Wesco International, Inc. · NYSE:WCC
Wesco International — Investor Presentation (December 2017)
24 slides from Wesco International's investor presentation, Dec 13, 2017
Slide 1: 2018 Outlook Webcast Presentation
Webcast Presentation – December 13, 2017 2018 Outlook
Slide 2: Safe Harbor Statement
2 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 factors that may cause a
Slide 3: 2018 Priorities
3 2018 Priorities • Outperform the end markets − Execute One WESCO sales growth initiatives − Maintain focus on sales execution and effectiveness − Differentiate via value-added services − Capitalize on growth markets − Make accretive acquisitions • Sustain and expand operating margin − Execute pric
Slide 4: Industrial End Market
4 Improving Flat Declining (10.2%) 1.2% 6.0% 11.2% FY 2016 Q1 2017 Q2 2017 Q3 2017 Organic Sales Growth versus Prior Year 42% Key Market Indicators U.S. industrial production Institute for Supply Management (ISM) indicators Capacity utilization Canadian industrial production • Global Accounts • Inte
Slide 5: Construction End Market
5 (2.2%) (3.6%) (4.4%) 6.0% FY 2016 Q1 2017 Q2 2017 Q3 2017 Key Market Indicators Architectural Billings Index Capital goods orders growth U.S. construction starts and put in place Canadian non-residential construction • Non-residential • Contractors 33% YTD Q3 2017 (0.6%) Construction End Market 20
Slide 6: Utility End Market
6 0.5% (4.5%) (4.4%) 8.6% FY 2016 Q1 2017 Q2 2017 Q3 2017 42% Key Market Indicators Distribution grid maintenance and upgrades Generation MRO, upgrades, and expansions Transmission line infrastructure build-out Residential and non-residential construction starts • Investor Owned • Public Power • Uti
Slide 7: CIG End Market
7 (1.7%) (2.0%) 7.4% 9.0% FY 2016 Q1 2017 Q2 2017 Q3 2017 Key Market Indicators Government spending Communications and security upgrades Education, healthcare and financial • Commercial • Institutional • Government 15% YTD Q3 2017 4.9% CIG End Market 2018 end market outlook: LSD to MSD sales increas
Slide 8: 2018 Sales Outlook
8 2018 Sales Outlook Sales Outlook End Market: Range Industrial LSD to MSD Construction Flat to MSD Utility Flat to LSD CIG LSD to MSD End Market Sales Growth 1% to 5% Market Outperformance ~1% Foreign Exchange slightly favorable Consolidated WESCO 3% to 6% Excludes future acquisitions. May not add
Slide 9: 2018 Sales Outlook by Geography
9 2018 Sales Outlook by Geography U.S. Canada International LSD to MSD growth LSD to MSD growth Flat …expecting solid U.S. and Canadian growth Sales Outlook Excludes future acquisitions.
Slide 10: 2018 Operating Margin Outlook
10 Range 2017 Operating Margin Outlook 4.1% to 4.3% Expected margin improvement • Operating leverage • Favorable business mix • Improved pricing +30 to 50 bps Subtotal Fully restore variable compensation 4.4% to 4.8% (20 bps) 2018 Operating Margin Outlook 4.2% to 4.6% 2018 Operating Margin Outlook …
Slide 11: 2018 Financial Outlook
11 3.80 ~3.75 ~4.05 2016 2017E 2018E 2018 Financial Outlook Sales ($B) Diluted EPS(1) ($) ~4.55 4.5% ~4.1% ~4.2% 2016 2017E 2018E Operating Margin (%) Sales +3% to 6% Effective tax rate ~28% Diluted shares outstanding ~47.5M 7.3 ~7.6 ~7.8 2016 2017E 2018E ~8.1 ~4.6% ~4.3% ~3.95 Margin improvement Va
Slide 12: Cash Generation and Leverage
12 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Cash Generation and Leverage (1) See Appendix for non-GAAP reconciliations. (2) Excludes the third quarter 2016 loss of $123.9M and related income tax benefit of $41.2M resulting from the redemption of the Company’s 6.0% Convertible Senior Debent
Slide 13: Effective Capital Allocation
13 Effective Capital Allocation Added New Share Repurchase Program • Up to $300M through end of 2020 • Replaces previous $300M authorization expiring in 2017 − utilized $250M through Q3 2017 • Authorization will enable WESCO to: − offset dilution from annual equity awards − make opportunistic purcha
Slide 14: Consistent Long-Term Growth Algorithm
14 Consistent Long-Term Growth Algorithm • Market growth • 1% to 2% from market outperformance • 1% to 3% from acquisitions • ~50% operating profit pull- through − gross margin improvement − operating cost leverage • ~30% effective tax rate under current tax law Annual Expectations over the Long-Ter
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Slide 16: Non-GAAP Financial Measures
16 Non-GAAP Financial Measures Appendix This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, financial leverage, free cash flow, adjusted net income and adjusted earnings per diluted share. WESCO believes that these non-GAAP measures
Slide 17: Definitions
17 Definitions • Financial leverage ratio is calculated by dividing total debt, which excludes debt discount and debt issuance costs, by the trailing twelve months earnings before interest, taxes, depreciation, and amortization (EBITDA). • Free cash flow is calculated by deducting capital expenditur
Slide 18: WESCO Profile Q3 2017
18 WESCO Profile Q3 2017 37% 33% 15% 15% 40% 15% 15% 12% 10% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Utility Contractors Commercial
Slide 19: Sales Growth - End Markets YTD Q3 2017
19 Note: The prior period end market amounts noted above contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth - End Markets YTD Q3 2017 vs. YTD Q3 2016 YTD Q3 YTD Q3 % 2017 2016 Growth Industrial 2,120 2,008 5.6% Construction 1,858 1,875 (0.9)% Utility 865 8
Slide 20: YTD Q3 2017 Organic Sales by End Market
20 YTD Q3 2017 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth 5.6 (0.9) (0.5) 4.4 2.3 FX Impact 0.0 0.2 0.1 0.0 0.1 Workday Impact (0.5) (0.5) (0.5) (0.5) (0.5) Organic Growth 6.1 (0.6) (0.1) 4.9 2.7 (%) Note: For organic sales growth in 2017, see quarterly e
Slide 21: Free Cash Flow Reconciliation
21 Free Cash Flow Reconciliation 2015 2016 2017 3Q YTD Cash flow provided by operations 283 300 81 Less: Capital expenditures (22) (18) (16) Free cash flow 261 282 65 Free cash flow as a % of adjusted net income(1) 125% 154% 46% Note: Free cash flow is a non-GAAP financial measure of liquidity. Capi
Slide 22: Financial Leverage Ratio
22 Financial Leverage Ratio Twelve Months Ended September 30, 2017 Financial leverage ratio: Income from operations $ 322 Depreciation and amortization 64 EBITDA $ 386 September 30, 2017 Short-term borrowings and current debt $ 41 Long-term debt 1,368 Debt discount and debt issuance costs(1) 14 Tota
Slide 23: Work Days
23 Work Days Q1 Q2 Q3 Q4 FY 2016 64 64 64 62 254 2017 64 64 63 62 253 2018 64 64 63 62 253
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