Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2023 Earnings Presentation
27 slides from Wesco International's earnings presentation, Nov 2, 2023
Slide 1: Third Quarter 2023 Webcast Presentation
NYSE: WCC Third Quarter 2023 Webcast Presentation November 2, 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: Third Quarter Highlights and Outlook
Third Quarter Highlights and Outlook • Another quarter of strong free cash flow generation ― Free cash flow of ~$360 million (>140% of adjusted net income) highlights strength of our B2B distribution model ― Reduced inventories, paid down debt, and repurchased shares of Wesco stock in Q3 ― Financial
Slide 4: Anixter Integration Update
Anixter Integration Update $ millions Gross Adjusted Adjusted Sales Leverage Margin EBITDA EBITDA Margin +29% +220 bps +91% +260 bps 3 turns Since closing Anixter acquisition 21.6% $457 $5,644 8.1% 5.7x $4,370 5.5% $239 19.4% 2.7x Lowest since Anixter acquisition Q3 2019 Q3 2023 Q3 2019 Q3 2023 Q3 2
Slide 5: Third Quarter Results Overview
Third Quarter Results Overview $ millions, except per share amounts Q3 Q3 • Record Q3 sales with records in CSS and UBS YOY 2023 2022 • Organic sales +3% YOY, reported sales +4% YOY • Internal initiatives driving market outgrowth Sales $5,644 $5,446 +3%1 • Gross margin stable sequentially and YTD Gr
Slide 6: Third Quarter Sales and Adjusted EBITDA Bridges
Third Quarter Sales and Adjusted EBITDA Bridges $ millions Net Sales1 Adjusted EBITDA 6.7% of sales $5,644 +3% organic $5,446 $466 $457 (2)% 8.6% of sales 8.1% (50) of sales bps Q3 2022 Market Share Gain/ M&A Difference in Q3 2023 Q3 2022 Sales Gross Compensation & Digital/IT Q3 2023 Sales Growth Cr
Slide 7: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) Third Quarter Drivers $ millions • Third quarter organic sales approximately flat Q3 Q3 – Construction flat as growth from large project shipments was offset by a YOY 2023 2022 decline in wire and cable sales – Industrial up HSD driven by growth in automation
Slide 8: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) Third Quarter Drivers $ millions • Record third quarter sales up 11%, up 4% organically Q3 Q3 YOY – Network infrastructure up LDD 2023 2022 – Substantial growth in hyperscale customers for WDCS including Rahi Sales $1,778 $1,602 +4%2 – Service provider sales
Slide 9: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) Third Quarter Drivers $ millions • Record third quarter driven by continued strength in Utility and Q3 Q3 YOY Integrated Supply 2023 2022 – Utility sales up HSD driven by electrification, green energy, and grid Sales $1,676 $1,609 +6%2 modernization investments Ad
Slide 10: Increasing Cross-Sell Target to $2.2 Billion
Increasing Cross-Sell Target to $2.2 Billion Cumulative Cross-Sell Synergies $2.2 $2.0 billion billion Solid customer Minimal overlap between $2.0 Strong pipeline of cross- relationships and global legacy Wesco and Anixter billion sell opportunities $1.8 supplier partnerships customers billion Captu
Slide 11: 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 Q3 $80 $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 Q
Slide 12: Free Cash Flow
Free Cash Flow Third Quarter Free Cash Flow $ millions $44 $357 $11 $(8) $(19) $51 $29 $249 143% of Adjusted Net Income Adjusted Accounts Inventory Accounts Capex Interest Other Free Net Income Receivable Payable Cash Flow Another quarter of strong cash flow consistent with our expectations; YTD fre
Slide 13: 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 3 turns 4.5x since June 2020 4.1x 3.9x 3.6x 3.5x • Pace of deleveraging significantly faster than 3.4x originally expected 3.2x
Slide 14: 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 15: Updating 2023 Outlook
Updating 2023 Outlook Outlook August 3, 2023 November 2, 2023 Market growth (including price) 3% - 4% 2% - 3% Plus: share gain/cross-sell 1% - 2% 1% - 2% Total organic sales 4% - 6% ~4% Sales Rahi acquisition ~2% ~2% Less: differences of foreign exchange rates ~(1)% ~(1)% Less: impact of one fewer w
Slide 16: Third Quarter Highlights and Outlook
Third Quarter Highlights and Outlook • Another quarter of strong free cash flow generation ― Free cash flow of ~$360 million (>140% of adjusted net income) highlights strength of our B2B distribution model ― Reduced inventories, paid down debt, and repurchased shares of Wesco stock in Q3 ― Financial
Slide 17: Appendix
APPENDIX wf wesco
Slide 18: Underlying Assumptions
Underlying Assumptions FY 2023 FY 2023 August Outlook November Outlook Depreciation and Amortization ~$175–185 million ~$175–185 million Interest Expense ~$370–390 million ~$380–390 million Other Expense, net ~$20–30 million ~$20 million Capital Expenditures ~$100 million ~$100 million Share Count ~
Slide 19: 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 20: 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 B2B: Business-to-Business OEM: Original equipment manufacturer COGS: Cost of goods sold OPEX: Operating expenses CIG: Commercial, Institutional and
Slide 21: Workdays
Workdays Q1 Q2 Q3 Q4 FY 2021 62 64 64 62 252 2022 63 64 64 62 253 2023 63 64 63 62 252 2024 63 64 64 63 254 21
Slide 22: 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 23: Organic Sales Growth by Segment
Organic Sales Growth by Segment $ millions Organic Sales Growth by Segment - YOY: Three Months Ended Growth/(Decline) Sept 30, Sept 30, Acquisition Foreign Exchange Workday Organic Reported 2023 2022 Impact Impact Impact Growth EES $ 2,190.7 $ 2,234.8 (2.0)% —% (0.2)% (1.6)% (0.2)% CSS 1,778.0 1,602
Slide 24: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow $ millions Three Months Ended Nine Months Ended Gross Profit: Sept 30, 2023 Sept 30, 2022 Sept 30, 2023 Sept 30, 2022 Net sales $ 5,644.4 $ 5,445.9 $ 16,911.8 $ 15,861.6 Cost of goods sold (excluding depreciation and amortization) 4,422.4 4,241.4 13,238.9 12,418.6 Gro
Slide 25: Adjusted EBITDA
Adjusted EBITDA $ millions Three Months Ended September 30, 2023 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 177.9 $ 146.0 $ 188.7 $ (293.6) $ 219.0 Net income (loss) attributable to noncontrolling interests — 0.7 — (0.1) 0.6 Pr
Slide 26: Adjusted EPS
Adjusted EPS $ millions, except per share amounts Three Months Ended Sept 30, 2023 Sept 30, 2022 (5) Adjusted Income from Operations: Income from operations $ 380.5 $ 401.6 Merger-related and integration costs (1) 15.0 13.2 Restructuring costs (2) 5.6 — Accelerated trademark amortization (3) 0.4 0.4
Slide 27: Capital Structure and Leverage
Capital Structure and Leverage $ millions Twelve Months Ended September 30, December 31, Financial Leverage: 2023 2022 Net income attributable to common stockholders $ 785.0 $ 803.1 Net income attributable to noncontrolling interests 0.2 1.7 Preferred stock dividends 57.4 57.4 Provision for income t