Attached files
| file | filename |
|---|---|
| EX-99.1 - NEWS RELEASE - WESCO INTERNATIONAL INC | wcc1q2017earningsrelease.htm |
| 8-K - FORM 8-K - WESCO INTERNATIONAL INC | wcc1q2017earnings8-k.htm |
Webcast Presentation
April 27, 2017
Q1 2017 Earnings
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Q1 2017 Earnings Webcast, 4/27/17
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 actual results
to differ materially. Such risks, uncertainties and other factors include, but are not limited to:
adverse economic conditions; disruptions in operations or information technology systems;
supply chain disruptions, changes in supplier strategy or loss of key suppliers; product or other
cost fluctuations; expansion of business activities; personnel turnover or labor cost increases;
tax law changes or challenges to tax matters; increase in competition; risks related to
acquisitions, including the integration of acquired businesses; exchange rate fluctuations; legal
or regulatory matters; litigation, disputes, contingencies or claims; debt levels, terms, financial
market conditions or interest rate fluctuations; goodwill or intangible asset impairment; stock
market, economic or political instability; and other factors described in detail in the Form 10-K for
WESCO International, Inc. for the year ended December 31, 2016 and any subsequent filings
with the Securities & Exchange Commission. The following presentation includes a discussion of
certain non-GAAP financial measures. Information required by Regulation G with respect to such
non-GAAP financial measures can be found in the appendix and obtained via WESCO’s website,
www.wesco.com.
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Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Highlights
…performance in-line with outlook
• First quarter results were in line with our
expectations and outlook
• Reported sales were flat
‒ Organic sales were down 2% in U.S.
‒ Organic sales were up 3% in Canada
• Organic sales were down 4% sequentially;
better than typical seasonality
• Improved business momentum driven by a
return to growth in the Industrial end market
and in Canada
• Free cash flow of 114% of net income
• April MTD sales down low single digits
3.2
(3.0)
(5.3)
(7.6)
(6.7)
(3.1)
(6.2)
(3.6)
(1.7)
Organic Growth
(%)
Jan (5)%
Feb (1)%
Mar Flat
Note: Organic growth excludes the impact of acquisitions in the first
year of ownership, foreign exchange rates and number of workdays.
See appendix for non-GAAP reconciliations.
Q1 Q2 Q3 Q4
2015
Q1
2016
Q2 Q3 Q4 Q1
2017
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Q1 2017 Earnings Webcast, 4/27/17
Industrial End Market
• Q1 2017 Sales
− Organic sales up 1% versus prior year
(up 3% in U.S. and down 5% in Canada in
local currency), after eight consecutive
quarters of sales declines
− Up 2% sequentially
• Most forward looking indicators have continued to
improve
• While still cost focused, customers are becoming
more optimistic regarding 2017
• Global Account and Integrated Supply opportunity
pipeline and bidding activity levels remain strong
• Customer trends include high expectations for
supply chain process improvements, cost
reductions, and supplier consolidation
Organic Sales Growth versus Prior Year
36%
Industrial
• Global Accounts
• Integrated Supply
• OEM
• General Industrial
Awarded a new multi-year contract to provide integrated supply
services and MRO and OEM materials to a global design,
engineering and manufacturing company.
Note: See appendix for non-GAAP reconciliations.
(13.7%)
(10.1%) (10.1%)
(6.8%)
1.2%
Q3 2016 Q2 2016 Q1 2016
2016
(10.2%)
Q4 2016 Q1 2017
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Q1 2017 Earnings Webcast, 4/27/17
• Q1 2017 Sales
− Organic sales down 4% versus prior year
(down 6% in U.S. and up 3% in Canada in
local currency)
− Down 10% sequentially, in line with normal
seasonality
− Growth with commercial contractors
partially offset weakness with contractors
serving the industrial market in the U.S.
• Backlog is up 1% versus prior year and is up
11% versus December 2016 year-end
• Expecting modest uptrend in non-residential
construction in 2017
• Non-residential construction market still below its
prior peak in 2008
Construction
• Non-
Residential
• Residential
34%
Organic Sales Growth versus Prior Year
Construction End Market
Awarded business by a Canadian oil company to supply low and
high voltage electrical materials for the expansion of multiple
facilities located in the oil sands.
Note: See appendix for non-GAAP reconciliations.
(3.6%)
2.3%
(5.5%)
(1.9%)
(3.6%)
Q2 2016 Q1 2016 Q3 2016 Q4 2016
2016
(2.2%)
Q1 2017
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Q1 2017 Earnings Webcast, 4/27/17
Utility End Market
Organic Sales Growth versus Prior Year
16%
Utility
• Investor Owned
• Public Power
• Utility Contractors
• Q1 2017 Sales
− Organic sales down 5% versus prior year
(down 6% in U.S. and up 10% in Canada in
local currency)
− Down 12% sequentially
− Excluding exited contract organic sales up
6% versus prior year (up 5% in U.S.), and
down 2% sequentially
• Scope expansion and value creation with investor
owned utility, public power, and generation customers
• Continued interest in Integrated Supply solution
offerings
• Secular improvement in housing market,
renewables growth, and consolidation trend within
Utility industry expected to be positive catalysts for
future spending
Awarded a multi-year contract to provide power delivery and
generation materials and services for a series of T&D infrastructure
upgrade projects at a current IOU Customer.
Note: See appendix for non-GAAP reconciliations.
0.6% 0.6%
(1.7%)
0.1%
(4.5%)
2016
0.5%
Q3 2016 Q2 2016 Q1 2016 Q4 2016 Q1 2017
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Q1 2017 Earnings Webcast, 4/27/17
CIG End Market
• Q1 2017 Sales
− Organic sales down 2% versus prior
year (down 4% in U.S. and up 26% in
Canada in local currency)
− Up 1% sequentially
• Government sales up mid-single digits
in the U.S.
• Customer focus remains on energy efficiency
(lighting, automation, metering), security, and
FTTX (fiber-to-the-x) applications
• Continued opportunities exist to support
FTTX deployments, data center construction
and retrofits, cloud technology projects, and
cyber and physical security for critical
infrastructure protection
Organic Sales Growth versus Prior Year
CIG
• Commercial
• Institutional
• Government
14%
Renewed a contract with a large telecommunications provider to
supply products to support their infrastructure expansion.
Note: See appendix for non-GAAP reconciliations.
0.4% 0.8%
(1.6%)
(5.8%)
(2.0%)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
2016
(1.7%)
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Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Results
Outlook Actual YOY
Sales (3)% to Flat $1.77B Flat
Gross Margin 19.7% Down 30 bps
SG&A $267M, 15.1% Down 1%, Down 10 bps (Core down 2%)
Operating Profit $67M Down 3%
Operating Margin 3.8% to 4.1% 3.8% Down 10 bps
Effective Tax Rate ~30% 28.1% Down 20 bps
90 bps
(2.1)%
Growth
60 bps
170 bps
$1.77B $1.78B
Q1 2017
Sales
Acquisitions Rest of
World
Canada U.S. Q1 2016
Sales
60 bps
3.2%
Growth
(11.0)%
Growth
(1.7)%
Organic
Growth
(0.2)%
Growth
Note: See appendix for non-GAAP reconciliations.
Foreign
Exchange
60 bps
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Q1 2017 Earnings Webcast, 4/27/17
Diluted EPS Walk
Q1
2016 $0.77)
Core operations (0.10)
Foreign exchange impact 0.06)
Change in accounting for stock-based awards 0.03)
Tax 0.04)
Share count (0.04)
2017 $0.76)
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Q1 2017 Earnings Webcast, 4/27/17
1.5
2
2.5
3
3.5
4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
75.0
43.1
2016 YTD 2017 YTD
Cash Generation
Free Cash Flow
($ Millions)
Note: See appendix for non-GAAP reconciliations.
114%
of net
income
217%
of net
income
> $1B of free
cash flow over
last 4 years Target Leverage
2.0x – 3.5x
3.4X
Leverage
(Total Par Debt to TTM EBITDA)
2015 2016 2017
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Q1 2017 Earnings Webcast, 4/27/17
2017 Outlook
Q2 FY
Sales (2)% to 1% Flat to 4%
Operating Margin 4.2% to 4.6% 4.4% to 4.6%
Effective Tax Rate ~ 29% ~ 30%
Diluted EPS $3.60 to $4.00
Free Cash Flow >90% of net income
Notes: Excludes unannounced acquisitions.
Assumes a CAD/USD exchange rate of 0.75 in Q2.
See appendix for non-GAAP reconciliations.
…sales and EPS outlook in line with 2017 Outlook Call range
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Q1 2017 Earnings Webcast, 4/27/17
Appendix
NON-GAAP FINANCIAL MEASURES
This presentation includes certain non-GAAP financial measures. These financial measures include
organic sales growth, gross profit, adjusted tax rate, financial leverage, and free cash flow. The
Company believes that these non-GAAP measures are useful to investors in order to provide a
better understanding of the Company's organic sales trends, effective tax rate on a comparable
basis, capital structure position, and liquidity. Management does not use these non-GAAP financial
measures for any purpose other than the reasons stated above.
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Q1 2017 Earnings Webcast, 4/27/17
WESCO Profile 2017
36%
34%
16%
14%
40%
15%
14%
12%
11%
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
Utility Contractors
Commercial | Institutional | Government
Global Accounts | Integrated Supply
OEM | General Industrial
Non-Residential | Contractors
Automation, Controls & Motors
Lighting & Sustainability
General Supplies
Communications & Security
Wire, Cable & Conduit
Electrical Distribution & Controls
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Q1 2017 Earnings Webcast, 4/27/17
Sales Growth
2015 2016 2017
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1
Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2)
Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9
Core (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) (4.0) (6.5) (5.5) (5.5) (1.1)
FX Impact (2.5) (3.0) (4.1) (3.7) (3.4) (2.6) (0.9) (0.3) (0.3) (1.0) 0.6
Workday Impact (1.6) 1.6 3.2 (1.6) 0.4
Organic 3.2 (3.0) (5.3) (7.6) (3.3) (6.7) (3.1) (6.2) (3.6) (4.9) (1.7)
(%)
Note: Core sales growth excludes acquisitions during the first year of ownership.
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Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Sales Growth – Geography
U.S. Canada International Total
Change in net sales (USD) (0.8) 7.4 (13.4) (0.2)
Impact from acquisitions 1.3 - - 0.9
Impact from foreign exchange rates - 4.2 (2.4) 0.6
Impact from number of workdays - - - -
Organic sales growth (2.1) 3.2 (11.0) (1.7)
(%)
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Q1 2017 Earnings Webcast, 4/27/17
Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation.
($ Millions)
Sales Growth-End Markets
Q1 2017 vs. Q1 2016 Q1 2017 vs. Q4 2016
Q1 Q1 Q1 Q4
2017 2016
%
Growth 2017 2016
%
Growth
Industrial Core 680 670 1.5 % 681 647 5.3%
Construction Core 554 567 (2.4) % 574 613 (6.4)%
Utility Core 267 279 (4.2) % 267 294 (8.9)%
CIG Core 258 262 (1.6) % 258 247 4.4%
Total Core Gross Sales 1,759 1,778 (1.1) % 1,780 1,800 (1.1)%
Total Gross Sales from Acquisitions 21 4 - - - -00
Total Gross Sales 1,780 1,782 (0.1) % 1,780 1,800 (1.1)%
Gross Sales Reductions/Discounts (8) (6) - (8) (7) -00
Total Net Sales 1,773 1,776 (0.2) % 1,773 1,793 (1.2)%
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Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Organic Sales by End Market
Industrial Construction Utility CIG WESCO
Core Sales Growth 1.5 (2.4) (4.2) (1.6) (1.1)
FX Impact 0.3 1.2 0.3 0.4 0.6
Workday Impact - - - - -
Organic Growth 1.2 (3.6) (4.5) (2.0) (1.7)
(%)
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Q1 2017 Earnings Webcast, 4/27/17
Adjusted Tax Rate
($ Millions)
Q1 2016 Q1 2017
Reported
Results
Adjustments
(1)
Adjusted
Results
Reported
Results
Adjustments
(2)
Adjusted
Results
Income before income taxes 50.7 - 50.7 50.4 - 50.4
Provision for income taxes 16.1 (1.8) 14.3 12.6 1.6 14.2
Effective tax rate 31.9% 28.3% 25.0% 28.1%
(1) Adjustment represents a discrete item related to the settlement of an outstanding tax matter in Q1 2016.
(2) Adjustment is the result of applying Accounting Standards Update No. 2016-09 to the exercise of stock-based awards in
Q1 2017.
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Q1 2017 Earnings Webcast, 4/27/17
Outstanding at
December 31, 2016
Outstanding at
March 31, 2017
Debt
Maturity Schedule
AR Revolver (V) 380 345 2018
Inventory Revolver (V) 4 - 2020
2019 Term Loans (V) 145 130 2019
2021 Senior Notes (F) 500 500 2021
2024 Senior Notes (F) 350 350 2024
Other (V) 24 31 N/A
Total Par Debt 1,403 1,356
Capital Structure
Key Financial Metrics
YE 2016 Q1 2017
Cash 110 103
Capital Expenditures 18 4
Free Cash Flow (1) 282 43
Liquidity (2) 705 727
($ Millions)
V = Variable Rate Debt 1 = Cash flow provided by operations less capital expenditures.
F = Fixed Rate Debt 2 = Total availability under asset-backed credit facilities plus invested cash.
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Q1 2017 Earnings Webcast, 4/27/17
Financial Leverage
Twelve Months Ended
March 31, 2017
Financial leverage ratio:
Income from operations $ 330
Depreciation and amortization 66
EBITDA $ 396
March 31, 2017
Current debt and short-term borrowings $ 29
Long-term debt 1,310
Debt discount and deferred financing (1) 16
Total debt $ 1,355
Less: cash and cash equivalents $ 103
Total debt, net of cash $ 1,252
Financial leverage ratio 3.4X
Financial leverage ratio, net of cash 3.2X
(1)Long-term debt is presented in the condensed consolidated balance sheet as of March 31, 2017 net of deferred financing fees
and debt discount.
($ Millions)
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Q1 2017 Earnings Webcast, 4/27/17
($ Millions)
2015 2016 Q1 2017
Amortization of Debt Discount(1) 6.1 3.0 0.1
Amortization of Deferred Financing Fees 6.1 3.6 0.9
FIN 48 (8.7) 1.2 0.1
Total 3.5 7.8 1.1
Non-Cash Interest Expense
(1) Includes convertible debt and term loan; the convertible debt was redeemed in Q3 2016.
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Q1 2017 Earnings Webcast, 4/27/17
Free Cash Flow Reconciliation
Q1
2016
Q1
2017
Cash flow provided by operations 78.6 47.6
Less: Capital expenditures (3.6) (4.5)
Free Cash Flow 75.0 43.1
Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are
deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund other investing
and financing activities.
($ Millions)
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Q1 2017 Earnings Webcast, 4/27/17
Work Days
Q1
Q2 Q3 Q4 FY
2015 62 64 64 63 253
2016 64 64 64 62 254
2017 64 64 63 62 253