Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2019 Earnings Presentation
20 slides from Wesco International's earnings presentation, Oct 31, 2019
Slide 1: Q3 2019 Earnings Webcast Presentation
Q3 2019 Earnings Webcast Presentation October 31, 2019 1
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 Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may caus
Slide 3: Q3 2019 Highlights
Q3 2019 Highlights Organic Sales Growth versus Prior Year Annual Quarter Third Quarter • Reported sales up 3.9% – Record Q3 sales with improving results in the U.S. and strength July +4% in Industrial, Utility, and Datacom 8.6% August +3% September +2% • Organic sales up 3.4% U.S. +4% – Up 1.2% sequ
Slide 4: Q3 2019 Results Versus Prior Year
Q3 2019 Results Versus Q3 Millions, except per share amounts Q3 2018 Q3 2019 prior year Outlook Sales $2,067 $2,148 3.9% 3% – 5% Gross Profit $397 $400 0.8% % of Sales 19.2% 18.6% (60) bps SG&A $284 $291 2.4% % of Sales 13.7% 13.5% (20) bps Operating Profit $98 $94 (3.9)% % of Sales 4.7% 4.4% (30) b
Slide 5: Third Quarter Gross Margin Influencers
Third Quarter Gross Margin Influencers Decline versus prior year primarily driven by two factors: Mix Impact Summary 1) Mix – Headwinds from differences in Historical Gross Margin vs. Q3 2019 Gross growth rates by end market, geography WESCO Average (1) Margin Impact and shipment type Industrial ABO
Slide 6: Diluted EPS and Sales Growth Walk
Diluted EPS and Sales Growth Walk Diluted EPS Walk Sales Growth Walk Q3 2018 Diluted EPS $1.41 Q3 2018 Sales $2,067 M Core operations $(0.05) U.S. 290 bps Canada 20 bps Foreign exchange rates $0.01 International 30 bps SLS acquisition $(0.05) Organic Growth 3.4% Tax, net of interest benefit $0.03 Fo
Slide 7: Industrial End Market
Industrial End Market Organic Sales Growth versus Prior Year Annual Quarter • Q3 2019 organic sales − Up 5% versus prior year − U.S. up 3%; Canada up 7% in local currency 11.2% − Up 1% sequentially • Pickup in sales growth rate against stiffer headwinds in 8.0% Industrial market in Q3 − Increased un
Slide 8: Construction End Market
Construction End Market Organic Sales Growth versus Prior Year Annual Quarter • Q3 2019 organic sales − Up 3% versus prior year − Up 4% in the U.S. and 1% in Canada in local currency − Up 2% sequentially • Backlog at historically strong level and flat sequentially (better than normal seasonality) 5.
Slide 9: Utility End Market
Utility End Market Organic Sales Growth versus Prior Year Annual Quarter • Q3 2019 organic sales − Up 3% versus prior year − Up 6% in the U.S.; down 28% in Canada in local currency due to non-renewal of Canadian contract in 4Q18 − Up 5% sequentially • Continue to drive product and service scope expa
Slide 10: CIG End Market
CIG End Market Organic Sales Growth versus Prior Year Annual Quarter • Q3 2019 organic sales − Up 1% versus prior year − Up 2% in the U.S.; up 6% in Canada in local currency − Down 3% sequentially 9.4% 9.0% • Supply chain solutions driving results in datacenter, 7.7% security, and cloud technology p
Slide 11: Free Cash Flow & Leverage
Free Cash Flow & Leverage Free Cash Flow Leverage ($ Millions) (Debt, Net of Cash, to TTM EBITDA) target leverage ~ $1.1B of free cash flow over the last 5 years 4.0x 2.0x – 3.5x 3.5x $117 million and $150.7 181% of net income in Q3 3.0x 90% of net income 3.0x 2.5x $86.3 2.0x 51% of net income 1.5x
Slide 12: 2019 Outlook
2019 Outlook Q4 Full Year Full Year implied at full year (current) (prior) midpoint Sales ~3.5% 1% to 3% 1% to 4% Operating Margin ~4.2% ~4.2% 4.2% to 4.5% Effective Tax Rate ~21% ~21% ~21 to 23% Diluted EPS $5.00 to $5.40 $5.00 to $5.60 Free Cash Flow ~ 90% of net income ~ 90% of net income Notes E
Slide 13: 2020 Preliminary Outlook
2020 Preliminary Outlook End Market: Range Industrial (LSD) to LSD Construction (LSD) to LSD Utility LSD CIG Flat to LSD End Market Sales Growth (1)% to 3% Market outperformance 1% to 2% Foreign currency / M&A1 neutral Consolidated WESCO Flat to 4% 1 Foreign currency exchange rates expected to be a
Slide 14: Operations Reorganization
Operations Reorganization • Announced appointment of Nelson Squires to Senior Vice President and Chief Operating Officer on October 1 • Streamlines our reporting structure – Business leaders report directly to COO – Global Operations and Supply Chain leader reports to COO • U.S. Vice President and G
Slide 15: Appendix
APPENDIX
Slide 16: Trailing Twelve Month Sales Mix
Trailing Twelve Month Sales Mix 15% 8% 10% 36% 41% 16% End 11% Products Markets 14% 33% 16% Industrial General Supplies Construction Communications & Security Utility Wire, Cable & Conduit CIG Lighting & Sustainability Electrical Distribution & Controls Automation, Controls & Motors 16
Slide 17: Organic Sales Growth
Organic Sales Growth ($ Millions) Year-over-Year Three Months Ended, Core Less: Less: Organic September 30, 2018 September 30, 2019 Growth FX Impact Workday Growth Industrial core sales 724 755 4.2% (0.4)% 0.0% 4.6% Construction core sales 686 706 2.9% (0.4)% 0.0% 3.3% Utility core sales 346 358 3.3
Slide 18: Capital Structure and Leverage
Capital Structure and Leverage ($ Millions) EBITDA Twelve Months Ended, December 31,2018 September 30, 2019 Income from operations 352 353 Depreciation and amortization 63 62 EBITDA 415 415 Debt Outstanding as of, Maturity December 31, 2018 September 30, 2019 AR Revolver (variable) 275 490 2022 Inve
Slide 19: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow ($ Millions) Gross Profit Three Months Ended, September 30, 2018 September 30, 2019 Net sales 2,067 2,148 Cost of goods sold1 1,670 1,748 Gross profit2 397 400 Gross margin 2 19.2% 18.6% Free Cash Flow Nine Months Ended, September 30, 2018 September 30, 2019 Net cash
Slide 20: Work Days
Work Days Q1 Q2 Q3 Q4 FY 2017 64 64 63 62 253 2018 64 64 63 62 253 2019 63 64 63 62 252 2020 64 64 64 61 253 20