Cdw Corporation · NASDAQ:CDW
Cdw — Q1 2019 Earnings Presentation
24 slides from Cdw's earnings presentation, May 1, 2019
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call May 1, 2019 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ First Quarter 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 Q1 2019 Financial Performance
Strong Q1 2019 Financial Performance ▪ Net sales increased $352 million from Q1 2018 to $4.0 billion – Up 9.7% on a reported basis – Up 11.5% on an average daily sales basis – Up 12.4% on an average daily sales constant currency basis ▪ Net income up 20.4% to $153 million ▪ Non-GAAP operating income
Slide 5: Highlights Combined Power of Business Model and Strategy
Highlights Combined Power of Business Model and Strategy ▪ Balanced portfolio of customer end-markets ▪ Broad product and solutions portfolio ▪ Three-part strategy for growth 5
Slide 6: Balanced Portfolio Drove Topline Growth
Balanced Portfolio Drove Topline Growth (Unaudited) ($ in millions) Three Months Ended March 31, Average Daily % 2019 2018 % Change Change(1) Corporate $ 1,736.2 $ 1,565.8 10.9% 12.6% Small Business 355.6 327.6 8.5 10.3 Public Government 488.4 418.5 16.7 18.6 Education 400.4 397.2 0.8 2.4 Healthcare
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: Q1 '19 Financial Results
Q1 '19 Financial Results (Unaudited) ($ in millions, except per-share amounts) Three Months Ended March 31, 2019 2018 % Change Net sales $ 3,957.9 $ 3,606.4 9.7% Avg Daily Net Sales $ 62.8 $ 56.4 11.5% Gross profit $ 672.1 $ 603.9 11.3% % of Net Sales 17.0% 16.7% SG&A, including advertising $ 443.2
Slide 9: Non-GAAP SG&A and Non-GAAP Operating Income
Q1 '19 Non-GAAP SG&A and Non-GAAP Operating Income (Unaudited) ($ in millions) Three Months Ended March 31, 2019 2018 % Change Reported SG&A, including advertising $ 443.2 $ 399.8 10.9% Adjustments: Equity-based compensation (12.7) (8.1) Scalar acquisition and integration expenses (0.4) — Amortizati
Slide 10: Interest Expense and Income Taxes
Interest Expense and Income Taxes (Unaudited) ($ in millions, except per-share amounts) Three Months Ended March 31, 2019 2018 % Change Interest expense, net $ 38.3 $ 37.7 1.8% Other income (expense), net $ 1.0 $ (0.7) nm* Income tax expense $ 38.7 $ 38.7 —% Net income $ 152.9 $ 127.0 20.4% * Not me
Slide 11: GAAP Effective Tax Rate
Q1 '19 GAAP Effective Tax Rate Three Months Ended March 31, 2019 2018 Federal statutory rate 21.0% 21.0% State taxes(1) 4.2 4.0 Excess benefits from equity-based compensation(2) (4.3) (2.5) Scalar acquisition tax benefit(3) (1.6) — All other items impacting tax rate 0.9 0.9 GAAP effective tax rate 2
Slide 12: Non-GAAP Net Income
Q1 '19 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended March 31, 2019 Three Months Ended March 31, 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: Earnings Per Share
Q1 '19 Earnings Per Share (Unaudited) ($ in millions, except per-share amounts) Three Months Ended March 31, 2019 2018 % Change Diluted EPS $ 1.02 $ 0.82 25.0% Non-GAAP net income* $ 185.4 $ 162.8 13.9% Non-GAAP diluted EPS* $ 1.24 $ 1.05 18.2% * Non-GAAP net income and Non-GAAP diluted EPS are non-
Slide 14: Debt and Revolver Availability
Debt and Revolver Availability ($ in millions) March 31, 2019 December 31, 2018 March 31, 2018 (unaudited) (unaudited) Cash and cash equivalents $ 285.0 $ 205.8 $ 221.0 Total debt $ 3,283.4 $ 3,208.6 $ 3,235.4 Net debt (total debt net of cash and cash equivalents) $ 2,998.4 $ 3,002.8 $ 3,014.4 Revol
Slide 15: Cash Conversion Cycle
Cash Conversion Cycle March 31, 2019 December 31, 2018 March 31, 2018 (unaudited) (unaudited) Days of sales outstanding (DSO)(1) 57 56 54 Days of supply in inventory (DIO)(1) 14 13 12 Days purchases outstanding (DPO)(1) (54) (50) (49) Cash Conversion Cycle(1) 17 19 17 (1) Based on a rolling three-mo
Slide 16: 2019 Capital Allocation Priorities
2019 Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of FCF 40% increase November 2018 to Increase Dividends Annually in 5 years(1) $1.18/share annually Maintain Net Leverage ~2.5 to 3.0 times Net Currently at 2.3x(3) Ratio(2) Leverage Ratio Supplement Organic Expand CD
Slide 17: 2019 Outlook
2019 Outlook(1) 2019(2) U.S. IT growth plus 300 to 375 bps Net Sales Growth plus ~100 bps from Scalar acquisition in constant currency Non-GAAP Operating Mid 7%'s Income Margin Non-GAAP Earnings per Just over 10% growth diluted share in constant currency (1) Annual targets are provided on a non-GAAP
Slide 18: Modeling Thoughts for 2019
Modeling Thoughts for 2019 ▪ Full-year constant currency Net sales growth of 300 to 375 bps above U.S. IT growth, plus ~100 bps from Scalar acquisition – 1H/2H sales ~50 bps heavier in 1H than historical average split of 48/52%; Q2 seasonality below historical – Currency headwinds expected at an ann
Slide 19: Modeling Thoughts for 2019 Cash Flows
Modeling Thoughts for 2019 Cash Flows ▪ Cash flow: – Annual Free Cash Flow within 'rule of thumb' of 3 ¾% to 4 ¼% of Net sales – Capital expenditures, excluding Census, slightly above ~0.5% of Net sales on an annual basis – Cash tax rate slightly below 25.5% – Achieve Cash Conversion Cycle within ta
Slide 20: Questions and Answers
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Slide 21: Non-GAAP Operating Income Reconciliation
Q1 '19 Non-GAAP Operating Income Reconciliation (Unaudited) ($ in millions) Three Months Ended March 31, % of Net % of Net 2019 sales 2018 sales Operating income $ 228.9 5.8% $ 204.1 5.7% Adjustments: Amortization of intangibles(1) 44.4 46.7 Equity-based compensation 12.7 8.1 Scalar acquisition and
Slide 22: Free Cash Flow
Q1 '19 Free Cash Flow (Unaudited) ($ in millions) Three Months Ended March 31, 2019 2018 % Change Net cash provided by operating activities $ 252.4 $ 222.2 13.6% Capital expenditures (19.4) (15.9) Net change in accounts payable - inventory financing 70.2 24.9 Free Cash Flow $ 303.2 $ 231.2 31.1% 22
Slide 23: Net Sales Growth on a Constant Currency Basis
Q1 '19 Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended March 31, Average Daily % 2019 2018 % Change Change(1) Net sales, as reported $ 3,957.9 $ 3,606.4 9.7 % 11.5 % Foreign currency translation(2) — (27.9) Net sales, on a constant currency basis* $ 3,957
Slide 24: Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis
Q1 '19 Non-GAAP Net Income Per Diluted Share, on a Constant Currency Basis (Unaudited) ($ and shares in millions, except per-share amounts) Three Months Ended March 31, 2019 2018 % Change Net income $ 152.9 $ 127.0 Amortization of intangibles 44.4 46.7 Equity-based compensation 12.7 8.1 Scalar acqui