WESCO International(WCC) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a return to sales growth in Q4 2024, with organic sales up 2% year-over-year, driven by a 70% increase in the global data center business and 20% growth in broadband [6][22] - Free cash flow for Q4 was $268 million, contributing to a record full-year free cash flow of over$ 1 billion, representing 154% of adjusted net income [10][47] - Adjusted earnings per share increased by 19% to $3.16 compared to the prior year [24] Business Line Data and Key Metrics Changes - Electrical and Electronic Solutions (EES) organic sales grew 1% in Q4, while Communications and Security Solutions (CSS) saw an 11% organic sales increase, primarily due to data center solutions [30][35] - Utility and Broadband Solutions (UBS) experienced a 6% decline in organic sales for Q4, with reported sales down 17% due to the divestiture of the integrated supply business [43][46] Market Data and Key Metrics Changes - The utility market faced headwinds from customer destocking and lower project activity, with expectations for recovery in the second half of 2025 [44][54] - Canadian broadband business showed strong growth, with sales up over 20% in Q4 [45] Company Strategy and Development Direction - The company aims for organic sales growth of 2.5% to 6.5% in 2025, with a focus on margin expansion across all business units [14][55] - Strategic acquisitions, including the purchase of Ascent, are intended to enhance service offerings and support growth in the data center space [13][42] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in a recovery for the utility vertical in the second half of 2025, supported by new customer wins and strong secular growth trends [76] - The company anticipates continued growth in the data center business, which is expected to drive overall sales and margin improvements [16][128] Other Important Information - The company plans to increase its common stock dividend by 10% in 2025, reflecting a commitment to returning value to shareholders [15][64] - The company has reduced net debt by$ 431 million and repurchased $425 million of shares in 2024 [14][68] Q&A Session Summary Question: Confidence in utility vertical recovery - Management highlighted new customer wins and discussions with utility customers as reasons for confidence in recovery in the second half of 2025 [74][76] Question: Gross margin expectations - Management confirmed expectations for gross margins to increase slightly throughout 2025, driven by higher supplier volume rebates [78][80] Question: SG&A and incentive compensation - Management clarified that SG&A is expected to increase sequentially due to merit increases and incentive compensation adjustments [92][93] Question: Ascent acquisition sales contribution - Management indicated that Ascent had run rate sales of about$ 115 million per year and contributed significantly to Q4 growth [158] Question: Sales cadence and project timing - Management explained that Q1 sales are expected to be light, with recovery anticipated in the second half of the year, primarily driven by utility growth [150][151]