Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2020 Earnings Presentation
25 slides from Wesco International's earnings presentation, Nov 5, 2020
Slide 1: Third Quarter 2020 Webcast Presentation
Third Quarter 2020 Webcast Presentation November 5, 2020 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 Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may
Slide 3: Q3 Summary
Q3 Summary • Results exceeded our expectations across the board on sales, profit, and free cash flow • Exceptionally strong profitability with adjusted EBITDA margin up versus prior year – COVID-19 cost reduction actions significantly exceeded expectations – Realized cost synergies of $15 million in
Slide 4: WESCO's Three Strategic Business Units (SBUs)
WESCO’s Three Strategic Business Units (SBUs) Legend Legacy WESCO Legacy Anixter Electrical & Electronic Communications & Utility & Broadband Solutions (EES) Security Solutions (CSS) Solutions (UBS) % of SALES 42% (2019 Pro Forma) of total company sales 33% 25% of total company sales of total compan
Slide 5: Secular Trends Driving Growth Across All SBUs
Secular Trends Driving Growth Across All SBUs Key Secular Trends EES CSS UBS IoT and Automation Increase in number of automated processes Data Center Capacity Increased bandwidth and power demands Communications 5G build-out, fiber-to-the-x, and proliferation of streaming and mobile data consumption
Slide 6: Financial Benefits of Transformational Combination
Financial Benefits of Transformational Combination Estimated Run Rate Impact After Year 3 ✓ Expands adjusted EBITDA margin 100+ bps and delivers 50 - 60% EPS accretion ✓ Doubles standalone EPS growth rate ✓ Generates annual free cash flow greater than $600 million ✓ Provides cross-selling and intern
Slide 7: Second Half Priorities – Q3 Achievements
Second Half Priorities – Q3 Achievements 1) Build on improving sales momentum 4) Rapidly execute Anixter merger synergies Sales up 8% sequentially on pro forma basis Executed the full year 1 run rate target of $68 million in EES and CSS up double digits sequentially on pro first four months forma ba
Slide 8: Integration Update
Integration Update Q3 Progress Revised Cost Synergies Synergy Type ($ millions) • Excellent progress on integration with accelerating synergy generation and capture March November • Executed full year 1 run rate synergy target of $68 million in four months since close with $15 million realized in Q3
Slide 9: Third Quarter Results Overview
Third Quarter Results Overview $ in millions Except per share amounts Q3 2019 Q2 2020 Versus Versus Q3 2020 Pro Forma1 Pro Forma1 Q3 2019 Q2 2020 Sales $4,370 $3,819 $4,142 (5)% 8% Adjusted Gross Profit2 847 741 814 (4)% 10% % of sales 19.4% 19.4% 19.6% 20 bps 20 bps Adjusted EBIT3 196 160 200 3% 25
Slide 10: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) $ in millions Sales • Construction demand improving in North America Versus Pro Forma – Record Q3 backlog Seq. YOY – U.S. up MSD sequentially versus pro forma +13% (10)% – Some project delays but not cancellations $1,830 $1,464 $1,654 • Increasing momentum in
Slide 11: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) $ in millions Sales • Improving momentum during the quarter; Versus Pro Forma continued share gains Seq. YOY +10% (2)% • Security sales up LSD versus market down MSD $1,415 $1,389 $1,260 • Global Accounts up LSD led by strong results in Q3 2019 Q2 2020 Q3 20
Slide 12: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) $ in millions Sales • Broadband sales up MSD versus prior year; up Versus Pro Forma HSD sequentially driven by 5G buildouts and Seq. YOY FTTx deployments flat (2)% $1,125 • Traditional utility businesses flat versus prior $1,095 $1,099 year on combined basis Q3 20
Slide 13: Free Cash Flow & Liquidity
Free Cash Flow & Liquidity Free Cash Flow Capital Allocation Priorities and Results $ in millions 292% • Continue to rapidly delever to target range of of adjusted net income 2.0 – 3.5x net debt to adjusted EBITDA by June 2023 51% $462 of adjusted net income • Strong results in Q3 $86 – Free cash fl
Slide 14: Summary
Summary • Excellent profitability performance in a COVID-driven environment • Substantial progress made on integration execution in first four months – Increased year 1, 2 and 3 cost synergy targets to reflect accelerating execution of integration initiatives and significant upside to original targe
Slide 15: Additional Information
ADDITIONAL INFORMATION
Slide 16: Electrical & Electronic Solutions (EES)
Electrical & Electronic Solutions (EES) Key Growth Drivers $7.2 • Accelerating electrification billion • Aging public infrastructure and need for government investments in sales • Continued LNG development • Increasing LED adoption $458 • Customer skilled labor shortages; demanding more from supply
Slide 17: Communications & Security Solutions (CSS)
Communications & Security Solutions (CSS) Key Growth Drivers $5.6 billion • Increased bandwidth and data center demands • Increased reliance on remote communications for school, work, and home in sales • Return to work solutions $434 • 24/7/365 connectivity driving IP convergence and increasing dema
Slide 18: Utility & Broadband Solutions (UBS)
Utility & Broadband Solutions (UBS) Key Growth Drivers $4.4 billion in sales • Investments in grid modernization, reliability and hardening • Continued consolidation in public utilities and outsourcing of supply chain to drive cost savings and efficiency $307 • Power generation mix shift from nuclea
Slide 19: Fourth Quarter FAQs
Fourth Quarter FAQs • Expect sequential sales to moderate due to normal seasonality and fewer workdays (3 fewer workdays than Q3 2020) • Continued focus on cost management: – Maintain control over discretionary spending – Additional realized synergies in Q4 • Effective October 1, returned all employ
Slide 20: 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 2021 62 64 64 62 252 20
Slide 21: Appendix
APPENDIX
Slide 22: Adjusted EPS
Adjusted EPS Q3 2020 YTD Q3 2020 Reported Adjusted Reported Adjusted Results Adjustments 1 Results Results Adjustments 1 Results (in millions, except for EPS) Income from operations $ 178 22 $ 200 $ 254 100 $ 355 Interest expense, net 75 - 75 152 - 152 Other, net (1) - (1) (1) - (1) Income before in
Slide 23: Capital Structure and Leverage
Capital Structure and Leverage $ in millions Pro Forma Reported Twelve Months Ended, EBITDA and Adjusted EBITDA September 30, December 31, 2020 2019 Net income attributable to common stockholders $ 264 $ 223 Net loss attributable to noncontrolling interests (1) (1) Preferred stock dividends 16 - Inc
Slide 24: Gross Profit and Free Cash Flow
Gross Profit and Free Cash Flow $ in millions Gross Profit Three Months Ended, September September 30, 2020 30, 2019 Net sales $ 4,142 $ 2,148 Cost of goods sold 3,356 1,748 Gross profit $ 786 $ 400 Merger-related fair value adjustments to inventory 28 - Adjusted gross profit 1 $ 814 $ 400 Gross mar
Slide 25: Adjusted EBITDA
Adjusted EBITDA $ in millions EBITDA and Adjusted EBITDA by Segment Three Months Ended September 30, 2020 EES CSS UBS Corporate Total Net income attributable to common stockholders $ 107 $ 91 $ 74 $ (206) $ 66 Net loss attributable to noncontrolling interests - - - (1) (1) Preferred stock dividends