Wesco International, Inc. · NYSE:WCC
Wesco International — Q4 2017 Earnings Presentation
25 slides from Wesco International's earnings presentation, Feb 1, 2018
Slide 1: Q4 & Full Year 2017 Earnings Webcast Presentation
Webcast Presentation – February 1, 2018 Q4 & Full Year 2017 Earnings
Slide 2: Safe Harbor Statement
2 Q4 & FY 2017 Earnings Webcast 2/1/18 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, uncertainti
Slide 3: Q4 2017 Highlights
3 Q4 & FY 2017 Earnings Webcast 2/1/18 Q4 2017 Highlights …performance exceeded outlook • Fourth quarter results exceeded our expectations • Positive business momentum and growth across all end markets and geographies • Reported sales were up 11%, organic sales were up 10% ‒ Highest organic growth r
Slide 4: Industrial End Market
4 Q4 & FY 2017 Earnings Webcast 2/1/18 Industrial End Market • Q4 2017 Sales − Organic sales were up 14% versus prior year (up 12% in the U.S. and up 15% in Canada in local currency) − Up 4% sequentially • Increasing business momentum with industrial customers • Sales growth was broad-based across t
Slide 5: Construction End Market
5 Q4 & FY 2017 Earnings Webcast 2/1/18 (2.2%) (3.6%) (4.4%) 6.0% 8.9% • Q4 2017 Sales − Organic sales were up 9% versus prior year (up 7% in the U.S. and up 13% in Canada in local currency) − Up 2% sequentially • Increasing business momentum with construction/contractor customers • Sales growth was
Slide 6: Utility End Market
6 Q4 & FY 2017 Earnings Webcast 2/1/18 Utility End Market Organic Sales Growth versus Prior Year 16% Utility • Investor Owned • Public Power • Utility Contractors • Q4 2017 Sales − Organic sales were up 9% versus prior year (up 10% in the U.S. and up 7% in Canada in local currency) − Up 4% sequentia
Slide 7: CIG End Market
7 Q4 & FY 2017 Earnings Webcast 2/1/18 CIG End Market • Q4 2017 Sales − Organic sales were up 5% versus prior year (up 5% in the U.S. and up 11% in Canada in local currency) − Down 9% sequentially • Technical expertise and supply chain solutions driving positive momentum in datacenter, broadband, an
Slide 8: Q4 2017 Results
8 Q4 & FY 2017 Earnings Webcast 2/1/18 Q4 2017 Results Outlook Actual YOY Sales 5% to 8% $2.00B Up 11.3% Gross Margin 19.2% Down 20 bps SG&A $285M, 14.3% Up 14%, Up 40 bps Operating Profit $81M Flat Operating Margin 3.9% to 4.3% 4.1% Down 50 bps Effective Tax Rate ~27% 23.9%, as adjusted Down 210 bp
Slide 9: Full Year 2017 Results
9 Q4 & FY 2017 Earnings Webcast 2/1/18 Full Year 2017 Results Outlook Actual YOY Sales 3% to 4% $7.68B Up 4.7% Gross Margin 19.3% Down 40 bps SG&A $1.10B, 14.3% Up 5%, Flat in bps Operating Profit $321M Down 3% Operating Margin 4.1% to 4.3% 4.2% Down 30 bps Effective Tax Rate ~26% 24.9%, as adjusted
Slide 10: Diluted EPS Walk
10 Q4 & FY 2017 Earnings Webcast 2/1/18 Diluted EPS Walk Q4 FY 2016 Adjusted (1) $0.96 $3.80 Core operations (Reflects favorable operating leverage, offset by the planned restoration of variable compensation versus prior year) (0.01)) (0.11) Foreign exchange 0.02 0.08 Tax 0.03 0.16 Share count 0.03
Slide 11: Free Cash Flow & Leverage
11 Q4 & FY 2017 Earnings Webcast 2/1/18 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Free Cash Flow & Leverage 282.2 127.6 2016 FY 2017 FY Free Cash Flow ($ Millions) Note: See appendix for non-GAAP reconciliations. 67% of adjusted net income 154% of adjusted net income ~ $1B of free cash f
Slide 12: 2018 Outlook
12 Q4 & FY 2017 Earnings Webcast 2/1/18 2018 Outlook Q1 FY (Current) FY (Previous) Sales 6% to 9% 3% to 6% 3% to 6% Operating Margin 3.5% to 3.8% 4.2% to 4.6% 4.2% to 4.6% Effective Tax Rate ~ 22% 21% to 23% ~ 28% Diluted EPS $4.40 to $4.90 $4.05 to $4.55 Free Cash Flow >90% of net income >90% of ne
Slide 13: Appendix: Non-GAAP Financial Measures
13 Q4 & FY 2017 Earnings Webcast 2/1/18 Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross margin, financial leverage, earnings before interest, taxes, depreciation and amortization (EBITDA
Slide 14: WESCO Profile
14 Q4 & FY 2017 Earnings Webcast 2/1/18 WESCO Profile 2017 37% 33% 16% 14% 40% 15% 15% 12% 10% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & ServicesMarkets & Customers Utility CIG Industrial Construction Investor Owned | Public Pow
Slide 15: Sales Growth
15 Q4 & FY 2017 Earnings Webcast 2/1/18 Sales Growth 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) (0.1) 7.8 11.3 4.7 Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9 0.2 Core (0.9) (6.0)
Slide 16: Q4 2017 Organic Sales Growth by Geography
16 Q4 & FY 2017 Earnings Webcast 2/1/18 Q4 2017 Organic Sales Growth by Geography U.S. Canada International WESCO Change in net sales (USD) 8.9 17.9 24.2 11.3 Impact from acquisitions - - - - Impact from foreign exchange rates - 5.1 4.9 1.2 Impact from number of workdays - - - - Organic sales growth
Slide 17: Sales Growth by End Markets
17 Q4 & FY 2017 Earnings Webcast 2/1/18 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q4 2017 vs. Q4 2016 Q4 2017 vs. Q3 2017 FY 2017 vs FY 2016 Q4 Q4 Q4 Q3 FY FY 2017 2016 % Growth
Slide 18: Q4 2017 Organic Sales by End Market
18 Q4 & FY 2017 Earnings Webcast 2/1/18 Q4 2017 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth 15.0 10.7 9.7 5.8 11.3 FX Impact 1.1 1.8 0.6 1.0 1.2 Workday Impact - - - - - Organic Growth 13.9 8.9 9.1 4.8 10.1 (%)
Slide 19: Gross Margin
19 Q4 & FY 2017 Earnings Webcast 2/1/18 Gross Margin ($ Millions) Three Months Ended Twelve Months Ended December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Net sales $1,997 $1,793 $7,679 $7,336 Cost of goods sold (excluding depreciation and amortization) 1,613 1,445 6,194 5,888
Slide 20: Adjusted Diluted EPS
20 Q4 & FY 2017 Earnings Webcast 2/1/18 Adjusted Diluted EPS ($ millions, except for EPS) FY 2016 Q4 2017 FY 2017 Reported Results Adjustments Adjusted Results Reported Results Adjustments Adjusted Results Reported Results Adjustments Adjusted Results Income from operations $ 332.0 - $ 332.0 $ 81.4
Slide 21: Debt Maturity Schedule and Capital Structure
21 Q4 & FY 2017 Earnings Webcast 2/1/18 Outstanding at December 31, 2016 Outstanding at December 31, 2017 Debt Maturity Schedule AR Revolver (V) 380 380 2020 Inventory Revolver (V) 4 12 2020 2019 Term Loans (V) 145 85 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 350 2024 Other (
Slide 22: Financial Leverage
22 Q4 & FY 2017 Earnings Webcast 2/1/18 Financial Leverage Twelve Months Ended December 31, 2017 Financial leverage ratio: Income from operations $ 321 Depreciation and amortization 64 EBITDA $ 385 December 31, 2017 Short-term borrowings and current debt $ 35 Long-term debt 1,314 Debt discount and d
Slide 23: Non-Cash Interest Expense
23 Q4 & FY 2017 Earnings Webcast 2/1/18 2015 2016 2017 Amortization of Debt Discount(1) 6.1 3.0 0.3 Amortization of Debt Issuance Costs 6.1 3.6 3.7 Uncertain Tax Positions (8.7) 1.2 0.1 Total 3.5 7.8 4.1 Non-Cash Interest Expense (1) Includes convertible debt and term loan; the convertible debt was
Slide 24: Free Cash Flow Reconciliation
24 Q4 & FY 2017 Earnings Webcast 2/1/18 Free Cash Flow Reconciliation FY 2016 FY 2017 Cash flow provided by operations 300.2 149.1 Less: Capital expenditures (18.0) (21.5) Free cash flow 282.2 127.6 Adjusted net income 183.8 189.6 Percentage of adjusted net income 154% 67% Note: Free cash flow is pr
Slide 25: Work Days
25 Q4 & FY 2017 Earnings Webcast 2/1/18 Work Days Q1 Q2 Q3 Q4 FY 2016 64 64 64 62 254 2017 64 64 63 62 253 2018 64 64 63 62 253