Cdw Corporation · NASDAQ:CDW
Cdw — Q2 2017 Earnings Presentation
25 slides from Cdw's earnings presentation, Aug 3, 2017
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call August 3, 2017 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Second Quarter and YTD 2017 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: Highlights Power of Business Model
Highlights Power of Business Model ▪ Balanced portfolio of customer end-markets ▪ Broad product and solutions suite ▪ Variable cost structure 4
Slide 5: Strong Financial Performance
Strong Financial Performance Second Quarter: ▪ Net Sales up 9% to $4.0 billion - Up 9.8% in constant currency ▪ Adjusted EBITDA up 4.7% to $315 million ▪ Non-GAAP net income per diluted share up 10.0% to $1.03 5
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, Average Average Daily % Daily % 2017 2016 % Change Change(1) 2017 2016 % Change Change(1) Corporate(2) $ 1,630.7 $ 1,490.8 9.4% 9.4% $ 3,107.0 $2,905.7 6.9% 6.9% Small Business(2) 321.5
Slide 7: Second Quarter Financial Results
Second Quarter Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended June 30, 2017 2016 % Change Net sales $ 3,994.4 $ 3,664.6 9.0% Avg Daily Net Sales $ 62.4 $ 57.3 9.0% Gross profit $ 641.1 $ 610.5 5.0% % of Net Sales 16.1% 16.7% SG&A, including advertising $ 4
Slide 8: Second Quarter Adjusted SG&A and Adjusted EBITDA
Second Quarter Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended June 30, 2017 2016 % Change Reported SG&A, including advertising $ 410.0 $ 387.0 5.9% Adjustments: Non-cash equity-based compensation (11.5) (9.7) Integration expenses (2.0) (2.2) Other expenses (1) (4.5)
Slide 9: Interest, Taxes and Non-GAAP Net Income
Interest, Taxes and Non-GAAP Net Income (Unaudited) ($ in millions, except per share amounts) Three Months Ended June 30, 2017 2016 % Change Interest expense, net $ (35.9) $ (36.9) (2.7)% Other income, net $ 0.3 $ 0.9 (60.2)% Income tax expense $ (54.5) $ (70.0) (22.2)% Net income $ 141.0 $ 117.5 20
Slide 10: Second Quarter Non-GAAP Net Income
Second Quarter Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended June 30, 2017 2016 Net income $ 141.0 $ 117.5 Amortization of intangibles (1) 46.3 47.1 Equity-based compensation 11.5 9.7 Integration expenses(2) 2.0 2.2 Other adjustments 3.7 0.3 Aggregate adjustment for income taxes
Slide 11: YTD Financial Results
YTD Financial Results (Unaudited) ($ in millions, except per share amounts) Six Months Ended June 30, 2017 2016 % Change Net sales $ 7,319.1 $ 6,781.3 7.9% Avg Daily Net Sales $ 57.2 $ 53.0 7.9% Gross profit $ 1,193.6 $ 1,135.0 5.2% % of Net Sales 16.3% 16.7% SG&A, including advertising $ 792.7 $ 75
Slide 12: YTD Adjusted SG&A and Adjusted EBITDA
YTD Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Six Months Ended June 30, 2017 2016 % Change Reported SG&A, including advertising $ 792.7 $ 750.4 5.6% Adjustments: Non-cash equity-based compensation (23.6) (18.1) Integration expenses (2.5) (3.9) Other expenses (1) (6.3) (2.8) Depre
Slide 13: YTD Non-GAAP Net Income
YTD Non-GAAP Net Income (Unaudited) ($ in millions) Six Months Ended June 30, 2017 2016 Net income $ 198.7 $ 195.3 Amortization of intangibles (1) 92.4 94.6 Equity-based compensation 23.6 18.1 Net Loss on extinguishments of long-term debt 57.4 — Integration expenses(2) 2.5 3.8 Other adjustments 4.9
Slide 14: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) June 30, December 31, June 30, 2017 2016 2016 Cash and cash equivalents $ 79.0 $ 263.7 $ 129.4 Total debt $ 3,296.3 $ 3,234.4 $ 3,240.5 Senior secured debt $ 1,548.5 $ 1,552.1 $ 1,564.9 Net debt (total debt net of cash and cash equivalents)
Slide 15: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) June 30, December 31, June 30, 2017 2016 2016 Days of sales outstanding (DSO) * 48 51 44 Days of supply in inventory (DIO) * 12 12 13 Days purchases outstanding (DPO) * (44) (44) (40) Cash Conversion Cycle * 16 19 17 * Based on a rolling three-month average. 15
Slide 16: Capital Allocation Priorities
Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of Increase Dividends Annually 49% increase to $0.64/share FCF in 5 years(1) Maintain Net ~2.5 to 3.0 times Currently at 2.8x (3) Leverage Ratio (2) Net Leverage Ratio Supplement Organic Tuck-in, accretive deals CDW UK acq
Slide 17: Capital Allocation Priorities Support Annual Medium Term Targets
Capital Allocation Priorities Support Annual Medium Term Targets 2016-2018 Net Sales Growth U.S. IT growth +200-300bps in Constant Currency Adjusted EBITDA High-7% to 8% Margin Leverage Maintain net debt/adj. EBITDA ratio at ~2.5-3.0x Non-GAAP EPS Low double-digits in Constant Currency Growth 17
Slide 18: Thoughts on Modeling 2017
Thoughts on Modeling 2017 Current expectations for PL: ▪ Full-year constant currency growth 350-400 bps above US IT market growth, exceeding our annual medium term target of 200 to 300 bps ▪ 2H seasonality slightly lighter than our normal ~ 48/52% split 1H/2H ▪ One fewer selling day vs. 2016 in Q3 ‘
Slide 19: Thoughts on Modeling 2017 cont'd
Thoughts on Modeling 2017 cont'd Current expectations for working capital and cash flow: • Annual Free Cash Flow within our enhanced "rule of thumb" of 3% to 3 1/2% of net sales • Capital expenditures ~0.5% of net sales on an annual basis • Achieve Cash Conversion Cycle within new, lower target rang
Slide 20: Questions and Answers
al Questions and Answers DU PEOPLE WHO GET IT 4 |
Slide 21: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, % of Net % of Net % of Net % of Net 2017 Sales 2016 Sales 2017 sales 2016 sales Net income $ 141.0 $ 117.5 $ 198.7 $ 195.3 Depreciation and amortization(1) 65.4 63.7 129.5 1
Slide 22: Second Quarter Free Cash Flow
Second Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended June 30, 2017 2016 % Change Net cash provided by operating activities $ 6.3 $ (114.5) Capital expenditures (17.2) (14.7) Net change in accounts payable - inventory financing 50.6 137.8 Free Cash Flow $ 39.7 $ 8.6 361.6% 22
Slide 23: YTD Free Cash Flow
YTD Free Cash Flow (Unaudited) ($ in millions) Six Months Ended June 30, 2017 2016 % Change Net cash provided by operating activities $ 376.2 $ 313.1 Capital expenditures (36.8) (25.7) Net change in accounts payable - inventory financing (85.1) 71.3 Free Cash Flow $ 254.3 $ 358.7 (29.1)% 23
Slide 24: Consolidated Net Sales Growth on a Constant Currency Basis
Consolidated Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, Average Average Daily % Daily % % Change % Change 2017 2016 Change (1) 2017 2016 Change (1) Consolidated Net sales, as reported $3,994.4 $ 3,664.6 9.0% 9.0% $
Slide 25: Non-GAAP Net Income Per Diluted Share, Constant Currency Basis
Non-GAAP Net Income Per diluted share, on a Constant Currency Basis (Unaudited) ($ and shares in millions, except per share amounts) Three Months Six Months Ended June 30, Ended June 30, Average Average Daily % Daily % % Change % Change 2017 2016 Change (1) 2017 2016 Change (1) Net income $ 141.0 $