UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||||||||
Suite 700 | |||||||||||||||||
| (Zip Code) | |||||||||||||||||
| (Address of principal executive offices) | |||||||||||||||||
(412 ) 454-2200
(Registrant's telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
| Title of Class | Trading Symbol(s) | Name of Exchange on which registered | ||||||||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | ||||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | ||||||||||||||
Item 2.02 Results of Operations and Financial Condition.
The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
On May 5, 2022, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2022. A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure.
The information in this Item 7.01 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
A slide presentation to be used by executive management of the Company in connection with its discussions with investors regarding the Company's financial results for the first quarter of 2022 is included in Exhibit 99.2 to this report and is being furnished in accordance with Regulation FD of the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WESCO International, Inc. | ||||||||
| (Registrant) | ||||||||
| May 5, 2022 | By: | /s/ David S. Schulz | ||||||
| (Date) | David S. Schulz | |||||||
| Executive Vice President and Chief Financial Officer | ||||||||
 | NEWS RELEASE | ||||
| WESCO International, Inc. / 225 West Station Square Drive, Suite 700 / Pittsburgh, PA 15219 | |||||
Wesco International Reports First Quarter 2022 Results
•Record net sales of $4.9 billion, up 22% YOY
–Organic sales growth of 21%
–Record backlog as of March 31, 2022, up more than 90% YOY and up 25% sequentially
•Record operating profit of $284 million; operating margin of 5.8%
–Gross margin of 21.3%, up 120 basis points YOY and up 50 basis points sequentially
–Record adjusted operating profit of $315 million, up 85% YOY; adjusted operating margin of 6.4%, up 220 basis points YOY
–Record adjusted EBITDA of $364 million, up 68% YOY; adjusted EBITDA margin of 7.4%, up 200 basis points YOY
•Record earnings per diluted share of $3.19
–Adjusted earnings per diluted share of $3.63, up 154% YOY
•Leverage of 3.6x; improvement of 0.3x sequentially and 2.1x post-close of the Anixter merger
–Trailing 12 months adjusted EBITDA of $1.3 billion
•Raising 2022 outlook for adjusted earnings per diluted share to a range of $14.00 to $15.00, or up 40% to 50% versus prior year
PITTSBURGH, May 5, 2022 /Business Wire/ -- Wesco International (NYSE: WCC), a leading provider of business-to-business distribution, logistics services, and supply chain solutions, announces its results for the first quarter of 2022.
“Our first quarter results speak volumes about the new Wesco’s foundation for accelerating growth and profitability,” said John Engel, Chairman, President and CEO. "After delivering an exceptional performance in fiscal 2021, we’re off to an even more impressive start in 2022. Once again, we achieved new company records for sales, backlog and profitability while continuing our rapid deleveraging which now stands at 3.6x adjusted EBITDA, compared to 5.7x when we closed the Anixter merger. With each quarter, the power of Wesco’s scale, expanded portfolio and industry-leading positions becomes more evident as we build momentum and deliver superior value to our customers.”
Mr. Engel continued, “The demonstrated strength of Wesco’s business model and the success of our almost two year integration effort is clearly apparent in the achievement of our three business units which all delivered double-digit sales and profit growth results in the quarter in spite of supply chain challenges in certain categories. Our exceptional financial results continue to support our investment in our digital transformation effort which when completed will raise Wesco to an even higher level of performance, operating efficiency and customer loyalty.”
Mr. Engel added, “As a result of our outstanding start to the year and the accelerating momentum across our business, we are substantially raising our outlook for 2022. We now expect sales for the year to increase 12% to 15% and adjusted EBITDA margin to expand to between 7.3% and 7.6%, equating to $1.54 billion of adjusted EBITDA at the midpoint of the outlook range. We are also increasing our outlook for adjusted EPS to a range of $14.00 to $15.00. Given this robust anticipated growth, we are adjusting our full year 2022 outlook for free cash flow to 80% of adjusted net income to reflect our continued strategic investment in inventory to support our record backlog. The new Wesco is proving to be an integral partner to our customers across each of our business segments. Our financial results continue to prove the extraordinary value of the Wesco and Anixter combination and point to a future of sustained growth and market outperformance.”
1
The following are results for the three months ended March 31, 2022 compared to the three months ended March 31, 2021:
•Net sales were $4.9 billion for the first quarter of 2022 compared to $4.0 billion for the first quarter of 2021, an increase of 22.0% reflecting continued strong demand, price inflation, expanded product and service offerings afforded by the combination of Wesco and Anixter, as well as secular growth trends in electrification, automation, communications and security. Organic sales for the first quarter of 2022 grew by 21.2% as the number of workdays positively impacted reported net sales by 1.6%, and foreign exchange rates and Canadian business divestitures negatively impacted reported net sales by 0.5% and 0.3%, respectively. Sequentially, net sales grew 1.7% and organic sales were flat. Backlog at the end of the first quarter of 2022 increased by more than 90% to a record level compared to the end of the first quarter of 2021. Sequentially, backlog grew approximately 25%, marking the fifth consecutive quarter of sequential growth.
•Cost of goods sold for the first quarter of 2022 was $3.9 billion compared to $3.2 billion for the first quarter of 2021, and gross profit was $1,049.1 million and $811.0 million, respectively. As a percentage of net sales, gross profit was 21.3% and 20.1% for the first quarter of 2022 and 2021, respectively. Gross profit as a percentage of net sales for the first quarter of 2022 reflects our focus on value-driven pricing and continued momentum of our gross margin improvement program, along with higher supplier volume rebate income. The first quarter of 2021 included a write-down to the carrying value of certain personal protective equipment inventories that unfavorably impacted gross profit as a percentage of net sales by 20 basis points. Sequentially, gross profit as a percentage of net sales increased 50 basis points from 20.8% for the fourth quarter of 2021.
•Selling, general and administrative ("SG&A") expenses were $718.1 million, or 14.6% of net sales, for the first quarter of 2022, compared to $636.6 million, or 15.8% of net sales, for the first quarter of 2021. SG&A expenses for the first quarter of 2022 include merger-related and integration costs of $25.6 million. Adjusted for this amount, SG&A expenses were $692.5 million, or 14.0% of net sales, for the first quarter of 2022. SG&A expenses for the first quarter of 2022 reflect higher salaries and variable compensation expense, as well as volume-related costs driven by significant sales growth. In addition, digital transformation initiatives contributed to higher information technology expenses in the first quarter of 2022. The realization of integration cost synergies partially offset these increases. SG&A expenses for the first quarter of 2021 included $46.3 million of merger-related and integration costs, as well as a net gain of $8.9 million resulting from the divestiture of Wesco's legacy utility and data communications businesses in Canada. Adjusted for these amounts, SG&A expenses were $599.2 million, or 14.8% of net sales, for the first quarter of 2021.
•Depreciation and amortization for the first quarter of 2022 was $47.0 million compared to $41.2 million for the first quarter of 2021, an increase of $5.8 million. In connection with an integration initiative to review the Company's brand strategy, certain legacy trademarks are migrating to a master brand architecture, which resulted in $5.3 million of accelerated amortization expense for the first quarter of 2022.
•Operating profit was $284.0 million for the first quarter of 2022 compared to $133.3 million for the first quarter of 2021, an increase of $150.8 million, or 113.2%. Operating profit as a percentage of net sales was 5.8% for the current quarter, compared to 3.3% for the first quarter of the prior year. Operating profit for the first quarter of 2022 includes the merger-related and integration costs, and accelerated trademark amortization described above. Adjusted for these amounts, operating profit was $314.9 million, or 6.4% of net sales. For the first quarter of 2021, operating profit was $170.6 million, or 4.2% of net sales, adjusted for merger-related and integration costs of $46.3 million, and the net gain on the Canadian divestitures of $8.9 million. Adjusted operating margin was up 220 basis points compared to the prior year.
•Net interest expense for the first quarter of 2022 was $63.6 million compared to $70.4 million for the first quarter of 2021. The decrease reflects the repayment of fixed rate debt with variable debt that has lower borrowing rates.
•The effective tax rate for the first quarter of 2022 was 17.2% compared to 9.9% for the first quarter of 2021. For the three months ended March 31, 2022 and 2021, the effective tax rates reflect discrete income tax benefits of $13.4 million and $8.3 million, respectively, resulting from reductions to the valuation allowance recorded against foreign tax credit carryforwards, as well as deductible stock-based compensation. These discrete income tax benefits reduced the estimated annual effective tax rate by approximately 8.7 and 14.4 percentage points, respectively.
•Net income attributable to common stockholders was $166.9 million for the first quarter of 2022 compared to $44.8 million for the first quarter of 2021. Adjusted for merger-related and integration costs, accelerated trademark amortization expense, and the related income tax effects, net income attributable to common stockholders was $189.8 million for the first quarter of 2022. Adjusted for merger-related and integration costs, the net gain on the Canadian divestitures, and the related income tax effects, net income attributable to common stockholders was $74.1 million for the first quarter of 2021. Adjusted net income attributable to common stockholders increased 156.2% year-over-year.
•Earnings per diluted share for the first quarter of 2022 was $3.19, based on 52.2 million diluted shares, compared to $0.87 for the first quarter of 2021, based on 51.7 million diluted shares. Adjusted for merger-related and integration costs, accelerated trademark amortization expense, and the related income tax effects, earnings per diluted share for the first quarter of 2022 was $3.63. Adjusted for merger-related and integration costs, net gain on Canadian divestitures, and the related income tax effects, earnings per diluted share for the first quarter of 2021 was $1.43. Adjusted earnings per diluted share increased 153.8% year-over-year.
2
•Operating cash flow for the first quarter of 2022 was an outflow of $171.9 million, compared to an inflow of $120.5 million for the first quarter of 2021. The net cash outflow in the first quarter of 2022 was primarily driven by changes in working capital, including an increase in trade accounts receivable of $324.6 million resulting from higher sales in the latter part of the quarter. An increase in inventories of $214.2 million also contributed to the net cash outflow due to investments over the last several months to both address supply chain challenges and support our strong sales growth opportunities, partially offset by a corresponding increase in accounts payable of $200.0 million. Net working capital days as of March 31, 2022, calculated on a trailing twelve month basis using the preceding four quarter income statements and the average of the preceding five quarter-end balance sheets, improved more than five days from the end of the first quarter of 2021.
Segment Results
The Company has operating segments that are comprised of three strategic business units consisting of Electrical & Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility & Broadband Solutions ("UBS").
Corporate primarily incurs costs related to treasury, tax, information technology, legal and other centralized functions. Segment results include depreciation expense or other allocations related to various corporate assets. Interest expense and other non-operating items are either not allocated to the segments or reviewed on a segment basis. Corporate expenses not directly identifiable with our reportable segments are reported in the tables below to reconcile the reportable segments to the consolidated financial statements.
The following are results by segment for the three months ended March 31, 2022 compared to the three months ended March 31, 2021:
•EES reported net sales of $2.1 billion for the first quarter of 2022 compared to $1.7 billion for the first quarter of 2021, an increase of 21.5%. Organic sales for the first quarter of 2022 grew by 20.8% as the number of workdays positively impacted reported net sales by 1.6%, and foreign exchange rates and the Canadian divestitures described above negatively impacted reported net sales by 0.4% and 0.5%, respectively. Sequentially, reported net sales grew 4.8% and organic sales increased 3.4%, reflecting continued strong demand. The increase compared to the prior year quarter reflects double-digit sales growth in our construction, original equipment manufacturer, and industrial businesses, reflecting business expansion, price inflation, as well as the benefits of cross selling and secular growth trends in electrification and automation. Operating profit was $178.8 million for the first quarter of 2022 compared to $100.1 million for the first quarter of 2021, an increase of $78.7 million, or 78.6%. The increase primarily reflects the factors impacting the overall business, as described above. Additionally, operating profit for the first quarter of 2022 was negatively impacted by accelerated trademark amortization expense of $2.2 million. EBITDA, adjusted for other non-operating income and non-cash stock-based compensation expense, was $192.4 million for the first quarter of 2022, or 9.2% of net sales, compared to $112.0 million for the first quarter of 2021, or 6.5% of net sales. Adjusted EBITDA increased $80.4 million, or 71.8% year-over-year.
•CSS reported net sales of $1.4 billion for the first quarter of 2022 compared to $1.3 billion for the first quarter of 2021, an increase of 14.7%. Organic sales for the first quarter of 2022 grew by 13.9% as the number of workdays positively impacted reported net sales by 1.6% and foreign exchange rates negatively impacted reported net sales by 0.8%. Sequentially, reported net sales declined 5.3% and organic sales decreased 6.7%, which primarily reflects the effect of supply chain constraints. The increase compared to the prior year quarter reflects double-digit growth in our network infrastructure business led by global hyper-scale data center customers and an increase in structured cabling driven by accelerating return-to-work activities, as well as growth in our security solutions business driven by IP-based surveillance and the adoption of cloud-based technologies. Operating profit was $104.0 million for the first quarter of 2022 compared to $74.0 million for the first quarter of 2021, an increase of $30.0 million, or 40.6%. The increase primarily reflects the factors impacting the overall business, as described above, as well as the absence of the personal protective equipment inventory value write-down described in the Company's overall results above. Additionally, operating profit for the first quarter of 2022 was negatively impacted by accelerated trademark amortization expense of $2.6 million. EBITDA, adjusted for other non-operating expenses and non-cash stock-based compensation expense, was $123.0 million for the first quarter of 2022, or 8.6% of net sales, compared to $90.7 million for the first quarter of 2021, or 7.3% of net sales. Adjusted EBITDA increased $32.3 million, or 35.6% year-over-year.
•UBS reported net sales of $1.4 billion for the first quarter of 2022 compared to $1.1 billion for the first quarter of 2021, an increase of 31.6%. Organic sales for the first quarter of 2022 grew by 30.4% as the number of workdays positively impacted reported net sales by 1.6% and the Canadian divestitures described above negatively impacted reported net sales by 0.4%. Sequentially, reported net sales grew 4.9% and organic sales increased 3.4%. The increase compared to the prior year quarter, as well as sequentially, reflects broad-based growth driven by investments in grid modernization, connectivity demand and rural broadband development, as well as expansion in our integrated supply business. Operating profit was $129.9 million for the first quarter of 2022 compared to $87.0 million for the first quarter of 2021, an increase of $42.9 million, or 49.3%. The increase primarily reflects the factors impacting the overall business, as described above, offset by the benefit in the corresponding prior year quarter from the net gain on the Canadian divestitures. EBITDA, adjusted for other non-operating income, non-cash stock-based compensation expense, and the net gain on the Canadian divestitures in the first quarter of 2021 was $136.4 million for the three months ended March 31, 2022, or 9.7% of net sales, compared to $83.7 million for the three months ended March 31, 2021, or 7.8% of net sales. Adjusted EBITDA increased $52.7 million, or 63.0% year-over-year.
3
Webcast and Teleconference Access
Wesco will conduct a webcast and teleconference to discuss the first quarter of 2022 earnings as described in this News Release on Thursday, May 5, 2022, at 10:00 a.m. E.T. The call will be broadcast live over the internet and can be accessed from the Investor Relations page of the Company's website at https://investors.wesco.com. The call will be archived on this internet site for seven days.
Wesco International (NYSE: WCC) builds, connects, powers and protects the world. Headquartered in Pittsburgh, Pennsylvania, Wesco is a FORTUNE 500® company with more than $18 billion in annual sales and a leading provider of business-to-business distribution, logistics services and supply chain solutions. Wesco offers a best-in-class product and services portfolio of Electrical and Electronic Solutions, Communications and Security Solutions, and Utility and Broadband Solutions. The Company employs approximately 18,000 people, partners with the industry’s premier suppliers, and serves thousands of customers around the world, including more than 90% of FORTUNE 100® companies. With nearly 1,500,000 products, end-to-end supply chain services, and leading digital capabilities, Wesco provides innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. Wesco operates approximately 800 branches, warehouses and sales offices in more than 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.
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 cause actual results to differ materially. These statements include, but are not limited to, statements regarding the expected benefits and costs of the transaction between Wesco and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company's plans, objectives, expectations and intentions, statements that address the combined company's expected future business and financial performance, and other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of Wesco's management, as well as assumptions made by, and information currently available to, Wesco's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of Wesco's and Wesco's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.
Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the transaction, the risk that the transaction could have an adverse effect on the ability of the combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, or the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters (including as a result of climate change), health epidemics, pandemics and other outbreaks, such as the ongoing COVID-19 pandemic, supply chain disruptions, and the impact of Russia's recent invasion of Ukraine, including the impact of sanctions or other actions taken by the U.S. or other countries, the increased risk of cyber incidents and exacerbation of key materials shortages, inflationary cost pressures, material cost increases, demand volatility, and logistics and capacity constraints, which may have a material adverse effect on the combined company's business, results of operations and financial condition, and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be found in Wesco's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Wesco's other reports filed with the U.S. Securities and Exchange Commission.
| Contact Information | |||||
| Investor Relations | Corporate Communications | ||||
| Will Ruthrauff Director, Investor Relations 484-885-5648 | Jennifer Sniderman Senior Director, Corporate Communications 717-579-6603 | ||||
http://www.wesco.com
4
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||||||||||||
| March 31, 2022 | March 31, 2021 | ||||||||||||||||
| Net sales | $ | 4,932,181 | $ | 4,041,477 | |||||||||||||
| Cost of goods sold (excluding depreciation and amortization) | 3,883,074 | 78.7 | % | 3,230,441 | 79.9 | % | |||||||||||
| Selling, general and administrative expenses | 718,098 | 14.6 | % | 636,576 | 15.8 | % | |||||||||||
| Depreciation and amortization | 46,980 | 41,209 | |||||||||||||||
| Income from operations | 284,029 | 5.8 | % | 133,251 | 3.3 | % | |||||||||||
| Interest expense, net | 63,620 | 70,373 | |||||||||||||||
| Other expense (income), net | 1,124 | (2,807) | |||||||||||||||
| Income before income taxes | 219,285 | 4.4 | % | 65,685 | 1.6 | % | |||||||||||
| Provision for income taxes | 37,654 | 6,531 | |||||||||||||||
| Net income | 181,631 | 3.7 | % | 59,154 | 1.5 | % | |||||||||||
| Net income (loss) attributable to noncontrolling interests | 388 | (24) | |||||||||||||||
| Net income attributable to WESCO International, Inc. | 181,243 | 3.7 | % | 59,178 | 1.5 | % | |||||||||||
| Preferred stock dividends | 14,352 | 14,352 | |||||||||||||||
| Net income attributable to common stockholders | $ | 166,891 | 3.4 | % | $ | 44,826 | 1.1 | % | |||||||||
| Earnings per diluted share attributable to common stockholders | $ | 3.19 | $ | 0.87 | |||||||||||||
| Weighted-average common shares outstanding and common share equivalents used in computing earnings per diluted common share (in thousands) | 52,237 | 51,708 | |||||||||||||||
| Reportable Segments | |||||||||||||||||
| Net sales: | |||||||||||||||||
| Electrical & Electronic Solutions | $ | 2,089,959 | $ | 1,720,813 | |||||||||||||
| Communications & Security Solutions | 1,434,175 | 1,250,615 | |||||||||||||||
| Utility & Broadband Solutions | 1,408,047 | 1,070,049 | |||||||||||||||
| $ | 4,932,181 | $ | 4,041,477 | ||||||||||||||
| Income from operations: | |||||||||||||||||
| Electrical & Electronic Solutions | $ | 178,771 | $ | 100,111 | |||||||||||||
| Communications & Security Solutions | 104,031 | 73,964 | |||||||||||||||
| Utility & Broadband Solutions | 129,948 | 87,030 | |||||||||||||||
| Corporate | (128,721) | (127,854) | |||||||||||||||
| $ | 284,029 | $ | 133,251 | ||||||||||||||
5
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(Unaudited)
| As of | |||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 201,474 | $ | 212,583 | |||||||
| Trade accounts receivable, net | 3,283,522 | 2,957,613 | |||||||||
| Inventories | 2,881,256 | 2,666,219 | |||||||||
| Other current assets | 512,717 | 513,696 | |||||||||
| Total current assets | 6,878,969 | 6,350,111 | |||||||||
| Goodwill and intangible assets | 5,144,803 | 5,152,474 | |||||||||
| Other assets | 1,161,261 | 1,115,114 | |||||||||
| Total assets | $ | 13,185,033 | $ | 12,617,699 | |||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | 2,341,137 | $ | 2,140,251 | |||||||
Short-term debt and current portion of long-term debt, net(1) | 70,263 | 9,528 | |||||||||
| Other current liabilities | 850,733 | 900,029 | |||||||||
| Total current liabilities | 3,262,133 | 3,049,808 | |||||||||
| Long-term debt, net | 4,836,658 | 4,701,542 | |||||||||
| Other noncurrent liabilities | 1,118,764 | 1,090,138 | |||||||||
| Total liabilities | 9,217,555 | 8,841,488 | |||||||||
| Stockholders' Equity | |||||||||||
| Total stockholders' equity | 3,967,478 | 3,776,211 | |||||||||
| Total liabilities and stockholders' equity | $ | 13,185,033 | $ | 12,617,699 | |||||||
(1) As of March 31, 2022, short-term debt and current portion of long-term debt includes the $58.6 million aggregate principal amount of the Company's 5.50% Anixter Senior Notes due 2023, which mature on March 1, 2023.
6
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
(Unaudited)
| Three Months Ended | |||||||||||
| March 31, 2022 | March 31, 2021 | ||||||||||
| Operating Activities: | |||||||||||
| Net income | $ | 181,631 | $ | 59,154 | |||||||
| Add back (deduct): | |||||||||||
| Depreciation and amortization | 46,980 | 41,209 | |||||||||
| Deferred income taxes | (4,471) | (13,074) | |||||||||
| Change in trade receivables, net | (324,558) | (117,412) | |||||||||
| Change in inventories | (214,203) | (124,772) | |||||||||
| Change in accounts payable | 199,983 | 250,987 | |||||||||
| Other, net | (57,273) | 24,398 | |||||||||
| Net cash (used in) provided by operating activities | (171,911) | 120,490 | |||||||||
| Investing Activities: | |||||||||||
| Capital expenditures | (15,247) | (10,211) | |||||||||
Other, net(1) | 111 | 54,753 | |||||||||
| Net cash (used in) provided by investing activities | (15,136) | 44,542 | |||||||||
| Financing Activities: | |||||||||||
Debt borrowings (repayments), net(2) | 191,227 | (288,499) | |||||||||
| Equity activity, net | (16,793) | (4,342) | |||||||||
Other, net(3) | (7,301) | (19,332) | |||||||||
| Net cash provided by (used in) financing activities | 167,133 | (312,173) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 8,805 | 1,893 | |||||||||
| Net change in cash and cash equivalents | (11,109) | (145,248) | |||||||||
| Cash and cash equivalents at the beginning of the period | 212,583 | 449,135 | |||||||||
| Cash and cash equivalents at the end of the period | $ | 201,474 | $ | 303,887 | |||||||
(1) For the three months ended March 31, 2021, other investing activities includes cash consideration totaling approximately $54.1 million from the divestiture of Wesco's legacy utility and data communications businesses in Canada. The Company used the net proceeds from the divestitures to repay indebtedness.
(2) The three months ended March 31, 2021 includes the redemption of the Company's $500.0 million aggregate principal amount of 2021 Notes. The redemption of the 2021 Notes was funded with excess cash, as well as borrowings under the Company's accounts receivable securitization and revolving credit facilities.
(3) For the three months ended March 31, 2022 and 2021, other financing activities includes $14.4 million of dividends paid to holders of Series A preferred stock.
7
NON-GAAP FINANCIAL MEASURES
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") above, this earnings release includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, gross margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, financial leverage, free cash flow, adjusted income from operations, adjusted operating margin, adjusted provision for income taxes, adjusted income before income taxes, adjusted net income, adjusted net income attributable to WESCO International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of financial performance, and the use of debt and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude items impacting comparability of results such as merger-related and integration costs, and the related income tax effect of such items, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.
8
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except per share data)
(Unaudited)
| Organic Sales Growth by Segment: | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Growth/(Decline) | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | Reported | Divestiture Impact | Foreign Exchange Impact | Workday Impact | Organic Growth | |||||||||||||||||||||||||||||||||||
| EES | $ | 2,089,959 | $ | 1,720,813 | 21.5% | (0.5) | % | (0.4) | % | 1.6 | % | 20.8 | % | ||||||||||||||||||||||||||||
| CSS | 1,434,175 | 1,250,615 | 14.7% | — | % | (0.8) | % | 1.6 | % | 13.9 | % | ||||||||||||||||||||||||||||||
| UBS | 1,408,047 | 1,070,049 | 31.6% | (0.4) | % | — | % | 1.6 | % | 30.4 | % | ||||||||||||||||||||||||||||||
| Total net sales | $ | 4,932,181 | $ | 4,041,477 | 22.0% | (0.3) | % | (0.5) | % | 1.6 | % | 21.2 | % | ||||||||||||||||||||||||||||
| Organic Sales Growth by Segment - Sequential: | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Growth/(Decline) | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | Reported | Divestiture Impact | Foreign Exchange Impact | Workday Impact | Organic Growth | |||||||||||||||||||||||||||||||||||
| EES | $ | 2,089,959 | $ | 1,994,954 | 4.8 | % | — | % | (0.2) | % | 1.6 | % | 3.4 | % | |||||||||||||||||||||||||||
| CSS | 1,434,175 | 1,514,813 | (5.3) | % | — | % | (0.2) | % | 1.6 | % | (6.7) | % | |||||||||||||||||||||||||||||
| UBS | 1,408,047 | 1,342,152 | 4.9 | % | — | % | (0.1) | % | 1.6 | % | 3.4 | % | |||||||||||||||||||||||||||||
| Total net sales | $ | 4,932,181 | $ | 4,851,919 | 1.7% | — | % | (0.1) | % | 1.6 | % | 0.2 | % | ||||||||||||||||||||||||||||
Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales.
| Three Months Ended | |||||||||||
| Gross Profit: | March 31, 2022 | March 31, 2021 | |||||||||
| Net sales | $ | 4,932,181 | $ | 4,041,477 | |||||||
| Cost of goods sold (excluding depreciation and amortization) | 3,883,074 | 3,230,441 | |||||||||
| Gross profit | $ | 1,049,107 | $ | 811,036 | |||||||
| Gross margin | 21.3 | % | 20.1 | % | |||||||
| Three Months Ended | |||||
| Gross Profit: | December 31, 2021 | ||||
| Net sales | $ | 4,851,919 | |||
| Cost of goods sold (excluding depreciation and amortization) | 3,844,038 | ||||
| Gross profit | $ | 1,007,881 | |||
| Gross margin | 20.8 | % | |||
Note: Gross profit is a financial measure commonly used in the distribution industry. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales.
9
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended | |||||||||||
| Adjusted SG&A Expenses: | March 31, 2022 | March 31, 2021 | |||||||||
| Selling, general and administrative expenses | $ | 718,098 | $ | 636,576 | |||||||
| Merger-related and integration costs | (25,563) | (46,322) | |||||||||
| Net gain on divestitures | — | 8,927 | |||||||||
| Adjusted selling, general and administrative expenses | $ | 692,535 | $ | 599,181 | |||||||
| Three Months Ended | |||||||||||
| Adjusted Income from Operations: | March 31, 2022 | March 31, 2021 | |||||||||
| Income from operations | $ | 284,029 | $ | 133,251 | |||||||
| Merger-related and integration costs | 25,563 | 46,322 | |||||||||
| Accelerated trademark amortization | 5,323 | — | |||||||||
| Net gain on divestitures | — | (8,927) | |||||||||
| Adjusted income from operations | $ | 314,915 | $ | 170,646 | |||||||
| Adjusted income from operations margin % | 6.4 | % | 4.2 | % | |||||||
| Three Months Ended | |||||||||||
| Adjusted Provision for Income Taxes: | March 31, 2022 | March 31, 2021 | |||||||||
| Provision for income taxes | $ | 37,654 | $ | 6,531 | |||||||
Income tax effect of adjustments to income from operations(1) | 8,008 | 8,145 | |||||||||
| Adjusted provision for income taxes | $ | 45,662 | $ | 14,676 | |||||||
(1) The adjustments to income from operations have been tax effected at rates of approximately 26% and 22% for the three months ended March 31, 2022 and 2021, respectively.
10
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended | |||||||||||
| Adjusted Earnings per Diluted Share: | March 31, 2022 | March 31, 2021 | |||||||||
| Adjusted income from operations | $ | 314,915 | $ | 170,646 | |||||||
| Interest expense, net | 63,620 | 70,373 | |||||||||
| Other expense (income), net | 1,124 | (2,807) | |||||||||
| Adjusted income before income taxes | 250,171 | 103,080 | |||||||||
| Adjusted provision for income taxes | 45,662 | 14,676 | |||||||||
| Adjusted net income | 204,509 | 88,404 | |||||||||
| Net income (loss) attributable to noncontrolling interests | 388 | (24) | |||||||||
| Adjusted net income attributable to WESCO International, Inc. | 204,121 | 88,428 | |||||||||
| Preferred stock dividends | 14,352 | 14,352 | |||||||||
| Adjusted net income attributable to common stockholders | $ | 189,769 | $ | 74,076 | |||||||
| Diluted shares | 52,237 | 51,708 | |||||||||
| Adjusted earnings per diluted share | $ | 3.63 | $ | 1.43 | |||||||
Note: For the three months ended March 31, 2022, SG&A expenses, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related and integration costs, accelerated amortization expense associated with migrating to the Company's master brand architecture, and the related income tax effects. For the three months ended March 31, 2021, SG&A expenses, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related and integration costs, a net gain on the divestiture of Wesco's legacy utility and data communications businesses in Canada, and the related income tax effects. These non-GAAP financial measures provide a better understanding of the Company's financial results on a comparable basis.
11
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||
| EBITDA and Adjusted EBITDA by Segment: | EES | CSS | UBS | Corporate | Total | |||||||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 178,735 | $ | 103,687 | $ | 129,981 | $ | (245,512) | $ | 166,891 | ||||||||||||||||||||||
| Net income attributable to noncontrolling interests | 210 | — | — | 178 | 388 | |||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | 14,352 | 14,352 | |||||||||||||||||||||||||||
| Provision for income taxes | — | — | — | 37,654 | 37,654 | |||||||||||||||||||||||||||
| Interest expense, net | — | — | — | 63,620 | 63,620 | |||||||||||||||||||||||||||
| Depreciation and amortization | 12,024 | 18,132 | 5,786 | 11,038 | 46,980 | |||||||||||||||||||||||||||
| EBITDA | $ | 190,969 | $ | 121,819 | $ | 135,767 | $ | (118,670) | $ | 329,885 | ||||||||||||||||||||||
| Other (income) expense, net | (174) | 344 | (33) | 987 | 1,124 | |||||||||||||||||||||||||||
Stock-based compensation expense(1) | 1,622 | 877 | 626 | 4,425 | 7,550 | |||||||||||||||||||||||||||
| Merger-related and integration costs | — | — | — | 25,563 | 25,563 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 192,417 | $ | 123,040 | $ | 136,360 | $ | (87,695) | $ | 364,122 | ||||||||||||||||||||||
| Adjusted EBITDA margin % | 9.2 | % | 8.6 | % | 9.7 | % | 7.4 | % | ||||||||||||||||||||||||
(1) Stock-based compensation expense in the calculation of adjusted EBITDA for the three months ended March 31, 2022 excludes $1.4 million as such amount is included in merger-related and integration costs. | ||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||
| EBITDA and Adjusted EBITDA by Segment: | EES | CSS | UBS | Corporate | Total | |||||||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 100,629 | $ | 73,594 | $ | 87,013 | $ | (216,410) | $ | 44,826 | ||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | (75) | — | — | 51 | (24) | |||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | 14,352 | 14,352 | |||||||||||||||||||||||||||
| Provision for income taxes | — | — | — | 6,531 | 6,531 | |||||||||||||||||||||||||||
| Interest expense, net | — | — | — | 70,373 | 70,373 | |||||||||||||||||||||||||||
| Depreciation and amortization | 10,563 | 16,293 | 5,210 | 9,143 | 41,209 | |||||||||||||||||||||||||||
| EBITDA | $ | 111,117 | $ | 89,887 | $ | 92,223 | $ | (115,960) | $ | 177,267 | ||||||||||||||||||||||
| Other (income) expense, net | (443) | 370 | 17 | (2,751) | (2,807) | |||||||||||||||||||||||||||
Stock-based compensation expense(2) | 1,351 | 425 | 340 | 2,577 | 4,693 | |||||||||||||||||||||||||||
| Merger-related and integration costs | — | — | — | 46,322 | 46,322 | |||||||||||||||||||||||||||
| Net gain on divestitures | — | — | (8,927) | — | (8,927) | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 112,025 | $ | 90,682 | $ | 83,653 | $ | (69,812) | $ | 216,548 | ||||||||||||||||||||||
| Adjusted EBITDA margin % | 6.5 | % | 7.3 | % | 7.8 | % | 5.4 | % | ||||||||||||||||||||||||
(2) Stock-based compensation expense in the calculation of adjusted EBITDA for the three months ended March 31, 2021 excludes $1.3 million as such amount is included in merger-related and integration costs. | ||||||||||||||||||||||||||||||||
Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, and net gain on the divestiture of Wesco's legacy utility and data communications businesses in Canada. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.
12
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except per share data)
(Unaudited)
| Twelve Months Ended | |||||||||||
| Financial Leverage: | March 31, 2022 | December 31, 2021 | |||||||||
| Net income attributable to common stockholders | $ | 530,039 | $ | 407,974 | |||||||
| Net income attributable to noncontrolling interests | 1,431 | 1,020 | |||||||||
| Preferred stock dividends | 57,408 | 57,408 | |||||||||
| Provision for income taxes | 146,633 | 115,510 | |||||||||
| Interest expense, net | 261,321 | 268,073 | |||||||||
| Depreciation and amortization | 204,325 | 198,554 | |||||||||
| EBITDA | 1,201,157 | 1,048,539 | |||||||||
Other income, net(1) | (44,181) | (48,112) | |||||||||
| Stock-based compensation expense | 28,556 | 25,699 | |||||||||
Merger-related and integration costs | 137,725 | 158,484 | |||||||||
| Net gain on divestitures | — | (8,927) | |||||||||
| Adjusted EBITDA | $ | 1,323,257 | $ | 1,175,683 | |||||||
| As of | |||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Short-term debt and current portion of long-term debt, net | $ | 70,263 | $ | 9,528 | |||||||
| Long-term debt, net | 4,836,658 | 4,701,542 | |||||||||
Debt discount and debt issuance costs(2) | 67,715 | 70,572 | |||||||||
Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2) | (786) | (957) | |||||||||
| Total debt | 4,973,850 | 4,780,685 | |||||||||
| Less: cash and cash equivalents | 201,474 | 212,583 | |||||||||
| Total debt, net of cash | $ | 4,772,376 | $ | 4,568,102 | |||||||
| Financial leverage ratio | 3.6 | 3.9 | |||||||||
(1) Other non-operating income for the twelve months ended March 31, 2022 and December 31, 2021 includes a $36.6 million curtailment gain resulting from the remeasurement of the Company's pension obligations in the U.S. and Canada due to amending certain terms of such defined benefit plans.
(2) Debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.
Note: Financial leverage is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, and net gain on the divestiture of Wesco's legacy utility and data communications businesses in Canada.
13
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended | |||||||||||
| Free Cash Flow: | March 31, 2022 | March 31, 2021 | |||||||||
| Cash flow (used in) provided by operations | $ | (171,911) | $ | 120,490 | |||||||
| Less: Capital expenditures | (15,247) | (10,211) | |||||||||
| Add: Merger-related and integration cash costs | 22,798 | 14,472 | |||||||||
| Free cash flow | $ | (164,360) | $ | 124,751 | |||||||
| Percentage of adjusted net income | (80) | % | 141 | % | |||||||
Note: Free cash flow is a non-GAAP financial measure of liquidity. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund investing and financing activities. For the three months ended March 31, 2022 and 2021, the Company paid for certain costs to integrate the acquired Anixter business. Such expenditures have been added back to operating cash flow to determine free cash flow for such periods.
14
First Quarter 2022 Webcast Presentation May 5, 2022 NYSE: WCC
2 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 cause actual results to differ materially. These statements include, but are not limited to, statements regarding the expected benefits and costs of the transaction between Wesco and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company's plans, objectives, expectations and intentions, statements that address the combined company's expected future business and financial performance, and other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of Wesco's management, as well as assumptions made by, and information currently available to, Wesco's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of Wesco's and Wesco's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the transaction, the risk that the transaction could have an adverse effect on the ability of the combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, or the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters (including as a result of climate change), health epidemics, pandemics and other outbreaks, such as the ongoing COVID-19 pandemic, supply chain disruptions, and the impact of Russia’s recent invasion of Ukraine, including the impact of sanctions or other actions taken by the U.S. or other countries, the increased risk of cyber incidents and exacerbation of key materials shortages, inflationary cost pressures, material cost increases, demand volatility, and logistics and capacity constraints, which may have a material adverse effect on the combined company's business, results of operations and financial condition, and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be found in Wesco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Wesco's other reports filed with the U.S. Securities and Exchange Commission ("SEC"). Non-GAAP Measures In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") above, this presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, gross margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, financial leverage, free cash flow, adjusted income from operations, adjusted operating margin, adjusted provision for income taxes, adjusted income before income taxes, adjusted net income, adjusted net income attributable to Wesco International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of financial performance, and the use of debt and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude items impacting comparability of results such as merger-related and integration costs, and the related income tax effect of such items, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above. Forward-Looking Statements
Agenda 3 Business Overview Financial Results Overview John Engel Chairman, President & CEO Executive Vice President & CFO Dave Schulz
4 2022 Off to an Exceptional Start Continued strong execution and accelerating value creation of Wesco + Anixter driving record-level results See appendix for non-GAAP reconciliations. • Up 22% YOY (up 2% sequentially) on a reported basis • Effectively managing global supply chain challenges • Leveraging increased scale, expanded product and services portfolio, and global supplier relationships • Benefiting from SBU cross-selling and attractive secular growth trends • Record-level backlog up 25% sequentially and up more than 90% YOY Record sales of $4.9 billion Up 21% YOY organically • Focus on value-driven pricing • Continued momentum of our gross margin improvement program Gross Margin up 120 bps YOY Up 50 bps sequentially • Benefits of scale, gross margin expansion, and increased operating leverage • Strong synergy execution delivering results above expectations Record adjusted EBITDA Up 68% YOY and margin up 200 bps YOY • TTM Adjusted EBITDA of $1.3 billion, up 54% since closing the Anixter acquisition • Accelerated deleveraging demonstrates the inherent strength of our distribution business model Leverage reduced to 3.6x Down 2.1x in 21 months
5 Strong Growth and Margin Expansion Versus Pre-pandemic Levels Substantial growth versus 2019 highlights the strength of the Wesco + Anixter combination 1 2019 figures are as-reported on Form 8-K dated November 4, 2020, and include sales and adjusted EBITDA derived from the legacy Wesco data communications and utility business in Canada that were divested in the first quarter of 2021. 2 See appendix for non-GAAP reconciliation. $4,070 $4,932 Q1 20191 Q1 20222 Q1 2019 (Pro Forma)1 Q1 20222 Sales +21% 4.6% 7.4% Q1 2019 Q1 2022 Adjusted EBITDA Margin +280 bps $187 $364 Q1 2019 Q1 2022 Adjusted EBITDA +95% Q1 2019 (Pro Forma)1 Q1 20222 Q1 2019 (Pro Forma)1 Q1 20222 5.7x 3.6x Q2 2020 Q1 2022 Since Anixter acquisition closing Q2 2020 (Pro Forma)1 Q1 20222 2.1x Leverage $ millions
6 Multiple Long-Term Growth Drivers The new Wesco is uniquely positioned for sustainable long-term growth + + Electrification Automation and IoT Green Energy and Grid Modernization 24/7 Connectivity and Security Digitalization Supply Chain Consolidation and Relocation to North America Strong Secular Growth Trends Rural Digital Opportunity Fund (RDOF) U.S. Infrastructure Bill Public-Private Partnerships for Smart Cities Canada Broadband Investments Increasing Public Sector Investment ✓ Leading Portfolio of Products, Services, and Solutions ✓ Leading Positions in All Business Units ✓ Global Footprint and Capabilities ✓ Leading Digital Investments and Pace of Investment ✓ Unlocking the Value of Our Big Data ✓ Accelerating Consolidation Across the Value Chain Wesco’s Uniquely Strong Position
7 A New Brand Identity for a New Company Our new brand identity reflects our ability to drive growth and innovation… responsibly and sustainably OUR MISSION We build, connect, power and protect the world. OUR PURPOSE Life should run smoothly, so we create a world you can depend on. OUR PROMISE Ingenuity Delivered. Advertising Wesco.com Social Media RecruitingOUR VISION To be the best tech-enabled supply chain solutions provider in the world.
First Quarter Results Overview Dave Schulz Executive Vice President & Chief Financial Officer
9 First Quarter Results Overview Exceptional financial results driven by strong sales growth, margin expansion and operating leverage Q1 2022 Q1 2021 YOY Sales $4,932 $4,041 +22% Gross Profit $1,049 $811 +29% % of sales 21.3% 20.1% +120 bps Adjusted Income from Operations $315 $171 +85% % of sales 6.4% 4.2% +220 bps Adjusted EBITDA $364 $217 +68% % of sales 7.4% 5.4% +200 bps Adjusted Diluted EPS $3.63 $1.43 +154% $ millions, except per share amounts • Record sales, +22% YOY and +2% sequentially on a reported basis • Organic sales +21% YOY and flat sequentially • Estimated pricing benefit of 8% YOY • Record backlog, +90% YOY and +25% sequentially • Gross margin +120 bps YOY and +50 bps sequentially • $63 million of realized cost synergies • $160 million of cross-sell synergies • Record adjusted EBITDA +68% • Adjusted EBITDA margin +200 bps YOY • Record adjusted diluted EPS +154% YOY See appendix for non-GAAP reconciliations. Preliminary April sales up approximately 22% YOY and compared to 2019 on a workday-adjusted basis
10 First Quarter Adjusted EBITDA Bridge Exceptional financial results driven by strong sales growth, margin expansion and operating leverage 2021 Q1 Adjusted EBITDA Sales Gross Margin Improvement Cost Synergies Volume-related Costs & Variable Compensation Digital/IT & Other 2022 Q1 Adjusted EBITDA $217 $364 5.4% of sales 7.4% of sales +68% +200 bps $ millions See appendix for non-GAAP reconciliations.
Continue to take share due to enhanced value proposition and complete electrical solutions offering First Quarter Drivers • Record quarter with sales growth in all operating groups – Non-residential construction tracking ahead of expectations – Strong industrial and OEM momentum continues • Backlog at record level; up 75% YOY and 25% sequentially • Record adjusted EBITDA and margin expansion driven by accelerating sales growth, synergy capture, and execution of margin improvement initiatives Electrical & Electronic Solutions (EES) Q1 2022 Q1 2021 YOY Sales $2,090 $1,721 +21%1 Adjusted EBITDA $192 $112 +72% % of sales 9.2% 6.5% +270 bps 11 $ millions Long-term, sustainable growth supported by secular trends of electrification, automation and green energy 1 Sales growth shown on an organic basis. Organic sales growth represents reported sales growth adjusted to remove the effect of acquisitions, divestitures, changes in foreign currency exchange rates and differences in working days. See appendix for non-GAAP reconciliations.
First Quarter Drivers • Strong quarter with sales growth in all operating groups despite continued global supply chain challenges – Network infrastructure growth led by global hyper-scale data centers and an increase in structured cabling due to accelerating return-to- workplace activities – Security growth driven by increased IP-based surveillance and adoption of cloud-based technologies by global customers – Continued strong demand from multinational customers for A/V projects and in-building wireless applications • Backlog at record level; up 89% YOY and 23% sequentially • Adjusted EBITDA and margin expansion driven by accelerating sales growth, synergy capture, and margin improvement initiatives Communications & Security Solutions (CSS) Global position, leading value proposition and accelerating secular trends drive strong outlook for 2022 and beyond 12 $ millions Q1 2022 Q1 2021 YOY Sales $1,434 $1,251 +14%1 Adjusted EBITDA $123 $91 +36% % of sales 8.6% 7.3% +130 bps Long-term, sustainable growth supported by secular trends of 24/7 connectivity, data center expansion, secure networks and IoT/automation 1 Sales growth shown on an organic basis. Organic sales growth represents reported sales growth adjusted to remove the effect of acquisitions, divestitures, changes in foreign currency exchange rates and differences in working days. See appendix for non-GAAP reconciliations.
First Quarter Drivers • Record quarter with double-digit sales growth in all operating groups – Broad-based growth in utility driven by investments in grid modernization – Broadband growth driven by connectivity demand and rural broadband expansion – Integrated supply up versus PY and sequentially, in-line with industrial recovery • Backlog at record level; up 130% YOY and 28% sequentially • Record adjusted EBITDA with accelerating sales growth and margin expansion Utility & Broadband Solutions (UBS) Leadership position and complete solutions offering continue to drive exceptional sales and profit growth 13 $ millions Q1 2022 Q1 2021 YOY Sales $1,408 $1,070 +30%1 Adjusted EBITDA $136 $84 +63% % of sales 9.7% 7.8% +190 bps Long-term, sustainable growth driven by industry- leading value proposition, scope expansion and attractive secular trends of green energy, grid modernization and infrastructure investment 1 Sales growth shown on an organic basis. Organic sales growth represents reported sales growth adjusted to remove the effect of acquisitions, divestitures, changes in foreign currency exchange rates and differences in working days. See appendix for non-GAAP reconciliations.
14 • Expanding pipeline of cross-sell opportunities • Strong customer relationships and global supplier partnerships • Minimal overlap between legacy Wesco and Anixter customers • Highly complementary products and services • Salesforce training and incentives in place • Opportunities to cross-sell exist across all three SBUs • Growth opportunity is further amplified by attractive secular growth trends Accelerating Cross-Sell Drives Market Outperformance Successful and accelerating cross-selling initiative to existing customers and new prospects Broad Portfolio of Cross-Sell Products and Services Balance of Electrical System Wire & Cable Solutions Substation and Grid Components Network Infrastructure and Security Services MRO Supplies and Safety Switch Gear $ millions Increasing cross-sell target from $600 million to $850 million Cumulative Cross-Sell Synergy Target $170 $500 $600 $525 Initial Target (June 2020) Target Increase (Aug 2021) Target Increase (Feb 2022) Target Increase (May 2022) Target Increase (May 2022) Target Increase (Feb 2022) Target Increase (Aug 2021) Initial Target (June 2020) $850 Captured ~62% of New Target Since Merger Closed Realized
15 Sales Synergies Increase as Leading Value Proposition Takes Hold Cross-sell momentum highlights the power of the combined portfolio EES and CSS CSS UBS Overview: Major EPC win for the construction of a new U.S. semiconductor fabrication facility Overview: Network infrastructure products award to support the outdoor Passive Optical Network of an entertainment theme park Initial Value $40+ million Initial Value $1+ million Overview: Expanded product scope for a long-term utility customer Initial Value $10+ million Key Enablers ✓ Ability to coordinate global transactions ✓ Strong existing relationships Key Enablers ✓ Access to two divisions of a Wesco supplier that was new to Anixter Key Enablers ✓ Supplier access from legacy company ✓ Unified sales team across Wesco and Anixter ✓ Consolidated logistics platform and data management provided additional efficiencies and scale to existing customer Wire and Cable Supply Chain Services Electrical Lighting Power Cable Infrastructure Cable Tray Major Product Categories Major Product Categories Major Product Categories
16 Accelerated Cost Synergy Realization Continues Tracking well toward 2023 cost synergy target of $315 million 202 1 (to date) To be realizedRealized Supply Chain $115 million G&A $95 million Corporate Overhead $45 million Field Operations $60 million To be realizedRealized $ millions $14 $34 $25 $44 $50 $60 2020 2021 2022 2023 $315 $250 $188 $39 $63 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Cumulative Realized Synergies Cumulative Realized Synergies By Type
17 Q1 Free Cash Flow 70 67 65 64 64 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Adjusted Net Income D&A, Variable Comp and Other Working Capital Increase Capex / IT Spend Free Cash Flow Free Cash Flow and Working Capital Days Responsively managing working capital in a high-growth, supply-constrained environment Net Working Capital Days1 1 Calculated on a trailing twelve-month basis using the preceding four quarter income statements and the average of the preceding five quarter-end balance sheets. See appendix for non-GAAP reconciliations. 5+ day Reduction $ millions $205 $(164) $(339) $(6) $(24) Primary Drivers • $(325) change in A/R • $(214) change in inventory
18 5.7x 5.3x 5.3x 4.9x 4.5x 4.1x 3.9x 3.6x Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 3.5x target range 2.0x Net Debt / TTM Adjusted EBITDA Leverage Improved 2.1x Since Anixter Acquisition in June 2020 Expect to exceed our deleveraging target again and return to our target leverage in Q2 2022 Acquisition closed June 2020 See appendix for non-GAAP reconciliations. • Leverage reduced 0.3x in Q1; 2.1x since Anixter acquisition closed • Accelerated expected timing to return to our target range by Q2-22 • Rapid deleveraging demonstrates inherent strength of our B2B distribution business model 2.1x Reduction
2022 Outlook 19 Outlook Notes • Does not reflect the effect of potential tax law changes or future refinancing activity • Foreign exchange rates expected to be neutral • Utility customer model shift results in negative sales impact of ~0.5% 1 Adjusted EBITDA is defined as EBITDA before other, net, non-cash stock-based compensation and merger-related costs; Adjusted EPS excludes merger-related costs, accelerated trademark amortization and the related income tax effects. Prior Updated (2/15/22) (5/5/22) Sales Market growth (including price) +3% to +5% +9% to +11% Plus: share gain/cross-sell +2% to +3% +3% to +4% Plus: benefit of one more workday in 2022 +0.5% +0.5% Reported sales +5% to +8% +12% to +15% Adjusted EBITDA Adjusted EBITDA margin1 6.7% to 7.0% 7.3% to 7.6% vs PY +20 bps to +50 bps +80 bps to +110 bps Implied midpoint of range $1.33 billion $1.54 billion Tax Effective tax rate ~25% ~24% Adjusted EPS Adjusted diluted EPS1 $11.00 to $12.00 $14.00 to $15.00 vs PY +10% to +20% +40% to +50% Cash Free cash flow percent of adjusted net income ~100% ~80%
20 Summary Differentiated capabilities and execution, along with improving macro environment, drive our increased 2022 outlook • Exceptional start to 2022 • Outstanding results across the board in Q1 and strongest quarter of Wesco + Anixter combination yet – All-time record sales, operating profit, adjusted EBITDA and adjusted EPS – Growth in every segment versus 2021 and pre-pandemic 2019 levels – Delivered very strong EBITDA margin expansion of 200 bps on value-based pricing execution, accelerated cross-sell, and continued cost synergies • Took market share through sales execution and cross-selling program and again increased cross-sell synergy target • Accelerated de-leveraging; leverage reduced 2.1 turns to 3.6x since merger close in June 2020 • Making excellent progress on our IT/Digital roadmap • Exceptionally well positioned to benefit from secular growth trends
APPENDIX
22 Glossary Abbreviations 1H: First half of fiscal year MSD: Mid-single digit 2H: Second half of fiscal year PF: Pro Forma A/V: Audio/visual PY: Prior Year COGS: Cost of goods sold OEM: Original equipment manufacturer CIG: Commercial, Institutional and Government OPEX: Operating expenses CSS: Communications & Security Solutions (business unit) ROW: Rest of world EES: Electrical & Electronic Solutions (business unit) RTW: Return to Workplace ETR: Effective tax rate SBU: Strategic Business Unit FTTx: Fiber-to-the-x (last mile fiber optic network connections) Seq: Sequential HSD: High-single digit TTM: Trailing twelve months LSD: Low-single digit UBS: Utility & Broadband Solutions (business unit) MRO: Maintenance, repair and operating WD: Workday MTDC: Multi-tenant data center YOY: Year-over-year Definitions Executed synergies: Initiatives fully implemented – actions taken to generate savings Realized synergies: Savings that impact financial results versus pro forma 2019 One-time operating expenses: Operating expenses that are in or will be realized in the P&L (including cash and non-cash) Leverage: Debt, net of cash, divided by trailing-twelve-month adjusted EBITDA
23 Workdays Q1 Q2 Q3 Q4 FY 2019 63 64 63 62 252 2020 64 64 64 61 253 2021 62 64 64 62 252 2022 63 64 64 62 253
24 Non-GAAP Measure Definitions Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Gross profit is a financial measure commonly used in the distribution industry. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non- operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, and net gain on the divestiture of Wesco's legacy utility and data communications businesses in Canada. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales. Free cash flow is a non-GAAP financial measure of liquidity. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund investing and financing activities. Financial leverage is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, and net gain on the divestiture of Wesco's legacy utility and data communications businesses in Canada.
25 Organic Sales Growth by Segment March 31, 2022 March 31, 2021 Reported Divestiture Impact Foreign Exchange Impact Workday Impact Organic Growth EES $ 2,089,959 $ 1,720,813 21.5% (0.5)% (0.4)% 1.6% 20.8% CSS 1,434,175 1,250,615 14.7% — % (0.8)% 1.6% 13.9% UBS 1,408,047 1,070,049 31.6% (0.4)% — % 1.6% 30.4% Total net sales $ 4,932,181 $ 4,041,477 22.0% (0.3)% (0.5)% 1.6% 21.2% March 31, 2022 December 31, 2021 Reported Divestiture Impact Foreign Exchange Impact Workday Impact Organic Growth EES $ 2,089,959 $ 1,994,954 4.8% — % (0.2)% 1.6% 3.4% CSS 1,434,175 1,514,813 (5.3)% — % (0.2)% 1.6% (6.7)% UBS 1,408,047 1,342,152 4.9% — % (0.1)% 1.6% 3.4% Total net sales $ 4,932,181 $ 4,851,919 1.7% — % (0.1)% 1.6% 0.2% Organic Sales Growth by Segment: Three Months Ended Growth/(Decline) Organic Sales Growth by Segment - Sequential: Three Months Ended Growth/(Decline) $ thousands
26 Gross Profit and Free Cash Flow $ thousands Gross Profit: March 31, 2022 March 31, 2021 December 31, 2021 Net sales $ 4,932,181 $ 4,041,477 $ 4,851,919 Cost of goods sold (excluding depreciation and amortization) 3,883,074 3,230,441 3,844,038 Gross profit $ 1,049,107 $ 811,036 $ 1,007,881 Gross margin 21.3% 20.1% 20.8% Free Cash Flow: March 31, 2022 March 31, 2021 Cash flow (used in) provided by operations $ (171,911) $ 120,490 Less: Capital expenditures (15,247) (10,211) Add: Merger-related and integration cash costs (1) 22,798 14,472 Free cash flow $ (164,360) $ 124,751 Percentage of adjusted net income (80)% 141% Three Months Ended Three Months Ended (1) For the three months ended March 31, 2022 and 2021, the Company paid for certain costs to integrate the acquired Anixter business. Such expenditures have been added back to determine free cash flow for such periods.
27 Adjusted EBITDA $ thousands EBITDA and Adjusted EBITDA by Segment: EES CSS UBS Corporate Total EES CSS UBS Corporate Total Net income attributable to common stockholders $ 178,735 $ 103,687 $ 129,981 $ (245,512) $ 166,891 $ 100,629 $ 73,594 $ 87,013 $ (216,410) $ 44,826 Net income (loss) attributable to noncontrolling interests 210 — — 178 388 (75) — — 51 (24) Preferred stock dividends — — — 14,352 14,352 — — — 14,352 14,352 Provision for income taxes — — — 37,654 37,654 — — — 6,531 6,531 Interest expense, net — — — 63,620 63,620 — — — 70,373 70,373 Depreciation and amortization 12,024 18,132 5,786 11,038 46,980 10,563 16,293 5,210 9,143 41,209 EBITDA $ 190,969 $ 121,819 $ 135,767 $(118,670) $ 329,885 $ 111,117 $ 89,887 $ 92,223 $(115,960) $ 177,267 Other (income) expense, net (174) 344 (33) 987 1,124 (443) 370 17 (2,751) (2,807) Stock-based compensation expense(1) 1,622 877 626 4,425 7,550 1,351 425 340 2,577 4,693 Merger-related and integration costs — — — 25,563 25,563 — — — 46,322 46,322 Net gain on divestitures — — — — — — — (8,927) — (8,927) Adjusted EBITDA $ 192,417 $ 123,040 $ 136,360 $ (87,695) $ 364,122 $ 112,025 $ 90,682 $ 83,653 $ (69,812) $ 216,548 Adjusted EBITDA margin % 9.2% 8.6% 9.7% 7.4% 6.5% 7.3% 7.8% 5.4% Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 (1) Stock-based compensation expense in the calculation of adjusted EBITDA for the three months ended March 31, 2022 and 2021 excludes $1.4 million and $1.3 million, respectively, as such amounts are included in merger-related and integration costs.
Adjusted Income from Operations: March 31, 2022 March 31, 2021 Income from operations $ 284,029 $ 133,251 Merger-related and integration costs 25,563 46,322 Accelerated trademark amortization 5,323 — Net gain on divestitures — (8,927) Adjusted income from operations $ 314,915 $ 170,646 Adjusted income from operations margin % 6.4% 4.2% Adjusted Provision for Income Taxes: Provision for income taxes $ 37,654 $ 6,531 Income tax effect of adjustments to income from operations(1) 8,008 8,145 Adjusted provision for income taxes $ 45,662 $ 14,676 Adjusted Earnings per Diluted Share: Adjusted income from operations $ 314,915 $ 170,646 Interest expense, net 63,620 70,373 Other expense (income), net 1,124 (2,807) Adjusted income before income taxes 250,171 103,080 Adjusted provision for income taxes 45,662 14,676 Adjusted net income 204,509 88,404 Net income (loss) attributable to noncontrolling interests 388 (24) Adjusted net income attributable to WESCO International, Inc. 204,121 88,428 Preferred stock dividends 14,352 14,352 Adjusted net income attributable to common stockholders $ 189,769 $ 74,076 Diluted shares 52,237 51,708 Adjusted earnings per diluted share $ 3.63 $ 1.43 Three Months Ended (1) The adjustments to income from operations have been tax effected at rates of approximately 26% and 22% for the three months ended March 31, 2022 and 2021, respectively. Adjusted EPS 28 $ thousands, except per share amounts
Capital Structure and Leverage 29 (1) Other non-operating income for the twelve months ended March 31, 2022 and December 31, 2021 includes a $36.6 million curtailment gain resulting from the remeasurement of the Company’s pension obligations in the U.S. and Canada due to amending certain terms of such defined benefit plans. (2) Debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value. $ thousands Financial Leverage: March 31, 2022 December 31, 2021 Net income attributable to common stockholders $ 530,039 $ 407,974 Net income attributable to noncontrolling interests 1,431 1,020 Preferred stock dividends 57,408 57,408 Provision for income taxes 146,633 115,510 Interest expense, net 261,321 268,073 Depreciation and amortization 204,325 198,554 EBITDA 1,201,157 1,048,539 Other income, net(1) (44,181) (48,112) Stock-based compensation expense 28,556 25,699 Merger-related and integration costs 137,725 158,484 Net gain on Canadian divestitures — (8,927) Adjusted EBITDA $ 1,323,257 $ 1,175,683 March 31, 2022 December 31, 2021 Short-term debt and current portion of long-term debt, net $ 70,263 $ 9,528 Long-term debt, net 4,836,658 4,701,542 Debt discount and debt issuance costs(2) 67,715 70,572 Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2) (786) (957) Total debt 4,973,850 4,780,685 Less: cash and cash equivalents 201,474 212,583 Total debt, net of cash $ 4,772,376 $ 4,568,102 Financial leverage ratio 3.6x 3.9x Twelve Months Ended As of