Cdw Corporation · NASDAQ:CDW
Cdw — Q1 2018 Earnings Presentation
26 slides from Cdw's earnings presentation, May 2, 2018
Slide 1: CDW Corporation Webcast Conference Call
CDW Corporation Webcast Conference Call May 2, 2018 CDW.com | 800.800.4239
Slide 2: Today's Agenda
Today's Agenda ▪ First Quarter 2018 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: Strong Q1 2018 Financial Performance
Strong Q1 2018 Financial Performance ▪ Net Sales increased $350 million from Q1 2017 to $3.6 billion – Up 10.8% on a reported basis and average daily sales basis – Up 9.6% ADS on a constant currency basis ▪ Adjusted EBITDA up 11.9% to $280 million ▪ Non-GAAP net income per diluted share up 40.5% to
Slide 5: Results Highlights Combined Power
Results Highlights Combined Power ▪ Balanced portfolio of customer end-markets ▪ Diverse product suite ▪ Variable cost structure 5
Slide 6: Balanced Portfolio Drove Topline
Balanced Portfolio Drove Topline (Unaudited) ($ in millions) Three Months Ended March 31, Average Daily % 2018 2017(1) % Change Change(2) Corporate $ 1,565.8 $ 1,440.6 8.7% 8.7% Small Business 327.6 292.0 12.2% 12.2% Public Government $ 418.5 $ 374.6 11.7% 11.7% Education 397.2 393.2 1.0 1.0 Healthc
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: Q1'18 Financial Results
Q1'18 Financial Results (Unaudited) ($ in millions, except per share amounts) Three Months Ended March 31, 2018 2017* % Change Net sales $ 3,606.4 $ 3,256.0 10.8% Avg Daily Net Sales $ 56.4 $ 50.9 10.8% Gross profit $ 603.9 $ 553.5 9.1% % of Net Sales 16.7% 17.0% SG&A, including advertising $ 399.8
Slide 9: Q1'18 Adjusted SG&A and Adjusted EBITDA
Q1'18 Adjusted SG&A and Adjusted EBITDA (Unaudited) ($ in millions) Three Months Ended March 31, 2018 2017(1) % Change Reported SG&A, including advertising $ 399.8 $ 382.8 4.4% Adjustments: Equity-based compensation (8.1) (12.1) Integration expenses — (0.5) 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 March 31, 2018 2017* % Change Interest expense, net $ (37.7) $ (39.7) (5.1)% Other (expense) income, net $ (0.7) $ 0.9 nm** Income tax expense $ (38.7) $ (16.3) 137.3% Net income $ 127.0 $ 58.2
Slide 11: Q1 '18 GAAP Effective Tax Rate
Q1 '18 GAAP Effective Tax Rate Three Months Ended March 31, 2018 2017 Federal statutory rate 21.0 % 35.0 % State taxes* 4.0 % 2.7 % Excess benefits from equity-based compensation** (2.5 )% (15.5 )% Mix impact from lower international income tax rates 0.1 % (0.7 )% All other items impacting tax rate
Slide 12: Q1 '18 Non-GAAP Net Income
Q1 '18 Non-GAAP Net Income (Unaudited) ($ in millions) Three Months Ended March 31, 2018 Three Months Ended March 31, 2017(1) Income Income Income Income before Net Effective before Net Effective income tax income tax expense (2) income tax rate expense 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: Q1 '18 Earnings Per Share
Q1 '18 Earnings Per Share Three Months Ended March 31, 2018 2017* % Change Diluted EPS $ 0.82 $ 0.36 129.6% Non-GAAP net income** $ 162.8 $ 121.9 33.6% Non-GAAP diluted EPS** $ 1.05 $ 0.75 40.5% * Amounts for 2017 have been adjusted to reflect the full retrospective adoption of ASU No. 2014-09, Reve
Slide 15: Debt and Revolver Availability
Debt and Revolver Availability (Unaudited) ($ in millions) March 31, 2018 December 31, 2017 March 31, 2017 Cash and cash equivalents $ 221.0 $ 144.2 $ 251.7 Total debt $ 3,235.5 $ 3,235.5 $ 3,280.5 Senior secured debt $ 1,539.5 $ 1,540.3 $ 1,545.7 Net debt (total debt net of cash and cash equivalent
Slide 16: Cash Conversion Cycle
Cash Conversion Cycle (Unaudited) March 31, 2018 December 31, 2017* March 31, 2017* Days of sales outstanding (DSO)** 54 53 51 Days of supply in inventory (DIO)** 12 13 14 Days purchases outstanding (DPO)** (49) (47) (46) Cash Conversion Cycle** 17 19 19 * Amounts for 2017 have been adjusted to refl
Slide 17: Four Capital Allocation Priorities
Four Capital Allocation Priorities Priorities Objectives Actions Target 30% payout of Increase Dividends Annually 31% increase November 2017 FCF in 5 years(1) to $0.84/share Maintain Net ~2.5 to 3.0 times Currently at 2.5x(3) Leverage Ratio(2) Net Leverage Ratio Supplement Organic Expand CDW strateg
Slide 18: 2018 Annual Medium Term Targets
2018 Annual Medium Term Targets* 2018** U.S. IT growth “a little over” 3% plus “a little over” Net Sales Growth 300 bps in constant currency Adjusted EBITDA Margin High 7's to 8% Margin Non-GAAP Net Income “Mid-to-high" twenty % growth in constant currency per diluted share * Annual targets are prov
Slide 19: Modeling Thoughts for FY 2018
Modeling Thoughts for FY 2018 ▪ Full-year constant currency Net Sales growth “a little over” 300 bps above US IT market growth – 1H/2H sales ~50 bps heavier in 1H than historical average split of 48/52%; Q2 seasonality below historical – Currency tailwinds expected at an annual average rate of ~ 50
Slide 20: Modeling Thoughts for FY 2018 Cash Flows
Modeling Thoughts for FY 2018 Cash Flows • Cash flow: – Capital expenditures slightly above ~0.5% of Net sales on an annual basis – Achieve Cash Conversion Cycle within target range of high teens to low 20's – Annual Free Cash Flow at the low end of new 'rule of thumb' run rate post-tax cuts of 3 ¾%
Slide 21: Questions and Answers
al Questions and Answers DU PEOPLE WHO GET IT 4 |
Slide 22: ASC 606 Impact
ASC 606 Impact Three Months Ended March 31, 2017 ($ millions) 606 605 Change Net sales $ 3,256.0 $ 3,324.7 $ (68.7) Gross profit 553.5 552.6 0.9 Gross margin 17.0% 16.6% 40 bps Income from operations 170.7 169.8 0.9 Net income 58.2 57.6 0.6 Adjusted EBITDA* 250.1 249.2 0.9 Adjusted EBITDA Margin* 7.
Slide 23: Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA to Net Income Reconciliation (Unaudited) ($ in millions) Three Months Ended March 31, % of Net % of Net 2018 Sales 2017(1) Sales Net income $ 127.0 3.5% $ 58.2 1.8% Depreciation and amortization (2) 66.6 64.2 Income tax (benefit) expense 38.7 16.3 Interest expense, net 37.7 39.7 EBIT
Slide 24: First Quarter Free Cash Flow
First Quarter Free Cash Flow (Unaudited) ($ in millions) Three Months Ended March 31, 2018 2017 % Change Net cash provided by operating activities $ 222.2 $ 369.9 Capital expenditures (15.9) (19.6) Net change in accounts payable - inventory financing 24.9 (135.7) Free Cash Flow $ 231.2 $ 214.6 7.7%
Slide 25: Consolidated Net Sales Growth on a Constant Currency Basis
Consolidated Net Sales Growth on a Constant Currency Basis (Unaudited) ($ in millions) Three Months Ended March 31, Average % Daily % 2018 2017(1) Change Change (2) Consolidated Net sales, as reported $ 3,606.4 $ 3,256.0 10.8% 10.8% Foreign currency translation(3) — 34.9 Consolidated Net sales, on a
Slide 26: 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 March 31, 2018 2017(1) % Change Net income $ 127.0 $ 58.2 Amortization of intangibles 46.7 46.1 Equity-based compensation 8.1 12.1 Net Loss on extin