Attached files
| file | filename |
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| EX-99.1 - NEWS RELEASE - WESCO INTERNATIONAL INC | wcc-1q2018earningsrelease.htm |
| 8-K - FORM 8-K - WESCO INTERNATIONAL INC | wcc-1q2018earnings8k.htm |
Webcast Presentation – April 26, 2018
Q1 2018 Earnings
2 Q1 2018 Earnings Webcast 4/26/18
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; increase in competition;
expansion of business activities; supply chain disruptions, changes in supplier strategy or loss of key
suppliers; personnel turnover or labor cost increases; risks related to acquisitions, including the
integration of acquired businesses; tax law changes or challenges to tax matters, including uncertainties
in the interpretation and application of the Tax Cuts and Jobs Act of 2017; exchange rate fluctuations;
debt levels, terms, financial market conditions or interest rate fluctuations; stock market, economic or
political instability; legal or regulatory matters; litigation, disputes, contingencies or claims; and other
factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December
31, 2017 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.
3 Q1 2018 Earnings Webcast 4/26/18
Q1 2018 Highlights
…performance exceeded outlook
• Strong first quarter results
‒ Double digit sales, operating profit and EPS growth
versus prior year
• Continued positive business momentum and growth
across all end markets and geographies
• Reported sales were up 12%, organic sales were up 11%:
‒ Up 10% in the U.S.
‒ Up 10% in Canada
‒ Up 24% in International
• Highest organic sales growth rate since 2011
• Estimated pricing impact +2%
• April MTD sales up low double digits
• Q1 backlog at an all-time record level, up 4% sequentially
and up 14% versus prior year
• Free cash flow at 105% of net income
(6.7)
(3.1)
(6.2)
(3.6)
(1.7)
1.0
8.6
10.1
10.9
Organic Growth
(%)
Jan 9%
Feb 14%
Mar 11%
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.
Q4Q1
2016
Q2 Q3 Q4 Q1
2017
Q2 Q3
2018
Q1
4 Q1 2018 Earnings Webcast 4/26/18
2017
8.0%
Industrial End Market
• Q1 2018 Sales
− Organic sales were up 10% versus prior year
(up 9% in the U.S. and up 17% in Canada in local
currency)
− Down 1% sequentially
• Increasing business momentum with industrial
customers
• Sales growth was broad-based across the U.S. and
Canada
• Global Account and Integrated Supply opportunity
pipeline and bidding activity levels remain strong
• Customer trends include continued high expectations
for supply chain process improvements, cost
reductions, and supplier consolidation
Organic Sales Growth versus Prior Year
37%
Industrial
• Global Accounts
• Integrated Supply
• OEM
• General Industrial
Awarded a multi-year contract to supply electrical MRO materials and support capital
projects for a large chemical manufacturer in the U.S. and Canada.
Note: See appendix for non-GAAP reconciliations.
1.2%
6.0%
11.2%
13.9%
10.4%
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
5 Q1 2018 Earnings Webcast 4/26/18
(3.6%) (4.4%)
6.0%
8.9% 9.4%
• Q1 2018 Sales
− Organic sales were up 9% versus prior year
(up 10% in both the U.S. and in Canada in local
currency)
− Down 9% sequentially
• Increasing business momentum with
construction/contractor customers
• Sales growth was broad-based across the U.S. and
Canada
• Backlog is up 14% versus prior year and is up 4% from
Q4
• Expecting moderate growth and uptrend in non-
residential construction market to continue
• Non-Residential
• Contractors
Construction
33%
Organic Sales Growth versus Prior Year
Construction End Market
Awarded a contract to provide electrical materials and services to a contractor to upgrade a
nuclear plant in Canada.
Note: See appendix for non-GAAP reconciliations.
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
2017
1.7%
6 Q1 2018 Earnings Webcast 4/26/18
Utility End Market
Organic Sales Growth versus Prior Year
16%
Utility
• Investor Owned
• Public Power
• Utility Contractors
• Q1 2018 Sales
− Organic sales were up 18% versus prior year (up
21% in the U.S. and down 6% in Canada in local
currency)
− Down 5% sequentially
• Continued scope expansion and value creation with
investor-owned utility, public power, and generation
customers
• Continued interest in Integrated Supply solution
offerings
• Favorable economic conditions, continued improvement
in construction market, renewables growth, and
consolidation trend within Utility industry remain
positive catalysts for future spending
Awarded a contract to provide electrical materials for wind farm substation project in the US.
(4.5%) (4.4%)
8.6% 9.1%
17.9%
Q1 2017 Q2 2017 Q3 2017 Q4 2017
Note: See appendix for non-GAAP reconciliations.
Q1 2018
2017
2.3%
7 Q1 2018 Earnings Webcast 4/26/18
CIG End Market
• Q1 2018 Sales
− Organic sales were up 9% versus prior year
(up 3% in the U.S. and up 5% in Canada in local
currency; balance of growth in International)
− Up 5% sequentially
• Technical expertise and supply chain solutions
driving positive momentum in datacenter,
broadband, and cloud technology projects
• Increasing momentum seen in LED lighting retrofits,
FTTX deployments, broadband build outs, and cyber
and physical security for critical infrastructure
protection
Organic Sales Growth versus Prior Year
CIG
• Commercial
• Institutional
• Government
14%
Awarded a contract to provide electrical materials for a public water treatment
facility upgrade in the U.S.
Note: See appendix for non-GAAP reconciliations.
(2.0%)
7.4%
9.0%
4.8%
8.5%
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
2017
4.8%
8 Q1 2018 Earnings Webcast 4/26/18
Q1 2018 Results
Outlook Actual YOY
Sales 6% to 9% $2.0B Up 12.5%
Gross Margin 19.1% Down 60 bps, down 10 bps sequentially (1)
SG&A $291M, 14.6% Up 9%, improved 50 bps
Operating Profit $73M Up 10%
Operating Margin 3.5% to 3.8% 3.7% Down 10 bps
Effective Tax Rate ~22% 19.6% Down 540 bps
EPS $0.93 Up 22%
10.4%
Growth
190 bps
790 bps
$2.0B
$1.8B
Q1 2018
Sales
InternationalCanadaU.S.Q1 2017
Sales
9.9%
Growth
23.5%
Growth
10.9%
Organic
Growth
12.5%
Growth
Note: See appendix for non-GAAP reconciliations.
(1) Reflects the impact of a 15 bps reclassification of certain labor costs from selling, general and administrative expenses.
Foreign
Exchange
160 bps110 bps
…margins stabilizing, positive operating profit pull through
9 Q1 2018 Earnings Webcast 4/26/18
Diluted EPS Walk
Q1
2017 $0.76
Core operations (Includes the planned restoration of variable compensation versus prior year)
0.07
Foreign exchange 0.01
Tax 0.06
Share count 0.03
2018 $0.93
10 Q1 2018 Earnings Webcast 4/26/18
1.5
2
2.5
3
3.5
4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Free Cash Flow & Leverage
43.1 45.3
2017 YTD 2018 YTD
Free Cash Flow
($ Millions)
Note: See appendix for non-GAAP reconciliations.
105%
of net
income
114%
of net
income
~ $1.2B of free
cash flow over
last 5 years
Target
Leverage
2.0x – 3.5x
3.5X
Leverage
(Total Debt to TTM EBITDA)
2016 2017 2018
11 Q1 2018 Earnings Webcast 4/26/18
2018 Outlook
Q2
FY
(Current)
FY
(Previous)
Sales 7% to 10% 5% to 8% 3% to 6%
Operating Margin 4.2% to 4.5% 4.2% to 4.6% 4.2% to 4.6%
Effective Tax Rate ~ 21% 21% to 23% 21% to 23%
Diluted EPS $4.50 to $5.00 $4.40 to $4.90
Free Cash Flow >90% of net income >90% of net income
Notes: Excludes unannounced acquisitions.
Assumes a CAD/USD exchange rate of 0.78.
See appendix for non-GAAP reconciliations.
12 Q1 2018 Earnings Webcast 4/26/18
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 believes that these non-GAAP measures are useful to investors as
they provide a better understanding of sales performance, and the use of debt and liquidity on a comparable
basis. Management does not use these non-GAAP financial measures for any purpose other than the reasons
stated above.
13 Q1 2018 Earnings Webcast 4/26/18
WESCO Profile 2018
37%
33%
16%
14%
40%
15%
15%
12%
10%
8%
Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis.
Products & ServicesMarkets & 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
14 Q1 2018 Earnings Webcast 4/26/18
Sales Growth
2016 2017 2018
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1
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
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
FX Impact (2.6) (0.9) (0.3) (0.3) (1.0) 0.6 (1.1) 0.8 1.2 0.4 1.6
Workday Impact 3.2 (1.6) 0.4 (1.6) (0.4)
Organic (6.7) (3.1) (6.2) (3.6) (4.9) (1.7) 1.0 8.6 10.1 4.5 10.9
(%)
Note: Core sales growth excludes acquisitions during the first year of ownership.
15 Q1 2018 Earnings Webcast 4/26/18
Q1 2018 Organic Sales Growth by Geography
U.S. Canada International WESCO
Change in net sales (USD) 10.4 15.6 32.7 12.5
Impact from acquisitions - - - -
Impact from foreign exchange rates - 5.7 9.2 1.6
Impact from number of workdays - - - -
Organic sales growth 10.4 9.9 23.5 10.9
(%)
16 Q1 2018 Earnings Webcast 4/26/18
Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation.
($ Millions)
Sales Growth-End Markets
Q1 2018 vs. Q1 2017 Q1 2018 vs. Q4 2017
Q1 Q1 Q1 Q4
2018 2017
%
Growth 2018 2017
%
Growth
Industrial Core 762 681 11.9% 762 744 2.4%
Construction Core 640 574 11.5% 640 679 (5.7)%
Utility Core 317 267 18.5% 317 322 (1.6)%
CIG Core 283 258 9.8% 283 261 8.4%
Total Core Gross Sales 2,002 1,780 12.5% 2,002 2,006 (0.2)%
Total Gross Sales from Acquisitions - - - -
Total Gross Sales 2,002 1,780 12.5% 2,002 2,006 (0.2)%
Gross Sales Reductions/Discounts (8) (8) (8) (9)
Total Net Sales 1,994 1,773 12.5% 1,994 1,997 (0.1)%
17 Q1 2018 Earnings Webcast 4/26/18
Q1 2018 Organic Sales by End Market
Industrial Construction Utility CIG WESCO
Core Sales Growth 11.9 11.5 18.5 9.8 12.5
FX Impact 1.5 2.1 0.6 1.3 1.6
Workday Impact - - - - -
Organic Growth 10.4 9.4 17.9 8.5 10.9
(%)
18 Q1 2018 Earnings Webcast 4/26/18
Gross Margin
($ Millions)
Three Months Ended
March 31,
2018
March 31,
2017
Net sales $1,994 $1,773
Cost of goods sold (excluding depreciation and amortization) 1,614 1,423
Gross profit $380 $350
Gross margin 19.1% 19.7%
19 Q1 2018 Earnings Webcast 4/26/18
Outstanding at
December 31, 2017
Outstanding at
March 31, 2018
Debt
Maturity Schedule
AR Revolver (V) 380 390 2020
Inventory Revolver (V) 12 0 2020
2019 Term Loans (V) 85 65 2019
2021 Senior Notes (F) 500 500 2021
2024 Senior Notes (F) 350 350 2024
Other (V) 36 43 N/A
Total Debt 1,363 1,348
Capital Structure
Key Financial Metrics
YE 2017 Q1 2018
Cash 118 124
Capital Expenditures 22 8
Free Cash Flow (1) 128 45
Liquidity (2) 794 813
($ 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 cash in investment accounts.
20 Q1 2018 Earnings Webcast 4/26/18
Financial Leverage
Twelve Months Ended
March 31, 2018
Income from operations (1) $ 326
Depreciation and amortization 64
EBITDA $ 390
March 31, 2018
Short-term borrowings and current debt $ 43
Long-term debt 1,292
Debt discount and debt issuance costs (2) 13
Total debt $ 1,348
Less: cash and cash equivalents $ 124
Total debt, net of cash $ 1,224
Financial leverage ratio 3.5X
Financial leverage ratio, net of cash 3.1X
(1) Due to the adoption of ASU 2017-07 on a retrospective basis in the first quarter of 2018, the Company classified the non-service cost components of net periodic benefit cost as part of net
interest and other for the twelve months ended March 31, 2018. These components aggregate to a benefit of $1.9 million.
(2) Long-term debt is presented in the condensed consolidated balance sheet as of March 31, 2018 net of debt discount and debt issuance costs.
($ Millions)
Note: For financial leverage ratio in prior periods, see quarterly earnings webcasts as previously furnished to the Securities & Exchange Commission, which can be obtained from the Investor
Relations page of WESCO’s website at www.wesco.com.
21 Q1 2018 Earnings Webcast 4/26/18
Free Cash Flow Reconciliation
Q1
2017
Q1
2018
Cash flow provided by operations 47.6 53.0
Less: Capital expenditures (4.5) (7.7)
Free cash flow 43.1 45.3
Net income 37.8 42.9
Percentage of net income 114% 105%
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 investing and financing activities.
($ Millions)
22 Q1 2018 Earnings Webcast 4/26/18
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