Cdw Corporation · NASDAQ:CDW
Cdw — Q3 2015 Earnings Presentation
25 slides from Cdw's earnings presentation, Nov 4, 2015
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call November 4, 2015 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ 3rd Quarter Results ▪ Key Performance Drivers and Strategic Progress ▪ Financial Results ▪ Outlook ▪ Q&A 2
Slide 3: Disclaimers
Disclaimers 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 results could materially differ
Slide 4: Record 3rd Quarter Financial Performance
Record 3rd Quarter Financial Performance ▪ Net sales up 7.2% to $3.5 billion; Organic net sales on a constant currency basis up 3.6% ▪ Adjusted EBITDA up 16.3% to $282.1 million ▪ Non-GAAP Net Income Per Diluted Share up 30.8% to $0.84 4
Slide 5: Highlights Combined Power
Highlights Combined Power ▪ Balanced portfolio of channels ▪ Broad product and solution suite ▪ Focus on cost control while continuing to execute on three-part strategy 5
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, Corporate: 2015 2014 % Change * 2015 2014 % Change ** Medium / Large $ 1,458.9 $ 1,374.8 6.1% $ 4,264.8 $ 4,045.1 5.4% Small Business 265.6 247.9 7.1 795.0 739.4 7.5 Total Co
Slide 7: Our Three-Part Growth Strategy
Our Three-Part Growth Strategy Increase "share of wallet" from existing customers while adding new customers Enhance our ability to deliver high-growth, integrated solutions Expand services capabilities 7
Slide 8: Third Quarter Financial Results
Third Quarter Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2015 2014 % Change Net Sales $ 3,501.1 $ 3,266.1 7.2% Avg Daily Net Sales $ 54.7 $ 51.0 7.2% Gross Profit $ 567.2 $ 507.3 11.8% % of Net Sales 16.2% 15.5% SG&A/Advertising $ 362.6 $
Slide 9: Third Quarter Adjusted SG&A and Adjusted EBITDA
Third Quarter Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended September 30, 2015 2014 % Change Reported SG&A, including advertising $ 362.6 $ 322.6 12.4% Adjustments: Non-cash equity-based compensation (7.8) (3.9) Acquisition and integration costs (7.0) — Other expen
Slide 10: Interest, Taxes and Non-GAAP Net Income
Interest, Taxes and Non-GAAP Net Income (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2015 2014 % Change Interest expense, net $ (38.5) $ (50.1) (23.2)% Other income (expense), net $ (18.0) $ 0.7 nm* Income tax expense $ (95.3) $ (33.9) 180.7% Net income $ 15
Slide 11: Third Quarter Non-GAAP Net Income
Third Quarter Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended September 30, 2015 2014 Net income $ 150.9 $ 55.6 Amortization of intangibles (1) 45.6 40.3 Non-cash equity-based compensation 7.8 3.9 Non-cash equity-based compensation related to equity investment(2) 20.0 — Net loss o
Slide 12: Financial Results YTD
Financial Results YTD (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2015 2014 % Change Net Sales $ 9,570.3 $ 9,024.4 6.0% Avg Daily Net Sales $ 50.1 $ 47.2 6.0% Gross Profit $ 1,558.2 $ 1,429.4 9.0% % of Net Sales 16.3% 15.8% SG&A/Advertising $ 996.1 $ 920.7 8
Slide 13: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) 9/30/2015 12/31/2014 9/30/2014 Cash and Cash Equivalents $ 97.5 $ 344.5 $ 357.8 Total Debt(1) $ 3,267.8 $ 3,166.0 $ 3,130.0 Senior Secured Debt $ 1,595.8 $ 1,513.5 $ 1,517.4 Net Debt (Total Debt net of Cash and Cash Equivalents)(1) $ 3,170.3
Slide 14: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) 9/30/2015 12/31/2014 9/30/2014 Days of sales outstanding (DSO) * 45 42 42 Days of supply in inventory (DIO) * 13 13 14 Days purchases outstanding (DPO) * (40) (34) (36) Cash Conversion Cycle * 18 21 20 * Based on a rolling three-month average. 14
Slide 15: Thoughts on Modeling 2015
Thoughts on Modeling 2015 For P&L currently look for: Organic, constant currency net sales growth of 200 to 300 bps above US IT market growth of 3% Past three year average organic 1H/2H revenue split of 48/52% Kelway on pace to deliver a total of 500-600 bps incremental growth in 2H; with Q4 c
Slide 16: Thoughts on Modeling 2015
Thoughts on Modeling 2015 For Cash Flow currently look for: CapEX ~ 0.7% of net sales, above "rule of thumb" 0.5% primarily due to investment in office consolidation Adjusting for pull-forward of ~$100MM FCF from Q1 and including incremental Kelway, 2015 FCF will exceed high-end of 2.5-3.0% of n
Slide 17: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Increase Dividends Annually Target 30% payout of 59% increase to $0.43/share FCF in 5 years Maintain Net Leverage ~2.5 to 3.0 times Currently at 3.1x (2) Ratio (1) Net Leverage Ratio Supplement Organic Growth with M&A Kelway acquisitio
Slide 18: Capital Allocation Priorities Support Medium Term Targets
Capital Allocation Priorities Support Medium Term Targets 2016-2018 Net Sales U.S. IT growth Growth* +200-300bps** Adjusted EBITDA Mid-7% Margin Leverage Maintain net debt/adj. EBITDA ratio at ~2.5-3.0x Non-GAAP EPS Growth Low double-digits*** * Organic, constant currency ** Exceed in 2016 due to De
Slide 19: Questions and Answers
[Mak Questions and Answers DW, PEOPLE WHO GET IT el iL JBL
Slide 20: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, % of Net % of Net % of Net % of Net 2015 sales 2014 sales 2015 sales 2014 sales Net income $ 150.9 $ 55.6 $ 313.8 $ 193.1 Depreciation and amortization(1) 59.9 51
Slide 21: Adjusted SG&A YTD
Adjusted SG&A YTD (Unaudited) ($ in millions) Nine Months Ended September 30, 2015 2014 % Change Reported SG&A, including advertising: $ 996.1 $ 920.7 8.2% Adjustments: Non-cash equity-based compensation (20.0) (11.5) Acquisition and integration costs (8.7) — Other expenses (1) (4.4) (6.9) Depreciat
Slide 22: Non-GAAP Net Income YTD
Non-GAAP Net Income YTD (Unaudited) ($ in millions) Nine Months Ended September 30, 2015 2014 Net income $ 313.8 $ 193.1 Amortization of intangibles (1) 126.1 120.8 Non-cash equity-based compensation 20.0 11.5 Non-cash equity-based compensation from equity investment(2) 20.0 — Net loss on extinguish
Slide 23: Third Quarter Free Cash Flow
Third Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended of September 30, 2015 2014 % Change Net cash provided by operating activities $ 195.8 $ 174.6 Capital expenditures (21.0) (13.4) Net change in accounts payable - inventory financing (18.6) (11.9) Free Cash Flow $ 156.2 $ 149
Slide 24: Free Cash Flow YTD
Free Cash Flow YTD (Unaudited) ($ in millions) Nine Months Ended September 30, 2015 2014 % Change Net cash provided by operating activities $ 294.9 $ 350.5 Capital expenditures (43.9) (34.4) Net change in accounts payable - inventory financing 22.6 43.1 Free Cash Flow $ 273.6 $ 359.2 (23.8)% 24
Slide 25: Organic Net Sales Growth and Organic Net Sales Growth on a Constant Currency Basis
Organic Net Sales Growth and Organic Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 % Change 2015 2014 % Change Consolidated net sales, as reported $ 3,501.1 $ 3,266.1 7.2% $ 9,570.3 $ 9,024.4 6.0%