WCC - Earnings call transcript Q2 2024 | WESCO International, Inc.

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Operator

Hello, and welcome to WESCO's 2024 Second Quarter Earnings Call. [Operator Instructions] Please note that this event is being recorded. I will now hand the call over to Scott Gaffner, Senior Vice President, Investor Relations, to begin.

Scott Gaffner

Thank you, and good morning, everyone.

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

guarantees uncertainties. and not are their are to subject statements of by performance, nature, Forward-looking may materially. results Actual differ Please see our filings for webcast slides and risk and the factors disclosures. additional company's SEC and update the to speaks of only Any circumstances. information undertakes forward-looking to this reflect information date, obligation no the as changed company

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

call we Officer; Chairman, Dave and morning, the call President John. and with Schulz, President over WESCO's On John Engel, the And this have Vice I'll Officer. Chief and Chief turn to that, Executive Financial Executive

John Engel

Scott. everyone. Thank Good joining Thank morning, our for you, you call today.

below decline growth organic low somewhat through is on we accompanied margins by for Our the economic improvement and and this as with results our in of And a a sales, Results a second gross single-digit basis. sales operating continued mixed that and environment. moved sequential in was in quarter against June. multi-speed were a reported however, expectations improved, quarter return

to our cash our With million cash track free generation full the $X $XXX first $XXX on we're year of in free million of flow half, outlook flow to record deliver billion.

our As repurchased $XXX strategies quarter. in executed allocation planned, million we stock and capital second of our the WESCO

center intelligence X management important building acquisition, acquisitions: first software-based data inventory asset second on a entroCIM Logix, and but software closed small, the also company; and an and the We one, company. software Storeroom being

benefit our our expanded strategy scale, component that as a portfolio capabilities, our our growth leading of long-term expansion enterprise important and from it's I global to critical note remains goal. margin towards continue our think we EBITDA move continue to and our M&A

cost to Day month. more acquisitions. currently integration these enable details look will forward critical aspects opportunities, additional a value shareholder through growth we're to sharing strategy combination We transformation rapid next of Investor digital us future our increase of efficiencies, our that of cross-sell The executing and on at

you but business to will was high the on prior aspects details strong, in the teens center data our and of want noteworthy a first of it year. businesses few momentarily, Dave up our touch was walk quarter. versus through X the Growth I

We benefit continue GenAI share and destocking to driven of project by by delays as the in and and significant quarter. is in purchases global the customers, from centers a second capture applications. growth more was of secular This increase our data growth utility offset the result by AI slowdown a than and

confident environment business, in to continue our customer While we & the Solutions Utility through remain half the and mixed expect do of economic our in UBS of delays long-term second purchasing growth XXXX. business the we Broadband

previous full easier but change. outlook. our from our our remains overall rate year our against supports at half in we've saw that an for second activity overall modest than sales you bid quoting, reduced With backlog to view more healthy, growth it the materials, this year-over-year reflect our said, As outlook a levels comparable, and and

our that, rest the it outlook results the hand you take with more Dave? So of in to I'll year. as updated for as through second now to our Dave well over detail quarter

David Schulz

Good Thank you, John. morning, everyone.

X. Page to Turning

of multi-speed our miss primary earlier, against a This includes sales noted leading John in in the continued approximately prior an driver were expected a As The weakness Utility X% sales X% market of price, organic low was & offset the reported economic second than decline by from volumes. year. benefit to lower line less environment. decline versus Broadband, top results below and our quarter single-digit mixed

a color of including headwind. provide were the both costs, was while year-over-year business slides. more negative. commodity pricing XXX in The impact minor in Pricing EES divestiture was of a points rates and I'll slightly exchange few and benefit differences foreign on CSS in Integrated next higher drivers tailwind the a the sales UBS, was from basis Supply the in

page, of gross can margin. you lower over see basis. adjusted of On offset the basis was by impact the year partially EBITDA on the sales lower Gross XX up prior a half reported the points margin

As impact Supply EES of divestiture. benefit prior the excluding company. discussed the was to rate gross year. had margin, slightly down due up the our was lower to prior Gross improvement in the year-over-year The the gross the UBS, the benefit, than margin this call, lower gross and in business in the of were mix a and Integrated divestiture, due Gross entirely earnings business. the margins the quarter Integrated of Supply excluding primarily in margin CSS balance versus

Excluding the cost Integrated increased the Supply impact merit divestiture, slightly taken by previous due quarters. SG&A the annual offset in increase, to of adjusted actions partially

On Integrated to Supply X. Page X rates additional X% exchange by due in foreign the differences a sequential offset were X combined points of basis contributing. SBUs The headwind to were quarter. and Turning second divestiture XXX sales points, up all workday with a XXX basis, basis in organic approximately

As of the you quarter. basis bottom points. up X sequential posted the EBITDA can to were from see SBUs basis XX on page, XX All adjusted margins first improvements of the the points chart on XXX

discounts basis Supply favorable cash points up divestiture and Gross adjustments. to sequentially Integrated XX due as well the inventory as margin was

due higher as Supply percentage improved the offset April neutral leverage sales. The on expanded sequentially gross earlier, on benefit increase sequentially the to as merit sales weaker margin on a mentioned improvement EBITDA divestiture Integrated within the adjusted business. in was SG&A CSS sequential margins I both operating As effective UBS, the EES SG&A annual to and by of impact of our gross offset X.

showed supplier peers years. Page last a quarter past outperformed over the proportion compares represent. we and This the of to WESCO's weighted the XX distributor both first our slide to they traded is organic on organic few purchases supplier of growth that our that chart X. left The has year-over-year to partners, the average publicly partners largest WESCO supports our Turning and our growth

that can of since the WESCO outperformed You see supplier middle the has average XXXX.

and The Baird these outperformed year-over-year that compares demonstrate have published clearly data communications right the over in growth and chart Distribution X sets think to data is distributors electrical has Survey, growth the We quarterly. our market the which peers, exceeded we X on the the WESCO's our organic last years.

to X. Turning Slide

line have organic sales each business year. the second sales Second the on actions down has an were our Organic quarter organic month a in in But both the through moved more cost reported EES business leverage quarter. stabilization importantly, seen the about to we top basis. allowed last X% improved the which and over taken we as

in Additionally, continue up wins, EES single were to low due digits growth some markets. large EES Canada significant sales project international the our see in to and we

quarter, sales low were normal strong in orders weakness and were U.S. X% single QX digits from recent due represents backlog digits. and in down into are down the revenue first the This QX shipments. on were X% offset in taken prior about OEM Similar consistent single a some offset low by in data down was partly project sales the low digits with project to to up in Backlog for market large year. single sales basis QX QX. as down solar, seasonality converted and Industrial sequential growth weakness with construction by continued activity MRO, from day-to-day about

was margin, by anticipated, approximately up Lastly, EES improve controls. XXXX to adjusted gross in higher points, of taken and cost continued margin as and basis and continued XX driven benefits XXXX cost EBITDA actions

Turning to Slide X.

sales While CSS of impacted which I'll in line adjusted EBITDA by the shortly. was were mix sales margin the in quarter generally expectations, with our explain

both quarter organic approximately an sales CSS on and X% up year basis. reported Second in the prior were from

encouraged prior hyperscale, from were our end with year-over-year first high low year, data digits. center customers. are an Growth quarter acceleration all enterprise data growth the was by quarter center teens Data where the We up the were broad-based business. and in acceleration versus second the multi-tenant, sales users, in up center single sales

The declining growth mid-single which intelligence. low office as year to comparisons past construction quarters, in market service due Enterprise down driven weakness was infrastructure, well business the continues opportunity it as of commercial the to were center office providers in few will digits, by step service cabling particularly this capacity, digits and driven nonresidential by general data weaker single exceptionally commercial over in sales network grow structured given activity. ease comprises be contracted expect has we security slowdown in of sales Security but The artificial and strong, as space change half down space. this in the significantly, a quarter. second Internet the providers, fourth of

and year, enterprise sequentially CSS backlog the and increased compression due the year end margin margin from versus drove availability. down XXX versus was decrease XXXX continues down EBITDA last of last Several normalizing primary to but was infrastructure network for lead of factors climb X% business. up gross XX% contraction prior from X% points. quarter. CSS product the the the time EBITDA CSS was up prior driver Adjusted margin Backlog basis year. after The in to the the

of direct First, including customer a are below margin, in programs had support higher CSS large of mix of average shipments We gross percentage that mix. the a ship higher projects.

The anticipated, were As was expectations margin. slower our which day-to-day I in sales business line previously, a mentioned than overall. with has generally higher

up to margins. we the sales with of make mix able the impacted While sales were projects,

supplier. by direct consolidate looking of expanding large the of margin Second, our anticipate the worked we several service our supplier second to base shop additional were quarter, by historically offering. global their the projects result through winning capabilities. to with This one-stop customers In future, these is of end services of the types sold take we In advantage our user to more and additional channel. the to sales adding suppliers and that projects

on trends. built this business deliver Third, rates to of growth higher secular the we've

capabilities in not but we future. the up to expect in to the this have the we only get sales growth, get We in X%, quarter did and invested people operating capture with leverage

leverage year, balance and margins the in additional expect CSS. For stable of operating gross the we

in is and project Turning customer divestiture. of UBS and experiencing which some quarter down the a to XX% current X. regulatory reported supply sales to integrated market short-term Organic activity, utility the interest the in environment. to were function were softness sales and X% The due rate down Slide is destocking lower related

these end year. We impacts the expect to last of through the

beyond. of grid and modernization into will XXXX believe We the energy, trends move from and we and green as these that secular acceleration support growth continue electrification, to trends benefit

customers present, high and our down call as to operations. single in in U.S., reflecting it Canadian government funding we are inventory work growth continued this driving is released. weakness is delay the were purchases demand digits, until to the sales bottom in continue Broadband through market difficult but At

a BEAD expect the from delay XX% on a We prior XXXX, Equity Deployment been sequential timing the into to on opportunity the as or backlog. Broadband converted dollars and was being and year getting with Access XX% pipeline down from projects this Backlog in there of market improve basis spent. has down

Adjusted despite points margins EBITDA in Integrated XX of headwinds. healthy EBITDA versus favorable the the gross by prior were top driven line the basis margins divestiture the margin business. and year, to improvements core Supply approximately were near-term

to each we by Page in units XX. million increasingly cross-sell the have to Also and a than of On our markets the power future Turning project, represent trend win project. These our plant recent more reinforce cloud worth a $XXX complex center business highlighted activity examples of win project end this slide, bidding aggregate, serve, energy positive sales. of large that, noting renewable projects are retrofit, a that projects. a major large data these and

Integrated shareholders outlined we for that million to our said to we of share long the capital full along $XXX the Moving allocation second in the use return to past over for quarter, after-tax to the X XXXX On Supply XX. have proceeds priorities we capital Slide the We term. our intended years, hit divestiture slide, target. from in repurchases with this and

repurchase In addition, options million pursue provides at outlook shares, the and/or debt, free half midpoint of with opportunistically reduce flow us additional cash M&A of our year. in the $XXX the XXXX to second

allows expect X-year to Recall in track common $X.X at flow through this including digital we remain XXXX. continue of in also of dividends, organic for and authorization. achieve Day $X billion which that on our outlook billion to we operational executing and return for The transformation. provided We operating cash target us approximately operating a repurchase our Investor dividend, XX% XX% growth $X.X through to generation efficiency invest to XXXX our upside our billion cash our and generation flow to shareholders share to increased cash

flow cash our Turning WESCO to hallmark Page model. a distribution XX. free strong of business Historically, has been in

of free cash we expected cash With the flow delivered million. in generation free the by of record and cash and sales we the has $XXX first XXXX, half free generated followed flow net significant in below our a $XXX growth working been in half company delivered we're XXXX well invested the We in million XXXX, of flow back which beginning WESCO. conversion. approximately This for strong capital heavily XXXX, in

On with more this to bridges a cash which XX-month income, than million million than basis, free adjusted net $XXX of flow generation from was working chart capital. cash trailing net more $XX

units. Now key Page the moving business our strategic to XX drivers for of

We reducing forecast, primarily organic driven markets. market in are utility conditions our by topline broadband growth and our

due This Looking specifically and project generated continued to mid-single digits the We a previously. is lower a softness driven is at utility. expect and conditions by UBS. to XXXX, change In off customer down activity. growth Utility in be in versus now a to recent XXXX business high double-digit low base. we destocking market increase historically coming high single-digit The

budgets if there momentum growth However, is the to power demand to market the the business address term. long-term for expenditure for look long the strong significantly historical utility rates capital curve, over you rising surpass this at

we Broadband, market assumed weakness U.S. For XXXX, in growth in offsetting the end would had recover by business the that of Canadian continued we our with the see

destocking be However, our sales down the spending we outlook to be dollars digits continues government until versus dollars and previous high released, BEAD down delays low of broadband delayed purchases single digits. customer our are single to of due of expect now to

business an forecast low large remain we reported increase remains growth as In overall despite project EES Industrial expect end to our digits in unchanged. EES, Within activity. markets largely flat XXXX, to expected is pressured construction The be the expected recent up single sales benefit the we flat. from but of market many be to day-to-day in is upside. end our to the growth support, business has expected in continued some verticals roughly softness OEM of moderated

for center to center for teens CSS and XXXX. our share market high now full our the in to which low business mid-teens up the data the to half be based the business flat expect accelerating we segment, on increase on versus second in generated at a in comparisons the And security, expect in we year. was data our second single-digit We relatively quarter, based Looking the gains in growth quarter. up be strong first of outgrow business

Lastly, single is our to low expected be enterprise network infrastructure digits. up

to outlook. Moving XXXX Slide XX for our

with outlook growth utility, has are to opportunity we adjusting the primarily see market while reported a on along broadband As Based market we down year. we range continued utility X.X% to noted long-term the the prior still earlier, reduction secular the down delays market in X.X% topline downshifted. and recovery, to in the forecast, reducing the our versus

on is shift slide, we market driven a the previous topline outlook the noted in change by the As entirely conditions. to

billion. with up to contribute XXXX be Supply Adjusting divestiture organic range, into is Integrated foreign to expected $XX we and for the year-to-date, EBITDA to billion translates exchange, line sales range top our slightly of reducing sales the expect price of the an lower to our revenue to down with X.X% to we X.X%. the and for volume $XX.X billion year total to full are billion midpoint $X.XX X.X%. outlook At along results of impact This EBITDA outlook the of $X.X point adjusted margin to X X% about negative. versus Due

We $XX. range adjusting for to adjusted EPS of our $XX outlook are a to also

current our appropriate, We and business is environment economic given feel mixed this that outlook the updated results.

flow to free Additionally, be more our $XXX cash history flow adjusted to previously income. than outlook highest represents cash net billion. for in our we outlook of the $X XXX% increased million free and in are reaffirming cash range flow the free of This

flow at leverage a we improvement our the X-day quarter XX-month days leverage, inventory and improve now our On the above net of We the continue outlook EBITDA. capital outstanding. trailing that target X.Xx working balance have X.X end expect in the second improve year, X.Xx to of We but to to range. slightly to days end through high to cash finished free assumed

balance low assumes digits monthly range per sales expectations Preliminary normal Integrated manage This the workday down economic we low to mixed continue the of excluding assumes run the end for sales quarter. the the seasonality. flat in environment. rate of effectively of cost XX. outlook divestiture July year, for guidance and past The comparisons impact the months sales with XX the sequentially to the EBITDA second current to Page the of to year be and the high quarter were in single midpoint year-over-year Turning shows sales quarter and margins more a versus down prior sales the the at also Supply continues, we reported single slide be expect while stable the our base should third of the the third growth quarterly digits. Sequentially, period. as

Slide XX. to Turning

Before a.m. Investor September our upcoming we X up open XX it I Central questions today, to highlight Day wanted on your from Thursday, for XX:XX to Time.

details on customers, giving update We our digital investors. be the our an suppliers, to and with will transformation on employees, we are and our benefits executing what more

also our a more discuss will this XX% intend to we use cash our the And in to cash EBITDA around With talk will flow increase path call questions. detail goal returns. upsized the generation that, and we operator, to how investment We now open can of long-term to finally, margin. we

Operator

Today's Capital Dray question Deane comes Markets. first with Instructions] from [Operator RBC

Deane Dray

construction, weakness. broadband. everything heard you we Maybe And the can solar, being talked and utility telecom with of of and start in terms in spots, the we've your about, slides before the the pockets release, commentary, weak

magnitude talk Are the a delays? nothing project longer? duration the they context slowing vertical lasting the expectations, getting you cancellations? worse the in your talk of these relatively just within getting is new about about of it from there's pockets Is here when So But weaker.

you're in where seeing a decision-making? here context all of that getting where bigger sentiment is bigger of here? delays there -- how Just demand at ripple pockets this they're just a we look kind there through these and you're Is trend

John Engel

It continued cancellations, hit let meaningful view bit but just and our occurred. backlog that expected utility is to that into had principally first upfront. in fourth normal We've We the seen have that in change business. run start of started recovery, a our we in in has cancellations question, in the slowdown that Thanks a more in We quarter, broadband thought kick purchase our the second for back quarter. only me The purchases of quarter. Deane. would so not kind No had -- no of utility rate into utility.

an And on it's the I our page, customers U.S., deck, our we in in think important is the of quarter. UBS point X/X our down had sales outlook in

the So utility very that's a overall market. indication of good

And that utility through and customers. discussions just so with our on being extending second half, based we see the that's

I think, value scale customer we patterns are. have size, again, good given think of in leading kind proposition exactly utility, I and insight where very our into purchasing

of business, is think balance industrial, vector slight the can great opportunity you improvement EES the back QX. consistent with pipeline. But versus kind stable; Construction to the of momentum QX. the stable, of is

bit the very, little you QX. and too, a of in I management. MRO, the market overall to but phase we as move think very And or day-to-day good with I improving; margin if in that's look out cost alignment EES at of moderation Just QX think momentum-wise, in dynamics. OEM,

for expansion as positioned continued well margin kicks future growth in. we're So

And we on acceleration. saw an CSS,

to space, value you'll digits? growing of growth QX. took And had everyone see from in double And through around It's was at know call, questions, centers single-digit a why the we data space, kicked of chain, into kind and up double-digit really So timing AI-driven from we picking last we wasn't gray the the of growth white centers I range data momentum. centers, quarter's started the benefit. see. it's lot data when that recall great

of there so And be a lag bit said there. we a will

that's see. we that So to -- kicking vector that. clearly Great great see to to momentum that in, And expect continue.

businesses. so other And X that's the

that's utility more second that's The half. not is back the coming Deane. color, in little big So -- there's helpful. Hopefully, a delta

Deane Dray

that for project been And is then destocking of utility, just kind and the the on multiple much that's to quarters? pushouts going versus clarify of on delays extended how

John Engel

utilities, delays. The across dynamic the was that's all the I chain spending wouldn't in not inflation years, economy is capital the occurring the continues. getting So it's value of couple that's destocking approved executed and say are last is -- but those with going by still the that our as dollars occurred project over far.

projects new underway they're current getting if the slipped kicking the projects that are of kind extending or not out not it's stretched or So in. are -- not

economy to seeing I what standards, adjusting strong lending dollar. our And on rates think tightened that is overall even served we're and the elevated the kind of interest the markets increased, impact

you're of seeing kind impacting resi just of that through, that's ripple You're bit a what's kind I -- weakening. construction little Seeing and of utilities. think

XX kind the territory. a seeing in notable the industrial contraction sideways. that been months, in XX You're is ISM of of That it's trending last number number, pretty

So that environment mixed the speaks multi-speed. and I overall economic to think being

Deane Dray

would just to right, one all All growth sector, that's mid- that that we question related to last in really that is, kind that And of helpful. growth center now, high right teens. the data expect. vertical The

Just you looks data margins average. the but business thought be an the that. talk like have getting for areas, about I other it'd for center of you're to segment it more the offset not would versus that

does So where the data...

John Engel

business of infrastructure, in Solutions quarter, solutions. we it's the our center business and on had or are through details of when in WDCS, in enterprise the the our the that you was network the kind of operating business, CSS, part security infrastructure about groups the that opening and improved enterprise comments. gross data in Data The It data it's Center his security our So margins actually Dave network center think WESCO and year-over-year. quarter contraction, that went

EBITDA the mentioned leverage get which those. And forward, to to reiterate, are with working stability. operating We're increased view growth, Dave CSS that expect Deane, and So the I I'll accelerating we we'll think going as on again, grows, margins increasingly down our for as line improve CSS.

Operator

with Darkatsh And Raymond from question our comes James. Sam next

Sam Darkatsh

your $XXX million you've million sales First $XXX cut guidance. in question, $XXX -- taken million to a

by your That's $XXX million. normal margin. EBITDA decremental than more way cutting obviously You're

then a million benefit with to And get flow the the why free so to with intact takedown Just also what's to get free flow cash might guidance cash EBITDA sense be trying free your guide? $XXX in incremental high. that intact, keeping flows to to as cash

David Schulz

changes at address guidance. me sales the Yes, million midpoint. of first let $XXX at the the Sam, to we're down the midpoint, coming And about

that out, our in called Solutions. majority the we quarter & perform we million. year. first by of of is driven second consensus the the But Utility did really As by Broadband also missed expectations in to the the not half we Clearly, just under $XXX

those So the the real of are drivers coming sales down.

a the on. for take count you decremental historically look than margin we heavier is at that decline, When it would

One of is adjusted Broadband the here the & things that our business margin highlight is highest I'll EBITDA business. Utility Solutions

half of out our taking So that, having of a disproportionate down, top will our recognizing for rebates. is are results sales were first also soft on of that margins. that sales decremental the the we're pressure volume in coming some that our year initial there we're given that, relative On be effect as And to our the on that the we're supplier outlook. recognizing majority the

the slower-than-expected outlook emphasize given volume margins we reflecting So will a rate with on there to gross supplier because that reduction be outlook, the are the rebates. pressure to this growth of

need platform. account On our margin of of also the take side to we the operating this, deleveraging into

cost to to in want in advantage to we've pressure months. down, out growth It's for in of come year, years. keep capability past the taken sales that us keeping So sure EBITDA XX back the the also mind margin. half difficult as significant the have the the cost reduction operating take to manage over of we reductions a already the trends on is that putting But make leverage we that secular

Sam Darkatsh

lower inventories, purchases, lower why free is lower doesn't cash the which implies change? SVR flow the implies So which

David Schulz

Correct.

that sales, we sales guided we've the appropriate you we sequentially anticipate so down the as curve think of And digit to, would given low flat, shape given we've reported the to single guide. being on

that cash net provided So the to the that from a previously. gives outlook hold flow what we we free perspective, you that's confidence can capital us working

Sam Darkatsh

a it. electrical is been pricing of and There's for EBITDA business, Got remind I'm manufacturers improper this pipe the electrical chatter us to And last question. you channel is some in part sales but your small and my of positive conduit. what coordination about mix between almost PVC your conduit? specific really can

David Schulz

be, if anyone Sam, you're course, I PVC pure categories, much we're that in have conduit contacted of We've I of would revenue. when this number all specifically product in products the of by smaller our me. of the it's anything suppliers. marketplace. from conduit, about across don't mid-single-digit talking a commodity our been mean, you of about percentage PVC-related front not concern portion that. about And aware not think

is this So relatively to new us. news

Operator

And question Inc. Stephens our Moll with today from Tommy next comes

Thomas Moll

have there idea your far farther to have may how above term term, go? sits some the I'll customer picture. typical any at X the on on near one how much near base customer today one we bigger referenced John, utility, and have inventory and you've this But you destocking for time. Do

John Engel

great Yes. actually There customer. There's -- it's question. some is variation a by

meaningful typically in inventory response running online run -- with storms. that Now a customers that supporting quickly back their and business position look, those to in up support getting to is

in they pretty on their meaningful overall across value the they're But environment, levels base. Tommy, general So I -- overall, a and running inventory always seeing portion than would the still say, But bit. we're the they're varies it down that tight chain. those just -- in purchasing customer it's purchasing There's significantly, just of there's customer we given a inventory thought. think extending the I pause further on

Thomas Moll

it. be market seems growing benefiting could you to utility, is tailwinds on a list a for And we've picture from just of call Bigger -- discussed Okay. this secular it that some interruptions, maybe they're time now.

of go not those the mentioned, You CapEx call dollars John, where don't inflation what I'll far. as it's impacted, just some this maybe dollars digesting but

of more regulatory concerns, potentially spending the mentioned is muted in You rates to some tying patterns.

that gives this see what the that we'll growth secular end market what had been confidence not you ago resume So long clip? pretty brisk a

John Engel

data and back long that a temporary It's will modernization, of I those power. the coupled whether buzz When nearshoring, at term look the grid have confidence trends reshoring recently, you about even mid- and to great pause. to energy, call green all all electrification, this AI-driven that around about, different you enable U.S. great question, factor I with is talking secular all secular the think America, it's trends, Yes. we're centers, everyone short, is Tommy. governing the a North and when that the and

So I'm term it. step-up the curve, the a have call demand to long mid that very confident power in we over I'll significant

AI whole ambitions in I the and to up think around enabling gen data going the energy, chain step-up put the increase distribution is going governing around -- power to so value around that green the and demand ambitions all the electrification, -- -- And critically that the item way pull of ambitions significant AI-driven value generation item, that that's results the power. chain is that's and on the centers,

So the enabling in ways or role This going these next And think managing we're going over various X-year is support a I X-quarter the in kind secular period beyond. to occur not This over decade a the and up. and utilities play to a trends a ramp growth. that. them see of critical multiyear through is secular

reliability and not transmission get at the meet addressed. confident distribution, look fidelity the requirements not you to It rising network, is with demand state of to very curve current and that and I'm will be that again, has distribution clearly required. sustainability power the positioned power meet to are going it get Again, So addressed. the to if it and it positioned

in big that into Tommy, all time. up a translates CapEx, step So over

Operator

question from today next Manthey And with comes Baird. David our

David Manthey

earlier, And ISM your out today, came John, to July XX.X. point

year about margin expected I there But year divestiture think margin, the XX than divestiture, XXXX right, margin divestiture taking said you math believe out than XXXX to question, still pretty be even into if which points higher you can basis you generally guidance, full gross America full XXXX? gross to the gross And in you my all higher, not to today. equal. being would is XXXX. just But the account prior higher do it's the So adds WIS the else put new that up and be Industrial

David Schulz

for the I thing previous & as gross right. points improvement. will on on guide to gross my for sales the Supply rebates, your to going that Solutions also our year, total in basis reiterate by ability pressure gross the not of our of Broadband margin. margins, mentioned to company, we We're divestiture math will Integrated driven that of Utility one one I volume margin on Schulz. that pressure XX It's put on downshifted Dave some it's will course. expectation about impact put have the specifically that's of responses of which supplier The primarily the Dave, achieve

of the benefit the Supply So depending are we fully balance partially points basis getting margin. this model or XX gross That will of to Integrated offset, yes, how from year, be relative divestiture. offset the the you on

you some EBITDA. swings there margin, And the how the gross point we've we're with I the adjusted I as not of to could have X% specifically. at for guide margin margin, view EBITDA again, you the provided we on you going framework SG&A, be your look of adjusted and outlook a So that year. of between When think take course, through X.X% gross appropriate depending to on think progress mean, we we

David Manthey

Yes.

that's fair. Okay,

Second question for quarter. in consecutive lighter EBITDA, the on than thought CSS little which second a bit came we

as momentum gross in margins OpEx to last enterprise you're margins quarter, CSS infrastructure the downfall assume in think I related business. attributed It your sounds were But bit. and the that slowing margins there expected lack datacom. like leverage? you quite investing there, the means to network were of core I a the

sales, reacceleration a see CSS network we could of solve infrastructure, if related, center, us itself? rough wondering breakdown that a data just give security? and you if then between I'm will And just So in

David Schulz

Yes, certainly.

did me start margin expectations quarter. our with margin meet the in let not second expectations. CSS first So the

project that So have we and we from mix of mix not the drag in the would shipments did expect the quarter. higher direct the

margin when We the up a line So we meet expectations gross look it gross did the not primarily margin. When quality, we I take on of at CSS only by at EBITDA issue. driven a margin, did the that not composition get our top X%. adjusted line with leverage profit top really specifically the the is look

about a that As And if stable XX%, XX% just data this line. take under in the on year, margins the what that I of then is balance benefit mix is do enterprise center also at of operating the will the think about plus leverage being side. get look top unit. business the CSS, of we within we infrastructure the network be the balance strategic so is Security anticipate

Operator

question next our And comes from at Ken Markets. KeyBanc Capital Newman

Kenneth Newman

already in I that you destocking wanted think the that business ago, was do end just how about not number the what industrial seeing few Obviously, you've markets. So the EES seen of in think that great. to we're a today? about as context PMI you touch just OE on industrial some But from quarters just macro guide in of maintained the the the

John Engel

far, differently market have say that of EES, softness QX, industrial portion we of an A that is pipeline. showed outstanding depending in opportunity some sideways. industrial, trending up is mean, outstanding not we quarter, The would mix That seeing -- a of is kind business, so of and results fundamentally Ken, bit saw for so their industrial be little on market the in those than they downshifting. an reported QX other players I we that I may this others. have But comment. have

your MRO, and in is just kick the we've but strong. We've Our in, just QX, over didn't quarters. activity seen last levels some moderation the bidding I to seen that in quoting that point. day-to-day mean, and several

we showed plus our that UBS, that I at I and I plus down said, think margins industrial the stability versus in X year-over-year, given And you some want important. When point, second improvements both So of pretty businesses. QX in half. again, that sales think with OEM, QX. construction extends even look were slight all this those EES business just it through expanded and to good both it's showed EES emphasize operating With

for and in future -- it that's growth cost think a margin place management, the more returns market we've SG&A in that in what good EES grow I to So advantage Industrial, of -- structure need we is take good to continues positioned. as to in we're well particular, got The management. meaningful way, and

seeing seeing I'm a don't -- of kind it I I'm So helps. that Hopefully, sideways. trending down. not step just

Kenneth Newman

Yes. That's helpful color.

a be I particular on a little help paying basis. I'm even if from Dave, to us sequential there's about bit think you to an we curious XQ thinking quarter, of follow-up, XQ? my OpEx that XQ attention or perspective For XQ on anything gave OpEx should on of in kind to last from help

David Schulz

The and than think other on QX sequentially incentives. our certainly. expense stock-based big to less the second QX Yes, is recognized in to quarter, compensation typical we thing about

in over point been is And we've the third last course, your modeling for given structural quarter. a anticipate But aggressively view. on I you cost again, our you're of step-up of there in takeout so would months. expense have how that the I modest that adjustment we XX any then, And managing -- mean, the volumes.

balance managing continue be to will We aggressive the spend year. of discretionary for the

Operator

next comes our Patrick question Baumann And JPMorgan. from with

Patrick Baumann

And pricing, of quick in And MRO a industrial one in up you to couple there quick the was was X% in was any all The because line, company or then the the was talked up segments could you there business, have day-to-day being about price mentioned, would segments? have better? quarter thought A margin in reverse I in commodity kind -- from guess. a the I gross half the been headwind quarter, across big that second any slowdown the that as margin. benefit the would X% pricing difference for EES here, the there on it

be maybe So on any would color helpful. that

David Schulz

Yes, certainly.

we've X% of overall quarter. a the the difference on in The first between key benefit the X% a pricing. the level the second company in approximately quarters benefit was quarter, pricing, disclosed commodity So pure here benefit

us our exposure commodities, to business. so did commodity. would And mid-single-digit about extra having That within sequentially from think EES pure you when we that get benefit primarily be

and benefit slightly negative. CSS The price quarter. pricing second the in continued UBS EES saw was both a from So

Patrick Baumann

No, no.

I of think that the it was part -- question.

part your EES a there like there, business have like resilient. that margin have I headwind pricing because the gross but weaker. And was benefit margin from there Was the was sounded other MRO it sounds margin. industrial gross more to would a it thought would commodity The been day-to-day was

David Schulz

our margin. with commodity inventory EES percentage benefit and the margin. EES really gross last EES substantial of is of No, to no not commodity so again, X And down over really up been going Those have average impact very the modest the on Again, was on because in material a have commodities costs company. months, mix we commodity-related. gross we're the

John Engel

nature, not Industrial, that all account or is And national too, on that there's component. of of a Industrial which multiyear the services which for a Patrick, good account programs, of market the portion remember, but to in business global are we go portion

you think of on weekly Industrial, a lockstep with when just commodities And margin the so mix move about that doesn't basis.

Patrick Baumann

then follow-up my the decline is of July And single Okay. digits. on low

to could rate? performance that you that? us help unusual that that understand also the there If in growth impacted performed any then if was how saw markets that segments unusual you or And different you relative saw anything different

David Schulz

we've workday sequential sales how That with sequential the growth, sequentially we quarter. organically viewing second given the X% in within were preliminary up quarter on in numbers, by that provide a the double-digit we're second reported CSS. And growth you the market a opportunity, big days things the step-up that we basis of is per of that about in close sequentially could was I'll don't sales front a units lot in I a books shaping. change half provide the back because saw actually if would what we how compare things highlight are with a versus when when where the take quarter, the one you the But for officially. and so Yes, there's a of those breakdown you sales, to last want year half so are that little couple of thing full look and the guided bit

outlook. Now impact quarter to any obviously, outlook the from provided we've year year the second from with full July or you. line significantly was full Nothing in that the trend our different

Operator

question of Coe next Wolfe from comes our Research. Nigel And

Nigel Coe

step about mean, to keeping flat singles, bit be but history, which the here, in I quarter that do extra third but we So the it term have looking down out quarter. day guide, with short a wouldn't low of third little

And flattish margins little message? weaker as the if that sequential, of down of Is the a macro. would bit then reflective if here, for I have be that's down to you're EBITDA you're that expected the baking So sort guiding margins, just in wondering are well. seasonality message sales essentially

weaker will offset I the volumes coming So Q-over-Q? in are be guess, what if

David Schulz

certainly. Yes,

first So the coming are outlook Nigel, for the me quarter, seasonality. address. typical Based sales yes, on we the off in let third recorded

year, I appropriate the saw think we the the that through Broadband our half way of that, of the that's viewing & Solutions primarily first outlook the believe business, for Utility trends we market this.

it coming is yes, seasonality. that off typical of So

Again, the of believe on takes that we how and end high the the input see the typical account quarter units business framing the guide from third into right the got we based we've for earlier, mentioned our we But As more perspective, months did of within expect seasonality. the shaping think is stable. this we a margin margin are one relatively stable From mention the quarter. to I QX be that's QX. margins the would would I up leave to that, that we where relatively

appropriate framework businesses. be But of quarter. that the we will of mix that, the the think some impacted, of that's third by And the course, for

Nigel Coe

-- I maybe go have out and if Maybe can just you definitely detail want parse would of And a outlook. to expected. mean, we to activity this in genuine spending. back more is try much by the destocking how it's weakness then than themselves weaker the customers come in bit utility in I just versus

what about changes of in year. back think to the the trying half Just

John Engel

are or in a the for Yes. that a that their time it made the they're I'd that It but earlier. just kind by purchasing, kind those. question. thanks view on given then to dynamic of and not of And that, that generation always I'll is it to -- projects all -- destocking. pause Utility, of And not will temporal. the long-term our clearly levels. It critical view. seems enabler again. I of already -- we current outlook. It on a the to is say inventories. realize a comment inventory delaying I'll be trends, It's view kicking inflation enabler, varies point they with at that not see down in executing just is reinforce it the can again, any power freeze it. putting you're bit see projects the talked going there I these secular about, projects. say customer, -- just are mid- of I and this you're reinforce it's Without run current underway, to given critical on is team's growth running is meaningful And do to because the pause but I going the It's our utilities my absolutely in. Again, new temporary

So it...

Operator

to turn the This concludes conference I'd any your closing like over session. for question-and-answer back John remarks. to Engel

John Engel

all. you, Thank

were to for all questions your to Thank I addressed close. It's you your a all able we much very today, through think get call -- so the we've I'll bring appreciated. support.

on follow-up We week of Industrial many of have X, on next KeyBanc X. a Forum attending X, August next on Conference be you Jefferies the over Leadership and Showcase We'll Raymond August schedule very forward with do Energy tomorrow. Industrial well September the Technology calls James of the as couple full to today the and as And and months. speaking we look

expect XXXX on Thursday, we'll long-term an on earlier. (sic) September at Investor Day addition, our look in update finally, In providing we [ on announce forward so the our XX. September as we The Day our was then strategy held we to Investor And X quarter to last Day. hold mentioned Investor ] October Dave in-depth third XX

day. good and you, thank that, with So

Operator

all This for concludes today's attending today's conference call. presentation. We thank you

You and wonderful may your now day. have a disconnect lines,

WESCO International (WCC) 1 Aug 242024 Q2 Earnings call transcript