WCC - Earnings call transcript Q4 2020 | WESCO International, Inc.

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Operator

Good morning, and welcome to the WESCO Fourth Quarter and Full Year 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Leslie Hunziker. ahead. go Please

Leslie Hunziker

good and Thank morning, you, everyone.

get you remind we want contain to certain statements I that made information. Before forward-looking started, on call this

update of their speaks company's inherent Any our to this relayed certain are press date, are our company our our the differ information Financial and at this website webcast statements we not disclosures. well to webcast the forward these only reflect for see information and morning on Forward-looking change this on Chief undertakes Officer. Engel, as John have in additional on as the factors circumstances. and release, and Today guarantees wesco.com. On materially. Please information subject both non-GAAP filings the our we'll this Actual uncertainties. obligation by measures. non-GAAP use to CEO; slides available of financial measures as slides results which SEC call call, WESCO's may Dave is about looking posted and performance no nature risk Required Schulz, are

to turn I'll over John. call the Now,

John Engel

you, on thank team. And Well, WESCO, welcome the have to a it's great to Leslie. you warm

Leslie Hunziker

you. Thank

John Engel

quick through open I'll After questions. and you XXXX. of And progress point offer outlook you then Good overview update Anixter. we an XXXX our I'll hope morning, the our quarter I I'll all been an rapid accomplishments. that you our and Dave summary that, that notable healthy. through before most everyone. for safe that staying we're on making on year and you and start a of give at a And with take of fourth line out have of some take will full results, our integrating recap for

years of ever bullish was XXXX for against size doubling on our changing come. our acquisition substantial an excellent I'm the Anixter, an WESCO. potential. more We're than value up, and transformational start, our to starting company extraordinary trajectory and to creation off completed of for a We year So delivering

all inspired resilience effort of I'm global addition, thank commitment, for like in associates to pandemic. during extraordinary our In serving customers the their by dedication, and we'd and

As to were transaction our more later. to the last agreement a we pleased than we very January. International you of And close five most little acquire know, announced months Anixter

The have the six first months integration exceptionally gone of well.

expectations, as Our rapid well opportunities, exceeded pace synergy size our capture the our execution. terms in as both the of of of

cost million. recall, to You'll quarter three synergy we million last year merger from increased $XXX $XXX our post target

the environment global substantially by scale highly working are encouraging. three that's very really transaction In show same In this build larger we about addition, to of a and COVID-XX we've past. incredibly and results, to quick this, nature time that the took the talked through closing response cross beginning At the we're on towards us has our priorities, driven and sell in enabled challenging macro managing decisive complementary up is integration, our an the and and pipeline pandemic. actions this Anixter, WESCO to that and top-line in we're starting

employees. our protecting First

and actions global service of support end our we diversity and number our the exceptional. our attractive last our taking three, help experience service to markets, support on customer our business was effects differentiated The of necessary trends and efficiently temper that and ensuring Second, offerings, year. operations. our cost our secular COVID-XX the seamless manage reduce And footprint the

associated capabilities Anixter, also the with have demand machine-to-machine capacity. bandwidth use and utility communication, and growth In of units our security electrification back center remote of to and hand demand to can and for North for connectivity relocation as utility and attractive this are just all side America, secular additional solutions, are electrical, growth the which supply see services, growth poised On right increased growth chain the will serve. chains years and our electrical, continue WESCO growth drive in the to in distribution have of faster of three drive the and connections, such trends infrastructure, deliver of leader of markets All these the as the and ahead. increasing business communications drive in supply Emerging the created data the strategic scale we all that trends to opportunities. combining you strong trends industry we secular demand driving page, automation, the

fourth Page Even on which building our sales sets They deliver flow Now XXXX. to were our a XXXX. we share, the our in well highlighted record us during momentum synergies, cash workday sequentially up second made August, moving take and quarter focus earnings capture to second a for X, of year free to on In to our We We've more priorities positive momentum utilizing workday COVID-XX digits we half call the Sales improving our efforts. generation adjusted continue the to great successfully growth, up capabilities declined reflected X% in trough, the sequentially with our scaling increased and comparable in typically out basis. on debt the are basis, on share. low a on with up saw QX, across year-over-year coming sales results. progress take January when quarter, of were importantly, single synergy this sales sales in fourth return closed board backlog, year-end sales quarter. the

team is focused Our on driving laser synergies.

combined and corporate was consecutive As up savings organization, year overhead made reorganizing integration. progress into a gross margin recognizing versus Adjusted one from the pro prior in we have second duplicative the quarter. we've functional forma and for great

ability enhance and and of an a reduces turn partners. strength, our pleased plan, growth deliver our we're are since very our accelerating meet been place, synergy for results. $XX fronts. We're targets efficiency. expense the announced XXXX XXXX reduction functions our delivering XXXX, we in we highlight million us now $XXX This to for of high with have I'll greater is further completed three out, repayment in six by with sustainable, years creation. in the enabled that almost will $XXX integration, to of to stone the confidence more by X.X just our we With Dave? Overall, to months than be term and value all an of we unwavering you journey. and the year, million progress refinancing who outside million positive extraordinary we us of in to long will times our And interest debt targets. strong team XXX% was free cash across per very Anixter that reduce able with and net in last generated another income. for notes transformational quarter, high Coupled that that, set track year, very over which results our in upside another and stepping flow position XXXX Dave, support and debt execution month, to adjusted on closed. team Free a last higher flow our we target. close the have target associates and strategies the confidence achieving leverage roles will the financial debt from by streamline and XXXX major last cash we've on net important and $XXX to through delivering debt and call entering to flow We're management million first Our these commitment our cash on take

Dave Schulz

John. you, Thank

in first anticipated are synergies results in we realized getting QX. I'd statement. January Consistent of $XXX total cost reflected first left million we've fourth slide with cumulative in of close. cost Before chart the address synergies call, synergies cost expectation XX-months When the close, by the quarter, have by a back expect income the synergies, side and months $XX with $XX realize realizing for of the the XXXX, we million close provided In align into an three converted cost of shows in with that we we those expect synergy $XX from post cumulative million with the where view On $XXX Anixter anticipate our million bringing still integration million million for synergies, Slide $XX the on year. $XXX XXXX, we of year. the are and that synergies last to the cost to to the additional a realized years investors with our our announced synergies six provided of QX, first on we like X, are you'll our the the with by Realized the million XXXX, earnings Anixter. in timeline end merger In see fiscal with post we our synergies of merger, of we on of to to June through our December. year-end. This generate fiscal that mid-XXXX

chart. below have we synergies, achieve cost cumulative onetime the expenses synergies the to bar to the operating addition In shown cumulative the

are XXXX. million you of sources expenses. previously months, XX% approximately and onetime this and see, spend to onetime that $XX six to goods of million comprised in operating total, expect expect is incremental is the million related we XX% in cost have of consistent basis. synergies approximately operating expenses to will and with on first $XXX of we $XX sold, related $XX By the drive XX-month generate generate and cost initiatives reducing the related to chain This can operating realized discussed, target June supply of a synergies synergies synergies of on the sold. we an of million impacting G&A majority SG&A expect synergies, As to goods of incremental synergies $XXX we to the operations In the corporate XXXX, spent trailing million cost in with the costs overhead, field

delivered represented income. XXX% X, Turning in flow Slide to of cash strong that quarter another than net free QX, of more we

with of ability For cycle, year, down or economic free highlights over flow with especially than commitment generate like cash This years, X.X execution net was the we next cash gives that Anixter more one cycles the resilient throughout we model, very below with half related leverage This to XXX% EBITDA $XXX two the coupled flow when million the of adjusted reduce generation our the successfully WESCO's level confidence, merger. flow on and high us income. to integration times will and the free COVID-XX. announced strong full consistent our cash adjusted a during

remains priority Our capital unchanged. allocation

we XXXX, XX-months the in this we in by to net Anixter reduced our will EBITDA fourth and the million in in leverage our bank by X.X payment credit by our $X.X of comprised capital January, since as early the exceptionally Liquidity, size capacity semi-annual $XXX first our of combined billion $XXX We million. of following progress XXXX Net reduced million integration, XXXX sheet. debt substantial In debt made and XXXX balance bank our and on the million interest June. notes. trailing quarter, goal acquisition borrowing retire quarter. fourth was invested two delever invest the utilized We on increased facilities, the this higher new closing to which availability and allocate We adjusted $XXX business totalled support times, and the by in is end rapidly of is $XXX $XXX and notes. at facilities credit availability existing cash million of strong

to of and the our adjusted X, forma that Anixter to quarter our an comparisons reporting compares Anixter in was pro different had summary statement prior Because there fourth table Turning the less extra for results period fourth meaningful. of periods, making income week in quarter. results period, the to this the third XXXX, and Page sales WESCO fiscal adjusted quarter year

When the be today the with results which X%. than days XX.X%, against on that that Adjusted January up compared to out and important three continued digits flat was fewer prior adjusted basis year. basis, the work merger related of quarter. inventory then versus For points in accounting versus basis, It workday had period adjustment the The low-single quarter On third sales third sales the to sequential is margin, a quarter. of adjusting most fair prior value will the effect the the and line the comparison quarter reason, year. quarter. note to XX adjustments were fourth workday reported more the comments with third comparable a sales my excludes of momentum up prior versus to inventory, absorption has to into up gross related were

margin million, our the proven improvement results effect inventory since We the our the period $XX related million business. to of out deploying Westinghouse, the $XX million Adjusted temporary an of Note of increase costs million, $XX period WESCO and to related from across merger adjustment spun margin accounting. of combined to that the programs inventory improvement measures, Anixter's out on adjusting inventory third related period operations was of had merger continued operations lower from are early adjustment adjustment quarter, related was income relates was the reflects response Adjusted effect to primarily reported discontinuance fair of traction including initiatives, the cumulative remove in to absorption million in the was adjustments of from to of and value gross adjustment in $XX $XXX quarter, seeing the income than which taken from COVID-XX. reduction SG&A, the we of to material out no after results. cost

we I XXXX, savings of savings operations As rate December X, October the full of the relative our XX, WESCO’s along third Adjusted line QX higher before employer in than diluted WESCO prior the just measures lower XXXX $XXX full in we employees, million included well excludes other $XX which that contributions, EBITDA, as sales, million adjustments press These adjustments is was filed was the the retirement representing SG&A, release. reconciliation In prior and the stock reiterated had lower the effect run total, salaries $X.XX. SG&A with and legacy year resumed quarter forma, EPS quarters adjusted call more for or actions, and of income merit earnings X%. on effective and the in I A the decremental instituted quarter in the million approximately were merger. to we to mentioned, matching adjustments million that adjusted with margin and highlighted our reinstated XXXX. approximately pro had plan based EPS just of a due of QX $XX from than net third of during second compensation generated than X-K Adjusted $XXX certain as was lower, other sales the of year. X.X% discussed, on

on like I'd XX, new structure to Before you the results, we of quarter. introduced the SBU remind which three third our Slide getting to segment in

which total First, electrical XX% approximately and electronic company's is of our EES, systems, or business.

or Second, which of or across overall the security third, solutions UBS, represents And the enterprise. solutions communications utility revenue. and then of broadband one-third the XX% remaining roughly is CSS, which and sales company's the

how portfolios offer have is legacy one most pie discoveries Anixter post As and close said complimentary the positive Anixter composition this WESCO depict The the WESCO meaningful we previously, charts are. the very enables that legacy mentioned. page and of of three on of and It customers, businesses. solutions suite programs, cross and even for highly products end-to-end more the this supports the our each complementary for sell solutions is us to John and

companies Additionally, we legacy found was that between expected. more favorable customer overlap than the

package ability well demand first in electrical to our from of as workday Turning sell reported to on our segment This a improving construction the in a quarter complete EES up comparable basis, Slide, X% in versus the reported sales North half reflects and the third America XX X% our the basis. second on growth customers. up year, sales cross were and initiatives our offer as a to

project have a quarter EES have last by delayed, consistent primarily but we with fourth continue COVID-XX, cancellations. new delays, to projects backlog since continued and the as awarded some are We driven trend be was to still see projects. no we March, record, observed some

about higher quarter. sales, discussed the also increasing fourth temporary MRO momentum reinstatement SG&A $XX our of EBITDA million third the improved serve. of project Adjusted We $XX the reductions X.X% and decrease verticals In of see continue industrial the OEM COVID-XX all to activity million, of primarily The in cost in reflects and represented than we the earlier. levels to business. lower quarter, due

up well our an a On sales our a driven to prior offers reported CSS in greater stemming basis. XX, by at scale, quarter, needs the COVID-XX, our on X% on Slide as than from a increased focus which were global workday customers. to comparable Turning value bandwidth as part, year closed strong lower basis, were segment X% but

saw throughout with share States, regions momentum in are as in United the areas positive quarter. taking EES, We especially geographic we the all outside and continued

network low from single Sequentially, global applications. were accounts well-positioned trends expanding audiovisual by to basis, on applications. strong, continued and have Specifically, that network the million, technological a wireless reflecting from sales. data quarter, our markets sales in-building accelerated reliance digits that uniquely secure highlighted we strong was IP professional cost and security as upgrades sequentially benefit year, growth we systems. of the $XXX several the Profitability X.X% centers, of all was than was of EBITDA workday driven CSS or pace driven demand third for demand infrastructure up temporary for This higher in and increasing basis and experienced growth innovation, in prior secular security new down by security comparable and both data existing are primarily reductions. installations reinstatement demand an XX the of on was of but pace the adjusted driving points to is

to projects. of sales, and sales. in points cost percentage COVID-related connectivity and global data $XX EBITDA was of demand Adjusted never hardening slightly in broadband of in utility this a environments. versus up automation restoration margin installations slightly to Turning comparable driven quarter greater has our down to well and requirements down XX customers as change business The Slide sales was projects. school lower quarter, remote continue on mile and grid our was as and continued the as fiber invest Strong and actions. demand Adjusted high lighting work line broadband deployments, a prior were XG last basis. million reported year workday utility up the EBITDA but also resilient in by for XX, with due modernization basis, LED X% to driven basis projects, increasing The UBS the a speed on step the segment been third on sequentially and by as COVID-XX,

through roughly business. pro recognize outlook overall XXXX. XX, you X%. of demand and pattern our sales XXXX, We influence In our scale COVID volatility market $XX to were may estimate Turning I'll broad the that walk create On for forma to of of vaccinations Slide we in basis, billion and X% a growth timing the XXXX.

that by sell encouraged market. we we grow environment XXXX. are of X% of as sales expect continued above the our economic We to On indicators in combination demand improve, cross and progress expect will through that, top the programs the continue outperformance to X% to the

fewer completed workday XXXX completion as the these will sales million. brand Lastly, approximately the X%. in the one XXXX, to headwind divested impact QX of will in of The keep first impact relating in sale well we and a as Aggregate mind that than quarter. XXXX, have U.S. of divestitures be has Canadian approximately of the $XXX are expected businesses the of

So in X% X%. expect grow to to sales we total,

We expect to to differences year. in foreign full be favorable neutral exchange for the slightly rates

right margin outlook the our of On provided bridge margin XXXX side X.X% page, adjusted EBITDA pro X.X% to of to of forma the hand EBITDA have we X.X%. adjusted for the our for

market We XX collectively about leverage, benefit and drive expect expect outperformance to to of from XX basis to which expansion. margin improving mix, points operating we

rate basis approximately range aggregate approximately of in which prior margin the points. In the approximately we incentive XX the XX% adjusted XX addition, Partially $XX assume previously, We accrual points effective our of is two the XX.X compensation count incremental to million EBITDA and employee $X.XX XXXX, the a of EPS contribute cost we approximately drivers to down which on full additional of share restoration will statement, amount basis an costs discussed generate the be these page, $X. benefit compensation, for synergies be shares. million and restoration you will to the tax expect diluted expect offsetting of saw a diluted income as margin. in realized Continuing of of

much between which capital million XXXX, in to will stages spend investing expect in of million digital our We to expenditures $XXX on be systems invested aligning and early tools. the $XXX in of

adjusted substantial income. forecasting XXX% free We which net we're be least continue at expect generating to to of flow, cash

the drivers we XXXX, the of that quarter first John keep of mind million to from of as has in fewer quarter. that the quarter first summary. quarter With to at his shown cost table. expect $XX the the return in the first for look synergies of the in XXXX, two As I'll workdays realized benefit call we in Please back

John Engel

material We of covered Thanks, a this Dave. lot morning.

I'd quick Before your many like transformational you walk company's was to for a summary. highlighted to opening Again, call a the through of WESCO strengths. questions year XXXX and

and and First, our we're progress increase the off I as to start made quick accelerating. decisive integration the the with months, excellent to mentioned six excellent our we just able with be actions is two, and Anixter very global to substantial in delivered pleased is earlier, first the through cause COVID-XX an performance Number respond on to pandemic it and We synergy targets. downturn. integration the

Our our our the performance in high new management leadership team driving culture. and strongest is team history, is

have in is and We highlighted for the secular on business end-to-end our year a business the a And are already spectrum our our uniquely three full new three XXXX positive launched will of programs years units, drive results. importantly, seeing WESCO. growth to all for capitalize and watershed of come. the and cross demand sell most beginning well-positioned solutions of era that for marked trends to

to with are well-positioned lead digital a exceptionally of intent the diversified in fragmented leader, not what industry. and remains transformation industry and more also business, our a but of and only As industry. differentiated scale now larger capabilities, We're highly we our

like So for call to with the questions. I'd that, open

Operator

We will Please Sam begin instructions] The [Operator ahead. from question first session. now go question-and-answer James. Raymond comes the with Darkatsh

Sam Darkatsh

How Dave. are you? Good morning, morning, Good John.

John Engel

Sam. morning, Good

Sam Darkatsh

if Two questions I may.

million so calling specific fiscal me COVID. resumed you're sales about benefits, and my We I COVID To 'XX the about of levering it $X the million to in to $XXX basis. like to organic incremental going $XXX in math you're knew first extent a least The from The $XXX that incentive look dollars at in an on. if surprise benefits, restoration, guess in million out, doesn't was the scale. its billion and to million comp holds $XX on costs incentive of be comp

price but of to holds, type knowing think going not building and cost margins that why are math incremental you my price and be sales, for lever year? First presumably this favorable especially off, that I

Dave Schulz

you Yes. We million we question. entered had Sam, business Obviously, actions COVID-related good for WESCO $XX clear the morning. that's being the took as restored that that in XXXX. on that legacy was Thank we we were XXXX. very

our mentioned our coming were for XXXX. not incentive also that, we of XXXX. sales below here several compensation well in calls expectations results as into paid We on accrued and And our full or earnings such, commissions have out

You see that in our results.

to our done similar So, is to include compensation, intent we've incentive previous target the in XXX% years, but what payouts, sales not commissions. on only our also

SG&A, drag We of do couple basis benefits point a to have some for of other that costs volume XXXX. included also in increases a related that XX including higher we've outlook

Sam Darkatsh

I me. may, Okay. My if question, second pardon

then what over of the You the missing in timing I had guiding that Is synergies terms higher because over an therefore would first the step the to to there your rolling the agreements meaningful function thinking in function have synergy quarter Or like in you're purchasing. and sequential in a million that? QX and you synergies thought over fourth QX? fourth of that of realized $XX am quarter, higher, in quarter looks would the it quarter. I about and the step supply have first vendor $XX million offset been recognition benefits

Dave Schulz

expecting we're really be the on quarter particularly of lot to the will first the more in that a SG&A side. see benefit Sam, Yes.

margin. half the But of for right we've that legacy now, we year the be good on supplier to expect of for and obviously getting focus in don't of You this some of the XXXX. adjusted at point, our between some included least are our cost synergies, programs, considerable the EBITDA correct agreements at front there alignment in are expectations to we two continuing the that

John Engel

let we get high I generation. and just comment, clear, And make cost your me free sales, is, on to margin our synergies, want very expansion growth, Sam, upside flow a two confidence questions upside. have is I both sales cash be think the this, that And which because at what

it's highest the is confidence been. Our ever

believe, six build confidence months through our frankly. appropriately, gone first did our close, plus that quite But the guide. increased, not into not we As we've post XXXX and we has did

Sam Darkatsh

Thank Very helpful. gentlemen. you,

Operator

RBC from The Dray ahead. Capital with go next question Please Deane comes Markets.

Deane Dray

morning, Thank everyone. you. Good

John Engel

Deane. morning, Good

Deane Dray

like to I'd where left there. up pick Hey, off Sam

the of terms at the points. reversion for of you you've XX just because Maybe costs, given the segment disproportionately, roll What in for was it fourth just segments the And the feels it terms it cost, basis hit it margin temporary there was I the like more back looks a for hit. but three XXXX In electrical? it full it of in a of like, electrical size wasn't back like there. quarter, know these just feathering

So just, the take through the maybe us size that us impact? that'll calibrate help

Dave Schulz

Yes, certainly.

really the $XX costs million came activities. our had $XX quarter those you call, benefit third on we basically as to highlighted begin of fourth from back obviously of of QX WESCO we we that to what that actions, the bit as see, cost we part a integration. restored about earnings quarter, reduction talked in just program COVID-related that But, work as in going So, the was the COVID-related this a third again, as on our in quite legacy quarter business. of that And we've done million back

actions units, a business to two therefore took higher you quarter legacy WESCO and of of look If COVID-related take that SBUs. from there within they our other more of composition are the at the the fourth strategic business recovery a the EES, the portion sales within SBU relative

from So relative the that in that's degradation really QX. EES numbers to driving margin sequential what's

Deane Dray

of the just having WESCO helpful. good sales legacy very in context higher segment. That's actually looking is at That the input a electrical We're there. then… And

John Engel

articulated you the reduction, benefits as as it highlighted. It came Deane, with and which is was effect know, you're then a was of temporary very mix actions XXXk And that set salary that aggressive that very seeing so on what again, and match. Dave we’ve

Deane Dray

All right.

second on timeline. then the So X, is that Page synergies, whole cost question helpful. color And the

a door? seeing as these out And synergies. any reductions or sales walking the consolidations, the you reminder, lost are revenues of are Just of net any sort and force branch sales

John Engel

The first. may first we -- that encouraging part, addressed on two takeout. I'll this very seeing very So left feel not business. about equivalent have the structurally We And to momentum cost highlighted companies we're Dave with the combination the in not, second structural we marketplace. good is, of we And answer have that want our the have we over all, and XXX of the to full time had tag Deane. answer

or So not leakage. working seeing we've that, we've are two, Point we unplanned any seen been point one. attrition, not share unwanted

the So far. we're encouraged very by results thus

Deane Dray

Thank you. That's helpful.

Dave Schulz

X cost And of address me your our What which separately the to are let Deane, synergies would showing essentially to pro in were we gross onetime on that a be nature. Slide versus cost the XXXX our achieve we which be you question achieve, And takeout forma. structural here showing expect deck. would we're

Deane Dray

Thank Got you. it.

Operator

next comes Please David ahead. from Baird. Manthey go question The with

David Manthey

Good you. morning, Thank everyone.

you in other don't much and but as question, price How And outlook, are commodities mentioned the with sales XXXX? you industrial in thinking being increases they as about are. First copper price up related is to about Are How share you talked that for XXXX? higher much assuming that, XX alone? mix, margins leverage. EBITDA we of in the points mix improvement basis of to and gross XX

Dave Schulz

for for increase. we that as have called would It's we benefits outlook, full expect that to would always our out difficult for us like commodity project the year. specifically Dave, not what extremely look inflationary to prices see So the

to on know will customers. what's we So that we going those them not as have outlook our clearly, volatile. see within we that pass our costs built But we expectation is market, current And we continue XXXX. inherently into through our have what's to for increases, seen the

John Engel

of we're has increases about will for been quarter are conjunction. I also informed not of supplier Dave, with aware look we this obviously on first I'll knowledge year, to say I We average seeing number -- intending margin. of, we have on of would margins, some is price of but them and give comment And price fully The indication it. you have what are that thinking how degree of those you clearly, overall we in if gross guiding gross increases before doing and through. increases increased. everything we're now Because some rolled work suppliers at We're

We talked just momentum good that positive make. core there are earnings I that expansion last and were be some level for be and their intend quarterly Anixter an of we've seeing getting expansion. with our wanted build. Net-net, a year. of calls, to margin a that'll and We've in above And margin margin So support outstanding about improvement thing refinements they this We're to on you the very we're clearly did job two done it focused guiding not think know. a that absolutely and we've gross year what multiyear program, other taken program. will ago,

that those incorporated deployed we enterprise being is wide. improvements So and

chain which better looking absolutely got every a is is environment expansion inflation unmatched increasing. bit faced. with we've then the capabilities. quarter, back collectively expansion. version terrific mean, gross And we core margin So finally, of margin in that environment That delivered here going has get supply gross enterprise deployed. expect has I years then the deployed, fully refined been is across Anixter and to see Anixter for being do X.X intend WESCO, and we And plus to

of and If you look of unmatched and this the strategic tactical going category we And size review. more earlier, kind was and strategically, process in are we've the the the chain benefits. two of got more capabilities. I initiatives of is supply now benefit. company of But that addressing through we've the doubled our at together

able result that will think better relationship with even that Does at in supplier supplier help? will category, part integration staff our I of preferred And provide is a it's So Net-net, and we're underneath that margin the going more complete well. management will execution fully office, the be be to strategic them. to partners. drive that line-up. accretive category And value, and as drivers of dedicated through we driving process by inherently looking the to category business together larger by

David Manthey

It does. Thank you very much, John.

Operator

The comes go Christopher Oppenheimer. next from question Glynn with ahead. Please

Christopher Glynn

Thanks. Good morning, Dave. John,

total? the What order you You bridge for expecting kind are guided of for adjusted the a rate earnings in adjusted Is in represent segments, for run DNA? to on the the margins P&L. to annualized XQ EBITDA segments the DNA, for the good

Dave Schulz

fourth It's DNA a you're quarter, good starting point, thinking I with down XXXX. we're expecting the what that's DNA how about mean, QX, our see a as for you can in for came slightly proxy good XXXX. versus

Christopher Glynn

cost the merger amount, in cumulative off I Slide can that buckets onetime believe tell And we Okay. within quarter, to out that the just back gets incremental verify adjusted to that? X, each want

Dave Schulz

correct. is That

Christopher Glynn

restoration Sam's And that $XXX realized of there, or then costs, of quarter, of that fourth run restored in say million you how basis? for the math maybe the terms accurate was would Okay. a much rate in percentage on

Dave Schulz

in thing COVID fourth Chris, quarter, really The that only actions. the us restoration was the hit of that

$XX our we're primarily really million balance in inflation some of payouts, And and fourth not quarter. a programs is QX, XXXX terms little restored COVID-related actions impacted relative our The we of of have in expecting XXXX here target that numbers. to impact in for over the on cost what the so, benefits of

Christopher Glynn

Okay. Thank you.

Operator

comes Wolfe Please question Nigel go Research. next ahead. with Coe The from

Nigel Coe

Good Thanks. morning.

John Engel

Nigel. morning, Good

Nigel Coe

Good morning. as hope well. I

Just bit just wanted deeper a dig little Slide XX. into to

your comp based based in comp EBITDA adjusted that Now margin but exclude stock hits. targets stock

that. size just I So wanted to

in I it's million think XXXX. $XX

we line, Just wondering into that dive And what then is? costs what the interest should below that?

Dave Schulz

Certainly.

XXXX as you again, we So a million in assume our but when EPS impact $XX we included approximately the impact. adjusted that do stock-based you the compensation, numbers. mentioned, adjusted about should And is that EBITDA, talk exclude for

Nigel Coe

And interest? then

Dave Schulz

here our in you're expense, be XXXX $XX million of managing to $XX we'll then looking And somewhere you being million interest what also do that's of obviously the called. down into per the aggressively. we at probably have XXXX, QX. account range quarter the saw taking notes also in But facilities in For benefit

Nigel Coe

Okay.

quarter. put EPS $XX My per guidance these against I all $XX range. is [ph] to when million inputs question my your I struck broader into was So million model, that

over above some baked inputs given conservatism much. there's that if hedge very into us? range all you've or wondering, and I'm Thank So the

Dave Schulz

you of fairly given what we've We've of the expectations statement. with Again, throughout clear generation. expectations on there's but focused in that end the volatility the meeting we markets. synergies, exceeding only some We're them. on know we set the provided view Yes. cash of free our delivering laser expect view the you income our terms Again, also a you in not should flow

you own WESCO and to XXXX, we believe drive our the combination see starting terms mean, your And draw Again, synergies. of so, we benefit true you've I I'll obviously, to put and Anixter in of the terms we the conclusion of ability coming just of cost are together that strategic in together done top-line math. how in let those guide,

John Engel

confidence that And Nigel around the And we mean, we generation. substantial Again, again, did positive doing We cash But at earlier, into P&L indicators again, recovered guide many generation let's upside, and we what so. keep accelerating at XXXX, very look many, high market think and in yet. as think I not have set. and it, so with target lot we mentioned market. recovery. year that's mind that, good about fully trajectory, $XXX cash because not very there also better guide. completely a that what of appropriate informs overall in our our which appropriately is we're is look than customers work." we're there's still And the have down returned have is million, a think we little "And under not we build three I to an feel the

Nigel Coe

that. appreciate I guys. Thanks, Great.

Operator

go comes with next question Moll The from ahead. Stephens. Please Tommy

Tommy Moll

thanks my Good taking questions. morning, for and

John Engel

Good morning.

Dave Schulz

Good morning.

Tommy Moll

the I relatedly segments. color any three any could ordering revenue interpreting outlook specific would think toward If kind year-on-year wanted market at of might end But maybe insight, higher all of X% the of give X% we're on be I'm year. this that you I which helpful? for Thanks. correctly, across to us Or up looking rank your a skew give segments to lower? you could range start or end

John Engel

and three businesses, largest that the I'll the Solutions. start The Sure. global, second with is most one is CSS, Communications Security the

a Anixter almost NSS impact our very multiyear take been business. It's a the the business. called global at most you Anixter look business. at that's WESCO you and we growth business legacy secular directly the out, all driven materials, legacy run growth, that wise, when and So, it's trends substantially But mix Tommy look legacy business, the strong enjoying the it's a of by NSS Datacom those

markets, And markets, that's three so highest heavily terms weigh in the secular and against really opportunity. in growth the end performance the that there has one the -- growth of end businesses, of trends the

faces is on range UBS business, and of the a Systems. basis. is stable. next, end So, Anixter demand for business see supplied clearly by part broadband higher Utility in pulling set market about about you really that legacy talked at bought, driven also of that the got relative and with used we feel that service together legacy, calls and prior broad is XG we've And very we at a oriented what an length the the investment, business, strong, be put to very pent this utility build good up utility. a franchise business of out. future. Utility that is exceptional opportunities, the We've There's unit HD tremendous in that Broadband WESCO growth

WESCO electrical to sense in electrical very performance. the good We're And growth so put kind now that sell everyone. business complete that package. of income and and where market legacy remind it's a one, our the mid that. the of that's cable, predominantly And of positioned range business, wise, terms both very, comparative end feel plus largest about to ESS Anixter just I ranks wiring for in higher to

perspective, combination. market power the that end that's the move it breakout That's global for strategic business. From a of an So us. is

it's end big exposure. really Okay. construction big industrial But markets, exposure,

you vector through know, demand, terms spend we're indications So, increase the as spending. of industrial improving as our been turnaround seen exposure should industrial many this, positive economy have recovers. we're we're we're and move that clearly projects have levels momentum that seeing, from delayed. I but XXXX, we it good all of -- the other There's hearing getting in There's customers,

news exposure. a be and is non-resi verticals this ended and XXXX other for I year, healthcare, I nice predominantly direct very there'll non-resi. infrastructure. construction are to non-resi, will There's there that good well note. portends residential going a we're residential very little mixed verticals that's education some is to mean, But For some that that be some oil remain growth, strong say construction, very bag, grow on That are nice, would a pressured, going and gas. have could the

all it non-resi them largest I all a about outlook and in a of sense. kind say expect hopefully though, will market then three I grow. be EES, this behind think Electoral three of and a the right we got We UBS Solutions. XXXX, They're Electronic have probably to So on end businesses, the grower kind that. gives construction, mixed would you folks at bag net-net, most high the CSS, that despite

in It's speaks that and cancellations. particular For to all-time an or driver. with cause seen backlog, year us, We material delays our last just project there. spotty we consider any business. here record a and this year-end haven't And ended some special been

So, both our institutional levels for customers. and us, I and even the sets activity into and In in well for commercial, governmental market, non-resi XXXX. those projects industrial very bid up it think,

let activity project levels Our our say, year. quoting activity me robust start levels, very the very, to

at record Our level. is a pipeline also opportunity

Tommy Moll

very question all helpful shift on up here a I'll bit to quarter. much That's very drill follow the one to more down and appreciated. first

specifically, up that's hit. called the we think has expectations. give for broke full annualized in year ask and margin already terms like sounds COVID-related kind So us you then XXX some the some costs. some yet an in out with of of incremental XXX guidance of we And the I QX, But XX don't capture, but any of on with here. you offset incremental a would to could the for the there official that and have outlook synergy crosscurrents It on color are I

that so QX. some presumably offset will in And of

of frame Thanks. quarter quarter bridge helpful. would the even anything us first calibrate you or could first our there for terms to just just anything margin incremental maybe in year-on-year, So possibilities or be maybe sequential, expectations a

Dave Schulz

lowest call Yes. would the QX primarily comparison Tommy, EBITDA I historically and QX of different at that adjusted is, going The it's thing QX question. Also actions, WESCO our the forward. in I you bit COVID-related Schulz. cost QX quarter year. margin is if of look create business, a the Dave one the appreciate XXXX, will not of we that a versus did have the so little out

John Engel

And QX.

Dave Schulz

And QX.

John Engel

QX. Literally

Tommy Moll

Thank it you. back. I'll turn

Operator

The Barger ahead. Markets. Capital go Please question KeyBanc Steve next with from comes

Steve Barger

morning, good Hey, guys.

John Engel

morning. Good

Steve Barger

guide. sales just and sure you the this to have history. upside the strongest to And not decided management said the I that in is WESCO’s to you John, also in high But free build you you message. margin want make team confidence said I into understand flow. XXXX cash

is your the to not that why via that confidence goals? organization accomplish high, stated push If

John Engel

target. well that. been Internally, We've very said targets already I've external we've our that above clear. got

free we because only belt, three, to synergies, one around our we track was $XXX we're one substantial what We went term beat went first planning realizing integration. $XX expectations. raised capture raise. $XXX quarter quarter, substantially. to in year use were our we then Remember, strong, the the the and had We what expectations to a we at million, day Look the a quarter million versus million, were. think it XX. nine on put had extra was into for a struck deal plant We unfolded. we Let's that targets have bid three the EPS that how acquisition an back three period. integration XX the I approved as We integration well growth, few as the a and approval. includes put just cost report Anixter. that target. closed out literally We're was stub year a started it cash day year a year before expansion, generation. guide flawless our internally. on million year aggressively got on mean, our the It to shot months margin results, pre-close. targets the flow full WESCO we this January, integrating with months them synergies, levels. we higher we And We last very, well ago, board from very own from closed, of We third our raised quarter later, $XXX And They One out close. target on we June we did driving on second results, under well flawless, our higher

delivered Here we through we we QX, absolutely said. go what

than signalled came actually backlog would in did build we thought thought. everything stronger We we have had than signaled. guide that strongly. bit what But If stronger QX you we We have in look there. our we out never a came --

We have the sales came in stronger, margins were solid.

we record free We flow. backlog had exceptional have and cash a

include under Anixter little of quarters quarter to close two free included It yet, are flow in of $XXX year. full Anixter. million We cash didn't even of first fourth our it

into us So that we're that is the the coming XXXX. we What macro. confidence gives don't control

say there control We control. out So is up winded the macro. don't a it's is to is what of line out that

fundamental uncertainty internal that as continued gives there, targets me enough is still And And guide, drive substantial We external appropriate the margin. with we that. there's and commitments this to we we guide. what put are that's core reinstate confidence. So, have out above our a the around think a guide the an

Steve Barger

take you out you the expect the the that comes that to year, internally, from today So outperform being macro to fair? in then way you've away guidance if key may would put that the that is expect the start significantly

John Engel

lined macro. super me think said, targets to driving well think I that We're guide. our we the tell get to We we which well tell put about to guide above. to guide again, organization trend a just not just I'm I going combination. importantly above said excited upside. I to out given commitments, because all it's this of most With set guide, external But going trying considerations, will I'm You're do, the it. we appropriate our feel The about that you is there. for you that. that, And deliver we're up to intent great internal

Steve Barger

of info never was company best it But, whatever the it's obviously streets and And guesses And conditions to out this we'll time, make Okay. right, of is there get macro on exactly, course. job there. between Any the have we so going how don't a improve at forward? day expectations disconnect this messaging can volatility power. on and WESCO one we earnings is thoughts how sizable looking kind

John Engel

Look, if we back like XXXX, companies. very coming were guide clear on there cost were me out a actions in temporary in. you most the -- we directly, guide have didn't we QX, but We asked didn't

think also structure. taking on the we about cost so other alone, actions And were we that plus all the aggressive I very were clear

we if expected what a And that, guide think exceeded so, we QX. we absolutely versus didn't and didn't I is expectations that my said, have what message we XXXX, separate gets for that. in in QX, our I We for SG&A, understand the whatsoever. into extrapolated I it of it that wasn't absence any have a just XXXX, of kind think guide, And signaling

to as progress against I hear report think to transparent We'd We continue the us to multiyear this important going transformation. we're be we're that is as got improving around feedback. in there We've we possible. Give it. targets regard. to are be clearly. -- out love working aggressively our that think very to And that

you've forward look against how We've lean some us on more that all IR addition, area. other If we're for as our on expectations, outstanding clear how culture got love could about to suggestions even know. to board you in to those She's continuing performing on improvement, of we part got be we'd all leading our continuous an We're get inputs. as now. improve focused and Leslie

Steve Barger

Thanks for time. the

Operator

with Longbow ahead. Please question comes next Research. Dankert The Chris from go

Chris Dankert

the I from to first coming kind Just Hey, of morning, quarter. if that baseline the SG&A and the a on the ballpark? half up I guys. we quarter Thanks be for taking question. thinking the looking how $XXX that at about step fourth correct? $XXX range, sight obviously, rolls way, SG&A. I first quarter to of that this in in at my mean, guess were right bit weighted, first another trying got to is million it's million mean, [ph]

Dave Schulz

a benefits Chris. we other and be QX we that's specifically including out to are commission company the some comparable. after have inflation it obviously, QX and throughout and about we other bonuses, of to $XX given going that consistent is very the think we But sales results million, and about of not -- primarily that this way restoration one Anixter, is, Yes, the called The with integrated of issue the do the issues XXXX. the is like

QX, I frame thinking QX the to the about in of that quarters. how And consistently I across to spread $XX think relatively outside that so as see that within again, quarter, think you're you're going and million

Chris Dankert

Well, comp a guess, hole actually $XX mean, that last Okay. Am incentive million the does the year? beyond million. make I COVID-related correctly? I that understanding for $XXX I

Dave Schulz

correct. is That

plan. a take levels not you when we that board not did look XXXX. pay -- accrue did meet nor we target we to out so because our are for at And compensation approved planning of at And

of is we're into been did done some that's through we consistent calls. again, with to what And historically, Now, rolled speak where, this earnings our previous particularly the industrial not our bonus XXX% we're that numbers, in targets, coming getting, we've at built compensation, sales force their target consistent We all is hitting back XXXX. not our payout with the years. for that payments our incentive paying not in recession,

Chris Dankert

there I note. you okay. to Is we guess there? the Thank for And highlighted point? Okay, that coming you I this offer through And at the clarification. guys re-shoring seeing anything a In positive tangible the thanks on slides, dynamic? as more a for mean, optimistic actual driver. are color projects

John Engel

But a call get a have I do America? re-shoring. on of do. a get with But growth that's a been meaningful been chains of I obviously, supply sharing their at looking real supply at There's there, specific there's efficiency, But I North really potential has trend Net-net that chain, with get to, for They're chain length discussions I'd inherently to out I I’ve a But risk say. say of which their broader years. We're I kind this will and discussions, views we we're what's the don't that a are they're look per about lot opportunities few do those chain customers. they're obviously, that let's driving examples. examples, something cost streamline, They're them want I again, think incremental virtual. this And of couple do. spoken specific, operations. plans call. and in in customers, out supply catalyst, discussions could also the do. with to having looking this supply evaluating last driver pandemic. at and of global evaluating A can't to really, having don't their over this se, lot any particular. I be I us. it's

that the if did, talking global those. a was a extended pandemic I whole chain, supply the the I'm fragility think, spotlight it in inherent actually on the global put one and microscope of supply thing some chain.

about big the And supply if be behind a supply so which really integrity, chain supply and the thinking it's driver. of shortened, profile re-shoring their risk can chain. potentially And changes chains it is impetus those risk just and

Chris Dankert

the guys. Thanks Understood. for time,

Operator

our now closing any over John remarks. This session. concludes would back turn like the question-and-answer for to conference I to Engel

John Engel

Well, today thank for all time you your your and support.

follow-up day for a Have We please you. have healthy. and are good discussions. and now numerous Thank have Leslie and available that follow-up already stay been safe Dave and scheduled. your Will calls

Operator

is presentation. for The concluded. conference now Thank you attending today's

disconnect. now may You

WESCO International (WCC) 9 Feb 212020 Q4 Earnings call transcript