01—Abstract
Summary
Summary of the 8-K filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Wesco International, Inc. reported second-quarter 2024 results in a press release furnished as Exhibit 99.1.
Net sales were $5.5 billiona, down 4.6% year over year, with organic sales down 0.8% and up 4.7% sequentially. Operating profit was $323.5 million, or a 5.9% operating margin, compared with $363.8 million a year earlier. Net income attributable to common stockholders was $217.7 million, or $4.28 per diluted share, versus $3.41 in the prior-year quarter.
On an adjusted basis, earnings per diluted share were $3.21b, down 13.5% year over year, and adjusted EBITDA margin was 7.3%. Operating cash flow was an outflow of $223.8 million for the quarter, driven by working capital changes, while first-half operating cash flow was an inflow of $522.5 million and free cash flow was $497.3 million. The quarter included the completion of the divestiture of the Wesco Integrated Supply (WIS) business on April 1, 2024, which produced a $102.9 million gain on sale.
The company used the net proceeds to complete $300 millionc of share repurchases. Management said second-quarter results were somewhat below expectations, citing a significant slowdown in purchases by utility customers, while data center sales in its Wesco Data Center Solutions business rose by double digits. Management lowered its full-year outlook, now expecting organic sales growth of (1.5)% to 0.5% and adjusted EBITDA margin of 7.0% to 7.3%, and reaffirmed free cash flow of $800 million to $1 billion.
The company expects the mixed economic environment and utility and broadband purchasing delays to continue through the second half of 2024. The filing also furnishes a slide presentation for investors in Exhibit 99.2, which notes an Investor Day scheduled for September 26.
02—Key points
Key Highlights
- Net sales of $5.5 billion for Q2 2024, down 4.6% year over year; organic sales down 0.8% and up 4.7% sequentially
- Diluted EPS of $4.28 on a GAAP basis; adjusted diluted EPS of $3.21, down 13.5% year over year
- Operating profit of $323.5 million (5.9% operating margin); adjusted EBITDA margin of 7.3%, up 90 basis points sequentially
- WIS divestiture completed April 1, 2024, with a $102.9 million gain; net proceeds used to complete $300 million of share repurchases
- Q2 operating cash flow was an outflow of $223.8 million, while first-half operating cash flow was $522.5 million and free cash flow was $497.3 million
- Full-year 2024 outlook reduced: organic sales growth of (1.5)% to 0.5% and adjusted EBITDA margin of 7.0% to 7.3%; free cash flow outlook of $800 million to $1 billion reaffirmed
- Utility customer purchasing slowdown and destocking weighed on UBS results; backlog declined 10% year over year
03—Questions
Frequently Asked Questions
Why did Wesco reduce its full-year 2024 outlook?
Management said it expects the mixed economic environment and customer purchasing delays in utility and broadband to continue through the second half of 2024, and it now expects organic sales growth of (1.5)% to 0.5% and adjusted EBITDA margin of 7.0% to 7.3%. Management noted that quoting, bid activity, and backlog remain healthy.
What drove the decline in adjusted earnings per share?
Adjusted diluted EPS fell to $3.21 from $3.71, a decrease of 13.5% year over year. The filing attributes the change to lower sales volume in the EES and UBS segments and to higher SG&A costs to operate facilities, partially offset by the WIS divestiture and lower payroll-related expenses.
Why was operating cash flow negative in the second quarter?
The company reported a Q2 operating cash outflow of $223.8 million, primarily from changes in net working capital. Accounts payable fell by $279.0 million on the timing of inventory purchases and supplier payments, and trade receivables rose by $142.7 million on the timing of customer receipts.
How did Wesco use the proceeds from the WIS divestiture?
The company utilized the net proceeds from the divestiture of Wesco Integrated Supply, completed April 1, 2024, to repurchase $300 million of its common stock in the second quarter.
04—Continue