Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2017 Earnings Presentation
23 slides from Wesco International's earnings presentation, Oct 26, 2017
Slide 1: Webcast Presentation – Q3 2017 Earnings
Webcast Presentation – October 26, 2017 Q3 2017 Earnings
Slide 2: Safe Harbor Statement
2 Q3 Earnings Webcast 10/26/17 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 o
Slide 3: Q3 2017 Highlights
3 Q3 Earnings Webcast 10/26/17 Q3 2017 Highlights …performance exceeded outlook • Third quarter results exceeded our expectations • Improved business momentum across all end markets and geographies • Reported sales were up 8%, organic sales were up 9% ‒ Highest growth rate in over 5 years ‒ Organic
Slide 4: Industrial End Market
4 Q3 Earnings Webcast 10/26/17 Industrial End Market • Q3 2017 Sales − Organic sales were up 11% versus prior year (up 5% in the U.S. and up 22% in Canada in local currency) − Up 2% sequentially • Increasing business momentum with industrial customers • Sales growth was broad-based across the U.S. a
Slide 5: Construction End Market
5 Q3 Earnings Webcast 10/26/17 (3.6%) 2.3% (5.5%) (1.9%) (3.6%) (4.4%) 6.0% • Q3 2017 Sales − Organic sales were up 6% versus prior year (up 5% in the U.S. and up 6% in Canada in local currency) − Up 8% sequentially • Increasing business momentum with construction/contractor customers • Sales growth
Slide 6: Utility End Market
6 Q3 Earnings Webcast 10/26/17 Utility End Market Organic Sales Growth versus Prior Year 15% Utility • Investor Owned • Public Power • Utility Contractors • Q3 2017 Sales − Organic sales were up 9% versus prior year (up 8% in the U.S. and up 10% in Canada in local currency) − Up 12% sequentially − E
Slide 7: CIG End Market
7 Q3 Earnings Webcast 10/26/17 CIG End Market • Q3 2017 Sales − Organic sales were up 9% versus prior year (up 5% in the U.S. and up 34% in Canada in local currency) − Flat sequentially • Technical expertise and supply chain solutions driving positive momentum in datacenter, broadband, and cloud tec
Slide 8: Q3 2017 Results
8 Q3 Earnings Webcast 10/26/17 Q3 2017 Results Outlook Actual YOY Sales 2% to 5% $2.00B Up 7.8% Gross Margin 19.3% Down 40 bps; Up 10 bps sequentially SG&A $280M, 14.0% Up 10%, Up 20 bps Operating Profit $89M Down 4% Operating Margin 4.2% to 4.6% 4.5% Down 50 bps; Up 10 bps sequentially Effective Ta
Slide 9: Diluted EPS Walk
9 Q3 Earnings Webcast 10/26/17 Diluted EPS Walk Q3 2016 Adjusted (1) $1.05) Core operations (Reflects favorable operating leverage, offset by the planned restoration of variable compensation versus prior year) (0.01)) Foreign exchange 0.02 Tax 0.02 Share count (Repurchased $50 million of shares in b
Slide 10: Cash Generation and Leverage
10 Q3 Earnings Webcast 10/26/17 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Cash Generation 204.0 65.1 2016 YTD 2017 YTD Free Cash Flow ($ Millions) Note: See appendix for non-GAAP reconciliations. 46% of net income 150% of adjusted net income > $1B of free cash flow over last 4 years Target
Slide 11: 2017 Outlook
11 Q3 Earnings Webcast 10/26/17 2017 Outlook Q4 FY (Current) FY (Previous) Sales 5% to 8% 3% to 4% 1% to 3% Operating Margin 3.9% to 4.3% 4.1% to 4.3% 4.1% to 4.3% Effective Tax Rate ~ 27% ~ 26% ~ 27% Diluted EPS $3.75 to $3.95 $3.60 to $3.90 Free Cash Flow >90% of net income >90% of net income Note
Slide 12: Appendix – Non-GAAP Financial Measures
12 Q3 Earnings Webcast 10/26/17 Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, financial leverage, free cash flow, adjusted net income and adjusted earnings per diluted share. T
Slide 13: WESCO Profile 2017
13 Q3 Earnings Webcast 10/26/17 WESCO Profile 2017 37% 33% 15% 15% 40% 15% 15% 12% 10% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Util
Slide 14: Sales Growth
14 Q3 Earnings Webcast 10/26/17 Sales Growth 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) (0.1) 7.8 Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9 Core (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) (4.
Slide 15: Q3 2017 Sales Growth – Geography
15 Q3 Earnings Webcast 10/26/17 Q3 2017 Sales Growth – Geography U.S. Canada International Total Change in net sales (USD) 3.9 14.7 47.6 7.8 Impact from acquisitions - - - - Impact from foreign exchange rates - 3.6 2.7 0.8 Impact from number of workdays (1.6) (1.6) (1.6) (1.6) Organic sales growth 5
Slide 16: Sales Growth – End Markets
16 Q3 Earnings Webcast 10/26/17 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q3 2017 vs. Q3 2016 Q3 2017 vs. Q2 2017 Q3 Q3 Q3 Q2 2017 2016 % Growth 2017 2017 % Growth Industrial Co
Slide 17: Q3 2017 Organic Sales by End Market
17 Q3 Earnings Webcast 10/26/17 Q3 2017 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth 10.3 5.6 7.5 8.0 7.8 FX Impact 0.7 1.2 0.5 0.6 0.8 Workday Impact (1.6) (1.6) (1.6) (1.6) (1.6) Organic Growth 11.2 6.0 8.6 9.0 8.6 (%)
Slide 18: 2029 Debentures Loss Non-GAAP Reconciliation
18 Q3 Earnings Webcast 10/26/17 2029 Debentures Loss Non-GAAP Reconciliation (in millions, except for EPS) Q3 2016 YTD 2016 Reported Results Adjustments (1) Adjusted Results Reported Results Adjustments (1) Adjusted Results Operating profit $ 92.6 - $ 92.6 $ 250.0 - $ 250.0 Interest 20.8 - 20.8 59.1
Slide 19: Debt Maturity Schedule and Capital Structure
19 Q3 Earnings Webcast 10/26/17 Outstanding at December 31, 2016 Outstanding at September 30, 2017 Debt Maturity Schedule AR Revolver (V) 380 400 2018 Inventory Revolver (V) 4 32 2020 2019 Term Loans (V) 145 100 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 350 2024 Other (V) 24
Slide 20: Financial Leverage
20 Q3 Earnings Webcast 10/26/17 Financial Leverage Twelve Months Ended September 30, 2017 Financial leverage ratio: Income from operations $ 322 Depreciation and amortization 64 EBITDA $ 386 September 30, 2017 Current debt and short-term borrowings $ 41 Long-term debt 1,368 Debt discount and deferre
Slide 21: Non-Cash Interest Expense
21 Q3 Earnings Webcast 10/26/17 2015 2016 YTD 2017 Amortization of Debt Discount(1) 6.1 3.0 0.2 Amortization of Deferred Financing Fees 6.1 3.6 2.8 FIN 48 (8.7) 1.2 - Total 3.5 7.8 3.0 Non-Cash Interest Expense (1) Includes convertible debt and term loan; the convertible debt was redeemed in Q3 2016
Slide 22: Free Cash Flow Reconciliation
22 Q3 Earnings Webcast 10/26/17 Free Cash Flow Reconciliation YTD 2016 YTD 2017 Cash flow provided by operations 217.2 81.1 Less: Capital expenditures (13.2) (16.0) Free cash flow 204.0 65.1 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are
Slide 23: Work Days
23 Q3 Earnings Webcast 10/26/17 Work Days Q1 Q2 Q3 Q4 FY 2015 62 64 64 63 253 2016 64 64 64 62 254 2017 64 64 63 62 253 2018 64 64 63 62 253