Wesco International, Inc. · NYSE:WCC
Wesco International — Investor Day (September 2024)
71 slides from Wesco International's investor day presentation, Sep 26, 2024
Slide 1: Investor Day: Solutions for the Future
Investor Day Solutions for the Future September 26, 2024
Slide 2: Forward-looking statements
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
Slide 3: Today's agenda
Today’s agenda BREAK Connecting Our Past, Present and Future John Engel, Chairman, President and Chief Executive Officer Tech-Enabled Business Transformation Akash Khurana, Executive Vice President and Chief Information and Digital Officer Connecting and Protecting the World Bill Geary, Executive Vi
Slide 4: Connecting Our Past, Present and Future
Connecting Our Past, Present and Future 4 John Engel / Chairman, President and Chief Executive Officer
Slide 5: Why invest in Wesco
Why invest in Wesco Key elements of our investment thesis Wesco is leveraging its sustainable value creation generating attractive returns with significant multiple expansion opportunity Market leader serving attractive end-markets Best positioned to deliver outsized growth due to the secular trends
Slide 6: Digital first culture and strategic priorities
Wesco’s “digital first” culture and agile organization are enabling the company’s vision to become the best tech-enabled supply chain solutions provider in the world Our evolution and strategic priorities drive superior financial results DRIVING SUPERIOR RESULTS • Organic sales growth above market •
Slide 7: Wesco is a leading supply chain solutions provider
73% 14% 13% US Canada Rest of World Sales by Geography1 Wesco is a leading supply chain solutions provider with global capabilities 7 40% 33% 27% EES CSS UBS Sales by Business Unit1 140,000 customers 1.5 million products ~800 locations End-Markets • Utility • Construction • Network Infrastructure &
Slide 8: Scale and solutions offerings drive competitive advantage
Scale and solutions offerings drive competitive advantage 8 As a market leader, Wesco has the most complete product and services portfolio, with scale and skills competitors can’t match Providing solutions across supply chain needs: Key customer needs drive demand Long-term relationships and trust d
Slide 9: Led by an experienced management team
9 Led by an experienced management team Akash Khurana EVP and Chief Information and Digital Officer John Engel Chairman, President and Chief Executive Officer Bill Geary EVP and GM, Communications and Security Solutions Jim Cameron EVP and GM, Utility and Broadband Solutions Nelson Squires EVP and G
Slide 10: Translating mission and vision into financial performance
10 Translating our mission and vision into solid financial performance through foundational strategies: Earnings compounder through M&A Digitalization Deliver strong, sustained financial performance Expand scale and capabilities Multiple drivers to future sustained outperformance
Slide 11: A technology-enabled business transformation
A technology- enabled business transformation Examples of Wesco’s digital transformation impact Technology Enabled Business Transformation 11 Flexible tools and open architecture enables faster updates Sales representatives have a complete view of the customer relationship Tools and capabilities tha
Slide 12: Progress update on our digital transformation
12 Progress update on our digital transformation AI-powered analytics, process automation, demand forecasting, working capital efficiency More than halfway complete on our technology and capabilities build Most difficult technical components are behind us Tangible improvements for customers and supp
Slide 13: Compounding value through growth engine
13 Compounding value through growth engine Multiple stages driving sustained outperformance RIGHT END-MARKETS OUTPERFORMING THE MARKET OPERATIONAL EXCELLENCE MARGIN EXPANSION UPSIZED CASH FLOW Services: A Growth Driver Capital Allocation Options
Slide 14: Multiple drivers of long-term 10%+ EBITDA margin target
14 Multiple drivers of long-term 10%+ EBITDA margin target 7.0%–7.3%1 2024 Outlook 10%+ MULTIPLE DRIVERS OF PROFITABILITY • Pay-for-performance • Systems and dashboards • Sales processes and playbook • Expanded services offerings Gross margin drivers • Benefits of scale • Operating leverage • Digita
Slide 15: The roadmap to the future
Wesco is leveraging its clear and sustainable drivers of value creation generating attractive returns 15 The roadmap to the future Capturing benefits of our Digital Transformation More than halfway complete on our technology and capabilities build; the financial and strategic benefits will enable ou
Slide 16: Tech-Enabled Business Transformation
Tech-Enabled Business Transformation Akash Khurana / Executive Vice President and Chief Information and Digital Officer 16
Slide 17: Key takeaways
Key takeaways 17 Succeeding in building new digital capabilities Investment in digital transformation is as planned and shifting to driving benefits through internal change management 01 04 Enables faster growth through M&A and improved sales effectiveness and cross-sell Benefits from our transforma
Slide 18: Evolving, modernizing, secured
Evolving, modernizing, secured Consolidating around one advanced digital infrastructure Technology as an enabler Focused on driving internal efficiency and stronger relationships Building capabilities Leveraging data, AI and digital tools for the right customer-centric solutions Creates competitive
Slide 19: Benefits of digital transformation across the value chain
19 Benefits of digital transformation across the value chain Enabling benefits for customers and suppliers Digital transformation touches all parts of the value chain enabling efficiency gains across the company and our partners Enhanced growth opportunities through visibility on cross selling, inte
Slide 20: Digital transformation more than halfway complete
Digital transformation more than halfway complete 20 2022 2023 2024 2025 2026 2027 ~$500 million budget for Digital Transformation (2021-2027) More than halfway complete on our technology and capabilities build Remaining funds to support completion of design & build work along with deployment Design
Slide 21: Project plan, execution and spend on track
Project plan, execution and spend on track Further deployment in 2025 Project spend more than halfway complete 21 270 230 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total Project Spend ($ in millions) 2021-2023 2024-2027
Slide 22: Improvements across our technology landscape
22 Improvements across our technology landscape BACK OFFICE Streamlining and automating internal processes and systems like HR and Finance MID OFFICE Operational excellence across demand, supply, inventory, warehouse and logistics FRONT OFFICE Responding to market opportunities, enabling superior cu
Slide 23: Our data unlocks the full power of the digital transformation
23 Our data unlocks the full power of the digital transformation Enterprise Data Lake Correlating data sets from across the value chain gives unprecedented insights into the value chain Data Ingestion, Transformation, Quality and Governance An environment built to leverage AI technologies Provide in
Slide 24: Benefits to expand our competitive advantage
24 Benefits to expand our competitive advantage Strengthens our confidence in achieving long-term targets Internal efficiencies and savings • Reduced SG&A by removing organizational complexity • Working capital efficiencies • More efficient mix focus to support gross margins Cross-sell growth opport
Slide 25: Tangible benefits for our customers
25 Tangible benefits for our customers Providing more meaningful, value-added relationships Integrated capabilities • Integrated delivery management • Reduced cost of serving complex demand • For a food manufacturing customer, integrated digital commerce across channels to create better spend manage
Slide 26: Suppliers get better demand visibility
26 Suppliers get better demand visibility Wesco can be a better partner to our suppliers by providing inventory information and demand generation Supplier integration • More accurate demand signals • Consolidating volumes in efficient channels • Increased supply chain flexibility through better inte
Slide 27: Being the best tech-enabled supply chain solutions provider
27 Being the best tech-enabled supply chain solutions provider Enhanced customer experience Our digital transformation will revolutionize our productivity, safety and customer experience 01 04 Innovation and agility A digital platform that enables continuous improvement, service delivery, AI driven
Slide 28: Connecting and Protecting the World
Connecting and Protecting the World Bill Geary / Executive Vice President and General Manager, CSS 28
Slide 29: Best in class capabilities in the data center space
Best in class capabilities in the rapidly growing data center space Wesco’s size, reach and capabilities enable end-to-end data center solutions Wesco is already capturing the large and growing data center opportunity Multiple underlying trends are accelerating growth 01 We have powerful and complet
Slide 30: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) Delivering comprehensive solutions that provide 24/7 connectivity 30 26% Data Centers 37% Enterprise Network Infrastructure 37% Security 63% U.S. 6% Canada 28% ROWExpected to maintain double-digit percentage growth 31 Sales by End-Market1 Sales by Geography1
Slide 31: Full solutions offering for all customer applications
90% 10% Full solutions offering for all customer applications 31 Long-standing experience with enterprise centers • Wide range of smaller scale projects and volumes Enterprise • Data centers owned and operated by a single organization Hyperscalers demand different capabilities • Global footprint inc
Slide 32: Continued growth in data centers
32 Continued growth in data centers Goldman Sachs, “Generational Growth: AI, data centers and the coming US power demand surge”; April 2024. Growing Today 160% Expected growth in data center power demand between 2023 and 2030 in the U.S. 1 8% Of U.S. power demand is expected to come from data center
Slide 33: Leveraging all three SBUs to drive data center opportunity
33 Leveraging all three SBUs to drive data center opportunity Wesco has an integrated offering with a range of capabilities for all stages of data center design, development, deployment, operations, maintenance and support Gray space addressable market is 3-4 times the white space addressable market
Slide 34: Unmatched depth and breadth of products and services
34 Unmatched depth and breadth of products and services Wesco has unique differentiators for data center customers 01 Expansive Product and Services Portfolio Technology, solutions, products and services 02 Comprehensive Expertise Crossing gray and white spaces, our scale and breadth of capabilities
Slide 35: The most complete supply chain provider for data centers
35 The most complete supply chain provider for data centers Offering the most complete set of capabilities in all stages of the data center life cycle Leveraging our strength in the white space to strengthen position in the larger gray space Embedding services with the product offering for rapid dep
Slide 36: Five-to-seven year data center construction cycle
Five-to-seven year data center construction cycle 36 Transformers Data Center Site Substation• Land acquisition with access to power • Transmission lines to a substation for site • Generator sets to enable backup power • Transformers to data center • Civil construction • Mechanical, plumbing and ele
Slide 37: Our solutions cover the full data center life cycle
37 Our solutions cover the full data center life cycle IT Compute, Network, Storage In-Rack Physical Infrastructure Accessories, Cabling, Optics, Racks, Rack Power Distribution Units Module Infrastructure Communication, Containment, Conveyance, Security, Structured Cabling White SpaceGray Space Advi
Slide 38: Ongoing support through a complete range of services
Ongoing support through a complete range of services Complements products across every stage of development 38 Key Service Offerings • Advisory services • Engineering and design • Technology selection • Kitting, staging and multi-site deployment • Global logistics and project coordination • Rack & r
Slide 39: Consolidated access to leading suppliers
Wesco offers data center customers consolidated access to leading suppliers across the full range of products Offering products from the industry’s leading suppliers 39 Key Supplier Partners Enabling the full assortment for data center customers
Slide 40: Best in class capabilities in the data center space
Best in class capabilities in the rapidly growing data center space Wesco’s size, reach and capabilities enable end-to-end data center solutions Wesco is already capturing the large and growing data center opportunity Multiple underlying trends are accelerating growth 01 We have powerful and complet
Slide 41: Break
Break Connect 7
Slide 42: Ingenuity Delivered: Solutions, Services, and Business Transformation
Ingenuity Delivered Solutions, Services, and Business transformation 42
Slide 43: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) 43 Industry Leading Scale Scope • Provider of electrical, MRO, safety and automation solutions • Broad range of products and solutions primarily to the construction, industrial and OEM markets • Uniquely positioned to provide the critical infrastructure expert
Slide 44: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) 44 • Services and solutions for investor- owned utilities, public power companies and municipalities, as well as contractors that service these customers • Complete solutions for service providers, broadband and wireless customers • Leading provider of grid and ne
Slide 45: Global technology and support services (TSS)
45 Global technology and support services (TSS) Domain Expertise • Broadband • Connected devices • Edge computing • Electrical power systems • Electrical wire and cable • High-density cooling • Network infrastructure • Physical security • Wireless and cellular networks (5G) Advisory Services • Appli
Slide 46: Managing large-scale and complex infrastructure projects
46 Managing large-scale and complex infrastructure projects for various industries Partnering with our customers on grid services Underground Materials Supply Asset & Inventory Management Grid Modernization Program Services Project Site Services Renewables
Slide 47: A global leader in wire and cable services
A global leader in wire and cable 47 Services Wesco sold enough wire and cable in 2023 to circle the globe more than ten times. Expert team of specification specialists Cable assembly / site readiness Applications engineering Electrical contractor support Certification and compliance Site preparatio
Slide 48: entroCIM offers solutions that drive product sales
entroCIM offers solutions that drive product sales 48 Acquiring solutions or capabilities to advance our strategy People Counting Lighting EV Charging Energy Tenant Management Elevators HVAC Air Quality An example of leading with solutions to drive product sales Enables building managers to connect
Slide 49: Improvements across our technology landscape
49 Improvements across our technology landscape BACK OFFICE Streamlining and automating internal processes and systems like HR and Finance MID OFFICE Operational excellence across demand, supply, inventory, warehouse and logistics FRONT OFFICE Responding to market opportunities, enabling superior cu
Slide 50: Key takeaways
Key takeaways 50 Overview of our businesses Providing products from leading suppliers and services that solve customer challenges in a variety of industries 01 Expertise in services and solutions Partnering with our customers to provide customized solutions, improving labor efficiency and driving su
Slide 51: Powering the Path to the Future
Powering the Path to the Future Dave Schulz / Executive Vice President and Chief Financial Officer 51
Slide 52: Long-term performance goals remain consistent
5%–8% sales growth EBITDA growth 2x sales Return on Net Assets expansion 100% FCF conversion through the cycle Wesco's long-term performance goals remain consistent Achieving long-term financial targets drives multiple expansion 52 Management compensation aligned to external targets 4%–6% organic 1%
Slide 53: Diversification across high-growth end-markets
Broad capabilities set the path for our next chapter Diversification across high-growth end-markets 53 24% 17% 15% 12% 12% 10% 10% Industrial OEM Data CenterUtility Construction Network Infrastructure & Broadband Security Note: Sales percentages are on a trailing twelve-month (TTM) basis through Jun
Slide 54: Reaffirming 2024 outlook
Reaffirming 2024 outlook 54 Organic Sales GrowthDrivers of 2024 growth (1.5) to 0.5% Organic Growth 1% Workdays (3)% Divestiture Impact1 (3.5)%–(1.5)% Reported sales growth $800 million–$1 billion Free cash flow $12.00–$13.00 Adjusted earnings per share 7.0%–7.3% Adjusted EBITDA margin2 (10)% 20% Ja
Slide 55: Reliable cycle of value creation
Reliable cycle of value creation Topline growth and operating leverage drives earnings expansion 55 Long-term Growth 4%–6% Organic Sales Growth Margin Expansion ~14% Incremental Adjusted EBITDA1 Margin EBITDA Growth 2x Sales Growth Sustainable Cash Flow Generation Over the Long Term Accretive Acquis
Slide 56: Secular trends and market outperformance
Electrification Automation and IoT Green energy and grid modernization 24/7 connectivity and security Supply chain consolidation and relocation to North America Digitalization and AI Secular trends and market outperformance Drivers of long-term sales growth Base market growth supplemented by secular
Slide 57: Driving toward EBITDA margin expansion
Driving toward mid- and long-term EBITDA margin expansion 1 See appendix for non-GAAP definitions and reconciliations. 2 Outlook provided on August 1, 2024. 57 2021 6.5%2019 5.2% 20242 7.0%-7.3% Adjusted EBITDA1 Margin % Mid-Term 2025 – 2027 4-6% Growth 20–30 bps EBITDA margin / year 3-5% Organic ~1
Slide 58: Digital transformation more than halfway complete
Digital transformation more than halfway complete 58 2022 2023 2024 2025 2026 2027 ~$500 million budget for Digital Transformation (2021-2027) More than halfway complete on our technology and capabilities build Remaining funds to support completion of design & build work along with deployment Design
Slide 59: Cash generation provides capital allocation catalyst
59 Cash generation provides capital allocation catalyst ~$3B free cash flow from 2025-27 target Average 2019 and Prior 2024 Outlook Range Drivers of Free Cash Flow Step Change in Free Cash Flow Lower leverage within updated target range Capex stable and fully funds digital transformation Progress on
Slide 60: Capital allocation framework
60 VALUE ACCRETIVE M&A and OPTIONALITY ~75% Continue to buy back stock while maintaining a modest dividend RETURN CASH ~25% Leveraging strong cash generation to drive operational performance, portfolio transformation and returns to shareholders Capital allocation framework Investment in capex and op
Slide 61: Robust balance sheet gives firepower
Robust balance sheet gives firepower 61 We have rapidly delevered following M&A Balance sheet significantly strengthened after Anixter integration 1.5-2.5x Net debt- to-adjusted EBITDA target range Optionality remains strong for deploying capital Acquisition Acquisition Acquisition 4.5x 3.0x 2.7x 3.
Slide 62: Reinforcing our M&A framework
Reinforcing our M&A framework 62 Revenue and cost synergies to create accretive M&A value for shareholders Industry Consolidation • Large M&A within the core business • Significant revenue and cost synergies • Operating leverage through scale Expand Services and Capabilities • Companies with complem
Slide 63: Long track record of value creating M&A
We have a long track record of value creating M&A 63 >50 acquisitions in the past 30 years Geographic expansion Doubled Canadian business Product expansion Data communications End-market expansion OEM Product expansion Broadband Transformational consolidation 2005 2006 2010 2012 2020 2022 Doubled si
Slide 64: Rahi as an example of strategic M&A
Rahi as an example of strategic M&A 64 A broader range of suppliers and products Expanded services offerings for technology- focused and hyperscale data center providers Enhanced suite of capabilities for contractors and integrators partners Additional locations and reach in regions around the world
Slide 65: entroCIM offers solutions that drive product sales
entroCIM offers solutions that drive product sales 65 Acquiring solutions or capabilities to advance our strategy People Counting Lighting EV Charging Energy Tenant Management Elevators HVAC Air Quality An example of leading with solutions to drive product sales Enables building managers to connect
Slide 66: The roadmap to the future
The roadmap to the future Capturing benefits of our Digital Transformation More than halfway complete on our technology and capabilities build; the financial and strategic benefits will enable our long-term targets 01 Progressing toward our 10%+ EBITDA margin We are focused on our target by 2030+, w
Slide 67: Question and Answer Session
Question and Answer Session 67
Slide 68: Appendix
Appendix asco
Slide 69: Non-GAAP Measures
Non-GAAP Measures 69 In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), this presentation may include references to certain non-GAAP financial measures. These financial measures may include organic sales growth, gross profit, gross mar
Slide 70: Adjusted EBITDA Margin and Leverage
Adjusted EBITDA Margin and Leverage 70 Twelve Months Ended December 31, Pro Forma ($ millions)(1) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Net Sales 6,579 7,513 7,890 7,518 7,336 7,679 8,177 8,359 16,017 18,218 21,420 22,385 Net income attributable to common stockholders 201.8 276
Slide 71: Free Cash Flow
Free Cash Flow 71 Twelve Months Ended December 31, ($ millions) 2012 2013 2014 2015 2016 2017 2018 2019 Cash flow provided by operations 288.2 315.1 251.2 283.1 300.2 149.1 296.7 224.4 Less: Capital expenditures (23.1) (27.8) (20.5) (21.7) (18.0) (21.5) (36.2) (44.1) Add: Non-recurring pension contr