Third Quarter Performance - Record quarterly sales reached $6.2 billion, driven by organic growth across all three business units: CSS up 18%, EES up 12%, and UBS up 3%[7] - Total data center sales amounted to approximately $1.2 billion, a year-over-year increase of roughly 60%[7] - Adjusted EBITDA margin saw a sequential increase of 10 bps due to improved gross margin[7] - Backlog increased by 7% year-over-year[7] - Preliminary October sales per workday showed positive momentum, increasing by approximately 9%[7] Full Year Outlook & Strategic Sales Growth - The company raised its full-year outlook for organic sales growth to 8%-9%, with reported growth expected at 7%-8%[7, 40] - Data Center sales are expected to be up approximately 50%[41] - The company anticipates reported sales between $23.3 billion and $23.6 billion[42] - Adjusted diluted EPS is projected to be in the range of $13.10 to $13.60[42] - Free cash flow is expected to be between $400 million and $500 million[42] Financial Restructuring - The company redeemed $540 million of preferred stock with a 10.625% dividend rate[37] - This refinancing is expected to generate approximately $32 million in annualized benefit to net income and cash flow, and approximately $0.65 annualized benefit to EPS[37]

Financial Data and Key Metrics Changes - Organic sales grew 7% in Q2, following a 6% increase in Q1, with preliminary July sales per workday up approximately 10% year over year [5][12] - Adjusted EBITDA margin increased by 90 basis points sequentially, while adjusted EPS rose 6% compared to the prior year [6][14] - Total data center sales surpassed $1 billion in Q2, marking a 65% year-over-year increase [5][21] Business Line Data and Key Metrics Changes - Communications and Security Solutions (CSS) achieved 17% organic growth, driven by strong data center performance, while Electrical and Electronic Solutions (EES) grew 6% [5][18] - Utility and Broadband Solutions (UBS) experienced a 4% decline in sales, although investor-owned utilities showed signs of recovery [24][27] - CSS data center sales represented nearly 40% of CSS revenue in Q2, up from approximately 30% in the prior year [19][21] Market Data and Key Metrics Changes - The utility market faced headwinds but is expected to return to growth in the second half of the year, with preliminary July sales for UBS showing slight improvement [24][39] - Backlog increased across all business units, with CSS backlog up 36% year over year [40][41] - The overall demand for data centers remains strong, with no slowdown in customer demand reported [19][21] Company Strategy and Development Direction - The company is focused on executing cross-sell initiatives, managing margins, and delivering operational improvements through technology [10][42] - The outlook for organic sales growth has been revised upward to 5% to 7% for the year, driven by strong data center performance and broader electrical sales trends [37][39] - The company plans to prioritize deleveraging the balance sheet while remaining opportunistic regarding share repurchases and acquisitions [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the utility business, supported by trends in electrification and green energy [27][39] - The company acknowledged the uncertainty surrounding tariffs and the overall economy but remains optimistic about demand for data centers and improving electrical end markets [39][40] - Management highlighted the importance of strong customer relationships and visibility into future demand, particularly in the data center segment [65][68] Other Important Information - The company redeemed $540 million of Series A preferred stock, improving its capital structure and extending debt maturities [29][30] - Free cash flow for Q2 was $87 million, representing approximately 45% of adjusted net income, with a trailing twelve-month free cash flow of $644 million [27][28] Q&A Session Summary Question: Clarification on pricing and guidance - Management confirmed that no tariff impacts are included in the second half outlook, and July's strong start reflects genuine demand increase rather than just easier comparisons [49][50] Question: Insights on utility business trends - Management noted that investor-owned utilities returned to growth in Q2, with expectations for public power customers to follow suit in the second half [59][62] Question: Data center growth metrics - Management indicated strong visibility into data center demand, with significant growth in both white space and gray space, particularly driven by AI applications [65][68] Question: Net working capital intensity targets - Management aims to return to pre-COVID levels of around 19% for net working capital intensity, with ongoing improvements noted [79][80] Question: Pricing impacts and inventory gains - Management clarified that known price increases are factored into guidance, but future pricing actions related to tariffs are not included due to uncertainty [84][86]

Financial Performance - Wesco's Q2 2025 reported sales increased by 8% year-over-year, with organic sales up by 7%[10, 9] - Adjusted EBITDA for Q2 2025 was $394 million, representing 6.7% of sales[11] - Data center sales surpassed $1 billion in Q2 2025, showing a 65% year-over-year increase[8] - The company is on track to deliver free cash flow between $600 million and $800 million for the full year 2025[32] Segment Performance - Electrical & Electronic Solutions (EES) organic sales increased by 6% year-over-year in Q2 2025, with an adjusted EBITDA margin of 8.1%[15, 16, 17] - Communications & Security Solutions (CSS) organic sales increased by 17% year-over-year in Q2 2025, with an adjusted EBITDA margin of 8.8%[21, 22, 23] - Utility & Broadband Solutions (UBS) organic sales decreased by 4% year-over-year in Q2 2025, but maintained an adjusted EBITDA margin above 10%[28, 29] Strategic Initiatives and Outlook - Wesco is increasing its full-year 2025 organic sales growth outlook to 5%-7% and reported growth of 4%-6%[8, 41] - The company redeemed $540 million of preferred stock, resulting in an estimated $32 million annualized benefit to net income and cash flow, and approximately $0.65 annualized benefit to EPS[38] - Preliminary July sales per workday are up approximately 10%, indicating increasing sales momentum[8, 46]

Core Viewpoint - WESCO International (WCC) reported a decline in adjusted earnings and net sales for Q1 2025, but showed positive organic sales growth, particularly in the CSS segment, which contributed to a slight increase in share price in pre-market trading [1][2]. Financial Performance - Adjusted earnings for Q1 2025 were $2.21 per share, down 3.9% year over year, missing the Zacks Consensus Estimate by 0.90% [1]. - Net sales were $5.34 billion, a slight decrease of 0.1% year over year, but exceeded the Zacks Consensus Estimate by 2.10% [1]. - Organic sales increased by 5.6% year over year [1]. Segment Performance - EES Segment (38.6% of Net Sales): Sales were $2.07 billion, flat year over year, with organic sales rising 3.4% due to OEM growth [3]. - CSS Segment (37.4% of Net Sales): Sales increased by 17.3% year over year to $2 billion, with organic sales up 18.1%, driven by a 65% surge in Wesco Data Center Solutions [4]. - UBS Segment (23.9% of Net Sales): Sales decreased by 19.2% year over year to $1.28 billion, with organic sales down 4.9%, primarily due to weakness in the utility business [5]. Margin Analysis - Gross margin for Q1 2025 was 21.1%, a contraction of 20 basis points year over year, influenced by lower margins in CSS and EES segments [6]. - Adjusted EBITDA margin declined to 5.8%, down 50 basis points year over year [6]. - Selling, general and administrative expenses rose to $829 million, up 2.3% year over year, with the adjusted operating margin contracting to 4.6% [7]. Balance Sheet & Cash Flow - As of March 31, 2025, cash and cash equivalents were $681.6 million, down from $702.6 million at the end of 2024 [8]. - Long-term debt increased to $5.14 billion from $5.05 billion in the previous quarter [8]. - Cash generated from operations was $28 million, significantly lower than $276.6 million in the previous quarter, with free cash flow reported at $9.4 million compared to $268.4 million previously [8]. 2025 Financial Outlook - WESCO maintains its 2025 outlook, expecting organic sales growth between 2.5% and 6.5%, with reported sales projected to be between $21.8 billion and $22.7 billion [10]. - Adjusted EBITDA margin is anticipated to be between 6.7% and 7.2%, with adjusted diluted EPS expected between $12 and $14.50 per share [11]. - Free cash flow is projected to be between $600 million and $800 million [11].