Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2018 Earnings Presentation
22 slides from Wesco International's earnings presentation, Aug 2, 2018
Slide 1: Q2 2018 Earnings Webcast Presentation – August 2, 2018
Q2 2018 Earnings Webcast Presentation – August 2, 2018
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: Q2 2018 Highlights
Q2 2018 Highlights Apr 11% May 10% Organic Growth • Continued strong results in the second quarter June 7% ‒ Double digit operating profit and EPS growth versus (%) prior year 10.9 10.1 • Continued positive business momentum and growth across 8.6 9.0 all end markets and geographies • Reported sales
Slide 4: Industrial End Market Organic Sales Growth versus Prior Year
Industrial End Market Organic Sales Growth versus Prior Year • Q2 2018 Sales − Organic sales were up 6% versus prior year • Global Accounts (up 5% in the U.S. and up 7% in Canada in local 37% • Integrated Supply • OEM currency) • General Industrial Industrial 13.9% − Up 1% sequentially 11.2% 10.4% •
Slide 5: Construction End Market Organic Sales Growth versus Prior Year
Construction End Market Organic Sales Growth versus Prior Year • Q2 2018 Sales − Organic sales were up 8% versus prior year 33% • Non-Residential • Contractors (up 8% in the U.S. and up 9% in Canada in local Construction currency) 8.9% 9.4% 7.9% 6.0% − Up 8% sequentially • Continued strong business
Slide 6: Utility End Market Organic Sales Growth versus Prior Year
Utility End Market Organic Sales Growth versus Prior Year • Q2 2018 Sales − Organic sales were up 19% versus prior year (up 18.8% 22% in the U.S. and down 2% in Canada in local • Investor Owned 17.9% currency) 16% • Public Power • Utility Contractors − Up 7% sequentially Utility • Continued scope ex
Slide 7: CIG End Market Organic Sales Growth versus Prior Year
CIG End Market • Q2 2018 Sales Organic Sales Growth versus Prior Year − Organic sales were up 9% versus prior year (flat in the U.S. and up 14% in Canada in local • Commercial 14% • Institutional currency; balance of growth in International) • Government CIG 9.4% − Up 15% sequentially 9.0% 8.5% 7.4%
Slide 8: Q2 2018 Results
Q2 2018 Results Outlook Actual YOY Sales 7% to 10% $2.1B Up 10.2% Gross Margin 19.0% Down 20 bps (1) SG&A $293M, 13.9% Up 10%, improved 10 bps Operating Profit $91M Up 10% Operating Margin 4.2% to 4.5% 4.3% Flat (2) Effective Tax Rate ~21% 21.5% Down 380 bps EPS $1.22 Up 20% $2.1B 150 bps 120 bps 16
Slide 9: Diluted EPS Walk
Diluted EPS Walk Q2 2017 $1.02 Core operations (Includes the planned restoration of variable compensation versus prior year) 0.09 Foreign exchange 0.02 Tax 0.06 Share count 0.03 2018 $1.22 …20% EPS growth versus prior year 9 Q2 2018 Earnings Webcast 8/2/18
Slide 10: Free Cash Flow & Leverage
Free Cash Flow & Leverage Free Cash Flow Leverage ($ Millions) (Total Debt to TTM EBITDA) ~ $1.2B of free 4 cash flow over Target last 5 years Leverage 2.0x – 3.5x 70.4 3.5 57.0 3.3X 3 2.5 2 65% 70% of net of net 1.5 income income Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 YTD 2018 YTD 2016 2017 2018 Note:
Slide 11: 2018 Outlook
2018 Outlook FY FY Q3 (Current) (Previous) Sales 3% to 6% 6% to 9% 5% to 8% Operating Margin 4.5% to 4.8% 4.2% to 4.5% 4.2% to 4.6% Effective Tax Rate ~ 21% 21% to 23% 21% to 23% Diluted EPS $4.60 to $5.00 $4.50 to $5.00 Free Cash Flow >90% of net income >90% of net income Notes: Excludes unannounce
Slide 12: Appendix: Non-GAAP Financial Measures
Appendix NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, financial leverage, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. Management believ
Slide 13: WESCO Profile 2018
WESCO Profile 2018 Markets & Customers Products & Services 8% 14% 10% 40% 16% 37% 12% 33% 15% 15% Industrial Global Accounts | Integrated Supply General Supplies OEM | General Industrial Communications & Security Construction Wire, Cable & Conduit Non-Residential | Contractors Utility Lighting & Sus
Slide 14: Sales Growth (%)
Sales Growth (%) 2016 2017 2018 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Change in Net Sales (2.2) (0.3) (3.6) (3.7) (2.4) (0.2) (0.1) 7.8 11.3 4.7 12.5 10.2 Acquisition Impact 3.9 3.7 2.9 1.8 3.1 0.9 0.2 Core (6.1) (4.0) (6.5) (5.5) (5.5) (1.1) (0.1) 7.8 11.3 4.5 12.5 10.2 FX Impact (2.6) (0.9) (0.3) (0
Slide 15: Q2 2018 Organic Sales Growth by Geography
Q2 2018 Organic Sales Growth by Geography (%) U.S. Canada International WESCO Change in net sales (USD) 7.7 13.2 35.2 10.2 Impact from acquisitions - - - - Impact from foreign exchange rates - 4.9 5.3 1.2 Impact from number of workdays - - - - Organic sales growth 7.7 8.3 29.9 9.0 15 Q2 2018 Earning
Slide 16: Sales Growth-End Markets
Sales Growth-End Markets ($ Millions) Q2 2018 vs. Q2 2017 Q2 2018 vs. Q1 2018 Q2 Q2 Q2 Q1 % % 2018 2017 Growth 2018 2018 Growth Industrial Core 764 714 6.9% 764 762 0.2% Construction Core 686 626 9.6% 686 640 7.2% Utility Core 338 284 19.3% 338 317 6.8% CIG Core 324 293 10.4% 324 283 14.5% Total Cor
Slide 17: Q2 2018 Organic Sales by End Market
Q2 2018 Organic Sales by End Market (%) Industrial Construction Utility CIG WESCO Core Sales Growth 6.9 9.6 19.3 10.4 10.2 FX Impact 1.1 1.7 0.5 1.0 1.2 Workday Impact - - - - - Organic Growth 5.8 7.9 18.8 9.4 9.0 17 Q2 2018 Earnings Webcast 8/2/18
Slide 18: Gross Margin
Gross Margin ($ Millions) Three Months Ended June 30, June 30, 2018 2017 Net sales $2,104 $1,910 Cost of goods sold (excluding depreciation and amortization) 1,704 1,544 Gross profit $400 $366 Gross margin 19.0% 19.2% Note: Gross profit is calculated by deducting cost of goods sold, excluding deprec
Slide 19: Capital Structure
Capital Structure ($ Millions) Outstanding at Outstanding at Debt December 31, 2017 June 30, 2018 Maturity Schedule AR Revolver (V) 380 395 2020 Inventory Revolver (V) 12 3 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 38 N/A T
Slide 20: Financial Leverage
Financial Leverage ($ Millions) Twelve Months Ended June 30, 2018 Income from operations (1) $ 334 Depreciation and amortization 64 EBITDA $ 398 June 30, 2018 Short-term borrowings and current debt $ 37 Long-term debt 1,262 Debt discount and debt issuance costs (2) 11 Total debt $ 1,310 Less: cash a
Slide 21: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation ($ Millions) YTD YTD 2017 2018 Cash flow provided by operations 66.8 86.8 Less: Capital expenditures (9.8) (16.4) Free cash flow 57.0 70.4 Net income 87.4 100.6 Percentage of net income 65% 70% Note: Free cash flow is provided by the Company as an additional liquidity m
Slide 22: 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 22 Q2 2018 Earnings Webcast 8/2/18