Wesco International, Inc. · NYSE:WCC
Wesco International — Q1 2023 Earnings Presentation
27 slides from Wesco International's earnings presentation, May 4, 2023
Slide 1: First Quarter 2023 Webcast Presentation
NYSE: WCC First Quarter 2023 Webcast Presentation May 4, 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: Strong First Quarter to Start 2023
Strong First Quarter to Start 2023 • Strong first quarter organic sales growth of 11% driven by secular demand trends, continued share gains, and improving supply chain ― Record first quarter sales for all three business units ― Strong cross-sell execution, raising target to $1.8 billion • Record fi
Slide 4: Substantial Value Creation Since Merger Close
Substantial Value Creation Since Merger Close $ millions Gross Adjusted Adjusted Sales Leverage Margin EBITDA EBITDA Margin Q1 Q1 Q1 Q1 Record Record Record Record +36% +220 bps +125% +300 bps 2.7x Since Anixter acquisition closing 7.6% 5.7x $5,522 21.9% $421 4.6% $4,070 3.0x $187 19.7% Q1 2019 Q1 2
Slide 5: First Quarter Results Overview
First Quarter Results Overview $ millions, except per share amounts Q1 Q1 YOY • Record first quarter sales, gross profit, gross margin, adjusted 2023 2022 EBITDA, adjusted EBITDA margin and adjusted EPS Sales $5,522 $4,932 +11%1 Gross Profit $1,209 $1,049 +15% • Organic sales +11% YOY, reported sale
Slide 6: First Quarter Sales and Adjusted EBITDA Bridges
First Quarter Sales and Adjusted EBITDA Bridges $ millions Net Sales1 Adjusted EBITDA +11% $5,522 organic 6.7% of sales $421 +16% $4,932 $364 7.6% of sales +20 bps 7.4% of sales Q1 2022 Market Share Gain/ FX M&A Q1 2023 Q1 2022 Sales Gross Cost Volume-related Digital/IT & Q1 2023 Sales Growth Cross
Slide 7: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) First Quarter Drivers $ millions Q1 Q1 • Record first quarter sales up 4% organically (up 6%1 excluding YOY 2023 2022 the impact of inter-segment business transfers) Sales $2,135 $2,090 +4%2 – Strong industrial momentum continued, up mid-teens driven by automa
Slide 8: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) First Quarter Drivers $ millions • Record first quarter sales up 13% organically (up 11%1 excluding the Q1 Q1 impact of inter-segment business transfers) with growth in all key end YOY 2023 2022 markets and geographies Sales $1,732 $1,434 +13%2 – Network inf
Slide 9: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) First Quarter Drivers $ millions Q1 Q1 • Record quarter with sales growth in all geographies YOY 2023 2022 – Broad-based utility growth of well over 20% driven by investments in Sales $1,655 $1,408 +18%1 electrification, green energy, and grid modernization – Inte
Slide 10: Increasing Cross-Sell Target to $1.8 Billion
Increasing Cross-Sell Target to $1.8 Billion Cumulative Cross-Sell Synergies $1.8 billion $1.6 billion Strong customer Minimal overlap between $1.45 Expanding pipeline of relationships and global legacy Wesco and Anixter billion cross-sell opportunities supplier partnerships customers $1.2 billion C
Slide 11: Cost Synergy Realization Continues
Cost Synergy Realization Continues Cumulative Realized Synergies Cumulative Realized Synergies By Type $ millions $315 Supply Chain $270 $115 million Q4 $73 G&A $188 $95 million Q4 $60 Q3 $68 Field Operations Q3 $50 Q2 $66 202 $60 million $39 Q2 $44 1 $76 Corporate (to date) Overhead Q4 $25 Q1 $63 Q
Slide 12: Free Cash Flow
Free Cash Flow $ millions Year-to-Date Free Cash Flow $211 $(134) $(224) $(87) $(266) $(87) $(14) $(18) Adjusted Accounts Inventory Accounts Capex Other Free Net Income Receivable Payable Cash Flow Managing working capital to ensure resilient supply chain in a secular-growth environment See appendix
Slide 13: Leverage Back within Target Range Well Ahead of Schedule
Leverage Back within Target Range Well Ahead of Schedule Net Debt / TTM Adjusted EBITDA Acquisition closed June 2020 5.7x 5.3x 5.3x 2.7x 4.9x Reduction • Pace of deleveraging significantly faster than Since June 4.5x 2020 originally expected 4.1x 3.9x 3.6x 3.4x 3.5x • Sequential leverage increase dr
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: Reaffirmed 2023 Outlook
Reaffirmed 2023 Outlook Reaffirmed 2023 Outlook Market growth (including price) 4% - 6% Plus: share gain/cross-sell 1% - 2% Total organic sales 5% - 8% Sales Rahi acquisition ~2% Less: differences of foreign exchange rates ~(1)% Less: impact of one fewer workday in 2023 (0.5)% Reported sales 6% - 9%
Slide 16: Summary
Summary • Strong first quarter organic sales growth of 11% driven by secular demand trends, continued share gains, and improving supply chain ― Record first quarter sales for all three business units ― Strong cross-sell execution, raising target to $1.8 billion • Record first quarter profitability ―
Slide 17: Appendix
APPENDIX wf wesco
Slide 18: Underlying Assumptions
Underlying Assumptions FY 2023 FY 2023 February Outlook May Outlook Depreciation and Amortization ~$170–180 million ~$170–180 million Interest Expense ~$330–370 million ~$350–390 million Other Expense, net Outlook not provided ~$30–40 million Capital Expenditures ~$100 million ~$100 million Share Co
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 COGS: Cost of goods sold OEM: Original equipment manufacturer CIG: Commercial, Institutional and Government OPEX: Operating expenses CSS: Communica
Slide 21: Workdays
Workdays Q1 Q2 Q3 Q4 FY 2020 64 64 64 61 253 2021 62 64 64 62 252 2022 63 64 64 62 253 2023 63 64 63 62 252 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 - QTD: Three Months Ended Growth/(Decline) Foreign March 31, March 31, Acquisition Workday Organic Reported Exchange 2023 2022 Impact Impact Growth Impact EES 2,135.1 2,090.0 2.2 % — % (1.7) % — % 3.9 % CSS 1,732.0 1,434.2 20
Slide 24: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow $ millions Three Months Ended Gross Profit: March 31, 2023 March 31, 2022 Net sales 5,521.9 4,932.2 Cost of goods sold (excluding depreciation and amortization) 4,313.4 3,883.1 Gross profit 1,208.5 1,049.1 Gross margin 21.9 % 21.3 % Three Months Ended Free Cash Flow:
Slide 25: Adjusted EBITDA
Adjusted EBITDA $ millions Three Months Ended March 31, 2023 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders 171.3 135.4 180.3 (304.3) 182.7 Net (loss) income attributable to noncontrolling interests (0.1) 0.2 — — 0.1 Preferred stock
Slide 26: Adjusted EPS
Adjusted EPS $ millions, except per share amounts ` Three Months Ended March 31, March 31, 2023 2022 Adjusted Income from Operations: Income from Operations 346.4 284.0 Merger-related and integration costs 19.5 25.6 Accelerated trademark amortization — 5.3 Adjusted income from operations 365.9 314.9
Slide 27: Capital Structure and Leverage
Capital Structure and Leverage Twelve Months Ended $ millions March 31, December 31, Financial Leverage: 2023 2022 Net income attributable to common stockholders 818.9 803.1 Net income attributable to noncontrolling interests 1.3 1.7 Preferred stock dividends 57.4 57.4 Provision for income taxes 281