WESCO International(WCC) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements and notes for periods ended June 30, 2025 and 2024 are presented Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (In millions) | Item | June 30, 2025 | December 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 | | Total liabilities | $11,447.5 | $10,095.9 | | Total stockholders' equity | $4,755.0 | $4,965.5 | - Total assets increased by $1,141.1 million from December 31, 2024, to June 30, 2025, primarily driven by increases in trade accounts receivable and inventories[12] - Total liabilities increased by $1,351.6 million, mainly due to higher accounts payable and long-term debt[12] Condensed Consolidated Statements of Income and Comprehensive Income Condensed Consolidated Statements of Income (In millions, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $5,899.6 | $5,479.7 | $11,243.3 | $10,829.7 | | Income from operations | $322.2 | $323.5 | $563.1 | $586.5 | | Net income attributable to WESCO International, Inc. | $174.5 | $232.1 | $292.9 | $347.9 | | Basic EPS | $3.88 | $4.34 | $6.01 | $6.32 | | Diluted EPS | $3.83 | $4.28 | $5.92 | $6.22 | - Net sales increased by 7.7% for the three months ended June 30, 2025, and by 3.8% for the six months ended June 30, 2025, compared to the prior year periods[13] - Net income attributable to WESCO International, Inc. decreased by $57.6 million (24.8%) for the three months and $55.0 million (15.8%) for the six months ended June 30, 2025, year-over-year[13] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (In millions) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 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 | | Cash and cash equivalents at end of period | $667.0 | $716.5 | - Net cash provided by operating activities significantly decreased from $522.5 million in H1 2024 to $135.8 million in H1 2025, primarily due to changes in working capital, including increases in trade accounts receivable and inventories[16][190][191] - Investing activities shifted from providing $269.1 million in H1 2024 (due to divestiture proceeds) to using $76.9 million in H1 2025 (due to acquisitions and capital expenditures)[16][195][196] Condensed Consolidated Statements of Stockholders' Equity Changes in Stockholders' Equity (In millions) | Item | Balance, Dec 31, 2024 | Balance, June 30, 2025 | | :--------------------------------- | :-------------------- | :-------------------- | | Total WESCO International, Inc. stockholders' equity | $4,970.7 | $4,762.2 | | Noncontrolling interests | $(5.2) | $(7.2) | | Total stockholders' equity | $4,965.5 | $4,755.0 | - Total stockholders' equity decreased by $210.5 million from December 31, 2024, to June 30, 2025, primarily influenced by the redemption of preferred stock and common stock repurchases, partially offset by net income and foreign currency translation adjustments[12][18] - The company redeemed all 21,612 outstanding shares of its Series A Preferred Stock for $540.3 million in June 2025, resulting in a $27.6 million gain recognized as income attributable to common stockholders[18][57] Notes to Condensed Consolidated Financial Statements 1. Organization - WESCO International, Inc. is a leading provider of business-to-business distribution, logistics services, and supply chain solutions[23] - The Company operates through three strategic business units: Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility & Broadband Solutions (UBS)[23] 2. Accounting Policies - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with Rule 10-01 of Regulation S-X and should be read with the Annual Report on Form 10-K for December 31, 2024[24] - A portion of the EES segment was moved to the CSS segment in Q1 2025 due to operational realignment, and prior period segment financial information has been recast[27] - The Company adopted ASU 2023-07 (Segment Reporting) in Q1 2025, resulting in additional disclosures of certain expenses at the reportable segment level[28] 3. Revenue Net Sales by Geography (In millions) | Geography | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $4,386.9 | $4,050.5 | $8,361.5 | $8,048.1 | | Canada | $804.0 | $744.4 | $1,516.8 | $1,462.9 | | Other International | $708.7 | $684.8 | $1,365.0 | $1,318.7 | | Total by geography | $5,899.6 | $5,479.7 | $11,243.3 | $10,829.7 | - Deferred revenue decreased from $141.8 million at December 31, 2024, to $108.7 million at June 30, 2025[32] - Variable consideration, including customer volume rebates, returns, and discounts, reduced revenue by approximately $109.4 million for Q2 2025 and $222.4 million for YTD June 30, 2025[33] 4. Acquisitions and Divestitures - On January 2, 2025, Wesco acquired Industrial Software Solutions (ISS) for $36.3 million cash, allocating $20.1 million to goodwill in the EES segment[35] - On December 5, 2024, Wesco acquired Ascent, LLC for $179.2 million, net of cash, assigning $118.4 million to goodwill in the CSS segment[36][37] - On April 1, 2024, Wesco divested its Wesco Integrated Supply (WIS) business for $354.9 million, recognizing a gain of $122.2 million[42] 5. Goodwill and Intangible Assets Goodwill by Reportable Segment (In millions) | Segment | January 1, 2025 | June 30, 2025 | | :------ | :-------------- | :------------ | | EES | $799.3 | $848.2 | | CSS | $1,347.0 | $1,355.8 | | UBS | $1,133.8 | $1,147.7 | | Total | $3,280.1 | $3,351.7 | - Goodwill increased by $71.6 million from January 1, 2025, to June 30, 2025, primarily due to adjustments for acquisitions ($20.4 million) and foreign currency exchange rate changes ($51.2 million)[43] Intangible Assets, Net (In millions) | Intangible Asset | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Trademarks (Indefinite) | $791.9 | $789.7 | | Customer relationships | $1,026.0 | $1,026.0 | | Distribution agreements | $1.5 | $1.5 | | Trademarks (Finite) | $2.6 | $3.8 | | Software | $14.9 | $14.9 | | Total Net Carrying Amount | $1,815.1 | $1,835.9 | 6. Stock-Based Compensation - Stock-based compensation awards include stock options, stock-settled stock appreciation rights, restricted stock units, and performance-based awards, vesting typically over three years[45][46] Stock-Based Awards Granted (Weighted-average fair value) | Award Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Stock options | $76.72 | $72.05 | | Restricted stock units | $179.33 | $157.19 | | Performance-based awards | $191.86 | $108.83 | - Total unrecognized compensation expense related to unvested stock-based awards was $82.4 million as of June 30, 2025, expected to be recognized through 2028[53] 7. Stockholders' Equity - The Company repurchased 300,528 shares of common stock for $50.6 million (including excise taxes) during the six months ended June 30, 2025, compared to 2,022,323 shares for $353.5 million in the same period of 2024[55] - All 21,612 outstanding shares of Series A Preferred Stock were redeemed on June 22, 2025, for $540.3 million, resulting in a $27.6 million gain[57] Cash Dividends Paid (In millions) | Stock Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | | Common stock | $44.2 | $41.2 | | Series A Preferred Stock | $27.3 | $28.7 | 8. Earnings Per Share Earnings Per Share Attributable to Common Stockholders | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to common stockholders (in millions) | $189.2 | $217.7 | $293.2 | $319.2 | | Basic EPS | $3.88 | $4.34 | $6.01 | $6.32 | | Diluted EPS | $3.83 | $4.28 | $5.92 | $6.22 | - Diluted EPS decreased by $0.45 (10.5%) for Q2 2025 and $0.30 (4.8%) for YTD June 30, 2025, compared to the prior year periods[62] 9. Debt Outstanding Indebtedness (In millions) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | International lines of credit | $5.6 | $0.6 | | Accounts Receivable Securitization Facility | $1,300.0 | $1,450.0 | | Revolving Credit Facility | $475.0 | $525.0 | | 7.250% Senior Notes due 2028 | $1,321.3 | $1,320.6 | | 6.375% Senior Notes due 2029 | $900.0 | $900.0 | | 6.625% Senior Notes due 2032 | $850.0 | $850.0 | | 6.375% Senior Notes due 2033 | $800.0 | $— | | Finance lease obligations | $63.2 | $57.3 | | Total debt | $5,719.3 | $5,107.7 | | Total long-term debt | $5,641.2 | $5,045.5 | - Total debt increased by $611.6 million from December 31, 2024, to June 30, 2025, primarily due to the issuance of $800 million 6.375% Senior Notes due 2033[64][67] - The net proceeds from the 2033 Notes were used to redeem all outstanding Series A Preferred Stock and repay a portion of the Revolving Credit Facility[69] 10. Pension Plan Settlement - The Anixter Inc. Pension Plan was terminated in 2022 and settled in 2024 through the purchase of single premium annuity contracts for $138.8 million[74] - A settlement cost of $5.5 million was recognized during the six months ended June 30, 2024, related to unrealized losses[75] 11. Fair Value of Financial Instruments - The fair value of fixed-rate debt was $3,984.9 million as of June 30, 2025, compared to its carrying value of $3,875.5 million[80] - Foreign currency forward contracts are used to reduce the effect of foreign currency fluctuations, with gross notional amounts of approximately $414.8 million at June 30, 2025[81][82] 12. Commitments and Contingencies - The Company is subject to various lawsuits and claims related to its business operations[83] - Management believes the ultimate outcome of these matters is not likely to have a material adverse effect on Wesco's financial condition or liquidity[83] 13. Income Taxes Effective Tax Rates | Period | 2025 | 2024 | | :--------------------- | :--- | :--- | | Three Months Ended June 30 | 26.1% | 27.4% | | Six Months Ended June 30 | 25.0% | 25.4% | - The effective tax rate for Q2 2025 was lower due to a higher provision for uncertain tax positions in the prior year[123] - The Company purchased $54.4 million of transferable clean energy tax credits in H1 2025, using $53.3 million for its 2024 U.S. federal income tax liability[86] 14. Business Segments - The Company's reportable segments (EES, CSS, UBS) are evaluated based on adjusted EBITDA[90] Segment Net Sales and Adjusted EBITDA (Three Months Ended June 30, 2025, In millions) | Segment | Net Sales | Adjusted EBITDA | Adjusted EBITDA Margin % | | :------ | :-------- | :-------------- | :----------------------- | | EES | $2,257.8 | $182.9 | 8.1% | | CSS | $2,265.2 | $198.9 | 8.8% | | UBS | $1,376.6 | $143.7 | 10.4% | | Total | $5,899.6 | $525.5 | | Segment Net Sales and Adjusted EBITDA (Six Months Ended June 30, 2025, In millions) | Segment | Net Sales | Adjusted EBITDA | Adjusted EBITDA Margin % | | :------ | :-------- | :-------------- | :----------------------- | | EES | $4,323.1 | $325.5 | 7.5% | | CSS | $4,265.5 | $357.4 | 8.4% | | UBS | $2,654.7 | $282.0 | 10.6% | | Total | $11,243.3 | $964.9 | | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analysis of financial condition and results of operations for Q2 and H1 2025 versus 2024, including non-GAAP measures Company Overview - Wesco is a global provider of business-to-business distribution, logistics services, and supply chain solutions, serving approximately 140,000 customers worldwide[101][102] - The Company operates through three strategic business units: Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility & Broadband Solutions (UBS)[103] - EES serves construction, industrial, and OEM customers; CSS is a global leader in data center, enterprise network, and security solutions; UBS serves utilities and broadband operators in North America[104][105][106] Business Highlights - Reported sales increased by 3.8% for the first six months of 2025, with organic sales growth of 6.4%, primarily driven by the data center business[107] - The Company redeemed all outstanding Series A Preferred Stock for $540.3 million, resulting in a $27.6 million gain and reduced financing costs[108] - Wesco is executing a multi-year Digital and Data Platform (DDP) development to unify operations and improve efficiency, and is positioned to benefit from secular growth trends like AI-driven data centers and electrification[110][111] Results of Operations Second Quarter of 2025 versus Second Quarter of 2024 Q2 2025 vs. Q2 2024 Financial Performance (In millions, except EPS) | Item | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :----------------------------------- | :------ | :------ | :--------- | :--------- | | Net Sales | $5,899.6 | $5,479.7 | $419.9 | 7.7% | | Cost of Goods Sold | $4,656.9 | $4,281.7 | $375.2 | 8.8% | | SG&A Expenses | $872.2 | $828.4 | $43.8 | 5.3% | | Income from Operations | $322.2 | $323.5 | $(1.3) | (0.4)% | | Interest Expense, net | $92.9 | $98.8 | $(5.9) | (6.0)% | | Other Income, net | $(7.3) | $(95.9) | $88.6 | (92.4)% | | Provision for Income Taxes | $61.8 | $87.8 | $(26.0) | (29.6)% | | Net Income Attributable to Common Stockholders | $189.2 | $217.7 | $(28.5) | (13.1)% | | Diluted EPS | $3.83 | $4.28 | $(0.45) | (10.5)% | | Adjusted EBITDA | $394.2 | $400.1 | $(5.9) | (1.5)% | - Organic sales for Q2 2025 grew by 7.2%, driven by approximately 6% volume increase in CSS and EES, partially offset by UBS decline, and 1% price impact[114] - Cost of goods sold as a percentage of net sales increased by 80 basis points to 78.9% in Q2 2025, reflecting lower gross margins across all segments[115] Six Months Ended June 30, 2025 versus Six Months Ended June 30, 2024 H1 2025 vs. H1 2024 Financial Performance (In millions, except EPS) | Item | H1 2025 | H1 2024 | Change ($) | Change (%) | | :----------------------------------- | :------ | :------ | :--------- | :--------- | | Net Sales | $11,243.3 | $10,829.7 | $413.6 | 3.8% | | Cost of Goods Sold | $8,875.0 | $8,493.8 | $381.2 | 4.5% | | SG&A Expenses | $1,708.5 | $1,657.8 | $50.7 | 3.1% | | Income from Operations | $563.1 | $586.5 | $(23.4) | (4.0)% | | Interest Expense, net | $179.2 | $193.2 | $(14.0) | (7.2)% | | Other Income, net | $(7.1) | $(74.3) | $67.2 | (90.4)% | | Provision for Income Taxes | $97.9 | $118.7 | $(20.8) | (17.5)% | | Net Income Attributable to Common Stockholders | $293.2 | $319.2 | $(26.0) | (8.1)% | | Diluted EPS | $5.92 | $6.22 | $(0.30) | (4.8)% | | Adjusted EBITDA | $704.9 | $740.5 | $(35.6) | (4.8)% | - Organic sales for H1 2025 grew by 6.4%, driven by approximately 5% volume increase in CSS and EES, partially offset by UBS decline, and 1% price impact[145] - Cost of goods sold as a percentage of net sales increased by 50 basis points to 78.9% in H1 2025, reflecting lower gross margins across all segments[146] Liquidity and Capital Resources - As of June 30, 2025, Wesco had approximately $1.8 billion in available liquidity, including $1.2 billion from its Revolving Credit Facility, $250.0 million from its Receivables Facility, and $350.5 million in available cash[175] - Approximately 68% of the Company's debt portfolio consisted of fixed-rate debt as of June 30, 2025[178] Financial Leverage Ratio (Non-GAAP) | Period | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Financial leverage ratio | 3.4x | 2.9x | Contractual Cash Obligations and Other Commercial Commitments - There were no material changes to contractual obligations and other commercial commitments since the Annual Report on Form 10-K for December 31, 2024[199] Seasonality - Operating results are not significantly affected by seasonal factors, though sales in Q1 and Q4 can be impacted by weather[200] Critical Accounting Estimates - No significant changes to critical accounting estimates were disclosed since the Annual Report on Form 10-K for December 31, 2024[201] Recent Accounting Standards - Refer to Note 2, 'Accounting Policies,' for a description of recently adopted and issued accounting standards[202] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to Item 2 and Item 1A for discussions on market risks - For changes to market risks, refer to Part I, Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and Part II, Item 1A, 'Risk Factors'[207] Item 4. Controls and Procedures Management confirmed effective disclosure controls and internal control over financial reporting as of June 30, 2025 - Disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2025[208] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[209] - The multi-year development and implementation of a new Digital and Data Platform (DDP) may affect internal control processes, but current quarter developments have not materially affected them[211][212] PART II—OTHER INFORMATION Item 1. Legal Proceedings The Company faces various lawsuits and claims, with no anticipated material adverse effect on financial condition or liquidity - The Company is subject to various lawsuits and claims related to its business[214] - Management does not believe the ultimate outcome of these pending matters is likely to have a material adverse effect on Wesco's financial condition or liquidity[214] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for December 31, 2024[215] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details of common stock repurchases and Series A Preferred Stock redemption during the three months ended June 30, 2025 Issuer Purchases of Common Stock (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :----------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------- | | April 1 - April 30, 2025 | 173 | $149.07 | — | | May 1 - May 31, 2025 | 66,213 | $171.00 | 65,000 | | June 1 - June 30, 2025 | 82,876 | $168.78 | 82,300 | | Total | 149,262 | $169.74 | 147,300 | - The Company repurchased 147,300 shares of common stock for $25.0 million under its publicly announced plan during Q2 2025[216] - All 21,612 outstanding shares of Series A Preferred Stock were redeemed on June 22, 2025, at $25,000 per share, totaling $540.3 million[216] Item 6. Exhibits Lists all exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and XBRL files - The exhibits include organizational documents (Certificate of Amendment, Restated Certificate of Incorporation, Amended and Restated By-Laws), certifications from the CEO and CFO, and XBRL interactive data files[217] Signatures Signatures of authorized officers, including EVP and CFO, and SVP, Corporate Controller and Chief Accounting Officer, certifying the report - The report is signed by David S. Schulz, Executive Vice President and Chief Financial Officer, and Matthew S. Kulasa, Senior Vice President, Corporate Controller and Chief Accounting Officer, on July 31, 2025[221]