.4 329.5 14.5 733.0 657.1 1
Slide 7: Our Three-Part Growth Strategy
Our Three-Part Growth Strategy Capture share and acquire new customers Enhance capabilities in high-growth solutions areas Expand services capabilities 7
Slide 8: Q2 2019 Financial Results
Q2 2019 Financial Results (Unaudited) ($ in millions, except per-share amounts) Three Months Ended June 30, 2019 2018 % Change Net sales $ 4,629.9 $ 4,186.1 10.6% Average daily net sales $ 72.3 $ 65.4 10.6% Gross profit $ 773.8 $ 695.6 11.2% % of Net sales 16.7% 16.6% SG&A, including advertising $ 4
Slide 9: Q2 2019 Non-GAAP SG&A and Non-GAAP Operating Income
Q2 2019 Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Three Months Ended June 30, 2019 2018 % Change Reported SG&A, including advertising $ 473.5 $ 430.1 10.1% Amortization of acquisition-related intangible assets (44.7) (46.6) Equity-based compensation (12.2) (11.0) Scalar
Slide 10: Interest Expense and Income Taxes
Interest Expense and Income Taxes (Unaudited) ($ in millions, except per-share amounts) Three Months Ended June 30, 2019 2018 % Change Interest expense, net $ 40.5 $ 37.2 8.7 % Other income, net $ 1.4 $ 1.5 (11.2)% Income tax expense $ 64.6 $ 56.8 13.8 % 10
Slide 11: Q2 2019 GAAP Effective Tax Rate
Q2 2019 GAAP Effective Tax Rate (Unaudited) Three Months Ended June 30, 2019 2018 Federal statutory rate 21.0% 21.0% State taxes(1) 4.0 3.9 Excess benefits from equity-based compensation(2) (1.2) (1.5) All other items impacting tax rate 0.9 1.3 GAAP effective tax rate 24.7% 24.7% (1) Net of Federal
Slide 12: Q2 2019 Non-GAAP Net Income
Q2 2019 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended June 30, 2019 Three Months Ended June 30, 2018 Income Income Income Income before Net Effective before Net Effective tax tax income income tax rate income income tax rate expense(1) expense(1) taxes taxes GAAP, as reported $
Slide 13: Q2 2019 Earnings Per Share
Q2 2019 Earnings Per Share (Unaudited) ($ in millions, except per-share amounts) Three Months Ended June 30, 2019 2018 % Change Diluted EPS $ 1.33 $ 1.12 17.9% Non-GAAP net income* $ 237.7 $ 213.2 11.5% Non-GAAP diluted EPS* $ 1.60 $ 1.38 15.7% * Non-GAAP net income and Non-GAAP diluted EPS are non-
Slide 14: YTD Financial Results
YTD Financial Results (Unaudited) ($ in millions, except per-share amounts) Six Months Ended June 30, 2019 2018 % Change Net sales $ 8,587.8 $ 7,792.5 10.2% Average daily net sales $ 67.6 $ 60.9 11.1% Gross profit $ 1,445.9 $ 1,299.5 11.3% % of Net sales 16.8% 16.7% SG&A, including advertising $ 916
Slide 15: YTD Non-GAAP SG&A and Non-GAAP Operating Income
YTD Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Six Months Ended June 30, 2019 2018 % Change Reported SG&A, including advertising $ 916.7 $ 829.9 10.5% Amortization of acquisition-related intangible assets (89.1) (93.3) Equity-based compensation (24.9) (19.1) Scalar acqui
Slide 16: YTD Non-GAAP Net Income
YTD Non-GAAP Net Income (Unaudited) ($ in millions) Six Months Ended June 30, 2019 Six Months Ended June 30, 2018 Income Income Income Income before Net Effective before Net Effective tax tax income income tax rate income income tax rate expense(1) expense(1) taxes taxes GAAP, as reported $ 452.8 $
Slide 17: YTD Earnings Per Share
YTD Earnings Per Share (Unaudited) ($ in millions, except per-share amounts) Six Months Ended June 30, 2019 2018 % Change Diluted EPS $ 2.35 $ 1.94 20.9% Non-GAAP net income* $ 423.1 $ 376.0 12.5% Non-GAAP diluted EPS* $ 2.84 $ 2.44 16.8% * Non-GAAP net income and Non-GAAP diluted EPS are non-GAAP f
Slide 18: Debt and Revolver Availability
Debt and Revolver Availability ($ in millions) June 30, 2019 December 31, 2018 June 30, 2018 (unaudited) (unaudited) Cash and cash equivalents $ 194.5 $ 205.8 $ 100.7 Total debt $ 3,278.8 $ 3,208.6 $ 3,240.3 Net debt (total debt net of cash and cash equivalents) $ 3,084.4 $ 3,002.8 $ 3,139.6 Revolve
Slide 19: Cash Conversion Cycle
Cash Conversion Cycle (Based on a rolling three-month average) June 30, 2019 December 31, 2018 June 30, 2018 (unaudited) (unaudited) Days of sales outstanding 52 56 50 Days of supply in inventory 14 13 13 Days purchases outstanding (50) (50) (46) Cash conversion cycle 16 19 17 19
Slide 20: 2019 Capital Allocation Priorities
2019 Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of Free 40% increase in November 2018 to Increase Dividends Annually Cash Flow ("FCF") in 5 $1.18/share annually years(1) Maintain Net Leverage ~2.5 to 3.0 times Net Currently at 2.3x(3) Ratio(2) Leverage Ratio Supple
Slide 21: 2019 Outlook
2019 Outlook(1) Annual 2019(2) U.S. IT growth + 400 to 475 bps Net Sales Growth + ~100 bps from Scalar(3) acquisition in constant currency Non-GAAP Operating Mid 7%s Income Margin(4) Non-GAAP Earnings per Low teens growth Diluted Share Growth in constant currency (1) Annual targets are provided on a
Slide 22: Modeling Thoughts for 2019
Modeling Thoughts for 2019 ▪ Full-year constant currency Net sales growth of 400 to 475 bps above U.S. IT growth, plus ~100 bps from Scalar acquisition – 2H sales ~100 bps lower than historical average of 52%; Q3 seasonality a couple hundred bps below 3-year historical average of 3% – Currency headw
Slide 23: Modeling Thoughts for 2019 Cash Flows
Modeling Thoughts for 2019 Cash Flows ▪ Annual Free Cash Flow within 'rule of thumb' of 3.75% to 4.25% of Net sales ▪ Capital expenditures, excluding Census, slightly above ~0.5% of Net sales on an annual basis ▪ Cash tax rate slightly below 25.5% ▪ Achieve Cash Conversion Cycle within annual target
Slide 24: Questions and Answers
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Slide 25: Q2 2019 and YTD Non-GAAP Operating Income Reconciliation
Q2 2019 and YTD Non-GAAP Operating Income Reconciliation (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, % of Net % of Net % of Net % of Net 2019 sales 2018 sales 2019 sales 2018 sales Operating income $ 300.3 6.5% $ 265.5 6.3% $ 529.2 6.2% $ 469.6 6.0% Amortization
Slide 26: Q2 2019 and YTD Free Cash Flow
Q2 2019 and YTD Free Cash Flow (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 % Change 2019 2018 % Change Net cash provided by operating activities $ 162.1 $ 110.1 47.2% $ 414.5 $ 332.3 24.7% Capital expenditures (24.5) (17.7) (43.9) (33.6) Net change in
Slide 27: Q2 2019 and YTD Net Sales Growth on a Constant Currency Basis
Q2 2019 and YTD Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, Average Daily % 2019 2018 % Change(1) 2019 2018 % Change Change(2) Net sales, as reported $ 4,629.9 $ 4,186.1 10.6% $ 8,587.8 $ 7,792.5 10.2% 11.1% (3) Fore
Slide 28: Q2 2019 and YTD Non-GAAP Net Income Per Diluted Share, Constant Currency
Q2 2019 and YTD Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis (Unaudited) ($ and shares in millions, except per-share amounts) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 % Change 2019 2018 % Change Net income $ 196.6 $ 173.0 13.6 % $ 349.5 $ 300.0 16.5% Amo