WESCO International(WCC) - 2024 Q2 - Quarterly Results

Financial Highlights and Management Commentary Wesco's Q2 results missed expectations due to utility slowdown, revising full-year outlook downwards despite data center growth Q2 2024 Key Performance Indicators | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Net Sales | $5.5 billion | -4.6% | | Organic Sales | - | -0.8% | | Gross Margin | 21.9% | +30 bps | | Operating Margin | 5.9% | -40 bps | | Adjusted EBITDA Margin | 7.3% | -40 bps | - Management attributed the weaker-than-expected results to a significant slowdown in purchases and capital project delays by utility customers, which offset double-digit growth in the Wesco Data Center Solutions business[3] - The company completed the divestiture of Wesco Integrated Supply (WIS) on April 1, 2024, and used the net proceeds to repurchase $300 million of its stock[2][4] Revised Full-Year 2024 Outlook | Metric | Revised Outlook | | :--- | :--- | | Organic Sales Growth | (1.5)% to 0.5% | | Adjusted EBITDA Margin | 7.0% to 7.3% | Consolidated Financial Results This section details Wesco's Q2 and H1 2024 financial performance, comparing key metrics against prior periods Second Quarter 2024 Performance (vs. Q2 2023) Q2 2024 net sales declined 4.6% to $5.5 billion, operating profit fell 11.1%, with net income up due to divestiture Q2 2024 vs. Q2 2023 Financial Summary | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,479.7 million | $5,745.5 million | -4.6% | | Organic Sales | - | - | -0.8% | | Gross Profit | $1,198.0 million | $1,242.4 million | -3.6% | | Operating Profit | $323.5 million | $363.8 million | -11.1% | | Net Income (Common) | $217.7 million | $178.7 million | +21.8% | | Diluted EPS | $4.28 | $3.41 | +25.5% | | Adjusted Diluted EPS | $3.21 | $3.71 | -13.5% | - The increase in gross margin to 21.9% from 21.6% YoY was primarily attributed to the impact of the divestiture of the lower-margin WIS business[4] - Company backlog declined by 10% year-over-year and approximately 2% sequentially from the first quarter of 2024[4] First Half 2024 Performance (vs. H1 2023) H1 2024 net sales decreased 3.9% to $10.8 billion, operating profit fell 17.4%, while operating cash flow significantly improved H1 2024 vs. H1 2023 Financial Summary | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $10,829.7 million | $11,267.4 million | -3.9% | | Organic Sales | - | - | -2.0% | | Gross Profit | $2,335.9 million | $2,450.9 million | -4.7% | | Operating Profit | $586.5 million | $710.2 million | -17.4% | | Net Income (Common) | $319.2 million | $361.5 million | -11.7% | | Diluted EPS | $6.22 | $6.90 | -9.9% | | Adjusted Diluted EPS | $5.51 | $7.47 | -26.2% | - The decrease in gross margin was due to a shift in sales mix, lower supplier volume rebates, higher inventory adjustments, and lower cash discounts[7] - Operating cash flow for the first six months of 2024 was a strong inflow of $522.5 million, a significant improvement from the $62.2 million inflow in the same period of 2023, primarily driven by better working capital management[16] Consolidated Financial Statements This section provides unaudited consolidated financial statements, including Income, Balance Sheets, and Cash Flows Consolidated Statements of Income Presents the company's revenues, costs, and profits for Q2 and H1 periods ending June 30, 2024 and 2023 Consolidated Statements of Income (Three Months Ended June 30) | (in millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net sales | $5,479.7 million | $5,745.5 million | | Income from operations | $323.5 million | $363.8 million | | Income before income taxes | $320.6 million | $264.2 million | | Net income attributable to common stockholders | $217.7 million | $178.7 million | | Earnings per diluted share | $4.28 | $3.41 | Consolidated Statements of Income (Six Months Ended June 30) | (in millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net sales | $10,829.7 million | $11,267.4 million | | Income from operations | $586.5 million | $710.2 million | | Income before income taxes | $467.6 million | $505.5 million | | Net income attributable to common stockholders | $319.2 million | $361.5 million | | Earnings per diluted share | $6.22 | $6.90 | Consolidated Balance Sheets Outlines the company's assets, liabilities, and stockholders' equity as of June 30, 2024, versus December 31, 2023 Consolidated Balance Sheet Summary | (in millions) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $716.5 million | $524.1 million | | Total current assets | $8,536.1 million | $8,391.6 million | | Total assets | $15,108.5 million | $15,060.9 million | | Liabilities & Equity | | | | Total current liabilities | $3,748.3 million | $3,388.4 million | | Long-term debt, net | $5,203.4 million | $5,313.1 million | | Total liabilities | $10,257.2 million | $10,029.0 million | | Total stockholders' equity | $4,851.3 million | $5,031.9 million | Consolidated Statements of Cash Flows Details cash sources and uses from operating, investing, and financing activities for H1 2024 and 2023 Cash Flow Summary (Six Months Ended June 30) | (in millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $522.5 | $62.2 | | Net cash provided by (used in) investing activities | $269.1 | $(43.7) | | Net cash used in financing activities | $(581.4) | $(20.4) | | Net change in cash and cash equivalents | $192.4 | $1.7 | | Cash and cash equivalents at end of period | $716.5 | $529.0 | - Investing activities in H1 2024 were highlighted by $334.2 million in proceeds from the WIS divestiture, while financing activities included $350.0 million in common stock repurchases[30] Non-GAAP Financial Measures Reconciliation This section reconciles GAAP to non-GAAP financial measures, including organic sales, adjusted EBITDA, and free cash flow - The company uses non-GAAP measures to provide investors with a better understanding of financial condition and results on a comparable basis, excluding items that impact comparability such as merger/integration costs, divestiture gains/losses, and restructuring costs[31] Organic Sales Growth by Segment Reconciles reported to organic sales growth by segment, with Q2 2024 total organic sales down 0.8% YoY, up 4.7% sequentially Q2 2024 vs. Q2 2023 Organic Sales Growth by Segment | Segment | Reported Growth | Organic Sales Growth | | :--- | :--- | :--- | | EES | (1.2)% | (0.6)% | | CSS | 0.8% | 1.1% | | UBS | (15.0)% | (3.0)% | | Total | (4.6)% | (0.8)% | Q2 2024 vs. Q1 2024 (Sequential) Organic Sales Growth by Segment | Segment | Reported Growth | Organic Sales Growth | | :--- | :--- | :--- | | EES | 3.5% | 2.3% | | CSS | 11.7% | 10.4% | | UBS | (8.9)% | 1.8% | | Total | 2.4% | 4.7% | Reconciliation of Adjusted Earnings per Diluted Share Reconciles GAAP earnings to adjusted diluted EPS, showing Q2 2024 adjusted EPS at $3.21, down from $3.71 in Q2 2023 Adjusted EPS Reconciliation (Q2) | (in millions, except per share) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Adjusted net income (common) | $163.5 | $194.3 | | Diluted shares | 50.9 | 52.4 | | Adjusted earnings per diluted share | $3.21 | $3.71 | Adjusted EPS Reconciliation (H1) | (in millions, except per share) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Adjusted net income (common) | $282.9 | $391.3 | | Diluted shares | 51.3 | 52.4 | | Adjusted earnings per diluted share | $5.51 | $7.47 | EBITDA and Adjusted EBITDA by Segment Reconciles net income to Adjusted EBITDA by segment, with Q2 2024 total Adjusted EBITDA at $400.1 million and a 7.3% margin Q2 2024 Adjusted EBITDA by Segment | Segment (in millions) | Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | | EES | $194.9 | 9.0% | | CSS | $150.8 | 8.1% | | UBS | $173.5 | 12.0% | | Total | $400.1 | 7.3% | H1 2024 Adjusted EBITDA by Segment | Segment (in millions) | Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | | EES | $360.7 | 8.4% | | CSS | $278.0 | 7.9% | | UBS | $342.9 | 11.3% | | Total | $740.5 | 6.8% | Financial Leverage and Free Cash Flow Details financial leverage and free cash flow, with leverage at 2.9x and H1 2024 free cash flow at $497.3 million Financial Leverage Ratio | Metric | As of June 30, 2024 | | :--- | :--- | | TTM Adjusted EBITDA | $1,582.6 million | | Total debt, net of cash | $4,554.6 million | | Financial leverage ratio | 2.9x | Free Cash Flow Reconciliation | (in millions) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Cash flow provided by operations | $522.5 | $62.2 | | Less: Capital expenditures | $(41.2) | $(44.3) | | Add: Other adjustments | $16.0 | $9.4 | | Free cash flow | $497.3 | $27.3 |