Wesco International, Inc. · NYSE:WCC
Wesco International — Q4 2018 Earnings Presentation
25 slides from Wesco International's earnings presentation, Jan 31, 2019
Slide 1: Q4 & Full Year 2018 Earnings Webcast Presentation
Q4 & Full Year 2018 Earnings Webcast Presentation – January 31, 2019
Slide 2: Safe Harbor Statement
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 other factors that may cause act
Slide 3: Q4 & Full Year 2018 Highlights
Q4 & Full Year 2018 Highlights Oct 1%) Fourth Quarter Nov (1%) • Continued strong results in the fourth quarter Organic Growth Dec 4%) ‒ Double digit EBIT (+12%) and adjusted EPS (+22%) growth vs. prior year (%) ‒ Gross margin expansion of 20 bps year-over-year and sequentially 10.9 10.1 ‒ Operating
Slide 4: Industrial End Market Organic Sales Growth versus Prior Year
Industrial End Market Organic Sales Growth versus Prior Year • Q4 2018 Sales − Organic sales were up 1% versus prior year • Global Accounts 36% • Integrated Supply (flat in the U.S. and up 10% in Canada in local • OEM currency) • General Industrial Industrial − Up 4% sequentially 13.9% • Industrial
Slide 5: Construction End Market Organic Sales Growth versus Prior Year
Construction End Market Organic Sales Growth versus Prior Year • Q4 2018 Sales − Organic sales were up 1% versus prior year 33% • Non-Residential • Contractors (up 1% in the U.S. and up 3% in Canada in local Construction currency) 8.9% 9.4% 7.9% − Flat sequentially 6.0% • Strong backlog and business
Slide 6: Utility End Market Organic Sales Growth versus Prior Year
Utility End Market Organic Sales Growth versus Prior Year • Q4 2018 Sales − Organic sales were down 5% versus prior year (down 3% in the U.S. and down 23% in Canada in • Investor Owned 17.9% 18.8% 16% • Public Power local currency) • Utility Contractors Utility − Down 10% sequentially 11.0% • Contin
Slide 7: CIG End Market Organic Sales Growth versus Prior Year
CIG End Market Organic Sales Growth versus Prior Year • Q4 2018 Sales − Organic sales were up 12% versus prior year • Commercial (up 1% in the U.S. and up 27% in Canada in local 15% • Institutional currency) • Government CIG 12.1% − Down 5% sequentially 9.0% 8.5% 9.4% 7.7% 2018 • Technical expertise
Slide 8: Q4 2018 Results
Q4 2018 Results Outlook Actual YOY Sales 1% to 4% $2.0B Up 0.7% Gross Margin 19.4% Up 40 bps (1) SG&A $284M, 14.1% Up 1%, improved 20 bps Operating Profit $91M Up 12% Operating Margin 4.3% to 4.6% 4.5% Up 40 bps Effective Tax Rate ~21% 21.2% Down 270 bps, as adjusted EPS $1.26 Up 22%, as adjusted 10
Slide 9: Full Year 2018 Results
Full Year 2018 Results Outlook Actual YOY Sales 6% to 8% $8.2B Up 6.5% Gross Margin 19.2% Flat (1) SG&A $1.15B, 14.1% Up 5%, improved 20 bps Operating Profit $353M Up 10% Operating Margin 4.2% to 4.4% 4.3% Up 10 bps Effective Tax Rate 19% to 21% 19.8% Down 510 bps, as adjusted EPS $4.70 to $4.90 $4.
Slide 10: Diluted EPS Walk
Diluted EPS Walk Q4 FY 2017 Adjusted $1.03 $3.93) Core operations 0.16) 0.49) Foreign exchange (0.01) (0.01) Tax 0.04) 0.30) Share count 0.04) 0.11) 2018 $1.26 $4.82 …23% adjusted EPS growth versus prior year 10 Q4 & FY 2018 Earnings Webcast 1/31/19
Slide 11: Free Cash Flow & Leverage
Free Cash Flow & Leverage Free Cash Flow Leverage ($ Millions) (Total Debt to TTM EBITDA) ~ $1.2B of free 4.0x cash flow over Target last 5 years Leverage 2.0x – 3.5x $260.5 3.5x 3.0x 3.0X 2.5x $127.6 2.0x 67% 116% of adjusted of net 1.5x net income income Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 FY
Slide 12: 2019 Outlook
2019 Outlook Q1 FY Sales (2%) to 2% 3% to 6% Operating Margin 3.5% to 3.8% 4.3% to 4.7% Effective Tax Rate ~ 23% 22% to 24% Diluted EPS $5.10 to $5.70 Free Cash Flow ~ 90% of net income Notes: Excludes unannounced acquisitions and SLS. Assumes a CAD/USD exchange rate of 0.74 in Q1. Q1 and FY 2019 ha
Slide 13: Sylvania Lighting Solutions (SLS) Acquisition
Sylvania Lighting Solutions (SLS) Acquisition • A leading provider of LED lighting solutions and turn-key services • Founded in 1969, currently owned by Osram Sylvania • Annual revenue of ~$100 million in the U.S. and Canada with 220 employees • Will complement WESCO’s existing turn-key lighting ren
Slide 14: Appendix: Non-GAAP Financial Measures
Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, financial leverage, earnings before interest, taxes, depreciation and amortization (EBITDA), free cash flow, adjusted net income a
Slide 15: WESCO Profile 2018
WESCO Profile 2018 Markets & Customers Products & Services 8% 15% 11% 40% 16% 36% 11% 33% 14% 16% Industrial Global Accounts | Integrated Supply General Supplies OEM | General Industrial Communications & Security Construction Wire, Cable & Conduit Non-Residential | Contractors Utility Lighting & Sus
Slide 16: Sales Growth (%)
Sales Growth (%) 2016 2017 2018 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Change in Net Sales (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) (0.1) 7.8 11.3 4.7 12.5 10.2 3.4 0.7 6.5 Acquisition Impact 3.9 3.7 2.9 1.8 3.1 0.9 0.2 Core (6.1) (4.0) (6.5) (5.5) (5.5) (1.1) (0.1) 7.8 11.3 4.5 12.5 10.2 3.4 0.7 6
Slide 17: Q4 2018 Organic Sales Growth by Geography
Q4 2018 Organic Sales Growth by Geography (%) U.S. Canada International WESCO Change in net sales (USD) (0.1) 1.7 7.7 0.7 Impact from acquisitions - - - - Impact from foreign exchange rates - (2.9) (3.4) (0.8) Impact from number of workdays - - - - Organic sales growth (0.1) 4.6 11.2 1.5 17 Q4 & FY
Slide 18: Sales Growth by End Market
Sales Growth by End Market ($ Millions) Q4 2018 vs. Q4 2017 Q4 2018 vs. Q3 2018 FY 2018 vs FY 2017 Q4 2018 Q4 2017 % Growth Q4 2018 Q3 2018 % Growth FY 2018 FY 2017 % Growth Industrial Core $742 $744 (0.2%) $742 $727 2.2% $2,995 $2,865 4.5% Construction Core 680 679 0.1% 680 689 (1.3%) 2,696 2,558 5
Slide 19: Q4 2018 Organic Sales by End Market
Q4 2018 Organic Sales by End Market (%) Industrial Construction Utility CIG WESCO Core Sales Growth (0.2) 0.1 (4.8) 11.4 0.7 FX Impact (0.8) (1.1) (0.2) (0.7) (0.8) Workday Impact - - - - - Organic Growth 0.6 1.2 (4.6) 12.1 1.5 19 Q4 & FY 2018 Earnings Webcast 1/31/19
Slide 20: Gross Margin
Gross Margin ($ Millions) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2018 2017 2018 2017 Net sales $2,011 $1,997 $8,177 $7,679 Cost of goods sold (excluding depreciation and amortization) 1,621 1,614 6,610 6,194 Gross profit (1) $390 $383 $1,567 $1,485
Slide 21: 2017 Adjusted Diluted EPS
2017 Adjusted Diluted EPS ($ millions, except for EPS) Q4 2017 FY 2017 Reported Adjusted Reported Adjusted Results Adjustments Results Results Adjustments Results Income from operations $ 80.9 - $ 80.9 $ 319.1 - $ 319.1 Interest, net 17.1 - 17.1 66.6 - 66.6 Income before income taxes 63.8 - 63.8 252
Slide 22: Capital Structure
Capital Structure ($ Millions) Outstanding at Outstanding at Debt December 31, 2017 December 31, 2018 Maturity Schedule AR Revolver (V) 380 275 2020 Inventory Revolver (V) 12 52 2020 2019 Term Loans (V) 85 25 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 350 2024 Other (V) 36 31
Slide 23: Financial Leverage
Financial Leverage ($ Millions) Twelve Months Ended December 31, 2018 Income from operations (1) $353 Depreciation and amortization 63 EBITDA $416 December 31, 2018 Short-term borrowings and current debt $56 Long-term debt 1,167 Debt discount and debt issuance costs (2) 10 Total debt $1,233 Less: ca
Slide 24: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation ($ Millions) FY FY 2017 2018 Cash flow provided by operations $149.1 $296.7 Less: Capital expenditures (21.5) (36.2) Free cash flow 127.6 260.5 Adjusted net income $189.6 $225.4 Percentage of adjusted net income 67% 116% Note: Free cash flow is provided by the Company a
Slide 25: Work Days
Work Days Q1 Q2 Q3 Q4 FY 2016 64 64 64 62 254 2017 64 64 63 62 253 2018 64 64 63 62 253 2019 63 64 63 62 252 25 Q4 & FY 2018 Earnings Webcast 1/31/19