Cdw Corporation · NASDAQ:CDW
Cdw — Q3 2016 Earnings Presentation
26 slides from Cdw's earnings presentation, Nov 2, 2016
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call November 2, 2016 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ 3rd Quarter and YTD 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 5.9% to $3.7 billion - Consolidated net sales, up 6.5% in constant currency ▪ Adjusted EBITDA up 10.0% to $310 million ▪ Non-GAAP net income per diluted share up 16.1% to $0.97 4
Slide 5: Highlights Combined Power
Highlights Combined Power ▪ Balanced portfolio of customer end-markets ▪ Breadth of our product and solution portfolio ▪ On-going success executing our three-part growth strategy 5
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, Average Daily Average Daily Corporate: 2016 2015 % Change % Change(1) 2016 2015 % Change % Change(1) Medium / Large $ 1,463.5 $ 1,490.6 (1.8)% (1.8)% $ 4,363.1 $ 4,353.7 0.2%
Slide 7: Our Three-Part Growth Strategy
Our Three-Part Growth Strategy 1 Increase "share of wallet" from existing customers while adding new customers 2 Enhance our ability to deliver high-growth, integrated solutions 3 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, 2016 2015 % Change Net sales $ 3,708.2 $ 3,501.1 5.9% Avg Daily Net Sales $ 57.9 $ 54.7 5.9% Gross profit $ 614.3 $ 567.2 8.3% % of Net Sales 16.6% 16.2% SG&A, including advertising
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, 2016 2015 % Change Reported SG&A, including advertising $ 376.8 $ 362.6 3.9% Adjustments: Non-cash equity-based compensation (10.0) (7.8) Acquisition and integration expenses (2.4) (7.0) Othe
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, 2016 2015 % Change Interest expense, net $ (37.6) $ (38.5) (2.3)% Other income, net $ 0.4 $ (18.0) 102.1% Income tax expense $ (72.3) $ (95.3) (24.1)% Net income $ 125.9 $ 1
Slide 11: Third Quarter Non-GAAP Net Income
Third Quarter Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended September 30, 2016 2015 Net income $ 125.9 $ 150.9 Amortization of intangibles (1) 46.5 45.6 Non-cash equity-based compensation 10.0 7.8 Non-cash equity based compensation related to equity investment (2) — 20.0 Net Los
Slide 12: Financial Results YTD
Financial Results YTD (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2016 2015 % Change Net sales $ 10,489.5 $ 9,570.3 9.6% Avg Daily Net Sales $ 54.6 $ 50.1 9.0% Gross profit $ 1,749.3 $ 1,558.2 12.3% % of Net Sales 16.7% 16.3% SG&A, including advertising $ 1,
Slide 13: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) September 30, December 31, September 30, 2016 2015 2015 Cash and cash equivalents $ 118.3 $ 37.6 $ 97.5 Total debt $ 3,241.4 $ 3,259.7 $ 3,267.8 Senior secured debt $ 1,559.3 $ 1,586.6 $ 1,595.8 Net debt (total debt net of cash and cash equi
Slide 14: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) September 30, December 31, September 30, 2016 2015 2015 Days of sales outstanding (DSO) * 49.0 48.0 45.0 Days of supply in inventory (DIO) * 13.0 13.0 13.0 Days purchases outstanding (DPO) * (44.0) (40.0) (40.0) Cash Conversion Cycle * 18.0 21.0 18.0 * Based on a ro
Slide 15: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of Increase Dividends Annually 49% increase to $0.64/share FCF in 5 years(1) Maintain Net ~2.5 to 3.0 times Currently at 2.9x (3) Leverage Ratio (2) Net Leverage Ratio Supplement Organic Tuck-in, accretive deals CDW U
Slide 16: Capital Allocation Priorities Support Medium Term Targets
Capital Allocation Priorities Support Medium Term Targets 2016-2018 Net Sales Growth U.S. IT growth +200-300bps Adjusted EBITDA Mid-7% Margin Leverage Maintain net debt/adj. EBITDA ratio at ~2.5-3.0x Non-GAAP EPS Low double-digits Growth 16
Slide 17: Thoughts on Modeling 2016
Thoughts on Modeling 2016 Current expectations: • Seasonality ~ 48% / 52% between 1H/2H - One fewer selling day in Q4 '16 vs. Q4 '15, and two fewer days sequentially Q3 to Q4 - On an average daily sales basis, sequential Q3 to Q4 decline at a slightly greater level than last year • Currency headwind
Slide 18: Thoughts on Modeling 2016 cont'd
Thoughts on Modeling 2016 cont'd Current expectations for working capital and cash flow: • Capital expenditures ~0.5% of net sales on an annual basis • Annual Free Cash Flow above "rule of thumb" of between 2.5-3% of net sales • Achieve Cash Conversion Cycle at low end of targeted low to mid-20s ran
Slide 19: Questions and Answers
al Questions and Answers DU PEOPLE WHO GET IT 4 |
Slide 20: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, % of Net % of Net % of Net % of Net 2016 Sales 2015 Sales 2016 sales 2015 sales Net income $ 125.9 $ 150.9 $ 321.2 $ 313.8 Depreciation and amortization(1) 63.1 5
Slide 21: YTD Adjusted SG&A and Adjusted EBITDA
YTD Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Nine Months Ended September 30, 2016 2015 % Change Reported SG&A, including advertising $ 1,127.3 $ 996.1 13.2% Adjustments: Non-cash equity-based compensation (28.1) (20.0) Acquisition and integration expenses (6.2) (8.7) Other expen
Slide 22: Non-GAAP Net Income YTD
Non-GAAP Net Income YTD (Unaudited) ($ in millions) Nine Months Ended September 30, 2016 2015 Net income $ 321.2 $ 313.8 Amortization of intangibles (1) 141.0 126.1 Non-cash equity-based compensation 28.1 20.0 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 September 30, 2016 2015 % Change Net cash provided by operating activities $ 186.2 $ 195.8 Capital expenditures (15.7) (21.0) Net change in accounts payable - inventory financing (32.1) (18.6) Free Cash Flow $ 138.4 $ 156.2
Slide 24: YTD Free Cash Flow
YTD Free Cash Flow (Unaudited) ($ in millions) Nine Months Ended September 30, 2016 2015 % Change Net cash provided by operating activities $ 499.3 $ 294.9 Capital expenditures (41.4) (43.9) Net change in accounts payable - inventory financing 39.2 22.6 Free Cash Flow $ 497.1 $ 273.6 81.7% 24
Slide 25: Trailing Twelve Months Free Cash Flow
Trailing Twelve Months Free Cash Flow (Unaudited) ($ in millions) Twelve Months Ended September 30, 2016 2015 % Change Net cash provided by operating activities $ 481.9 $ 379.4 Capital expenditures (87.6) (64.5) Net change in accounts payable - inventory financing 112.5 55.0 Free Cash Flow $ 506.8 $
Slide 26: Consolidated Net Sales Growth on a Constant Currency Basis
Consolidated Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, Average Average % Daily % % Daily % 2016 2015 Change Change (1) 2016 2015 Change Change (1) Consolidated Net sales, as reported $ 3,708.2 $ 3,501.1