Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2018 Earnings Presentation
24 slides from Wesco International's earnings presentation, Nov 1, 2018
Slide 1: Q3 2018 Earnings Webcast Presentation – November 1, 2018
Q3 2018 Earnings Webcast Presentation – November 1, 2018
Slide 2: Safe Harbor Statement
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, uncertainties and other factors that may cause act
Slide 3: Q3 2018 Highlights
Q3 2018 Highlights July 5% Aug 5% • Continued strong results in the third quarter Organic Growth Sept 3% ‒ Double digit EBIT and EPS growth versus prior year (%) ‒ Gross margin and operating margin expansion, both 10.9 10.1 sequentially and year-over-year 8.6 9.0 • Continued positive business moment
Slide 4: Industrial End Market Organic Sales Growth versus Prior Year
Industrial End Market Organic Sales Growth versus Prior Year • Q3 2018 Sales − Organic sales were up 1% versus prior year • Global Accounts (up 3% in the U.S. and up 4% in Canada in local 37% • Integrated Supply • OEM currency) • General Industrial Industrial 13.9% − Down 3% sequentially 11.2% 10.4%
Slide 5: Construction End Market Organic Sales Growth versus Prior Year
Construction End Market Organic Sales Growth versus Prior Year • Q3 2018 Sales − Organic sales were up 3% versus prior year 33% • Non-Residential • Contractors (flat in the U.S. and up 12% in Canada in local Construction currency) 8.9% 9.4% 7.9% 6.0% − Up 2% sequentially 2.8% • Strong backlog and bu
Slide 6: Utility End Market Organic Sales Growth versus Prior Year
Utility End Market Organic Sales Growth versus Prior Year • Q3 2018 Sales − Organic sales were up 11% versus prior year (up 13% in the U.S. and down 4% in Canada in local • Investor Owned 17.9% 18.8% 16% • Public Power currency) • Utility Contractors Utility − Up 4% sequentially 11.0% 8.6% 9.1% • Co
Slide 7: CIG End Market Organic Sales Growth versus Prior Year
CIG End Market Organic Sales Growth versus Prior Year • Q3 2018 Sales − Organic sales were up 8% versus prior year • Commercial (flat in the U.S. and up 12% in Canada in local 14% • Institutional currency; balance of growth in International) • Government CIG − Down 1% sequentially 9.4% 9.0% 8.5% 7.4
Slide 8: Q3 2018 Results
Q3 2018 Results Outlook Actual YOY Sales 3% to 6% $2.1B Up 3.4% Gross Margin 19.2% Up 10 bps (1) SG&A $284M, 13.7% Up 1%, improved 30 bps Operating Profit $98M Up 10% Operating Margin 4.5% to 4.8% 4.7% Up 30 bps Effective Tax Rate ~21% 17.2% Down 830 bps EPS $1.41 Up 26% 170 bps 260 bps $2.1B 10 bps
Slide 9: Diluted EPS Walk
Diluted EPS Walk Q3 2017 $1.12 Core operations 0.17) Foreign exchange (0.03) Tax 0.14) Share count 0.01) 2018 $1.41 …26% EPS growth versus prior year 9 Q3 2018 Earnings Webcast 11/1/18
Slide 10: Free Cash Flow & Leverage
Free Cash Flow & Leverage Free Cash Flow Leverage ($ Millions) (Total Debt to TTM EBITDA) ~ $1.2B of free 4.0x cash flow over Target last 5 years Leverage $150.8 3.5x 2.0x – 3.5x 3.1X 3.0x 2.5x $65.1 2.0x 46% 90% of net of net 1.5x income income Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2017 YTD 2018 YTD 201
Slide 11: Effective Capital Allocation
Effective Capital Allocation Consistent Cash Deployment Priorities Increased Share Repurchase Authorization • Support organic growth • Up to $400M through end of 2020 − $100M increase in authorization • Fund accretive acquisitions − utilized $25M in 3Q18 − anticipate utilizing additional $175M of •
Slide 12: 2018 Outlook
2018 Outlook FY FY Q4 (Current) (Previous) Sales 1% to 4% 6% to 8% 6% to 9% Operating Margin 4.3% to 4.6% 4.2% to 4.4% 4.2% to 4.5% Effective Tax Rate ~ 21% 19% to 21% 21% to 23% Diluted EPS $4.70 to $4.90 $4.60 to $5.00 Free Cash Flow ~ 100% of net income > 90% of net income Notes: Excludes unannou
Slide 13: 2019 Sales Outlook
2019 Sales Outlook Sales Outlook End markets in U.S. and Canada LSD to MSD growth in all end markets End Market Sales Growth 2% to 5% Market outperformance 1% to 2% Foreign currency slightly unfavorable Consolidated WESCO 3% to 6% Note: Excludes future acquisitions …another year of market outperform
Slide 14: Appendix: Non-GAAP Financial Measures
Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross margin, financial leverage, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. Management believ
Slide 15: WESCO Profile 2018
WESCO Profile 2018 Markets & Customers Products & Services 8% 14% 10% 40% 16% 37% 12% 33% 15% 15% Industrial Global Accounts | Integrated Supply General Supplies OEM | General Industrial Communications & Security Construction Wire, Cable & Conduit Non-Residential | Contractors Utility Lighting & Sus
Slide 16: Sales Growth (%)
Sales Growth (%) 2016 2017 2018 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Change in Net Sales (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) (0.1) 7.8 11.3 4.7 12.5 10.2 3.4 Acquisition Impact 3.9 3.7 2.9 1.8 3.1 0.9 0.2 Core (6.1) (4.0) (6.5) (5.5) (5.5) (1.1) (0.1) 7.8 11.3 4.5 12.5 10.2 3.4 FX Impact (2.6) (0.
Slide 17: Q3 2018 Organic Sales Growth by Geography
Q3 2018 Organic Sales Growth by Geography (%) U.S. Canada International WESCO Change in net sales (USD) 3.5 4.8 (4.2) 3.4 Impact from acquisitions - - - - Impact from foreign exchange rates - (3.4) (1.6) (0.8) Impact from number of workdays - - - - Organic sales growth 3.5 8.2 (2.6) 4.2 17 Q3 2018 E
Slide 18: Sales Growth by End Market
Sales Growth by End Market ($ Millions) Q3 2018 vs. Q3 2017 Q3 2018 vs. Q2 2018 Q3 2018 Q3 2017 % Growth Q3 2018 Q2 2018 % Growth Industrial Core $727 $726 0.2% $727 $764 -4.8% Construction Core 689 678 1.6% 689 686 0.4% Utility Core 347 314 10.6% 347 338 2.7% CIG Core 312 292 7.1% 312 324 -3.5% Tot
Slide 19: Q3 2018 Organic Sales by End Market
Q3 2018 Organic Sales by End Market (%) Industrial Construction Utility CIG WESCO Core Sales Growth 0.2 1.6 10.6 7.1 3.4 FX Impact (0.6) (1.2) (0.4) (0.6) (0.8) Workday Impact - - - - - Organic Growth 0.8 2.8 11.0 7.7 4.2 19 Q3 2018 Earnings Webcast 11/1/18
Slide 20: Gross Margin
Gross Margin ($ Millions) Three Months Ended September 30, September 30, 2018 2017 Net sales $2,067 $2,000 Cost of goods sold (excluding depreciation and amortization) 1,670 1,615 Gross profit (1) $397 $385 Gross margin (1) 19.2% 19.3% (1) Gross profit is calculated by deducting cost of goods sold,
Slide 21: Capital Structure
Capital Structure ($ Millions) Outstanding at Outstanding at Debt December 31, 2017 September 30, 2018 Maturity Schedule AR Revolver (V) 380 365 2020 Inventory Revolver (V) 12 - 2020 2019 Term Loans (V) 85 25 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 350 2024 Other (V) 36 32
Slide 22: Financial Leverage
Financial Leverage ($ Millions) Twelve Months Ended September 30, 2018 Income from operations (1) $343 Depreciation and amortization 64 EBITDA $407 September 30, 2018 Short-term borrowings and current debt $32 Long-term debt 1,229 Debt discount and debt issuance costs (2) 11 Total debt $1,272 Less:
Slide 23: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation ($ Millions) YTD YTD 2017 2018 Cash flow provided by operations $81.1 $174.5 Less: Capital expenditures (16.0) (23.7) Free cash flow 65.1 150.8 Net income $140.9 $167.3 Percentage of net income 46% 90% Note: Free cash flow is provided by the Company as an additional liq
Slide 24: Work Days
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 2019 63 64 63 62 252 24 Q3 2018 Earnings Webcast 11/1/18