Brian Begg Vice President & Treasurer
Welcome and WESCO Overview
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Safe Harbor Statement All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to: adverse economic conditions; disruptions in operations or information technology systems; supply chain disruptions, changes in supplier strategy or loss of key suppliers; product or other cost fluctuations; expansion of business activities; personnel turnover or labor cost increases; tax law changes or challenges to tax matters; increase in competition; risks related to acquisitions, including the integration of acquired businesses; exchange rate fluctuations; legal or regulatory matters; litigation, disputes, contingencies or claims; debt levels, terms, financial market conditions or interest rate fluctuations; goodwill or intangible asset impairment; stock market, economic or political instability; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2016 and any subsequent filings with the Securities & Exchange Commission. The following presentation includes a discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be found in the appendix and obtained via WESCO’s website, www.wesco.com.
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
WESCO: A Leading Global Supply Chain Solutions Provider
Capital Projects MRO OEM
…providing world-class brands and industry-leading service capabilities
Founded 1922 in
Pittsburgh, PA
$7.3 Billion in Revenue
One of the world’s largest distributors of electrical, industrial, and
communications products and services
#373 of the Fortune 500
9,000 employees
Including new construction and retrofits, renovations, and upgrades
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
WESCO’s Go-to-Market Strategy
Capital Projects MRO
OEM
WESCO Characteristics
…providing full supply chain solutions to meet customers’ unique requirements
Serving Three Customer Demand Streams
Supporting a broad range of business models:
Standard Distribution Model
Supply Chain Solutions Partner • Integrated Supply
• Global Accounts
• Kitting, assembly and pre-fabrication
• Jobsite and field support
• Engineering and design support
• Local, branch-based distribution
500 Branches
75,000 Customers
1,000,000 SKUs
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
WESCO’s Value Proposition
• Long-term customer relationships and deep familiarity with their operations
– Gaining additional business with existing customers
• Better outcomes for our customers – Identifying opportunities – Selecting the best solution – Reducing their project and
operating risks – Increasing their productivity and
reducing their costs – Supporting their global operations – Simplifying their supply chains and
outsourcing non-core activities
Combining our competitive differentiators…
• A broad product portfolio
• Technical expertise and a wide range of service offerings
• Blue-chip customer and supplier base
• A global footprint
• A culture of customer service excellence, cost control, and lean continuous improvement
…driving deeper customer relationships than traditional distributors and e-commerce providers
…into customized supply chain solutions
…that result in:
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
…providing world class brands when and where needed
Competitive Differentiator: Product Portfolio and Supplier Relationships
Automation, Controls & Motors
8%
Lighting & Sustainability
12%
General Supplies
40%
Communications & Security
15%
Wire, Cable & Conduit
14%
Electrical Distribution & Controls
11%
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
…WESCO adds value throughout the supply chain
CUSTOMERS NEED: Procurement
Warehousing /Logistics Technical expert knowledge An efficient supply chain with
fewer suppliers
WESCO OFFERS: • Deep customer relationships • Product, process, and
technical expertise • Increased scale • Global sourcing • Financial strength and liquidity
SUPPLIERS NEED: Sales
Marketing Delivery Service
(1) Data Source: National Association of Electrical Distributors, 2017 NAED Market Overview, April 2017.
Approximately 75% of electrical products go to market through distribution(1)
The Importance of the Distributor
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
…value-added services drive customer loyalty and long-term relationships
Competitive Differentiator: Service Capabilities
2016 Sales: $7.3B
Our services and technical expertise drive the majority of our product sales
Capital Project Solutions
Supply Chain Solutions
Technical Expert Solutions
Customized Product Solutions
All Other Sales
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
…enabled by investments in technical expertise and digital capabilities
Service Capabilities Examples
Supply Chain Solutions
• Integrated Supply • Global sourcing • Warehousing and logistics • Storeroom management • Vendor-managed inventory • Transaction cost review
Capital Project Solutions
• Engineering and design support • Lean construction processes • Materials management • Pre-fabrication and assembly • Jobsite trailers and “WESCO on
Wheels” customized carts
Technical Expert Solutions
• Energy usage analysis • Lighting renovation and retrofit • Data center assessment • Automation upgrades • Safety assessment and training • Product and application training
Customized Product Solutions
• Kitting • Assembly • Prefabricated systems • Cable management • Process streamlining
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Competitive Differentiator: WESCO’s Global Reach
WESCO Presence Service area
…serving our blue-chip customers wherever they are located
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Cost Leverage
…compares favorably to industry benchmarks
807 798
2015 2016
Sales per Employee ($ Thousands)
NAED: National Association of Electrical Distributors. Source of NAED data: most recent annual benchmark study, published in June 2016.
612 NAED
Operating Expenses (%)
15 15
2015 2016
19% NAED Benchmark
116
2015 - 2016 • Eliminated approximately 1,000 positions • Eliminated or consolidated 40 branches, including our
businesses in Australia and Brazil • Invested in resources to deliver competitive advantage and
improve margin: – Added end market sales & marketing leaders and product
category managers – Established and expanded eCommerce organization – Created WESCO’s first Global Supply Chain organization – Improved IT and business unit finance capabilities
2017 • Adding technical sales resources (reflected in 2017 Outlook) • Continuing to tightly manage operating costs
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
WESCO Performance Objectives and Strategies
• Focus on growth markets • Accelerate One WESCO
growth initiatives • Differentiate through
services • Leverage digital
capabilities • Make accretive
acquisitions
…focused on driving profitable growth and shareholder value
Generate strong free cash flow and allocate capital to drive
growth and shareholder returns
Expand margins
Drive above-market sales growth
• Grow with strategic suppliers
• Simplify and standardize product offerings
• Drive pricing discipline and tools
• Optimize distribution network
• Tightly manage operating costs
Performance Objectives:
Strategies: • Invest in organic growth and acquisition opportunities
• Manage debt within target range
• Repurchase shares
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
WESCO Financial Performance Goals
Drivers
• Working capital management • Prudent capital expenditures
• Operating leverage from top-line growth • Margin improvement initiatives
• Organic growth strategies • Acquisitions
• Effective capital allocation • Focus on improving ROIC • Consistent execution
Performance Goals
Free cash flow greater than 90% of
net income
Double digit EPS growth
Grow faster than the market
Superior investor returns
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Financial Performance
Sales
…solid long-term performance
6% CAGR
5.1
6.1 6.6
7.5 7.9
7.5 7.3
2010 2011 2012 2013 2014 2015 2016
112 134
265
308
231 261
282
2010 2011 2012 2013 2014 2015 2016
Free Cash Flow 109% of Adjusted Net Income
on Average ($ Billions) ($ Millions)
Note: See appendix for non-GAAP reconciliations.
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
1.5
2
2.5
3
3.5
4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Balanced Capital Structure
Leverage (Total Par Debt to TTM EBITDA)
…maintaining fiscal discipline and flexible capital structure
> $1B of free cash flow over
last 4 years
Note: See appendix for non-GAAP reconciliations.
Target Leverage
2.0x – 3.5x
3.4X
2015 2016 2017
Outstanding Debt December 31,
2016 March 31,
2017 Matures
AR Revolver (V) 380 345 2018
Inventory Revolver (V) 4 - 2020
2019 Term Loans (V) 145 130 2019
2021 Senior Notes (F) 500 500 2021
2024 Senior Notes (F) 350 350 2024
Other (V) 24 31 N/A
Total Par Debt 1,403 1,356
Liquidity(1) 705 727
Capital Structure ($ Millions)
V = Variable Rate Debt F = Fixed Rate Debt
(1) = Total availability under asset-backed credit facilities plus invested cash
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017 Acquisitions
325 400
1,500 1,600 1,900 2,000
20102
20112
20124
20143
20153
20161
Acquisition Criteria Consistent with WESCO strategy
Rate of return greater than WESCO risk-adjusted average cost of capital
Accretive in first year of operation
Margins higher than WESCO
Cumulative Acquired Sales
($M, first 12 months)
#
…driving strategic growth and shareholder value
Strategy and Priorities
Acquired Sales by End Market since 2010
CIG Industrial
Utility
Construction
Consolidate core electrical products and services category in North America
Expand into adjacent product and services categories
Follow customers globally and establish local operations in high priority countries.
Markets & Customers
Geographies
Products & Suppliers
Core
1
2
3
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Capital Allocation Strategy
…completed $50M share repurchase in May to offset dilution impact of 2016 & 2017 equity awards
Priorities for Driving Shareholder Value
• Support organic growth
• Fund accretive acquisitions
• Maintain target leverage
• Repurchase shares – Authorization from Board
– Offset dilution from annual equity awards
– Opportunistic purchases
Cash Deployment After Organic Growth Investments
2015 - YTD 2017
Debt Reduction
Acquisitions
Share Repurchase
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Long-Term Growth Algorithm
• Market growth
• 1% to 2% from market outperformance
• 1% to 3% from acquisitions
• ~50% operating profit pull-through on organic growth
− gross margin improvement
− operating cost leverage
• ~30% effective tax rate
Annual Expectations over the Long-Term
• Greater than 90% of net income
…managing the business for strong EPS growth and cash flow
Sales EPS Free Cash Flow
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
0%
2%
4%
6%
8%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
…driven by volume leverage, supply chain initiatives and continued cost focus
Expecting Operating Margin Expansion
DRIVERS: Volume leverage
Procurement, pricing and distribution network optimization
Continued cost focus
EBIT %
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
2017 Priorities
• Return to sales growth −Outperform end markets with One WESCO sales growth initiatives − Invest in and capitalize on growth markets −Maintain focus on execution and sales effectiveness
• Make accretive acquisitions to strengthen portfolio and take market share
• Sustain and expand operating margin − Improve margin through pricing and sourcing initiatives − Deliver productivity through LEAN operational excellence initiatives, organizational
streamlining and branch network optimization efforts
• Maintain strong free cash flow generation and flexible capital structure
…outperform the market while maintaining cost and cash management discipline
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Invest in WESCO
• Industry leader with deep domain expertise in electrical, industrial, construction, and utility
• Proven business model and well positioned in large, fragmented markets
• Blue-chip customer and supplier base
• Proven acquirer and integrator in a consolidating industry
• Extensive global supply chain capability
• Operational excellence culture founded on lean principles
• Operating margin expansion results and future potential
• Strong free cash flow generation through economic cycle
…strong company with proven and effective supply chain solutions
Appendix
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Free Cash Flow Reconciliation ($ Millions)
2010 2011 2012 2013 2014 2015 2016
Cash flow provided by operations 127.3 167.5 288.2 315.1 251.2 283.1 300.2
Less: Capital expenditures (15.1) (33.3) (23.1) (27.8) (20.5) (21.7) (18.0)
Add: Non-recurring EECOL pension contribution - - - 21.1 - - -
Free cash flow 112.2 134.2 265.1 308.4 230.7 261.4 282.2
Free cash flow as a % of adjusted net income 97% 68% 118% 117% 84% 125% 154%
Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund the Company's other investing and financing activities. During the quarter ended September 30, 2013, a non-recurring contribution was made to fund the Canadian EECOL pension plan. This contribution was required pursuant to the terms of the share purchase agreement by which the Company acquired EECOL in 2012. EECOL sellers fully funded this contribution by way of a direct reduction in the purchase price at the date of acquisition. U.S. GAAP requires the contribution to be shown as a reduction of operating cash flow, however, it is added back to accurately reflect free cash flow.
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Goldman Sachs 2nd Annual Leveraged Finance Conference, June 20, 2017
Financial Leverage
Twelve Months Ended March 31, 2017
Financial leverage ratio: Income from operations $ 330 Depreciation and amortization 66 EBITDA $ 396
March 31, 2017 Current debt and short-term borrowings $ 29 Long-term debt 1,310 Debt discount and deferred financing (1) 16 Total debt $ 1,355 Less: cash and cash equivalents $ 103 Total debt, net of cash $ 1,252
Financial leverage ratio 3.4X Financial leverage ratio, net of cash 3.2X
(1)Long-term debt is presented in the condensed consolidated balance sheet as of March 31, 2017 net of deferred financing fees and debt discount.
($ Millions)