WESCO International, Inc. (NYSE:WCC) Q1 2023 Earnings Call Transcript

John Engel: Good morning Tommy.

Tommy Moll: I don’t want to make a mountain out of a molehill here on EES, but just I do want to clarify one point. I mean your full year outlook on revenue is unchanged in the mid-singles. And then there was some commentary just around the margin compression and adjustments to the cost structure there. If we think about any change to the revenue trajectory, was it really limited to that weakness in the OEM piece of the business there, or was there anything else you would call out for us?

John Engel: That was a topic in Q1.

Tommy Moll: Great. Thank you.

John Engel: And one other point, Tommy, just to amplify, and I know it’s clear, but I want to — so the cost – – increases a little bit — got ahead a little bit of where the sales ended up coming in, and I said the sales came in a bit lower, but gross margins, record level, gross margins, the record level for all three SBUs, including EES in Q1. Very important point. Fundamentally, the margin expansion improvement program is enterprise-wide. And I know that’s been a question may have had, the proverbial over-earning question. We’re thrilled with our gross margin trajectory, and we continue to do a great job executing that enterprise-wide program.

Tommy Moll: And John, that’s where I was headed for my next question, just on price/cost. It sounds like there’s little or maybe even no incremental price assumed in your guide for the year. How would you characterize the environment there on price and then also on any inflationary pressures or lack thereof? What can you give us for an update on that side of the equation? Thank you.

Dave Schulz: Tommy, it’s Dave Schulz. So, we did see the number of supplier price increase notifications came down in the first quarter, and the average percentage increase also came down substantially of what was published in the first quarter. So, as we took a look at how pricing impacted each of our business units, we mentioned both UBS and EES experienced most of the benefit, much less so within our CSS business, but I also want to highlight that the pricing benefit that we saw in the first quarter for EES moderated versus what we saw in 2022. And reporting 8s and 6s as a price benefit throughout the quarters in 2022, that came down to a 5, and that came down even more so within our EES business, which, of course, is impacting the sales growth.

But overall, we continue to work closely with our suppliers to understand what is their expectation for price increases. There have been some of our large suppliers that have announced that they expect to take additional price increases. But again, we’ve not included that until we actually see it impacting our revenue. And we just didn’t see a lot of incremental pricing in our first quarter results.

Tommy Moll: Thanks, Dave. I’ll turn it back.

Operator: The next question is from Christopher Glynn with Oppenheimer. Please go ahead.