Wesco International, Inc. · NYSE:WCC
Wesco International — Q4 2023 Earnings Presentation
31 slides from Wesco International's earnings presentation, Feb 13, 2024
Slide 1: Fourth Quarter 2023 Webcast Presentation
NYSE: WCC Fourth Quarter 2023 Webcast Presentation February 13, 2024
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: 2023 Results and 2024 Outlook
2023 Results and 2024 Outlook Fourth quarter results below expectations − Lower stock and flow sales along with delays in certain projects − Certain sectors including utility, data center, and industrial continued to grow, while others declined including broadband, OEM and construction related secto
Slide 4: Post Anixter Merger Performance Exceeded Expectations
Post Anixter Merger Performance Exceeded Expectations Sales Cost EBITDA2 Margin Return to Synergies Synergies Expansion Target Leverage . . . . Realized sales synergies Exceeded cost Delivered 240 bps of Reduced leverage 13x original target synergy target by 60% margin expansion1 by ~3 turns $2,300M
Slide 5: Fourth Quarter Results Overview
Fourth Quarter Results Overview $ millions, except per share amounts Q4 Q4 • Reported sales down ~2% YOY, organic sales down ~3% YOY YOY 2023 2022 • Growth in utility, industrial, data centers, and enterprise network infrastructure, more than offset by declines in broadband, OEM and Sales $5,473 $5,
Slide 6: Fourth Quarter Growth Below Expectations
Fourth Quarter Growth Below Expectations Quarterly YOY Organic Sales Growth YOY Organic Sales Growth 2022 - 2023 Q4 2023 Q4 Sales Decline Drivers CSS 21% 21% • Sales below expectations due to lower stock and 17% flow sales along with projects delayed into 2024 14% EES 11% • Lower stock and flow sale
Slide 7: Fourth Quarter Sales and Adjusted EBITDA Bridges
Fourth Quarter Sales and Adjusted EBITDA Bridges $ millions Net Sales1 Adjusted EBITDA 6.7% of sales $5,559 (3)% $5,473 Organic $451 8.1% of sales $385 (15)% 7.0% (110) bps of sales Q4 2022 Market Growth Share Gain/ M&A Foreign Q4 2023 Q4 2022 Sales Gross SG&A Q4 2023 Sales (Including Cross Sell Exc
Slide 8: FY 2023 Results Overview
FY 2023 Results Overview $ millions, except per share amounts FY FY • Record annual sales with organic growth of ~3% YOY YOY 2023 2022 • Record CSS sales driven by data center demand and security share gains Sales $22,385 $21,420 +3%1 • EES sales down YOY as strength in industrial more than offset b
Slide 9: FY 2023 Sales and Adjusted EBITDA Bridges
FY 2023 Sales and Adjusted EBITDA Bridges $ millions Net Sales1 Adjusted EBITDA 6.7% $22,385 Organic +3% of sales $21,420 $1,726 $1,705 (1)% 8.1% 7.6% (50) of sales of sales bps FY 2022 Market Growth Share Gain/ M&A Foreign FY 2023 FY 2022 Sales Gross SG&A FY 2023 Sales (Including Price) Cross Sell
Slide 10: FY2023 SG&A by Quarter
FY2023 SG&A by Quarter $ millions 2023 Adjusted SG&A by Quarter Fourth Quarter Sequential SG&A Drivers • Approximately 1/3 of the increase due to benefits $811 and healthcare costs $798 $799 • Balance of the increase driven by higher facilities $776 cost, IT, and sales promotions Q1 23 Q2 23 Q3 23 Q
Slide 11: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) $ millions Fourth Quarter Q4 Q4 Sales down approximately 4% on both a reported and organic basis YOY • 2023 2022 – Construction down HSD primarily due to weakness in wire and cable as well as solar – Industrial up MSD driven by growth in automation and oil and
Slide 12: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) $ millions Fourth Quarter Q4 Q4 Reported sales up 2%, down 1% organically YOY • 2023 2022 − Enterprise Network Infrastructure up LSD as strength in wireless was offset by declines in internet service provider sales, particularly in Canada Sales $1,791 $1,763
Slide 13: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) $ millions Fourth Quarter Q4 Q4 Sales down 2% on both a reported and organic basis YOY • 2023 2022 – Utility sales up LSD versus prior year up 20%+ driven by electrification, green energy, and grid modernization investments Sales $1,598 $1,627 (2)%1 – Broadband sa
Slide 14: Free Cash Flow
Free Cash Flow $ millions FY 2023 FY 2023 1H / 2H $52 $(68) $50 $(320) $822 $(691) $416 $(92) $444 $(817) $553 54% of Adj. Net Income $27M Adjusted D&A and Accounts Inventory Accounts Capex Free 1H 2H Net Income Other Receivable Payable Cash Flow 2023 2023 Wesco well positioned to deliver strong cas
Slide 15: Narrowing and Reducing Target Leverage Range to 1.5x to 2.5x
Narrowing and Reducing Target Leverage Range to 1.5x to 2.5x 6.0x M&A 5.5x M&A 5.3x 5.0x 4.5x 4.5x M&A Revised Target 4.0x 3.4x 3.9x Leverage Range 3.5x 3.5x 2024 and beyond 3.0x 3.0x 3.2x 3.3x 2.7x 2.7x 2.7x 2.9x 2.5x 2.8x 2.5x 2.0x 2.0x 1.5x Target Leverage Range 1.5x 1.0x Leverage (Net Debt / TTM
Slide 16: 2024 Strategic Business Unit Sales Growth Drivers
2024 Strategic Business Unit Sales Growth Drivers % of Wesco SBU Sales 2023 Sales 2024 Outlook Breakdown 1 2023 2024 Construction Electrical & Electronic Solutions 38% Flat to +LSD Industrial OEM Enterprise Network Infrastructure Communications & Security Solutions 32% Security +LSD to +MSD WDCS Uti
Slide 17: 2024 Outlook
2024 Outlook 2024 Outlook Organic sales Flat to +3% Sales Plus: impact of two additional workdays in 2024 +1% Reported sales +1% to +4% Adjusted Adjusted EBITDA margin 7.5% - 7.9% EBITDA Implied midpoint of range ~$1.75 billion Adjusted Adjusted diluted EPS $13.75 - $15.75 EPS Cash Free cash flow ~$
Slide 18: Attractive Long-Term Growth Trends
Attractive Long-Term Growth Trends 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 U.S. Rural Broadba
Slide 19: Appendix
APPENDIX wr wesco
Slide 20: 2023 Inter-Segment Business Transfers
2023 Inter-Segment Business Transfers FY $ millions Q1 2022 Q2 2022 Q3 2022 Q4 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 21: Glossary
Glossary 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 B2B: Business-to-Business OEM: Original equipment manufacturer COGS: Cost of goods sold OPEX: Operating expenses CIG: Commercial, Institutional and Government RO
Slide 22: Workdays
Workdays Q1 Q2 Q3 Q4 FY 2021 62 64 64 62 252 2022 63 64 64 62 253 2023 63 64 63 62 252 2024 63 64 64 63 254 22
Slide 23: 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 24: Organic Sales Growth by Segment
Organic Sales Growth by Segment $ millions Organic Sales Growth by Segment - Three Months Ended: Three Months Ended Growth/(Decline) December 31, December 31, Foreign Organic 2023 2022 Reported Acquisition Exchange Workday Sales EES $ 2,084.2 $ 2,168.4 (3.9)% — % 0.2 % — % (4.1) % CSS 1,791.3 1,762.
Slide 25: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow $ millions Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, Gross Profit: 2023 2022 2023 2022 Net sales $ 5,473.4 $ 5,558.5 $ 22,385.2 $ 21,420.1 Cost of goods sold (excluding depreciation and amortization) 4,302.7 4,340.2 17,
Slide 26: Adjusted EBITDA – Q4 2023
Adjusted EBITDA – Q4 2023 $ millions Three Months Ended December 31, 2023 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 152.4 $ 117.4 $ 160.4 $ (302.6) $ 127.6 Net income (loss) attributable to noncontrolling interests 0.3 0.6 — (
Slide 27: Adjusted EBITDA – Q4 2022
Adjusted EBITDA – Q4 2022 $ millions Three Months Ended December 31, 2022 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 185.7 $ 153.9 $ 176.4 $ (311.4) $ 204.6 Net (loss) income attributable to noncontrolling interests (0.4) — — 0
Slide 28: Adjusted EBITDA – FY 2023
Adjusted EBITDA – FY 2023 $ millions Year Ended December 31, 2023 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 668.7 $ 531.1 $ 712.5 $ (1,204.2) $ 708.1 Net (loss) income attributable to noncontrolling interests (0.5) 1.6 — (0.5)
Slide 29: Adjusted EBITDA – FY 2022
Adjusted EBITDA – FY 2022 $ millions Year Ended December 31, 2022 EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total Net income attributable to common stockholders $ 801.3 $ 527.0 $ 648.5 $ (1,173.7) $ 803.1 Net income attributable to noncontrolling interests 0.2 — — 1.5 1.7 Preferre
Slide 30: Adjusted EPS
Adjusted EPS $ millions, except per share amounts Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, Adjusted Earnings per Diluted Share: 2023 2022 2023 2022 Adjusted income from operations $ 327.5 $ 397.4 $ 1,480.1 $ 1,515.3 Interest expense, net 97.0 87.3 38
Slide 31: Capital Structure and Leverage
Capital Structure and Leverage Twelve Months Ended December 31, December 31, Financial Leverage: 2023 2022 $ millions Net income attributable to common stockholders $ 708.1 $ 803.1 Net income attributable to noncontrolling interests 0.6 1.7 Preferred stock dividends 57.4 57.4 Provision for income ta