WESCO International(WCC) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Management Commentary Management highlights strong sales momentum in the first half of 2025, outperforming the market with accelerating organic sales growth, reaching 7% in Q2 - Organic sales growth accelerated from 6% in Q1 to 7% in Q2, with preliminary July sales per workday up approximately 10% year-over-year[4] - Total data center sales surpassed $1 billion in the quarter, marking a new record and a 65% increase versus the prior year[4] - The company redeemed its preferred stock in June, which is expected to improve cash flow and EPS run rates, targeting over 75% of free cash flow for debt reduction, stock buybacks, and acquisitions[5] - The full-year 2025 organic sales growth outlook has been raised, while the EPS mid-point is maintained, supported by secular trends in AI-driven data centers, electrification, and automation[5] Second Quarter 2025 Highlights Wesco reported a 7.7% year-over-year increase in net sales for Q2 2025, with organic sales up 7.2%, and adjusted diluted EPS grew 6% YoY to $3.39 Q2 2025 Key Metrics | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Reported Net Sales | - | Up 7.7% | | Organic Sales | - | Up 7.2% | | Data Center Sales | > $1 billion | Up ~65% | | Adjusted Diluted EPS | $3.39 | Up 6% | | Adjusted EBITDA Margin | 6.7% | Up 90 bps sequentially | - Backlog showed strength, increasing year-over-year and sequentially across all three business units[6] Financial Performance Analysis Key Financial Highlights (GAAP & Non-GAAP) For Q2 2025, net sales increased 7.7% YoY to $5.90 billion, while GAAP net income attributable to common stockholders decreased 13.1% to $189.2 million, with operating cash flow significantly improving to an inflow of $107.8 million Q2 & H1 2025 Financial Performance Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | GAAP Results | | | | | | | | Net Sales | $5,899.6 | $5,479.7 | 7.7% | $11,243.3 | $10,829.7 | 3.8% | | Net Income (Common) | $189.2 | $217.7 | (13.1)% | $293.2 | $319.2 | (8.1)% | | Diluted EPS | $3.83 | $4.28 | (10.5)% | $5.92 | $6.22 | (4.8)% | | Operating Cash Flow | $107.8 | $(223.8) | 148.2% | $135.8 | $522.5 | (74.0)% | | Non-GAAP Results | | | | | | | | Organic Sales Growth | 7.2% | (0.8)% | N/A | 6.4% | (2.0)% | N/A | | Adjusted EBITDA | $394.2 | $400.1 | (1.5)% | $704.9 | $740.5 | (4.8)% | | Adjusted Diluted EPS | $3.39 | $3.21 | 5.6% | $5.60 | $5.51 | 1.6% | Net Sales Analysis Q2 2025 organic sales grew 7.2% YoY, driven by volume and price growth in the CSS and EES segments, which offset a volume decline in the UBS segment, with backlog increasing 11% YoY - Q2 organic sales growth of 7.2% was driven by the CSS and EES segments, while the UBS segment experienced a volume decline[11] - Backlog at the end of Q2 2025 increased by 11% year-over-year and approximately 5% sequentially[11] Profitability Analysis Gross margin decreased to 21.1% in Q2 2025 from 21.9% in Q2 2024 due to product mix, while SG&A expenses rose, yet Adjusted EBITDA margin improved 90 basis points sequentially to 6.7% - Gross margin for Q2 and H1 2025 was 21.1%, down from 21.9% and 21.6% in the respective prior-year periods, driven by product mix in the EES and CSS segments[9] - Q2 SG&A expenses increased due to higher salaries, benefits, and operational costs, with Adjusted SG&A as a percentage of sales at 14.6%, slightly down from 14.7% in Q2 2024, showing operating leverage[10] - Q2 Adjusted EBITDA decreased slightly YoY but increased 90 basis points sequentially, reflecting lower gross margin offset by operating leverage on higher sales[16] Cash Flow and EPS Analysis Adjusted EPS for Q2 2025 increased to $3.39, benefiting from lower interest expense and favorable foreign currency fluctuations, while operating cash flow was a net inflow of $107.8 million, a significant turnaround from the prior year - The increase in Q2 adjusted EPS was primarily driven by lower interest expense from debt refinancing, favorable foreign currency exchange impacts, and a reduction in outstanding shares[14] - Q2 operating cash inflow of $107.8 million was driven by net income and an increase in accounts payable, which offset cash used for increased trade accounts receivable and inventories[15] Consolidated Financial Statements Condensed Consolidated Statements of Income For the three months ended June 30, 2025, Wesco reported net sales of $5.90 billion and net income attributable to common stockholders of $189.2 million, or $3.83 per diluted share, with both periods showing a YoY decline in net income and EPS Q2 2025 Income Statement Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $5,899.6 | $5,479.7 | | Income from operations | $322.2 | $323.5 | | Net income attributable to common stockholders | $189.2 | $217.7 | H1 2025 Income Statement Highlights (in millions) | Line Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net sales | $11,243.3 | $10,829.7 | | Income from operations | $563.1 | $586.5 | | Net income attributable to common stockholders | $293.2 | $319.2 | Condensed Consolidated Balance Sheets As of June 30, 2025, Wesco's total assets stood at $16.20 billion, up from $15.06 billion at year-end 2024, driven by higher trade accounts receivable, inventories, and accounts payable, with total debt increasing to $5.67 billion Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $9,243.6 | $8,351.4 | | Total assets | $16,202.5 | $15,061.4 | | Total current liabilities | $4,431.2 | $3,804.0 | | Long-term debt, net | $5,641.2 | $5,045.5 | | Total liabilities | $11,447.5 | $10,095.9 | | Total stockholders' equity | $4,755.0 | $4,965.5 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $135.8 million, a significant decrease from $522.5 million in the prior year, primarily due to larger increases in trade receivables and inventories, with financing activities including debt borrowings, stock repurchases, and preferred stock redemption H1 2025 Cash Flow Summary (in millions) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $135.8 | $522.5 | | Net cash (used in) provided by investing activities | $(76.9) | $269.1 | | Net cash used in financing activities | $(108.3) | $(581.4) | | Net change in cash and cash equivalents | $(35.6) | $192.4 | - Financing activities in H1 2025 included net debt borrowings of $605.0 million, redemption of preferred stock for $540.3 million, and repurchases of common stock for $50.0 million[31] Non-GAAP Financial Measures & Reconciliations Organic Sales Growth Reconciliation In Q2 2025, total organic sales grew 7.2% YoY, led by the Communications and Security Solutions (CSS) segment with 17.3% growth and the Electrical and Electronic Solutions (EES) segment with 6.0% growth, while the Utility and Broadband Solutions (UBS) segment saw a decline of 4.4% Q2 2025 Organic Sales Growth by Segment (YoY) | Segment | Reported Growth | Organic Growth | | :--- | :--- | :--- | | EES | 5.8% | 6.0% | | CSS | 19.0% | 17.3% | | UBS | (4.5)% | (4.4)% | | Total | 7.7% | 7.2% | Q2 2025 Organic Sales Growth by Segment (Sequential) | Segment | Reported Growth | Organic Growth | | :--- | :--- | :--- | | EES | 9.3% | 4.9% | | CSS | 13.2% | 8.9% | | UBS | 7.7% | 4.1% | | Total | 10.4% | 6.2% | Adjusted EBITDA and EPS Reconciliation Adjusted EBITDA for Q2 2025 was $394.2 million (6.7% margin), a slight decrease from Q2 2024, with the CSS segment being the largest contributor, while adjusted diluted EPS rose to $3.39, up from $3.21 in the prior-year quarter Q2 2025 Adjusted EBITDA by Segment (in millions) | Segment | Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | | EES | $182.9 | 8.1% | | CSS | $198.9 | 8.8% | | UBS | $143.7 | 10.4% | | Total | $394.2 | 6.7% | Reconciliation to Adjusted EPS (Q2 2025) | Metric | Amount (in millions) | | :--- | :--- | | Net income attributable to common stockholders (GAAP) | $189.2 | | Adjustments (net) | $(21.7) | | Adjusted net income attributable to common stockholders | $167.5 | | Diluted shares | 49.4 | | Adjusted earnings per diluted share | $3.39 | Financial Leverage and Free Cash Flow Reconciliation The company's financial leverage ratio increased to 3.4x as of June 30, 2025, up from 2.9x at the end of 2024, reflecting an increase in net debt, while free cash flow for Q2 2025 was an inflow of $86.5 million, a substantial improvement from the prior year Financial Leverage Ratio | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Adjusted EBITDA (TTM) | $1,473.6M | $1,509.1M | | Total debt, net of cash | $5,056.0M | $4,409.5M | | Financial leverage ratio | 3.4x | 2.9x | Free Cash Flow (in millions) | Period | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Cash flow from operations | $107.8 | $(223.8) | $135.8 | $522.5 | | Free Cash Flow | $86.5 | $(234.1) | $95.9 | $497.3 | Other Information Company Overview and Forward-Looking Statements Wesco International is a Fortune 500 company with approximately $22 billion in annual sales in 2024, providing B2B distribution, logistics, and supply chain solutions, with the report containing forward-looking statements subject to various risks and uncertainties - Wesco is a FORTUNE 500® company with approximately $22 billion in annual sales in 2024, employing around 20,000 people across 700 sites in 50 countries[19] - The report includes forward-looking statements subject to risks such as failure to integrate acquisitions, interest rate fluctuations, supply chain disruptions, and geopolitical issues[20][21] Webcast Information Wesco will host a webcast and teleconference to discuss its second quarter 2025 earnings on Thursday, July 31, 2025, at 10:00 a.m. E.T., accessible via the Investor Relations section of the company's website - A webcast to discuss Q2 2025 earnings is scheduled for Thursday, July 31, 2025, at 10:00 a.m. E.T.[18]