Cdw Corporation · NASDAQ:CDW
Cdw — Q3 2017 Earnings Presentation
25 slides from Cdw's earnings presentation, Nov 1, 2017
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call November 1, 2017 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Third 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 Combined Power
Highlights Combined Power ▪ Balanced portfolio of customer end-markets ▪ Broad product and solutions suite ▪ Variable cost structure 4
Slide 5: Strong Financial Performance
Strong Financial Financial Performance Third Quarter: ▪ Net Sales increased $326 million from Q3 2016 to $4.0 billion - Up 8.8% on a reported basis - Up 10.5% on an average daily sales basis ("ADS") - Up 10.4% in ADS on a constant currency basis ▪ Adjusted EBITDA up 4.5% to $324 million ▪ Non-GAAP n
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, Average Daily Average Daily 2017 2016 % Change % Change (1) 2017 2016 % Change % Change (1) Corporate (2) $ 1,598.5 $ 1,466.4 9.0% 10.7% $ 4,705.5 $ 4,372.1 7.6% 8.2% Small B
Slide 7: Third Quarter Financial Results
Third Quarter Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended September 30, 2017 2016 % Change Net sales $ 4,033.9 $ 3,708.2 8.8% Avg Daily Net Sales $ 64.0 $ 57.9 10.5% Gross profit $ 642.0 $ 614.3 4.5% % of Net Sales 15.9% 16.6% SG&A, including advertisin
Slide 8: Third Quarter Adjusted SG&A and Adjusted EBITDA
Third Quarter Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended September 30, 2017 2016 % Change Reported SG&A, including advertising $ 398.3 $ 376.8 5.7% Adjustments: Equity-based compensation (10.0) (10.0) Integration expenses — (2.4) Reinstatement of prior year uncl
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 September 30, 2017 2016 % Change Interest expense, net $ (37.8) $ (37.6) 0.5% Other income, net $ 0.7 $ 0.4 75.5% Income tax expense $ (77.4) $ (72.3) 7.1% Net income $ 129.2 $ 125.9 2.6%
Slide 10: Third Quarter Non-GAAP Net Income
Third Quarter Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended September 30, 2017 2016 Net income $ 129.2 $ 125.9 Amortization of intangibles (1) 46.5 46.5 Equity-based compensation 10.0 10.0 Net Loss on extinguishments of long-term debt — 2.1 Integration expenses (2) — 2.4 Reinsta
Slide 11: YTD Financial Results
YTD Financial Results (Unaudited) ($ in millions, except per share amounts) Nine Months Ended September 30, 2017 2016 % Change Net sales $ 11,353.0 $ 10,489.5 8.2% Avg Daily Net Sales $ 59.4 $ 54.6 8.8% Gross profit $ 1,835.6 $ 1,749.3 4.9% % of Net Sales 16.2% 16.7% SG&A, including advertising $ 1,
Slide 12: YTD Adjusted SG&A and Adjusted EBITDA
YTD Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Nine Months Ended September 30, 2017 2016 % Change Reported SG&A, including advertising $ 1,191.0 $ 1,127.3 5.7% Adjustments: Equity-based compensation (33.6) (28.1) Integration expenses (2.5) (6.2) Reinstatement of prior year unclaim
Slide 13: YTD Non-GAAP Net Income
YTD Non-GAAP Net Income (Unaudited) ($ in millions) Nine Months Ended September 30, 2017 2016 Net income $ 327.8 $ 321.2 Amortization of intangibles (1) 138.9 141.0 Equity-based compensation 33.6 28.1 Net Loss on extinguishments of long-term debt 57.4 2.1 Integration expenses (2) 2.5 6.2 Reinstateme
Slide 14: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) September 30, December 31, September 30, 2017 2016 2016 Cash and cash equivalents $ 97.9 $ 263.7 $ 118.3 Total debt $ 3,429.9 $ 3,234.4 $ 3,241.4 Senior secured debt $ 1,738.9 $ 1,552.1 $ 1,559.3 Net debt (total debt net of cash and cash equ
Slide 15: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) September 30, December 31, September 30, 2017 2016 2016 Days of sales outstanding (DSO) * 53 51 49 Days of supply in inventory (DIO) * 13 12 13 Days purchases outstanding (DPO) * (47) (44) (44) Cash Conversion Cycle * 19 19 18 * Based on a rolling three-month averag
Slide 16: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of Increase Dividends Annually 31% increase to $0.84/share FCF in 5 years (1) Maintain Net ~2.5 to 3.0 times Currently at 2.9x (3) Leverage Ratio (2) Net Leverage Ratio Supplement Organic Tuck-in, accretive deals CDW
Slide 17: Capital Allocation Priorities Support Medium Term Targets
Capital Allocation Priorities Support Medium Term Targets 2016-2018 Net Sales Growth U.S. IT growth +200-300bps in Constant Currency Adjusted EBITDA High 7's to 8% Margin Leverage Maintain net debt/adj. EBITDA ratio at ~2.5-3.0x Non-GAAP EPS Low double-digits in Growth Constant Currency 17
Slide 18: Thoughts on Modeling 2017
Thoughts on Modeling 2017 Current expectations for P&L: ▪ Exceed our full-year constant currency growth annual medium term target of growing 200 to 300 bps faster than the US IT, likely between 425 to 450 bps ▪ Currency headwinds ~20 bps for FY 2017; currency tailwinds of ~70 bps in Q4 ▪ Full year A
Slide 19: Thoughts on Modeling 2017 cont'd
Thoughts on Modeling 2017 cont'd Current expectations for working capital and cash flow: • Annual Free Cash Flow within our enhanced "rule of thumb" of 3 to 3½% of net sales • Capital expenditures ~0.5% of net sales on an annual basis • Cash Conversion Cycle within enhanced target range of high teen
Slide 20: Questions and Answers
al Questions and Answers DU PEOPLE WHO GET IT 4 |
Slide 21: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, % of Net % of Net % of Net % of Net 2017 Sales 2016 Sales 2017 sales 2016 sales Net income $ 129.2 $ 125.9 $ 327.8 $ 321.2 Depreciation and amortization (1) 65.7
Slide 22: Third Quarter Free Cash Flow
Third Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended September 30, 2017 2016 % Change Net cash provided by operating activities $ 62.9 $ 186.2 Capital expenditures (21.9) (15.7) Net change in accounts payable - inventory financing 43.7 (32.1) Free Cash Flow $ 84.7 $ 138.4 (38.
Slide 23: YTD Free Cash Flow
YTD Free Cash Flow (Unaudited) ($ in millions) Nine Months Ended September 30, 2017 2016 % Change Net cash provided by operating activities $ 439.1 $ 499.3 Capital expenditures (58.6) (41.4) Net change in accounts payable - inventory financing (41.4) 39.2 Free Cash Flow $ 339.1 $ 497.1 (31.8)% 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 September 30, Nine Months Ended September 30, Average Average % Daily % % Daily % 2017 2016 Change Change (1) 2017 2016 Change Change (1) Consolidated Net sales, as reported $4,033.9 $ 3,708.2 8
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 Ended September 30, Nine Months Ended September 30, 2017 2016 % Change 2017 2016 % Change Net income $ 129.2 $ 125.9 $ 327.8 $ 321.2 Amortization of intan