Wesco International, Inc. · NYSE:WCC
Wesco International — Q2 2016 Earnings Presentation
24 slides from Wesco International's earnings presentation, Jul 28, 2016
Slide 1: Q2 2016 Earnings Webcast Presentation
Webcast Presentation July 28, 2016 Q2 2016 Earnings
Slide 2: Safe Harbor Statement
2 Q2 2016 Earnings Webcast, 7/28/16 Safe Harbor Statement Note: 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, uncerta
Slide 3: Q2 2016 Highlights
3 Q2 2016 Earnings Webcast, 7/28/16 Q2 2016 Highlights …performance in line with outlook • Reported sales were flat • Organic sales were down 3% in the US and down 3% in Canada • Adjusting for Easter holiday, April organic sales were down 5% • Oil & gas sales were down ~25% • Gross margin was flat •
Slide 4: Industrial End Market
4 Q2 2016 Earnings Webcast, 7/28/16 Industrial End Market • Q2 2016 Sales − Organic sales down 10% versus prior year (down 9% in the U.S. and down 21% in Canada in local currency) − Up 2% sequentially − Sales declines driven by oil and gas, metals and mining, and OEM customers • Headwinds remain str
Slide 5: Construction End Market
5 Q2 2016 Earnings Webcast, 7/28/16 • Q2 2016 Sales − Organic sales up 2% versus prior year (up 2% in U.S. and up 4% in Canada in local currency) − Up 15% sequentially − Sales growth to commercial construction contractors more than offset continued weakness with contractors serving industrial market
Slide 6: Utility End Market
6 Q2 2016 Earnings Webcast, 7/28/16 Utility End Market Organic Sales Growth versus Prior Year 16% Utility • Investor Owned • Public Power • Utility Contractors • Q2 2016 Sales − Organic sales up 1% versus prior year (flat in U.S. and up 4% in Canada in local currency) − Up 8% sequentially • Five and
Slide 7: CIG End Market
7 Q2 2016 Earnings Webcast, 7/28/16 CIG End Market • Q2 2016 Sales − Organic sales up 1% versus prior year (up 2% in US and up 10% in Canada in local currency) − Up 6% sequentially • Growth in communications and security category continues and bidding activity levels remain high. • Customer focus re
Slide 8: Q2 2016 Results
8 Q2 2016 Earnings Webcast, 7/28/16 Q2 2016 Results Outlook Actual YOY Sales (3)% to (1)% $1.91B (0.3)% growth Gross Margin 19.9% Flat SG&A $275M, 14.4% Flat, flat; core down 4% Operating Profit $88M Down 3% Operating Margin 4.5% to 4.9% 4.6% Down 10 bps Effective Tax Rate ~30% 27.3% Down 200 bps 37
Slide 9: Diluted EPS Walk
9 Q2 2016 Earnings Webcast, 7/28/16 Diluted EPS Walk Q2 2015 $1.00) Core Operations (0.13) Acquisitions 0.05) Foreign Exchange Impact 0.01) Tax 0.03) Share Count 0.06) 2016 $1.02)
Slide 10: Cash Generation and Leverage
10 Q2 2016 Earnings Webcast, 7/28/16 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 120.0 131.5 YTD 2015 YTD 2016 Cash Generation Free Cash Flow ($ Millions) See appendix for non-GAAP reconciliations. 156% of net income 123% of net income > $1B of free cash flow over last 4 years 2014 Target Levera
Slide 11: 2016 Outlook
11 Q2 2016 Earnings Webcast, 7/28/16 2016 Outlook Q3 FY (Current) FY (Previous) Sales Flat to (3)% Flat to (2)% Flat to (5)% Operating Margin 4.9% to 5.3% 4.6% to 4.8% 4.8% to 5.0% Effective Tax Rate ~ 29% ~ 29% ~ 30% Diluted EPS $3.85 to $4.10 $3.75 to $4.20 Free Cash Flow >100% of net income >90%
Slide 12: Planning to Redeem 6% 2029 Convertible Debentures
12 Q2 2016 Earnings Webcast, 7/28/16 Planning to Redeem 6% 2029 Convertible Debentures on or after September 15, 2016 • Simplifies capital structure • Eliminates future EPS dilution associated with these debt instruments • Reduces volatility in fully-diluted share count • Provides an ongoing benefit
Slide 13: Appendix: Non-GAAP Financial Measures
13 Q2 2016 Earnings Webcast, 7/28/16 Appendix NON-GAAP FINANCIAL MEASURES This webcast includes certain non-GAAP financial measures. These financial measures include normalized organic sales growth, gross profit, financial leverage and free cash flow. The Company believes that these non-GAAP measure
Slide 14: WESCO Profile 2016
14 Q2 2016 Earnings Webcast, 7/28/16 WESCO Profile 2016 37% 33% 16% 14% 40% 15% 15% 12% 10% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power
Slide 15: Sales Growth
15 Q2 2016 Earnings Webcast, 7/28/16 Sales Growth 2014 2015 2016 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Change in Net Sales 0.2 5.9 7.6 6.1 5.0 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) Acquisition Impact 0.5 1.6 1.8 1.6 1.4 1.2 1.6 2.0 3.0 2.0 3.9 3.7 Core (0.3) 4.3 5.8 4.5 3.6 (0.9) (6.0) (9.4) (9.7) (
Slide 16: Q2 2016 Sales Growth – Geography
16 Q2 2016 Earnings Webcast, 7/28/16 Q2 2016 Sales Growth – Geography U.S. Canada International Total Change in net sales (USD) 2.2 (6.9) (9.8) (0.3) Impact from acquisitions 4.9 - - 3.7 Impact from foreign exchange rates - (3.5) (3.7) (0.9) Impact from number of workdays - - - - Normalized organic
Slide 17: Sales Growth-End Markets
17 Q2 2016 Earnings Webcast, 7/28/16 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q2 2016 vs. Q2 2015 Q2 2016 vs. Q1 2016 Q2 Q2 Q2 Q1 2016 2015 % Growth 2016 2016 % Growth Industri
Slide 18: Q2 2016 Organic Sales by End Market
18 Q2 2016 Earnings Webcast, 7/28/16 Q2 2016 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth (10.8) 0.9 0.2 0.1 (4.0) Workday Impact - - - - - Workday Adjusted Core Growth (10.8) 0.9 0.2 0.1 (4.0) FX Impact (0.7) (1.4) (0.4) (0.7) (0.9) Workday Adjusted Organi
Slide 19: Debt Maturity Schedule and Capital Structure
19 Q2 2016 Earnings Webcast, 7/28/16 Outstanding at December 31, 2015 Outstanding at June 30, 2016 Debt Maturity Schedule AR Revolver (V) 525 158 2018 Inventory Revolver (V) 75 16 2020 2019 Term Loans (V) 175 175 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) 350 2024 2029 Convertible
Slide 20: Financial Leverage
20 Q2 2016 Earnings Webcast, 7/28/16 Financial Leverage Twelve Months Ended June 30, 2016 Financial leverage ratio: Income from operations $ 354 Depreciation and amortization 66 EBITDA $ 420 June 30, 2016 Current debt and short-term borrowings $ 45 Long-term debt 1,361 Debt discount and deferred fin
Slide 21: Convertible Debt and Non-Cash Interest
21 Q2 2016 Earnings Webcast, 7/28/16 ($ Millions) Maturity Par Value of Debt Debt Discount & Deferred Financing Fees Debt per Balance Sheet 2029 344.9 (164.8) 180.1 Convertible Debt At June 30, 2016 Non-Cash Interest Expense ($ Millions) 2014 2015 YTD 2016 Convertible Debt 4.1 6.1 2.3 Amortization o
Slide 22: EPS Dilution
22 Q2 2016 Earnings Webcast, 7/28/16 EPS Dilution Weighted Average Quarterly Share Count Stock Price Incremental Shares from 2029 Convertible Debt (in millions)3 Incremental Shares from Equity Awards (in millions) Total Diluted Share Count (in millions)4 $30.00 0.45 0.16 42.85 $40.00 3.33 0.32 45.88
Slide 23: Free Cash Flow Reconciliation
23 Q2 2016 Earnings Webcast, 7/28/16 Free Cash Flow Reconciliation Q2 2015 Q2 2016 YTD 2015 YTD 2016 Cash flow provided by operations 42.5 60.0 132.6 138.6 Less: Capital expenditures (7.6) (3.5) (12.6) (7.1) Free Cash Flow 34.9 56.5 120.0 131.5 Note: Free cash flow is provided by the Company as an a
Slide 24: Work Days
24 Q2 2016 Earnings Webcast, 7/28/16 Work Days Q1 Q2 Q3 Q4 FY 2014 63 64 64 62 253 2015 62 64 64 63 253 2016 64 64 64 62 254