Wesco International, Inc. · NYSE:WCC
Wesco International — Q4 2022 Earnings Presentation
33 slides from Wesco International's earnings presentation, Feb 14, 2023
Slide 1: Fourth Quarter 2022 Webcast Presentation
Fourth Quarter 2022 Webcast Presentation February 14, 2023 NYSE: WCC
Slide 2: Forward-looking statements
2 All statements made herein that are not historical facts should be considered as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to
Slide 3: Exceptional Fourth Quarter Closes Out Record 2022
3 Exceptional Fourth Quarter Closes Out Record 2022 Delivered an encore in 2022… 2023 expected to be another transformational year See appendix for non-GAAP reconciliations. • Exceptional growth in the fourth quarter driven by secular demand trends, continued share gains, and the start of supply cha
Slide 4: Substantial Value Creation Since Merger Close
4 Substantial Value Creation Since Merger Close $ millions $17,205 $21,420 FY 2019 FY 2022 +25% Sales Record $903 $1,726 FY 2019 FY 2022 +91% Adjusted EBITDA Record 5.2% 8.1% FY 2019 FY 2022 +290 bps Adjusted EBITDA Margin Record 5.7x 2.9x Q2 2020 Q4 2022 Leverage 19.5% 21.8% FY 2019 FY 2022 +230 bp
Slide 5: Transformational Combination of Wesco + Anixter
$383 $415 $903 $855 $1,176 $1,726 $1,900 2017 2018 2019 2020 2021 2022 2023… Target 5 • Leading Scale • Secular Trends • Cross Sell • Share Gains • Margin Improvement • Cost Synergies • Lean Practices • Agile Development • Digital Transformation • M&A Transformational Combination of Wesco + Anixter
Slide 6: Wesco + Rahi: Data Center Solution Experts
Wesco + Rahi: Data Center Solution Experts 6 Electrical Infrastructure Network Infrastructure Security Services & IT Networking Power Substations and Grid Services Pro A/V Rahi • FY 2022 $480M sales1 • 20%+ growth expected in 2023 • 900+ employees • 25 countries Complementary Portfolio • Global scal
Slide 7: Upsized Cash Generation Capability Funds Strategic Objectives and Increased Returns
7 Upsized Cash Generation Capability Funds Strategic Objectives and Increased Returns 1 ~$1.50 annualized cash dividend rate; subject to Board approval in early 2023 Invest for Above Market Growth. Organic growth opportunities M&A to further accelerate growth $1 billion share repurchase authorizatio
Slide 8: Fourth Quarter Results Overview
8 Fourth Quarter Results Overview Exceptional financial results driven by strong sales growth, margin expansion and operating leverage Q4 2022 Q4 2021 YOY Sales $5,558 $4,852 +14%1 Gross Profit $1,218 $1,008 +21% Gross Margin 21.9% 20.8% +110 bps Adjusted EBITDA $451 $320 +41% EBITDA Margin 8.1% 6.6
Slide 9: Fourth Quarter Sales and Adjusted EBITDA Bridges
9 Q4 2021 Adjusted EBITDA Sales and M&A Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other Q4 2022 Adjusted EBITDA Fourth Quarter Sales and Adjusted EBITDA Bridges $320 $451 6.7% of sales 8.1% of sales $ millions 1 Sales growth attribution based o
Slide 10: FY 2022 Results Overview
10 FY 2022 Results Overview Exceptional financial results driven by strong sales growth, margin expansion and operating leverage FY 2022 FY 2021 YOY Sales $21,420 $18,218 +18%1 Gross Profit $4,661 $3,792 +23% Gross Margin 21.8% 20.8% +100 bps Adjusted EBITDA $1,726 $1,176 +47% EBITDA Margin 8.1% 6.5
Slide 11: FY 2022 Sales and Adjusted EBITDA Bridges
11 FY 2021 Adjusted EBITDA Sales and M&A Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other FY 2022 Adjusted EBITDA FY 2022 Sales and Adjusted EBITDA Bridges $1,176 $1,7266.7% of sales 8.1% of sales $ millions 1 Sales growth attribution based on c
Slide 12: Electrical & Electronic Solutions (EES)
Growth due to enhanced value proposition, electrification trend, and complete electrical solutions offering Fourth Quarter Drivers • Record fourth quarter with sales growth in all operating groups – Non-residential construction demand remained strong driven by investments in electrification and rene
Slide 13: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) Global position, leading value proposition and accelerating secular trends drive strong outlook over the long term 13 $ millions Q4 2022 Q4 2021 YOY Sales $1,763 $1,515 +12%1 Adjusted EBITDA $170 $125 +35% % of sales 9.6% 8.3% +130 bps 1 Sales growth shown o
Slide 14: Utility & Broadband Solutions (UBS)
Fourth Quarter Drivers • Record quarter with sales growth in all operating groups – Broad-based growth in utility driven by investments in electrification, green energy, and grid modernization – Broadband communications growth driven by connectivity demand and rural broadband expansion – Integrated
Slide 15: Increasing Cross-Sell Target to $1.6 Billion
15 June 2020 November 2022 February 2023 Expanding pipeline of cross-sell opportunities Increasing Cross-Sell Target to $1.6 Billion Successful cross-selling initiatives driving market outperformance Cumulative Cross-Sell Synergies $1.4 billion $966 million Realized through prior quarter-end Cross-s
Slide 16: Cost Synergy Realization Continues
16 Cost Synergy Realization Continues Tracking well toward 2023 cost synergy target of $315 million 202 1 (to date) To be realizedRealized Supply Chain $115 million G&A $95 million Corporate Overhead $45 million Field Operations $60 million To be realizedRealized $ millions Cumulative Realized Syner
Slide 17: Free Cash Flow
17 Free Cash Flow Effectively managing working capital to ensure execution in a high-growth, supply-constrained environment $ millions See appendix for non-GAAP definitions and reconciliations. $231 $399 $41 $47 $69 $73 $(62) Adjusted Net Income D&A, Variable Comp and Other Accounts Receivable Inven
Slide 18: Leverage Back within Target Range
18 5.7x 5.3x 5.3x 4.9x 4.5x 4.1x 3.9x 3.6x 3.4x 3.2x 2.9x Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Net Debt / TTM Adjusted EBITDA Leverage Back within Target Range Well Ahead of Schedule Strong deleveraging momentum continued in Q4; Now well within targ
Slide 19: Attractive Long-Term Growth Drivers + Wesco's Uniquely Strong Position
a • Leading Portfolio of Products, Services, and Solutions • Leading Positions in All SBUs • Global Footprint and Capabilities • Digital Investments Unlocking the Value of Our Big Data • Accelerating Consolidation Across the Value Chain Electrification Automation and IoT Green Energy and Grid Modern
Slide 20: 2023 Outlook
2023 Outlook 20 Outlook Notes • Growth from price reflects carry-over pricing from 2022; no additional pricing benefit assumed in 2023 • After the impact of revenue transfers, acquisitions, workday adjustments and foreign exchange impacts, reported sales growth for EES is expected to be mid-single d
Slide 21: Summary
21 Summary Differentiated capabilities and execution drive strong outlook and superior results • Record results in 2022 show the growing power of the Wesco and Anixter combination – Record sales and profitability in all three business units – Record gross margin, operating profit, adjusted EBITDA, a
Slide 22: Appendix
APPENDIX
Slide 23: Underlying Assumptions
Underlying Assumptions 23 FY 2023 Depreciation and Amortization ~$170–180 million Interest Expense ~$330–370 million Capital Expenditures ~$100 million Share Count ~52-53 million Effective Tax Rate ~27%
Slide 24: 2023 Segment Account Transfers
2023 Segment Account Transfers 24 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022 EES Sales (45) (55) (46) (52) (198) CSS Sales 37 48 37 45 168 UBS Sales 8 7 9 7 30 $ millions Beginning in 2023, the primary sales management responsibility for certain accounts will transfer from EES to CSS and UBS. The 2022
Slide 25: Glossary
25 Glossary Abbreviations 1H: First half of fiscal year MSD: Mid-single digit 2H: Second half of fiscal year PF: Pro Forma A/V: Audio/visual PY: Prior Year COGS: Cost of goods sold OEM: Original equipment manufacturer CIG: Commercial, Institutional and Government OPEX: Operating expenses CSS: Commun
Slide 26: Workdays
26 Workdays Q1 Q2 Q3 Q4 FY 2020 64 64 64 61 253 2021 62 64 64 62 252 2022 63 64 64 62 253 2023 63 64 63 62 252
Slide 27: Non-GAAP Measure Definitions
27 Non–GAAP Measure Definitions Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, foreign exchange rates and number of
Slide 28: Organic Sales Growth by Segment
28 Organic Sales Growth by Segment - QTD: Three Months Ended Growth/(Decline) December 31, 2022 December 31, 2021 Reported Acquisition Impact Foreign Exchange Impact Workday Impact Organic Growth EES $ 2,168,448 $ 1,994,954 8.7% —% (2.6)% —% 11.3% CSS 1,762,837 1,514,813 16.4% 7.4% (2.7)% —% 11.7% U
Slide 29: Gross Profit and Free Cash Flow
29 Gross Profit and Free Cash Flow $ thousands Three Months Ended Twelve Months Ended Gross Profit: December 31, 2022 December 31, 2021 September 30, 2022 December 31, 2022 December 31, 2021 Net sales $ 5,558,494 $ 4,851,919 $5,445,916 $ 21,420,116 $ 18,217,512 Cost of goods sold (excluding deprecia
Slide 30: Three Months Ended December 31, 2022 EBITDA and Adjusted EBITDA by Segment
30 Three Months Ended December 31, 2022 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 185,736 $ 153,912 $ 176,359 $ (311,439) $ 204,568 Net (loss) income attributable to noncontrolling interests (403) — — 615 212 Preferred stock d
Slide 31: Year Ended December 31, 2022 EBITDA and Adjusted EBITDA by Segment
31 Year Ended December 31, 2022 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 801,283 $ 526,985 $ 648,478 $(1,173,683) $ 803,063 Net income attributable to noncontrolling interests 158 — — 1,493 1,651 Preferred stock dividends — —
Slide 32: Adjusted EPS
Adjusted EPS 32 ` Three Months Ended Twelve Months Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Adjusted Income from Operations: Income from Operations $ 381,755 $ 220,283 $ 1,438,085 $ 801,873 Merger-related and integration costs 15,246 38,692 67,446 158,484 Acceler
Slide 33: Capital Structure and Leverage
Capital Structure and Leverage 33 $ thousands Twelve Months Ended Financial Leverage: December 31, 2022 December 31, 2021 Net income attributable to common stockholders $ 803,063 $ 407,974 Net income attributable to noncontrolling interests 1,651 1,020 Preferred stock dividends 57,408 57,408 Provisi