Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2021 Earnings Presentation
27 slides from Wesco International's earnings presentation, Aug 5, 2021
Slide 1: Second Quarter 2021 Webcast Presentation
1 Second Quarter 2021 Webcast Presentation August 5, 2021 NYSE: WCC
Slide 2: Forward-Looking Statements
2 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: Agenda
3 Business Overview Financial Results Overview John Engel Chairman, President & CEO Executive Vice President & CFO Dave Schulz Agenda
Slide 4: Very Strong Results Across The Board
4 Very Strong Results Across The Board Raised 2021 outlook on accelerating sales and margin growth momentum • Sales up 24% YOY on a pro forma basis and up 14% sequentially – Leveraging increased scale, expanded product and services capabilities, and global supplier relationships – Seeing early benef
Slide 5: Growth Opportunity Amplified by Attractive Secular Growth Trends
Growth Opportunity Amplified by Attractive Secular Growth Trends Supply chain consolidation and relocation to North America Exceptionally well-positioned across all business units Electrification Automation and IoT Green Energy and Grid Modernization 24/7 Connectivity and Security Digitalization 5
Slide 6: Second Quarter Results Overview
6 Second Quarter Results Overview Dave Schulz Executive Vice President & Chief Financial Officer
Slide 7: Second Quarter Results Overview
7 Q2 2020 Pro Forma1 Q2 2021 YOY Sales $3,706 $4,596 24% Gross Profit 726 965 33% % of sales 19.6% 21.0% +140 bps Adjusted Income from Operations2 158 262 66% % of sales 4.3% 5.7% +140 bps Adjusted EBITDA3 210 309 47% % of sales 5.7% 6.7% +100 bps Adjusted Diluted EPS2 $2.64 Second Quarter Results O
Slide 8: Margin Improvement Program Yielding Excellent Results
8 Margin Improvement Program Yielding Excellent Results Executing a rigorous program across entire company Capability Building Sales Processes and Playbook Performance Management Systems and Dashboard • Revised business principles to support margin and growth • Dynamic, interactive training and deve
Slide 9: Adjusted EBITDA Bridge
9 $210 $309 2020 Q2 Adjusted EBITDA Sales Gross Margin Cost Synergies Volume- Related, Variable Compensation and Other Benefit Costs Reversal of COVID Cost Actions, Other 2021 Q2 Adjusted EBITDA Adjusted EBITDA Bridge Sales Strength + Margin Expansion + Accelerated Synergy Capture = Strong EBITDA Gr
Slide 10: Electrical & Electronic Solutions (EES)
10 $83 $168 Q2 2020 Pro Forma Q2 2021 $1,437 $1,923 Q2 2020 Pro Forma Q2 2021 Electrical & Electronic Solutions (EES) Ability to offer complete electrical package driving share gains and strong growth See appendix for non-GAAP reconciliations. $M 8.7% of sales 1 1 5.8% of sales +34% • Strong double-
Slide 11: Communications & Security Solutions (CSS)
11 $1,198 $1,461 Q2 2020 Pro Forma Q2 2021 $104 $131 Q2 2020 Pro Forma Q2 2021 Communications & Security Solutions (CSS) Industry leading value proposition driving share gains and global growth See appendix for non-GAAP reconciliations. 9.0% of sales 1 WD-workday 8.7% of sales $M +22% • Strong globa
Slide 12: Utility & Broadband Solutions (UBS)
12 $1,072 $1,212 Q2 2020 Pro Forma Q2 2021 $81 $101 Q2 2020 Pro Forma Q2 2021 Utility & Broadband Solutions (UBS) Leadership and scale driving share gains and strong growth See appendix for non-GAAP reconciliations. Sales Adjusted EBITDA 8.3% of sales 1 7.6% of sales 1 Includes Anixter’s reported re
Slide 13: Sales Synergies Increase as Strong Value Proposition Takes Hold
13 Sales Synergies Increase as Strong Value Proposition Takes Hold Cross-sell momentum highlights the power of the combined portfolio • Increasing cumulative sales synergy target from $170 million to $500 million by end of 2023 • Pipeline of recent cross-sell wins growing 1 Reflects 3% growth compar
Slide 14: Increasing Cost Synergy Target to $300 Million
14 Outlook raised on higher value of existing initiatives Increasing Cost Synergy Target to $300 Million $117 Million Realized To-Date • Increasing cost synergy target 20% to $300 million by December 2023 – 80% SG&A and 20% COGS • Increasing one-time integration expenses to $225 million to reflect i
Slide 15: Leverage Improved 1.2x in Months Since Anixter Merger
15 Leverage Improved 1.2x in 12 months since Anixter Merger Accelerated timeline: now on track to return to target leverage range of 2.0-3.5x by 2H:22 • Leverage reduced 0.4x in Q2 – Net debt increase driven by investment in working capital to support double- digit sales growth – Working capital imp
Slide 16: 2021 Outlook
16 2021 Outlook Accelerated execution and market recovery drives increased outlook for 2021 2020 Pro Forma Sales $16.0 billion Adjusted EBITDA $858 million 2021 Outlook Prior (5/6/21) Revised (8/5/21) Market growth 4.5% - 6.5% 9% - 10% Plus: share gain/cross sell 1% - 2% 2% - 4% Less: impact of one
Slide 17: Summary
17 Summary Our performance and improving macro environment drive stronger outlook • Very strong results across the board – Outperforming the market – Double-digit sales growth YOY on a pro forma basis and sequentially in all businesses ◦ Capitalizing on leadership position and expanding business ◦ R
Slide 18: Appendix
APPENDIX
Slide 19: Glossary
19 Glossary 1H: First half of fiscal year 2H: Second half of fiscal year A/V: Audio/visual COGS: Cost of goods sold CIG: Commercial, Institutional, and Government CSS: Communications & Security Solutions (business unit) EES: Electrical & Electronic Solutions (business unit) ETR: Effective tax rate F
Slide 20: Workdays
20 Workdays Q1 Q2 Q3 Q4 FY 2019 63 64 63 62 252 2020 64 641 64 61 253 2021 62 64 64 62 252 1 Pro Forma Q2 2020 period has 62.5 workdays.
Slide 21: Increasing Cost Synergy Outlook
21 Increasing Cost Synergy Outlook Increasing outlook due to higher existing synergies and new opportunities $37 $125 $175 $225 Cumulative merger and integration expenses $ millions 2H 2020 2021 2022 2023 2020 2020 Q1 2021 Q2 2021 2020 Q1 2021 Q2 2021 2020 Q1 2021 Q2 2021 Realized to-date To be real
Slide 22: Pro Forma Workday-Adjusted Net Sales
22 $ in millions Pro Forma Workday-Adjusted Net Sales: Three Months Ended June 30, 2021 June 30, 2020 Growth Reported Reported Anixter(1) Pro Forma Reported Pro Forma Adjusted(2) Net sales $ 4,596 $ 2,087 $ 1,619 $ 3,706 120.2 % 24.0 % 21.6 % Pro Forma and Workday-Adjusted Net Sales (1) Represents A
Slide 23: Gross Profit and Free Cash Flow
23 Gross Profit and Free Cash Flow $ in millions Gross Profit: Three Months Ended June 30, 2021 June 30, 2020 Net sales $ 4,596 $ 2,087 Cost of goods sold (excluding depreciation and amortization) 3,631 1,693 Gross profit $ 965 $ 394 Gross margin 21.0 % 18.9 % Free Cash Flow Three Months Ended June
Slide 24: Adjusted EBITDA
24 Adjusted EBITDA EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin % by Segment Three Months Ended June 30, 2021 EES CSS UBS Corporate Total Net income applicable to common stockholders 154 111 95 (255) $ 105 Net loss attributable to noncontrolling interests — — — — — Preferred stock dividends —
Slide 25: Adjusted EPS
25 Adjusted EPS Q2 2021 (in millions, except for EPS) Reported Results Adjustments 1 Adjusted Results Income from operations $ 218.9 $ 42.8 $ 261.7 Net interest 67.6 — 67.6 Other income, net (0.8) — (0.8) Income before income taxes 152.1 42.8 194.9 Provision for income taxes2 32.8 10.4 43.2 Effectiv
Slide 26: Capital Structure and Leverage
26 Capital Structure and Leverage $ in millions Pro Forma1 Twelve Months Ended Financial Leverage: June 30, 2021 December 31, 2020 Net income attributable to common stockholders $ 221 $ 116 Net loss attributable to noncontrolling interests — (1) Preferred stock dividends 58 30 Provision for income t
Slide 27: Combined Proforma Financial Information
27 $ in millions Three Months Ended, June 30, 2020 EES CSS UBS Corporate Total Proforma Net Sales1 $ 1,436.6 $ 1,198.2 $ 1,071.5 $ — $ 3,706.3 Gross profit 725.9 Gross margin % 19.6 % Operating income 56.9 Operating margin % 1.5 % Merger-related costs 101.3 Adjusted operating income 158.2 Adjusted o