Cdw Corporation · NASDAQ:CDW
Cdw — Q1 2016 Earnings Presentation
21 slides from Cdw's earnings presentation, May 4, 2016
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call May 4, 2016 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ 1st Quarter Results ▪ Key Performance Drivers and Strategic Progress ▪ Financial Results ▪ Outlook ▪ Q&A 1
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 1st Quarter Financial Performance
Record 1st Quarter Financial Performance ▪ Net sales up 13.1% to $3.1 billion; Average daily net sales up 11.4% ▪ Average daily organic net sales on a constant currency basis up 3.5% ▪ Gross profit up 14.9% to $525 million ▪ Adjusted EBITDA up 10.4% to $233 million ▪ Non-GAAP net income per diluted
Slide 5: Highlights Combined Power
Highlights Combined Power ▪ Balanced portfolio of channels ▪ Broad product and solution suite ▪ Impact of mix on profitability 4
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended March 31, Average Daily % Corporate: 2016 2015 % Change Change(1) Medium / Large $ 1,410.7 $ 1,341.9 5.1% 3.5% Small Business 281.6 268.5 4.9 3.2 Total Corporate $ 1,692.3 $ 1,610.4 5.1% 3.4% Public: Government $ 339.9 $
Slide 7: Our Three-Part Growth Strategy
Our Three-Part Growth Strategy Gain "share of wallet" from existing customers and acquire new customers Expand high-growth, integrated solutions Enhance services capabilities 6
Slide 8: First Quarter Financial Results
First Quarter Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended March 31, 2016 2015 % Change Net sales $ 3,116.7 $ 2,755.2 13.1% Avg Daily Net Sales $ 48.7 $ 43.7 11.4% Gross profit $ 524.5 $ 456.5 14.9% % of Net Sales 16.8% 16.6% SG&A, including advertising
Slide 9: First Quarter Adjusted SG&A and Adjusted EBITDA
First Quarter Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended March 31, 2016 2015 % Change Reported SG&A, including advertising $ 363.5 $ 304.9 19.2% Adjustments: Non-cash equity-based compensation (8.4) (4.7) Acquisition and integration expenses (1.6) (0.3) 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 March 31, 2016 2015 % Change Interest expense, net $ (38.1) $ (44.8) (14.9)% Other income, net $ 1.0 $ 4.5 (77.4)% Income tax expense $ (46.1) $ (32.3) 42.7% Net income $ 77.8 $ 54.7 42.2
Slide 11: First Quarter Non-GAAP Net Income
First Quarter Non-GAAP Net Income (Unaudited) Three Months Ended March 31, ($ in millions) 2016 2015 Net income $ 77.8 $ 54.7 Amortization of intangibles (1) 47.5 40.3 Non-cash equity-based compensation 8.4 4.7 Net loss on extinguishments of long-term debt — 24.3 Acquisition and integration expenses
Slide 12: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) March 31, December 31, March 31, 2016 2015 2015 Cash and cash equivalents $ 248.2 $ 37.6 $ 447.4 Total debt(1) $ 3,251.9 $ 3,259.7 $ 3,180.3 Senior secured debt $ 1,577.6 $ 1,586.6 $ 1,509.7 Net debt (total debt net of cash and cash equivale
Slide 13: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) March 31, December 31, March 31, 2016 2015 2015 Days of sales outstanding (DSO) * 49 48 45 Days of supply in inventory (DIO) * 14 13 13 Days purchases outstanding (DPO) * (43) (40) (37) Cash Conversion Cycle * 20 21 21 * Based on a rolling three-month average. 12
Slide 14: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Increase Dividends Target 30% payout of Annually 59% increase to $0.43/share FCF in 5 years Maintain Net Leverage ~2.5 to 3.0 times Ratio (1) Currently at 2.8x (2) Net Leverage Ratio Supplement Organic Tuck-in, accretive deals CDW UK a
Slide 15: Capital Allocation Priorities Support Medium Term Targets
Capital Allocation Priorities Support Medium Term Targets 2016-2018 Net Sales U.S. IT growth Growth +200-300bps* Adjusted Mid-7% Margin EBITDA Leverage Maintain net debt/adj. EBITDA ratio at ~2.5-3.0x Non-GAAP EPS Growth Low double-digits *Exceed in 2016 due to 7 months incremental CDW UK and a majo
Slide 16: Thoughts on Modeling 2016
Thoughts on Modeling 2016 For P&L currently look for: Revenue: FY16 organic, constant currency growth within annual medium term target of 200 to 300 basis points above annual US IT market growth − Continue to expect 2016 US IT growth of 2-3%, ramping through the year Seasonality ~ 48%52% between
Slide 17: Thoughts on Modeling 2016
Thoughts on Modeling 2016 For P&L currently look for: NGNI and EPS: Year to go quarterly interest expense, depreciation & amortization and non- cash equity compensation in line with Q1 Effective tax rate to be between 37-38% Share repurchases to offset dilution and contribute to achievement of
Slide 18: Questions and Answers
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Slide 19: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended March 31, % of Net % of Net 2016 Sales 2015 Sales Net income $ 77.8 $ 54.7 Depreciation and amortization(1) 64.0 52.5 Income tax expense 46.1 32.3 Interest expense, net 38.1 44.8 EBITDA 226.0 7.3% 184.3 6.7%
Slide 20: First Quarter Free Cash Flow
First Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended March 31, 2016 2015 % Change Net cash provided by operating activities $ 427.6 $ 177.8 Capital expenditures (11.0) (10.0) Net change in accounts payable - inventory financing (66.5) (42.3) Free Cash Flow $ 350.1 $ 125.5 179.
Slide 21: 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 March 31, Average Daily % 2016 2015 % Change Change(1) Net sales, as reported $ 3,116.7 $ 2,755.2 13.1% 11.4% Impact of acquisition(2) (232.1) — Organic net sales* $ 2,88