Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2017 Earnings Presentation
22 slides from Wesco International's earnings presentation, Jul 27, 2017
Slide 1: Q2 2017 Earnings Webcast Presentation
Webcast Presentation – July 27, 2017 Q2 2017 Earnings
Slide 2: Safe Harbor Statement
2 Q2 Earnings Webcast 7/27/17 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 o
Slide 3: Q2 2017 Highlights
3 Q2 Earnings Webcast 7/27/17 Q2 2017 Highlights …performance in-line with outlook • Second quarter results were in line with our outlook • Reported sales were flat, organic sales up 1% after eight consecutive quarters of sales decline ‒ Organic sales were down 1% in U.S. ‒ Organic sales were up 2%
Slide 4: Industrial End Market
4 Q2 Earnings Webcast 7/27/17 Industrial End Market • Q2 2017 Sales − Organic sales up 6% versus prior year (up 4% in U.S. and up 10% in Canada in local currency) − Up 5% sequentially • Positive momentum driven by sequential sales growth in most end market verticals • Global Account and Integrated S
Slide 5: Construction End Market
5 Q2 Earnings Webcast 7/27/17 (3.6%) 2.3% (5.5%) (1.9%) (3.6%) (4.4%) • Q2 2017 Sales − Organic sales down 4% versus prior year (down 6% in U.S. and down 4% in Canada in local currency) − Up 10% sequentially − Growth with commercial contractors partially offset weakness with contractors serving the
Slide 6: Utility End Market
6 Q2 Earnings Webcast 7/27/17 Utility End Market Organic Sales Growth versus Prior Year 15% Utility • Investor Owned • Public Power • Utility Contractors • Q2 2017 Sales − Organic sales down 4% versus prior year (down 4% in U.S. and down 7% in Canada in local currency) − Up 6% sequentially − Excludi
Slide 7: CIG End Market
7 Q2 Earnings Webcast 7/27/17 CIG End Market • Q2 2017 Sales − Organic sales up 7% versus prior year (up 2% in U.S. and up 31% in Canada in local currency) after three quarters of sales declines − Up 14% sequentially • Technical expertise and supply chain solutions driving positive momentum in datac
Slide 8: Q2 2017 Results
8 Q2 Earnings Webcast 7/27/17 Q2 2017 Results Outlook Actual YOY Sales (2)% to 1% $1.91B Flat Gross Margin 19.2% Down 70 bps SG&A $267M, 14.0% Down 3%, Down 40 bps Operating Profit $83M Down 6% Operating Margin 4.2% to 4.6% 4.4% Down 20 bps Effective Tax Rate ~29% 25.3% Down 200 bps (0.8)% Growth 40
Slide 9: Diluted EPS Walk
9 Q2 Earnings Webcast 7/27/17 Diluted EPS Walk Q2 2016 $1.02) Core operations 0.00) Foreign exchange impact (0.03) Tax 0.03) Share count 0.00) 2017 $1.02)
Slide 10: Cash Generation and Leverage
10 Q2 Earnings Webcast 7/27/17 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Cash Generation 131.5 57.0 2016 YTD 2017 YTD Free Cash Flow ($ Millions) Note: See appendix for non-GAAP reconciliations. 65% of net income 156% of net income > $1B of free cash flow over last 4 years Target Leverage 2.0x
Slide 11: 2017 Outlook
11 Q2 Earnings Webcast 7/27/17 2017 Outlook Q3 FY Sales 2% to 5% 1% to 3% Operating Margin 4.2% to 4.6% 4.1% to 4.3% Effective Tax Rate ~ 27% ~ 27% Diluted EPS $3.60 to $3.90 Free Cash Flow >90% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.78 in Q3. Se
Slide 12: Appendix: Non-GAAP Financial Measures
12 Q2 Earnings Webcast 7/27/17 Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, financial leverage, and free cash flow. The Company believes that these non-GAAP measures are usefu
Slide 13: WESCO Profile 2017
13 Q2 Earnings Webcast 7/27/17 WESCO Profile 2017 37% 33% 15% 15% 40% 15% 14% 12% 11% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & ServicesMarkets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Utilit
Slide 14: Sales Growth
14 Q2 Earnings Webcast 7/27/17 Sales Growth 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) (0.1) Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9 Core (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) (4.0) (6.5)
Slide 15: Q2 2017 Sales Growth – Geography
15 Q2 Earnings Webcast 7/27/17 Q2 2017 Sales Growth – Geography U.S. Canada International Total Change in net sales (USD) (0.8) (2.5) 24.0 (0.1) Impact from acquisitions - - - - Impact from foreign exchange rates - (4.8) (3.4) (1.1) Impact from number of workdays - - - - Organic sales growth (0.8) 2
Slide 16: Sales Growth – End Markets
16 Q2 Earnings Webcast 7/27/17 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q2 2017 vs. Q2 2016 Q2 2017 vs. Q1 2017 Q2 Q2 Q2 Q1 2017 2016 % Growth 2017 2017 % Growth Industrial Cor
Slide 17: Q2 2017 Organic Sales by End Market
17 Q2 Earnings Webcast 7/27/17 Q2 2017 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth 5.1 (5.9) (4.9) 6.6 (0.1) FX Impact (0.9) (1.5) (0.5) (0.8) (1.1) Workday Impact - - - - - Organic Growth 6.0 (4.4) (4.4) 7.4 1.0 (%)
Slide 18: Debt Maturity Schedule and Capital Structure
18 Q2 Earnings Webcast 7/27/17 Outstanding at December 31, 2016 Outstanding at June 30, 2017 Debt Maturity Schedule AR Revolver (V) 380 376 2018 Inventory Revolver (V) 4 8 2020 2019 Term Loans (V) 145 115 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 350 2024 Other (V) 24 26 N/A
Slide 19: Financial Leverage
19 Q2 Earnings Webcast 7/27/17 Financial Leverage Twelve Months Ended June 30, 2017 Financial leverage ratio: Income from operations $ 325 Depreciation and amortization 65 EBITDA $ 390 June 30, 2017 Current debt and short-term borrowings $ 25 Long-term debt 1,335 Debt discount and deferred financing
Slide 20: Non-Cash Interest Expense
20 Q2 Earnings Webcast 7/27/17 2015 2016 YTD 2017 Amortization of Debt Discount(1) 6.1 3.0 0.1 Amortization of Deferred Financing Fees 6.1 3.6 1.9 FIN 48 (8.7) 1.2 0.2 Total 3.5 7.8 2.2 Non-Cash Interest Expense (1) Includes convertible debt and term loan; the convertible debt was redeemed in Q3 201
Slide 21: Free Cash Flow Reconciliation
21 Q2 Earnings Webcast 7/27/17 Free Cash Flow Reconciliation YTD 2016 YTD 2017 Cash flow provided by operations 138.6 66.8 Less: Capital expenditures (7.1) (9.8) Free cash flow 131.5 57.0 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are ded
Slide 22: Work Days
22 Q2 Earnings Webcast 7/27/17 Work Days Q1 Q2 Q3 Q4 FY 2015 62 64 64 63 253 2016 64 64 64 62 254 2017 64 64 63 62 253