Wesco International, Inc. · NYSE:WCC
Wesco International — Investor Day (June 2017)
120 slides from Wesco International's investor day presentation, Jun 7, 2017
Slide 1: 2017 Investor Day
2017 INVESTOR DAY WESCO International 2017 Investor Day June 7, 2017
Slide 2: Safe Harbor Statement
2 2017 WESCO INVESTOR DAY Safe Harbor Statement All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other
Slide 3: Welcome and WESCO Overview
2017 INVESTOR DAY John Engel Chairman, President, and Chief Executive Officer Welcome and WESCO Overview
Slide 4: 2017 WESCO Investor Day Agenda
4 2017 WESCO INVESTOR DAY 2017 WESCO Investor Day Agenda Cocktail Reception immediately following Investor Day begins at 1:00 p.m. Welcome and WESCO Overview John Engel, Chairman, President and Chief Executive Officer United States Andy Bergdoll, Group Vice President and General Manager, United Stat
Slide 5: WESCO: A Leading Global Supply Chain Solutions Provider
5 2017 WESCO INVESTOR DAY WESCO: A Leading Global Supply Chain Solutions Provider Capital Projects MRO OEM …providing world-class brands and industry-leading service capabilities Founded 1922 in Pittsburgh, PA $7.3 Billion in Revenue One of the world’s largest distributors of electrical, industrial,
Slide 6: WESCO's Go-to-Market Strategy
6 2017 WESCO INVESTOR DAY WESCO’s Go-to-Market Strategy Capital ProjectsMRO OEM WESCO Characteristics …providing full supply chain solutions to meet customers’ unique requirements Serving Three Customer Demand Streams Supporting a broad range of business models: Standard Distribution Model Supply Ch
Slide 7: WESCO's Value Proposition
7 2017 WESCO INVESTOR DAY WESCO’s Value Proposition • Long-term customer relationships and deep familiarity with their operations – Gaining additional business with existing customers • Better outcomes for our customers – Identifying opportunities – Selecting the best solution – Reducing their proje
Slide 8: WESCO adds value throughout the supply chain
8 2017 WESCO INVESTOR DAY …WESCO adds value throughout the supply chain CUSTOMERS NEED: Procurement Warehousing /Logistics Technical expert knowledge An efficient supply chain with fewer suppliers WESCO OFFERS: • Deep customer relationships • Product, process, and technical expertise • Increased sca
Slide 9: Competitive Differentiator: Product Portfolio and Supplier Relationships
9 2017 WESCO INVESTOR DAY …providing world class brands when and where needed Competitive Differentiator: Product Portfolio and Supplier Relationships Automation, Controls & Motors 8% Lighting & Sustainability 12% General Supplies 40% Communications & Security 15% Wire, Cable & Conduit 14% Electrica
Slide 10: Competitive Differentiator: Service Capabilities
10 2017 WESCO INVESTOR DAY …value-added services drive customer loyalty and long-term relationships Competitive Differentiator: Service Capabilities 2016 Sales: $7.3B Our services and technical expertise drive the majority of our product sales Capital Project Solutions Supply Chain Solutions Technic
Slide 11: Service capabilities enabled by technical expertise and digital
11 2017 WESCO INVESTOR DAY …enabled by investments in technical expertise and digital capabilities Service Capabilities Examples Supply Chain Solutions • Integrated Supply • Global sourcing • Warehousing and logistics • Storeroom management • Vendor-managed inventory • Transaction cost review Capita
Slide 12: WESCO Performance Objectives and Strategies
12 2017 WESCO INVESTOR DAY WESCO Performance Objectives and Strategies • Focus on growth markets • Accelerate One WESCO growth initiatives • Differentiate through services • Leverage digital capabilities • Make accretive acquisitions …focused on driving profitable growth and shareholder value Genera
Slide 13: Evolution of WESCO's Digital Capabilities
13 2017 WESCO INVESTOR DAY Drive Above-Market Sales Growth: Evolution of WESCO’s Digital Capabilities Drive Customer Adoption • Dedicated eCommerce team • Focus on current WESCO customers and business models • Improved user experience • Easier to transact business Value-Added Offerings Standard Offe
Slide 14: Make Accretive Acquisitions
14 2017 WESCO INVESTOR DAY Drive Above-Market Sales Growth: Make Accretive Acquisitions 325 400 1,500 1,600 1,900 2,000 2010 2 2011 2 2012 4 2014 3 2015 3 2016 1 Acquisition Criteria Consistent with WESCO strategy Rate of return greater than WESCO risk-adjusted average cost of capital Accretive in f
Slide 15: Acquisitions Have Strengthened WESCO
15 2017 WESCO INVESTOR DAY Acquisitions Have Strengthened WESCO TVC Communications (2010) EECOL Electric (2012) Aelux / Lumigent (2015) Communications Supply Corporation (2006) Carlton-Bates (2005) …expanding our portfolio and capabilities while increasing market share AED Hill Country Needham (2015
Slide 16: 2017 Priorities
16 2017 WESCO INVESTOR DAY 2017 Priorities • Return to sales growth −Outperform end markets with One WESCO sales growth initiatives − Invest in and capitalize on growth markets −Maintain focus on execution and sales effectiveness • Make accretive acquisitions to strengthen portfolio and take market
Slide 17: Key Messages
17 2017 WESCO INVESTOR DAY Key Messages WESCO’s Businesses and End Markets • Significant growth markets and opportunities exist across businesses • Executing plans to drive above-market sales growth • Using services as a key differentiator Supply Chain and Operations • Significant opportunity to fur
Slide 18: United States
2017 INVESTOR DAY Andy Bergdoll Group Vice President, United States United States
Slide 19: Market Opportunity
19 2017 WESCO INVESTOR DAY Packaging MROP Electrical Construction Controls Datacom Material Handling Chemicals Power Transmission Welding/ Gases Plastics Fluid Power Rubber Products Steel $117 $81 $77 $50 $43 $29 $27 $25 $16 $13 $11 $9 $8 $8 Market Opportunity …large fragmented market provides oppor
Slide 20: 2016 U.S. Sales by End Market
20 2017 WESCO INVESTOR DAY 37% 29% 18% 15% 42%WESCO 2016 U.S. Sales by End Market ($5.6B) 2017 outlook: flat to LSD sales increase Utility CIG Construction Industrial United States WESCO Organic Sales Growth vs. Prior Year -6% -3% -5% -4% -2% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Strategic Priorit
Slide 21: United States: a market leader with national footprint
21 2017 WESCO INVESTOR DAY United States …a market leader with an extensive national footprint INFRASTRUCTURE 350 Branches 5 Regional Distribution Centers 4 Platform Distribution Centers 4 Assembly Operations (includes Saltillo, Mexico) BUSINESS MODELS • Local, branch-based distribution • Engineerin
Slide 22: U.S. Growth Opportunities
22 2017 WESCO INVESTOR DAY …the portfolio and expertise to capitalize on new and specialized market growth opportunities U.S. Growth Opportunities UTILITY CIGINDUSTRIAL CONSTRUCTION Alternative energy Utility infrastructure Grid automation Supply chain services OEM and direct materials Internet of T
Slide 23: Utility
2017 INVESTOR DAY Andy Bergdoll Group Vice President, United States Utility
Slide 24: Utility End Market Opportunities
24 2017 WESCO INVESTOR DAY WESCO Opportunities • Industry investments in grid hardening, security, generation fleet conversion to gas, alternative energy integration, and transmission capacity expansion • Emerging opportunities in street light conversions, broadband/FTTX, grid automation • Accelerat
Slide 25: WESCO Utility
25 2017 WESCO INVESTOR DAY WESCO Utility Utility Sales by Power Chain Segment • Utility Sales by Customer Segment DistributionTransmission / Substation Generation Utility Contractor Public Power Investor-Owned Utility (IOU) …addressing the entire power chain through each customer segment • Low proje
Slide 26: Utility Services Portfolio
26 2017 WESCO INVESTOR DAY Utility Services Portfolio Service Offerings Generation Transmission/ Substation Distribution Grid 1 Sourcing and Category Management 2 Procurement and Expediting 3 Inventory Optimization 4 Point of Use Programs 5 Cross-Dock and Logistics 6 Warehous
Slide 27: Utility Products Portfolio
27 2017 WESCO INVESTOR DAY Utility Products Portfolio Product Categories Generation Transmission/ Substation Distribution Grid 1 T&D Components 2 Wire/Cable/Conduit 3 Equipment and Apparatus 4 Electrical MRO 5 Communication and Security 6 Outdoor Lighting 7 Industrial MRO, Tool
Slide 28: WESCO Utility Integrated Supply Program
28 2017 WESCO INVESTOR DAY SOURCING & PROCUREMENT • Leverage spend • Automated orders / VMI • e-Catalogs • Supplier Management • Catalog clean-up and SKU reduction INVENTORY MANAGEMENT • Centralize placement • Optimized inventory levels • VMI and vending • Integrated demand planning • Safety and sto
Slide 29: Success Story – Utility: Investor-Owned Utility
29 2017 WESCO INVESTOR DAY Success Story – Utility Investor-Owned Utility Modernizing and Upgrading Infrastructure BACKGROUND • A customer’s transmission and distribution infrastructure required a $1.4B investment to modernize and upgrade. The customer did not want to invest in non-core infrastructu
Slide 30: Success Story – Utility: Public Power Integrated Supply
30 2017 WESCO INVESTOR DAY Success Story – Utility Public Power Integrated Supply BACKGROUND • A long-time WESCO customer decided to adopt a category management philosophy to drive material cost savings. WESCO was invited to present our category management competencies as well as our service offerin
Slide 31: Commercial, Institution, and Government (CIG)
2017 INVESTOR DAY Andy Bergdoll Group Vice President, United States Commercial, Institution, and Government (CIG)
Slide 32: CIG End Market Opportunities
32 2017 WESCO INVESTOR DAY WESCO Opportunities • Large, fragmented, and diverse market provides wide range of growth opportunities • Increased infrastructure spending expectations in the U.S. and Canada • Favorable market trends in data centers, security and mobility • WESCO is one of two globally e
Slide 33: CIG Customer Segments and Solutions
33 2017 WESCO INVESTOR DAY CIG Customer Segments and Solutions • Enterprise • Retail …providing a full range of solutions to a variety of end users GovernmentCommercial Communication Service Providers Data Service Providers Institution • Internet and Cloud services (data centers) • Outsourced data c
Slide 34: WESCO CIG Opportunities and Demand Drivers
34 2017 WESCO INVESTOR DAY …well-positioned to grow with expanding demand for technology Communications & Security Lighting & Sustainability Wire, Cable & Conduit Electrical Distribution & Controls Automation, Controls & Motors General Supplies By Product WESCO CIG Opportunities Demand Drivers • Exp
Slide 35: Success Story – Security
35 2017 WESCO INVESTOR DAY Success Story – Security BACKGROUND • School district with 21,000 students and dozens of buildings and campuses • Their legacy system did not allow for high-quality imagery or on-demand viewing of events, creating a significant challenge in ensuring the safety of students,
Slide 36: Success Story – Datacom
36 2017 WESCO INVESTOR DAY Success Story – Datacom BACKGROUND • Global technology customer is building and expanding datacenters in 10 countries. • WESCO provides datacom, security and electrical products, along with project management, design and global logistics services. – Our model includes in-c
Slide 37: Summary WESCO U.S.
37 2017 WESCO INVESTOR DAY Summary WESCO U.S. • U.S. Market is large and fragmented with many opportunities • Customers are driving technology integration • WESCO’s product and service portfolio is uniquely positioned address customer needs …significant opportunity to drive above-market growth UTILI
Slide 38: Industrial
2017 INVESTOR DAY Kevin Kerby Vice President, Global Accounts Industrial
Slide 39: Industrial End Market Opportunities
39 2017 WESCO INVESTOR DAY Opportunities • One WESCO expansion and new customers • Expand services footprint • Grow with value creation solutions • Capitalize on industrial networking growth opportunities 42%WESCO Industrial Sales (% of Total) 2017 end market outlook: LSD sales decline to LSD sales
Slide 40: Industrial Customer Base
40 2017 WESCO INVESTOR DAY Industrial Customer Base 2016 Industrial Sales $2.6B Global Accounts (excl. OEM) Integrated SupplyOEM All Others …long-term customer relationships, enabled by portfolio, footprint and supply chain expertise • Global Accounts – large customers with national/international fo
Slide 41: Global Accounts and Integrated Supply
41 2017 WESCO INVESTOR DAY Global Accounts and Integrated Supply …winning diversified new business while retaining current customers *Reflects sales over the total life of the agreement New Contracts / Agreements Total 2016 Sales Technology Oil & Gas OEM Transportation Metals & Mining Aerospace & De
Slide 42: Value Proposition
42 2017 WESCO INVESTOR DAY Customized Product Solutions Integrated Supply Capital Project Solutions Global Accounts Value Proposition …addresses key customer needs and applications Standardizing products, pricing, terms and service across multiple customer facilities Industrial & Electrical Distribu
Slide 43: WESCO's Global Reach
43 2017 WESCO INVESTOR DAY WESCO’s Global Reach WESCO Presence Service area …serving our blue-chip customers wherever they are located
Slide 44: Business Objectives and Customer Engagement
44 2017 WESCO INVESTOR DAY Business Objectives and Customer Engagement Acquire new customers Centralized lead generation team …working all organizational levels and key customer decision makers Penetrate existing customers and build C-level relationships Global Account Managers with vertical market
Slide 45: A Typical Customer
45 2017 WESCO INVESTOR DAY A Typical Customer OEM Lighting D A T A C O M M U N I C A T I O N S W I R E D A T A C O M M U N I C A T I O N S C O N D U I T ‐ M E T A L C O N D U I T ‐ N O N M E T A L L I C C O N D U I T & C A B L E F I T T I N G S R A C E W A Y S , W I R E W A Y S , S T R U T , C A B L
Slide 46: Conduit and Raceway, Wire
46 2017 WESCO INVESTOR DAY Conduit and Raceway Wire A typical industrial customer served by WESCO Global Accounts Switchgear, Wire, Cable, and Conduit Switchgear Wire & Cable Cutting Cable Paralleling Arc Flash Studies Coordination Studies Kitting Job Carts Services
Slide 47: Lighting
47 2017 WESCO INVESTOR DAY Lighting Lighting A typical industrial customer served by WESCO Global Accounts Layout design Energy efficiency and sustainability audits Energy performance analysis Lighting renovation services Services
Slide 48: Electrical, Industrial, and Safety MRO
48 2017 WESCO INVESTOR DAY Electrical, Industrial, and Safety MRO Material Handling Safety Services A typical industrial customer served by WESCO Global Accounts Abrasives Cutting Tools Chemicals Fasteners PVF Welding Hand Tools Gloves Paper Goods Cleansers Brooms Mops Safety training and fit testin
Slide 49: Diversified Manufacturing Automation Equipment
49 2017 WESCO INVESTOR DAY Diversified Manufacturing Automation Equipment A typical industrial customer served by WESCO Global Accounts Services Production Line Services Bill of Material Review Quality, Kitting, JIT B&C Sourcing Kanban
Slide 50: Assembly
50 2017 WESCO INVESTOR DAY Assembly Wire Harnesses Cable Assemblies Panel builds Sensors Switches PLCs A typical industrial customer served by WESCO Global Accounts Services
Slide 51: Business Process Outsourcing (Integrated Supply)
51 2017 WESCO INVESTOR DAY Business Process Outsourcing (Integrated Supply) Strategic Sourcing Storeroom Management Inventory Management Quality Assurance VMI Shutdown support (job trailers) E-Catalog Inventory Optimization Lean Warehousing optimization Category Management Tactical procurement servi
Slide 52: Multi-location Customers
52 2017 WESCO INVESTOR DAY Multi-location Customers A typical industrial customer served by WESCO Global Accounts and Integrated Supply WESCO Express Materials Standardization and consolidation programs Global e-business solutions (VMI, vending, e-catalog, EDI/XML) Enterprise reporting and analytics
Slide 53: Industrial Networking
53 2017 WESCO INVESTOR DAY Industrial Networking A typical industrial customer served by WESCO Global Accounts • Initial focus on digital ceiling and industrial plant floor • IoT will enable: – The ability to gather and analyze data across the enterprise – Increased productivity – Improvements to pr
Slide 54: A One WESCO Customer
54 2017 WESCO INVESTOR DAY A One WESCO Customer OEM Lighting D A T A C O M M U N I C A T I O N S W I R E D A T A C O M M U N I C A T I O N S C O N D U I T ‐ M E T A L C O N D U I T ‐ N O N M E T A L L I C C O N D U I T & C A B L E F I T T I N G S R A C E W A Y S , W I R E W A Y S , S T R U T , C A B
Slide 55: Industrial End Market Success Story
55 2017 WESCO INVESTOR DAY Industrial End Market Success Story Global Multi Division Manufacturer OEM Supply Chain and Business Process Outsourcing Customer engaged WESCO to support its new OEM supply chain strategy in one division and its outsourcing strategy in another division BACKGROUND SCOPE OU
Slide 56: Industrial Growth Opportunities
56 2017 WESCO INVESTOR DAY Industrial Growth Opportunities • Lighting Retrofit • Critical Infrastructure Upgrade • Supply Chain Services • OEM/Direct Material • Industrial Networking …significant opportunities for growth and expanding customer relationships
Slide 57: Summary
57 2017 WESCO INVESTOR DAY Summary • The Industrial end market is large and offers excellent growth opportunities. • WESCO has key competitive differentiators to enable us to outperform the market: − Long-term customer relationships with opportunities for expansion − Diversified end market customer
Slide 58: Construction
2017 INVESTOR DAY Les Kebler Group Vice President, International Construction
Slide 59: North American Construction Market
59 2017 WESCO INVESTOR DAY North American Construction Market • ~$450B construction market - $44B* WESCO addressable market • Low to mid single digit increase in non-residential fixed investment • Infrastructure spending provides additional upside • Potential incremental tailwinds (regulations, tax,
Slide 60: Construction End Market Opportunities
60 2017 WESCO INVESTOR DAY WESCO Opportunities • Full suite of services to support contractors • Infrastructure and resources in place today • Capitalize on high-growth markets • Global expansion and capital projects • Increased infrastructure spending 42% • Non-residential ‒ Commercial ‒ Industrial
Slide 61: Characteristics of the Construction Industry
61 2017 WESCO INVESTOR DAY Characteristics of the Construction Industry • Highly fragmented market • Cyclical market with high growth segments • Shortage of skilled workers • Slower digital adoption relative to manufacturing, retail and agriculture • Cost overruns and missed schedules on mega-projec
Slide 62: Construction Strategy
62 2017 WESCO INVESTOR DAY Construction Strategy Focused on Cost and Schedule • Transparency of activity through the construction cycle • Visibility and accountability for all stakeholders • Position product close to craft to increase productivity • Differentiate material management by risk to the p
Slide 63: New Construction Product and Services Portfolio
63 2017 WESCO INVESTOR DAY New Construction Product and Services Portfolio Job Trailer (Consumables) Physical Security Lighting Just-in-Time Delivery Job Carts Pre-fabrication Kitting / StagingUtility Substation Data Center Cable Cable Management
Slide 64: Building / Ops Services Portfolio
64 2017 WESCO INVESTOR DAY BUILDING / OPS SERVICES Lighting Renovation and Retrofit Product and Services Portfolio Access Control Smart Meeting Spaces Wireless Video IP Telephony Digital Signage Switchgear Energy / Metering Sensors and ControlsPhysical Security
Slide 65: Services for the Construction Industry
65 2017 WESCO INVESTOR DAY Construction Phase Customer Needs WESCO Services Engineering & Design • Specification assistance • Product alternatives • Turnkey solutions • Design layouts • Reduced engineering man-hours Construction • Right product, right time • Lower installed cost • Higher productivit
Slide 66: Capitalizing on High Growth Markets
66 2017 WESCO INVESTOR DAY Capitalizing on High Growth Markets Market Market Drivers WESCO Differentiators LED Lighting • $300B “traditional” base, $15B+ LED market in 2017 • Current 15% adoption projected to double by 2020 • Specialized sales leaders and resources • Turn-key design, procure and ins
Slide 67: Construction Center of Excellence
67 2017 WESCO INVESTOR DAY Construction Center of Excellence …opportunities to penetrate additional markets Acquisitions Expanded Construction Footprint May 2015 Commercial Construction 9 Branches March 2016 Commercial and Residential Construction 5 Branches November 2015 Commercial Construction Lig
Slide 68: Success Stories – Construction
68 2017 WESCO INVESTOR DAY Success Stories – Construction National Retail Store LED Lighting Project • Awarded multi-store contract to upgrade interior and exterior lighting to energy efficient LED technology • Initial order for 20 stores rolling out to 100+ locations across the U.S. • Scope of work
Slide 69: Construction Summary
69 2017 WESCO INVESTOR DAY Construction Summary • The non-residential construction market is large and growing • Significant Incremental spending potential from infrastructure spending and tax and regulatory reform • Industry challenges present opportunities to add value • WESCO is very active today
Slide 70: Canada
2017 INVESTOR DAY Nelson Squires Group Vice President, Canada Canada
Slide 71: WESCO's Canadian Market Share and Addressable Market
71 2017 WESCO INVESTOR DAY WESCO’s Canadian Market Share and Addressable Market …market leadership position with opportunities for growth All Others Top 5 distributors total ~75% Canadian Electrical Distribution Market (~$10B) Source: MDM ($ Billions) Packaging Electrical & Controls MROP All Other C
Slide 72: Canada Strategic Priorities
72 2017 WESCO INVESTOR DAY 57% 26% 8% 9% Strategic Priorities • Build on our market leadership position • Capitalize on increased infrastructure spending • Increase our industrial footprint • Continue to broaden our utilities business • Continue to diversify the business beyond traditional markets •
Slide 73: WESCO's Canadian Business
73 2017 WESCO INVESTOR DAY WESCO’s Canadian Business • 19% of total WESCO sales in 2016 • Expanded and diversified through acquisitions and organic growth since recession trough …larger, stronger, and more diversified business 2010 2016 Utility CIG Industrial Construction752 1,846 C$ Millions
Slide 74: Canada: strong national presence
74 2017 WESCO INVESTOR DAY Canada …strong national presence Branch Locations WESCO 70 EECOL 58 Distribution Centers
Slide 75: WESCO's Industrial End Market in Canada
75 2017 WESCO INVESTOR DAY WESCO’s Industrial End Market in Canada Modest recovery in business sentiment(1) supported by: − Foreign (export) demand − Expected rebound in activity in energy-producing regions …poised to benefit from increased activity (1) Source: Bank of Canada Business Outlook Survey
Slide 76: Oil Sands Update
76 2017 WESCO INVESTOR DAY …activity is picking up in 2017 Oil Sands Update • Drilling activity is increasing • Consolidation a positive in the mid to long term • Companies more disciplined in spend • Maintenance spending beginning to pick up • Pipeline projects provide significant opportunity • Reb
Slide 77: WESCO's Construction End Market in Canada
77 2017 WESCO INVESTOR DAY • Population growth is expected to drive construction of housing, schools, healthcare facilities and infrastructure • Tight office space market in Toronto, Winnipeg and Vancouver • Industrial capacity utilization has grown to over 80% WESCO’s Construction End Market in Can
Slide 78: Canadian Infrastructure Funding
78 2017 WESCO INVESTOR DAY The Canadian government recently announced plans to more than double their existing infrastructure funding, targeting a total of C$186 billion in combined public and private investments over the next 11 years …WESCO has the experience and expertise to win incremental infra
Slide 79: Canada Growth Opportunities
79 2017 WESCO INVESTOR DAY Canada Growth Opportunities …well-positioned to capitalize on a wide variety of growth opportunities UTILITY CIGINDUSTRIAL CONSTRUCTION Utility infrastructure OEM and direct materials Supply chain services Internet of Things Energy efficiency solutions LED lighting/lightin
Slide 80: Success Story – University
80 2017 WESCO INVESTOR DAY Success Story – University Canadian University Transition from Outsourced to In-House BACKGROUND • Facilities are a mix of new and aging buildings • Customer is transitioning from outsourced to internal maintenance and construction teams SCOPE • Includes all electrical mat
Slide 81: Success Story – Utility
81 2017 WESCO INVESTOR DAY Success Story – Utility Utility Broadened the Customer Base With Customized Solutions BACKGROUND • Utilities business leveraging key customer relationships to grow • Worked with suppliers to broaden the business at three significant customers SCOPE • Partnered with supplie
Slide 82: Success Story – Telecom
82 2017 WESCO INVESTOR DAY Success Story – Telecom Telecom Company Outsourcing Supply Chain Management BACKGROUND • Customer is transitioning from insource to outsource • WESCO is the only distributor to offer a full Canadian geographic footprint SCOPE • Full leverage of existing DCs, equipment, and
Slide 83: Success Story – Industry Association
83 2017 WESCO INVESTOR DAY Success Story – Industry Association Provincial Farmers Association Safety Solutions BACKGROUND • Access to 42,000 farmers and foresters via a single web portal • First partnership of its kind in Canada SCOPE • Single provider of safety solutions, PPE, and technical suppor
Slide 84: Summary
84 2017 WESCO INVESTOR DAY Summary • WESCO is a market leader in Canada −Strong resources and capabilities, the broadest infrastructure and a diverse customer base −Attractive growth opportunities are available across the business −One WESCO provides a strategic advantage to further leverage Canadia
Slide 85: Supply Chain and Operations
2017 INVESTOR DAY Hemant Porwal Vice President, Global Supply Chain and Operations Supply Chain and Operations
Slide 86: Supply Chain and Operations Mandate
86 2017 WESCO INVESTOR DAY Supply Chain and Operations Our Mandate Deliver growth and increase profitability by leveraging the value chain from sourcing to customer fulfillment with the right people, process, infrastructure and technology. Our Values • Promote safety • Feel the heat of the business
Slide 87: Architecting the One WESCO Strategy
87 2017 WESCO INVESTOR DAY Supply Chain & Operations – architecting the One WESCO Strategy Lean organization designed for efficiency and effectiveness in sync with marketing demand creation, sales operations, and category management …focused on customer satisfaction, profitability, and social respon
Slide 88: Processes to Drive Operating Margin Expansion
88 2017 WESCO INVESTOR DAY Sourcing Optimization Pricing Optimization Inventory Optimization Network Optimization Transportation Optimization Processes to Drive Operating Margin Expansion …new capabilities and ways of working
Slide 89: Sourcing and Inventory Evolution
89 2017 WESCO INVESTOR DAY • Strategic and diverse supply base • Spend managed by category • Centralized and automated source to pay transactions • Higher product turns and improved cash conversion cycle • Spend negotiated locally • Costs negotiated at the customer level • Limited strategic supplier
Slide 90: Leverage Spend to Grow Strategic Suppliers
90 2017 WESCO INVESTOR DAY Current Phase “RFI the Tail” Leverage Spend to Grow Strategic Suppliers • Over 3,000 customers • 22 product categories • 800+ suppliers • 11,000+ SKUs • Expected Results • Stakeholder-aligned enterprise strategic sourcing • Leverage national spend with strategic sourcing •
Slide 91: Reduce Complexity and Leverage Spend – Direct Materials
91 2017 WESCO INVESTOR DAY Reduce Complexity and Leverage Spend – Direct Materials Specialty Wire & Cable • 9 cable categories reviewed, including: − LAN, coax, audio, and speaker cables − 180 SKUs • 9 reverse auctions in about 2.5 hours • 10 suppliers to 6 suppliers • Maintained or improved product
Slide 92: Pricing Evolution
92 2017 WESCO INVESTOR DAY Pricing Evolution • Pricing analytics and optimization tools • Price intelligence spanning product categories, industry verticals and customer size • Pricing established as a Center of Excellence • Prices set primarily by branch, initiating shift to category • Most custome
Slide 93: Disciplined Approach to Pricing
93 2017 WESCO INVESTOR DAY Disciplined Approach to Pricing • Proved margin improvement opportunity with successful branch pilots • Conducted ~200 gap-to-goal sessions Pricing Approach …focused on improving billing margins with accountability, analytics, and tools 2016 Accomplishments • District leve
Slide 94: Operations and Transportation Evolution
94 2017 WESCO INVESTOR DAY Operations and Transportation Evolution • Strategically located branches, distribution centers and sales offices worldwide • Transportation is a global function with agile capabilities for the “last mile” • Infrastructure that enables growth, exceeds customer requirements
Slide 95: U.S. Distribution Network Optimization
95 2017 WESCO INVESTOR DAY U.S. Distribution Network Optimization • Open two One WESCO regional distribution centers • Convert the three U.S. distribution centers to One WESCO distribution centers • Reconfigured systems to support One WESCO DC network strategy • Determined multiyear network roadmap
Slide 96: Reduced Transportation Spend While Improving Service
96 2017 WESCO INVESTOR DAY Reduced Transportation Spend While Improving Service Pre Bid • Post Bid • Local negotiations with poor Service Level Agreements • Manual process • 8 different carriers • Center-led negotiations • Electronic sourcing event with multiple rounds of bidding activity • Consolid
Slide 97: Supply Chain and Operations Summary
97 2017 WESCO INVESTOR DAY Supply Chain and Operations Summary • Laid the groundwork in 2015 to support operating margin expansion • Made significant progress in 2016 to implement Global Supply Chain strategy • Continued engagement with local and Corporate teams • Executing plans which target at lea
Slide 98: Financial Update
2017 INVESTOR DAY Dave Schulz, Chief Financial Officer Financial Update
Slide 99: WESCO Financial Performance Goals
99 2017 WESCO INVESTOR DAY WESCO Financial Performance Goals Drivers • Working capital management • Prudent capital expenditures • Operating leverage from top-line growth • Margin improvement initiatives • Organic growth strategies • Acquisitions • Effective capital allocation • Focus on improving R
Slide 100: Financial Performance
100 2017 WESCO INVESTOR DAY 0.75 0.49 2.46 3.80 1999 2002 2009 2016 Financial Performance Adjusted Diluted EPSSales 10% CAGR …solid long-term performance 5% CAGR 3.4 3.3 4.6 7.3 1999 2002 2009 2016 52 12 279 282 1999 2002 2009 2016 Free Cash Flow 11% CAGR -15% 26% 14% Average Annual TSR* ($ Billions
Slide 101: Cost Leverage
101 2017 WESCO INVESTOR DAY Cost Leverage …compares favorably to industry benchmarks 807 798 2015 2016 Sales per Employee ($ Thousands) NAED: National Association of Electrical Distributors. Source of NAED data: most recent annual benchmark study, published in June 2016. 612 NAED Operating Expenses
Slide 102: Balanced Capital Structure
102 2017 WESCO INVESTOR DAY 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Balanced Capital Structure Leverage (Total Par Debt to TTM EBITDA) …maintaining fiscal discipline and flexible capital structure > $1B of free cash flow over last 4 years Note: See appendix for non-GAAP reconciliations. Target
Slide 103: 2017 Year to Date Results
103 2017 WESCO INVESTOR DAY 2017 Year to Date Results • Improved business momentum driven by a return to growth in the Industrial end market and Canada • Reported sales flat • Organic sales down 2% vs. prior year − down 4% sequentially; better than typical seasonality • EBIT margin down 10 bps vs. p
Slide 104: 2017 Outlook
104 2017 WESCO INVESTOR DAY 2017 Outlook …will update our 2017 outlook on July 27 Sales Flat to +4% EBIT Margin 4.4% to 4.6% Effective Tax Rate ~30% EPS $3.60 to $4.00 Shares outstanding ~49 million Free cash flow At least 90% of net income Year to date results vs original expectations: Canada Indus
Slide 105: Capital Allocation Strategy
105 2017 WESCO INVESTOR DAY Capital Allocation Strategy …completed $50M share repurchase in May to offset dilution impact of 2016 & 2017 equity awards Priorities for Driving Shareholder Value • Support organic growth • Fund accretive acquisitions • Maintain target leverage • Repurchase shares – Auth
Slide 106: Long-Term Growth Algorithm
106 2017 WESCO INVESTOR DAY Long-Term Growth Algorithm • Market growth • 1% to 2% from market outperformance • 1% to 3% from acquisitions • ~50% operating profit pull- through on organic growth − gross margin improvement − operating cost leverage • ~30% effective tax rate Annual Expectations over th
Slide 107: WESCO Long-Term Algorithm – Illustrative for 2020
107 2017 WESCO INVESTOR DAY WESCO Long-Term Algorithm – Illustrative for 2020 2017E 2020E 2017E 2020E Sales EPS • 3% annual end market growth • 1% market outperformance • 2% growth from acquisitions • 20 bps annual gross margin expansion • 50% pull-through on organic sales growth • 10%+ EPS growth e
Slide 108: Expecting Operating Margin Expansion
108 2017 WESCO INVESTOR DAY 0% 2% 4% 6% 8% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E …driven by volume leverage, supply chain initiatives and continued cost focus Expecting Operating Margin Expansion DRIVERS: Volume leverage Pro
Slide 109: Summary
109 2017 WESCO INVESTOR DAY Summary • We have right-sized the organization and added capabilities to drive growth and margin expansion as end markets improve • Our long-term growth algorithm delivers margin expansion and double-digit EPS growth from: −Organic sales growth and strong operating levera
Slide 110: WESCO International
2017 INVESTOR DAY John Engel Chairman, President and Chief Executive Officer WESCO International
Slide 111: Invest in WESCO
111 2017 WESCO INVESTOR DAY Invest in WESCO • Industry leader with deep domain expertise in electrical, industrial, construction, and utility • Proven business model and well positioned in large, fragmented markets • Blue-chip customer and supplier base • Proven acquirer and integrator in a consolid
Slide 112: 112 2017 WESCO INVESTOR DAY
112 2017 WESCO INVESTOR DAY
Slide 113: Appendix
2017 INVESTOR DAY Appendix
Slide 114: Sales Growth
114 2017 WESCO INVESTOR DAY Sales Growth 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9 Core (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) (4.0) (6.5) (5.5) (5.5)
Slide 115: Q1 2017 Sales Growth – Geography
115 2017 WESCO INVESTOR DAY Q1 2017 Sales Growth – Geography U.S. Canada International Total Change in net sales (USD) (0.8) 7.4 (13.4) (0.2) Impact from acquisitions 1.3 - - 0.9 Impact from foreign exchange rates - 4.2 (2.4) 0.6 Impact from number of workdays - - - - Organic sales growth (2.1) 3.2
Slide 116: Sales Growth-End Markets
116 2017 WESCO INVESTOR DAY Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q1 2017 vs. Q1 2016 Q1 2017 vs. Q4 2016 Q1 Q1 Q1 Q4 2017 2016 % Growth 2017 2016 % Growth Industrial Core 6
Slide 117: Q1 2017 Organic Sales by End Market
117 2017 WESCO INVESTOR DAY Q1 2017 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth 1.5 (2.4) (4.2) (1.6) (1.1) FX Impact 0.3 1.2 0.3 0.4 0.6 Workday Impact - - - - - Organic Growth 1.2 (3.6) (4.5) (2.0) (1.7) (%) For organic sales growth in 2016, see quarterl
Slide 118: Financial Leverage
118 2017 WESCO INVESTOR DAY Financial Leverage Twelve Months Ended March 31, 2017 Financial leverage ratio: Income from operations $ 330 Depreciation and amortization 66 EBITDA $ 396 March 31, 2017 Current debt and short-term borrowings $ 29 Long-term debt 1,310 Debt discount and deferred financing
Slide 119: 2016 Adjusted Diluted EPS
119 2017 WESCO INVESTOR DAY 2016 Adjusted Diluted EPS FY 2016 Reported Results Adjustments Adjusted Results Operating profit $ 332.0 - $ 332.0 Interest 76.6 - 76.6 Loss on debt redemption 123.9 (123.9) 1 - Income before income taxes 131.5 123.9 255.4 Taxes 30.4 41.2 1 71.6 Effective tax rate 23.1% 2
Slide 120: Free Cash Flow Reconciliation
120 2017 WESCO INVESTOR DAY Free Cash Flow Reconciliation FY 2016 Q1 2017 Cash flow provided by operations 300.2 47.6 Less: Capital expenditures (18.0) (4.5) Free Cash Flow 282.2 43.1 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducte