PITTSBURGH — Wesco International announces its results for the fourth quarter and full year 2024.
“We are pleased with our return to sales growth in the fourth quarter sparked by more than 70% growth year-over-year in our global Data Center business, 20% growth in Broadband Solutions, and renewed positive sales momentum in Electrical and Electronic Solutions. This was partially offset by a slowdown with industrial customers and the expected continued weakness in our utility business in the fourth quarter. With that said, our positive momentum has carried into January with preliminary sales per workday, adjusted for M&A, up 5% versus prior year. Our opportunity pipeline remains at a record level, backlog remains healthy and bid activity levels remain very strong. Gross margin was stable on a full-year basis although we experienced some pressure in Communication and Security Solutions as sales ramped to customers on project deployments. Consistent with past practice, we expect to improve margins as we move through the project deployment life cycle in this segment,” said John Engel, Chairman, President, and CEO.
Engel continued, “Our continued focus on effective working capital management yielded strong benefits again in the fourth quarter and contributed to record free cash flow generation of over $1 billion in 2024, or 154% of adjusted net income. Financial leverage remained stable at 2.9x trailing twelve-month adjusted EBITDA as we reduced our net debt by $431 million and repurchased $425 million of shares last year. We also significantly strengthened our portfolio through the divestiture of our integrated supply business and the acquisitions of three services-based businesses, including Ascent. As we look to 2025, our pipeline of strategic acquisitions remains strong and is aligned with our goal to increase service offerings to our customers.”
Engel added, “We also made excellent progress on our enterprise-wide digitalization efforts and overall business transformation in 2024. We’re more than halfway complete on our technology and capabilities build, which once completed, will accelerate our earnings growth through greater cross-sell, expand our margins through improved pricing and operating cost leverage, and dramatically increase our speed to value on the integration of future acquisitions.”
Engel concluded, “In 2025, we expect organic sales to grow 2.5% to 6.5% and operating margin to expand, as all three business units are expected to deliver profitable growth. We expect to generate $600 to $800 million of free cash flow and I am pleased to announce that we plan to increase our common stock dividend by 10% again this year to $1.82 per share while continuing our share buyback program. As we outlined in our recent Investor Day, we are committed to substantial value creation from operational improvements, digital transformation, and our capital allocation strategy including additional M&A. We’re well-positioned to deliver outsized growth due to the secular trends of AI-driven data centers, increased power generation, electrification, automation, and reshoring. And we remain laser focused on our enterprise wide margin improvement program, which has been a historical strength for Wesco. I’m confident that Wesco will outperform our markets this year, and we’re best positioned to deliver improved sales growth and continue toward our long-term EBITDA margin expansion goal. Finally, I continue to be very proud of our talented and dedicated Wesco team, who remain steadfast in executing our strategic plan to capture the significant value creation opportunity in front us, as we realize our vision of becoming the best tech-enabled supply chain solutions provider in the world.”
The following are results for the three months ended December 31, 2024 compared to the three months ended December 31, 2023:
- Net sales were $5,499.7 million for the fourth quarter of 2024 compared to $5,473.4 million for the fourth quarter of 2023, an increase of 0.5%. On an organic basis, which removes the impact of the Wesco Integrated Supply (“WIS”) divestiture, the Ascent, LLC (“Ascent”) acquisition, differences in foreign exchange rates, and the impact from the number of workdays, sales for the fourth quarter of 2024 grew by 2.4%. The increase in organic sales primarily reflects volume growth in the CSS segment, partially offset by volume decline in the UBS segment. Sequentially, net sales increased 0.2%. Adjusting for the unfavorable impact from the number of workdays of 1.6%, the unfavorable impact from fluctuations in foreign exchange rates of 0.5%, and the increase from the acquisition of Ascent of 0.6%, organic sales grew by 1.7% sequentially.
- Cost of goods sold was $4,335.7 million for the fourth quarter of 2024 compared to $4,302.7 million for the fourth quarter of 2023, and gross profit was $1,164.0 million and $1,170.7 million, respectively. As a percentage of net sales, gross profit was 21.2% and 21.4% for 2024 and 2023, respectively. The decline in gross profit as a percentage of net sales for the fourth quarter of 2024 primarily reflects a decrease in CSS sales margin, partially offset by the impact of the divestiture of the WIS business.
- Selling, general and administrative (“SG&A”) expenses were $817.3 million, or 14.9% of net sales, for the fourth quarter of 2024 compared to $810.1 million, or 14.8% of net sales, for the fourth quarter of 2023. SG&A expenses for the fourth quarter of 2024 include $10.0 million of digital transformation and restructuring costs and $0.1 million of excise taxes on excess pension plan assets. SG&A expenses for the fourth quarter of 2023 include $11.3 million of digital transformation, merger-related and integration, and restructuring costs. Adjusted for these costs, SG&A expenses were $807.2 million, or 14.7% of net sales, for the fourth quarter of 2024 and $798.8 million, or 14.6% of net sales, for the fourth quarter of 2023. Adjusted SG&A expenses for the fourth quarter of 2024 primarily reflect higher costs to operate our facilities, employee expenses, taxes, and transportation costs, partially offset by lower payroll expenses.
- Operating profit was $301.1 million for the fourth quarter of 2024 compared to $315.8 million for the fourth quarter of 2023, a decrease of $14.7 million, or 4.7%. Operating profit as a percentage of net sales was 5.5% for the current quarter, compared to 5.8% for the fourth quarter of the prior year. Adjusted for digital transformation costs, restructuring costs, and excise taxes on excess pension plan assets, operating profit was $311.2 million, or 5.7% of net sales, for the fourth quarter of 2024. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, and accelerated trademark amortization expense, operating profit was $327.5 million, or 6.0% of net sales, for the fourth quarter of 2023.
- Net interest expense for the fourth quarter of 2024 was $85.1 million compared to $97.0 million for the fourth quarter of 2023. The decrease is primarily attributable to lower borrowings and a decrease in variable interest rates.
- The effective tax rate for the fourth quarter of 2024 was 20.8% compared to 31.5% for the fourth quarter of 2023. The effective tax rate for the quarter ended December 31, 2024 was lower than the comparable period due to the favorable impact of changes in estimates of uncertain tax positions and foreign return-to-provision adjustments.
- Net income attributable to common stockholders was $151.0 million for the fourth quarter of 2024 compared to $127.6 million for the fourth quarter of 2023, an increase of 18.3%. Adjusted for digital transformation costs, restructuring costs, excise taxes on excess pension plan assets, the adjustment to the loss on termination of a business arrangement, the reduction to pension settlement cost, and the related income tax effects, net income attributable to common stockholders was $157.4 million for the fourth quarter of 2024. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, net pension settlement cost, and the related income tax effects, net income attributable to common stockholders was $137.9 million for the fourth quarter of 2023.
- Earnings per diluted share for the fourth quarter of 2024 was $3.03, based on 49.8 million diluted shares, compared to $2.45 for the fourth quarter of 2023, based on 52.0 million diluted shares, an increase of 23.7%. Adjusted for digital transformation costs, restructuring costs, excise taxes on excess pension plan assets, the loss on termination of a business arrangement, the reduction to pension settlement cost, and the related income tax effects, earnings per diluted share for the fourth quarter of 2024 was $3.16. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, net pension settlement cost, and the related income tax effects, earnings per diluted share for the fourth quarter of 2023 was $2.65.
- Operating cash flow for the fourth quarter of 2024 was an inflow of $276.6 million compared to $69.3 million for the fourth quarter of 2023. Free cash flow for the fourth quarter of 2024 was $268.4 million, or 155.8% of adjusted net income. The net cash inflow in the fourth quarter of 2024 was primarily driven by net income of $165.9 million, as well as an improvement in net working capital. Changes in net working capital included a decrease in trade accounts receivable due to the timing of receipts from customers, resulting in a cash inflow of $167.2 million. Inventory management efforts leading to a $67.0 million decrease in inventory also contributed to the cash inflow. These inflows were partially offset by a decrease in accounts payable of $148.5 million due to the timing of payments to suppliers.
The following are results for the year ended December 31, 2024 compared to the year ended December 31, 2023:
- Net sales were $21.8 billion for 2024 compared to $22.4 billion for 2023, a decrease of 2.5%. On an organic basis, which removes the impact of the WIS divestiture, Ascent acquisition, differences in foreign exchange rates, and the impact from the number of workdays, sales for 2024 declined by 0.6%. The decrease in organic sales reflects volume declines in the UBS and EES segments, partially offset by a volume increase in the CSS segment, and price inflation in the EES and UBS segments.
- Cost of goods sold for 2024 was $17.1 billion compared to $17.5 billion for 2023, and gross profit was $4.7 billion and $4.8 billion, respectively. As a percentage of net sales, gross profit was 21.6% for 2024 and 2023.
- SG&A expenses were $3,306.2 million, or 15.2% of net sales, for 2024 compared to $3,256.0 million, or 14.5% of net sales, for 2023. SG&A expenses for 2024 include $37.0 million of digital transformation and restructuring costs, a $17.8 million loss on abandonment of assets, and $4.9 million of excise taxes on excess pension plan assets. SG&A expenses for 2023 include $72.1 million of digital transformation, merger-related and integration, and restructuring costs. Adjusted for these costs, SG&A expenses were $3,246.5 million, or 14.9% of net sales, for 2024 and $3,183.9 million, or 14.2% of net sales, for 2023. The increase in adjusted SG&A expenses for 2024 compared to 2023 reflects higher costs to operate our facilities and an increase in IT costs.
- Operating profit was $1.2 billion for 2024 compared to $1.4 billion for 2023, a decrease of 13.0%. Operating profit as a percentage of net sales was 5.6% for the current year, compared to 6.3% for the prior year. Adjusted for digital transformation costs, the loss on abandonment of assets, restructuring costs, and excise taxes on excess pension plan assets, operating profit was $1.3 billion, or 5.9% of net sales, for 2024. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, and accelerated trademark amortization expense, operating profit was $1.5 billion, or 6.6% of net sales, for 2023.
- Net interest expense for 2024 was $364.9 million compared to $389.3 million for 2023. The decrease primarily reflects lower borrowings, the redemption of the 2025 Notes in the second quarter of 2024, and a decrease in variable interest rates.
- Other non-operating income for 2024 was $92.7 million compared to expense of $25.1 million for 2023. In 2024, we completed the divestiture of our WIS business and recognized a gain from the sale of $122.2 million. Due to fluctuations in the U.S. dollar against certain foreign currencies, a net foreign currency exchange loss of $25.5 million was recognized for 2024 compared to a net loss of $22.9 million for 2023. Adjusted for the gain on the divestiture of our WIS business, a $3.6 million loss on termination of a business arrangement, and $2.5 million of pension settlement cost related to the final settlement of the Anixter Inc. Pension Plan, other non-operating expense was $23.4 million for 2024. Other non-operating expense for 2023 includes net pension settlement cost of $2.8 million related to the settlement of certain pension plans. Adjusted for this amount, other non-operating expense was $22.3 million for 2023.
- The effective tax rate for 2024 was 24.4% compared to 22.8% for 2023. The higher effective tax rate in 2024 is primarily due to increases in valuation allowances recorded against certain deferred tax assets.
- Net income attributable to common stockholders was $660.2 million for 2024 compared to $708.1 million for 2023. Adjusted for digital transformation costs, the loss on abandonment of assets, restructuring costs, excise taxes on excess pension plan assets, the gain recognized on the divestiture of the WIS business, the loss on termination of a business arrangement, pension settlement cost, and the related income tax effects, net income attributable to common stockholders was $618.6 million for 2024. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, net pension settlement cost, and the related income tax effects, net income attributable to common stockholders was $763.6 million for 2023.
- Earnings per diluted share for 2024 was $13.05, based on 50.6 million diluted shares, compared to $13.54 for 2023, based on 52.3 million diluted shares. Adjusted for digital transformation costs, the loss on abandonment of assets, restructuring costs, excise taxes on excess pension plan assets, the gain recognized on the divestiture of the WIS business, the loss on termination of a business arrangement, pension settlement cost, and the related income tax effects, earnings per diluted share for 2024 was $12.23. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, net pension settlement cost, and the related income tax effects, earnings per diluted share for 2023 was $14.60.
- Operating cash flow for 2024 was an inflow of $1,101.2 million compared to $493.2 million for 2023. Free cash flow for 2024 was $1,045.2 million, or 154.2% of adjusted net income. The net cash inflow in 2024 was primarily driven by net income of $719.4 million and non-cash adjustments to net income totaling $105.6 million. Operating cash flow was positively impacted by net changes in assets and liabilities of $276.2 million, which primarily comprised an increase in accounts payable of $329.5 million, primarily due to the timing of inventory purchases and payments to suppliers, and an increase of $62.7 million in accrued payroll and benefits costs, partially offset by an increase in trade accounts receivable of $50.7 million due to the timing of receipts from customers.