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Wesco International 8-K Report, Financial Results (Feb 13, 2024)

Reports
Earnings & Results·Regulation FD·Exhibits & Filings
Filing Date
Filed February 13, 2024
Period End
February 13, 2024
Security
WCC
In the record · 2016–202610-K1210-Q338-K143

WCC filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 143 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Mar ’18Mar ’18
  2. Leadership change8-K · Jun ’20Jun ’20
  3. Material agreement8-K · Nov ’22Nov ’22
  4. Material agreement8-K · Sep ’26Sep ’26

01—Abstract

Summary

Summary of the 8-K filed February 13, 2024. Cited figures are marked; the original filing is the authoritative source.

WESCO International, Inc. reported fourth-quarter 2023 net sales of $5.5 billiona, down 1.5% from $5.6 billion a year earlier, with organic sales declining 2.6%.

Operating profit was $315.8 millionb, or 5.8% of net sales, compared with $381.8 million, or 6.9%, in the prior-year quarter. Adjusted EBITDA margin was 7.0%, and adjusted diluted earnings per share were $2.65, versus $4.13 a year earlier. Management described fourth-quarter results as below its expectations, citing lower stock and flow sales and project delays.

Backlog at year-end was down 10% from the end of the fourth quarter of 2022. For full year 2023, net sales were a record $22.4 billionc, up 4.5%, with organic sales up 3.2%. Operating profit was $1,406.4 million, or 6.3% of net sales, and adjusted EBITDA was $1,705.3 million, or a 7.6% margin, down 50 basis points year over year.

Net income attributable to common stockholders was $708.1 milliond, and adjusted earnings per diluted share were $14.60, down 11.1%. Operating cash flow was $493.2 million, and free cash flow was $443.6 million. For 2024, the company expects sales growth of 1% to 4% and an adjusted EBITDA margin of 7.5% to 7.9%, with free cash flow of approximately $600 million to $800 million.

It plans to increase the common stock dividend by 10% to $1.65 per year, continue share repurchases, and lower its target financial leverage range to 1.5x to 2.5x net debt to adjusted EBITDA. Financial leverage was 2.8x at December 31, 2023.

02—Key points

Key Highlights

  1. Q4 2023 net sales of $5.5 billion declined 1.5%; organic sales declined 2.6%, and operating margin was 5.8% versus 6.9% a year earlier.
  2. Full-year 2023 net sales reached a record $22.4 billion, up 4.5%, with organic growth of 3.2%, driven mainly by price inflation.
  3. Full-year adjusted EBITDA was $1,705.3 million, a 7.6% margin, and adjusted diluted EPS fell to $14.60 from $16.42, down 11.1%.
  4. Gross margin declined to 21.6% for 2023 from 21.8%, reflecting lower supplier volume rebates and sales mix shifts.
  5. 2024 outlook calls for sales growth of 1% to 4%, an adjusted EBITDA margin of 7.5% to 7.9%, and free cash flow of approximately $600 million to $800 million.
  6. The dividend is planned to rise 10% to $1.65 per year, and the target leverage range is lowered to 1.5x to 2.5x, with leverage at 2.8x at year-end 2023.
  7. Backlog at December 31, 2023 declined 10% year over year, while CSS and UBS posted record full-year sales.

03—Questions

Frequently Asked Questions

  1. Why did fourth-quarter results fall short of expectations?

    Management attributed the shortfall to lower stock and flow sales and delays in certain projects expected to ship in December. Sales declined in construction and original equipment manufacturer (OEM) markets, and broadband sales fell more than expected. Organic sales declined 2.6%, and gross margin declined to 21.4% from 21.9%.

  2. How did the Anixter integration affect results?

    Management described the three-year Anixter integration as successfully completed. It reported sales increasing 30% and adjusted EBITDA increasing 89% versus 2019 standalone results, with EBITDA margin expansion of 240 basis points. Merger-related and integration costs were $55.4 million in 2023, compared with $67.4 million in 2022.

  3. What are the company's capital return plans and leverage targets?

    The company plans to raise its common stock dividend by 10% to $1.65 per year and continue its share repurchase program. It is lowering its target financial leverage range to 1.5x to 2.5x net debt to adjusted EBITDA. Financial leverage was 2.8x at December 31, 2023, and the company returned about $150 million of cash to common shareholders in 2023 through $75 million of repurchases and $77 million of dividends.

  4. What does the 2024 outlook assume?

    The outlook projects sales growth of 1% to 4%, including an expected contribution of about one percent from carryover pricing and two additional workdays. It projects an adjusted EBITDA margin of 7.5% to 7.9%, adjusted diluted EPS of $13.75 to $15.75, and free cash flow of approximately $600 million to $800 million. Management noted that election-cycle uncertainty, easing inflation, geopolitical developments, and short-term borrowing rates could affect demand.

04—Continue

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