WESCO International : 2024 Q1 Earnings Presentation

NYSE: WCC

First Quarter 2024

Webcast Presentation

May 2, 2024

Forward-Looking Statements

All statements made herein that are not historical facts should be considered as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding business strategy, growth strategy, competitive strengths, productivity and profitability enhancement, competition, new product and service introductions, and liquidity and capital resources. Such statements can generally be identified by the use of words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," and similar words, phrases or expressions or future or conditional verbs such as "could," "may," "should," "will," and "would," although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and beliefs of Wesco's management, as well as assumptions made by, and information currently available to, Wesco's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of Wesco's and Wesco's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Important factors that could cause actual results or events to differ materially from those presented or implied in the forward-looking statements include, among others, the failure to achieve the anticipated benefits of, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions; the inability to successfully integrate acquired businesses; the impact of increased interest rates or borrowing costs; fluctuations in currency exchange rates; failure to adequately protect Wesco's intellectual property or successfully defend against infringement claims; the inability to successfully deploy new technologies, digital products and information systems or to otherwise adapt to emerging technologies in the marketplace, such as those incorporating artificial intelligence; failure to execute on our efforts and programs related to environmental, social and governance (ESG) matters; unanticipated expenditures or other adverse developments related to compliance with new or stricter government policies, laws or regulations, including those relating to data privacy, sustainability and environmental protection; the inability to successfully develop, manage or implement new technology initiatives or business strategies, including with respect to the expansion of e-commerce capabilities and other digital solutions and digitalization initiatives; disruption of information technology systems or operations; natural disasters (including as a result of climate change), health epidemics, pandemics and other outbreaks; supply chain disruptions; geopolitical issues, including the impact of the evolving conflicts in the Middle East and Russia/Ukraine; the impact of sanctions imposed on, or other actions taken by the U.S. or other countries against, Russia or China; the failure to manage the increased risks and impacts of cyber incidents or data breaches; and exacerbation of key materials shortages, inflationary cost pressures, material cost increases, demand volatility, and logistics and capacity constraints, any of which may have a material adverse effect on the Company's business, results of operations and financial condition. All such factors are difficult to predict and are beyond the Company's control. Additional factors that could cause results to differ materially from those described above can be found in Wesco's most recent Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission.

Non-GAAP Measures

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), this presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, gross margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, financial leverage, free cash flow, adjusted selling, general and administrative ("SG&A") expenses, adjusted income from operations, adjusted operating margin, adjusted provision for income taxes, adjusted income before income taxes, adjusted net income, adjusted net income attributable to Wesco International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of our financial condition and results of operations on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude items impacting comparability of results such as merger-related and integration costs, and the related income tax effect of such items, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

2

First Quarter Highlights and Outlook

First quarter sales in-line with quarterly commentary and our full year 2024 outlook

• Sales in-line with expectations against toughest comparison of the year (sales growth of 12% in Q1 2023)
• Sales rebounded in February with sequential increase in March
• Backlog flat sequentially and down 10% versus prior year; remains at historically high levels
• EBITDA in-line with normal seasonality and full year outlook

Record free cash flow of more than $700 million; greater than $1.4 billion TTM free cash flow

• Reduced leverage to 2.6x (nearing target range of 1.5x - 2.5x)
• Repurchased $50 million of common stock in the quarter

Reaffirming 2024 outlook for organic growth, EBITDA margin and EPS ranges; increasing free cash flow outlook for 2024

• Completed $20 million of annualized structural cost reduction actions in late Q1
• Expect to initiate $300 million of share repurchase in Q2 with proceeds from the Integrated Supply divestiture
• Free cash flow outlook range increased to $800 million to $1 billion; provides optionality for share repurchase, debt reduction and/or M&A in the second half

Reaffirming 2024 outlook for organic growth, EBITDA margin and EPS ranges; increasing free cash flow outlook for 2024

See appendix for non-GAAP reconciliations

3

First Quarter YOY Results

Sales in-line with expectations; EBITDA in-line with typical seasonality

Net Sales1

$ millions

$5,522

$5,350

(3)%

organic

Q1 2023	Price	Volume	Other 2	Q1 2024
Sales				Sales

• Organic and reported sales down 3%
• Estimated growth from price of ~1%
• Sales volume lower year-over-year due to a difficult comparison and choppy end market environment

Adjusted EBITDA

$421

7.6%

of sales

				$340
				6.4%
				of sales
Q1 2023	Sales	Gross	SG&A	Q1 2024
Adjusted EBITDA		Margin		Sales

• Billing margin down YOY primarily due to mix
• Gross margin at 21.3% down ~60 bps YOY due to lower billing margin and billing-to-gross margin adjustments
• Higher SG&A primarily due to payroll and facilities costs
• Adjusted EPS of $2.30 down year-over-year primarily due to lower operating results driven by sales and gross margin year-over-year

1	Sales growth attribution based on company estimates
2	Other reflects differences in foreign exchange rates	4
See appendix for non-GAAP definitions and reconciliations

First Quarter Sequential Results

Sales in-line with expectations; EBITDA in-line with typical seasonality

Net Sales1

$ millions

$5,473

$5,350

(4)%

organic

• Lower sequential sales as expected due to the soft start in January

Q4 2023	Price	Volume	Other 2	Q1 2024
Sales				Sales

Adjusted EBITDA

$385

7.0%
				$340
of sales
					6.4%
					6.4%
					of sales
					of sales
Q4 2023	Sales	Gross	SG&A	Q1 2024
Adjusted EBITDA		Margin			Sales

• Billing margin up sequentially
• Gross margin at 21.3% was down 10 basis points sequentially due to billing-to-gross margin adjustments and mix
• Higher SG&A costs primarily due to restoration of incentive compensation

1. Sales growth attribution based on company estimates
2. Other reflects differences in number of workdays and foreign exchange rates

See appendix for non-GAAP definitions and reconciliations

5

Wesco Has Outgrown Suppliers and Peers

	Growth versus Wesco's Top 10
30%	Publicly-Traded Suppliers

20%

10%

0%

(10)%

Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
2021	2021	2021	2021	2022	2022	2022	2022	2023	2023	2023	2023	2024
	Wesco YOY Organic Growth				Suppliers YOY Weighted Average Growth1

Wesco's Top 10 Public Suppliers

Growth versus Distribution Peers

30%

20%

10%

0%

(10%)

Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
2021	2021	2021	2021	2022	2022	2022	2022	2023	2023	2023	2023	2024
Wesco YOY Organic Growth			Baird YOY Electrical Growth		Baird YOY Datacom Growth

Baird Distribution Survey

• Includes Wesco's top 10 publicly traded suppliers
• Making up ~25% of total Wesco COGs
• No one supplier accounted for more than 5% of
  Wesco's purchases in 2023

ABB Hubbell

Belden Legrand

CommScope Prysmian

Corning Rockwell

Eaton Schneider

Results from Baird's Distribution Survey for

electrical and datacom distributors

1 Weighted based on the proportion of Wesco's purchases that each supplier represents

6

Electrical & Electronic Solutions (EES)

First Quarter Drivers

• Organic and reported sales down 2% YOY
• • Construction flat as growth from large project shipments offset by lower solar sales
  • Industrial up LSD driven by growth in automation, electrical equipment upgrades, and strength in oil and gas markets
  • OEM down HSD
• Backlog flat sequentially and down 5% versus prior year; strong bid and quote activity

$ millions
	Q1	Q1	YOY
	2024	2023
Sales	$2,099	$2,135	(2)%1
Adjusted EBITDA	$166	$183	(9)%
% of sales	7.9%	8.6%	(70) bps

1 Sales growth shown on an organic basis

• Adjusted EBITDA margin down YOY due to lower gross margin partially offset by lower SG&A as a percentage of sales

Continued focus on growth initiatives and cost actions…long-term secular growth drivers remain intact

See appendix for non-GAAP definitions and reconciliations

7

Communications & Security Solutions (CSS)

First Quarter Drivers

• Organic and reported sales down 4% YOY
• • Enterprise Network Infrastructure down LSD due to continued softness in the service provider market
  • Security down HSD due to difficult year-over-year comparison
  • Wesco Data Center Solutions (WDCS) up LSD largely driven by growth in hyperscale
• Backlog normalizing; down 20% YOY and up 9% sequentially

$ millions
	Q1	Q1	YOY
	2024	2023
Sales	$1,670	$1,732	(4)%1
Adjusted EBITDA	$127	$156	(18)%
% of sales	7.6%	9.0%	(140) bps

1 Sales growth shown on an organic basis

• Adjusted EBITDA margin down YOY due to lower gross margin and lower operating leverage due to the decline in sales

Global position, leading value proposition and secular trends expected to drive growth in 2024, including the impact of AI in data centers

See appendix for non-GAAP definitions and reconciliations

8

Utility & Broadband Solutions (UBS)

First Quarter Drivers

• Organic and reported sales down 5% YOY
• • Utility sales down LSD on prior year growth of more than 20%
  • Broadband sales down DD due to continued demand weakness
• Backlog down 7% YOY and down 1% sequentially; remains at historically high levels
• Adjusted EBITDA margin down YOY due to higher SG&A costs with stable gross margin

$ millions
	Q1	Q1	YOY
	2024	2023
Sales	$1,581	$1,655	(5)%1
Adjusted EBITDA	$169	$188	(10)%
% of sales	10.7%	11.3%	(60) bps

1 Sales growth shown on an organic basis. Includes sales from Integrated Supply business which was divested as of April 1, 2024.

Leadership position and expanded solutions offering to drive sales and profit growth in 2024

See appendix for non-GAAP definitions and reconciliations

9

Highlighting ~$200M of Recent Large Project Wins

EES

Customer

Chemical and materials science company

Summary

Awarded a $30 million contract over four years to provide wire and cable, power control, and instrumentation to support the world's first net-zero carbon emissions integrated ethylene cracker

CSS

Customer

Major financial services firm

Summary

$40+ million win with a leading North American investment and banking firm to support multiple locations with a full suite of data center solutions including physical security and on-premise value- added service solutions

UBS

Customer

National renewable contractor

Summary

Secured $125 million project over five years to deliver high voltage breakers for

1. renewable project, ensuring multi-year supply chain continuity

10