WESCO International(WCC)2025-05-01 13:00Financial Data and Key Metrics Changes - The company reported a 6% organic sales growth in the first quarter, exceeding expectations, driven primarily by a 70% increase in the data center business and high single-digit growth in OEM and broadband sectors [4][5][14] - Gross margin remained stable sequentially and adjusted EBITDA margin decreased by 60 basis points year-over-year, primarily due to project and product mix [14][15] - Adjusted earnings per share were $2.21, down 4% from the prior year [15] Business Line Data and Key Metrics Changes - The data center business was a significant growth driver, up 70% year-over-year, while OEM and broadband businesses also saw high single-digit growth [5][14] - EES organic sales increased by 3%, but reported sales were flat due to foreign exchange headwinds and one less workday [17] - CSS sales grew 18% year-over-year on an organic basis, with data center solutions up more than 65% [19][20] Market Data and Key Metrics Changes - The utility market continued to experience softness due to customer destocking and lower project activity levels, with expectations for growth returning in the second half of the year [26][27] - Broadband business showed high single-digit growth, particularly in Canada, while UBS backlog was down 13% year-over-year but up 13% sequentially [27] Company Strategy and Development Direction - The company is focused on debt reduction and stock repurchases while investing in tech-enabled business transformation and managing M&A opportunities [8][41] - The strategic emphasis on data centers is expected to drive growth, with a reaffirmed full-year outlook for reported sales growth increased from mid-teens to about 20% [36][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty surrounding tariffs and their potential impact on the global economy but emphasized a focus on controllable factors such as cross-sell initiatives and operational improvements [9][39] - The company expects to deliver between $600 million to $800 million in free cash flow for 2025, with a focus on high-return opportunities [40] Other Important Information - The company issued $800 million in senior notes to redeem preferred stock and strengthen its balance sheet, with an estimated annualized net income and cash flow benefit of approximately $30 million [6][30] - Backlog increased sequentially in all three business units, indicating positive momentum moving into the second quarter [9][38] Q&A Session Summary Question: Clarification on revised outlook regarding tariffs - Management confirmed that no tariff-related price increases were incorporated into the outlook, which assumes organic growth rates of 2.5% to 6.5% [47][48] Question: Supplier price increases and their impact - Management noted that supplier price increases were down in Q1 but have significantly increased in Q2, with average price increases moving to high single digits [60][61] Question: Confidence in utility market recovery - Management expressed confidence in a return to growth in the utility market in the second half of the year, supported by ongoing customer engagement and new account wins [64][68] Question: Data center growth and customer engagement - Management highlighted strong momentum in the data center business, with customers increasing their scope of business with WESCO, including a focus on AI-driven data center builds [76][83] Question: Pricing dynamics across business units - Management indicated that pricing pressures are more pronounced in the EES and utility businesses compared to CSS, which has a more stable supplier base [100][102]