WESCO International(US:WCC)2021-05-09 12:06Financial Data and Key Metrics Changes - First quarter sales increased by more than 3% year-over-year, with backlog reaching an all-time record level, up more than 20% since December [5][13] - Gross margin improved by 50 basis points year-over-year, reaching 20.1%, the highest since 2016 on a pro forma basis [13][14] - Adjusted EBITDA was $217 million, up $35 million from the prior year, representing 5.4% of sales, a 90 basis point increase [16][20] Business Line Data and Key Metrics Changes - EES segment sales increased by 4% year-over-year, with adjusted EBITDA at 6.5% of sales, up 130 basis points [22][23] - CSS segment sales decreased by 4% year-over-year, but adjusted EBITDA improved to 7.3% of sales, 40 basis points higher than the prior year [24][25] - UBS segment sales were slightly down year-over-year but up 2% on a workday adjusted basis, with adjusted EBITDA at $84 million, up 100 basis points [26] Market Data and Key Metrics Changes - The utility market remains stable, with strong demand for grid modernization and broadband services, benefiting from federal funding initiatives [26][29] - The non-residential construction market is expected to decline, impacting the EES segment, while the CSS segment is poised to benefit from data center growth [29][70] Company Strategy and Development Direction - The company is focused on accelerating integration with Anixter, targeting $170 million in cost synergies for 2021, an increase of $40 million from previous estimates [18][19] - Strategic initiatives include optimizing the supply chain network and enhancing service capabilities through facility consolidation [11][12] - The company is well-positioned to capitalize on growth trends in electrification, automation, communications, and security [12][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic recovery and the company's ability to manage supply chain challenges effectively [39][60] - The outlook for 2021 has been revised upward, with expected sales growth of 4.5% to 7.5% and adjusted EBITDA margin of 5.8% to 6.1% [28][30] - Management highlighted the importance of digital transformation and talent acquisition in driving future growth [62] Other Important Information - The company generated strong free cash flow, representing over 140% of net income, and has reduced net debt by more than $500 million since the merger [27][28] - The effective tax rate is expected to be approximately 22%, slightly lower than previously anticipated [31] Q&A Session Summary Question: Can you discuss the price-cost dynamics and supply chain disruptions? - Management noted inflation in commodity prices and effective execution of gross margin improvement programs, with no material supply chain disruptions observed in Q1 [37][39] Question: Is gross margin expected to rise sequentially throughout the year? - Management indicated that while they do not provide specific guidance, they are focused on continuing gross margin improvement [47][48] Question: What is the breakdown of the $40 million increase in synergies? - The majority of the synergy increase is attributed to SG&A reductions, with some anticipated benefits in gross margin in the second half of 2021 [50][51] Question: How much pricing benefit was realized in Q1? - Pricing was estimated to contribute one to two points of positive impact in Q1, with no specific pricing benefit included in guidance for the remainder of the year [53] Question: What are the secular growth trends in the utility space? - Management confirmed strong secular growth trends in both the utility and broadband sectors, positioning the company favorably for future growth [68][70]