Wesco International, Inc. · NYSE:WCC
Wesco International — Q4 2021 Earnings Presentation
30 slides from Wesco International's earnings presentation, Feb 15, 2022
Slide 1: Fourth Quarter 2021 Webcast Presentation
Fourth Quarter 2021 Webcast Presentation February 15, 2022 NYSE: WCC
Slide 2: Forward-looking statements
2 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 may cause actual results to
Slide 3: Agenda
Agenda 3 Business Overview Financial Results Overview John Engel Chairman, President & CEO Executive Vice President & CFO Dave Schulz
Slide 4: Strong Results Across The Board
4 Strong Results Across The Board Strong execution and value of Wesco+Anixter drove record sales, backlog and profitability in 2021 Sales up 16% YOY and 6% sequentially on an organic basis • Effectively managing global supply chain challenges • Increased inventories to support sales growth and ensur
Slide 5: Secular Growth Trends Amplify Growth Opportunity
5 Secular Growth Trends Amplify Growth Opportunity Exceptionally well-positioned across all business units Supply Chain Consolidation and Relocation to North America Electrification Automation and IoT Green Energy and Grid Modernization 24/7 Connectivity and Security Digitalization
Slide 6: New Product Highlight: A/V Conference Room as a Service
6 New Product Highlight: A/V Conference Room as a Service Service capability that leverages the end-to-end solutions of Wesco+Anixter • Recently launched A/V Conference-Room-as-a-Service offering • Subscription-based service that enables rapid deployment of multiple conference rooms as a single subs
Slide 7: ESG Update
7 ESG Update Named to the 2022 Bloomberg Gender Equality Index for the fourth consecutive year Environmental • Reduced greenhouse gas emission intensity level by 23% • Reduced recordable rate by 55% since 2017; Wesco consistently performs 6x-8x better than peer group of distributors benchmarked by t
Slide 8: Fourth Quarter Results Overview
Fourth Quarter Results Overview Dave Schulz Executive Vice President & Chief Financial Officer
Slide 9: Fourth Quarter Results Overview
9 Fourth Quarter Results Overview Outstanding financial results driven by strong sales growth, margin expansion and operating leverage Q4 2021 Q4 2020 YOY Sales $4,852 $4,129 18% Gross Profit 1,008 811 24% % of sales 20.8% 19.6% +120 bps Adjusted Income from Operations 271 172 58% % of sales 5.6% 4.
Slide 10: Fourth Quarter Adjusted EBITDA Bridge
10 Fourth Quarter Adjusted EBITDA Bridge Outstanding financial results driven by strong sales growth, margin expansion and operating leverage 2020 Q4 Adjusted EBITDA Sales Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other 2021 Q4 Adjusted EBITDA
Slide 11: FY 2021 Results Overview
11 FY 2021 Results Overview Outstanding financial results driven by strong sales growth, margin expansion and operating leverage FY 2021 FY 2020 PF YOY Sales $18,218 $16,017 14% Adjusted EBITDA $1,176 $855 37% % of sales 6.5% 5.3% +120 bps • Sales +14% YOY • Record backlog, +88% YOY • Adjusted EBITD
Slide 12: Electrical & Electronic Solutions (EES)
Continue to take share due to enhanced value proposition and complete solutions offering Fourth Quarter Drivers • Strong double-digit sales growth in all operating groups – Non-residential construction remains ahead of expectations – Industrial and MRO momentum continues, along with OEM and CIG • Ba
Slide 13: Communications & Security Solutions (CSS)
Fourth Quarter Drivers • Strong quarter with sales growth in all operating groups – Network infrastructure growth led by data center and hyperscale projects – Continued strength in cloud and professional audio/visual applications – Security growth driven by increased IP-based surveillance and adopti
Slide 14: Utility & Broadband Solutions (UBS)
Fourth Quarter Drivers • Double-digit sales growth in all operating groups – Growth in utility driven by IOU customers and Public Power investments in grid modernization and new business wins – Broadband growth driven by connectivity demand and rural broadband expansion – Integrated supply up versus
Slide 15: Cross-Sell Drives Market Outperformance
15 • Expanding pipeline of cross-sell opportunities • Strong customer relationships and global supplier partnerships • Minimal overlap between legacy Wesco and Anixter customers • Highly complementary products and services • Salesforce training and incentives in place • Opportunities to cross-sell e
Slide 16: Accelerated Cost Synergy Realization Continues
16 $14 $34$25 $44 $50 $60 2020 2021 2022 2023 Accelerated Cost Synergy Realization Continues Accelerated synergy capture leads to increased 2023 target of $315 million Cumulative Realized Synergies 202 1 (to date) Supply Chain $115 million G&A $95 million Corporate Overhead $45 million Cumulative Re
Slide 17: Free Cash Flow and Working Capital Days
17 70 70 67 65 64 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Adjusted Net Income D&A / Other Working Capital Increase Capex / IT Spend Free Cash Flow Free Cash Flow and Working Capital Days Responsively managing working capital in a high-growth, supply-constrained environment 6-day reduction Free Cash Flow
Slide 18: Leverage Improved 1.8x Since Anixter Merger
18 Leverage Improved 1.8x Since Anixter Merger 18 Months Ago Remain on accelerated track to return to target leverage range of 2.0-3.5x during second half of 2022 5.7x 5.3x 5.3x 4.9x 4.5x 4.1x 3.9x Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 • Leverage reduced 1.4x in 2021; 1.8x since An
Slide 19: 2022 Outlook
2022 Outlook 19 FY 2022 Outlook Market growth +3% to +5% Plus: share gain/cross-sell +2% to +3% Plus: benefit of one more workday in 2022 +0.5% Reported sales +5% to +8% Adjusted EBITDA margin1 6.7% to 7.0% +20 bps to +50 bps vs PY Effective tax rate ~25% Adjusted EPS1 $11.00 to $12.00 +10% to +20%
Slide 20: Summary
20 Summary Differentiated capabilities and execution, along with improving macro environment, drive strong 2022 outlook • 2021 was an exceptional year all around • Delivered very strong financial results capping off an outstanding first 18 months of WESCO + Anixter – Growth in every segment versus b
Slide 21: Appendix
APPENDIX
Slide 22: Glossary
22 Glossary 1H: First half of fiscal year 2H: Second half of fiscal year A/V: Audio/visual COGS: Cost of goods sold CIG: Commercial, Institutional and Government CSS: Communications & Security Solutions (business unit) EES: Electrical & Electronic Solutions (business unit) ETR: Effective tax rate FT
Slide 23: Workdays
23 Workdays Q1 Q2 Q3 Q4 FY 2019 63 64 63 62 252 2020 64 64 64 61 253 2021 62 64 64 62 252 2022 63 64 64 62 253
Slide 24: Gross Profit and Free Cash Flow
24 1 Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales. Adjusted gross profit and adjusted gross margin exclude the effect of merger-related fair value adjustments to i
Slide 25: Adjusted EBITDA Q4 2021
25 Note: EBITDA and Adjusted EBITDA are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before
Slide 26: Adjusted EBITDA FY 2021
26 Note: EBITDA and Adjusted EBITDA are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before
Slide 27: Pro Forma Net Sales and Adjusted EBITDA by Segment
27 Pro Forma Net Sales and Adjusted EBITDA by Segment 1 Pro forma adjustments represent Anixter’s results for the six-month period from January 6, 2020 to June 22, 2020, as previously reported in an 8-K filed on November 4, 2020, except that those results have been adjusted for the difference in rep
Slide 28: Adjusted EPS
Adjusted EPS 28 1 Adjustments include merger-related costs, a net gain on the sale of Wesco's legacy utility and data communications businesses in Canada, accelerated amortization expense associated with migrating to the Company's master brand architecture, a curtailment gain resulting from the reme
Slide 29: Organic Sales Growth by Segment
29 Organic Sales Growth by Segment $ millions Year-over-year: December 31, 2021 December 31, 2020 Reported Divestiture Impact Foreign Exchange Workday Impact Organic Growth EES $1,995 $1,668 19.6% (0.8)% 1.3% 1.6% 17.5% CSS 1,515 1,369 10.6% — % 0.2% 1.6% 8.8% UBS 1,342 1,091 23.0% (1.1)% 0.6% 1.6%
Slide 30: EBITDA and Leverage Footnotes
1 EBITDA and adjusted EBITDA for the twelve months ended December 31, 2020 gives effect to the combination of WESCO and Anixter as if it had occurred at the beginning of the respective trailing twelve-month period. 2 Other non-operating income for the year ended December 31, 2021 includes a $36.6 mi