Cdw Corporation · NASDAQ:CDW
Cdw — Q2 2016 Earnings Presentation
26 slides from Cdw's earnings presentation, Aug 3, 2016
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call August 3, 2016 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ 2nd 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: Highlights Combined Power
Highlights Combined Power ▪ Balanced portfolio of channels ▪ Broad product and solution suite ▪ On-going success executing our three-part growth strategy 4
Slide 5: Record 2nd Quarter Financial Performance
Record 2nd Quarter Financial Performance ▪ Net sales up 10.6% to $3,665 million; Average daily net sales up 10.6% ▪ Average daily organic net sales on a constant currency basis up 4.5% ▪ Adjusted EBITDA up 12.2% to $301 million ▪ Net income up 8.6% to $118 million; Net income per diluted share up 12
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, Average Daily Average Daily Corporate: 2016 2015 % Change % Change(1) 2016 2015 % Change(2) % Change(1) Medium / Large $ 1,489.0 $ 1,521.3 (2.1)% (2.1)% $ 2,899.6 $ 2,863.2 1.3% 0.5% Sm
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: Second Quarter Financial Results
Second Quarter Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended June 30, 2016 2015 % Change Net sales $ 3,664.6 $ 3,314.0 10.6% Avg Daily Net Sales $ 57.3 $ 51.8 10.6% Gross profit $ 610.5 $ 534.5 14.2% % of Net Sales 16.7% 16.1% SG&A, including advertising
Slide 9: Second Quarter Adjusted SG&A and Adjusted EBITDA
Second Quarter Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended June 30, 2016 2015 % Change Reported SG&A, including advertising $ 387.0 $ 328.6 17.8% Adjustments: Non-cash equity-based compensation (9.7) (7.5) Acquisition and integration expenses (2.2) (1.4) Other ex
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 June 30, 2016 2015 % Change Interest expense, net $ (36.9) $ (37.8) 2.4% Other income, net $ 0.9 $ 4.0 (76.2)% Income tax expense $ (70.0) $ (63.9) 9.6% Net income $ 117.5 $ 108.2 8.6% Di
Slide 11: Second Quarter Non-GAAP Net Income
Second Quarter Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended June 30, 2016 2015 Net income $ 117.5 $ 108.2 Amortization of intangibles (1) 47.1 40.2 Non-cash equity-based compensation 9.7 7.5 Acquisition and integration expenses(2) 2.2 1.4 Other adjustments 0.3 1.0 Aggregate adj
Slide 12: Financial Results YTD
Financial Results YTD (Unaudited) ($ in millions, except per share amounts) Six Months Ended June 30, 2016 2015 % Change Net sales $ 6,781.3 $ 6,069.2 11.7% Avg Daily Net Sales $ 53.0 $ 47.8 10.9% Gross profit $ 1,135.0 $ 991.0 14.5% % of Net Sales 16.7% 16.3% SG&A, including advertising $ 750.5 $ 6
Slide 13: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) June 30, 2016 December 31, 2015 June 30, 2015 Cash and cash equivalents $ 129.4 $ 37.6 $ 335.7 Total debt(1) $ 3,240.5 $ 3,259.7 $ 3,177.5 Senior secured debt $ 1,564.9 $ 1,586.6 $ 1,505.8 Net debt (total debt net of cash and cash equivalent
Slide 14: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) June 30, 2016 December 31, 2015 June 30, 2015 Days of sales outstanding (DSO) * 44.0 48.0 41.0 Days of supply in inventory (DIO) * 13.0 13.0 13.0 Days purchases outstanding (DPO) * (40.0) (40.0) (35.0) Cash Conversion Cycle * 17.0 21.0 19.0 * Based on a rolling thre
Slide 15: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of Increase Dividends Annually 59% increase to $0.43/share FCF in 5 years (1) Maintain Net ~2.5 to 3.0 times Currently at 2.9x (3) Leverage Ratio (2) Net Leverage Ratio Supplement Organic Tuck-in, accretive deals CDW
Slide 16: Capital Allocation Priorities Support Medium Term Targets
Capital Allocation Priorities Support Medium Term Targets 2016-2018 Net Sales Growth U.S. IT growth Net Sales Growth +200-300bps Adjusted EBITDA Mid-7% Margin Adjusted EBITDA Leverage Leverage Maintain net debt/adj. EBITDA ratio at ~2.5-3.0x Non-GAAP Non-GAAP EPS EPS Growth Low double-digits Growth
Slide 17: Thoughts on Modeling 2016
Thoughts on Modeling 2016 ▪ Seasonality ~ 48% / 52% between 1H/2H − One fewer selling day in Q4 ’16 vs. Q4 ’15, and two fewer days sequentially Q3 to Q4 − On an average daily sales basis, sequential decline Q3 to Q4 in line with historical average ▪ CDW UK adds ~175 basis points of growth in Q3 (inc
Slide 18: Thoughts on Modeling 2016 cont'd
Thoughts on Modeling 2016 cont’d ▪ Year to go quarterly depreciation & amortization and non-cash equity compensation roughly in line with Q2 ▪ Year to go interest expense more in line with Q1 ▪ Effective tax rate to be between 37-38% ▪ Share repurchases to offset dilution and contribute to achieveme
Slide 19: Questions and Answers
al Questions and Answers DU PEOPLE WHO GET IT 4 |
Slide 20: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, % of Net % of Net % of Net % of Net 2016 Sales 2015 Sales 2016 sales 2015 sales Net income $ 117.5 $ 108.2 $ 195.3 $ 162.9 Depreciation and amortization(1) 63.7 52.6 127.7 1
Slide 21: YTD Adjusted SG&A and Adjusted EBITDA
YTD Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Six Months Ended June 30, 2016 2015 % Change Reported SG&A, including advertising $ 750.5 $ 633.5 18.5% Adjustments: Non-cash equity-based compensation (18.1) (12.2) Acquisition and integration expenses (3.9) (1.7) Other expenses (1)
Slide 22: Non-GAAP Net Income YTD
Non-GAAP Net Income YTD (Unaudited) ($ in millions) Six Months Ended June 30, 2016 2015 Net income $ 195.3 $ 162.9 Amortization of intangibles (1) 94.6 80.5 Non-cash equity-based compensation 18.1 12.2 Net loss on extinguishments of long-term debt — 24.3 Acquisition and integration expenses(2) 3.8 1
Slide 23: Second Quarter Free Cash Flow
Second Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended June 30, 2016 2015 % Change Net cash provided by operating activities $ (114.5) $ (78.7) Capital expenditures (14.7) (12.9) Net change in accounts payable - inventory financing 137.8 83.5 Free Cash Flow $ 8.6 $ (8.1) nm* *
Slide 24: YTD Free Cash Flow
YTD Free Cash Flow (Unaudited) ($ in millions) Six Months Ended June 30, 2016 2015 % Change Net cash provided by operating activities $ 313.1 $ 99.1 Capital expenditures (25.7) (22.9) Net change in accounts payable - inventory financing 71.3 41.2 Free Cash Flow $ 358.7 $ 117.4 205.5% 24
Slide 25: Trailing Twelve Months Free Cash Flow
Trailing Twelve Months Free Cash Flow (Unaudited) ($ in millions) Twelve Months Ended June 30, 2016 2015 % Change Net cash provided by operating activities $ 491.5 $ 358.2 Capital expenditures (92.9) (56.9) Net change in accounts payable - inventory financing 126.0 61.7 Free Cash Flow $ 524.6 $ 363.
Slide 26: 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 June 30, Six Months Ended June 30, Average Average % Daily % % Daily % 2016 2015 Change Change 2016 2015 Change Change (1) Net sales, as reported $ 3,664.6 $ 3,314.0 10.6