01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Wesco International, Inc. reported first-quarter 2024 net sales of $5.35 billiona, down 3.1% from $5.52 billion a year earlier, with organic sales declining 3.2% on an approximately 4% volume decline partially offset by about 1% price.
Income from operations fell to $263.0 millionb from $346.4 million, and diluted EPS was $1.95 versus $3.48. Adjusted EBITDA was $340.4 million, compared with $420.7 million, and adjusted diluted EPS was $2.30 versus $3.75 in the prior-year quarter. Results reflect restructuring, digital transformation and pension-related charges in the current period.
Cash flow was strong: operating cash flow was $746.3 millionc, driven largely by a $620.9 million increase in accounts payable, versus cash used in operations of $255.4 million a year earlier. The company issued $900 million of 6.375% senior notes due 2029 and $850 million of 6.625% senior notes due 2032 in March 2024, and intends to use proceeds to redeem its 7.125% notes due 2025 on or after June 15, 2024. Financial leverage was 2.6x at March 31, 2024, down from 2.8x at December 31, 2023, and the company reported $984.1 million of cash and cash equivalents on its balance sheet.
The company agreed to sell its Wesco Integrated Supply business, which closed April 1, 2024 for total consideration of approximately $338.3 milliond, with an expected second-quarter gain of $88.0 million to $108.0 million. The company also repurchased 343,147 shares for $50.5 million during the quarter and paid $20.9 million in common dividends and $14.4 million in preferred dividends.
02—Key points
Key Highlights
- Net sales of $5,350.0 million, down 3.1% year over year; organic sales declined 3.2% on approximately 4% lower volume and about 1% favorable price.
- Income from operations of $263.0 million vs. $346.4 million; diluted EPS of $1.95 vs. $3.48, including restructuring, digital transformation and pension-related charges.
- Adjusted EBITDA of $340.4 million vs. $420.7 million; adjusted diluted EPS of $2.30 vs. $3.75.
- Operating cash flow of $746.3 million, boosted by a $620.9 million increase in accounts payable, compared with $255.4 million of cash used a year earlier.
- Issued $1.75 billion of new senior notes (2029 and 2032) and intends to redeem $1.5 billion of 7.125% notes due 2025 after June 15, 2024.
- Sale of Wesco Integrated Supply business closed April 1, 2024 for approximately $338.3 million, with a expected gain of $88.0 million to $108.0 million in Q2 2024.
- Financial leverage ratio of 2.6x at March 31, 2024, down from 2.8x at December 31, 2023; repurchased $50.5 million of common stock in the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Wesco International kept $0.02.
- Revenue$5.35B100.0%
- Cost of revenue−$4.21B78.7%
- Gross profit$1.14B21.3%
- Operating costs−$874.9M16.4%
- Operating income$263.0M4.9%
- Interest, other & tax−$147.2M2.8%
- Net income$115.8M2.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $5.35B$5.52B | −3.1% |
| Cost of Revenue | $4.21B$4.31B | −2.3% |
| Gross Profit | $1.14B$1.21B | −5.8% |
| SG&A Expenses | $829.40M$817.70M | +1.4% |
| Operating Income | $263.00M$346.40M | −24.1% |
| Net Income | $115.80M$197.10M | −41.2% |
| EPS (Basic) | $1.99$3.58 | −44.4% |
| EPS (Diluted) | $1.95$3.48 | −44.0% |
| Shares Outstanding (Basic) | 50.90M51.00M | −0.2% |
| Shares Outstanding (Diluted) | 51.90M52.50M | −1.1% |
05—Questions
Frequently Asked Questions
Why did Wesco's profitability decline in the first quarter of 2024?
Net sales fell 3.1% on approximately 4% lower volume across all three segments, led by UBS. Cost of goods sold rose to 78.7% of net sales from 78.1%, and SG&A increased $11.7 million to $829.4 million, including $8.0 million of restructuring costs, $6.1 million of digital transformation costs and $4.8 million of excise taxes on excess pension plan assets. Income from operations fell 24.1%.
How strong was the cash flow in the quarter?
Operating cash flow was $746.3 million, compared with cash used in operations of $255.4 million in the first quarter of 2023. The improvement was driven mainly by a $620.9 million increase in accounts payable, which the company attributed to a system conversion, the timing of inventory purchases and a bank holiday at quarter end. Trade receivables increased $116.1 million, partly offsetting the benefit.
What did Wesco do with its debt in 2024?
On March 7, 2024, Wesco Distribution issued $900 million of 6.375% senior notes due 2029 and $850 million of 6.625% senior notes due 2032. Proceeds were used to repay borrowings under the Revolving Credit Facility and a portion of the Receivables Facility, and the company intends to redeem its $1.5 billion of 7.125% senior notes due 2025 on or after June 15, 2024, redrawing under its facilities as needed. Total debt was $5,255.0 million at March 31, 2024.
What is the status of the Wesco Integrated Supply divestiture?
Wesco Distribution agreed on February 22, 2024 to sell its Wesco Integrated Supply business, part of the UBS segment. The sale closed April 1, 2024 for total consideration of approximately $338.3 million, adjusted from a $350.0 million base price. The company expects a gain on sale of $88.0 million to $108.0 million in the second quarter of 2024, and will provide transition services for about nine months.
How much liquidity did Wesco have at quarter end?
As of March 31, 2024, Wesco had approximately $1.7 billion of available borrowing capacity under its Revolving Credit Facility and $846.8 million under its Receivables Facility, plus available cash of $678.8 million, for liquidity of approximately $3.2 billion. The company stated it was in compliance with all financial covenants at quarter end.
06—Continue