On May 5, communications and electronics products distributor Wesco International (NYSE: WCC), announced its results for the first quarter of 2022.
For the three months ended March 31, 2022, compared to the three months ended March 31, 2021, the provider of business-to-business distribution, logistics services, and supply chain solutions reported that net sales for the company were a record $4.9 billion for the first quarter of 2022, compared to $4.0 billion for the first quarter of 2021, an increase of 22.0%.
In a press release the distributor said the strong Q1 showing reflects "continued strong demand, price inflation, expanded product and service offerings afforded by the combination of Wesco and Anixter, as well as secular growth trends in electrification, automation, communications and security."
See also: Wesco sells legacy Canada datacom business to Guillevin
John Engel, chairman, president and CEO for Wesco, commented, “Our first quarter results speak volumes about the new Wesco’s foundation for accelerating growth and profitability. After delivering an exceptional performance in fiscal 2021, we’re off to an even more impressive start in 2022. Once again, we achieved new company records for sales, backlog and profitability while continuing our rapid deleveraging which now stands at 3.6x adjusted EBITDA, compared to 5.7x when we closed the Anixter merger. With each quarter, the power of Wesco’s scale, expanded portfolio and industry-leading positions becomes more evident as we build momentum and deliver superior value to our customers.”
The distributor further stated that its operating profit was $284.0 million for the first quarter of 2022 compared to $133.3 million for the first quarter of 2021, an increase of $150.8 million, or 113.2%.
Wesco's Engel continued, “The demonstrated strength of Wesco’s business model and the success of our almost two year integration effort is clearly apparent in the achievement of our three business units which all delivered double-digit sales and profit growth results in the quarter in spite of supply chain challenges in certain categories. Our exceptional financial results continue to support our investment in our digital transformation effort which when completed will raise Wesco to an even higher level of performance, operating efficiency and customer loyalty.”
The distributor noted that its operating cash flow for the first quarter of 2022 was an outflow of $171.9 million, compared to an inflow of $120.5 million for the first quarter of 2021. The company noted its net cash outflow in the first quarter of 2022 was primarily driven by changes in working capital, including an increase in trade accounts receivable of $324.6 million resulting from higher sales in the latter part of the quarter.
Segment results
Wesco's operating segments are comprised of three strategic business units, consisting of those for Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS).
Per a press release, the following results highlights by segment are below listed for the three months ended March 31, 2022, compared to the three months ended March 31, 2021:
- Wesco's EES segment reported net sales of $2.1 billion for the first quarter of 2022 compared to $1.7 billion for the first quarter of 2021, an increase of 21.5%. Operating profit was $178.8 million for the first quarter of 2022 compared to $100.1 million for the first quarter of 2021, an increase of $78.7 million, or 78.6%. The distributor said the increase compared to the prior year quarter reflects double-digit sales growth in its construction, OEM, and industrial businesses, reflecting business expansion and price inflation, as well as the benefits of cross selling and secular growth trends in electrification and automation.
- Wesco's CSS segment reported net sales of $1.4 billion for the first quarter of 2022 compared to $1.3 billion for the first quarter of 2021, an increase of 14.7%. Sequentially, reported net sales declined 5.3% and organic sales decreased 6.7%, which the company noted primarily reflects the effect of supply chain constraints. The distributor said the increase compared to the prior year's quarter reflects double-digit growth in Wesco's network infrastructure business led by global hyperscale data center customers, and an increase in structured cabling driven by accelerating return-to-work activities, as well as growth in its security solutions business driven by IP-based surveillance and the adoption of cloud-based technologies. Operating profit was $104.0 million for the first quarter of 2022 compared to $74.0 million for the first quarter of 2021, an increase of $30.0 million, or 40.6%.
- Wesco's UBS segment reported net sales of $1.4 billion for the first quarter of 2022 compared to $1.1 billion for the first quarter of 2021, an increase of 31.6%. The distributor said the increase compared to the prior year's quarter, as well as sequentially, reflects broad-based growth driven by investments in grid modernization, connectivity demand and rural broadband development, as well as expansion in its integrated supply business. Operating profit was $129.9 million for the first quarter of 2022 compared to $87.0 million for the first quarter of 2021, an increase of $42.9 million, or 49.3%.
Engel concluded, “As a result of our outstanding start to the year and the accelerating momentum across our business, we are substantially raising our outlook for 2022. We now expect sales for the year to increase 12% to 15% and adjusted EBITDA margin to expand to between 7.3% and 7.6%, equating to $1.54 billion of adjusted EBITDA at the midpoint of the outlook range. We are also increasing our outlook for adjusted EPS to a range of $14.00 to $15.00. Given this robust anticipated growth, we are adjusting our full year 2022 outlook for free cash flow to 80% of adjusted net income to reflect our continued strategic investment in inventory to support our record backlog. The new Wesco is proving to be an integral partner to our customers across each of our business segments. Our financial results continue to prove the extraordinary value of the Wesco and Anixter combination and point to a future of sustained growth and market outperformance.”