WESCO International, Inc.

Good day and welcome to the Westcote First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one. Please note that this event is being recorded. I would now like to turn the conference over to Leslie Hunziker, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead.

Thank you, and good morning, everyone. Before we get started, I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not guarantees of performance and, by their nature, are subject to inherent uncertainties. Actual results may differ materially. Please see our webcast slides as well as the company's SEC filings for additional risk factors and disclosures. Any forward-looking information relayed on this call speaks only as of this date, and the company undertakes no obligation to update the information to reflect the changed circumstances. Today, we'll use certain non-GAAP financial measures. Required information about these non-GAAP measures is available on our webcast slides and in our press release, both of which are posted on our website at wesco.com. On the call this morning, we have John Engel, our CEO, and Dave Schultz, LESCO's Chief Financial Officer. Now I'll turn the call over to John.

Thank you, Leslie, and good morning, everyone. We're off to a great start in 2021, outperforming our markets, accelerating execution of our integration plan and synergy capture, delivering significant margin expansion and generating very strong free cash flow. First quarter results were excellent across the board. I'm very proud of our team and want to thank them for the great work that they're doing. We're seeing positive sales momentum across each of our three global business units, and backlog has reached a new all-time record level. Workday adjusted sales were up more than 3% versus last year, and were also up 1% versus the first quarter of 2019 on a pro forma basis. Against a tough year-over-year comparison, we delivered sales at pre-COVID levels as the economic recovery is underway and demand is building in nearly every end market we serve. This ramp-up in activity, coupled with continued benefits from secular growth trends and our sales synergies, including cross-selling and value-based pricing initiatives, is setting the stage for a top-line performance that is better than our initial expectations for the year. We're making great progress on our margin improvement program as well, reflecting our ability to more than offset cost inflation. In the first quarter, gross margin was up 50 basis points versus last year and was up 40 basis points versus the first quarter of 2019. These are pro forma comparisons. Gross margin also expanded 50 basis points sequentially versus the fourth quarter of 2020. Strong execution of our margin improvement initiatives drove gross margin expansion across each of our three business units. We're also making great progress on our integration plan and are accelerating our execution and synergy capture. As sales grew and gross margin expanded, the torque on our operating leverage increased, reflecting the benefits of our structural cost reduction initiatives in our operating profit growth. As you saw in our press release earlier this morning, due to our strong first quarter results and accelerated synergy realization to start the year, we have raised our full year 2021 outlook for sales, synergies, and profitability. Finally, we generated strong cash and paid down debt in the first quarter, as we expect to do every quarter through the integration. The power of our business model is clearly being demonstrated. With over $500 million of net debt reduction over the last three quarters since closing the Anixter merger, that is, we have reduced our financial leverage almost a full term to 4.9 times net debt to adjusted EBITDA. In summary, the first quarter is another strong proof point of the substantial value creation potential of Westco plus Anixter. Now moving to page five. As I mentioned since the merger close in June of last year, combining two industry powerhouses provides a tremendous opportunity to create value for our company and for our industry. I'm very pleased with our team's execution of our integration plan. It is delivering the synergies and capturing the initial value of the transformational combination of Wesco and Anixter. Specifically, these results are being generated as we leverage our broad product services and solution portfolio. share best practices as one team focused on value-based selling, and capture cost synergies by eliminating redundancies, optimizing our supply chain network, and improving process efficiencies through other integration initiatives. In the first nine months since closing the deal, we continue to outperform market growth rates and have generated nearly $75 million in realized cost synergies, primarily from organizational redesign that delivers structural cost takeout. and also from increased efficiencies and reducing staffing redundancies. We expect this phase of the synergy capture to be completed in the next couple of months ahead of schedule. Additional integration initiatives are also well underway that will deliver further savings over the long term. For example, the design phase of our supply chain network optimization effort for the U.S. is now complete. Over the course of the integration, we expect to reduce roughly one-third of our U.S. locations through consolidation of overlapping Annex and West Coast facilities. We're also repositioning a mix of our national, regional, and local distribution centers to enhance service capabilities and capture the benefits of a centralized network with much greater scale. In 2021, we expect to complete about 20% of the U.S. network optimization effort, supporting the incremental cost synergies we're targeting this year. The strength of our franchise, the power of our industry-leading value proposition, and the benefits of our increased scale are now more evident than ever. As the economic recovery accelerates, we're exceptionally well positioned to capitalize on the secular growth trends of electrification, automation, communications, and security. With that, I'll turn it over to Dave to walk you through the details of our first quarter, as well as how we're thinking about the full year. Dave.