Wesco International, Inc. · NYSE:WCC
Wesco International — Q1 2020 Earnings Presentation
22 slides from Wesco International's earnings presentation, Apr 30, 2020
Slide 1: First Quarter 2020 Webcast Presentation
First Quarter 2020 Webcast Presentation April 30, 2020 1
Slide 2: Additional Information and Where to Find It
Additional Information and Where to Find It This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale
Slide 3: Response to COVID-19 Pandemic
Response to COVID-19 Pandemic PRIORITIES ACTIONS TAKEN • Implemented multi-shift strategy to promote social distancing Protect 1 • Increased regular cleaning protocols Employees • Reward and recognition bonus for on-site employees • Implemented Business Continuity Plan Superserve • All U.S. and Cana
Slide 4: First Quarter Results Overview
First Quarter Results Overview Versus Q1 First Quarter Highlights 2019 2020 Adjustments PY Outlook • Results were on track with our outlook until mid-March • WESCO deemed an essential business and all U.S. and Sales $1,961 $1,969 0.4% 2% - 5% Canada branches are operational Gross Profit $382 $376 (1
Slide 5: First Quarter Sales Summary
First Quarter Sales Summary ORGANIC SALES ORGANIC SALES Year Over Year Year Over Year GROWTH GROWTH Total U.S. Canada International January 2.2% Industrial (6.2)% (8.6)% 1.5% 3.5% February 2.0% Construction (2.0)% 1.7% (8.3)% (5.4)% March (8.6)% Utility 8.9% 8.2% 27.5% (20.7)% CIG (0.7)% 2.3% (9.8)%
Slide 6: Strong Balance Sheet
Strong Balance Sheet Liquidity (as of 3/31/20) Bank Credit Facilities Limited Operating Covenants • Liquidity: $732 million • Mature in 2022 and 2024 • No maximum leverage covenant – Invested cash: $285 million • Low cost LIBOR based • Fixed charge coverage covenant • Borrowing bases provide confide
Slide 7: Strong Free Cash Flow Through the Cycle
Strong Free Cash Flow Through the Cycle Cumulative Free Cash Flow Free Cash Flow as % of Last 3 years $569M 89% of net income Adjusted Net Income Last 5 years $1,113M 108% of net income Last 10 years $2,163M 103% of net income Great Recession 300% Industrial 250% Recession 265% 200% 150% 154% 100% 1
Slide 8: Resilient Business Model with Substantial Free Cash Flow and Rapid Deleveraging
Resilient Business Model with Substantial Free Cash Flow and Rapid Deleveraging Proven ability to delever through economic cycles and post strategic M&A Deleveraging Through the Cycle 1 Deleveraging Post M&A 1 Proven ability to deleverage through economic cycles... Demonstrated ability to delever po
Slide 9: WESCO is Larger and More Diverse than 2009
WESCO is Larger and More Diverse than 2009 Acquisitions have diversified WESCO by Product Line, End Market, Supplier, Customer, and Geography Sales ($ billions) Broadband Communications 6.1% CAGR $8.4 Safety Canada $4.6 Expansion Turnkey Lighting Solutions Construction 2009 2019 Stronger, More Stabl
Slide 10: Transformational Combination of WESCO and Anixter
Transformational Combination of WESCO and Anixter Transaction Milestones Integration Planning Progress ✓ Agreement announced ✓ Integration planning underway ✓ Obtained committed financing ✓ Progress has been rapid and is accelerating ✓ HSR waiting period expired ✓ Joint integration teams established
Slide 11: Evolving Secular Trends Benefit WESCO + Anixter
Evolving Secular Trends Benefit WESCO + Anixter Secular Trends Benefitting WESCO and Anixter…. …Contribute to Financial Benefits of the Transformational Combination IoT and Remote Connectivity Automation Increase in number of Increased reliance Estimated Impact in Year Three on remote automated comm
Slide 12: Summary
Summary • Quick and decisive actions taken in response to COVID-19 pandemic • Strong liquidity and favorable borrowing covenants • Resilient business model and strong free cash flow throughout the cycle • Larger and more diverse by product line, end market, and geography • Anixter transaction is on
Slide 13: Appendix
APPENDIX
Slide 14: First Quarter Diluted EPS and Sales Growth Walk
First Quarter Diluted EPS and Sales Growth Walk Diluted EPS Walk1 Sales Growth Walk Reported Q1 2019 Diluted EPS $0.93 Q1 2019 Sales $1,961 M Core operations $(0.02) U.S. (80) bps Canada (80) bps Foreign exchange rates $0.00 International (10) bps SLS acquisition $(0.05) Organic Growth (1.7)% Tax $(
Slide 15: First Quarter Gross Margin Drivers
First Quarter Gross Margin Drivers Mix Impact Summary Historical Gross Margin vs. Q1 2020 vs. WESCO Average Q4 2019 Gross margin versus fourth quarter driven by three factors: Industrial ABOVE END MARKET • Getting traction on our margin CIG AVERAGE Neutral improvement initiatives Construction BELOW
Slide 16: Free Cash Flow & Leverage
Free Cash Flow & Leverage Free Cash Flow Leverage ($ Millions) (Debt, Net of Cash, to TTM EBITDA) $1 billion+ of free cash flow over the last 5 years target leverage 4.0x 2.0x – 3.5x 3.5x $18.0 3.0x 3.1x 43% of net income $15.8 46% of net income 2.5x 2.0x 1.5x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2019 YTD 202
Slide 17: Work Days
Work Days Q1 Q2 Q3 Q4 FY 2018 64 64 63 62 253 2019 63 64 63 62 252 2020 64 64 64 61 253
Slide 18: Adjusted Results
Adjusted Results Q1 2020 Reported Adjusted Results Adjustments (1) Results (in millions, except for EPS) SG&A expenses $ 299.4 $ (4.6) $ 294.8 Income from operations 60.9 4.6 65.5 Net interest and other 16.5 (0.5) 16.0 Income before income taxes $ 44.4 5.1 $ 49.6 Income tax 10.3 1.2 11.4 Effective t
Slide 19: First Quarter Organic Sales Growth
First Quarter Organic Sales Growth Year-over-Year Three Months Ended, Core Less: Less: Organic March 31, 2019 March 31, 2020 Growth FX Impact Workday Growth Industrial core sales 737 702 (4.6)% 0.0% 1.6% (6.2)% Construction core sales 630 629 (0.2)% 0.2% 1.6% (2.0)% Utility core sales 308 341 10.6%
Slide 20: Capital Structure and Leverage
Capital Structure and Leverage EBITDA Twelve Months Ended, December 31,2019 March 31, 2020 Income from operations 346 336 Depreciation and amortization 62 63 EBITDA 408 399 As of, Maturity Debt December 31, 2019 March 31, 2020 AR Revolver (variable) 415 600 September 2022 Inventory Revolver (variabl
Slide 21: Gross Profit and Free Cash Flow - Quarter
Gross Profit and Free Cash Flow - Quarter Gross Profit Three Months Ended, March 31, 2019 March 31, 2020 Net sales 1,961 1,969 Cost of goods sold1 1,579 1,592 2 Gross profit 382 376 2 Gross margin 19.5% 19.1% Free Cash Flow Three Months Ended March 31, 2019 March 31, 2020 Net cash provided by operat
Slide 22: Free Cash Flow - Annual
Free Cash Flow - Annual Twelve Months Ended December 31, ($ millions) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net cash provided by operating activities 292 127 168 288 315 251 283 300 149 297 224 Less: capital expenditures (13) (15) (33) (23) (28) (21) (22) (18) (21) (36) (44) Plus: n