Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2022 Earnings Presentation
28 slides from Wesco International's earnings presentation, Aug 4, 2022
Slide 1: Second Quarter 2022 Webcast Presentation
Second Quarter 2022 Webcast Presentation August 4, 2022 NYSE: WCC
Slide 2: Forward-looking statements
2 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 may cause actual results to
Slide 3: Agenda
Agenda 3 Business Overview Financial Results Overview John Engel Chairman, President & CEO Executive Vice President & CFO Dave Schulz
Slide 4: 2022 Momentum Continues with Record Second Quarter
4 2022 Momentum Continues with Record Second Quarter Record results and strong execution drives increased 2022 outlook See appendix for non-GAAP reconciliations. • First $5 billion quarter; up 19% YOY and up 11% sequentially on a reported basis • Leveraging increased scale, expanded product and serv
Slide 5: Substantial Value Creation Since Merger Close
5 Substantial Value Creation Since Merger Close $ millions $8,483 $10,416 1H 2019 1H 2022 +23% Sales Record $435 $809 1H 2019 1H 2022 +86% Adjusted EBITDA Record 5.1% 7.8% 1H 2019 1H 2022 +270 bps Adjusted EBITDA Margin Record 5.7x 3.4x Q2 2020 Q2 2022 Leverage 19.6% 21.5% 1H 2019 1H 2022 +190 bps G
Slide 6: Multiple Long-Term Growth Drivers
6 Multiple Long-Term Growth Drivers The new Wesco is uniquely positioned for sustainable long-term growth + + Electrification Automation and IoT Green Energy and Grid Modernization 24/7 Connectivity and Security Digitalization Supply Chain Consolidation and Relocation to North America Strong Secular
Slide 7: Second Quarter Results Overview
Second Quarter Results Overview Dave Schulz Executive Vice President & Chief Financial Officer
Slide 8: Second Quarter Results Overview
8 Second Quarter Results Overview Exceptional financial results driven by strong sales growth, margin expansion and operating leverage Q2 2022 Q2 2021 YOY Sales $5,484 $4,596 +19% Gross Profit $1,189 $965 +23% % of sales 21.7% 21.0% +70 bps Adjusted Income from Operations $388 $262 +48% % of sales 7
Slide 9: Second Quarter Adjusted EBITDA Bridge
9 Second Quarter Adjusted EBITDA Bridge Exceptional financial results driven by strong sales growth, margin expansion and operating leverage Q2 2021 Adjusted EBITDA Sales Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other Q2 2022 Adjusted EBITDA $
Slide 10: Electrical & Electronic Solutions (EES)
Exceptional growth due to enhanced value proposition and complete electrical solutions offering Second Quarter Drivers • Record quarter with sales growth in all end markets – Non-residential construction tracking ahead of expectations – Strong industrial and OEM momentum continues • Backlog at recor
Slide 11: Communications & Security Solutions (CSS)
Second Quarter Drivers • Record quarter with sales growth in all end markets despite continued global supply chain challenges – Network infrastructure growth led by global hyper-scale data centers and an increase in structured cabling due to accelerating return-to- workplace activities – Security gr
Slide 12: Utility & Broadband Solutions (UBS)
Second Quarter Drivers • Record quarter with double-digit sales growth in all end markets – Broad-based growth in utility driven by investments in grid modernization – Broadband communications growth driven by connectivity demand and rural broadband expansion – Integrated supply up versus PY and seq
Slide 13: Cross-Sell Driving Market Outperformance
13 $170 • Expanding pipeline of cross-sell opportunities • Strong customer relationships and global supplier partnerships • Minimal overlap between legacy Wesco and Anixter customers • Highly complementary products and services • Salesforce training and incentives in place • Opportunities to cross-s
Slide 14: Cross-sell momentum highlights the power of the combined portfolio
14 • Cross-sell momentum highlights the power of the combined portfolio EES CSS UBS Overview: Multi-million project win to provide cable, switchgear, and bulk electrical material to support the construction of a 900,000 sq. ft. data center Overview: Middle mile broadband project to provide broadband
Slide 15: Accelerated Cost Synergy Realization Continues
15 Accelerated Cost Synergy Realization Continues Increased 2022 synergies again; Tracking well toward 2023 cost synergy target of $315 million 202 1 (to date) To be realizedRealized Supply Chain $115 million G&A $95 million Corporate Overhead $45 million Field Operations $60 million To be realizedR
Slide 16: First Half Free Cash Flow
16 First Half Free Cash Flow $438 Adjusted Net Income D&A, Variable Comp and Other Accounts Receivable Inventory Accounts Payable Capex / IT Spend Free Cash Flow $40 $(57) $(717) $(531) $534 $(293) Free Cash Flow Managing working capital to ensure effective execution in a high-growth, supply-constra
Slide 17: Leverage Back within Target Range
17 5.7x 5.3x 5.3x 4.9x 4.5x 4.1x 3.9x 3.6x 3.4x Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Net Debt / TTM Adjusted EBITDA Leverage Back within Target Range Well Ahead of Schedule Achieved our deleveraging target by returning to target range one year sooner than originall
Slide 18: Increased 2022 Outlook
Increased 2022 Outlook 18 Outlook Notes • Does not reflect the effect of potential tax law changes or future refinancing activity • Utility customer model shift results in negative sales impact of ~0.5% 1 Adjusted EBITDA is defined as EBITDA before other, net, non-cash stock-based compensation and m
Slide 19: Summary
19 Summary Differentiated capabilities and execution drive our increased 2022 outlook • Strong momentum continued in Q2 closing out an exceptional first half • Outstanding results across the board in Q2 and strongest quarter of Wesco + Anixter combination yet – All-time record sales, gross margin, o
Slide 20: Appendix
APPENDIX
Slide 21: Glossary
21 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: Commun
Slide 22: Workdays
22 Workdays Q1 Q2 Q3 Q4 FY 2019 63 64 63 62 252 2020 64 64 64 61 253 2021 62 64 64 62 252 2022 63 64 64 62 253
Slide 23: Non-GAAP Measure Definitions
23 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
Slide 24: Organic Sales Growth by Segment
24 Organic Sales Growth by Segment $ thousands June 30, 2022 June 30, 2021 Reported Divestiture Impact Foreign Exchange Impact Workday Impact Organic Growth EES $2,330,153 $1,923,011 21.2% — % (1.9)% — % 23.1% CSS 1,601,997 1,461,120 9.6% — % (1.9)% — % 11.5% UBS 1,551,375 1,211,659 28.0% — % (0.6)%
Slide 25: Gross Profit and Free Cash Flow
25 Gross Profit and Free Cash Flow $ thousands Three Months Ended Gross Profit: June 30, 2022 June 30, 2021 March 31, 2022 Net sales $5,483,525 $4,595,790 $4,932,181 Cost of goods sold (excluding depreciation and amortization) 4,294,086 3,630,633 3,883,074 Gross profit $1,189,439 $965,157 $1,049,107
Slide 26: Adjusted EBITDA
26 Adjusted EBITDA $ thousands EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total EES CSS UBS Corporate Total Net income attributable to common stockholders $222,758 $130,639 $161,784 ($308,827) $206,354 $153,976 $111,046 $94,688 ($254,867) $104,843 Net income (loss) attributable to
Slide 27: Adjusted EPS
Adjusted EPS 27 $ thousands, except per share amounts Adjusted Income from Operations: June 30, 2022 June 30, 2021 Income from operations $370,709 $218,872 Merger-related and integration costs 13,427 37,720 Accelerated trademark amortization 3,672 5,049 Adjusted income from operations $387,808 $261,
Slide 28: Capital Structure and Leverage
Capital Structure and Leverage 28 (1) Other non-operating income for the twelve months ended June 30, 2022 and December 31, 2021 includes a $36.6 million curtailment gain resulting from the remeasurement of the Company's pension obligations in the U.S. and Canada due to amending certain terms of suc