Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2022 Earnings Presentation
29 slides from Wesco International's earnings presentation, Nov 3, 2022
Slide 1: Third Quarter 2022 Webcast Presentation
Third Quarter 2022 Webcast Presentation November 3, 2022 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: Agenda
Agenda 3 Business Overview Financial Results Overview John Engel Chairman, President & CEO Executive Vice President & CFO Dave Schulz
Slide 4: 2022 Momentum Continues with Record Third Quarter
4 2022 Momentum Continues with Record Third Quarter Record adjusted EPS of $4.49, up 64% YOY; Affirming 2022 EBITDA and EPS outlook See appendix for non-GAAP definitions and reconciliations. • Increased scale and mix shift into higher growth and higher margin end markets fueling positive momentum •
Slide 5: Substantial Value Creation Since Merger Close
5 Substantial Value Creation Since Merger Close $ millions $12,853 $15,862 YTD 2019 YTD 2022 +23% Sales Record $674 $1,274 YTD 2019 YTD 2022 +89% Adjusted EBITDA Record 5.2% 8.0% YTD 2019 YTD 2022 +280 bps Adjusted EBITDA Margin Record 5.7x 3.2x Q2 2020 Q3 2022 Leverage 19.5% 21.7% YTD 2019 YTD 2022
Slide 6: Attractive Long-Term Growth Drivers and Wesco's 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 7: Acquired a Leading Global Hyperscale Data Center Company
Actual 7 ~$400M in TTM1 Sales Data Center • Cloud • Edge • Colocations Workplace Productivity • End-User Computing • Applications • Audio and Video Solutions Secure Connectivity • Local Area Network • Wireless Network • Service Provider 900+ Total Employees 25 Countries Served Solutions 1Preliminary
Slide 8: Third Quarter Results Overview
Third Quarter Results Overview Dave Schulz Executive Vice President & Chief Financial Officer
Slide 9: Third Quarter Results Overview
9 Third Quarter Results Overview Exceptional financial results driven by strong sales growth, margin expansion and operating leverage Q3 2022 Q3 2021 YOY Sales $5,446 $4,728 +17%1 Gross Profit $1,205 $1,008 +19% Gross Margin 22.1% 21.3% +80 bps Adjusted EBITDA $466 $330 +41% EBITDA Margin 8.6% 7.0%
Slide 10: Third Quarter Sales and Adjusted EBITDA Bridges
10 Q3 2021 Adjusted EBITDA Sales Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other Q3 2022 Adjusted EBITDA Third Quarter Sales and Adjusted EBITDA Bridges $330 $466 6.7% of sales 8.6% of sales $ millions 1 Sales growth attribution based on compan
Slide 11: Electrical & Electronic Solutions (EES)
Growth due to enhanced value proposition and complete electrical solutions offering Third Quarter Drivers • Record third quarter with sales growth in all operating groups – Non-residential construction demand remained strong – Strong industrial and OEM momentum continues • Record backlog up 2% seque
Slide 12: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) Global position, leading value proposition and accelerating secular trends drive strong outlook over the long term 12 $ millions Q3 2022 Q3 2021 YOY Sales $1,602 $1,489 +10%1 Adjusted EBITDA $156 $134 +17% % of sales 9.8% 9.0% +80 bps Long-term, sustainable
Slide 13: Utility & Broadband Solutions (UBS)
Third Quarter Drivers • Record quarter with double-digit 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 –
Slide 14: Increasing Cross-Sell Target to $1.4 Billion
14 June 2020 August 2021 February 2022 May 2022 August 2022 November 2022 Expanding pipeline of cross-sell opportunities Increasing Cross-Sell Target to $1.4 Billion Successful cross-selling initiatives driving market outperformance $ millions Cumulative Cross-Sell Synergies $600 million$500 million
Slide 15: Cost Synergy Realization Continues
15 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 16: Year-to-Date Free Cash Flow
16 Year-to-Date Free Cash Flow $688 Adjusted Net Income D&A, Variable Comp and Other Accounts Receivable Inventory Accounts Payable Capex / IT Spend Free Cash Flow $139 $(104) $(738) $(886) $480 $(421) Free Cash Flow Managing working capital to ensure effective execution in a high-growth, supply-con
Slide 17: Leverage Back within Target Range Well Ahead of Schedule
17 5.7x 5.3x 5.3x 4.9x 4.5x 4.1x 3.9x 3.6x 3.4x 3.2x Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Net Debt / TTM Adjusted EBITDA Leverage Back within Target Range Well Ahead of Schedule Deleveraging continued in Q3; Now well within target range Acquisition closed J
Slide 18: Updated 2022 Outlook
Updated 2022 Outlook 18 Outlook Notes • Does not reflect the effect of potential tax law changes or future refinancing activity • Utility customer model shift results in negative sales impact of ~0.5% • Does not reflect Rahi acquisition which closed on 11/1/22 Prior Revised 8/4/22 11/3/22 Sales Mark
Slide 19: Summary
19 Summary Differentiated capabilities and execution drive strong outlook • Outstanding results in Q3 and strongest quarter of Wesco + Anixter combination yet – Third quarter record sales – All-time record gross margin, operating profit, adjusted EBITDA, adjusted EBITDA margin and adjusted diluted E
Slide 20: Appendix
APPENDIX
Slide 21: Underlying Assumptions
Underlying Assumptions 21 Fourth Quarter FY 2022 Depreciation and Amortization ~$40–45 million ~$175–180 million Interest Expense ~$80–85 million ~$285–290 million Share Count ~52-53 million ~52-53 million Effective Tax Rate ~26% ~24-25%
Slide 22: Glossary
22 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 23: Workdays
23 Workdays Q1 Q2 Q3 Q4 FY 2019 63 64 63 62 252 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 24: Non-GAAP Measure Definitions
24 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 25: Organic Sales Growth by Segment
25 Organic Sales Growth by Segment $ thousands Organic Sales Growth by Segment - QTD: Three Months Ended Growth/(Decline) September 30, 2022 September 30, 2021 Reported Divestiture Impact Foreign Exchange Impact Workday Impact Organic Growth EES $2,234,771 $1,982,485 12.7% — % (2.2)% — % 14.9% CSS 1
Slide 26: Gross Profit and Free Cash Flow
26 Gross Profit and Free Cash Flow $ thousands Three Months Ended Nine Months Ended Gross Profit: September 30, 2022 September 30, 2021 June 30, 2022 September 30, 2022 September 30, 2021 Net sales $5,445,916 $4,728,325 $5,483,525 $15,861,622 $ 13,365,592 Cost of goods sold (excluding depreciation a
Slide 27: EBITDA and Adjusted EBITDA by Segment
27 Three Months Ended September 30, 2022 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $214,054 $138,747 $180,354 $ (307,905) $225,250 Net income attributable to noncontrolling interests 200 — — 408 608 Preferred stock dividends — —
Slide 28: Adjusted EPS
Adjusted EPS 28 Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Adjusted Income from Operations: $401,592 $229,466 $1,056,330 $581,589 Merger-related and integration costs 13,210 35,750 52,200 119,792 Accelerated trademark amortization
Slide 29: Capital Structure and Leverage
Capital Structure and Leverage 29 $ thousands Twelve Months Ended Financial Leverage: September 30, 2022 December 31, 2021 Net income attributable to common stockholders $751,555 $407,974 Net income attributable to noncontrolling interests 1,794 1,020 Preferred stock dividends 57,408 57,408 Provisio