01—Abstract
Summary
Summary of the 8-K filed October 31, 2024. Cited figures are marked; the original filing is the authoritative source.
Wesco International, Inc. (NYSE: WCC) reported third-quarter 2024 results on October 31, 2024.
Net sales were $5.5 billiona, down 2.7% year over year, reflecting the Wesco Integrated Supply divestiture; organic sales declined 0.6%, and sales rose 0.1% organically sequentially. Operating profit was $335.6 million, a 6.1% operating margin, compared with $380.5 million in the prior-year quarter. Gross margin improved to 22.1%, up 50 basis points year over year, while adjusted EBITDA margin was 7.3%, down 80 basis points year over year and flat sequentially.
Net income attributable to common stockholders was $189.9 millionb, and diluted EPS was $3.81 versus $4.20 a year earlier. Adjusted diluted EPS was $3.58, down from $4.49. Cash generation was a key bright spot.
Operating cash flow was $302.1 millionc in the quarter and $824.6 million for the first nine months of 2024, versus $423.9 million a year earlier. Free cash flow was $279.5 million in the quarter and $776.8 million year to date. Financial leverage was stable at 2.9x trailing twelve-month adjusted EBITDA, and net debt was reduced by $188 million during the quarter.
The company also repurchased $25 milliond of shares in the quarter. Management reaffirmed its full-year 2024 outlook for sales, profitability and free cash flow.
It highlighted double-digit sales growth in its global data center business, offset by continued weakness in Utility and Broadband Solutions. The company also furnished an investor slide presentation, which indicates that it is currently tracking toward the lower half of the full-year range for sales and adjusted EBITDA margin.
02—Key points
Key Highlights
- Third-quarter net sales of $5.5 billion, down 2.7% year over year; organic sales down 0.6%, primarily due to the Wesco Integrated Supply divestiture.
- Gross margin of 22.1%, up 50 basis points year over year; adjusted EBITDA margin of 7.3%, down 80 basis points year over year and flat sequentially.
- Operating profit of $335.6 million (6.1% of net sales) versus $380.5 million a year earlier; diluted EPS of $3.81 versus $4.20, and adjusted diluted EPS of $3.58 versus $4.49.
- Operating cash flow of $302.1 million in Q3 and $824.6 million year to date, up from $423.9 million; free cash flow of $776.8 million year to date, 153.7% of adjusted net income.
- Financial leverage stable at 2.9x trailing twelve-month adjusted EBITDA; net debt reduced by $188 million in the quarter.
- Data center business grew more than 40% per the investor presentation, with CSS organic sales up 8%, offset by continued weakness in Utility and Broadband Solutions (UBS organic sales down 7%).
- Full-year 2024 outlook reaffirmed for sales, profitability and free cash flow of approximately $800 million to $1 billion.
03—Questions
Frequently Asked Questions
Why did reported net sales decline in the third quarter of 2024?
Net sales fell 2.7% to $5.5 billion, mainly due to the divestiture of the Wesco Integrated Supply business. On an organic basis, which also excludes foreign exchange and workday effects, sales declined 0.6%, reflecting volume declines in the EES and UBS segments that were partially offset by a volume increase in CSS and price inflation in EES and UBS.
Why did adjusted EBITDA margin decline year over year even though gross margin improved?
Gross margin rose to 22.1% from 21.6%, mainly reflecting the Integrated Supply divestiture. However, adjusted SG&A rose to 15.0% of net sales from 13.7%, driven by higher payroll, facilities and transportation costs, which reduced the adjusted EBITDA margin to 7.3% from 8.1%.
How strong was cash flow and what did management do with it?
Operating cash flow was $302.1 million in the quarter and $824.6 million year to date, and free cash flow was $279.5 million in the quarter and $776.8 million year to date. Management used the cash to reduce net debt by $188 million and repurchase $25 million of shares in the quarter.
What is the company's outlook for the remainder of 2024?
Wesco reaffirmed its full-year 2024 outlook for sales, profitability and free cash flow. The accompanying presentation says that if current sales and margin run-rates continue, the company expects to land in the lower half of the full-year range for sales and adjusted EBITDA margin, and it expects continued data center growth and slow purchases by utility customers in the fourth quarter.
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