Wesco International, Inc. · NYSE:WCC
Wesco International — Q1 2022 Earnings Presentation
29 slides from Wesco International's earnings presentation, May 5, 2022
Slide 1: First Quarter 2022 Webcast Presentation
First Quarter 2022 Webcast Presentation May 5, 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 Off to an Exceptional Start
4 2022 Off to an Exceptional Start Continued strong execution and accelerating value creation of Wesco + Anixter driving record-level results See appendix for non-GAAP reconciliations. • Up 22% YOY (up 2% sequentially) on a reported basis • Effectively managing global supply chain challenges • Lever
Slide 5: Strong Growth and Margin Expansion Versus Pre-pandemic Levels
5 Strong Growth and Margin Expansion Versus Pre-pandemic Levels Substantial growth versus 2019 highlights the strength of the Wesco + Anixter combination 1 2019 figures are as-reported on Form 8-K dated November 4, 2020, and include sales and adjusted EBITDA derived from the legacy Wesco data commun
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: A New Brand Identity for a New Company
7 A New Brand Identity for a New Company Our new brand identity reflects our ability to drive growth and innovation… responsibly and sustainably OUR MISSION We build, connect, power and protect the world. OUR PURPOSE Life should run smoothly, so we create a world you can depend on. OUR PROMISE Ingen
Slide 8: First Quarter Results Overview
First Quarter Results Overview Dave Schulz Executive Vice President & Chief Financial Officer
Slide 9: First Quarter Results Overview
9 First Quarter Results Overview Exceptional financial results driven by strong sales growth, margin expansion and operating leverage Q1 2022 Q1 2021 YOY Sales $4,932 $4,041 +22% Gross Profit $1,049 $811 +29% % of sales 21.3% 20.1% +120 bps Adjusted Income from Operations $315 $171 +85% % of sales 6
Slide 10: First Quarter Adjusted EBITDA Bridge
10 First Quarter Adjusted EBITDA Bridge Exceptional financial results driven by strong sales growth, margin expansion and operating leverage 2021 Q1 Adjusted EBITDA Sales Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other 2022 Q1 Adjusted EBITDA $
Slide 11: Electrical & Electronic Solutions (EES)
Continue to take share due to enhanced value proposition and complete electrical solutions offering First Quarter Drivers • Record quarter with sales growth in all operating groups – Non-residential construction tracking ahead of expectations – Strong industrial and OEM momentum continues • Backlog
Slide 12: Communications & Security Solutions (CSS)
First Quarter Drivers • Strong quarter with sales growth in all operating groups 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 – Securit
Slide 13: Utility & Broadband Solutions (UBS)
First Quarter Drivers • Record quarter with double-digit sales growth in all operating groups – Broad-based growth in utility driven by investments in grid modernization – Broadband growth driven by connectivity demand and rural broadband expansion – Integrated supply up versus PY and sequentially,
Slide 14: Accelerating Cross-Sell Drives Market Outperformance
14 • 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-sell e
Slide 15: Sales Synergies Increase as Leading Value Proposition Takes Hold
15 Sales Synergies Increase as Leading Value Proposition Takes Hold Cross-sell momentum highlights the power of the combined portfolio EES and CSS CSS UBS Overview: Major EPC win for the construction of a new U.S. semiconductor fabrication facility Overview: Network infrastructure products award to
Slide 16: Accelerated Cost Synergy Realization Continues
16 Accelerated Cost Synergy Realization Continues 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 realizedRealized $ millions $14 $34 $25 $
Slide 17: Free Cash Flow and Working Capital Days
17 Q1 Free Cash Flow 70 67 65 64 64 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Adjusted Net Income D&A, Variable Comp and Other Working Capital Increase Capex / IT Spend Free Cash Flow Free Cash Flow and Working Capital Days Responsively managing working capital in a high-growth, supply-constrained environm
Slide 18: Leverage Improved 2.1x Since Anixter Acquisition
18 5.7x 5.3x 5.3x 4.9x 4.5x 4.1x 3.9x 3.6x Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 3.5x target range 2.0x Net Debt / TTM Adjusted EBITDA Leverage Improved 2.1x Since Anixter Acquisition in June 2020 Expect to exceed our deleveraging target again and return to our target lever
Slide 19: 2022 Outlook
2022 Outlook 19 Outlook Notes • Does not reflect the effect of potential tax law changes or future refinancing activity • Foreign exchange rates expected to be neutral • Utility customer model shift results in negative sales impact of ~0.5% 1 Adjusted EBITDA is defined as EBITDA before other, net, n
Slide 20: Summary
20 Summary Differentiated capabilities and execution, along with improving macro environment, drive our increased 2022 outlook • Exceptional start to 2022 • Outstanding results across the board in Q1 and strongest quarter of Wesco + Anixter combination yet – All-time record sales, operating profit,
Slide 21: Appendix
APPENDIX
Slide 22: Glossary
22 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 23: Workdays
23 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 24: Non-GAAP Measure Definitions
24 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 25: Organic Sales Growth by Segment
25 Organic Sales Growth by Segment March 31, 2022 March 31, 2021 Reported Divestiture Impact Foreign Exchange Impact Workday Impact Organic Growth EES $ 2,089,959 $ 1,720,813 21.5% (0.5)% (0.4)% 1.6% 20.8% CSS 1,434,175 1,250,615 14.7% — % (0.8)% 1.6% 13.9% UBS 1,408,047 1,070,049 31.6% (0.4)% — % 1
Slide 26: Gross Profit and Free Cash Flow
26 Gross Profit and Free Cash Flow $ thousands Gross Profit: March 31, 2022 March 31, 2021 December 31, 2021 Net sales $ 4,932,181 $ 4,041,477 $ 4,851,919 Cost of goods sold (excluding depreciation and amortization) 3,883,074 3,230,441 3,844,038 Gross profit $ 1,049,107 $ 811,036 $ 1,007,881 Gross m
Slide 27: Adjusted EBITDA
27 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 $ 178,735 $ 103,687 $ 129,981 $ (245,512) $ 166,891 $ 100,629 $ 73,594 $ 87,013 $ (216,410) $ 44,826 Net income (loss) attribut
Slide 28: Adjusted Income from Operations
Adjusted Income from Operations: March 31, 2022 March 31, 2021 Income from operations $ 284,029 $ 133,251 Merger-related and integration costs 25,563 46,322 Accelerated trademark amortization 5,323 — Net gain on divestitures — (8,927) Adjusted income from operations $ 314,915 $ 170,646 Adjusted inco
Slide 29: Capital Structure and Leverage
Capital Structure and Leverage 29 (1) Other non-operating income for the twelve months ended March 31, 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 su