Core Insights - Wesco International reported $5.34 billion in revenue for Q1 2025, a slight year-over-year decline of 0.1% and an EPS of $2.21, down from $2.30 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $5.23 billion by 2.10%, while the EPS fell short of the consensus estimate of $2.23 by 0.90% [1] Financial Performance Metrics - Net Sales for Electrical & Electronic Solutions (EES) were $2.07 billion, matching the four-analyst average estimate, with a year-over-year decline of 1.6% [4] - Net Sales for Utility & Broadband Solutions (UBS) were $1.28 billion, below the four-analyst average estimate of $1.36 billion, reflecting a significant year-over-year decline of 19.2% [4] - Net Sales for Communications & Security Solutions (CSS) reached $2 billion, surpassing the $1.82 billion average estimate, with a year-over-year increase of 19.8% [4] Adjusted EBITDA Analysis - Adjusted EBITDA for Corporate was -$128.70 million, slightly worse than the average estimate of -$126.37 million [4] - Adjusted EBITDA for UBS was $138.30 million, below the four-analyst average estimate of $146.25 million [4] - Adjusted EBITDA for CSS was $158.50 million, exceeding the average estimate of $143.46 million, while EES reported $142.60 million, below the average estimate of $163.59 million [4] Stock Performance - Wesco International's shares returned +0.4% over the past month, contrasting with a -0.7% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company reported a 6% organic sales growth in Q1 2025, exceeding expectations, driven by strong performance in the data center business, which grew 70% year-over-year [4][14] - Gross margin remained stable sequentially and improved in the CSS segment, while adjusted EBITDA margin decreased by 60 basis points year-over-year [5][14] - Adjusted earnings per share were $2.21, down 4% from the prior year [15] Business Line Data and Key Metrics Changes - The data center business was a significant growth driver, up 70%, while OEM and broadband businesses experienced high single-digit growth [5][14] - EES organic sales increased by 3%, but reported sales were flat due to foreign exchange headwinds and one less workday [16] - CSS sales grew 18% year-over-year on an organic basis, with data center solutions representing nearly 40% of CSS sales [18][20] Market Data and Key Metrics Changes - The utility market continued to show weakness due to customer destocking and lower project activity, with expectations for recovery in the second half of the year [25][66] - Broadband business grew high single digits, particularly in Canada, while UBS backlog was down 13% year-over-year but up 13% sequentially [25][26] Company Strategy and Development Direction - The company is focused on debt reduction and stock repurchases while investing in tech-enabled business transformation and managing M&A opportunities [7][40] - The strategic focus includes addressing supply chain challenges and leveraging global scale to mitigate tariff impacts [9][33] - The company reaffirmed its full-year outlook, increasing sales growth expectations for the data center business from mid-teens to about 20% [34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the utility business in the second half of the year, supported by ongoing electrification and grid modernization trends [25][66] - The company acknowledged uncertainties related to tariffs and their potential impact on the global economy but emphasized control over internal initiatives [8][39] - Management noted that while there is a risk of demand destruction due to higher prices, they believe pricing benefits from tariffs could mitigate this risk [108] Other Important Information - The company issued $800 million in senior notes to redeem preferred stock and strengthen its balance sheet, with an estimated annualized net income benefit of approximately $30 million [6][29] - Free cash flow for Q1 was $9 million, exceeding expectations, with a focus on reducing inventory as a percentage of sales [26][27] Q&A Session Summary Question: Clarification on revised outlook regarding tariffs - Management confirmed that no tariff-related price increases were incorporated into the outlook, which assumes organic growth rates of 2.5% to 6.5% [46][48] Question: Supplier price increases and surcharges - Management noted that supplier price increases in Q1 were down 15% year-over-year, but there has been a significant increase in price notifications in Q2 [59][60] Question: Confidence in utility market recovery - Management indicated that they have not seen significant changes in the utility market and expect a return to growth in the second half of the year based on customer activity levels [66][68] Question: Data center growth and customer engagement - Management highlighted strong momentum in the data center business, with customers increasing their scope of supply and no reduction in booking rates [76][78] Question: Pricing dynamics across business units - Management explained that CSS has seen less impact from pricing increases compared to EES, which is more affected by tariffs and supplier pricing dynamics [95][98]

Financial Data and Key Metrics Changes - The company reported a 6% organic sales growth in the first quarter, exceeding expectations, driven primarily by a 70% increase in the data center business and high single-digit growth in OEM and broadband sectors [4][5][14] - Gross margin remained stable sequentially and adjusted EBITDA margin decreased by 60 basis points year-over-year, primarily due to project and product mix [14][15] - Adjusted earnings per share were $2.21, down 4% from the prior year [15] Business Line Data and Key Metrics Changes - The data center business was a significant growth driver, up 70% year-over-year, while OEM and broadband businesses also saw high single-digit growth [5][14] - EES organic sales increased by 3%, but reported sales were flat due to foreign exchange headwinds and one less workday [17] - CSS sales grew 18% year-over-year on an organic basis, with data center solutions up more than 65% [19][20] Market Data and Key Metrics Changes - The utility market continued to experience softness due to customer destocking and lower project activity levels, with expectations for growth returning in the second half of the year [26][27] - Broadband business showed high single-digit growth, particularly in Canada, while UBS backlog was down 13% year-over-year but up 13% sequentially [27] Company Strategy and Development Direction - The company is focused on debt reduction and stock repurchases while investing in tech-enabled business transformation and managing M&A opportunities [8][41] - The strategic emphasis on data centers is expected to drive growth, with a reaffirmed full-year outlook for reported sales growth increased from mid-teens to about 20% [36][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty surrounding tariffs and their potential impact on the global economy but emphasized a focus on controllable factors such as cross-sell initiatives and operational improvements [9][39] - The company expects to deliver between $600 million to $800 million in free cash flow for 2025, with a focus on high-return opportunities [40] Other Important Information - The company issued $800 million in senior notes to redeem preferred stock and strengthen its balance sheet, with an estimated annualized net income and cash flow benefit of approximately $30 million [6][30] - Backlog increased sequentially in all three business units, indicating positive momentum moving into the second quarter [9][38] Q&A Session Summary Question: Clarification on revised outlook regarding tariffs - Management confirmed that no tariff-related price increases were incorporated into the outlook, which assumes organic growth rates of 2.5% to 6.5% [47][48] Question: Supplier price increases and their impact - Management noted that supplier price increases were down in Q1 but have significantly increased in Q2, with average price increases moving to high single digits [60][61] Question: Confidence in utility market recovery - Management expressed confidence in a return to growth in the utility market in the second half of the year, supported by ongoing customer engagement and new account wins [64][68] Question: Data center growth and customer engagement - Management highlighted strong momentum in the data center business, with customers increasing their scope of business with WESCO, including a focus on AI-driven data center builds [76][83] Question: Pricing dynamics across business units - Management indicated that pricing pressures are more pronounced in the EES and utility businesses compared to CSS, which has a more stable supplier base [100][102]

Group 1: Earnings Performance - Wesco International reported quarterly earnings of $2.21 per share, missing the Zacks Consensus Estimate of $2.23 per share, and down from $2.30 per share a year ago [1] - The earnings surprise for this quarter was -0.90%, and the company had a previous quarter surprise of -1.86% with actual earnings of $3.16 per share against an expectation of $3.22 [2] - Over the last four quarters, Wesco has surpassed consensus EPS estimates only once [2] Group 2: Revenue Performance - The company posted revenues of $5.34 billion for the quarter, exceeding the Zacks Consensus Estimate by 2.10%, but slightly down from $5.35 billion year-over-year [3] - Wesco has topped consensus revenue estimates three times over the last four quarters [3] Group 3: Stock Performance and Outlook - Wesco International shares have declined approximately 10% since the beginning of the year, compared to a -5.3% decline in the S&P 500 [4] - The company's earnings outlook is mixed, with a current Zacks Rank of 3 (Hold), indicating expected performance in line with the market [7] - The current consensus EPS estimate for the upcoming quarter is $3.40 on revenues of $5.62 billion, and for the current fiscal year, it is $13.25 on revenues of $22.27 billion [8] Group 4: Industry Context - The Electronics - Parts Distribution industry, to which Wesco belongs, is currently in the top 38% of over 250 Zacks industries, suggesting a favorable industry outlook [9]

Financial Performance - First quarter 2025 reported net sales were $5,343.7 million, down 0.1% year-over-year, with organic sales growth of 5.6%[6] - Diluted earnings per share (EPS) for the first quarter was $2.10, reflecting a 7.7% increase year-over-year; adjusted diluted EPS was $2.21[6] - Net income for the three months ended March 31, 2025, was $118.3 million, a slight increase from $116.1 million in the same period of 2024[26] - Adjusted net income attributable to common stockholders for the three months ended March 31, 2025, was $109.6 million, a decrease of 7.9% from $119.2 million in the same period of 2024[35] - Net income attributable to common stockholders for the twelve months ended March 31, 2025, was $662.8 million, slightly up from $660.2 million for the previous year[42] Sales and Revenue - Data center sales experienced significant growth of 70% in the first quarter[6] - Organic sales growth for the total net sales was 5.6% for the three months ended March 31, 2025, despite a reported decline of 0.1%[30] - Preliminary sales per workday in April were up 7% compared to the prior year, indicating continued positive momentum[4] Cash Flow and Liquidity - Operating cash flow for the first quarter was $28 million, a decrease of 96.2% compared to the previous year[6] - Free cash flow generation in the first quarter was $9.4 million, a decline of 98.7% year-over-year[7] - The company reported a net cash provided by operating activities of $28.0 million for the three months ended March 31, 2025, a significant decrease from $746.3 million in the same period of 2024[26] - Free cash flow for the three months ended March 31, 2025, was $9.4 million, a significant decrease from $731.4 million for the same period in 2024, representing a decline of approximately 99%[45] - Cash flow provided by operations for the three months ended March 31, 2025, was $28.0 million, down from $746.3 million in the prior year[45] Expenses and Margins - Gross margin for the first quarter was 21.1%, down 10 basis points sequentially and 20 basis points year-over-year[6] - Adjusted selling, general and administrative expenses were $829.0 million for the three months ended March 31, 2025, representing 15.5% of net sales, compared to 15.1% in 2024[33] - Total Adjusted EBITDA for the three months ended March 31, 2025, was $310.7 million, compared to $340.4 million in Q1 2024, indicating a decrease of 8.7%[38] - Adjusted EBITDA margin for Q1 2025 was 5.8%, down from 6.4% in Q1 2024, showing a decline of 0.6 percentage points[38] - Adjusted earnings per diluted share for Q1 2025 was $2.21, down from $2.30 in Q1 2024, reflecting a decline of 3.9%[35] Debt and Financial Position - Long-term debt increased to $5,136.6 million as of March 31, 2025, compared to $5,045.5 million as of December 31, 2024, reflecting a rise of 1.8%[24] - Total debt as of March 31, 2025, increased to $5,215.5 million from $5,112.1 million as of December 31, 2024, reflecting a rise of about 2%[42] - The financial leverage ratio increased to 3.1 as of March 31, 2025, compared to 2.9 as of December 31, 2024, indicating a higher reliance on debt[42] - Interest expense, net for Q1 2025 was $86.3 million, a slight decrease from $94.4 million in Q1 2024, reflecting a reduction of 8.6%[35] - The company reported a net interest expense of $356.9 million for the twelve months ended March 31, 2025, down from $364.9 million in the previous year[42] Asset Management - Total assets increased to $15,515.1 million as of March 31, 2025, compared to $15,061.4 million as of December 31, 2024, reflecting a growth of 3.0%[24] - Total current liabilities rose to $4,035.5 million as of March 31, 2025, from $3,804.0 million as of December 31, 2024, indicating an increase of 6.1%[24] - The company experienced a change in trade receivables, net, of $(188.7) million for the three months ended March 31, 2025, compared to $(116.1) million in 2024, indicating a worsening in cash flow management[26] Corporate Actions - The company plans to redeem preferred stock in June using proceeds from $800 million of notes issued during the first quarter[5] - The company issued $800 million in Senior Notes due 2033, intending to use the proceeds to redeem outstanding preferred stock and repay a portion of its revolving credit facility[26] - Preferred stock dividends remained constant at $14.4 million for both Q1 2025 and Q1 2024[35] - The company experienced a restructuring cost of $1.1 million in Q1 2025, compared to $8.0 million in Q1 2024[38] - Restructuring costs for the twelve months ended March 31, 2025, decreased to $5.1 million from $12.1 million in the previous year, indicating a reduction of approximately 58%[42] Digital Transformation - Digital transformation costs included in the adjusted EBITDA for Q1 2025 amounted to $6.2 million[38] - Digital transformation costs for the twelve months ended March 31, 2025, amounted to $25.0 million, slightly up from $24.9 million in the previous year[42]

Core Insights - Wesco International reported a 6% organic growth in sales for Q1 2025, driven by a 70% increase in data center sales and high single-digit growth in Broadband and OEM businesses [2][10]. - The company reaffirmed its full-year outlook for 2025, citing positive momentum and a strong opportunity pipeline [3][10]. Financial Performance - Net sales for Q1 2025 were $5,343.7 million, a slight decrease of 0.1% compared to $5,350.0 million in Q1 2024 [4][10]. - Organic sales growth was reported at 5.6%, reflecting volume growth in the Communication and Security Solutions (CSS) segment, partially offset by a decline in the Utility Business Solutions (UBS) segment [5][24]. - Gross profit for Q1 2025 was $1,125.6 million, with a gross margin of 21.1%, down from 21.3% in the previous year [4][26]. - Net income attributable to common stockholders increased to $104.0 million, or $2.10 per diluted share, representing a 7.7% increase year-over-year [4][10]. Cash Flow and Capital Management - Free cash flow for Q1 2025 was significantly lower at $9.4 million compared to $731.4 million in Q1 2024, primarily due to changes in working capital [4][10]. - The company issued $800 million in notes to redeem preferred stock, which is expected to strengthen the balance sheet and improve cash flow and earnings per share [3][10]. Segment Performance - The CSS segment experienced an organic sales growth of 18.1%, while the UBS segment saw a decline of 4.9% [24]. - The Electrical and Electronic Solutions (EES) segment reported a 3.4% organic sales growth [24]. Operational Highlights - The company noted a stable gross margin on a sequential basis compared to Q4 2024, with initial improvements in Communication and Security Solutions [2][3]. - SG&A expenses increased to $836.3 million, reflecting higher operational and transportation costs [4][7]. Market Outlook - Wesco remains focused on cross-selling activities and operational improvements amid economic uncertainty, with confidence in outperforming market trends driven by AI-driven data centers and electrification [3][10].

Group 1 - Wesco International will hold its first quarter 2025 earnings conference call on May 1 at 9:00 a.m. ET [1] - The company reported approximately $22 billion in annual sales for 2024 [3] - Wesco operates over 700 sites in around 50 countries, providing a local presence and a global network for customers [3] Group 2 - Wesco will participate in several upcoming conferences, including the Oppenheimer Industrial Growth Conference on May 7 and the Goldman Sachs Leveraged Finance and Credit conference on May 29 [2] - The company employs approximately 20,000 people and partners with premier suppliers in the industry [3] - Wesco offers a diverse portfolio of products and services, including Electrical and Electronic Solutions, Communications and Security Solutions, and Utility and Broadband Solutions [3]

Core Viewpoint - Wesco International, Inc. announced the pricing of an $800 million offering of 6.375% senior notes due 2033, increasing from a previously announced $600 million [1][2] Group 1: Offering Details - The offering will result in net proceeds of approximately $789.5 million after deducting discounts and estimated expenses [2] - The notes will be issued at a price of 100% of the aggregate principal amount and are scheduled to settle on March 6, 2025 [1][2] - The notes will be unsecured and rank equally with other existing and future unsecured obligations of Wesco Distribution [3] Group 2: Use of Proceeds - Wesco intends to use the net proceeds to redeem all outstanding 10.625% Series A Fixed-Rate Reset Cumulative Perpetual Preferred Stock and related depositary shares on June 22, 2025 [2] - Prior to the redemption, proceeds will also be used to repay a portion of outstanding borrowings under its accounts receivable securitization facility and asset-based revolving credit facility [2] Group 3: Company Overview - Wesco International is a leading provider of business-to-business distribution, logistics services, and supply chain solutions, with approximately $22 billion in annual sales in 2024 [6] - The company operates over 700 sites in approximately 50 countries, providing a local presence and global network for customers [6]

Core Viewpoint - Wesco International, Inc. plans to offer $600 million in senior notes due 2033 to eligible purchasers, aiming to use the proceeds for redeeming its Series A Preferred Stock and repaying outstanding borrowings under its credit facilities [1][2]. Group 1: Offering Details - The offering consists of $600 million aggregate principal amount of senior notes due 2033 [1]. - The notes will be unsecured and unsubordinated debt obligations, ranking equally with existing and future unsecured obligations of Wesco Distribution [3]. - The offering will be made only to qualified institutional buyers and non-U.S. persons under specific regulations [4]. Group 2: Use of Proceeds - Net proceeds from the offering will be used to redeem all outstanding Series A Preferred Stock and related depositary shares on June 22, 2025 [2]. - Prior to the redemption, proceeds will also be used to repay a portion of borrowings under the accounts receivable securitization facility and the asset-based revolving credit facility [2]. Group 3: Company Overview - Wesco International is a leading provider of business-to-business distribution, logistics services, and supply chain solutions, with approximately $22 billion in annual sales in 2024 [6]. - The company operates over 700 sites globally, providing a local presence and a global network to serve various industries [6].

Core Insights - Wesco International's international operations are crucial for assessing its financial resilience and growth prospects [1][2] - The company's total revenue for the quarter was $5.5 billion, reflecting a year-over-year increase of 0.5% [4] International Revenue Breakdown - Canada contributed 12.97% of total revenue, amounting to $713.5 million, which was a decline of 3.54% compared to expectations [5] - Other International generated $685.9 million, representing 12.47% of total revenue, exceeding Wall Street's expectations by 0.93% [6] Future Revenue Predictions - Analysts forecast total revenue of $5.23 billion for the current fiscal quarter, a decline of 2.3% year-over-year, with Canada and Other International expected to contribute 13.5% each [7] - For the full year, total revenue is projected at $22.28 billion, an increase of 2.1% from the previous year, with Canada and Other International expected to contribute 13.7% and 12.6%, respectively [8] Conclusion on International Operations - The reliance on international markets presents both opportunities and risks for Wesco International, making it essential to monitor international revenue trends for future forecasts [9][10]