WCC - Earnings call 4 2023 | WESCO International, Inc.

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Operator

Hello, and welcome to WESCO's Fourth Quarter and Full Year 2023 Earnings Call.

[Operator Instructions]

This event is being recorded. I would now like to hand the call over to Scott Gaffner, SVP, Investor Relations, to begin. Please go ahead.

Scott Gaffner

morning, good and you, everyone. Thank

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

nature, for Please see not and webcast slides uncertainties. are of company's our factors results are SEC and the their filings Actual materially. statements inherent risk subject differ Forward-looking may as to additional guarantees by performance disclosures.

reflect the update information only as date, to and speaks the on to of obligation call company changed this related no Any forward-looking undertakes circumstances. the information this

today, we certain our in on which use webcast available will information of about non-GAAP find and Required Additionally, on website financial at these our slides is both can measures. press wesco.com. release, non-GAAP measures you our

Chairman, and CEO; Vice On Schulz, Executive Dave CFO. President and the morning, Engel, call this President and we have WESCO's John

turn I'll Now John. call to the over

John Engel

you, for you and Scott. joining the everyone, Good Thank today. thank morning, call

had to entire well You today, to earlier team. saw disappointing we They're the unacceptable. they're expectations. which me results very management our XXXX, unacceptable and quarter unacceptable earnings from below results, they're out to a WESCO fourth These our release close

them. understand this will key We that fourth address our results, take we're had in summarize we issues issues already But to actions you quarter. drove and through first, shortly. in taking X detail quarter I'll the Dave the fourth the

reduced market and expectation to positive slightly downshift was with flat to versus for First, reported declined a our X% sales sales. This some due purchases customers.

our balance our a IT-related This expenses. cost finally, the to free lower operate health costs, higher care of we purchases. And to This to was flow due accounts due generation was and benefits and facilities along experienced was payable timing below cash Second, higher related to expectations. SG&A higher-than-anticipated our with expenses.

year, OEM construction-related including to while last and sectors. including with specific security network industrial and somewhat year data sectors, and grow, broadband expectations, others infrastructure a full underperformed, continued utility, centers, basis consistent certain On our

economic global year. effectively leading this solutions, patterns changing all supply chains WESCO was a environment buying yield. last of provider business managing chain the mixed And customer while supply as team As this through navigated done

that pleased X team high the the given our backlog historical growth challenges. end -- increases versus of market these year following in years backlog finished double-digit near XXXX September. We with our stable delivered revenue level I'm a X% of with and a

cash common flow our flow of free cash the half was free full dividends we Our generation shareholders in returned to higher second year share repurchases. through and and X/X

trends take long-term move look XXXX, the we So outperform us consistently with to provide the as we secular forward, have a described and our and continue competition. opportunity market into growth that will the we to

on of demand. leading general of cycle, benefit expect that uncertain inflation, short-term solutions. economic leader, and from Regardless upheaval While of portfolio services our election the rates our product and borrowing expanded of to these near-term we as geopolitical I'm capabilities, the and our conditions impacts, favorable, as scale mindful backdrop the in a global market have our view XXXX may easing

we X this while our sales deliver flow will investment year, in generates WESCO our expansion EBITDA and us to continue has goal. our WESCO transformation our long-term profitable we confident to to the outperform that commitment as allowing return that months. positioned that are and to margin am that XX I out growth the Our are cash digital shareholders. over substantial capital expected those next toward investment over supported The benefits last and roll magnify again markets program years

with you moment X I to important a take Finally, want to updates. provide

our we went that since for public XX ago. and the narrowing announce target are range lowering years to company time pleased leverage the very I'm First, first

net X.Xx a had historically X.X to to debt You'll recall have we that leverage EBITDA. target of range

on upsized size and update and appropriate this important our the it target. time to generation, Based believe we cash is scale

X.Xx EBITDA X.X target midpoint our a is debt compared net forward, prior of to range at range. and with this reduction leverage our turn Moving the to of represents X.XX a

return increasing Second, cash to are our of we cash shareholders XXXX. -- in

of Board beginning Directors of to quarter Our this the in increase first by intends year. dividend WESCO's XX%

also share year. year are We continuing expect repurchase outpace program, repurchases we and share to last our this our

integration business acquisition higher-margin segments, our increasing WESCO Page as all but to This markets, acquisition the of Anixter Now resilience take to to literally economic completion and clear of our established our leader of summarize a transformed also growth our the only minute reducing across I Anixter. and X. and want not business brief phases turning it end of our the word mix-shifted The a successful cycle. higher brief of WESCO. to several in cyclicality X-year

set at stand-alone Sales at margin acquisition. Anixter underscore the If of and expanded the the adjusted the the WESCO commitment extraordinary And performance XXX of we of EBITDA metrics versus look our targets entire synergy EBITDA the time increased acquisition, operational increased We performance since companies. and they performance exceeded all initial the points. XX% XX% our XXXX team. basis

XXXX return our S&P to shareholder did since by X through Most X delevering schedule. while ahead compared year this the balance the XXX. XXXX, the merger XX% was end all importantly, Anixter turns, XXX% total sheet in closing of of We rapidly for June

As much both WESCO of set of a new created is has to The paradigm. customers. here today, a suppliers our a our distributor. than traditional global and Anixter more We're combination we partner WESCO and sit critical

that take further long-term benefit compared our That paradigm transformation digital the tomorrow. to of uniquely are create at to to competitors. positioned The our of WESCO us which capitalize we designed to from trends on new empowers the time secular is and to committed we the that acquisition

now Dave quarter take for and Dave? results I'll XXXX. as our well hand as our to fourth year it to you full over XXXX through outlook

David Schulz

and appreciate Thank Good call you, John. I morning, the today. joining everyone, you're

sales, with disappointing margin quarter had below and As a cash John our expectations. flow mentioned, we

quarter results. security, more quarter, our by network in you X, third X% year-over-year. declines Slide and On sales down construction. were OEM enterprise the offset summary centers data industrial, in Like broadband, than utility, see Reported a growth infrastructure of fourth and was

destocking customer experienced we quarters. expectations, in shorter-cycle quarter, in December. a saw in versus second particularly businesses step-down We in third In our the fourth demand the and our

basis, On approximately were sales contribution a X% an X%, decline volume. as offset organic a down was by X-point price positive in from

up sales project prior our and were strong in we the shipment quarter, year. continue versus see flow While with stock the fourth down demand sales direct to

high for September. growth X% approximately year-over-year to end outlook continues backlog be backlog and down from the at of was down supporting Project XX% levels, historically total, XXXX. In our in sequentially

to as times lead for improved XXXX most to backlog product categories. continue moderate have expect in We

in was gross XX.X%, margin the sequentially. prior was Gross the year business point in the impact points Relative down reduction anticipated of XX supplier basis by the rebates mix. driven XX margin volume as to as basis quarter, well decline

as with prioritize growth line industry our tend and improvement protect profitable enterprise-wide to margin and continue top to we've We program. gross progress an the leader on margin made

down and and slide. the share quarter. primarily sales well than the as $X.XX prior rate reflecting to a was tax of and headwind margins. lower a were combined expense next year, $X.XX higher higher lower I'll earnings sales year-over-year, for expenses, interest on diluted in $X.XX, The XX% EBITDA the lower effective due of impact higher the of was primarily approximately the per gross discuss which Adjusted quarter impact Adjusted SG&A margin as

commitment part to stock more As repurchased in capital our of million November. $XX to of we return shareholders, common

continued construction digits XXXX, single year, preliminary were EES and As with low in compared down OEM base digits. to up in in down we and UBS Of slow December. day from the fourth and utility start start quarter January work CSS comparison. sales backlog note, the This a mid-single strong down reflects slightly in we prior per weakness the January approximately broadband, decline X% a saw that ticked against and period

provide we you in On sales X. to additional quarter. Slide some the page, the to miss this insight Turning to want

As price you and quarter volume with XXXX, X flat as in line. third benefits the we exceptionally growth to about that slowed and continued second moderated. materially relatively In the but was the pricing growth in volume can contributing second experienced top into quarters, see, XXXX the points strong

we see driven we from Instead, primarily projects call with early we to backlog. As sales October into from quarter sales, fourth in flow mentioned on primarily and into project to again of November, we stock by our as acceleration moved in the and and the within the expected shipment an along November the business. delays, of slowdown experienced December, CSS a some further our earnings

approximately flat instead, and expecting were down to they We organic X%. remain are sales

Turning X. to Page

a positive partially approximately share I by organic a lower the a price declined year. ago, and gains prior sales only X% benefit volumes. were volumes Market versus prior As moment by were was offset from reflecting cross-sell mentioned as offset year, X% down versus the

the impacts fourth quarter. see taken provide On represented costs EBITDA in increases adjusted the gross year year-over-year the up lower by of transformation. from SG&A In page, the salaries to you to sales, prior These and I'll June. higher to our and XX were digital the headwinds the you right and later offset margin and of points higher reduction cost related partially details SG&A in in our was side operate higher SG&A benefits, higher can SG&A adjusted facilities primarily in due increase The costs the on more basis actions sales, XX.X% total, call. of

over full X prior results. year due in Slide the representing the year were Organic a our Now X% year, to record. up carryover moving sales to Sales to of full up benefits review largely X%, were pricing. XXXX

by disappointed are the fourth quarter. in the weaker-than-expected results We

we UBS, delivered share growth acquisition. offset demand security. CSS sales significantly our also up the of utility organic X% demand EES market record It's in that in as offset was weaker industrial of integrated important the OEM gains XXXX a by power partially and sales direct construction. broadband in by from growth like-for-like the basis delivered driven by note center in is and throughout supply diversified data We on the strong in reflection a in strong weakness Sales to from were and strong a growth year. end in Anixter record, were exposure

down relatively Gross moderated. the was we contracted margin was of impact as percentage of anticipated. due EBITDA Adjusted EBITDA to sales operating XXXX. a supplier expected did points lower SG&A, get sales higher flat we due to basis the and rebates not XX leverage margin volume as with further as

of to more returned proportion greater a return $XXX between shareholders capital to dividends. commitment WESCO our common repurchases than and we shareholders, million share with to Consistent

you growth market, this -- Turning and sales workday acquisition share XXXX. of to as year, Page gains for was growth our net program of can the the benefit X. currency balanced of of Rahi in contribution cross-sell to as by X% relatively Rahi the see slide, of our to in from having price, X.X% XXXX one the On these Each acquisition as the fewer which the contributed in late portion drivers a of well full growth a foreign headwind. including offset

EBITDA right the can side relatively SG&A. year-over-year of growth of sales On the X% you this as the benefit the was see offset page, by higher flat

Moving XX. to Slide

the shown quarterly quarter. have We of SG&A cadence by

by in driven XXXX, low see up the single versus increase. merit second digits. can SG&A year that digits normal our You mostly annual quarter mid-single in merit was was the step-up increase In a the

the forecast However, an the line $XX with the million of the actions spending June sequential cost top lower discretionary structural at the These in third then along in $XX drivers of reductions, additional same primary and of decrease million took year cost in million quarter. the time, full annualized were and we quarter. our actions third reduced $XX of for

and quarter, $XX the due to to in million to higher the this cost X/X operate higher-than-anticipated adjusted care was increased was health of IT-related increase benefits and fourth Approximately balance facilities due costs sequentially. expenses. our In SG&A

fourth sales these the actions are downshift Given XXXX, address higher in costs. the to quarter start to we slow and taking

down wire Slide X% quarter and automation Turning high Construction gas were in be Fourth basis. well like-for-like as reflecting weakness continued strong digits solar business to strong in sales prior down single approximately were and oil our X% and sales driven on down sectors. cable to digits, EES the was a down XX. organic year-over-year comparison. base Industrial against period digits. up continued mid-single weaker a mid-single the year and were over OEM sales and by demand as

down high a remains X% sales. as year, and Backlog continued the down historically of backlog of sequentially X% supplier lead EES prior reflecting reduction the level a at times. from percentage was

gross margin was EBITDA year points, XXX lower with supplier higher prior from operating adjusted Adjusted margin basis expenses. down reflects from EBITDA rebates and down which the headwinds volume

continued weakness For organic digits in fourth Similar construction partially but the full was strength reflects were a industrial, X%, by year, mid-single XXXX. on up offset OEM, sales in like-for-like down to which X% up quarter, the in which basis.

companies XX. X% versus were CSS the reported Fourth XXXX. in and sales Certain out down technology prior Slide large business of quarter basis X% up year. our into a quarter fourth projects shifted to on Turning organically with the

and a was service was infrastructure, we up in experienced sales offset with as Enterprise Canadian the Internet along digits network Internet flow slowdown Additionally, sales contractors. by cabling, to stock which service growth single structured providers. low to with wireless in providers, declines comprises quarter

saw Security share. but sales lower well low of XXXX, which believe as than midsized were contract negatively security were overall past construction impacted we versus down market the the digits small more was and spending. single and quarters, by We up XX% gaining over contractors positioned couple are

and CSS customers. significant year of sequentially December level. at times down sales backlog September returned Data by product double normal availability. reductions end up with due in was XX% to has to hyperscale from driven prior the lead center X% low were from increased down the Backlog supplier the levels digits, and strength

data the including in acquisition year, and up growth For experienced full record, organically. up in Rahi the solid center, gains We the basis reported were security. benefit share CSS X% on of XX% and sales a a

driven network record record EBITDA higher with of by up by infrastructure was EBITDA year, operating leverage and strong versus adjusted Enterprise up also cost driven and was Profitability in on applications. sales. adjusted prior XX wireless the also points, basis controls X.X%, strength margin

X% digits UBS a were in prior quarter. strong in year. comparison Turning sales versus Sales utility XX%-plus single to Slide low the down up in XX. were the

of continue trends to project green our energy electrification, We modernization in from the and secular benefit grid business.

As we tightly our a customers see stock sales managing more did expected, in slowdown and flow inventory. with

unexpected sales purchases through inventory mid-single funding was industrial with which up other Integrated Broadband customers step-down the over released. is XX%, consistent represented were work our versus prior in portfolio. and government within experienced down supply pause customers demand incremental an digits the continue with we year, as strength to until

down a high the a at was percentage sales. Backlog up on level from X% remains Backlog year prior X% and basis. sequential as a of historically

and by down of the year, mix XXX percentage Adjusted points prior versus EBITDA as supplier impact higher rebates, basis a sales. approximately volume lower was SG&A driven a

record EBITDA supply expansion, partially year, a up margin with significant the growth broadband. full utility, our including EBITDA organically, in adjusted X% UBS record by in and in and offset reflecting For sales despite and sales were double-digit record broadband. revenue integrated scope the cross-sell customers, weakness adjusted posted decline

lower in $XXX in income million Turning $XXX the to Page fourth XX. and million, below Free Relative our cash flow primary provided was to a the $XXX drivers in decline lower totaled assumptions the due the we range outlook, XXXX November. to net balance. quarter were million generation that sales payables which in to

front, down sales payables On purchases lower balance of the quickly we our payables inventory third to our which aligned versus the quarter. drove the environment,

and stable second third were in quarter. Purchases the

expectations accounts our were in of resulting million of by lower payables year. lower, $XXX use payable the balance. X payable for in in represented a the XXXX. full fourth were The Days flow of fourth sales end a and cash quarter $XXX the of below and the decrease use stock in to million compared purchases day decreased approximately the As quarter,

XX. Slide to Moving

to X.Xx milestone in our our have of X as the net same X.X leverage to X.X of XXXX. EBITDA. an range This As the for top to operated John call, turns since revising company we important target mentioned to with is are at IPO leverage the we debt the

to time. reduce to over leverage our We work will range new

go EECOL XXXX target in in range Anixter what to Additionally, the we acquisitions to XXXX. maintain with fund the to and did similar we above will flexibility

cash back to strong allows flow generation free Our quickly within the move target range. us

reduction We plan going remain focused opportunistically capital to share and on utilize a balanced debt our strategy, allocation for forward. repurchases cash and

We will shareholders XXXX. the via dividend also capital during return to initiated

XXXX. first As in to quarter John the of raise intend mentioned, the common dividend stock we

we be based repurchases, share on conditions. On opportunistic continue market will to

executing authorization. billion We our to against share $X repurchase are committed

rates However, past the the be to in considering balanced significant over interest and year. share buybacks we rise reduction, continue between will debt

to how start provided quarterly business year Page on Now sales of EES the details calls XXXX, our want strategic our to key for along expectations performed during we this with the with for moving We XX as XXXX. full the largest summarize units. the and our drivers is I'll segment.

As you industrial. in faced headwinds XXXX, and see, offset significant than that we in construction more growth can both OEM in

expected to from pressured EES sales despite As an end markets flat we benefit expected expect move growth to low the roughly we many activity. project in market up is reported from customers in we remain growth total is end into Industrial single be to XXXX, as large OEM to flat. in increase digits verticals support. of be continued construction again

double-digit XXXX, CSS share We our the to us gains data that at market. center along outgrow in Looking generated significant WESCO growth segment. in strong solutions in allowed with security

However, and products, enterprise structured the markets. infrastructure, of cabling construction-specific due experienced applications, which and data slowing including communication focused softness service build-outs on providers network is to XG

CSS of Enterprise network expect security double-digit remain. infrastructure largest XXXX, to for with volume up infrastructure That share approximately business is we gains strong we to enterprise segment of sales the expected makes a revenue. growth in data that XX% low said, we but CSS and up the growth some again center mid-single saw network strong year weakness expect for digits. and in in is In

dollars Lastly, growth offset by supply customer and spent. are XX% we approximately mid-single-digit and due in in broadband growth This partially generated government during of looking decline to destocking an utility in purchases UBS, growth was integrated at double-digit until delays XXXX.

as manage projects. supply more a XXXX comparisons, moderate utility We and in tightly customers lap more but inventory and price significant as pace we and strong at expect integrated growth XXXX, increases in utility

on In and a expect XXXX volume with see addition, in to strong late growth we in broadband sales digits. Despite XXXX. factors, these before recovery to in input, don't based customer we until turning XXXX UBS expect supplier up growth mid-single for

on midpoint Moving to for From with patterns price each top rates to to flat. to normal relatively for XXXX. move businesses, summarize X% expect to is perspective, Based range, up outlook we expected the XX. our throughout about sequential expect up At the X%. of X% sales of line to flat XXXX. volumes organic with quarterly to of view contribute growth as revenue a I'll see we be X% Slide our we the total the

However, first given sequential to the decline tough revenue growth a comparison in would translate in normal with the mid-single-digit improving subsequent quarter, low trends in year-over-year quarters. to rates

up we At the approximately provide be do see of to outlook while of would XXXX. sales margin, an we gross our XXXX. point expect X EBITDA pricing adjusted from for midpoint margin, X.X% revenue improvement outlook, including On carryover in not

Our XXXX. transactional were margins in stable

a as improved the along expect XXXX. flat margin We rebates higher of supplier improvement to program and of sales, our percentage mix drive with volume in benefits results

there actions quarter margins We earnings. when offset we'll take second we actions took cost SG&A, plan million $XXX along combined merit return to the and more and partially third represent our to cost only by items to in we first actions with additional increase, headwind quarters the approximately of the are for On XXXX the target be cost annual report an XXXX. regarding be compensation. These to -- incentive expected and are specific payouts protect headwinds our only related in to

expect we free midpoint the in million slide, a the X.X% free of earnings $XX.XX and adjusted $X.XX the history. of represent outlook highest million Based flow to and on of perspective, cash together improvement growth between we assumptions This EBITDA million. at adjusted P&L range approximately $XX.XX of billion on our find the and of all with cash that flow midpoint. a underlying this sales range flow EBITDA per $XXX of combined X.X% in share the $XXX margin with margin to $XXX can would from be to free cash our expect you Bringing at

XXXX. we moment a an see are working on ago, and to As focused our improvement days I in expect capital reducing discussed

our and XXXX, slide intact. are the shown base the we years profitability This The of Now our solutions in are to trends uniquely moving side long-term secular growth multi-speed of growth that the ahead. strong customer trends Page the on to XX. end-to-end directly X provide company to our secular global left this in aligned with and Despite the page. economy position XXXX shows drive

participation exceptionally public investments these increasing sector partnerships private trends, Our well. in broadband with and in the with WESCO coupled infrastructure, position sector,

Our share. grow WESCO for to framework to due and trends secular the of the X% is growth market combined X% benefit above increasing long-term financial to

With questions. we for now the can operator, that, call open

Operator

[Operator Instructions]

first comes Our RBC Capital Dray question from with Deane Markets.

Deane Dray

OE terms changed tell flow so and specifically, idea parsing sounded start latter through How during you in weakness? can What construction you we soft? was -- -- stock with Maybe were government are the of what customer quarter, what about did that can behavior. customers that for then point and waiting in funding businesses the the see specifically the like changed the it were where us business? And

John Engel

Yes. Dave expectations. had highest down construction off industrial, was a it it Deane, OEM level, far at a wasn't down as strong But -- was our bit. the didn't bit. mentioned, EES

than if look Now and EES, anticipated. underlying little flow weaker of a mix at stock we is you the

shipments, DS up. overall wasn't delta both the That the expectations. projects tick We a did shift was project in The our and shipments UBS. of kind delta -- CSS have big versus big

you So of me each through let them. take

project CSS sizable expected with specifically saw sequentially. are -- few contractors a to select slowdown really that fairly up in projects. some had various their pushouts, to CSS flow, customers and stock step really a and these We

versus was expectations. this really So

nicely, very major momentum. drivers. strong strong, had digit UBS supply very Supply, as Integrated actually, called integrated industrial-oriented which business, and WIS part business very well mid-single growth, of is X grew that

weaker It range. QX. in the It over been XX% was in Broadband year had XX% was we than significantly all down thought. down

but challenging little on have had down comparable bit We worse nevertheless, broadband 'XX, expected. of the bottom broadband, further. we kind QX So hit we but a lagged very it than a was did in thought of kind

Deane, their say, inventory clearly through I'd they November say, a And utility we adjusting purchases utility, as some and stock latter was of case really customers were where the flow. management that did move through, then let's part finally, impacted and December

they they levels kind were kind of push kind of of had had So out. inventory -- stuff just riding and they the

You call year-end it inventory management.

you anything? your to hit think add I Dave, questions. do all want I

David Schulz

I mention just want to OEM. on Yes.

had You a quarter to OEM there. question not throughout talked ship sales one manufactured there. we were were customers specific about other had issues We our the XXXX. expecting we've bottom shipping We that fourth expecting out of to in being There think that business hit some that in were structures our we're sectors of out. we

we do customers. of there downshift So that think our some a market OEM was with

Deane Dray

a That pricing 'XX. as X% And follow-up only was the you're sounds just all So like you normalize. talk seeing a we're It impacts about helpful. getting benefit of for from normalization? carryover. Can then

normalizing seeing in patterns inventory and backlog. from in how order You're seeing customers more your normalizing they you're and manage their

price through us regarding themes then patterns. and take Just and order of kind specifically those

David Schulz

Yes.

me Let start the pricing with impact.

of XXXX, in was X points we've throughout price are increases the still benefit pre-COVID. a of growth lower was -- typical rate of the price what on did we price supplier We been As fourth quarter. quarter-over-quarter. was reported of we've much the Most seeing it that benefit the more but saw positive,

of points partners. the of our X So announced supplier many from increases X we're price to at looking

from benefit do XXXX get of about to outlook. expect point that we in We've our some carryover So carryover. pricing included X

price. So we normalization that seeing are of

products. always But always have the to pricing the commodity impact commodity generally, expectations. Of pure stabilized That's hard on for predict. pre-COVID has environment the to we'll course, us

of within that we're businesses serve. the activity seeing bidding terms order In the patterns, quite still bit we a of

And to that out seeing typical there through how us suppliers. order much these activity. support see do we inventory our have we'll we down from go customers our that's we are and these of on for lead XXXX, as do good the product return things bidding times and with projects based continue to still availability through We expect, many major order on So these are projects coming still to patterns. playing like that

John Engel

we've good through Deane, look one had pandemic, I of out chain out question supply period a had we'll the entered, going of the your coming value the the time back I think pandemic, pandemic side. global -- think chain through the as effects the that some this we is in to other in into and across entire went and we dramatic clearly came then

kind switchgear what like almost engineered and back now continue back categories said, a to Dave all is lead except few select business. across seeing transformers. are supplier normalized By level a levels of -- to of at more times large, dimensions lease as pre-COVID we're and be for the Pricing, products,

closed So most end, has supply we end think, that kind it, I back XXXX. out is of its chain through, the there through as on disruption, a worked front of way

Operator

Nigel The next question comes from Coe with Research. Wolfe

David Schulz

line your Nigel, end. may be muted on your

Nigel Coe

Yes. muted. It was

good free And cash really the and their the played But luck. the companies the make was very obviously quarter disappointing mentioned way flow regard. own out. you that John, the disappointments So in in SG&A

the an the information about solved? what that kind wondering And commitments. organizational be I'm maybe us think needs what and of team when a in So you that to organization? around talk confidence back just to flow transpired, about there changes 'XX just can step take Is issue deliver is on here give

John Engel

Nigel, thanks management are for the entire They're question. I unacceptable. and these results opening my me comments unacceptable team. to by saying started the today

company, new and exceptional results a established record built and a clearly we've very of we think delivering track I creating value. strong

not as we some And kind year, cost softening rates actions. we bouncing think look, summary, we this QX, you we in little EES QX, go about enter And sales took a still we through of had pretty a bit our of in as XXXX If quickly. then have back in yet. things move

declining have as January. we in sales, Dave So mentioned,

that, the top extends it line. on of kind trend QX the So

Although ticked up backlog has sequentially.

point. encouraging an that's So

delivered had, have We've we've got got value. team We've that clear the initiatives best Nigel. very

brought we over years ago, year. done and we've years initially and the we've improvement it did we -- refine Anixter since it As that last refined our WESCO we every margin we've as together, several we -- several launched program entered

capabilities opportunities. and see that effective tools in we adding we program, tremendous to continue So and new cross-sell refine to of January XXXX that and that's again,

a I think results. rigorous good and process, process built strong around real very we've recipe delivering a the a cross-sell have

momentum So we'll quickly. the that highly back get here confident

quarter-to-quarter you out put we normal As year we kind and of do this guide. of more expect set terms are we a the look above in, the We at as measured if guidance seasonality that year, takes how guide range the us in across And walk that thoughtful for midpoint well there. of we sequentially. up factor I the that very we of think

place, So execution. being momentum have in that confident now a most the of I market I look again, And the and X in at back the these factors companies place, in external very off XXXX. we team 'XX have the results normalize we feel of seem to brought year down middle we've we're in the building together and delivered we since initiatives that as

Maybe talked I Dave, you to cash cash add Dave anything? I if don't because know -- can the to speak flow. flow just think

David Schulz

throughout reduction significant in a was timing of generated really amount disappointed things and one XXXX I Obviously, flow is big X the from think accounts of accounts the stayed driver being factors, that we payable. by particularly and QX, with one biggest cash Yes. experienced the QX performance. payables -- relatively stable, are balance purchases. cash purchases Again, that the the there The very our our the And balance. of of driven in we in payable

as our payables. stock to not that and underperform flow new creating were not replenishing therefore, inventory, our And we expectations, began business

getting that not business as balance purchases. paying replenishing we're decline flow unexpected, sheet. not So vendors, stock those driven was payables but by our really Clearly, onto and and new we're the

Nigel Coe

range my out a modeling my in But then of below Is earnings my within contingency getting roll the guidance EBITDA there take billion just is guidance? And question. detail high the model, end based If range on the the is $X.XX or based EBITDA I'm through the appreciate the and EPS guide is to to math missing there. is on there follow-on some line there anything items. I'm I bad? I

David Schulz

year, We our we provided had of through we in and our of of That impact also to expense, get the range the to EPS. impact there's is million the our are P&L of which here of One nothing midpoint the then of our range. the $XX else, from our to exchange the where roll those that things the million. We rates again, we end sheet. I of would with provided that close relatively high is pension think, impacts a outside million and balance of I out the called pensions this on other But $XX assumptions we've did foreign you on XXXX. what And combination $XX highlight should to underlying you, range.

Operator

comes question Sam from with next Darkatsh Our Raymond James.

Sam Darkatsh

the John, you're board. on steel U.S.

You've like. had X, couple, X sounds a fun months, last it

is trying I'm days based days, inventory. of higher days to to respect adjusting on when back the So question, look Graybar extended it's obviously with And your whether XX when this WESCO don't at pre-pandemic pre-pandemic competitors, guess, versus or think difference. I I lead for Anixter. XX, like inventory at And first isolation, the is know, it I times. I Rexel, like, understandable looks understand they're But in

versus ship? still inventories you Schneider us your utility? but here, with elevated Is Is a Is peers. at not WESCO-specific? while this help it different How it it thing? reconcile Eaton Is the are do something mix direct --

David Schulz

in went COVID project the recovery driven as engineered then primarily into get have relative clearly that backlog, what And believe those we have and could I focused business we that 'XX. you going of were that when forward make to outlook do that we the in longer a the could We that in higher XXXX. and half Yes, will something clearly there. times here did our and We is in it engineered for get many the to is make This the a days we want we getting not back outlined we reduce customized We Sam. is XXXX. cash are little through percentage inventory that flow progress very provide that by waiting in It's our we much expecting of saw something projects peer for Again, much increase bit our our that perspective we of days, project that those have project of of on. free components. included to include inventory related. group components lead 'XX

business that it is lead cases, customer. the of around of is some include relative the longer service longer and time some clearly, types group, of the globe some competitive But it the the projects in to we mix, it some is then of service and that, us times for to

Sam Darkatsh

your is leverage. comfortable My thinking historically company range, lowering target I with debt second the behind the question, know John,

at inarguably say, have, you're preferreds. call an the least equity a I in undervalued going would You to year,

got You've flows. countercyclical cash

X do in pleased optimal mentioned is prior Why remarks you versus this. structure think to X.X the capital your the you're this that I prepared real to turns?

John Engel

will One characteristics Sam. company. us flow cash a the things, is free guide generation of the combined confidence We've give cash upsized the record that year. got this Two in

the of than confident cash. we're and I to Investor we the our more mean, business about and at outlined strongly What well -- So as underlying I committed our market the ability the Day, What outlined time remain as expansion. margin generate delivering over we're the characteristics EBITDA over then consistently ever confident to, model that's the the underlying cash characteristics outperforming we business. and of top flow there line

we're the committed driver. faster externally, much very quickly, that's very first had we than confident So flow cash the delevered and underlying in characteristics. We

others. a ratio. it's lower should some operate peers on our at we've should And leverage think Secondly, -- recognition general, little bit we I of based -- investor that looked feedback, we and in and investor with we a --

a when. and always obviously. going decision some And time some so move here to for point, It's represents -- just And matter it's were made a this we've looked at I think Sam. that of decision, we at

that we'll think our increasing, our as a target the dividends, to announcing a message got and were But to increased the strong intent, we share with range return it buyback operate target capital that sends of authorized. intent as consistently increase leverage a program still we've within continuing well as it form lower very shareholders in which

hope very We it's strong message. a So I think that such. you see it as

Operator

from Glynn Christopher comes question next with Oppenheimer. The

Christopher Glynn

you're cash practice, levels had opportunistic Just billion 'XX. to the talking to authorization more of of Share into it uses like about use going dive now. seems $X you wanted intent It by some forward.

you the million cash in could curious, preferreds in $XXX the what I have balance us amount appropriate just if for those, about think And you'll quarter, sheet threshold second cash expecting those a help is benchmark? 'XX. of think of we're context, is sort

David Schulz

payments, against primary and our cash start me rough $XXX $XXX grounding million including flow of let the you $XXX everyone of the with We've midpoint allocate the preferred, provided of The Chris, still at in leaves dividend around walked common free the the by Yes, We sources we cash. That on about priorities. our million XXXX. outlook, through that. cash can of of guide. million us that cash just

we're that going from share perspective, the opportunistic So buyback. on be to

$X the have authorization. not bound. is billion We That time

we still to So up that is stages. always something very We're here can limit. leverage that $X that at the billion early

of not have done X buybacks past We considerable share a over the amount years.

buybacks. be on continue So debt we from existing down that to our perspective, leverage share we'll opportunistic we or pay for cash whether

return. where how word a we the opportunistic bit. it like exactly we That's we quite can that best get use at And is look

on to be quarter preferred out XXXX. do up paying As we in that capacity taken needs of facilities our the mind have down we that that keeping frees debt, that existing our think second existing that we're just in about

as So deploying our we that is part of about cash here think calculus in XXXX.

Christopher Glynn

Dave. That's great color,

sheet on have $X.X other support you on to what billion about one component, average? balance should Just your is operations the

David Schulz

amount correct. carrying. that's typically the we mean That's been that I have

through with sheet. building And $XXX day-to-day sales the comfortable as to we elements think about of sequential cash go a that we're as million again, particularly different throughout that business, we typical on balance supporting of million the $XXX So the year.

balance got to sheet. we've the sure available that want we make So the capital on

Operator

comes with question next David Baird. Manthey from The

David Manthey

look of that that expectation? EBITDA when bars skinny, Is of side this Slide right-hand what really green? bridge, next those your they'll might First the question, but all telling that time us X green. X, we They so be should you're be at is year, be

David Schulz

and commented, So anticipate we EBITDA highlight sales audience, that sales and leverage remarks, that still XXXX be Slide fiscal but expect the We and that expect improve margin rate Dave, gross year did be prepared we're sales SG&A. -- negative, that a gross bridges we as get X. will would just positive on we our SG&A were referring to green, we operating leverage year-over-year. in margin to would -- the to for would

David Manthey

maybe supply chain somewhat you All -- as fair. right. talked down, stable. on the And When think issues out, the elevated you inventories But the downside I are still what you would the That's rebates like working kind when about then I you that right more we've is I'm mentioned cetera. think project thinking stable, through backlogs being about, mean of to Can are just relative it rebates likely. going the that be idea don't et us business, flat seem say why you to talk be there? think would about

David Schulz

specific push on history year. here XXXX. did market volume Yes, on products are supplier X.X% we what was what The with are to are certainly. joint the growth We And in growth suppliers performance our XXXX. channel. you us generally every based volume That that incenting higher as the our at included it's ensure of then those partners that a us to the look rebate the supplier supplier negotiate about through rates in that view and our -- the or a programs opportunities our end XXXX. That categories we of of of sales take at rebates, during being moderated product a

So we points, basis about lost XX about X.X%.

expectations those year. volume rebates expectation to to and sales that volume provided that is Our continue rebate given that you. Again, for we going hold supplier reset we're outlook to every market get negotiate to supplier our

versus put percentage will of be sales some supplier for XXXX. XXXX. still see but in XXXX as you out expectation that So their SVR what of negotiating expectations can a our consistent our of terms partners have our relatively is We're

David Manthey

health Is close You much maybe could strokes you're And in want don't if to third outside increase SG&A you benefits areas just through sales in you about said opposed care. reductions. I here. it talk targeting? promotions, this targeting the current other those? just in the IT, you Can about the it Is broad that on Dave, one about talked your too facilities, you talk of But about for something quarter of if those? can the coming loop to the Okay. reduction you're of talk the areas X/X as finally quantifying thought that?

David Schulz

to And year. coming off increases with There's 'XX, are as back sales a growth think And XXXX. always whenever our half and We the the got forward SG&A profitability to the X spend. some significant from 'XX combination get about percentage we've In wrong target items. going in this again, got close years SG&A of the Certainly. a we'll we've of SG&A in we what past, we've Like And And that got of in we've our spend way. we back. we before. as of XXXX, means perspective some reduce and target puts is unexpectedly to discretionary some we've done structural again, an sales. calls double-digit done plus went the had moderated everything

in facilities costs. there. digital demand to our continue to want be focused transformation. our to how some on see out do very headcount do includes We very, We'll That we based our consolidate on the that we of management invest reduce

we make we're something able is pull forward. that want to to continue that sure to So that

changes the and that profitability my tighten from but is we a us. from expect of combination also to our on you expenses discretionary some investors so and structural make the belt that need on we've expect perspective, that focus we internally the got ensure And this to of then

Operator

The Baumann with next JPMorgan. question comes from Patrick

Patrick Baumann

Slide Just go first business. about talk on wanted terms fourth some to Can of quarter had. to of Maybe and missing X you the you go sales the expectations your CSS 'XX? in on over these business your where like back in data then it back the visibility center-related? And you Was projects what's in of outlook? like acquired? this Is coming saw Rahi that specifically delayed? Is embedded that you items

lot I like don't is before. have here. manufactured about business a I of housing. how ones And then Like solar for guys in you? you a feel EES over big where of is much you visibility then year, OEM, remember -- talking course on the you of declining? what's a the that like And don't about this segment, couple the mean, to I talked what's

me to besides the talked is business the here exactly It's would in the of what that OEM and You've fourth helpful. vehicles. quarter in about not small drove weakness kind be what clear

David Schulz

Certainly.

those of data look expectations, did We projects where the large CSS. CSS were customers, see technology to Let the some you and current pushed miss our business. out clearly start how the That's they've we with a was expectations we to relative if quarter, the our our ship biggest including XXXX. pushed to finished of take having at some fourth focused Relative on me been year. November, got centers, in December, to within

unexpected. that something is was that So

We included rates into XXXX. sales year have growth in as those about think the the we current

EES. On

So some and had manufactured sales. It OEM. is, EES out on which structures some came stable. includes also in, That of manufactured within specialty Patrick, business vehicle. includes relatively close the had been it some as business, John mentioned, relatively you housing. those the makeup calls as mention our puts called We said, we has I'll to expectations, but

were and sales market the expected have I see sales. think did segments customers that mean, we've November, we terms other where ship in we in did opportunity overall I in to bottom some But of hit the December our not ship.

to So that that, driven we downshift a do by our think expectations. was relative market

just highlight again UBS. would. came I'll than we thought Broadband then on it And down more

very utility, again, expectations was quarter. business. highlighted the very The other comparison, But fourth in we thing tough strong below some see the from numbers. had came demand we We the against in still strong utility that just comping our

John Engel

trends growth are secular the that still intact. add I'll Patrick,

what just relative is plus the WESCO call our data business, to which Data WDCS to Dave's and was I'll combination Anixter's of data comment add so exceptionally strong. I'll Solutions, our -- And Rahi which we legacy business, center centers Center

year. and quarter, strong in very it was digits. Obviously, strongly So up very results the it that had the fourth grew double across

got results strong activity did high think strong question -- good very expected of to digit some well. part single The business. still that think, opportunities we to that high growth portion in was bid The were that get AI-driven to is and I data very quoting with I December. out as there your of And in levels exceptionally we that had levels. is low And expect vector accelerate, further expected But momentum double-digit slip we because there. bidding centers. for CSS projects demand only the XXXX Very our

David Schulz

Yes.

failed me mention go solar. I Let just back. to

patterns residential solar just to provided is that based number. and solar EES high rates some a single-digit a So plus our of business. nonresidential support of business on specific percent customers solar. EES business. We've for do We've those of in our the combination interest significant downturn demand seen related not inflation, We

Patrick Baumann

the just first one follow-up then And on quarter. just

you have digit. expectations I up, start mid-single at starting think, midpoint. could You then you're the think, I'm for basis them wondering down for color that the the full because was slow, you sales XX on the give you're some year, margin on mentioned, points down And going to if I But I to since year-over-year imagine year-over-year margin.

help around be just that. could That's you parameters If provide some helpful.

David Schulz

Patrick. Yes,

Let me sales developed first. we XXXX you on I'll our through outlook, and walk how focus

applied line down and about X% the the That's we typical with workday built in started we're we way XXXX XXXX on seasonality is QX And the of our outlook we month on mentioned, in we that per As January a with basis. our typical preliminary sales sales basis. seasonality. a

same seasonality, and quarters. January respectively. methodology one for that We've see the down QX first the digits, X%, down is see reported we XXXX, and single note that low here perspective, up XX% up of and our applied of were So thing we digits. The that sales I'll from mid-single QX typically typical quarter each

base comparisons got So first the in period tough we've half.

half of to just the QX fourth sequential into to typical and the quarter. includes applied flat relatively we've growth In modest QX very sequentially seasonality year, the then QX growth which rate again, second a by quarter QX,

the X the half extra In year. they're of in workdays, we back XXXX, both have

the front X helped think back That the roughly So sales of half, as extra we half, back about it's half. construct XX% outlook, by our XX% of being XX% course, workdays.

applied So again, typical sales our against seasonality we've outlook.

course, range a and But look look have to at of higher the incorporated the into we've of you you seasonality, we've for factors taken how end it towards some If we, X%. other X% range our that the of point of typical external XXXX. the at would set

Our of to project activity, continue the X%. That strong. our supports also bidding levels range X% be to

full On going the profile, margin the the for given the quarter. expectations to provide first We're the for margin profile specific our year. we've margin you not drivers and

Operator

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

John Engel

again bring all we We've many close. have questions. Okay. of I I planned tomorrow joining coming you. follow-up us. your Thank I'll and appreciated. many forward know you the We today addressed calls in call your for to thank a the days. for speaking It's to you look with support.

We X will participating a the also of in next over series conferences months. be

James our the Industrial the JPMorgan's we the Loop Conference; announce First, X. quarter Thursday, And first Institutional earnings Raymond third, Investor expect second, Conference; May Conference. to on and additionally, results

thank So a with that, you, and have day. good

Operator

attending Thank conference. our concludes for This presentation. you today's

now disconnect. may You

WESCO International (WCC) 13 Feb 242023 Q4 Earnings call transcript