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WESCO INTERNATIONAL INC (WCC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $5,343.7 million, up organically 5.6% YoY, driven by ~70% data center growth; GAAP diluted EPS was $2.10 (+7.7% YoY), while adjusted EPS was $2.21 (−3.9% YoY) .
  • Versus S&P Global consensus: revenue beat ($5,343.7M vs $5,263.5M*), but EPS ($2.10 vs $2.32*) and EBITDA ($289.1M vs $323.0M*) missed; adjusted EBITDA was $310.7M (−8.7% YoY) .
  • Gross margin was 21.1% (−20 bps YoY, −10 bps QoQ); sequential margin was “relatively stable,” with initial improvement in CSS mix; management reaffirmed full-year 2025 guidance and raised data center outlook within CSS .
  • Capital structure catalyst: $800M 6.375% notes issued to redeem $540M preferred stock in June, expected to add ~$0.65 annualized EPS and ~$30–32M net income/cash flow run-rate benefit post-redemption .
  • Near-term setup: April sales per workday up ~7%; Q2 reported sales expected up MSD–HSD, with EBITDA margin down ~50 bps YoY due to project/product mix; tariff-related price actions not included in the outlook yet .

What Went Well and What Went Wrong

What Went Well

  • Data center strength: total data center sales up ~70% YoY; within CSS, WDCS up >65%; data center ~16% of company sales in Q1 and ~14% on TTM basis; backlog up strongly in CSS (+32% YoY, +18% QoQ) .
  • Organic growth and momentum: organic sales +5.6% YoY; April sales per workday up ~7%; OEM and Broadband grew high-single digits; EES backlog +3% YoY, +4% QoQ .
  • Balance sheet/cash flow actions: $800M 2033 senior notes; preferred redemption set for June; no significant maturities until 2028; positive Q1 operating cash flow; reaffirmed $600–$800M FY25 FCF .

Quotes:

  • CEO: “Our positive momentum is building to start the second quarter with preliminary April sales per workday up 7% versus prior year.”
  • CFO: “We have not seen any change in order or buying patterns with data center customers…they have been increasing their level of spend and expanding their scope of supply with WESCO.”

What Went Wrong

  • Margin pressure: gross margin 21.1% (−20 bps YoY, −10 bps QoQ) on project/product mix; CSS gross margin down YoY; EES gross margin down 60 bps on project mix and competitive pricing .
  • Utility softness: UBS organic sales −5% (reported −19% due to WIS divestiture); UBS backlog −13% YoY (+13% QoQ); management expects utility growth to return in H2 2025 .
  • EPS/EBITDA vs consensus: GAAP EPS and EBITDA missed consensus despite revenue beat; adjusted EPS and adjusted EBITDA declined YoY .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$5,489.4 $5,499.7 $5,343.7
Gross Margin (%)22.1% 21.2% 21.1%
EBITDA ($USD Millions)$406.5 $340.1 $289.1
Adjusted EBITDA ($USD Millions)$398.1 $370.5 $310.7
Diluted EPS (GAAP, $)$3.81 $3.03 $2.10
Adjusted EPS ($)$3.58 $3.16 $2.21

Q1 2025 vs Q1 2024 (YoY):

  • Net Sales: $5,343.7 vs $5,350.0 (−0.1%) .
  • Gross Margin: 21.1% vs 21.3% (−20 bps) .
  • GAAP EPS: $2.10 vs $1.95 (+7.7%) .
  • Adjusted EBITDA: $310.7 vs $340.4 (−8.7%) .
  • Adjusted EPS: $2.21 vs $2.30 (−3.9%) .

Consensus vs Actual (S&P Global, Q1 2025):

  • Revenue: Consensus $5,263.5M* vs Actual $5,343.7M → Beat .
  • Primary EPS: Consensus $2.32* vs Actual $2.10 → Miss .
  • EBITDA: Consensus $323.0M* vs Actual $289.1M → Miss .
    Values retrieved from S&P Global.

Segment Breakdown (Q1 2025):

SegmentNet Sales ($MM)Gross Margin (%)YoY Organic Growth
EES$2,065.3 22.8% +3.4%
CSS$2,000.3 21.0% +18.1%
UBS$1,278.1 18.4% −4.9%

KPIs (Q1 2025):

  • Organic Sales Growth: +5.6% .
  • Data Center Sales: ~70% YoY; ~16% of Q1 company sales; ~14% of TTM sales .
  • Backlog: CSS +32% YoY/+18% QoQ; EES +3% YoY/+4% QoQ; UBS −13% YoY/+13% QoQ .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 2025)Current Guidance (May 2025)Change
Organic Sales GrowthFY 20252.5%–6.5% 2.5%–6.5% Maintained
Reported Sales GrowthFY 20250%–4% ($21.8–$22.7B) 0%–4% ($21.8–$22.7B) Maintained
Adjusted EBITDA MarginFY 20256.7%–7.2% 6.7%–7.2%; expect below midpoint given mix Tone lower on margin
Adjusted Diluted EPSFY 2025$12.00–$14.50 $12.00–$14.50 Maintained
Free Cash FlowFY 2025$600–$800M $600–$800M Maintained
CSS Reported GrowthFY 2025Up mid-single digits Up mid-to-high single digits (data center up ~20%) Raised
Data Center SalesFY 2025Up mid-teens Up ~20% Raised
Q2 OutlookQ2 2025N/AReported sales up MSD–HSD; EBITDA margin down ~50 bps YoY New update
Modeling AssumptionsFY 2025D&A ~$185–195M; Interest $340–350M; Other $10–20M; Capex ~$120M; Share count 49–50; ETR ~27% D&A ~$185–195M; Cloud amort. ~$40M; Interest $340–350M; Other $10–20M; Capex ~$120M; Share count 49–50; ETR ~26% (~27% in Q2–Q4) Updated cloud amort., tax

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
AI/Data CentersDouble-digit growth; mix headwind in CSS; backlog up ~70% YoY growth; data center ~16% of Q4 sales; margin normalization over lifecycle ~70% YoY growth; CSS WDCS >65%; expanding scope incl. services; margins improved sequentially Strengthening
Supply Chain/TariffsPrior playbook success; low direct exposure Prepared; inventory actions Tariff price increase notifications up ~150% in Q2 to date; pass-through strategy; importer of record <4% COGS Rising focus
Utility/MacroUBS weakness; backlog down Expect H2 recovery; new wins Destocking continues H1; H2 return to growth expected; backlog −13% YoY, +13% QoQ Stabilizing/inflect H2
Pricing/MixSupplier volume rebates low in 2024 Expect slight GM expansion in 2025; mix headwinds Price ~1.5% contribution; project/product mix pressuring GM; full-year GM down vs 2024 GM pressured
Canada TrendsN/AStrong momentum; share gains Very strong start; outperformed market; backlog grew Positive
Capital AllocationFCF record; buybacks; deleveraging Preferred redemption plan; dividend up 10% $800M notes; preferred redemption June; no major maturities until 2028; near-term focus on delevering and buybacks Executing

Management Commentary

  • Prepared remarks emphasized building momentum, with organic sales up 6% and preliminary April sales per workday +7%; gross margin “relatively stable” sequentially and CSS improvement as expected .
  • Strategy highlights: cross-selling, enterprise-wide margin improvement, tech-enabled transformation; confident in secular drivers (AI data centers, power generation, electrification, automation, reshoring) .
  • Capital actions: $800M 2033 notes to redeem high-cost preferred in June; strengthens balance sheet, reduces financing costs; extends maturities; liquidity for capital priorities .

Quotes:

  • “We are maintaining our full year outlook…we remain sharply focused on what we can control – our cross-selling activities, our enterprise-wide margin improvement program, and operational improvements resulting from our tech-enabled business transformation.” – CEO
  • “We generally see a two-quarter lag between a price increase effective date and when it begins hitting our revenue…at the company level, we only see about half of that published price increase impacting our revenue.” – CFO

Q&A Highlights

  • Tariffs and pricing: significant increase in supplier price notifications Q2-to-date; pass-through strategy; limited direct importer exposure (<4% of COGS); surcharge handling varies by supplier .
  • Utility trajectory: visibility from customer interactions and new wins supports H2 growth inflection; destocking persists H1 .
  • Data center mix: early-phase direct-ship weighs on margin, but lifecycle services and broader scope expected to normalize margins; sequential CSS margins improved .
  • SG&A cadence: Q2 merit increase (~3% on ~2/3 people cost) will lift SG&A sequentially; incentive comp reset is a 20–30 bps headwind .
  • Full-year margin view: Gross margin now expected down vs 2024; EBITDA margin below midpoint of range due to mix .

Estimates Context

  • Consensus vs actual (Q1 2025, S&P Global):
    • Revenue: $5,263.5M* (10 est.) vs actual $5,343.7M → Beat .
    • Primary EPS: $2.32* (10 est.) vs actual $2.10 → Miss .
    • EBITDA: $323.0M* vs actual $289.1M → Miss .
      Values retrieved from S&P Global.

Where estimates may adjust:

  • Upward revenue revisions likely in CSS/data center given backlog and April momentum; however margin assumptions may be trimmed due to mix, implying EPS/EBITDA estimate cuts despite sales strength .

Key Takeaways for Investors

  • Mixed print: revenue beat but EPS/EBITDA misses reflect project/product mix; monitor margin trajectory as CSS lifecycle services attach and EES mix normalizes .
  • Data center secular tailwind is accelerating (WDCS >65% growth; data center ~16% of Q1 sales); management raised FY data center outlook to ~20% growth and CSS to mid–high single digits .
  • Utility softness remains the main headwind near-term, but H2 inflection guided; backlog improving sequentially; new wins supportive .
  • Tariff dynamics could create transitional inventory gains and pricing tailwinds but are excluded from guidance; watch Q3/Q4 for price realization lag effects .
  • Capital structure catalyst: preferred redemption in June reduces financing costs, adds ~$0.65 annualized EPS and ~$30–32M net income/cash flow benefit; deleveraging continues with no major maturities until 2028 .
  • Near-term trade: Q2 sales momentum (MSD–HSD) vs ~50 bps YoY EBITDA margin compression suggests top-line strength but cautious margin; consider positioning for revenue-sensitive exposure with margin normalization in H2 .
  • Medium-term thesis: secular AI data center and electrification/grid modernization drivers, combined with tech-enabled margin programs and capital allocation, support multi-year outgrowth once mix headwinds abate .

Appendix: Q1 2025 Actual vs Consensus Detail

MetricActual (Q1 2025)Consensus (Q1 2025)
Revenue ($MM)$5,343.7 $5,263.5*
Primary EPS ($)$2.10 $2.32*
EBITDA ($MM)$289.1 $323.0*
Values retrieved from S&P Global.