Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2023 Earnings Presentation
30 slides from Wesco International's earnings presentation, Aug 3, 2023
Slide 1: Second Quarter 2023 Webcast Presentation
NYSE: WCC Second Quarter 2023 Webcast Presentation August 3, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements 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 m
Slide 3: Second Quarter Highlights and Outlook
Second Quarter Highlights and Outlook • Strength of portfolio drove record second quarter sales ― Record sales in CSS and UBS driven by share gains and secular trends more than offset supply chain rebalancing that drove customer destocking, and select market weakness in the electrical industry (EES)
Slide 4: Anixter Integration Update
Anixter Integration Update $ millions Gross Adjusted Adjusted Sales Leverage Margin EBITDA EBITDA Margin Record +30% +210 bps +78% +210 bps 2.9x Since closing Anixter acquisition $5,746 21.6% $442 7.7% 5.7x $4,413 5.6% $248 19.5% 2.8x Lowest Since Anixter acquisition Q2 2019 Q2 2023 Q2 2019 Q2 2023
Slide 5: Second Quarter Results Overview
Second Quarter Results Overview $ millions, except per share amounts Q2 Q2 YOY • All-time record sales, with record sales in CSS and UBS 2023 2022 • Sales impacted by select market weakness in EES Sales $5,746 $5,484 +3%1 • Organic sales +3% YOY, reported sales +5% YOY • Backlog up 6% YOY, down 2% s
Slide 6: Second Quarter Sales and Adjusted EBITDA Bridges
Second Quarter Sales and Adjusted EBITDA Bridges $ millions Net Sales1 Adjusted EBITDA +3% 6.7% $5,746 organic of sales $444 $442 flat $5,484 8.1% 7.7% (40) of sales of sales bps Q2 2022 Market Share Gain/ FX M&A Q2 2023 Q2 2022 Sales Gross Compensation & Digital/IT Q2 2023 Sales Growth Cross Sell S
Slide 7: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) Second Quarter Drivers $ millions Q2 Q2 • Second quarter sales down 5% organically (down 3%1 excluding YOY 2023 2022 the impact of inter-segment business transfers) Sales $2,200 $2,330 (5)%2 – Construction down MSD primarily due to declines in wire and cable;
Slide 8: Q2 Mega-Project Cross-Sell Win in EES
Q2 Mega-Project Cross-Sell Win in EES Project Overview • Recently awarded a $120 million project to support the construction of a new EV manufacturing facility Switchgear • Supplying switchgear, lighting, wire and cable, and electrical supplies • Scope of award has expanded substantially driven by c
Slide 9: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) Second Quarter Drivers $ millions • Record quarterly sales up 16% (up 7% organically) with growth in all key end markets Q2 Q2 YOY – Network infrastructure up LDD 2023 2022 – Substantial growth in hyperscale Sales $1,851 $1,602 +7%2 – Service provider sales
Slide 10: Wesco Data Center End-to-End Solutions
Wesco Data Center End-to-End Solutions Edge and Micro MTDC and Hyperscale Enterprise Data Centers Colocation Facilities Environments Supporting All Data Center Environments Expanded product End-to-end data center Increased global services, Extensive supplier and Focused expertise in white and soluti
Slide 11: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) Second Quarter Drivers $ millions Q2 Q2 • Record quarter driven by strength in Utility and Integrated YOY 2023 2022 Supply Sales $1,694 $1,551 +10%1 – Utility sales up LDD driven by investments in electrification, green energy, and grid modernization Adjusted EBIT
Slide 12: Secular Trends Accelerating Power Chain Modernization and Expansion
Secular Trends Accelerating Power Chain Modernization and Expansion Cost to modernize 60% of distribution lines Grid hardening and transmission lines by ~$700B 2050 have exceeded life modernization Increase in annual expectancy transmission capex by 2040 2x 90% of transformers Renewables Historical
Slide 13: Increasing Cross-Sell Target to $2.0 Billion
Increasing Cross-Sell Target to $2.0 Billion Cumulative Cross-Sell Synergies $2.0 billion $1.8 Expanding pipeline of Strong customer Minimal overlap between billion relationships and global legacy Wesco and Anixter cross-sell opportunities $1.75 supplier partnerships customers billion $1.45 billion
Slide 14: Cost Synergy Realization Continues
Cost Synergy Realization Continues Cumulative Realized Synergies Cumulative Realized Synergies By Type $ millions $315 Supply Chain $270 $125 million Q4 $73 G&A $188 $95 million Q4 $60 Q3 $68 Field Operations Q2 $78 Q3 $50 Q2 $66 202 $45 million $39 Q2 $44 1 $76 Corporate (to date) Overhead Q4 $25 Q
Slide 15: Free Cash Flow
Free Cash Flow Second Quarter Free Cash Flow $ millions $8 $(30) $(14) $150 $293 $208 $(29) 141% of Adjusted Net Income Adjusted Accounts Inventory Accounts Capex Other Free Net Income Receivable Payable Cash Flow Strong second quarter cash flow consistent with expectations; YTD free cash flow of $2
Slide 16: Leverage Within Target Range
Leverage Within Target Range Net Debt / TTM Adjusted EBITDA Acquisition closed June 2020 5.7x Leverage at lowest level since Anixter acquisition 5.3x 5.3x Reduction of 4.9x 2.9 turns 4.5x since June 2020 4.1x 3.9x 3.6x 3.5x • Pace of deleveraging significantly faster than 3.4x originally expected 3.
Slide 17: Attractive Long-Term Growth Drivers
Attractive Long-Term Growth Drivers Increasing Public Wesco’s Uniquely Secular Growth Trends Sector Investment Strong Position a U.S. • Leading Portfolio of Products, Infrastructure Services, and Solutions Bills + + Electrification Automation and IoT • Leading Positions in All SBUs Rural Digital Opp
Slide 18: Updating 2023 Outlook
Updating 2023 Outlook Outlook May 4, 2023 August 3, 2023 Market growth (including price) 4% - 6% 3% - 4% Plus: share gain/cross-sell 1% - 2% 1% - 2% Total organic sales 5% - 8% 4% - 6% Sales Rahi acquisition ~2% ~2% Less: differences of foreign exchange rates ~(1)% ~(1)% Less: impact of one fewer wo
Slide 19: Second Quarter Highlights and Outlook
Second Quarter Highlights and Outlook • Strength of portfolio drove record second quarter sales ― Record sales in CSS and UBS driven by share gains and secular trends more than offset supply chain rebalancing that drove customer destocking, and select market weakness in the electrical industry (EES)
Slide 20: Appendix
APPENDIX wf wesco
Slide 21: Underlying Assumptions
Underlying Assumptions FY 2023 FY 2023 May Outlook August Outlook Depreciation and Amortization ~$170–180 million ~$175–185 million Interest Expense ~$350–390 million ~$370–390 million Other Expense, net ~$30–40 million ~$20–30 million Capital Expenditures ~$100 million ~$100 million Share Count ~52
Slide 22: 2023 Inter-Segment Business Transfers
2023 Inter-Segment Business Transfers Q1 Q2 Q3 Q4 FY $ millions 2022 2022 2022 2022 2022 EES Sales (45) (55) (46) (52) (198) CSS Sales 37 48 37 45 168 UBS Sales 8 7 9 7 30 Beginning in 2023, Wesco shifted the business associated with certain accounts from EES to CSS and UBS. The 2022 sales amounts b
Slide 23: Glossary
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: Communica
Slide 24: Workdays
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 24
Slide 25: Non-GAAP Measure Definitions
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 wo
Slide 26: Organic Sales Growth by Segment
Organic Sales Growth by Segment $ millions Organic Sales Growth by Segment - YOY: Three Months Ended Growth/(Decline) June 30, June 30, Acquisition Foreign Exchange Workday Organic Reported 2023 2022 Impact Impact Impact Growth EES $ 2,200.3 $ 2,330.1 (5.6)% —% (0.9)% —% (4.7)% CSS 1,850.9 1,602.0 1
Slide 27: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow $ millions Three Months Ended Six Months Ended Gross Profit: June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net sales $ 5,745.5 $ 5,483.5 $ 11,267.4 $ 10,415.7 Cost of goods sold (excluding depreciation and amortization) 4,503.1 4,294.1 8,816.5 8,177.2 Gross
Slide 28: Adjusted EBITDA
Adjusted EBITDA $ millions Three Months Ended June 30, 2023 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 167.0 $ 132.2 $ 183.1 $ (303.6) $ 178.7 Net (loss) income attributable to noncontrolling interests (0.7) 0.1 — (0.1) (0.7) P
Slide 29: Adjusted EPS
Adjusted EPS Three Months Ended $ millions, except per share amounts June 30, 2023 June 30, 2022 Adjusted Income from Operations: Income from operations $ 363.8 $ 370.7 Merger-related and integration costs (1) 10.9 13.4 (2) Restructuring costs 9.8 — (3) Accelerated trademark amortization 0.8 3.7 Adj
Slide 30: Capital Structure and Leverage
Capital Structure and Leverage Twelve Months Ended $ millions June 30, December 31, Financial Leverage: 2023 2022 Net income attributable to common stockholders $ 791.3 $ 803.1 Net income attributable to noncontrolling interests 0.2 1.7 Preferred stock dividends 57.4 57.4 Provision for income taxes