Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2020 Earnings Presentation
27 slides from Wesco International's earnings presentation, Aug 13, 2020
Slide 1: Second Quarter 2020 Webcast Presentation
Second Quarter 2020 Webcast Presentation August 13, 2020 1
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 may
Slide 3: Highlights
Highlights Second quarter • Q2 results exceeded our expectations on sales, opex, EBIT, EBIT%, EPS, and free cash flow • Reported sales down 3%; Organic sales down 12% ̶ Sequential sales improvement through the quarter (April -13%, May +9%, June +5%) ̶ Continued strength in Utility; up 7% over prior
Slide 4: Second Quarter Results Overview
Second Quarter Results Overview Three Months Ended June 30, 2020 2019 GAAP Merger- Adjusted Anixter Adjusted GAAP WESCO + related WESCO + Only1 WESCO WESCO $ in millions Anixter1 Adjustments Anixter1 Except per share amounts Sales $ 2,087 $ 2,087 $ 222 $ 1,865 $ 2,150 Gross Profit 394 394 45 349 409
Slide 5: Second Quarter Sales Summary (Legacy WESCO)
Second Quarter Sales Summary (Legacy WESCO) ORGANIC SALES ORGANIC SALES Year Over Year Year Over Year GROWTH1 GROWTH Total U.S. Canada International April (16)% Industrial (20)% (21)% (22)% (2)% May (10)% Construction (18)% (16)% (21)% (19)% June (13)% Utility 7% 6% 36% (53)% CIG (5)% (4)% (10)% (7)
Slide 6: Strong Balance Sheet
Strong Balance Sheet Liquidity (as of 6/30/20) Bank Credit Facilities Limited Operating Covenants • Liquidity: $819 million • Mature in 2023 and 2025 • No maximum leverage covenant – Invested cash: $169 million • Low cost LIBOR based • Fixed charge coverage covenant based on liquidity or availabilit
Slide 7: Key Second Half Priorities
Key Second Half Priorities • Build on improving sales momentum • Maintain disciplined cost management • Deploy Anixter’s gross margin improvement programs that generated seven consecutive quarters of year-over-year improvement through Q2 2020 • Rapidly execute Anixter merger synergies • Focus free c
Slide 8: Merger Update
MERGER UPDATE 8
Slide 9: WESCO-Anixter Merger Highlights
WESCO-Anixter Merger Highlights Transformational Combination Creates the Industry Leader in Electrical, Communications, and Utility Distribution and Supply Chain Solutions Differentiated Scale and Capabilities in Highly Fragmented Industry Complementary Products, Industries and Geographies Drive Acc
Slide 10: Transformational Combination Creates the Industry Leader
Transformational Combination Creates the Industry Leader in Electrical, Communications, and Utility Distribution and Supply Chain Solutions A leader in electrical distribution A leader in data communications, security, and wire & cable distribution ~$17 billion ~$1 billion ~50 ~18,900 Pro Forma Pro
Slide 11: Differentiated Scale and Capabilities in Highly Fragmented Industry
Differentiated Scale and Capabilities in Highly Fragmented Industry 6/30 TTM Net Sales North American Share 1 ($ in billions) $16.6 7% 6% Sonepar $8.1 $8.5 Other 5,000+ Graybar Rest of Rexel Top 200 + Combination enhances capabilities, expands share and increases scale 1. Source: Electrical Wholesal
Slide 12: Evolving Secular Trends Benefit WESCO + Anixter
Evolving Secular Trends Benefit WESCO + Anixter Secular Trends Benefitting WESCO and Anixter…. …Contribute to Financial Benefits of the Transformational Combination IoT and Remote Automation Connectivity Estimated Impact in Year Three Increased reliance Increase in number of on remote automated comm
Slide 13: Anixter Merger – Consistently Meeting Commitments
Anixter Merger – Consistently Meeting Commitments Commitments Results Successfully raised bank and bond debt of ~$5 billion; Complete capital raise to fund Anixter merger Bond offerings were substantially oversubscribed Close transaction in Q2 or Q3 Transaction Closed on June 22, 2020 Maintain ample
Slide 14: Process-Oriented Approach to Drive Integration Execution
Process-Oriented Approach to Drive Integration Execution Flawless Build World Deliver Value OBJECTIVES: Day 1 / Day Class New Capture 100 Execution Company • Ensure uninterrupted operations and • Combined company spend and growth • Implement operating model and design protect the base business syner
Slide 15: On-Track to Deliver on the Core Integration Objectives
On-Track to Deliver on the Core Integration Objectives G On-Track Objective Execute a Flawless Day One Deliver Value Capture Build a World-Class NewCo Status Complete G G Highlights • Executed Day One with minimal • All master planning and value capture • Announced new organization disruption to the
Slide 16: Making Rapid Progress on Synergy Capture
Making Rapid Progress on Synergy Capture Cost Synergies ($ millions) Substantial Progress Since Closing • Captured operational synergies including renegotiating contracts, reducing duplicative spend with vendors, and redundant headcount Field Meaningful Operations G&A • Delivered on over 30 unique i
Slide 17: Resilient Business Model with Substantial Free Cash Flow and Proven Ability to Deleverage
Resilient Business Model with Substantial Free Cash Flow and Proven Ability to Deleverage Net Debt / Adj. EBITDA ✓ Anticipated deleveraging to be driven through a combination of: 2 + Strong free cash flow1 generation 5.7x + Cost savings realization 5.3x3 – Additional capital expenditures to drive sy
Slide 18: Resilient Business Model with Substantial Free Cash Flow and Rapid Deleveraging
Resilient Business Model with Substantial Free Cash Flow and Rapid Deleveraging Proven ability to deleverage….. Q2 Free Cash Flow5 Through the Cycle 1 Post M&A 1 2.9x 4.5x $103 million 2.7x 1.6x Acq. EECOL 2 legacy WESCO 2007 2011 2012 2014 + ~$1.0 billion cumulative FCF ~$800 million cumulative FCF
Slide 19: Consent Agreement with Canadian Competition Bureau
Consent Agreement with Canadian Competition Bureau • Announced agreement with Canadian Competition Bureau on August 6, 2020 • Merger was permitted to close when the waiting period expired on June 18, 2020 • Agreement requires WESCO to divest legacy businesses in Canada: ̶ Utility ̶ Datacom (inside p
Slide 20: Summary
Summary • Continue to take decisive actions in response to COVID-19 pandemic • Executed successful capital raise with strong liquidity and favorable borrowing terms • Completed Anixter merger on June 22, 2020 meeting our expectation of second or third quarter closing • Larger and more diverse by pro
Slide 21: Appendix
APPENDIX
Slide 22: Second Quarter Diluted EPS and Sales Growth Walk
Second Quarter Diluted EPS and Sales Growth Walk Diluted EPS Walk1 Sales Growth Walk Reported Q2 2019 Diluted EPS $1.45 Q2 2019 Sales $2,150 M Core operations $(0.45) U.S. (860) bps Foreign exchange rates $(0.02) Canada (340) bps Tax $0.02 International (30) bps Lower share count $0.04 Organic Growt
Slide 23: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow Gross Profit Three Months Ended, June 30, 2019 June 30, 2020 Net sales $ 2,150 $ 2,087 Cost of goods sold1 1,741 1,693 Gross profit2 $ 409 $ 394 Gross margin 2 19.0% 18.9% Free Cash Flow Three Months Ended, June 30, 2019 June 30, 2020 Total Anixter WESCO Net cash (use
Slide 24: Second Quarter Organic Sales Growth
Second Quarter Organic Sales Growth $ in millions Year-over-Year Three Months Ended, Core Less: Less: Organic June 30, 2019 June 30, 2020 Growth FX Impact Workday Growth Industrial core sales 765 608 (20.6)% (1.0)% 0.0% (19.6)% Construction core sales 707 575 (18.7)% (1.1)% 0.0% (17.6)% Utility core
Slide 25: Capital Structure and Leverage
Capital Structure and Leverage $ in millions Reported Pro Forma EBITDA Twelve Months Ended, December 31,2019 June 30, 2020 Income from operations $ 346 $ 551 Depreciation and amortization 62 133 EBITDA $ 408 $ 684 Stock-based compensation 19 47 Foreign exchange and other 1 4 Merger-related costs 3 1
Slide 26: Decremental Operating Margin
Decremental Operating Margin Decremental Operating Margin Three Months Ended June 30, 2020 June 30, 2019 Adjusted $ in millions WESCO Reported Change Net sales $ 1,865 $ 2,150 $ (285) Income from operations 70 98 (28) Decremental operating margin 10% Note: Decremental operating margin is defined as
Slide 27: Work Days
Work Days Q1 Q2 Q3 Q4 FY 2018 64 64 63 62 253 2019 63 64 63 62 252 2020 64 64 64 61 253 27