WESCO International Q1 Earnings Call Highlights

Key Points

• Exceptional Q1 results: WESCO reported record sales of $6.1 billion (up 14% YoY) with 12% organic growth, adjusted EBITDA up 25% to $389 million, adjusted EPS +52% to $3.37, and free cash flow of $213 million (128% of adjusted net income) as margins expanded.
• Data centers are the main growth driver: Data center sales rose ~70% to $1.4 billion (24% of quarterly sales) and on a trailing 12-month basis are ~$4.8 billion, making data centers WESCO’s largest end market and fueling record backlogs across segments.
• Stronger balance sheet and raised guidance: Management completed a $1.5 billion bond refinancing (expected >$20 million annual interest savings), exited the quarter at 3.2x net debt/EBITDA, repurchased $25 million of shares, and raised FY26 guidance to reported sales growth of 6%–9%, adjusted EPS of $15–$17, and free cash flow of $500M–$800M.

WESCO International NYSE: WCC reported what executives called an “exceptional start” to fiscal 2026, driven by accelerating demand across end markets—most notably data centers—alongside margin expansion and strong cash generation.

First-quarter results topped expectations

Chairman, President and CEO John Engel said first-quarter sales, backlog, operating margin, adjusted EPS and free cash flow all rose from the prior year and exceeded management’s expectations. The company posted record first-quarter sales of $6.1 billion, up 14% year over year, marking the third straight quarter of double-digit sales growth.

Executive Vice President and CFO Indraneel Dev said reported sales growth included 12% organic growth, with volume growth across all three strategic business units (SBUs) and an estimated ~3 points of price benefit. Gross margin was 21.2%, up about 20 basis points, while SG&A leverage improved by 40 basis points. Adjusted EBITDA increased 25% to $389 million, and adjusted EBITDA margin expanded 60 basis points to 6.4%.

Adjusted diluted EPS rose 52% to $3.37, which Dev attributed primarily to higher sales and improved profitability. He also said results benefited from a lower tax rate and “the absence of the preferred stock dividend following last year’s redemption.”

Free cash flow was $213 million, equal to 128% of adjusted net income. Dev said net working capital was a source of cash despite sequential sales growth, “largely driven by timing of inventory purchases and accounts payable.”

Data centers grew to the company’s largest end market

Both Engel and Dev highlighted data centers as a key growth driver. Engel said data center sales were $1.4 billion, up approximately 70% year over year, and represented 24% of total company sales in the quarter.

Dev added that on a trailing 12-month basis, data center sales were approximately $4.8 billion, or 20% of total sales, making data centers the company’s largest end market across its three SBUs. Management emphasized WESCO’s participation across the full data center lifecycle, spanning power, connectivity and ongoing operations, and serving hyperscale, multi-tenant, colocation and enterprise customers.

In Q&A, Engel described strong growth in “white space” within the Communications & Security Solutions (CSS) segment—“north of 60% in the quarter”—and said “gray space,” served largely by Electrical & Electronic Solutions (EES), was up “over 100% in the quarter.” He said services are embedded in those offerings and not broken out separately.

When asked about why full-year data center growth expectations step down versus the first-quarter pace, Engel attributed it to project timing.

Segment performance: CSS and EES expanded margins; UBS lagged

• CSS: Dev said organic sales rose 22% and reported sales were up 24%, driven by continued strength in Wesco Data Center Solutions, which delivered a record quarter with sales up “over 60%.” Security delivered high single-digit growth, while enterprise network infrastructure declined mid-single digits due to weakness in the service provider market, though it grew high teens including data center-related sales. CSS backlog ended at a record level, up about 40%. Adjusted EBITDA increased 41% to $223 million, and margin expanded 110 basis points to 9%. Dev noted modest gross margin pressure from large data center projects but said the company “generally see[s] healthy and accretive EBITDA margins” for Wesco Data Center Solutions.
• EES: Organic sales increased 7% and reported sales rose 9%. OEM was up mid-teens, supported by semiconductor and data center markets, while construction rose low double digits on robust wire and cable demand and infrastructure activity. Industrial declined low single digits due to project timing, but Engel pointed to mid-single-digit growth in short-cycle industrial “stock and flow” and said EES industrial backlog rose double digits. Dev said data center sales in EES were up “over 100%” and represented about 10% of EES sales. EES backlog ended at a record level, up 14%. Adjusted EBITDA rose 30% to $185 million, and margin expanded 130 basis points to 8.2%.
• UBS: Organic sales increased 6%, with utility up high single digits, driven by double-digit growth in investor-owned utilities and positive momentum in grid services. Public power was flat, which Dev said was encouraging, but he cautioned the market remains highly competitive with continued gross margin pressure amid weak sales in transformers and wire and cable. UBS backlog increased 16%. Adjusted EBITDA declined 5% to $131 million, and margin decreased 120 basis points to 9.6%, driven by gross margin pressure and higher SG&A as a percentage of sales.

Engel also told analysts the company is seeing “increasing interest” in its grid services-enabled power capabilities from hyperscalers and other data center customers, calling the long-term opportunity tied to AI-driven infrastructure investments “bullish.”

Balance sheet actions and capital allocation

Dev said WESCO completed a $1.5 billion bond refinancing that was “upsized relative to the initial launch,” citing strong investor demand and “record pricing.” He said the offering achieved the lowest coupon the company has ever had on a senior notes offering and the lowest for a BB-rated five-year note issued since 2021. The net proceeds will be used to redeem 2028 senior notes, improve liquidity, and strengthen the balance sheet, with expected annualized interest expense savings of “more than $20 million.”

The company exited the quarter at 3.2x net debt to adjusted EBITDA. Dev also said WESCO repurchased $25 million of shares during the quarter to offset dilution.

Guidance raised as momentum continues into April

Following the first-quarter performance, management raised its fiscal 2026 outlook. Dev said the company has seen “no meaningful disruption to our revenue or profitability” through the first quarter and into April, though it is monitoring macro uncertainty. He said the Middle East accounts for less than 1% of sales and that “all of our employees are safe.” He added that secondary impacts such as transportation costs have been “manageable” and that tariff impacts are “not material,” noting WESCO is the importer of record for a “small percentage” of cost of goods sold.

The updated full-year outlook calls for:

• Reported sales growth: 6%–9% (organic 5%–8%), implying $24.9 billion–$25.6 billion in reported sales
• Adjusted EBITDA margin: 6.6%–7%
• Adjusted diluted EPS: $15–$17 per share
• Free cash flow: $500 million–$800 million

Within CSS, Dev said WESCO raised its 2026 outlook to low double-digit growth and now expects data center sales to be up 20%+ for the year, while outlooks for EES and UBS were unchanged.

Looking to the second quarter, Dev said April sales per workday were up about 10% year over year, with growth led by CSS. He said second-quarter reported sales are expected to be up high single digits and that EBITDA margin is expected to be “about flat year-over-year,” citing higher incentive compensation as roughly a 25 basis point headwind. He also reminded investors that the company typically generates about 70% of annual cash flow in the second half.

Engel said the company ended the quarter with a record backlog up 22% year over year and argued that the faster growth in backlog relative to sales “bodes well” for the balance of 2026 and provides a view into 2027, noting some project shipments extend into 2027 and beyond.

WESCO expects to report second-quarter results on Thursday, July 30, Engel said.

About WESCO International NYSE: WCC

WESCO International, Inc is a leading global distributor of electrical, industrial, communications and utility products, serving a diverse customer base across maintenance, repair and operations (MRO), original equipment manufacturing (OEM) and construction markets. The company offers a comprehensive portfolio of products ranging from power distribution and automation solutions to data communications, security systems and lighting controls. Through an extensive branch network, WESCO provides critical components and value‐added services that help organizations streamline operations and improve reliability in their facilities and infrastructure.

In addition to its broad product offering, WESCO delivers advanced supply chain management and logistics solutions designed to optimize inventory levels, reduce downtime and lower overall procurement costs.

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