WESCO International, Inc. · NYSE:WCC
WESCO International — Q1 2017 Earnings Presentation
23 slides from WESCO International's earnings presentation, Apr 27, 2017
Slide 1: Q1 2017 Earnings Webcast Presentation
Webcast Presentation April 27, 2017 Q1 2017 Earnings
Slide 2: Safe Harbor Statement
2 Q1 2017 Earnings Webcast, 4/27/17 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
Slide 3: Q1 2017 Highlights
3 Q1 2017 Earnings Webcast, 4/27/17 Q1 2017 Highlights …performance in-line with outlook • First quarter results were in line with our expectations and outlook • Reported sales were flat ‒ Organic sales were down 2% in U.S. ‒ Organic sales were up 3% in Canada • Organic sales were down 4% sequential
Slide 4: Industrial End Market
4 Q1 2017 Earnings Webcast, 4/27/17 Industrial End Market • Q1 2017 Sales − Organic sales up 1% versus prior year (up 3% in U.S. and down 5% in Canada in local currency), after eight consecutive quarters of sales declines − Up 2% sequentially • Most forward looking indicators have continued to impro
Slide 5: Construction End Market
5 Q1 2017 Earnings Webcast, 4/27/17 • Q1 2017 Sales − Organic sales down 4% versus prior year (down 6% in U.S. and up 3% in Canada in local currency) − Down 10% sequentially, in line with normal seasonality − Growth with commercial contractors partially offset weakness with contractors serving the i
Slide 6: Utility End Market
6 Q1 2017 Earnings Webcast, 4/27/17 Utility End Market Organic Sales Growth versus Prior Year 16% Utility • Investor Owned • Public Power • Utility Contractors • Q1 2017 Sales − Organic sales down 5% versus prior year (down 6% in U.S. and up 10% in Canada in local currency) − Down 12% sequentially −
Slide 7: CIG End Market
7 Q1 2017 Earnings Webcast, 4/27/17 CIG End Market • Q1 2017 Sales − Organic sales down 2% versus prior year (down 4% in U.S. and up 26% in Canada in local currency) − Up 1% sequentially • Government sales up mid-single digits in the U.S. • Customer focus remains on energy efficiency (lighting, auto
Slide 8: Q1 2017 Results
8 Q1 2017 Earnings Webcast, 4/27/17 Q1 2017 Results Outlook Actual YOY Sales (3)% to Flat $1.77B Flat Gross Margin 19.7% Down 30 bps SG&A $267M, 15.1% Down 1%, Down 10 bps (Core down 2%) Operating Profit $67M Down 3% Operating Margin 3.8% to 4.1% 3.8% Down 10 bps Effective Tax Rate ~30% 28.1% Down 2
Slide 9: Diluted EPS Walk
9 Q1 2017 Earnings Webcast, 4/27/17 Diluted EPS Walk Q1 2016 $0.77) Core operations (0.10) Foreign exchange impact 0.06) Change in accounting for stock-based awards 0.03) Tax 0.04) Share count (0.04) 2017 $0.76)
Slide 10: Cash Generation and Leverage
10 Q1 2017 Earnings Webcast, 4/27/17 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 75.0 43.1 2016 YTD 2017 YTD Cash Generation Free Cash Flow ($ Millions) Note: See appendix for non-GAAP reconciliations. 114% of net income 217% of net income > $1B of free cash flow over last 4 years Target Leverage 2
Slide 11: 2017 Outlook
11 Q1 2017 Earnings Webcast, 4/27/17 2017 Outlook Q2 FY Sales (2)% to 1% Flat to 4% Operating Margin 4.2% to 4.6% 4.4% to 4.6% Effective Tax Rate ~ 29% ~ 30% Diluted EPS $3.60 to $4.00 Free Cash Flow >90% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.75
Slide 12: Appendix: Non-GAAP Financial Measures
12 Q1 2017 Earnings Webcast, 4/27/17 Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, adjusted tax rate, financial leverage, and free cash flow. The Company believes that these no
Slide 13: WESCO Profile 2017
13 Q1 2017 Earnings Webcast, 4/27/17 WESCO Profile 2017 36% 34% 16% 14% 40% 15% 14% 12% 11% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power
Slide 14: Sales Growth
14 Q1 2017 Earnings Webcast, 4/27/17 Sales Growth 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9 Core (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) (4.0) (6.5) (5
Slide 15: Q1 2017 Sales Growth – Geography
15 Q1 2017 Earnings Webcast, 4/27/17 Q1 2017 Sales Growth – Geography U.S. Canada International Total Change in net sales (USD) (0.8) 7.4 (13.4) (0.2) Impact from acquisitions 1.3 - - 0.9 Impact from foreign exchange rates - 4.2 (2.4) 0.6 Impact from number of workdays - - - - Organic sales growth (
Slide 16: Sales Growth-End Markets Q1 2017
16 Q1 2017 Earnings Webcast, 4/27/17 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q1 2017 vs. Q1 2016 Q1 2017 vs. Q4 2016 Q1 Q1 Q1 Q4 2017 2016 % Growth 2017 2016 % Growth Industri
Slide 17: Q1 2017 Organic Sales by End Market
17 Q1 2017 Earnings Webcast, 4/27/17 Q1 2017 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth 1.5 (2.4) (4.2) (1.6) (1.1) FX Impact 0.3 1.2 0.3 0.4 0.6 Workday Impact - - - - - Organic Growth 1.2 (3.6) (4.5) (2.0) (1.7) (%)
Slide 18: Adjusted Tax Rate
18 Q1 2017 Earnings Webcast, 4/27/17 Adjusted Tax Rate ($ Millions) Q1 2016 Q1 2017 Reported Results Adjustments (1) Adjusted Results Reported Results Adjustments (2) Adjusted Results Income before income taxes 50.7 - 50.7 50.4 - 50.4 Provision for income taxes 16.1 (1.8) 14.3 12.6 1.6 14.2 Effectiv
Slide 19: Debt Maturity Schedule and Capital Structure
19 Q1 2017 Earnings Webcast, 4/27/17 Outstanding at December 31, 2016 Outstanding at March 31, 2017 Debt Maturity Schedule AR Revolver (V) 380 345 2018 Inventory Revolver (V) 4 - 2020 2019 Term Loans (V) 145 130 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 350 2024 Other (V) 24
Slide 20: Financial Leverage
20 Q1 2017 Earnings Webcast, 4/27/17 Financial Leverage Twelve Months Ended March 31, 2017 Financial leverage ratio: Income from operations $ 330 Depreciation and amortization 66 EBITDA $ 396 March 31, 2017 Current debt and short-term borrowings $ 29 Long-term debt 1,310 Debt discount and deferred f
Slide 21: Non-Cash Interest Expense
21 Q1 2017 Earnings Webcast, 4/27/17 ($ Millions) 2015 2016 Q1 2017 Amortization of Debt Discount(1) 6.1 3.0 0.1 Amortization of Deferred Financing Fees 6.1 3.6 0.9 FIN 48 (8.7) 1.2 0.1 Total 3.5 7.8 1.1 Non-Cash Interest Expense (1) Includes convertible debt and term loan; the convertible debt was
Slide 22: Free Cash Flow Reconciliation
22 Q1 2017 Earnings Webcast, 4/27/17 Free Cash Flow Reconciliation Q1 2016 Q1 2017 Cash flow provided by operations 78.6 47.6 Less: Capital expenditures (3.6) (4.5) Free Cash Flow 75.0 43.1 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are d
Slide 23: Work Days
23 Q1 2017 Earnings Webcast, 4/27/17 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