Cdw Corporation · NASDAQ:CDW
Cdw — Q2 2018 Earnings Presentation
31 slides from Cdw's earnings presentation, Aug 2, 2018
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call August 2, 2018 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ Second Quarter and YTD 2018 Results ▪ Capital Allocation Priorities ▪ 2018 Annual Medium Term Targets ▪ Modeling Thoughts ▪ 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 Q2 2018 Financial Performance
Strong Q2 2018 Financial Performance ▪ Net Sales increased $294 million from Q2 2017 to $4.2 billion – Up 7.6% on a reported basis and average daily sales basis – Up 7.0% ADS on a constant currency basis ▪ Net income up 22.8% to $173 million ▪ Adjusted EBITDA up 9.6% to $345 million ▪ Net income per
Slide 5: Results Highlight Combined Power
Results Highlight Combined Power ▪ Balanced portfolio of customer end-markets ▪ Diverse product suite ▪ Three-part strategy for growth 5
Slide 6: Balanced Portfolio Drove Topline Growth
Balanced Portfolio Drove Topline Growth (Unaudited) ($ in millions) Three Months Ended June 30, Six Months Ended June 30, 2018 2017(1) % Change(2) 2018 2017(1) % Change(2) Corporate $ 1,733.8 $ 1,580.1 9.7% $ 3,299.6 $ 3,020.7 9.2% Small Business 329.5 315.0 4.6 657.1 607.0 8.3 Public Government 493
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: Q2'18 Financial Results
Q2'18 Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended June 30, 2018 2017(1) % Change Net sales $ 4,186.1 $ 3,891.7 7.6% Avg Daily Net Sales $ 65.4 $ 60.8 7.6% Gross profit $ 695.6 $ 640.8 8.6% % of Net Sales 16.6% 16.5% SG&A, including advertising $ 430.1 $
Slide 9: Q2'18 Adjusted SG&A and Adjusted EBITDA
Q2'18 Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended June 30, 2018 2017(1) % Change Reported SG&A, including advertising $ 430.1 $ 410.0 4.9% Adjustments: Equity-based compensation (11.0) (11.5) Integration expenses — (2.0) Depreciation and amortization: Amortizatio
Slide 10: Interest Expense and Income Taxes
Interest Expense and Income Taxes (Unaudited) ($ in millions, except per share amounts) Three Months Ended June 30, 2018 2017(1) % Change Interest expense, net $ 37.2 $ 35.9 3.5% Other income, net $ 1.5 $ 0.4 293.3% Income tax expense $ 56.8 $ 54.4 4.4% Net income $ 173.0 $ 140.9 22.8% (1) Amounts f
Slide 11: Q2 '18 GAAP Effective Tax Rate
Q2 '18 GAAP Effective Tax Rate Three Months Ended June 30, 2018 2017 Federal statutory rate 21.0% 35.0% State taxes(1) 3.9% 2.6% Excess benefits from equity-based compensation(2) (1.5)% (9.5)% Mix impact from international income tax rates 0.1% (0.7)% All other items impacting tax rate 1.2% 0.5% GAA
Slide 12: Q2 '18 Non-GAAP Net Income
Q2 '18 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended June 30, 2018 Three Months Ended June 30, 2017(1) Income Income Income Income before tax Net Effective before tax Net Effective income expense(2) income tax rate income expense(2) income tax rate taxes taxes GAAP, as reported
Slide 13: Two Ways to calculate Non-GAAP Net Income
Two Ways to calculate Non-GAAP Net Income Adjusted EBITDA: GAAP Income before Income taxes: - Depreciation and amortization + Amortization of purchased intangibles + Amortization of purchased OR intangibles + Equity-based compensation - Interest expense + Other unusual or non-recurring items = Non-G
Slide 14: Q2 '18 Earnings Per Share
Q2 '18 Earnings Per Share Three Months Ended June 30, 2018 2017(1) % Change Diluted EPS $ 1.12 $ 0.89 26.9% Non-GAAP net income $ 213.2 $ 163.0 30.8% Non-GAAP diluted EPS $ 1.38 $ 1.03 35.1% (1) Amounts for 2017 have been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Revenu
Slide 15: YTD Financial Results
YTD Financial Results (Unaudited) ($ in millions, except per share amounts) Six Months Ended June 30, 2018 2017(1) % Change Net sales $ 7,792.5 $ 7,147.6 9.0% Avg Daily Net Sales $ 60.9 $ 55.8 9.0% Gross profit $ 1,299.5 $ 1,194.3 8.8% % of Net Sales 16.7% 16.7% SG&A, including advertising $ 829.9 $
Slide 16: YTD Adjusted SG&A and Adjusted EBITDA
YTD Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Six Months Ended June 30, 2018 2017(1) % Change Reported SG&A, including advertising $ 829.9 $ 792.8 4.7% Adjustments: Equity-based compensation (19.1) (23.6) Integration expenses — (2.5) Depreciation and amortization: Amortization of
Slide 17: YTD Non-GAAP Net Income
YTD Non-GAAP Net Income (Unaudited) ($ in millions) Six Months Ended June 30, 2018 Six Months Ended June 30, 2017(1) Income Income Income Income before tax Net Effective before tax Net Effective income expense(2) income tax rate income expense(2) income tax rate taxes taxes GAAP, as reported $ 395.5
Slide 18: YTD Earnings Per Share
YTD Earnings Per Share Six Months Ended June 30, 2018 2017(1) % Change Diluted EPS $ 1.94 $ 1.24 57.1% Non-GAAP net income $ 376.0 $ 284.9 32.0% Non-GAAP diluted EPS $ 2.44 $ 1.77 37.6% (1) Amounts for 2017 have been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Revenue fro
Slide 19: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) June 30, 2018 December 31, 2017 June 30, 2017 Cash and cash equivalents $ 100.7 $ 144.2 $ 79.0 Total debt $ 3,240.3 $ 3,235.5 $ 3,296.3 Senior secured debt $ 1,543.7 $ 1,540.3 $ 1,544.9 Net debt (total debt net of cash and cash equivalents)
Slide 20: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) (in days) June 30, 2018 December 31, 2017(1) June 30, 2017(1) Days of sales outstanding (DSO)(2) 50 53 49 Days of supply in inventory (DIO)(2) 13 13 12 Days purchases outstanding (DPO)(2) (46) (47) (45) Cash Conversion Cycle(2) 17 19 16 (1) Amounts for 2017 have bee
Slide 21: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of 31% increase November 2017 Increase Dividends Annually FCF in 5 years(1) to $0.84/share annually Maintain Net ~2.5 to 3.0 times Currently at 2.5x(3) Leverage Ratio(2) Net Leverage Ratio Supplement Organic Expand CD
Slide 22: 2018 Annual Medium Term Targets
2018 Annual Medium Term Targets (1) 2018(2) U.S. IT growth roughly 3¾% plus Net Sales Growth roughly 375 bps outperformance in constant currency High 7's to 8% Adjusted EBITDA Margin Margin Non-GAAP Earnings High twenties % growth in constant currency per diluted share (1) Annual targets are provide
Slide 23: Thoughts on Modeling FY 2018
Thoughts on Modeling FY 2018 ▪ Full-year constant currency Net sales growth ~375 bps higher than US IT – 1H/2H sales ~75 bps heavier in 1H than historical average split of 48/52% – Low single digit sequential sales increase from Q2 to Q3 – Currency tailwinds expected at an annual average rate of ~ 3
Slide 24: Modeling Q2 and FY 2018 Cash Flows
Modeling Q2 and FY 2018 Cash Flows • Cash flow: – Capital expenditures slightly above ~0.5% of Net sales on an annual basis – Achieve Cash Conversion Cycle within target range of high teens to low 20s – Annual Free Cash Flow at the low end of new 'rule of thumb' run rate post-tax cuts of 3 ¾% to 4 ¼
Slide 25: Questions and Answers
al Questions and Answers DU PEOPLE WHO GET IT 4 |
Slide 26: ASC 606 Impact
ASC 606 Impact (unaudited) Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 ($ in millions) 606 605 Change 606 605 Change Net sales $ 3,891.7 $ 3,994.4 $ (102.7) $ 7,147.6 $ 7,319.1 $ (171.5) Gross profit 640.8 641.1 (0.3) 1,194.3 1,193.6 0.7 Gross margin 16.5% 16.1% 40 bps 16.7% 16.3
Slide 27: 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 2018 Sales 2017(1) Sales 2018 Sales 2017(1) Sales Net income $ 173.0 $ 140.9 $ 300.0 $ 199.0 Depreciation and amortization(2) 66.3 65.4 1
Slide 28: Second Quarter Free Cash Flow
Second Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended June 30, 2018 2017 % Change Net cash provided by operating activities $ 110.1 $ 6.3 nm* Capital expenditures (17.7) (17.2) Net change in accounts payable - inventory financing (135.3) 50.6 Free Cash Flow $ (42.9) $ 39.7 nm*
Slide 29: YTD Free Cash Flow
YTD Free Cash Flow (Unaudited) ($ in millions) Six Months Ended June 30, 2018 2017 % Change Net cash provided by operating activities $ 332.3 $ 376.2 (11.7)% Capital expenditures (33.6) (36.8) Net change in accounts payable - inventory financing (110.4) (85.1) Free Cash Flow $ 188.3 $ 254.3 (26.0)%
Slide 30: 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, 2018 2017(1) % Change(2) 2018 2017(1) % Change(2) Consolidated Net sales, as reported $ 4,186.1 $ 3,891.7 7.6% $ 7,792.5 $ 7,147.6 9.0% Foreign currency transl
Slide 31: Non-GAAP Net Income Per Diluted Share, on a 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 June 30, Six Months Ended June 30, 2018 2017(1) % Change 2018 2017(1) % Change Net income $ 173.0 $ 140.9 $ 300.0 $ 199.0 Amortization of intangible