WESCO International, Inc.

Hello, and welcome to WESCO's second quarter earnings call. I would like to remind you that all lines are in listen-only mode throughout the presentation. If you would like to ask a question, please press star followed by one on your telephone keypad. Please note that this event is being recorded. I will now hand the call over to Scott Gaffner, Senior Vice President, Investor Relations, to begin.

Thank you, and good morning. 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 filing 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. Additionally, today we will use certain non-GAAP financial measures. Required information about these non-GAAP measures is available on our webcast 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, Wesco's Chairman, President, and Chief Executive Officer, and Dave Schultz, Executive Vice President, Chief Financial Officer. Now I'll turn the call over to John.

Thank you, Scott. Good morning, everyone, and thank you for joining the call today. The power of our portfolio and mixed shifts in the higher growth markets is clear in our record second quarter sales, although sales were below our expectations in the quarter due to our EES business. Continued strong growth and record sales in our CSS and UBS businesses more than offset a quarterly drop in our EES business. The decline in EES was largely the result of unprecedented supply chain rebalancing in the electrical industry, leading to customer destocking, along with weakness in certain sectors, including commercial construction and manufactured structures. Our long-term secular growth drivers remain intact, and they are reflected in our continued sales growth in the utility, data center security, and industrial sectors. On the strength of our industry-leading customer value proposition, strong cross-sell execution continued in the quarter, and we're now raising our sales synergy target again. We've had a series of these, a string of these, since we put the two companies together. We're raising it from $1.8 billion to $2 billion. Lead times for most product categories have returned to 2019 levels. The extraordinary supply chain disruptions and customer purchase patterns driven by the pandemic over the last few years are now correcting with the rapid reduction in supplier lead times. Against these supply chain rebalancing conditions, our gross margins remain healthy and stable. While economic conditions remain positive, consistent with a soft landing, we did see pockets of underperformance in certain end markets served by our EES business. Even with the increased overall sales in the second quarter, I'm very happy to say our free cash flow generation of $293 million was very strong and brought us back into positive territory for the first half of 2023. And that's back in line with our expectations. During the second quarter, we reduced our inventories and we paid down debt. Our financial leverage now stands at 2.8 times, near the midpoint of our target range. And it is the lowest level since the annexure acquisition in June 2020. Given our anticipated free cash flow generation in the second half of 2023, we stand in a very good position to use that cash flow to increase value to our shareholders with stock buybacks, and that is our plan. We remain confident in and focused on the transformational steps we are taking to improve our digital capabilities, capture additional market share, and create value for all our stakeholders. We continue to invest in our digital transformation plan, and we're working to deliver digital capabilities to benefit our customers and supplier partners that will be game-changing. We've already taken steps to address our cost versus current market conditions through a $25 million annualized cost reduction set of actions. They were taken in June, and they will begin to benefit our second half. Given our EES results in the second quarter, we are revising our full-year outlook. It is important to note that our revised outlook still delivers record sales, record EBITDA, and record free cash flow on a full-year basis at the midpoint. The power of WESCO's scale, industry-leading positions, and expanded portfolio of product, service, and solutions positions us to capture the benefits of enduring secular growth trends, as well as the anticipated increased infrastructure investments in North America. We are committed to and remain very confident in our ability to deliver the financial objectives presented in our investor day, including our long-term margin expansion, profit growth, and cash generation targets. Now turning to page four. The strength of our business model and the success of our integration efforts since closing the annex or acquisition in mid-2020 have established a track record of exceptional results for our company. Our second quarter results compared to the pro forma pre-pandemic results of Legacy Westco plus Legacy Annex during the second quarter of 2019 clearly highlight the successful combination of these two Fortune 500 companies. Over the past three years, we were outperforming the market, delivering impressive sales growth and margin expansion, all while rapidly deleveraging our balance sheet. The combination of these two organizations has led to a more diverse portfolio of higher growth and higher margin businesses with deep exposure to long-term secular growth trends that will drive our future sales and profitability. With that, I will now turn the call over to Dave.